Encouraging shysters to go bust is no way to foster enterprise
It was gonna be great. It was gonna be the best thing ever. A day to remember. A red letter day. Mr Conafray had been looking forward to his birthday present for months. At last he was going to fulfil a lifetime’s dream and get behind the wheel of something really snortingly fast.
Thanks to the generosity of his loving wife and children, he was going to be conveyed to Brands Hatch, attended by every comfort, and installed in a succession of ever more gruntful machines. Jaguars, Astons, AC Cobras, Nobles. Mr Conafray was going to crunch gears, burn rubber and generally kick automotive ass in such a way as to make Jeremy Clarkson look like a 75-year-old nun in a bath chair.
His wife had paid £750 for this Red Letter Days birthday experience, and he had every reason to think it would be worth it. When he looked up the website, he found dreamy pictures of balloon flights and cut-glass whisky decanters by roaring fires in sexy locations. There was scuba diving and bungee jumping and paraplaning and cars, cars, cars.
According to the blurb, Red Letter Days was “driving the experiences market forward, creating innovative and exciting experiences for everyone”.
Well, the guys and gals at Red Letter Days certainly cooked up a once-in-a-lifetime package for Mr Conafray. He had the exciting and innovative experience of being suddenly informed, as the day of his Red Letter experience drew closer, that the company was having difficulty meeting its financial obligations. In fact, they were effectively bust, and the only value he would get from his £750 voucher was to use it to light the fire.
At which point, we might sadly take our leave of Mr Conafray, reflecting that this is just another Esther Rantzen-ish story of consumer disappointment. Except that there appears to be a further and graver injustice.
The “experience” company was set up by one Rachel Elnaugh, 40, who has long been touted as a leading example of female British entrepreneurial flair. Indeed, she is still to be seen on a business management TV show, hosted by the BBC’s economics correspondent Evan Davis, in which she dishes out waspish advice to would-be tycoons.
She is said to drive a Bentley, and it is reported this week that her entrepreneurial drive is unabated by her recent prang. She has taken a 20 per cent stake in Easyart, an internet art print dealership.
As he contemplates her new investments, Mr Conafray can be forgiven a brief spasm of irritation. Or more than irritation. It is flipping outrageous. What is going on? How can someone like Rachel Elnaugh waltz off, and the Conafray family be left £750 down – and they are one of many – to carry on her high-rolling career?
Well, one of the joys of being an MP is that you see a lot of people, with a lot of problems, and over the past few months I think I have detected a pattern. First there was the father who came to tell me that his daughter’s wedding had been blighted by the way in which the wedding list company had decided to go bust.
They chose to do this, conveniently, in the interim between receiving a huge quantity of money from the wedding guests for assorted carriage clocks, toasters etc, and the wedding day itself, so that under the laws of insolvency the presents went back to the suppliers.
Then exactly the same thing happened to a girl who works at the Spectator, except with a different firm, and I thought, hah. Some law must have changed, I reckoned, making it easier for firms to go bust and escape their obligations. And so it has.
We are now operating under the terms of the Enterprise Act 2002, which was intended to encourage struggling entrepreneurs to press the reset button by using the bankruptcy option.
According to the Government, these unfortunates should then be “free to move on to new ventures unencumbered by the stigma and restraints traditionally associated with bankruptcy”.
The Act, we are told, “aims to make administration more accessible, cheaper and less bureaucratic”.
And of course the intention is a fine one. The Act is a product of Gordon Brown’s longstanding fixation with the US, and his desire to make our economy as vibrant and dynamic as America’s. He thinks the problem with us Brits is that we are all too terrified of embarrassment, too frightened of ridicule, too fearful of failure to take the risks necessary for successful capitalism.
And he is right. We all wish Britain were more like America, in the sense that people were more willing to take a punt, work hard, and in general have a Chumbawamba-style I-get-knocked-down, I-get-up-again approach to their lives. But there are many ingredients to an enterprise culture, and you can’t just create one by removing the penalties for fecklessness.
We have much higher taxes in Britain, a much more obtrusive state, and a post-war tendency to think that on the whole events in our lives are not our fault, and that nanny will be there to pick up the pieces, and it is that psychological condition that is reinforced by the new laws on bankruptcy and insolvency.
I don’t know whether Rachel Elnaugh’s experience had anything to do with the Enterprise Act 2002, but most accountants are convinced that the law is partly responsible for the stunning rise in bankruptcies. In the third quarter of this year there were 17,562 individual insolvencies, with bankruptcies rising by 31 per cent and Individual Voluntary Arrangements – where you pay off your debts at a fixed rate – rising by an amazing 95 per cent.
Of course much of this may be a function of worsening economic conditions, and excessive household debt, and all the problems for which Gordon will shortly be paying a political price. But it is also clear that by encouraging bankruptcy – literally – the Government is encouraging some people to take the money and run, and to conclude that they are better off being dead than in the red, especially when they can be born again almost immediately, with bankruptcy discharged after only a year.
Yes, we need an enterprise culture, but you should bring it about first by reuniting effort and reward, and cutting taxes, not encouraging shysters to go bankrupt at the drop of a hat.
I certainly do not say that Rachel Elnaugh is a shyster, but before she makes any further investments morally she should damn well pay back Mr Conafray.
The US style of “Chumbawamba: I-get-knocked-down, I-get-up-again ” culture is not so much the former, as ” I get knocked down , and I sue your ass for every penny you have “. We already have too much of that particular US style “claim culture” here: it doesn’t need Government enhancement.
We could certainly do without the Government’s allowing , by default, potential crooks carte blanche to cut and come again: this seems like a charter for crookery, if ever I saw one.
The lesson to be learned , I would say is not to buy via the internet , without a blue chip guarantee of delivery , and I suspect that such an undertaking is as rare as hens teeth.
Mr Conanfray and anyone paying for goods in advance (such as wedding lists) would be well advised to use their credit cards for those transactions. Even if the card bill has been paid off the credit card company remains liable for any debt if the consumer fails to receive his good or services.
Oh no no no no no! Only I know the truth. Silence from you all at once! Kazzzzaaaaa
I’m not sure whether Boris Johnson realised the point of Tubthumping (as it’s a bit odd for an MP to cite an anarchist band), but Chumbawamba are very appropriate in this context. The Red Letter Days “let’s go bust, screw everyone and start over” experience is the sort of classic capitalist trouble they sing out against, albeit RLD seems a smaller scale than most. Read more about Chumbawamba, their views and how workers should get equal pay and equal say on http://www.chumba.com/ -> FAQs -> Capitalism
Another kick in the groin ,( where else from this Government?). Stamp prices to rise 9p to allow the already underworked postmen to retire at 60. ( only one delivery per day now! )
Reminds me of the man arriving late to work and saying ,”OK boss; I’ll finish early to compensate !”
This; hot on the heels of another think tank’s recommendation that the poor non- public sector worker shall have to add another 2 years to his working life , in order to help fill the hole in the pension fund: caused, incidentally, by Prudence’s massive raid on pension funds, some time ago.
A solution of this conundrum has not been found, rather , another unanswerable question has been posed. The Government collaped in the face Public sector union demands for the
continuation of the early payment of pensions; this in the face of the ever increasing hordes of public sector workers: non productive workers , all. How can this possibly be justified ?
It’s a question of the drones taking over the hive. and the greater public getting stung – again.
When my firm went titsup in 2002, I don’t think this act applied. We were in a bit of a pickle financially, as some promised investment had failed to come through. We were advised by our lawyers that between the moment we realised (or were advised) that we were insolvent, to the moment we declared insolvency and called in adminsitrators, any extra debts incurred would be down to the personal liability of the directors. As we were directors we didn’t want to end up personally bankrupt. So, we paid our staff and outstanding bills, and closed down before we became really, badly insolvent. As one of the directors, but also as an employee, I personally received no pay for the last 2 months and I was left with a personal debt of a few thousand pounds. Some suppliers were left demanding some money, as we had contracts with them. The main loser was our office landlord. In the end, not one creditor bothered to turn up to the insolvency meetings. Oh, and no customer was left out of pocket.
It was a valuable lesson in what happens when things go wrong, but, it was not so painful as to destroy our lives completely. I’ve now paid back my debts and have another succesful enterprise. I certainly don’t want that pain and humiliation again, so I am making sure this time round to do it properly!
It seems to me that this is the way business insolvencies should work: a modicum of pain for the entrepreneurs, but not so much that they will never try again and live their lives as “failures”. It would be helpful for failed entrepreneurs to have some assistance from small business organisations in analysing what went wrong, and learn how to do it right next time: a kind of “remedial class” or sentence, if you will.
Consumers (as the previous poster said) should ALWAYS use a credit card when paying in advance. Business should always make a risk analysis when entering into a deal that could leave them out of pocket.
Caveat emptor; but the flip side of the coin is that we do need entrepreneurs!!
Not Saying – good to see someone bringing a little personal perspective to this discussion. It’s a little too easy to come on all high and mighty about insolvency when you’ve never been there yourself.
One of the problems with this is that there are many different kinds of insolvency:
There are honest businesses that fail (like yourself, as I understand it), and could do with a little help sorting out the debts and getting restarted.
There are the shysters Boris is correct in identifying, but incorrect in linking to the Enterprise Act. People like Rachel Elnaugh have been playing fast and loose with company law for as long as I can remember and way beyond that too. It’s a by-product of free enterprise, and trying to link it to an act introduced by the current government is fatuous.
And there are the personal bankruptcies exploding all around us – which have nothing to do with the enterprise of the individuals involved, and everything to do with the utter moral failing of our financial institutions.
However on one point I’m inclined to disagree with you. Of course it makes sense to protect yourself from companies going bust by using a credit card; but at the same time we need to closely examine the whole notion of credit. Personal bankruptcies are booming precisely because it’s so easy to get in debt. The banks will deny this till they’re blue in the face, but as long as they’re allowed to bombard us with opportunities to buy money – and in many cases actively target the people most likely to get into trouble – then the fault lies at their door.
This is a big, bigt issue – and much more complicated than one ill-advised piece of legislation. I’m afraid Boris is guilty of some rather lazy party point-scoring by trying to pin it all on Gordon Brown. The chaos in our personal finances goes right back to the deregulation of the financial services sector that Mrs Thatcher so glibly sanctioned at the height of her power. We’ve become a society built on financial sand, and the bankruptcies that Brown has almost inadvertently encouraged are the first tremors as the foundations give way.
I’m sorry to bang on so long about this, everybody, but I’ve been there myself and I know how painful it can be. I sincerely hope Boris takes the time to talk to people – a LOT of people – who’ve been through bankruptcy or an IVA or a failed business. Notwithstanding Rachel Elnaugh, I suspect he’ll find that the vast majority of people trying to rebuild their lives in the shadow of the credit referencing agencies are guilty of nothing worse than incompetence and gullibility.
Dear Boris,
You state:
“We need an enterprise culture, but you should bring it about first by reuniting effort and reward, and cutting taxes, not encouraging shysters to go bankrupt at the drop of a hat.”
I agree 100%.
For those folks who think that there are shysters (here in the US where I am) who are taking advantage of bankruptcy loopholes here in the US, you are correct.
However, maybe one might wish to look at that matter from a different perspective?
It’s the same principle as with freedom of speech. That means we don’t always like what we hear or read, but should we do away with freedom of speech because there are many things people say which we find reprehensible? Of course not.
That some dirtbags weasel their way through loopholes in a system designed to encourage entrepreneurship, does not mean we should do away with a system…that encourages entrepreneurship, even though it is not a 100% fool-proof one.
On a related matter, The US Trustee’s Office, which administers bankruptcy laws, just a couple of weeks ago implemented comprehensive changes in personal bankruptcy laws here, called “The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005”, which will make it far more painful for a person to declare personal bankruptcy-not absolving them automatically from debt repayments for example.
This is critical, as here as in the UK no doubt, something like 80 plus percent of all people work in small businesses. So when a small business-all in private hands-go broke, the owner can no longer just file for personal bankruptcy to avoid the small business’s failure and subsequent debts. Basically, this will mean that people who have started their own businesses will now be “strongly encouraged” to make their business work, as opposed to cutting ‘n running with Uncle Sam stepping in to keep the debtors at bay.
Finally, there’s no such thing as a singularly perfect mechanism to encourage job creation. Like freedom of speech, toying with job producing instruments requires exceptional care, for as imperfect as the principle of free speech may seem-like when we read the drivel of Monbiot for example-freedom to do business should not be trampled upon.
I must say , that from a Party so concerned with private enterprise, there has ben remarkably little interest in THIS article on private enterprise.
I’ve got a great way of making a business work. You start up a bank, bombard the appropriate postcodes with offers of loans and easy credit, structure society around a free enterprise system that positively applauds people for over-consuming and living beyond their means, charge your borrowing customers extortionate rates for tiny ‘services’ and penalties that are largely carried out by computer, then comprehensively cover your ass by linking everyone’s creditworthiness to private agencies that are incapable of making a decision unless their computers tell them so. As a lucrative sideline, you can also encourage them to join pension funds and endowment policies that turn out to be worth about 10% of the value you promised. When they object to this, you can refer them to a tiny paragraph hidden away at the bottom of page 28 of the proposal form which absolves you of all responsibility. Meanwhile, you can re-invest the money they lent you in companies that make irrelevant products that nobody needs but everyone thinks they want (because you’re also funding some very persuasive advertising at the same time) and the whole cycle starts all over again.
Of course all banking services carry ‘an element of risk’. Your charges will usually cover you against this, but if all else fails and the borrower (private or small business) gets into difficulties, you simply look down your nose at them, sniffily tell them they should have known better, then quietly inform the credit referencing agencies’ computers that there’s been a default. The defaulting customer will then have to spend many years living on cash money and personal cheques that you will only honour after they’ve been in your system, earning interest, for at least a week.
That’s the way to make a business work. If I had my time over again, I’d definitely heed my father’s advice and become a banker. But not the responsible, personal kind of banker they used to have in my father’s day – I’d be a thrusting modern banker, managing credit scores for untold millions of consumers I’m never likely to meet and couldn’t care less about. Just so long as the P and L account stays in the black.
D’you see now? You silly billy failures and bankrupts? It’s all YOUR fault!
It sounds as ifyou ALMOST followed your father’s advice markgamon. However : I’m sorry to have to say that your idea is already fit and well , and in use by , amomgst others , my bank.
Rats. I thought I’d stumbled on a great entrepreneurial idea that I could have taken on telly’s Dragons’ Den. Or better still, I could type the whole thing out, dress it up as a ‘business plan’, and ask my bank for some seed money…
Oh.
As for this “Great Enterprise” enterprise , it is obviously a non starter. If Tory enterprise is to be measured by the enthusiasm here so abundantly NOT shown , it is no wonder that we languish in the doldrums of political activity.
I think I must be a lazy sod. Here am I in wage slavery when people pay to go to gyms to be bossed around by proto-fascists on machines of torture with ‘music’ pounding out at them. If it happened to terrorist suspects you can bet Rita Whatsabati and Robert Fisk would be there like a shot.
I was in Hong Kong once and, wandering around suddenly saw, through the windows of a building, lots of white people pulling levers like mad and sweating profusely – some were ladies so I suppose they perspired. My first, rather John Buchanish, reaction was that the fiendish Chinese were engaged in torture and I tried to work out what Richard Hannay would do. My colleague pointed out that it was in fact a health club and these were paying customers.
I think that the reason China kept to itself for so long was that they all thought we in the West were bonkers. I don’t blame them!
I did have this idea of a sea holiday where you had a huge rowing boat and you chained the paying punters to the oars and then carried stuff around the world charging transportation for it.
What a surprise to see Miss Rachel Elnaugh the topic of moral discussion once again. Talk about personal perspective, we are still owed over �5,000 by RLD. Actually, you may remember the last series of Dragons Den, two decent blokes had a snowboarding concept (www.snowbone.com) which Elnaugh decided to back. we had been supporting Snowbone on a pro bono basis as we knew the concept was a winner.
Needless to say, Elnaugh backed the idea, had several more meetings, hell, she even paid one or two Snowbone bills as promised. However, the investment promised so gallantly on BBC airtime never materialised. Safe to say, she promised time and time again – so much so that Snowbone even went into production at her direction. she then left them high and dry owing tens of thousands of pounds that she had ordered them to spend. We, like many others, are still waiting on our �5k Miss Elnaugh.
It pains me to see Rachel on the current series, lauding it up as if she has a few million for this type of project – when in fact she’s sacrificed personal glory for credibility and at that, has left a number of decent hard working citizens up the creek without the proverbial paddle.
How the BBC can still use her after current debacles I know not. Do the right thing Rachel Elnaugh and pay your bills.