7 European Charter for Small Enterprises
| (26364)
6336/05
COM(05) 30
+ ADDs 1-4
| Commission Communication on the implementation of the European Charter for Small Enterprises
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| Legal base | — |
| Document originated | 8 February 2005
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| Deposited in Parliament | 17 February 2005
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| Department | Trade and Industry
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| Basis of consideration | EM of 25 February 2005
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| Previous Committee Report | None
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| To be discussed in Council | 7 March 2005 Competitiveness Council
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
7.1 As the Commission points out, "Small businesses play
a central role in the European economy"; there are some 25
million of them in the EU, constituting 99% of all businesses,
employing almost 95 million people, and providing 55% of total
jobs in the private sector: "Small businesses are thus crucial
for growth and employment all over Europe".[22]
Against this background, the European Charter for Small Enterprises
was adopted at the Feira Council in 2000. It calls upon Member
States and the Commission to take action in ten areas to support
and encourage small enterprises. It uses the open method of coordination,
which was defined in the Conclusions of the Lisbon European Council
of March 2000 as follows:[23]
- fixing guidelines for the Union combined with specific timetables
for achieving the goals which they set in the short, medium and
long terms;
- establishing, where appropriate, quantitative
and qualitative indicators and benchmarks against the best in
the world and tailored to the needs of different Member States
and sectors as a means of comparing best practice;
- translating these European guidelines into national
and regional policies by setting specific targets and adopting
measures, taking into account national and regional differences;
and
- periodic monitoring, evaluation and peer review
organised as mutual learning processes.
7.2 To complement the Charter, the Entrepreneurship
Action Plan addresses a wider range of entrepreneurship-related
issues, which were underlined as essential by the High Level Group
on the Lisbon Strategy chaired by Mr Wim Kok. The Charter is
expanding geographically: 35 countries are now covered, including
Norway; the candidate countries (2002); the countries of the Western
Balkans (2003); and Moldova and the Mediterranean partners (2004).
The Commission says that "This steady enlargement of participating
countries, on a voluntary basis, shows the momentum the Charter
has built up by bringing together key aspects of policy contributing
to the small business environment".[24]
The Commission Communication
7.3 The Charter includes a commitment to monitor
and evaluate progress annually through a Commission report on
relevant issues at the Spring European Summits. The review process,
which includes bilateral meetings with the Member States "where
business organisations actively participate, ensures that the
Member States stay active and keep living up to their commitment
to improve the small business environment on a continuous basis".
The participation of business organisations in the Charter process
is "indispensable" because "it contributes to a
more realistic approach and ensures proper feedback to the Commission
and the Member States". Good practice is identified, disseminated
and actively used, which is "the real added value of the
Charter process". The Commission judges that the Charter
process has "led to progress in the field of Community policies
affecting small and also medium-sized enterprises", especially
in helping to "focus the attention of policy-makers at the
highest level on the need for continuous improvement, not least
through learning from each others' best practices. The new Member
States have been particularly active in learning from others and
early results demonstrate that this approach is successful".
The Charter is judged to be an effective tool to bridge performance
gaps in the EU, even though, the Commission acknowledges, "the
real impact on the small business environment sometimes takes
considerable time to show". [25]
7.4 This is the fifth annual implementation report,
based on national reports from the participating countries. It
is "a snapshot of the main developments from autumn 2003
to autumn 2004… [which] identifies strengths and weaknesses
across the EU and its neighbours, highlights promising national
measures and issues recommendations for future action, thereby
strengthening policy in support of small businesses and maintaining
the efforts towards the Lisbon objective".[26]
It is complemented by supporting documents that give an
overview of recent implementation measures undertaken by the Member
States, Norway, the candidate countries, Moldova and the countries
of the Western Balkans, as well as, in the last associated document,
descriptions of Community actions and SME support mechanisms.
7.5 This year, the main report examines in more detail
progress made in three priority areas, selected from the ten Charter
areas:
- education for entrepreneurship,
especially secondary education;
- better regulation, especially impact assessment
and bankruptcy law; and
- skills shortages, especially measures to overcome
the lack of skilled technicians and engineers.
Charts showing the aggregated number of measures
taken by the Member States in these areas are set out in the Annex.
The conclusions are helpfully summarised in the Explanatory Memorandum
of 25 February by the Parliamentary Under-Secretary of State for
Small Business and Construction at the Department of Trade and
Industry (Mr Nigel Griffiths):
"On education for entrepreneurship, some
countries have linked together key government departments with
an interest in delivering enterprise education (this is considered
essential), while others need to do more to inject entrepreneurship
into their secondary school curricula. On better regulation,
the importance of impact assessments is recognised almost everywhere,
but some countries need to make their processes more rigorous,
and to apply all-round measures on bankruptcy law. On overcoming
skills shortages, most countries are monitoring skills needs
and making educational and training policies more economically
relevant but some need to improve skills monitoring and university/business
linkages. The UK scores very well in each of the tables on the
priority areas in the Annex."
7.6 The three associated reports on implementation
in each of the different parts of Europe (the Member States and
Norway, the Candidate Countries and Moldova and the Western Balkans)
present a mix of good and less good developments across the ten
Charter areas. Not surprisingly, much remains to be done in the
Candidate Countries: for Bulgaria and Romania, to improve both
the competitive performance of their enterprises and the legal
framework so as to favour the creation and growth of new enterprises
as a whole. As is the case across the Union, further efforts
are needed to provide lifelong training and an adequate supply
of skills adapted to the needs of small businesses.
7.7 The Charter process "has landed on fertile
ground in the countries of the Western Balkans and in Moldova".[27]
Most progress has made in the area of cheaper and faster start-up,
with Serbia, Kosovo, Moldova and Bosnia-Herzegovina in particular
speeding up the process and introducing the required legislation
(Moldova has a one-stop shop system). Education and training
for entrepreneurship is present in some form in all countries,
but remains an optional, extra-curricular activity. Regulatory
reform is ongoing in most countries. So far, very few countries
have introduced regulatory impact assessments or are planning
to introduce them.
7.8 Looking at its own activities, the Commission
says that the SME dimension is more and more integrated in most
activities of the European Union. Among numerous programmes or
initiatives that are designed for or mainly benefit SMEs, the
Multiannual Programme for Enterprise and Entrepreneurship and
its recently-completed Best Procedure projects is highlighted.
As an example of the "Shared Learning" approach, Cyprus,
Latvia, Hungary and Norway said that the recommendations of the
Best Procedure project on "Restructuring, bankruptcy and
a fresh start" have been incorporated into their revised
legislation. More broadly, the Structural Funds are noted as the
most important programme for SMEs accessible at regional and local
level, while
"many other programmes have been geared towards
the needs of SMEs, e.g. in the fields of environment, energy,
training or internationalization [and] policies, such as competition
policy or trade policy, have also taken into consideration the
specific situation of SMEs. Improvements are still needed in
order to facilitate SME participation in EU programmes. Often,
procedures are not adapted to SMEs, be it in terms of administrative
requirements or in terms of the time taken to assess projects.
To facilitate SME participation, further measures are envisaged,
including political prioritisation and facilitating the participation
of SMEs specifically regarding the selection process and management
of programmes. The provision of information and support for SMEs,
in particular through Commission networks such as the Euro Info
Centres, also needs to be enhanced and the relevance of EU programmes
for SMEs systematically evaluated."[28]
The Government's view
7.9 In his Explanatory Memorandum, the Minister briefly
comments as follows:
"The Government welcomes the reports as they
reveal both further progress that has been made across the EU
against Charter commitments and measures that remain to be taken.
DTI officials are making the reports known to the Devolved Administrations
and inter-Departmentally so that Government as a whole can take
due account of the good practices and other information. DTI
officials will also continue to discuss Charter actions with other
signatory countries and the Commission. The report comments that
it would be useful to streamline future reporting between the
Charter and the Entrepreneurship Action Plan. We strongly endorse
this approach and will press the Commission to take it forward."
Conclusion
7.10 We endorse the Commission's conclusion that
"Europe still has a long way to go to meet the Lisbon objective
for 2010. Progress is strongly dependent on success in our efforts
to foster entrepreneurship and small businesses. We need an environment
where small businesses do not struggle with red tape and where
entrepreneurial people can transform their ideas into businesses".
The figures cited at the outset of our Report say it all —
25 million small businesses, 99% of all businesses, almost 95
million employees, and 55% of private sector jobs. It is therefore
important that the Commission not only puts jobs and growth at
the centre of its 2005-2009 Objectives (which we consider in paragraph
8 of our Report) but also recognises that, as the Objectives say,
small and medium-sized enterprises (SMEs) "are the engine
of job creation".
7.11 In the same document the Commission highlights
the need "to reduce the burden of regulation at all levels
in order to foster entrepreneurship and investment, notably for
small and medium-sized enterprises". When we considered
the EU programme for enterprise and entrepreneurship on 26 January,[29]
we noted, as an example of the disproportionate impact of regulation
on SMEs, the evidence in the 2004 Enterprise Scoreboard which
showed that the compliance costs for corporate tax and VAT, in
relation to sales, amounted to 2.6% for SMEs compared with 0.02%
for large companies. So it is particularly important that one
of the outcomes of the imminent mid-term Review of the Lisbon
Process is a concerted drive to turn the positive rhetoric on
SMEs into a sustained reality.
22 COM (05) 30, page 3. Back
23
Lisbon European Council 23/24 March 2000, Conclusion 37. Back
24
Page 3 of the Communication. Back
25
Pages 3 and 4 of the Communication. Back
26
Page 4 of the Communication. Back
27
Page 8 of the Communication. Back
28
Page 9 of the Communication. Back
29
(26135) 14639/04; see HC 38-v (2004-05), para 9 (26 January 2005). Back
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