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7.49 pm
Mr. Mark Prisk (Hertford and Stortford): In opening this debate, the Secretary of State for Trade and Industry claimed that this was a Budget for enterprise that provided opportunities for all. I should like to test that claim and consider in particular the impact of the Budget on two especially enterprising groups: the self-employed and small businesses. I do so as someone who was both director of a small firm and self-employed for the 12 years preceding my entry into the House.
The self-employed are vital to the economy, not least in Scotland, as my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Duncan) pointed out. They are often the leading innovators and are usually the ones who create the jobs and wealth in our local communities. Self-employment also provides an essential flexibility in the labour market, enabling businesses to respond quickly to changes in supply and demand. More importantly, however, self-employment epitomises an enterprise culture. It means that no matter who someone is, and whatever their background, if they have the skill, the will to work and the ambition, they can be their own boss and stand on their own two feet. So if the Budget were indeed about promoting enterprise and creating opportunities for all, it would have to tackle the needs, concerns and aspirations of the self-employed. It would have to cut their taxes, end any discrimination and slash the red tape that currently holds back budding entrepreneurs.
It is true that the Budget offers some tax cuts for small businesses, but many people fail to realise that those cuts are available solely to companies. That means that the self-employed, who are unincorporated and run two thirds of all small businesses, are specifically excluded from each of the tax cuts outlined by the Chancellor last Wednesday. They are excluded for no reason other than
their legal status. I therefore ask the Paymaster General why she has forgotten the self-employed and turned her back on the freelancer, family firm and local partnership. Are they not enterprising? Do they not merit the same tax cuts as their incorporated competitors?It is fair to say that there was one tax change for which the self-employed were thought good enough. It is a change that affects their bottom line and which 85 per cent. of self-employed people specifically said they did not want. I refer, of course, to the substantial rise in national insurance contributions. For many self-employed people, the increase will mean a hike of anything between £250 and more than £1,000 in extra costs. No tax rise is welcome, but what a brilliant tax to choose to discourage the self-employed. If there is one Government charge that the self-employed particularly resent, it is national insurance. The reason why is that they pay twice: once through class 2 contributions for the benefits that they receive, and again through class 4 contributions, which most of them see as a tax on their enterprise. That is what self-employed people in my constituency tell me they feel about the Budget. Despite all the glossy reports and all the Minister's warm words, that is the culture that the Government are creating. They are a Government who have turned their back on so many of the entrepreneurs whom they claim to support.
I should like to turn now to the smaller businesses that are incorporated and consider how the regulatory changes in the Budget affect them. I welcome the significant increase in the VAT threshold, which will undoubtedly help and is welcome in that context. However, a minor change in the VAT regime is not enough. Before the Budget was announced, many people were expecting much more radical action. After all, manufacturing in the United Kingdom has now been in recession for more than a year. Although there are some glimmers of hope, manufacturing businesses needed real help in the Budget to reduce their costs and improve their profitability. They did not need a £3 billion hike in their costs. And it may even be £4 billion—who knows? As the director general of the Engineering Employers Federation said, £3 billion of extra costs is £3 billion less to invest.
One of the main complaints that businesses raise with me is that they now have to administer the Government's social welfare programme through the pay-as-you-earn system. The payroll burden, which has been mentioned by one or two hon. Members, has grown substantially since 1997, ensuring that in addition to wages and non-wage costs, a business is required to spend its time and money running the complicated system of credits so loved by the Chancellor. That includes the working families tax credit, the stakeholder pension, student loans, attachment of earnings orders and child support tax credits. Together, those measures represent a serious drain on business resources. Of course, for small businesses, the burden is completely disproportionate. Even the Inland Revenue reckons that it costs a small business with up to about four employees £288 per person per year simply to administer the system, never mind wages or national insurance.
While I accept that the Chancellor acknowledged that problem in his Budget, I point out that he failed to act decisively. Instead of seeking to reduce the burden, the Government are planning merely to encourage firms to
file the same returns electronically, as the Secretary of State confirmed. Furthermore, the new tax credits, which are intended to be more responsive, will be more complicated and difficult to administer.Will the Paymaster General please look again at the payroll burden, which is her direct responsibility? The system needs to be completely overhauled. Most important of all, the Government themselves and not business should now administer their social policies. Such an approach would have significant benefits, including reducing business costs, making Britain more competitive; cutting the cost of employing people without affecting their wages; and helping productivity by releasing people to do business rather than filling in forms—a special benefit for small businesses. Currently, the average small business spends up to 31 hours every month merely complying with Government regulations. Given that there are approximately 3.5 million small businesses, if such a change managed to reduce that time by only four hours a month, 21 million working days would be released back into the economy every single year. That could make a significant difference to the productivity about which the Chancellor claims to be concerned. I hope that the Paymaster General will respond positively to that point.
The Chancellor began his speech last Wednesday by promising a Budget that would create a culture for enterprise. Yet, as I have shown, he has excluded either by mistake or by intent the very entrepreneurs whom he praises from receiving the tax cuts, and then added insult to injury by raising the one tax that they all despise. Equally, the right hon. Gentleman's acknowledgement of the burden on small businesses is contradicted by the heaping on of ever more bureaucracy and costs. Far from promoting enterprise, the Chancellor has taxed it; far from creating opportunity for all, he has excluded 3 million self-employed entrepreneurs. More talk, certainly, and more taxes, of course, but there is no real help in this Budget. That is the reality of this Budget for business, and that is what business will remember this Government for.
7.58 pm
Dr. Hywel Francis (Aberavon): I intend to speak about the importance of the principles of fairness and enterprise that are enshrined in the Budget for disabled people and their carers. I therefore wish to declare my membership of the Down's Syndrome Association and the Iron and Steel Trades Confederation, the community union, which now includes the National League of the Blind and Disabled.
I warmly welcome the Budget as a major step forward for enterprise and fairness in Britain. As the TUC said recently, it is
- "a defining moment in the future of the British health care system and the history of the present Government."
In that spirit, the challenge of enterprise needs to be accessible to all, as do family prosperity and improving public services. Too many people are still excluded from the full opportunities of enterprise: the homeless, ethnic minorities, school leavers without qualifications and disabled people. I would like to speak in the House on all those groups in the near future, but tonight I wish to focus on people with disabilities.
Many people with disabilities desire to go on that journey of hope from welfare to work. It is a precarious and difficult journey that requires learning and training opportunities as well as advocacy and professional support. If ever we needed to embed the enterprise culture in the culture of social justice, we need to do so with and for people with disabilities. I welcome the attention given to such people in the Red Book, in its commitment to help
- "those who can and wish to work make a successful return to employment."
The Government have supported such bodies as the Shaw trust, which has done much in recent years to assist disabled people towards independent living and new learning opportunities. The trust believes, as I do, that disabled people who have been out of work for a long time need more than changes in the law and tax breaks, important though those may be. They need new learning opportunities—negotiated by them—professional support and advice, and an advocate to convince employers of their worth. The new deal for disabled people and the supported employment programme will provide a major start, but far more investment is needed in such schemes, particularly given that disabled people make up nearly half the total of economically inactive people of working age in the United Kingdom.
Recent research at the university of Nottingham has shown the real value of the personal adviser system in the new deal for disabled people. It has shown that it is really working, as is the supported placement scheme. Only last Friday in my constituency, I saw the work of such schemes at the opening of the Karten computer training, education and communication centre in Llandarcy, where young disabled people will gain confidence, self-worth and a new quality of life through new information and communications technology learning opportunities, and support and advice systems. All this should lead to quality work opportunities. That is a true example of synergy between fairness and enterprise in my constituency. More of this needs to be done across the country.
Dr. Kevin Fitzpatrick, the commissioner for disability rights in Wales, has emphasised many times that when a disabled person works, there is a significant reduction in
benefit take-up. There is a positive contribution from tax and national insurance, and a reduction in calls on health and social services. Carers can return to work. The disabled person has greater power as a consumer, becomes an equal and valued citizen, grows in confidence and—most importantly—contributes positively to the life of the community and the economy in new ways. All this has started to happen since the return of the Labour Government in 1997.Labour Members agree that the first step change as a result of this Budget will be the rebuilding of the national health service. The next—before the next Budget, we hope—will be to ensure that disabled people have the opportunity to be at the heart of our new enterprise economy, and to provide substantial new learning, advisory and advocacy support for the millions who wish to work.
I welcome the Chancellor's recent commitment that, in the coming spending review, education will receive the priority it requires to deliver further substantial improvements. I am sure that he had in mind a high priority for disabled people in general. When we begin to achieve all this through his present Budget and the next spending review, we shall provide the real resources necessary for that essential journey of hope towards an enterprising and fair society for all. We have made a great start with this great Budget.
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