Labour’s small business focus and their problem with it

Liam Hehir has identified a problem with Labour’s focus on small business.

It is obvious, their complete lack of talent in their caucus of anyone who has run a small business…and of course their spokesperson who has only ever written a few papers while interning in the House of Commons a few years back.

It was encouraging to see Andrew Little push his party to update its definition of working people beyond the narrow paradigm of the cloth-capped worker on the assembly line.

The man has a pretty good chance of being New Zealand’s next prime minister, after all, so it’s good to see him take a realistic view of work in the modern economy.

One difficulty he might have is that his caucus remains light on small and medium-sized business experience. There are only a few members of the caucus, for example, who will have an understanding of what it actually means to grapple with GST, manage debtors, meet payroll and personally bear the costs of regulatory requirements. These are unique pressures that you don’t get as an employee of the state or working in a large company.

I have always liked the story of how former United States senator and Democratic presidential nominee George McGovern came to appreciate this. After losing a re-election in the Republican wave election of 1980, McGovern needed something to do in his retirement years. Having long held an interest in hospitality, he decided to use his savings to buy a small hotel and conference facility in Stratford, Connecticut.

It was not long before a terrible truth dawned on McGovern: being a small businessman was much, much harder than it looked when he was a history professor and a politician. His business went under in less than three years. Most of McGovern’s savings went with it.

In the years that followed, McGovern often wrote about his business failure with great intellectual honesty. He said a big part of the reason his business went bust was that the costs of complying with tightening health and safety requirements had become crippling. Complicated tax rules and business regulations also meant that hotel management had to dedicate a lot of time to form-filling and reporting to various agencies. That left less time to spend actually running and promoting the hotel so that it could attract paying customers.

This is important. The problem is Andrew Little has stated that the one major help to small business in New Zealand, the 90 Day bill, will be repealed, harming small business not helping it.

Labour needs to ditch that policy forthwith if they are truly to be taken seriously on small business.

Will Labour’s and Little’s union backers allow that?

Hehir continues with the McGovern theme.

He also validated two concepts that people drawing a salary from the state or large corporations could sometimes struggle to comprehend.

First, the culture of bureaucracy and compliance hits small businesses particularly hard.

Many of the health and safety requirements that dragged his hotel under were easily absorbed by the established luxury hotels in New York. This was not so for smaller businesses operating in price-sensitive, provincial markets.

Second, many regulations designed to protect employees end up hurting those working for smaller enterprises. When his business failed, McGovern took comfort in the fact he could always make money on the lecture circuit. “But what about the 60 people who worked for me in Stratford?” he asked. “While running my struggling hotel, I never once missed a payroll. What happens to the people who counted on that, and to their families and community, when an owner goes under?”

That real sense of anguish and personal responsibility can come only from bitter experience. It’s not something that a bachelor of arts followed by a career in the public service can prepare you for.

McGovern didn’t become a Right-winger as a result of all this. He did, however, lament the fact that he only learned what small business people go through after leaving politics. He wrote that, had he been armed with this knowledge before going into public life, he would have made “a better US senator and a more understanding presidential contender”.

Oh, well. Better late than never, right? Except that McGovern’s epiphany was too late for him to be able to do anything about it (other than letting the experience serve as a useful parable).

Will Andrew Little have an epiphany? Is he capable of such a thing?

Or will he stick to his union dogma?

We can’t possibly know because all Andrew Little or Jacinda Ardern have delivered is bumper sticker slogans and zero policy.

Does Andrew Little really have the stones to look at regulatory reform and removing silly barriers to small business? I suspect not, his example of what works well was from mega business Fonterra, which shows just how out of touch he is with the tradies, the multitude of employers with less than 50 workers and other businesses beset with compliance costs that large companies just soak up.

Is Little prepared to reduce company tax and remove FBT for small businesses? Somehow I doubt it.

Perhaps the single best thing Labour could do is declare a small business crisis…that is the only thing that ever seems to work.

Switching back to Little’s speech, a more concrete step in this direction would be for him to use his influence as leader to promote diversity within his party. I am not referring to matters like gender or ethnicity. Those are things Labour thinks a great deal about.

What I mean is that Labour would do well to make an effort to ensure entrepreneurs have a higher public role in the party – including higher rankings within caucus.

We’re not talking plutocrats here, but those everyday business owners with fewer than 50 employees. Collectively, these people employ an enormous number of New Zealanders, often risking their livelihoods in doing so.

They also suffer under inflexible and overly prescriptive business laws and would have borne the brunt under a David Cunliffe administration.

When it comes to speechifying, Little has made a good start.

Let’s see whether the delivery keeps up with the rhetoric.

We aren’t talking about corporate bludgers either like Selwyn Pellett.

So far all we ahve is bumper stickers…if policy doesn’t turn up soon then that’s all they’ve got, but then again with a caucus whose talent is as shallow as a bird bath and list that isn’t much better we really shouldn’t expect that much.

 

– Manawatu Standard

 

 


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  • Sagacious Blonde

    It’s always interesting to watch someone’s ideology change once they start running their own small business – the late Sir Paul Holmes was an example.

  • hookerphil

    “The man has a pretty good chance of being New Zealand’s next prime minister,’ Really?

  • Aucky

    If Little is serious he has to retain the 90 day clause and put initiatives in place that make running small businesses even easier.

    So many people who run small businesses are former core Labour voters – phone technicians, courier drivers, franchisees, shuttle drivers,TV servicemen are all doing their own thing now because it works for them and it works for the big companies that used to employ them. It won’t change either because the system works for both parties and new immigrants from Asia and India want their own business no matter how small because it’s part of their psyche.

    Your call Andrew but you’ll never get to be PM unless you can deliver to small business – they form a very significant part of your missing million.

  • The Accountant

    The problem for the unionist is that they have an inherent distrust of all business. They can’t change the mindset between a business that has a thousand staff and a business that has less than 5. The expectation that owners want to be successful standing on the corpses of their staff is so ingrained they simply can’t change their mind when evaluating their approach. I can’t see that happening here either. Kudos for looking for somewhere to get traction with the public, but ability to deliver is non-existent.

  • Cadwallader

    Exactly most people mistrust what they don’t understand. In Little Angry’s case that would be much of the universe. In all honesty there is nobody in the Labour Caucus who I’d trust to invest a $ for me. They are fundamentally naive.

  • Positan

    “The man has a pretty good chance of being New Zealand’s next prime minister … ”

    I can’t imaging how. Little is essentially an opportunist who’s clawed his way to the top of his political mud-heap by dumping his organisational responsibilities in order to seize a political one. Significant damage to the Party would have been the easily foreseen result – and it was so.

    In addition, Little’s performance to date as leader of the opposition has been less than signal – and, on top of that, there’s discernible lack of any sort of competent talent in Labour’s caucus. So, whatever are the influences that could even remotely factor Little’s “good chance” of becoming prime minister?

  • I generally agree, but would be weary of introducing a special tax rate for ‘small businesses’. I’ve done the tax administration of that before and it just adds complexity to the situation (and for small businesses, that complexity ends up being time-consuming, frustrating, and expensive, as you end up with a number of tax avoidance provisions to stop abuse).

    • MaryLou

      But it’s so complicated now. You can’t BE the Courier, the salesman, the daily accountant and everything else. Paperwork is so time consuming and frankly IRD gives me the runnies. Everything has to get checked again and again.

      If it was simpler, we could get it done and move on. And make business better, and employ more people! Isn’t that a win for IRD as well as the people involved?

  • MaryLou

    So much of this is true it’s almost painful. And whilst it’s true of Andrew Little and Labour, a part of me feels that National has few people who actually understand small business as well. Big corporates are an entirely different beast – much easier to make 200 people you don’t know redundant than it is to make 5 people redundant when you work with them every day, know how they rely on their pay packet and how it will affect them.

    Likewise employment law – grounds for dismissal are huge. Every day we see cases come out of ERA decisions that make your hair curl. What politicians forget is that whilst going through this incredibly uneven process – your business is suffering, everybody’s job security is suffering, and so are the staff in a small office that have to watch it drag on.

    No – National needs to wake up as well. This is a parable for both party’s.

    • NZ 2014

      Go and ask some SME owners about the 90 day trial or not raising the minimum wage last year and see if they say yes which they will.

  • Diddle_De_Dee

    All Labour needs to do to create more small businesses is to force their outdated policies and beliefs onto big businesses and they will soon become small.

  • Sailor Sam

    But you all forget that Angry is already running a small business – the labour party.

    • Bunter

      Yes, but is it paying it’s way? Is it profitable? Can it pay it’s tax, GST and ACC levies. Do they comply with H&S standards etc etc etc. probably the answer is ‘yeah right!

      • MaryLou

        Isn’t there a slight problem with his ex-Union books?

        Edit spelling

        • Not Clinically Insane

          There certainly is with the Chief of Staff’s past….

  • NZ 2014

    This Labour party is dopey for instance during the last 2 elections they have proposed as part of their policy to improve NZ economically is to impose new taxes.
    This new rubbish about SME is a smokescreen, they wanted to raise the minimum wage last election and throw another burden on already struggling employers. idiots the lot of them.

  • Dumrse

    I used to divide my political anger between Wussel and Little. Guess what Mr Little !

  • cows4me

    If Little wants my vote the formula is simple, a 180 degree turn in their polices. The so called politicians in the Labour Party live in the twilight zone. How over paid bludgers believe they have a right to tax and regulated hard working people because they think they are blessed with an unearned wisdom is criminal. If I was King anyone standing for parliament would have had to had a job in the private sector for at least 10 years, it might focus some minds a bit better.

  • kehua

    Douglas was the same , failed pig farmer.

  • SlightlyStrange

    I have a friend who is in a similar position – more work than he can handle. If it weren’t for all the issues you’ve highlighted, he was going to offer for me to work for him. Instead, we’re going to go with separate self-employed status, with me effectively contracting to him and some of his clients.

    • MaryLou

      Unfortunately, it’s the best idea. It means your earning potential caps out with the daylight (or however many hours you can work), but the alternative is definitely risky.I would definitely not employ anyone else either, were it not for the 90 days. People (lefties) assume you can just get rid of anyone on a 90 trial if you feel like it, but it’s still not that simple. There are still “processes” and rules around what you can and cannot do.

  • Kiwibabe

    If running a business successfully through its perpetual challenges is beyond the grasp and abilities of the current Labour line up, running the country would be a whole much bigger leap. Government, society and economics are vastly complex, so if politicians don’t measure up enough to run a business then there is no way one would wisely want them to ever gain power.
    Anyway, NZ is the envy of likes of Australia and others internationally because of the job Key is doing.
    Career politicians or those without serious managerial and business nouce can only deliver mediocrity whether that is apparent short term or takes longer to become evident. We equally do not want those on the far right who lack social concerns or understanding, or indeed those on the left whose social solutions continue to fail. Afterall, so called poverty and rampant house price escalation existed under and were not cured by Clark’s Labour government.

  • Kiwibabe

    As Little could not even win his electorate, twice, how the heck could one imagine he could do a good job of running a government and country?

  • Sir Cullen’s Sidekick

    I thought Leader Angry Andrew is running a “Little” business?!

  • Blockhead

    A few years ago I met Mark Peck, ex Labour MP, socially. In the course of discussion we talked about his cafe business in central Wellington. He admitted that if he knew as an MP what he had learned as the owner/operator of a small business, he would not have supported many of the laws the Labour Government (of which he was a part) put into place. He was very candid about the lack of true business experience in the Labour casucus at that time. Not much has changed.

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