SMEs collateral damage in surplus quest

First came the federal budget surplus promise, now comes the surplus pain.

Shadow small business spokesman Bruce Billson says that pain has been highlighted by officials from the Department of Innovation, Industry, Science and Innovation, who he says told a Senate Estimates hearing in Canberra yesterday that $27.5 million of funding to key SME support programs including the Business Enterprise Centres has been frozen after a directive from the Finance Department.

Billson has lashed a “shameful” Federal Government for trying to hide the freeze. He says officials told Senate Estimates that instead of owning up to the fact funds have been frozen, they said “the advice that we would have provided to the applicants is that the assessment process is progressing”.

Billson, who loves a thundering press release, had a good old shot at Labor.

“Respected service providers are being left in limbo and forced to wind-back support to small businesses trying to cope with the challenges of a difficult economy made worse by the carbon tax and a growing red tape burden.

“Instead, the government misleads service providers into believing that tenders are still being evaluated when in fact the funding has been frozen.

“While the government fudges its finances to create the illusion of a surplus, it has left small business advisory service providers ‘on hold’ waiting to learn of their funding fate.”

Although Jackie Zelinsky, chief executive of BEC Australia, told SmartCompany funding had been paused rather than frozen, it’s certainly a bad look.

Freezing or “pausing” the funds is one thing: not telling applicants what’s happening is tricky and frankly silly.

And Billson is right when he says this all comes back to Wayne Swan’s surplus promise. With the budget surplus forecast at a skinny $1.5 billion and tax revenues coming under further pressure from the slowdown in the mining sector, the government is going to have to look for spending cuts or spending deferrals.

Swan will release his mid-year economic outlook in the coming weeks and we’ll get a better feel for just how many spending cuts will or won’t be necessary.

But what this episode makes clear is that Penny Wong’s Finance Department is already putting the brakes on all sorts of spending measures big and small. And SME programs aren’t immune, as we’ve already seen with Commercialisation Australia grants being frozen a few months ago.

To me, freezing SME programs is silly – the SME community is such an important driver of employment and economic activity.

But with Swan and Prime Minister Julia Gillard locked into their surplus commitment, the cuts will keep coming and election promises may be pretty thin on the ground next year – from both sides.

James Thomson is a former editor of BRW’s Rich 200 and the publisher of SmartCompany and LeadingCompany.