MAKING CHILDCARE AFFORDABLE - REFORMING THE TAX SYSTEM

Earlier this year, the DayCare Trust, a charity that promotes high quality affordable childcare, published its annual survey of childcare costs in the UK.

For households with young children and parents working, the results were not surprising.

It showed that, since 2011, nursery costs have risen by nearly 6 per cent. This means that at a time when wages have been largely frozen, the average yearly expenditure for a child under two is now just over £5,000.

However, that depends on where you live in the UK and the most expensive nursery recorded by the survey costs £300 for 25 hours care or £15,000 per annum.

Childminder costs have also risen by 3.2 per cent for a child under two, and 3.9 per cent for a child aged two and over.  As a result, childcare costs now swallow up 27 per cent of UK parents' net income every year.

But it is not only the costs that are the issue.

A report for the CentreForum thinktank by the Conservative MP Elizabeth Truss suggests that while the number of nursery places has increased since 1996, the number of childminder places has dropped to 245,000 over the same period.

According to Truss, this is down to current regulations that restrict childminding services to three children for every adult caring for them. This differs from other countries, such as the, Germany, Ireland and Netherlands, where the ratio is currently 5:1.

By reforming the current rules, Truss believes that not only would childminding become more affordable it would also, through attracting higher quality individuals into the service, improve the quality of care. She also argues that any concerns over child safety could be dealt with through local regulation of childcare services.

Certainly, for working families currently under financial pressures, there needs to be some way of ensuring that they can gain access to quality childcare but, more importantly,  that they can afford such childcare.

So how can the Government deal with this in times of austerity? One way would be to examine whether, and how, childcare could become tax deductible.

It would enable those who are working to benefit directly and could encourage more women to switch from part-time to full time work.

And whilst political opponents may well say that those that are better off would benefit disproportionately, this could be dealt with by limiting tax relief to the basic rate of tax.

Such a scheme could also be extended to take into account the hundreds of thousands of grandparents who currently act as volunteer childminders to help out their families.

And for a nation that desperately needs more entrepreneurs to start new businesses, such taxable deductions would help the millions of self-employed, who are excluded from the current employers' childcare vouchers scheme, to get support from the government.

Certainly, it is not a new idea and countries such as Canada, where the economy is currently growing strongly, have such a scheme in place.

In the UK, where the focus has been on cutting public expenditure, politicians have been reluctant to discuss such a measure. However, this may finally see the light of day as the Prime Minister himself noted that he is ‘minded’ to consider such an initiative.

Back in 2010, this Conservative-led Government promised radical changes when it came into office, especially in reforming a tax and benefit system that penalises those who work.

A policy where childcare costs can be written off against tax could, if examined and costed properly, be a more practical alternative to the married person's tax allowance that has caused strains in the Coalition and, for two parties struggling in the polls, would be a very popular measure with millions of parents who make up the so-called squeezed middle across the nation.

KAUFFMAN, START-UP ACTS AND LESSONS FOR GOVERNMENT

Last week, during an eight day visit to the United States, I paid a visit to the Ewing Marion Kauffman Foundation in Kansas City, Missouri.

Established in the 1960s by a local entrepreneur, it is now one of the thirty largest foundations in the USA with an asset base of around $2billion. More relevantly, it is focuses its activities on specifically advancing entrepreneurship and improving the education of children and youth.

In terms of the former, the Foundation works with leading educators, researchers and other partners to further understanding of the powerful economic impact of entrepreneurship and to improve the environment in which entrepreneurs start and grow businesses. It also develops programmes to train the nation’s next generation of business leaders through enhancing entrepreneurial skills and abilities.

Needless to say, the meetings we had with their research, policy and training divisions were extremely useful and whilst Kauffman does focus its efforts solely within the United States, it welcomed the opportunity to work with a small nation such as Wales in the future.

However, it is not only Wales that can learn from the Kauffman Foundation and its focus on delivering a more entrepreneurial economy should strike a chord with politicians and policymakers in the UK Government. Certainly, with the economy still stuttering, it is clear that government can, and must, play a bigger role in stimulating entrepreneurial activity to create wealth and jobs.

In particular, there needs to be more high growth sustainable businesses created within the economy.  To achieve this goal, there needs to be a continuous stream of new ideas capable of being commercialised, more bold entrepreneurs who can launch and build new twenty-first-century companies, fewer roadblocks to the launch and growth of these new enterprises, and low-cost capital available to finance them.

However, there seems to be little impetus to support more new firms within the USA, despite the evidence on their role in the economy. For example, nearly all of the new jobs created in the US economy have come from businesses that are less than five years old. More importantly, a disproportionate number of innovations during the last decade have been commercialised by new firms.

This policy vacuum by the political leaders of America has led to the Kauffman Foundation proposing a "Startup Act" to jump-start the U.S. economy and increase job creation by accelerating the growth of new and young businesses.

Some of the changes in government policy proposed by this act include welcoming immigrants capable of building high-growth companies to the United States by providing "Entrepreneurs' visas" and green cards for those with degrees in science, technology, engineering and mathematics. This is plain common sense, given that research has shown that non-Americans have founded over half of the new firms in Silicon Valley and that a disproportionate number of the 500 largest U.S. public companies were created by immigrants or the children of immigrant founders.

The Act also recognises that new, growing firms often require outside capital, in the form of both equity and debt. This is especially true for firms in capital-intensive businesses in fast growing knowledge-based sectors such as alternative energy or aspects of life sciences. It therefore proposes that any long term investments in start-ups should be free from capital gains to differentiate it from other forms of personal investments. It also suggests, to deal with the cashflow difficulties that many new firms face in their earlier years, that they should be excluded from corporate tax in the first year of taxable profits, with a 50 per cent reduction in the next two years.

Finally, there is a recognition that many new firms are faced with a disproportionate amount of regulatory burden. The Act therefore proposes that such barriers to the formation and growth of new firms can be reduced ensuring that all business regulation lapses automatically after ten years unless it is reproposed and implemented. In addition, common sense and cost-effective standards for regulations should be introduced, and a regular assessment made of state and local startup policies.

The Kauffman Foundation still has a long way to go before it ensures that such proposals become real but the job creating potential of new firms is something that policymakers in the UK, at both national and devolved levels of government, need to recognise.

Whilst much of the focus of the industrial policy in Westminster and Cardiff Bay has been on supporting larger companies, the real job creators in the economy have yet to be appreciated by our politicians. Whether the UK needs its own Startup Act is open to question but it certainly needs Government to make it easier for entrepreneurs to set up new firms and, more importantly, to put policies in place that enable them to oo sustainably over the long term.

A CHILDREN'S CREATIVITY CENTRE FOR WALES?

As you read this, I will have arrived back in Wales from a week of intensive visits to the USA.

It began in Silicon Valley with meetings at Microsoft, Electronic Arts, the Irish Innovation Centre, as well as conversations with a couple of Welsh-run technology companies in the San Francisco Bay Area.

We then flew to Missouri in the middle of the country to meet up with the Kauffman Foundation, the World’s largest charity devoted to entrepreneurship and finished with a series of meetings at the Massachusetts Institute of Technology (MIT) on the East Coast of America.

It was a hard slog, especially in crossing various time zones during the week but was well worth it, especially in terms of partnerships with both academia and business in areas such as educational technology and enterprise development.

However, one of the most eye-opening experiences we had was nothing directly to do with the business community but, nevertheless, has the real potential to make an enormous difference to the development of an innovative economy.

On May 6th, we made a visit to the Children’s Creativity Museum, a hands on multimedia arts and technology centre in San Francisco. Established in 1998, its mission is to nurture creativity, collaboration and communication to inspire new ideas and innovative solutions.

It does this through transforming the way children between the ages of 3 and 12 learn, encouraging them to imagine, create and share through a variety of interactive activities that helps to instil a love of learning and building creative confidence at a young age. These range from a design studio, where kids learn how to manipulate photos, illustrations, text, and symbols using photoshop software, to an Animation Studio where children build characters out of wire and clay, choose scenery, and then film their own stop-motion animation movie that they can then share with friends and family.

It also has an Innovation Lab to foster design thinking skills from a young age and encourages kids to think creatively, develop problem-solving skills, and nurture a prototyping mindset through what is known as a “Mystery Box Challenge”. This is similar to the scene from the Tom Hanks film Apollo 13, where NASA scientists in Houston have to save the astronauts only with what is on board the Apollo capsule stranded in space. In this case, kids are given a box full of different objects and then challenged to create various new ideas which can range from a ladder for a fish to inventing a space suit for a shark!

The other way that the museum makes a real difference is by engaging with the local creative and business communities. Not only does it have artists in residence who work with children to develop and showcase exhibits, it also brings in technology companies from the area to share and test new concepts with children. It was a fantastic experience, more so because of the hundreds of children actually taking part in the various activities in the museum and clearly enjoying and learning from their participation.

With many organisations now realising that the knowledge and competences needed to compete in a 21st century workplace includes "soft" skills such as creativity and innovation, critical thinking, communication and collaboration, it would seem that the Museum has found a real role to help develop the workforce of the future at an age where they haven’t even started thinking about their first job. The question for me is whether we could set up something similar in Wales? We already have the groundbreaking Techniquest to help children develop a better awareness of science and engineering but could we also do the same for encouraging creativity? The Museum in San Francisco would love to help and collaborate but I think we could also be more engaged with organisations in Wales to make this happen.

For example, how could the Heritage Minister, through the Arts Council, ensure that this is supported by the Welsh Government. Could those in charge of BBC Wales consider how they could use their vast expertise and facilities to support such a concept?

What about technology companies such as Sony, who could contribute their digital video knowledge to the centre? Individual knowledge-based firms could also help out, especially those in the independent TV sector such as Tinopolis, Green Bay and Boomerang. Dinamo TV, which makes the popular Rastamouse series, is a leader in their field of animation whilst Bangor-based Gaia Technologies has 3-D educational software that is amongst the best in the World.

So there may be an opportunity here to develop a Children’s Creativity Centre in Wales that not only builds on the original concept but adds a distinctive Welsh flavour by showcasing our fantastic creative industries sector to help develop the workforce of the future.

Certainly, if creativity and innovation are what will differentiate successful economies in the future, then we need to start developing those skills in our young children at the earliest age possible.

TOMORROW'S LEADERSHIP

This week, I have spent considerable time reflecting on the common attributes of successful of companies in Wales for a new Wealth Creators supplement, published on May 16th in the Western Mail.

In examining 200 mid-sized companies, the research undertaken by Dr Niall MacKenzie and myself will demonstrate the importance of medium-sized businesses to the Welsh economy and, more importantly, their potential for growing the Welsh economy.

Whilst not wishing to fully pre-empt those findings, the importance of good leadership and developing talent shines through in those successful companies that are creating wealth and employment throughout Wales.

But the role of a leader in both the private and public sectors is constantly changing and its significance in identifying talent is becoming increasingly debated. To help deal with such issues, it is timely that the University of Wales Global Academy recently announced a new initiative this week that will help to tackle the critical issue of how to develop new leaders.

Tomorrow’s Leadership, a residential conference taking place in the beautiful surroundings of the Brecon Beacons National Park between the 20th and 22nd of June, has brought together a wide range of speakers and participants to debate and analyse a new model of leadership for the 21st century. The conference is intriguing for a number of reasons.

Firstly it will utilise an “Open Space” methodology where the experiential and collaborative learning of all delegates is as important as the knowledge imparted by the keynote speakers. The conference will also apply leadership models from other cultures given that diversity is a huge driver for innovation and change in businesses. In addition, all delegates will receive a personal confidential leadership profile report allowing them to review their journey to being the best possible leader they can be.

Yet it is the conference’s focus on the concept of the Triple Context - the importance of keeping in balance the economy, the natural environment and the social and political system - which offers the greatest benefits to the Welsh businesses. At the heart of the Triple Context are the findings of an influential report “Tomorrows Global Talent: How will leading global companies create value through people?” which surveyed of fifty global corporations and argues that the next big step change in the success of companies requires a profoundly new approach to leadership and engaging with talent.

As businesses focus more and more upon creating better products and services through new skills and innovation, then the role of people with a business has never been so important. The report states that tomorrow’s company must operate within a new business market where value creation depends on environmental and social issues as much as economic benefits.

Simply put, businesses will have to increasingly think about their own sustainability and the communities and ecosystems they operate within, To achieve this, companies should therefore refocus on talent development. This not only means the obvious high-flyers and rising-stars but all of their employees as well as other stakeholders in the business.

Increasingly, those who study organisations have concluded that talent is not something that only a rare few people have within a business but is instead a diverse and multifaceted capability that everyone has. Therefore, the biggest task ahead for business leaders is to find that talent and empower new leaders within their company, and smart companies look beyond their traditional key roles and staff but search for talent across all their corporate ecosystems, both internally and externally. In all these aspects of building a triple context business and developing talent, leadership is now absolutely vital.

Tomorrow’s leaders will recognise their role is changing as they place sustainability at the forefront of their strategy. In addition, those leading the organisation will move being the chief executive officer to the ‘Chief Talent Officer’ who devotes more time to understanding these issues as tomorrow’s companies will be successful at finding, engaging and leading every bit of individual and collective capability in their staff.

The future for those companies willing to embrace these concepts will be exciting and rewarding, and I strongly encourage all businesses in Wales to embrace this unique skills development opportunity which will help them become more competitive, more sustainable and more relevant to society.

WORKPLACE BULLYING

Earlier this week, it was reported that an Australian executive is suing her former employer for £9.2 million of damages, alleging that her employer engaged in ''bullying, suppression and victimisation'' which she said prevented her from doing her job.

Along with damages for the impact on her reputation and future earnings, the executive was also seeking orders 'designed to ensure that the dysfunctional culture of bullying, suppression and victimisation at her employer is reformed''.

Unfortunately, such a case is no longer an isolated incident, with an increasing number of surveys on workplace bullying indicating shown that many organisations are complacent when it comes to dealing with this growing problem.

According to those working in the human resource field, workplace bullying is generally defined as vindictive, cruel, malicious or humiliating behaviour towards an individual or even a group of employees.

Whilst this can occur between workers, it also now increasingly involves the abuse of authority by management, reflecting an autocratic style that is increasingly in conflict with the work practices of some of the best organisations in the World.

Perhaps the biggest problem is that there is usually an absence of any formal policies and procedures to deal with bullying and, worse of all, senior managers often ignore it. This is mainly because there is a stereotype approach as to what bullying constitutes, despite the fact that it can take many different forms and is not necessarily a case of one size fits all i.e. it can include unwarranted or invalid criticism, fault-finding, exclusion, isolation, being singled out and treated differently, being shouted at, humiliated, excessive monitoring and having verbal or written warnings imposed for no reason.

The problem has been further complicated in recent years by the emergence of online social networking, which means that bullying is moving from the office onto the internet with serious consequences for organisational policies to deal with this abuse. In fact, a recent survey estimated that as many as one in five workers had been bullied by email and one in 16 said that they had been bullied by text message

With the situation becoming increasingly complex, there have been calls, especially from trade unions, to make workplace victimisation unlawful.

However, there would be no need for legislative action if those with strategic responsibility for organisations, such as board of directors or trustees, were made more aware that the main consequence of a bullying culture an inevitable decrease in productivity and a direct impact on the ‘bottom-line’. More worryingly for the future of the organisation, good employees will eventually leave whilst those involved in bullying remain.

This will inevitably start the process again as those managers who are the perpetrators of bullying are often motivated by their own personal issues such as lack of self-confidence and envy towards other people's abilities, success and popularity. As a result, they constantly deny responsibility for their behaviour and its consequences and are unable or unwilling to recognise the effect of their behaviour on others. If nothing is done to address this problem, then it will have a direct effect on the performance of the organisation, negatively affecting its culture and productivity and may, in extreme instances, affect its reputation, especially if legal action is taken.

The problem is that when such bullying becomes institutionalised and results in situation where staff are constantly overloaded, where there is a blame culture amongst colleagues, and where aggressive behaviour is tolerated, there will be serious consequences for the future of that organisation. Indeed, there are an increasing number of research studies, which show that rather than increasing performance, overloaded and bullied employees tend to work for organisations where the management style is bureaucratic and reactive, and, inevitably, its performance is in decline.

Not surprisingly, such behaviour hits the bottom line of the business with a recent survey by the Health & Safety Executive (HSE) estimated that 10.8 million working days a year are lost to stress, anxiety and depression at a cost of billions of pounds to UK industry annually.

In contrast, those workers who go the extra mile for their employer, who feel recognised and supported and look forward to going to their place of work every day, are those employed for growing, dynamic companies where the management style is empowering and successful.

So perhaps the simple message for all organisations is that its employees are its biggest assets, something that some still fail to grasp even in the 21st Century.

More specifically, if these assets are affected by issues such as workplace bullying, the result could be lower profits, demotivated employees and, in extreme cases such as the one currently being fought in Australia, unnecessary court actions that will cost millions of pounds in damages and much more in reputational costs for both the organisation and the managers involved.

THE KAYA FESTIVAL

In February, I met a quiet and unassuming young man, Thabani Nyoni, who explained his vision for a new world music festival. 

Zimbabwean born Nyoni has lived in London since the age of five and I was immediately struck by his idea that creativity and diversity can help the Welsh economy.

Nyoni is one of the founders of the Kaya Festival taking place in the Faenol estate from the 1st to the 3rd of June. Bryn Terfel's Faenol festival no longer exists but that doesn’t deter this music entrepreneur in the slightest. He chose the venue for his new venture after attending the Radio 1 Big Weekend in 2010. 

Now with backing from Welsh Government, Gwynedd Council and the Arts Council, his vision has become reality.

This week, Ron Jones, founder of Wales's largest television company Tinopolis, wrote a salient article in his capacity as chairman of the Welsh Government creative sector advisory panel. He said that “Around the world, governments are realising the creative industries are amongst the leading sectors driving economic growth… our challenge is to ensure that no talent gets wasted, that no ideas are unexplored and no company is unable to take advantage of market opportunities.”

And thankfully, in this instance, the Welsh Government and other partners are collaborating to ensure Nyoni’s talent and ideas are not wasted. But it’s not simply the creative and economic benefits of a new music festival in Wales that interest me as the economic evidence regarding the local impact of music festivals is also overwhelming.

In 2009, a Welsh Music Foundation report looked at the now hugely successful Green Man Festival (which takes place on the Glan Usk estate in Powys) and found that it attracted 18,000 visitors, 98% of which visited solely to attend the festival and 77% came from outside Wales. Green Man now generates £3.5 million in direct additional expenditure in the region and £4.5 million from additional tourism expenditure.

It is interesting to note that when Green Man started, back in 2003, it only attracted 500 people. The Kaya Festival has already surpassed that figure in its first year. Big things start from small beginnings. The same study also claims softer benefits to the region through increased exposure from editorial coverage and the overall enhancement to brand Wales’ by being a ‘cool place’ to visit.

There are other examples of both cultural and economic impact to Wales, ranging from the Wakestock Festival on the Llyn Peninsula, attracting 25,000 people, to the much smaller but hugely influential Do Lectures, taking place again in Pembrokeshire this week. It is Nyoni's belief that Kaya offers something different to the local and UK festival crowd by also promoting creative skills and job opportunities. Whilst larger, more impersonal festivals are being hit by the economic climate, there is still a place for smaller festivals that offer a unique experience.

And it’s that aspect of Kaya festival which really excited me. Not content with establishing a new and commercially risky world music festival in North Wales, the organisers are also determined to develop the talents of local young people.

They’ve secured a personal performance and Q&A session from MC star Tinchy Stryder to help encourage local young people to take their first steps in the music business. Coleg Menai, Careers Wales and other local training providers will, through the festival, offer apprenticeships, mentoring and on-site training in all aspects of running a commercial music festival.

With youth unemployment hitting record highs, we must find better ways to engage and encourage young people. Kaya is a perfect opportunity to do so and North Wales must take advantage of such a great opportunity to promote local talent and develop more new creative entrepreneurs ourselves.