Businesses (Hansard, 8 December 1988)

§ Mr. Cope

[holding answer 5 December 1988]: Since June 1987, the Government have continued in their efforts to promote a more vigorous enterprise culture and stimulate the development of small and medium sized businesses (SMEs).

Information and Advice

The small firms service (SFS) has increases its links with other agencies in the small firms support network. Its database of national information is now available to other organisations advising small businesses.

In 1987–88 the SFS answered over 266,000 inquiries, helped over 27,000 small businesses by counselling, and held over 39,000 counselling sessions.

The service has opened six inner city offices and is appointing inner city business advisers to promote self-employment and small business development in inner city areas. In December 1987 the service opened a centre for European business information in London.

The recent pilot for Government business shops will be expanded in 1989 with plans for four more in England, two of which will be sited in small firms centres. They will provide information on tax, national insurance and VAT, to help tackle Government rules and regulations at a single point.

Further details of the service's achievements are contained in the small firms service 1987–88 annual report, a copy of which is in the Library.

The local enterprise agency grant scheme was introduced on 1 April 1986 to encourage greater private sector support for the agencies. £2,713,856 was paid to 186 agencies in 1987–88. A local enterprise agency project scheme (LEAPS) commenced on 1 July 1988 to support projects providing special help to inner city businesses. To encourage private sector support for LEAs, the Government made provision in the Income and Corporation Taxes Act 1988 (section 79) for tax relief on contributions to approved agencies by a company or unincorporated business.

The Rural Development Commission provides rural small businesses with advice through 33 business service offices. On 13 January the Department of Trade and Industry introduced the "enterprise initiative", a national programme which aims to raise the performance of management by promoting the use of best practice. The key element in the enterprise initiative is the six consultancy initiatives, covering marketing (including export marketing), design, quality, manufacturing systems, business planning, and financial and information systems. The other initiatives cover research and technology, enterprise and education, regional assistance and export.

Single European Market

The DTI has run a campaign to persuade firms of all sizes to prepare for the completion of the single European market in 1992.

Finance

Use of the loan guarantee scheme has increased following the introduction of simplified administrative procedures for loans up to £15,000. On 22 June 1988, as part of the action for cities initiative, an increase in the 312W guarantee to 85 per cent. was introduced for businesses based in, or working to be based in, inner city task force areas.

The Business Expansion Scheme

In his Budget statement my right hon. Friend the Chancellor of the Exchequer announced a ceiling of £500,000 on investments under the business expansion scheme in any one company in any period of 12 months.

By the end of October 1988, over 390,000 people had taken part in the enterprise allowance scheme. Greater emphasis is now being placed on counselling and training applicants.

Taxation

The basic rate of income tax has been reduced from 27 per cent. to 25 per cent. and the small companies' rate of corporation tax has been reduced from 27 per cent. to 25 per cent. Capital gains tax has been rebased to 1982 so that only gains on losses accrued since 31 March 1982 are brought forward into account. Retirement relief has been extended to include 50 per cent. of the gains between £125,000 and £5,000. The inheritance tax threshold has been raised from £90,000 to £110,000 and the previous four rates reduced to a single rate of 40 per cent. The VAT registration threshold has been increased to £22,100. The rules for registration of voluntary and intending traders have been relaxed. Following a review of the Finance Act 1985 VAT penalties, a number of changes have been made to the regulations including the introduction of a more flexible penalty system for late registration.

Training

Since the introduction of employment training (ET) in September this year, the provision of training for enterprise programmes has been split between ET, for those wishing to start up in business, and programmes dealing with growth and development of existing small firms.

Employment training provides training for people who want to become self-employed and they can enter the programme without having to satisfy the usual ET eligibility criteria. A full range of enterprise training is available throughout the country on ET including enterprise assignments, counselling, skills training, enterprise rehearsal and formal start-up training through business enterprise programme (BEP) courses.

The Department of Employment Training Agency also runs a number of programmes aimed at equipping existing entrepreneurs with the skills and knowledge required to manage and develop a small business succesfully.

Purchasing

The Government have improved small firms' access to information about purchasing departments, their procedures, requirements and points of contact. A Department of Employment booklet, "Tendering for Government Contracts," has been supplemented by some individual Departments' own publications and information published on Prestel. Tendering and approval procedures have been simplified by exempting suppliers to most Government Departments from normal approval procedures for contracts under £10,000, by allowing non-approved firms to tender for non-urgent contracts subject to subsequent approval and by encouraging Departments to make regular reviews of tender lists to encourage new suppliers.

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MOD Initiatives

MOD has continued to pursue the small firms initiative launched in November 1986. On 30 November 1988 the small firms advice division was expanded into the newly established MOD new suppliers service but the new service still retains within it a small firms group. A new and expanded edition of the booklet, "Selling to the MOD," has been published. These latest initiatives will encourage more companies of all sizes to compete for MOD business.

Innovation

The small firms merit award for research and technology—SMART—was run for the first time in 1986 to encourage small firms and potential entrepreneurs to put forward innovative ideas that cannot attract existing sources of funding. The Department of Trade and Industry, which runs this scheme, is evaluating the second competition which was run this year. It was extended to 140 awards in a broad range of technologies.

The support for innovation schemes was introduced in 1981 by the Department of Industry to offer firms assistance with research and development projects. Small firms have a simplified appraisal process and so far 50 per cent. of participants in the scheme have been small firms.

The teaching company scheme was set up by the Science and Engineering Research Council and the Department of Trade and Industry in the mid-1970s. In 1977–78 total funding for the scheme was around £15 million split between DTI, the research councils and industry. The scheme has led to the recruitment of high quality graduates into small companies, especially those with no previous graduate employees. The Department of Trade and Industry announced earlier this year that the scheme is being substantially increased with a target of 500 projects by 1992–93. The DTI will also put greater emphasis on the projects of small and medium sized firms, which should comprise 60 per cent. of all projects by 1992–93.

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.

Marketing

In 1987, my Department, together with the then Manpower Services Commission and Lloyds Bank, sponsored a series of workshops designed to show managers of small firms how to improve their competitiveness by the implementation of practical marketing techniques. COSIRA (now merged with the Development Commission), with funds provided by my Department offered grant to assist small rural businesses to improve their marketing and sales to trade buyers.

Wales

The Secretary of State for Wales instigated the gateway network initiative for small businesses in October 1987. It provides a high quality advice service to businesses in Wales through co-operation between member organisations. In July 1988 the local investment initiative ("local link") was launched. This scheme fosters contact between local businesses and investors.

In October 1988 a one-stop shop (Government Business Shop) was launched with the purpose of enabling businesses to get advice on tax and other Government regulations under one roof.

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Northern Ireland

In Northern Ireland initiatives have included: —introduction of new arrangements for enterprise training, covering those setting up new small businesses; —upgrading of support to SMEs to help them improve their marketing and export activities; —a programme to increase the awareness of local businesses of the opportunity to supply public sector purchasing requirement.

Scotland

The Government continue to provide substantial assistance to small firms in Scotland through the wide range of services delivered on an integrated basis by the Scottish Development Agency, including the consultancy initiative and the small firms information service and business counselling service; through the Highlands and Isles Development Board; and through the Industry Department for Scotland.

The year 1987 saw a net increase of 2,500 registered companies in Scotland. Many of these received Government assistance. Scotland was the first area in the United Kingdom to open a Government business shop to provide small companies with advice on Government regulations.