Small Business Start-ups (Scotland)

Matt Hancock Excerpts

Wednesday 14th May 2014 Westminster Hall

[The Minister for Skills and Enterprise (Matthew Hancock)]

It is a pleasure to respond to this debate. The hon. Member for Inverclyde (Mr McKenzie) thanked me for being here, but that is my duty, not least because, as the Minister for Skills and Enterprise, I am responsible for small business. I take particular umbrage at his criticism that nobody in the Government is responsible for small business. Indeed, rather than small business being supported through an independent agency separate from Government, it is at the heart of the Government’s agenda here in the UK, hence the plethora of measures over the past couple of years to make life easier for small business.

I start by reflecting, acknowledging and supporting the figures that the hon. Gentleman mentioned on the growth of small businesses. There are more entrepreneurs in Scotland than ever before, and they are building on Scotland’s historical strength in exporting entrepreneurs the world over. It is good to hear that that, which has been going on for centuries, continues.

As someone from a family with a small business background, I am passionate about strengthening the small business environment across the whole UK. Of course, some of these issues are devolved, but the UK Government have been taking steps to strengthen the position in Scotland. I will set out some of those steps, and I will also respond to some of the points that the hon. Gentleman raised.

The hon. Gentleman called for a British investment bank, and I am delighted to say that in the past 12 months we have opened the British business bank. Of the £782 million of loans to and investments in smaller businesses, £35.4 million was in Scotland—a £20 million increase in support compared with the previous year. The British business bank brings together the management of all Government lending and investment programmes into a single, commercially minded institution that includes some of our most popular schemes.

The hon. Gentleman mentioned the new enterprise allowance, which is important in helping unemployed people to start businesses. The start-up loans and the enterprise finance guarantee schemes have been benefiting start-ups and small businesses across the country, including in Scotland. We launched the start-up loans programme in Scotland in March, and it has already helped nearly 300 entrepreneurs to set up their own businesses, with a total investment of just under £1 million. In the Inverclyde constituency, nine individuals have benefited, with more sure to follow.

Likewise, since May 2010, 850 Scottish businesses have been supported by the bigger enterprise finance guarantee scheme to the tune of £109 million, with just under £1 million of that sum going into the Inverclyde constituency. The enterprise finance guarantee is for slightly bigger businesses, whereas start-up loans are targeted at people at the very start of building their business. Some 7,500 people have signed up to the new enterprise allowance in Scotland.

Those are targeted schemes. We have also improved the tax system for small business that applies across the whole UK. That includes the launch of the seed enterprise investment scheme, which incentivises people to invest in smaller and growing businesses. We have also expanded the enterprise investment scheme for slightly bigger businesses. Those schemes are hugely popular, and we announced in the Budget that the seed enterprise investment scheme will be made permanent—we introduced the scheme for a few years as a trial—in part because of its popularity and its impact on ensuring that Britain is the best place to start and grow a business. That is our goal.

The hon. Gentleman talked about the breadth of sectors—an important point—and growing home-grown businesses and businesses that come from the communities that serve as their customer base. The best thing that the Government can do in that is support the ideas that people have, rather than trying to give direction, by supporting all small businesses to start and grow—not only by reducing regulation, taxes and barriers to growth, but by putting in place the infrastructure, skills and support necessary to help them.

[Mr McKenzie]

Will the Minister not also say something about the mentoring factor, which I have already highlighted? A lot of small businesses need that in the initial stages of set-up and afterwards, to take them past the many pitfalls and hurdles that they will encounter.

[Matthew Hancock]

The hon. Gentleman is absolutely right. The start-up loans scheme has mentoring built into every loan. The reports we get back show that the mentoring is as important as the money in helping businesses to expand. There are mentoring schemes on a local level—he mentioned his local authority—at the level of the Scottish Government and at a national level.

Ensuring that there is simplicity in the communication of the available schemes is important, and we are bringing those schemes together to try to ensure that the various offers that the Government have to support businesses to grow are clear. Smaller businesses in particular do not have time to navigate through the large bureaucracy inevitably involved in government. It is our job to ensure that the offer is consumer-focused and focused on and responsive to the needs of individual small businesses.

The hon. Gentleman mentioned the industrial strategy, and it is a great credit to this country that we now have an industrial strategy that covers many different sectors and brings together the players across the country, including the Government and various Government agencies, as well as businesses large and small in different industries.

For too long, Britain was an outlier in not having a proactive approach to industrial strategy, with the view that the Government should not have a say. That was in the heady days of new Labour and seemed to be the religion of the Department for Business, Innovation and Skills and its various forerunners. That has changed over the past few years, and there is now strong cross-party support for industrial strategies that actively support the growth of businesses and sectors and that try to improve the links between Government and business—they are inevitable in almost any sector—to support growth and jobs.

The hon. Gentleman mentioned prompt payment, a vital part of the effectiveness of the business environment. We have recently consulted on strengthening prompt payment to improve transparency and on putting the prompt payment code on a statutory footing. We have also asked whether we should go further and say that there should be a statutory limit on the length of payment terms. We will publish the results of that consultation shortly.

We put all options on the table and we had a large number of responses. The goal is to improve not only the length of payment terms, but the certainty around them. There are two slightly different issues with prompt payment: one is how long payment terms are and the other is how frequently payments are made on the agreed terms. In both cases, failure by a client can have a negative impact on a small business.

[Mr McKenzie]

Does the Minister agree that some of the larger, more household high street names have been pushing out their payment terms? Although they have signed up to prompt payments, they have now pushed their terms well beyond that and are taking advantage of being associated with it.

[Matthew Hancock]

That is exactly what was looked at in the consultation, and we will publish the response to it shortly. The hon. Gentleman also mentioned small business Saturday. We saw the success of small business Saturday in the USA. The President of the United States is a passionate advocate of it, and we listened to him and introduced small business Saturday last year. I can tell the hon. Gentleman that it will take place on the first Saturday in December. I very much hope and fully expect that there will be cross-party support, as there was last year, to strengthen the institution and take it on to a higher level with even broader awareness. The awareness of small business Saturday in its first year was pretty amazing. It was high last year, and I hope that it can be higher still.

[Mr McKenzie]

Perhaps the Minister would consider holding two or three small business Saturdays a year.

[Matthew Hancock]

It could be said that too much of a good thing might be a problem. One for the time being is probably the right approach. The date was chosen because it is the busiest shopping day of the year. The run-up to Christmas is an important time, especially for retailers.

There is one important issue that the hon. Gentleman did not directly mention, although I am sure we are on the same page on it. The Union is an extremely important element in the support of small business across Scotland, not only in supporting exports—UK Trade & Investment supports exports right across the world—but because ensuring that we can trade within the United Kingdom without international borders is a huge strength to the Scottish economy just as it is a huge strength to the economy of England, Wales and Northern Ireland.

Other parts of the UK buy 70% of Scottish exports, which is more than Scotland exports to the rest of the world and four times as much as Scotland exports to the European Union. Borders matter. They reduce trade and labour migration and disrupt economic and cultural links. I very much hope that the hon. Gentleman is as supportive as I am of the larger UK economy, which provides Scotland with jobs, stability and security. The Union is absolutely vital and we will be passionately arguing for it in September.

[Mr McKenzie]

I share the Minister’s commitment to keeping the United Kingdom together and to having that larger trading area for businesses, be they small, large or even bigger enterprises. Does he believe that one of the benefits might be the linking up of supply chains from larger organisations in the rest of the UK with smaller businesses in Scotland? That would be put in jeopardy if the Union was not preserved.

[Matthew Hancock]

There are huge advantages to the Union in supply chains. I put it in a positive light: this great trading union has been very successful over a long period, and we want that success to be built on, rather than put at risk. When we think about small businesses in Scotland and how we can support them, an important element of that is supporting free trade within the United Kingdom.

The economy is growing and unemployment has come down throughout the country in the past year. There was good news today with the Bank of England’s forecasts for the UK, which were increased again. That shows that there is growing confidence in small business in Scotland and across the country. We know that the people of Scotland are passionate and tenacious in their support for and execution of business, whether large or small. We are equally passionate about helping them achieve their ambitions.

Whether businesses are large or small, they are all driving in the direction of trying to increase prosperity and jobs. It is not right to try to split off large and small businesses and propose tax increases for one part. It is far better to support the growth of all businesses and the incomes, jobs and economic security they bring to the people who run them and the people who are employed because of them.

I hope that this debate has been an effective airing of the support that the Government have for businesses in Scotland, as well as in the rest of the United Kingdom. Finally, I have no doubt that although we have done a lot to improve the environment for business in Scotland, there is much more to do.