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12.33 pm
Mrs. Teresa Gorman (Billericay): I congratulate the hon. Member for Wolverhampton, South-West (Ms Jones) on her practical, down-to-earth contribution. One of the things that women bring to the House is a good dose of common sense. While our male colleagues, with the best will in the world, often waffle on about the niceties of a matter, she brought it down to the facts, because of her background as a business adviser and training manager.
I was interested to hear the hon. Lady say that the problem that small firms have with schemes such as business links, mentioned by the hon. Member for Weston-super-Mare (Mr. Cotter), is that they do not have the time, staff or ability to let people go off on all these wonderful courses. Nor do they have time to fill in the endless forms to take advantage of the wonderful grants that are available through the Government, and perhaps the European Community.
The Minister has pledged that she intends to isolate and tackle the factors that stifle growth. I hope that, when she does so, the hon. Lady is on her team, because she has a lot of practical common sense to offer. She told us about the problems faced by the innovative wool merchants of mediaeval Wolverhampton, who had to counter attempts by the king to get in on the act and spoil their efforts to establish the wool industry. She knows perfectly well that similar problems are faced by companies now from the local council's planning man or environmental man, who will not agree to a change of business use for premises wanted by business men. Those are the practical problems that we should talk about in a debate on innovation.
The debate has been stimulated by the Government's response to a report published in another place entitled "The Innovation-Exploitation Barrier". The barriers to exploitation and innovation are largely Government-made. They are the regulatory structures that stop newcomers and entrepreneurs from getting their good ideas off the ground. On the very first page, the report points out that one of the greatest problems is the availability of finance. Many people have a good idea, and translating it into a practical new business is a major problem in itself, let alone obtaining the means to finance it.
Most small business men initially go to their banks, and they often pawn their homes to get the necessary funding. Every time the Government put up interest rates, that creates additional problems for them. After just six months in office, the Government have put them up no fewer than five times.
That means that the business man has to find more money to meet his monthly repayment loans. That is a serious problem. It is all very well for the Governor of the Bank of England and his monetary committee to sit there working out international market movements in currencies, but it boils down to the practical problem of finding the extra money out of meagre profits to meet the loan repayments.
We saw some mega-mistakes in financial wranglings because of the ghastly exchange rate mechanism experiment. Because of that, small firms that had hocked their businesses and their homes to extend their commercial activities went down the pan. That was a dreadful example to us of the way in which such currency interventions can operate, and I am afraid that it was my Government who pursued that policy towards integration with Europe.
I beg the Minister to bring those examples to the attention of her Government colleagues who wish to pursue the idea of joining a single European currency. The problems we encountered will recur, and perhaps no one will suffer more than small businesses and the people employed by them.
I would not quarrel with the idea that the universities produce a great many of our innovative ideas, but we must also remember that many people learn their trade on the
job, particularly those who do not do well at school or do not go to university. Let me mention a couple of outstanding examples.
I believe that Alan Sugar is touring the country on behalf of the Government trying to get children at school interested in the idea of business. I hope that he also points out the problems he had when he started on a market stall. He had to go to Korea to get his low-cost computers made. That may have had something to do with funding and the difficulties created by Governments when it comes to employing people. He may have had problems with his local council when it came to setting up his factory. Perhaps the health and safety officer was set to create so many problems for him that he could not produce his product at a price at which he could sell it.
Dyson is another man who had a great idea. He is an engineer who learned his trade as a workman, but he could not get funding here, and had to go to Japan to get his project off the ground. In fact, I understand that the big companies wanted to buy up his idea for a new vacuum cleaner just so that they could shelve it.
All those barriers are practical problems. If the Government want to innovate to get rid of those problems, they should start by considering the system in Italy. There, small firms employing fewer than 20 people, or fewer than five in agriculture, are exempt from most of the petty regulations applying to employment and from social service regulations; as a result, the additional costs of employing people are lower.
In this country, those additional costs are running at 18 per cent. of salary; in Germany, the figure is about 45 per cent., which is why we would be mad to take on the responsibilities implicit in the social chapter. Doing so would make us uneconomic and undermine and begin to destroy our industry--which is doing extremely well thanks to the work of the previous Government.
The first innovation I would recommend to the Government, therefore, is to send someone to Italy to find out about that country's marvellous scheme. The vast majority of large companies--even companies such as Fiat and Benetton Group--make most of their products not in vast factories, but in little back-street workshops and in family businesses that can get on with the job without Government regulations and inspectors breathing down their necks.
Dr. Palmer:
Although I respect the hon. Lady's enthusiasm for European ideas, does she really think it wise to introduce artificial distinctions between larger companies, which would be required to treat their employees well, and smaller companies, which would be free from restrictions? Would not that lead to all sorts of artificial construction, whereby larger companies disguised themselves as conglomerates of smaller companies?
Mrs. Gorman:
The hon. Gentleman raises an interesting point, but that situation already exists to some extent. The growth in part-time work in this country has more to do with firms, both large and small, trying to get around the extremely expensive and limiting Government regulations and restrictions on employing people than with the jobs on offer needing only part-time workers.
That change from full-time to part-time jobs will continue if the new Government insist on introducing the minimum wage. That is not because small firms pay
minimal wages--there is no evidence that they do. It is terribly important that younger people are able to get on the job ladder. Young people with few skills have only one way of learning skills to make themselves more employable, and that is by taking a relatively modestly paid job. It is a way of paying for training, just as those who go to university forgo income for several years as a means of paying for their training. The minimum wage will deprive young people of that opportunity.
The Government often mention the United States when talking about the minimum wage. In the United States before 1948, when the minimum wage was introduced, the unemployment rate among unskilled black young people was roughly the same as that among whites. By 1976, black youths in America were half as employable as white youths, and the ratio has worsened since. Because employers are able to discriminate at no cost--they have to pay the same wage, whoever they take on--they tend to take on white employees. The statistics tell us that mucking about with wages and imposing restrictions on employers leads to a reaction.
The information I have cited comes to me via a pamphlet by Walter Williams, a prominent black economist in the United States. He condemns minimum wages outright, because of the damage they have done to the employability of young black people in America, who tend to have a lower-quality education to offer employers. Our response might be to improve our education standards, but we will need to do a great deal to improve our schools--one way might be to put them in the hands of the private sector.
Mrs. Gillan:
Does my hon. Friend agree that the Government show a high level of hypocrisy because they know that the minimum wage will cause job losses, particularly among young people, and that is why the Low Pay Commission has specifically been given a brief to consider 18 to 24-year-olds? The minimum wage will undoubtedly cause job losses, particularly among young people.
Mrs. Gorman:
I absolutely agree with my hon. Friend.
I have pointed out that, although many ideas come from universities--high-tech, biotech, infotech and all the rest--the great majority of new jobs are low-tech jobs, which the Government have also made one of their major targets. Every day, those jobs supply us with our needs, whether they be fast food sandwiches, someone to unplug the drains, or street sweepers. All those jobs are important too, which we tend to forget when we talk about the wonders of new technology.
Perhaps new technology comes down to a new way of recording music or providing entertainment, but low-tech jobs are all valid ways of people earning a living, and they probably provide much more employment than the high-tech element. That is how the small corner shop and the factory under the railway arch contribute, and I implore the Government to understand that their policies of involving themselves in more regulations will have a destructive effect in that respect.
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