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March 15, 2011

Cameron to Enterprise “Maximum warp, Engage!.. please?”

In this second article on the development of low-carbon motorsport, Azhar Hussain says David Cameron's attack on bureaucrats completely missed the point. It's mindset, not regulations, that are blocking the road to environmental enterprise.

PM David Cameron in a speech to the party faithful declared war on the “enemies of enterprise”. Listening from the trenches, sadly it recalled Blackadder Goes Forth: less Picard and too much Melchett.

The country needs a reboot and Cameron may well be the leader to do it. But, speaking as foot soldier, there seems a glaring disconnect between the grand vision and the facts on the ground.

He highlighted regulations and bureaucrats as the pain in the process for SME engagement. But Cameron may be focussing on the macguffin in lieu of the actual antagonist. The real enemy within is our cultural mindset.

Cameron may have been thinking about the US and its incredible ability to innovate and spark industries. But anybody who has done any business there will readily admit the myriad layers of bureaucracy, jurisdictions and regulations that exist to get anything done. Despite all that, the US still allowed a Silicon Valley to take root and to thrive as a model that everybody tries to emulate. The reason, I have found, is a passion born of incredible optimism that permeates every facet of American culture. “It could be you” is more than a punch line, it’s a religion.

To this foot soldier, the smarter strategy would be not to focus on special schemes for SMEs but rather create an environment where the focus is on the outcome rather than the method. Stop trying to prescribe innovation.  Inevitably it will be the nimble, the smart and the driven who best thrive in that environment, and these are overwhelmingly SMEs. The constant desire to define what enterprise looks like by those often least skilled to do so is what’s holding us back.

A good example of missed opportunity is the Plug-In Car (PIC) grant run by the Office for Low Emission Vehicles (OLEV) from within the Department of Transport.

From Jan 2011, this awards up to £5,000 to those who choose to buy a low-emission car. It was designed to encourage the supply and adoption of low emission vehicles. But in the end, it will have little lasting impact as its beneficiaries will be mainly global mega-corporations whose behaviour was not affected one volt by the availability of the PIC grant.

PIC is restricted to four-wheel vehicles only, so if you need two-wheels then you are out of luck. Perversely not only are two-wheels an incredible export opportunity but they are also the most ready to deliver a truly zero-emission experience for the vast majority of customer miles. But this PIC does nothing to address that. It effectively eliminates those without dedicated parking space with power.  That actually happens to be most of us.

Conversions of existing cars are excluded from PIC too, denying the opportunity for small enterprises to create innovations and seed a new market. It seems clear that, before we all rush out to buy an e-something, it would be pretty profitable to pioneer technologies, skills and distribution models to start chipping away at the estimated 600 million cars that are already on the road. This grant does nothing to encourage that.

In the end the PIC only benefits the giants of today—Mercedes, GM, Toyota and the rest—who can do little to encourage the kind of enterprise that Cameron was pointing at. These guys will be just fine whatever the Government does. Even if that meant no PIC at all.

This government has carried over Labour's PIC grant even though it seems to have been created by the very “...bureaucrats in government departments who concoct those ridiculous rules and regulations that make life impossible for small firms” that Cameron highlighted in his speech. But highlighting the PIC grant only leads us to a broader issue, which is that we are just not as culturally geared up to have a go as we think we are. We are so scared of failure that we constantly revert to the status quo in the mistaken belief that this is the safe option.

The UK, in contrast, is at its heart a PAYE nation and sees enterprise as an exotic occupation. We have never really embraced the idea that celebrating failure is a necessary step to building a successful enterprise.  So we create processes to avoid failure but instead stifle innovation and fresh thinking.  This leads to the rush to the familiar which basically means go with the big brand.  If you want to encourage growth in the SME sector, then change the mindset.

It’s not regulation per se that’s the issue.  We soldiers need to be regulated.  Just look at the bankers to see what deregulated and unchecked soldiers can do.  The last thing we need or should want is to have regulations removed.  Removing blanket regulations will only entrench the enemy of the enterprise even deeper into the order of battle.

What we need is smart regulation. Regulations that create a healthy tension in which enterprise can be born.  It’s the prescriptive nature of government intervention that is failing the SMEs.

Here’s some ideas. Eliminate CO2 bands for road tax and move to a fixed £/unit of CO2 g/km emission linked to inflation. Build in multipliers so that the relationship is non-linear between the tax rate and the vehicle CO2 emissions: that is, the higher emissions, the faster the tax accelerates. Now comes the tension part: offer matched funding on a per-CO2-unit basis to consumers to install technology that will reduce emissions. Sit back and watch the enterprise slay its enemies. It’ll be glorious.

Blackadder once observed. "There was a tiny flaw in the plan. It was bollocks.” He might have been reminded of that again, sitting in the audience watching Cameron do his Henry V.

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