House of Commons Hansard Debates for 13 Nov 1992

Mr. Bruce : Yes, absolute extortion ; yet that is the way the banks behave every day.

As it was a publishing business, I needed to acquire some publishing and word processing equipment. The suppliers said to me, "As you are a new business, we shall extend no credit to you. We want a bank letter of credit up front before we will deliver the machines." Every way one turns, one is faced with increased costs, compared with those of established, larger businesses. One is squeezed by the bank and the suppliers. No wonder many businesses find it extremely difficult to get off the ground. I should point out that my business was not one of those that failed. I have no connection whatever with it now, but that small business is successful. However, the way in which the business was launched very nearly took us over the edge in the first two years. We had no help from big business or from the banks.

I wholly support the action group that has been formed, consisting of people who have suffered as a result of the banks' actions. It is to make detailed proposals. They ought to be taken fully into account. I hope that the Government will listen to those people. Legislation on the late payment of debt, particularly by big businesses, will have to be introduced. In a recession, too many big businesses decide that they are going to survive at the expense of their small business customers. That is unacceptable and is not in the national economic interest.

Mr. Dowd : In the light of those remarks, how does the hon. Gentleman regard the attitude of many companies--that systematic late payment is, in their eyes, very prudent cash management?

Mr. Bruce : The hon. Gentleman is absolutely right. In its early days, Tesco financed its expansion entirely by that process. For a large business simply to delay payment--which may add up to millions of pounds-- to a range of suppliers by an extra two to four weeks is a very substantial cash advantage. That is why I believe that people who say that that is bad and ought to be stopped will have no effect. I do not see how it can be stopped other than by legislation that leads to automatic interest surcharges on late payment.

Mr. Couchman : Does the hon. Gentleman agree that many small businesses, whether or not they establish proper trading terms with their major contractors, are loth to take action against them because those contractors may be their only customer, or at least their main customer? If the small businesses press too hard for payment, they may find that they are set to one side by the main contractor, with the result that another firm benefits.

Mr. Bruce : I agree with the hon. Gentleman. I have been in that situation. Companies cannot afford to offend their main suppliers--they cannot bite the hand that feeds. Payment should be by agreed terms and any delay should be subject to an automatic surcharge. I cannot see any other way of reversing the process. Unfortunately, one or two hon. Members, have been disparaging of local authorities' role in developing small

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businesses. Local authorities play a useful role in helping to promote and assist small businesses, not least because they have local knowledge that other agencies cannot bring to bear. Gordon district council's economic development unit has been able to provide practical, down-to-earth assistance to many small businesses, which have acknowledged to me that that has sometimes made the difference between weathering a storm and achieving expansion. It is not always a matter of money ; sometimes the unit can guide small businesses through red tape or the way in which planning applications are dealt with. Those applications can be processed either in a way that is helpful or in a way that can destroy business. Sensitivity and understanding are critical.

District and regional councils in my area have stepped in when companies have got into financial difficulties and have offered practical assistance by taking over premises and leasing them back, releasing capital to restructure the business. It is a risk and it does not always work, but on balance the community has benefited through businesses and jobs being saved and, subsequently, jobs being created. If the Government do not recognise the role of local authorities or squeeze them so that they are unable take such action, no other agency is likely to step in and fill the gap. The role of local authorities should be acknowledged and recognised.

Mention has been made of the venture capital or risk capital gap facing small businesses. This is a particular hobby-horse of mine. I believe that it is a very genuine problem and some imaginative measures are necessary to deal with it. I have explained why the banking sector is failing many small businesses. It is not providing the support that they need and it is imposing charges that can prove fatal and are contrary to creating a healthy business climate. Often small businesses are expected to provide finance from resources wholly secured against the personal capital of the individuals involved, yet they are in markets where bigger businesses can get wholly unsecured capital at more competitive rates. Small businesses have to have some additional advantage--the imagination of their product, which gives them a competitive edge, the hours that they are prepared to work or some other factor. There should be access to capital funding that is assessed properly on the basis of the commercial risk but is not always fully secured by the personal investment of principals in the company.

The Chancellor acknowledged yesterday that the problems in the housing market are a significant source of the lack of confidence in the economy. Over the years, many small businesses have financed their expansion on the basis of the security of the bricks and mortar of their principals. We must find a better way of financing small businesses, because in a recession, when the value of property falls and often the equity in a property falls below the borrowing secured against it, banks are not willing to lend and company directors are not willing to take the risk of borrowing against that lack of security. We shall have to re-inject confidence in the housing market over a significant period before getting out of this hole, but in the meantime we must look for a mechanism that will provide risk capital to small businesses without requiring the security of a house to be put on the line. Banks must

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recognise that that will secure a successful, thriving small business economy, to the benefit of the whole of our society and big and small businesses alike.

If we do not act now, the recession will go on longer because there is a lack of confidence to invest in the future, and I am afraid to say that lower interest rates are not enough to resolve that. I hope that the Government will recognise that if ever there was an opportunity to introduce less secured risk capital for small business, this is it. If they can bring that forward in the next year, they may begin to get business confidence going and small businesses thriving again.

11.25 am

Mr. David Shaw (Dover) : I congratulate my hon. Friend the Member for Colchester, North (Mr. Jenkin) on securing this debate on small businesses. As chairman of the Back-Bench Conservative small businesses committee, I welcome his appointment as secretary of the committee ; I know that it will prosper with him as its secretary. I apologise for the fact that, because I have to attend my constituency advice bureau, I shall have to leave before the winding-up speeches. I enjoy the speeches of my hon. Friend the Minister, and I shall make a great effort to read his interesting speech on Monday in the Official Report.

The importance of the small business sector has been highlighted by Conservative Members. My hon. Friend the Member for Colchester, North mentioned the significant employment gains that have been made by the small business sector. Even in the depths of recession, there are some 400,000 business starts each year. We may ask why, and the answer is that, just as people want to own their own homes, they want to start their own businesses.

We must continue to encourage small business men and women. If society's values are right, no one should receive greater applause from the public than the business man or women who meets the pay cheque at the end of the week or month. Meeting the pay cheque is a great skill which should be widely respected and well rewarded. Sadly, there is little or no encouragement from the Labour party. We were entertained by the hon. Member for Bolsover (Mr. Skinner), but in his 40-minute speech he did not mention the word "profits". He criticised the education system, and I accept that he knows what a good education is. Indeed, he had one at grammar school. But, I wonder, would the hon. Member join me in arguing that our education system should include small businesses as a subject on the curriculum?

I also wonder why the hon. Member for Bolsover is now advocating import controls. His advocacy is significant, because he turned Labour party policy on Europe in the past few weeks and managed to make it vote against the Maastricht Bill. He alone did that. What he advocates today becomes Labour party policy tomorrow. Perhaps import controls will be Labour policy, if not tomorrow perhaps by the end of next week.

Mr. Jenkin : Labour will vote against GATT.

Mr. Shaw : The Labour party may vote against the GATT agreements. I enjoy the possibility of facing my electorate in Dover knowing that I can say that the Labour party wants to impose import controls, which would damage the ferry

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industry of Dover tremendously. I am grateful that the hon. Member for Bolsover has come out today with what should be true Labour party policy.

We should be depressed if we looked at the Labour party manifestos of 1979, of 1983 and of 1987. I cannot find there any mention of small businesses or any advocacy of support for them. In the 1992 manifesto, the Labour party mentioned small businesses, but we know that Labour promised support for everything in a manifesto that was long on promises and short on credibility.

I could not find any mention of profits in any Labour manifesto or in any other Labour document. I invite hon. Members to say whether they have ever heard a Labour party spokesman explain why business needs to earn profits. Have hon. Members ever heard a Labour party spokesman ask or answer the question about how businesses earn profits?

Mr. Jenkin : I recall a Labour party document on the economy which criticised the level of profitability in some British businesses on the ground that it added to inflation. Can anyone imagine the logic of criticising the profits made by big businesses on the ground that they add to inflation? What a distorted sense of priority the Labour party must have.

Mr. Shaw : My hon. Friend is correct. To the Labour party, profits mean inflation. Any business man or anyone who understands business knows that approximately one third of profits goes to the Government in tax, approximately one third goes into investment, and approximately one third is retained by the business for working capital and for future expansion. Without profits, we have no businesses.

If the Labour party cannot utter the P word--profits--how can it have a policy on business or on small business? Why do Labour spokesmen never explain to their supporters the need to earn profits? Is it because the Labour party's foundations are still firmly based on a bedrock of envy? For a Labour party politician to go to Labour party meetings and to argue the case that businesses need profits and must make profits might offend the base of the Labour party's support. I will refer to the Government's many achievements in connection with small businesses. The 1980s were a successful period for small businesses. There were low income tax rates, there were incentives to start and to expand small businesses, and there were incentives to invest. The business expansion scheme and venture capital finance meant that far more finance was available for small businesses. It is important that many of those policies are continued and that finance is readily available for small businesses in the 1990s.

The Government recently raised the VAT threshold and many small businesses, especially the really tiny ones such as the guest houses in my contituency, could become VAT-free. That has been immensely helpful to the really small guest houses in Dover and in other areas.

Small shopkeepers have had the deferral of the increase in uniform business rate this year. That deferral has been popular in Dover and Deal, and in other constituencies where there are many shopkeepers.

Mr. Jim Cousins (Newcastle upon Tyne, Central) : How does the hon. Gentleman respond to the fact that the Government have just announced that the maximum uniform business rate poundage is to be levied next year?

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Will that not be far more significant for many small businesses than anything in the autumn statement yesterday?

Mr. Shaw : All small businesses have to pay a certain amount in taxation. There is no question but that there must be a contribution to local services. I am sure that the hon. Gentleman, whose party always advocates massive expenditure in public services and in local councils, accepts that we have to raise some finance from small businesses. However, the deferral this year has meant a one-off, significant improvement in the cash flow of small businesses. Although I should love another deferral next year, I am a realist. The public expenditure position is such that we shall have to ask small businesses to make that contribution next year.

Mr. Cousins : Is the hon. Gentleman telling the House that he is happy that a small business in his constituency which pays the uniform business rate will help to subsidise the introduction of the council tax? Does he see that as a right use of small businesses and their incomes?

Mr. Shaw : I pointed out to the hon. Gentleman that there has been a one-off deferral this year which has benefited small businesses immensely. Next year, small businesses will not see an increase in the proportion that they will donate to the totality of the expenditure towards the council tax. The Treasury will find the resources to support the council tax from other sources and not from the uniform business rate, which will not go up by more than inflation.

The Government, through the Local Government Finance Act 1988--I was a member of the Committee that debated the Bill--capped for the first time the maximum that small businesses would have to pay in annual increases to the level of inflation. That was very significant. It was Labour councils that squeezed small businesses with 60 per cent. increases in rates. Opposition Members cannot support Labour councils that increased rates for small businesses by 60 per cent. The Government have now ensured that the uniform business rate cannot go up by more than the level of inflation, whereas Labour councils introduced real increases.

Mr. Cousins : I should very much welcome the hon. Gentleman's travelling from Dover to Newcastle to explain to my small business constituents why they will have to wait another eight years for the full benefit of the rate revaluation that accompanied the introduction of the uniform business rate. Perhaps the hon. Gentleman could encourage the Government to move a little faster.

Mr. Shaw : I assure the hon. Gentleman that I am prepared to speak to any suffering small business man in a Labour constituency and to explain why he should vote Conservative and why he should stay with the Conservative party.

Another Government achievement is that, for the first time, they have tried to tackle the issue of late payment. It is a difficult and sensitive area. If the matter is mishandled in the private sector, it could result in many small businesses losing business and contracts. The Government have been responsible in insisting on prompt payment by their contractors to sub- contractors. That means that there will be a greater emphasis on big companies making prompt payments.

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I also congratulate the Government on the introduction of one-stop shops. Please may I have one in Dover, and please may we ensure that one-stop shops are introduced all over the place as soon as possible?

Conservative Members have been challenged to say that we support the Chancellor and his autumn statement. I said that I did in every media opportunity yesterday and I say so again in the House. I greatly regret that I was not called yesterday by Madam Speaker. Many Conservative Members wanted to speak so that they could say that they supported what the Chancellor had done.

Forty per cent. capital allowances are very good news. For the past two years, I have advocated the inclusion of such a measure in Finance Bills and I shall continue to advocate that the allowance should be retained. The interest rate reduction to 7 per cent. is very good news for small businesses. The maintenance for capital expenditure on schools, on the roads programme and on the health programme is very good news. Small businesses will benefit from that.

My only regret about the autumn statement is that the poor media were wound up to expect really bad news. Their computer systems were rolling and the words were already on the screens from which the broadcasters read in the expectation of delivering bad news. How could they deliver bad news when we have a 1 per cent. reduction in interest rates and when all the key capital programmes are retained? The only conceivable bad news was that the public sector payroll would have to be curtailed in the way in which the private sector payroll has been curtailed in the past few years. That was fair news, not bad news.

I have a few suggestions on small businesses for the Government to consider. Red tape is always with us. I should like the Government to abolish red tape for businesses employing five people or fewer.

Mr. Elletson : My hon. Friend is suggesting a few ideas for the Government to consider. Does he agree that tourism plays an important role in the economy that has hitherto not been as widely recognised as it ought to have been? Tourism is also a sector in which small businesses are especially active and on which thousands, if not millions, of people's jobs depend. Does my hon. Friend further agree, therefore, that the Government should consider new ways of supporting and developing the British industry, which is a world-beating, world-class industry and which is experiencing difficult times as a result of the world recession?

Tourism could do with all the extra support that it can get from the Government. We need a proper tourism strategy to assist the English tourist board and other national and regional tourist boards to promote holidays and visits to England and the other countries of the British Isles. Will my hon. Friend join me in urging the Government to consider that question?

Does he also agree--

Mr. Deputy Speaker : Order. Interventions are supposed to be brief. I appreciate the fact that the hon. Gentleman is trying to get his point across, but may I ask him to bear that in mind? Mr. Shaw.

Mr. Shaw : I welcome my hon. Friend the Member for Blackpool, North (Mr. Elletson) to the House, not least as I knew him before he came here. As one would expect,

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given the constituency that he represents, he is a strong advocate of tourism. Employees, self-employed business men and others employed in the industry in Blackpool, North may be justly proud of their representative's advocacy of their cause, from which they will no doubt benefit. Such is my hon. Friend's enthusiasm that he wanted to make a double intervention.

Mr. Elletson : On that point, does my hon. Friend agree that the withdrawal of grant under section 4 of the Development of Tourism Act 1969 from England but not from Scotland and Wales has discouraged the development of tourism in England, and that that is something which the Government should reconsider?

Mr. Shaw : I take note of the technical detail that my hon. Friend adduces. There is no question but that any change to the Development of Tourism Act--especially the change that he has assiduously discovered-- should be considered carefully by the Government. No doubt this is a matter of considerable concern to my hon. Friend's constituents and he advances a good case for examining that section of the Act and considering whether we can continue to support tourism under it.

I was referring to red tape. I believe that, for businesses employing five or fewer people, the form-filling exercise should be restricted to one day a year, which could be national small businesses form filling day. I recommend that that day should be a bank holiday for large businesses and public sector companies, and hope that those working in such enterprises, who would have no forms to fill, would go to church and pray for the small business men and women as they fill their forms.

On that day, and only on that day, would small business men be required to fill out forms for the Inland Revenue and the VAT man and in respect of statistics collected by the Government. The Inland Revenue and the VAT people should be banned from requiring forms from small business men at any other time of the year.

I repeat that I refer only to really small businesses employing five people or fewer--the businesses that find form filling such a problem. I know that my right hon. Friend the Secretary of State for Employment is keen to abolish the communist May day bank holiday. I suggest that it should be replaced with another socialist, bureaucratic, communist-type bank holdday that would benefit small business men, who will no doubt have the sympathy of those who work in the public sector and large companies who will join together to pray for the health of the small business sector.

Mr. Dowd : The hon. Gentleman is clearly an enthusiastic advocate of small business. Perhaps he can give me some advice. Sainsbury's, which is generally recognised as a well-run and laudable organisation providing good value for money and good service, proposes a major development in Lewisham. That development is bitterly opposed by all the small local businesses, many of which employ fewer than five people. What advice should I give to whom in those circumstances?

Mr. Shaw : If the hon. Gentleman does not know whom to advise and how to represent his constituency interests, he should resign and let a Conservative take the seat.

Mr. Dowd : Is that the hon. Gentleman's advice?

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Mr. Shaw : That is my advice to the hon. Gentleman.

Let me commend to the Government an idea about taxes. The first £5, 000 of small business profits should be tax free to enable small businesses to pay for audit requirements, if they are limited companies, and for bureaucracy and form filling. That would be the Government's contribution to small business and no doubt would be widely welcomed.

I would also suggest that, until a small business has £100, 000-worth of net assets, it should not pay corporation tax. Everyone in the country should have the right to start a business and build it up to a new asset value of £100,000 before having to pay tax. That would provide a secure base and would mean that many more small businesses would survive recessionary and difficult periods. They could survive a major customer going bankrupt and other similar problems that small businesses face.

I repeat that I welcome the 40 per cent. capital allowances, but feel that they should be permanent for all businesses, whether small or large.

I also advocate a potential benefit for small business women and women who work in small businesses. At present, child care facilities--workplace nursery schemes--are available to Whitehall civil servants and to many who work in large companies. Why should child care be available only to the children of bureaucrats and people who work in large companies such as banks? Why cannot we have tax relief for small business women and women who work in small businesses? More should be done to give tax relief for investment in small enterprises. The business expansion scheme is due to cease operation at the end of this year. I hope that I shall not reveal any confidences if I say that, having attended a dinner at which my right hon. Friend the Prime Minister was present last night, I have been encouraged to feel that small businesses are on the agenda for next year's Budget. If the Prime Minister can ensure that the Chancellor never allows them to be dropped from that agenda, we shall be very supportive of his Budget next year, as we were of his autumn statement yesterday.

We need a replacement for the business expansion scheme. We should encourage small businesses and improve the climate in which they operate through education. Why cannot the national curriculum include small business? It is all very well teaching English, our native language, and mathematics--and perhaps, on the practical side of mathematics, a little finance--but, as historically we are supposed to be a nation of shopkeepers, why do not we teach small business, one of the nation's historic subjects?

I also believe that the Government have a role in monitoring the banks. Many hon. Members have referred to the increase in margins that the banks have required of small businesses during the recession. That is especially wrong in view of the fact that many of the banks' losses are due to loans to large companies and to the third world.

The training of bank managers can always be improved. It is never of a high enough standard. The Government should require bank chairmen to consider their training policies regularly so that businesses can increasingly borrow money based on their cash flow and not based on the security of people's homes.

I commend to the House the way in which the DTI consultancy scheme is operating. The scheme is very useful, but will my hon. Friend the Minister consider

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whether it can be further improved? I wrote to a Minister in the DTI recently about a business in my constituency. I did not know at the time that the business was receiving help under the consultancy scheme in respect of quality assurance standard achievement. That was good news, but I had written because the business man had lobbied me to discover whether he could receive help under the marketing consultancy arrangements.

I was disturbed to find that we had supported the business man in respect of quality assurance standards, but when that was achieved he could not be helped in respect of marketing because he had already been helped in one project. If we were to go the whole hog, he would be helped to produce his product to a high quality and would then be helped to market his product in this country and in Europe. The consultancy scheme should be available not just initially to produce products well, but for the second stage to market those products. The Government have done much to help small businesses, but more can always be done. I argue that more should be done to help small businesses.

11.51 am

Mr. Nick Raynsford (Greenwich) : I want to begin by disabusing the hon. Member for Dover (Mr. Shaw) of some of his illusions and prejudices about the experiences of Opposition Members by declaring an interest. I am a director of a small business which, like many other people, I set up when I faced redundancy five years ago. I have subsequently operated that business through very difficult times and have provided employment for a limited number of people. It continues to operate in these difficult times. That has given me some experience of today's subject for debate.

I congratulate the hon. Member for Colchester, North (Mr. Jenkin), who sadly is not in the Chamber at the moment, on his good fortune in securing the debate and on his good judgment in choosing this important subject of small businesses in Britain today.

He was right to emphasise the importance of small businesses in the British economy. They are a substantial component in the economy and will be of increasing importance in changing economic and technological circumstances in which there will be an ever-greater emphasis on creativity, the need for rapid and flexible responses to changing technology and an emphasis on innovation, new ideas and technical solutions to existing problems. Additionally, small businesses are crucial as one of the few options available to people who are losing their jobs in so many areas where large businesses are failing as a result of the tragically damaging recession in which the country is sadly locked at the moment.

However, it is important to flag up two crucial caveats about the context in which small businesses operate. The first is that small businesses cannot, in general, operate in isolation. Many of them are dependent on large businesses in their areas for a significant part of their order books.

There was much discussion in the mid-1980s about the way in which clusters of small businesses developed around large firms. That created a virtuous economic cycle in which small and large businesses contributed to the economic well-being of the area. Sadly, the converse is also true. In areas where the recession is hitting most severely,

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there is the contrary phenomenon of small businesses failing because their order books have been hit by the reduction in the work, or even the failure, of larger firms.

My hon. Friend the Member for Bolsover (Mr. Skinner) rightly reminded us of the problems facing mining communities at the moment. Many small businesses may fail if the pits close and the main economic lifeblood of the area is no longer available.

The second caveat is obvious. It is the very high failure rate among small businesses and among businesses as a whole. Failures have reached unprecedented levels and we must not overlook the disastrous personal hurt and hardship which flow from that. Many people have invested a life-time's experience and all their savings, and have devoted an inordinate amount of work and personal commitment, into building up a small business. However, they now face the end of their dreams because they cannot keep the company alive in the current tragically difficult circumstances. Where a business has been founded on loans secured against a home, there is an even greater personal problem because people face not just the loss of their business, but the loss of the family home.

In such circumstances, it is important to stress that however crucial small businesses are to the British economy, we cannot look solely to small businesses to pull Britain out of recession. I must disagree with the suggestion of the hon. Member for Colchester, North that the DTI should become a Department for small businesses. There must be a strategic approach to business as a whole. The DTI has an important role to play and we should like to see it playing a more active and interventionist role supporting all types of business--small and large--and acting in our national interests like the equivalent Departments in countries such as France and Japan which act consistently and decisively in the interests of businesses of all sizes to ensure that they can compete successfully in the international market.

Of the detailed concerns raised by the hon. Member for Colchester, North, I want to comment on late payment, VAT and the services provided by the banks. There is no question that late payment is a crucial problem for many small businesses that have tight cash flows. However, from my experience, that problem cannot be attributed uniquely or even disproportionately to late payment by public sector organisations. Some public sector organisations are slow in paying, but so, too, are many private sector organisations. The problem of non-payment and total default is largely found in the private sector. It does not arise in respect of public sector credit.

Measures to encourage and require prompt payment are necessary, but they should be handled sensitively. We should not forget that small businesses can sometimes be slow in making payments if they do not receive what is due to them on time. Delayed payments can be a means of avoiding financial difficulties. There should be measures to ensure and promote prompt payment, but we should not forget that late payment can often be a lifeline to a small business that might otherwise be in difficulty if it had to meet all its bills on the day that they fell due.

I have been surprised by the number of firms that have approached me over the past seven months--since I have been the hon. Member for Greenwich-- with serious problems caused by VAT demands. Customs and Excise

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have pressed rigorously for payment on time, without any concern or sympathy for the practical difficulties facing those firms. When I have taken up such cases--I have taken up several--with Customs and Excise, I have generally received a sympathetic and helpful response from head office. In some cases it has been possible to ensure that pressures are diminished and that agreement is reached with the firm to enable it to pay over a period. At least two firms have been saved from closure and liquidation. That makes sense. It can be in no one's interest, and certainly not in the interest of Customs and Excise, to force a firm into bankruptcy, which would preclude the possibility of outstanding VAT being paid in full and would result in other creditors failing to be paid. Indeed, people who are dependent on the firm would risk losing their jobs or contracts. There is much sense in adopting a more realistic and sensible approach.

When a business is going to fail, that approach may not be appropriate, but where allowing the rescheduling of VAT payments can enable the survival of a business which is otherwise sound and has good prospects of survival it must make sense. We should urge the Government to take a more sympathetic approach, and we should urge Customs and Excise to take a more sympathetic and flexible approach, deal with cases on their merits, and agree to reschedule the payment of VAT when doing so will prevent a firm from going into liquidation.

We also have to promote an entirely different approach by the banks in their treatment of small businesses. How many cases have been brought to hon. Members by small businesses telling us about unacceptable behaviour by the main clearing banks imposing extortionate charges? The hon. Member for South Hams (Mr. Steen) rightly raised that point in an intervention. From my experience, I can only endorse his point about businesses being charged extortionate rates instead of appropriate and fair rates of interest.

Often, there is a harsh response, leading to the closure of a business when it is in difficulty, by banks which promoted their services by talking about how sympathetic they are, how flexible and understanding they will be, how they will listen to the business and how they will help it in its formative years. However, as soon as the first difficulty arises, the bank turns the screw, reduces the overdraft facility, calls in the loan and forces the business into liquidation. How many cases have involved businesses that were essentially sound but could have continued if the bank had been more realistic, understood short-term cash flow difficulties that businesses face, and been prepared to support those businesses through their difficult time? Sadly, all too often in their attitudes to small businesses, banks display the same short-term thinking and the same lack of understanding of the needs of business and the British economy that they have demonstrated in their lending policy in respect of very much larger ventures.

I believe that we must do all that we can to encourage the banks to avoid that chronic short-termism which has been such a damaging feature of British banking practice and take a more realistic and more sympathetic approach in which there is a closer association with businesses and a greater understanding of their needs and a willingness to support them through difficult times. Not only a code of good practice but a change of attitude is required in relation to banks and small businesses.

The hon. Members for Colne Valley (Mr. Riddick) and for Dover (Mr. Shaw) are no longer present as they have

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to visit their constituencies. I, too, have to visit one of the larger businesses in Greenwich this afternoon, so I will not be able to stay until the end of the debate. I apologise to the Minister and to my colleagues on the Front Bench for not being present. I shall be visiting a business which is crucial to the economic well-being of my constituency.

The hon. Member for Colne Valley suggested the removal of requirements to satisfy fire regulations and the hon. Member for Dover advocated the abolition of red tape for businesses employing five people or fewer, which is an entirely inappropriate approach. I do not encourage the proliferation of form-filling and red tape, but there are certain requirements which, in the public interest, must be maintained. Fire safety is absolutely crucial.

I refer to one example. There are a number of small businesses running hotels or houses in which several people are living, often in the most squalid and dangerous conditions. We know about them when a scandal occurs, when a hotel or lodging house burns down. One such incident occurred this year in Hove, causing death or injury to a significant number of people. It is unacceptable to put the public and the people living in such places at risk to try to encourage a few irresponsible entrepreneurs to make more profit.

Mr. Couchman : My hon. Friend the Member for Colne Valley (Mr. Riddick) was not complaining that we need fire regulations and proper inspection ; he was complaining about the constant ratchet effect of tightening the regulations, which can result in this year's fire officer's proposals for fire safety being derided by next year's inspector as inadequate and often wrong-headed.

Mr. Raynsford : I am grateful to the hon. Gentleman for his intervention. I was about to make a plea for the tightening up of fire regulations in relation to houses in multiple occupation. The present regulations do not ensure adequate safety for people living in such houses, and the rate of accidents and deaths is unacceptable. Responsible business people and responsible entrepreneurs accept that there must be a proper regulatory framework to deal with the public interest in matters of such importance. As I have said, I do not advocate a plethora of red tape and regulations just for their sake, but in crucial issues such as fire safety we cannot possibly afford to scrimp and reduce standards.

It is important to distinguish between measures that will encourage responsible businesses and responsible entrepreneurs who are going to try to make their profit in a way that provides a genuine service to a high standard to the public and those who are trying to make a profit at the expense of other people, often putting people's lives at risk.

As I have emphasised, small businesses are vital to the needs of the country. More needs to be done to assist and support them. I pay tribute to the imaginative ventures in many parts of the country to encourage and support small businesses. In my constituency of Greenwich, a local enterprise board was set up by the local authority in conjunction with private sector interests. It is a separate company--it is not part of the local authority, but it receives support from it--and it is making important contributions to assisting small businesses and newly established businesses in the area. Advice, training, the provision of small factory units and workshops and assistance on a variety of technical issues are available

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from that small initiative. I have already seen the value of its work since I became Member of Parliament for Greenwich at the general election.

I am always disappointed when I hear Conservative Members' blanket condemnations of public sector initiatives. We should encourage precisely those initiatives involving the public sector, working in co-operation with the private sector. We should not knock them. I should like a more positive response by Conservative Members to such initiatives which local authorities in great financial difficulty--my local authority is certainly one--are taking to try to help business.

Mr. Dowd : Does my hon. Friend agree that such extremely valuable but none the less discretionary services provided by local authorities in combination with private undertakings are the first to come under threat when local authority budgets are so constrained that they can barely meet their statutory obligations in other sectors?

Mr. Raynsford : I thank my hon. Friend for that intervention with which I concur. It would be tragic if such imaginative initiatives were put at risk because authorities face financial difficulties. I am not experienced in the detailed arrangements in Lewisham, but no doubt it is taking similar positive measures to those in Greenwich. It is important to support and encourage small businesses, but it is an illusion to believe that they alone can solve our economic problems. The measures announced in the autumn statement will be insufficient to generate a full and lasting economic recovery. We need more ; we need a real industrial strategy and a strategy for tackling unemployment. As part of that, we need measures that will assist small businesses to grow, to continue in operation and to survive the difficult pressures that they are facing. In some cases they will grow into large businesses, which will contribute more importantly in the future.

12.10 pm

Mr. Anthony Steen (South Hams) : I liked the speech by the hon. Member for Greenwich (Mr. Raynsford), which contained some interesting thoughts, many of which could have been expressed by one of my hon. Friends. Perhaps the hon. Gentleman might consider crossing the Floor when he next makes a speech like that, because it contained many things with which Conservative Members would agree. I hope that I shall be forgiven for not following the speeches of many other hon. Members. Most speeches today have taken about 20 minutes ; some have taken about 40. I shall make a short speech, because although other speeches have been interesting and stimulating, mine might be improved by trying to keep to the traditional 10 minutes.

I congratulate my hon. Friend the Member for Colchester, North (Mr. Jenkin) on his skill in winning the debate. Friday debates are always worth while.

I shall home in at once on the subject of red tape and bureaucracy. The centralised bureaucracy of communist regimes did not work and tended to stifle local enterprise. In this country, we have tended to avoid that mistake and have not suffered from the excesses of centralisation and over- bureaucracy ; as a result, we have an enterprise culture. In the past decade, as I am sure the hon. Member for Greenwich will agree, I sense that bureaucracy has

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