The Chancellor waffled on about the millions of new companies created in the past ten years, yet these ‘new’ companies are simply a legal re-branding: sole-traders and partnerships that have become companies for tax reasons alone. If you look at the data for total UK businesses, there is a surge in the proportion of companies and a matching decline in sole traders and partnerships since 1997. But nothing real has gone on here; Brown’s and Darling’s new companies are simply the same old businesses re-branded but having to jump through a whole set of administrative hoops to take advantage of the 0 and 10 per cent starting rates for companies introduced in 2000 but recently removed.
Darling’s promise to give 30 per cent of government contracts to small firms is symptomatic of this obsession with definitions. By all means look at the tenders of small firms, but give the contract to the most efficient firm. Firms should not be in business for tax reasons but for the quality of their services, products and ideas. Their size should be determined by economic factors beyond the control of the government.