Labour needs to become the party of enterprise as it takes on the Tories, Labour’s Business, Innovation, and Skills (BIS) shadow Chuka Umanna told a New Statesman/ACCA Labour conference fringe event. ACCA meanwhile warned the young Labour high-flyer that the BIS brief could be a lesson in humility.
Attempting to answer the question ‘does Labour have an enterprise plan’, the newly(ish)-appointed Labour BIS spokesman outlined the party’s plan for boosting private sector and small business and criticised the coalition’s enterprise policies since the last election. Whole new demographics were ‘up for grabs’ after the last election and Labour now had an opportunity to become the party of enterprise, he said.
Umunna warned that the Chancellor George Osborne’s influence in government had robbed the BIS department of the ‘clout’ needed to be an effective department. The much publicised bank-lending agreement ‘Project Merlin’ was a PR gimmick, he said, and a failure to engage with the EU meant regulation could not be brought under control.
Umunna also criticised the Coalition’s decision to scrap the Regional Development Agencies (RDAs). Admitting that some RDAs had been ‘captured’ by narrow local interests, Umunna suggested that scrapping all the RDAs seemed to be throwing the baby out with the bath water.
Setting out Labour’s enterprise policies, the shadow minister focused on access to finance, regulation, public procurement, business support, and the wider issue of making globalisation work for individuals (the ‘big question’ for Europe’s social democrats).
On access to finance, Umunna refused to accept the banks’ position that lending was down due to low demand. This was not what he was hearing from his constituents and small businesses, he said. Government, he argued, should not ‘let the banks off the hook’ after the financial crisis, and should force state-owned banks to make more new finance available for business. A change to ‘lending culture’ was also needed, he said, with banks and small businesses forging closer relationships.
Turning to red tape and public procurement, Umunna refused to promise cuts to red tape, emphasising ‘quality of regulation, not quantity; small business access to public procurement was something Labour should have done more on while in government.
Sounding a note of caution for Labour’s wide-ranging plans, ACCA’s SME expert Manos Schizas warned that supporting emphasise was not something that could be done by the BIS department alone. Instead, argued Schizas, government needs to get the wider macro-economic picture right, rather than focusing on micro-economic policy. Facing up to the limitations of the BIS role could be a lesson in humility, said Schizas.
Where BIS could make a difference, he argued, was over business support and access to finance.
Throwing some light on the discrepancy between the banks and Chuka Umunna’s position on lending, Schizas argued that the issue was information, the currency of access to finance.
Businesses without the right ‘information’ – such as those with no experience of securing finance, or those without prepared accounts – would have no chance of securing finance, said Schizas. Similarly, banks that used information in the wrong way make poor lending decisions, he concluded.
Responding to Chuka Umunna’s comments about business support – including criticism of the scrapping of some programmes and criticism of the Coalition’s new mentoring scheme – Schizas cautioned that business support schemes needed to build up credibility amongst those they helped. In some cases, such as with Business Link, this credibility did not exist and so the Coalition was right to close the service down.