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New Enterprise Allowance or New Enterprise Alliance?


Another government, another push for another 10 000 small businesses to be created from the ranks of the long term unemployed.

To me it seems similar to what we already have under the Flexible New Deal, unless I am missing something: it may be a tad better resourced.  But, I am encouraged that Iain Duncan Smith appears to have a real commitment to social justice, at least, he chairs the cabinet committee on it.   Let’s hope that his commitment to social justice rather than newspaper headlines really shapes this New Enterprise Allowance.

So what are the chances of success for the New Enterprise Allowance, and what might be the pitfalls?

To begin with, although I am a big fan of mentoring, I am not convinced that it is the best way to support people with transitions from unemployment to self employment.  The best mentors (as opposed to coaches) have ‘been there, done that, seen the film and got the t-shirt’.  They can offer sage advice and guidance based on practical experience (usually gained over many years in a specific and relevant industry, and importantly should be chosen by the mentee and not assigned to them by a service provider); Mentors should know what it takes and be available to put in the time and commitment necessary.  Let’s also hope that they are properly trained, supported and supervised in the process of mentoring.  And mentoring should not be a mandatory component but an option, we have to recognise that folks learn in different ways and for some the thought of being mentored just does not cut it.

So, if we must have a mentoring programme let us run it well.  Lets take mentoring seriously.  Let’s make sure that we have enough well trained mentors.  Personally I doubt that we will.  More likely we will find an army of middle managers looking to do some CSR, or rebadge existing enterprise advisers as New Enterprise Allowance Mentors.  Plus ça change…probably

I think the enterprise coaching role is, in places where it has not been confused with enterprise evangelism, much more likely to be effective.  Non directive, facilitated conversations that give people space to develop their options and make their own choices provides a sustainable route to more enterprising communities.  Conversations that don’t use ‘benefits’ and ‘enterprise’ as carrots and sticks to manipulate people to meet government targets and trigger payments by ‘results’.  Our industry is riddled with such practice.  We need conversations that respect people and their right to choose.

I suspect that mentors will work with mentees primarily on ‘the business plan’.  I doubt they will have the coaching skills to really work on developing the person rather than their idea.

Will a decision not to start up be valued and rewarded as highly as a decision to start?  I hope so.

Will the New Enterprise Allowance engage ‘the community’ in supporting local people struggling to make the transition to self employment?  No sign of community panels and networks to support the formal delivery structures.  It is not so much a New Enterprise Allowance that we need in our communities as a New Enterprise Alliance….

Will the scheme be designed to encourage the formation of team based start-ups where complimentary skill sets and personalities ensure that all functions in the business are adequately covered?  I doubt it.  It will, if history is our guide, take the shortest, lowest cost, route from benefits to self-employment, not the route that is most likely to result in a sustainable business with the potential to grow.  While we should be looking to maximise return on investment I suspect we will look to minimise investment.  Cost per start-up will be the metric of choice.  And the sooner we get the better.

The New Enterprise Allowance will be for long term unemployed who ‘want’ to start a business.   Finding the people who really WANT to will be an enormous challenge.  Personally I don’t think it is anywhere near enough for someone to want to start a business.  It needs to be something that they HAVE to if they are to have a decent chance of success.

We have approaching 800 000 people who have been unemployed for more than 6 months.  The New Enterprise Allowance hopes to help 10 000 of them to start a business this year, that is just over 4 in every 500.

  • But which 4?
  • What percentage of the 800 000 will wish to engage with the programme?
  • How many will the delivery mechanism engage with at the start of the process?
  • How many of those will make it through to trading?
  • What positive outcomes will be delivered to those that engage with the programme but decide not to start a business?

This represents a challenge.  To help find the few who really will do the groundwork required and learn what needs to be learned.  It is a challenge both for marketing the scheme and effective psychological contracting between service provider and service user..

And the whole scheme reeks of yet more ‘fast enterprise’.  A couple of mentoring sessions and three half days with a training company and you will be ready to roll.  Well maybe. And maybe not.  Where these sorts of schemes prevail they prioritise the most capable and even then have frightening business failure and loan default rates.  Good business start ups plan and prepare carefully.  They don’t rush it.  There is little point in starting 10 000 new businesses in a year if the survival rates are not good.  And please this time will someone show an interest in survival rates?

Then there is the cash element.  In the transcript of his speech on Conservative Home, IDS is reported as saying:

We will provide business mentoring and a financial package worth up to £2000 to get your business up and running.

Now quite what is meant by ‘a financial package worth up to £2000’ remains to be seen.  Cash grant?  Loan?  Benefits?  But clearly in this transcript it is £2000 in addition to the mentoring provided.

But can anyone explain to me the why the magical figure of £2000?  How about we teach them to access the finance that they need to give their business a well capitalised start?   Whether that is £5 or £5m?  If we are serious about teaching people how to run a small business let’s not cap ambition according to the size of our currently cash strapped treasury pockets.

So at first glance it looks to me like wrong pedagogy, wrong curriculum, wrong ‘financial’ package, wrong pace of change and a failure to embed enterprise culture in the community.  Apart from that all systems are go.  I can already hear the usual suspects sharpening their pencils in anticipation of the invitations to tender.

I hope it is me that is wrong….

What do you think?

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  1. October 6, 2010 at 9:48 am

    What do I think Mike? That you are probably about right. You’ve been there done that and seen it all happen before. As a wise old ex Enterprise Agency CEO said to me ‘in 20 years of doing this, I’ll see the same things come and go time and time again’. I can’t imagine that this will be anything different. What IDS fails to see is that working with the long term unemployed is a long term investment and probably THE most difficult group to get into business start up. The dangle of the £2k package may help – especially if it is cash.

    I think your idealistic choose a mentor and coach scenario will be impossible to achieve and it will, as ever be allocated by post code, not by appropriateness. Assuming (I’ve not heard anything more on the New Enterprise Allowance – surprising considering the field I work in), that it will be gov employess (in a round about way) that will deliver the start up mentoring/business plan writing support so they can access their £2k support.

    Is there any mention of sustainability? Peer to peer support groups? I would imagine sustainability will be based on a phone call 6 months after ‘start up’ so that the provider can then draw down their funds for having started a sustainable business. I’m guessing good luck to the long term unemployed person beyond this date. At best they will be able to get their support from a website during the most critical part of running their business. Those who started their business years ago and are ‘growth’ will be able to access face to face support from a business adviser for free. Perhaps these businesses will then be able to provide jobs for the long term unemployed who have had the wind knocked out of them again because their business has now failed and they may have to repay the possible £2k loan?

    4 in 500 – that is a massive ask. That is a lot of jobs to create let alone for people to create for themselves. if each of those people came totally off benefits, they will need to earn (in the South East) around a minimum of £18,000 pa from this business. That is £180 million of profit – turnover somewhat higher. £50 milllion (ish) going back into the gov through tax plus same again on benefits saving? (unless they all just transfer onto working tax credits – a thinly disguised benefit). It IS going to be a tough ask – unless they can commit say 20% of potential savings and tax revenue to run a programme of this type, making sure that they liaise with leading thought providers and knowlegde providers in this area, as well as the long term unemployed and communities that they are part of. This will make sure that they are going to put together the right programme for the right people to achieve the right outputs for them – not for the politicans, not for the papers, but for the people.

    Do 4 in 500 long term unemployed people want to (have to?) start their own business? Is there empirical evidence to support this?

    Enough of my cynicism – what are we going to do about it? Set up our own social enterprises that address these issues? (Which is perhaps what the gov want – big lottery to pay for it? Benevolent big business? Philanphropists? or make it commercial? Big Society will help) Write to IDS and tell him what we think? Offer to set up a ‘community’ panel to advise/discuss with ministers on what really happens on the ground and what, from experience, they should be considering when annoucing these schemes?

    I’m sure my long term unemployed clients will soon be asking for the £2000 grants to start their business. They often lead a hand to mouth existence – who can blame them if someone says there may be £2k available for them to ‘start a business’.

    Now I’ve ranted I’ll go and read up more on the ‘New Enterprise Allowance’

  2. October 11, 2010 at 2:39 pm

    Mike, thought provoking, ambitious but mainly wrong.

    This is a government funded programme designed initially to get around 8,000 of the 10,000 into sustainable self employment as a pilot , which will hopefully justify further funds being spent in this way.

    It is not a community programme. New Deal for Communities and Neighbourhood Renewal programmes under the last government were of mixed and limited success, so far as I can see.

    To be supportive, I too am a big fan of mentoring, and agree that for the longterm unemployed a special breed of mentors is needed and the client should certainly be able to choose their mentor and change their mentor.

    The Mentors need to be properly trained, supported and supervised and this is likely to eat up some of the £2,000 of funding.

    I also agree that mentoring should not be mandatory.

    As a model, the New Entrepreneur Scholarship scheme seemed to achieve successful outcomes for clients and might be used as the foundation.

    The scheme is likely to work best from using trained volunteers alongside paid advisers as mentors.

    £2,000 is not much of a budget and may even have to include the cost of the mentoring, as I read the IDS statement differently.

    Again it would be helpful if some EFS or similar money could be used alongside this scheme to further support the same people.

    I am inteested to know more about the cost of the enterprise coaching schemes you have in mind and any evidence of the results they have generated.

    With the slightly new proposed scheme, I would like there to be bonuses for both the client and the provider of the support for sustained self employment or rather non-return to benefits.The benefit payments saved should be shared between the government, client and provider for 5 years from the time the person comes off benefit.

    I agree with you that a decision not to start up should be valued and rewarded as highly as a decision to start. In the past the failure of schemes to do this has lead to many businesses being started that had little hope of succeeding and when they went down brought others down with them through leaving bad debts.

    Team starts should be encouraged and self-employment plus part time work as an employee should also be promoted.

    The scheme is not designed to engage ‘the community’ in supporting local people struggling to make the transition to self employment, nor in my view, should it.

    If I understnd it correctly, your New Enterprise Alliance is a very different animal. It would be massively more costly and perhaps something that might be financed by a benevolent Dragon (or footballer) rather than the state.

    I am not convinced your model would maximise return on investment.

    I see the new scheme as a welcome step in the right direction.

    In answer to Gareth I think there is evidence that around 10% of the unemployed could benefit from the scheme.

    I believe The New Enterprise Allowance will be for both the recently unemployed and the long term unemployed who ‘want’ to start a business and yes finding the people who really WANT to will be an enormous challenge. I agree it is nowwhere near enough for someone to want to start a business. They must be committed to being their own boss and ready to accept a period of hybrid employment being self-employed and an employee.

    Those who break through and develop a business, taking on employees, should be exempt from most employment legislation until they employ more than 5 people and should also receive part of the benefit saving when they take on an unemployed person to work with them.

    I see no problem with prioritising the most capable and while there is something to be said for planning and preparing carefully, business success is generally less about planning and more about passion and perseverance combined with adaptibility.

    I think I can explain why the magical figure of £2000, it’s because it’s the minimum payment needed to give the scheme an even chance of success, including a small loan, where this is likely to be decisive for success.

    I don’t think we are putting a cap on ambition with this scheme, most expansion comes from re-invested profits.

    Surely this is a start and better than nothing?

    So at first glance it looks to me like wrong pedagogy, wrong curriculum, wrong ‘financial’ package, wrong pace of change and a failure to embed enterprise culture in the community. Apart from that all systems are go. I can already hear the usual suspects sharpening their pencils in anticipation of the invitations to tender.

    I hope it is me that is wrong….

    • October 11, 2010 at 8:44 pm

      Considering that I have go this ‘mainly wrong’ there is a heck of a lot you agree with Albert!

      In fact I am not sure quite what it is that I have got wrong in your opinion.

      It is not a community programme and that is one of its many problems. You see, just like it takes a village to raise a child, it takes a community to support its entrepreneurs.

      The development of the community and teaching it how to support local people with talent and passion is arguably more important than making available advisers, mentors, grants and web sites.

  3. Norman
    October 11, 2010 at 9:09 pm

    I’ll keep it brief:
    “It takes a community to support its entrepreneurs”
    Paces Campus in High Green was set up to be just such a community of supports. I use the word “community” in the sense of interconnectedness (borrowed from Abundant Communities, note MIke!). We have been finding our way – with not a lot of external interest or funding for the model and against some downright opposition. Its strength is the “talent and passion” of its people, mostly ordinary people scraping together resources and finance, pursuing their own demons, running their own enterprises (private and social) and charities. One day I ought – with others – to write the story. A missing chapter would be just the sort of “development of the community and teaching it how to support local people” that you advocate, Mike. Maybe it’s not too late?

  4. October 11, 2010 at 9:21 pm

    After-thought: here’s the website if I’m permitted to post it. http://www.pacescampus.co.uk

  5. David Palmer
    October 12, 2010 at 1:54 pm

    I am one of the great unwashed benefit claimers, I am not getting anywhere finding a job or contract and I want to start my own business..

    The obvious risk is losing my benefit, I do not get JSA as but I am totally dependant on other benefits. Note that unlike press reports these are not cumulative, so if we get child tax credits or carers allowance for our disabled child they deduct 85% of it. They also only pay 75% of our rent despite our rent not having increased for 8 years. I used to earn up to 10k a month, so I used all my savings and a considerable amount of credit card debt before claiming benefits. I am already in huge debt and because the benefits do not cover the most basic living expense I am sinking further into debt.

    Anyway, last week I asked about a previous programme where they paid £1000 in two £500 instalments to the employer which would be my own limited company. I was told it has been scrapped as had the £300 discretionary allowance.

    To be honest I do not need mentoring, what I need is financial support to get up and running. Business Link offers various options for grants but these all require you to spend your own money. So it seems to me that this is where the £2k should be applied. This would allow me a 100% rebate on spending on branding, marketing and setup costs. I do not need an office (although if I could get office rent repaid it would be helpful for networking) , I will work from home, I am using VoIP to give myself a business line and I can route this to my mobile. I also have the web setup but it will be a long stretch before I can afford PPC so I will depend on my own SEO.

    The other area of support I need is some tax break, perhaps for the first 24 months. Right now for every £100 net I might earn I will have £85 deducted from my housing benefit. My feeling is that I will need to invest every penny I earn back into the business; I will not pay myself anything until I can pay the gross equivalent of what I get on benefits.

    Before I heard of this allowance my plan was to work the 15 hours a week I am allowed to work, but this week my “new deal” advisor has told me I have to attend something that in her words “is a complete waste of time for someone of your age and skills”. She said it is designed to push people off the long term unemployed register. It seems I have to attend this for 30 hours a week for 13 weeks. This would leave me no time to develop my business, because they do not refund my petrol or parking expenses but will refund my bus fares. This adds two hours a day.

    I can see how this programme might help some of the unemployed, but I am not even getting JSA so my only option is to sign off as I do not want to lose the momentum of all the work I have done so far. I have been told this programme is going to be scrapped and replaced by something else but they have not decided what yet so it is still on.

    So signing off means I will not be able to get the £2k which I gather was for “certain” parts of the country. All of this just makes me bitter towards the Government, it is better not to promise anything than to promise something that is virtually impossible to get.

  6. November 7, 2010 at 12:46 pm

    In the early 1990s I scripted and directed a series of video films explaining and promoting the Enterprise Allowance Scheme. Regional versions of the films featured the stories of many successful businesses started by people who had previously been unemployed. My videos were shown at Job Centres throughout the country. I believe the scheme was a great way to encourage and assist self-employment as a viable alternative to unemployment.

  7. gary monaghan
    November 19, 2010 at 11:50 am

    The numbers don’t add-up.
    Margaret Thatcher, 1983- £40 per week Ent. Allow. Scheme for one year=2K. Dole was around £25.
    Tracey Emin, Julian Superdry, Alan Creation Records all joined and did well.
    2010/11- IDS/Lord Young etc 2K(dole payments for 6 months?), current dole £65.
    There is no incentive for the long-term unemployed to take a cut in their dole money on this cheap scheme.
    Thatcher created 250,000 jobs(EAS) in 18 months, the current scheme talks about 10,000 jobs.
    IDS/LORD YOUNG/GRAYLING- your numbers don’t add-up.

  1. October 6, 2010 at 9:16 am
  2. November 1, 2010 at 9:32 am

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