Enterprise and Small Business Principles

Forms of government action for small business

There is a variety of ways in which government can seek to help small business. It is possible to distinguish these between the underlying policy aims, the policy method and the targeting.

The underlying aims of government support can be distinguished between three broad approaches:

■ Cost reduction - The use of grants, subsidies or reduced-rate loans to reduce the cost of inputs into the business. These can be targeted (e. g. a grant to a specific busi­ness) or general (e. g. to reduce energy costs, to reduce general taxation or to reduce labour costs by government finance to improve the general level of education and training).

■ Risk reduction - The use of macro-economic policies (such as taxation, interest rates and other instruments) to stabilise the economy and reduce oscillations and un­certainties. Government’s regulatory environment itself is a key contribution to the level of risk small businesses experience.

■ Increase the flow of information - To make information more readily available on international trends in markets, national and local issues, and on government pol­icies that affect small businesses. This can be via targeted supports (and information services) or general publicity.

The methods of government support cover four broad fields namely:

■ finance (grants and subsidies; cost effects of taxation and compliance)

■ providing information

■ providing specialist advice

■ helping with training and personnel development.

Targeting can focus on:

■ stages of business development including idea formation/entrepreneurship, start-up, early growth, development and expansion;

■ types of business, by firm size, exporters/non-exporters, by sector, by location (e. g. rural, inner city, community-based, ethnic minority);

■ factor inputs and resources, including capital, land and premises, personnel and skills and innovation/technology transfer;

■ general business climate such as culture of entrepreneurialism and workplace ethics, regulatory environment and the macro-economic environment.

These are only examples of a large, complex and overlapping field of possible instru­ments that government can implement in its desire to help small business. To help understand how these instruments have developed in practice, the next section sum­marises the main initiatives in the UK at three levels: national, sector and local.