31 October 2010

Should governments be involved in 'Business Support'?

The British government has announced that it will close the network of 'Business Links' throughout the country to help save money. Plus they also announced the closure of the 'Regional Development Agencies' from 2012. The Business link network was designed to help businesses (mainly small businesses) through help/advice/training/information etc.
The RDA's were set up in 1999 by the then Labour government to help focus investment on projects in the nine EU regions of England.

The British government will save approximately GBP 2 billion per annum by axing the RDA's.
It was a good idea at the time to help each region 'do its own thing', although they reported to central government. But like most government backed organisations they eventually lacked focus an became overstaffed. The salaries paid to the senior staff were much higher than in the private sector. Moreover the RDA's also obtained funding from the EU for regional projects.
Most of this EU funding was wasted in my opinion.

Back in August this year the Tax Payers Alliance developed a case for abolishing the RDA's.
See: http://tpa.typepad.com/home/files/structure_of_government_3_the_case_for_abolishing_rdas_e.pdf

Anyhow, the British government has gone ahead and decided to close these organisations.
However, I note that the RDA's will be replaced by something called an LEP -Local Enterprise Partnership. (I get the feeling we have been there before).

The United Kingdom is a so called developed economy so should governments be involved in 'business support' and if so to what level?
You would think that today the UK needs more business support than ever before to recover from the crisis. Governments will always toy around with different support structures to show how they intend to help the private sector but I think the best thing would be for government to stay out of too much interference in private sector business. In the UK we have well established Chambers of Commerce which provide a whole range of services to its members. These Chambers have seen many different government initatives come and go over the years, but the Chambers of Commerce still exist and are better managed and leaner than any government 'quango'.

However, in a developing economy like Ukraine I think there is a need for as much business support as possible during the next 5-10 years and maybe longer.

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