Labour commits to new regional banks
By Toby Perkins
— In his first conference speech as leader, Ed Miliband expressed his determination to make Labour the party of small business. Last month we took another step towards this goal.
As the challengers of tired orthodoxies and the drivers of social mobility, small businesses share our values. Ninety per cent of people moving from unemployment into private sector employment do so with small businesses. Within the ranks of the almost five million small firms sit the seven per cent of high-growth businesses that create more than half of all new jobs. Growth and small business success go hand in hand and we cannot deliver excellent public services without the contribution they make to the economy and the exchequer.
This is why a key plank of our policy review was the instigation of the Small Business Taskforce which had a single goal: how can the next Labour government make Britain the best place it possibly can be to set up and grow a small business? Following the tragic death of Nigel Doughty last year, the taskforce was led by Bill Thomas, a former senior vice-president of Hewlett Packard.
The taskforce – which included leading businessmen, entrepreneurs and academics – consulted widely across the UK with individual businesspeople, business organisations such as the Federation of Small Businesses and the British Chambers of Commerce, trade unions and trade bodies. New academic research was produced and international best practice was studied during visits to Singapore, Germany and the United States.
The 100 recommendations in the final report covered the full spectrum of small business policy – from access to finance and insolvency to skills and the machinery of government – and they are as radical as they are diverse. This is best demonstrated by the taskforce’s ideas around access to finance, which small businesses tell me is the most pressing issue facing them today. Business lending has fallen in every quarter of the last two years and this is at least partly a result of our uncompetitive banking sector where 89 per cent of all our businesses are locked into the five big banks.
Rather than tinkering around the edges of this problem, or simply looking to introduce one more bank to the mix, the taskforce examined how we can transform the existing culture of British banking. Our European competitors, particularly Germany, have maintained higher levels of small business lending in recent years with commercial banks which are focused on supporting the real economy, not maximising their own profits.
The taskforce report analysed how the local lending principles of the German Sparkassen savings banks could be brought to life in a British context. It did not recommend an exact replica but this idea has the potential to fundamentally transform the banking sector to the benefit of small businesses. Ed Miliband has now committed the next Labour government to creating a network of regional banks.
The taskforce also recommended radical reforms to the machinery of government. It proposed for example, the creation of a small business agency at the heart of government. The report also revealed a failure of ambition on procurement. While federal laws in the US ensure that a proportion of government procurement goes to American small businesses, we have no similar legal requirements. The taskforce recommends how we can catch up.
Self-employment is a challenging but empowering path out of unemployment and the taskforce called on government to provide support for those who have the potential to move into it, together with a wider push to boost entrepreneurial skills in school and beyond.
The report also focused on innovation and called for a unified strategy to boost British research and development. It backed faster access to broadband for Britain’s start-ups, help for smaller firms to export and a new approach to regulation which takes into account quality, as well as quantity.
Toby Perkins MP is shadow minister for small business and a vice-chair of Progress
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