Sunak’s software scheme ‘likely to fail’ small businesses

Sunak’s software scheme ‘likely to fail’ small businesses
Justin Tallis/Pool via REUTERS

Chancellor Rishi Sunak’s software scheme, which saves small businesses - including advice firms - up to £5,000 on accounting and customer relationship management systems, has been dubbed a likely failure in its current state.

Five industry bodies which represent hundreds of thousands of small businesses between them wrote to the Department for Business Energy & Industrial Strategy yesterday (February 14), warning the government its scheme - launched last month - could prove to be “yet another missed opportunity” which “underdelivers”.

They argued the ‘Help to Grow: Digital’ scheme “needlessly excludes over 90 per cent of small businesses”, due to the fact it only admits firms with five or more employees.

Instead, the letter suggested the scheme’s eligibility be reduced to one employee, due to the fact that those businesses hiring their first employees are most likely to benefit from help with digital adoption.

Currently, companies which apply must be at least a year old and employ between five and 249 people. The funding covers 12 months’ worth of approved software product core costs.

When it launched, Sunak said the scheme was about “levelling up their [small businesses’] digital technology and skills”. But the industry now reckons it “is likely to fail to address this digital shortfall in any meaningful way”.

Signatories of the letter included trade bodies such as Association of Accounting Technicians and Association of Chartered Certified Accountants, as well as think tank Entrepreneurs Network, and not-for-profit organisations including Forum of Private Business and Coadec.

As well as criticising eligibility, these bodies also highlighted the “very short list of suppliers” for small businesses to choose from.

Compared to HMRC’s list of more than 500 software suppliers for its ‘Making Tax Digital’ programme, the Help to Grow: Digital scheme lists just three accountancy providers -  Sage, Crunch and Intuit - and it excludes resellers and partner networks.

It also doesn’t cover ‘Enterprise Resource Planning’ software, or accounting software which stretches into planning and forecasting. The industry argued in the letter that this software was “vital” for businesses to grow.

At present, the scheme offers each business £5,000 for licensing costs. But the industry has argued this is “the smallest” cost in adopting digital technology, while far greater costs come with installation, training and consultation.

“This will not result in any increased costs for the taxpayer as the £5,000 limit will remain in place but it will greatly enhance the effectiveness and participation rates for the scheme,” the industry said.

Signing off the letter, all five bodies said they are “ready and willing” to help the government to improve the scheme, which was first promised in Sunak’s March 2021 Budget.

FTAdviser understands all the technology suppliers on the government scheme had to pass a selection process.

A government spokesperson said: “Our flagship Help to Grow schemes are giving small and medium sized businesses across the UK the tools, funding and support to thrive.

“The Help to Grow Digital programme will continue to develop and scale as appropriate, expanding the scope of technologies and financial discount covered.”