The Labour Party wants to give SMEs more government procurement spend. Maybe.

The next Labour government (that's assuming that the UK votes the party in at the May 2015 election) will apparently set up a "Small Business Administration" in the heart of government. That's according to the Labour leader, Ed Miliband, writing in the Sunday Times this week, and reporting a range of initiatives that the party is announcing to show its support for business.

Labour needs to show it isn't a purely anti-business party, as many of its ideas seem to be pointing in that direction. (Greater regulation of the energy industry for example). And of course our own 'procurement manifesto' from last week suggested that a focus on small business and localisation might be a fruitful area for Labour to differentiate itself from the current coalition government, which has done some good things in the procurement space but has been fundamentally centralist in nature.

However, the Party needs to get its wording right. In the Sunday Times, behind the paywall, Miliband said the new small business body would ensure that "fully a quarter of government contracts go to dynamic small and medium-sized firms."

This suggests that he doesn't understand the difference between the volume of contracts and the value. Because it is certain that already at least a quarter of contracts by volume go to SMEs, even in central government, because SMEs by definition tend to pick up a large volume of small contracts.

So across central government, SMEs win around 10% of contracts by value, but that probably means they win well over 25% by volume. The Sunday Times wrongly says that currently only one in ten contracts goes to a small firm, so they are confused too. Conversely, it is large firms who win the small number very high value contracts (building aircraft carriers, huge IT programmes).

If Miliband and Labour are serious about this, they need to start talking about the value of contracts. but really, unless they are prepared to say something about how they are going to achieve this, then it is just meaningless manifesto fodder. Are they going to dis-aggregate contracts as per the EU (optional) Directives? Break up the Crown Commercial Service? Because otherwise, it won’t just happen – this government has made considerable effort in some areas, to be fair, but the 25% target is still some way off.

Now I'd suggest they don't totally forget the volume of contracts, because spreading the money around more widely does have some benefits to SMEs too. But if they want to show a real difference to the Conservative approach, Labour must make sure they understand these nuances and show that they’ve thought through the issues properly. There's no evidence of this yet.

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