Memorandum submitted by PRIME (the Prince's
Initiative for Mature Enterprise)
PRIME is the only national organisation in the
UK dedicated to helping people aged over 50 to set up in business.
PRIME is a registered charity linked to Age Concern England whose
aim is to release the untapped potential of 50+ enterprise. PRIME
was founded with the active support of HRH The Prince of Wales
and is one of the 17 charities of which he is President and which
comprise the Prince's Charities Group.
PRIME undertakes campaigning to make those over
50 aware of the opportunities for self-employment and enterprise,
and to improve the help and support available to enable them to
create sustainable businesses. PRIME also works with over 100
partner organisations to provide practical help and support. Finally
PRIME undertakes research into the neglected area of 50+ research
Between 2001 and 2005 PRIME operated a micro-finance
loan fund for those aged over 50 wishing to start a business but
without the finance. PRIME only loaned to those who were unable
to borrow money from the bank because they did not meet the credit
checks of the bank or because they had little or no supporting
collateral. The scheme was operated with guarantees from the DTI,
under the Phoenix Fund, Age Concern and Help the Aged.
When the Phoenix Fund was regionalised PRIME
was unable to find the necessary supporting guarantees to borrow
more capital to lend on. PRIME receives some 12 calls a week asking
for a loan despite the fact that it says does not operate a loan.
It has been seeking ways of re-opening a loan scheme since September
PRIME, based on its experience, has a particular
interest in the unclaimed assets discussions, and in particular
in the proposals for a Social Investment Bank. It therefore wants
to address itself to the issues raised by the Commission on Unclaimed
Assets in its document The Social Investment Bank March 2007.
There is, however, a broader issue that needs addressing about
the concentration on youth in the discussions.
PRIME acknowledges that the 2005 Pre-Budget
Report did mention a focus on financial inclusion, but it stressed
the focus on the needs of young people. This led to the first
report of the Commission on Unclaimed Assets stressing the role
of the Social Investment Bank in helping young people. PRIME responded
to this document by pointing out the needs of the over 50s.
It is worth re-visiting some of the data on
ECONOMIC ACTIVITY AMONGST 50-SPA IN THE UK
|Region||Total Pop 50-SPA
||Working as Employee
|Yorkshire and The Humber
Source: Nomis Annual Population Survey April 2005
to March 2006:
SPA = men 50-65
It would be comforting to imagine that the workless was composed
of 2% of the population that wanted to find a job and 27% that
did not need to work. While it is difficult to give precise figures,
"Winning the Generation Game" (Cabinet Office 2000)
probably made the best estimation of what these workless older
people were actually doing:
|% estimate in "Winning the Generation Game"
||Estimate projected onto 2006|
|Retired on adequate pension||9
|Retired on inadequate pension||18
These data provide a fairly robust model to work with, whilst
not being totally precise. On the assumption that 75% of those
on Incapacity Benefits really can and want to work, that 75% of
the carers will need to find employment at some stage; and that
75% of those retired with inadequate pensions need to work, these
data suggest that there are 1,890,000 people aged 50-SPA wanting
If even as few as 1% of these became self-employed, that
would be 18,900 new businesses. Even on the basis that 50% of
these were drawn from those on Incapacity Benefit with an average
annual welfare payment of £7,000, transforming this into
an income from their business of £5,000 p.a. the added value
would be £113,400,000 per annum. If an additional £5,000
of added value was created by each of the other 9,450, then the
added value would be £160,650,000 per annum.
Under the New Deal 50+ self-employment route from April 2000
to March 2003 (when Working Tax Credit was introduced and the
employment credit abolished) there were approximately 12,000 people
aged 50+ who pursued this programme, ie 4,000 per annum. Data
has subsequently become extremely difficult to find but clearly
the figures are attainable.
The difficulty is that starting a business does require some
capital and the majority of these over 50s would not qualify for
a bank loan to start a business. A loan fund providing micro-finance
for the over 50s who want to start a business is therefore vital:
(i) to create savings in welfare;
(ii) to give financial independence and dignity to people
who at 50 have one-third of their lives in front of them; and
(iii) to avoid a social welfare explosion in ten years time
as this number become ill, as research shows happens more frequently
to the workless.
PRIME would therefore urge that the Social Investment Bank
needs to have a stronger focus on micro-finance for the over 50s
to enable many more to access the funds to start a business. Key
to this is the guarantee.
Community Development Finance Institutions like PRIME need
to be able to grow a very large portfolio so that risk can be
accommodated within the financial economies of scale. Alternatively
they will have to concentrate on a smaller number of large and
relatively risk free deals, making little impact on the social
structures that conceal, for example, 50+ worklessness. Organisations
like PRIME cannot grow quickly enough to ensure the deal flow
is sufficient to cover risk, and they find it difficult to raise
the capital and revenue through which to grow, if there is no
guarantee behind the capital.
PRIME's concern is, therefore, that the Social Investment
Bank, with its inherent tension between being small, adaptable,
innovative and able to take risks, and being solid dependable
and able to attract capital to create a new asset class, will
veer towards the latter. Attractive as these two functions might
appear for a new institution, PRIME takes the view that the Social
Investment Bank needs to put a guarantee function first and foremost
in the first years of its existence. In PRIME's view this will
start to unlock hesitant and risk averse capital and it will afford
the time for intermediaries serving the disadvantaged to grow.
By putting the guarantee function first there is an opportunity
to unlock different forms of capital. For example there is a new
breed of on-line loan exchanges developing. At present these schemes
tend to lend to the lowest risks thus limiting their social impact.
PRIME has already undertaken investigations into how a guarantee
scheme could harness a new stream of loan capital for financially
excluded over 50s through the on-line loan exchanges. All that
is missing is the guarantee. Of course PRIME's concern is for
over 50s business start-up micro-finance, but there is no reason
for such a scheme not to be made available to other disadvantaged
While PRIME supports the idea of a Social Investment Bank,
PRIME believes its initial task should be that of providing a
guarantee which enables smaller Community Development Finance
Institutions the opportunity to attract capital for the financially
disenfranchised, enabling them to grow and develop. There is a
place for the bigger, brasher and more publicity garnering investments,
but not at the total expense of initiatives that really benefit
communities on a small scale. PRIME takes the view that the Social
Investment Bank, by acting as a guarantor in the initial years
of its existence, will, in fact enable an asset class to develop.
In PRIME's opinion the Social Investment Bank may evolve to take
on a role as innovator and magnet for new capital.