One of the reasons I haven't been blogging as often as I should is that I've been writing a report for the Arts Council about self-employment in the creative industries. I've been convinced for some time that the government should be re-creating some version of the 1980s Enterprise Allowance Scheme to encourage entreprenership.
The original scheme paid people £40 a week to set up their own businesses. This was slightly more than the dole at the time and this acted as an incentive for people to come off benefits. This was seen at the time as a way of fixing the unemployment figures, but it also launched a number of successful careers, including that of Alan McGee, the founder of Creation Records .
In April the government introduced "self-employment credit" for people who have been on Jobseekers Allowance for six months. This gives them £50 a week (less than the dole for most people) for 16 weeks and plugs people into advice about how to run their business. There hasn't been much publicity around this scheme and I wonder how many people will take it up.
As part of his work for the report, one of my researchers managed to track down Sir David Trippier, former Tory MP for Rossendell and Darwen, who was at one time the industry minister responsible for running the scheme. The interview makes for interesting reading, especially Trippier's view that any new version of the scheme should have increased the period the allowance is received to two years:
“I became Minister for Small Firms and Enterprise in 1985 having served as a junior minister in the Department of Trade and Industry. I was delighted to take up the post. As MP for Rossendale and Darwen, an area that had been affected greatly by the decline of the textile industry, I was acutely aware of the effects of rising unemployment levels.
In this role, I was responsible for the Enterprise Allowance Scheme and answerable to Parliament for it. The EAS, of course, was very much part of the prevailing economic thinking at that time, and the Prime Minister was very supportive of our efforts. It was my wish to bring about dramatic change in the employment landscape to encourage people to become employers of other people rather than expect others to employ them.
It was clear to me at that time that large companies, the ICIs of this world, were not going to increase their labour force. I could only see economic growth coming from small and medium sized companies. I wanted us to be an entrepreneurial society, a risk taking society. But it was not in our nature, as Britons, to take risk. It never has been. I looked to the United States, a nation of pioneers and risk takers, for ideas that we could replicate here. I wanted the country to be a country of enterprise. The EAS was central to this.
The EAS did have what I perceived to be certain flaws when I joined. I was unhappy that individuals could claim the benefit without any formal training or experience at all. I quickly recommended that some appropriate formal training, in management and marketing skills for example, be made compulsory for applicants before they received their first cheque.
Without the proper training, individuals were not adequately equipped to run their own firm. It is true that many individuals did come from, for example, heavy industries and thus had very little experience of entrepreneurship. Therefore, it is fair to say that certain people were encouraged, by employment officials, to enter self-employment who were never going to be up to it.
It’s true that we were bedevilled by the constraints of bureaucracy, from the government and increasingly from Brussels. Nevertheless, the EAS was intentionally open and permissive. We could have imposed checks and what not every two months, but we would have just ended up strangling the entrepreneurship we sought to promote.
It was remarkable how many people were attracted to the EAS. The EAS budget had to be increased more than once to accommodate such large numbers. I recall that the failure rate of EAS businesses was actually lower than that of firms set up under the Small Firms Loan Guarantee Scheme.
However, initially, we didn’t realise that there would be positive effects beyond economic growth. But EAS firms were so diverse. There were so many different types of small businesses. There were cultural and arts related firms springing up everywhere. I remember going to Newcastle to visit some EAS shop units, and all the units were occupied by people in the cultural and design industries. I recall thinking ‘This is really, really good’.
So, in essence, with the EAS, we weren’t just encouraging self-employment for self-employment’s sake. It brought about a diversity of culture. It also encouraged a lot women to start their own businesses and I worked closely with Baroness Platt, the Chair of the Equal Opportunities Commission, to ensure that more and more women became self-employed. In fact, I recall that, statistically, EAS firms run by women were more successful than those run by men because women prove to be more prudent with their finances.
If the EAS were to be reintroduced, it would obviously require a lot more money. Payments were, I recall, £40 per week. The only further change I would make to the EAS structure, is that I believe it must be extended to two years. When starting a small business, most of the costs incurred are ‘front end’, and if the umbilical cord is cut after only twelve months, it can be very tough for people, especially in times of recession.
It is true that not all EAS firms remained in business for long. Many firms did in fact fail not long after they ceased being subsidised. But I was adamant that the failure of your business should not be a stigma that you have to carry around with you for the rest of your life. From my experience, these EAS companies contributed to both the economy and the wider economy, and increased the quality of life for wider society.”