Stephen Purvis is an technology entrepeneur, and the Chair of Policy North.

Continued private investment into Small and Medium Enterprises (SME) is a catalytic fulcrum for continued economic resurgence and continuing record low unemployment.

In such times of budgetary constraints, it is sometimes tempting, particularly for the left, to look at what may be perceived as soft tax incentives for investors in small businesses. In particular, the Seed and Enterprise Investment Schemes (SEIS & EIS), Venture Capital Trust allowances (VCTs), and Entrepreneur’s Relief may be easy targets for the Treasury.

That would be a big mistake. The NHS is a critical, loved and valued institution that has countless independently-validated claims for increased investment based on the changing and ageing nature of the UK population. The harsh reality is that such investment must be paid for.

Policy North’s position here is unambiguous. To dilute the current levels of downside investment protection to private investors, at a time when the UK is needing to compete on a global scale in competitive international markets, would be foolhardy at best. Schemes such as EIS and SEIS offer both down and upside protection to investors in small businesses.

Taking the example of a £100,000 investment qualifying for SEIS relief, at the front end 50 per cent can be offset against an investor’s income tax bill. Assuming certain conditions are met, the gains will be free of Capital Gains Tax (CGT). If the investment were to fail, there are tax breaks to mitigate the loss.

If the company sells and their share becomes worth £250,000 there will be no CGT on that sum. If the company fails completely or is deemed to be of negligible value, the investor could receive income tax relief of up to 45 per cent on the £50,000 that was not used as income tax relief.

The net result is that if you invest £100,000 in a SEIS qualifying small business and it fails, the actual loss would be only £27,500.

A successful investment in this example would lead to a net gain of £150,000 free of CGT. The point here is that there is some protection if the company you have invested in fails. On the other hand you get to keep more of the gains if the investment goes well. That upside and downside protection is attractive to investors.

SMEs generate the highest proportional levels of tax income and job creation. It is our view that to downwardly modify EIS, SEIS, or VCT allowances would simply make it less attractive to invest in companies that are the lifeblood of the economy.

Entrepreneurs Relief (ER) is about as Conservative a policy as one can imagine. It rewards risk-taking, devolves the operational execution of business to the private sector, and rewards the creation of jobs and wealth in the broadest sense.

ER seeks to reduce the CGT liability of a qualifying investment from 20 per cent to 10 per cent, subject to a lifetime limit currently set at £10 million. If we want the private sector to continue to place capital at risk and create, scale, and exit businesses then it is right that there are proportional incentives for those who take the risks. ER is a critical relief that should be under consideration for lifetime limit uplift, rather than being on the Treasury chopping block.

Policy North is a business-led think tank, and I speak from first-hand experience on the matters in this article. In many cases the availability of appropriate investment relief has been the determining factor in aligning the risk profile of the investment opportunity with my own risk appetite.

In a specific example, a significant six-figure investment was only made due to the availability of EIS relief on the transaction. It led to the creation of around 35 new highly-skilled jobs, significant Treasury receipts in VAT, PAYE employee taxation, Corporation Tax and, ultimately, Capital Gains Tax. That investment, part of a larger seven-figure deal, simply would not have been made in the absence of such downside protection and none of the aforementioned Treasury receipts would have materialised.

I love the NHS, it has been there for me and my family at each time of asking. It requires the bold investment that has been proposed, but not at the expense of the continued positive recovery of our economy and the associated inflection in the life chances of millions of people. There are other places to look for savings, but not here.

Increasing, not decreasing, support for private sector investment will lead to disproportionate returns for the Treasury and is a far more sound strategy for increasing public sector investment over the medium to long term.