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Mr. Fabricant: My right hon. Friend will be aware that I used to run a broadcast electronics company: one might say, an engineering company. Is he aware that the Engineering Employers Federation says that small engineering companies will be stifled by the Bill? Is he further aware that the CBI is also saying that the Department of Trade and Industry has over-egged the directives from Brussels and that there can be no future for engineering if such small firms are stifled at birth?
Mr. Redwood: My hon. Friend is ahead of me because I was going to refer to the plight of engineering firms. He is right to say that the Engineering Employers Federation is worried by the changes. It stated in January:
- "The proposed changes to the law on industrial action will inevitably change the industrial relations climate and may make industrial action more common."
The Institute of Directors has been even tougher in its opposition to the Bill. That may come as no surprise to the Secretary of State, but the IOD may be right; he should bear that in mind as a possibility. It has stated:
On the specific matter of small firm exemption, the CBI proposed that the threshold should be raised to 50--another part of our case in going for the lower number, rather than 100. The CBI says:
The Federation of Small Businesses has proposed a threshold of 100 and would obviously prefer 50 to the threshold in the legislation. It is worth dwelling on its quotes because it speaks for many small businesses. Its voice should be heard in our important debate. In a press release in February, the federation stated:
We have just heard from the Minister for the Cabinet Office something about "joined-up government". That is an extraordinary idea from this Government, who have nothing joined up about them at all and who make disjointed statements from day to day, based on their idea of media management and what might make a good headline or news story the following day.
We are told that there is to be a regulatory impact assessment for every new measure that is proposed. Whoopee, Mr. Deputy Speaker; but that is not new. There have been cost assessments of regulations for many years. We want the Government to produce honest assessments, rather than fiddled ones, and then to understand what the assessments are telling them. The regulatory cost assessments of these and other measures that the Government have introduced should be telling them that they are taking too much money out of British business, and that the reason why factories are closing and people are being sacked day by day in the industrial sector has something to do with the Government's policy.
If the Government take out too much in tax and regulation and push sterling too high, it will become difficult to compete and jobs will be lost. We do not want more regulatory impact assessments. We want the Government to come up with some honest figures, to understand the voice of business, to understand what business is saying and to do something about it.
The Secretary of State's usual defence is to say that the previous Government introduced regulations. That is quite true; they did, and those regulations also increased costs. However, the Secretary of State is proposing far more expensive and damaging regulations than did the previous Government, on top of the regulations introduced by that Government. If the Secretary of State wished to identify regulations introduced by the previous Government that he thought we could do without, nobody would be more delighted than I. I am sure that I could persuade my right hon. and hon. Friends to see the wisdom of repealing those regulations, as well as those that he is proposing. We would be delighted. Rather the sinner repenteth before it is too late than that the sinner should go on to his inevitable doom.
We are giving the Secretary of State a chance to repent with new clause 2. As we are prepared to trust him in this respect, we are offering him the power to choose those items in the Employment Rights Act 1996 that he thinks should no longer apply to very small firms: those employing 10 people or fewer. We are leaving it to his judgment. He will be in a good position to consult and to find out from business which parts of the legislation are most damaging and which could be removed without doing overwhelming damage--something that he and I would not want. We are being true to our word. We are happy to look at past as well as future legislation.
The main burden of the Opposition's charge is simple. There are already too many regulations. The Government have introduced some big and expensive ones already which business is having to digest, the minimum wage and the working time directive being two of the most obvious and expensive. We say to the Government, "Please do not put on top of that all the additional requirements of the Bill. Please exempt small firms. Please do something for very small firms."
If the Secretary of State does nothing for those categories, it will reveal that he is not interested in deregulation or British business, that he does not understand the catastrophe in modern British industry and that he will do absolutely nothing to stop those job losses and factory closures.
Mr. Bercow:
I support new clauses 1 and 2, which offer a lifeline to the small businesses of this country. What my right hon. Friend the Member for Wokingham (Mr. Redwood) had to say in support of the clauses demonstrated beyond doubt that, in the context of this Bill--as in other aspects of Government legislation and public debate--the official Opposition are on the side of small business and the Government are working against it.
Six reasons occur to me why the new clauses should be accepted. The first is the background to them. The circumstances in which we find ourselves are serious indeed for the small business sector of our economy. In 1998, 38,000 small businesses in this country closed. That represented a 6 per cent. increase on the figure for 1997. I hope that the House will be interested to know, and disturbed to learn, that in the first quarter of this year, no fewer than 11,000 small companies have ceased to trade.
There are a variety of reasons for closures and cessation of trade, but two reasons are paramount. [Interruption.] Before the hon. Member for Eccles (Mr. Stewart) chunters on any further, for all the world as if his main ambition this afternoon were to resemble the village idiot, let me favour him with the facts--[Interruption.] I shall continue to be as polite as I ordinarily am. Let me favour the hon. Gentleman with the evidence of the Federation of Small Businesses. As he was a doughty contributor to the proceedings of the Standing Committee, I hope that he will be interested to know the verdict of that organisation, which is the authentic voice of small and medium-sized enterprises in the United Kingdom.
The federation says--not anecdotally, but on the basis of all the evidence of its members--that there are two main problems. One is cash flow; the other is the burden of regulation on enterprises. In the context of the first reason, to prove that I am being scrupulously fair, I say at the outset that although far too many of the companies that have ceased to trade have gone bust, several of them have not.
Some of those companies--especially micro- businesses, although larger businesses are also involved--have made the decision to cease to trade while still relatively profitable, because they think that the odds are stacked against them, and that the Government seek to thwart rather than to assist them.
"The Bill is entirely inconsistent with its"--
the Government's--
"objective of creating a competitive economy. The legislation imposes a raft of new costs and burdens on firms, including compulsory trade union recognition, higher compensation for unfair dismissal and the Parental Leave Directive. These measures will sap the competitiveness of British Firms."
The Institute of Personnel Directors is against the proposals. The Chemical Industries Association has also said that it is worried about the measures. It says that it
does not welcome the Bill and thinks that there are alternative ways in which to promote partnership which fall short of the compulsion in the Bill.
"Members believe that direct relations between management and employees is the norm in businesses with far more than 20 employees."
It proposes 50 as a reasonable, prudent guess of a sensible limit. The British Chambers of Commerce has also said that 50 is a reasonable limit, rather than the 20 in the Bill.
"Small firms are now being over-regulated to such a degree that it is too costly and too risky to employ staff . . . The provisions of the Employment Relations Bill will place them under further pressure and the introduction of the Working Families Tax Credit will mean the onus of administering more benefits falling on to employers."
In an earlier submission, it made it clear that it was against the union measures in the White Paper and draft legislation. Firms across the spectrum--the CBI, the IOD, small firms and chambers of commerce--are saying that they do not want the legislation and that, if we have to have it, small firms must be exempted because they behave differently and would be particularly vulnerable to its measures. Will not the Government listen?
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