An enterprising move, but is it enough?

I have been arguing for a return of the Thatcher-era Enterprise Allowance scheme for two years, so I was delighted to see David Cameron announce the extension of the New Enterprise Allowance today. It always made sense to allow as many people as possible to come off the dole and set up their own businesses. I only hope the inducements will be attractive enough.

I recently came across some brilliant public information films about the original scheme. You can check one out here if you want to be reminded of the last time the country faced mass unemployment.

The original EAS was effective because it was a straightforward bribe. Recipients were paid £40 a week, significantly more than the dole at the time and were able to stay on the scheme for a year.

Under the new scheme, budding entrepreneurs will only be paid the equivalent of the dole (around £50 per week) for three months. They will also receive access to business loans and advice, but it isn’t yet clear where this will come from and who will be providing it.

Done right, this is a genuinely exciting prospect – especially for young people keen to set up in new media or the creative industries. But everything depends on the quality of the advice.

It would be churlish to pour cold water on the 21st century version of the EAS, especially after making such a noise about bringing it back. But it would be a real shame if the take-up was low, or the failure-rate of the businesses too high.

Recently, when the enterprise minister responsible for the original scheme, David Trippier, was asked what he would do differently, he said he would have extended it for two years. Three months is a very short time to get a business off the ground.

Research on the original scheme also discovered that businesses were less successful the more time people had spent on the dole. People should not have to drift towards long-term unemployment before they qualify for help on the scheme.

But I wish the government well on this one. There is no doubt that small start-up businesses will have to play a part in the recovery (especially in areas where there are no large employers in the private or state sector).

I just hope ministers have given themselves and a new generation of entrepreneurs a fighting chance of success.