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Small firms agency under attack. By Dan Martin

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24th May 2006
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The government is unable to assess whether its £2.6 billion budget for funding the flagship Small Business Service (SBS) has been well-spent, a damning report has concluded.

The study by the National Audit Office (NAO) concluded that due to poor communication across government and no systematic approach to setting priorities, the Department of Trade and Industry is unable to say whether the SBS is properly achieving its objectives to boost UK enterprise.

The NAO claimed that the SBS - which is supposed to lead the charge against small business deregulation - lacks influence in Whitehall to slash red tape or prevent the introduction of potentially harmful new rules. Six of the 11 government departments questioned were unable to say how or if the SBS had impacted on deregulatory initiatives.

The report also criticised the flagship Small Firms Loan Guarantee Scheme, aimed at helping small businesses which face a brick wall when attempting to secure funding.

NAO said although the initiative has assisted 5,800 companies during the past year, the default loan rate is almost nine times that of commercial lenders. It claimed there was also evidence to suggest competitors are being damaged by the scheme.

"When an organisation has to resort to using taxpayers money to demonstrate its effectiveness that is the time to question whether it should continue."

David Frost, British Chambers of Commerce

In addition, the plethora of different small business support schemes came under attack. There are currently more than 3,000 available which NAO said adds to difficulties with planning and assessing cost-effectiveness.

Sir Digby Jones, director general of the Confederation of British Industry (CBI), claimed his organisation's own analysis of the SBS's performance showed it had failed to meet most of its targets.

"The government set the objective of making the UK the best place in the world to start and grow a business," he said. "But that can never happen until the SBS improves its performance and the rest of government takes the needs of small and growing business more seriously."

David Frost, from the British Chambers of Commerce, was also vocal in his criticism.

"When an organisation has to resort to using taxpayers money to demonstrate its effectiveness that is the time to question whether it should continue," he said.

"It is also of deep concern that in the light of an increasing burden on businesses from regulation and red tape amounting to over £50bn since 1998 the instruments the SBS uses to measure the regulatory burden on small businesses are still incomplete."

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