Start-up Loans

Lord Stevenson of Balmacara Excerpts

Wednesday 20th November 2013 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the Minister for repeating the Statement made in the other place. I would also like to place on record the thanks of the House for the work that has been done by James Caan and the Start Up Loans Company to support people in setting up their businesses. It would be good also to record our congratulations to Allen Martin, the 10,000th recipient of start-up loans. Mr Allen is one of the first ex-servicemen to benefit from the Start Up Loans Company and we wish him well with his new venture.

Small businesses are the lifeblood of our economy. The £50 million that has been lent to 10,000 new entrepreneurs is an important token of that enterprise spirit that we know runs deep in this country. However, as we examine the performance of start-up loans in the context of the broader picture for the economy and small businesses, and the support available to start up, we agree with Mr Caan that there is still much work to be done. A key lesson from the start-up loans programme in so far as we have the results is that access to finance schemes is only as good as the infrastructure that supports them, and relies on a wider system of business support, mentoring and signposting. This is the very fabric of support now lacking in so many parts of our country in the absence of Business Link, after the abolition of the RDAs and with the deliberate impoverishing of local government, which had a good record on this issue under the previous Government.

This is borne out by the statistics that we are welcoming today. In every recession, there has been an increase in business start-ups. People faced with a flat job market and low demand for their skills will often look to create their own job by setting up a business. Desperation is not a bad motive for launching a firm, but does the Minister agree that where business support networks are strongest, as they are in London, it is noticeable that that is where there have been far and away the most loans to date? The statistics on the start-up loans scheme that the Government have released today suggest that some regions are missing out. Some 15% of the population live in London while 36% of the loans issued have been in London, and almost half in London and the south-east. Only 5% of the start-up loans have been issued in the north-east and 5% per cent in the south-west.

Can the Minister explain to your Lordships’ House why the scheme has not been delivered in a more consistent way across the country? What will he do to boost business support in the areas that are receiving the least of the start-up loans money? Will he comment on the fact that the successful Business Link scheme has not been replaced by anything meaningful to provide support not just for start-ups but for developing small firms around the country?

Is the Minister aware that James Caan is on record as saying that the support and mentoring available under the scheme was a more important part of the success of the programme than the loan itself? While providing finance to start-ups is important, mentoring also plays a crucial role in helping businesses get off the ground. Does the Minister share my concern that just 17% of those contacting the Government’s new mentoring portal did so in order to find a mentor? Can he do more in this area?

Start-up businesses need to have affordable premises. Given that many businesses now pay more in business rates than on their rent and that business rates have gone up by £1,500 on average in this Parliament, will the Minister say whether the Government will back Labour’s plans to cut and freeze business rates to help start-ups and save 1.5 million businesses across the country an average of £450? A cost that places burdens on new start-ups is rising energy costs. Under Labour’s energy price freeze, start-ups and other businesses will save over £5,000. Why do the Government refuse to take action to help reduce the crippling costs that start-up businesses face?

Alongside the start-up loans scheme, the Government announced the start-up spaces scheme to great fanfare almost two years ago. We were told then that over 300 government offices would be available for start-up businesses to use as premises, but to date just one has opened. Can the Minister explain why the scheme has not been delivered? Is it because the Government have not kept their promise to make the spaces available to start-ups? According to the statistics released by the Government today, almost two-thirds of start-up loans have gone to men. Given the failings that we have seen under this Government with the Aspire Fund that was set up to help women entrepreneurs and that made only five investments in 2011-12 compared to 127 in 2009-10, what steps are Ministers taking to ensure that there is more support available to women entrepreneurs?

Finally, providing help and support for start-ups is important, but thousands more small businesses across the country are struggling to get the finance that they need after the failure of the Government’s Project Merlin, credit easing and funding for lending schemes. According to the Bank of England, net funding to businesses has fallen by £14 billion in the past 12 months. While the £50 million that has been provided through the Start Up Loans scheme is welcome, it is but a drop in the ocean compared with the Government’s failure to get banks lending.

I failed to get an answer to the question I put to the Minister yesterday, so I encourage him to answer it now. It was about the British Business Bank, not RBS. My main point was that last week we learnt that the bank, announced in September 2012, had finally made its first investment of £45 million to two financial institutions: Praesidian Capital Europe and BMS Finance. I asked the Minister: when we will see funding flowing to the small and medium-sized businesses that need it, and when do the Government expect the British Business Bank to reach its target of £10 billion?