Stephen Timms – 2000 Speech at the Art Key Loan Fund Launch

The speech made by Stephen Timms, the then Financial Secretary to the Treasury, on 12 January 2000.

Introduction

I am delighted to be here at the launch of ART’s Key Loan Fund. As one of the leading local organisations in the country spearheading community re-investment, ART’s progress is a shining example of just how valuable and effective community funding can be.

Modern and decent

Let me first set out our hopes for social enterprises in the context of what this Government is trying to do.

Over the past two and a half years the Government has embarked on the task of building a new Britain which we want to be modern and decent – both of those things at the same time. The key economic priority has been to secure a new stability after decades of boom and bust, and that has been achieved now in a quite remarkable way. That is what enables us to articulate a new optimism about the future.

The Chancellor set out in the November Pre-Budget Report four new ambitions for Britain in the new decade:

• that productivity should rise faster than our major competitors so that we can start to close at last the productivity gap;
• that we should have a greater proportion of the working population in a job than we’ve have ever had before and that we should keep it like that;
• that for the first time over half of school leavers should go on to study for a degree; and
• that over the decade we should halve the number of children living in poverty, on the way to the Prime Minister’s goal of eliminating child poverty altogether in 20 years.

Building on the new stability these are attainable ambitions, consistent with the vision we’ve spelt out. Modern as well as decent. Enterprise and fairness – a creative partnership.

These are great tasks that we want to enlist support for on the way to this modern and decent Britain of the future.

We are determined that Britain should break the closed circle which in the past has too often restricted enterprise only to the fortunate few. We won’t succeed if we waste the potential of a vast swathe of our communities, as tragically has been done far too often over the past 20 years.

Phoenix Fund

As ART’s work demonstrates, locally-rooted partnerships can play a key role in creating an enterprise-for-all culture and tackling the exclusion facing people in disadvantaged areas. The skills of the private sector at its best being applied to some of the problems of our disadvantaged areas at their worst.

That is why, following the Policy Action Team report on social exclusion and enterprise which ART contributed to, Gordon Brown announced a £30 million programme – the Phoenix Fund – to boost enterprise in disadvantaged areas and amongst disadvantaged groups. As he rightly said, our poor communities do not need more benefit offices – they need more businesses creating more jobs.

ART only exists because businesses in deprived communities in Birmingham often find it difficult to assemble all the skills and raise all the capital they need to grow. But its not just a problem in Birmingham. Small businesses, community and voluntary enterprises across the country, often cannot raise the critical amounts of capital they need to start or grow towards achieving their potential.

The Phoenix fund will go some way to addressing this. Work on the fund is at an early stage, but it is likely to include three key elements.

First, support for business. Part of the Phoenix fund will be an enterprise development fund to promote innovative ways of providing support in deprived areas. For example, by looking at how to extend the techniques of business incubation – with managed workspaces and high quality advice on how to run a business located on the same site as others.

There are very few incubators in the UK aimed specifically at supporting disadvantaged communities. This compares to the US where 5 per cent of all incubators are classed as ’empowerment’ incubators to support disadvantaged groups, and many more are used as an integral part of strategies to re-develop communities hit by economic hardship.

Second, the Phoenix Fund will promote Community Finance Initiatives such as ART which can act as a bridge between mainstream institutions and entrepreneurs in deprived communities, through:

• a new national challenge fund for community finance initiatives; and
• access to the Government’s loan guarantee scheme to help them obtain commercial lending.

Third the DTI is putting in place a national mentoring scheme for people looking to start up in business. An experienced business mentor can play a key role in steering a new business to success. By April 2001 DTI aims to have 1,000 business mentors helping around 25,000 existing businesses and business start-ups each year.

Business support

This follows the Policy Action Team conclusion that small businesses in deprived areas often do not have sufficient access to high quality business support, such as advice on business planning, and managing cashflow.

There are lots of agencies and initiatives providing business support to disadvantaged communities. And in many cases they are doing a lot of good work. But we need more sense of a strategic framework into which all this fits. There’s too little sharing of experience at national level, too little sense of what’s important, of what works and what doesn’t. And that means too little scope to deliver a step-change in impact. It’s part of Government’s role to help provide a strategic lead, matched by strong links with local and regional organisations.

That is one reason why the new Small Business Service will be so important  a national agency providing the focal point for small business issues in Government. Within its wider role to promote small business, it will have an explicit remit to promote enterprise in disadvantaged communities.

A more competitive banking sector

Finally, to help promote a competitive and innovative banking sector, the Bank of England has agreed to report regularly on finance for business in deprived groups and communities.

This will build on the work that the Bank has been doing over the past seven years on finance for small firms in general.

Conclusion

As the Prime Minister stated in his New Year message, our goal is to create a nation where fairness and enterprise go together. The choice posed in 20th Century politics between economic competence on the one hand and social justice on the other needs to be consigned to the history books of the last Century, not carried over into this new one.

That is why, building on the measures in the Pre-Budget Report, the Government will be supporting the National Campaign for Enterprise in Spring this year. The campaign will help to create a more entrepreneurial culture across the UK by transforming attitudes, developing skills and encouraging the formation of new and successful enterprises.

Enterprise is vital force against social exclusion. It provides jobs and services in places that lack both – that alone is very important. But it also helps to build self-confidence, independence and pride in the lives of local communities and the individuals who live there.

I’ve seen this from close quarters in my own constituency in East London.

ART’s Key Loan Fund has the potential to achieve a great deal, not only for businesses across Birmingham that obtain funding through it, but also for the individuals and communities touched by the businesses.

I wish ART every success with the Fund. Thank you for the opportunity to join you today.