Start-up Loans

Toby Perkins Excerpts

Wednesday 20th November 2013 Commons Chamber

[Toby Perkins (Chesterfield) (Lab)]

I thank the Minister for his statement. Given that I first saw it when I arrived at the House, I also thank him for not saying anything surprising during it. I want to place on record the thanks of the whole House for the work that has been done by James Caan and the Start-Up Loans Company to support people to set up their own businesses. I also record our congratulations to Allen Martin, the 10,000th recipient of a start-up loan.

I understand that Allen is one of the very first ex-servicemen to benefit from a start-up loan. It was immense good fortune—I am sure the Prime Minister, as a public relations professional, will have appreciated his luck—that the 10,000th recipient of a loan should happen to be a Royal Naval veteran who gave 22 years’ service to our country, is over the age of 30 and lives far away from London. Sadly, he is not all that typical of the people who are benefiting from the scheme. However, atypical as he may be, he is a great role model to inspire future business leaders.

Small businesses are the lifeblood of our economy, so the £50 million that has been lent to 10,000 new entrepreneurs is an important symbol of the enterprise spirit that runs deep through the proud history of our great island people. The Minister was right to broaden his remarks to address the broader context of the scheme. As we examine the performance of start-up loans in the context of the broader picture for small businesses and the support available, we will see that James Caan is right to say there is still much work to be done.

Does this scheme have a default target and, if so, how is it performing against it? A key lesson from the start-up loans programme is that access to finance schemes is only as good as the infrastructure that supports them and that the schemes rely on a wider system of business support, mentoring and signposting—the very fabric of support that is so lacking in many parts of the country in the absence of Business Link, the abolition of the regional development agencies and the impoverishment of local government.

That 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 seek to create their own job by setting up a firm. Desperation is not a bad motive for launching a firm—I have done it myself—but it is noticeable that far and away the most loans have been given where businesses support networks are strongest, namely London: 15% of the population lives in London, yet 36% of the start-up loans have been delivered there.

Does the Minister recognise the links between an integrated business support network and successful start-ups? If so, does he regret the destruction of Business Link and the failure to replace it with anything meaningful to provide support, not just to start-ups, but to developing small firms around the country?

Just as with the regeneration money from the Growing Places fund that went much more to London and the south-east, just 5% of the loans under discussion are going to areas such as the north-east, which has seen huge job losses and which we would have thought would be ripe for skilled workers looking to set up their own firms. What is the Minister doing to create a one nation business support network for those areas receiving the least of the start-up loans money? Although we absolutely recognise and welcome the scheme’s success in attracting people from black and minority ethnic backgrounds and the number of women who have benefited from it, it is important that that geographical aspect is recognised.

Is the Minister aware that James Caan has said that support and mentoring is a more important part of the success of this programme than the loan? Is the Minister therefore embarrassed that recent research has shown that people using the Government’s Mentorsme website are four times more likely to offer themselves as experts than as businesses needing mentoring? Does he think that a scheme with four times as many experts as recipients of that expertise sounds like a success?

Will the Minister promise that the success of this worthwhile scheme will not blind him to the fact that there is a crisis in business support in many areas of this country and that businesses that would have had a chance of success will fail because of a lack of signposting and mentoring?

The Minister spoke about commercialised British ideas going overseas, but this type of scheme, important though it is, is not likely to make a difference, because it seems to be targeting a very different part of the market.

The Government’s failure to support small firms with access to finance cannot be camouflaged by this worthwhile scheme. Given that the Government have overseen a £14 billion reduction in lending to small business, will the Minister, at the same time as he celebrates his £50 million scheme, recognise that total lending from it is less than 1% of the shortfall in net lending that British business has experienced? [Interruption.]

[Mr Speaker]

Order. May I gently say to the hon. Gentleman that I think he is approaching his last sentence?

[Toby Perkins]

You are very wise, once again, Mr Speaker, to notice that.

Will the Minister make a statement on the real access to finance crisis that he has done so little about? Will he recognise the need for radical change to the banks through the Labour party’s proposed network of local banks and support for challenger banks, which will lead to the desperately needed improvement in the position of small firms seeking access to finance?

[Matthew Hancock]

Mr James Caan, who runs the start-up loans scheme on our behalf and to whom I pay tribute, is absolutely right to say how important mentoring is—and I think we have just seen why. What a pity that the Labour party cannot be enthusiastic about and supportive of a scheme that has done so much: 37% of start-up loans go to BME entrepreneurs and more than a third to the unemployed. We are aiming for 30,000 and the pace of delivery is accelerating.

I will turn to the specific questions asked. I entirely agree with the hon. Gentleman’s point about business growth in hubs, which is why the development of Tech City UK and of start-up hubs around the country—in Manchester, Cambridge, Edinburgh and almost every city—is welcome and I hope it will get cross-party support.

The hon. Gentleman said that we need to ensure that this scheme is part of a package, but I am not sure whether he was listening to the statement. The whole point is that the scheme is precisely part of a plan to start improving access and helping people right at the start of their business careers, and to then expand the enterprise investment scheme, enhance the guarantees available, establish the business bank and, most importantly, turn around the banks. I think that a little more support from the Labour party for turning around the mess it created would be more appropriate.