Financial Assistance to Industry

Seema Malhotra Excerpts

Monday 24th May 2021 General Committees

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Mr Gray. I thank the Minister for his opening remarks, in which he rightly laid out the context of the UK’s productivity challenge, a matter that I understand well. Indeed, I had intended to set up the first all-party parliamentary group on increasing productivity—I think it did get launched. The subject is a very important part of our parliamentary debate.

The Minister set out what we are debating: a motion to approve £220 million of financial assistance to business schools to help to fund the Help to Grow Management programme that was announced in the Budget on 3 March. As he said, the intention of the programme is to give 30,000 SMEs access to a mini MBA-style executive education for their senior management over the next three years.

SMEs are indeed the backbone of our economy. The almost 6 million SMEs in Britain are engines of growth and it is right to invest in the strategic management skills of SME leaders. We need to grow our way into the future and, as the CBI points out today, to seize this moment to create a more inclusive economy, so any support for innovation, productivity and the growth of SMEs—each of our constituencies will contain SMEs—is welcome. I hope that all our SMEs will take advantage of the programme.

We therefore support the funding to help our SMEs across the country to grow, but I and well-respected stakeholders in senior positions in academia and business have concerns about some of the Government’s decisions. We want the programme to be successful and to deliver on its aims of supporting productivity and growth, while providing value for money for the taxpayer and small business leaders. It is in that context that I would be grateful for the Minister’s response to the questions I shall raise, and for ongoing evaluation and feedback so that we can ensure that the programme delivers with its outcomes.

I would be grateful for two points of clarification. Section 8 of the Industrial Development Act 1982 provides the Government with the general power to provide selective or targeted financial assistance, for example to specific firms or institutions, when they determine that such assistance is likely to benefit the economy of the UK or any part or area of it. Subsection (8) provides that sums to be paid in respect of any one project shall not exceed £30 million except when authorised by a resolution of the House of Commons, hence today’s proceedings to make available £220 million over three years to fund the Help to Grow Management scheme.

Sections 11 and 15 of the 1982 Act require the publication of an annual report describing the exercise of powers under the Act, which suggests that details will be available at the end of 2021-22, and in subsequent years, on how much of the allocated £220 million has been spent on the programme. However, section 75 of the Coronavirus Act 2020, which grants emergency powers to handle the covid-19 pandemic, amends the 1982 Act to disapply the overall limits that it sets for the total financial assistance that the Government can provide when the funding is “coronavirus-related”. It also creates a quarterly reporting obligation on the Government in relation to coronavirus-related funding. Will the Minister clarify whether the £220 million allocated to the Help to Grow Management scheme is “coronavirus-related” within the meaning of the Coronavirus Act 2020?

Secondly, the overall Help to Grow scheme has been allocated £520 million, with the second programme being Help to Grow Digital. Today’s motion relates only to Help to Grow Management, so will the Minister confirm whether he will seek approval under a separate resolution for the Help to Grow Digital scheme in advance of its launch in the autumn?

Labour believes strongly that small businesses should be at the heart of the recovery from covid. We are concerned by the drop in new start-ups, which are down 11% since 2016. I grew up above a shop in a local business in Osterley, and every year across the country we celebrate small business Saturday. In April, Labour promised £1 billion of funding to support the creation of 100,000 start-ups across the country in the first term of a Labour Administration. We do not want this programme to go the way of the Government’s green homes scheme which, despite significant demand among the public, had a lack of take-up due to its bad design. Supporting our SMEs to survive and thrive as we exit lockdown and move into a post-pandemic, post-Brexit economy means planning ahead and thinking through policy to get it right first time. We need this programme to be effective, and to be designed with usability and SMEs’ needs as the first priorities.

I would be grateful for the Minister’s response to a number of questions about design, accessibility and scale, and value for money. First, on take-up, businesses were able to register their interest as of 3 March 2021. Over two months on, will the Minister provide an update on how many businesses have done so? What forecasts or estimates do the Government have regarding how many businesses are expected to apply, and by when?

In the current climate, is the Department confident that business leaders will be able to give up the time needed to be successful on a 12-week programme? Was any consideration given to a pyramid of programmes, which some business leaders have raised with me? The programme could be a significant part of such a structure to allow for greater accessibility and targeted support for SMEs that might not have that amount of time. What measures are being applied to ensure that businesses that are under-represented by sector, or indeed female-led, ethnic minority-led, or disabled people-led businesses, are accessing the programme?

Secondly, on the curriculum and diversity of need, how will the curriculum for the programme be developed? Is that in progress and in what timeframe will it happen? Will the curriculum be standardised across the 33 business schools? On 19 May, the Business Secretary announced the expert advisory council for the programme. What role will that council play in setting the curriculum for the programme, given that the first cohort will begin in June 2021—I believe that the Minister mentioned that date—at certain business schools, including Aston University, where I undertook a masters myself?

Some business schools have raised with me the question of whether there is any room to customise part of their course to take account of local circumstances. There is concern that a one-size-fits-all approach will not meet a diversity of need on the basis of place or sector. Will the Minister also confirm whether any support to non-university-led programmes is being considered for organisations that work closely to help small businesses on the ground?

Thirdly, I want to raise the issue of exclusions, which covers charities and micro-businesses? Why are charities not eligible? I am sure that the Minister supports the view that innovation and business management are vital in the voluntary sector, too. Classes at business schools often comprise people from not only the private sector, but the public and voluntary sectors. Clearly charities would benefit from such a scheme. This point is particularly important because charities have experienced a severe capital shortage throughout the pandemic. Will the Government explain whether equivalent support is being offered to the leaders of small charities?

What is the policy basis for the exclusion of businesses with one to four employees? Much research suggests that moving from one to two employees can be one of the biggest hurdles that a business faces, but once that happens, it can lead to an acceleration of a business’s growth and the likelihood that it survives.

I would be grateful if the Minister would clarify the process by which the Small Business Charter, which does good work, was determined as the gatekeeper for the programme. There are schools outside the 33 charter members that are leading business schools for SME growth and support. Is the Minister suggesting—perhaps he was alluding to this in his speech—that they will need to seek accreditation in order to participate? I would be grateful if he would cover that point.

How is the £220 million to be allocated across schools? Will that be done on a pro-rata basis? Labour’s analysis of the start-up loan scheme shows that nearly £1 in every £4 has gone to London, while the north-east has seen just £1 in every £20. How will the Government ensure a fairer distribution of funding across every region and nation of the country?

How will the Government advertise the programme? The Minister mentioned the CBI and the Federation of Small Businesses in his opening remarks, but the advertising will need to reach those who need the programme the most. Social media is not enough. Will he use existing local infrastructure, including local chambers of commerce, post offices, community centres and bank managers, for example, to help promote the programme?

Can the Minister outline how the impact of the programme will be measured? Will the Government monitor and report on the growth and improvements in productivity and innovation from participating businesses? Will there be a longer term evaluation in order to see that impact? In the Business, Energy and Industrial Strategy Committee’s evidence session on 18 May, he struggled to articulate how sharing prosperity, or levelling up, will be measured. There are great risks of such programmes not succeeding unless there is a built-in, fast-cycle evaluation, with opportunities to learn and to tweak design. Is an interim evaluation planned, and if so, how will it be carried out? Will the results be reported to the House?

On value for money, the cost of the programme appears to be at the higher end for executive courses of this type. It is priced at £7,500 per place, which appears, from what is available publicly, to be for about 50 hours of tuition—so about seven days—with other study alongside. Can the Minister explain how that was costed, and what benchmarking and value-for-money criteria were applied? I have had a lot of contact with business schools over many years, including through my own MBA, but some figures that I was sent today appear to suggest that the cost per tuition hour of this proposed programme is considerably higher than that of the prestigious executive education courses run by some of the best business schools. We want to have the maximum impact and the best use of resources to support the SME sector across the country, so I would be grateful if he shared with the Committee the costing and the value-for-money exercise undertaken. If he cannot do so today, perhaps he could write to me with that information.

Finally, on creating an environment for success, this programme is being introduced in the context of short-term existential threats to thousands of SMEs. Although the funding is extremely welcome, the Budget that announced the programme did not contain long-term solutions for the debt crisis that, as the Minister will be aware, thousands of businesses across the country face. Innovation is important, but many firms are also fighting for their short-term survival. For example, what is the Government’s answer to the £7.5 billion of commercial rent arrears that the British Property Federation estimates will have accumulated by 30 June 2021? The Night Time Industries Association has warned that 75% of commercial tenants in the UK’s night time sector face the prospect of insolvency in the near future without a solution. I will be grateful for the Minister’s response.

[Paul Scully]

I welcome the hon. Lady to her place. I know that there will be plenty of opportunities for she and I to discuss this and many other issues in the time to come. I also send my best regards to her predecessor, the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), with whom I had fruitful debates, often in this very room. The hon. Lady and I will get to know each other and Committee Room 10 quite well in the coming months.

This is not considered to be a coronavirus-related measure. It looks at the wider aspect of productivity under the Act. I hope that answers the hon. Lady’s question in that regard. The course is 32 hours of formal training, to be delivered over three months, accompanied by peer learning and one-to-one mentoring, and participants will also be able to join an alumni community. I therefore believe that the course offers value for money for the recipient, who will be asked to pay 10%—£750—as a joining fee. Equivalent executive education programmes can cost up to £10,000 per participant.

[Seema Malhotra]

The 32 hours has been published in the description of the programme, but there are also other taught hours, perhaps for case studies. I was just trying to understand what the full expectation would be of tuition hours—where an academic or speaker will be involved in delivering some of that tuition, whether in groups or lectures. Secondly, to clarify, I understand that the Minister is saying that the course offers value for money, but an exercise must have been carried out to come to the costing of £7,500. If he does not have that information, I would be grateful if he could write to me with it. It is quite significant in terms of ensuring that we are delivering value for money for the taxpayer, as well as value for the small businesses that need the support.

[Paul Scully]

Indeed, and if there is anything that I do not cover today, I am happy to follow up on it. As I say, we have worked with business schools across the country; 33 are accredited at the moment and another 33 are seeking accreditation. By the end of that, we will have quite an extensive list—well beyond the existing cohort—that will be able to provide coverage across the country.

[Seema Malhotra]

I am grateful for the Minister’s generosity in giving way. A number of business schools contacted me because they were not clear about this. Is the expectation that other business schools may be able to participate in the programme if they feel that they have either the resources or the opportunity to do so? That might be in parts of the country where there do not seem to be as many courses advertised at the moment, because I have been looking at the regional advertising of what is available. Will it be the case that other business schools could participate, but they would have to become accredited to do so?

[Paul Scully]

I can give the hon. Lady an absolute yes. We are encouraging more business schools to apply to the Chartered Association of Business Schools for accreditation to the SBC, and CABS will seek to complete that accreditation process within two months. As soon as schools gain accreditation, they will be able to deliver the programme. We want to ensure that there is a clear framework. I know that there are plenty of excellent business schools up and down the country, but we want to ensure that we can work within that framework to achieve the value for money that the hon. Lady rightly asks about, and to ensure that we have a consistent approach across the country.

The best description that I have heard of levelling up is that potential is equally distributed across the country, but opportunity is not, so we need to try to tackle that. Similarly, on business advice, we said in our manifesto, which we are trying to deliver, that the UK should be the best place to start, grow and scale a business, but we want to go further. I have seen this myself with my own business, and certainly in the last year working up and down the country. I want to ensure that we have a degree of consistency so that no matter where someone is in the UK, that should be the best place to start, grow and scale a business. That involves access to finance, mentoring, peer-to-peer networking and infrastructure, and this programme plays a major role within that.

The hon. Lady raised a really good point about not only geographical differences, but differences among the people whom the approach might benefit. We are working through our communications plan to ensure that we can get this out. We are converting registrations of interest into actual places and, similarly, making more registrations of interest available. What I am more interested in is the kind of businesses that we can speak to. Exactly as she said, it is female entrepreneurs, ethnic minority-led businesses and young people, whom I speak about and listen to on a regular basis.

The themes tend to be the same regarding what the barriers are for those businesses, but the answers are very different. With a tailored programme of work such as this, we can start to tackle that. However, we need to make sure that we do not go solely through the same people—the CBIs and the Institutes of Directors. Someone with an informal network will not necessarily be aware of those institutions or feel that they can engage clearly with them. What more can we do? I am always keen to hear more about how to reach those groups.

When we were handing out the first grants for retail, hospitality and leisure small businesses in the early stages of the pandemic—it was seemingly one of the easiest areas of support, because we knew exactly who qualified—we were still struggling with the relationship between the local authority and those businesses, because we did not have bank account details. Why? The businesses did not have a close transactional relationship with their local authority, so we had to do quite a lot of outreach through accountants, intermediaries and the local media in order to access the people who were running businesses based, as I say, on their informal networks. I am really keen to see what more we can do to drill down, because they are the people for whom this scheme will have the biggest effect.

The hon. Lady rightly talks about how we measure this. Frankly, there is little point in our subsidising someone who would pay the full £10,000 to go on a course over someone who perhaps could not afford it, would not be aware of it or would not think it was for them, although it actually would be very much for them. We ask for £750 because, frankly, if someone has a stake a scheme, they tend to get more out of it in the first place. I am really keen that we do more about finding those hard-to-reach people, and we will direct the funding more at places where productivity is lowest geographically. That is really important in the work that we are doing.

[Seema Malhotra]

I am grateful to the Minister for explaining that that is indeed a priority for the Government. It is important for the House to be kept updated, because we want this to be successful. If places are not being reached, it will show in the numbers of those registering interest and the regions in which people are registering interest. I hope the Minister will keep the House updated on the numbers, including by region.

May I probe the Minister on one point? He rightly talked about consistency, and I have a great deal of sympathy with the idea that we want to make sure that the programme has the same quality, standard and consistency across the country, but will he respond to my point about whether a proportion of the curriculum could be more tailored? For example, it is English Tourism Week. We know that the tourism sector has been very hard hit—

[The Chair]

Order. Interventions should be brief.

[Seema Malhotra]

I would be grateful if the Minister could consider whether that could be part of the way in which the programme is refined.

[Paul Scully]

The programme is sector-agnostic, but the peer networking within it means that there can be a certain degree of tailoring towards a particular business leader’s business or sector. Clearly, the alumni aspect, as it develops and expands, will be really productive. I know from courses that I have done in the past—in politics and in the business world—that such learning is often the most beneficial to business leaders.

The hon. Lady asked about charities. Unfortunately, the programme is not available to charities. It is a business-led programme, based on business productivity, but social enterprises clearly are well within the remit, so we want to make sure that we can deliver on that.

[Seema Malhotra]

I also asked why the programme is not available to charities, which I do not think the Minister has fully answered. If that is the case, what is the alternative? Leadership, management and innovation capability within the charity sector is also extremely important as such organisations play an enormous role in our local economies and are great employers.

[Paul Scully]

Charities are indeed great employers. Many of them do fantastic work, and there are always interesting things that we can do to support charities. This scheme answers a particular question. It is an outcome-driven thing: how do we increase productivity? It is especially aimed at businesses and social enterprises that have that sort of outlook, and that is the outcome that we are after. The hon. Lady asked how we will measure that, which is a really important point. On all of the productivity measurements that we already do, we want to make sure that we can see a company’s turnover and the prospects improving. The measurements that we want to make will be covered.

We need to drill down further into how we measure overall outcome, and therefore how we report it. The hon. Lady will undoubtedly ask questions, and rightly so. The easiest thing in the world would be to just give this to a young hotshot whose business is expanding anyway. We want to make sure that we can find the hard-to-reach people and increase their productivity, because that will be of use to the levelling-up agenda, and productivity will help the prosperity of communities as well as businesses. Businesses can be a force for good for not just UK plc, but communities, cities and towns.

The hon. Lady asked about the curriculum. As I have said, the curriculum has been run through business support specialists, including existing courses such as the Goldman Sachs 10,000 and formal learning at business schools, as well as other organisations that run their own schemes. We want to make sure that we learn from the best and get the best in. That means not only doing these informal comms, but working through banks, accountants and intermediaries. Every business has an accounts package such as Sage, Intuit and Xero. Small businesses know that they can work through these areas, and I am keen to make sure that we work with them to get to the harder-to-reach businesses, because we continue to be a champion of the needs of business and industry. That is why we have published “Build Back Better: our plan for growth”.

The supporting strategies will put the UK at the forefront of opportunities and give businesses the confidence to invest, boosting productivity across the UK and enabling our green industrial revolution, which is so important. “Build Back Better” can mean a wide number of things to a wide number of people. Building back better will not only increase productivity, but will build back fairer so that people working in such organisations can feel that they have productive jobs and careers.

--- Later in debate ---

[Seema Malhotra]

The Minister is right about building back better, fairer and greener. We need to make sure that businesses are supported in the growth sectors that might be coming, particularly around the decarbonisation of our economy. I hope that there will be a connection, when future growth is planned within the industrial strategy, to help to support businesses to take advantage of some of those opportunities, too.

I am aware of the Goldman Sachs programme. Indeed, that has seen considerable success. There will be other initiatives that are important to learn from regarding how grassroots businesses have been supported to grow. Have the Government learned from other programmes in the development of the scheme and its curriculum?

[Paul Scully]

I used that as an example, but we have been working with business schools and the schemes that I have dealt with over the last year. In my 14 months as a Minister, I have spoken to about 5,000 or 6,000 businesses. A lot of those have gone through various schemes such Goldman Sachs’s, and also Be the Business, which is a Government-sponsored organisation doing fantastic work up and down the country. We will continue to work and learn from them, but we do not want to replace what is already there. We want something that is additional, that adds value and a degree of consistency, and that allows Britain to be proud, and to be the best place to start to grow and scale up a business that will attract investment, increase productivity for the UK and help us to build back better. I commend the motion to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the motion, That this House authorises the Secretary of State to undertake to pay, and to pay by way of financial assistance under section 8 of the Industrial Development Act 1982, compensation to Business Schools in respect of a proportion of the indirect costs of funding the Help to Grow Management Programme up to a limit of £220 million over three years.