Public Accounts Committee Press Notice

11th PAC Report 2006-07

Supporting small business

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

“I welcome the Government’s decision, in response to concern by my Committee over the effectiveness of the Small Business Service, to downsize it as a smaller policy unit within the DTI. The new, slimmed down unit must now do what its predecessor never managed: justify its existence.

“The Department must also draw up a clear action plan for cutting the number of small business support programmes from the current total of 3,000 to fewer than 100. Britain’s small businesses are too important for our economy for them to waste time and money trying to understand where to get support and attempting to cut a way through the present forest of regulation.”

Mr Leigh was speaking as the Committee published its 11th Report of this Session which, on the basis of evidence from the Small Business Service (SBS), examined its work influencing government on behalf of small business and delivering business support services

In 2000, the Small Business Service was established as an Executive Agency within the Department of Trade and Industry (the Department), responsible for overseeing government policies and plans for small businesses and delivering some business support services. On 26 October 2006, the Minister for Industry and the Regions announced that the SBS would be reformed to operate as a policy unit within the DTI’s Enterprise and Business Group focusing on influencing the business environment and supporting entrepreneurs, but shedding its executive agency status and losing its service-delivery role to regional partners such as regional development agencies.

The SBS has been accountable for the Public Service Agreement (PSA) objective “to build an enterprise society in which businesses of all sizes thrive and achieve their full potential”. In pursuing this objective, the SBS has had three PSA targets: an “increase in the number of people considering going into business”; to “improve the overall productivity of small firms”; and “more enterprise in disadvantaged communities”. Of the £2.6 billion the Government has spent on supporting small businesses each year, the SBS has spent less than 15%. The SBS has had no formal authority over the 15 government Departments involved in small business support.

Given the large number of small businesses in England, the many sectors in which they operate and the variety of economic, social and government influences to which they are subject, any moves to improve small business performance are inherently complex. In an effort to reduce that complexity and help deliver quality support to all small businesses, the SBS created a performance framework bringing together multiple objectives, targets and strategic themes. Unfortunately, the resulting performance framework is complex. In particular, it has been difficult to see how success with the strategic themes would lead to the achievement of the targets, and how achieving targets would, in turn, satisfy the Government’s aims and objectives.

The Government Action Plan for Small Business, designed to take forward the Government’s objectives for small businesses, did not identify which bodies were responsible for the listed actions, or the scale of resources they would commit. The Action Plan required sharpening to make Government bodies accountable for their contributions and to highlight the need to rationalise support schemes.

There have been a number of shortcomings in relation to the SBS’s involvement with government regulation. Although small businesses are dissatisfied with the volume and complexity of, and frequent changes to, regulation, the Government has no official statistics on the national cost to business of regulation or on the overall burden of compliance. The SBS’s contribution towards the development of regulation and policy has been mixed, with cases where the SBS has been fully involved in ensuring regulations take small business priorities into account but other cases where it has not.

Many small businesses cannot obtain market finance, and the default rate for the Small Firms Loan Guarantee Scheme has been so much greater than the commercial rate it is not certain that the Scheme has promoted the generation of viable businesses.

The SBS’s performance in influencing government for small business has been mixed. Although the SBS has stated that its position within “the Whitehall village” has enabled it to promote small business within government, there is evidence that influence has been limited. While measuring the SBS’s performance in its influencing role is inherently challenging, the SBS lacks a system with which to assess its success as an “influencer”.

Notes for Editors

1. Contact details for requests for further comment from Mr Edward Leigh are provided below. ISDN facilities are available for broadcasting purposes.

2. The full text of the Committee’s Conclusions and Recommendations is attached to this press notice.

3. This report can be accessed via the internet on the day of publication.

All media enquiries to:

Luke Robinson
Select Committee Media Officer
Tel: 020 7219 5693
Mobile: 07917 488549