Our 9 point enterprise manifesto for the forgotten millions
This is our bold 9 point manifesto for really getting to grips with one of our most profound social problems: the deep-seated unemployment that pervades so many parts of our country but which remains hidden from view. Long-term unemployment destroys people’s self-confidence, damages their health and eats away at communities. We believe that a concerted focus on supporting businesses to start up and thrive in such areas is the best and most sustainable way to create the One Million Jobs that our most deprived areas need and deserve.
1. Concentrate on the areas where unemployment is most intense; Create Social Enterprise Zones
We believe that the best way to rebuild an area of high unemployment is to work with the people who live there! Areas of high unemployment should be declared Social Enterprise Zones; places where local communities take an active part in attracting new, more targeted investment of energy and money specifically designed to help them create work for the local residents.
Each zone will need a champion – a socially motivated but pragmatic and entrepreneurial person: a social entrepreneur in residence. ‘A person who uses entrepreneurial skills for the primary purpose of resolving difficult social or environmental issues’
The social entrepreneur would actively seek out the countless local people who have answers to some of the problems that they see around them. He/she would help them put their idea into practice whether it be setting up their own business, developing a local youth club or organising a cooperative kitchen.
In this way, we can promote people who know their community well, who can feel and see what needs to be done and can get on and do it. There is no single prescription as to what such areas need. There are only local ideas.
All this local energy needs to be encouraged and supported and we want real action on a number of policy areas: A SEZ would be a place where local & social employers are supported with contracts and investment, where more money is spent and re-spent, and where unemployed people receive genuine support to get work.
The rest of our manifesto sets out how we would make SEZs work.
2. Promote Local & Social Enterprise
Promote & support local people to start their own businesses and social enterprises. We meet people every day who have harboured a business idea for years but who don’t know how to develop it. We believe in supporting and nurturing those ideas. This starts with practical enterprise training and mentoring to help them convert their idea into reality.
Why local or social?
Quite simply local businesses tend to recruit local people. Moreover, if we can help people who are normally discriminated against in the conventional jobs market to become business owners we know that they are much more likely to recruit people like themselves and so break the cycle of discrimination. Local businesses are crucial for helping people with disabilities or who have significant care responsibilities as they struggle with travelling or cannot go too far away from the people they care for. They need local work. Beyond the individual issues that people face there are also substantial structural problems for people on low wages affording the costs of travelling to get work.
The Joseph Rowntree Foundation (JRF) has consistently highlighted travelling as a barrier to work.
“Work-related mobility is largely confined to those with higher skill levels ….. Nationally, those in elementary and personal service occupations have the lowest median travel to work distance (less than three kilometres) while those in professional occupations have the highest (around seven kilometres).”
Commercial businesses tend to locate in areas where profit margins are higher and where investments are likely to make greater returns. They do not invest in areas where crime is high and skill levels are low, and which are less attractive to potential employees from outside the area. Social enterprises, on the other hand, are motivated by precisely those challenges. They are deliberately created to tackle ingrained and difficult social issues. They are not focused on profit maximisation as a sole priority. As a result, they are proven to be much more likely to set up in areas of high unemployment and social need.
3. Make the first year of starting up in an SEZ much less daunting by implementing our “L” plates for start-ups policy
Of all the new things that we do in our lives, setting up a business is perhaps the most alien, exceptional, and complex activity we will embark on.
There is no rule book for starting an enterprise like there is for a new game, and no toleration for the sort of mistakes one would expect from a novice. The new entrepreneur is expected to learn everything immediately. In addition to knowing everything about the business product they plan to make, they need to understand that mysterious thing called the market and how to sell to it. As a new kid on the block they get few discounts on supplies and no credit. And then on top of all these business challenges they’re expected to be fully compliant with all the laws and regulatory requirements in their field of endeavour as well as have the knowledge of the tax-man’s demands and those of Companies House. And if they’re on benefit they also have to navigate a judgemental and inflexible system that will stop payments at the slightest breach of any of its myriad, opaque rules.
Our Entrepreneur “L” plate would create a window of tolerance for first time start-ups, especially in SEZs, that would be designed to support their journey into the world of business.
Essentially, the wannabe business person would register for the L plate and once armed with their registration would get a number of reliefs, discounts and deferments for a determined period (at least one year). With the L plate on, if you stalled at a compliance junction you’d get patient support rather than hostile demands to get off the road.
For instance, Companies House and HMRC could allow an extra 3 months’ grace on production of first accounts and could provide tele-mentoring to L-platers’ on completing the documentation and first tax return etc.
The L plate could also trigger specific one to one guidance and advice on tax and benefit issues with a dedicated advisor. It would be recognised by the Housing Benefit system and a bespoke system of assessment and support could be introduced for them.
The Treasury could even offer a tax relief for L-platers’ first year’s income.
At a local level, business rates, local authority market fees and a wide range of licenses and permissions could be offered at a discount to encourage L-platers’.
The L plate concept could also attract more established businesses – on the basis that if they secure work with a start-up business they are likely to keep working with them for many years to come – they could offer discounts on a whole range of services such as bookkeeping, banking, insurance, premises, IT and IT support, stationery, utilities.
It is even conceivable that L Plate Entrepreneurs could be cost – neutral to the government. Sponsors such as banks and insurance houses are sure to see the tremendous brand benefits of supporting people working hard to do their own thing. Indeed, the government could auction the scheme to business and offer exclusive rights for a set period. Successful bidders would bring all their marketing talents to encourage more people to look at enterprise for the first time.
4. Channel existing money into SEZ
To create jobs in deprived areas local businesses need work.
The public sector spends a considerable amount of money on delivering services. We want Local authorities to split up large contracts for services such as street care, housing and grounds maintenance, etc. and make them more accessible to businesses dedicated to creating local employment for the good of the community.
We also want them to adopt a more strategic approach to the way they spend their money generally. With the right Local Money policies we can double the amount of money spent in deprived areas and increase employment accordingly:
To that end, we want all corporations, local authorities and central government departments to set targets for procuring goods and services from locally run companies that are actively investing in the sort of long-term employment and training approaches necessary to break the cycle of low skills and unemployment. The size of the target would vary depending on the nature of the organisation and the nature of its supply chain. As a starting point, we advocate at least 5% of supply chain procurement contracts be placed with such firms. By way of example, two major hospitals in Cleveland, Ohio are looking to exceed 25% local spend in the next few years.
Furthermore, large organisations should commit to accepting that such suppliers, because they are employing and training ‘hard to reach’ people, have inherently higher costs. This should be reflected in the corporation accepting a reasonable price premium on these services in the first instance. They should then commit to working with the supplier in a proactive way to enable them to reduce their costs over time whilst still achieving the social outcomes. This support could take the form of pro bono managerial, legal and accounting advice. Small businesses would also benefit from technology sharing, marketing support and market development and networking
5. Create affordable workspace across an SEZ
Fundamental to our local jobs strategy is the creation and preservation of suitable workplaces where local and social enterprises can operate. It is important to recognise that most small business ideas are likely to be vocational such as catering or jewellery making or clothes making. The sort of laptop based incubator units will have only limited appeal. We are arguing for a stop to the destruction of local commercial areas under the blanket “permitted development” rules. Instead we want to see the creation of new affordable workplaces designed for micro craft & manufacturing enterprises.
Local groups should be empowered to harness disused local institutional buildings for the community benefit, The local authority could support this process by holding design competitions to find the most effective and desired ways of using such spaces. In order to preserve this capacity for future generations we advocate placing unused public buildings in special trusts dedicated to preserving their employment creation ethos.
6. Reform the Start Up Loans scheme
Create a small grants scheme to help early stage ideas get off the ground.
We do not believe that it is practical or ethical to put people who have very limited resources into debt at the beginning of their attempt to climb out of unemployment. We also believe that most ideas can be effectively demonstrated with a relatively small amount of money – certainly less than £1000.
At an average of £5,000 the Start-up loan scheme is not suitable to people starting up from scratch. A small grant scheme designed to help people get ideas off the ground would make a huge difference to the millions who have ideas but who don’t have the resources to even give them a trial. People who have developed their idea into a sensible business plan should be eligible for the small grant to get the idea into practice. It would enable them to buy the raw materials to make a few products or develop a trial service that they could offer locally. It would cover the costs of getting a market pitch and basic insurance etc. If their idea was successful and they got trading regularly they would then be able to go to apply for a full start-up loan.
7. Create hundreds of Local banks
To be successful local firms need access to responsive finance from banks that understand their locality. For small start-ups the current banking structure fails on both fronts. We want to open up the market to significantly more competition. At a time when even long established small businesses can’t secure a bank loan we surely need a local bank revolution. We need to create new sources of local finance that value relationships and foster local networks. Banks could and should be at the heart of communities. They have the ability to bring clients together and broker trade and other deals. We should be aiming to create many more “uber-local” banks such as the “Bank on Dave”, Burnley Savings and Loans Company. Banks like this will help to lock in local money by accepting people’s savings which can then be re-invested in the community.
We don’t want 4 or even 8 banks in the country we want to see more like 400 – one for every area!
8. Reform welfare to work system – support employers directly
Unemployed people learn faster on the job than in “training schemes”. To help employers in SEZ’s to train people themselves they should receive a direct payment from the Department of Work and Pensions (DWP) without a middle man or intermediary
Under the Work Programme, “intermediaries” receive between £4,000 and £14,000 to find people jobs, depending on how difficult they are to place. They tend to prefer training delivered off-site, in a generic fashion away from the pressures and immediacy of work, which in our experience is an ineffective, frustrating diversion.
As a result of their involvement relatively few people are given genuine work experience. Worse still, most of the charities and social enterprises doing the real work of training hard to employ people receive a tiny fraction of the placement fee.
The front-line employing organisations could do so much more for the trainees if they received appropriate funding to provide on-the-job training. In this way both the employing organisation and the employee would get much more from the arrangement. We say, dump the intermediaries.
The Future Jobs Fund (FJF) programme demonstrated that it was possible to operate a large, competitive scheme whereby relatively small businesses and social enterprises could receive payments directly from the DWP. This meant that they received the full amount for each trainee without an intermediary taking a percentage. This covered the costs for the extra supervision involved in working with inexperienced, unemployed people. It also meant that each enterprise was responsible for identifying the specific needs of the trainee and was able to cover the costs of any remedial training they required. Specialist trainers in literacy and numeracy as well vocational NVQs could be brought in to support trainees on an individual needs basis.
9. Impose a levy on job destruction
We’ve saved our most controversial idea for last. We want to place a levy on job destruction in order to fund more job creation
An average 2/3rds of a million people are laid off every year in the UK. To fund new businesses prepared to start up in very challenging environments we want to see a levy on firms making people redundant. The majority of funds raised by the levy should be focused on creating jobs in the SEZs and other designated areas of high unemployment
The Labour Force Survey (LFS) has recorded data on redundancies since 1995. Over that period an average of 164,000 people have been made redundant every quarter. This equates to more than 650,000 people laid off per year. What is most striking about this graph is that, apart from the terrible peak in the immediate aftermath of the collapse of Lehman Bros in September 2008, the level of redundancies stays remarkably consistent. No matter where we are in the economic cycle, large numbers of people are made redundant every year. When one considers the wider circle of families and friends who are affected when someone is made redundant, these numbers clearly represent a lot of pain and anguish for millions of people. The consistency of the redundancy data through good years and bad suggests that one of the benefits of a redundancy levy is that it will provide the long-term funding to underpin the sort of patient, long-term entrepreneurial business model we feel with best tackle structural unemployment.
At a very affordable rate of £1,000 per person, the total raised by the redundancy levy would be £650 million per year. This would kick start a phenomenal amount of new job creation.
by Colin Crooks
Founder and CEO of Tree Shepherd