Working Tax Credit is a kind of reverse income tax that you should get if your household income falls below a certain level. For the newly self-employed it provides a useful safety net, as it means you know your income won’t fall to zero even if your net profit does. In the early stages of a new business this is very reassuring, as the risk of low or negative income from the startup is real.

Since the 50-plus element is only available to those who are returning to work after previously being on benefit it seems a very odd thing to cut. And it won’t save much for the public purse, since you’ve only ever been able to claim it for your first 12 months back in work. After that it ceases automatically anyway.

The Chancellor hopes to save £35 million in the tax year 2012-2013 by this measure, and £40 million a year thereafter.

Lets’s hope all of this money returns in some way to those striving to get themselves back into work by their own efforts. It’s a very strange thing to remove one of the few forms of financial assistance that was already well-targeted at those actively trying to work themselves off welfare dependency.

On a more positive note the Chancellor announced that the personal income tax allowance is to rise from April 2011 by £1,000 to £7,475, removing some 880,000 people on the lowest incomes from having to pay income tax at all. Eventually he hopes to raise the allowance to £10,000, but gave no definite date.

This measure should help many self-employed people, since most are set up as sole traders and are taxed primarily through income tax, filling in the self-employed self-assessment form.

There’s more about the budget on the resources area on PRIME’s other web site, PRIME Business Club.

Working Tax Credit - current maximum rates per year
(what you actually receive tapers off as your income rises. The Chancellor has also changed the taper “withdrawal rate” too, up two per cent to 41 per cent, so in future you will lose money faster).

 
Latest Working Tax Credit rates and thresholds

Full budget report on HM Treasury site (as big PDF) Stuff about ending the 50-plus back-to-work element is budget policy decision 41 in table 2.1 on page 48.

My fellow expert, Dan Hyde, the pensions reporter on www.thisismoney.co.uk, found himself, against his better judgement, defending the pensions industry. My other co-expert, Frances Fay (www.francesfay.co.uk), author of the Good Retirement Guide found herself under attack with the familiar line “It’s alright for you”. I was luckier thanks to a jaunty octogenarian who had created his own business driving trucks around and was clearly loving it.

But just when you leave the bus-stop three buses going to your destination pass you by. Immediately after the programme three pieces of research on pensions self-presented on my computer screen.
The first was reported in the Mature Times. Retirement specialist Partnership reported that 77 per cent of all the annuities they dealt with were for pension pots of around £30,000. This would buy £40 per week to top up the state pension of £97.65 (assuming you were entitled to it all – many women now in the 50s are not). This is roughly a quarter of the UK average male and female wage of £500 per week. No wonder the callers to BBC Radio Scotland complained!

But then came Ernst & Young’s report for the 2020 Public Service Trust at the RSA entitled “The Deficit: A longer Term View” http://www.2020publicservicestrust.org/publications/
Basically they were saying that an ageing population along with the cost of climate change and three other public expenditure drivers would ensure that the UK had an unsustainable budget deficit. If I understood the argument, the cost of state pensions and welfare for an ageing population, alongside the other public expenditure drivers, would mean that the UK had to borrow more and more from the money markets because we would not be able to meet the budget deficit from higher taxes or public expenditure cuts. The message is that unless we start to make difficult choices, “we’re doomed”.

Then up pops a message from the International Longevity Centre with a research review on the future of retirement (http://www.ilcuk.org.uk/). The review reported on a survey of 280 people aged 50 – 69, finding that of those above SPA (state pension age) and still working, one in three was self-employed. However only 56 per cent of the self-employed had a pension compared to 72 per cent of those who had been or were employees. What is clear is that the self-employed retire much later. This accords with PRIME’s own anecdotal evidence.
What do we make of all this? Well in my view the chances of improved pensions over the next decade or so are just about zilch. If anything there will be continued pressure to keep the state pension as low as possible. Just raising the retirement age is not going to help – already almost one person in three between the ages of 50 and SPA is workless. Pretending people are able to work longer is a self-delusion.

As a nation we need to change our view of older people and their contribution to the labour market. If we want to help older people to continue to be active in the labour market, increase individual and national wealth and reduce the cost of an ageing population, we just have to invest in self-employment support for older people.

The old hands of the business-support industry label this “The Three Cs” ….. meaning that you expensively close the old organisation, then open up a new organisation across the road, rehiring the same staff but buying new Carpets, Curtains and Computers each time.
 
So what would I do if I was in charge?
 
Here are a three ideas:
 

1. Move to three UK providers.

At the moment, England puts most of its investment into one monolithic system: Business Link. This, like the UK’s education system, is in a state of constant change. Business Link was originally split into 82 units, each of which invented its own business-support systems (commissioning unique software, etc). Once these 82 were running smoothly, the 82 were scrapped in favour of nine units, with nine different systems this time, all run “by the private sector” (i.e. by short-term contractors) but all answering to one central set of objectives and metrics.

Meanwhile Wales and Scotland have each invented their own systems for business support, and have similarly changed these countless times.

This tinkering will never cease, because Soviet-style central planning will always lead to disappointment and yet another attempt at a new central plan by the next politician in charge.
 
Now ask yourself, why are the UK supermarkets so brilliant at giving the customer what the customer wants? It is because Tesco, Sainsburys and Asda compete to win customers. They find out what customers really want, then provide it cost-effectively to every town in the UK. (Hmmn, I can sense some readers’ hackles rising as I write this bit… )
 
We need a similar set-up in business support. I can imagine three or four companies (such as Serco and Exemplas) becoming superb as a result of such intense national competition. Rather then creating regional monopolies, we need a handful of national competitors which are rewarded in line with their success. How would I measure success? No room to explain it all here, but I believe that we could come up with a better system than the current one.
 

2. Mandate these big providers to use small suppliers

I never cease to be bowled over by the dynamism of the small business sector. These guys are truly hungry! The same goes for some of the smaller charities. It’s often a case of delivering excellent service or having no job next year.
 
And while public sector procurement is hugely biased in favour of (low risk) large suppliers, private sector procurement is far more open to small businesses.
 
When I think of training courses, or mentoring programmes, or websites , or online tools, or back-office systems, I can  always think of a small supplier who would be excellent… especially if they were given the chance to supply a national organisation (as proposed above) over a long period of time.
 
In fact I can imagine both the national business support providers and their small suppliers becoming world class, and supplying overseas customers, just as our private schools and leading universities educate students from around the world.
 

3. Encourage online suppliers

I count myself very lucky, as my company is one of the two main publishers behind the business advice on the massively successful www.businesslink.gov.uk website.
 
But this website leaves precious little room in the marketplace for the private sector websites. I think it should proactively partner with the private sector and I would include our own specialist websites in the list www.startupdonut.co.uk, www.marketingdonut.co.uk and www.lawdonut.co.uk.
 

Rory MccGwire is founder and Chief Executive of BHP Information Solutions.

If you are as interested as I am in the whole issue of how best to organise this country’s business support, you may also be interested in my blogs on this theme on the Startup Donut website:

Business regulation

Have your say! Business support – Part 1

Have your say! Business support – Part 2

Have your say! Business support – Part 3

These are short but practical workshops that will be invaluable for any person or organisation that is helping their local community.  Meeting the needs of people with long-term health conditions or disabilities need not be difficult or expensive.  The straightforward approach and information helps de-mystify the law and shows how your organisation can reach every part of the community.

The workshops will cover:

The workshops are aimed at anyone who delivers services to the public - whether voluntary or charitable activities, private or public sectors.

The workshops will be held at the Winding Wheel in Chesterfield on:

29 June - 1300 - 1600 or 30 June - 1000 - 1300.

Tea and coffee will be provided plus a full set of handouts.

There is no charge for the workshops which are funded by the Chesterfield Borough Council Working Neighbourhoods Fund.

To book a place, please contact Theresa by:

• Phone: 01329 841814.
• E-mail: theresa@disabilitydynamics.co.uk
• Post: 25 Catisfield Road, Fareham, Hampshire.  PO15 5LP.

Places are limited so please book early.

For more information about Disability Dynamics, visit www.disabilitydynamics.co.uk/

The official statements 24 May 2010

Jobs and Welfare
http://programmeforgovernment.hmg.gov.uk/jobs-and-welfare/

Key points seem to be: a new “Work for Yourself” programme to encourage self-employment with loans and mentoring, new locally-based Work Clubs for conventional job seekers, and a promise of faster access to back-to-work programmes for those facing the biggest barriers.
On the last point, currently those unemployed and over 50 normally have to wait at least six months before getting on a government-sponsored self-employment programme.

Business
http://programmeforgovernment.hmg.gov.uk/business/

No real detail here, but several interesting commitments. Some (unspecified) RDAs are likely to be replaced by local authority-led “Local Enterprise Partnerships”, the IR35 self-employment tax ruling will be replaced with something less hostile to genuine small businesses, and more government tenders will go online with an “aspiration” that 25% of government contracts will eventually go to small and medium-sized businesses.

Detail on corporation tax rate changes that could well affect older entrepreneurs wanting to sell up to move into retirement are still to come.

Pensions and Older People
http://programmeforgovernment.hmg.gov.uk/pensions-and-older-people/
The default retirement age will go, while the state pension age probably will increase to 66 - but not before 2016.

Conservative position before the election

“Our ‘Work for Yourself’ programme will help move people into self-employment. We will build a network of business mentors and offer substantial loans to would-be entrepreneurs, supporting self-employment and franchising as a route back into work. We will work with specialist organisations that already have a proven track record in this area, like the Prince’s Trust and the Bright Ideas Trust, to offer the best support.”

For getting workless people back into ordinary jobs (as opposed to their own self-employed businesses) the Conservatives were talking about a mixture of “Service Academies” for particular employment sectors and small locally-based job clubs. This ideas still seem to be going forward, but no new detail has emerged.

Future of RDAs

While the Conservatives have long been sceptical about the value of England’s nine Regional Development Agencies in promoting prosperity and economic growth, the man who now has the top job at the department that funds them is Liberal Democrat Vince Cable, 67.

But he wasn’t a great fan of the RDAs either. Before the election he explicitly questioned the value of having them at all in the South East and the East of England, but suggested they might have role where structural unemployment is still a problem.

The form of words used in today’s statement suggests RDAs could possibly survive in areas where they can show they are popular - and in particular if they are supported by the local authorities in their region. But that the presumption now is that many will go.

In England local authorities are elected by the people. The big weakness of the RDAs is that despite spending large amounts of tax payers money they are not elected, and with the single exception of the London Development Agency they have very little democratic accountability.

So with spending cuts now a priority they have few allies to defend them. It seems local authorities will increasingly take over any functions that are deemed worth keeping.

This will move England closer to the Scottish position, where the elected local authorities already take on more business promotion and economic development functions.

Most relevant new ministers

DWP
Secretary of State for Work and Pensions – Rt Hon Iain Duncan Smith MP
Minister of State – Chris Grayling MP
Minister of State – Steve Webb MP
Parliamentary Under Secretary of State – Maria Miller MP
Parliamentary Under Secretary of State (Minister for Welfare Reform) – Lord Freud
(What do they all do? More details may be posted on the DWP site later:
http://www.dwp.gov.uk/about-dwp/ministers/ )

BIS
Secretary of State for Business, Innovation and Skills – Dr Vincent Cable MP
Minister of State – Mark Prisk MP

Other relevant departments
Secretary of State for Communities and Local Government – Eric Pickles MP
Secretary of State for the Home Department and Minister for Women and Equalities – Rt Hon Theresa May MP
Secretary of State for Education – Michael Gove MP

You can find the relevant discussion paper here (as a PDF download) and the analysis can be found here.

PRIME would like to highlight three things:

(i) The Discussion Paper invites your input by the 30th June 2010. This is your opportunity to say what you think is important.

(ii) For the first time a paper published by the government states that almost one person in three between the ages of fifty and state pension age is currently out of work. This needs to be emblazoned from the tree-tops to counter some of the knee-jerk media response to unemployment statistics.

(iii) Self-employment for the over 50s is featured as an important labour market response. Olderpreneurship is not seen as a rather quirky side issue, but an important part of the future economy.

(iv) Wow. Someone has been listening.

Jobcentre itself does not actually run these programmes, but instead contracts them out to mainly private providers. The bulk of the work is carried out by a mixture of private companies and some “third sector” non-profits. PRIME itself has sometimes been a provider in such schemes, so we know what they are like.

Most of the organisations involved, whether private or charitable, are actually looking to make a profit or surplus on providing such services. Payment to the providers is usually by results in some way. They receive a portion of the money up-front when they start training or helping a person, but the majority later - when the trainee achieves some target outcome, like ceasing to claim benefit or staying in a job for three months.

This all sounds pretty efficient, but there are some potential problems with this model. The Committee has drawn attention to them in its report - and found some evidence that bad things are happening.

Basically providers have a financial incentive to concentrate their efforts on the candidates most likely to succeed - in the words of the report to “cream off” the people most likely to help them attain their targets. Meanwhile those the provider thinks are not likely to end up giving them good or profitable outcomes are at risk of being simply “parked” - i.e. minimal effort is expended on them.

This is indeed a real risk, and it is likely that future back-to-work schemes, whichever flavour of government is in power, are likely now to follow some payment by results model. The Committee is to be congratulated on drawing attention to the problems that can result. The solution, if there is one, is to police the contracts more effectively, and perhaps to broaden the range of rewarded outcomes, so that all who go on these programmes get a fair crack of the whip.

Extract from report below.
Full report at the Parliament web site - HTML version (browsable) or PDF version.

Creaming and Parking

100. Providers are increasingly being paid by results, on the basis of the number of customers moving into work, rather than a flat fee. There are two particular risks associated with this approach. The first is that of ‘creaming’, where contractors who are paid by results are likely to concentrate their efforts on those participants who are closest to the labour market and more easily placed in a job. The second is that of “parking” where participants who are deemed furthest from the labour market will receive a bare minimum of services and are unlikely to make any progress whilst participating in a programme. In this way providers seek to maximise their profit, focusing on customers who will earn them outcome payments, while spending as little as possible on customers who will not.

101. There is evidence that creaming and parking is taking place in the Pathways to Work programme. Research by the Department found that provider staff felt that the focus on performance targets influenced their behaviour with clients, to the extent that they spent less time than required with people with multiple barriers to work (and perceived as harder to help). They also felt that they needed to encourage job ready clients to take jobs that would enable a swift return to work, rather than take lengthier routes towards jobs that they wanted.

102. In addition, most providers who took part in the research perceived that clients were, on the whole, harder to help than they had anticipated and some staff expressed concerns that this had also led to job outcome targets being prioritised ahead of clients’ well being and ability to sustain employment.

from p28, section 4, Vulnerable Groups in The House of Commons Work and Pensions Committee - Fourth Report Management and Administration of Contracted Employment Programmes

Here are some examples.

The Genesis Senate - Britain’s Economic Revival through micro, small and and medium-sized businesses

SFEDI (The Small Firms Enterprise Development Initiative) - Making self employment and micro enterprise a viable income opportunity for all

NFEA (National Federation of Enterprise Agencies) - Enterprise, the Economy and Society

And there are more.

What they all have in common is a view that enterprise will be critical to coming out of the recession, and start-up support, advice and mentoring should be available to a far wider range of people than is currently the case. They all want to see enterprise as an equal and integral part of Welfare to Work and better advertising of enterprise opportunities in Jobcentre Plus. And they all want to see finance to start a business available to a wider range of people.

Well, PRIME has been pre-empting the enterprise manifestos.

We now have a PRIME 50+ self-employment flyer in every Jobcentre Plus in England and Scotland, and now over one third of our enquiries are from people reading about PRIME and self-employment in Jobcentre Plus.

We have a sub-contract or agreement with a major contractor in every Flexible New Deal area in England and Scotland under the first phase and we have been working hard to ensure we are in every area in the second phase. We are currently awaiting the announcement on the second phase major contractors. This means for the over 50s, self-employment and enterprise will be a key option in Welfare the Work.

We recently launched our mentoring scheme for people just starting out on their enterprise journey in Bristol, Newcastle and Belfast. We have worked closely with Her Majesty’s Revenue and Customs to train volunteer mentors and they are available now. We will be adding new areas as we roll out the scheme across the country.

And yes, we have the PRIME-Zopa olderpreneur loan scheme.

All the parties are busy telling us how they will get people back into employment and off the dole queue. They have to realise that creating the jobs comes first, and that means putting enterprise first. Without a growth in new businesses, and therefore in new jobs, the best laid welfare to work plans are doomed to failure. So the issues raised in the enterprise manifestos need to be given pride of place in each political party manifesto.

I wonder if they will.

This is on the official unemployment count. The official count includes only those out of work who are claiming Jobseekers Allowance, making it fairly inaccurate for both younger and older workers.  Younger workers disappear off the figures if they go back into education, while older workers stop being counted if they go onto health-related benefits - which many more over 50s are on than Jobseekers Allowance.

Nonetheless the official figures do provide an indication of whether the trend in unemployment is up or down. The trend now is still bad for the over 50s.

According to PRIME’s Peter Bennie, quoted in The Times, “It used to be that around 14 per cent of Jobseekers Allowance claimants were over 50. But in some towns and cities that figure is now at 35 or 36 per cent.”

The Times also talked to James O’Grady, 53, who lost his sales job last year and has just gone self-employed. And it talked to a younger jobseeker, an 18-year-old now on an apprentice scheme.

Full Times article on Age barriers to getting a job

ABSTRACT This paper summarises the ways in which the recession has impacted on the older (50+) workforce, comparing ONS data for different age cohorts since August 2008 – the point where the UK was entering recession and marked differences in the impact on these age cohorts started to appear. The data is drawn from ONS Labour Market Statistical Bulletins from October 2008 to February 2010, which provides figures from August 2008 to January 2010.

The scheme is the latest stage of Backing Young Britain, an even larger campaign launched back in July. Initially the emphasis was on apprenticeships, work experience and internships.

The mentoring offer has only just kicked off. The main money is coming from the Department for Work and Pensions. Companies contribute volunteer mentors, who get trained for free at taxpayers’ expense.

So it’s a well-thought-out scheme. Shame there’s nothing similar for older people.

Meanwhile here at PRIME we are starting our own more modest mentoring scheme for older people thinking about going into self-employment. These programmes do cost something to run even with volunteers as you need to vet and train the mentors, and then publicise what you are doing so the right people get to hear about it.

Fortunately as a charity we’re not completely without supporters. As yet we haven’t quite managed to get 150 organisations on board to back the mentoring project, but we have got two. Bank of America Charitable Foundation is providing the money and HMRC are first in with a team of volunteers.

Bristol is the first city to go live. We’ll be adding two more later this month.

If you want more details about getting mentoring support for yourself then contact PRIME’s Mentoring Manager Harri Harrison at harri.harrison@ace.org.uk . He’s also your man if you are an organisation that has some volunteer mentors to offer.

Get yourself a PRIME mentor in Bristol

Welcome to PRIME Business Club’s March 2010 newsletter.

You are receiving this entirely free because you contacted PRIME, the charity set up by Prince Charles, about starting your own business.

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In this issue
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1. Get a FREE business check-up

2. FREE eight day course for over-45 Londoners

3. Could you become a PRIME online mentor?

4. Newsletter controls

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1. Get a FREE business check-up
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PRIME has teamed up with UK business set-up specialist Clever Gecko to offer our members a FREE health check for their businesses.

Business Doctor is predominately aimed at those people who have already started and would just like some advice on how they are doing. The check-up will give you an opportunity to discuss any concerns you may have but also for the Doctor to highlight issues that may not be obvious to you.

If you are still just contemplating starting your own business then Business Doctor can still help by assessing your business idea for viability

To find out more and to take up the offer go to:
www.primebusinessclub.co.uk/category/offers/

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2. FREE eight day course for over-45 Londoners
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The Centre for Micro Enterprise, a unit within London Metropolitan University has funding to support a small number of people over the age of 45 who want to go self-employed.

Places on the course will be offered on a first come-first served basis. You must have a London postcode to be eligible.

They are offering an eight day programme delivered one day a week over eight weeks. The course is designed to help you to develop your skills to enable you to set up your own business

To find out more go to:
www.primebusinessclub.co.uk/2010/02/26/free-eight-day-course-over-45-londoners/

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3. Could you become a PRIME online mentor?
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Have you already experienced the challenge of setting up your own business? Would you be prepared to share your experience as a PRIME mentor?

Mentoring online can be the perfect way to share your hard earned wisdom with those who can benefit from your experience and knowledge, all in an interesting online environment.

To find out more go to: www.primebusinessclub.co.uk/category/volunteer/

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4. Newsletter controls
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