Start-Up Loans

Prime Minister David Cameron delivered a speech about the expansion of the Start-Up Loans scheme and met with young entrepreneurs at an event in Preston.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
The Rt Hon Lord Cameron

James Caan (Start-Up Loans)

Ladies and gentlemen, good afternoon and thank you very much for coming here today.  I am James Caan, Chairman of Start-Up Loans, and I am delighted to introduce you to the Prime Minister, David Cameron, who is here today to support Start-Up Loans.  So please put your hands together for the Prime Minister.

Prime Minister

Thank you very much.  Thank you very much, James, thank you very much for that introduction.  Thank you, everyone, for coming together today: a very Happy New Year to you.

It is good to be here celebrating this idea of Start-Up Loans, now well under way; 460 loans made to small start-up businesses and now at a run rate of 100 new ones every week.  We hope that is going to speed up and we are going to create literally tens of thousands of new start-up businesses.

Now, today is about your questions and, hopefully, my answers; so no long speech from me.  But, as it is New Year, I thought we should start the New Year with a few home truths, because these home truths are very relevant to what Start-Up Loans are all about.

The first is that we are in a global race today in this world.  It is a very competitive world and some countries will make it - they will be competitive, they will be fit, they will get their act together, they will pay down their debts, they will keep their taxes low, they will start up new businesses - and some countries won’t make it.  And I am determined Britain is going to be one of the countries that makes it.

Home truth number two is that jobs don’t come from the government; jobs come from the private sector.  And so what we need to do in our country, as we all know there have to be public spending reductions to deal with our deficit, as the state gets smaller we need the private sector to get bigger.  That vitally needs to happen.

And that leads me to home truth number three, which is where Start-Up Loans come in, which is that while big business is absolutely vital for our country - big companies here in Lancashire like BAE Systems, a fantastic British company, I spent a lot of time travelling the world trying to sell some of their products, great big businesses we have in Britain - but the truth is, home truth number three, is the new jobs predominantly will come from small- and medium-size and start-up businesses.
And the good news here is that we have seen, over the last two years, a million new private sector jobs and we have seen the fastest rate of new companies starting than at any time in our country for decades, both for the year that has just passed and the year before that.
So that is what needs to happen.  So what we are talking about here today, start-up loans for new entrepreneurs to start up a business and hopefully take people on, is absolutely vital for the future of our country.  And the government’s role in this has got to be to try and do everything we can to encourage more start-ups and then to help them to grow, to help them get finance, to help them to take people on, to help them to compete and succeed.  That is what the government should be doing to help you do what you are doing yourselves.
So that is all I wanted to say by way of introduction.  Questions, points or even stories from the businesses you are starting up, so I can hear firsthand from you about entrepreneurship in Britain, what you are doing and how we can help.  Who wants to go first? 


Okay, isn’t it the job of the banks to be lending to small businesses rather than schemes like this?  It is a great scheme but what are you doing about the culture of self-interest that still exists in the banks?

Prime Minister

I think that is a very good point.  I mean, the short answer is yes, a lot of this should be the job of banks but, frankly, after the terrible problems of 2008/2009 when we had a virtual banking collapse in Britain, those banks are nursing their way back to health.  A healthy country needs healthy banks and, frankly, there are gaps in the market, and one of the gaps in the market is the early start-up finance that an entrepreneur needs to get going.  And I am not content to just sit back and wait for the banks to get on with this work.
I think it is important to say this is quite high-risk; this is where not everyone will succeed, where banks that are being quite cautious at the moment are likely to hold back.  Let’s get in there as government and say here is - and it is up to £110 million now available; that could lead to the creation of tens of thousands of businesses.  We are prepared to step in and provide that start-up finance.
Now, I want to get the banking system back to health again, I want banks to start lending to small- and medium-size businesses again.  There are some signs that that is happening and we are putting a huge amount of pressure on them.  We are, for instance, doing what lots of people have asked us to do, which is to separate the risky investment banks from the retail arms, and what we are doing is putting in place a ring fence so that if in future there is a bank failure, those banks can fail without the taxpayer having to cough up the money and bail them out.

But it is inevitable; even as the banks mend, it is inevitable that the government, the Bank of England, has to do more.  And that is why you have got the Funding for Lending scheme by the Bank of England; that is why you have got this scheme and many others from the government to try and help plug that gap.

But should the banks be doing more?  Yes.  Will we keep the pressure on them to do more?  Yes.  But can we wait for that?  No.


Prime Minister, thank you.  One barrier of entry for start-ups is finance, which it’s great to see so much support and investment from the government.  Another barrier is to speak with public sector organisations as a start.  We were trying to speak to the Border Agency because we had a proactive, positive system to support Border Agency compliance with unscrupulous agents and students.

It has been an absolute nightmare to get a meeting from the Border Agency, not that we are trying to sell them anything or get endorsement - the Right Honourable Ben Wallace has actually been a lot of support in this area for us, but we just can’t get a meeting just to show them and get any feedback.

Prime Minister

Very good point.  I think this whole - if you think about it, as I’ve just said, the state has got too big and the private sector is too small, but even as the state gets a bit smaller, it is still going to be a massive customer for business, and frankly the state isn’t a very good customer for business.  It is particularly not a good customer for small businesses.  So there is a range of things that we can do here.
First of all I will work with Ben and make sure you get that meeting with UKBA if you leave your details with me, but there are some general things we need to do to make the public sector a better customer.  The first is we need to be much more aggressive with ourselves, the public sector, at saying we want to deal with small business.

So we have set a target of 20% of contracts going to small businesses.  We have already, I think, doubled what we do over the last two and a half years with small businesses, but we need to go further.  And in doing that I think there are two quite vital steps that will help make a difference.  One is to break up government contracts, make them smaller and put them all online, because then those costs of entering, doing business with government, get smaller.

And the second thing relates directly to what you say, which is lots of entrepreneurs come up with great ideas to save government money, to do things differently, but the public sector says to you, ‘Well, ‘I’m sorry, I haven’t got a contract process for that; we are not running a competition for that bit of work because that is not part of what we do.’  And it drives entrepreneurs mad because you are effectively saying to the government, ‘I’ve got a new way for you to do business, a new way for you to act that will save money.’

And so we have got to get the public sector to think, ‘Can I open myself up to new ideas and new thinking which might actually save me money?’  And we are going to be taking more action on that front very directly to what you say.


Hi, thanks for taking my question.  I’m Adam from Charlbury Tea.  First of all - 

Prime Minister

What is your - explain what your business is? 


Well, after I graduated I started a tea business.  We are three years old now.  I graduated from Newcastle University, but my question sort of relates to - I know a lot of people went to university and did degrees that they ended up not being able to get a job with, and obviously the scheme today is promoting people to start businesses.

And just really the question is how are you going to control the quality of the businesses because we might wake up in a few years time where there’s a lot of people who are unemployable for the fact they have started a business that they can’t move forward with it?

Prime Minister 

Good point, very good point.  First of all, this scheme, Start-Up Loans, has a number of delivery partners across the country which will go through with applicants their business plan to check that they are qualified to receive that loan.

Now, inevitably, in any scheme like this you are going to have some that succeed and some that don’t make it.  I think the Prince’s Trust have a version of this and they reckon that one in three of their loans don’t make it, but the other two go on and do make it.  And hopefully - and some of the ones I met today are actually already starting to employ people.

But I think your question goes to a deeper point, which is are we doing enough in this country to set out the choices for people as they are at school.  As they are 12, 13, 14, are we doing enough to explain what the options are?  I don’t think we are.  I meet quite a lot of university graduates who are delighted with the degree they did and think that it has helped them on their way.

You do meet some university graduates who say, ‘Well, actually if I had known about apprenticeships that were available, maybe I would have gone that route after school,’ because of course many apprentices go on and do a degree paid for by their work.  They earn and learn at the same time.  So I think we need to do better in our schools at setting out the choices for young people; the apprenticeship path, the university path and, indeed, the path that we are offering here today of the Start-Up loan of starting up a business when you’re 18 rather than going to university.  So I think we need to set out all those choices. 

Just one last point, because I think it goes to your question, which is how do you encourage people to make rational choices.  Now I know that the student loans aren’t universally popular but I do think because students know if they earn more than £21,000 they are going to be paying back that loan, the students are becoming more demanding of the university and are starting to ask universities, ‘What does this course consist of?  What will I be studying?  What is the outcome for graduates who do this course?’  I think we’re developing a far more intelligent higher education system because students want to know what results they’ll get from the degree that they are effectively paying for. 


Can you tell me what the government are doing to encourage enterprise education in schools? 

Prime Minister

Yes, we’ve got a number of different schemes.  There’s a very good one called Tenner where we give young people £10 and encourage them to start a business and to have a competition within the school about who can grow that business best. 

But I would, in a way, throw the question back to you because of course we can write into a national curriculum you must teach children all these things.  We can make speeches about how teachers need to be more pro-business, more pro-enterprise in schools.  But, actually, if you believe as I do that we’ve all got our responsibilities in this country, I think one of the things we most need to do is encourage entrepreneurs and businesspeople to go back into school and explain why what they do is so exciting.


That’s exactly what I do.

Prime Minister

Fantastic.  Well, you’ve got to encourage everyone else in the room to do the same thing.  And I think there - we do have a potential problem here because a lot of kids aren’t getting the sort of work experience that you used to get because of all the concerns about the health and safety, and it’s all too difficult and all the rest of it.  And so, if we’re not careful, there’s a danger that schools and businesses will separate even more than they are today.  So I want to see a real effort…


Because work experience has been taken out of schools. 

Prime Minister

Well, not in all - not taken out of all schools.  It’s been taken out of some and that’s partly because some businesses that used to run work experience schemes have said, ‘Because of all the health and safety, because of the bureaucracy, I don’t think I can offer this anymore.’  And I think this is very, very bad news. 

So we need to encourage businesses to offer that work experience.  We need to simplify the health and safety rules.  We need to say to schools that every school should have a plan for how you’re going to teach children about enterprise and business.  I don’t actually think the right answer is just to add endlessly to the national curriculum more and more subjects. 

I think one of the problems we’ve had in Britain is that we’ve had too many people leaving school without the absolute basics, which have to include English and maths.


But you’ll still get - you’ll still get people - we work for universities as well.  I speak to young people that have left university, or still at university and don’t have the basic skills that they - I think they should have.

Prime Minister

Yes, well that’s why - that’s why the Education Secretary, if he was standing here, would explain that the English Baccalaureate - the Ebacc - the whole idea is to say that, you know, English and maths must be part of everybody’s core curriculum because frankly there isn’t a job - if you think about it - there isn’t really a job in the world that doesn’t require English and maths.  You’ve got to have those core skills.


Foundation skills.

Prime Minister

Absolutely, but you’ve got to - you know, so you’ve got to have those core skills.  But I think we really need a big conversation in the country about getting businesses and getting entrepreneurs back into schools to explain to young people why it’s such an exciting career path. 

And you’d be - you’d be amazed by…  Well, you do it, so you know.  But one or two visits from one or two businesses can change the whole attitude of a school and the whole attitude of those young people towards business and enterprise.


I’d like to know any tax break or tax incentive for small businesses, for example, if you employ somebody first time, you have to pay national insurance contributions.  So I’d like to know, you know, what government is doing about it.

Prime Minister

Okay.  Well, we’ve tried to - we’ve looked at a whole range of things because we basically want to make this the best country in the world to start a business, to grow a business, and - let’s not be shameful about saying it - making money out of that business.  We want to make sure that if you’re a successful entrepreneur, that there is a way of then making a serious amount of money out of that business that we hope you’ll put into other enterprises and other businesses and grow the economy. 

And I think I’m right in saying that our tax breaks for start-ups - the Enterprise Investment Scheme and other schemes like that - now mean that actually if you’re an entrepreneur in Britain and your business succeeds, you keep a higher percentage of your money here than you would if you were doing it in Silicon Valley in San Francisco. 

But you’re specifically asking about tax breaks for expanding businesses.  We’ve just done something in the budget, which I think is very important, which is to give 100% capital allowances for all capital investment up to £25,000 and I think for small businesses contemplating that extra piece of machinery, that extra photocopier, that extra printer, that can make a huge difference.  We also have had a scheme, and we’ll go on looking at this but it’s difficult sometimes to make it work right, of saying if you take on someone then you don’t pay the national insurance.  We ran that for a period and it led to the creation of, I think, some 20,000 or so jobs, but we’ll keep on looking at that.

I think at the moment what I hear from business - one of the biggest concerns is business rates, particularly for small businesses, the capital allowance was something that people specifically asked for and we’ve also tried to keep the main rate of corporation tax and the small rate of corporation tax right down because I think they’re an advert for your economy.  They’re like a - they’re like the sign over the economy saying, ‘Open for business’ and we’re going to have corporation tax rates that are much lower than almost any other G8 country.


No one pays it anyone.  Starbucks and Amazon aren’t paying it, so -

Prime Minister

Well we’ve got to crack that, you’re absolutely right.  This is a really - this is a really important issue.  I think - you know, I think we’re offering actually a fair deal to businesses.  We’re saying, ‘Look we’re going to have a really low rate of corporation tax’ but I want to make damn sure that those companies pay it.  It’s simply not fair and not right what some of them are doing by saying, ‘I’ve got lots of sales here in the UK but I’m going to pay a sort of royalty fee to another company that I own in another country that has some special tax dispensation.’ 

That is - that’s not right, and so we are looking - and I’m chairing the G8 this year so I’m going to be getting the Americans and the French and the Germans and the Italians and the Japanese all to look at this together - how can we try and stop unfair tax farming practices?  Because look, you know, we’ve got a very low rate of corporation tax; we’re already giving business a good deal, but I think to take that deal and then say, ‘But I’m actually going to find a way of not paying any corporation tax at all’ that’s not right. 

And I think we do need a debate in this country, not only what is against the law - that’s tax evasion, that is against the law, that’s illegal and if you do that the Inland Revenue will come down on you like a tonne of bricks - but what is unacceptable in terms of really aggressive tax avoidance.  Because some people say to me, ‘Well, it’s all within the law; you’re obeying the law, it’s okay.’  Well, actually there are lots of things that are within the law but we don’t do because actually we have some moral scruples about them and I think we need this debate about tax too.  I’m not asking people to pay massive rates of tax.

As I’ve said, we’ve got a low top rate of income tax now; we’ve got a low rate of corporation tax now; we are a fair tax country.  But I think it’s fair then to say to business, you know, ‘We’re playing fair by you; you’ve got to play fair by us.’  And we’re going to be doing that internationally - me chairing the G8, I’ve put it right at the top of the agenda for the G8 this year - as well as making sure we fix it nationally too.  So you’ve got a very important point. 


I just want to echo the two previous points.  My company, 3ManFactory, as the name suggests started out with three partners and we’re now at the stage where we’re ready to take someone on.  One of the things that puts us off is not only the costs but also the amount of paperwork and the bureaucracy.  Because, as a small business, with only three of us in it at the moment, the amount of extra work that is required just by taking on one extra person is a huge leap.  I just wondered what’s being done to kind of assist, you know, in that?

Prime Minister

Well we are trying - you know, this - we are trying to help with this because obviously it’s businesses like yours, if you take on one, two, three more people - if every business your size did that we wouldn’t have an unemployment problem.  This is where the growth in jobs is going to come from.  So there are a number of things that we’re doing, and I’ll set out a few of them for you. 

The first thing is we are looking at a whole new employment status, which might be ideal for your business, where basically you say to a start-up or a small business, ‘Do you want to take on this new status where basically you have just the basic employment rights that exist across the European Union, but no more than that, the basic - the most basic employment rights?  But in return for giving up your existing rights and just having the most basic rights, you are a shareholder in the business as well as an employee.’  So that might be an interesting option for you and I’d really encourage you to have a look at that.

Quite aside from that, we should just make it easier and less risky to employ people.  So one of the things we’ve done there - one of the biggest complaints we had from business - is that if you take someone on, they automatically have access to tribunals.  And so we’re saying, ‘No, that’s not right; it should be put off for two years before you get access to a tribunal.’  So every time people have come to us with specific issues - I’m very happy for one of my team to talk to you about any specific issues - we’ve tried to deal with those specific issues.  In Europe I’ve tried to get, and have had some success in making sure that micro-businesses, like yours, of less than ten people, are exempt from all new employment regulations.  So, things like that to help you grow, because as I say our future is in your hands and businesses like yours.  We want to make it simpler.


We want to concentrate on growing, to be honest, rather than paperwork.

Prime Minister

Correct, correct.  Well, that’s why, that’s why, as I say, this exemption from the new regulation will help, but this new employment status you might want to have a look at. 


Thank you, Prime Minister.  Daryl, from the Institute of Directors.  Thank you for coming up to the North West; we appreciate it.  I love this scheme.  I think this scheme great.  I think there’s a bit of cynicism amongst the IoD members with some of these schemes where they’ve seen in previous governments where public funding for business growth has been started off on very good schemes, but then those schemes have become bloated with employees.  How do we cap?  How do we ensure that the money that’s been drawn down, either through ERDF funding for business growth or for schemes like this, doesn’t go towards employing public sector people again or in pseudo limited companies set up through councils.

Prime Minister

Yes.  I think this is a really good point.  If anything, governments tend to produce too many schemes, and what we need to do is focus on those that really work.  Now, what I like about this scheme and David Young, who’s been one of the key inventors of this and James Caan and others have been highly involved in this; it’s very private sector focussed.  It’s very simple, actually.  It’s just saying to people aged 20, 18 to 24, now 18 to 30 - not to be confused with the holiday company - different things are going to happen in these businesses, I can assure you.  Available 18 to 30, and it’s for a start-up loan.  It does what it says on the tin.  So, it’s not I think going to be abused by businesses breaking themselves up and trying to get a hold of bits of it.  It’s not going to be abused by the public sector taking it over.  It’s very simple and straightforward. 

And I think what we need to do with the other schemes is look at those schemes that are working and working well - I would say Enterprise Zones, very simple good idea; you locate in an area that has high needs and has a cluster of effective businesses and you keep the tax rates down.  Enterprise Zones, you know, boost them, go for them, really back them up.  But, when you find scheme not working, kill it off.  Don’t run too many things at the same time. 

But this to me is a very simple, very straightforward scheme that is absolutely where we need to be as a country, which is encouraging entrepreneurship, helping people take that first step, knowing that not everyone will succeed, but some of these will grow into successful small, medium-sized and even who knows one day really effective big businesses.

Because the interesting thing about the world today, you look at all these businesses that, well, some of the ones we’re taking about - the Amazons or the Starbucks or the Googles or the Facebooks; ten years ago, some of these businesses didn’t exist.  They’re now amongst the biggest businesses anywhere in the world.  The barriers to entry, the barriers to create a big successful business are much lower than they’ve ever been because of the Internet.

And I just want to end on a sort of optimistic message, which is: in my view, there is absolutely no reason why Britain can’t create the next Google, the next Amazon, the next Facebook because we’ve got some of the key advantages.  We’ve got the international language of the Internet and business: English.  We have actually got - although not everyone has access to them - pretty good broadband services in Britain.  We have a very good technology and information technology sectors.  We’re in the middle of the world’s time zones, between America on the one hand and the Far East on the other.  We’ve got some of the best universities anywhere on our planet, so we’ve got a lot of the ingredients for being a very successful country in terms of start-up, tech start-up and internet businesses.  

So, I’m hugely enthusiastic and optimistic about what we can achieve, but these are tough times.  I know that and we have to do everything we can to encourage that private sector growth, that small business growth that I spoke about.  So, can I thank you all very much for coming?  Can I thank the University for hosting us today?  Can I wish you all well with your schemes, those that have got your loans and are starting up your businesses, those that are applying for your loans and hoping to be made happy today as you go through your business plans, and to everyone else for coming and for asking such good questions?  Thank you very much indeed.  Thank you.

Updates to this page

Published 3 January 2013