Notes on the Front

Obviously Kitty has read one too many missives from ISME and IBEC about how small Irish enterprises would be world champions were it not for high taxes, high wages, over-regulation, public sector workers, trade union, environmentalists, whatever else you’re having. I’m not in any way condoning Kitty’s actions but I have sympathy: what’s a body, whether two-legged or four, to do when the dogs of neo-liberalism keep howling outside your door?

The Left and small enterprises have history, most of it not good. The latest skirmish has been ICTU’s well-founded opposition to the operation of the Business Expansion and Seed Capital Schemes. The small enterprise lobby counters with attacks on public sector workers, high government expenditure and ‘interference’. While there are sections of the Left who still hanker after the co-option of ‘small business’ into a progressive politics (e.g. the anti-monopoly alliance), this rarely goes beyond the level of rhetoric.

This ongoing battle is unfortunate since it is only the Left that can actually champion the policies needed to grow and sustain small enterprise. This may seem curious at first – given the stranglehold that the Right has over issues of enterprise and competition – but let’s get down to the nuts and bolts.

To create a strong indigenous enterprise base we will have to find new ways of growing and sustaining small enterprises. In the private sector, there are more people working in small units (employing less than 50 people) than larger ones, though most of these – 70% – are sole traders while nearly 45% are involved in the largely non-internationally traded sectors of construction and wholesale/retail. Another problem is size: more than 2/3 of small enterprises have nine employees or less. This is not the ideal platform from which to launch a strong, innovative and potentially export-oriented sector.

To address these issues the Small Business Forum released a report last year: Small Business is Big Business. Its findings were both challenging and surprising.

First, it didn’t wail on about wages and labour costs. It hardly mentioned them at all. It didn’t complain about tax levels. How could they? We have one of the lowest corporate and payroll tax regimes in Europe and income taxes are low relative to the EU average. They do mention local authority charges and regulation, which I will return to below.

The issues that arose revolve around three broad headings:

• The lack of managerial competence
• The inability to access finance, ICT and innovation capital
• The lack of a co-ordinating regime by which small businesses can be organised

At each stage the report calls on the resources of the state – whether it’s increased public expenditure, new state bodies or agencies, or more effective co-ordination/planning to bring current and future initiatives together. In other words, without explicitly stating it, it calls for more state intervention to start-up, grow and sustain small businesses.

The Right is not comfortable with this. The Left should be. We are the ones who should be addressing these needs because we have no hang-ups regarding greater state involvement. Indeed, it is only through greater corporate organisation and social partnership (real partnership at the local level) that we can begin to build highly productive, outward looking enterprises. Let’s take some examples:

‘. . . the level of general management skills in small businesses is relatively poor, particularly in specific functional skills such as human resources, marketing and finance and in forward planning and strategic management … small firms engage in management training and development only to a very limited extent . . .’

This leads to a call for a new Management Development Council to supply appropriate training programmes to be undertaken by the Department of Enterprise.

‘Very few small businesses have the resources or the expertise to engage in R&D . . . a number of companies have some in-house (innovation) capacity, but not sufficient to engage in formal R&D activity.’

This results in proposals for Innovation Vouchers and Knowledge Acquisition Grants to be provided by the Department of Enterprise, Enterprise Ireland and City/County Development Boards.

‘. . . the low uptake and limited use of ICT by small businesses is due to low level of awareness of the benefits presented by the technology . . . ‘

The leads to the idea of a subsidised ICT audit scheme for small businesses.

You get the idea. At each stage the problem is resolved by recourse to public resources. But does the forum go far enough? Probably not. It is still based on the idea of ‘provide them with support and they will come’. It’s not that easy. For many small enterprises, struggling to keep afloat, there simply isn’t the time or resources to exploit the benefits that some of these programmes can offer. So we could go further.

For instance, back in 1999 the Labour Party proposed the following

‘Apart from premises and access to finance, assistance with bookkeeping and financial management has been identified as being important to the survival of small businesses.  (Therefore)  linked to each Local Employment Service, Partnership Office or Enterprise Board, there should be a unit which offers a range of supports to small businesses. Such supports would include assistance with bookkeeping, tax returns, administration and legal advice. Each unit should also offer use of computer facilities on a limited basis. In non-LES areas such a unit should be linked to the County Enterprise Board.’

This was in the context of disadvantaged areas.  But let’s run with this: Much of this day-to-day work, easily dispatched by larger enterprises, is burdensome for the small sectors. So why not introduce an integrated programme with a state agency providing this assistance to all small enterprises on a subsidised fee based on ability-to-pay? This would be based on co-operative ventures sharing these costs between a number of enterprises in order to reduce the individual burden.

Take it one step further. A co-operative venture could provide marketing, R&D and market intelligence resources (something beyond most small enterprises). It could even provide every agency-assisted enterprise with their own website – designed and maintained by the co-operative venture. These programmes could be ideally operated through expanded and invigorated City/County Development Boards – the Cinderella of business support agencies.

The key thing in all this is to identify the real workplace obstacles small enterprise face, and start thinking outside the proverbial box, with agencies at local levels delivering the service in partnership with a number of stakeholders, including employees and trade unions. Of course this would require a quid-pro-quo – based on a new contract – involving, among other things, best labour and environmental practice. But this new give-and-take could drive home the point – success is based on expanding and developing, not exploiting and racing to the bottom.

So what about the new bugbears of the Right – regulation and local authority charges? The National Competitiveness Council knocks the ‘over-regulated regime’ on the head. Ireland, on a range of measurements from labour, product and compliance costs, ranks as one of the least regulated countries in the OECD:

‘The WEF (World Economic Forum) survey data suggests that the level of regulation on Irish enterprises is low relative to many of the other countries benchmarked . . . According to IMD survey, labour market regulations are not believed to have a significant impact on business activities.’.

This doesn’t mean we should dismiss this issue. The Small Business Forum has some non-contentious proposals (allowing new regulations to come into effect on only two dates each year to facilitate small businesses keeping track of regulatory change). However, the main problem with the small enterprise sector is not ‘too much state’ but ‘not enough’.

The second issue is local authority charges. I’ll leave it to business groups to bemoan how oppressed they are. But there is little doubt that local authority financing is ever more reliant on arbitrary service charging (understandable given the deplorably few local revenue raising powers). This issue cuts across business and households. So after ICTU and business groups finish knocking heads over BES, they could sit down and draw up an agreed set of proposals on local authority financing – one which could satisfy not only both their constituencies, but fulfil the need for a vibrant local government sector.

There is much to be gained in all of this. For small enterprises, new thinking and new allies. For the Left, a new constituency and a new perspective on enterprise strategy and wealth creation. People can assess the viability of this new rapprochement for themselves. For me, it all comes back to Kitty. Rather than take up arms against a street of troubles, it should be doing what it was always meant to – playing with string.

Kitty would be grateful.