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The Department for Business, Innovation and Skills will play a crucial role in delivering policies which will encourage and sustain economic growth. The Department has branded itself the "Department for Growth" and its overarching strategy is to create an environment that enables businesses to invest with confidence and the conditions for businesses to start out, invest, grow and be profitable. We welcome this ambition and the Department's clear message that it will be "a voice for business in Government and the voice of Government and the key contact point of Government for Business in the economy".
The Department has set out, in broad terms, its strategy to deliver on this but we are concerned by a lack of detail on how it will be put into practice. There also needs to be a meaningful way of assessing the Department's policies which concentrates on outcomes rather than internal processes. In the current economic climate it is important that the Department's limited resources are put to the best use. Without clear performance measurement of its activities there is a risk that economic success could mask failures in departmental policy while economic hardship could mask excellent strategies or interventions.
The overall strategy may well be pointing in the right direction, but all that the Department does will be of little consequence if business does not get access to sufficient levels of working capital. If it is not available then the economic recovery will wither on the vine. The key responsibility for the Department is to deliver increased bank lending rates to SMEs. The commitment from the banks to increase levels of bank lending represents a step in the right direction. The only reliable assessment of the banks' commitment, however, will be the level of take-up of that additional finance. If onerous terms and conditions or high costs continue to act as deterrents to accessing that finance then the additional funds will have little, if any, effect.
Different sectors of the economy will need different levels and forms of support. In order to deliver well-directed policies, the Department, at a sectoral level, has to be informed, experienced and flexible. While the Government's growth strategy appears to move in this direction, our evidence from three sectors has shown that more work needs to be done. The establishment of the Small Business Economic Forum has the potential to provide clear lines of communication between business and Government, but it must deliver tangible support and not become a talking shop with little or no action. The banking sector has to improve its engagement with and understanding of the businesses it supports. For that reason, we believe that the banking sector's proposal to establish a network of banking mentors is a step in the right direction.
During our inquiry we considered a range of support programmes which are run by the Department. The improvements to the effectiveness of the Enterprise Finance Guarantee Scheme are welcome, as is the Government's decision to extend its lifespan. However, it still does not reach to all sectors of the economy, in particular the creative industries, and this needs to be addressed as a matter of urgency.
We also welcome the establishment of the Business Growth Fund which has the potential to deliver significant investment to industry. The Government has not yet decided on the form of its representation on the Board of the Fund. We believe it is important that the Department and not HM Treasury represent Government. To relinquish that role to HM Treasury will not give business the appropriate levels of expertise and support it requires.
The Manufacturing Advisory Service is a good example of the Department providing support for business. However, the Government needs to be alert to the fact that organisation change following the abolition of the Regional Development Agencies risks losing valuable expertise and wasting its limited resources. We believe that this needs to be addressed as a matter of urgency.
Other programmes have been less successful. The Automotive Assistance Plan, while well intentioned, failed to deliver. This is not the fault of the Government as it inherited the programme. However, it is important that the lessons of this failure are leant and applied to any future intervention by the Department.
The Department's strategy is to create the right environment for business to thrive. We support that ambition. How the Department delivers that strategy in the form of demonstrable support to all sectors of the economy, and whether it can resolve the fundamental problems of business access to working capital, will determine whether or not the Department will succeed in its key role.
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