Policymakers need to move on from a skewed debate around bank lending, and do more across the entire funding “ladder” for high growth businesses and investors. In particular government should concentrate efforts on removing barriers and targeting support for innovative small businesses that have the aspirations and the potential to achieve rapid growth.

Financing Innovation argues that the government should consider allowing new businesses to bypass all the current complexity on charges, reliefs, rates and exemptions and instead deal with a simple flat tax. While a move to a single rate and allowance should not amount to a tax break, it would give business owners real clarity about their maximum tax liability each year.

The report is critical of the current tax system, saying that constantly changing rules can be confusing and prevent small business owners focusing all of their efforts on growing the business.

The report also recommends a new model for extending finance to young entrepreneurs who want to start a business.