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9.31 pm
Mr. Christopher Fraser (Mid-Dorset and North Poole): There is a lot to be said about the detail of Government policy. I am afraid that there is not much time to make all the points, so I shall stick to a few.
The Secretary of State refused to recognise the entrepreneurial spirit that was created in the 1980s by the last Conservative Government, from whom his right hon. and hon. Friends have much benefited, particularly the hon. Member for Croydon, Central (Mr. Davies), who, I am afraid to say, is not in the Chamber.
One point was made earlier about the British Chambers of Commerce. It has made a substantial contribution in highlighting the expenses that regulations have imposed on business, amounting to about £10 billion. The burdens barometer that it has published makes interesting reading.
I am particularly concerned about the increasing payroll burden. One area is the cost of compliance. It is highly regressive against small employers, in that the "bottom" 30 per cent. shoulder 75 per cent. of the compliance costs.
Small businesses have become unpaid tax collectors, administering the working families tax credit, student loans and stakeholder pensions, although I accept that the smallest employers have been exempted from the latter. The Government have already imposed a huge raft of burdens on small businesses through central policy planks that are highly unlikely to be repealed.
We must remember that the first year of a new business is the most important and difficult. If the business has an accumulation of regulation to apply, it will be a lot less effective in achieving its initial goals. It can be crippling at a time when the company should be spending time building itself up.
The hon. Member for Ochil (Mr. O'Neill) talked about analysis of Government regulation. Key new regulations on business have been introduced by the Labour Government through "Fairness at Work", which includes statutory trade union regulation and changes to dismissal; and the European Union social chapter, which includes parental leave and the working time directive, as my
hon. Friends have so well articulated. That particularly affects areas such as the one that I represent, given that it relies so much on the tourism industry.
The "Making Work Pay" provisions include minimum wage administration and the working families tax credit. The environmental burdens include the climate change levy and the fuel escalator. There are other burdens, including administration of quarterly payments of corporation tax and, dare I say it, the ubiquitous IR35.
The area of social chapter regulation that concerns me was mentioned by my hon. Friend the Member for Buckingham (Mr. Bercow): the parental leave directive. We must remember that the costs of applying that will arise in three areas: arranging cover for people while on leave; obviously, additional administration; and defending unsuccessful applications to employment tribunals.
My hon. Friends have already pointed out some of the problems with the working families tax credit, but it must be said that business groups have focused their sternest criticism on the administrative burden that will result from companies being asked, effectively, to administer the welfare state. That cannot be good.
The Federation of Small Businesses has criticised the Government for failing to advise benefit claimants that they do not necessarily have to receive the working families tax credit in their pay packet. As the Government have failed to make that clear, the FSB itself is informing employees by sending leaflets to its 150,000 members, advising them of the option and by posting details on its website. It should not have to do that--the Government should be responsible for it.
The part-time workers directive is the latest burden introduced in the United Kingdom as a consequence of the Government signing the social chapter. According to the British Chambers of Commerce, under the Government's proposal for implementation of the European Union part-time workers directive, United Kingdom businesses will face increasing legal costs. I read much of the material that the British Chambers of Commerce publishes, simply because it gleans much information from those who are out there in the business world--unlike the Ministers mentioned by hon. Friend the Member for Buckingham, who do not have that experience.
Another problem that will arise if part-time and full-time workers have the same rights is the way in which company pensions are allocated.
One of the biggest criticisms of the part-time work regulations, besides the regulations themselves, is the manner of the consultation on them. The Government have consistently been criticised for the way in which they have conducted consultation on important regulations, allowing little time for scrutiny and business preparation.
The burdens on business introduced by the Government have a profound effect. Let us not forget that small business was the backbone of the 1980s and 1990s economic success that was led by the previous Government. This Government must ensure that there is a reduced regulatory burden on small businesses.
A more entrepreneurial spirit is the order of the day. Cumulative regulation stifles business, and it has a disproportionate effect on small businesses at a time when they can least afford to apply them.
9.37 pm
Mr. Kerry Pollard (St. Albans):
Much has been made by Opposition Members of a lack of experience in the Department of Trade and Industry in running a small business. I ran a small business for many years before being elected to the House. Should such experience become a requirement in the job description for future Ministers, I am available.
I should like to mention quickly a small business in my constituency, Groot and Hartman, which is working double shifts to cope with demand for its product. That is quite typical of what is happening in my constituency--all small businesses are doing exceptionally well.
Small businesses require three things: stability, low inflation and low interest rates. The Government are delivering all three of those, with continuity. All small business people will, of course, say that they want no regulation at all--not one bit of it--which, as we know, and as they accept, is an impossibility. They certainly want less regulation.
The week before last, I was in Brussels, with my hon. Friend the Member for North-West Norfolk (Dr. Turner). Our counterparts from other European Parliaments said that the United Kingdom is far ahead of them in deregulating small business. There was no question but that they were envious of the action that we have taken on the issue. That is not to say that we have it right, but we are getting it better.
Mr. Alan Duncan (Rutland and Melton):
We have had a very lively debate in the three hours allotted to us today. It is difficult, however, to add to the scope and detail of the opening speech of my hon. Friend the Member for Tiverton and Honiton (Mrs. Browning), who, with her own experience of running a business, brings to the debate the detail and knowledge that Labour Members lack. She lamented the fact that the debate on small business has been downgraded by the Government and put into the Westminster Hall annexe. It has taken Conservative Members to bring it back to the main Chamber of the House of Commons.
My hon. Friend's main message was that people who run a small business are increasingly saying to the Government, "Get off our back." Indeed, my hon. Friend quoted a business man who said that the Government are showing an unforgivable lack of understanding of what it takes to employ someone. I shall address that issue in a moment. We see that interference extended further to the likes of nursing homes, with the absurdity of instructions to widen doorways by 1.5 in. When the Conservatives are in government, we shall have a full audit of regulations with a view to ensuring that there are fewer of them.
In sad contrast to my hon. Friend the Member for Tiverton and Honiton, the Secretary of State appeared disdainful of the problems caused by over-regulation. He simply does not understand what it takes for a small company to grow. In his policy, we see the absurdity of his making it hard for business to take risks, then setting up regional venture funds to tackle the problems that his Government have exacerbated.
The hon. Member for Weston-super-Mare (Mr. Cotter) made a pertinent point when he said that there are increasing disincentives to taking on apprentices. The hon. Member for Ochil (Mr. O'Neill), as the House heard, takes a slightly inconsistent approach to the topic. We all welcome his robust comments in the reports of the Select Committee, which he oversees. However, as if to atone for being so critical, he takes a different attitude in debates such as these. As my hon. Friend the Member for Buckingham (Mr. Bercow) said, the hon. Gentleman seems to have something of a Jekyll and Hyde character, taking the opposite view in these debates from that which he takes when he chairs the Select Committee, as he does so well. My hon. Friend the Member for Buckingham made a remarkable parliamentary contribution, characterised by his usual dynamism, authority and forensic and analytical skill.
The hon. Member for Crosby (Mrs. Curtis-Thomas) lamented the fact that it has not always proved easy for central Government to estimate the costs of regulation. That may be so, but the Government should appreciate the fact that there is another litmus test: if in doubt, they should just go and speak to those running small businesses, who will tell them whether the regulations are punitive--as they feel increasingly strongly they are.
We also had very helpful contributions from my hon. Friends the Members for South Dorset (Mr. Bruce) and for Mid-Dorset and North Poole (Mr. Fraser)--a sort of Dorset double--and from the hon. Members for North-West Norfolk (Dr. Turner) and for St. Albans (Mr. Pollard).
However, perhaps the tone of the debate was set by a recent document from the Forum of Private Business. On the front page, it says that employment regulations are a top priority for action. Later, it adds:
In taking such an international view, I note that, despite many weeks and months of campaigning by Conservative Members--and despite increasing evidence of the detrimental effects of the Government's policy--the Government still refuse to appreciate the bad decision that they have taken in adopting IR35. Even last night--and in this morning's debate in the Westminster Hall annexe about the internet--it became increasingly clear that their approach to IR35 will drive people out of this country.
I have here one of many hundreds, if not thousands, of letters from a person in such a predicament, who writes:
When will the Government appreciate that, whenever they take a decision to collect more money or impose a directive, they are, as my hon. Friend the Member for South Dorset said, increasing the payroll burden on small businesses, which they cannot afford? They are being asked to fulfil tasks for Government as unpaid tax collectors, and often to do so with little notice, which throws their business into chaos and causes them to set aside the main purpose of their commercial activity in order to do the Government's work for them.
The Government must not only now make it their policy to put less of a burden on small businesses, but must ensure that, when they do increase that burden, because they have not listened, they at least give businesses sufficient notice so that they can organise their affairs and tackle their main priority before doing the Government's work for them.
I have a very few minutes to say the many things that I would like to say in this rich area of policy and, at the moment, of complaint. Perhaps at the root of what the Minister should appreciate--and the Secretary of State clearly failed to appreciate--is that what matters to a small business is the marginal cost of employing someone. It is that marginal decision which leads a company, at the beginning of its life, to take on that one extra person--and then, one hopes, another--that allows it to grow from a little acorn into the big oak that it needs to be if it is to appear in the FTSE 100.
The Government are increasing that marginal cost of employment, so that the burden of taking on a person is becoming increasingly difficult for small businesses which have to count their pennies, and which see one extra person on their payroll as an important element of all their costs and budget.
We are also seeing the continuing gold plating of directives. When will the Secretary of State appreciate that a new EU directive is not an instruction to shape a law according to an exact form of words, but merely a requirement for this Parliament to shape its law according to the parameters laid down, in words that we in this House choose and understand? Increasingly, those directives impose more burdens on our businesses--and comparatively greater burdens than those placed on many of our EU counterparts. That not only puts small businesses at a competitive disadvantage but leaves them facing obligations that they need not face.
There is evidence that firms are facing extra costs from a range of increasing burdens, mainly in the form of employment regulation . . . There are also pressures on sectors, such as the construction industry tax scheme, regulation of care homes . . . and security companies.
Many sectors of small business activity are feeling the strain of the Government's intervention. Many references have been made to the document produced by the British Chambers of Commerce, which puts the cost of the burdens on its businesses at something approaching £10 billion. That is dwarfed by the calculation on the next page in which the BCC says that the stealth taxes affecting its sector equate to something approaching 32 billion dollars, which is another cost that it, like other areas of business, has to face. [Hon. Members: "Dollars?"] I meant pounds. Having been so long in international trade, which is something that Labour Members do not understand, I occasionally make a slip and take an international rather than a parochial view.
It makes little difference to me. I will be long gone by the time the damage has been done by the idiotic Government.
When will Ministers wake up to the fact that, at a time when they are attempting to promote the internet revolution, their own policy is destroying this country's position and chucking out of business, or out of the country altogether, those at the leading edge of the revolution that we wish to encourage?
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