A History of Enterprise Policy by Mallett Oliver; Wapshott Robert;

Author:Mallett, Oliver; Wapshott, Robert;
Language: eng
Format: epub
Publisher: Taylor & Francis Group
Published: 2020-07-15T00:00:00+00:00

The Wilson Committee and Small Firm Finance

In January 1977, amid the economic struggles and concerns about key industries, Labour set up the Committee to Review the Functioning of Financial Institutions chaired by former Prime Minister Harold Wilson. The Committee was composed of a varied membership (in terms of their backgrounds and views) of 18 members and, over the next three years, it held 55 meetings at a cost of £334 000 (Hansard, HC Deb. 30 June 1980 vol.987 col.372). As well as several interim reports (including an important one on small firms discussed further later), the Committee produced a substantial final report (not published until June 1980) and 13 volumes of evidence.

The terms of reference for the Committee were:

To enquire into the role and functioning, at home and abroad, of financial institutions in the United Kingdom and their value to the economy; to review in particular the provision of funds for industry and trade; to consider what changes are required in the existing arrangements for the supervision of these institutions, including the possible extension of the public sector, and to make recommendations.

This included institutions such as the Bank of England, other banks, finance houses, life insurance companies, pension funds, building societies and the Stock Exchange, together with the arrangements in place for export credit.

The Committee produced an interim report in 1979 on The Financing of Small Firms. This report, and the wider work of the Committee, attempted to weigh the contrasting views and complex nature of small firm access to finance and whether the Macmillan gap still existed. The authors of the report explained their rationale for focusing on small firms:

The main reason for singling out small firms for special treatment in this way is the virtual consensus in the submissions we have received

that there are problems with the arrangements for financing smaller businesses, whatever the availability of funds to industry and trade as a whole. There appeared to us to be a case for closer examination of these claims, both because of their importance in their own right and because of the general lessons which might be expected from the scrutiny of the financial system at what is so widely believed to be one of its weakest points. Moreover, the Government has specifically asked for our views on the subject so that they can take them into account in deciding about further action to help small businesses.

(p. 1)

This work was informed by several relevant research projects the Committee commissioned. For example, Jones (1979) conducted research for the Committee on 296 incorporated companies with less than £4m capital employed (from a population of nearly 0.25m companies), analysing accounts submitted to Companies House. Jones found that small companies predominantly relied on retained funds within the business, but were also more dependent on bank finance than were large companies. Other studies also confirmed the importance of retained profits and overdraft facilities, but that banks were generally perceived as indifferent to small businesses.

A commissioned study by Mitchell and Clay (1979) looked at ICFC

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