Monday, 7 March 2011

Setting forth to smite the ‘enemies of enterprise’

In his speech to the Conservative Spring Forum in Cardiff, David Cameron did us all a great favour by identifying the ‘enemies of enterprise’ responsible for holding back business and economic growth. The Guardian reports:

The prime minister, who said that enterprise was about morals as well as markets, listed three "enemies of enterprise' in a speech at the Conservative spring forum in Cardiff:

"The bureaucrats in government departments who concoct those ridiculous rules and regulations that make life impossible, particularly for small firms."

"The town hall officials who take for ever with those planning decisions that can be make or break for a business – and the investment and jobs that go with it."

"The public sector procurement managers who think that the answer to everything is a big contract with a big business and who shut out millions of Britain's small- and medium-sized companies from a massive potential market."

Fighting talk. It’s not too difficult to envisage Dave, resplendent in chainmail and the flag of St George, astride a trusty charger, smiting down with sword and axe the bureaucratic wretches who ravage the land with their rules and regulations. As people keep telling us, he is ‘born to do the job’. And let’s face it, the bureaucrats, planners and procurement managers deserve to face the wrath of Dave’s cold, sharp steel.

...Or do they? Surely Dave couldn’t be guilty of the most extreme exaggeration and distortion? Leaving aside the gratuitous abuse of public sector workers for the moment, let’s take each of the issues raised by the PM in turn: regulation, planning and procurement.

Regulation

Here we go again. I do get depressed endlessly rebutting spurious nonsense about red-tape. So tired in fact that I don’t intend writing anything new in response to Dave. Instead, here are some paragraphs  drawn from our 2011 Budget Submission sent to the Chancellor last Friday:

The World Bank currently rates the UK 4th out of 183 countries in its Ease of Doing Business Rankings[i]; an index averaging each country's percentile rankings on 9 topics, made up of a variety of indicators, giving equal weight to each topic. The UK scores as follows:

  • On ‘starting a business’ the UK ranks 17th out of 183 countries; Demark ranks 27th, Norway 33rd and Germany 88th; and,
  • On ‘paying taxes’ – which considers both the level of business taxation and the administration required to comply – the UK ranks 16th; Denmark 13th, Norway 18th and Germany 88th. The United States ranks 62nd on this measure.

The OECD indicators of employment protection measure the procedures and costs involved in dismissing individuals or groups of workers and the procedures involved in hiring workers on fixed-term or temporary work agency contracts.

Employment Protection in 2008 in OECD and selected non-OECD countries[ii]







The OECD also publishes Indicators of Product Market Regulation; a comprehensive and internationally-comparable set of indicators that measure the degree to which policies promote or inhibit competition in areas of the product market where competition is viable. The indicators cover formal regulations in the following areas: state control of business enterprises; legal and administrative barriers to entrepreneurship; barriers to international trade and investment.

The OECD’s analysis[iii] of product market regulation 2008 found that, out of the 37 countries studied, only the United States regulated its product markets less stringently than the UK.

So the UK has the third least regulated labour market and the second least regulated product market in the OECD. Square that with Dave’s hysterical rantings.

Note – full referenced Budget Submission can be found here.

Planning

Are delays in the planning process attributable only to ‘town hall officials’. Hardly. Here’s a few others:

  • Democracy – people actually want a planning process that properly considers the pluses (e.g. jobs) and minuses (e.g. environmental impact) of any planning application. This takes time. Objections – hell, even from other businesses!! – are received and have to be considered. Yes, it is a reasonable aspiration for decision times to be improved but this requires action from all parties not just ‘officials’ because of...
  • Poor quality applications – hold on a minute, you don’t mean that businesses might have to take a look at themselves?! Indeed I do because poor quality applications are routinely submitted. For instance, applications regularly fail to make due reference to protected areas;
  • Capacity – there is a capacity issue in some local authorities and other public sector bodies. This is distinct from the deliberately obstructive approach described by the Prime Minister. But there are too few planners  - particularly those with experience in handling applications in certain fraught areas i.e. mining, quarrying, windfarms. This situation is exacerbated by the general planning skills shortage and the incentives available for planners to move to the private sector. Of course, any solution demands investment in people and skills.... and what is the Government doing?

Procurement

I think Dave boy might have created something of a hostage to fortune here.

The truth is that for a number of years, procurement officials at both Scottish and UK level have been working hard to assist small and medium sized businesses (SMEs) engage with the planning process. When the Public Sector Procurement Directive was transposed into UK and Scottish law in 2006 rigorous attempts were made to ‘reduce burdens’ on SMEs. This was done at the expense of the additional scope provided by the Directive to include employment, social and environmental clause in public sector contracts.

The trouble is, Government has been struggling to reconcile this approach with the other key imperatives for procurement policy; efficiency (value for money) which implies the aggregation of contracts thereby favouring bigger firms and to a lesser extent community benefit i.e. employment of local people, apprenticeship numbers etc. The community benefit strand can be extended to the use of procurement to drive up standards – employment and environmental – across the economy.

It is demonstrably false to claim that ‘public sector procurement managers’ have driven the efficiency agenda to the exclusion of the others. When businessman John McClelland was brought in to advise on government procurement, he stressed the (narrowly) efficient approach. SMEs are also guilty of failing to actually submit bids for projects that are within their reach.

Given that the Government has been particularly severe in slashing capital budgets it is difficult to believe that they will genuinely push a (less narrowly efficient) SME agenda at the expense of aggregating contracts.

On the basis of the evidence is it really fair to label regulators, planners and procurement officials as being ‘the enemies of enterprise’? Of course it isn’t. A more rational approach to identifying the genuine barriers that prevent companies expanding might come up with some very different answers. The financial sector perhaps which even before the crisis failed to provide growing companies with patient, committed capital? Central Government in the UK which resolutely refuses to run a credible industrial strategy when most other developed nations offer far more assistance to growing sectors and firms? The coalition government whose cuts will have a seriously detrimental impact on SMEs across the UK?

I await the Budget with rising trepidation.

Stephen Boyd - STUC

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