§ [Relevant documents: The Report and Accounts of the Small Business Service for 2000–01 [HC 104 of Session 2001–02] and the Framework Document for Government Departments "Think Small First".]
§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. McNulty.]9.34 am
§ The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths)
It is a pleasure to open this important Adjournment debate on the need to ensure that our small businesses get to the future first. The Government have an ambition to make the United Kingdom the best place in the world to start and grow a business. Successful businesses are set up and run by enterprising individuals, but the Government shape the environment within which they can do business. The Government therefore have a responsibility to provide the most appropriate support required by our small businesses so that they can compete effectively to meet the challenges of a global economy.
We also have a responsibility to minimise the burdens that are imposed through better regulation and other measures. We have a duty to provide a stable macroeconomic environment that allows small business and enterprise to flourish. I want to stress the importance of small and medium-sized enterprises to the economy. It is clear that the SME sector, in terms of job creation alone, is vital to the economy. Nearly three quarters of the increase in employment has come from small and medium-sized firms. In the past five years for which figures are available, more than 750,000 more people were in work. Some 5.9 million jobs were created, and SMEs created 540,000 of the gain. That is 71 per cent. of all the extra jobs created.
UK SMEs have a combined annual turnover of around £1 trillion. SMEs also bring benefits such as stimulating competition, providing a supply chain and developing and exploiting new technologies and niche markets, so there are many reasons for the Government to focus on this sector.
In the industrial economy of the 20th century, large corporations drove economic progress. In the knowledge economy, the drivers of change will be small businesses. In March this year, a Department of Trade and Industry foresight report entitled "Financing the Enterprise Society" was published. The foresight programme is a partnership of Government and business, small and large, which helps all of us to think about the future and helps business get to the future first.
1048 The report predicts that over the next 10 years small businesses will be the main drivers of economic growth, product innovation and job creation in our economy. There are several reasons for the shift in importance from large to small organisations. First, there is the war for talent. People with knowledge, imagination, creativity and entrepreneurial drive are increasingly impatient with large organisations. They want more freedom, and more control over what they do; they want to own their work, and they want to own the results. Large businesses are trying, sometimes desperately, to strip out their bureaucracies, change their culture and marry the benefits of scale with the benefits of small, but it is a tough thing to do, as we in Government know only too well. Thus smaller and entrepreneurial businesses are finding it easier to attract the people they need.
Secondly, there is the impact of information and communications technology. Increasingly, the use of the internet and e-business is bringing about the death of distance. Ease of access to information will drive down prices and allow the rapid rise of new competitors, leading to increasing globalisation, even by small businesses. The technology revolution in particular is changing the way we live and work—as consumers, as citizens and, very definitely, as business people.
The third reason for the shift from large to small organisations is the speed of change and the need to innovate. That is where small can definitely have its advantages. Around 88 per cent. of all novel innovators—the firms introducing a technologically new or improved product to the market—are SMEs. It is usually much easier for small businesses to change their products. They can change direction quickly, move swiftly into new markets, seize opportunities in new technologies and work in new and innovative ways to achieve their goals. In today's business world, it is not just getting ahead but staying ahead that counts.
We support the growth of the self-employed sector and of small business. We want to make it easier for people to start up on their own account. We are working to achieve that by producing more user-friendly guidelines such as those set out in the Inland Revenue's booklet "Thinking of Working for Yourself?" Already the number of small businesses, including self-employed people, is growing fast—up 170,000 in the past four years. On the basis of the foresight study, we can predict that by 2010 there will be almost 1 million more SMEs—a growth from 3.7 million today to more than 4.5 million. Between them, those businesses will have created 2 million new jobs.
I want to say a few words about the life cycle of small businesses. The numbers understate the scale of the change. I do not have to tell informed hon. Members here that many small businesses do not last. However, that does not mean that they fail. There are many reasons why an owner will decide to close a business, often to start up something else, sometimes to move into employment. New businesses emerge to fill the gaps left by the weakest link, but on present trends, on the basis of the foresight projections, most of the businesses that exist today may not exist in 10 years. But of course their parents are already in business; it is just that most of the 4.5 million businesses that will exist in 2010 have not yet been born.
Start-up and survival rates are critical. Life expectancy for small businesses has improved in recent years, benefiting from a more benign economic environment. 1049 Almost 130,000 more businesses have started up than have closed in the past three years. More than 1.6 million new businesses have started since April 1997, of which an estimated 900,000 are still trading. The latest survival rates show that more than 88 per cent. of businesses now survive one year after registration, with 61 per cent. surviving three years.
The number of business closures during 1999—382,000—was the lowest in a decade. There were 3,700 company insolvencies in the fourth quarter of 2000. That is much lower than in the early 1990s, when they peaked at almost 16,000 a quarter. Of course, all that is against a background of the longest period of low inflation for more than 30 years and the longest run of low interest rates throughout that period, with rates less than half the level of a decade ago. Long-term rates are now lower than in the United States and in other EU states.
One million more people are now in work, and unemployment is down in every region and nation of the United Kingdom. We are encouraging enterprise and entrepreneurship for all. We need to ensure that we maximise the potential of all our aspiring entrepreneurs. If the United Kingdom is genuinely to become an enterprise society, there is no doubt that more needs to be done to encourage everyone in society to believe that they can really make it in business. That is one reason why the Government established the Small Business Service in April last year.
The role of the Small Business Service is to develop world-class business support services. We are all concerned that small businesses and those who want to start up in business should have easy access to high-quality business advice and support in whatever way best suits them and at every stage of their development. I am confident that all business link partners will have the needs of small businesses uppermost in their minds, and this can be summed up as their commitment to a ruthless customer focus.
Our commitment to social inclusion means reaching the parts that other schemes fail to reach, and the SBS is also investing in deprived areas and among groups who are under-represented in business, via the Phoenix fund and community finance initiatives. The Phoenix fund has already generated a great deal of interest—250 bids were received, of which 50 were successful.
Let me tell the House about one such bid—the Phoenix development fund project for women in Birmingham. It aims to establish, develop and maintain a programme to help women across Birmingham, irrespective of their status, ethnicity or religion, to set up and run businesses. The programme will contain a blend of workshops and group business counselling activity, together with structured training. The menu of options available includes one-to-one business counselling, idea-generation workshops, workshops on relevant pieces of legislation and skills training. The project also plans to establish a self-financing working forum for women-led businesses.
About a third of start-ups today are by women. More than 840,000 women in the UK are self-employed. Despite a significant increase in women's participation in other parts of the labour market, the proportion of businesses started by women has remained roughly constant since 1998. True, nine out of 10 women think it 1050 is easier to start up in business today than in the past. However, discrimination is still a reality. Research by the NatWest shows that women are most likely to establish businesses in service areas. Almost 50 per cent. of businesses in that sector are started by women, and such businesses are least likely to have employees as they tend to be run from home. Women face problems starting up, including sexual discrimination, not being taken seriously, and, very important, having to juggle family responsibilities.
The SBS small firms loan guarantee scheme has been of particular help to women, who may lack a proven track record, in raising finance. Business link operators have been addressing their business plans to how best to support and encourage female entrepreneurs.
The Government recognise the increasingly important contribution of ethnic minority businesses to the economy. For many decades, such businesses have been a driving force. Starting small, ending up big—some of them massive—all of them make a tremendous contribution to British society. It is estimated that ethnic minority businesses represent about 7 per cent. of the total UK small business stock. Britain's ethnic minority businesses contribute almost £13.5 billion annually to the economy. More than half of that is here in London, where almost 50 per cent. of the UK's ethnic minority population lives.
People from ethnic minority groups are more likely to be in business on their own account and to employ others. We recognise that many ethnic minority business people are among the most entrepreneurial in our society, and we have a lot to learn from their experiences. In 1997, people from ethnic minority backgrounds represented 5 per cent. of the UK population, yet entrepreneurs from ethnic minority backgrounds were responsible for 9 per cent. of new business start-ups.
The needs of ethnic minority businesses are diverse, but they all share the common concerns of small business, including raising finance, competition and marketing. The Government want to make sure that we are tailoring our policies and business support to improve their competitiveness. That is why the new network of business links is gearing up to meet the needs for start-up support from the black and ethnic minorities. Business links can make the difference between somebody being able to start a business and just aspiring to it.
Denton Thomas was a Business Link client. When he decided to set up his own travel agency, he did not need any advice on how to do his books or pay his tax because he had been working for the Inland Revenue for 22 years, but he did need advice on accessing finance to keep him afloat through the first few months of trading. Business Link provided advice on applying for finance and helped him through the process. That was six years ago; today his turnover is approaching £1 million and he has plans for expansion. He knows that Business Link made all the difference and that without it he would not be where he is today.
We are keen to ensure that the Government think small first. A major role for the SBS, especially in relation to regulation, is to ensure that Government Departments are really thinking about the effects of their actions on small businesses. To promote this objective, the Government published "Think Small First" back in January. As a result of that publication, we have agreed to introduce a 1051 minimum period of 12 weeks for consultation on possible new regulations and a 12-week period of grace after regulations are finally agreed, when guidance should also be made available. This consultation period prior to the regulations coming into force will give small businesses and the regulators another opportunity to consider the implications and make the changes required.
I know that the House will join me in hoping that wherever possible we can avoid making regulations and bringing in legislation. Under all Governments, there have been criticisms that red tape stifles small business, but it is important to remember that, according to the OECD's "Economic Outlook" published in December 1999, the UK has less regulation than other OECD countries. We know, however, that there is no room for complacency and that we need to work hard to maintain and improve that position.
Of course, the sensible way is to strike a balance on regulation to protect employers, workers, and consumers and to guarantee decent minimum standards. Most businesses see the advantages of treating staff and customers well, but a tiny few do not. Last year, 180,000 people were injured and 160 killed in workplace accidents, and 30,000 consumers were harmed by faulty products. Consequently there will always be a need for regulation in some form. The Government's role is to ensure that we promote intelligent or smart regulation. In that way, we can provide businesses with effective incentives fully to meet their potential, and not wrap them up in red tape.
For employers, we have introduced exemptions for small businesses in relation to trade union recognition, EU requirements on unit pricing in shops, merger fees and rules on stakeholder pensions. While minimising administrative costs to employers, millions of employees have gained from a direct improvement in their terms and conditions, for example, through the introduction of the national minimum wage and annual leave entitlement—all with no apparent negative effect on employment levels.
Recent research shows that fewer than one in six businesses cite red tape as their most important problem. The concerns of businesses were expressed in the following proportions in a recent MORI poll: 44 per cent. on securing sales and cash flow; about 14 per cent. on costs and overheads; and about 6 per cent. on changes to regulations. That reinforces the need for accessible business support and advice for small businesses. That is why we have made that help more readily available than ever before.
In partnership with the Business Link network, the SBS recently launched a national website and contact centre—www.businesslink.org—providing information and advice. I remind the House that 1.7 million small and medium-sized enterprises are already IT-literate, and more than 450,000 of them have access to the web. The service that we now provide will continue to expand and evolve.
A major objective of the web service is to provide personalised support enabling registered users to have their interests noted so that they can be automatically provided with up-to-date information and regulatory changes and, in due course, with business opportunities—for example, from EU tendering lists.
Business Link can help with all aspects of setting up, running and growing a business. Although the new Business Link network went live in April, I should like to 1052 take this opportunity to thank everyone involved—Business Link, local authorities, chambers of commerce and others—for their effort and commitment in making this possible.
I believe that we are building on the good foundations laid over the past decade and that we are well on the way to having in place a truly world-class business support service. That is precisely what our small businesses deserve.
§ Mr. Richard Page (South-West Hertfordshire)
May I start by declaring an interest? I have an interest in small businesses in that I have owned, operated and worked in several of them. The number of employees ranged from six to 106. The turnovers were from a few thousand to tens of millions. It is exciting. It is rewarding—sometimes—but it is also hard work. Running a small business is tough. I make that point not only to demonstrate that I have some of hands-on experience, but also so that those who are interested in such matters will appreciate that I am declaring an interest. Those interests are in the register for all who want to examine them.
My work in small businesses has taught me that we cannot fire a magic silver bullet to make all the problems of small business disappear so that all will be well. The problems of this vital sector can be likened to a cake. That cake is cut into slices of varying thickness and digestibility, but all have to be tackled and consumed. When that has been done, the Government of the day will look down at the plate to find another cake there—also with slices of various sizes. The aim of the game is to ensure that it is a smaller cake and that when that one is gone, there should be an even smaller one, although I doubt that we shall ever arrive at the point when there will be no cake at all: no problems facing the small business sector. As the Minister said, the sector is diverse; it is made up of many, many parts, so what might help one part of the sector may often damage another.
From that perspective, I can fully understand why, over the past few years, Labour Members have highlighted the Government's efforts to maintain stability in the economy. Obviously I welcome that stability: no one wants high inflation or high unemployment. I was about to say "high taxation", but some Labour Members are rediscovering an innate restlessness on that subject. It was there years ago, but has been coming back since 7 June.
I want to deal with some of the larger slices and—surprise, surprise—the largest slice is the one on which the Minister spent some time: the question of regulation. As I listened to his remarks, I could have signed up to almost everything. As a former Minister for small business, I said, "Yes, that's right, that's what we want to achieve, that's good": but then I gave myself a little pat on the cheek, woke up and found that what the Minister was saying and what the Government were actually doing, although not diametrically opposed, were certainly not exactly the same thing.
The truth is that the Government put considerable spin on their claim to be the friend of business in general and of small business in particular, but that is belied by the facts. In April 1997, Labour's business manifesto stated:We will not impose burdensome regulations on business, because … successful business must keep costs down.1053 But what do we find? Since 1997, the Labour Government have added £10 billion, through regulation, to the burdens on business. Those are not our figures; they come from small business organisations.
I do not want to embarrass the immediate predecessor of the Secretary of State for Trade and Industry, but it was that right hon. Gentleman, the present Secretary of State for Transport, Local Government and the Regions, who—
§ Geraint Davies
Does the hon. Gentleman recall that about 90 per cent. of that £10 billion consists of the costs of the minimum wage and the working time directive? The Conservatives are now in favour of the minimum wage and they cannot change the working time directive, so to present that as red tape is misleading.
§ Mr. Page
I was merely pointing out that since 1997 there is an extra cost burden on businesses of about £10 billion. It is made up of several things, some but not all of which we have signed up to. I do not disagree with part of the hon. Gentleman's comments, but I do not think that the burden is quite so heavily loaded on one side. It is much broader. I shall come to that point—he will be delighted to hear—as I progress through my few words.
I do not want to embarrass the Secretary of State's immediate predecessor, but he said on 2 February that he wouldguarantee that we would not allow regulation to stifle enterprise".A few months later, he went on to concede thattoo often regulations have been introduced with too little consultation and too little warning".He should know; he is in a perfect position to judge.
More regulations than ever before—well over 3,500—were imposed on British businesses in 1999, but that record did not last long. Last year, 3,865 regulations that affect businesses were passed by the Government. I am told that the overall cost of complying with European Union and domestic regulations is equivalent to about 3.7 per cent. of our gross domestic product. That approach can only be described as control freakery—a phrase that is now entering the parliamentary lexicon—and it is unsustainable. Big firms can handle the extra cost involved, but smaller firms simply cannot; it is too much for them.
The owners and managers of firms with 10 to 14 employees spent about 31 hours a month complying with such regulations, according to a NatWest survey conducted in the autumn of 1999. I suspect that they would probably spend longer doing so now. A more recent survey by Kingston Smith showed that 56 per cent. of small firms found employment regulations extremely or very time consuming; 42 per cent. reacted in the same way to pay-as-you-earn regulations and a similar proportion to health and safety regulations; and 35 per cent. found personal taxation forms confusing. I put myself in that 35 per cent., and I should be interested to 1054 know whether any hon. Member does not do the same. Obviously, as all Labour Members are loyal to the core, they will leap up and say how simple all that is and how easy they find filling in their personal tax forms.
In each of the regulatory sectors, significant numbers of businesses have doubted whether they are actually complying with the regulations. The Government, not small firms, are responsible for the complexity of the regulatory machinery. We all know that the Government have a number of inspectors who are expert in various disciplines—so they should be—but they expect small business men to be expert in all those sectors as well. That is a burden too far, but I am glad to say that the Government have been listening to what we have been saying. The inspectors are now trying to play—it will be a hard task for them—a more advisory role, providing guidance, rather than an enforcement role. I welcome that change and hope that it can be extended. The inspectors have to do their job, but only if a small business does not comply, having been warned. They should give advice when it is clear that small business men or women probably have not got a clue whether they are complying with the latest regulations.
I do not want to encourage kleptomania, but the time has come for the Government to adopt—dare I say steal?—Conservative party policies on deregulation. That should not worry them too much; they have stolen so many of our clothes already that a few more will not do any harm. However, an independent assessment of the overall costs of regulation to the economy is urgently needed, as is a willingness on behalf of the Departments responsible for those regulations to accept targets to reduce the burden that they impose, year on year.
New regulations should not be introduced unless, simultaneously, old ones are removed under the regulatory reform process. Sunset clauses should be used more often and more openly. Small businesses certainly have a good claim to be exempted from certain classes of regulation. I welcome the examples that the Minister mentioned, but such exemptions should be extended. There is evidence that businesses on the continent are allowed exemptions from European regulations, whereas we try to ensure that as many people as possible comply with them. If firms with 10 or fewer employees had been exempted from the parental leave regulations, more than 80 per cent. of firms would have been freed from an obligation that is especially onerous for micro-organisations, but only 20 per cent. of employees would have been affected. We should encourage that.
The Minister tells us that deregulation is part of the Government's agenda. Ministers often say that they want regulations to be lifted, but I wonder whether any of them has ever run a business. If they had, they would immediately tell their Departments, "We are not winning." Out in the real world, the Federation of Small Businesses has produced a red-tape dossier, which lists regulations that hurt small businesses, and a booklet entitled "Constraints on Business Growth", both of which should be compulsory reading for Ministers. We recommend that our party should go away and read the book, "Men are from Mars, Women are from Venus"; well, I recommend that Ministers read the booklet "Constraints on Business Growth" and the red-tape dossier. If they did so, they would start to grasp the feelings of those in small business towards what the Government have done in the past few years.
1055 We can bat surveys back and forth, but part of the survey that underpins that booklet was carried out by Strathclyde university, which produced the statistic that some 50 per cent. of small businesses wanted to expand, but the fact that more and more burdens are being lumped on to employers has led to some 56 per cent. of them voicing concerns about the effect of regulation in relation to employing staff. I do not know how many people were involved in the MORI survey. nor whether MORI comes that high up the poll for accuracy in various parliamentary predictions, but the Strathclyde university survey polled about 21,000 people.
§ Geraint Davies
I, too, have run a small business. Does the hon. Gentleman accept that some red tape, such as the working families tax credit in the payroll, are part of enabling more people to access the job market, which reduces small business wage costs because more people are in the market? Although small businesses moan and groan about red tape, it is part of the reason why they are growing and creating more profit, and they cannot have it both ways.
§ Mr. Page
The hon. Gentleman seems to be trying to fight both ways. Certain regulations are necessary; they exist to provide protection. We certainly would not want a complete free-for-all, without rules and guidance, but there is excessive enthusiasm for regulation and gold plating. Either he is right, or a substantial percentage of the small business sector and the Minister are wrong, and I am wrong. The Minister has just spent half an hour at the Dispatch Box arguing that regulations and red tape need to be reduced for companies, and I endorse that position.
§ Mr. Page
I hope to speak for only 20 minutes—so long as I do not keep getting interrupted.
The Government inherited a golden legacy, and I admit that when the economy is going from strength to strength, help and protection for small businesses is not so urgently needed, but when there is a downturn, it becomes vital to try to reduce the burdens on them. The Chancellor claims that he has done away with boom and bust. I seem to remember that there was a king called Canute who thought that he could stop the tide, but he was unsuccessful, and I strongly suspect that no Chancellor can insulate a country from world conditions.
The Minister and I are as one in believing that future employment will come from small businesses. Large companies are downsizing whenever possible and subcontracting out more and more work. The old concept of large businesses doing everything in-house is dead. Small businesses must be part of the supply chain. I know that over the years the Government have endeavoured to build up a supply chain involving small firms so that they can develop flexibility, which is essential, and larger firms can keep their products up to date and their designs fresh and exciting, rather than ossifying in traditional patterns.
The Government use many fine words, but over-regulation and gold plating carry on apace, and each year sees a new record figure for regulations established. The Government have, using psychology, carefully named the taskforce headed by Lord Haskins. The fact that it is 1056 called the better regulation task force, rather than the "less regulation taskforce", means that it will not necessarily reduce the burden of regulation, but rather try to make it better. However, the Government simply pile regulation on regulation.
Lord Haskins has expressed his frustration about the fact that the taskforce is failing even to slow the remorseless flood of regulation that spews out of Whitehall every day. Much has been made of the Regulatory Reform Bill. I served on the Standing Committee that considered the Bill, and I wish it well, as we all do. However, the power to examine regulations comes into effect only when they are two years old. There is no mechanism to check the existing Whitehall regulation machine, as Lord Haskins is so obviously aware.
The Small Business Service is supposed to explain regulations to puzzled, concerned business men, but the head of the service, David Irwin, has complained that the task grows more complex each day. Last September, he said that he wanted to introduce a red tape index, which would monitor the amount of regulation introduced each year by each Department, and then he would try to make the Departments cut that amount. That sounds fine, but the service has failed to meet its target, and a series of parliamentary answers shows that little, if any, progress has been made. Again, we have spin, but no delivery.
I agree with almost all of the "Think Small First" report. Its executive summary says:Businesses have a range of needs, including access to advice and training, finance, workspace, labour with the appropriate skills and information. They desire a tax and regulatory environment that is fair, simple and straightforward. Ideally, they would like a culture that is supportive of business rather than antagonistic.There is nothing wrong in all, but are businesses getting a regulatory environment that is fair, simple and straightforward? I do not think so. In an interview on the internet, David Irwin says that his task is tomanage all of the government's small business support programmes and cut back regulation".What power does he have to cut regulation? What power has any organisation to do that?
Today, the Small Business Council has announced 21 measures. In true Labour style, the announcement was made on the "Today" programme. I look forward to hearing about those measures, but I look forward even more to hearing whether the Government will set up an independent organisation that could say "Stop!" when a regulation was proposed. The House could be told that the organisation had objected, and that would inform our decision whether to agree to the proposed regulation.
There is talk of the Department of Trade and Industry wanting to establish a Brussels bureau to be closer to the source of regulation. The aim would be to make it self-sufficient in two years. That is a bit rich because the Government are saying to business, "Please pay us to tell you what regulations we will impose on you in the coming years."
Returning to the Whitehall regulation sausage machine, I anticipate that anyone who objects to a regulation will be told by the Government, "Don't worry, if it does not work, we can use our new mechanism to examine it after two years." I wonder whether that attitude will permeate through the legislative process, and result in even less enthusiasm for halting regulation.
1057 I advise the Government to consider our manifesto commitment to establish an independent body that can prevent a Department from introducing a regulation unless it is referred to the House of Commons. The House should be paramount in these matters. I hope that it will be paramount on Monday in the decisions on Select Committee membership because those decisions should not be imposed by the various Whips Offices. If the Government are twitchy on that subject, I have grave doubts that they would be prepared to set up an independent body to control regulation.
We need independent assessment of the cost of regulation, and I hope that, at the very least, a red tape index will be established. If the Government do not have the courage to set up an independent body, they should use their toothless tabby, the better regulation task force, to produce information on the cost of regulation. The information should be gathered by the taskforce, rather than by the Small Business Service, because it has got to be seen to be at arm's length from the Government. Many Bills have a little note in the back, saying that the Government believe that they will incur no appreciable cost to industry, or whoever is affected by the legislation. However, when one talks to the people who are affected, they say that their costs will increase. That is why an independent assessment is necessary.
The Government must put themselves in the shoes of small business men, rather than trying to adopt the attitude that nanny knows best. There was a classic example of that immediately after the Government came to power, when they established a statutory right to interest on late payments. I accept that it was a manifesto commitment, but they continued with it despite the fact that they were mistaken in thinking that it would enable businesses to solve their late payment problems.
The measure has now vanished without trace, and if there is evidence that it has been a glorious success, I would like to see it. I have asked for such evidence, but nothing has been forthcoming. All I have is an article that was in a national newspaper a few months ago which says:The Labour party is today revealed as a 'maximum risk' late payer of its debts—despite introducing laws aimed at forcing businesses to settle up on time.Again, Labour is saying one thing and doing another.
I do not oppose everything that the Minister said. Much of it was supportive and helpful, and Conservative Members want to encourage that. We all want business start-ups to succeed, but that applies only to those that have a reasonable chance of success, rather than those set up by graduates of the "it seemed a good idea at the time" school. I am not saying that the UK should be like Germany, where anyone who wants to start a business has to be endorsed by the local chamber of commerce. There should be greater encouragement to ensure that, before a business starts trading, there is some check or independent evaluation of its business plan. This is not the time and place to develop that argument to the full, but we should do what we can to prevent the phenomenon by which companies start but then go bust in a very short space of time. That causes heartache not only for the individuals involved, but for all the people connected to the company—the people who have provided it with credit and supplied it with goods. Everyone gets hurt when a business fails.
1058 Small businesses in certain parts of the country have also been badly hit by the foot and mouth disaster. The problems do not affect just farmers: they go broader than that. Thankfully, my constituency has not had this terrible disease visited upon it, but NSR Communications, a company based in Rickmansworth that supplies public address and communications equipment, has found itself in trouble because the orders for its equipment have not materialised. As we all know, a number of agricultural shows and fairs in the north of the country have been cancelled and that has caused huge problems in many constituencies.
I pay tribute to the Secretary of State for Trade and Industry. NSR Communications was directed to the loans guarantee scheme and it was told that only companies that could demonstrate that they had a viable future would benefit from a loan guarantee. Obviously a company faces tremendous difficulties when it is affected by the problems caused by foot and mouth but, following my representations, the right hon. Lady went on to explain that she had asked her officials to discuss with the principal lending institutions the idea that viability should be considered on a long-term and short-term basis. She hoped that businesses that were successful before the onset of the disease would be supported by lenders until matters improved. I am grateful for her support.
I shall not describe all the difficulties facing the small businesses affected by foot and mouth, but the support that the Government have announced is inadequate. As the Minister will know, at Question Time yesterday, I raised that concern at the Dispatch Box and he made great play of the fact that £3 million had been allocated to the north-west to help the companies affected by foot and mouth. Given the effects on small businesses, £3 million is a mere drop in the ocean and we all understand the difficulties involved in channelling the money to those companies to ensure that they succeed.
We are as one in what we want to achieve, but we face a difficulty in how we are going to get there. The Government instinctively find it difficult to let things go and stop the control freakery that I mentioned earlier. Small firms are the main losers in that process. They lack the resources of the larger firms and they do not possess the same skills in dealing with the demands of the state. Just registering for VAT brings a 300-page book through the post from Customs and Excise. Many small businesses trying to stay afloat in competition with others cannot turn themselves into amateur tax men, health and safety officials or experts on employment law. The big firms can afford to employ specialists, but small firms cannot. Business Link can play an important role in that regard.
Government policies and regulations are not always put directly or exactly into effect. That brings the policies and the mechanisms of policy into disrepute. There is an excessive regulation of small firms and an indifference to their problems except in times of obvious crisis. That is discriminatory and unfair.
The gap between the two political parties is most obvious on this issue. We believe in less regulation and we think that small firms are likely to succeed in an environment in which the hand of the state lightly touches their affairs. The bureaucracy should exist to serve the interests of the people and of the small and large businesses that provide this country with prosperity. The Government's temporary political strength should not lead them to believe that the current conditions will last for 1059 ever. Like the Minister, I believe that the future of employment and the future of companies in driving the economy forward rely on our small businesses. Conservative Members will do everything that we can to help them.
§ Mr. Tom Watson (West Bromwich, East)
I am delighted to make my maiden speech in the House of Commons on an issue that is of vital importance to my constituents in West Bromwich, East. Being elected as the Member of Parliament for West Bromwich, East is a great honour, and I am thankful for the faith and the trust that the people have put in me. However, I have to admit to more than a little trepidation, because I am following in the footsteps of two excellent parliamentarians.
Peter Snape represented West Bromwich, East for 27 years. He left with a distinguished record of service to his constituents and party as well as with a reputation for toughness in the Chamber. The best compliment that I can pay Peter is to say that he never lost sight of where he came from. His working life began as a signalman in the Edgeley No. 2 junction signal box on the west coast main line and, despite his success as a Whip and as a member of the Labour party's transport team, he never forgot his roots. His no-nonsense manner and understanding of the world outside Westminster kept his feet firmly on the ground, but that would often get him into trouble with his colleagues. He was the only member of the Tribune group of MPs to vote for Denis Healey in the party's leadership election. However, Peter was always prepared to take a contrary view if it was the right thing to do.
Parts of my constituency were also represented by another highly successful parliamentarian. Baroness Boothroyd was a renowned defender of democracy and champion of this House. Parliamentarians around the globe referred to her as Madam Speaker, but in West Bromwich she was affectionately and simply known as "Our Betty".
Hon. Members will therefore know how tough it is to take up the role of MP for West Bromwich, East. However, the job has been made much easier by the welcome that the people of the constituency have given me.
West Bromwich, East is a misleading name for the constituency because the seat takes in parts of Walsall, Wednesbury and Birmingham. Each area is fiercely independent, with its own identity and proud history. A quick glance at Wednesbury's "What's on" for July shows a community overflowing with activity—from whist drives to wheelchair basketball.
One of the most frightening experiences of the election campaign was drawing the bingo numbers at the Friar Park millennium centre in Wednesbury. People talk about the fear that hon. Members face when making their maiden speeches, but let me say that this is nothing compared to the terror felt when pulling out the bingo numbers in front of Gladys Cooper and the 50 ladies from Friar Park who regularly attend her bingo club.
The Great Barr parts of my constituency are in the authority of Sandwell but the postal district of Birmingham. They share a common interest with the Walsall part of my constituency in protecting our precious green belt. Great Barr hall and the green fields that surround it lie in the constituency of my right hon. Friend 1060 the Member for Walsall, South (Mr. George), but a proposed new housing development on the site will affect many of my constituents, who fear congested roads and a reduction of our green spaces. Over the coming months, I will work to ensure that their fears are not realised.
Given my background as an officer for Britain's most progressive trade union, the Amalgamated Engineering and Electrical Union, I hope that the House will forgive me if I concentrate my remarks on the engineering and manufacturing challenges facing small companies in this sector.
After the industrial revolution, West Bromwich was known as "Spring Town". There was no shape or size of spring, for whatever use, that could not be made there. Springs of every shape and size were made and exported to all corners of the world. The springs made by Salter's Weighing Machines graced every kitchen table across the land, as well as shops, offices and factories all over the world. Anywhere where there was a need for accurate measurement of weight, a West Bromwich spring would be present. But that was the tip of the iceberg. West Bromwich also made springs for suspensions and shock absorbers. Ask for a spring for any purpose, and one of the small firms in what today we would call a cluster was able to make it. The byword was innovation.
West Bromwich Spring in my constituency has been at the forefront of the industry for more than 100 years. It makes anything from a spring as small as a few millimetres in length that weighs less than a gram to one two metres high that weighs half a tonne. Although it is important to celebrate such long-standing success and technical expertise in an intensely competitive industry, it is important for us not to rest on our laurels. Put simply, we cannot live for ever on the innovations of our parents and, in some parts of the black country, our grandparents.
It is worth mentioning how, in that early cluster of spring companies, innovation and technology transfer took place. After a long day of thirsty work at the hearth or forge, the springmakers would often drop by at the local pub for a fine pint of black country beer—a practice that many of my constituents still enjoy today. Over a pint, springmakers would fall into conversation about the trouble that they had in getting a particular steel to harden or their difficulty in making an accurate spring. As they chatted away, one would tell the other that he, too, had had the same problem and some time ago achieved the solution, which he then passed on. The next day, back at work, that solution would be put into practice, and technology transfer had occurred.
Today, the technology challenges that small engineering and manufacturing firms face are much broader in scope, from the advances in new materials—composites, polymers and plastics—to the technological explosion in computers and telecommunications brought about by the e-revolution. Sadly, the range of technical support that they need can no longer be found in the local pub. Hon. Members should not think that I am trying to persuade them that there are no excellent hostelries in West Bromwich, East—the Vine and the Crown offer the best curry and beer in the country, and they sustained my campaign team through the long month of the general election.
I warmly welcome the Government's commitment to supporting all small firms through the Small Business Service. I also welcome the commitment to creating a 1061 regional manufacturing advisory service. It is important to regard the Small Business Service as we would a GP—as looking after the health of small firms in an area. However, when it encounters a technology-based firm with a particular technology problem, it must be able swiftly to refer it to the best possible body of expertise in the relevant technology, wherever that happens to reside.
In an ever more complex world in which multiple technologies are required to make even more complex products, technology transfer from industry to industry and firm to firm will be achieved in many different ways, from seminars and conferences to the use of the internet and the world wide web. We must embrace all those methods to equip our firms to compete in an intensely competitive global market.
On a personal note, I began by mentioning my predecessors. As a new Member, I cannot help but be struck by the history that swirls around us in this place—the statues of kings, queens and great leaders of the past and the ornate paintings and architecture—but if there is one thing that my predecessors taught me it is that we should always keep our feet on the ground. We are here to serve the people who elected us. The problems that they share, the challenges that they face and their hopes for the children whom they cherish are the reason why we are here.
§ Brian Cotter (Weston-super-Mare)
I applaud the hon. Member for West Bromwich, East (Mr. Watson) for his interesting and lively maiden speech. He mentioned a couple of pubs and said a little about his constituency, but what struck me most was his interest in business and industry. We welcome an hon. Member with such a background, especially as there are fears that the manufacturing industry is in the doldrums. I look forward to hearing more from him.
I declare an interest as managing director of a small manufacturing company. I should be running my business this morning, but I am attending the debate because I keenly anticipate the Under-Secretary making some interesting comments. I hope that my presence will be worth while. [Interruption.] I think that the Under-Secretary said, "One person, one job," but it is important that hon. Members have other experiences. I could not abandon my business when I was elected because my employees depend on me for their work. Like that of the hon. Member for West Bromwich, East and other hon. Members, my business experience contributes to this place. Perhaps the Under-Secretary has such experience, but many civil servants and others do not, and we need people who have day-to-day experience of business.
Small business is usually the responsibility of a Minister of State. It is regrettable that the role has been downgraded—as some Labour Members have—and is now the responsibility of an Under-Secretary. I had hoped that the Government would mark the way in which they think about small business by appointing a Minister of State. It is a shame that they have chosen not to do that, although I hope that the Under-Secretary will be effective.
It is also a shame that we are having the debate today. I am not sure whether this is the annual debate on small business. Perhaps the Under-Secretary will make that 1062 clear. We need an annual debate, although that is not to say that we should not debate the subject at other times. The annual small business debate should be declared as such and held when many more hon. Members are present to participate.
Having made those slightly jarring comments, I welcome the Under-Secretary to his job and look forward to hearing from him as he gains experience. We want the Government to produce new initiatives. Mere words to the effect that they support small business are not enough. I want something more tangible. Perhaps the hon. Gentleman will surprise us at the end of the debate.
We welcome the Small Business Service. As a concept, it follows the United States model and is a good thing. However, after a year, it is worrying that many people wonder whether it has established a clear profile. The hon. Member for South-West Hertfordshire (Mr. Page) referred to effectiveness in regulation and legislation. I have been looking for such effectiveness in the Small Business Service, as there is in the United States service. The chief executive should have a powerful role and be able to intervene at the heart of government to ensure that regulation is effective and not over-burdensome.
I am not the only one making such comments. The better regulation task force has recommended that the Small Business Serviceshould lead a project to deliver, in partnership with other representative bodies, a single internet portal",and that it should be more effective in delivering what it has been set up to do. It is essential that the SBS functions effectively to ensure that the small business community is at last represented—not just by an Under-Secretary but by an organisation at the heart of government.
The Government had an opportunity during the foot and mouth crisis to demonstrate their commitment to small businesses, but they did not come up trumps—nor, indeed, did the Small Business Service. When the crisis broke, many small firms were unsure where to go for the help promised to them. At the time, Government help was very modest, and it was regrettable that, on telephoning the helpline, people found out that they had to pay 8.75 per cent. interest on any deferred payments. That was subsequently put right. The SBS should have come into play quickly and effectively, but it did not. We support the concept of the Small Business Service, but it must be effective.
The Under-Secretary spoke about the Business Link network. The SBS has indeed improved it by issuing franchises, but I still hear reports about their variable effectiveness. The Under-Secretary highlighted the Phoenix scheme and others, and there are some good ones, but we look to him to spread them throughout the country to reach small and micro-businesses in particular.
The Government have today been politely castigated by the Small Business Council, whose report has drawn attention in particular to rules on consultation of small business. The Government and the SBS have not been effective in consulting small businesses so that such firms have a better chance to affect legislation.
The Liberal Democrats have consistently raised concern about regulatory impact assessments. On the one hand, I am glad that the council has said that Departments have failed to produce what is required, but on the other, 1063 I am disappointed that it has had to do so. We have hammered on about the issue in this Chamber and elsewhere. I hope that the Under-Secretary will take the council's report very seriously.
We broadly welcome the proposed enterprise Bill. We hope that it will be effective in many areas. We welcome proposals to abolish the Crown's preferential right to recover unpaid taxes, to remove automatic VAT fines and to crack down on monopolies and cartels, and the possibility of a new flat rate of VAT. That will be music to the ears of many small business owners.
I hope that the Government will seriously consider including in the Bill a dedicated payments regulator, as recommended in the Cruickshank report. Many in the small business community, the Liberal Democrats, the Forum of Private Business and the Federation of Small Businesses have been concerned about the outcome of the Cruickshank report. At the request of the banks, there has been a delay to give them more time to consider evidence. As the days go by, it is incumbent on the Government to take the report and the issue of the banks very seriously, because we need action and support for small businesses. The banks should not be given time to be less helpful to business than they should be; the situation cannot be allowed to continue.
I am disappointed with the Government on business rates, on which a White Paper was published in the last Parliament. Time and again, the small business community has put concern about business rates at the top of its agenda. Red tape and bureaucracy, about which small businesses have strong concerns, can be difficult to tackle—although my party has clear proposals, having identified 25 unnecessary burdens which in government we would repeal right away, and we are examining many others—but the issue of business rates is very clear.
Small businesses have to pay a very large proportion of their turnover in business rates, for which they get very little return. They have to pay as much as 35 per cent. of turnover, which is clearly a burden, as against larger concerns, such as supermarkets, which pay as little as 2 to 5 per cent. of turnover. I pledged at the general election that we would continue to fight in this Parliament for a scheme to help small firms with rates.
§ Nigel Griffiths
I shall address as many points as possible in my winding-up speech, but I must ask the hon. Gentleman what is his policy? Who does he think should meet the cost, and how much would small businesses have to pay?
§ Brian Cotter
We are very clear on that. Our policy is one of business rate allowances. Small firms under a rateable value of £25,000 would qualify for rate relief on the first £1,500 of that rateable value. There would be no red tape or unnecessary burdens, and 87 per cent. of firms in the country would qualify for such relief, saving between £600 and £700 each. The Under-Secretary asked for the Liberal Democrat scheme, and I have made it absolutely clear—it is in our manifesto. I ask him for the same clarity and commitment today.
The Under-Secretary might say in response that, under his Government, 50 per cent. mandatory rate relief, and so on, has been introduced. All such schemes are very good and to be applauded. Before the election, a Bill was introduced proposing a 50 per cent. mandatory rate relief 1064 for village shops and post offices. The original scheme was extended to pubs and small garages. However, let me point out in anticipation of the Minister mentioning that scheme that the £9,000 threshold was impossibly low, with the result that only the very smallest of, for example, pubs would benefit. I challenge the Government to come up with a more helpful policy. My hon. Friends and I strongly support the schemes that have been aimed at rural areas, but businesses in large urban areas also need help.
§ Mr. David Heath (Somerton and Frome)
My hon. Friend is right. The other problem with the schemes introduced to support rural small businesses is that they apply only in those local government areas that are classified as rural for government purposes, so a business in an extremely rural part of a district council area that is otherwise suburban or urban will not qualify, which seems ridiculous.
§ Brian Cotter
That is correct. During the foot and mouth crisis we came across the problem of areas not being regarded as in need of assistance. Rather than continuing to talk, the Government must do an awful lot of work to help people. Furthermore, from day one of the foot and mouth crisis, we Liberal Democrats urged that the help proposed should apply to businesses with a rateable value of up to £50,000, but only in the last few days have the Government announced that they intend to extend their assistance in that way.
Before the election, the Government proposed a supplementary business rate scheme, which we felt would impose one more burden on small businesses, so we are glad to see that the Government have abandoned the idea. Instead, they talk about creating business improvement districts. Small businesses welcome the concept but we urge the Government to ensure that the small business community has real input into where the districts should be and how they will operate. Small businesses must have a voice and their concerns must be addressed if the districts are to be effective in ensuring that small businesses are not overwhelmed as they have been in the past by initiatives in which larger companies have a greater say.
We could go on for ever about red tape, but there are clear issues. Excessive regulation comes from many quarters: the European Community is often blamed and I, as a Liberal Democrat, would never say that everything that comes from Europe is to be accepted willy-nilly. However, we in this country have for some reason developed a culture whereby a few pages are turned by civil servants into a sheaf an inch thick. That has happened often. I urge the Minister to make a commitment to resolving that issue. In Holland, the part-time working regulations comprised two or three pages, whereas we ended up with 40 or 50. That has to stop.
Another issue arises when small businesses are turned into tax collectors for the Government, through the working families tax credit, for example. The Liberal Democrats believe that the credit is a good measure, but small firms should not have to implement it. Some other means should be found. Similarly, stakeholder pensions have imposed a burden on small businesses in terms of both paperwork and cost. It is likely that pension firms will help small businesses to run the schemes—but at 1065 a cost. We are concerned that in a few years' time, there will be only two big pension companies left to run stakeholder pensions and they will be able to present small firms with a bill that they have to pay.
There are other Government proposals on tax credits that I ask the Minister to address when he winds up the debate. Other issues arise in the context of red tape, including consultation, which was addressed by the Small Business Council today, and a longer lead time for new legislation.
As the hon. Member for South-West Hertfordshire said, small businesses suffer from inspections, some of which may be unnecessary. Many companies endure inspection after inspection. In 1997, 24,000 inspectors carried out 465,000 inspections. Many will have overlapped with each other and been conducted in a draconian fashion. The Government should take the lead in that area.
We Liberal Democrats believe that there should be an inspectorate specifically for small businesses—one that exercises a light-touch regime whereby inspectors go into businesses to advise them, rather as we hope Ofsted will in education. If firms are clearly non-compliant, heavier teams could be brought in. In response to our initiative, the Government asked how one inspector could possibly know about all the different matters that require inspection, but it is equally valid to ask how small businesses can be expected to cover all those matters. If the Government do not expect a single inspector to be able to understand all the issues, how can they expect a small business man to do so?
I should be interested to learn whether this is to be an annual debate. I believe that an annual report on small businesses should be presented to the House for an annual debate. I urge the Government to consider compiling such a report on the impact that legislation has had on small businesses in the last year. That could provide an effective means of demonstrating the Government's commitment to examining the burdens on small businesses. Furthermore, by concentrating minds, it might ensure that many regulations were disposed of.
The Liberal Democrats are looking for a lot from the new Minister. I hope that we can ensure that the Small Business Service is a more effective and stronger representative of small businesses. I look to the Government to produce an effective annual report on small businesses, and I hope that we will have further debates—if not annually, on some day other than a Friday so that more Members have an opportunity to examine that report on the Government's handling of small businesses.
§ Jon Cruddas (Dagenham)
It does not seem long since I was the designated Labour party researcher in an historic by-election in mid-Staffordshire. We all knew at the time that we had a candidate who would go far in Parliament, but I could hardly have imagined that 11 years later, that candidate would call me to make my maiden speech. Thank you, Madam Deputy Speaker, for this opportunity.
I congratulate my good and hon. Friend the Member for West Bromwich, East (Mr. Watson), who I know will be a powerful advocate on behalf of working people. It is a great honour for me to represent the people of 1066 Dagenham. I pay tribute to my predecessor, Judith Church, who served them loyally and energetically. I know that she will be missed by many hon. Members and that everyone joins me in wishing her well for the future.
I am the fourth Labour Member of Parliament to represent the people of Dagenham. Before my immediate predecessor, Bryan Gould represented the constituency for 11 years; before him, John Parker was its Member of Parliament for 48 years, eventually becoming Father of the House. I acknowledge the work of all my esteemed predecessors and shall seek to continue their work.
To outsiders, Dagenham is synonymous with the Ford plant, and the fortunes of my constituents are seen as almost solely dependent on the nature of Ford's involvement in Dagenham. Indeed, one wag said to me this morning that contributing to a debate on small firms was appropriate, given that Ford is pulling out of Dagenham.
That attitude is precisely the problem that we face in Dagenham. The end of car production in the first quarter of 2002 is seen by many as devastating for both the town and local people. Indeed, press reports at the time of the announcement talked of a dying town. It is my job to dispel those distorted and simplistic views. Dagenham is well situated to gain from its geographical location and historic association with manufacturing industry. Alongside that, the strategies of the Labour Government in east London and the priorities of the London Development Agency and the Mayor all point to the positive opportunities that are opening up in Dagenham.
My constituency partly covers the Becontree estate, the largest council estate ever built in Britain and one of the largest public housing projects in the world. It is often argued that Dagenham was built for the sole purpose of supplying labour for the Ford plant, yet the estate predates the building of the Ford complex.
However, it cannot be disputed that Dagenham has its share of economic and social problems. A cursory look at some of the statistics in the borough can make for difficult reading. Adults there have the second lowest level of numeracy and the fourth lowest level of literacy in the country, and 4 per cent. of residents have higher education qualifications, which is among the lowest in the country. We have the lowest wage economy in greater London. Barking and Dagenham remains one of the most deprived boroughs in the capital—indeed, in the whole country.
Today, however, I want to flag up a positive agenda for economic and social change in Dagenham and, in so doing, to overcome misconceptions about the area. Geographically, Dagenham sits at the centre of the so-called Thames gateway sub-region, an increasingly integrated area that includes 13 boroughs and 2 million people, and covers many of the most deprived communities in the country. Because of the location of the Ford motor company, Dagenham will remain the manufacturing centre of the Thames gateway.
East London is an exciting place to be at the moment. In the political economy of London, the centre of gravity is moving eastward. The Mayor talks of shifting priorities from west to east London and building a new city to the east. The nature of the London housing market and the dynamics of transport congestion are pushing London eastward, and the people of Dagenham are set to benefit from the major changes that that will bring. I shall now consider some projects that are taking place.
1067 First, despite the press reports that I mentioned earlier, there are considerable developments on the Ford Dagenham estate, some of which will be discussed by the company later today at a press conference. A new high-technology engine manufacturing plant is soon to be built and will be one of the most modern manufacturing facilities in Europe. Annual engine production will rise to 900,000 units a year by 2004. After the end of car assembly, more than 5,000 people will still be employed on the Dagenham estate, which will continue to be London's largest industrial centre and will become Europe's premium manufacturing facility for diesel technology.
In addition, a new supplier park is to be created in Dagenham on London Development Agency land to support the new diesel facility and will attract small and medium-sized, high-tech businesses. On top of that, a proposed new centre for manufacturing excellence on the Ford estate will provide education and training, from basic skills right through to advanced postgraduate degrees for local people.
We must also consider some of the major infrastructure projects. The scarcity of river crossings over the east Thames remains a major impediment to successful economic regeneration. East of Tower bridge, there are only three road and three rail crossings, compared with 26 between Blackwall and Battersea. The proposed package of three new river crossings will have a major impact on creating employment and development opportunities.
The channel tunnel rail link, which will go underground in Dagenham, is vital if international and domestic connections to London and the south-east are to be created and major hubs for new investment established. Hopefully, the Docklands light railway will be extended into the borough, linking it to major job generation sites across east London. Crossrail remains a catalyst for regeneration and strategic regional integration. Options linking Dagenham dock and the key employment sites in the Royal docks and Canary wharf" will be high on my agenda. Within Dagenham itself, change is evident, and will be of direct benefit to the community. The heart of the Thames gateway project is providing a new economic future for Dagenham and south Hornchurch to the tune of nearly £500 million.
Just outside the constituency border, the new Oldchurch hospital will be built, and I shall work to ensure that it is completed on time. The local education authority and all the people who work in our schools deserve special mention, as their work has ensured that the borough has some of the fastest improving schools in the country. The Government's strategy to confront pensioner poverty and provide dignity in older age is beginning to bear fruit, as is the tax credit regime for young families.
I could go on; overall, a lot is happening. My job is to ensure that local people benefit from change, and to put the case for Dagenham at Westminster. The radical industrial strategy for east London puts paid to some of the simplicities common in debates about the so-called new economy. Regeneration is based on large-scale manufacturing, construction and civil engineering projects, yet it includes large, medium and small firms at the cutting edge of research, design, skills and technology. That is not the old economy; it is the economy of the future for large parts of east London.
1068 Dagenham has a strong tradition of industrial working class organisation. Before the general election, I worked in Downing street, seeking to develop a positive trade union agenda and better employment rights for people at work. In the House, I shall continue to push that agenda to ensure dignity in the workplace.
The future is bright for the people of Dagenham. Geographically we sit at the centre of the Thames gateway sub-region. Economically, the centre of manufacturing in London will remain within Dagenham even after the regrettable end of car assembly at Ford. It is my job to help to drive the agenda of change in east London. I hope that we can begin a transformation materially to change the lives of the working people of Dagenham. That is why I joined the Labour Party.
§ 11.7 am
§ Annabelle Ewing (Perth)
I am grateful to have been called early in our debate to make my maiden speech in Parliament. I am not entirely sure of the convention for successive maiden speeches, but I should like to congratulate the hon. Member for Dagenham (Jon Cruddas) on his eloquent and interesting speech; I am sure that he will serve the interests of his constituents well.
It is with trepidation that I make my maiden speech today, because I note that it is Friday the 13th. For some people, 13 is their lucky number. My lucky number, however, would have to be 48, which, as some hon. Members will be aware—certainly Conservative Members—is the size of my majority. In my constituency of Perth, such a small majority is not without precedent. Indeed, one of my illustrious predecessors, Sir Nicholas Fairbairn, who was well known to the House as a colourful character and eloquent member of the Scots Bar, had a majority of 53 when he first came to the House in 1974. He went on to hold the seat for 21 years; I take that as a good marker for my own tenure.
I believe that my constituency of Perth likes determined and strong-minded individuals who are prepared to speak up for the interests of their constituents, and there is no better example of a real fighter for her constituents and for Scotland than Roseanna Cunningham, my immediate predecessor and fellow member of the legal profession. Roseanna entered the House in June 1995 as the Scottish National party Member for Perth and Kinross—as the constituency then was—following a spectacular by-election victory. She went on to hold the seat in the 1997 United Kingdom general election. That was the first time in the SNP's history that a by-election victor had held a seat in a general election. In doing so, Roseanna moved the cause of Scottish independence significantly further forward.
As many hon. Members will be aware, Roseanna was a forceful debater and never failed to get her point across. She was a champion of the land reform debate, and succeeded in wresting further powers for the Scots Parliament from the Government during the passage of the Scotland Act 1998. There were very few concessions during the passage of that Act, a point that will not be lost on the people of Scotland in the years to come. Roseanna Cunningham is now a Member of the Scots Parliament, and I feel sure that all Members in this place would wish her well in her continuing work in that Parliament.
For me, it is a great privilege to have been elected to serve as the Member for Perth. I have heard claims in the House during the past few weeks on the part of various 1069 Members while making their maiden speeches to the effect that their constituencies are the most beautiful. I would respectfully have to differ, for who, having been to Perthshire, could fail to be enchanted?
My constituency consists of the fair city of Perth itself, where some hon. Members will be interested to know that the fair maids reside, and the peaceful village of St. Fillans, nestling on the shore of Loch Earn to the west. It extends through the southern highland town of Crieff and beautiful Comrie down Strathearn to the thriving town of Auchterarder and the neighbouring village of Aberuthven. It includes the gentle plains of the Carse of Gowrie and the historic village of Abernethy. No visitor to my constituency could fail to be impressed, and no visitor could fail to be struck by the diverse nature of the countryside, with the lower Grampians to the north, the Ochils to the south, the silvery Tay stretching to the east and beautiful rich farming lands throughout the constituency.
A visitor to my constituency would be able at the end of the day to unwind, perhaps in the beautiful Gleneagles hotel with a wee whisky, the headquarters of Highland Distillers being based in Perth. With the whisky we, of course, have the water. We have Highland Spring, the world famous mineral water producer, which is based at Blackford in my constituency.
A visitor will also quickly become aware of the importance of small firms to the local economy of Perthshire, particularly in the tourism sector, which has been hard hit by the foot and mouth crisis. It must be said that the tourism sector has been struggling for some years now against the backdrop of the high pound policy and the highest fuel taxes in Europe. Those are both Government policies, and regrettably both are currently outwith the jurisdiction of the Scots Parliament. It must also be said that the shambolic state of the Scottish tourist board, which is known as visitscotland, but perhaps not for much longer, has not helped the situation for those who are trying to make a living in the tourism sector.
It is not only tourism that is suffering. Small firms in general in my constituency, as elsewhere in Scotland, are burdened with over-regulation, excessive red tape and high business rates. In Scotland, we once again have higher business rates than in England. The poundage has been decoupled by the Scottish Finance Minister and the Labour-Liberal coalition in the Scottish Parliament. Small businesses are overtaxed and they are acting as unpaid tax collectors. Those problems are exacerbated in my constituency by the lack of a 21st-century telecoms infrastructure, with very little broadband communication and high-speed ISDN—integrated services data network—available outside Perth city.
Notwithstanding what the Minister said, in my constituency there is now a downward trend in business start-ups. There is also an increasing trend of business failures. Those failures do not take place because those concerned go on to start another business. They are the result of people being unable to afford to keep their businesses going. That is the depressing reality.
In Scotland, small firms are the motor for growth. Without a supportive framework for small businesses, we cannot move forward. Indeed, growth in Scotland in the past 30 years has averaged a paltry 2.1 per cent., lagging behind the rest of the United Kingdom and our other European competitors.
1070 The simple fact is that the Union is not working for Scotland. We need to ensure that full financial powers are returned to Scotland so that we can create the right economic conditions for our small firms to flourish and for our country to prosper, a country where we will not be ripping out key services from our local hospitals, as is the threat in my constituency to Perth royal infirmary. In short, Scotland needs to return to the normal status of independence, for it is only with independence that Scotland can move forward.
I am honoured to have been elected as Member of Parliament for Perth and I fully intend while in the House to champion the interests of small firms and to stand up for my constituents and my country. In so doing, I am following in the illustrious footsteps of my mother, Winnie Ewing, former Member for Hamilton and then for Moray and Nairn, and now a Member of the Scots Parliament for the Highlands and Islands. I am also following in the footsteps of my sister-in-law, Margaret Ewing, former Member for Dunbartonshire, East and thereafter for Moray, and now the Member of the Scots Parliament for Moray. One of the Doorkeepers, who remembered both my mother and my sister-in-law, said to me the other week that it seemed to him that as soon as one Ewing left another one arrived fairly quickly thereafter.
My mother is sitting in the Speaker's Gallery, and I feel that it would therefore be appropriate for me to conclude by echoing a statement that she made at the time of her famous by-election victory in Hamilton in November 1967. That is that I and my hon. Friends are not here to settle down; we are in the House to settle up for Scotland.
§ Geraint Davies (Croydon, Central)
I was enriched by and pleased to hear the three maiden speeches, in particular the one delivered by my hon. Friend the Member for West Bromwich, East (Mr. Watson) whose predecessor, Peter Snape, I knew well. Another West Bromwich Member was Baroness Boothroyd, whom we all knew in the House as a great character. I am pleased that my hon. Friend the Member for Dagenham (Jon Cruddas) is still in the Chamber. I am almost one of his neighbours. I am aware of the difficulties in Dagenham and the concerns over Ford but pleased by the recent news about new production and new clusters. I am sure that he will be a strong advocate for the area and its people, who have such opportunities alongside such problems.
I was pleased to hear the comments of the hon. Member for Perth (Annabelle Ewing), whose speech I much enjoyed. I look forward to going on holiday to her constituency one day but hope that I am able to do so before I am required to have a passport to go there. I am pleased to see her mother here as well.
Like others who have spoken, I have a background in small business. In the first instance, however, it was in multinational companies. I managed a marketing department; I then started a couple of my own businesses in travel and in graphic design, a business which has an international clientele. My interests are declared in the Library. I come to this place with an idea of some of the difficulties of running a small business. That runs alongside my admiration for the public sector, having been the leader of Croydon council.
1071 I shall talk in general about the need for a strong and stable economy, which is the start point for small business success. I am sure that we can trade all sorts of statistics across the Chamber. The Government, however, are bound to be in a stronger position because more small businesses are being created than ever before and there are fewer business failures. That is partly due to the support that has been given to small businesses. Largely, however, it is due to the overall economic success that we are now enjoying. That is the result of the prudent economic management of the economy, and not least the independence of the Bank of England, which has guaranteed low interest rates and low inflation rates. Proper cost control by my right hon. Friend the Chancellor of the Exchequer has ensured that we have an economic climate in which small businesses are succeeding.
When small business people approach me and talk about regulation and red tape, they must put that in the context of a successful economy that is delivering more prosperity, more growth and more profits. Alongside that environment, the Government are introducing an agenda that has made work pay. We have the working families tax credit and other opportunities that have enabled people to access the market and to earn enough wages to make work worth while. These people are often employed in small businesses. I said in an intervention that regulations are part of an equation: if we did not have regulations and opportunities, wage costs for small business would be much greater, as would the scarcity of skills, and the success of small business would be much less. We must examine the entire picture rather than take an opportunistic approach, as the Opposition do, and try to pick off little bits and misrepresent the impact of red tape.
§ Geraint Davies
The reality is that the WFTC guarantees a minimum weekly income of more than £200 for a family. In the hon. Gentleman's example, the employee would be taking a job that paid less than that, and it is obvious that the small business person has a profit motive not to pay the WFTC on top of that. If the regulatory cost were more than the reduced wage saving, the employer would not take the employees on. In fact, employers who complain about the WFTC are those who are employing people at that level of pay. Those employees are now earning livable wages.
The Labour party believes in decent, basic wages as well as access to work, especially for people with young families. That is an important part of our legislation. If the burden were so heavy, more and more small firms would resist employing people entitled to the WFTC. The reality is that some of those employers want to pay slave wages and to have no regulation. In today's successful economy, wages are being bidded and, moreover, 1072 in regions outside London, the WFTC is helping to generate more jobs and eliminate the poverty experienced under the disastrous years of Tory rule.
§ Mr. Page
My point is that the Government are shifting responsibility that should be theirs on to companies—in the WFTC and in many other respects. We do not object to the WFTC—I have been an advocate of such support for a long time—but it should be paid as a benefit. The companies should not have to pay it; the Government should do so.
§ Geraint Davies
My right hon. Friend the Chancellor would say, "Yes, Ronald Reagan thought that that was a great idea." I will not resort to that. The WFTC was test-marketed in the United States and found to be effective in drawing people into work, widening the labour pool and therefore lowering average labour costs.
I realise that the hon. Gentleman's point is that the WFTC should be managed through the benefit system and not the corporate system. The difference is that we are trying to empower people through work. The current system tells people, "You are working and you deserve this money, with a subsidy provided by the Government." The other way would be to say, "You should queue at the benefit agency for a hand-out." We are trying to achieve a cultural change by creating a work ethic and an entrepreneurial culture whereby Britain can succeed in a global economy, where it failed under the Conservatives.
I suggest that the hon. Gentleman could not provide a list of prospective employers who do not take people on because of the WFTC. When I ask people how their business is doing, whether it is profitable and whether they are employing more people, they say yes to all those questions but they still moan about the payroll. Most people in that position have some accountancy support that provides assistance to their business. Red tape is not a good thing, but regulation that leads to lower wage costs, higher engagement in the market and greater success for small businesses must be our priority. The hon. Gentleman's suggestion would be counter-productive.
Creating an entrepreneurial culture is easier said than done. We have already heard various pronouncements from the Government about encouraging an entrepreneurial culture in schools. We will have to create the space in the curriculum to do that and prioritise among the many excellent initiatives that we have introduced. Thanks to the rethink of the new AS-levels, we will be able to strip down the curriculum. If we genuinely want to introduce entrepreneurial opportunities in schools, we will have to think carefully about where they fit in.
New Addington, Croydon, which historically has not delivered the best education results, is now an education action zone and we have links with businesses—some of which I initiated—that enable mentoring and allow the pupils to experience working in small businesses. That gives them self-esteem and an opportunity to experience life beyond a traditional educational environment. We may wish to pursue that approach in other schools.
The next big economic challenge for the Government, after creating stability in the economy and an extra 1 million jobs, is to make those people who are in work more productive. That is the big prize. We all now know that average productivity in Britain is some 45 per cent. 1073 below that in the United States and some 20 per cent. lower than in France. Productivity growth has been slow because of the influx of unskilled workers, and one of our missions must be to enable them to become more productive. Part of that will require education outside the traditional education system, as well as further investment in education itself. We should not concentrate exclusively on small business, but we should always remember that small businesses require employees with skills and productive aptitude.
The recent OECD report on the impact of investment in education on economic growth showed that some 0.4 per cent. of the annual growth of 2.5 per cent. that we enjoy can be attached to educational investment. In the case of the US, that figure falls to 0.07 per cent. Studies show a high return from investment in quality education in Britain and I hope that the Government will continue to increase investment in that area. It will increase from 4.9 per cent of gross domestic product now to 5.3 per cent. by 2003.
We also need to provide more access to higher education, with student debt relief and imaginative ways to enable people from poorer backgrounds to enter higher education. That will enable them to achieve higher productivity, not least in computing and the high-tech arena. That increased productivity is important to small businesses, because the internet and computer facilities enable them to overcome the hurdles of transport cost and distance. Computers enable speed of exchange and open up wider markets that were formerly available only to large businesses. For example, I was involved in setting up a business that has only a handful of people but services 130 countries with graphic design online. A few years ago, that would not have been possible. Higher education enables small businesses to access IT.
I mention transport in passing, and the Government have a 10-year transport plan of £180 billion. Any business that sells actual physical products is aware of the costs of delay and congestion, which are enormous burdens on productivity. The Government are now investing in tackling that issue.
Investment in health has not been mentioned, but it is very important for small businesses. If a small business person has a health problem that needs attention but has to wait six months for treatment, that will have an adverse effect on the business. Small business people feel that they cannot afford to become ill and spend time away from running their businesses. The Government intend to invest a quantum amount in health, but we should also consider the economic and productivity impact of different decisions made by the health service.
With regard to red tape, entrepreneurs do not want to spend all day filling in forms. It is important to achieve a balance. Through their competitive and profit-making objectives, big companies aim to compete with other big companies and crush smaller ones out of existence. It is in the interest of big companies to encourage red tape, because that hits small companies more than larger ones. We must recognise which companies have the ear of Government. Big companies, with their public affairs departments and consultancies, can penetrate an extremely complicated system and gain access to people with influence. That clearly has an impact on small business and thus on competitive choice.
1074 The hon. Member for South-West Hertfordshire (Mr. Page) mentioned the sum of £10 billion as the red tape cost to business. That is a spurious figure thrown around by the British Chambers of Commerce. It is not helpful, as I pointed out earlier, because it includes the cost of the minimum wage and the working time directive, which there is no intention to change. However, there is a significant cost arising from red tape. I support any attempts by the Government to reduce the complexity of the payroll. Indeed, the Government have given a commitment to reduce payroll burdens and corporation tax, which I welcome.
With reference to the Inland Revenue and Customs and Excise, I do not want a large number of small businesses going bust because the Government move in for their money. When a company is having trouble paying its debts, it is often the Government rather than the banks or other firms to which it owes money who pull the rug from under it. When a company goes down and stops selling its products, its creditors do not have much chance of being paid. I know that the Government are reviewing the position and recently announced that Customs and Excise would no longer be the first creditor to be paid. More flexibility is needed.
Council tax has been mentioned. The Government are introducing a new system of subsidies, which will mean a 20 per cent. reduction in business council tax for 60 per cent. of companies. I welcome that.
We are not specifically discussing retail businesses, but my hon. Friend the Minister referred to ethnic small business. The evolution of ethnic small business is often from small retail businesses—shops—to professions such as accountants and doctors in the second generation, and bigger business. I am acutely aware of the plight of the community shopping parade, where pharmacies have recently felt the squeeze from lower drug prices. The gradual but consistent and chronic erosion of community shopping facilities has social costs for poorer and older people and those who do not have access to transport.
There is a rolling programme of the concentration of power in the retail community. In my area, Tesco moved out of a large estate of 20,000 people after 31 years, undermining shopping facilities there. The Competition Commission has done a lengthy study of the competitive impact of supermarkets, but the output is not tough enough. The required codes are simply dreamed up by the suppliers and retailers. We should examine the situation carefully and perhaps offer more support to small retailers, through council tax and planning.
The Government intend to make planning more business-friendly, but I am not sure what that means. Councils need to study the composition of their boroughs and the relationship between larger and smaller companies there, especially retail businesses, and draw up plans to support small retail centres, rather than allowing them to fall away as a result of the power of large retailers, which rests in their ability to negotiate much lower unit costs. Transparency in that area is needed.
I am glad that the Government are taking initiatives on crime prevention and are aware of the problems of parking. Small retailers face multiple problems. The removal of small retail opportunities creates food deserts, which in turn result in health problems in many neighbourhoods where people cannot buy fresh food 1075 unless they catch two buses. There are broader social and health problems, as well as the environmental problems arising from increased car travel to and from shops.
On financing, I am glad that the regional development agencies are up and running. Part of their remit should be to examine small business innovation and competitiveness. I welcome the progress on regional venture capital funds, which traditionally have not taken much notice of small business. I hope that the reduction in capital gains tax will encourage more investment in smaller operations. There are other models that could be considered—for example, German banks take shares in small businesses.
The first step is to put small business higher up the agenda for economic success. The Government have done that, and I am proud and pleased to be able to make a contribution to the debate, having a firm background in small business. I hope to encourage more support from the current Administration.
§ Mr. Roger Gale (North Thanet)
I apologise to the House for my absence for a short period earlier this morning. My right hon. Friend the Member for Haltemprice and Howden (David Davis)—or for what some of us still fondly know as Boothferry—announced his retirement from the leadership stakes of our party. As one of his supporters, I wished to be there to support him. Those who know my right hon. Friend well will understand that the dark horse has been taken away merely to be reshod, not shot. I am sure that we shall hear a great deal from him in the future.
I add my congratulations to the three hon. Members who have so far made their maiden speeches this morning. I understand that there are others to follow. The previous Member for West Bromwich, East, Peter Snape, was a personal parliamentary friend and was known on both sides of the House for his robust debating performance. It will be interesting to see whether his successor is able to develop the same fierce parliamentary skills as Snapey had.
The hon. Member for Dagenham (Jon Cruddas) referred to the welcome announcement for his constituents and for the country of the development of new diesel engines, which I heard, as did many of us, on the wireless this morning. I am sure that that will be good news for his constituents. I wish him and them well. I have a proprietary interest, though not in diesel, as the driver of a modest Ford Escort estate with only 69,000 miles on the clock. If he knows the man who can cure the rattle underneath, I should like to talk to him afterwards.
We welcome the hon. Member for Perth (Annabelle Ewing). Although the conventions deny us the opportunity to see visitors in the House from these Benches, it is a pleasure to know from her that her mother is present this morning. As the hon. Lady rightly claims, she represents one of the most beautiful constituencies in the country, though not quite as beautiful as North Thanet. I had a dear friend who invited me to go to Perth for a weekend some time ago, to take part in an occupation known as hill walking, which I discovered was a euphemism for mountaineering, but I thoroughly enjoyed the experience. I am glad that we are discussing small firms, because it seems to me that the SNP is turning into a small, family business. In view of the hon. Lady's more 1076 partisan remarks, if she could simply let me have on a postcard the answer to the West Lothian question, I should be most grateful.
I was hoping to hear the maiden speech of the hon. Member for Birmingham, Perry Barr (Mr. Mahmood), and I expect that we will hear it shortly, provided that he catches your eye, Madam Deputy Speaker. I first met his predecessor in 1974 during the general election campaign when Jim, now Lord Callaghan, was on the hustings and I was working for the BBC. I spent a day going round the country with Jim following the Labour party campaign. That in itself was an interesting experience. We ended the day in Perry Barr where a young man called Jeff Rooker was seeking his first election to Parliament. As we all know, 26 years later Lord Rooker is wearing ermine. It remains to be seen whether his successor follows that far in his footsteps. I suspect that by then we may have a wholly elected upper House, and if we do, it will not be before time. I wish the hon. Gentleman well and I look forward to hearing his speech.
Turning to this morning's debate on small firms, I wish to touch on one general area and then briefly deal with three specific matters: the concerns being expressed by proprietors of residential and nursing homes; the concerns being expressed by the National Federation of Sub-Postmasters and the difficulties that small rural post offices in particular are facing; and the concerns of those engaged in farming, which used to be big business, but is rapidly being turned into small business.
The British Retail Consortium, in a briefing note that has probably been sent to many hon. Members says:The BRC accepts that regulation is an important function of government, however excessive regulation adds cost to business and in an industry as competitive as retail that in turn adds to consumers through higher prices. Many regulations have perfectly sensible aims that retailers support, however all too often instead of ensuring high standards, regulations force hours of form-filling which prevents companies offering the best value to their customers.That note sums up much of what has been said here this morning and what has been said to hon. Members on both sides of the House when we visit small firms, retail businesses, hotels, guest houses and the like in our constituencies.
Business wants to make a profit. That was the clear message that came across to me at the last small business breakfast that I held in my constituency just before the general election was called. Business men want to reinvest in modern processes, to grow their businesses and to distribute to shareholders. They want to hedge against rainy days, plough money into pension funds and create employment. They want to create sound and lasting enterprises that they can pass on to their children, their grandchildren or future owners in perpetuity. They do not want to be treated as unpaid tax collectors and social services, hedged around by so much red tape and bureaucracy that they cannot get on with their job.
The difficulties being experienced by the residential and nursing home sector clearly highlights this. One of the National Care Homes Association's particular concerns relates to the regulations shortly to be introduced under the Care Homes Regulations 2001. Under those regulations, care and residential homes will have to notify a new commission of every death that takes place in a home and every serious illness. Let us think about that.
So far as I am aware, every death in the country is recorded by the registrar, so a record already exists. If a person dies under remotely suspicious or contentious 1077 circumstances, there is a coroner's inquest. A death must be registered by a general practitioner. The medical history of people in residential and nursing homes is almost invariably very well known. I cannot for the life of me understand, and nor can the National Care Homes Association, why this new burden of bureaucracy is being placed upon care homes. What is the point? Why do they have to tell a commission that somebody is very ill? By the nature of their circumstances and their age, people who go into nursing homes tend to be ill, or to become ill. It seems to me that this is yet more bureaucracy run amok.
Prior to this debate, I was astonished to discover that care homes are subject to inspection by nine different authorities: local authority inspectors, health authority inspectors, Health and Safety Executive inspectors, environmental health inspectors, pharmacy inspectors, fire inspectors, Inland Revenue inspectors, national insurance inspectors and local authority contract compliance officers. It is very small wonder that so many nursing and residential homes in my constituency and throughout Kent are going out of business—[Interruption.] I have been completely thrown as my right hon. Friend the Member for Haltemprice and Howden has entered the Chamber.
We raised the issue with the Secretary of State for Health in February. We pointed out that nursing and residential homes were closing and that this was having a serious impact on the care of the elderly and on employment—nursing and residential homes are considerable employers—and a profound impact on the national health service generally. The Secretary of State told us that he was not surprised that some residential and nursing homes were closing because property prices were rising and people were selling up, but that the number of beds lost was more than compensated for by massive new investment in the health service.
I should like the Secretary of State to visit the Queen Elizabeth the Queen Mother hospital in Thanet, the Kent and Canterbury hospital in Canterbury, or the William Harvey hospital in Ashford, because there is a queue in every single accident and emergency department. The queues are caused by bed blocking because the hospitals are stuffed full of people who should not be in hospital, do not need to be in hospital and do not wish to be in hospital. There is nowhere for them to go because the residential and nursing homes have closed. Those homes have closed because of the additional burdens of costs and regulations that have been placed upon them. Indeed, 60 per cent. of the costs in residential and nursing homes are wages. For an 18-bed residential home the increase in costs this year as a result of the statutory minimum wage will be £10,000. That 18-bed home will receive a £5,000 increase from fees. Where will the other £5,000 come from?
About seven years ago, a nursing home that I was told about invested a considerable sum of inevitably borrowed money to build 10 new bedrooms. Each bedroom was about 10 sq m; they satisfied all the regulations in place at the time and complied with every brand-new, up-to-date local authority requirement. All the bedrooms had lavatories and wash basins en suite, which is what the elderly clients indicated that they would like. The users were happy, the authority was happy, the proprietors were happy. Now, under the regulations, to satisfy the demand for more square footage—although granny, frankly, is not 1078 going to leap out of bed and play football in it—the loos and wash basins, which the clients use and want, have to be taken out. That is arrant nonsense.
The net effect is that the proprietors—people who care about their business and their clients—have had enough, so they are closing. In Kent, hundreds of beds have been lost in the past 18 months and more will follow. If that is true in Kent, my guess is that it is true in every constituency that makes this sort of provision. The effect of that on the health service cannot be underestimated. The Secretary of State for Health, never mind the Minister responsible for small business, will have to come to the Dispatch Box very soon and tell us where these patients—these clients—will go. My guess is that this winter we will face a serious crisis. I look to those on the Government Front Bench for answers.
§ Geraint Davies
Is the hon. Gentleman aware that the current occupancy rate of private nursing homes is 88 per cent. and that the view is that they can take up to 93 per cent., given that there is a certain amount of turnover? Is he aware that the increase in social services investment from the Government to pay for the added costs that he mentioned such as minimum wages is about 12 per cent.? Inevitably, the increased cost must be borne by local authorities which receive more money to match the needs. I accept that there are localised problems and that bed blocking exists. However, such problems can be overcome when people with decent skills are paid decent wages; otherwise, such homes employ slave labour and provide poor service to vulnerable clients.
§ Mr. Gale
I have to speak as I find. I have been visiting the residential and nursing care homes in my constituency for 18 years. When I first became a Member of Parliament in 1983, it is true that there were some appalling premises. They were run badly and were known, grotesquely but probably rightly, as granny farms. Throughout the 1980s, the Conservative Government introduced sensible regulation and changes, and imposed sensible requirements. Proprietors were able to gain a reasonable return on a reasonable investment while providing a high standard of care and attention and very good qualified care assistants to look after the patients. Those people were, possibly, underpaid in comparison with those who go out at night and stack shelves at Asda. However, in fair terms, while I am quite sure that the proprietors would have liked to pay them more, they were not doing too badly.
The hon. Gentleman must recognise what many of us have recognised when we have visited or been in constituencies in which massive job losses are threatened. I recall fighting a by-election in Birmingham, Northfield, when the then Government were accused of winding down what was known in those days as Austin—the Longbridge plant—and of reducing the number of jobs from 14,000 to 9,000. However, the choice was not between 14,000 and 9,000 but between 9,000 and none.
My constituents who are and have been employed in nursing and residential care homes value and enjoy their jobs. They do not want to be priced out of business, thank you very much. As for the Government's investment, again, I have to speak as I find. In Kent, over the past winter, we experienced bed blocking. Too late in the day, the Secretary of State for Health, out of panic, threw 1079 £700,000 at Kent county council so that it could buy some beds. First, the space did not exist because so many nursing home beds had gone. Secondly, the going rate for some of the care provided should be £500, but is currently £340 a week. In a panic, the authority said, "We have been given a bit more money so we had better pay a bit more." However, that is short-term money, not long-term money, unless the hon. Member for Croydon, Central (Geraint Davies) is going to take the Chancellor's position and say that he will make that year-on-year change in funding. That has not happened, and the money is not there.
§ Mr. Gale
The hon. Gentleman made a very long speech and he also made a fairly long intervention.
The money is not there. The Chancellor is not giving the money to Kent county council or to other similar authorities. It is not good enough for the Government to pile burden upon burden on local authorities without providing the resources—the means to justify the will.
I wish to move on because I know that there are hon. Members who wish to make their maiden speeches, and I want to hear them. However, this is an opportunity for us to make some important points.
The concerns of the sub-postmasters are well known. Sub-post offices are going out of business at far too fast and undesirable a rate. Those of us who represent constituencies that embrace both towns and villages are acutely aware—this is not a partisan point—that rural villages depend heavily on key services, including the village school, but particularly on the local post office. It is the place where the villagers gather on certain days of the week, if only to collect their benefits, pensions and whatever. It caused a great deal of alarm when the Government said that they would take much of that work away.
The Secretary of State has given an assurance that anyone in receipt of pensions or benefit can have a Post Office card account and anyone can have a Pat 14 Account. Will everyone who wishes to have a Post Office card be allowed to have one, or will the dead hand of the Treasury come along and say, "Hang on a minute, this is costing us far too much. Pensioners are choosing to have their benefits paid this way rather than directly into bank accounts, which is what we would really like them to do, although we cannot say so because the post offices would scream blue murder." Will there be a ceiling on the issue of cards, or will everyone who wants one be able to have one? It is a straightforward question. If the Minister does not know the answer, I invite him to write to me. If the number of cards is limited, the income stream will be useless to the network, and still more post offices will shut.
I represent a constituency that is largely urban in its population, but largely rural in its landscape. All of us who represent such constituencies have to recognise the crisis in farming. Farm incomes have fallen dramatically. I was not joking when I said that many farms used to be big businesses and are now small ones. Many small farms are seriously struggling.
We have to look—I say '"we" because again, this is not a party political point, although there will be differences of opinion about how the problem should be addressed— 1080 at the difference between farmgate prices and supermarket prices. The gap is widening. A year ago, the gap between the price of a dozen eggs at the farm gate and in the supermarket was £1; now it is £1.25. It seems to so many people who used to believe that they were providing a service to the country—putting the breakfast on our table, if you like—that the balance is totally out of kilter. They work day and night, sometimes literally 365 days a year, to deliver a high-quality product for which they do not receive a fair price.
Given all the other vicissitudes, including the obvious knock-on effects of foot and mouth on rural tourism and on the incomes of farms that may have diversified into a couple of cottages for let, if we do not do something about farm incomes now, never mind in six months, those businesses will have gone for good. It is a cri de coeur, but I urge the House to take on board the plight not only of the obvious victims of foot and mouth—although, Lord knows, the farmers who have lost their flocks and herds are important enough—but of others who, at the periphery of agriculture are at this very moment, as we sit here, losing their livelihoods.
I conclude with this thought. Business is blessed with courage, innovation, intellect and willingness to work hard to achieve. Left to its own devices with light-touch regulation, British business can beat the world. It is the job of politicians to create the framework within which that can happen. We are far too good at change for the sake of change, meddling and trying to mend things that are not broken. We do the business of this country no service when we do that.
§ Mr. Khalid Mahmood (Birmingham, Perry Barr)
Thank you, Madam Deputy Speaker, for calling me to make my maiden speech. I congratulate my hon. Friends the Members for West Bromwich, East (Mr. Watson) and for Dagenham (Jon Cruddas) and the hon. Member for Perth (Annabelle Ewing), who is just leaving the Chamber, on their excellent maiden speeches.
I want to say a few words about my predecessor, Jeff Rooker. Before his retirement from this House, Jeff served as the Member for Perry Barr for 27 years. While I was campaigning, it became obvious how popular he was; he still has the great respect of many thousands of his former constituents. As the House knows, Jeff served the previous Labour Government as a senior Minister and, as a Member of another place, continues to serve the present Government. He will be a hard act to follow, and I wish him well in the other place.
My constituency is very much part of the fabric of the city of Birmingham. It is a large urban constituency which runs from a few hundred yards from the Hawthorns, the home of West Bromwich Albion, right down to Villa Park, the home of Aston Villa. It is also the home of the Perry Barr and Alexandra stadiums—the first for canine runners chasing hares, and the second for human runners chasing medals, where Birchfield Harriers produce many successes.
In many respects my constituency has prospered, thanks to Government initiatives, including the new deal. Because of the prudent running of the economy, unemployment has fallen considerably. However, there remain pockets of stubborn deprivation that need to be targeted with special initiatives. I welcome the new deal 1081 for communities in Handsworth and the single regeneration projects in both the Handsworth and the Sandwell wards.
There is another example of a place where special help involving a multi-agency approach could succeed by piloting special initiatives: the Perry Villa estate in my constituency. About 300 families live on the estate. Unemployment is higher than average. There is a high perception of crime, a lack of skills and a poor environment. We have set up a residents association, but we now need help to improve housing, set up play areas for children, give people opportunities to learn new skills, and reduce the fear of crime. That can be achieved only by a multi-agency approach, with the health authority, local businesses, the city council, further education institutions and the police—but above all, the community—all having their say. We must break down artificial agency barriers and work in a more integrated way.
Another example is the approach made to me by the Rookery road traders association. The traders very much want to play a part, working with local agencies, in improving that urban shopping area. However, like Perry Villa, they need help. The will of the people is there, but we need help from the bottom up for these initiatives to work. Let us give more and more encouragement to local people to improve their lives and environment with the help of joined-up local and national government.
There are many pensioners living in Perry Barr. Labour's first term did much for pensioners, with the minimum income guarantee, winter fuel allowances, the reduction of VAT on home energy and free television licences for the over-75s.
My constituency and Birmingham as a whole contain a huge number of small businesses, ranging from local newsagents run by families to small and medium-sized manufacturing companies. Although the city is synonymous with large industries—in particular, car manufacturing—Birmingham has, for more than a century, been a cradle of small businesses. Obviously, there are far fewer metal-bashing based companies now, but my constituency can boast of many new 21st-century businesses. It is still true today to say, "If it is not made in Birmingham, it is not made anywhere."
Small businesses in Birmingham are benefiting from new and more relevant support arrangements. The Small Business Service, working with the city council's economic development department, is leading in the provision of support to new and existing businesses. Small businesses need clear, usable support. They need access to help in developing financial and payroll systems, clarity in tax matters and in health and safety and environmental legislation, and simple and usable advice on grants and other start-up support.
A fresh spirit of enterprise exists in my constituency, and established businesses are being supported in better ways. In Perry Barr we have a business park, which extends over nearly a square mile, where growing companies are locating and state-of-the-art buildings provide the kind of accommodation that modern companies need.
Birmingham has the largest employment zone in the United Kingdom, and better links and pathways are being provided to get people into jobs. We must support our 1082 traditional manufacturers in engineering and the sectors that actually make things. Because of the current challenging market conditions and the need to improve productivity to global levels, we must ensure that the race to modernise and diversify our economy does not leave those firms behind. We must ensure that skills are further developed among our workers, in partnership with management, to meet the challenge of competition.
I applaud the work of our local universities in reaching out to businesses in new and relevant ways. The university of Central England at Perry Barr, together with those at Aston and Birmingham, has been showing the way, in partnership with the city council and the regional development agency, in providing first-class support to adopt new technologies. However, some sectors seem slow to adapt. The lesson is clear: we must help our businesses to take on board new technologies and economic change in a faster, better and smarter way. That involves building on the approaches that work best for our local businesses.
We have many examples of clusters of businesses, such as jewellery and new media. The design space 2000 project at our local university—UCE—is an example to the country of intelligent and joined-up working, with business, education and local government all working together in new fruitful ways.
I welcome the establishment of the Phoenix fund for Birmingham, which particularly focuses on women and support for ethnic minority groups. I hope that the Government's new initiative on the neighbourhood renewal fund, announced by the Minister for Housing and Planning recently, will be targeted, in part, towards helping small businesses to improve the quality of their outlets and workplaces.
Although this debate on small businesses is taking place at the end of the parliamentary week, I trust that that does not undermine its importance. Small businesses are vital to the economy of my city and to the country at large.
Today is Friday the 13th, so some may think that I am chancing my luck by speaking in the House on this day and date, but I cannot be that unlucky, as I was born 40 years ago. Some may say that life begins at 40; certainly my parliamentary life does. To represent Perry Barr in the House is a great honour, especially because from the age of nine I—like many of my good friends, such as Lord Hattersley and the former city leader, Sir Richard Knowles—have been an adopted Brummie. I hope that I can emulate them and achieve a fraction of what they achieved in their many years of service to the city.
There is another adopted Brummie to whom I owe so much—my late father, who came to the city in the late 1940s. My elation at being elected to Parliament for a seat in the city that so readily adopted me was tempered with sadness, because he did not live to see that day. I hope that I can honour him by serving my constituents with humility and determination in the years to come.
§ 12.8 am
§ John Barrett (Edinburgh, West)
Thank you, Madam Deputy Speaker, for this opportunity to make my maiden speech and to participate in this debate. As someone who ran a small business for many years, I appreciate being called to speak at this time. I also thank the new small 1083 business Minister for his invitation to contact him to discuss the ways in which we can improve services to small businesses.
I congratulate the hon. Member for Birmingham, Perry Barr (Mr. Mahmood) on interesting maiden speech, and I look forward to hearing more contributions from him in the years ahead. I also congratulate all the hon. Members who have made maiden speeches today. As the hon. Members for Perth (Annabelle Ewing) and for West Bromwich, East (Mr. Watson) said, being Friday the 13th, it is good to have survived the experience.
I am perhaps in a unique position, as my two immediate predecessors in Edinburgh, West still serve as elected Members, as they both won seats in the Scottish Parliament.
For Donald Gorrie, who stood down from Westminster this year, the Parliament represented the fulfilment of a lifetime's campaigning. Donald was elected to this place on his fifth attempt, and in his first speech, he argued for a Scottish Parliament in the debate on the Referendums (Scotland and Wales) Bill. Although he has often been described as a maverick, and still is, Donald consistently fought for a Parliament in Scotland, with Members elected by a fair voting system. He now sits in that Parliament, and is involved in the partnership Government. At times, he causes more problems for both partners than many members of the Opposition.
Donald's predecessor in Edinburgh, West was Lord James Douglas-Hamilton, who is also a Member of the Scottish Parliament—the same Parliament that he spent much of his time in this House opposing. As a list Member, he was elected under the proportional voting system, which he also opposed.
It is a great privilege to be in this place, and I look forward to working on behalf of all the residents of Edinburgh, West. It is heartening that relatively affluent constituents were prepared to elect a candidate who was advocating an increase in their tax rates. Proposals for fair, progressive increases in taxation, linked to identifiable increases in key public services, can strike a chord with the very people being asked to meet the cost.
Although the statistics detailing Edinburgh's relative affluence do not lie, they do not tell the whole story. The constituency stretches from Queensferry at the Forth bridges to Muirhouse and West Pilton, and within it there is great diversity, with areas of poverty as well as areas of affluence. In those poorer areas, there is not only financial poverty but a poverty of expectation. At the general election, those areas had a very low turnout of under 50 per cent.
It was not satisfaction with Labour which kept the majority of those electors at home on 7 June but disillusionment with politicians of all parties and detachment from the political process. We should not try to dismiss that with glib phrases such as "voter apathy". We need to address the underlying causes of that fracture between the political classes and ordinary people. We must put an end to the present voting system, which disfranchises many, whether or not they bother to vote. The introduction of a fair, proportional system is part of the answer.
There is a need for politicians of all persuasions to do more to engage with the electorate, to understand their needs and aspirations, and, more importantly, to recognise that aspirations have been damped down or even, in some 1084 places, extinguished. We must offer people a way out of their impoverishment, a stake in society and a share of the wealth of their nation. In recent years, there has been much talk of social inclusion, but in the past four years the gap between rich and poor has grown even greater, and too little has been done to reverse the damage done to society in the Thatcher years.
As the MP for Edinburgh, West, I shall endeavour to serve all my constituents, including the rich and the poor, those who voted for me, those who voted for candidates from other parties and those who opted out of the political system. Many of the matters of concern to my constituents have now been devolved to the Scottish Parliament, and I look forward to working with Margaret Smith, the Edinburgh, West Liberal Democrat MSP. We will be an effective team working on behalf of our constituents.
It is a great honour to represent such a diverse constituency, with its historic villages such as Corstorphine and Davidson's Mains. Like the hon. Member for West Bromwich, East, I must pay tribute to one of my local hostelries, the Corstorphine Inn, which sustained my campaign team at the general election. From Cramond to Barnton, the constituency includes castles, large estates and housing estates. In Muirhouse and West Pilton there is a great community spirit, but some pockets are the most deprived areas in the constituency.
West Edinburgh has a booming economy and the lowest unemployment rate in the city, but there are pockets of high unemployment, and we must match those who want jobs to those who want skilled workers. Education and training are key issues. We must invest in education, rather than throwing the education system—and the health service—out to the private market.
Although a city seat, Edinburgh, West has a rural dimension in the villages of Ratho, Ratho Station and Dalmeny, where many problems were caused by the recent foot and mouth outbreak. Not only were farmers affected, but the royal highland show was cancelled and Edinburgh zoo was temporarily closed, with the loss to the local economy of many millions of pounds. As the zoo is in my constituency, I probably represent more penguins than any other Member.
I am proud to serve on the City of Edinburgh council.
Edinburgh is a beautiful city, the home of the best Hogmanay celebration in the world. It has the international festival, the fringe festival, the book festival, the jazz and blues festival, the science festival and the longest continually running film festival in the world. I would like to welcome many Members there during the recess.
Edinburgh is also home to the Scottish Parliament where my predecessor now sits. In that Parliament, Liberal Democrats form part of the Government and have played a role in delivering a fairer voting system, scrapping tuition fees and delivering an excellent teachers pay deal and free long-term care for the elderly, with the details being announced just last week. I look forward to similar policies being introduced here.
In my constituency, transport is always a key issue. It has a particular relationship with small businesses, because transport policies to improve the ability of commuters to move from outwith the city into the city centre have often meant ruin for small shops and businesses along those routes. Planning decisions have 1085 allowed the construction of out-of-town shopping centres and had devastating effects on local shopping centres.
What can be done to help? The Minister mentioned several good ideas including the reduction of red tape and the need to have access to finance and skilled labour. However, I ask him to consider some other issues. The first is the threat of the black economy with tax evasion and, for example, the unlicensed disposal of waste causing ever-increasing problems. When sensible regulation is in place for bona fide traders, there must be prosecutions of fly-by-night traders.
We must also stimulate enterprise, and one sector that I particularly wish to mention is arts and entertainment. This country has tremendous potential. In the United States, the entertainment industry now exports more than General Motors or Ford. We must stimulate our creative talent in computer technology, design, film, fashion and music. In the creative industries, we can lead the world.
However, we must not develop small business support as a separate policy. We should integrate our small business support with education so that the skills developed—whether academic or professional—will produce thriving industry; with transport so that the work force have access to the places where employers need them; with health provision so that we increase the amount of health care and advice about safe working to avoid the time lost through bad health such as back problems, which cost the country, employees and businesses millions; and with planning and housing policy so that we do not drive the cost of affordable housing away from affordable work space.
Many small businesses supply the goods and quality of services that can be delivered only by small businesses with specialist expertise in the field. They have the tools; we should let them get on with the job.
As a new Member, my first impression of this place was that it was steeped in history and had many fine traditions. I find the pink ribbon for hanging my sword on the coat hanger in the Members' Cloakroom quite invaluable.
However, since the general election much has been made of the low turnout. It is up to hon. Members to set an example to show why the public should participate in the democratic process, as we are the product of their decision to vote on polling day. It is no wonder that members of the general public are disillusioned by what they see if elected Members do not set an example for others to follow. We must rekindle the interest of the public in the political process—it is our responsibility. If we do not, we do not deserve their votes.
While we are here and grappling with the problems of the western world, I hope that we never forget those in the third world who are desperate to fill their empty bellies while burdened with debt to the richest nations on the planet. At the weekend, I was on the telephone to my wife, who is in Botswana, where she said there were walking skeletons on the street. Yesterday, a 2,000-page United Nations report on the impact of climate change stated that industrial pollution is the main cause and that the consequences for human society are likely to be catastrophic. Global warming is real—that is official. Crop failures, water shortages and disease will affect others much more than they affect us. The poor are always hardest hit.
1086 As well as looking after our constituents, we must never forget those elsewhere in the world with problems much greater than our own. I hope that my time in this Parliament will see a change to a time when we no longer sit back and watch what happens elsewhere as if we were immune from the consequences to a time when we realise that we all share the same planet and that we had better start looking after it.
§ Tony Cunningham (Workington)
Thank you, Madam Deputy Speaker, for giving me the opportunity to make my first speech in the Chamber. It is indeed a privilege to be making it at a time when so many excellent maiden speeches have been made. Like other new Members, I have been inundated with requests to join various groups in the House. May I suggest that we form a new one, the Friday the 13th club, and we could celebrate the date in the future?
I was advised to read some of my predecessors' maiden speeches to give me an idea of what to say. I was not aware that the hon. Member for South-West Hertfordshire (Mr. Page), who is one of my predecessors, would be sitting on the Conservative Bench opposite me. The speeches reminded me why the by-election took place in 1976. The sitting MP, Fred Peart, formerly a Leader of the House, was called into Downing street by the Prime Minister, Jim Callaghan, who said, "Fred, I'm going to have to move you upstairs to another place because I require your seat in the Cabinet for a younger Member." Fred said, "But Jim, you're older than I am", to which Jim said, "Yes, but I'm the Prime Minister." I have learned that lesson.
I am only the fourth Labour MP for Workington since 1918. Looking at the speeches by Tommy Cape, which he made immediately after the great war, and Fred Peart, which he made right after the second world war, it is clear that they came from a different age. However, what shines through and links them with my immediate predecessor, Dale Campbell-Savours, is the desire for social justice, for which I shall continue to strive.
Dale Campbell-Savours has been an inspiration to me and many others. He is greatly admired and respected, not just in the House, but by thousands of his constituents, because he is a fighter and a campaigner. No cause was too large or too small. If people needed help, he was there for them. He will be missed in the House and I wish him well in his new role in the other place. I also pay tribute to his secretary, Joan Gyles, who was with him for more than 20 years.
My best story of Dale was one that he told me about being here in his early days as an MP when the House often sat into the small hours of the morning. If he wanted an issue reported on Radio Cumbria the following morning and the station was closed because it was 11 or 12 o'clock at night, he used to ring up and put questions to the answering machine, which he would answer himself. I said, "Dale, don't you think that that's cheating a little bit?", to which he replied, "No. I used to ask myself difficult questions"—and he did.
I am proud to represent the Workington constituency. It is where I was born, grew up and have spent most of my life. It is a beautiful area, with its lakes and mountains 1087 and stunning coastal scenery. The town of Workington has a strong industrial heritage and is known for its famous visitors. The Scots among us might be interested to know that Mary Queen of Scots spent her last night of freedom in Workington hall. Maryport has a Roman history and links with Hadrian's wall. I remind hon. Members that the wall did not stop at Bowness. A turf wall was built down the west Cumbrian coast, perhaps as an early attempt to deal with the West Lothian question.
We have the beautiful seaside resort of Silloth, with its famous golf course, and Aspatria, which is an old mining and old market town. Cockermouth is the birthplace of William Wordsworth and Keswick is a famous holiday destination for generations of people. When all that is combined with friendly, hard-working people, it is easy to understand why it is such an honour to represent the constituency.
No matter how beautiful the constituency is, however, if people do not have jobs and do not share in its prosperity, the beauty is not so obvious. Small businesses are important. Although unemployment in the constituency is lower than it has been for 30 years and more jobs are being created than lost, especially by small and medium-sized enterprises, I have two pleas. West Cumbria used to be dominated by coal mining, the iron and steel industries and shipbuilding. Rails marked "Made in Workington" can be seen all over the world, in Australia, India, Brazil, Mexico and the United States. What we have left is a steelworks that rolls railway lines. Unfortunately, it has come under threat in recent times.
Following the terrible Hatfield disaster, the work force at the steelworks toiled round the clock to produce thousands of tonnes of rails to repair and upgrade the rail network. Now that that crisis is over, Railtrack is placing orders for rails in Italy, Austria, Sweden and other European countries. I say this to Railtrack: "If you are taking British taxpayers' money, then for heaven's sake spend it in Britain." Workington is the only plant in the country that makes rails. It is of national strategic importance. It is vital that the plant stays open—to the people who work there and their families, and to the nation.
Those who remember the 1966 World cup final will surely remember the remarks of the commentator, Kenneth Wolstenholme, at the end of extra time: "They think it's all over—it is now." I am sorry, but when it comes to foot and mouth in my constituency and its impact on small businesses, it is far from over. The farming communities have undoubtedly suffered and are still suffering. I call for a lull inquiry in order that we may learn lessons for the future.
One group of small businesses has been devastated by the outbreak: tourism and related businesses. Anyone with a hotel or guest house, a caravan park or a holiday cottage, anyone who is a joiner or a plumber who normally works in the tourism industry, and anyone who runs a leisure or outward bound business in the Newlands or Borrowdale valleys can be 80 or 90 per cent. down on normal trade. Small businesses are struggling, and unless there is continued support, it will be a very long winter for many of my constituents.
I should like to recount just one story. A married woman in my constituency who has two small children sold her house and invested in a small guest house. Business is very difficult. She said to me, "Remember, 1088 this is not just my business; this is my home as well and that is under threat." I have a series of suggestions that I shall pass to the Minister, but I want to make it perfectly clear that many in my constituency desperately need help. Although I welcome the money that the Government have already given, we need more, and for some time to come. What is really needed, however, is the return of visitors to one of the most beautiful parts of the world. I appeal to Members and people outside the House to come to my constituency, where they will be given a tremendously warm welcome and have a fantastic holiday.
I spoke at the outset about social justice. Recently, two great stalwarts of my local Labour party, George Robinson and Mary Graham, died. I pay tribute to them and the hundreds of others in my constituency who have spent their lives campaigning for social justice. I assure the people of Workington that I will continue that fight.
§ Mr. Adrian Flook (Taunton)
I should like to thank and praise the hon. Members for West Bromwich, East (Mr. Watson), for Dagenham (Jon Cruddas), for Perth (Annabelle Ewing), for Birmingham, Perry Barr (Mr. Mahmood), for Edinburgh, West (John Barrett) and for Workington (Tony Cunningham), who have made their maiden speeches this morning. The hon. Member for Workington made a witty and passionate speech, and his constituency well deserves that passion. I, too, will be speaking about foot and mouth disease and its impact on my constituency, particularly on small businesses.
As the son of a small business man and the older brother of one who has been hounded out of his business by red tape and regulation, such that he is now happy to work for a firm alongside 25,000 other employees, it would be fair to say that I know a little about small businesses. We have some big businesses in my constituency, but they are more the likes of Sainsbury, Asda and Safeway. The number of people employed by the county council and Taunton Deane borough council takes them beyond the size of small and medium enterprises.
We have some Government agencies, such as the Charity Commissioners and the United Kingdom Hydrographic Office, as well as some private sector concerns that employ fewer than thousands: those include Avimo in Taunton and Relyon and Swallowfield in Wellington. After that, the size of employer rapidly decreases, which is hardly surprising given that Taunton is a county town, albeit one that has prospered in the past decade, as has Wellington.
The local unemployment rate is only 2 per cent., but I sense that we are at the top of the economic cycle. Ridiculous house prices have been recorded in Somerset. I heard a worrying story about that the other day. A local auctioneer told me that a house with some land attached just outside my constituency had been valued at £325,000, but that to get it away at auction, it had been put on at £275,000. In open auction, that property went for £605,000. To a former stockbroker, whose job was to spot market trends, that really rings the bell that the economy has peaked.
Hon. Members will have been sent Barclays bank's quarterly small business survey, which provides a depressing overview of the sector. Business starts in England and Wales are down 9 per cent. Business starts 1089 in the catering and hotels sector—crucial to my constituency and to any rural part of Britain—have declined 28 per cent., with leisure industry starts down a depressing 49 per cent. In his opening remarks, the Minister said that businesses were set up and run by enterprising individuals, but added that it is the Government who shape the environment. I do not know whether that environment is being shaped by a pasta machine or a mangle, but I do know that Barclays and my constituents all see the same thing: that today's issues are access to finance, bank charges and the well known red tape.
I know a business woman—a young lady in whom I wish to declare an interest—who runs her own business, in which I have no interest to declare. She considered doubling the number of workers in her firm—increasing that number by one, so that there would be two—but when she looked at the large book of complicated regulations issued by some Department or other, she shuddered at the thought of having to read through one and a half inches of closely typed pages and concluded that it was not worth the effort to hire people when she could subcontract instead.
Let us compare and contrast that with the Government's attitude to other contractors, namely those affected by IR35. The Government have forced people to work for bigger businesses than themselves with the aim of ensnaring more people in PAYE and other tax arrangements, but on the other side of the red tape and regulations, the Government's policy of pushing people out of subcontracting is forcing smaller companies to subcontract. That is a shame. It is good when people can employ others, but not so good when small companies are forced to use subcontractors as a first stage.
My hon. Friend the Member for South-West Hertfordshire (Mr. Page) described the impact of foot and mouth on his constituency and on small traders. The same is true in my constituency, where several of this year's agricultural shows have been cancelled. Barclays recognises the impact of foot and mouth, as does everyone in my constituency—especially the impact on small businesses.
Small businesses throughout my constituency have been hit by foot and mouth. The lessons were immediately apparent to those businesses at the heart of the outbreak; sadly, however, no one outside that core appears to have taken any real notice. The Government have offered extra money in the form of expensive loans, but that is not what is wanted. What people on Exmoor—of which the Taunton and Bridgwater constituencies form two thirds—want is for the disease to be eradicated swiftly. They also need immediate help to mitigate the problems that foot and mouth has caused. In short, Exmoor has not had foot and mouth; it has not been infected, but it has been affected.
Earlier this year, the Government produced a small firms package, which the Federation of Small Businesses was quick to praise in part. However, it was also disappointed that the Government had, once again, widened the fiscal gap between incorporated small businesses and unincorporated sole trade concerns. The policy unit chairman of the federation said:There are over 3 million self-employed people who will be unable to take advantage of the cut in the small company tax rate.1090 He went on to say;Such measures, whilst welcome for incorporated businesses, discriminate against those who are self-employed and turn them into second-class citizens in the world of commerce.More importantly, if someone is making no money, they pay no tax anyway. That is particularly true of the problem on Exmoor and indicative perhaps of the difficulties throughout the rural parts of my Taunton constituency. Sadly, it is beginning to affect the town itself; there is a knock-on effect, although it has not manifested itself properly in the town. We are now in July, five months after the start of the biggest crisis to hit Somerset in decades, but not one penny of aid has yet been handed over to any small business.
The South West of England regional development agency and Business Link have not given away any of the money that they promised. Just two days ago, they said that the money is still two weeks away. They said that they have made checks and counter-checks and are now making checks to counter the counter-checks on the original applications for help. Sadly, small businesses are the real losers. Fortunately—I hope that this is true also in Cumbria—they have a champion in a new group called Living Exmoor, chaired by the charming and fearless Judy Carless who, throughout the recent election campaign, managed to doorstep every single national party leader. She asked each of them in turn what they would do for Exmoor.
If only such forthrightness were obvious elsewhere. From a standing start, Living Exmoor now has several hundred members: from the Tantivy and Wiggys in Dulverton to the Royal Oak at Withypool and the White Horse at Exford. That is real self-help. Government agencies, such as South West Tourism, cost the taxpayer a fortune. The Under-Secretary said that the Government and their agencies should think small first. A member of Living Exmoor asked me why, if the agencies were well funded by the taxpayer, they were missing many obvious tricks. Last week, tourists could not get a coach in Spain. Why did South West Tourism not say that there were coach operators and hotel rooms going begging on Exmoor, as I am sure they were in Cumbria, so that those tourists could have a holiday in Britain? Why were public relations operations not promoting Britain to those poor tourists stuck at Gatwick? It is important that Government agencies do more to help small businesses.
As the hon. Member for Workington said, tourism is important; my part of Britain is as beautiful as his, and farming is just as important there. It is worth pointing out again and again that farming is a small business and that many people are engaged in it; many small businesses are run by farmers. Farming may account for only 1.5 per cent. of our gross domestic product but, nationally, farmers look after 80 per cent. of our landscape and even more in Somerset. Farming and tourism go hand in hand on Exmoor and throughout most of Taunton Deane.
The real problem is not the impact that foot and mouth has already had on businesses in my constituency, but the impact that it will have. The second quarter figures for businesses failing and going bust in the south-west are worrying. The fact that bank managers have withdrawn funding for small businesses—mostly tourism businesses—in the second quarter of the year is extremely scary. That quarter is the beginning of the tourism season, when those businesses expect an enhanced and increased 1091 cash flow For bank managers to pull the plug means that they can see no prospect for recovery in the summer and the autumn.
As small businesses go into the autumn, they will have no fat to survive the winter. That means that banks will pull the plug more quickly than they would have done in the past. They will do that throughout the summer, autumn and winter. The problem will become worse both in rural areas and in the town.
To be added to that is the possible late start to the traditional hunting season. Hunting may not please all Members, but eight hunts add considerably to the tourism business going into and on to Exmoor. It is important to remember what the hunts provide for the area, both for small businesses and as suppliers of tourists, whom I would call sporting pursuits tourists.
Where are the Government agencies and local councils in this context? The Minister referred to Business Link as having a ruthless customer focus. Business Link may be trying hard down in Somerset, but why is it thanking Living Exmoor, the voluntary self-help group, for doing its lobbying? The self-help volunteers are helping the so-called professional guys, who are sitting around in suits navel gazing, as it might seem to the people on Exmoor. The House must remember that not one penny in aid has yet been handed over.
Living Exmoor is disappointed with the lack of help from agencies, and also from Somerset county council. I hope that the hon. Member for Somerton and Frome (Mr. Heath), who was a former leader of that council, will be able to help me in getting across to the council that small business men on Exmoor cannot understand, when political control has not changed, sadly, following the county council elections, and when the officers have not changed. the excuse that it was the county council elections that created a hiatus. That is given as one of the reasons why aid has not yet been given to businesses on Exmoor.
Before the election and since the election, my party has been asking for help for small businesses affected by foot and mouth. We have asked for the speeding up of VAT refunds to help cash flow. Much more money could easily have been given in the form of interest-free loans for the affected areas. There could be a more flexible reassessment of income tax liabilities. As the hon. Member for Workington said, "They think it's all over, but it isn't yet." He is right. There should be a full inquiry, and I would add that it should be a full public inquiry.
§ Mr. Mark Field (Cities of London and Westminster)
To follow on from the remarks of my hon. Friend the Member for Taunton (Mr. Rook), this is very much a debate full of maiden speeches. It is perhaps relevant that yesterday I was playing cricket and making my debut for the Lords and Commons team. We had to rush back for a couple of votes. My sartorial elegance, or otherwise, consisted of cricket whites and a blazer. Knowing that you are the Chairman of the all-party cricket group, Mr. Deputy Speaker, I suspect that you may have approved rather more than the Whips, who rightly ticked me off for not wearing the normal attire.
It has been an interesting debate and we have heard some thoughtful maiden speeches. I speak as a member of the new intake, who is making only his second speech 1092 in the House. The hon. Members for West Bromwich, East (Mr. Watson) and for Workington (Tony Cunningham) both made impassioned pleas about their constituencies and the importance of developing business in them. Likewise the two Scottish Members who made their maiden speeches, the hon. Members for Perth (Annabelle Ewing) and for Edinburgh, West (John Barrett), said some interesting things about Scottish issues. Unfortunately, the hon. Member for Birmingham, Perry Barr (Mr. Mahmood) is no longer in his place. He said a few words about his late father. Five weeks ago, when I was elected as a Member, my first thoughts too were with my late father, who passed away about 10 years ago. At such moments, these family links mean so much to many of us in this place.
Like many of the new boys and girls who have come to the House, it is a frightening realisation that we know so little about virtually everything that goes on in the House—or perhaps I speak only for myself. This week we have discussed such issues as Northern Ireland election fraud and statementing in schools for young children. I confess that before the debates took place—I suspect that it is a confession that will terrify many of my constituents—I reckoned that on either subject I could write on the back of one rather small envelope all that I knew about the issues. However, I can profess to be a comparative expert on small business, because I have spent the past seven or eight years running a business full-time and my business background goes back to my university days when I set up a publishing concern. My firm, which I run with a fellow director, now has 12 employees and turns over more than £2 million a year. I shall return to that subject later in my speech.
My constituency of Cities of London and Westminster is best known for its larger businesses. All the leading international investment banks are based in the City of London and a significant number of large companies that play on the global stage are based in Westminster. However, it would be wrong to imagine that the constituency has only large businesses—it has a thriving small business sector.
The congestion charge is at the forefront of people's minds in London this week, because the Mayor of London has made it clear that he will impose such a charge on people coming into central London. Understandably, the focus has been on the effect that the charge will have on motorists and other commuters and it was initially promised that we would see a distinct improvement in public transport before it was introduced. However, the real sufferers from the charge will be those small businesses—often sole traders or small family businesses—based in central London, which will find that the 15 to 20 per cent. projected reduction in the number of commuters will make a big dent in their turnover and profits. That is one reason why we should think again about what will be a controversial subject in the years ahead.
We have had an interesting debate this morning. In the past, small business matters tended to be seen as the preserve of Conservative Members, but it is clear that the sector is increasingly important to the Government. I agreed with much of what the Minister said, but red tape is of concern to small business. The political battleground lies in what we would call red tape and the Government and various unions would describe as employee rights. Our aim is to ensure that small business does not suffer from the debate on the opposite sides of the same coin.
1093 Many of the Government's actions are to be welcomed. For example, the Chancellor has made some great changes in the capital gains tax regime. I support many of those changes, but he has made the regime more complicated than it needs to be. We must also recognise the importance of a low tax economy. We live in a global economy, whether we like it or not, and that applies to small business as much as to the largest companies. We therefore need low income tax and a low capital gains tax regime to ensure that entrepreneurs are not persuaded to leave these shores in a brain drain.
As I have mentioned, I run my own business, which I set up some eight years ago. Others who have set up their own businesses will know that there is nothing more exciting. My business partner and I started in a small room with a couple of telephones and a fax machine. We had to lick the stamps for the first letters to our prospective clients, and it was a more exciting experience even than getting into Parliament. We have tried to develop the business and we now have a dozen staff, but I am concerned that red tape and bureaucracy disproportionately affect small business. Large companies have payroll departments, human resources departments and office managers, and they can cope with the demands. Even in my own business, which is now 12 people strong, that administrative burden falls heavily on me and my fellow director, as we cannot pass it on elsewhere. I beseech the Government to consider the matter carefully before gold-plating any directives from Europe and to ensure that in their own legislation new red tape is kept to a minimum. As has been mentioned from all parts of the House, the small business sector will be the vehicle for growth of employment opportunities in this country in the years ahead.
We heard from the hon. Member for Dagenham (Jon Cruddas). What is happening in his constituency is a tragedy, with the largest employer for the past half century making many people redundant. In future, international companies will not offer great numbers of jobs. There is a risk that all those companies will downsize, and with the push to keep costs, particularly labour costs, at a minimum, more and more skilled and semi-skilled jobs will go to third-world countries.
We must ensure that we do not strangle small business in Britain. My principal worry is that we will discourage small businesses that employ 10 or 12 people from becoming businesses employing 25 people, simply because we will not have a light regulatory regime in place. I look forward to working closely with my hon. Friends and, I hope, with Ministers to begin to build a regime that ensures that there are no such constraints on the growth of smaller firms.
The extension of maternity and paternity leave, which applies beyond the small business sector, is seen as a family friendly right. It is easy for freelance journalists and others who work on a piecemeal basis to extol the virtues of part-time working, but that creates difficulties for small businesses. In my own business, two of our dozen employees were on maternity leave in the early part of this year. That made matters extremely difficult. Jobs had to be left open and we did not know whether to take on part-time staff. The burden should not be underestimated, especially in businesses that are trying to 1094 employ young people, graduates and people in their 20s. We should consider whether smaller businesses could be exempted from some of that regulatory burden.
It has been a pleasure to contribute to the debate on a key sector of our economy, which will be the great vehicle for employment growth in the next decade or so.
§ Nigel Griffiths
With the leave of the House, I shall respond to the remarks made during the debate. First, however, I join in the welcome for the excellent maiden speeches that we heard this morning.
My hon. Friend the Member for West Bromwich, East (Mr. Watson) showed a close knowledge of the needs of all his constituents. His remarks that were particularly appreciated were his references to the achievements of disabled constituents and to his predecessors in West Bromwich who were distinguished Members of the House—Peter Snape and Betty Boothroyd.
My hon. Friend's detailed knowledge of "Spring Town", as he called it, will no doubt allow him to spring to prominence and high office in this place. I liked the analogy that he made between Business Link and general practitioners, stressing the need to tap into the best expertise available. I am delighted to tell him that one of my first acts as Minister was to approve the Business Angels programme, which will allow such expertise to be harnessed by our new generation of entrepreneurs.
My hon. Friend the Member for Dagenham (Jon Cruddas) made a very forward-looking speech, which combined a close knowledge of his constituency with a commitment to social inclusion. As he knows, that cause was very close to the heart of his predecessor, Judith Church. His determination to support Ford and other companies in their reinvestment shows that he will be leading the drive to bring prosperity to all parts of his constituency.
It was a pleasure to hear the speech of the hon. Member for Perth (Annabelle Ewing), especially her description of her beautiful constituency which I know well. Her predecessor excites the envy of the House in still being able to enjoy representing that constituency in the Scottish Parliament. I do not know what the Gaelic for doppelganger is, or whether the hon. Lady is a fan of "Dynasty". Her mother must be very proud of her and I am sure that she will relish her triumphs in this place.
The fourth maiden speech this morning was made by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Mahmood). His predecessor has a long history in this place—27 years—and I am sure that he will have a great future in the other place. My hon. Friend rightly outlined the historic role of his city in supporting small businesses, growing great businesses over a number of centuries from the beginning of the industrial revolution. He spoke also of his traders' association and business park and the key role that people play in bringing about change. I am sure that he will provide the leadership that is required to take his city forward in this century, with links with business, university, local government and other elected representatives. I am sure that his father is looking down on him with pride.
The fifth maiden speech was from the hon. Member for Edinburgh, West (John Barrett). Again, I hope that the House will indulge me in welcoming a near parliamentary 1095 neighbour who speaks for another great city. It was heartwarming to hear him talk of a city that we both love and mention his concerns for the third world. I helped found the fair trade non-governmental organisation Scottish Education and Action for Development in Edinburgh two decades ago and it is a cause dear to the heart of many right hon. and hon. Members on both sides of the House. He will forgive me for saying that the impact of alternative voting systems on the turnout in the Scottish Parliament and European elections was no great advert for such changes, but I look forward to hearing his views develop in future speeches.
The sixth maiden speech was from my hon. Friend the Member for Workington (Tony Cunningham), who rightly paid tribute to Dale Campbell-Savours, who was an exemplary parliamentarian admired by us all. My hon. Friend gave us one of the wittiest anecdotes about his predecessor which I am sure Dale will have enjoyed listening to and reading in Hansard. He mentioned that his constituency is the country beloved by Wordsworth:Bliss was it … to be alive,But to be young was very heavenand spoke of the industrial relevance of his constituency today.
My hon. Friend also referred to the impact of foot and mouth on his constituency. I was brought up in a rural community and my heart goes out to the farmers, farm workers and other members of that community. some of whom I went to school with and whose great hardships I know of at first hand. He took the opportunity very early in this Parliament of passing me his proposals for helping his constituents and I know from his speech and his actions that he is a powerful and passionate advocate for rural communities.
The hon. Member for Taunton (Mr. Hook), whose own maiden speech impressed me, made a number of cogent points in his second speech. I have been looking at all the forms that businesses have to complete. If he will send me the forms that his one-person business had to study and complete to take on a second employee, I shall be interested in seeing them.
The hon. Gentleman stressed the importance of the small business community in terms of the impact of foot and mouth disease. I know, in unrelated areas, that my attempt to traverse the Cuillin ridge earlier this year had to be postponed for a month because of foot and mouth, despite the fact that there was no disease in the area. I know about its impact on the tourism industry. He also asked why only four applications had been received from the business recovery fund in his area. I will investigate that and get back to him.
The hon. Member for Cities of London and Westminster (Mr. Field) made a thoughtful contribution. I believe that George Bain did an excellent job on the national minimum wage, which is now accepted by Members on both sides of the House. He is looking at the very issues that the hon. Gentleman raised, and I have equal confidence that he will come up with a solution that will not overburden other areas.
The hon. Member for Weston-super-Mare (Brian Cotter) said that some regulations are an inch thick. We all want that reduced; a number of working groups made up of people of no political party and business people are examining that issue. I gave an example in my 1096 introductory remarks, of which I am rather proud, of the work that the Small Business Service did to produce a book for people starting in business on the tax that they have to pay. The book is half the size of the original draft that came from the Inland Revenue, and that 50 per cent. reduction should set a trend that should be followed.
The hon. Gentleman also mentioned the impact of the banks. As he will know, these were referred by my right hon. Friend the Secretary of State for Trade and Industry to the Competition Commission. We are awaiting its response in October, and I am sure that the hon. Gentleman will join me in hoping that the news is good.
The Small Business Council report was produced yesterday, and I forgive the hon. Gentleman for his selective reading of it. He failed to mention the effect of the Small Business Service in lobbying in Whitehall to make sure that the proposals in the Green Paper for a supplementary business rate were defeated. That shows just how effective David Irwin and his people are.[Interruption.] I am pleased to hear the hon. Gentleman acknowledge that from a sedentary position.
The hon. Gentleman responded courageously to my intervention on business rates. I have one advantage over him: I live in a city that was once run by the Liberal Democrats and the Conservatives. The rates went through the roof, with business rates going up even more than domestic rates. That perhaps explains why they formed a one-term administration in local government and have not returned to power there.
I want to pay tribute to the bravery of the hon. Member for South-West Hertfordshire (Mr. Page) in spending so much time on the topic of regulation. He said that he signed up to some regulations and not to others. He should have added that the vast number of regulations signed up to by the last Government, of which he was a Member, beggared belief. We may not have been much better than them when it comes to statutory instruments, but we cannot have the pot calling the kettle black. The last Government introduced some 3,000 statutory instruments, not three or 300, even in their last full year of government and after almost a decade after their attempts at deregulation. I was concerned by the example that he gave as a case of ineffective and burdensome bureaucracy and of regulation that he claimed was not welcomed by small businesses. That example was the statutory late payment regulations.[Interruption.] I assure the right hon. Member for Bromley and Chislehurst (Mr. Forth) that there is lots to talk about in respect of the speeches made from his Benches. I know that he was not here to hear them, so it is not so much a case of refreshing his memory as rubbing salt in his wounds.
Before today, I thought that we had consensus on statutory entitlement to compensation for late payment. I know that the Federation of Small Businesses and even the Confederation of British Industry, which tends to represent larger businesses but has many SME members for which it speaks eloquently, see the merits of the late payment regulations. The legislation has had some considerable effect. It was the only example that we got of something that a Conservative Government would do, but if it is the first piece of legislation that the Conservatives would repeal, they will have even fewer friends in small business than they have now.
1097 There is no evidence that the Labour Administration are more inclined to regulate than previous Administrations, but I want to ensure that the number of regulations is kept to an absolute minimum. It is important that there is independent scrutiny of regulations in the audit of regulatory proposals. We want a system and guidance to underpin the regulatory impact assessment process and to ensure that the process is subject to reviews and improvements.
The hon. Member for South-West Hertfordshire criticised the establishment of the Brussels office of the Small Business Service. Its clear purpose is to give small business a voice in the Commission, especially before the Commission frames legislation. He criticised the funding arrangement for the office, which he said meant that the taxpayer would have an open-ended commitment—would sign a blank cheque—and that businesses that benefited from it would not be expected to contribute. I am afraid that we shall have to disagree on that, but we are at least two years away from business being asked to contribute to that service. The Government believe that it is vital that small businesses are represented in Europe, and that is why the Small Business Service SME liaison office is being run from Brussels.
Other issues put to me included inspections. An example was given of a premises that was inspected nine times. I agree that that is too often, and I have had discussions on how to cut the number of visits. There is a trend, especially with the creation of unified authorities, towards closer co-operation between inspectors.
There is no reason why an inspector should not play the role of both cop and coach. If the fire extinguisher is close to its deadline for renewal, there is no reason why the fire inspector should not say, "Look, get this replaced. Ring me when you have done so, but if you don't, we will be back to carry out an inspection. By the way, here 1098 are the telephone numbers of the places where you can get it replaced." Where one visit can serve a multiple purpose, that should be done. I know that we will have the support of the House if we achieve that.
There were a number of less than supportive comments about the SBS. However, I think the House acknowledged that its chief executive, David Irwin, who has direct access to the Cabinet Office and, indeed, to No. 10, has had a great effect in ensuring that the supplementary business rate was not introduced and in helping tens of thousands of small businesses with their programmes and business plans. Businesses are being helped to secure finance and with other matters. As the service is only just over a year old, that is a creditable record of achievement and I am confident that it will go on to achieve much more.
The hon. Member for North Thanet (Mr. Gale) raised issues in connection with residential care homes. He acknowledged in his speech that the provisions of the Care Standards Act 2000 will benefit users and providers of care by ensuring that regulations are consistent and coherent. Of course, regulations and standards are the subject of a regulatory impact assessment, which will be produced for consultation. I anticipate that he will ensure that the groups that he mentioned make representations.
Several of the contributions to the debate have been of considerable merit. The latter stages of the debate obviously drew Members to the Chamber—the quality of the speeches was doubtless circulating as Members sent their notes to Hansard. It is always a pleasure to respond to a debate that includes contributions by Members from both sides of the House who really care about the subject—in this case, small businesses in their constituencies.
§ Mr. Tony McNulty (Harrow, East)
I beg to ask leave to withdraw the motion.
Motion, by leave, withdrawn.