We hear a lot about entrepreneurs and the need to be entrepreneurial in Wales, although everyone’s idea of what that actually means is probably a little bit different.
The usual suspects admired for their entrepreneurial skills such as Richard Branson or Sheryl Sandberg undoubtedly are entrepreneurs, but I believe that the sort of people Purple Shoots supports through its ethical loans and self-reliant groups are entrepreneurs just the same and deserve equal amounts of admiration. They show resilience in bucket loads. Many of them have overcome difficult or distressing circumstances which have left their financial situation spiralling downwards and have somehow fought back from that; then they have faced multiple rejections by mainstream funders who look at their credit history, lack of assets and cash and not at their potential. In spite of all that, they continue to believe in their business and don’t give up. If they get their business started, the path they are on is far more risky and difficult than it is for those of us who started businesses as middle-class entrepreneurs, with money and a safety-net behind us.
These are among the reasons why we believe our borrowers stand a good chance of succeeding – and also why I am frequently irritated by commentators who accuse our poorer communities of being without aspirations and lacking in entrepreneurs when in fact these communities are full of them, and their only “lack” is an opportunity to draw those skills out and a bit of funding to get started – as we prove as many times over as we our funds will allow.
But there is one major barrier to these hidden entrepreneurs which can not only prevent them from starting a business but can also derail them once they have and that is our benefits system. The stated aim of the Government is that the benefits system should encourage people to work and they say they have set the system up to achieve this, but in practice it has the opposite effect, especially in relation to self-employment. I am not advocating throwing out Universal Credit – the principle of having one simplified system for all benefits is a good one and much more likely to result in fair outcomes, but there are flaws which need to be faced and addressed before it can achieve what the Government wants. In no particular order, these are:
- Inability to save: The benefits system only allows a claimant to hold a minimal amount of savings before the amount of benefits cuts away, which means effectively that savings above that level must be spent. Apart from the obvious disincentive to saving, for someone who wants to start a business, it means it is impossible for them to save up funds to invest in it or to provide a cushion for their families when the inevitable problems of a small business arise
- Enterprise Allowance Scheme – again a good concept, trying to maintain benefits payments whilst the business gets off the ground, but the problems with this are twofold: (1) there is a limited time window to prepare a business – a claimant gets to the end of that and has to start, ready or not (2) NEA payments do not last for nearly long enough – 3 months at Job Seekers equivalent and 3 months at half that. Few new businesses can deliver their owner a meaningful income after only 3 months.
- Universal Credit – NEA can be supplemented by Universal Credit and payments taper down as income goes up. This is fine – although a bit disheartening and disincentivising as there is no reward for business success – but the real problem arises after 12 months when the system assumes that the business can pay its owner the minimum wage and benefits payments are reduced accordingly, regardless of whether the business is actually delivering this income. This can cause great hardship and frequently business failure – which begs the question “who has this policy helped?”
- Timeframes – By that I mean the delay in receiving benefits. A great deal has already been written about the hardship caused by the 6 week wait for Universal Credit so I won’t repeat that, but generally it should be easier for people to try out generating an income without their support stopping abruptly and taking weeks to restart. The system works against people trying out something new, because failure leaves the entrepreneur with nothing for a long time. This is particularly an issue for people with long term health conditions who want to work but aren’t sure what level of work they could manage. They should be able to try without jeopardising all their hard won benefits.
- Stigma. The final big thing about the benefits system is not the system but the stigma that large numbers of people attach to it. The view that people on benefits are lazy and scroungers is widely held and re-enforced by the media. In 6 years of lending and developing self-reliant groups amongst people who are mostly benefits claimants when I meet them, I have never met anyone who wanted to be on that position. They all wanted to be independent, to be using their skills and to have the dignity of earning their own money. Many of them feel crushed by the negative attitudes towards them.
So one thing everyone can do is to change the narrative around people in poverty – most of them are not lazy scroungers in need of help, but people with skills and aspirations in need of opportunity and respect.