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What Small Businesses Can Expect from a Labour Government

On 10 June 2014, Toby Perkins gave a speech to The Entrepreneur’s Network policy think tank on the subject of “What Small Businesses Can Expect from a Labour Government”.  You can read this below.

Many thanks for that introduction Philip.  I would just like to say that it is a privilege not only to be invited here today, but also to have been invited to become an Ambassador for the Entrepeneurs Network.  I’m sure TEN is going to go from strength to strength and I look forward to being a part of that journey.

TP interview in his officeI am particularly excited about this journey because in many ways I still think of myself as more of a businessman than a politician.  Before 2010 I could even have been described as a human being.

One of the reasons I was so delighted to be appointed as Ed’s Shadow Small Business Minister is because I have lived many of the problems I am now tasked with finding solutions for.

After leaving behind a less than auspicious academic career, I took on a telesales job and continued to work in the private sector for my entire career up to 2010.  I eventually set up the third of my own small businesses in the Sportswear business, supplying and importing bespoke Rugby kit to Clubs, universities and schools and through an internet business, Club Rugby.

Alongside this work I was also involved in a social enterprise.  Based in the area of Chesterfield I previously represented as a Borough Councillor, the Families First Children’s Nursery was a cooperative formed with investment from the last Labour Government.  Serving an area with significant deprivation, the nursery has overseen a dramatic improvement in Early Years Education.

So supporting and promoting entrepreneurs and small businesses is always at the heart of my approach to politics … and I can assure everyone here that entrepreneurs are central to the vision of One Nation Labour too.

In his first ever conference speech as leader in 2010, Ed Miliband expressed his determination to; “make Labour the party of enterprise and small business” and he has energetically pursued this goal ever since.

In 2011, Labour became the first party to set up an entrepreneurs’ network – the NG, or “Next Generation” network – to showcase the best of British talent and help aspiring business people hear from some of our most inspirational business leaders.

Cutting edge events have involved Dragons Den Piers Linney, Samir Desai founder of Funding Circle, MOBOs founder Kayna King at a women in entrepreneurship event at Wayra hub, and a Google hangout linking entrepreneurs across tech centres in Tel Aviv, Tech City and Lagos.

Its free to get involved and if any of you would like to join and come to future events please do give me your cards after lunch.

In 2012 Labour launched a scheme to encourage more people with a small business background to stand for Labour at election time.  This has now borne fruit with entrepreneurs standing for Labour in key marginals such as Reading West, Bury North and Stafford.

In 2013 Labour’s Small Business Taskforce, comprised of successful entrepreneurs, business representatives and academics produced their list of final recommendations to the Party.

Labour has committed to following many of these, including taking steps to help small starts ups more easily access quick broadband connections.

The next Labour government is determined not to sit on the sidelines but to take an active role on the side of entrepreneurs and create an environment where small firms can survive and thrive.

To achieve this we have a clear plan to support entrepreneurs in the big challenges they face.

An area where a Labour government would make a real difference is in access to finance.  Many of you will have read my article in The Entrepreneur’s Network’s launch manifesto about how government can take a leading role to support small businesses in accessing finance.  So this seems an appropriate area to start on today.

Entrepreneurs who want to start out, or to grow their small business consistently tell me that their biggest barrier is the reluctance of banks to lend.

Figures published in the last week showed that in the first quarter of this year net lending to SMEs by Funding for Lending participants actually fell by £700 million.  And in the last year net lending to SMEs has fallen by £3.2 billion.

Rather than continuing to tinker around the edges of this problem, Labour’s solution is truly transformative.  Around 90% of the UK’s five million small businesses are locked into just five big banks, who lend on roughly the same criteria. It’s not uncommon to hear about entrepreneurs rejected by each of these in turn.

By contrast, our prime European competitor, Germany, actually increased lending during the global downturn.

They achieved this because of the existence of Sparkassen.  These are commercial banks, but they are also established with state backing.  They return a profit to shareholders but are confined to a specified region and have a legal responsibility to promote local economic growth.

When I visited Germany I was struck by the pride and faith ordinary savers, businesses and entrepreneurs have in their Sparkassen.  They talk about these banks in the same terms a British person might talk about the NHS or the BBC.

It was also apparent as soon as you step into a local branch that these are banks run on a different basis from many closer to home.  I met local bank managers who are intimately attuned to their local economies and have the autonomy and the authority to lend significant sums to entrepreneurs whom they feel will succeed in their town, community or region.

Of course the Sparkassen have a long tradition in Germany and are ingrained into its federal structure.  It would be impossible to exactly replicate the model in this country.

But its key principles – permanency through state backing; a core duty to support growth and innovation within a defined geographic area; and professionalism with real banking experts that understand their local customers and communities – could be transferred to a British context.  Examples such as the Bank of Salford, which lends to businesses and consumers within the City of Salford, highlight the potential of this transformative model.

A working group, dominated not by politicians, but by those with real experience in the field, are currently taking this forward on our behalf.

Outside of banking, new start ups are also held back from receiving finance by late-payments from the larger organisations they supply to.  Late payment is a clear example of what Chuka Umunna, my boss … and the Shadow Secretary for Business, has identified as “blue tape” where small businesses are held back by more established larger companies.  A quarter of company bankruptcies are estimated to be the result of late payments.

Businesses need a strong government willing to take action on their behalf.

The last Labour government created an interest rate penalty for large firms who delayed payment to their small suppliers.  The next Labour government will further tackle this issue and ensure government sets the best example, by making it mandatory for all government bodies to publish their record on this.

We obviously welcome the government’s commitment to take action on this issue as announced in last week’s Queen’s Speech, however we share the concerns of the FSB and others that these steps will not go far enough and will seek to strengthen them in Committee.

The cost-of-living crisis has also spread to entrepreneurs and Labour is determined to address this.  The £1,500 rise in business rates since 2010 has hurt entrepeneurs.  Labour would not bring forward the planned one per cent Corporation Tax cut for 80,000 large firms and use the money to instead cut the business rate bills of 1.5 million small firms.

Likewise, when one in every seven pounds of GDP is spent by the state, Labour understands that procurement is the biggest lever we can pull to help entrepreneurs branch out into new markets.  Unfortunately, the current Whitehall machinery is not set up to understand and respond to the need of British small businesses.

Currently, none of the fifteen civil servants reporting directly to the BIS permanent secretary is responsible for small businesses and the amount of procurement spend which goes to small businesses is not precisely monitored.

By contrast, the head of the US Small Business Administration – a team at the heart of the US government that promotes the interests of small businesses across government – reports directly to the President and 45% of US Federal procurement spend goes to US small businesses.

To catch up with our competitors and to ensure that the next Labour government is the best customer it can be we will establish our own Small Business Administration at the heart of government, something organisations like the Federation of Small Businesses have long campaigned for.

All these measures support those who have already started out, but it is also a crucial task for government to create an environment where an entrepreneurial career path is accessible and normal.  Previous efforts to improve social mobility have perhaps overly focused on the professions, when entrepreneurialism can also be a great path to prosperity.

This is why Labour’s Waltham Forest Council is pioneering a scheme which places an entrepreneur or business owner on the board of governors at each local school to ensure that pupils are exposed to this exciting career path early in life.

Similarly, Labour’s plans to give parents of primary school children guaranteed access to childcare from 8am-6pm will help people from all backgrounds to find the space to pursue entrepreneurial projects.

As innovators and challengers of tired orthodoxies I see entrepreneurs as Labour’s natural allies.  I hope the broad overview I have just provided has been helpful and you can see that we have a suite of active policies to support small businesses at every stage of their development.

I have no doubt Labour is fulfilling Ed Miliband’s vision to become the Party of enterprise and small business and would be delighted to discuss any of the ideas I have just touched upon in greater detail.  Thank you very much for listening.

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Welcome

I am Toby Perkins, Labour's Member of Parliament for Chesterfield. If you would like to get in touch with me, my office is open and can be reached by phone on 01246 386 286. I also hold regular surgeries so that constituents can meet me and I can take up their concerns. If you would like to make an appointment then please do contact my office. Thank you for visiting.

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