John Walker introduced Small Business Minister, Lord Davies CBE.

He said that the CBE was awarded to Lord Davies in June 2002 for his services to the financial sector. Lord Davies was Chairman of Standard Chartered Bank between 2006 and 2009. In 2009 he became 2009 Government Minister.

John Walker invited Lord Davies to address the conference on the small business surgery.

Lord Davies said that speaking after Mandelson was difficult. He reported back about the session this morning and what his responses were on a couple of issues:

1) Access to finance and the Enterprise Finance Guarantee:

The question is: are the banks doing enough? Are we doing enough? The Government has intervened through EFG and the scrappage scheme. We have to keep the pressure on the banks, he said. He would say it is now easier than it was to get access to finance, although it is still not ideal. He explained that the reaction of the banks in the first stage of the crisis was paralysis. Now that we are in the recovery stage, we have to make sure the banks are there to give access to finance to small businesses. The real test is whether the banks are there for small businesses or not. It is vital that the Government continuous to talk with the banks to help businesses, for example with invoice discounting and trade finance.

2) How do we get an enterprise spirit in the UK?
Lord Davies addressed the following challenges in this regard:
In the UK there is a social stigma related to failure. We have no tolerance to failure like there is in the US. In the UK failure is not acceptable. This mentality needs to change.

Secondly, he said we need more women in enterprise. To have more women in businesses, we need to start with the big companies. They should have more women on their boards. Here we also need a change in culture. It is proven that if we had the same percentage of women in businesses, this would deliver £42bn to the UK economy.

Thirdly, Lord Davies said we have to showcase British success. Diversity of businesses is extraordinary in the UK and is a great strength for the economy. Success breeds success. We have to talk up and showcase these successes.

Fourth, the UK is a trading nation and the 6th largest manufacturing nation. Therefore, we need language skills so that small businesses can export their way out of the recession. He said we have to help small businesses to benefit from the huge potential that the world market offers to them. Just because English is the world's business language doesn't mean that small businesses cannot put other languages on their websites.

Last, he asked if Britain is an engineering force? Or a manufacturing force? Yes, it is. We are leader in IT, mobile industry, renewable energies and we have very advanced creative industries. However, we have to encourage young people to become engineers.

3) Procurement
The Government spends £220bn on public contracts. Therefore it is important that the Government makes the paperwork easier for small businesses and gears procurement more toward them. The Government will implement the recommendations of the Glover report and will devise a scheme whereby small businesses will get trained to tender for public procurement contracts.

4) Administrative burdens
Finally, he said that the Government continuously needs to have a drive to reduce the bureaucracy so that the cumulative effect of all legislation does not smother small businesses.  The Government needs to make sure that we save the £3bn through adequate measures that reduce administrative burden. Access to finance and the reduction of the burden of paper work are the two most important problems for small businesses.

John Walker invited members to ask questions to the Small Business Minister.

Tony Baron, Pembrokeshire branch, asked when the Government will stop talking to banks and start telling them what to do? The spreads between what the costs are for the banks and what the lending costs are for small businesses are scandalous. Lord Davies answered that the Government has taken several actions, for example setting lending targets that are geared to lending to the market. We are putting pressure on the banks but banks are independent and confidence has been fragile. He acknowledged that small businesses have been repaying loans rather than taking them out but he stressed that is now significantly better than it was, although still not perfect. The banks will need to hold more capital and liquidity and the industry needs to change across the world. He invited members to come to him with individual cases. He finished by saying that the Government is meeting with the banks on a continuous basis.

A member asked if something will be done about the unfair treatment of honest businesses by HMRC. Lord Davies replied that Inland Revenue had an agreement with small businesses to defer taxes. This has had a huge impact on the British economy. HMRC has also become much more pragmatic in helping small businesses. Over 100,000 businesses had their taxes referred.

Another member asked that if small businesses are the lifeblood of the economy, what is being done to help business start up, particularly in the rural economies? Lord Davies answered that there are two things that we need to do: we need to realise the low carbon and digital economy. Therefore, the digital economy bill is so important. Approximately 60       percent of small businesses started from home, mostly with money from friends and family. He said that if we wanted to be able to compete with the world, access to broadband is vital. Secondly, support schemes should not just be geared to big cities but should also be used to encourage enterprises in the rural areas.  Lord Davies stressed that RDAs have a pivotal role in this.
 
Bill Knox said that the FSB Tax Committee was shocked about the new penalties and the amount of paper work that taxes produce. Again, Lord Davies replied that the tax deferral had a profound impact on the UK economy. For a more detailed answer he said that he needed to investigate more.

Anne Taylor, South Bucks and Aylesbury asked how Lord Davies intended to encourage women to start a business. He answered that we have not enough female role models yet. The Government has a task force to encourage more women. Also banks need to think more about female entrepreneurship. The RDAs will run an ambassadors programme and the Government will implement 14 recommendations of the task force.  For example, he said that the Government has to reach out to the 18-25 age group, and visit schools and universities.

Finally, female entrepreneurship should also happen through big companies. He stressed we need more women in the top table and that he would personally name and shame companies that don't have a woman on their board. Other countries have quota. Lord Davies said that this was not the way to do it and that your board should be reflective of your workforce. He found it very important to create a hall of fame for women who have been successful.

John Walker concluded the session and said that the reality on the ground is often very different from policy intentions. Lord Davies replied that he needs facts and specific examples, individual cases, and invited FSB members to email him.