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Businesses: Regional Growth Fund

Volume 728: debated on Wednesday 8 June 2011

Question

Asked By

To ask Her Majesty’s Government how many small and medium-sized enterprises have been helped by the Regional Growth Fund, and what other plans they have to help such businesses.

My Lords, about one-third of the £450 million conditionally allocated for successful bids in round 1 will benefit small and medium-sized enterprises. Our expectation is that at least 1,000 SMEs, located in areas where there is not already a vibrant private sector and culture of enterprise, will benefit directly from round 1. The second round of the fund is bigger, and we expect further bids that will benefit SMEs.

Given that only one-third of the successful submissions are from small businesses, whereas the regional growth fund was designed to help small businesses, does the Minister accept that a flaw in the design of that fund is that you had to submit a minimum bid of £1 million, which is out of reach for many small businesses? Does she accept that the advice on the BIS help site is absurd, given that the proposal that you should spatchcock together lots of different projects from small businesses not only increases bureaucracy but means that projects are brought together which are unnatural neighbours? Is it not time that the Government thought big about small businesses?

I know exactly what the noble Lord is talking about: the threshold value of £1 million seems very high for very small businesses. We recognise that £1 million is too high a threshold for the smallest businesses. Sadly, it would take much time and resource to deal with a very high number of very small bids. We have addressed that point by conditionally allocating funding to organisations with experience of the SME sector, so that they can work with it to deliver the grants. Projects below £1 million can join up with other projects to form a coherent package and can bid together to meet the threshold. I come from a business background and know that if you cannot get a grant or a loan for the business the first time round, you go out there to find another business that will join you so that you can get it. This is a competitive process, which is what we want it to be, and I think it will succeed.

My Lords, the credit crunch which started four years ago was as a result of the sub-prime crisis. After the credit crunch came the financial crisis then the recession and then the sovereign debt crisis, but the biggest domino effect was that lending to small businesses all but froze. Are the Government really doing enough to compel or encourage the banks to lend to small businesses, given the support that we have given to the banks over those years?

My Lords, the noble Lord will know that my right honourable friend in another place, the Secretary of State, is for ever speaking to and with businesses. Yes, of course we know that we need a predictable tax system to reward endeavour; we know that we need better access to both debt and equity finance; and we know that we need to reduce red tape. We are working hard on all of that.

My Lords, other support for small businesses is intended to come through local enterprise partnerships. Will the Minister take on board concerns that not enough small businesses—not in sufficient force—are being involved in local enterprise partnerships throughout the country? This is of great concern. Surely this should be part of the approval process that the Minister has to go through when he sets up the local enterprise partnerships in the first place.

The evidence is that we have been overwhelmed by the number of bids that have come in. For the second round that we are in now, there is an enormous number of bids, which is very heartening. It is competitive, and people are doing awfully well with it. I hope that I can speak later to the noble Lord and reassure him on this with the evidence that we have.

My Lords, given the record levels of youth unemployment, is the Minister aware of the newly released data from the Federation of Small Businesses showing that only 8 per cent of small businesses have taken on an apprentice in the past year? This is concerning, given that in 2009 more than half of the apprenticeships took place in businesses with fewer than 50 employees. Furthermore, the federation believes that allocated funding to apprenticeships must be used to benefit micro-businesses—that is, businesses that are likely to take on their first apprentice with the potential to grow. It believes that the Government should better promote group training agencies or apprentice training agencies.

My Lords, I expected this question to come from the noble Lord, Lord Sugar, whom I see is in the House today. My answer to this question is that this is a challenge fund and projects can cover whatever the bidders want. The aim of the fund is to create jobs and these could include apprenticeships—a key part of this Government’s growth agenda. We look forward to bids coming forward for apprenticeship growth.

My Lords, my question for the Minister is not the one that she was anticipating. She will recall that in my short stint at BIS as an adviser to the Government, I concentrated on the business link centres. At the end of that period, I concluded that they were, frankly, a waste of money. I was told that they cost £250 million per year. Will the Minister give us an update on the status of the business link centres and indicate whether she has come to the same conclusion? Will the money that was given to the business link centres be deployed somewhere else?

I was not prepared to answer a question on that, but I will of course send an answer to the noble Lord. I would like to reassure him that I think that he would approve of the system that we are using here. It is working. The bids have already levered in £2.5 billion of private sector funding. Maybe he would like to follow carefully how we are proceeding with this sum—and maybe even support us in some ways.