Conclusions and Recommendations
1. Since
we took evidence from the Department, the Government has announced
that the SBS will be reformed as a smaller policy unit within
the DTI, focused on influencing policy affecting small business.
The old SBS failed to convince us that it was contributing cost-effectively
to the achievement of Government objectives for small business,
so we endorse its downsizing. The new, smaller unit will need
to do better than the old in showing that its benefits exceed
its costs.
2. The Government's small business support
network of around 3000 national, regional and local programmes
is too large and complex. Many small businesses
find it difficult to understand and access the various support
schemes, while the administrative costs to small businesses of
dealing with so many different programmes are unnecessarily high.
The Government announced in the 2006 Budget that it intended to
cut the number of small business support programmes from 3000
to fewer than 100. The Department needs to take the lead by drawing
up an action plan with milestones to achieve this objective, and
coordinating government-wide action to that end.
3. The SBS, and the Government as a whole,
has not been able to evaluate its impact against government aims
and objectives for the small business sector.
Although the SBS was on course to meet two of the three PSA targets
for the small business sector, indicators do not clarify whether
the SBS had made progress because of its own or other government
actions to support small business, or because of general factors
such as the overall performance of the economy. The Department
should take the lead in evaluating the Government's overall impact
against its objectives for small businesses.
4. There are no official statistics on the
national cost of regulation on small business. The
Government has embarked on a costing exercise to measure the burden
of regulation on business, and a baseline should soon be established.
As the Better Regulation Executive assesses regulatory burdens
and the potential for cuts, the Department should ensure that
small business circumstances are fully taken into account by consulting
small businesses and offering their perspective on the impact
of regulations.
5. There is a wide gap between the commercial
default rate for small business and the default rate under the
Small Firms Loan Guarantee Scheme. The
Graham Review of the Small Firms Loan Guarantee Scheme estimates
that the Scheme has a default rate of 35% compared with a commercial
default rate for small business of 4%. The Scheme's high default
rate is partly attributable to intervening when the market will
not but, with a default rate so much higher than the commercial
rate, it is questionable whether the Scheme is best calculated
to promote the generation of viable businesses. There needs to
be a substantially higher proportion of viable outcomes among
businesses assisted by the Scheme.
6. It has been difficult to assess the performance
of the SBS in its role influencing the work of other government
bodies, and the few indicators that exist have offered a mixed
picture. Many Departments have not consulted
the SBS in a timely manner before producing regulations that could
affect small businesses, and there has been wider uncertainty
over the SBS's progress in influencing government bodies to deliver
better regulation. Government Departments and agencies have considered
the SBS to be a reliable source of information, but poorly positioned
to set the government-wide agenda on small business.
7. The Government's Action Plan for small
business lacks accountability as it does not identify which bodies
are responsible for which actions or the scale of change required.
It also says nothing about the need to rationalise support schemes.
The SBS have not published Action Plan progress updates on their
website as they said they would. The Action Plan should be revised
to clarify which bodies are accountable for actions, and the Department
should publish updates on progress on their website.
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