The Entrepreneurs Network's response to the Queen's Speech

On the Queen’s Speech focus on deregulation, The Entrepreneurs Network’s Research Director, Sam Dumitriu said:

“The only real solution to the cost-of-living crisis is a dynamic, growing economy. It is right then that the Government is pursuing a deregulatory agenda designed to cut the burden on entrepreneurs and allow startups to bring new technologies such as gene-edited food or e-scooters to market.“In recent years, the Conservatives’ pro-enterprise credentials have rightly come under scrutiny. Scrapping badly thought-out plans to restrict the ability of tech entrepreneurs to sell their companies will go some way to restoring their reputation as a party on the side of enterprise. “But, there’s more work to be done. The Online Safety Bill, carried over from the last Parliamentary session, would create massive burdens on innovative digital startups and ultimately entrench the market share of tech giants like Google and Facebook. It should be dropped.”

On Data Reform, The Entrepreneurs Network’s Founder Philip Salter said:

“The UK’s data protection rules are far-from-perfect. Too often, they burden SMEs with excessive costs, hold up research and development, and inconvenience the public with pointless cookie pop-ups. None of which are necessary to protect consumer data from misuse.

“If a new regime can make it easier for biotech startups to use data to develop medicines and allow government departments to better share data so businesses do not need to give the same information twice then it will be a major post-Brexit win.

“The key challenge for the Government is moving to a new system while preserving data adequacy with the EU. The best designed system in the world would be worthless if it meant businesses could not easily transfer data back and forth between the UK and Europe.”

On Procurement, The Entrepreneurs Network’s Senior Researcher, Aria Babu said:

“Small businesses regularly complain about how selling to the government is a time consuming, opaque, and bureaucratic process. As a result, many see selling to the government as not worth their time.

“Despite significant efforts made by successive governments to spend a higher proportion of procurement budgets on small businesses, a steady upwards-tick in red tape and qualification criteria have made it harder for SMEs to bid for public sector contracts.“Moving to a less-bureaucratic, tech-enabled procurement system isn’t just good news for SMEs, it is good news for taxpayers too who will get better value for money. ”

What should we do with our health data?

The NHS is sitting on a gold mine. We’re a nation of 70 million people where almost everyone is covered by the same health system and much of their data is already logged in the same computer system. Unlike American insurance companies, the data about patients' drug usage is stored on the same system that contains clinical notes. And the UK is relatively ethnically diverse, which means that findings based on UK health data are more likely to be applicable at a global scale.

For example, for everyone who was vaccinated against COVID-19 in the UK the NHS has logged what vaccine they received, their number of doses, and when they received said vaccine. Everyone who was hospitalised due to Covid also has that information logged onto the same system. Together, this information can give us high-quality information on which vaccines are the most effective, give us a sense of who benefits the most from boosters, and how different vaccines respond to new variants.

There are many other plausible applications of NHS data.

• We could use it to better monitor the effectiveness of new drugs. Post- market drug surveillance, as it is called, is useful because it shows you how drugs interact in a real-world context. Clinical trials are often run on patients with few ailments, but outside of trials this is rarely the case in the real world. (In fact, people who have at least one disease are much more likely to suffer from multiple diseases.) Better post- market drug surveillance, aided by more data, would give us a better understanding of when to prescribe medicines and to whom.

• Data about when and where people need to be treated can be deployed to use hospital resources more effectively and efficiently, as has been effective in Australia.

• AI can be trained on banks of patient data and can be used to find links between different diseases or predict who needs pre-emptive medical care.

• Smart watches and rings can be used to monitor things like a patient's blood sugar and hormone levels throughout the day, and this data can then be integrated with a patient’s medical records, to give doctors a more complete view of a patient’s health.

A few weeks ago, Ben Goldacre wrote a report for the government about better use of health data. It is comprehensive, covering everything from dealing with privacy and ethics concerns to the practicalities of gathering and finding people to use the data. But, it perhaps deliberately dodges a key debate. Should private companies have access to our data, and how should they be allowed to use it?

Answering this question matters a lot. Get it right, and we will improve healthcare and lead happier and longer lives.

The life-saving drugs and treatments that the NHS gives us are not made by the government. Instead they are designed, tested, and manufactured by private companies. So capitalising on the full potential of NHS data will mean sharing it with businesses.

Goldacre’s report does acknowledge that there is a political battle to be fought. 

In media and public discourse around access to NHS data two principle concerns dominate: appropriate safeguarding of patients' privacy; and the notion that NHS data is being “sold” for commercial use.

And it describes the following case, where allowing private businesses to use NHS data already clearly benefits the wider public:

When side effects are spontaneously reported for a given treatment, regulators will typically approach the relevant pharmaceutical company and require them to conduct pharmacoepidemiological research, using complex statistical models in electronic health records data – often from the NHS, using subsets of the GP data – to evaluate the extent to which a given adverse outcome is more or less common in recipients of different comparable drugs, or with comparable medical histories.

But it fails to acknowledge any of the other benefits of allowing private companies to use the data.

The NHS’s teams of analysts are not good enough to reap the benefits of the data either.

• Training is low-quality and is often framed as a voluntary activity without there being a clear path to validate or certify skills gained. Private sector analysts are often given access to training, accredited courses, and conferences to keep them up to date with the latest statistical methods.

• The path to promotion usually requires analysts to move into management roles, which means the best analysts either stay junior or spend less of their time working on data.

• NHS analysts are typically paid under £45,000, while their peers in the private sector can expect to earn over £80,000.

Together this means that NHS analysts are poorly trained, likely to leave, or making major sacrifices to do public service.

To remedy this, the report proposes better training, recruitment, pay, and methods of empowering NHS analysts. This is not good enough. Many of the issues NHS analysts face are problems that are prevalent throughout the public sector. While it may be possible to make the NHS data analysts a rare, shining example of a great public sector work environment, I think this will be a hard fight to win. Political pressures will always favour more spending on medical staff and healthcare over analysts. It is overly ambitious to think that the NHS will ever be able to compete with the likes of McKinsey or DeepMind for data science talent.

It is more realistic, instead, to focus on external collaborations. Of course, the easier it is for people outside of the NHS to access the data, the more concerned we have to be about data privacy. So we need robust security standards.

There are problems with the current system, which is over-reliant on pseudoanonymisation, which doesn’t really work. Pseudoanonymous data  just removes a couple of key pieces of identifiable information, like a patient’s name. But if I know a person’s birthday and saw their Facebook post about getting vaccinated with Pfizer in April, then it would not be difficult to put that information together to snoop on a friend’s private medical records.

Sometimes synthetic data is used, where a new dataset is created that is similar to what a real data set would look like. This is problematic because the process of creating synthetic data uses computer programmes. Machine Learning algorithms trained on synthetic data could, plausibly, be useless.

The approach favoured by Goldacre, which I think is a good idea, is to create Trusted Research Environments where people can apply for access to NHS data.

A Trusted Research Environment (TRE) is a secure environment that researchers enter in order to work on the data remotely, rather than downloading it onto their own local machine. Users can extract and download the answers from their analyses – such as results tables, or graphs – but individual patients’ data always stays within the secure environment.

All of this implies that Goldacre and his fellow report writers believe that private researchers should have access to NHS health data. Despite this, the report does not mention startups or businesses and has only a cursory mention of pharmaceutical companies.

The danger is that we create a world-class library of healthcare data and fail to use it well. If the data is gated in such a way that it can only be used by researchers at large established pharmaceutical companies or universities, then we will miss out on some of the most innovative and novel therapies. It is not uncommon for pioneering drugs to be created by startups which are then purchased by larger pharmaceutical companies. While it is, of course, possible for a new startup to partner with a university or an established company to access the data, this creates an extra barrier for the creation of new drugs and biases the economy towards existing players.

The UK has a thriving, plausibly world-leading, Life Sciences research environment. But if we want to maintain an edge we have to be smart about what we do. The NHS’s bank should give us an easy advantage, leading to the creation of all kinds of healthcare innovations. It is in everyone’s best interest to get this right.

I want to see the NHS proactively gather more patient data. GP surgeries often keep their records in paper filing cabinets. This is a waste. Instead we should be encouraging surgeries, hospitals and clinics to be uploading their data to a central system. We should make this easy to do and make sure it fits in with other work that doctors are already doing, like recording patient’s blood work or giving out prescriptions. Patients should have the choice to opt out but data should be gathered by default.

The central data system should be held securely, and have dedicated teams making sure that the library is easy to use, well maintained, and that the data is accurate. Then, as Goldacre proposes, we should allow trusted researchers access to this data. After appropriate security measures are put in place, we should be generous about who we give the data access to. Provided they agree to certain ethical standards, research teams and startups should be given the information they need, and the process for gaining access should be quick and unbureaucratic.

If we manage to create this, this system will be unlike anything else in the world. If we can combine it with data from 23 and Me, period/fertility trackers, and smart watches it would be more powerful still. This is an ambitious goal, but it is worth pursuing as it will increase the quality of healthcare we can get, provide a new stream of income for the NHS, and create more viable therapies. Few government interventions are as win-win-win as this and we are well placed to achieve this.

Is Musk a modern Medici?

Elon Musk is a divisive figure. Simply mention his name on Twitter, and you’ll summon both his haters and his fans. But the controversy he excites signifies the start of a very positive trend – a trend that in the seventeenth century helped sustain the Industrial Revolution, and which in the late nineteenth century gave us much of the infrastructure for science and knowledge-creation that we still use today.

To put Musk into perspective, we should bear in mind that the vast majority of the wealthiest people throughout history have largely been content to just make their money, hoarding it for their own families or spending it on themselves. Most new fortunes were traditionally sunk into country estates, expensive private schools, and perhaps on gaining a few aristocratic titles. Many of the richest people today continue to do something similar, largely retreating from public life once their millions or billions have been made.

As Nadia Asparouhova notes, “the default state of a suddenly wealthy person is to quietly buy the boat or the vineyard in Napa, raise a family, and avoid confronting the power they've been given.” Even the now-famous industrialists of the Gilded Age, like Carnegie or Rockefeller, had to deliberately campaign to persuade their fellow fortune-makers to become philanthropists like them, endowing libraries, universities, and museums. Paying a few million to charity or into a named foundation may now be par for the course for the wealthy with no idea how to spend it, but it was not always thus. Philanthropy had to be normalised first, by those with the imagination and inclination to do so.

Indeed, it was from very similar initiatives amongst a handful of the wealthy that we got much of the technological progress of the sixteenth and seventeenth centuries. The Medici were far from the first oligarchs to seize both riches and power, but they certainly stood out both then and today as being among the most devoted to spending their wealth on the arts, encouraging others with similar power and wealth to do the same. 

One of the things that once differentiated Britain from the rest of Europe was the much greater early willingness of the nobility, gentry and wealthier merchants to spend their wealth on encouraging inventors. Eventually, when many inventors soon found themselves with fortunes of their own, they tended to refrain from simply becoming mere landed gentry, instead encouraging the next generation of inventors as well. Britain may not have been the only country to have inventors, but it is where innovation most dramatically accelerated in the seventeenth and eighteenth centuries – partly thanks to the philanthropic habits of their major success stories. James Watt made his fortune from steam engines, but he also later supported an innovative pneumatic medical institute to combat tuberculosis – not just financially, but by designing some of its equipment. Watt thereby nurtured the careers of the next generation of innovators, including Thomas Beddoes and Humphry Davy.

Given Elon Musk’s major investments in developing new technologies – Tom Chivers convincingly argues that for all his flaws, he’s been a major force for good in combating climate change – he has almost certainly already nurtured the career of a future Humphry Davy or two. 

Philanthropy doesn’t have to be purely charitable, after all. Indeed, investing in risky ventures – even if the returns might be large – is something that a lot of technology-made rich people seem peculiarly willing to do. We would be much worse off if they cared only about preserving their wealth, as it would be much wiser for them to invest in something much more boring (but less world-changing) things like land, bonds, or listed shares.

Of course, many dislike Musk not because of anything he actually does, but because he has become a billionaire in the first place. They are concerned that our economic system can produce any such person at all, able to wield extraordinary influence on a whim (though personally I find it encouraging that so many of the wealthiest people in the world today are entrepreneurs and inventors, rather than just landed aristocrats and magnates’ heirs). 

So long as billionaires exist, however – and I don’t think that will change anytime soon – it’s a good thing that Musk and his ilk wish to take some responsibility for their power, and devote their funds to the public good, and even that they wish to be in public life at all. The default alternative, as Asparouhova warns, would be much worse: “The failure mode of today's ascendant wealth class would be a backslide into aristocracy, perpetuating the bloat and disquiet of generational wealth”. 

Closing the Funding Gap

Over the last decade, I've tried to shift inclusion in entrepreneurship and investing: through education, storytelling, and access to capital. Policy cuts through all three of these things, which is why I decided to get involved in this project with The Entrepreneurs Network.

We kicked off our programme with a roundtable on the funding gap for founders of colour. Let's be real. Most of us have discussed the funding gap more than enough. We are bored of it; I am bored of it. It's time for some action. Maybe we've been directly impacted by it as founders; maybe we've struggled to gain funding; maybe we've been seen by our peers to be investing in what they think is socially good and nice projects, as opposed to what it really is, which is an absolute need for more funding options for underrepresented founders. This isn't charity. This is a need for innovation that serves everyone.

The Entrepreneurs Network will use the insights of this project to campaign around this issue. They were among the first to call-out the gender equity funding gap and since then, others have taken up the torch, with industry and Government working together on initiatives like the Investing in Women code. While there is a long way to go, we have seen the funding gap narrow over the past few years.

The same attention hasn’t been paid to entrepreneurs of colour. The Government’s recent response to the Commission on Race and Ethnic Disparities does not go anywhere near far enough.

Less than 2 percent of VC funds in the UK invested in teams of founders who were all from an ethnic minority demographic. This is mad. Yet founders of colour have built over a million businesses, created over 3 million jobs, and delivered more than £74 billion to the UK economy and growing.

This project is in partnership with Morgan Stanley, which recently expanded its Multicultural Innovation Lab to Europe, Middle East and Africa, having successfully run it in the US for almost five years now. “It's about connecting capital to ideas,” explained Sanghamitra Karra, Managing Director, EMEA Head of Multicultural Innovation Lab at Morgan Stanley. “We want to make sure that we help businesses grow. We want to make sure that new products get formed, and we want these new businesses to help communities grow.”

Sanghamitra pointed to research they’ve done on why VCs aren’t investing in diverse entrepreneurs and the trillion-dollar case for investing in female and multicultural entrepreneurs.

Insights from the roundtable

“The challenge always is when you're presenting to a VC, you're usually sitting in the room of white, middle-class men. The challenge is getting them to really appreciate the problem.” – Angela Malik-Agarwal, Founder & CEO of Planet Nourish

“We're a FinTech that empowers migrant communities to build generational wealth. So here, we have a triple glass ceiling where I'm a female founder, a woman of colour, and we are also serving communities of colour. So I had problems when I was trying to raise venture capital. I had to contort myself and my business so that venture capitalists and investors would understand what we’re doing. Oftentimes, I was talking to people who didn’t know anything about immigrant communities and that was tough.” – Nina Mohanty, Founder of Bloom Money

One of the major topics of conversation during the roundtable was whether investors should have quotas for the amount of funding they give. There wasn’t agreement on this, with some worried it would be seen as tokenism.

"Sometimes when we got a yes from VCs, I would wonder if I am their token founder that they’ve chosen to invest in – that I’m the brown woman that they get to put on their website. Especially with social impact funds, they'd keep telling me that they are diverse and they invest in diverse founders but then I'd later find out that they have no women or no people of colour on their portfolio team page, which I find very alarming.” - Nina Mohanty, Founder of Bloom Money

There is a worry that official quotas would only increase the feelings of imposter syndrome that some minority founders face.

“It’s not about quotas on the founders and amounts invested. I think we need quotas on the investors and that these will filter down to the founders. This way you won’t end up with people feeling as if they only received money because the company had to invest in them. Instead you have ethnic minority investors who have a larger community to draw upon.” – Josephine Philips, Founder & CEO of Sojo

But Nina and Josephine’s views weren’t shared by all. Ezechi Britton MBE believed that anything that gave him, and people like him, control of the levers of power is a good thing.

“If I get to sit at the top table, and if I get my hands on the levers of power, and I am only there because of a quota, that doesn't bother me. Sign me up. I don’t care, so long as I am in the room where it happens. We have to recognise that people don’t just change without encouragement or incentive. Do I like quotas? No. Are they necessary? Yes.” – Ezechi Britton MBE, Founding Member, Principal & CTO in Residence at Impact X Capital Partners LLP & Co-Founder and CEO of Code Untapped

It was agreed that quotas don’t need to be applied to the whole industry.

“It’s probably unrealistic to force private Angel-owned funds to change their behaviour. The way they invest is going to be at their discretion and they are going to do what they want. But I do think the BBB is the answer. It should be made to invest in diverse fund managers. That’s the simplest and most straightforward solution.” – Andy Davis, Co-Founder of 10x10

"If we’re not going to enforce quotes on everybody, then at least we should enforce them on certain VCs, subject to where their cash has come from. If the money has come from publicly funded sources, like the BBB or from pension funds, then I want to have some say about where that money goes and I expect it to be representative of the population as a whole.” – Ezechi Britton MBE, Founding Member, Principal & CTO in Residence of Impact X Capital Partners LLP & Co-Founder and CEO of Code Untapped

Some suggested that a data driven approach would be better. A quota would be a crude tool and would not uncover the reasons for why ethnic minority entrepreneurs are underinvested in – moves like this could just result in the most privileged people, who are ethnic minorities, receiving funding. This would only make the situation more equitable on the surface but would fail to address the core of the issue.

“I think it's really about having a data-driven approach. We need to understand why VCs tend to overlook these opportunities, whether it's in the way that they ask questions, which I know is the case for unconscious bias in gender, or whether it is about what they're seeking to build and who their target consumers are. Something like standardising investment committee questions, or even just screening questions, could go a really long way. So I don’t know that having quotas is necessarily the right approach.” – Saloni Bhojwani, Co-Founder and Partner of Pink Salt Ventures

We know that a large part of the reason that white founders are more likely to receive funding is that they have relationships with people in Venture Capital before they even found their first businesses. “Warm approaches” to funders, by people who already know them, are much more successful than cold approaches. And this is bad for business.

“Diverse and emerging fund managers outperform the market. But the amount of capital going towards that part of the market is low.” - Saloni Bhojwani, Co-Founder and Partner of Pink Salt Ventures

Sanghamitra Karra, the Managing Director, EMEA Head of Multicultural Innovation Lab at Morgan Stanley worries that new technology is making this problem worse. VCs are now building technology that grabs information from LinkedIn Connections as a way of finding new people to fund. This technology focuses on people who went to elite universities or else helped to build unicorns, meaning that people who have been gate-kept from established tech companies and academic institutions are still more likely to lose out.

Taking it back to quotas, Angela did not think that this was a good enough response.

“When you’re pitching an ESG company, then you’re competing against companies that are doing things like making beer from recycled bread. It’s a very broad space with a lot of categories. So who is going to be more successful? It’s probably the guy who is talking about saving the world through recycling bread. So there’s a fundamental disconnect between the different goals. If you have a quota, then you have to be included in the conversation. And that is basically a way of giving a leg up to individuals who come from different backgrounds and different life experiences. Did I go to the right school? Do I have the right network? Can I pick up the phone and get a warm introduction? No. So I think there has to be a way to give people the chance to go forward.” – Angela Malik-Agarwal, Founder & CEO of Planet Nourish.

If you want to hear more about our Inclusive Innovation Forum you can subscribe to our newsletter here.

To the Moon

There are things you shouldn’t ever bring up in polite conversation: politics and religion, obviously, but also crypto, blockchain and Web3.

If you do, there’s a good chance you’ll hear predictions about the demise of fiat currencies and how there isn’t a problem whose solution isn’t sitting on the blockchain. Or you’ll meet the person who thinks it’s all just a waste of energy (literally and figuratively); that it’s a big bubble and the whole shebang is worthless – not just dogecoin, but smart contracts too.

I don’t have any unique insights on how revolutionary the technologies will or won't be. I’ve read the same articles available to any interested reader. That said, I think we should take the potential seriously. I would be nervous about betting (even if only my reputation was at stake) against the likes of Marc Andreessen, Elizabeth Stark or Vitalik Buterin without knowing a lot more.

But currently the UK government is doing just that – and it’s not just reputations on the line. At a recent roundtable we hosted, dozens of crypto and blockchain entrepreneurs spoke eloquently about how their businesses are solving very real problems. But, for many, their biggest problem is trying to build it in the UK.

We’ve hosted meetings with more or less every type of business out there, but no sector has been shunned like these entrepreneurs. Incredibly, some had actually been told by their regulator they should move their business abroad.

This negligence has shown itself in the way the Financial Conduct Authority (FCA) has been forced to extend a temporary licensing programme for cryptocurrency firms. Mel Stride MP, chair of the Treasury select committee, is asking questions: “It is disappointing to hear that the FCA hasn’t fully met its own already-extended deadline, which the committee strongly encouraged it to meet. I look forward to receiving a full explanation for the delay.”

If you speak to someone within the FCA (and I have) you would be hear about a regulator that’s overworked and under-resourced. Wherever the fault lies, the UK is haemorrhaging crypto entrepreneurs.

An entrepreneur speaks out in the FT: “I have been the biggest fan of the FCA over the years. They were the gold standard of regulation. But no longer.” Lisa Cameron MP, who is an Officer of the APPG for Entrepreneurship, recognises the problem: “The lack of clarity from the FCA has presented huge challenges to firms in terms of business certainty.”

Crypto, blockchain and Web3 (if you think that’s even a useful term) covers a lot of ground. These aren’t industries immune from fraud and regulatory complexities. And let’s be clear, some of this is indeed the Wild West – just yesterday the Vietnamese-owned Ronin Network was hacked to the tune of $600m. But we mustn’t tar all crypto with the same brush.

It also probably doesn’t make sense to conflate crypto with blockchain. If you look at Beauhurt’s list of 249 high-growth blockchain companies you’ll find some crypto companies, but also plenty doing very uncontroversial, reassuringly boring things being done in regulated industries. The government needs to be careful about the way we define our terms.

With a financial centre to rival any on earth, the UK is perfectly placed to benefit from whatever the future holds. We could also help tame the wilder elements with proportionate regulation. As The Times reported: “​​While UK-based businesses that do not register with the watchdog are required to stop trading, they can bypass the FCA by setting up abroad, where they can continue to offer their services to people in Britain."

We’re not just failing to attract entrepreneurs from abroad, but actively turfing out those already here.

APPG AGM
Later this month, the APPG for Entrepreneurship will hold its AGM. This is where it elects new Officers. As the Secretariat we’re coordinating all this.

You can see the current list of Officers here. These are MPs and Peers who are supportive of the APPG’s aims: to encourage, support and promote entrepreneurship, and ensure Parliament is kept up-to-date on what is needed to create and sustain the most favourable conditions for entrepreneurship.

You can help! Most obviously if you’re an MP or Peer get in touch with Katrina Sale to find out more. If not, ask any MPs or Peers you know to get involved, or even contact your local MP (find out who that is here) to suggest they should.

In addition, we’re looking to expand our APPG Advisers too. These are normally people involved in business groups like the FSB, Enterprise Nation, or CBI. Anyone who fits the bill can get in touch with me to find out more.

Finally, if you have any ideas of work we should be doing, drop me a message. While we're never short of our own, we’re always open to fresh ideas from outside.

You can sign up to Philip’s Newsletter here.

What a Drag

“Don’t be fooled, Rishi Sunak is a fiscal conservative first, and a low-tax conservative second.” So begins Sam Dumitriu’s response in City AM to the Spring Statement.

By freezing tax thresholds, the Chancellor is stealthily raising taxes by dragging many into the higher rate of tax. In 1992, 1.6m paid the 40p rate of Income Tax; in 2022, three times as many (4.8m) pay it; in 2026, the OBR forecast 6.8m will pay it. He’s also timed his tax cuts for maximum electoral advantage: “more pain now, but a nice feel good year in 2024”. This will hit the poorest hardest.

Beyond the headlines, Aria Babu has picked out some of the announcements you might have missed. It wasn’t all bad – for example, R&D Tax Credits will be expanded to cover cloud & data – but Coadec and others were disappointed to see that the government has decided not to change the EMI share options scheme. In his newsletter, Dom Hallas links to a mini-tweet thread from Matt Clifford and the #NotOptional campaign, which called on European legislators to fix the patchy, inconsistent, and often punitive rules that govern employee ownership. I expect we’ll see a similar campaign here, which we’ll keep you updated about.

A disappointing Spring Statement isn’t the end of the world. It isn’t supposed to be a big fiscal event. The budget, in six months time, is much more important. Sam has spotted signs that it could be a big one for tax reform: “Top of the list is tackling under-investment. The Chancellor has rightly identified that by international standards our tax system’s treatment of investment in physical capital is stingy. He will need to act soon to fix that as next year the super-deduction will expire and corporation tax will rise to 25 per cent.”

The solution here is full expensing, which Sam argues for in Energising Enterprise, a new report he’s penned for Bright Blue (I don’t know where he finds the time!).

You can see the UK’s current lacklustre economic trajectory in this Resolution Foundation chart: real wages in the UK will rise by about as much in 19 years as they did in a normal 19-month period before the financial crisis. This isn’t good enough.

As Duncan Weldon writes: “UK macro-policymakers just keep accepting economic damage as irreversible. They shouldn't." We need is growth. The policy ideas are ready and waiting. There really is no alternative.

Double Standards
Aria has written on our blog about the unfair way female founders are treated by the media: “​​Female entrepreneurs are accused of getting into cat-fights, of not being feminist enough, being hyper-critical, cruel, mercurial, inexperienced, and of “going too far” when pivoting their business.”

On the theme for female founders, get involved in our Female Founders Forum. On Thursday we have a lunchtime roundtable in Southampton with Rt Hon Caroline Nokes MP, who chairs the Women and Equalities Committee, if you can make it.

Something Ventured
Also on Thursday, we’re hosting a Something Ventured virtual roundtable with Ian McLennan, Partner at Triple Point. This series of events are arguably the most information rich we do. In 40 minutes you (and I) will learn and discuss emerging digital and data insights, back office innovations, and valuations. We keep these events purposely small, so please let me know if you would like a place.

Sign up to Philip’s Friday Newsletter here.

In defence of Girlbosses

Last week Marc Andreessen tweeted about how the press aggressively targets female founders.

Get you a hobby you love as much as the press loves running hit pieces on aggressive, determined female founders. pic.twitter.com/FzmYQ3cdR9

— Marc Andreessen (@pmarca) March 17, 2022

Female entrepreneurs are accused of getting into cat-fights, of not being feminist enough, being hyper-critical, cruel, mercurial, inexperienced, and of “going too far” when pivoting their business.

This article from Mother Jones seems to really relish tearing down female founders as a whole group, asking

How are female founders still fucking up this badly? The primary villains, invariably white and privileged, are always the same. Her slick businesses are often underpinned by young employees who say they’ve been subjected to various forms of abuse, including racism and wage theft. But the bosses don’t see any of it—and how could they? They’re preoccupied, staring at each other. 

That fixed gaze—and failure to learn from the various exposés uncovering exploitation and embarrassingly spoiled behavior—has become a propulsive distraction.

People disagree with their bosses all the time. Startups can be rewarding and exciting places, but the high-pressured environment doesn’t suit everyone. This is no secret. Founders are a disproportionately privileged group of people. There is no question about that either.

But for some reason it is so much worse for a female founder to be white or to have wealthy parents. As if, by paving the way for one form of diversity, she is expected to represent every intersection of society. Male founders can micromanage their businesses, accidentally tank their company’s stock price, and hire entire departments full of male software engineers. Female founders, on the other hand, have to be perfect.

Take Emily Weiss, the founder of Glossier, who was accused of being too intense because she wanted sign-off on every employee. This was a problem, allegedly, because she did this in areas that were outside of her expertise. I find it difficult to believe that a fifty-something male CEO would have his authority questioned if he took similarly firm control of his company. He’d probably have his work-ethic and attention to detail praised.

These criticisms of female founders are tired. We’ve all seen it before, in every industry under the sun. Women aren’t allowed to be anything other than agreeable, pliant, and conciliatory. If they step out of line, then it is inevitable that journalists will come after them.

But might it go deeper? A lot of articles talk about how employees are upset and quitting these female-founded companies, which indicates to me that this time the blame does not sit entirely with the media. It’s starting to sound like people don’t like working for women who are younger than them.

This fits with what I have heard outside of entrepreneurship too. One of my friends said that when she was a junior doctor, she would struggle with nurses and midwives who didn’t want to follow instructions from a woman in her twenties. Even Taylor Swift, after ten years of being one of the world’s most popular musicians, gets snarky comments from the industry questioning whether she really writes her own songs.

People are social and they seek approval from their peers. So if women are endlessly criticised for being assertive or exceptional, then many more will choose to keep quiet and achieve less. If women receive a tirade of public abuse whenever they build something big, is it any wonder that they are still less likely to found businesses?

I don’t have a good solution to this. There have been plenty of campaigns trying to encourage women to be leaders. Lean In and Ban Bossy don’t seem to have shifted the dial, mostly they just attract jibes on the internet. The same goes for even superficial changes to old narratives, like Emma Watson portraying a feminist-inventor Belle in the Beauty and the Beast remake. It feels like we’re swimming upstream.

My solution right now is to highlight incidences of sexism as and when I see them. But what I really want is deep cultural change - which is not something I can do alone. I want everyone to change how they talk about successful women, and I want these changes to take place throughout our culture; from each individual parent up to the most influential media moghuls.

This sounds like it could be an impossible task, but we’ve been moving incrementally in the right direction, so it’s not hopeless.

What the Spring Statement means for entrepreneurs

Tomorrow’s headlines on the Spring Statement will cover the changes to fuel duty, national insurance, and income tax (in two years time). These reforms have the most direct impact on most people’s budgets, but beyond the headline announcements, there were a number of proposals that will affect entrepreneurs that went under the radar.

When the super-deduction is over, the UK is set to have one of the most punishing tax regimes for investment in the OECD. The Chancellor says that he is keen to address this. He floated five reforms he is considering

“1. Increase the permanent level of the Annual Investment Allowance, for example to £500,000. At its peak, this could cost around £1 billion in a single year. Previously an Annual Investment Allowance threshold of £1 million has covered around 25% of Annual Investment Allowance eligible plant and machinery expenditure.

2. Increasing Writing Down Allowances for main and special rate assets from their current levels of 18% and 6% to 20% and 8%. At its peak, this could cost £2 billion in a single year. This would particularly support those investing above the permanent Annual Investment Allowance level.

3. Introduce a First Year Allowance for main and special rate assets where firms can deduct, for example, 40% and 13% in the first year, with the remaining expenditure written down at standard Writing Down Allowances. At its peak, First Year Allowances of 40% and 13% could cost £3 billion in a single year. This would particularly support those investing above the permanent Annual Investment Allowance level. However, it may add a layer of complexity to the UK’s capital allowances regime.

4. Introduce an Additional First Year Allowance, to bring the overall amount that can be claimed to greater than 100% of the initial cost. An additional capital allowance of 20% in the first year, on top of standard Writing Down Allowances on 100% of the initial cost across the first and subsequent years. This would spread relief over time, while giving relief on over 100% of the initial capital cost. At its peak, an additional allowance of 20% could cost over £4 billion in a single year. It may add a layer of complexity to the UK’s capital allowances regime.

5. Introduce full expensing, to allow businesses to write off the costs of qualifying investment in one go. No other country in the G7 has implemented this on a permanent basis. Full expensing of plant and machinery could cost significantly more than the above options. At its peak, this could cost over £11 billion in a single year.”

We are big fans of full expensing, which we recommended in our 2018 report on Tax Reform for the All-Party Parliamentary Group for Entrepreneurship

The Chancellor was right to talk about how the UK spends less than half the OECD average on R&D and he is looking at ways to boost R&D spending. The interesting changes are:

“To support the growing volume of R&D underpinned by mathematical advances, the definition of R&D for tax reliefs will be expanded by clarifying that pure mathematics is a qualifying cost.

This spring, the government will launch a review into the Future of Compute, building on a range of compute work across government and in particular the Government Office for Science report on Large Scale Computing. In the past decade, compute has grown as a critical general-purpose technology for productivity, prosperity, and innovation, making it essential to review our compute needs over the next decade. Led by an external expert, the review will provide recommendations to form the basis of a long-term plan for the government’s approach to compute.”

If the Government is looking for ideas on cloud compute, they can read our report with Seb Krier where he calls for a pool of cloud compute credits for the UK’s R&D system and upgrades to public data infrastructure.

On AI:

“The government will partner with industry and academia to create 1000 new AI PhDs. The government will invest £117 million to create the PhDs through Centres for Doctoral Training (CDTs), with the investment further leveraging industry and university funding. This will build on the 16 existing CDTs across the UK, to train a new generation of AI researchers to develop and use AI in areas such as healthcare, climate change and creating new commercial opportunities.”

The government is extending the Annual Investment Allowance.

“To support businesses to invest and grow, the temporary £1 million level of the Annual Investment Allowance has been extended to 31 March 2023. This is the highest level of support for capital expenditure ever provided through the Annual Investment Allowance and provides generous relief for investment across over a million SMEs.”

And they are increasing the Employment Allowance again:

“In April 2020, the government increased the Employment Allowance from £3,000 to £4,000. Spring Statement announces a further increase from April 2022, meaning eligible employers will be able to reduce their employer NICs bills by up to £5,000 per year – this is a tax cut worth up to £1,000 per employer.”

For SMEs:

“The government has already reduced the burden of business rates in England. The business rates multiplier will be frozen in 2022-23, which is a tax cut for all ratepayers worth £4.6 billion over the next five years. Eligible retail, hospitality, and leisure businesses will also benefit from a new temporary 50% Business Rates Relief worth £1.7 billion.”

Sam has talked about Business Rates before. This policy will mean a bit more cash in the pockets of SMEs, but ultimately, we would like to see Business Rates replaced with a levy on unimproved land values, instead of what’s built on top.

Something else to look out for is the new Innovation Challenge.

“The launch of an Innovation Challenge to crowdsource ideas for how the government can operate more efficiently.”

We will keep our eyes-peeled for more details on this, which could be very promising.

In our Startup Manifesto with Coadec we called for the limits of EMI to be increased from a £30m asset capitalisation to £100m, and from 250 to 500 employees. As Coadec’s Dom Hallas tweeted, we are disappointed to see that there will be no changes to the Enterprise Management Incentive (EMI) scheme.

“At Budget 2020, the government launched a review of the Enterprise Management Incentive (EMI) scheme, to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and to examine whether more companies should be able to access the scheme. The government has concluded that the current EMI scheme remains effective and appropriately targeted.”

The Entrepreneurs Network responds to the Spring Statement

In response to the Chancellor’s Spring Statement, Sam Dumitriu, Research Director at The Entrepreneurs Network said:

“There is no good economic argument for hiking taxes on employment today only to cut Income Tax two years later. In effect, the Chancellor has raised taxes on work and cut them on unearned income.

“If the Chancellor wanted to properly back businesses and workers, he should have ditched the Health and Social Care levy altogether.

“Sunak signalled big changes to the tax system in the Autumn. There is a pressing need to fix the way investment is taxed. When the super-deduction expires Britain will have one of the most punishing tax treatments for investment in the OECD. Allowing businesses to fully deduct investment costs upfront would be a good start.

“The Chancellor’s pre-Statement rhetoric around R&D Tax Credit has caused concern among startups and innovators. Entrepreneurs then will be relieved that the Chancellor floated making R&D more, not less, generous in Autumn.”

Hope Springs

On Wednesday the Chancellor will deliver his spring statement. The Economist’s Bagehot column reasonably concludes that Sunak’s popularity is about to take a hit. It’s easy to make voters happy when you give out £400bn, as he did during the pandemic. But that’s now over. Inflation may hit 10%; energy bills may cost the equivalent to raising the rate of income tax by six percentage points; the price of diesel may reach £3 per litre by the end of this year; and, unless he changes his mind, we have a 2.5p rise in national insurance from next month.

Make no mistake about it. These will be tough conditions for doing business – not least for small businesses. That’s why we’ve joined forces with Enterprise Nation to set out what the Chancellor should prioritise to support them.

In our Access to Finance briefing paper we recommend:

– allowing micro businesses to use the new Help to Grow schemes and create a new tax relief to help the self-employed acquire new skills;
– helping entrepreneurs to scale and innovate by scrapping the sunset clause for EIS, SEIS, & VCTs and simplifying the process for Advanced Assurance;
– ruling out an Online Sales Tax;
– reinstating and expanding the New Enterprise Allowance to £100 per week for up to a year, allowing recipients to access more of it upfront, and expanding the eligibility of the scheme to all 23-year-olds earning less than the National Allow micro businesses to use the new Help to Living Wage;
– using data to make it easier for small businesses to learn about the wide array of support schemes available.

This isn’t exhaustive of course, but it would be a start. You can read more about it here.

The Chancellor should also cancel the rise in National Insurance, or at the very least raise the income threshold for paying employee’s NI, as recommended by Robert Colvile and Tom Clougherty.

Although the Chancellor can’t change the macro-economic conditions, he can and must be ambitious about growth – it’s really our only option. In a week where the Government released an unforgivably damaging Online Safety Bill – both for tech and freedom of speech – the Government has a lot of making up to do.

As Sam Dumitriu writes: “In theory, leaving the European Union was meant to free us to diverge from some of the bloc’s anti-tech instincts. Yet, the most significant divergence to date will be replacing the relatively pro-innovation e-Commerce Directive and its sensible liability protections with a bill that’s as, if not more, badly drafted than the Cookies Directive. At least with the Cookies Directive you can avoid the annoying mandated pop-ups with a nifty browser plugin.”

Rishi claims he wants “a future economy built on a new culture of enterprise.” Now’s the time to prove it.

S(tuck) In
Our Access All Areas project is just the first of four reports we’re undertaking with Enterprise Nation. We’ll also be looking at Access to People, Access to Markets, and Access to Government. If you run a small business and want to get involved, drop our events team a message and I’ll make sure you’re invited to the next roundtable. We may end up using you and your business as a case study.

For those running scale-up companies, we have a dinner on Tuesday in London with FTI (see below), which we may be able to squeeze you into. This is focused on the founders of high-growth businesses, as we want to explore the unique challenges they face. Just drop me an email with some information about you and your business.

Entrepreneurship Education x3
Everyone has a view on education. We’ve all experienced it in one way or another and we all know it could be better. While education can never be distilled down into a single goal, a goal that’s becoming increasingly important is for schools to prepare young people for the modern workplace. After all, it’s undeniable that the modern world of work requires entrepreneurial skills in a way that wasn’t the case in the past.

Through the All-Party Parliamentary Group (APPG) for Entrepreneurship, of which we’re the Secretariat, we’ll be investigating this issue over the coming months. We have put out a Call for Evidence, and would be incredibly grateful if you could respond to it.

There are a lot of questions, but we honestly don’t expect you to answer them all (unless you really want to). If you were able to focus on just one or two that you feel best-placed to answer that would be great. We may get in touch to use you as a case study in the report.

See the questions and respond here.

Sign up to Philip’s Friday Newsletter here.

Access All Areas: Finance

It feels like a long time ago when then-Chancellor Phillip Hammond abolished the Autumn Statement in late 2016. He rather reasonably spotted that having two major fiscal events each year is a nightmare for individuals and businesses planning their affairs. He rightly noted: “No other major economy makes hundreds of tax changes twice a year, and neither should we.” His vision was of a Budget in the autumn to give businesses time to prepare for major changes to the tax system and a policy-light spring statement where the Chancellor would respond to the OBR’s latest forecast and do little else. It was a fundamentally sound idea.

Events, sadly, have tended to get in the way. The Chancellor has been forced into action multiple times over the past two years. He has had a pandemic, lockdown, reopening, lockdown two, lockdown three, and surging energy costs to deal with. The Russian invasion of Ukraine is forcing Sunak’s hand again. It is fanciful to suggest that he can get through the Spring Statement without acting to protect households and small businesses struggling with surging costs.

His priority will be to help struggling households – his initial package of support is clearly insufficient. But business shouldn’t be forgotten. After all, they create the jobs that households rely on. There will understandably be a fair bit of fire-fighting, but pandemic-style bailouts are unlikely. We can’t simply freeze the economy in place whenever trouble comes.

Instead, we need a plan to help businesses realise their growth ambitions. To that end, today we’ve released a new report on Access to Finance, working with our friends at Enterprise Nation. It’s part of our joint Access All Areas project. Based off the simple idea that we should make it easier for businesses to access things they need to succeed, from productivity-enhancing tech to expert advice, and everything in between.

In the first report in the series, Enterprise Nation’s Emma Jones and I set out three concerning issues that the Chancellor needs to address. First, self-employment has fallen from record highs. Second, while equity investment in the UK continues to grow, the number of first-time seed stage deals is dropping. And third, the aforementioned cost of living crisis threatens to crush consumer demand and force many businesses to close.

So what should be done? We set out five key changes in the paper, but I’ll focus on just three.

First, the government shouldn’t make the problem worse. HM Treasury recently opened a consultation looking into introducing an Online Sales Tax. It’d be a terrible idea. The ability to sell online has dramatically cut the cost of starting a business and many high street retailers were saved by pivoting to online sales during the pandemic. Do we really need to penalise these businesses right now? The Government’s plan is to use the revenue from an Online Sales Tax to cut business rates, but there’s a problem with that plan. Economic research finds that when business rates are cut, the benefits do not always flow to businesses. Rather, landlords tend to respond by hiking rents offering little relief for SMEs.

Second, high-growth businesses often have trouble getting off the ground. Loans are often inappropriate for startups who lack a trading history and may be years away from turning a profit. That’s why schemes like VCTs, EIS and Seed EIS exist to support equity investment. They’re powerful schemes and have driven investment in startups over the past decade, but they aren’t perfect. We set out two ways they could be better. Most importantly, they need to be simpler. The requirement to have a named investor to gain advanced assurance makes it unnecessarily harder for startups to access the relief. In addition, the threshold for accessing the scheme should be updated and increased from £150k to £250k to reflect larger first-time deal sizes. Fixing this, would go some way to arresting the decline in first-time seed stage deals.

Third, Help to Grow, a new initiative to help businesses adopt productivity-enhancing tech and improve their management skills should be expanded and improved to allow micro-businesses to benefit. At the moment, they require businesses to have at least five employees to be eligible, as a result 95% of small businesses are locked out. The digital scheme also only offers a limited range of software. For example, although the scheme provides discounts on accounting software, it does not apply to forecasting and planning software, which could drive growth and productivity. Point-of-sale software and enterprise resource planning (ERP) software are both key to helping businesses sell more and become more efficient, but at the moment both are excluded from the scheme.

Changing the eligibility rules around the scheme so businesses with at least one employee can use it and expanding the range of software on offer would have major benefits and help SMEs achieve their long-term growth ambitions.

You can read the whole report for more ideas. The challenge now for the Chancellor is to act and help businesses not only survive difficult economic conditions, but sustainably grow and thrive.

My Kingdom for a Paperclip

This week we hosted a roundtable discussion with Kingsley Napley on the visa system for tech entrepreneurs. While there have been some positive changes and announcements for business owners, the sharp and ambitious entrepreneurs sitting round the table were bamboozled by the bureaucracy.

As bad as complexity is for entrepreneurs, however, our kafkaesque system is proving tragedy for Ukrainian refugees.

Just look at the eight bureaucratic ordeals Ukranians need to go through in order to get into the UK. Remember, these are visas for people with family members here – we aren’t letting many in (much the pity). As Rob Behrens, the Parliamentary and Health Service Ombudsman says: “It is vital the Home Office acts to correct failings in its handling of visa applications”. These are failings he and many others have previously reported.

As Jill Rutter writes, the Home Office should have been planning this back when intelligence reports were highlighting the threat to Ukraine, though it’s not too late. The Government sent in Richard Harrington as refugees minister, to work across the Home Office and the Department for Levelling Up, Housing and Communities, and Sunder Katwala has put forward some nifty solutions on how to fix asylum for refugees through sponsorship, which the Government should adopt.

To quote Behrens: “In this horrendous situation swift action is needed to make sure the process of getting a visa is simple, accessible and quick. Lives depend on it.”

I wasn’t the first – nor will I be the last to say it – but a few days before Putin invaded I argued here that the Home Office is unfit for purpose. It’s a crying shame to be proven right so quickly.

As well as using immigration as a humanitarian tool for supporting those in dire need, it also happens to be a driver of economic growth. It can even be both: just read the story of our Patron Sukhpal Singh Ahluwalia who arrived in the UK in 1972 as a refugee, fleeing the regime of Idi Amin in Uganda. And it can be used as a tool of foreign policy too. Even before the invasion, 43% of Russians between the ages of 18 and 24 wanted to leave the country for good, with 44% of those who hoped to emigrate citing the “economic situation” as their motivation. Many of the best and brightest had already left, with between 1.6 and 2 million Russians – out of a total population of 145 million – leaving Putin’s Russia for Western democracies.

As we argued in The Way of the Future, we should proactively seek to attract people who live in places like Russia to the UK:

“Such policies have a long and global history, the most famous recent example being Operation Paperclip: shortly after the Second World War, the US actively recruited over 1,600 German engineers, persuading them to move to America. These recruits became many of the chief architects of the US space programme, including Wernher von Braun. A similar approach in the 19th century ensured that Isambard Kingdom Brunel was a British engineer, rather than a French, Russian or American one, because of the government’s active steps to recruit and retain the engineering talent of his father.”

The Government did its duty by extending residency rights to BN(O)s in Hong Kong. It’s time it did the same for Ukrainans and Russians too.

Innovation Loans
The Government has launched a new series of loans worth £150 million to support innovative SMEs. Businesses with innovative late-stage projects can apply for a loan between £100,000 and £2 million.

The loans will support innovations deemed to have the strongest potential to support future economic growth and tackle social challenges. It will prioritise projects focused on the areas of the economy highlighted in Innovate UK’s plan for action.

This policy has come out of a successful pilot scheme, which has seen innovation loans of £163 million to around 200 businesses.

Demand tripled between 2017 and 2019 in the pilot, with a success rate of approximately 20%. If you do apply for one please let us know your experience. As Sam Dumitriu has written about InnovateUK’s SMART grants, the process can be challenging, and they are genuinely interested to hear and act on your experiences on the ground.

Find out more here.

Sign up to Philip’s Friday Newsletter here.

#StandWithUkraine

Given Putin’s horrific war on Ukraine, it would be remiss to write about anything else. And while I’m in no way qualified to offer any insights on foreign policy (despite, or perhaps because of having studied International Relations), I want to share some ways that individuals and businesses can help and are already helping.

The Government has put together a list. Top is donating to the Disasters Emergency Committee Ukraine Appeal, which the Government will match pound-for-pound.

A new sponsorship scheme will also soon be launched so Ukrainians who have been forced to flee their homes have a route to safety. The scheme will match businesses (as well as people, charities and community groups) with Ukrainians who do not have family ties to the UK. Details of this will soon be published, which we will share through Twitter and in the next newsletter.

FT Sifted has also written some great articles on ways to help. Anisah Osman Britton (who runs our Inclusive Innovation Forum) has a piece on how to support Ukrainian tech workers. She suggests a lot, including hiring temporary talent to support displaced refugees – one option is Remote Ukraine – and following Daria Fedko’s Telegram Group.

Anisah also points readers in the direction of #TechForUkraine, which is designing digital solutions for non-profit organisations needing tech support. Companies with tech skills can sign up here. Along these lines, Ukraine Global Taskforce, launched by Google engineer Gustavo Iwanaga, has over 300 people in over 48 countries working on projects from managing the food supply chain to prepping first aid kits.

#SupportUkraine is a “bare-minimum guide for businesses around the world on how you can support Ukraine.” And Ukraine Tech Collective is matching international software developers with job vacancies left by Ukrainian software engineers called on to defend their country.

In addition, there’s an ever-growing list of companies that are cutting ties with Russia, including behemoths like BP, Shell, Google, Meta, and Microsoft. TechUK has put together a helpful article on what companies must do to comply with Russian sanctions. On this, Duncan Weldon has a summary of the economic sanctions on Russia, and Alan Cole makes a strong case for why the sanctions are working.

Do let me know if there is anything else you think I should share next week.

The Kids Aren't Alright
This week, Aria Babu was invited to appear before the Work and Pensions Select Committee to share her insights on Universal Credit and childcare (watch her here). Aria has shared her thoughts on our blog, criticising the broken system:

“The fact that childcare is so difficult to access is plausibly the greatest driver of gender-based inequality in the country. As low-income mothers struggle to care for their children and work, more children end up living in poverty. On top of that, locking women out of work holds back economic growth. And, to state what should be obvious, it isn’t fair that women should have fewer employment opportunities and less time to build their skills.”

Sign up to Philip’s Friday newsletter here.

What I said about childcare at the Work and Pensions Select Committee

Because of my work for the Female Founders Forum I was invited to appear before the Work and Pensions Select Committee to talk about Universal Credit and childcare.

The current Universal Credit system, at least as it is used to fund childcare, seems to be broken. There are multiple different systems for subsidising childcare and they are clunky and difficult to navigate. The support parents can access varies a lot with their circumstances; how much they earned in the past month, how much other members of their household earn, term times, how many children they have, and how old their children are.

Parents giving evidence to the committee said they weren’t aware of all forms of funding, like the flexible support fund, and many said the fact that they had to pay for costs upfront, before they knew how much universal credit they were going to receive, made managing their budgets difficult.

To make matters worse, the maximum reimbursement for childcare has been frozen since 2005 and the cost of childcare has almost doubled since then. This is over twice the rate of inflation. Effectively, what this means is that the number of hours of childcare that a family has funded has halved over time and this effect is strongest in London and the South East. Currently, in 99% of local authorities, the cap does not cover a full-time place for a child under two and in 9% of authorities it doesn't even cover a 25-hour, part time place.

On the panel, Gavin Rice, from the Centre for Social Justice, said that in the UK, a higher proportion of childcare benefit is going to wealthier families than in other countries, and that this is a mistake. Respectfully, I disagree with him.

I do not believe that childcare policies should be written with redistribution as the primary aim - there are other parts of the benefits and tax systems that are better suited to these goals. When writing childcare policy, we should be thinking about how to build a world where women can “have it all”. With childcare costs as high as they currently are, supporting women into work will mean giving tax-payer money to ordinary families as well as the worst off.

Across heterosexual couples with children, the bulk of unpaid labour falls to the wife.While significant culture change is happening, and more men are contributing to managing a household and taking care of their children, as things currently stand, women are much more likely than their husbands to reduce their hours or stop working entirely. Over half (60%) of mothers who don’t work say that they would prefer to be working and 29% say that the reason they are not working are issues with arranging childcare. Almost half (46%) of mothers who are working say that they would increase their hours if childcare were not a barrier.

The fact that childcare is so difficult to access is plausibly the greatest driver of gender-based inequality in the country. As low-income mothers struggle to care for their children and work, more children end up living in poverty. On top of that, locking women out of work holds back economic growth. And, to state what should be obvious, it isn’t fair that women should have fewer employment opportunities and less time to build their skills.

When creating childcare policy, a decent rule-of-thumb should be that no one is made worse off by working. When you account for tax, national insurance, student loan repayments, and childcare costs, some women with young children face a very high marginal tax rate when reentering work. One woman, when giving evidence to the committee said that she was made worse off by about £80 per month but that it was important for her to continue working so that she could progress in her career and set a good example for her daughter.

A simpler and more generous system would be helpful but I think something important has been lost in this conversation about how the benefits and subsidies work.

We should be asking ourselves why childcare is so expensive in the first place? The UK has some of the most expensive childcare costs in the developed world. Full time care costs 30% of the median person’s earnings - twice the OECD average.

Regulation is a key driver. We have very strict ratios regarding how many children can be cared for by an adult. For children under two years, we require one staff member for every three children. For two-year-olds, it is one adult for every four children, and for three and four year olds the ratio is usually one to eight.

The UK’s ratios are much stricter than in other countries. Countries like Sweden, Denmark and Spain have no such prescriptive ratios at all. Economic analysis suggests that if we relaxed our ratios to Norwegian levels, we could halve childcare costs. If this is true, adopting Norwegian-style regulations would reverse much of the damage caused by the past two decades of sky-rocketing costs.

There’s also evidence to suggest that we are incredibly undersupplied when it comes to childminders and nursery staff. In an earlier committee session, Helen Donoghue said that members of the Professional Association of Childcare and Early Years (PACEY) members turn away 16% of parents because they lack capacity.

Part of the reason this is happening is that it has become increasingly difficult for people to receive informal care from their parents’ friends. In 2009 there were two policewomen who would look after each other’s daughters when the other was on a shift. They did this about twice a week for ten hours. The officers were reported to Ofsted, they think by a neighbour, because this counted as illegal, unregistered childminding.

I am surprised that these rules still have not been rolled back. It takes a village to raise a child and for most of history children were cared for by a broad, trusted network of friends and extended family. It is incredibly strange that we have chosen to outlaw this practice.

These policies were put in place to improve the quality of early-years care for children. Of course, there is some benefit to children being taken care of by professionals but we know that children also benefit a lot from spending time with adults who are heavily invested in them. By making it difficult for people to start up small-scale and flexible childminding businesses in their own communities, we decrease the quality of care that children are given. And by banning informal childcare, we increase the pressure on the formal sector - which is often a worse option for parents and children alike.

Of course, the regulations exist because the government shares parents' concerns about the quality of childcare provided and they want to make sure that the children are with safe and responsible adults. One way we could increase the number of childminders, while also ensuring that children are safe, is to allow people who are already trusted with children’s welfare to do childcare. We could automatically grant licences to the parents of other children, doctors, teachers, nurses, social workers, and so on.

By both simplifying the childcare subsidy system and by tweaking our needlessly strict regulations, we have the ability to dramatically reduce the cost of childcare for parents. This would free mothers to follow more of their ambitions and would be an important step towards gender parity in workplaces.

Capital. People. Ideas.

Chancellor Rishi Sunak opened yesterday’s Mais Lecture by condemning Russia’s unprovoked aggression: “When the sovereign freedom of one democratic nation is threatened, wherever they may be in the world, democracy everywhere is challenged.” Spot on.

The Mais Lecture is an annual event at Bayes Business School (formerly Cass), where Prime Ministers, Chancellors, Governors of the Bank of England set out their economic vision.

Sunak gave us a flavour of what to expect in his upcoming Budget, but it will also be seen by many as his pitch to be the next Prime Minister. And that pitch is “a future economy built on a new culture of enterprise.”

Sunak praised free markets as a machine for innovation and growth: “The arc of human history has taught us that more than any other economic system, the free market provides the best possible route to achieving the most happiness and security for the greatest number of people.” As is almost a tradition for politicians, he then points out the free market’s limits – whether that’s the need for a safety net, its impact on social bonds, and externalities like climate change. All pretty standard stuff.

According to Sunak the biggest challenge the free market faces today is where new growth will come from – again, all pretty standard stuff. Most economists and think-tankers have been sounding the alarm on UK productivity for years.

After a lot of platitudes, however, Sunak hinted at something more interesting and concrete.

He has three priorities:

1) On capital investment, Sunak refers to the growth we experienced in the 19th and 20th centuries: “Even in the decade before the global financial crisis, capital deepening grew UK productivity by just 0.4pp per year, less than half the OECD average.” As he explained, today capital investment by UK businesses averages just 10% of GDP, considerably lower than the OECD average of 14%.

And he offers a diagnosis: “An analysis of the Net Present Values of different countries’ tax treatment of long-lived capital assets like plant and machinery shows that despite the UK’s highly competitive headline corporation tax rates, the overall tax treatment provided for capital investment is much less generous than the OECD average.”

The Chancellor’s priority will thus be to cut taxes on business investment, which is something we have long called for. In fact, our Research Director Sam Dumitriu was among the very first in the UK to push for expanding capital allowances, and will soon release a report with another think tank that I expect will be similarly influential. Watch this space.

2) On improving technical skills, Sunak is particularly concerned with adult education. Just 18% of people aged 25-64 hold vocational qualifications. This is a third lower than the OECD average, with UK employers spending just half the European average on training their employees.

Sunak thinks we need to reform the complexity and confusion in the current system. There are currently 4,000 qualifications at level 3, and over 3,000 at levels 4 and 5. But while confusion and complexity are no doubt a problem, are they really the main problem for employers? Sunak hints that the Apprenticeship Levy might also need reform, which we’ve called for before, but I’m sure there are some smart entrepreneurs and experts in the adult education space who have some ideas on what more can be done. If so, get in touch.

3) Last, and best, the Chancellor lauds the importance of innovation (I would suggest reading this section in full). Citing Paul Romer’s insight on the non-rivalrous nature of ideas and the $400 bet between Professor Robert Gordon and Professor Erik Brynjolfsson on whether we’re still innovating, Sunak comes down on the side of the latter, taking the view that Artificial Intelligence is a general-purpose technology, like steam power, electricity, and information technologies.

I think this is correct. And we put out a paper by former Office for AI Adviser Séb Krier, setting out exactly how the UK can be the place in the world for AI.

Ultimately, Sunak acknowledges that differences in productivity explains almost all of our economic gap with the US. He claims Brexit could give us the freedom to improve our regulation of technology, life sciences, financial services and innovation (more on that below), and claims that the Government is already helping with British Patient Capital, the Future Fund, tax reliefs, and the Help to Grow programmes, as well as by reforming Solvency II, listings rules, and the charge cap to unlock pensions. Mostly things we have called for or supported, but we think we will need much more than this to close the gap with the US. We’ve got a host of reports in the pipeline to set out exactly how.

We were also very pleased that Sunak cited our research, when he said that half of our most innovative companies have an immigrant founder. But actions speak louder than words. Given the Investor Visa has been scrapped and the Innovator visa is under threat, we won’t be counting chickens any time soon.

Sunak is also going to look into better incentives for R&D. As he acknowledges, self-financed business R&D as a percentage of GDP is less than half the OECD average, and while other nations have been improving their R&D investment rates in recent decades, that in the UK has stayed flat or even fallen. In addition, business spending on R&D amounts to just four times the value of R&D tax relief, while the OECD average is 15 times. So I think we can expect some more targeted tax breaks for entrepreneurs looking to invest.

The speech isn’t inherently Conservative and certainly isn’t conservative with a small ‘c’, so we hope he’ll be reading about the way of the future.

Mugwump
The Substacker Mugwump has something interesting to say about the benefits of Brexit. #FBPE types shouldn’t be overly concerned. Mugwump lives up to the meaning of their sobriquet – a person who remains aloof or independent, especially from party politics.

While they think Brexit has made us poorer, compared to what we could have been, this only makes the need for ambitious policies more necessary – policies like planning reform (see our recent paper for what this could look like, and Ryan Bourne’s article mentioning it on ConservativeHome.)

​​Mugwump was inspired to write following the Cabinet Office’s “embarrassing” The Benefits of Brexit policy paper. Embarrassing, because it is a hodgepodge of vacuous statements and things we could already have done inside the EU. As well as things that are objectively bad for growth, like ending free movement.

So what can actually be done that will meaningfully offset some of the damage of Brexit? Mugwump puts forward a non-exhaustive list of 12 ideas, including joining the Trans-Pacific Partnership (TPP), unilaterally recognising EU and non-EU standards, auctioning airport slots, and reforming GDPR (although this will likely still have to be done in negotiation with the EU).

Although ​​Mugwump isn’t particularly optimistic about the potential for his wishlist happening – whether for political feasibility or the risk of retaliatory measures from the EU – their realist approach is a whole lot better than the Cabinet Office’s waffle.

Home Truths

The Home Office is having a bit of a mad one.

Yesterday, without warning, it scrapped the UK’s Tier 1 Investor Visa. While the government has been right to scrutinise the route, its failures have been due to the Home Office not properly regulating and overseeing the route. There was an opportunity to reform it to support entrepreneurs – instead, they’ve thrown out the baby, bathwater, the bath, the kitchen sink and their toys out of the pram.

The Home Office is also currently looking at the Innovator Visa, the main route for entrepreneurs. Given yesterday’s announcement and various rumours, I’m pretty sure they’ll mess that up too.

That’s not all. Earlier in the week the FT revealed that the Home Office is planning to demand tech companies block ‘legal but harmful’ posts as part of the Online Safety bill. While this might be aimed at the likes of Google and Facebook, it would hit thousands of tech startups that host user-generated content online, including travel review sites and food delivery marketplaces, as well as personal messages.

Camilla de Coverly Veale of Coadec has written about why the ​​proposals risk crippling the UK’s internet economy. As she notes, by the Government’s own estimates the new regime will affect 24,000 businesses, the overwhelming majority of which are small and micro platforms.

But this is just the tip of the iceberg. Coadec also has a report out today on the wider threat of the Online Safety Bill. For example, businesses would be required to proactively monitor user-to-user interactions, which would require data collection, storage and use in explicit breach of both the UK and EU GDPR’s standards. This would end our data adequacy status with the EU, which allows the free flow of personal data between jurisdictions.

The Government’s own estimates suggest that a loss of data adequacy would cost £1.4 billion in compliance costs, and Coadec estimates that all the proposals add up to a crippling £2.5 billion a year. This doesn’t just put us out of step with the US and Europe – it puts us on another planet.

I’m starting to think the New Statement’s John Elledge might be right. Maybe it’s time to abolish the Home Office.

Foundational Thinking
Regular readers will already know about Strong Foundations – our case for why the UK’s housing shortage is denting our entrepreneurial ambitions.

Over 60 of UK's most ambitious entrepreneurs backed it in a letter in The Telegraph, which argued that talent is being priced out of our most productive cities. As author Aria Babu writes in City AM, ​​Britain’s productivity has been battered by the scarcity of affordable homes. She builds on these thoughts in CapX, explaining why there is something special about clusters, and why they’re essential to the levelling up agenda:

“If we want to level up, then policymakers have to understand and exploit the economics of clusters – not ignore them. Part of the reason the UK’s left behind regions are poorer is that we have ignored these truths. Many of our cities lack adequate infrastructure and are badly connected, which means they function less like a city than a collection of small towns. Leeds, for example, is the largest city in Europe without a metro system, meaning potential benefits of agglomeration are remaining unrealised. One stark statistic illustrates this well: in the UK only 40% of people who live in big cities can reach their city centre within half an hour. In Europe 67% can.”

Aria was also interviewed on GB News about it, I wrote about the report for Forbes and the New Statesman picked up on Aria’s paper in reference to Kirstie Allsopp’s embarrassing interview with the Sunday Times.

So what next? There are opportunities in the upcoming Levelling Up Bill for some of the recommendations in the report. Namely: instituting Street Votes, liberalising Green Belt rules, building more public transport, making it easier to convert properties between different use classes, allowing high quality micro home projects, and trialling community land auctions.

You can still back the report here, which will take a few seconds. And spread the word by retweeting this Twitter thread, sharing through other social media, or just forwarding this email on to others.

Calling Female Founders: Wales & Southampton
We aim to bridge the gap between entrepreneurs and policymakers. We do this on many levels but the bluntest, and sometimes most effective approach, is simply putting smart entrepreneurs in the room with politicians.

To that end, as part of our Female Founders Forum we run with Barclays, we have a virtual event with Virginia Crosbie MP next week from 12.30pm to 2pm. It is focused on Wales, so if you’re based there, do business there or have an interest in the country, this is for you. Just let Katrina know if you want to come and she will send a calendar invite.

Next month, we have Rt Hon Caroline Nokes MP for an in-person roundtable in Southampton. Caroline is chair of the Women and Equalities Committee, which examines the work of the Government Equalities Office and holds the Government to account on equality law and policy. This is our first event in Southampton, so we could really do with your help in sharing with entrepreneurs in and around the city. Once again, just let Katrina know if you want to come and she will send a calendar invite.

Sign up for Philip’s Friday newsletter here.

Sixty Entrepreneurs Back Open Letter on Housing

To coincide with the launch of our new paper Strong Foundations, we have an open letter in today’s Telegraph endorsing the report and pushing for more action to make it easier to build enough homes in the places where they are most needed.

You can read it below:

Britain’s start-ups are being held back by the high cost of housing and office space.

Talent is priced out of our most productive cities. Londoners spend nearly 40 per cent of their income on rent. And, after paying extra for talent because of higher housing costs, British businesses are punished again through some of the most expensive office rents in the world.

The United Kingdom has many strengths for entrepreneurs: world-class universities, London’s financial hub, and the highest venture-capital investment in Europe. But Berlin, Paris and Amsterdam become more inviting as housing continues to get more expensive in London, Oxford and Cambridge. Silicon Valley provides a cautionary tale, where insufficient housing has led to an exodus of founders and investors.

But there is cause for optimism. Simple tweaks to planning legislation could solve much of the problem. A new report from the Entrepreneurs Network sets out a range of reforms that could make millions of new homes available.

It is vital that the reforms are included in the upcoming levelling up bill. We urge Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, to consider seriously the pivotal role this bill could play.

List of signatories:

Matt Clifford
Entrepreneur First

Emma Jones
Enterprise Nation

Simon Woodroffe
YO! Company

Philip Salter 
Founder' The Entrepreneurs Network

Dr Dylan Jones-Evans
Director, Enlli Associates

Andrew Dixon 
Director ,ARC InterCapital Ltd

Jessica Mendoza
CEO, Monadd

Dr Cristiana Banila 
Founder & CSO, Mitra Bio

John Hassard 
Director EnviroMission Ltd

Cordelia Meacher
Managing Director, FieldHouse Associates

Lorraine Thomas 
Founder, View From My Window

Anne-Laure Le Cunff 
Founder, Ness Labs Ltd

Alex Hanson-Smith
Co-Founder & CTPO, inploi

Giovanna Forte
CEO, Forte Medical Limited

Maria Tanjala
CEO FilmChain

Marc Figueras
Director KeyNest

Simon Labahn
Co-Founder & CEO, Spotlight

Richard Mabey
CEO, Juro

Peter Francis
Co-Founder, FluidStack

Rose Tan
Founder, PlayThru

Lorna Armitage
Co-Founder & COO, CAPSLOCK

Erika Brodnock
CEO, Optimum Health 

Maiko Schaffrath
Founder, Impact Hustlers

Sebastien Krier
Director, Dataphysix Ltd

Henry Whorwood
Head of Research & Consultancy, Beauhurst

Tommy Long
Co-Founder, JDLT

Paul C Cheshire
Professor of Economic Geography, London School of Economics

Sahil Sethi
CEO, Maji

Aileen McDonnell
CEO, B4Box

Alison Surtees
Co-Founder, Future's Venture

James Frewin
Founder, OCTOBER®

Elle Sharman
Founder, Swan

Jevan Nagarajah
Founder & CEO, Better Dairy

Camin McCluskey
Co-Founder & CTO, Telescope Analytics

Favour Mandanji Nyikosa
Co-Founder & CTO, Augmize

Serdar Paktin
Founder, pakt

Dr Filip Auksztol
CEO, Quantum Boost Ltd

Stuart Johnson
Founder & CTO, Simple Construction Software

Ashvin Prabaker
Founder, Stealth Startup

David Murray-Hundley
Co-Founder & CEO, Pario Ventures

Ian Merricks
Managing Partner, White Horse Capital

Sam Gordon
Founder, Gordon & Eden

Ross Williams
CEO, Venntro Media Group

Guy Tolhurst
Group CEO, Indagate Group

Andrew Evans
CEO, Smart Pension

Karina Robinson
CEO, Robinson Hambro Ltd

Russ Shaw
Founder, Tech London Advocates & Global Tech Advocates

Stuart Lucas
Executive Chairman, Asset Match Limited

Jack Bartlett
Co-Founder, acceler8

Sharief Abdel-Hadi
Co-Founder & CEO, Apricot

Mark Brownridge
Board Member, EISA

Rajeeb Dey
Founder & CEO, Learnerbly

Alison Cork
CEO, Alison at Home 

Sean Ramsden
Founder & CEO, Ramsden International

Charis Sfyrakis
CEO, Algomo

Lance Forman
Owner, Forman & Field

Michael Nabarro
Co-Founder & CEO, Spektrix Ltd

Sandip Gangakhedkar
Co-Founder & CTO, Imperium Drive

Alastair Paterson
CEO, Digital Shadows

Apurva Chitnis
CEO, Sidetrack
 
Meri Beckwith
Co-founder, Lindus Health

Dana Denis-Smith
CEO, Obelisk Support 

Ben Southwood
Senior Fellow, Create Streets

Daniel Pryor
Head of Research, The Adam Smith Institute

John Myers
Founder, London YIMBY

Sun Don't Shine

In his new role as Minister for Brexit Opportunities and Government Efficiency, Jacob Rees-Mogg has called on Sun readers to write to him to tell him about “any petty old EU regulation” that he should scrap.

In the letter, Rees-Mogg rightly applauds the Vaccines Taskforce, and accurately identifies possible regulatory reforms around procurement (we'll have a paper out on this soon), data and medicines. However, like the Red Tape Challenge before it, this call to action will probably fail to get good ideas.

Polly Mackenzie from Demos has a Tweet thread explaining why. It covers a few different angles – a key one being the inability of people to disentangle who’s to blame for a particular regulation. She brings up the example of who is to blame for making you fill out a bank form. The bank? The FCA? The EU? International money laundering rules? Parliament?

It’s a fair point, but the people writing to Rees-Mogg don’t actually need to do the analysis. It should be the job of government. Instead, I think the real problem is that from inside the system it’s difficult to know that things could be better.

Of course, organisations like ours can act as a conduit for good ideas. For example, drawing on the work of Jan Rosenow of the Regulatory Assistance Project and conversation with entrepreneurs, Eamonn Ives argued in our comprehensive Green Entrepreneurship report with the Enterprise Trust that the Energy Performance Certificate (EPC) ratings were biassed against environmentally friendly technologies, like heat pumps. This week, much to our delight, it has been announced that EPC ratings will stop penalising heat pumps.

It’s a small victory, but we’ve had quite a few of those over the years, and aren’t short of more ideas.

Just this week Alec Stapp’s observed that the “UK requires merging firms to mail physical documents to every single one of their shareholders”, following news that a billion pound merger was delayed because they can’t find enough paper to mail out more than 120 million pages of docs.

Stapp’s observation points to a way I think governments could meaningfully engage beyond think tanks and lobby groups: by talking with people who have experienced how other countries do things better.

I’ve bored regular readers enough about digital government in Estonia, but it’s true of many policy areas and many countries. While copying other countries might not be the post-Brexit vibe Rees-Mogg is looking for, if he or a successor decide to go to the public for ideas it would be worth asking those that have experience beyond our borders – whether they are (or have been) immigrants or expats.

Of course, you don’t need to have experienced another country to know how to spot these things – in the US, Flexport founder and CEO Ryan Petersen just used common sense to solve L.A.'s Shipping Jam, pointing out that they should end restrictions on stacking empty containers more than two high – but by narrowing the question Rees-Mogg would get more considered replies.

As Mackenzie argues, the Red Tape Challenge just mobilised lots of activists calling for regulations to be maintained that the government had no intention of changing. Asking a question where respondents are forced to actually look for meaningful improvements – even if it’s based on practical experience rather than intimate policy knowledge – could help government decide where to focus.

What Are The Odds?
A decade ago the Royal Statistical Society (RSS) found that only 40% of MPs got the following question correct: “If you toss a coin twice, what is the probability of getting two heads?”

They asked the same question to the current Parliament. This time round, 52% gave the correct answer, so there has been some improvement, but the result will still be disconcerting for many.

Some will use this as a stick to bash MPs with. But that won’t solve anything. We need to focus instead on making it more appealing to be an MP and we should also think of ways MPs can continue to learn while in the job (even if it’s things that they probably should have picked up in school).

MPs spend a lot of their time talking to people who are more expert in the thing being discussed than they are. They can’t possibly be expected to know everything and the only way to get through it is to bluff. This is why many MPs, even in conversation, speak as though they’ve been asked to give an impromptu speech, rather than have a proper discussion where the goal is learning and solving problems.

I don’t have all the answers though – just like the MPs who the RSS surveyed.

As a Bee
We have so many events coming up that it’s easiest just to share them in a cleaner format:

– Small business owners should register their interest to join Emma Jones MBE for a discussion on access to finance on 21 February from 4pm to 5pm. Your thoughts will feed into our Small Business Forum project: Access all Areas.

– Entrepreneurs and policymakers are welcome to join James Perry, founder of BCorp, who will lead a virtual discussion on non-financial reporting on 24 February from 10am to 11am as part of our Green Entrepreneurship Forum.

– Female founders from Wales (virtual, 24 February), London (in-person 10 March), or the South West and South Coast (in-person 24 March) should get involved in our Female Founder Forum roundtables.

– Anyone interested in levelling the playing field for underserved founders will want to sign up for our virtual panel discussion on 3 March from 4pm to 5pm. This part of our Inclusive Innovation Forum.

– Tech entrepreneurs will want to join the founder Dinesh Dhamija and other entrepreneurs for a roundtable breakfast discussion on the future of immigration.

– MPs, Peers and sharing economy entrepreneurs will want to pop into the House of Lords on 15 March from 3.30pm to 5pm for a spot of afternoon tea.

– Patrons, Advisers and the founders of high-growth businesses are welcome to join us for a Private Entrepreneurs’ Dinner on 22 March 2022 from 7.30pm to 9.30pm to discuss the new Step-Up Coalition.