Treasury's scale-up gap: what Depledge's exit reveals about UK growth policy

A dispute over vocabulary that points to a policy gap

The Financial Times reported on Tuesday that Alex Depledge, who advised Rachel Reeves on entrepreneurship and left government after John Healey's Budget, said the Treasury does not understand scale-ups. Her sharpest illustration was linguistic: she said she had warned the chancellor's office repeatedly that "enterprise" and "scale-ups" are different things, yet the Budget speech blurred them. A day later she softened her stance, saying many of the strongest advocates of the agenda were the ministers and officials she worked with.

The retreat matters. It means the most pointed claims, that officials were obstructive and that the Treasury lacks the necessary understanding, now rest on a single account given at a conference and then qualified. What survives is a pattern worth examining, because the distinction she drew is not pedantic. A corner shop, a consultancy and a company growing at several times the rate of the economy need different things, from capital and tax treatment to public contracts. A government that uses one word for all of them is likely to design one set of tools.

Procurement is the real test

The most concrete allegation concerns buying. Depledge told the conference that most government technology contracts go to American prime contractors, and that her attempt to install an external chair on a procurement task force was blocked after a clash with a senior official. She attributed this to reluctance to lose control. The FT did not report a response from the official concerned, and the Treasury's public line, via financial secretary James Murray, was that she had brought useful challenge to policy.

We cannot verify the account, but the structure it describes is familiar. Ministers have said they want more contracts to reach small firms and want bidders judged partly on British jobs created. Those aims collide with a buying system that rewards suppliers able to carry risk and compliance cost. One reader with experience of the sector made the point precisely: bidding rules built on layers of policy requirements are manageable for a large company with a bid team and unmanageable for a firm of thirty. Another argued that officials, rationally, pick large suppliers because the supplier absorbs the blame if a project fails.

An outside chair would have been a test of whether that logic can be changed. Whether it was blocked for the reasons Depledge gave, or for ordinary governance reasons, is unclear. What is clear is that the task force, as reported, has not yet shown that it can shift contract flows.

Founders' Relief and the tax question

The second test is tax. Depledge helped design Founders' Relief, which the FT said offers a 10 per cent rate on lifetime gains of up to £10mn, and she defended it as backing the country's biggest growth lever. The tax specialist Dan Neidle has criticised it as suited only to a narrow band of founders. Readers split along similar lines: some saw it as useful signalling, while one argued that it rewards selling early rather than building a durable large company, and that earlier changes to inheritance-related relief had done more harm to long-term owners.

That disagreement is the heart of the matter. A relief that pays out on sale encourages exits; scale-up policy usually wants founders to stay and keep investing. Depledge's own remedy, redirecting pension fund money towards scale-ups, addresses the capital side of that problem and is the more likely route to sustained growth in this parliament, as she put it. It also faces its own difficulties, since trustees have duties that no minister can wave away.

What to watch

Three things will show whether this was a passing row. First, whether the Treasury's language shifts in future statements, separating scale-ups from general enterprise policy. Second, whether the procurement task force acquires outside leadership or publishes data on awards to small and British firms. Third, whether detail emerges on directing pension capital towards growing companies, which would move the debate from tax breaks to the funding gap.

Readers were not unanimous about where the blame lies. Some pointed to ministers' lack of private-sector experience, others to civil service incentives that reward promotion over delivery, and others noted the Chancellor's mixed career background. The more useful reading may be that both claims are hard to test, while contract data and tax uptake are not. Those numbers, rather than conference remarks, will show whether the government's growth plan reaches the firms it is meant to serve.