Three Big Ideas #8
Three Big Ideas #8
A Stamp Duty sting, clarifying competition policy, and backing science fundamentals
Welcome to our weekly Three Big Ideas roundup, in which we serve up a curated selection of ideas (and our takes on them) in entrepreneurship, innovation, science and technology, handpicked by the team.
🏡 Eamonn Ives, Research Director
It’s only natural that commentary on last week’s Budget has focused on its headline measures like the rise in employer National Insurance. Sneaking somewhat under the radar, however, were the various changes made to Stamp Duty – the tax people pay when purchasing a house. Currently, first-time buyers pay no tax on properties valued up to £425,000, but from April next year this relief will fall by nearly a third to £300,000. Under the new arrangements, an average two-bedroom London flat for a first-time buyer – price, £440,000 – will incur Stamp Duty of £7,000, almost ten times what it would have been previously.
Stamp Duty is an atrocious tax – destroying 75p of wealth for every £1 it raises – and reducing the generosity of the nil-rate only makes it worse. One of its most malign effects is the friction it creates in the housing market, by discouraging people from selling up even when it may be in their best interest to do so. This in turn renders labour markets less flexible, hitting economic output in the long run. The Chancellor made clear in the Budget that taxes needed to go up in order to balance the books but this short-term cash grab could well end up being pennywise yet pound foolish if – and when – it drags on growth, year after year.
There’s still time to rethink this, and with Labour’s relatively younger, unpropertied base disproportionately losing out from it, it’s not unimaginable that they’ll change their minds. But that won’t happen without a fight – let’s hope it starts here.
♟️ Philip Salter, Founder
There are gaps in policy making that need bridging, as entrepreneurs aren’t always happy to talk directly to government about their business concerns. Take competition policy. Speak with any of the UK’s most ambitious tech startups you’ll hear concerns about the Competition and Markets Authority, but most entrepreneurs don’t raise their head above the parapet to say this. Not least as it may prejudice future M&A activity. That’s why I raised these concerns with Jonny Reynolds this morning at a roundtable with entrepreneurs and business groups.
First and foremost, entrepreneurs’ are worried that their path to exit could be blocked by the CMA. While politicians may dream of every startup becoming a unicorn, in reality very few tech companies are destined to be a Markit, Wise or Deliveroo. For many entrepreneurs, an exit to a bigger player in tech will be the end game. This isn’t just a UK thing – it’s the way all tech ecosystems work, and it’s critical for incentivising entrepreneurs to start, employees to join and investors to back these tech tech startups.
This isn’t new. Back in 2021 we wrote Better Together, which made the case for the procompetitive benefits of M&A in tech. It drew on cross-country studies which find that restrictions on takeovers can have strong negative effects on VC activity to argue that startup formation and venture capital investment is extremely sensitive to the availability of exits.
With the rise of AI and the need for compute, we’re also hearing a growing concern from founders of startups that want to enter into development partnerships with big tech companies. Strict regulatory requirements on partnership are making this close to impossible. Clearly, in the first instance the CMA needs to provide some guidance on the sorts of partnerships that would cause them concern so that entrepreneurs and investors know what the rules are.
👩🔬 Anastasia Bektimirova, Researcher
A journal from the National Academy of Sciences and Arizona State University surveyed 784 people in the US science and technology policy community to explore their career paths, motivations, activities, and opinions on how the field is changing. Commenting on the release, the publication’s editor-in-chief said:
“Today, those in the field are far less likely to think of themselves as working for science (e.g., advocating for more research funding) than to see themselves as taking a wider societal role, such as influencing policy and regulation and bringing science to society.”
To me, this trend rings alarm bells, because it presents the risk of losing sight of the very scientists who drive scientific progress. The main question guiding science policy – what is needed to generate more value from science? – is fundamentally about “working for science” and scientists.
And there are real opportunities to grasp here. Just take the plight of junior scientists. Globally, the academic system is failing early-career scholars. The UK is no exception. A country that becomes the best place in the world to start a scientific career will gain strategic advantage in science. There is no reason why this country can’t be the UK. As former government science and tech adviser James Phillips rightly notes, this is a “niche opportunity or resource that the UK can have that is globally overlooked.” It’s high time for science policy work, both outside and inside of government, to wake up to this.
Industry bodies representing the interests of universities and scientific organisations that are members of such bodies abound, and quite a few think tanks ponder how to seed science and tech progress throughout government and public services. But advocating for the scientist and better organisation of scientific practice might not always look the same as putting the interests of a scientific organisation as a business first. The Metascience Unit inside the government is a good start, but we could benefit from directing more brainpower to the same questions outside it.