Conservatives set out stall on small business at FLA/FPB event

4 October 2006

Mark Prisk, Shadow Minister for Business & Enterprise, last night (3 October) used a Conservative conference fringe event hosted by the Forum of Private Business (FPB) and sponsored by the Finance & Leasing Association (FLA), to criticise the Government for failing to understand the needs of business, and promised that a Conservative Government would tackle the problem of overregulation.

In a keynote speech he detailed how important the small business sector was to the economy, and stressed its contributions to the exchequer.

Small businesses were also among the best employers and practitioners of what was now termed 'corporate social responsibility', he went on. Mr. Prisk saluted the owners and managers of small businesses as driven by admirable and important values - aspiration, ambition and ability. Such values lay at the heart of Conservative philosophy, he mused.

But the UK was loosing its enterprise culture; he claimed that ignorance in Whitehall meant that Government policies were frequently misdirected. Of the thirteen Labour Ministers serving in economic departments, not one had run their own business he noted.

It was therefore time to think about enterprise in a whole new way, he argued.

He insisted that he would rise above party politics, but criticised what he said was a Government strategy that attempted to fit broad policies to a highly differentiated market. The Government was 'ignorant' of the needs of business, he went on, before observing that the Chancellor, Gordon Brown, had never worked in a business, having been an "academic".

Small businesses were actually quite varied, he contended, with around 80 per cent representing the "steady majority" of small, low (or no) growth businesses such as restaurants, local shops and so on. But the other 20 per cent were run by typically younger "change agents"; entrepreneurs who pushed their businesses to achieve high levels of growth. It was this group that was the most important for UK competitiveness, he explained.

Addressing the barriers to developing business, he identified venture capitalists as a key way of mobilising investment. However, their operations had not always been perceived as problem-free, and he recalled past claims by trade associations of an 'equity gap' in the market.

Investigating the claims, Mr. Prisk said that he had identified a lack of rigorous evidence on the subject that had impeded analysis. However, one recent report by research firm Library House had found that the venture capitalist market was "alive and well", actually constituting the second largest market after the United States, including in the most important value ranges.

The actual problem lay more in companies' ability to absorb large amounts of investment, he revealed. However, the Government had adopted an "anecdotal" led approach to the issue rather than relying on evidence, which had resulted in assistance directed towards the wrong place.

There were roughly 3,000 schemes directed by the Department for Trade and Industry for the purpose of assisting business. These, he claimed, were uncosted and unchecked, and there were questions over their performance.

Such schemes could also be difficult to access, and the entire culture was "counter-intuitive to the entrepreneurial spirit".

These problems, he went on, were compounded by an 'overlaying' of quangos, with many poorly implemented and directed bodies adding to complications. It was wrong for civil servants to tell small businesses what they should be doing when they had not been there themselves, he added.

Again criticising Gordon Brown's lack of first-hand business experience, he called for a fundamental reappraisal of how, if, and when state aid was offered to business.

The Conservatives were looking at drawing up a clear set of principles upon which to base decisions about state intervention, he revealed that would adopt a rigorous, long-term approach towards assistance.

Small and medium sized businesses were being "badly let down" at the moment, partly through ignorance and partly through a culture that assumed Government 'knew best'.

What Government actually needed to do was understand the motivations driving business people - their needs, and their aspirations - and to "think big about small business". Taken together this could make the UK the "best place to start-up and run a business".

In the subsequent question and answer session, Mr. Prisk condemned the gold-plating of EU legislation and cautioned against Government agencies becoming too risk-averse.

The Health and Safety Executive came in for particular criticism for a 'mass' of 'absurd' rules. At the same time, Whitehall was paying too much attention to 'output' as measured by policies and legislation, and not enough to actual effects on the ground.

On the question of Europe, he proposed that a Conservative Government should consider moving at the same pace as the slowest European country in implementing EU legislation that affected business.

Concluding, he pointed to the importance of mentoring and young enterprise schemes in building business skills.

Chairing the session, FPB Chief Executive, Nick Goulding, emphasised the importance of leasing to small business growth. He commented that:

"Access to the right kind of finance for business development is crucial. Leasing can be a cost effective option for smaller businesses, particularly if they have not got the cash readily available to purchase, but need the equipment. It can also help small firms regulate cash flow more effectively because it involves predictable, regular installments as opposed to a single lump sum payment. Leasing helps by avoiding tying up lines of credit and frees up resources to be used in other areas."

In his remarks to the audience, Martin Hall, FLA Director General, pressed the case for opening up the SME capital allowances regime to leased assets, including, restored accelerated allowances for information technology. He stated that:

“The proportion of business finance provided by FLA members to SMEs has fallen from 53% of the total business finance provided in 2000 to 45% in 2005. That is a very worrying trend. We reiterate our plea to the Chancellor to open the SME capital allowances regime to leased assets in his forthcoming Pre-Budget Report.”