Small businesses need more political clout, says the FSB

They are the backbone of the economy, accounting for 58.8% of private sector employment and 48.8% of private sector turnover but it looks like small businesses feel unloved.

by Thomas Mahon
Last Updated: 06 Nov 2012

The Federation of Small Businesses (FSB) says that its members aren’t appreciated, that the government doesn’t communicate with them, and that things just can’t go on like this.

Rather than appoint a relationship counselor, the trade organisation reckons a dedicated seat in the cabinet could do wonders to bridge the politico-industrial divide. It recommends that Britain follow the American model, known as the 'Small Business Administration'. In the US, the SBA has a seat in the cabinet and protects SMEs from policy produced by other government departments that frequently harm their interests. In addition, this minister oversees an agency devoted to promoting small business interests. Sounds good, eh?

The FSB also believes that having their own dedicated minister could help SMEs in the tricky business of finding finance. This has been highlighted as one of the biggest issues that small businesses face, despite the government’s Project Merlin initiative. In fact, research published on Monday shows the proportion of businesses with fewer than 250 staff that talked to banks about securing a loan reached the lowest recorded by the Business Monitor survey.

The FSB went on to give government policy a half-implied shoe-ing, saying the sector has seen only temporary, eye-catching measures that have had no tangible effect. The FSB urged the government to reform employment tribunals, and introduce a true fuel duty stabilizer. It suggests the government accept the recommendations of the Office for Tax Simplification to consider a turnover tax for the very smallest of firms. And noted, cheerfully, that a minister could help sort out disaster assistance for businesses hit by renewed rioting (!) or other unexpected problems.

But the biggest difference that a full-time small business minister (not that we're doubting the abilities of minister for business and enterprise Mark Prisk) could make is to address the issue of procurement. The government is seeking to meet its 'aspirational target' of 25% of government contracts being awarded to SMEs. And finally, a minister would be able to improve communication with small businesses, which it describes as a 'major weakness' in the current arrangements.

Tory MPs may well be pricking up their ears at the proposal of a new cabinet seat. Scurrilous reports, no doubt completely invented, suggest the Tory backbenchers might just be less than overjoyed at the performance of Liberal Democrat business minister Vince Cable. The baseless accusations continue that some hard-liners may even favour the destruction of Vince’s Department for Business Innovation and Skills, with its responsibilities for higher education being sent back to Conservative Michael Gove’s Department for Education. Far be it for us to suggest that conservative policy-makers may suddenly be seeing a route to a BIS-free, Cable-free country appearing in front of them...

Bu is there any chance of this happening? MT doubts it. SMEs don’t have a good track record of engaging with government ministers of any stripe, and it’s hard to imagine any politician wanting to take it on. There isn’t a tin hat thick enough to protect them from the rocks that would be thrown at them. The bankers would appreciate someone to share the flack though...

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