Government Shows Support for SMEs - 13 December 2005
[ Last Updated 11 January 2006 ]
Media Statement from Hon Lianne Dalziel, Minister for Small Business
Small Business Minister Lianne Dalziel today announced the government's strong support for recommendations from the Small Business Advisory Group.
The government's response to the Advisory Group's first annual report on enhancing small and medium-sized enterprise (SME) growth was released by the Minister today.
"The government acknowledges the challenges facing our SMEs, as reported by the Group and I congratulate them on their report. We are working to address virtually all the issues, as we essentially support 18 of the 19 recommendations, if not in form, in substance."
The Small Business Advisory Group is an independent group comprising of nine people who own SMEs. Last year they produced their first annual report to government outlining how they believed government could enhance growth in the sector.
"SMEs are an important driver of economic growth. About 97 per cent of New Zealand businesses are in the SME sector and they accounted for 60 per cent of new jobs over the last five years. Our response to the group's recommendations shows that we are committed to helping SMEs grow, and I believe this will produce major benefits." Lianne Dalziel said.
The Minister said that most of the recommendations have either already been implemented, or are being addressed. Responses to some of the key recommendations include:
- Additional funding for mentoring services including funding to assist SMEs establish Advisory Boards;
- Upgrading www.biz.org.nz into a single point-of-entry portal providing for all business information needs;
- Internal advocates for SMEs have been established in a number of departments including Labour, IRD, ACC and MED to ensure SME interests are considered in policy development;
- MED is currently examining ways the government can measure and publish costs of compliance, including the cumulative impact of regulations over time;
- Changes simplifying depreciation and the fringe benefit tax regime;
- Establishment of a $40million seed co-investment fund designed to make it easier for SMEs with growth potential to access capital.
"All up, this is a very significant package of improvements that shows this government's commitment to this important sector," Lianne Dalziel said.
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Questions and Answers
1. What Is SBAG?
The Small Business Advisory group is comprised of nine people who own small and medium sized businesses (SMEs). Their purpose is to give SMEs a greater voice in policy development and to advise Ministers of issues facing SMEs.
The members of SBAG are:
- Peter Kitchen, Kaitāia, tourism sector, SME owner, Māori
- Nigel McKinlay, Dunedin, footwear manufacturer, business owner
- Alison Quesnel, Auckland, health products, business mentor, SME owner
- Lachlan McKenzie, Rotorua, farming, SME owner
- Denise L'Estrange-Corbet, Auckland, fashion design and retail, SME owner
- Murray Cleverley, Timaru, CEO Economic Development Agency, meat processing, SME owner
- Cameron Moore, Christchurch, manufacturing, SME owner
- Stuart Wilson, Wellington/Auckland, information technology, SME owner
- Robyn Reid, Nelson, aviation, economic development, SME owner
2. Why Does SBAG Produce an Annual Report?
Part of SBAG's function is to provide ongoing advice to government on any issues affecting SMEs. Mainly this is done out of the public eye. However they decided in 2004 to produce a published report setting out some key things they thought government should do to improve the business environment for SMEs.
In introducing the idea of an annual report they were following the example of the Small Business Council in the United Kingdom - the former Chairman of the Council met with SBAG early in 2005.
3. Why Has the Government's Response Taken So Long?
SBAG reported in August 2004. Since then there have been four Ministers for Small Business - all of who were keen to make their personal contribution to the government's response. Following the election the Minister for Small Business, Hon Lianne Dalziel, completed the task begun by her predecessors.
However, as the government's response shows, action has either been taken or has commenced on all but one of the recommendations since August 2004. In fact the response published today is the bringing together of information about what has been achieved since August 2004 and what is proposed to address the recommendations.
The report had been delayed for further work prior to the election so it was simply a question of bringing together the Ministerial Group and gaining sign off on enhancements to the report back.
4. Are There Any Recommendations that the Government Has Put into Effect?
Of the 19 recommendations in the SBAG Report many have, directly or indirectly, been addressed by government decisions that have already been announced. These include:
- The changes to depreciation and Fringe Benefit Tax regimes announced in Budget 2005 (Recommendations 7 and 18)
- The creation of a Market Development Assistance Scheme for exporters, as a part of the New Zealand Trade and Enterprise (NZTE) Growth Services Fund (Recommendation 8)
- Additional funding for business mentoring services in Budget 2005 and the creation of a fund to allow small businesses to establish Advisory Boards to assist with developing business strategies (Recommendations 1 and 2)
- The funding of projects under the oversight of the Business Capability Partnership (a joint private-public sector process for enhancing management capability), including projects to encourage the development of benchmarking tools and alignment business awards adjudication criteria (Recommendation 3)
- The establishment of a Seed Co-Investment Fund - $40M to be invested alongside private investors in early stage companies commencing from 1 July 2006 (Recommendation 6)
- The Department of Labour has published, both in hard copy and on the web, revised guides on hiring staff and on managing employment relationships. Both include helpful checklists. SBAG has been integral to the development of both sets of material.
5. What Recommendations Are the Government Still Working On?
Work is continuing on ways to address all the issues raised by SBAG, and in many cases on how to implement their recommendations. These are detailed under each recommendation in the report back document.
6. Has the Government Rejected Any of the SBAG Recommendations?
In the case of the recommendation on compulsory enterprise education the government wants to address the problem (i.e. young people not considering self-employment) through its current review of the curriculum covering education for enterprise to be completed in 2007/2008, rather than just add to an already crowded school year. Entrepreneurship will be an important feature of the reviewed curriculum.
Recommendation 19, which includes the proposal for a qualifying period for personal grievances for probationary staff, has been rejected. The government acknowledges that some employers say they do not take on staff for fear of personal grievances, however it believes the solution lies in better workplace employment practices.
7. What Happens Next?
Work will continue to complete the projects and programmes identified as being in progress in the Reportback. Ministers and officials will continue to meet with SBAG and to consider their views of improvements needed to the business environment.
The government's new website New Zealand Business Consultation is now available for businesses that wish to register to be consulted by government agencies during the formulation of policy.
8. When Is the Next SBAG Annual Report Due?
The next SBAG report has been scheduled for publication at the end of February 2006. The Group agreed to postpone its next report until it received the formal response from the government to its first report.
9. What Were SBAG's 19 Recommendations?
1. Enhance funding to Business In The Community and/or similar providers of mentoring services to upskill their mentors and mentor co-ordinators in order to provide a superior service to clients and to market their services.
2. Provide funding to SMEs with growth potential to engage an Advisory Board to assist them in the governance of their business. The Advisory Board would typically comprise 2-4 people capable of bringing to the business an impartial eye and expertise that the founder/owner does not possess.
3. Support the use of existing and new local business awards programmes as a way of providing benchmarking information to firms. The expectation is that a common template would be devised that could be used by local business organisations and trade associations to establish and judge annual business awards. The template should be designed in such a way as to permit key comparisons with companies in already established benchmarking systems. The information from these templates could be fed into a central database that would provide benchmarking data for participating businesses across the country.
4. Make readily and cheaply available to all SMEs a checklist of things they need to do, and the assistance that is available, when starting and growing a business. Any help-sheets that are produced must be in a consistent and user-friendly format and be kept up to date.
5. Provide a complete checklist of issues to be considered when hiring an employee, together with supporting advice and guidance, quickly and cheaply for businesses.
6. Undertake policy development work aimed at making access to funds easier for SMEs with growth potential (e.g. encouraging banks to lend on cashflow/character in addition to assets; loan guarantees).
7. Urgently undertake a revision of rates of tax deduction for depreciation with the view of reducing taxation in the first three years of plant installation, and offsetting that with lower allowable tax deductions for depreciation in the following years.
8. Develop a strategy for providing assistance to SMEs to implement sales and marketing strategies and plans.
9. Ensure basic enterprise education is part of the core curriculum at Year 10 (4th form) and that provision is made for better support for enterprise education providers and for promoting careers in business to school pupils.
10. Identify and remedy the barriers to government agencies purchasing from New Zealand suppliers to ensure that the government makes greater use of its procurement powers as a tool to encourage innovation and growth in New Zealand's SMEs.
11. Make greater efforts to harmonise borders with Australia and make trading with our neighbour easier.
12. Have each government department identify a small business advocate who would be responsible for presenting the SME perspective on any proposals being developed by the department that might impact SMEs.
13. Charge a senior manager in each government department with scrutinising all the regulations designed by the department, to assess the need for them, their quality and the impact they will have on business (and SMEs).
14. Measure and publish the cumulative effects of the costs of compliance with regulations passed in the previous six months.
15. Ensure all business-related legislation and regulations come into effect on only one or two pre-determined days per annum. Common commencement dates, especially when coupled with advance notice and guidance, would offer a greater degree of certainty, and would help SMEs to plan and budget, and reduce their costs. In addition, businesses would know that they have to deal with regulatory changes only at fixed, predictable points in the year.
16. Ensure proposals for changes to regulations that affect business are put out for a minimum three months' consultation period and do not come into force until three months after the government or Parliament agrees to the changes. This provides adequate time for SMEs to contribute to the design of the regulations and to prepare for their commencement. Listening to businesses has a number of specific benefits. It allows government to tap the widest source of information possible and thus improve the quality of decisions reached; it alerts policy makers to any concerns and issues not picked up through existing evidence; and it helps to monitor existing policy and to determine whether changes are needed.
17. Have government agencies (particularly ACC, OSH and ERMA) run regular (e.g. every third Wednesday of the month) local information nights. There, businesses could learn what is required of them by way of compliance, hear what is new since last month, and have one-on-one advisory sessions (information from which is not passed on to the enforcement arm of the organisation).
18. Simplify FBT on business vehicles by moving it from the FBT return to an adjustment on depreciation in the employer's income tax return and base this adjustment on the depreciated value of the vehicle.
19. Rebalance the legal procedures for dismissing non-performing staff and provide qualifying periods for personal grievances for probationary staff. We believe that these are the single most important changes that could be made to the employment legislation and that they would lead directly and immediately to employment and business growth.
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