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Mr. Sheerman: The Minister may shake his head, but a little frisson is already coming from some areas. No one is perfect and, given that 180 business links have now been commenced, one would not expect no disharmony whatever. A careful balance must be struck and local politicians and Ministers must do all that they can to encourage the partners to work together and ensure that the business link group does not get a reputation for trying to get its own way. Politicians know that that is not how to achieve an effective partnership and good results. We must make small and medium-sized firms understand that concept.
I strongly agreed with my hon. Friend the Member for Hornsey and Wood Green (Mrs. Roche) that the scheme must not be geared only to where the Government think that they will achieve the quickest results. We all know that business schools and researchers have told the Government how to achieve the quickest fix and double the size of medium-sized businesses, but we must make the scheme appeal to and help small as well as large enterprises. I remember when the former President of the Board of Trade introduced the first pilot scheme in December 1992, which was designed for very small as well as large enterprises. Those small enterprises must be helped, which is why I made the jibe to the Minister when he introduced this debate that it is a pity that enterprise allowance has been lost. Helping small businesses to start up remains vital to their life blood.
Small and medium-sized businesses need help and good-quality advice, and the business link programme can deliver that. It is odd that I have been described as "old Labour" as the other day someone trying to be rude to me in a meeting said that I was a Blairite before Blair. I believe that the private sector should not be shut out.
Mr. David Chidgey (Eastleigh):
I have listened to the debate with increasing fascination because we appear almost to be running a parallel debate. All hon. Members who have spoken appear to agree, which is obviously causing confusion. It appears that we are witnessing the Government and the official Opposition debating not whether the business links is a good idea, but who thought of it first. It is vastly entertaining.
I am always tempted to scurry out of the Chamber and fetch the famous Liberal yellow book of the early years of the present century and demonstrate that all the good ideas emanated from my party, but that might test the patience of the House too much. [Hon. Members: "Hear, hear."] I shall therefore refrain from embarking on what I believe would be a sterile exercise--my words would fall on deaf ears, at least.
I listened to the Minister's remarks with great interest. Although I cannot quite accept some of the glowing sentiments that he expressed, I can agree that the one stop shop--the business links--is a good idea that deserves support from both sides of the House. By concentrating services and help for small business in one place which, one hopes, is accessible by one telephone call, business links is a vast improvement on the confusing plethora of services from different sources that existed previously. Organisations that were trying to make their way in business might previously have found it too daunting to seek help, and returned to doing whatever they did previously.
I shall discuss several matters that show that we should not be complacent. I hope that the Minister will direct attention to those matters of concern in the months ahead. Specifically, I shall speak about the help that is needed by very small businesses, about which several hon. Members have spoken. I shall also discuss the amount that the business link is likely to charge small businesses for its services, and the best way in which to streamline the services that are provided by chambers of commerce, training and enterprise councils and other organisations. I do not believe that streamlining is quite as easy as might have been inferred from some hon. Members' speeches.
We must emphasise the importance of micro-
businesses--businesses with one to nine employees. Several hon. Members have mentioned them. As the hon. Member for Hornsey and Wood Green (Mrs. Roche) said, they represent nearly 95 per cent. of all the firms in the country. Equally important is the fact that they represent more than 28 per cent. of the work force. They make an important contribution to our economy.
The Minister emphasised the importance of small businesses to the economy. Their needs should be addressed carefully and specifically and they should be vigorous supported.
The small business has great difficulty employing key staff to cope with the management tasks that are taken on as a matter of course by larger enterprises. I remember, from my professional experience running my own office with a few staff--slightly more than 10, but certainly not in the wider range--becoming a multi-skilled person, not because I wanted to but because I had to. That is a common experience. People spend many long hours trying to do the accountant's job after most others have gone home, and hope that they have got it right.
A great problem for micro-businesses, as I call them, is having skills in-house, training their staff and undertaking financial planning, business development and the essential management task of marketing. The problem is that, although they recognise that they do not have skills in-house, they often do not have the financial resources to buy in expertise either. They are too busy trying to make a turn on their day-to-day business. Whatever profit they make might be kept for the days when the orders do not come in; it is not automatically spent on buying in expertise on matters that are separate from their main function.
Many small business are very suspicious of consultants. I am an ex-consulting engineer, so I know. The people who earn their living on the knife edge often say, "If you ask a consultant the time, the first thing he will do is borrow your watch". A politician would probably not give it back. The key point is that many small businesses operate at the margins, and cling on by their fingertips to survive. They do not have the fat in their financial operations that enables them to employ outside expertise.
Under the current regulations, many firms have little opportunity to take up the services offered by business links. It is not only a question of cost. Small firms with four or five employees--there are many of them--cannot spare the employee time involved in making contact with business links.
We must introduce imaginative ways of delivering business links services. We must use distance learning techniques, set up support networks--as other hon. Members have said, that is happening informally-- and use new technology. If business link is to succeed, it must be based on imaginative and time and resource efficient techniques to enable very small businesses to take advantage of it.
I should like to mention cost comparison. I mentioned that small businesses are conscious of the margins on their resources. We must come to grips with the fact that many small businesses will take a very critical look at the charges that will eventually flow from using business link services.
We know that the highest growth in new businesses is in the service sector which, basically, involves selling people's time and expertise. The hourly rates chargeable for people's time have inevitably been driven down by the recession and by fierce competition, not only in the United Kingdom but world wide. We now confront global competition through the information super-highway. That competition will have a strong impact on the profitability--and the soundness--of small businesses in the service sector.
It is now possible, in no more time than it takes to go down the road to a local supplier, to buy in computer programming and project design from centres as far away as India, where overheads and wage costs are much lower.
A company that sells a product that depends on a person's time, finds itself competing--somewhat unfairly, one might say--with companies whose costs are dramatically lower but whose products are as available because they are on tap on the information super-highway.
The charges for business link services must reflect that super-competitive environment. If clients or potential clients of business links who are in the service sector find that, when pricing their products, they cannot do more than double the salary costs to cover overheads, social costs and perhaps some profit, they will not be prepared to pay business links charges approaching those that management consultants like to charge. Business links must be able to operate sympathetically to small businesses and at rates that clients consider reasonable and worth while. Their clients are at the sharp end and know how tight the margins are.
I shall now discuss combining the skills of the chambers of commerce with those of the TECs. Following that avenue to concentrate services is an attractive option because one draws in established skills and the other draws in organisations that are well known in the business community and supported by it. It would be wrong, however, if the House were to assume that that course would be a panacea. Much depends on the location and culture of the business community being served.
When I was the Liberal Democrat spokesman for employment and training, I had the opportunity to visit Northampton. I was much impressed by the results of the Northamptonshire TEC's merging with the Northamptonshire chamber of commerce. There were some remarkable results in training programmes, but that is a subject for another day. The important factor is that both bodies served the county of Northamptonshire. Their boundaries were coterminous, so, when they merged, the synergy between the two was obvious and the chamber of commerce's representatives on the board of the new organisation were elected from the membership of the old chamber of commerce--something that is unusual, but to be encouraged.
In Hampshire, such easy merging and synergy is probably a long way away. We have two major cities, Portsmouth and Southampton, which have distinctly different cultures. There is a long history of fierce competition between them, perhaps going back to the civil war when, as I remember, they were on different sides. That competition runs through everything from their soccer teams to their universities. Each city has a powerful chamber of commerce that competes with the other for Government assistance, business development and export trade.
Hampshire TEC, however, has to serve the needs of both cities fairly and without favouritism--and they are two completely different areas. The day that the Hampshire TEC and the chambers of commerce of Portsmouth and Southampton contemplate a merger is so far away as to be out of sight.
I have received feedback from the business community in Hampshire, where business link is due to be launched in 1996. During the past couple of years, much effort has been expended on ensuring that we set in place effective working partnerships for the benefit of the business community of Hampshire. I have received feedback that suggests that, at times, the efforts have been plagued by shifting goalposts as the DTI's objectives change to
respond to the problems that it encounters in other parts of the country. I accept that the process is iterative, but that creates extra problems for the TEC which is trying to set business links in place.
The primary concern in Hampshire in the run-up to the launch of business links is its longer-term financial viability, which hon. Members touched on earlier. It is intended that, after three years of DTI pump-priming, funding should end. The DTI's view seems to be that, by that time, sponsor and partner contributions and the income generated from services will be sufficient to allow the organisation to survive independently. That might be right, but it is difficult to see where the profits will be made. Will they be made from making margins on DTI service contracts? For that to happen, the DTI will have to be happy with the level of margin made, bearing in mind the value-for-money responsibilities rightly attached to Government funding. The DTI will not want business links to make excessive profits on contracts. Will the profits come from charging customers for services, in full or in part, taking due regard to the European Union's state aid rules?
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