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7.20 pm
Mr. Howard Flight (Arundel and South Downs): I should like to talk about trade, industry and employment from the point of view of someone responsible for a company employing some 450 people around the world. In the private sector, survival is about covering one's costs with a margin. Government action and legislation that add to those costs directly affect employees.
The Government's objectives, as expressed in the Queen's Speech, are to achieve high and stable levels of growth and employment and to improve productivity through measures addressing competition, investment and entrepreneurship. We all share those objectives. Governments will always engage in propaganda and are entitled to do so, but I am concerned that the present Government believe that the policies that they have been pursuing and advocating will achieve their objectives. That is not the perception of those of us who live in the real world.
I shall concentrate on small business. In his Budget speech, the Chancellor had much to say about the Government's support for and encouragement of small business and entrepreneurs, although I have found no such references in the Queen's Speech. I perceive that the Government are doing grave damage to small business. They are listening to the chairmen in big business, who lead easy lives, rather than paying attention to the problems that their measures are causing small business. My hon. Friend the Member for Billericay (Mrs. Gorman) has already made some of the points: I shall highlight one issue in particular.
During the summer--I think it was 10 September--a national insurance regulation was slipped through that imposes a massive tax on small business: the very business that the Chancellor said he was trying to encourage. When small companies are set up, entrepreneurs have shares in them. Now, if those businesses start to succeed and, under typical buy-out ratchets, the shares convert from one class to another, they face a substantial tax. Next year they will pay 12.2 per cent. in national insurance. Typically, 30 per cent. of the equity of a company may be affected. Although no one will have realised any money, some businesses will be hit by a massive tax of some 5 per cent. of their market value.
Still to come is a similar tax. When a business is floated to raise money, and the options that entrepreneurs may own need to be sold as part of the issue, there will be a tax of 12.2 per cent. on their value. How on earth can the Government say that such measures are supportive of entrepreneurs and small businesses?
I could cite other measures that will be equally damaging to small businesses. The working families tax credit, to which others have referred, will place a massive burden on under-resourced small businesses. Trade union negotiations represent yet another burden on businesses with 20 employees, as will the costs of extended maternity leave. Those and other very nice measures are desirable in principle, but will not keep a small business afloat. Small businesses cannot have people disappearing all the time.
In the financial services sector, quite unfairly in some cases, two measures will drive small independent financial intermediaries out of business. Many consider that a desirable objective. It will no longer be possible for many small businesses to compete and to comply adequately with rising regulation and bureaucracy.
First, I should like to know why the Queen's Speech contained no reference to the assertions by the Chancellor of the Exchequer. Was it all just hot air? Secondly, I should like the Government to do what the Chancellor claims they are doing, and not to damage small business.
The Government promise to improve levels of growth and employment. I agree with my right hon. Friend the Member for Huntingdon (Mr. Major), who asked whether the Government were aware of what is going on. The Organisation for Economic Co-operation and Development, which is a conservative organisation that does not support any one political party, has warned that the United Kingdom will be lucky to achieve 0.8 per cent. growth next year and 1.5 per cent. growth in 2000. It warns that unemployment here will rise by 500,000 during 1999-2000, and that Government debt will be £36 billion over what has been forecast.
The Confederation of British Industry--a great friend of the Labour Government and not exactly an organ of the Opposition--has found the lowest level of business confidence in the United Kingdom since 1980. It predicts a sharp downturn, with considerable risk of outright recession. Consumer confidence is declining, and the level of consumer spending on credit cards is at its lowest since records began in 1993. New orders are at their lowest since 1991, and exports are at their weakest since records first began in 1977. Ours is hardly an economy that will achieve nice growth and in which employment will increase; it is likely to decrease substantially.
Others have referred to the economic background. The Government have introduced £40 billion-worth of extra costs and taxes on businesses, and plan to spend an extra £37 billion on social security. The extra taxes and regulatory costs on businesses are equivalent to £1,500 per job.
It is interesting to step back and look at continental Europe and America over the past 25 years. The US economy, which does not have overdone employment laws but an open labour market, has created some 40 million new jobs in the past 25 years. Continental Europe, which has restrictions and regulations--all in a good cause--towards which our Government are now moving with increasing enthusiasm, has lost 15 million jobs in the past 30 years. That is a pretty clear demonstration that increased employment costs that make it more difficult for small businesses price people out of work.
Mr. Chris Pond (Gravesham):
Is the hon. Gentleman aware that, over the period to which he refers,
Mr. Flight:
With the greatest respect, I dispute the hon. Gentleman's figures. The other day, I saw with some astonishment that the number of people employed in Germany was 29 million out of a population of 80 million, whereas the number of people employed in this country was 27 million out of a population of nearly 60 million. I do not know from what base the hon. Gentleman calculates the growth rate in Germany, but more people are out of work in Germany than has been the case since before the second world war, whereas this country has the lowest unemployment rate of any economy in Europe.
I do not think that anyone in the business world is taken in by the fairness at work agenda. Fairness at work--a silly euphemism--is about settling the account with the trade unions and moving in line with European employment regulations, or, rather, job-destroying regulations. In horticulture, for example, which employs 30,000 people, the directive on part-time workers will destroy many jobs; the industry cannot afford to provide all those who, under prior arrangements, work fewer than 20 hours a week, with the contracts, terms and benefits of full-time employment. The directive will mean that large numbers of employees, especially females who want part-time employment, will lose their jobs.
The fairness at work Bill will enforce trade union recognition. As the CBI has pointed out, good employee relations should be built on trust, which is not best fostered when trade unions have imposed collective bargaining on an employer. On smaller industries, the CBI has said that the removal of the cap on unfair dismissal compensation will drive many people out of business. I know from direct experience of employers' concerns about the liabilities that may arise when someone is not suitable for a job. It can be two years before one knows whether an employee will fit in, especially in a highly skilled job, and there is now a major deterrent to employing anyone in such a post.
The Government have undergone a sudden conversion to the McKinsey report, although they do not refer to its main points on lower productivity. The fact that the many people in this country who have been employed in lower-paid jobs would be unemployed in continental Europe must be put into the equation if the productivity figures are to be comparable.
As my right hon. Friend the Member for Huntingdon said, the state of the economy is partly the Government's fault and partly a result of what is happening in the rest of the world, but the Government's actions will lead to declining levels of growth and to 500,000 fewer people in employment. The third way--guff, as far as I can see--is a reversion to Labour's bad old ways. It is about higher taxes and higher Government spending, especially on social security. The Government are restoring the economically damaging trade union process that was shown not to work in the 1970s--the laws were often impossible to enforce.
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