Enterprise Allowance Scheme

Enterprise Allowance Scheme
Name	Enterprise Allowance Scheme
Country	United Kingdom
Introduced	1981
Abolished	1991
Administered by	Department for Employment
Type	Welfare-to-work scheme

Enterprise Allowance Scheme was a British initiative introduced in 1981 to subsidize unemployed individuals who wished to start small businesses. It aimed to reduce unemployment by supporting self-employment and connecting benefits administered by the Department for Employment with small-business support mechanisms in the periods of the Margaret Thatcher era and the broader Ronald Reagan‑era neoliberal reforms. The scheme operated alongside initiatives from the Manpower Services Commission and intersected with policy debates at the HM Treasury and within the House of Commons.

Background and Origins

The scheme emerged amid the early 1980s recession when unemployment in regions such as South Wales, Greater Manchester, and Tyneside spiked after industrial restructuring affecting firms like British Steel Corporation and the National Coal Board. Policymakers drew on precedents including the Employment Opportunities Act 1980 and advisory input from bodies such as the Confederation of British Industry and the Federation of Small Businesses. Influences also included international examples like the Small Business Administration in the United States and microenterprise programmes promoted by economists associated with Chicago School thinking, including commentators linked to Milton Friedman and Friedrich Hayek.

Scheme Design and Eligibility

The design offered a weekly allowance paid over a fixed term to claimants leaving benefits to form businesses in trades from retail and catering to crafts and consultancy. Eligibility criteria connected to prior benefit receipt under schemes such as the Supplementary Benefit and assessment by local offices of the Department for Employment. Applicants often needed to present simple business plans, sometimes drawing on support from organizations like the Prince's Trust and local Chambers of Commerce; mentors included figures from the National Federation of Self Employed and Small Businesses and advisers with experience in Small Business Service initiatives.

Administration and Implementation

Administration involved partnership between local employment offices, regional offices reflecting boundaries like Greater London Authority and West Midlands, and national policymaking at the Department for Employment. Payments were routed through benefit systems linked to the Jobcentre network and monitored by officers influenced by priorities from the Cabinet Office. Implementation varied across constituencies represented by MPs from parties such as the Conservative Party, the Labour Party, and the Liberal Democrats, producing differing outcomes in urban centres like Liverpool and rural areas like Cornwall.

Impact and Evaluation

Evaluations by academic researchers at institutions including London School of Economics, Oxford University, and the University of Manchester assessed survival rates, income trajectories, and spillover effects. Some longitudinal studies compared cohorts aided by the scheme to control groups involved with the Manpower Services Commission or remaining on benefits administered by Department for Employment, finding mixed results on firm longevity and employment creation. Case studies highlighted success stories resembling entrepreneurs associated with Camden Market traders and small manufacturers in Sheffield, while comparative policy analysts referenced models like the Employment Retention and Advancement approach in the United States.

Criticisms and Controversies

Critics from trade unions such as the Trades Union Congress and commentators in outlets linked to New Statesman and the Financial Times argued that the scheme sometimes subsidised low‑wage self‑employment and fragmented collective bargaining in sectors represented by unions including Unite the Union and GMB. Academic critics invoked work by scholars from University of Warwick and Goldsmiths, University of London who questioned measurement methods used by evaluators at bodies like the National Audit Office. Controversies also touched on regional inequality, with MPs from constituencies in Scotland and Northern Ireland raising concerns in debates at the House of Commons.

Legacy and Influence on Policy

The scheme influenced subsequent UK programmes such as the New Deal and successors administered under ministries led by figures including Tony Blair and Gordon Brown. Its legacy is visible in contemporary microenterprise policies championed by organisations like the British Business Bank and is studied alongside international initiatives including the World Bank's microfinance projects. Retrospectives in journals published by Cambridge University Press and policy units at the Institute for Public Policy Research assess its role within the trajectory from the Winter of Discontent era reforms to 21st‑century employment policy.

Category:Economy of the United Kingdom Category:Unemployment