| Previous Section | Index | Home Page |
1.2 pm
Mr. David Prior (North Norfolk): I congratulate the hon. Member for Wolverhampton, South-West (Ms Jones) on her maiden speech. We are all pleased to welcome to the Chamber an hon. Member with practical, down-to-earth experience of small businesses. If it is not presumptuous for a new Member like myself to say so, I think that she will make a terrific contribution to the House.
I shall make four points. First, all successful small businesses are led by entrepreneurs. There is a very limited role for Government in innovation. The Government must resist the temptation to interfere and intervene, and leave it to the hundreds of thousands of small business people who run their own businesses and do so successfully.
Secondly, the Minister should not underestimate what has happened over the past 20 years. There has been a radical change in British industry over that time. In south Wales, Scotland and the north-east--the traditional industrial areas--the steel industry, shipbuilding and coal have gone, and have been replaced by a multitude of new factories making new products. We are now the biggest
semiconductor manufacturer in Europe. One should not rubbish what has happened over the past 20 years. The reform has had a profound effect on the British economy.
Thirdly, we have focused on high-tech businesses, by and large, today. However, there are many small businesses in market towns and small industrial estates throughout the country making traditional products. For those businesses, innovation is just as important as it is for high-tech companies. The product life cycle has shortened tremendously in the past few years, as rapid prototyping, stereolithography, computer-aided design and more flexible machine tools have made new products quicker to produce. As a result, traditional companies are under the same pressure to innovate as the more sexy high-tech companies, so that sector must not be ignored.
Finally, there will be innovation only if small businesses are successful and make profits. After the first five months of the new Government, the signs are not encouraging. There have been five increases in interest rates, there is an overvalued exchange rate, more regulation is threatened, with the setting up of the food standards agency, flexibility has been undermined by the social chapter, small businesses face a higher pension bill, and the apparent relaxation of planning policy guidance 6 for supermarkets in towns will undermine many small businesses in traditional high streets. In addition, the scope of the competition Bill has been widened to include the vertical integration of many industries, including the pharmaceutical industry, the public house sector and electrical retailing. My hon. Friend the Member for Billericay (Mrs. Gorman) has already mentioned the minimum wage.
After only five months of a new Government, the outlook for small business is not good. We heard the Minister using management speak and business consultancy words such as innovation and benchmarking, but it all comes down to profitability. If businesses are profitable, they will reinvest in new products, design and innovation. If they are under pressure, they will not. I know from my own experience how easy it is to cut back on product development when times are hard. It is one of the first items of spending that small companies can cut out when they have to.
Mr. John Wilkinson (Ruislip-Northwood):
I start by declaring an interest as the executive chairman of a small company. Let me say what a pleasure it has been to listen to the speeches today, particularly the maiden speech of the hon. Member for Wolverhampton, South-West (Ms Jones). She represents the west midlands, the vibrant and vigorous powerhouse of industry, business and commerce--the real engine room of Britain's industrial prosperity. It was refreshing to hear a speech that was full of experience and wisdom based on professional experience.
The hon. Lady said that she wanted to take part in one of the big debates. What was particularly delightful about her speech was that although today's big debate has been characterised by some extremely long speeches, hers most certainly was not. It was succinct and to the point, and she set us all an admirable example, as did my hon.
Friends the Members for North Norfolk (Mr. Prior) and for Billericay (Mrs. Gorman), who speaks with such authority on enterprise and the small companies sector.
I listened with sympathy to the Minister's speech. It was full of good intentions, and she recited the departmental orthodoxy quite admirably. I am not in any sense being cynical--far from it. However, the hon. Lady is potentially the victim of circumstances quite beyond her control. As my hon. Friend the Member for North Norfolk so eloquently suggested, the prognosis for the small business sector certainly does not look good. The Minister is likely to be the victim of the action or in some cases the inaction and prejudice of some of her ministerial colleagues in other Departments.
We must go to the heart of the matter, which was very well synthesised by my hon. Friends the Members for North Norfolk and for Billericay. Why do people go into small business in the first place? It may be because they have an idea of their own; perhaps they are in a big company and wish to pursue an area of expertise that has not been fully developed in an overlarge organisation; or they may feel that they want to make money. That is what we must emphasise. People do not innovate for innovation's sake. They innovate because they have to maintain their market share or expand it. Ultimately, if they are entrepreneurs, they have to be the driving force of a company that will make money, increase profits and thereby employ people. Such entrepreneurs can offer a future, which they can hand over to their family. I speak most particularly of the family business sector.
As capitalisation of so many small enterprises is low, they are particularly vulnerable to upward changes in interest rates, as my hon. Friends the Members for Chesham and Amersham (Mrs. Gillan) and for Billericay pointed out. We have had five interest rate rises from the Government already. The Government are taking a very relaxed, hands-off approach. The implication is that it is not their fault, because the Bank of England is independent, but five interest rate rises in five months is a bit much. It is symptomatic of something fundamentally wrong.
What is wrong is that the Chancellor--I spoke of the vicarious effect of the actions of the Minister's colleagues on her Department--was not willing to grasp the nettle of burgeoning demand in the economy with a much tighter fiscal stance in his Budget. He was lauded almost to the rooftops by Labour Members at the time, but many of us old lags on the Opposition Benches recognise that, come the winter, there will be much less to cheer about in his Budget.
Interest rates are one aspect that affects small businesses, but there are of course a number of others. There has been allusion in the debate to the effect of the abolition of dividend interest tax relief on pension funds. Some small companies might have to run a pension fund of their own, so they would have to increase their contributions to maintain their employees' pensions at the expected level. Perhaps the employees have personal pensions. If so, small companies would again have to increase their wages for their employees, to maintain the level of pension for which they had planned. Both those instances represent upward pressures on costs and wages.
It is not as if the owners or managers of small businesses did not have enough to do--they do. They have enough preoccupations on their minds. Many of
them are one-man bands. I think that it is valid to compare them with the delightful characters who go down the streets of Santiago in Chile with a penny whistle between their teeth, an accordion in their arms and cymbals strapped to their knees. The sound is wonderful and they maintain the tune, but they are working flat out all the time--and so are entrepreneurs, managers and owners of small businesses. They have so many preoccupations, such as pay-as-you-earn, value added tax, the uniform business rate, the demands of planning departments and environmental health, which all have to be addressed.
The Government must be realistic. They have to try to reduce the burdens on small businesses. How can they do so while, at the same time, they have embraced the social chapter? The European Union is not the friend of small business. The Government must abjure some of the delusions with which they came to office. The social chapter and all the directives that will flow from it are one aspect.
| Next Section
| Index | Home Page |