Small and Medium-sized Enterprises: Government Policy

Lord Corbett of Castle Vale Excerpts

Thursday 17th June 2010 Lords Chamber

[Lord Corbett of Castle Vale]

My Lords, I, too, welcome the noble Baroness to her new responsibilities and I congratulate my noble friend on the measured and informed manner in which he opened this Labour Back-Bench debate. It is a pity that the monitors do not make this clear so that everyone can know exactly what is going on.

I come from the West Midlands, which is the cradle of the Industrial Revolution. We built the first iron bridge and named a town after it. We built the first iron boat. Men such as Matthew Boulton, James Faraday and James Watt—with his steam engine—pioneered that era’s technology, which gave us immense prestige and power all around the world. More lately, the regional development agency, Advantage West Midlands, has provided £19 million, which has been invested in research and development for some of today’s technology—in this case, low-carbon vehicles. This is centred at the University of Birmingham, which also hosts the national nanotechnology centre. Invention and innovation are in our bones in the West Midlands.

It is an enormous shame that the coalition Government started their life by immediately breaking promises that they gave over the Future Jobs Fund. In the course of that, they will this year deny an estimated 80,000 young people the chance either to set up their own business, or to get the kind of jobs and develop the skills they need to make successes of their lives and contribute to our economic recovery. I do not say this in a flippant manner. The then leader of the Opposition, Mr Cameron, in Liverpool described this as a great scheme. He was backed up by Mrs Theresa May, then a member of the shadow Cabinet, who said that the Conservative position had been “misrepresented” and:

“We have no plans to change existing”,

Future Jobs Fund “commitments”. Little Mr Echo, Steve Webb, on the Liberal Democrat Front Bench, was even more explicit. He said:

“We have no plans to change or reduce existing government commitments to the Future Jobs Fund”.

You could normally bank those promises and undertakings, but they were broken, torn up and ignored, even before the ink was dry on them. In my own region, an allocated 10,100 jobs under the fund will now not happen, and young people under this Government will be forgotten and left to rot, as they were in the 1980s and early 1990s.

The Prime Minister has a great sense of irony. The Minister he appointed as Secretary of State at the Department for Business, Innovation and Skills is none other than the man who spent the election campaign arguing for its abolition, but we will pass gently over that. The smell of power encourages people to change their minds.

I declare an interest as an ambassador for Advantage West Midlands, our regional development agency. Its record is impressive in a region which has stubbornly high unemployment and too low a level of new small business start-ups. In a word, there is a lack of entrepreneurship. Overall, for every £1 invested by Advantage West Midlands, £8.14 is generated for the regional economy. Between 1994 and 2007, new business growth was 1.6 per cent a year—a tad lower than the national figure. Matching national growth would have produced something like an extra 5,000 new businesses in the region. The new Secretary of State for Business has caused great confusion with his remarks yesterday about the future of RDAs. He said that:

“RDAs will be replaced by local enterprise partnerships”.

He went on to say that the RDAs,

“will be replaced, but the structures that emerge could have a regional scope if that is what people want”.

He added further to the confusion that he has caused by saying that RDAs,

“will not perform the same range of functions as they do currently”.—[Official Report, Commons, 16/6/10; cols. 906-08.]

That has got the Government off to a good, clear start, has it not? Significantly, the Secretary of State said not a single word in that debate in another place about the financing of the RDAs. Maybe the Minister will have something to say about this in winding up. What will their funds be? Will they be cut, left alone or expanded? On what basis will they be allocated? We need to know this.

In 2009-10, Advantage West Midlands invested more than £150 million in business support activity, aligned with the then Government’s Solutions for Business products portfolio. This meant that it assisted 28,000 businesses, safeguarding or creating 17,500 jobs and assisting 17,000 people with their skills needs. This real assistance at a time of economic peril will be at risk if the axe is taken to AWM and other regional development agencies. It will deny those opportunities—we desperately need those opportunities to grow our way out of this financial meltdown—to budding entrepreneurs, add to the bill for keeping people idle, slow economic recovery and depress life chances and community cohesion. Now, self-employment among men in the West Midlands is close to the national average. Among women, it is the lowest of all the UK regions. Young people also have lower rates of self-employment in the West Midlands than nationally and the same is true of minority-ethnic groups. Importantly—I know this from the experience of a very successful secondary school in my former constituency in Birmingham—attitudes among young people to starting their own businesses are exceptionally positive, reflecting the success of improved secondary school teaching and learning and the rising aspirations of today’s young people. That, surely, is what any Government should want to encourage.

I wish to give some examples of the success that Advantage West Midlands has had in assisting the start-up of small businesses. Vicky Cargill, of Remote Business Support Ltd, offers virtual PA services, including audio transcription, presentation, formatting to diary management and marketing advice from her home. She took advantage of a three-day start-up course run by Business Link West Midlands, and already has several clients. Peter Morrison of BioFuels International is the first in the United Kingdom to manufacture an eco log made from compost material, 70 per cent of which is fallen leaves. With help from Business Link, he secured the patent pending on the leaf-log invention and he and his partner are now awaiting exclusive rights to trademark the name. An Australian couple, Michele Forge and Stephen Burnett of Greenbean Mobile Coffee Company, set up an Aussie-style mobile coffee company with a difference in Stratford-upon-Avon. They travel between business parks, markets, food festivals and trade fairs in their bright green caffeine machine dispensing hot drinks. Steve Westwood and Emma Wood set up SEMS Wood and Wax. They did not let redundancy or the impact of the credit crunch stop them having a go at running their own business. They have used support from Business Link to launch this wood and wax retail outlet specialising in quality second-hand furniture, candles, holders and fragrances for the home and are currently putting the finishing touches to a 1,000-square-foot store, which will offer a large selection of their goods. Kevin Jew and Kenneth Mole set up KJ Fasteners when their employer went into administration after three decades. They are looking for a turnover of half a million pounds a year. In only the second year of their business, they got help from Business Link West Midlands and are striking out on their own as nut and bolt distributors.

These are all vital pieces in the jigsaw of getting economic recovery going. I say to the noble Baroness that nothing which this Government do should imperil that entrepreneurship. We need to encourage it, not to chop it off, particularly as the recovery is still so fragile. I hope very much that the noble Baroness will clear up this confusion about the RDAs because lots of people, not just those working for the RDAs, have built up a lot of experience. People are looking to support from the RDAs and want to know now—perhaps they are in the middle or early stages of their engagement with RDAs such as Advantage West Midlands—what will happen. I hope that the noble Baroness can put their minds at rest and give them a nice weekend.