The remarkable legacy of the Enterprise Allowance Scheme and the case to bring it back

During the 1980s, in the midst of surging unemployment, Margaret Thatcher’s government rolled out the Enterprise Allowance Scheme (EAS), an initiative which provided a weekly allowance for unemployed people of working age with entrepreneurial ambitions. Although it had its critics, the ESA left a remarkable legacy.

Rolled out nationwide in 1983, the Enterprise Allowance Scheme provided £40 (£166.45 today when adjusted for inflation) a week for up to 12 months. Its recipients needed to have been unemployed for at least eight weeks and have at least £1,000 (£4,161 today) in savings.

At a time when the unemployment rate was above 11%, how aspiring entrepreneurs met the scheme’s cash requirement appears paradoxical. However, Luke Haines, an EAS beneficiary who found fame with The Auteurs in the early 90s, told The Guardian that if you went to the bank and told them you were doing the scheme, they gave you a £1,000 loan “just like that”.

Those enrolled in the scheme, which supported 103,000 people a year at its peak, received business advice and were required to submit business plans. The EAS has been criticised as an attempt to massage the period’s dire unemployment figures, whilst fewer checks and more money compared to being on the dole meant some did abuse it. However, it is credited with helping 325,000 become self-employed.

James Aitken, owner and founder of destination management company Cashel Travel, got started on the scheme. But before signing up, Aitken had 18 jobs by the time he was 19, on account of the period’s economic turbulence.

“I bought a Vauxhall Viceroy with money I borrowed from my father and started chauffeur driving, taking rich Americans around the highlands,” he says. “I did that for a couple of years and then realised there was more money to be made doing accommodation rather than just driving. So, I started a company called Scottish Tours, eventually sold it and I’ve been in the industry ever since.”

Over the past 30 years, Aitken has founded four companies and sold three of them. He also serves as the chairman of UKinbound, CEO of Tiernan Travel and managing director of Broadstone Network, a video marketing company. But looking back, he concedes that he couldn’t afford to sign off the dole to become an entrepreneur without some financial support, especially as he had a family.

The Riverside

The EAS also helped Keith Jeffrey and a group of friends to establish The Riverside, a legendary Newcastle music venue where Nirvana played their first European show.

After successfully acquiring grant funding from Newcastle City Council, Jeffrey, who served as the venue’s deputy director and business manager, says the Enterprise Allowance Scheme was one of the key factors in sustaining the business during its first year. “It took the basic need to earn a living out of the day-to-day business operations,” he adds.

The Riverside ran for around 15 years before it was acquired by a corporate leisure business, but not before it hosted the likes of the Happy Mondays, Primal Scream and David Bowie, along with pioneering acid house, world music and jazz in the city.

Jeffrey left the business in 1990 and went on to lead several companies, including the National Glass Centre and Coventry University Social Enterprise, and he currently runs BreakThrough Coaching. However, he says the Enterprise Allowance Scheme allowed him and his friends to take the risk of establishing that first business.

“Around 10 people’s salaries were liberated to focus on getting the business up and running. It was really hard but what I know about business now I learned in those early years,” he adds.

Yet it was not risk-free. New Enterprise Allowance

The EAS was replaced by the Business Start Up Scheme in 1991, and other similar policies followed. In 2011, seemingly inspired by the EAS, David Cameron’s government launched the New Enterprise Allowance (NEA). However, its scope of support was much more limited.

Initially, NEA recipients were required to claim jobseekers’ allowance (JSA) for six months prior, although this was changed to allow for applications from day one of a JSA claim in October 2012. In January 2015, it was extended to include people in receipt of several other benefits. The NEA was also worth £1,274, paid at £65 a week for the first 13 weeks and then £33 a week for a further 13 weeks. This was a far cry from the £2,080 (£8,655 today) paid out by the Enterprise Allowance Scheme.

Considering the reduced support, it’s not surprising the New Enterprise Allowance enjoyed less success. 276,000 individuals took part and 157,000 (57%) progressed to set up a business. In comparison, more than half a million people signed up to the EAS and 325,000 became self-employed over a shorter duration. Plus, 18 months after enrolling, 65% of participants had set up and were still employed in their businesses, with over a fifth of these new business owners employing other people.

So, is it time it made a comeback?

Aitken believes so. “Now it’s very hard and very easy to start a business,” he says. “There are few barriers to entry, but you need capital. A lot of people with good ideas need some stability for a while to take the risk. If you’re unemployed, it’s hard to take the risk and give everything up because if you don’t make money within the first couple of weeks, you’re gone and back on the dole again.”

Jeffrey concurs. He says, “I think it'd be fantastic for people because there's a whole thing now about side hustles and if you've got a computer, you can run all sorts of businesses.

“For a lot of people, if it gave them the freedom to start up something they really believed in, you might end up with another Superdry or Creation Records. I guarantee it would because if talent is being constricted, particularly working-class kids because they have to pay bills, they’re going to have to take a job at McDonald's.”