Abstract
The New Enterprise Allowance scheme provides support for unemployed people wishing to start a business or become self-employed. Financial support is provided through a weekly allowance and access to loan capital, with business advice provided through volunteer mentors. This paper outlines the introduction of New Enterprise Allowance in the UK, provides an overview of the service and describes the experience of one contractor delivering New Enterprise Allowance in North Scotland.
Introduction
The New Enterprise Allowance (NEA) is a scheme funded by the UK Government to assist unemployed people in starting their own business (McGuinness and Dar, 2014). NEA provides mentoring support for participants through volunteer mentors and financial assistance in the form of the NEA.
NEA is available to eligible individuals who are aged over 18, are resident in Great Britain and are claiming certain out-of-work benefits. Eligibility for the scheme is determined by Jobcentre Plus Advisers who refer participants to the Lead Accountable Body (LAB) responsible for delivering the scheme in the district in which the participant claims benefits. The LAB is responsible for matching the participant with a volunteer business mentor. The mentor helps the individual to draw up a business plan, which is then assessed by the LAB. If the business plan is approved, the individual can access financial support through the Allowance and start-up loan facility.
The financial support consists of:
A weekly allowance worth £1274 over 26 weeks, paid at £65 a week for the first 13 weeks and £33 a week for a further 13 weeks, and The facility to access a loan of up to £2500 to help with start-up costs, subject to status.
In order to comply with the conditionality attached to some out-of-work benefits, this assessment process is expected to be completed within eight weeks. Individuals are eligible to join the scheme from Day 1 of their claim for out-of-work benefit, until required to join the Work Programme. The Work Programme is the mandatory programme for jobseekers who have been jobless and have claimed benefits for a qualifying period of time. The Work Programme is designed to provide a ‘black box’ service to jobseekers for a period of 24 months. During that period, jobseekers do not have access to other government-funded initiatives, including NEA.
The scheme is open to participants who are claiming Jobseeker’s Allowance (JSA) and not on Work Programme; most Employment and Support Allowance (ESA) claimants; lone parents or people claiming as sick who are claiming Income Support and Universal Credit claimants who are in the work-related requirement, work preparation and work-focussed interview groups.
Background
NEA replaced the self-employment options contained within the programmes which formed the New Deal. Within the different New Deal options, unemployed individuals were offered support to access employment or training. Self-employment support consisted of assistance with business planning and a period of ‘test trading’ during which a participant could continue receiving benefits or allowances for a maximum of six months whilst they developed and started their business. Further support was available from April 2009 to March 2013 through a Self-Employment Credit. Eligible individuals who ceased claiming benefits to become self-employed could access a self-employment credit of £50 per week for up to 16 weeks.
NEA was introduced as a Trailblazing pilot in six local authority districts in Merseyside from the end of January 2011 and was rolled out across all of Great Britain by the end of August 2011. Each of the 37 Jobcentre Plus districts has a separate agreement with a LAB, although some organisations provide the NEA service in more than one district. The initial contract for service was for 21 months up to 31 March 2013. Contracts have since been extended to 31 December 2014 (DWP, 2013a). A procurement exercise is currently underway to replace the existing contracts from 5 January 2015. Initially, NEA was available to individuals who had been claiming JSA for 26 weeks. This was brought forward to those who had been claiming for 13 weeks and over in July 2012 and further refined to offer support from Day 1 of a JSA claim from October 2012.
Overview of the service
Under the contract for delivery of NEA, the LAB is required to:
source volunteer Business Mentors to work with NEA Participants. LABs delivering in districts in Wales must ensure that they have Welsh-speaking Mentors available to be matched with Welsh-speaking participants, at the participant’s request. It is a condition of the contract that volunteer mentors are not remunerated; ensure there are sufficient volunteer Business Mentors to work with NEA Participants; do all that is necessary to ensure the volunteer Business Mentors have the right skills and experience to provide business mentoring support to NEA Participants and have the relevant accreditation if necessary; provide an initial assessment/pre-screen of Eligible Individuals that are referred to them by Jobcentre Plus, within five working days of the referral date. This will include an initial assessment of the individual’s self-employment prospects, their business proposition, its growth potential and their overall suitability for the NEA programme; match the Participant with a volunteer Business Mentor within 10 working days of the initial assessment. Each Participant must have a mentor who works with them while they are preparing to become self-employed (the Pre Start-up Period) and for a period of at least 26 weeks to support them in the early months of Trading (the Post Start-up Period). Mentors must have business experience and the appropriate skills needed to support Participants to prepare for self-employment and develop a viable business plan that demonstrates the business’s potential for growth. Business Mentors will be expected to understand the local business landscape and be candid with Participants, but at the same time have the ability to listen and empathise; ensure that the mentor is providing appropriate mentoring and business advice, including making an initial assessment of the Participant’s business proposition, helping them to prepare a business plan and provide on-going support for a minimum of 26 weeks, once the Participant has left JSA and commenced Trading – the period from mentor match to business plan approval will be wherever possible kept tight, to eight weeks or less; organise an approval process for the business plan. During this approval process, Participants will need to demonstrate that their business plan is viable and that the businesses have the potential for growth. The business mentor will make a recommendation to the LAB as to whether Participants should proceed to Trading and qualify to apply for the NEA Allowance and have access to a NEA Loan; work with the volunteer Business Mentors and other local partners to signpost Participants to other sources of business support and funding that may be available; ensure effective relationship management with Jobcentre Plus, including managing the referral process, mentoring timescales and communications, ensuring Participants are working with their mentors and providing timely notifications at each stage of the process, in particular when business plans are approved; ensure effective relationship management with the providers appointed by Jobcentre Plus to administer the NEA loans (only participants with an approved business plan through the NEA can be referred to the lenders). administer an approval process for Participants’ business plans. Participants can submit their business plan for consideration on more than one occasion, where it is initially declined, at the LAB’s discretion. Considerations when deciding whether a re-submission should be approved will include, but are not limited to:
the proportion of the 8-week Pre Start-up Period that has passed; the likelihood that the business plan can be raised to the acceptable standard in the time remaining and available funding.
Suppliers of the NEA programme (the LAB) are paid on a ‘payment-by-results’ basis. The outputs and outcomes which trigger payment are also the crucial success factors for the programme. These are agreed as:
The number of participants who are matched to a business mentor within 10 days of referral The number of participants who complete the mentoring phase and have a business plan approved The number of participants who sign off benefits and commence trading The number of participants who complete 26 weeks of trading.
Performance
NEA is widely considered to have been successful in moving people off benefits and into self-employment (DWP, 2013b). The Great Britain New Enterprise Allowance Quarterly Official Statistics released on 17 June 2014 indicate that since NEA was rolled out in April 2011 up to March 2014, 93,880 starts have been made where people have begun working with a business mentor. During this period, 46,000 of those mentor starts progressed to start receiving the weekly allowance. A total of 10,610 businesses were started by people aged 50 and over, and 3370 businesses started by young people. A total of 8590 businesses were set up by disabled people (DWP, 2014).
Experience in North Scotland
NEA has been delivered in North Scotland District by Claverhouse Training (Claverhouse) since inception in July 2011. Claverhouse is a social enterprise with charitable status which has a 30-year history of providing employability services for unemployed adults. Claverhouse is based in Dundee and has experience of delivering services in the three local authority areas of Tayside (Dundee, Perth and Kinross and Angus). North Scotland District includes 10 local authority areas in the North, North West and North East of Scotland.
The initial contract for NEA was issued as a grant agreement, and in North Scotland, the LAB was expected to be a not-for-profit organisation or consortium, and the delivery model was expected to demonstrate a partnership approach. Claverhouse deliver the initial sift and business plan approval service across all of the geography of the District, and subcontract with a small supply chain of local employability specialists for the areas outwith Tayside, to source volunteer mentors, assist in the development of business plans and provide participant support and guidance.
The key performance measures to end of May 2014 are as follows. A total of 2057 referrals to the scheme have been through an initial viability assessment. Of those, 1346 have progressed to being matched with a mentor. A total of 750 have commenced trading – of the cohort who have completed the pre start-up mentoring period, this represents a conversion rate of 61% mentees to starting trading. A total of 503 businesses have achieved 26 weeks trading – of the cohort who have been on the scheme 26 weeks, this represents a sustainability rate of 89%.
Distribution of North Scotland NEA participants.
Source: Claverhouse.
Occupational distribution of North Scotland NEA participants.
Source: Claverhouse.
Footnotes
Acknowledgements
The Claverhouse Group, a not-for-profit company, is Tayside’s leading provider of government-funded training programmes, offering guidance and support to unemployed adults seeking employment.