12/01/2011

By Max Clarke

WHAT IS IT?

Announced by Secretary of State on the 5th October 2010, the New Enterprise Allowance (NEA) scheme makes funds and business mentors available to provide support for unemployed people wanting to start a business.

For the first 3 months, successful applicants will receive payments equal to typical Jobseeker’s Allowance (JSA), and for the next 3 months this amount will halve.

Applicants will be provided business mentors to nurture their ideas and further develop them into viable business proposals with the intention of ultimately guiding them to profitability.

A loan of up to £1,000 is also available to go towards start-up costs associated with their business, bringing the total sum to around £2,000.


WHO IS ELIGIBLE?

Anyone who is over 18 and who has been on Job Seeker’s Allowance for at least 6 months.


WHAT IS IT FOR?

Though stimulating the economy and reducing joblessness is one facet of the scheme, the NEA is also aimed at reducing deprivation and tackling disadvantage:

“The New Enterprise Allowance is an innovative programme that will help people facing disadvantage to move off benefits and forge a better future”. Says Business and Enterprise Minister Mark Prisk.


IS IT A GOOD IDEA...?
...YES:

In many ways the scheme is similar to Thatcher’s Enterprise Allowance Scheme launched in the 1980s, which paid £40 a week to get the unemployed off the dole, also with the intention of starting their own businesses.

Thatcher’s scheme appears to have been successful, with Alan McGee of Creation Records and Julian Dunkerton of SuperDry clothing fame launching their business careers under the scheme, while the leftist Spectator journalist Martin Bright called for the scheme’s reinstatement in mid 2009- over a year before Iain Duncan Smith’s announcement of the Coalition Government’s plan to launch the New Enterprise Allowance.

David Cameron has said of the NEA scheme that it would help make the coming years "some of the most dynamic and entrepreneurial in our history".

Former Dragon’s Den star, philanthropist, and serial entrepreneur James Caan is also a proponent of the NEA, calling the decision "great news for budding entrepreneurs”, and saying that an “increase in start-up businesses will be good for jobs."

Mark Prisk said: "In the current economic climate, it has never been more important to promote an enterprise culture in the UK. It is vital that businesses have the information, advice, and mentoring they need to grow and expand. The best people to advise small businesses are those who have already started and run successful companies, so it is particularly important that this new framework focuses on providing access to business mentors."

...NO:

However, the NEA has also received significant criticism, with opponents arguing; that the figures (£1,000 benefits replacement and a £1,000 loan) are simply not enough to launch a business; and that the 6 month period of mentoring and funding is not long enough to effectively launch a company past its initial, fledgling stages.

With £50 million earmarked for the scheme, and David Cameron announcing it is to help 40,000 people- firstly this figure amounts to just £1,250 per head- significantly less than the already criticised £2,000 figure; and secondly, if a full 40,000 new enterprises are launched under the scheme, this is an increase of just 0.83% from Britain’s existing 4.8 million SMEs- an almost insignificant rise.

David Ingall, Partner of JWPCreers and UK200Group member labelled the scheme a “New Year Fantasy”, claiming that if the Government was serious about nurturing businesses, they wouldn’t have simultaneously announced their decision to target 50,000 businesses in order to scrutinise their accounts and punish all those whose were not in order, collecting millions in penalties at the expense of British SMEs.

David Ingall, has also criticised the application process, deeming the scheme “a New Year fantasy” before going on to say “I am sad that such a hare-brained scheme is being proposed by the government".