§ 2 pm
§ Mr. Iain Luke (Dundee, East)
I am glad to have been successful in the ballot for precious moments in Westminster Hall, as I have sought this debate for some time. I wish to review the critical role played by the small business sector in the economic performance of the United Kingdom. I hope that we will have a wide-ranging debate and I look forward to contributions from hon. Members who represent different parts of the UK. Given his track record in office, I am sure that the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Edinburgh, South (Nigel Griffiths), will listen intently to the debate and take up the points that are raised.
My constituency in Scotland has had a poor track record in small business start-ups. Despite the fact that we work within the United Kingdom economy, more than one issue differentiates small businesses in the UK context—and, indeed, in the English and Welsh context—and the Scottish small business sector. I shall explore those issues in the debate. The United Kingdom Government have a responsibility to take action to ensure that structural inhibitions are tackled and smoothed out, so that we gain our objective of prosperity for all.
We are holding our discussion at a time when the global economy is beset by uncertainty and worries about recession. That is all the more reason why we must do all we can to foster enterprise and innovation, and to ensure that the heartening rate of small business start-ups is maintained and improved. It is worth making the point that, in the face of global economic problems, the UK has performed better than most of the industrial world. Although gross domestic product shows significant falls, it remains positive compared with our European and G7 partners.
It is true that the Scottish economy has suffered particularly badly from the global downturn. The primary impact has been on the electronic communications industry. It has also affected the small business sector, which has a fine track record of exporting to and tapping into markets throughout the globe, outwith and within the European Union. The knock-on effect of the economic downturn in markets that were initially seen as good for Scotland, has had an impact on the growth of its small businesses.
Scotland has suffered great shrinkage in its manufacturing capacity. It has a lower growth rate than that of the United Kingdom as a whole. The debate now taking place in the main Chamber emphasises the uncertain international situation. Such a problem means an even bigger squeeze on share prices, markets and the confidence of markets throughout the world. But despite the uncertainty and flux, the nature of the macro-economic situation in the United Kingdom and in Scotland is good. Indeed, only yesterday in Dundee, an article inThe Courier about the latest Scottish economic report, which is published by the Scottish Executive, stated that growth would occur in the Scottish economy in 2003. Moreover, growth is expected to be higher this year than previously, which is good news for Scotland. That also shows that the economy throughout the United Kingdom seems to be picking up.
103WH Let us consider macro-economic aspects, such as low inflation, low unemployment, low interest rates, record numbers of people in work, and especially improvements in the rate of small business start-ups, which are evident from the figures issued by the Treasury and the Department of Trade and Industry last November. All those things hold out the promise of a strong economic recovery in the coming years. Figures recently issued by Barclays showed that more than 91,000 new small businesses commenced trading in the first three quarters of 2002; that is an increase of 14 per cent.
§ Mr. Henry Bellingham (North-West Norfolk)
Were there 91,000 start-ups in the UK as a whole, or only in Scotland? Does the hon. Gentleman know the figure for Scotland?
§ Mr. Luke
The figures apply to the whole of the UK. I do not have the figures for Scotland, but I hope to have them in future to provide evidence of differentials in growth.
One of the best ways of fulfilling the hopes that I have raised of an economic recovery is to ensure that the small business sector is fostered. It is important to remember that the small business sector comprises the vast bulk of the British economy: it encompasses 90 per cent. of the 3.7 million business operations in the UK. It is necessary to highlight the importance of the small business sector and its contribution to the creation of wealth, employment and business activity in the UK. Although it is usually bigger businesses such as British Airways and BAE Systems that receive media attention and attract glamour, these businesses—only 7,000 of which employ more than 250 people—form the tip of an iceberg.
Given the nature of business growth, many larger businesses are now becoming much more footloose. Many are wholly or partly owned by concerns and shareholders outside the UK; as a consequence, they are much more prone to relocation outside the UK economy and to radical downsizing in times of economic difficulty. To draw from local experience, over the past year Levi Strauss & Co. has left the constituency of my hon. Friend the Member for Dundee, West (Mr. Ross), and ABB Power T&D Ltd has closed its premises in my constituency, Dundee, East.
The typical British business is a small business that employs 10 or fewer employees. Many are family businesses, and most are sole traders. They are firmly located within the context of the British business environment, and the continued robust health of small businesses is an essential component of the UK's better economic performance at a time of global and European downturn. Despite the disadvantages of an overvalued pound and the UK's continuing exile from the eurozone, a survey conducted last year by the Federation of Small Businesses showed that 22 per cent. of small businesses continued to trade strongly with European Union countries.
Despite that positive evidence, the sector continues to experience serious problems that inhibit better performance. They were clearly identified in last year's survey by the Federation of Small Businesses: lower costs and overseas competition have an impact on how 104WH businesses operate in this economy; there was a big problem with access to finance; and the ability to employ staff was circumvented by the costs that had to be borne. Access to business advice, transport costs and access to education and training for staff also scored highly as problems in recent surveys. Those problems were identified as of great concern to small businesses in the UK.
Given the growing importance of our trade with the European market, which will soon have a population of almost 340 million, one major factor in the continued well being of the sector is our early entry into the eurozone. Many small business men and women will join me in welcoming the announcement in June of the progress that is being made towards satisfying the five economic tests, which is scheduled to be announced by the Chancellor. I hope that soon afterwards we will have an early and successful referendum and an early and unimpeded entry to the eurozone. That will give certainty to the UK's trading position and remove the extra cost of the artificially strong pound values that burden the UK. Funding in general is a specific problem. The ability to access funds to promote growth is a worry north and south of the border. The Government should be doing more to address the real concern on both sides of the border about the ability to achieve business growth.
§ Mr. Andrew Love (Edmonton)
Does my hon. Friend accept that the formation of new businesses is relatively secure in the United Kingdom economy and that the problem lies with taking small businesses with fewer than 10 employees and growing them into medium-sized and larger businesses? Surely that is the main area that we ought to be looking at.
§ Mr. Luke
I take my hon. Friend's point. I agree with him in the main, although there is a factor in the Scottish context that inhibits the growth of small businesses; I shall talk about it later. Throughout the UK, to grow from a small company with less than 10 employees to a larger company with between 49 and 250 employees is a big leap, and further finance is needed to ensure that the gap is overcome. I thank my hon. Friend for allowing me to make that point in response to his intervention.
The Government have done a lot to remove the red tape and the bureaucracy about which many complain. I am sure that the hon. Member for North-West Norfolk (Mr. Bellingham) will make the point that there is too much bureaucracy. The Government have done great things on removing red tape, on taxation, and on statutory requirements for thousands of businesses. Progress has been made in those areas, but there is a need for more. I am sure that the Minister and others in their discussions with the Federation of Small Businesses will continue to focus on those prime areas of concern.
As a new Member of Parliament with a special interest in such matters, I have visited many small businesses in my constituency and, whenever possible, I have taken the opportunity to engage in dialogue with proprietors, directors or sole traders. They continue to refer to the burden of bureaucracy that hampers their growth and business operations.
Only this week, when people knew that I would be making a contribution to the debate, I had a phone call from a small sole trader in Dundee, who said that, in the 105WH past, he had been successful in obtaining contracts for small jobs for Government Departments in and about Dundee, but because of European procurement requirements, he was removed from the tendering contract and lost out to a company that had a base in Dundee, but was at the larger end of the small and medium-sized enterprise range and had consequently relocated outside the city. Therefore, the work that is being carried out in the Government Departments in the city is provided by a company located outside the city boundaries—indeed, at some distance from the city. That small business man feels greatly aggrieved. When we look at procurement policies and the way in which Government Departments contract out work, we should at least make some leeway for local small business operators.
Another major area of concern is transport costs and transport infrastructure, which is vital to all the peripheral parts of the UK and which is clearly linked to successful business start-ups and continued profitability. My own area, the north-east of Scotland, is seriously hampered by the lack of modern, high-speed road and rail links down the east coast. The Minister, who represents a seat in Edinburgh, will be only too aware of the poor road links between our part of the country and the rest of the UK—the A1 is very poor. He will also be aware of the concern expressed by hon. Members who represent Edinburgh about the reprioritising of railway investment in the east coast main line through the latest Strategic Rail Authority investment review, which puts back any investment, particularly north of Edinburgh, into the very distant future—perhaps the next millennium, if things go the way that they have in the past. I hope that the Minister will take that up, because it is a cause of concern to many small businesses in Scotland.
I referred earlier to the general underperformance of the Scottish economy when viewed against overall UK economic performance. The "Lifting the Barriers to Growth in UK Small Businesses" survey conducted last year by the Federation of Small Businesses showed a vibrant, ambitious small-business sector flourishing in Scotland. Nevertheless, the survey also showed the clear distinction between the UK-wide business environment and that in Scotland.
Scottish small businesses are showing a much more youthful profile than ever before, and the Scottish small business sector can boast the highest proportion of wholly female-owned small businesses in the UK. However, on the downside, the number of small business start-ups is lower than the UK average. Business owners in Scotland are more likely to have bought a going concern or inherited a business than those in the rest of the UK. On the point made by my hon. Friend the Member for Edmonton (Mr Love), that means that there are not as many start-ups in Scotland as in the rest of the UK. That must be addressed.
Business turnover is lower in Scotland than elsewhere in the UK, and the number of employees per business is also lower. That is a consequence of Scotland's businesses being subject to more cost constraints in their business activities. Scotland remains the area of the UK in which small businesses find the burdens of transport costs, fuel and road tax most onerous. Some 62 per cent. 106WH of those surveyed last year expressed dissatisfaction with Scotland's road infrastructure and its links to UK and European markets.
The use of technology in Scotland's small business sector is comparable with that in the rest of the UK, but access to ISDN and broadband is considerably more limited. Despite the technological differences, there is a clear desire for involvement in new ventures to improve marketing, increase research and development, and break into overseas markets. The ability to achieve those goals and to improve the ability to compete is severely hampered by the divergence I mentioned between the business environments in Scotland and in the UK overall. Poor access to broadband particularly affects my area: access is very bad there, even for Scotland. However, much of the country enjoys unlimited access to broadband.
A great percentage of small businesses have not been able to achieve and sustain real growth because of a lack of access to investment capital, and we must address that as soon as possible. Earlier, I referred to high transport costs resulting from not only fuel prices, but geographical location. Because of the smaller nature of Scottish small businesses, they feel a relatively greater impact on overall costs and eventual turnover from taxes in general, and environmental levies in particular. All that affects the ability of Scottish small businesses to invest in long-term growth and viability.
I freely admit that the remedies and responsibilities for those problems fall not only to this Parliament but to Holyrood. To be fair, considerable progress has been made on such matters, with the Westminster Government cutting and slashing taxes in last year's Budget to ensure that small businesses enjoy more advantages. The Scottish Executive played their part, too, falling in line with the Department of Trade and Industry's new manufacturing and innovative strategy, and announcing new resources to boost joint academic and industrial ventures. I hope that that will increase new start-ups in, for example, life sciences and medical biotechnology, especially in areas such as Dundee. Dundee has a good track record of creating new small companies involved at the sharp end of technology, especially computer-game technology.
Much remains to be done. We must constantly review how we handle the thorny issues of economic growth, both north and south of the border.
§ Mr. Gareth Thomas (Harrow, West)
I apologise to my hon. Friend for missing the first couple of minutes of his contribution. Does he share my hope that the Minister will also address the difficulties that small businesses face when trying to access affordable insurance cover? The cost of insurance cover, if businesses can get it, has multiplied by five for some businesses.
§ Mr. Luke
I am happy to respond to that because small businesses in my area have brought that issue to my attention. The growth of the cost of insurance cover during the past few years has been unbelievable. Given the insurance industry's problems, that must be tackled. Larger companies have easier access to insurance because they have a larger financial base than small businesses. Small businesses might not grow or might go into liquidation because they are unable to get such cover, so my hon. Friend's point is well made.
107WH I was talking about the need to examine the way in which we manage our policy, and I referred to two specific aspects. The first is the role of enterprise companies and development agencies north and south of the border. If there are problems of divergence between the Scottish and UK growth figures, we must examine ways in which enterprise companies—in this case, the national company Scottish Enterprise—deal with that. We must continue to review their roles and what happens in England where there are development agencies.
§ Mr. Love
My hon. Friend mentioned the low growth rates of Scottish small businesses compared with that of small businesses in the rest of the United Kingdom. Scottish Enterprise picked up on that issue, set up a special project and invested substantial resources to assist the formation of small businesses in Scotland. As I understand it—the Minister might comment on this—that has not yet produced the additional formation that one would expect. Does my hon. Friend know any reasons why there is such difficulty in forming small businesses in Scotland?
§ Mr. Luke
I know about that from my constituency experience. I appreciate the national strategy that Scottish Enterprise has put in place, but I do not believe that the strategies employed by enterprise companies in the locale exert real pressure at the grass roots and the coal face for the implementation of the policy. There is no discussion about strategies required for local areas. There is a need to examine not only the national operation of Scottish Enterprise and the development agencies south of the border, but the way in which money channelled through national or regional agencies by Government is to get down to the grass roots. Scottish Enterprise Tayside, the local enterprise company in Tayside, has lost its way on many such issues and it should be more focused. The Government should ensure that it is refocused.
Although the fact that the structure of the companies does not allow for political input might be a good thing, it removes the ability of politicians in Westminster and the Scottish Parliament to give a political and economic focus. We are involved with the trends and we know what is happening in the national economy. That would assist local enterprise companies to devise their strategies accordingly.
§ Mr. Kerry Pollard (St. Albans)
My hon. Friend the Member for Edmonton (Mr. Love) said that small businesses are not doing well not only in Scotland, but in several regions of England. Apropos of that, the eastern region is doing really well. There is a culture in the region of getting up and at 'em and a culture of small businesses. However, large businesses have been the norm in other areas of the country, and it is difficult to achieve a culture change from one to another.
§ Mr. Luke
I happily accept that I am speaking from a Scottish perspective. I examined the figures issued last year by the Treasury and the Department of Trade and Industry, and there are obviously divergences throughout the United Kingdom. Much of that happens for the same reasons as in Scotland: there are peripheral areas served by poor infrastructure and they are affected 108WH by the way in which their development agencies work. Although I am speaking from a Scottish perspective, the national Government must do more to refocus the priorities that it sets.
I made these very points in the debate on the Scottish economy in the Scottish Grand Committee last week. Given that Scotland has a separate Parliament, there may be a need to create a cross-border consultative body based on the Irish model, where Ministers meet on a regular basis to discuss the structural problems that affect Scotland's contribution to the UK economy. There could even be a quarterly meeting of Scottish MPs and MSPs to review not only the work of that ministerial body, but also the work of the bodies in Scotland that are charged with creating economic growth and prosperity.
That would give a focus to the work in Scotland and tie it in constitutionally more closely with the workings of the UK Government. In making this suggestion, I reject the arguments put by the Scottish National party. I do not see anyone from the SNP here today, so I do not know what interest they have in the Scottish economy. They did not perform well last week: their concept of financial autonomy—for them a back door for independence—does not hold water. The argument put by the hon. Member for Banff and Buchan (Mr. Salmond)—who is not here today—in the pages of business section ofThe Scotsman yesterday is a recipe for the break-up of a successful economic arrangement that would mean job losses and the loss of work and prosperity in Scotland. I am sorry that there are no SNP Members here to put their case on that point.
§ Mr. Gareth Thomas
My hon. Friend's contribution has focused on the whole range of general issues that affect small businesses and the climate within which they operate. Will he acknowledge that Scotland has a proud tradition of community-owned small businesses? There is a range of specific issues that affect such businesses, relating to the nature of the legislation and the way in which that legislation has fallen behind company law.
§ Mr. Luke
Given my previous experience in local government and economic development, and as one who was very much involved in the fostering of small community businesses, I am happy to argue their case and praise their activity, but north of the border they have lost their way—I am not sure about the situation in England. I agree that we need to refocus their structure and address the way in which they can channel funds and prosper.
Credit unions have been a big success in providing funding and bringing corporate co-operative action together. There is a need to look at that sector, because it is a good and useful vehicle for creating small business ventures that are collectively owned. There is a need to consider different models outwith the normal models, such as sole traders or small partnerships, by creating community-based organisations. That is something that I know the Government are keen to do, and in Scotland, there has been an emphasis on that in the past.
I am glad that we have had time to stage this important debate. It reminds us that we should never forget or belittle the contribution that small businesses make to the economic life of this country. Without 109WH doubt, they are the wellspring and the fountain of regeneration in the British economy. We must make sure that new companies appear, grow, become larger employers and provide prosperity, services and employment throughout the British economy. The massive multinationals often steal much of the economic limelight, but without the solid base of the small business sector, the British economy would be built on weak foundations.
I know that the Minister has done a great deal in this area and I look forward to hearing what more the Government can do to sustain and encourage small businesses. Earlier this week the Secretary of State for Scotland had meetings in Scotland to discuss the role that the Government could play, and I hope that those discussions with small businesses and business in general will pay dividends. The Government have made tremendous efforts to promote growth in the future and set the scene for the eagerly awaited economic upturn.
There will, no doubt, be criticism of the Government and of some of their policies, as well as claims that they have not done enough to foster small businesses, but the figures show that there has been considerable growth, and in that light, the charges appear unfounded. Hopefully, the Government will make the case—I am sure that the Minister will—that small businesses in the UK benefit from the least-regulated regime in Europe. I hope that we can do more to reduce that regulation.
As we are discussing issues relating to the Scottish economy as well as the UK economy, I am sorry that no SNP Member is present. I am sure that their leader is in the House, although I would have thought that he would have ensured that there was a representative in this Chamber to speak on behalf of his party in this debate.
I hope that the Government will take note of what is said in this debate, and that they will examine the infrastructure and structural problems in the Scottish economy in relation to the UK economy. The Federation of Small Businesses has been active in putting the case for small businesses. Only yesterday, in the business section ofThe Scotsman, John Downie poured scorn on the manufacturing plans in the Scottish manufacturing steering group report. At the end of the day, the Federation of Small Businesses makes a positive contribution to the work of the Government, by ensuring that they do what they can to ensure that small businesses are fostered. It is essential that we do all that we can to ensure that that growth continues.
§ Mr. Deputy Speaker (Mr. Frank Cook)
Order. I see hon. Members rising who have not notified me of their intention to speak. In 90-minute Adjournment debates, it is customary to commence the first of the three winding-up speeches no later than 30 minutes before conclusion, which means that there are now 29 minutes for open debate. I ask those hon. Members who are seeking to contribute to bear that in mind, not only in their personal contributions, but in interventions that they make or accept. We must start the first of the three winding-up speeches by 3 o'clock.
§ Ms Meg Munn (Sheffield, Heeley)
I congratulate my hon. Friend the Member for Dundee, East (Mr. Luke) on securing this debate. I am pleased to have the opportunity to take part, because I also have an interest in small businesses in the north of England, although obviously my hon. Friend is from a bit further north. I shall focus on the importance of small businesses to strong regional economies and, in doing so, I will identify particular ways of doing business. There are some business organisations in my part of the world that could be employed in other parts of Britain. I shall also focus briefly on women entrepreneurs.
A couple of weeks ago, the regional development agency, Yorkshire Forward, launched its 10-year regional economic strategy and focused on the skills that will be needed for the region to progress over the next 10 years. It also identified the need for more small businesses and greater growth. I am especially pleased that in Sheffield, as well as the usual business support that the Government have introduced, for example, through the Small Business Service business links programme, we have agencies that offer support to businesses to help them become established, to grow and succeed.
Sheffield chamber of commerce is one of the most successful in the country. I attended an event last week when it took over responsibility for the Sheffield enterprise agency, which takes referrals from the Small Business Service to help people to launch their businesses. The most interesting speech of the evening—even more interesting than my own—was from a young woman who had been in the beauty business for only eight weeks. She was clearly very experienced in her area of work. She had worked for major companies such as Yves Saint Laurent or Yves Rocher—Yves somebody-or-other, anyway—and had managed the training for people throughout the UK, but she decided that she wanted to have a better work-life balance. She wanted to use her skills to set up her own beauty treatment business from home, and she had been enabled to do that with the support of the Sheffield enterprise agency.
Sheffield chamber of commerce also has responsibility for the south Yorkshire international trade centre, which works with businesses to see how they can take advantage of the opportunities to export to the EU and more widely. That scheme is recognised as successful. Those involved with the trade centre enjoyed Prince Andrew's visit last month, during which he learned about the work that is being done there.
We are not only interested in businesses created from one model. In Sheffield, we have a long-established cooperative development agency, and I am especially pleased that more than 10 per cent. of the Labour cooperative MPs have taken an interest in the debate and are present today. That shows how important mutuals and social enterprise are to the economy. It is pleasing to know that work is being done to put into action the Department of Trade and Industry's clear aim of more support for social enterprises. I welcome the proposals for a more supportive legislative environment, and I welcome the fact that in future each business link must plan to support social enterprises. I would be pleased to hear from the Minister about that area of work when he has the time to respond.
111WH There are some excellent examples in my constitutency. Heeley city farm is not just part of the city farm movement; it has expanded to provide training through the new deal, it has a garden centre and café?and it has just been awarded money to develop a large community composting scheme. Next to that we have Heeley development trust, which is a community-owned organisation that manages community resources. That provides a particularly interesting model, because it tries to do what the Government want such organisations to do. It aims to own buildings and rent them out, so that it can move from being grant-funded to being self sufficient. Sheffield Rebuild is also a good example of social enterprise, and it is one of the fastest growing businesses in Sheffield. It trains young people entering the construction industry, and it supplies building services to social housing providers in Sheffield. It recently won a special social enterprise award in the inner city 100 awards.
Small businesses struggle, and I have visited some in my constituency. The owner of Ponsford's furniture store told me that one of his real problems was how to deal with the range of issues involved in running a small business without a large supporting personnel department and particular expertise. For that reason, I welcome the red tape busting roadshow initiative led by the Yorkshire and Humber chamber of commerce, which travels throughout Yorkshire giving advice to small businesses, such as telling them where they can go when they have a problem. The reality for many small businesses is that certain problems do not arise every day: they may come across some issues only every now and then. By offering small businesses signposts to the organisations that can help them, they may become less isolated and more confident in dealing with the range of regulations.
One arguments says that we should have less regulation, but I will talk later about women in business and about the benefits that they have received from various changes that the Government have introduced. We must recognise that such changes are often beneficial to the business community and to the economy, and that it is important to enable small businesses to deal with the relevant issues.
Hon. Members may know that I asked a question last week about the DTI's work on developing help for women entrepreneurs. I was able to use that to highlight the fact that a survey undertaken by Global Entrepreneurship Monitor 2002, which is a worldwide survey of entrepreneurial activity, showed that in Yorkshire and Humberside women are leading men. I received some good press coverage about the Yorkshire lasses—a term that I do not take offence at.
Although women are ahead of men in Yorkshire and Humberside, the level of entrepreneurial activity is still low compared with the eastern region, which my hon. Friend the Member for St. Albans (Mr. Pollard) mentioned. Overall, men in the UK are twice as likely to set up a business as women. If women were setting up small businesses at the same rate as men, there would be 100,000 new businesses a year.
What can be done? A range of things can be done. When I first went to the Sheffield business club I was surprised to see the number of women there. Many of them, like the young woman I mentioned earlier, had been working for somebody else, but had decided that 112WH they had the skills and ability to work on their own. They were getting support from other people through the Sheffield small business initiatives and advice on where to get help. Those women were feeling their way through, and, as the young woman said last week, starting to feel more confident in realising and living their dreams. There are some wonderful examples of successful businesses. The Minister was complimentary about Diva, which is a female-run, public relations company in Sheffield that recently won three awards. The women there have told me that they now need help to move on to the next stage. That is an area that my hon. Friend the Member for Edmonton (Mr. Love) mentioned earlier. The Small Business Service is to provide support for fast-growing businesses.
Other aspects of Government policy also help women, such as improved child care resources. Indeed, many women are going into the business sector of child care. There is the increased financial support for families, such as the child tax credit, and higher child benefit, which enables women to afford child care and gives them the space to set up their businesses. There is also the Government's strategy for more flexible working, which means that parents are better able to combine their working lives with their family responsibilities. I do not believe that that causes problems for business, contrary to what some might say. When businesses can adapt to that strategy and positively embrace it, they keep their staff and do not have the expensive problem of recruiting additional people.
I know that many other hon. Members want to contribute to the debate, so I shall conclude. We want more small businesses to grow and to be provided with more support. Some of the organisations that operate in my constituency could be replicated elsewhere to support people going into business. We want to encourage a range of support, especially child care, to enable women to go forward and take up opportunities.
§ Mr. Gareth Thomas (Harrow, West)
I, too, congratulate my hon. Friend the Member for Dundee, East (Mr. Luke) on securing the debate and on the way in which he made his case. He was absolutely right to praise the campaigning work of the Federation of Small Businesses, and in his comments about the Scottish National party. However, he might also have expressed surprise at how few members of the main Opposition party could be bothered to be here for such an important debate.
I want to focus on three issues, two of which have come up in the interventions that I have made on my hon. Friend. The third and perhaps parochial point concerned west London. I represent a seat in west London. The west London economy provides two and a half times as many jobs as the City of London, but the issues facing the area receive significantly less column inches than the City of London. Recent research by Business Link for London has highlighted a range of issues. If we could sort those out, west London's economic performance could be even stronger than it is at the moment in the small business area.
Many small businesses feed off large, flagship developments. In west London we shall benefit from the modernisation of Wembley stadium, the new terminal 5 113WH programme at Heathrow and the White City development. Those flagship developments have brought transport capacity in the west London area into stark relief. One issue that I urge the Minister to take back to the Department and to continue to promote in discussions with colleagues in the Ministry for Transport is the importance of Crossrail for the west London economy. I also urge the Minister gently to promote the need for more investment in trams and intermediate forms of travel in the west London economy. The Croydon tram link has proved, beyond wildest expectations, the benefits of investment in intermediate forms of transport for the south London economy. Frankly, we want the benefits in west London as well. The 140 bus route from my constituency to Heathrow would be an ideal route for such investment.
I want the Minister to tackle the difficulties facing small businesses over insurance cover. Compulsory employer's liability cover and public liability insurance are two particular aspects of insurance cover that I had in mind. An AXA survey published in December suggested that some 210,000 small and medium-sized businesses have no employer's liability cover at all. The construction sector has been especially badly hit by the rising cost of premiums for insurance cover. Given that such cover is a legal requirement, many businesses face the choice of either trading illegally, closing down the business or trying to pass on the cost of the increased premiums. For many businesses, all those choices are difficult and may result in a move away from reputable companies to those less keen on sticking to legislation.
The Government have recognised the considerable difficulties over insurance cover. In last year's pre-Budget report, the Chancellor of the Exchequer announced a review that would be conducted by the Department for Work and Pensions. The Office of Fair Trading is also studying the market for liability insurance cover. How is that work progressing? If the Minister could give us some details on that, several firms in the construction, repair and modernisation sector in my constituency that are currently faced with that most pressing problem would have more confidence.
My hon. Friend the Member for Sheffield, Heeley (Ms Munn) referred to the not-for-profit small business sector. The Minister will be aware of the strategy set out in the report published last year "Private Action: Public Benefit". The strategy aims to review the issues facing the not-for-profit sector, recognising that the legal forms available to such businesses are certainly not appropriate as they stand. The report made a series of recommendations on the need to modernise the law on industrial and provident society legislation beyond the legislative reform already initiated by my hon. Friend the Member for South Derbyshire (Mr. Todd) in his private Member's Bill. The report also recognised the need to bring into law much more quickly than at present the industrial and provident society rules and regulations in comparison with company law where appropriate.
I hope that the Minister will be able to shed some further light on regional development agencies and whether they are being encouraged more fully to recognise the potential of social enterprises. I look forward to his response.
§ Mr. Kerry Pollard (St. Albans)
I congratulate my hon. Friend the Member for Dundee, East (Mr. Luke) on securing the debate. I also congratulate the Minister on his proactive approach to small businesses. He and his team have a high and increasing reputation for all their efforts in the small and medium-sized enterprises sector. There is no doubt that the SME sector in the United Kingdom has helped our economy through the global slowdown. Without that, we would be in a much worse situation. The SME sector as a whole must congratulate itself on achieving that.
In the UK, it takes one day to set up a small business; in Europe, it takes many weeks. That is how we view small businesses here and how we ought to encourage them to set up and react. Recently, an Act was passed here that enabled a small business to fail, get up, dust itself off and start all over again. That is more good news, delivered by this Labour Government.
There are of course problems for the small business sector. A small business man will say, "All I want is for Government to get off my back; I want no rules, no regulation, no forms. I will pay some tax when I feel like it. I want to be left to run my business as I want." That is not the real world, no matter how much some would like it to be. I know that the Minister is doing his level best to apply a light touch. There are problems with factoring, which is a major issue for small businesses, and with the high and increasing costs of insurance. My hon. Friend the Member for Edmonton (Mr. Love) referred to that. Costs rose by as much as 50 per cent. and sometimes 60 per cent. year on year; that is a huge burden for small businesses to carry.
I draw to hon. Members' attention the example of a small, very successful business in my constituency. It is called Hocking NDT; NDT stands for non-destructive testing. It is a small firm that specialises in testing aircraft parts, and it is vital that it does its work properly. Two of its employees decided that they could put the technology to use on rail track. At present, people test the track by walking along it at a speed of about 1.8 mph. The two employees designed a device that can be attached to the front of a train to go at 65 mph, doing exactly the same job. That is revolutionary. Two employees of a family concern did that in their own time. The device has now been patented.
That is an example of the entrepreneurial skills that we have in this country in abundance. We must encourage those skills to ensure that small businesses flourish. That will help our economy by providing jobs and tax revenue. It is the way forward. I am sure that the Minister will come up with solutions to some of the problems that hon. Members outlined. I will shut up now to let others speak.
§ Mr. Andrew Love (Edmonton)
Thank you, Mr. Deputy Speaker. I had not intended to speak, so you are right to ask me to be brief. First, I echo the comments of 115WH every hon. Member this afternoon on the contribution of the small business sector to the British economy. When speaking of the economy, we always think of the largest companies such as British Airways and British Petroleum, and of course they make a major contribution. However, small businesses are major and growing employers and wealth creators in our economy.
I wish to raise with the Minister a point that I made earlier in an intervention: our problem in the United Kingdom does not seem to relate directly to the formation of small businesses, although there are regional variations. Our economy seems to have a relatively buoyant formation of small businesses. Where our economy does not seem to be operating as effectively as it should is in developing those small businesses into medium and large businesses. Germany has a very large middle business sector that is a major contributor to its economy. We must return to that issue time and again to make the most of business formation and business growth to help the economy and to provide employment.
Every hon. Member touched on regulation. However, if we leave behind the sterile debate that often goes on in Westminster we shall find that we need balanced, reasonable regulation for small businesses. Regulation should not be a burden on them; it should help them to achieve their functions more effectively. In my capacity as secretary of the all-party small business group, I have listened to numerous debates about the concerns of business, both here and in my constituency, and I accept that we should reduce regulation. However, whenever we discuss which regulation should not be applied it becomes difficult to find anyone who can suggest what to do. Whichever regulation is suggested—whether it concerns minimum wages, working families or health and safety—people of every political hue claim that important safeguards and regulations must remain for the sake of both employees and employers. We must get away from sterile debate and accept that regulation is here to stay. We shall never get rid of it, but we need to find a balance by keeping the right regulation and getting rid of that which is not appropriate.
One of the main ways in which we can find that balance is to have a change of culture at Westminster. All the pressures in Parliament are for more and more regulation. We need to create pressures that will reduce regulation. I shall not list all the factors that go towards increasing legislation, but I shall touch on one that has helped to reduce it. I pay tribute to the Conservative Government—I do not often do that, so the hon. Member for North-West Norfolk (Mr. Bellingham) should listen carefully—for the formation of the Deregulation Sub-Committee. That produced a number of measures that have reduced regulation. However, the real impetus to start the process came from the Labour Government when they transformed the Deregulation Sub-Committee into what is now the Select Committee on Deregulation and Regulatory Reform. The speed of deregulation has accelerated greatly in the last couple of years. That is a first step along the road.
We need to take other steps; I suggest two in particular. First, Government Departments should have placed upon them a duty to report on how they have deregulated as well as regulated, so that the public and Parliament can know what is happening. Secondly, the Deregulation and Regulatory Reform Committee 116WH has a co-ordinating role to fulfil. It should look across Government Departments to see what is done by each of them in order to reduce regulation and, if necessary, to scrutinise departmental activity and call to account Ministers whose Departments are not performing that function. If we add those measures together, we shall have a significant impetus towards deregulation. We shall then have a sensible way forward: at the same time as we create regulation, we shall also reduce it where it has become redundant. That would satisfy the small business community and would play a major part in allowing it to grow and to contribute even more to the economy.
§ Mr. Mark Lazarowicz (Edinburgh, North and Leith)
I congratulate my hon. Friend the Member for Dundee, East (Mr. Luke) on securing the debate and I apologise to you, Mr. Deputy Speaker, and other hon. Members for having missed part of it. In two minutes, I shall make two brief points.
First, I suggest to the Minister that it is always important to consider not just the good things that he and his Department are doing to promote small business. Like many hon. Members, I am impressed by the way in which the Government have simplified the regulatory framework. However, they should also look at the effects on small businesses of other policies. Businesses in my constituency have raised with me the effect of the current investigation by the Office of Fair Trading into pharmacies. Lindsay and Gilmour, which has its head office in my constituency, runs some 10 community pharmacies in different parts of Scotland. The company is worried that its ability to run those outlets as small businesses might be affected by the review of pharmacy provision. I am not in favour of a protectionist approach to small businesses, but we must consider how they are affected by wider policies.
Finally, the Federation of Small Businesses has commented on what it sees as the unfair burden on the self-employed, as opposed to incorporated businesses. The Government have done much to encourage the sole trader, but there is a strong case for shifting the balance further to ensure that the self-employed enjoy some of the advantages of incorporated businesses when they start up. Let us not forget that many small businesses are not necessarily the fruit of a carefully thought-through business plan or a strategy for business development. Often, they start as someone's hobby or spare-time activity, which then expands into a business. Many such businesses fail, but many others succeed, and we should do what we can to encourage them.
§ 3 pm
§ Brian Cotter (Weston-super-Mare)
I congratulate the hon. Member for Dundee, East (Mr. Luke) on securing the debate. He made many interesting points, and I particularly welcome his remarks on the euro, because it is important to highlight the problems in terms of manufacturing companies' productivity. I also echo the hon. Gentleman's concern about broadband. Work is going on, but many rural areas are still not connected, and I hope that the Minister will give the point serious consideration.
117WH The hon. Member for Sheffield, Heeley (Ms Munn) made some key points about women in business. She also highlighted the fact that the Government and others had introduced many initiatives—about 180 of various sorts—to help groups in the business community, such as women. I urge the Minister to recognise the need to pull together and examine those initiatives so that they can be made more generally effective. At present, as the hon. Lady said in relation to Sheffield, they are very effective only in certain areas.
Yesterday, I met a member of the Afro-Caribbean business community, and we talked about its problems. There is also the issue of young people. I hope that the Minister will take all those issues on board.
At this stage, I should declare an interest. I am the director of a small manufacturing company, which obviously means that I am very interested in and welcome the debate.
As hon. Members have made clear, small businesses are an important factor in this country's economic thrust. They make up a large proportion of businesses, employing people and generating jobs and money. They are also community based and recycle money into the local area, which is important in terms of keeping areas going. The same is not true of the big supermarkets, whose money goes to a central pot and, for all I know, offshore. Another important aspect of small businesses is that they provide diversity and choice in local areas, and cater for local needs and interests.
My hon. Friend the Member for Bath (Mr. Foster) particularly wanted me to refer to an organisation called Computer Village, in Bath. It recently received an award for excellence as a computer retailer. Given that it comes up against big companies, that is a tribute to the way in which small businesses effectively deliver services.
I come from a manufacturing background, and I pay tribute to a manufacturing company in my constituency called Nickel-Electro, which has 60 employees. I recently visited it, and its innovativeness shows that small firms are often more ambitious and interesting. They can drive things forward because they are more contained and can take decisions quickly, in a way that big businesses often cannot. I congratulate those two companies.
Many hon. Members mentioned red tape, and we need to raise the issue frequently. I say that particularly because the payroll costs of small businesses are something like £288 per employee; a big company would pay only a fiver. The business rate is also disproportionately weighted against small companies. I urge the Government to consider those points—the payroll and bureaucracy costs and the business rates for small business being so large.
A report was recently published on regulatory impact assessments. I have served on several Standing Committees, and I have often urged the Government to consider doing regulatory impact assessments for Bills. Ministers consistently say that they are doing so, but I consistently see them not doing it well enough. I urge the Government to consider what happens in the Netherlands, where a separate organisation has the job of making an impact assessment and examining the 118WH ways in which, for example, small businesses might be hit by legislation. That would be better than the blanket statement that a Bill would cost £350 million—or whatever figure it might be.
Other hon. Members have mentioned the Small Business Service. Liberal Democrat Members welcomed that initiative, but I am a little disappointed. The initial concept was that the service should provide a robust, strong voice for small businesses; it would be independent of the Department of Trade and Industry and would say what needed to be said. It is not fulfilling that purpose terribly well, because it is not sufficiently independent. The head of the service should by now be a household name—someone who is known for fighting on behalf of small businesses, someone who would cause the Minister to quake in his shoes a little, someone who is ready to hammer him into the deck. That seems not to be happening, and I hope that something will be done to address that particular problem.
The Government took a long time to respond to the Cruickshank report, but small businesses still express concern about the banks, about interest payments and about the difficulty of switching from one bank to another. I hope that the Minister will refer also to that.
The hon. Member for Harrow, West (Mr. Thomas) and others referred to insurance matters. I see the chairman of the all-party small business group. the hon. Member for St. Albans (Mr. Pollard), nodding his head—he, too, referred to them. I urge those hon. Members who have not yet done so to put their names to my early-day motion on that matter. I am glad to say that the Government listened. Two reports were organised, one from the Department for Work and Pensions and one from the Office of Fair Trading. I think that the DWP report will be published shortly. I hope that both reports will be addressed quickly by the Government because the problems need to be tackled urgently.
I know of companies whose premiums have increased by 600 per cent. and more. For one company in my constituency, the cost of insurance went up from £9,000 to £48,000 in one hit. The Minister will agree, I am sure. that that is not tenable, and I hope that the Government will address the issue. I have met many representatives of the insurance industry as well as of business. I try, as we all should, to work alongside them, but we want openness and clarity on the subject. I think that the Small Business Service should have been fighting harder on that front, helping those companies whose premiums have been unfairly raised simply because they operate a certain category of business. Within those categories, some are more risk-prone than others. Risk management is an issue that could be covered.
I am glad to see that the problem suffered by newsagents has been addressed after the report of the Office of Fair Trading. There are many problems for small businesses and I am worried, in particular, about local pharmacies. They are so important to the local community, but they are currently at risk. I hope that the Minister will address such a serious issue. I thank the hon. Member for Dundee, East for calling the debate.
§ Mr. Henry Bellingham (North-West Norfolk)
I begin by declaring an interest that is specified in the Register of Members' Interests. I congratulate the hon. Member 119WH for Dundee, East (Mr. Luke) on introducing such an excellent debate. Many local examples have been cited of exactly how vital the small firms sector is to the economy. The hon. Gentleman rightly spoke about the need to foster innovation and entrepreneurship, and put such matters in the wider Scottish economic context.
The hon. Gentleman was right to chastise SNP Members for not turning up here today. Time and again, they have gone on about how they are the friends of small businesses, yet they do not bother to attend such an important debate. The hon. Member for Harrow, West (Mr. Thomas) said that I am the only member of the official Opposition who is present. I must point out that, when we debated the Industrial Development (Financial Assistance) Bill on Monday, only one Labour Back Bencher was present. Many other things are going on today. There is an important debate in the main Chamber, so it is good news that so many people have turned up here.
The hon. Member for Sheffield, Heeley (Ms Munn) made the good point that the burdens, particularly the overall impact of red tape, fall disproportionately on small firms because they do not have the resources or the personnel to deal with them. She also flagged up sign posting. Will the Minister explain the progress of the Department of Trade and Industry's business support review? There are many schemes to support small businesses, but they are often faced with a plethora of schemes and the situation becomes confusing. The hon. Lady was right to flag up female entrepreneurs. We all want more women in business.
The hon. Member for Harrow, West referred to employer and public liability. That was also picked up by the hon. Member for Weston-super-Mare (Brian Cotter). The Minister will note that exchanges were made on such matters during Department of Trade and Industry questions. In fact, I have referred to two horror stories of companies whose premiums have rocketed sky high. The hon. Member for Harrow, West asked about the reports of the Department for Work and Pensions and the Office of Fair Trading. Many firms cannot wait any longer. As the hon. Gentleman said, a few are trading illegally now and many others need respite quickly.
The hon. Member for Edmonton (Mr. Love) made the interesting point that not enough small businesses move from small firm status to the middle size—mittelstand—status. That is a fair observation. I do not know whether research has been done on such matters. Obviously, in Germany many more smaller firms can move on. That is perhaps because there is not the tradition in Germany of small businesses trying immediately to go public. Many companies have come on to the A market, but it would be interesting to see how many of them started as small companies and how many of the equivalent companies in Germany decided to remain privately owned, middle-sized businesses.
The hon. Gentleman was right to talk about the regulatory impact assessment regime. He referred to the need to widen the Deregulation and Regulatory Reform Committee, so that we have deregulation reports from Whitehall. That is an extremely sensible suggestion. I wish to put another idea to the Minister. The Government could build on the small firms loan guarantee scheme. I know that the Government and the Confederation of British Industry are keen on such an 120WH initiative. The scheme has been a huge success. The Minister will be aware that since it started in 1981, more than 80,000 loans have been guaranteed. The value of those loans is now well over £3 billion. The average size of a loan is about £37,000. The scheme plugs an important funding gap for small businesses.
I hope that, when the Department of Trade and Industry considers the business support measures and puts in place a review of them, it will think about expanding the scheme. I notice that that will be in the submissions of many trade associations and small business organisations to the Chancellor for his Budget. After all, when such firms succeed—and most of them do—the money gets paid back. The Government only guarantee the loan. I ask the Minister to consider carefully whether the small firms loan guarantee scheme could be extended to various other categories. Why, for example, does it not cover banking, finance and associated services, or education?
The hon. Member for Sheffield, Heeley mentioned getting more women entrepreneurs involved in small businesses. Many women want to become involved in small businesses on the education support services front, yet they cannot qualify for the small firms loan guarantee scheme if their business is in any way connected with education. That is a ridiculous anomaly. The same is true of businesses affiliated to medical, health and veterinary services; they cannot get a Government-backed loan. Motor vehicle repair and servicing are very important in some of our constituencies, where there are many young people who want to go into that kind of business, but retail and transport are also excluded.
We could make the scheme a little more flexible overall. I shall give the example of a company that did not get a loan. It was a business that needed funding to cope with increased orders. It was excluded from securing a £250,000 loan because, despite having been in existence for two years, its parent had gone into receivership, and the management team had bought the company from the receiver and traded with the same staff, premises, customers and order book. The Small Business Service interpreted the change in ownership as a cessation of business.
I hope that the Minister will take from this debate the strong points made by many hon. Members. Obviously, there are some things that the Government cannot do, but there are others that they can, and some of them do not cost any more money. I would have thought that extending and reinforcing the success of the small firms loan guarantee scheme would be a good way of telling the small business sector that the Government want to do all they can to help them.
The Liberal Democrat spokesman mentioned the burdens of red tape. Does the Minister agree with David Frost, the Director General of the British Chambers of Commerce, who said the other day that the community burden of red tape has now reached over £20 billion, excluding the £10.2 billion cost of the minimum wage, which my party firmly supports? Mr. Frost went on to say:
"Red tape is strangling British productivity and it is threatening to combine with other blocks on business to create critical mass that will destroy jobs through a dramatic loss of competitiveness."121WH That has become a great worry. I hope that the Minister will comment on what David Frost said, because some of those burdens are home-grown and are being gold-plated. Some have come out of Europe, and the Government have no control over them. However, 60 per cent. of the burdens came from the UK.
The Liberal Democrat spokesman mentioned the report commissioned by the British Chambers of Commerce by Tim Ambler of the London business school and Francis Chittenden of Manchester business school. They considered 200 regulatory impact assessments. According to their report, only 11 per cent. of impact assessments even considered the possibility that there might be an alternative to legislation. Some 60 per cent. of the 200 assessments examined said that the consultation with the stakeholders was very poor indeed. An example that they gave—and this might be something that the hon. Member for Sheffield, Heeley supports—was the Government's policy on the right to demand flexible contracts. The cost of that to business is some £296 million a year. The benefit to businesses will also be substantial, but no alternative was proposed and there was no proper consultation on it. Does the Minister agree with David Frost's conclusion from the study?
The Minister will know that storm clouds are brewing on the horizon. The CBI's last report was very gloomy, and today's figures show that manufacturing and investment are at their lowest level since records began. That is not good news. I know that the Minister recognises that, because he has great energy and enthusiasm and a great weight falls on his shoulders. The new jobs that must replicate those lost to manufacturing must come from the small firms sector, and we look to the Minister to respond to those important points.
§ Mr. Deputy Speaker
Order. The hon. Gentleman rightly drew attention to his interests in the Register of Members' Interests, which is as it should be. However, that is not much help to hon. Members who are participating in the debate if they cannot refer to the register. I shall make representations to arrange for copies of the register and "Dod's Parliamentary Companion" to be made available on each side of the rostrum, so that hon. Members in the Chamber will have full information available.
§ The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths)
I am proud to be the Minister with responsibility for small businesses. I am proud to have a great team at the Department of Trade and Industry, and I am proud of the Small Business Service and many business links.
I am proud of the role that small businesses play in ensuring that we have the fastest growing economy in the G7 and the fourth largest economy in the world. I am proud of the quality of the contributions of my hon. Friends, and of their commitment to small businesses in not only their towns and communities, but throughout the United Kingdom. None of my colleagues are more committed than my hon. Friend the Member for 122WH Dundee, East (Mr. Luke), who articulately voiced many of the issues that affect and interest small businesses. I congratulate him on his contribution.
Small businesses play a major part in our economy. The Federation of Small Businesses, the British Chambers of Commerce, the Institute of Directors, the Forum of Private Business and the Confederation of British Industry's small and medium-sized enterprises council play an invaluable role in advising me and, I am sure, the Opposition and colleagues about what is good for small businesses. Perhaps the fact that we have taken their advice is one of the reasons why 1.7 million small businesses have started in the past five years, and why their survival rates are the highest for a decade.
There are issues in Scotland—nowhere more than in Dundee—that my hon. Friend the Member for Dundee, East rightly highlighted. I am delighted by recent developments in Dundee that have made it one of the top biocentres in the UK and, therefore, in Europe. The University of Dundee has done tremendous work on spin-out companies, and several will be world showcase companies. I talked today to lain Gray, the Minister for Enterprise, Transport and Lifelong Learning in the Scottish Executive, about the valuable role played by Dundee, and he told me about recent examples, including two today, that will take the expenditure on spin-out companies from the university to £30 million. One such company, Calico Jack, received a £40,000 smart award, which is a Government grant to help it to take its technology at the micro-project level toward commercialisation. Another company is CXR Biosciences, which has attracted £4 million from the private and public sector and is the university's newest spin-out company. I will want to follow the company's progress through my hon. Friend.
None of that would have happened without the commitment of my hon. Friend and others in the Dundee area to putting Dundee on the map and sending the clear message that Dundee is one of the best places in Britain to set up and grow a small business. The small business gateway in Dundee spends £23 million, and receives a contribution from Dundee city council of £115,000. That spending ensures that there is a one-stop shop in Dundee not only for people who are growing a business, which was a vital point made by my hon. Friend, but for people who are starting businesses. That £23 million contribution is very valuable. It complements the work done by business link organisations in England through the Small Business Service, which provided 250,000 businesses with advice and support last year, including 18,000 start-ups. I agree that the focus should not only be on start-ups, but on businesses that are willing and able to grow.
I now turn directly to the key issues that have been raised. Procurement is vitally important. One of the first questions that I asked when I became a Minister at the Department of Trade and Industry was how a small business got the contract to clean the carpet or the windows. The bundling of contracts has been detrimental to small companies. I am pleased that the representations that I made in my first few months as Minister resulted in the Chief Secretary to the Treasury, who has responsibility for these matters, abolishing the requirement to supply three years of accounts. That is a welcome move, although it is only a beginning.
123WH I recently had a meeting with my right hon. Friend to progress that agenda, and I am confident that the Treasury will work with us on behalf of small businesses to ensure that anachronistic procurement rules are changed so that the public get value for money while, at the same time, small businesses get a fair crack of the whip.
Every hon. Member will know about the problems caused by insurance. I have had several meetings, not only with the stakeholder groups that I mentioned earlier, but with the Association of British Insurers and the British Insurance Brokers' Association. My right hon. Friend the Minister for Work, my hon. Friend the Financial Secretary to the Treasury and I sit in a tripartite committee. I do not apply a blame culture to insurance companies. There are commercial pressures and wrong decisions can be taken. We must work together to do what we can to alleviate the burden. Small businesses must have affordable cover, and we are working hard with the industry to come up with practical solutions.
It is vital to do what we can on regulatory impact assessments. I was in Brussels last Wednesday and I was interested to hear what Nick Clegg, the Liberal Democrat MEP, said about the need to have regulatory impact assessments in Brussels, especially when regulations are amended by the European Parliament that do not appear to have had a proper impact assessment. We have an established RIA procedure, and although there are always grounds for improvement, I gain satisfaction from the fact that our European colleagues and their civil servants come to see what we are doing. We are always open to suggestions for improvement.
The small firms loan guarantee scheme is especially vital. I know that every hon. Member will have constituents who have benefited from it. There was a barrier in 1993 to certain sectors, some of which have been mentioned. I asked for the criteria to be examined and questioned whether what applied a decade ago should still apply. I am pleased that we were able to persuade my right hon. Friend the Chancellor of the Exchequer to make a change that comes into effect on 1 April. The number of sectors eligible will be extended to include retailing, catering, coal, hairdressing, house and estate agents, libraries, museums, cultural activities, motor vehicle repair and servicing, steel and travel agents.
My hon. Friend the Member for Sheffield, Heeley (Ms Munn) eloquently raised a key issue. I have visited several companies in her constituency. She mentioned the role of women entrepreneurs. Only about 33 per cent. of companies in Britain are set up by women entrepreneurs. My hon. Friend highlighted the fact that there would be 100,000 more new businesses if women set them up at the same rate as men. Our extension of the small firms loan guarantee scheme as from 1 April to industries such as catering will bring benefits to women and women entrepreneurs.
I am pleased that we are the fourth biggest economy in the world. I want us to maintain that position. To do that, we must ensure that we embrace the talents of everyone in our society, regardless of race or gender, so that the benefits are enjoyed by everyone in our society and are passed on to our children and grandchildren. I congratulate my hon. Friend on raising this important topic.