As the Secretariat for the APPG for Entrepreneurship, Mishcon The Leap partner The Entrepreneurs Network, is hosting a series of webinars to bring Parliamentarians and leading business owners together to explore what the future holds for start-ups and scale-ups post-COVID-19.
In this latest APPG for Entrepreneurship session on the Economy, Technology and Bouncing Back after Coronavirus, together with Mishcon The Leap, Corporate Tax Partner at Mishcon de Reya, Gary Richards, joined John Penrose, MP for Weston-Super-Mare and former Lord Commissioner of HM Treasury, and Rt. Hon Baroness Kramer, Liberal Democrat spokesperson for the HM Treasury, on a panel to discuss what our economy will look like post-COVID-19, how our business practices will change and the impact that the Government’s exit strategy will have on tax.
Here are some of the most thought-provoking insights from the session.
Highlights & Insights from the Panel
John Penrose MP spoke about the ‘new normal’ and where our economy is heading post-COVID-19:
“What the lockdown has done is moved all of those trends which were already established and has shunted them forward at a much faster rate than anyone was expecting”.
He spoke of the challenges Rishi Sunak, Chancellor of the Exchequer for the HM Treasury will face post-COVID-19, including balancing day-to-day spending while supporting the UK’s long term economic success:
“[Rishi’s] only answer has to be to change the shape of the tax system. That will probably mean he will have to simplify it, in order to get rid of quite a lot of the existing special loopholes, special programmes and special dispensations that have been given”.
The Rt. Hon Baroness Kramer stressed that there is a silver lining to COVID-19 which is the opportunity to lean into technology to push the UK faster into the fourth industrial revolution and tackle low productivity:
“There has been an extraordinary advance in the acceptance of new technology and also the use of technology, by a sweeping range of the population”.
She spoke about how it is important for the Government to invest in the opportunities that will underpin the UK’s future economy:
“This to me is the time to invest for recovery. I am concerned that we invest in the businesses of the future”.
She also spoke about her concern about the fiscal position for businesses, how she predicts there will be further redundancies as the Coronavirus Job Retention Scheme tapers off, and her concerns about the accessibility of the Future Fund for Angel Investors and individuals:
“It’s important that we don’t lose many of the start-ups that are out there because they are our future”.
Gary Richards spoke about what the UK’s new tax system should look like and how it can be best developed to drive economic growth. He suggested that it should be designed to minimise distortions, be reliable and avoid unnecessary tax cuts and subsidies:
“Tax cuts only make sense if they stimulate the economy”.
He also spoke about potential abuses of taxation, such as the Gig Economy and suggested that the HMRC may need to be more flexible:
“We may need to be more radical. We may need to look at taxes on wealth or on capital”.
He suggested that entrepreneurs should see tax rises as a way to benefit their businesses in the long term as it will help to stimulate activity in the economy.
Questions & Recommendations
During the Q&A session, we touched on a range of key issues.
One person asked about how the Government should think about attracting the best and brightest individuals to the UK post-COVID-19.
In response, John Penrose MP spoke about how immigration will be a key part of driving the UK economy forward. However he also tied this back to technological advancements and suggested that some work could be done remotely.
“If we get the immigration system right, the best tech experts… should be available to you. If we can work remotely, they may not even have to work [in the UK]”
Baroness Kramer suggested that there are a set of real problems with the UK’s current visa system. She suggested that the UK Government needs to look at the current salary benchmark in order to compete with other countries.
“When you are running a tech company, you don’t just employ a few high skilled people, you have to be able to employ people all the way down the line to keep your company going”
One person asked about 5G and whether it should be the main infrastructure focus.
In response John Penrose MP suggested that 5G will be essential and that it is important for the Government to set up a system which is neutral so it allows for the technology to play out commercially, rather than rewarding companies that are able to best lobby their interests to the Government.
One person asked whether further tax breaks for investment made sense and whether we should be looking for the Future Fund to allow investors to benefit from EIS and SEIS.
In response John Penrose MP suggested in order to reduce distortions, we may need to trade away some of the schemes that the Government has created to justify their continued existence.
A question was raised about why funding tends to be focused on innovative companies and not bailing out companies that aren’t going to be viable for the future.
In response Baroness Kramer suggested that R&D tax credits should be a real focus going forward and we should use tax schemes to accelerate this.
It was asked whether there is any room for focusing on companies that the Government thinks will grow and lead to increased tax revenues in the future or is it too distortionary?
In response Gary Richards spoke about the challenges with Entrepreneurs Relief and how it was perceived by many people to be used by people who didn’t need an incentive. Gary suggested that the Relief should be focused on the long term and subject to certain criteria in order to be effective.
One person asked how the Government should best balance tax cuts.
John Penrose MP suggested that the squeeze on public sector spending will be difficult to continue and this will force the HM Treasury to consider increasing headline rates on tax and consider raising money by tax reform.
Baroness Kramer spoke about the pre-COVID-19 budget and the cost of political popularity, and suggested that the Government will have to cut back on its commitments in order to deal with the crisis.
“This is a real lesson, be careful what you promise”.
Gary Richards suggested that tax cuts should be directed to the lower paid.
So where do we go from here? As the speakers have suggested, COVID-19 has accelerated the UK faster into the fourth industrial revolution and has changed the way we work. Though going forwards, there is an opportunity to lean into technology and invest in the UK’s businesses of the future, like our start-ups.