Examination of Witnesses (Questions 60
WEDNESDAY 2 MAY 2001
60. On this point, some of the most daunting
things for businesses in regulatory terms are not the ones that
affect their own business, but their external relations and where
Government is involved. We are talking here about export licences,
import licences. In the case of language schools which I have
a lot of in my constituency, we are talking about getting permission
for people like the Chinese coming here to carry on a course.
There are all sorts of government agencies involved which they
find it very difficult to deal with, because they are not used
to that sort of activity. Are you being a sort of proactive champion
of those causes as well?
(Mr Irwin) I think it is probably fair to say that
we are not spending as much time as I would like going out to
look at the existing regulations of which you speak. Indeed, I
have been targeting all the business representative organisations
to look at a particular piece of regulation and then, as they
often do, to tell us they do not like it at all, but also to tell
us where there is some wider issue about the regulation that "If
you were to do it in this way, to simplify it, then it would make
our life much easier." We are still not getting as many of
those proposals as we would like.
61. Should you be a conduit, therefore?
(Mr Irwin) Absolutely.
62. Should I be telling my people, "If
you've got a problem with this, go to the SBS and they'll try
and sort it out for you"?
(Mr Irwin) Essentially, we do not want to get into
the position of sorting out individual businesses' individual
problems with their Chinese staff seeking work permits, but if
there is a generic problem like that, then of course we should
be aiming to sort it out.
63. This is not work permits, this is visas.
(Mr Irwin) If there is an individual problem, then
that is one we should be referring to our local Business Link,
because they should be able to help sort that out.
(Mr Waller) It is worth mentioning as an example of
the sort of things that we do on the less glamorous side, that
there is a concept, Local Business Partnerships, whereby all the
regulators within a local authority, will form together in a partnership
with local businesses to talk about the way in which regulations
are enforced by the local authority with the business community.
We actually have taken over responsibility in Whitehall from the
Cabinet Office, and we have carried out an audit of the current
partnerships and are promoting more, with a new one starting in
Essex. So I think the principle of getting engaged with the regulators
to make things more effective in enforcement terms and in exactly
how it is administered is very much part of our remit, and I think
it is probably fair to say that it is one which we would like
to see develop as we move forward.
64. The Small Business Research Initiative is
going to be launched this month. How optimistic are you that it
is going to be successful?
(Mr Irwin) I think that "hopeful" is probably
the best word. There is always a difficulty with this sort of
initiative. I would like to encourage many more government departments
to look far more closely at how any of their expenditure could
potentially be directed towards small businesses. Of course, going
back to our Call Centre say, that could not be delivered by a
small business, but there are other things that actually could
easily be delivered by small businesses, and often there are savings
to be had. So we have been talking already to the Office of Government
Commerce, the OGC, about ways in which we can look at how we can
encourage all departments to look at the way in which they procure
business services, to consider what more could be bought from
small businesses, and to try to put in place something like that
which actually encourages people to do that, rather than always
doing things in the way that they have been done in the past.
65. We have got to watch this space and see
whether it happens?
(Mr Irwin) Yes. What I do not support is the sort
of affirmative action type of programme that they have in the
US where typically what happens is that businesses do quite well
whilst they have that sort of action, and then considerable numbers
go belly up afterwards because they suddenly have to compete in
the real market. I was reading some figures yesterday which showed
one of the particular programmes run in the United States where
there were 30 per cent went bust within days of the affirmative
action ending and 58 per cent of those that remained went downhill
66. In 2000, last year, you carried out a survey
of 1500 small businesses to identify priorities for their work.
Are the findings of that survey available to us?
(Mr Irwin) I do not have them here with me, but I
am sure that we can make them available.
67. Have you got some key points from them that
you might be able to share with us?
(Mr Irwin) Yes. To a large extent, what they did was
reflect what we already thought were the needs of business. They
were a foundation. In that respect, given my background with small
businesses, we have spent a lot of time listening to communities,
businesses, enquiring of Business Links and asking them to demonstrate
to us how they were going to be talking to business both during
the contract and on a continuing basis. We have been setting up
ourselves, particularly in relation to regulatory work, significant
numbers of focus groups. Peter has already mentioned work we have
been doing with Local Business Partnerships. As I have been going
round the country I have been talking to small businesses. So
there is all of this together. Then I shall be doing more research
looking at an omnibus panel to continue to get that good feedback
from businesses about their needs. The number one need at the
moment is financeraising finance, credit control, cashflow,
being paid by your customers and debtors. The number two issue
at the moment on the whole is labour and skillsdifficulty
in finding people to work for you at all, and certainly difficulty
in finding people with the right skills.
68. Can I come in here? We have had representations
in this Committee from the organisation of the Federation of Small
Businesses who maybe would have a slightly different agenda from
the first two items that you have identified. To what extent do
you find yourself in a kind of confusing position as the mouthpiece
of small business carrying out these surveys? You may find that
what the surveys are saying are at variance to the agendas being
presented by the bodies which claim to be representative of the
(Mr Irwin) I do not think the FSB survey necessarily
varies from the FSB's policies, but there are ways of writing
questions. What I think is differentthis actually only
came to me a few days agoin a lot of the surveys people
like the FSB do is the way they are written, and they say, "Are
any of these a problem to you?" You look at the list of pay,
hours, regulations, and you say, "Oh yes" and you tick
them all, whereas I have been going round and saying, "Tell
me about the issues and problems." It is not unusual to be
in a room, often with 15 or 20 businesses, and not mention regulation
at all, nobody mentions regulation. I say, "Is regulation
an issue?" and they say, "Oh yes, it is an issue",
then they begin to tell me some of the problems of regulation.
In general, though, I would say it is not the one that is on the
tip of their tongue. Of course, if something has just happened
it will be on the tip of their tongue, but it is not their day-to-day
big issue. The day-to-day big issue is finding customers, making
the business work, getting finance and staying in business to
69. I spend quite a lot of my time meeting members
of the business community in my constituency at business breakfasts,
business lunches and those sorts of things. Something that continually
comes up is the culturenot the culture of business, but
the culture of business service, the support system, the Small
Business Service in effect. I am a bit unnerved, in a way, that
you have had a survey, then you have not told people what the
outcome of it is. I think that demonstrates the sort of culture
that I think we need to tackle, that small businesses will only
continue to spend time raising issues and feeding into the governmental
processes, which is what we want them to do, if they can see that
it has an effect, if there is some reason for it. That is probably
quite short-term feedback. It is not 12 months, 18 months, two
years later that it comes about. It does need to be faster than
that, because the world is faster than that. The Civil Service
is not, but the world is. How are you going to make sure that
you are more transparent, that these communications with businesses
are actually fed back to businesses in some way? Are they going
to be on your web pages? How are you going to get these things
back to people?
(Mr Irwin) Yes, they certainly are. I shall go back
and check that. I was not aware that we had not actually published
that survey, so we will check up on that. Yes, we will be providing
feedback, and I think it is important that we do that. Going back
to your question, I have also been doing quite a lot to try to
change the culture within the Small Business Service. For example,
we have been requiring that every member of staff gets out to
meet with small businesses, no matter what their role is within
the Small Business Service, so they have a chance to meet with
small businesses. We have been going further than that and encouraging
staff to go and spend a week's placement in small businesses,
so they get a chance really to get under the skin of the individual
entrepreneur and find out what makes them tick. Wherever possible,
we are sending staff out with a business adviser, a fund manager,
to meet four or five businesses in a day, so they get a feel for
the elements of small businesses; and certainly, as I have been
doing, meeting chambers of commerce,trade associations or whatever
it may be, so that we are all the time trying to get feedback
from them. Certainly I find that I feed back to them as well.
Yes, we will be doing a lot more in terms of feedback through
that. Perhaps we can broaden that out a little more, because I
actually think that changing society's attitude is very important
to enterprise. I believe that as a society we do not value enterprise
and entrepreneurs in the same way as, say, we value footballers
and popstars. I think we need to be doing a lot more to encourage
society to respect success, not to stigmatise failure. We need
to be helping people who, for whatever reason, have either ceased
to trade or have failed, to learn from their experience so that
they can set up again. We need to encourage, and society needs
to encourage, people to want to start in business. There was some
very interesting work done recently by Andersens when they were
looking at the best cities around the world in which to do business,
where again they went out and asked people what were the factors.
One of the most important factors was actually a positive attitude
to business. I think that if we do that, then that means we can
potentially get through a virtuous circle.
Helen Southworth: One of the things that I find
extremely good about my own Small Business Service transfer from
Business Link is the fact that I meet them consistently when I
am going round to business lunches, business breakfasts, business
associations, exhibitions and those sorts of things, and they
cannot be picked out from the crowd, they look like business people.
I hope that is a link we are actually going to see consistently
existing across the country.
70. On the SMART (Small Firms Merit Award for
Research and Technology), we have heard some sort of rumours that
the grants may be ended and they may be replaced with either loans
or with some sort of royalty arrangements. When we were going
round the country recently talking to an awful lot of people in
the regions, a number of them said, "Well, these SMART awards
are very good, they're worth having, we like having the plaque
on the wall, it adds a bit of prestige to us to have won a SMART
award, but frankly the cost, both in financial terms and in management
time, of applying for them, means it is relatively marginal; it
is helpful, but it's not massively helpful." If they were
then to be converted into loans or some sort of royalty scheme,
I get the impression that they would fall away altogether. Would
you like to comment on that?
(Mr Irwin) Firstly, can I say that we are still engaged
in a five-year evaluation of the SMART programme, and we do not
yet have the final results from that. Secondly, I have certainly
been asking some questions about whether we should give the money
away as grant aid, or whether there are alternatives which are
worth at least exploring. One specific suggestion I have made,
although absolutely no decisions have been taken, is the concept
of non-recourse loans. The reason we have been looking at that
is because clearly we have a limited budget, the focus is relatively
narrow. I would like to broaden the focus and be able to help
many, many more businesses than we do currently, but we have to
be able to do that within a fixed budget. I would also like to
see SMART as being part of a total package where debt finance
is a key stage of a business development, so that if, for example,
we givewhich we doSMART grants to good projects,
then why should we not share in a little bit of the return from
those SMART projects so that we can help many, many more businesses?
71. Would your loan be easier to obtain than
the SMART award? Would there be less management time?
(Mr Irwin) As I say, we have taken no decisions, but
if it were done as a non-recourse loan, then we would do it quicker
than we currently do it. If the project fails, then there is no
recourse, we do not get our money back. If the project goes ahead,
then in due course we get the money back and can recycle it.
72. Your loan would be subordinate to the bank,
(Ms Merrifield) Yes.
(Mr Irwin) It depends on the success.
73. Depending on the success of the project?
(Mr Irwin) Yes, entirely. As I say, we have taken
no decisions on that, but those questions are being asked at the
74. Are you consulting with the firms on that?
(Mr Irwin) I was going to say that interestingly the
research that is being done for us is asking firms about it. Certainly,
as I have been going round talking both to SMART award winners
and to people who have not got SMART awards, asking them how they
would feel about the possiblity of loans, as you would expect,
those who have not got SMART grants say yes, but interestingly
those who have got them have also said yes.
75. I am a director of a company which was fortuitous
enough to win two SMART awards. It was enormously helpful to us,
and I think we are now probably one of the most successful companies
on the exchange, if not the most successful company on the exchange.
I cannot see any justification for why, in those circumstances,
one should not make some return on that SMART award, not least
as I think it is also particularly helpful as an anchor investment
to other venture capitalists, because you have done some value
judgement on the technology. Can I just ask, going on from that,
about the Queen's Awards? The very large majority of companies
are small businesses. If you look at those who are given awards,
it is always the BAE Systems, it is the big companies. Do you
not think it is time that more Queen's Awards for enterprise,
export, innovation were given to small businesses?
(Mr Irwin) Actually I do. It was not really until
the announcement towards the end of last monthbecause the
previous year I had not been in the role more than a few weeks
and was not into itlooking at the winners this time around,
and particularly coming from the north-east where I do not think
there was a single enterprise that won there, that it struck me
that there is a need at the very least to promote to business
the importance of the cachet that a Queen's Award can give, because
there is no doubt about that. Almost certainly there is a role
there. I am not saying there should necessarily be more awards
given, but certainly I think we should have a role too in encouraging
businesses to apply for them.
76. The criterion for the Queen's Award, the
way it is structured, makes it very difficult for small business
both to apply and to win, does it not?
(Mr Irwin) We can have a look at the criterion. It
is not our gift, but we can encourage them.
(Mr Waller) I was at a reception ten days ago for
the current round of Queen's Award winners. It may have been coincidence,
but the companies I ended up talking to all seemed to be small
companies. There is clearly a recognition in the Queen's Award
Office of the need to improve the marketing, to improve the niche.
It is now generally accepted, that we could do with many more
small companies engaged in the awards. They have got the detailed
plans to promote and to encourage as well. So that is in hand,
but it is something we will certainly want to keep an eye on to
see whether that marketing is working.
77. If we could just come back to SMART awards
for a moment, I understand the logic that says we might be able
to give more money to more companies if there were some element
of clawback. It would have to be conditional upon a very successful
outcome so that it was something rather more than just a marginal
improvement for the company concerned, and obviously, as my colleague
has said, if it has been enormously successful partly as a result
of the award, then there may be a case for it. In general, though,
do you not think that we already spend too little on research
and technology in this country compared with most other countries?
Is there not a need, therefore, to encourage more activity of
this nature as a general principle? Will you be pressing for that?
(Mr Irwin) Yes, as a country I think we should be
spending more on research and development. We certainly could
not meet the need through the limited resource that we have on
SMART, for example. There is no doubt that there are many more
firms which need to be thinking more. It is not just about spending
more on R&D, it is also, it seems to me, about how should
one commercialise the R&D that already exists, so how can
we build better links, for example, between universities and small
businesses? That does not necessarily require hard commitment,
but it does require some effort. That is why I have been talking
to some of the universities, I have been talking to some of the
people who are responsible for the development programmes, I have
been talking to staff within Business Links, about how we can
encourage better links between academia and business so that we
get better technology transfer, more spinoffs from universities,
for example. I think that almost certainly there is a lot more
that we can do to help businesses commercialise.
78. We have been looking at exactly that in
the course of our present inquiry. We also probably needand
perhaps this is where you can give some adviceto persuade
people of the need to protect their RDT. They do not always do
that. Sometimes they spend the money, get it all right, and somebody
else says, "Thank you very much" and walks away with
it. Will you be giving that sort of advice at all?
(Mr Irwin) Yes, and I would hope that every business
adviser is already giving that sort of advice. Certainly I have
been in the position in the past where I have been talking to
people about that and they have not even been aware of the need
to do a patent pending, let alone the full patent. On one occasion
I almost gave them the money from my own pocket in order that
they should be protected. Yes, we need to be ensuring that advisers
are in a position to do that. We have been having some discussions
with people in the Patent Office about the link-up of IPR awards.
We have been having further discussions about what more we can
do in that regard so that people are actually in the process,
they are actually protecting the IPR at every stage. We have been
talking to the Patent Office too about what further work we can
do together to help businesses in that regard.
79. That is encouraging, because clearly it
does not always happen at the moment, does it?
(Mr Irwin) It does not, I agree.