Reddish Business Incubator

Greg Clark Excerpts

Tuesday 26th April 2011 Westminster Hall

[The Minister of State, Department for Communities and Local Government (Greg Clark)]

It is a pleasure to serve for the first time under your chairmanship, Mr Scott. I congratulate the hon. Member for Denton and Reddish (Andrew Gwynne) on securing the debate. To judge from his suntan, he comes hot from the campaign trail. It has been a beautiful weekend to be out on the hustings, and I detected a hint of the hustings in his remarks, if that is not too churlish an observation.

I shall address the context of the business incubator before I turn to the specific issues that the hon. Gentleman raised. As he acknowledged, the Government’s policy is one of localism. It is important that local authorities’ behaviour and policies are held to account by local people—as a local representative, he is taking the opportunity to do so today—but it is not for central Government to comment on the detailed policies and practices of local authorities. They are, rightly, independent of central Government, responsible for their own finances and free to make their own decisions.

As the hon. Gentleman said, the Localism Bill will increase opportunities for local authorities to be relatively free to take decisions and to be scrutinised on them locally. Indeed, we want to go further than that. Beyond the Localism Bill, the local government resource review, which has kicked off, is considering options to allow authorities to keep their business rates precisely so that there can be a better relationship between the opportunities for new business in an area and the rewards that an authority receives from them. It is important that we consider and expand the opportunities available for local councils to engage with their businesses so that there is encouragement for more to be set up.

The potential for increased control of local finances will mean that local councils will be able to consider whether business incubators—or innovation centres, as they are sometimes called in other authorities—are right for them. There is no reason why such types of activity should not be provided by the council or with close council involvement. It was not clear from the hon. Gentleman’s remarks whether he thinks that the innovation centre—the business incubator—should be closed down and its activities ceased, whether it should not have been established in the first place, or whether it should be run in a slightly different way. I will be happy for him to intervene if he can clarify that.

[Andrew Gwynne]

I mentioned that I was supportive of local authorities supporting local businesses. I also mentioned Stockport Boost and Tameside Works First, which are good examples of where that happens in my constituency. What I am concerned about is the bottomless pit that seems for ever to be filled by council tax payers’ money in Reddish. We need to get a grip on this. More importantly, the local community, through the local council, needs to scrutinise that effectively. The real problem in Reddish is that there has not been effective scrutiny.

[Greg Clark]

I am grateful for the hon. Gentleman’s clarification. I take it from that that he is in favour of incubators and of them succeeding. I think that he would want to be the first to congratulate the council on securing valuable jobs. Some 140 people are employed in the incubator, and I think it is important to recognise the potential for increasing employment in small businesses in a part of his constituency that is relatively deprived. I hope that he supports the principle of an incubator, although it would be reasonable for him to set out any concerns about how it has been managed in the past and how it will be managed in the future.

The hon. Gentleman will be aware that the incubator model is typically not financially self-sustaining. Most of those that have been established involve some degree of public support, whether from European funds, as is sometimes the case, national Government funds or local authority funds. For example, his Labour colleagues in Darlington are keen to establish a business incubator and are looking for central Government funds to support that. The model of a business incubator usually involves some commitment of public funds with the intention that that should create jobs and reduce other demands on council revenue and expenditure so that a virtuous cycle is generated.

The hon. Gentleman is a reasonable man and I think that he would be the first to acknowledge that, in times of economic difficulty, small businesses will be affected—perhaps more so than larger businesses, in some ways. I am sure that he would agree that it would not be right to take away something of particular importance at a time of economic difficulty. It is right to keep faith with small businesses, rather than exacerbating the difficulties they might have due to the state of the economy by introducing jeopardy into an arrangement that exists to make sure that there are jobs to replace those that are lost elsewhere in the economy.

[Andrew Gwynne]

I take on board what the Minister says about business support, but does he think that the obligation of the community interest company to the local taxpayers of Stockport should be at least to collect the rents from the businesses in the business incubator?

--- Later in debate ---

[Greg Clark]

Of course, and I will talk about the hon. Gentleman’s point later. Any administration of any organisation should be run to standards of good practice, and it is important that that continues. It was the hon. Gentleman’s Government who established community interest companies as a model in which the voluntary sector, communities and the local public sector could come together to pursue not-for-profit opportunities of local benefit, so I hope that he is not suggesting that there is something inherent in the structure of CICs from which we should back away. Obviously, he is right to ask questions and he has obtained information on the running and the practices of the organisation.

The hon. Gentleman will be aware that his council in Stockport and other Greater Manchester authorities have come together to make a successful and impressive proposal, which I think he supports, on the local enterprise partnership for Greater Manchester. The document that was successful in achieving authorisation is clear that the No. 1 ambition of the LEP is to develop Greater Manchester

“as a powerhouse for entrepreneurs, business start ups and innovation”.

I think that incubators such as that under discussion can play an important role, as all Greater Manchester councils, whatever their political complexion, would recognise. I do not think that this is a question about the principle of business incubators or about having community interest companies.

The hon. Gentleman asked about the performance of the incubator in question. On accountability for public funding or any other type of initiative, it is established that there are means—for local councillors, and for local representatives such as him—by which to obtain information and to shine the spotlight on the way in which organisations operate. He has done that by securing this debate, and I know that he has done so locally as well.

When considering Stockport council’s decision to support the business incubator project, it is worth remembering that every authority has a structure in place whereby it has to account for public sector funds. Indeed, legislation requires, and will continue to require, all local authorities to make arrangements for the proper administration of their financial affairs, to ensure that their financial management is adequate and effective, and to have in place a sound system of internal control that includes arrangements for the management of risk. I believe that this particular project was called in by the council’s scrutiny committee and considered in detail. Information has been disclosed through the freedom of information process and the future plans for the organisation have been established. I can tell the hon. Gentleman that, after looking at the matter closely, nothing has led me to believe that Stockport council has not exercised the proper degree of scrutiny. Nothing that the hon. Gentleman has said today has established that the council has been derelict in any of its responsibilities.

[Andrew Gwynne]

Will the Minister give way?

[Greg Clark]

I will not, because we have only a couple of minutes left and I want to conclude my comments. It is not a question of passing judgment on whether Stockport council was wasteful in its decision to provide support to the incubator. That decision has been made by a democratic and independent organisation and by a local authority aiming to help businesses to start up and grow in its area. As central Government, we should respect that.

The hon. Gentleman is right that we should make use of the powers available. He said at the beginning of the debate that I believe in transparency. The measures in the Localism Bill will increase the transparency to which local authorities are subject. I am keen that local people should be able to see what is being done with taxpayers’ funds. The local authority’s business plan for the incubator is in the public domain and people can take a view on whether it is an acceptable way to proceed. If they look at other business incubators throughout the country, they will see that it is rare for an incubator to operate at 100% capacity. The point of an incubator—almost—is to have some space available so that prospective businesses can locate there, so this situation is not out of the ordinary.

I know that that the local enterprise partnership will take a particular interest in the matter. It has made it clear that the facilities will be important for the full employment potential of Greater Manchester to be realised. I hope that the hon. Gentleman and his colleagues in Greater Manchester, including the other authorities, will consider how this particular incubator can be part of a network that the LEP may look to establish across the city so that it can realise the undoubtedly great potential for the small businesses of Greater Manchester to lead the way out of the economic difficulties from which they are suffering. I am grateful that I have had the opportunity to address the hon. Gentleman’s remarks.