HC Deb 27 July 1988 vol 138 cc253-6W
Mr. David Shaw

To ask the Secretary of State for Employment if he will make a statement on the achievements of his Department and his policies in helping small businesses over the last 12 months compared with the previous 12 months; and if he will publish the performance indicators by which his Department monitors those achievements and the statistical results of such monitoring.

Mr. Fowler

[holding answer, 19 July 1988]: I am pleased to announce that in 1987 the number of businesses registered for VAT increased by 45,000. This is the largest increase since 1979. In the period 1979 to 1987 the number of businesses registered for VAT has increased on average by more than 500 per week. In 1987 nearly 900 additional businesses were created each week.

Between 1979 and 1987 the number of self-employed people increased by 50 per cent, to 1.9 million. From 1986 to 1987 alone there was an increase of 230,000 self-employed people. These figures show clearly the strength of the small business sector, which has resulted both from the encouragement given to it by the Government and others and from the willingness of individuals to take advantage of the opportunities that exist in the United Kingdom today.

I set out below some of the measures for which my Department has been responsible over the past year.

The Small Firms Service

The small firms service offers advice, information and counselling to small businesses. During 1987–88 the SFS continued to maintain emphasis on counselling established businesses and on supporting and working with other small business advisory services.

On 5 July my right hon. Friend, the Minister of State announced that the national reference book, a database of information sought by small firms used and developed by the small firms service inquiry staff, is now available to other advisory services upon subscription. Statistics about the work of the service in England are set out below:

1986–87 1987–88
Inquiries 283,537 266,174
New counselling cases; 27,158 27,259
Counselling sessions 38,210 39,138

The small firms service annual report which was published on 5 July provides further information. Copies are held in the House of Commons Library.

Local Enterprise Agency Support

The Local enterprise agency grant scheme was introduced on 1 April 1986. This is a five year scheme of financial assistance designed to establish a network of viable self-supporting enterprise agencies. In 1986–87 £2,359,960 was paid in grants to 168 agencies. A further £2,713,856 was paid to 186 agencies in 1987–88.

Enterprise Allowance Scheme

Over the past year the scheme has continued to expand. The number of entrants in 1986–87 was 86,715 rising to 106,305 in 1987–88. Provision has been made for 110,000 entrants in 1988–89.

The scheme continues to encourage the formation of viable businesses with the potential for growth and job generation. The most recent survey of applicants showed that of those who received the allowance for a full year, 65 per cent, are still trading three years after start up and, at that point, for every 100 businesses still trading 114 additional jobs have been created.

Loan Guarantee Scheme

This scheme was extended for a further three years in 1986, with the premium payable reduced from 5 per cent, to 2.5 per cent. An evaluation of the scheme has recently been carried out by consultants who are due to report shortly. In addition a telephone survey of current users of the scheme is taking place.

In 1987–88 1,234 loans to a value of £46.23 million were issued. This compares with 1,050 loans to a value of £40.37 million in 1986–87.

In January 1988 simplified administrative procedures were introduced for loans up to £15,000. Since then the rate of applications has increased and is now running at around 200 a month.

Business Expansion Scheme

This scheme was introduced in 1983 and has played an important part in improving the flow of equity finance to small companies. It offers individual taxpayers the opportunity to offset the value of new equity investments of up to £40,000 a year in qualifying unquoted companies against their liability to tax.

In his Budget statement my right hon. Friend the Chancellor of the Exchequer announced a ceiling of £500,000 on investments under the BES in any one company in any period of 12 months. This will encourage prospective investors to examine smaller companies and gives a clear indication to smaller companies, investors and advisors that the BES is aimed at providing equity finance for smaller businesses.

The Prince's Youth Business Trust

The Department has agreed to match private sector donations to the trust. In 1987–88 £1.5 million was paid to the trust. The Department's contribution is to be used to provide loans to young people setting up in business or expanding an existing business.


Expenditure by the Training Commission (previously the Manpower Services Commission) on small firms training was increased from £18.6 million in 1986–87, benefiting 67,000 people, to £19.3 million, benefiting 107,000 people, in 1987–88.

In April this year the Department published a series of booklets aimed at encouraging graduates into the small firms sector by either starting up their own business or taking up employment in an existing small firm. The Department has continued its support for the Shell technology enterprise programme, placing undergraduates with small firms during the summer holidays.

Inner Cities

As part of the Government's action for cities programme announced on 7 March, new initiatives have been introduced to extend the wide range of help available to new and existing small businesses in inner-city areas and to make services to small firms more accessible.

New offices for the small firms service are planned in Sheffield, Middlesbrough, Blackburn, Wolverhampton, Leicester and Derby; those in Sheffield and Middlesbrough are now open. A new local enterprise agency project scheme commenced on 1 July, establishing a fund of £0.6 million to support local enterprise agency projects to provide special help to inner-city businesses. On 22 June, a raised Government guarantee of 85 per cent, on loans to firms in the 16 inner-city task forces became available under the loan guarantee scheme. New initiatives are also being introduced to promote self-employment and provide extra training and advice for participants on the enterprise allowance scheme.


The Advisory Conciliation and Arbitration Service produced a guide for small businesses entitled "Employing People" which received a Plain English award in 1987.

Health and Safety

The Health and Safety Commission's small firms working group has special responsibility for the interests of small firms. A number of publications aimed specifically at small firms have been produced and distributed by the Health and Safety Executive. The most recent is "Essentials of Health and Safety at Work" a handbook giving practical advice on health and safety problems.

Purchasing from Small Firms

There are regular contacts with other Departments at ministerial and official level to encourage purchasing from small firms. My Department has agreed to fund a post in the central unit on purchasing to promote the opportunities available for small firms. We publish a booklet "Tendering for Government Contracts" which gives guidance on what Government Departments seek to buy and the names and addresses of the relevant contact. My Department also produces its own leaflet "Selling to the Department of Employment" which is widely distributed through DE's small firms centres and regional enterprise units.

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