Roger Trapp: Still too much red tape for small businesses

Early indications are that the optimism that characterised Gordon Brown's Budget last month was reasonably well-placed.

Early indications are that the optimism that characterised Gordon Brown's Budget last month was reasonably well-placed. Research just published by the accountancy firm KPMG and the Economist Intelligence Unit suggests that executives in small and medium-sized companies are markedly more upbeat in the last quarter than they were in the previous one. Moreover these representatives of the so-called engine room of the economy expect a return of "real activity" in the marketplace through mergers and acquisitions, buyouts and other exercises so beloved of corporate financiers at KPMG and elsewhere.

But Mr Brown should not feel too pleased with himself. For all his protestations about promoting enterprise and growth, business people still associate him and his colleagues at the Treasury with taxation, while other government departments are accused of doing little except talk about reducing the burden of regulation and administration.

For Mr Brown's part, the continual preoccupation with tax avoidance does much to reinforce this impression, while the various enterprise incentives that have tended to be a feature of his Budgets look like little more than tinkering. Take research and development (R&D) tax credits as an example. Just 5 per cent of the executives questioned for the KPMG/EIU study said that the R&D system had encouraged them to actually invest more in research and development. A fifth of those polled complained that the system was too complicated, while more than a quarter hadn't even heard of it.

Moreover, complying with regulations and red tape was by far the most prominent concern in the sector (cited by 38 per cent), far ahead of flat market conditions (14 per cent) and skills shortages (14 per cent).

On the matter of skills, however, there is a little brighter news. As reported on this page, the Chancellor has given a boost to a pioneering scheme to address the skills gap in small and medium-sized companies by releasing the funding to allow the expansion of the pilot scheme for the second time, meaning that the Employer Training Pilots programme now covers a third of the country. Having begun in Tyne and Wear, Greater Manchester, Derbyshire, Birmingham and Solihull, Swindon and Wiltshire and Essex, it was expanded last summer to include Berkshire, Kent & Medway, East London, Leicestershire, Shropshire and South Yorkshire. The latest funding means that from this summer it will also take in the whole of the North-east, Lancashire, West Yorkshire, the Black Country, Cambridgeshire and Devon and Cornwall.

But the important thing about this scheme is not the geographical areas covered, nor the numbers of businesses and people covered (nearly 8,000 and 40,000 respectively until the latest expansion); it is the approach taken. In this respect, the Chancellor and his cohorts can be said to be listening to what business - particularly the much-praised but little-assisted middle market - really needs.

At a time when the Government is encouraging thousands of school leavers into college courses that employers do not necessarily value, a part of Whitehall has apparently cottoned on to the fact that employers and employees alike will embrace training if it is relevant to their needs and is accessible. This is not to say that all education should be organised around the market, but when it comes to addressing the skills shortages in industry, it is surely right that the fix is appropriate and direct.

Anybody with any experience of traditional government-sponsored training will be pleasantly surprised by the emphasis on demand rather than supply in the Employer Training Pilot.

One can debate how appropriate it is to use public money not just to subsidise but to incentivise private-sector employers to invest in their long-term futures. One employer I spoke to felt that receiving 150 per cent of an employee's wages as compensation for attending a training course was "over and above" what was required. The point is that initiatives such as this, and that which provided the money for Roffey Park to make available the management expertise that is normally reserved for larger corporations (see box, page 3), could help make Britain much more competitive.

Again, one can argue about the need to encourage people who are already enterprising to invest in an area crucial for their development. But enterprise of this sort from the Government is surely to be encouraged - and it will be a pity if it loses out in another bout of tinkering in a Budget of the future.