The election interview: Matt Hancock
What will the Conservatives do for small businesses if elected? We speak to business and enterprise minister Matt Hancock on policy pledges, scale-ups, and why he feels business should fear Labour
In the past week we’ve heard a great deal about the ‘Coalition of Chaos’ with the Conservatives seeking to strike fear in voters’ minds about the potential influence of the Scottish Nationalist Party (SNP) if Labour opted to join forces to form a government.
Polls appear to suggest the Conservatives may have edged ahead and this week the party published a letter in the Daily Telegraph co-signed by more than 5,000 small businesses supporting the Tories’ promise to finish what it has started.
But, would Britain be more “open for business” with the Conservatives in power? And has the party presided over a term in which its business policies helped you get through a tough recession?
Last week we questioned Labour’s shadow business secretary Chuka Umunna on his party’s plans for business. This week, we speak to Conservative business and enterprise minister Matt Hancock to find out which policies he thinks will win business owners’ hearts and minds, the schemes he believes are working, what the Conservatives can do to support scale-up businesses, and the performance of Local Enterprise Partnerships.
What are the five key policies that will ensure the Conservatives get the small business vote?
On the big picture first of all, I often hear small businesses saying the single most important thing to do is to keep the economy on track. The economy is growing and consumers are getting more confident and that’s the single biggest message. But then, of course, there are huge amounts of detail beneath that.
One area in particular that gets raised is business rates, where we’ve taken action to alleviate the worst problems and we’ll have a review, which is underway to report in 2016, to tackle some of the problems that business rates raises.
The third area that is frequently raised is the need to access talent and the skills agenda, where apprenticeships are clearly playing a part but we’ve got more to do to expand apprenticeships through education.
A fourth would be that some businesses have specific regulatory areas where they want the government to listen to specific concerns. Whether it’s the exact operation of the industrial emissions directive or how some of the food safety policies are implemented, the request is to ensure we have a government that listens to small businesses. And our proposal to continue reducing the burdens on businesses is an important part of that.
And fifth, I’d say there’s an array of very local specific issues where national government can play a role with local authorities too. One that retail businesses often raise is parking. We have a new policy that came in this month of 10 minutes free parking before you can get a parking ticket, just to allow people to pop in to small retail shops and to turn parking fines from a revenue raiser to a deterrent. Although these things are incredibly local because it all depends on exact geography of the retail space it is something central government can help with. The pop-in parking is a classic small change that can have a big difference.
What existing schemes for small businesses do you think have been successful over the past five years and will be retained?
There’s a whole series. SEIS and EIS are as generous as we’re allowed to make them within the laws of the European Union and have been enormously successful in helping people finance small businesses. We continue to push the commission to accept the benefits across the board of having a generous support for people wanting to invest in small enterprises. I’ve no doubt it will be an area where we need to continue to keep up the pressure to make sure it works as well as possible.
The apprenticeship scheme has been incredibly powerful in giving young people opportunity and allowing businesses to get the skills they need and we’re going to expand from two million to three million apprentices over next parliament.
The Start Up Loans scheme has expanded opportunity and we want to treble that over the next parliament to offer 75,000 loans. Some of the government advisory services, whether the UKTI on exports or the Business Growth Service have been successful and need continued support.
Funding for Lending, Growth Vouchers, the Regional Growth Fund, and Export Enterprise Finance Guarantee are examples of schemes that many have criticised. How do you plan to put those areas right?
I’m not sure I accept the analysis in full. For instance, the Regional Growth Fund has been very successful and leveraged significant amounts of private spending and helped in particular to support jobs growth in areas where the necessary reductions in public sector headcount were greatest.
In terms of the export finance support you’ve got to look across the board at the suite of offers from UKTI working with UK Export Finance. Growth Vouchers was a time-limited scheme designed to find out what advice businesses actually use. On its own terms it’s been highly successful.
Part of what we’re trying to do is turn around government schemes to be customer focused and the focus is the small businesses themselves. I come from a small business background and I want these schemes designed to work for small businesses rather than designed to work for the government.
Often that means being super simple rather than fiddly and Growth Vouchers was designed with metrics to learn exactly what it is small businesses use when they themselves are given the cash to pay for advice. We’re analysing how well that worked and what actually happened in order to provide a better advisory offer in the future.
Export figures have not risen in the way you had hoped. What’s the Conservatives’ solution?
The biggest single solution would be to resolve the issues in the Eurozone, which remains our biggest export market. Obviously that’s not entirely in our hands. Our focus has been on ensuring that our offer is as broad as possible to the fastest developing parts of the world too.
For instance, we’ve got a commitment to increase UKTI focus on China where there is not only growth potential in the size of the market but also the share of the market that the UK can take.
We retain the £1 trillion exports target. It is ambitious, but our attitude is that Britain’s future will be determined by our ability to pay our way in the world. There are enormous opportunities around the world so we need to redouble our efforts to seize them.
On immigration, what are you going to do to open the doors to tech talent from outside the EU? Prominent tech entrepreneurs suggest restoring post-study work visas for STEM graduates, making it easier to hire from overseas, and reforming the graduate entrepreneur visa…
We’ve clearly had to deal with a system that had very little control in 2010 and tackle the problems of uncontrolled immigration. We have, over the parliament, focused effort on ensuring people who need to come for good business reasons can find it easier to do so, such as improving the fast-track Chinese visa offer. It’s all got to be done within the constraints to ensure we have a controlled immigration system.
That’s not only to the rest of the world but also part of our proposals to reform the EU as well and tackle freedom of movement to take benefits as opposed to freedom of movement for a job. The manifesto sets out a clear direction and we’ll keep working to ensure that for those who want to do business here we’ll make it possible and easy when they’re coming but within a system that needs to remain in control.
Can you promise anything specifically to respond to tech entrepreneurs’ suggestions?
No, we’ve made the changes that we’ve made and we’re going to stick to them.
Statistics have shown the number of high-growth UK companies with a turnover of more than £2.5m is in slight decline. How will you look to turn more start-ups into scale-ups and what’s your response to Sherry Coutu CBE’s Scaleup Report?
I thought it was a good report that we need to highlight the challenges faced by scale-ups. We feel that in the start-up space we have an excellent offer. In the scale-up space where Britain has traditionally had a financing gap we’ve made progress, but more to do.
Specifically from the government offer, our Help to Grow proposal is aimed precisely at using the government balance sheet to help people get finance in this space. But it’s one of a suite of broader policies. I think over the next decade or so the technological revolution in finance is going to burst open this space.
The use of crowdfunding and fintech is an exciting development. But so too is the breaking open of the enterprise banking market, which had narrowed and narrowed over years and years and has really started to reopen.
We’ve seen 20 new challenger banks get licenses since 2010. Before 2010 there hadn’t been any new banks for 100 years. I can’t imagine any other market that hasn’t had any new entrants for over 100 years. Imagine if fashion hadn’t had any new entrants in 100 years we’d all still be wearing tweed.
I want people to have the choice and there are some really positive developments in that space. Using the British Business Bank by supporting their capital structures and the British Business Bank has also supported some of the fintech pioneers such as Funding Circle.
Direct government schemes such as Help to Grow are important but it’s part of a much wider busting open of the market and I’m guided by this statistic: In America 20% of scale-up capital comes from banks and 80% comes in the form of equity products of one form or another. In the UK it is exactly the other way round.
There is no God given reason 80% of scale-up capital needs to come from bank lending. That is just a matter of history rather than design. I think we would do well as a nation to get that into a better balance.
There is the British Growth Fund (BGF), which is backed by the major banks but is private equity and was designed after the Rowlands Report to fill that equity gap.
That’s right and another area where we want to do more is how very long-term investors like pension funds can more easily invest in equity finance. Given that their asset structures are regulated there’s a clear role for government in freeing them to do so.
On BGF and the backing of the likes of Passion Capital to invest in early stage tech start-ups there is always the question of ROI. Is there anything you can tell me about the success of that backing to equity investment?
It’s always too early to tell isn’t it, but the principle is clear and I think in terms of the numbers we’re so far in the direction of debt rather than equity that a push to rebalance that is justified. But it’s got to be done in a way that is driven by business and commercial judgements.
As a minister I try not to make judgements on individual projects for obvious reasons. It’s far better that I stick to the job of having an eye over the framework and direction rather than getting into individual positions.
It’s now five years since we said goodbye to Business Link. How do you think that’s going? I’m thinking of Local Enterprise Partnerships. Eric Pickles hinted at fewer LEPs with one think tank suggesting further devolution could boost the economy by £144bn, so what can we expect next?
I’m glad that all the major parties support the LEPs as a vehicle for local growth support because a long-term stability in the structures is valuable here. It’s vital that the LEPs remain private sector led. When you have devolved bodies some will always perform better than others.
One of the main indicators of how successful the LEPs have been is how genuinely private sector led they are. One of the reasons they’re so much better value but also more nimble than their predecessor the RDAs is because they’re small, light on bureaucracy, and led by private sector decision makers rather than being overly bureaucratic and trying to replicate government departments in the regions.
In terms of their coverage, Eric was responding to a question of what would happen to a proposal to merge. They were designed to reflect economic geographies but designed from the bottom up rather than imposed from top down. The other change of attitude we’ve tried to instill is that the support LEPs get are negotiated deals. They come to the table with proposals for what’s needed locally. Incredibly important for local intelligence and priorities. And central government has views on making essential services available everywhere where necessary. Then that negotiation takes place and each side challenges the other on value for money and the fit of the proposition being put forward.
Having been involved in the process a couple of times it’s a really positive, collaborative but challenging way to ensure local priorities get supported in way that fits a national strategy.
In terms of transparency and reporting are you going to enforce that at all so that we can all see how money is being spent at a local level?
It’s very important that they’re appropriately transparent in the same way we’ve ensured local councils have to be. After all it’s tax payers’ money involved. There may be sensitivities where it’s not only tax payers’ but commercial funding involved. This is another really important development which LEPs have been really successful at which is leveraging private investment alongside the public.
There are still a million businesses that haven’t started the process of auto-enrolment. What’s the plan for that and will you be prepared to put it back?
There is no backlog. We actively chose to delay auto-enrolment for the smallest companies to learn how the process was working on the ground so small businesses had more time to prepare and so some of the service companies aiding auto-enrolment could get going.
This is a deliberate decision to implement carefully something which has very strong cross-party support and support of most of the business community and will be a very positive long-term change to the pension industry and people that today don’t have pensions but will under auto-enrolment. As the business minister my job is to ensure it goes ahead and is as easy as possible to implement.
I’m glad to say the decision to delay the start for the smallest businesses has led to improvements in how it is delivered. There are now super simple options for companies that want to comply with the law and do so at the minimum cost and bureaucracy.
How will Conservatives encourage more women into business and support female entrepreneurs?
We’re going to support entrepreneurs whether men or women, young, old, gay or straight. First and foremost equality of opportunity is about making opportunity equal. There are of course some targeted policies too. You’ve got to recognise that men and women often – not always – have different responsibilities. We’ll offer 30 hours of free childcare for three and four year olds which will make it easier for mothers returning to work to start their own businesses, reflecting the fact of life, whether right or wrong that mothers typically have primary responsibility for childcare.
Also we’re trying to make sure all the support available is rigorously tested for all audiences. I talked earlier about how we’re trying to make the customer the focus. That involves testing what works for men and women so that both can access government support as easily as each other.
What do you fear most for small businesses if Labour gets in?
The biggest concern I have is that abandoning the plan to turn around the economy, which is clearly working but is not completed, will lead to economic instability. Coming right back to the start the first thing small businesses ask for is for that economic stability to be retained.
I worry about their commitments on spending leading to higher taxes and I worry that there is an anti-business, anti-enterprise rhetoric. And I worry that these would be magnified if the SNP was propping up a Labour administration.
But I have good news because there’s one way to stop this and that’s to vote Conservative on the 7th May.
Finally, what are the three things you’ve found so far that are concerning small businesses most?
Economic security, the need to remain competitive in a global context, and the deep desire to retain and strengthen in this country the environment for and support for enterprise. Those who start their own businesses and take a risk, employ people and create jobs prosperity deserve recognition for what can be an incredibly difficult and lonely task and they deserve that recognition from their politicians and wider society too.