Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 40 - 59)



  40. Who is responsible for helping SMEs to export? Is it the Small Business Service or British Trade International?
  (Mr Waller) It is Trade Partners UK, which is the international trade brand of British Trade International. The Business Links employ people to promote exports under contract with and funded by Trade Partners UK. Just extending it slightly, essentially any Business Link will have three core contracts. A core contract with the SBS to provide the overall service, a contract with Trade Partners UK to provide the export and international trade side, and a core contract with the local Learning and Skills Council to provide workforce development, IiP and so on. Those three contracts will effectively come together as the core contracts for each of them and I think over time will be trying to coincide everything so we have a single approach. We may end up with a single contract, I do not know. We are not there at the moment.

  41. Is the Small Business Service still the sole gateway for the local market reports? Are they still charged?
  (Mr Waller) I would not know.
  (Mr Irwin) You mean the reports which the old overseas trade people used to do?

  42. Yes.
  (Mr Irwin) We will have to find out because that would be a TPUK responsibility.

  43. The payroll service went to the Inland Revenue. If someone wants to have advice about the payroll service, do they track down the Inland Revenue and speak to them about it or is there a role for the Small Business Service in this? What is going to happen?
  (Mr Irwin) I think there is a role for our advisers to be able to assist a business or potential business with every aspect of managing and growing a business. If an adviser cannot give someone specific advice on how to run their own payroll, they should be able to bring in someone who can. We are not responsible for running a payroll service on behalf of small businesses, although I recognise payroll does impose particular burdens and we are currently exploring with others ways in which we could lighten that burden.

  44. Do you have any ideas to share with us yet?
  (Mr Irwin) They are at a very early stage but we have been talking to application service providers and to writers of software about ways in which we can automate more of the process.

  45. How does the Small Business Service fit into devolution?
  (Mr Irwin) Complicatedly, I think! We are responsible for the Business Link network which only operates in England. Some of the national programmes are UK-wide programmes but we are still responsible for them in toto—things like Inside UK Enterprise, the benchmarking index. Some programmes, like the Small Firms Loan Guarantee and SMART are also national programmes and are managed in slightly different ways in Scotland from the way they are in England. SMART is managed in a slightly different way as a national programme. In relation to our role in relation to regulation, we have a national remit although we are trying to work very closely with all three of the devolved administrations but particularly with the Scots because they tend to have slightly different regulations or the same regulation in different types of areas. I am going very shortly to meet Wendy Alexander and go to her Better Regulation Committee. So we are trying to work closely with them.

  46. Will you have a role for helping to formulate RDAs' regional strategies? You were talking about the Small Business Service as the voice of business.
  (Mr Irwin) We have followed on from the RDAs, and the RDAs were just about to publish their regional economic development strategies by the time we came into existence, so we did not have any role to help them the first time round. I would be very surprised though if Business Link contractors locally were not involved in helping RDAs with their strategy in the same way I was in my previous incarnation running an enterprise agency in the North East.

  47. Will it be more formal than that or will it be like before and be like the curate's egg?
  (Mr Irwin) I think the process before was pretty formal because there was a great desire by the RDAs to ensure everyone was involved. We would be keen to ensure that a view from the business support network is fed back into the RDAs. I do not think that is something we would wait for a strategy on to feed in. I would like to think we will be encouraging both our regional managers and indeed the chief executives and chairs from individual Business Links to be feeding that back in on a regular basis, which is why I am keen, as I said earlier, we get a Business Link involved in the sub-regional partnerships because that is a very important part of the process.
  (Mr Waller) Every RDA I visited in a sense boasted to me just how widespread their consultation was on the Regional Economic Strategies. I do not think anyone can say they do not seek views on them. It is their decision in the end what is in the strategy but there is plenty of opportunity to comment. Probably we will join in that at national level as well and talk to them about that.


  48. Mr Irwin, you said in passing earlier that you were not a civil servant, that you came from an entrepreneurial background, what is your impression of the RDAs? We visited some of them and they are still at the stage of being stuffed with civil servants. Some of us last week visited Scottish Enterprise and they have been in existence for 25 years, they have shaken out a few of the civil servants, they have attracted people in, there has been a bit of a turnover, folk who have worked for them have gone back to private business and come back in again. Do you feel the Regional Development Agencies are fast enough on their feet in business terms, or do you think they still have the plodding tread of a civil servant?
  (Mr Irwin) I am not sure it is fair for me to comment on the RDAs.

  49. You have been working alongside them for 12 months.
  (Mr Irwin) Sure. I see the RDAs as being very much there to develop strategy for a region. I see the Business Link network being there very much to deliver a range of services directly to small businesses. Of course the RDAs have a role to ensure everyone is coming together, everyone is happy with the strategy but also that the strategy is right for the region. When a major problem blows up, from what I have seen of the RDAs, they have been pretty good at responding to those specific needs.

  Chairman: A former member of this place, Alan Clarke, writing on the First World War Army said they fought like lions but were led by donkeys. I am not going to ask you to go down that road but sometimes the great strategists fight yesterday's battles rather than tomorrow's ones because they do not know anything about what is happening. Anyway, I will not put that in your mind any further.

Mr Chope

  50. Can I ask you to illustrate what happens in practice with a specific example? The Government has recently announced a policy in relation to foot-and-mouth that it would be possible for businesses, particularly small businesses, to apply for a temporary reduction in their rateable value. That was given to the Valuation Office Agency. Although the Government is a bit coy about giving me the exact figures, it seems something like 100,000 businesses have already made applications. We know that there are already 600,000 rating valuation appeals outstanding from the revaluation in 2000 and prior to the foot-and-mouth crisis the Government was saying that the latest of those appeals would not be dealt with until the year 2003-04. There is a lot of concern here because obviously if people are in a crisis situation they are seeking temporary revaluations downwards. I wondered if you could let us know exactly what your involvement has been in the discussions with the Valuation Office Agency in relation to the timescale for dealing with these appeals and the priority that is to be given to the smallest businesses in that appeal process.
  (Mr Irwin) Certainly I have not, and I do not think any of my staff have, talked directly to valuation officers. What we have done is we have given details and information to all of our Business Link operators so they in turn, when they are working with their clients, can show their clients exactly where to go, know what it is the Government has promised, not just in terms of rateable valuations but in terms of Inland Revenue and Customs being rather more generous than is typically the case, and also that the banks have agreed to give loan breaks or indeed the small firms loan guarantee. What we have also been encouraging is that whenever anyone comes up against what is apparently a brick wall they are to let me personally know and I have undertaken I will take that up with the bank or the Inland Revenue or the Valuation Office. So far, before you ask the next question, I have not yet had anyone who has felt the need to come to me to ask for our assistance.

  51. What you are saying is that you have been passing on information but that is a very different function from the function set out as being your main purpose, which was to provide a strong voice for small firms at the heart of government. In answer to a Parliamentary Question which I put down, I was told by the Treasury that the Valuation Office Agency were urgently discussing with you, the SBS, amongst others, how to prioritise and implement this difficulty of all these people who have applied for temporary rating reductions. I am just dismayed to hear you say that even now, some six or eight weeks after this initiative was announced by the Government, you have still not had any direct, head-to-head discussions with the Valuation Office Agency as to how this is going to get implemented in practice. There are about 100,000 small businesses out there who are thinking they are going to get instant results, but on the basis of the resources available at the moment they may be waiting until 2004 before they get a determination of their appeal. Is this not an area where you should really be being proactive on behalf of these small businesses? They are engaged in entrepreneurial activity, obviously realising the risks, but they found the risk resulting from the foot-and-mouth crisis was one they could not possibly guard against.
  (Mr Irwin) Certainly we would be there to be the strong voice of small business, you are absolutely right. Interestingly, however, I have been talking to businesses in some of the foot and mouth areas. They have not raised this as a major issue.

  52. Yet 100,000 have appealed. They obviously think it is important.
  (Mr Irwin) Yes, they have appealed, and they are hoping, as we do, that it is going to go through on appeal. If the appeals do not go through quickly, then they will be coming and shouting, and we in turn will be shouting on their behalf.

Mr Baldry

  53. First, it is the only positive piece of evidence that the Government has offered to small businesses in the tourist sector hit by foot and mouth, other than deferring or rearranging corporation tax or VAT. The only area where a small business can have some reduction in their overheads to help their cashflow is by some reduction in their business rates, therefore this is actually quite a key issue for them, is it not?
  (Mr Irwin) Yes, I accept that. If the valuation is not going through quickly, then it will be a difficulty.

  54. I do not want to trespass on Mr Chope's question, but I think what we are trying to get a feel of is to what extent are the Small Business Service champions of small businesses, or to what extent are you just an information service on behalf of the Government and agencies of the Government?
  (Mr Irwin) I would actually argue that we have been very effective as a strong voice as part of Government. We have been communicating views, particularly when Ministers have been putting forward proposals for new regulations, for example. On some occasions, Ministers have decided not to regulate or they may have decided to regulate in a different way. When Ministers do want to regulate, then we want to ensure that they are doing it in such a way that it minimises the burden, and again they have been listening to that. We encouraged the Government that they should ensure that where there were changes to the regulations then there should be a reasonable consultation period, and the Government agreed that there should be a minimum consultation period. We have argued with the Government that where new regulations are being introduced, there should be a minimum of 12 weeks between new regulations being agreed and actually being enforced. We are also saying that businesses should have an opportunity to look at the implications for their business where it is necessary to put in place new procedures. In January we published "Think Small First" where practically every department has agreed to sign up to a framework that encourages them to think about the implications for small businesses whenever they are thinking about regulation, whenever they are thinking about additional schemes to support small businesses. If you look at one or two of the issues that have been in the papers recently—the proposal for a supplementary rate, for example—businesses were not terribly happy about that, which is probably an understatement. The proposal that is now on the table is that we should have instead a US-style business improvement district that will lead to the improvement of businesses. That is being looked at now, and that is down to my officials making the case to do something in a different sort of way.

Mr Chope

  55. Following on from that, are there any other examples you can give us of where the SBS has actually succeeded in cutting red tape for small businesses in the last year?
  (Mr Irwin) Yes, we have one interesting example which is the construction industry best practice consortium. They came to us and said they thought the way in which construction industry certification works is too complicated, and they came with a number of recommendations. We put them to the Inland Revenue and to the Treasury and they have accepted them. We have been trying to influence in areas like the regulatory investigation powers—RIP—where we were able to temper some of the initial thoughts of what the regulation ought to be. In my discussions with businesses, on the whole, whilst regulation is important to them, it is not usually the first of their priorities—in fact, it usually comes out about fifth or sixth. What is always interesting when you talk to businesses is they recognise that there always has to be regulation to protect communities, to protect employees, to protect the environment, whatever it is. Their concern is where the balance comes between the burden that regulation imposes on the one hand and not having a regulation at all on the other. I was interviewed recently by a journalist from The Times. She said that even the FSB thinks that we are beginning to make a difference in that area.

  56. The Daily Telegraph reports that in a submission to the DTI's `full pint' consultation, the SBS said that proposals were `unnecessary' and that `the cost will be enormous . . . and will fall on the consumer.' Can you tell us your views about this? Will you make it your practice in future to make the SBS views on such matters as public as possible, in the interests of transparency?
  (Mr Irwin) There are some things, clearly, where it is helpful to have a debate in public. There are some debates it is not terribly helpful to have in public.

  57. In what sense? Helpful to whom? Helpful to the Prime Minister, or helpful to the Opposition, or helpful to the people or to the small businesses?
  (Mr Irwin) If, for example, a Minister has an idea for a new regulation which has not reached the public domain, if we say, "Business will not like this if this goes ahead", and the Minister then says, "Okay, I'll accept that" and decides not to do it, then I personally think it is rather unfair to the Minister, but actually it is also rather unfair to business, because business ends up picking up the wrong message; they pick up a message about a new regulation they know nothing about and they question us about it. If, on the other hand, there is a public debate about a proposed new regulation, then I think it is reasonable that it is open to all. If you want me to answer the specific question on the head on beer, our concern was that at the moment the industry standard is that there should be 95 per cent of a full pint in the measure and that is what beer is priced at. So that if there is 100 per cent rather than 95 per cent, then the price of a pint will actually go up, let alone the extra metering that will be required and the extra glasses. Since you mention the article in the Daily Telegraph, you may also be interested to know that we set some of our beer drinkers to go out specifically to get a view about this, before we came to our conclusions.

  58. I think that is an excellent example of how you could be a champion of small business against regulations. If the Government insist on going ahead with this proposal, will you be equally outspoken in condemning any decision they come to, or will you feel yourself compromised because you are, in a sense, an arm of the state?
  (Mr Irwin) I think I have already been outspoken. Clearly, a decision like that ultimately is a decision for Ministers. All I can do is ask Ministers to listen to small business through me. That is actually a reasonable compromise. There are lots of other ways in which business can shout if they do not like the decisions that Ministers take.
  (Mr Waller) Also if a Minister has made a decision, our job is not necessarily ended, because we want to talk to the officials who are responsible for the detail, to make that as burden-free as possible. I think honestly one of the dangers here that we have to watch as an organisation is that we do not spend all our time on, as it were, the big public debate about what can be a relatively small regulation, and actually focus on some of the many regulations which are already in place, many of which are already administratively in place, and concentrate on some of those, because I think those are some of the areas where the biggest benefits for our customers can be achieved.

  59. So what is the distinction of responsibility between your service and the Better Regulation Task Force in this field?
  (Mr Irwin) Clearly there is some overlap. The Better Regulation Task Force has a responsibility for all regulations. We are interested in regulations that are to do particularly with small and medium sized businesses. So we aim to work very closely with the Regulatory Investigation Unit when we are doing our work. We are also increasingly getting Ministers coming to us to ask for our view. It is not a question of us going out and saying, "What do you think you're doing with this?" Increasingly, Ministers are coming to us and saying, "We would like to know what the small business view is on this particular area." So if we take one area, for example, which is in relation to disability discrimination, there were two different timetables, one for disability discrimination in relation basically to anyone who might come onto the premises of a business, and one with a different timetable for employees. One had a 2004 timetable, and one had a 2006 timetable. The Minister came to ask our view on whether we thought it would be possible to bring the two together, the obvious reason being that it would be more sensible to keep them together. I was very keen that we should do some focus groups. We did some focus groups. We got a view from small business on that, and in fact we found that small business was quite relaxed about bringing forward the later timetable. The more we can do that, then the more comfortable I believe Ministers will be about coming to ask for our help.

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