10 Multi-Annual Programme for Enterprise
and Entrepreneurship
| (a)
(26177)
14940/04
SEC(04) 1460
(b)
(26223)
16026/04
COM(04) 781
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Commission Staff Working Paper on a Report on the Multi-Annual Programme for Enterprise and Entrepreneurship and in particular for small and medium-sized enterprises (SMEs) (2001-2005)
Draft Decision amending Council Decision 2000/819/EC on a Multi-Annual Programme for Enterprise and Entrepreneurship, and in particular for Small and Medium-sized Enterprises (SMEs) (2001-2005)
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| Legal base | (a) —
(b) Article 157 (3); co-decision; QMV
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| Document originated | (a) 15 November 2004
(b) 7 December 2004
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| Deposited in Parliament | (a) 2 December 2004
(b) 16 December 2004
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| Department | Trade and Industry
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| Basis of consideration | (a) EM of 31 December 2004
(b) EM of 10 January 2005
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| Previous Committee Report | None
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| To be discussed in Council | Not yet determined
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| Committee's assessment | Politically important
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| Committee's decision | (a) Cleared
(b) Cleared, but information on progress requested
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Background
10.1 The Lisbon European Council of March 2000 set the EU the
strategic goal of becoming the world's most competitive, dynamic,
knowledge-based economy by 2010, capable of sustainable economic
growth with more and better jobs and greater social cohesion.
Multi-Annual Programmes in this area had existed before 2000,
but the 2001-2005 Multi-Annual Programme for Enterprise and Entrepreneurship
(MAP) was established in December 2000 as one important means
of fulfilling the Lisbon goal.
10.2 The background to the proposed Council Decision
is set out in the Commission's explanatory memorandum:[26]
"The multiannual programme (MAP) for enterprise
and entrepreneurship, and in particular for small and medium-sized
enterprises (SMEs) was adopted on 20 December 2000 to run from
1 January 2001 to 31 December 2005, with a budget of 450 million
euro.
"The MAP aims to achieve the following objectives:
— to enhance the growth and competitiveness
of enterprises in a knowledge-based and internationalised economy;
— to promote entrepreneurship;
— to simplify and improve the administrative
and regulatory framework for business so that research, innovation
and business creation can flourish;
— to improve the financial environment
for business, especially SMEs;
— to give business easier access to Community
support services, programmes and networks and to improve the co-ordination
of these facilities; and
— to support the implementation of the
European Charter for Small Enterprises[27]
at Community level.
"The MAP is implemented through 3 types of delivery
instruments:
— the exchange of experience and the identification
of good practices between the Member States;
— the operation of a network of Euro-Info-Centres
offering services and advice about European matters to enterprises
throughout European regions;
— the provision, via the European Investment
Fund[28] (EIF), of a
number of Community financial instruments for SMEs."
10.3 An external evaluation of the MAP for the period
2000-2004 is contained in the Commission staff working paper (document
(b)).
The results of the evaluation
10.4 The independent contractor's comprehensive report
is helpfully summarised by the Parliamentary Under-Secretary of
State for Small Business and Enterprise at the Department of Trade
and Industry (Mr Nigel Griffiths) in his Explanatory Memorandum
of 31 December 2004:
"The contractor found that, on the whole, MAP
responded to the needs of the pre-Accession EU-15, was generally
highly effective and adequately efficient and was likely to achieve
its objectives. On the other hand, MAP lacked visibility, some
of its non-financial areas were less efficient than others and
some financial instruments had been inefficient. Links between
MAP and other instruments such as the European Charter for Small
Enterprises should be strengthened; and a successor programme
should feature innovation more centrally and contain more integrated
business support arrangements.
"Turning to the component parts, policy development
comprises BEST[29] (i.e.
the most important) and other project studies, and conferences,
usually designed to identify and facilitate the exchange of best
practices in a variety of enterprise-related areas. In most cases,
there was direct Member State involvement through nominated experts.
These activities were relevant to national and wider EU policy
formulation, though a wide knowledge of them was lacking and follow-up
activity was patchy. The report recommends a strengthening of
dissemination and, for the future, concentration on benchmarking
and best practice projects rather than projects for creating databases
or one-off publications. The report also calls for more follow-up
activity and long-term projects.
"The second component, the EIC network, comprises
300+ business support offices across Europe and in a few African
and Asian Mediterranean countries. At an individual level, EICs
(which are normally co-located with other support offices, e.g.
Business Link Operators in England) offer advice to business and
other enquirers about trade and regulations in Europe, principally
for SMEs. At a group level, the network offers Europe-wide cooperation
between the offices and a direct communication process with the
Commission, which manages them. The EICs can be considered effective.
However, the contractor found that the network's potential had
not yet been fully exploited. The network should be better promoted
through awareness-raising, and enhanced coordination and rationalisation
with other business support networks. This should improve EIC
efficiency and feature in a successor to MAP.
"The third component, the financial instruments,
is by far the main MAP area in terms of money committed and spent
(72% of the 2003 MAP budget). The SME Guarantee Facility (SMEG)
is the largest instrument, the Start-up scheme of the European
Technology Facility (ETF-SU) is the next largest and Seed Capital
Action (SCA) and the Joint European Venture (JEV) are more minor.
The report states that, although the needs of SMEs in most Member
States are similar, problems are experienced more severely in
the new EU-10 Member States than in the former EU- 15. Due to
a number of weaknesses in business support and infrastructure
combined with an underdeveloped SME finance market, it is recommended
that MAP financial instruments be more flexible and be designed
with measures to adapt them to actual needs.
"The report recommends that more resources be
made available for action and effective dissemination of best
practice. Strong introductory campaigns are recommended along
with capacity-building and cross--border co-operation. These are
all seen as vital to make future MAP products more flexible and
practical with particular reference to EU-10 countries.
"The report praises the effectiveness of ETF-SU
and SMEG. However, there is concern that a number of other instruments,
in particular the targeted SMEG-ICT Loan Window and SCA, have
not been as effective as hoped and need more consideration in
the future; and JEV has been so ineffective that it is being discontinued
with effect from this month. More specifically, the report considers
that, overall, ETF-SU had had a limited quantitative impact but
a strong strategic impact; that SMEG has had a rather large quantitative
impact and a strong strategic impact; that SCA has been of limited
use; and that JEV has been too bureaucratic. The decision to terminate
JEV preceded the contractor's study. The contractor recommends
continuance of the other instruments. The report also discusses
possible new interventions, including a Europe-wide Small Business
Investment Company-like instrument (SBIC).
"The report adds that ETU and SMEG have been
particularly effective in Member States where schemes are managed
by powerful, nationwide, public-backed financial intermediaries.
It is considered that without MAP intervention, the support of
young companies and SMEs in general by financial intermediaries
through the EU would have been severely affected and in some cases
not possible at all. Continued intervention is needed across Europe,
with particular attention being made to the early stage venture
capital market, which is underdeveloped in most countries other
than the UK, and loan guarantee schemes where there is a similar
situation. The report also recommends widening the dissemination,
visibility and implementation of MAP products and, in particular,
the results of MAP actions.
"This last point links to the report's admission
that, notwithstanding the praise, any analysis of the impact of
the financial instruments is necessarily patchy and is hampered
by a number of factors including the difficulty of attributing
positive impacts on the overall business environment to MAP interventions.
"The report concludes that MAP has generally
been a success (albeit this is not easily measurable or quantifiable…);
and that, according to a large majority of financial intermediaries,
policy makers and experts, SMEG and ETF-SU have made a strong
contribution to improving the financial environment for business,
especially SMEs. On the latter point, the report states that,
'the only dissenting opinion comes from some UK policy-makers
and financial experts'."
The Commission's proposals
10.5 The Commission explains that, from March to
May 2004, it carried out a public consultation on possible elements
of a future support programme for entrepreneurship and enterprise
competitiveness, to succeed the MAP, which indicated "strong
support for a wider basis for policy analyses, development and
co-ordination as well as for specific measures to help enterprises
to be competitive and innovative":[30]
"The proposed successor programme would have
begun in 2006, under the current financial perspective, and ended
in 2010, the target date for achieving the ambitious objectives
set by the Lisbon agenda. The challenge for the new programme
would therefore be to contribute to competitiveness in a more
comprehensive way than achieved by the MAP. Subsequent to the
evaluation and the public consultation, the Commission decided
that a framework programme would have the greatest potential to
boost innovation and competitiveness.[31]
The Commission therefore proposed, in a Communication of 14th
July 2004[32] to prepare
such a framework programme in the context of the new financial
perspective (2007-13). The framework programme will provide the
means and instruments for implementing policies in varied fields
influencing European competitiveness. This would include:
— Improving the business environment (access
to investment capital; secure electronic networks; the effective
delivery of EU-wide business services; and modernised services
through the use of ICTs).
— Ensuring that innovation works to promote
competitiveness and is carried through into practical application
at a business level. (Synergies with the Framework Programme for
Research 'Technological platforms', environmental technology,
renewable energy, working through the Intelligent Energy Agency.)
— Backing up European policy on enterprise
competitiveness, innovation, entrepreneurship and SMEs with policy
expertise and the promotion of EU action."
10.6 The Commission says it is not possible to present
such a Commission proposal in time for the programme to begin
in January 2006. Also, the programme should begin at the same
time as the 7th Framework Programme for Research. Consequently,
both these programmes should start on 1 January 2007. To ensure
continuity, the current programme, as amended in 2004, should
be prolonged until 31 December 2006. The Commission also proposes
to increase the funding by €81.5
million.
The Government's view
10.7 In his Explanatory Memorandum of 10 January
2005, the Parliamentary Under-Secretary of State for Small Business
and Enterprise at the Department of Trade and Industry (Mr Nigel
Griffiths) says:
"DTI's Explanatory Memorandum 14940/04 on the
final evaluation report noted the evaluator's comment that, while
a large majority of financial intermediaries, policy makers and
experts had agreed that two of the financial instruments —
the SME Guarantee and ETF-Start-Up — have made a strong
contribution to improving the financial environment for business,
dissenting opinion had come from some UK policy-makers and financial
experts. Generally, UK experts on the MAP do, in fact, agree with
the overall assessment of the final evaluation, but believe that
the balance of financial instruments can be improved further,
and should be. For example, more innovative financial products
such as co-investment with the private sector and greater support
to stimulate Business Angel activity should be included.
"With virtually a whole year to go before the
MAP extension takes effect, DTI officials will continue to lobby
the Commission (and other Member States) to make better use of
the MAP financial instruments. In particular, we will press the
Commission to use the interim period to identify and support initiatives
where the risks and the rewards are shared with private investors
and which are targeted at those businesses with high growth potential.
The UK will repeat these points, subject to stakeholders' views,
when we respond to the Commission's current public consultation
on CIP.
"The Proposal is to amend Articles 7 and 8 of
Decision 2000/819/EC. However, Article 1 should also be amended
to reflect the extension of MAP from five years to six years.
Officials will make this point in the Competitiveness and Growth
Working Group discussions."
10.8 On the consultation arrangements, he says:
"Enterprise stakeholders are aware of the proposal
to extend MAP. DTI has periodically consulted enterprise stakeholders
on MAP, and is consulting them on CIP before responding to the
Commission."
10.9 As for the timetable, he says the proposal "is
unlikely to encounter opposition and should be approved before
mid-2005:
"The Commission is currently conducting a public
consultation on CIP, seeking views on initial ideas for the new
programme. The Commission intends to produce a detailed Proposal
following the Spring 2005 European Council."
Conclusion
10.10 We have no questions to ask, and we clear
the documents.
10.11 According to the DTI, SMEs make up well
over 90% of businesses in both the UK and the EU as a whole. Looking
ahead, while regulatory reforms and national actions will remain
the principal means of achieving the Lisbon goals, there are no
doubt areas that warrant using EU resources to support national
efforts, so long as they provide clear added value and focus on
addressing market failures. At either level, national or European,
both public policy and market failures usually affect SMEs disproportionately.
For example, the 2004 Enterprise Scoreboard (which we examine
in para 9 of this Report) notes that, for SMEs, the compliance
costs for corporation tax and VAT, in relation to sales, amounts
for SMEs to 2.6%, compared to 0.02% for large companies. We should
accordingly be grateful if the Minister would let us know in due
course what progress is made on making better use of the MAP financial
instruments, particularly in the ways he outlines, and what initial
ideas emerge from the consultation exercises to which he refers
on the proposed Competitiveness and Innovation Programme, together
with his views on them.
26 COM(04) 781, pages 2-4. Back
27
The European Charter for Small Enterprises, adopted at the Feira
Council in June 2000, identified ten key policy areas for SMEs
(education and training for entrepreneurship; cheaper and faster
start-up; better legislation and regulation; availability of skills;
improving online access; more out of the single market; taxation
and financial matters; strengthen technological capacity; successful
e-business models and top-class small business support; more effective
representation of small enterprises' interests at Union and national
level). Member States report annually to the Commission on progress
in each of these areas. Back
28
The European Investment Fund (EIF) is the specialist risk capital
arm of the European Investment Bank (EIB), with a specific remit
to support the creation, growth and development of Small and Medium-sized
Enterprises. Its tripartite shareholding includes the EIB, the
European Union represented by the European Commission, and a number
of European banks and financial institutions. It intervenes mainly
by means of risk capital and guarantee instruments, either drawn
from its own funds or within the framework of mandates entrusted
to it by the EIB or the European Union. Back
29
Business Environment Simplification Task Force. Back
30
COM(04) 781, pages 2-4. Back
31
Now called the Competitiveness and Innovation Programme, or CIP. Back
32
COM(04) 487: Commission Communication: Financial Perspectives
2007-13; see HC 42-xxxiv (2003-04), para13 (27 October 2004). Back
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