Entrepreneurs need a free market, not student loan giveaways from Jeremy Hunt
Entrepreneurs are a frequent component of a politician’s stump speech. MPs love to boast about their regard for job creators.
Regardless of which end of the political spectrum you’re on, if you put any importance on healthy economic growth, you know that these people are vital to our success.
But for all the lip service politicians pay to entrepreneurs, their business policies tend to create a more regulated, restrictive market, which makes it increasingly difficult for new guys and gals on the block to break in.
The latest example of this is Jeremy Hunt, who is trying to inch ahead in the Tory leadership race by positioning himself as the pro-business candidate. First he pledged to cut corporation tax – taking it down to 12.5 per cent.
Then yesterday, Hunt promised to relieve successful entrepreneurs of their student debt, waiving loan repayments for graduates who start a company that employs more than 10 people for at least five years.
While Hunt’s corporation tax cut makes lots of economic sense (it is estimated that over 50 per cent of this tax comes out of workers’ wages, and it hinders the UK from competing for business from around the world), his new plan misses the mark.
Tuition fees are inherently progressive. Those who don’t attend university should not have to pay for the experience of those who do, especially as the latter are likely to be higher earners later on in life.
The fees, which do not have to be paid upfront and are only repaid when the graduate is earning a certain amount, haven’t put off low-income students from going to university. In fact, teenagers from the most deprived areas of the UK are steadily becoming better represented on university campuses.
If Hunt’s concern is that young people might put off starting a business because of concern over debt, he should be promoting a graduate tax, which would see graduates paying an earnings levy to their university, rather than taking out loans before their studies.
Instead, he has proposed a convoluted scheme that raises a host of questions. What if the graduate’s company receives state subsidies? Does it need to make a profit? Can you simply employ your friends, on low salaries, and reap the benefits?
And would this policy even apply to today’s budding tycoons? Steve Jobs, Mark Zuckerberg, Bill Gates, and dozens more of the most successful founders dropped out of university to build their businesses, recognising that a degree wasn’t a key ingredient to their success.
Besides, Hunt’s policy won’t make any meaningful difference to effective industrialists. A successful entrepreneur will not need to worry about their loan repayments.
They will, however, need to worry about business rates, corporation tax, mounting red tape, overly complex wage-setting rules, and campaigns by more established firms (sometimes backed up by politicians) to keep them out of the market.
If Hunt is serious about pursuing a pro-growth agenda, by raising more revenue through the creation of new businesses, he needs to create an environment in which these businesses can actually thrive.
Entrepreneurs don’t need giveaways. They need a genuinely free market to operate in, which allows them, through merit, to succeed or fail on fair grounds.