Small Business Minister: Reducing burdens

Small Business Minister, Alun Michael, outlined the Government's thinking towards small businesses at a speech to the Institute of Chartered Accountants of England and Wales (ICAEW).

He acknowledged that small businesses are the engine room of the UK economy and invariably the one who face biggest hurdles trying to grow their businesses.

He detailed the work the Government had already done to encourage small businesses, particularly through the Small Business Service whose role was to encourage Whitehall to "think small first".

Full text of Alun Michael's speech:

I'm delighted to have opportunity this morning to talk to you about the importance of business growth to the UK's continuing international competitiveness and prosperity.

The global economic map is being redrawn.

The world's developing and emerging economies grew more than twice as quickly last year as established advanced economies. The way wealth is created is also changing, with science and skills more important now than ever. Vast new industries are taking shape around the convergence of IT, biotechnology and nanotechnology.

As the economies of developing countries grow, and technology and scientific understanding change our world faster than ever before, we in Britain face major challenges.

The Government's priority, therefore, is to create the right foundation and conditions for UK businesses to develop, innovate and grow to meet that challenge.

This is particularly true for small and medium sized businesses. They are the engine room of the UK economy and invariably the ones who face biggest hurdles trying to grow their business.

There are now four million small businesses in the UK – three hundred thousand more than in 1997 with new companies starting up at the rate of more than one thousand a day.

They account for 99% of all businesses, provide 56% of private sector employment, and 52% of private sector turnover.

They are an important source of new competition and innovation.

The vitality of this sector is critical to our objective of raising the rate of UK productivity growth and narrowing the productivity gap with our international competitors.

The Government has made significant progress already.

Over the last 8 years have created and maintained a stable macroeconomic environment with long-term interest rates around their lowest levels since the 1960s, the longest ever period of sustained growth in GDP, the highest level of employment in our history, the lowest business failure rate since 1993; and the longest period of sustained low inflation for 40 years.

And we've made life easier for business. We've cut corporation tax.

Simplified VAT registration and set the highest VAT threshold in Europe.

Introduced new incentives for long-term business investment by cutting capital gains tax – for many business transactions – from 40% to 10%.

Worked across Whitehall to introduce Common Commencement Dates for new regulations.

Made it simpler to set up and run a business - today you can register your company electronically and be up and running in just one working day, and our Company Law Reform Bill will make process even easier – generating benefits to business of some two hundred and fifty million pounds a year.

We've rationalised range of DTI business support products from more than 180 to 9 – including products covering Innovation, Best Practice and Grants for Research & Development.

We've introduced R&D tax credits worth six hundred million pounds a year to companies and by next year will have reinvested some three hundred and fifty million pounds in knowledge transfer from British Universities to British businesses.

We've improved access to finance by setting up 9 Regional Venture Capital Funds, which have almost 42 million pounds invested in 134 companies, and by launching Early Growth Funding with 34 small businesses benefiting to the tune of five million pounds.

And it doesn't stop there.

We'll be investing more than 308 pounds (sic) over three years in the debt and equity markets, alongside the private sector, through the Small Firms Loan Guarantee and Enterprise Capital Fund schemes.

The Small Business Service, the DTI and RDAs all have a crucial role in supporting businesses.

The SBS has repositioned itself this year to enhance its strategic influencing role across all areas of national and regional government, as well as internationally. Much of this role is to encourage Whitehall to "think small first".

I want to see an environment where people talk about value that SBS has added to their organisations. Be it in helping small businesses to find most appropriate solutions to the issues that affect them; or in helping Government's delivery organisations to be more customer-focussed; or in stimulating other organisations to adjust their strategies to meet the needs of the small business sector.

As part of refocusing of the SBS, we have given more responsibility to the Regional Development Agencies. A prime responsibility of the RDAs is to promote the productivity of businesses in their region. And, by asking them to manage the local and regional Business Link service and some of DTI's business support products and services, RDAs will be better positioned to deliver on their promise of increasing productivity in the economy.

Working in collaboration, the combination of regional management by the RDAs and national brand development by the SBS should bring about national consistency in the service offer whilst also providing local stakeholders with the flexibility they need to prioritise those customers who will deliver maximum impact on the economy.

The Government also welcomes RDA-led proposals for development of a framework to stimulate the provision of coaching equally to ambitious start-ups as well as to existing businesses with high growth potential.

Building on the excellent start made by EMDA, SEEDA are working with the RDAs and key stakeholders to develop a coherent High Growth coaching strategy.

DTI provides an overarching role as the department working for business and with specific responsibility for fostering science and innovation and raising UK productivity.

However, it is not just the job of SBS, DTI or the RDAs to support and encourage business growth. We are working in partnership with other Government Departments such as DfES on implementing the Skills Strategy - giving employers real choice over training on offer and stronger voice in shaping its supply; introducing new National Employer Training Programme from April 2006; establishing the National Council for Graduate Entrepreneurship – to promote option of starting a business to graduates; and, from this Autumn, ensuring all pupils receive 5 days enterprise education by end of Key Stage 4 – and like Ministers at DFES, I want that to be about learning by doing not just classroom talks.

But working partnerships also extend beyond Government.

Indeed, I know many of you in the Institute already work closely with SBS, DTI and the RDAs - and that is something we should be looking to build on for the future.

So, what more is there for Government to do?

Despite World Bank placing UK first in the world amongst major economies in terms of regulatory quality, we know we haven't got it right yet.

That was highlighted by the CBI in a recent report on SBS and while the report was a little ungenerous, it made some serious points.

We need a step-change in better regulation.

That's why the Prime Minister appointed a Cabinet minister, John Hutton, with responsibility to drive regulatory reform, providing a strong lead across Government for us to deliver on our commitments under the Arculus and Hampton reports.

I believe we have an opportunity to implement one of the most radical packages for reform anywhere in the world. Thirty-five agencies cut to just 9.

A million fewer inspections every year.

Requirements in every department for targeted reductions in burdens on business.

Now DTI is working with Whitehall to map out the regulatory framework as first step to simplifying system as a whole.

But let me be clear about one thing – better regulation is not a euphemism for totally free market without social protection.

Appropriate and targeted regulation improves standards in public services, promotes competition; and ensures fairness at work, as well as protecting consumers and our environment.

But I firmly believe we can reduce the burden of regulation and enhance our flexibility while ensuring high standards.

The Company Law Reform Bill will be a major overhaul of an area of law that is of fundamental importance to business, but is currently over-regulatory and often impenetrable.

The Bill will remove unnecessary burdens, make company law more straightforward and easier to understand for small businesses. We estimate that it will generate benefits of some £250m a year for companies.

I am especially pleased that Bill will bring together and restate law on auditing company accounts. It will introduce a package of measures to improve the transparency and quality of the audit service available to businesses.

It will also enable a company to agree with its auditors that their liability if negligent will be limited to a fair and reasonable proportion of the company's loss. It's the sort of change that needs care – it's intended to apply common sense, not to tilt the balance of responsibility between companies and auditors, nor to create an environment where a focus on limiting liability becomes disproportionate and a distraction from the central purposes of audit.

We're also keen to ensure that in making sure the process is of the highest quality we don't lose sight of the strategic importance of having a true and fair statement of the company's health.

Let me close by saying that I am proud of what we've achieved so far, but far from complacent. The action we're taking is very much on the right lines to deliver a more flexible, productive and competitive UK economy capable of meeting challenges of a rapidly changing global economy.