Luke Johnson: Give enterprise a chance

Our tame entrepreneur takes Companies House to task - and explains why business might provide the answer to the Government's education problems.

by Luke Johnson
Last Updated: 01 Mar 2011

I have taken fewer holidays abroad in recent years. This is partly because we now have three children under six, so travelling anywhere has become a major undertaking; but also because holidays so often seem uncomfortable, boring, bad value and generally unsatisfactory.

In some ways, the vacation industry is in the disappointment business. There are crowds, delays, indignities at airports and, frequently, poor weather, as well as the irritations of daily rip-offs, inconveniences, jet lag and so forth. I hate playing the tourist, and find that being in a resort - which is meant to be a relaxing experience - is often more stressful than staying at home.

The great advantage of remaining in London, rather than getting sunburnt on a foreign beach, is that one can be more productive. For me, one of the results is that last year I wrote a book called Start It Up, which will be published by Penguin later this year. It's a guide to entrepreneurship for those who want to break free of corporate life and run their own business. I'll be promot-ing it through a series of talks, a website and a PR campaign.

Like most forms of authorship these days, writing the book was not exactly a for-profit enterprise, but I did it because I believe in the cause. Look out for it on Amazon, and other places where books are sold.

One of the arms of government that virtually all British entrepreneurs have to deal with is Companies House. This self-important body seems to me to be a job-creation scheme for Wales, Scotland and Northern Ireland, specifically designed to burden the private sector for little practical purpose. We impose a greater disclosure obligation on private enterprises than any other country on earth - but to what end?

The private sector must file a total of almost 10 million documents a year with Companies House, and pay over £65m for the privilege. The man-hours spent by businesses compiling such stuff must run into billions. What a colossal waste of energy! All in the name of nebulous concepts like 'disclosure', 'transparency' and 'governance'.

Companies House kids itself that it has 'customers' and that it is engaged in 'helping business', claiming that its activities are 'benefiting the economy'. Only civil servants who have never run a business or had to pay these endless charges could have dreamt up such doublespeak.

In the real world, customers have a choice and get something in exchange for their money: but if a firm fails to adhere to the endless requirements supervised by Companies House, the penalties are draconian - and these bureaucrats are super-efficient at dishing them out. Meanwhile, the Rules and Powers of the registrar who runs the place are terrifying. No wonder he has a personal pension pot (assembled with our money) of almost £700,000.

The whole exercise is just another bureaucratic expense and distraction for hard-pressed small companies. The Coalition should carry out a rigorous cost-benefit analysis to fairly decide if all the demands of Companies House do create value. My view is it's a pedantic value-destroyer whose scale and remit should be substantially downsized.

I write this with some feeling, because the drones there have told us that we are forbidden from using the word 'Institute' for our non-profit think-tank for entrepreneurs. Apparently, you cannot use the word unless you are an organisation of the 'highest standing' - but what do you call yourself to gain such standing in the first place if you cannot use the word? A classic Catch 22.

No doubt Companies House disapproves of entrepreneurs - even though, without them, the bureaucrats in Cardiff would have nothing to do, and no fees to pay for their handsome pensions.

State education is too important to be left to local authorities. Our country's future prosperity depends on us finding ways to teach our children more effectively.

I was lucky enough to be taught in a grammar school, but those were largely destroyed by hypocritical characters like Baroness Shirley Williams (public school educated, of course). Now, at least, new suppliers are being encouraged by go-ahead minister Michael Gove to come and manage schools - including charities, social enterprises and perhaps even for-profit businesses.

All the research suggests that what really matters is not so much the buildings or the facilities as the quality of the teachers. At the heart of the schools revolution is the idea that independent providers can reinvent the ways in which staff are recruited, retained and incentivised, and at the same time do away with national pay awards, negotiated by unions. Charter schools in the US have shown that new systems, free from unions and bureaucrats, can produce better results.

I am keen that the Royal Society of Arts, which I chair, should champion a family of academies under the proposed legislation. We already sponsor one successful secondary school in Tipton, in the West Midlands.

This Government's educational endeavour is perhaps the single most important initiative in the Tory manifesto. I hope they are sufficiently bold to carry it through, and that they receive adequate support from enough quarters for it to take hold.

The stakes are high: a recent OECD PISA study, the highly authoritative international ranking of students for reading, maths and science, placed the UK in 25th place. Shanghai was first. Unless we improve our schools dramatically, we are doomed to a relentless relative decline - economically, intellectually and culturally.

Luke Johnson is chairman of Risk Capital Partners

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