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Andrew Selous (South-West Bedfordshire): Does my hon. Friend share my concern about the costs of employment tribunals in which the employer is found to be wholly innocent? Earlier this week, I met a man with a small business who told me that a tribunal had cost his firm £27,000. Even though his firm was completely exonerated, he had no chance of getting that money back. Does my hon. Friend agree that that is a serious point, which needs to be looked at?
Mr. Yeo: It is a very serious point. It is scandalous that many employers are burdened with huge costs as a result of tribunals, some of which involve frivolous claims. Indeed, I am told that there are examples of employees going from one firm to another, taking one case after another to a tribunal.
If the Secretary of State had any concern for the next generation of workers, and if she were as anxious as the Conservative party is to secure a fair deal for small business, in which no one is left behind or held back, particularly the most vulnerable and least skilled workers, she would argue, as we are doing, for more flexibility in labour markets—the flexibility that creates jobs, as we see in the United States, instead of the rigidity that destroys them, as we see in Germany, and which, sadly for Britain's future workers, appears to be the model that the Government favour.
The third concern for small business managers is time, far too much of which is spent by small business people filling in Government forms, trying to understand what new regulations mean for their businesses, and trying to comply with those regulations. Far too much time is spent administering the Government's tax and benefits systems. The handling of the Chancellor's increasingly chaotic attempts at social engineering and wealth redistribution has been forcibly sub-contracted to business, which now not only administers payrolls and the entire national insurance contribution regime, but has been compelled to take over some of the functions of the Benefits Agency.
As more employees become eligible for some form of tax credit, the Government need to consider the effect that that has on relations between employers and
employees. Does it really promote good relationships at work if employees have to disclose intimate financial information to their employer? The time that all of that takes would be better spent talking to customers, improving products, controlling costs, and all the other things that small business people must do. Saving half an hour a week might even allow small business people to get home a little earlier on a Friday evening to spend a little more time with their families. Cutting a few regulations might allow small business people to enjoy a taste of the benefits that the Secretary of State claims to want to create through the work-life balance.
Mr. Mark Prisk (Hertford and Stortford): My hon. Friend has highlighted an essential issue for small businesses. Is he aware of the latest figures on the number of hours that small business men and women running family firms have to endure? I understand that more than 28 hours a month are spent filling in forms.
Mr. Yeo: Some of the figures for the amount of time that small business people have to spend filling in forms and complying with regulations are alarming. That is unproductive time. On a future occasion, I hope to tell the House about some of the forms that small business people are required to complete. However, it is not just red tape that takes up their time—infrastructure problems do so as well. Britain's increasingly third-world transport system, which we heard about during the previous debate, wastes a huge amount of time and represents a vast burden for business. Ministers themselves have admitted that that costs billions of pounds.
Mr. Robert Key (Salisbury): Does my hon. Friend agree that another part of the infrastructure surprisingly neglected by the Government is broadband access for the very companies in rural areas that could most benefit from that new technology? That is proving to be a serious handicap in our competitiveness with other European countries. The Government could have done a lot more, for example, by allowing piggy-backing on their programmes for wiring up doctors' surgeries and schools in rural areas, but they simply have not bothered.
Mr. Yeo: My hon. Friend is right, and highlights an area of infrastructure that is the direct responsibility of the DTI. The Government's failure to achieve the ambitious plans that they published for access to broadband is causing genuine problems for many small businesses, particularly in rural areas. Many of my hon. Friends have constituents who cannot get access to broadband now and cannot even get a date when they will have such access.
In the next few months, I shall set out in more detail what the Conservative fair deal for small business will include. This afternoon, in an attempt to promote constructive debate about these important issues, I invite the Secretary of State to agree that a fair deal for small business must start with the recognition of four fundamental principles. First, the most important thing that any Government can do for business, small or large, is create a stable macro-economic climate. No amount of ministerial intervention, new Government initiatives or grants to bail out failing businesses in the
constituencies of ministerial colleagues can replace the need for policies that promote wealth creation and preserve the competitive position of British business. We live in times of exceptional uncertainty, when modern technology and communications have made investment and jobs more internationally mobile than ever before. Investment which, a decade ago, may have been made in Ipswich, is today just as likely to go to India. Whole industries in which western Europe led the world in the last century are migrating to China in the first quarter of this century.That is why it is worrying that, under Labour, productivity is rising at only half the rate that it was under the Conservatives. That is why it is worrying that business investment last year suffered its biggest drop for over 10 years, and the second biggest on record since that series of data was started in 1966. That is why it is worrying that last year, strikes cost business more lost days than in any year for more than a decade. That is why it is so worrying for business that, for every week that the Labour Government have been in power, an average of 2,000 manufacturing jobs have been destroyed. That is why it is worrying that Britain's deficit in traded goods is the worst since records began 306 years ago. Those figures are a reminder of worrying trends in the British economy, and they reflect the accumulation of difficulties that small business faces and the gradual erosion of the competitive advantages that Britain fought so hard to win in the 1980s and the early 1990s.
The second principle to be recognised is that the effectiveness of Government intervention is extremely limited. Take the Small Business Service, on which spending has rocketed to £423 million. Is that sizeable chunk of taxpayers' money achieving added value for small business? It is hard to see that it is. It certainly has not established itself as a champion of small companies in the Government and it is not yet established as a widely used source of valued business advice. The Small Business Service business plan for 2003 states:
- "Business Link is being enhanced to improve the support given to those starting a business."
- "Key to success will be repositioning and strengthening Business Link as a valued brand."
The same document goes on to state that a key task for the Small Business Service will be the establishment and rolling evaluation of three regional development agency-led business support pilots in the north-west, the west midlands and the east midlands. It continues:
- "A new challenge is to understand the relationship with factors such as company culture, ownership issues and sector-specific issues which can make many small businesses reluctant to grow."
- "map the interdependence of these factors and, by March 2004, publish a 'capabilities for growth' strategy."
The Department of Trade and Industry seems to have decided to exclude such private sector business support groups as the Federation of Small Businesses, the British
Chambers of Commerce, the Institute of Directors, the CBI, the Small Business Bureau and the Forum of Private Business. It has excluded those, as well as many more specialist bodies, from playing a leading role in small business development. More is the pity. The DTI will rue the day.The third principle concerns tax. It is time to recognise that business is much more heavily taxed than when Labour came to power. No further increase in the tax burden on business can possibly take place. Two weeks ago, the Leader of the House let the cat out of the bag when he admitted that tax would have to go up again next year. Most of us suspected that already. The Chancellor had already had to admit that he got his sums wrong twice, in the pre-Budget report last November and in the Budget in April. Most people believe that his forecasts for tax revenue will again be proved wrong in the next few months.
Since income tax is a sacred cow that cannot be touched—an extraordinary commitment, as national insurance contributions, which have precisely the same effect as income tax on employees, have already been raised—we must conclude that business taxes will bear the brunt again next year. If the Secretary of State wants to champion small business, I invite her to make a commitment here today to fight publicly against any proposal by the Chancellor to raise tax on business. She should make it clear that if tax on business is raised again while she is Secretary of State, she will resign her office.
The fourth and last principle concerns regulation. It is long overdue to recognise that regulation costs business more than ever before and is weakening the competitive position of British business. Regulation damages small business particularly badly. The burden cannot be increased any further. I invite the Secretary of State to introduce sunset clauses into many of the Government's regulations, such as the provisions of the Employment Act 2002, so that their effect on the job prospects of potential workers can be properly analysed. Those four principles—that small businesses are affected by the macro-economic climate more than anything else; that direct action by the Government without the full involvement of the private sector is of little benefit; that the tax burden on business must now be capped; and that the tide of regulation must be reversed—are the crucial pillars on which a fair deal for small business must rest, so that no small business is left behind. I invite the Secretary of State to commit herself to upholding each of those principles.
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