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North-East Lancashire (Enterprise Allowance Scheme)

Volume 24: debated on Monday 17 May 1982

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Motion made, and Question proposed, That this House do now adjourn.— [Mr. Boscawen.]

2.10 am

I welcome the opportunity of raising on the Adjournment a subject of particular interest to me, which is the progress of the enterprise allowance scheme in North-East Lancashire. At the outset I pay tribute to the Minister, the Manpower Services Commission and the Departments of Employment and Industry for selecting and designating North-East Lancashire or, more particularly, the Pendle, Hyndburn, Burnley and Rossendale borough council areas as one of the three English pilot areas, the others being Coventry and the Medway towns. I hope to demonstrate how right the authorities were in choosing North-East Lancashire and how well it has responded to the challenge.

I have no wish in this short debate to dwell on the problems of North-East Lancashire, but I must place on record the pressures on so many of its industries such as textiles, footwear, aerospace and furniture, with the resulting rise in unemployment of approaching 350 per cent. between mid-1979 and the present day. Certainly that is true of the Nelson and Colne travel-to-work area. Last week I arranged for a delegation from Pendle to plead for the retention of intermediate area status at the Department of Industry.

Having said that, there are some excellent firms in North-East Lancashire. Many started from small beginnings by individuals with limited capital. There is a great entrepreneurial spirit in the area and I find reassuring the demand that exists for new small workshops and the sub-units that have been converted from older mill premises.

The House will recall the characteristics of the enterprise allowance scheme. The scheme started in January, just over three months ago. To qualify, individuals have to be aged between 18 and 65, have capital availability of £1,000, have been in receipt of unemployment or supplementary benefit at the time of making their application, and have been unemployed or under formal notice of redundancy for 13 weeks. Successful applicants receive £40 a week for 12 months, which provides them with an income during the early period of endeavouring to establish a business.

What has been the interest in and take-up of the scheme? I am happy to say that it has been exceptionally good. It has been so good that there is a real likelihood of the scheme running out of funds in about mid-July on presently allocated resources for new applicants. The North-East Lancashire allocation equated to the backing of 330 individuals for 12 months on the basis of £40 a week. Already 361 applications have been received and of these 94 have been rejected, cancelled or postponed, and 157 have been approved. I am especially pleased that over one-third of the latter come from the Pendle area. I understand that 110 are awaiting decisions and that the majority of these are likely to be favourable. These figures at least equal Coventry's and are demonstrably better than those in the Medway towns.

The House will be aware that the only restriction on the types of business that come within the scheme relate to those that are considered to be socially undesirable. Those that are now operational fall into four broad categories. First, there is retailing of items such as video films, children's wear and a specialist coffee and tea shop. Secondly, there are services to building such as plumbing, bricklaying, electrical work, joinery and grant work. Thirdly, there are motor car maintenance services such as body spraying and building, mobile servicing and autoeletrical work. Fourthly, there are agricultural services such as stocktaking, the cleaning of farm buildings and the manufacturing of show jumps. There is also a wide miscellany of projects and businesses such as the manufacturing of perfumes, sports bags and soft toys—indeed, we have a knife grinder.

The tremendous interest in the scheme has not just happened. I pay tribute to all those who have administered and promoted the scheme so far, especially to Mr. MacNamara, the head of the Burnley jobcentre, where the scheme is administered, and to Mrs. Porter and her team, and the other jobcentres that are involved. There are also the area's local authorities, the North-East Lancashire Development Association and the local radio and press, which have helped in the promotion. At the outset of the scheme I organised at the Nelson and Colne college on a Sunday afternoon a small business seminar, which was attended by approximately 80 people, to boost and promote the scheme.

We then established a Pendle small firms counselling service with experienced business men to guide and advise. I should like to thank those individuals for their efforts. I am looking forward to opening a specialist anticorrosion company in Trawden on Friday. It has been started by Mr. Peter Clegg who six months ago was one of the victims of redundancy. He will receive support under our enterprise allowance and will initially provide employment for four people. My hon. Friend the Member for Rossendale (Mr. Trippier) is anxious to speak in the debate. He has supported the scheme most enthusiastically both personally and by the Rossendale Trust which was his inspiration. I know that the hon. and learned Member for Accrington (Mr. Davidson) and the hon. Member for Burnley (Mr. Jones), who unfortunately cannot be with us, are keen to support the whole concept of the scheme.

The small firms information service, in conjunction with the MSC job centres, has held 20 group seminars in Burnley with an attendance of 263 people. There have been 96 counselling or advisory sessions, and more are planned. In addition, a five-week course starts next month at the Burnley technical college sponsored by the MSC under its training opportunities scheme known as TOPS.

I should like to make a number of observations and comments on the scheme. First, it appears that about 20 to 25 per cent. of those on the scheme were formerly receiving unemployment benefit of over £40 a week. To their credit they are accepting a short-term income reduction to try to get their own businesses established. Second, some people would have applied to participate in the scheme but have been excluded as they were not entitled to supplementary benefit because of other sources of income, for example, a married woman with a husband working.

Third, the £1,000 capital restriction seems to have presented few problems. I should emphasise that it is not necessary actually to have cash in the hand. A letter from a bank manager promising support, if necessary, would appear to suffice. Fourth, the 13-weeks unemployed restriction seems to present some problems. While one would certainly not wish to encourage people in work artificially to declare themselves redundant to qualify, nevertheless I ask the Minister to look again at the position of people who have worked for, say, six weeks under notice of redundancy and on termination wish to start in business immediately. Our existing rules require that person effectively to kick his heels for another six or seven weeks.

I should like to thank the Minister for one thing. Where we have taken up particular cases of apparent anomalies his Department has done everything possible to help. One of my constituents had been working on the MSC community enterprise programme. Initially, he was told that that did not count towards the 13-weeks rule, although apparently people who completed a TOPS course were eligible. As a result of my intervention it has been agreed that provided all other conditions have been fulfilled and the TOPS or CEP courses have been completed—they must not give them up simply to claim the enterprise allowance—both groups will be eligible.

I hope that I have demonstrated the successful progress of the scheme. Many new enterprises have been spawned and some new jobs created. Naturally, there will be failures—two have already ceased trading—but I believe that this exercise is most beneficial and cost effective. While it is true that the State pays out a weekly allowance, it saves on the unemployment and social security benefit that it was formerly paying. It must make financial and social sense to encourage people to become self-employed rather than remain unemployed.

I thank the Minister for his help and support. I ask him to make more funds available so that we may build on what has been created and enable us to carry on with the enterprise allowance scheme. In time perhaps a national scheme may be considered, modelled on our success.

2.19 am

I warmly congratulate my hon. Friend the Member for Nelson and Colne (Mr. Lee) on raising this important subject on the Adjournment. I could not emulate his fluent and articulate contribution, but as a North-East Lancashire Member I am equally anxious to record my thanks to my hon. Friend the Under-Secretary for selecting and designating Rossendale as one of the areas in the sub-region of North-East Lancashire qualifying for this useful scheme.

My hon. Friend the Member for Nelson and Colne was kind enough to refer to the Rossendale enterprise trust, of which we in the valley are immensely proud. I am relieved of the duty of explaining the purpose of the trust to the Minister, because he kindly visited my constituency last year and is well aware of the trust.

In the context of the debate, the trust, through the excellent offices of its director, Mr. Roger Pearson, has played a significant part in encouraging constituents of mine to take advantage of the enterprise allowance scheme. The take-up in Rossendale has been very encouraging and, even at this stage, I can assure the Under-Secretary of its success.

I wish to make two brief points. The first is to echo the appeals of my hon. Friend the Member for Nelson and Colne to the Minister to recognise the success of the initiative and ensure that sufficient funds are made available for the completion of the pilot scheme.

Secondly, I am convinced that many more people in North-East Lancashire would benefit from the scheme if they were aware of it.

The House must congratulate my hon. Friend the Member for Nelson and Colne on his ingenuity in publicising the scheme through the debate, but my hon. Friend the Under-Secretary must appreciate that his Department could assist by again advertising the scheme in the appropriate local newspapers. In that way, the Under-Secretary, whose concern for the unemployed is well known to us all, could emphasise the practical benefits of a bold and imaginative scheme which I know would attract many people who are anxious to start their own businesses. Once again, I thank the Minister for starting the scheme and I commend it to my constituents.

2.22 am

I am pleased that my hon. Friend the Member for Nelson and Colne (Mr. Lee) has raised this important subject. I know that he has been closely connected with the enterprise allowance scheme in his constituency and I was interested to hear that he will be helping later this week at the opening of an anti-corrosion company, the proprietor of which, Mr. Peter Clegg, was declared redundant not long ago.

I well remember visiting the constituency of my hon. Friend the Member for Rossendale (Mr. Trippier) and talking to representatives of the Rossendale trust, in which he has played a major part. The trust has played its part in promoting the scheme. This is the first opportunity that we have had in the House to debate the scheme and for that reason, too, I am grateful to my hon. Friend the Member for Nelson and Colne for initiating the debate.

Conservatives believe strongly in initiative, hard work, enterprise and profit. We know that, unless a company is making profits, there will not be a future for that firm. That is what the scheme is all about. It recognises the difficulty of getting, and keeping, a business going, especially for those who are unemployed. Because of that, the scheme was conceived and born. It is a bridge between being unemployed and going it alone. Without the scheme, there would not be a real start for many of those who find themselves redundant today.

Both my hon. Friends have pointed out why the scheme is a success. Because of the lack of finanace we had to make the scheme a pilot one. The finance was found from limited resources. There was about £2·1 million for the schemes in England. That means that about 1,000 people will be able to participate. The pilot areas that we chose were, we hoped, a cross-section of the country. As both my hon. Friends said, we chose North-East Lancashire, Coventry, Medway, my right hon. Friend the Secretary of State for Wales chose the Wrexham-Shotton area and my right hon. Friend the Secretary of State for Scotland chose north Ayrshire.

As my hon. Friend the Member for Nelson and Colne reminded the House, the take-up has been staggeringly good. He quoted a figure of 157 approvals for North-East Lancashire. My figure is a little out of date. At the end of April there were 142 in North-East Lancashire, 145 in Coventry, 79 in the Medway towns, 58 in the Wrexham and Shotton area and 13 in north Ayrshire. That adds up to a total of 437.

The progress of the pilot schemes is being monitored carefully. I hope that both my hon. Friends trust, as do I and the Government, that the schemes will be successful. I am sure that they will accept that by and large, we are at an early stage and must walk carefully. As my hon. Friend the Member for Nelson and Colne said, we must be prepared to accept that not all of the schemes will be as successful as we hoped. We must expect some to fail. That is why we must regard them as pilot schemes although I am hopeful that, by and large, they will be successful.

I know that entrepreneurial flair and spirit in my hon. Friend's constituencies flourishes. I am sure, therefore, that they were the right areas for a pilot scheme. I say that because I have been invited by both hon. Friends, for several years now, to meet their constituents to see for myself what sort of people they are, especially as my constituency is not far away in the North-West. I know that they are composed of proprietors' businesses. That is where employment comes from. I know that prosperity has always started from small beginnings and that they are prepared not just to pick up a challenge but to carry it forward. That, as I have already said, has been proved by the take-up in North-East Lancashire which, by any stretch of the imagination has been exceptionally good.

My hon. Friend pointed out the difficulties in his constituency and the problems of the textile companies. He also referred to the problems relating to special development area status, and so on. He will appreciate that that is a matter for my right hon. Friends the Secretaries of State for Trade and for Industry. All I can say is that the transition from the old to the new, and moving towards new industries and away from old industries is always difficult. From what I have seen of the scheme those difficulties are being potentially transcended because people like my hon. Friends are putting everything that they can into making sure that we are moving forward rather than harking back.

I am most grateful to my hon. Friend the Member for Nelson and Colne for his very complimentary remarks about the Burnley jobcentre officials, particularly the manager, Mr. MacNamara, and Mrs. Porter, who is responsible for the day-to-day administration of the enterprise allowance scheme. I hope that he will agree that I should pass on his and my own thanks to the chairman of the Manpower Services Commission and to both those officials. I also agree with both my hon. Friends about the invaluable contribution made by the Department of Industry small business centre, the manager of which is Mr. Paul Davidson, and I shall certainly pass on those remarks to my hon. Friend the Under-Secretary of State for Industry.

Among the specific points raised by my hon. Friends was, first, the level of the allowance. My hon. Friend the Member for Nelson and Colne pointed out that, with the allowance at £40, some people were taking a cut in what they would otherwise have had in their pockets. That is so, but in 75 per cent. to 80 per cent. of cases the applicant will receive more benefit than would hitherto have been the case. The allowance is not simply a subsidy to help people set up their own businesses. It is to help people dependent on benefit who wish to set up their own business but who may be deterred because they would lose their entitlement to benefit.

My hon. Friend also referred to the £1,000 which is needed to set up the business. I accept that we are still in a trial period. That seems to me to be about the right level, but I hope that my hon. Friends will bear with me until we monitor the trials taking place.

The qualifying requirement of 13 weeks' unemployment was designed to exclude people who gave up jobs and businesses simply to apply for support under the scheme. Removal of the qualifying period would reduce the cost-effectiveness of the scheme. That would not be acceptable to the Government as we are anxious to ensure that taxpayers' money is spent to the best effect.

I am extremely grateful to my hon. Friends the Members for Nelson and Colne and for Rossendale for raising this matter. I know that both have done all that they possibly can to promote the enterprise allowance scheme. Knowing them both and their constituencies, I am convinced that that is the perfect pilot area for the scheme. I know, too, that local radio, television and the press in the area have seen to it that the opportunities offered by the scheme are properly publicised. I should like to ask my hon. Friends to thank the media in their area for putting before their constituents the opportunities that are available under the scheme.

I assure both my hon. Friends that the Government will monitor carefully the future of the pilot areas. I assure them that the Government hope that the scheme will be a great success. My hon. Friends ask that more funds should be made available. I hope that, if the scheme is deemed to be a success, more funds will be available. It would certainly be a proper use of taxpayers' money.

The Government believe in people being able to set up their own businesses. When they do that it is not just for themselves, but, in the longer term, it is for those whom they employ, and that in turn will benefit not just themselves but the whole of the community.

Once again, I thank my hon. Friend for putting the scheme before the House. I hope that we shall debate it time and time again, as it expands, providing that the pilot areas are successful.

Question put and agreed to.

Adjourned accordingly at twenty-five minutes to Three o' clock.