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Bolton Committee


Published for historical reference.

A committee of inquiry set up by the President of the (then) Board of Trade in 1968 under the chairmanship of John Bolton to report on the role of small firms in the British economy. The committee reported in November 1971 that there were one and a quarter million small firrns in the U.K. economy contributing some 24 per cent of the net output of the private sector, or 19 per cent of the Gross National Product. The small-firm sector was in secular decline, both in number and in its share of economic activity. Quite apart from the social and political value of small firms, the committee distinguished a number of important economic functions performed by them (while recognizing their organic role and the difficulty of distinguishing single functions). Two of these functions - 'as a breeding ground of new industries and the source of dynamic competition' were regarded as of crucial importance, and it could not be assumed that the ordinary working of market forces would necessarily preserve a small-firm sector large enough to perform them. The report found that the small-firm sector in the U.K. was significantly smaller than in other advanced countries, but the committee judged that the decline 'has not yet reached a stage at which deliberate disciimination in favour of small firms on the part of the government would be justified'. The committee recommended, and this was subsequently accepted by the government, that a small-firms division should be established in the Department of Trade and Industry to monitor the health of the small­firm sector. The committee made a number of recommendations for improving the availability of statistical information on small firms, including a census of enterprises and many other matters including taxation, industrial training, form filling, competition policy, disclosure, industrial development and planning controls. The committee concluded that the Macmillian Gap had been filled, althoµgh it was 'important to remember that the role of (financial) . . . institutions, however adaptable and sensitive to market needs .. . is necessarily limited ... (and) can never take the place of personal wealth and ploughed-back profits'. The causes of the decline in the small-firm sector were identified as increasing taxation, increased importance of marketing economies, the increasing role of the state, the emergence of the giant corporation, improved transport and communication and other technological factors.

Reference: The Penguin Dictionary of Economics, 3rd edt.