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Mr. Pollard: Does my hon. Friend accept that we need to support not just the big scientific research but small research, which also has spin-outs? I am thinking in particular of small business research at Kingston university.

Dr. Gibson: I agree. The other night, I was at the Institution of Chemical Engineers prize-giving ceremony at Alexandra palace. An amazing number of small businesses were vying for simple little prizes, but there was great excitement. It was hard to distinguish between all the enterprising projects in the oil and engineering industries.

The Royal Society report discovered after the discussions with all the groups I have mentioned that the major factor was encouragement and funding from the university, making spin-out activity a priority in the university. The White Paper on higher education will look at that as well. Another factor was support from the head of the department, saying "This is what we are going to do." That galvanises activity, enthuses the people in the department to take their ideas forward and makes the spin-out company possible.

Another factor was flexible working arrangements, so that the academic with the idea could get support and help, and get on with the business of moving the project into industry. The Royal Society said that those factors made it successful. One must have success and role models in the department, the university and the region. That is beginning to work. Another factor was mentors from industry to guide people in the department so that they could move their research forward.

Of course, there is pressure on those people, too: the research exercise. They must still be distinguished academics. They must keep research in the top flight. They must get research grants. If there is one red tape problem, it is filling in the forms to get money from

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Europe and elsewhere. Academics are good at filling in their expense forms—there are no problems there—but when it comes to filling in research grant forms from Europe, they have great problems and it drives them insane. They sometimes complain about the journey from the car park to the university being too long, but that is just a fringe activity in terms of what is happening and the entrepreneurial skills.

Formal training is going on with young people, and the higher education White Paper will develop that. It will move things forward at a great rate. The Government's incentives and interactions with banks are helping spin-out companies and making them work together—there are spin-out companies across the land.

I do not want one spin-out company in the part of the world that my hon. Friend the Member for St. Albans (Mr. Pollard) represents. I want 50, fighting for the same space, talking to each other, drinking coffee together, coming up with sparky ideas. We have not touched the enthusiasm and intelligence of this country in that area yet, so I look forward in the next year to more spin-out companies. I want to see the Americans coming over here from California because we are good at it.

One thing may be important, and my hon. Friend the Minister may want to say something about it—I would welcome it if he did. We may need regulations on intellectual property. Who owns the patents? Should it be the university or the person who makes the discovery? What about the business that expands it? How does one develop that kind of relationship? That is a real issue. In the United States, the Bayh-Dole Act 1980 helped to solve that issue. It drove on US technology transfer. I hope that the Government will consider the need for such provision to ensure that new technologies push forward.

Mr. Pollard: My hon. Friend mentions the USA, which is held up as a model of excellence for small businesses. Does he realise that in this country it takes but a day to set up a new small business, yet in France and Belgium it takes eight weeks, in Germany it takes six weeks, and so on? That is what we are doing to encourage our small business sector and to ensure that it is easy for people to start small businesses.

Dr. Gibson: Absolutely, and the same is true of products that have to be regulated and ratified. In the medical world, which I understand a little, the interaction of the National Institute of Clinical Excellence, in assessing whether a product is ready and safe for the market, is extremely important. We are not quite as fast as the Belgians in such matters, but we are getting there. We are learning to regulate speedily, and to ensure that our products are the best and the safest. So I welcome the Government's exciting initiatives.

6.30 pm

Mr. Peter Duncan (Galloway and Upper Nithsdale): I welcome the opportunity to contribute briefly to this important debate. As has been said, it is truly astonishing that this Labour Government are somewhat picky in terms of which manifesto commitments they choose to honour. They could have honoured the manifesto commitment to have an annual report on small business issues without unduly troubling the usual channels.

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I have 12 years' experience in business, although at a different end of the spectrum from that of my hon. Friend the Member for Tunbridge Wells (Mr. Norman). I hope that I can contribute something to the debate, perhaps in the form of a reality check. Some of my colleagues in the small business community would be totally astonished to read the Government amendment to the motion, which

and states that

Those comments would cause considerable consternation in the small business community, and rightly so.

Small businesses are a vital part of our economy that we cannot choose to ignore lightly. I was struck by the new report by the Federation of Small Businesses, which suggests that without small businesses we would have no economy at all. Research shows that between 1995 and 1999, the net number of jobs created by small firms was 545,000, compared with just 218,000 created by large companies. Even more important, according to the report more than 1.5 million jobs were lost in established firms during that time, but new firms created 2.3 million jobs. That is the "churn" effect of business: as old businesses mature and eventually tail off, jobs are replenished, as my hon. Friend the Member for Tunbridge Wells said, from the gene pool of new businesses.

How do we create the next generation of new businesses? Frankly, we make it worth their while. Many in entrepreneurial circles believe that currently, the effort is not worth their while, given the endless taxation, regulation and means-testing of benefits. As a result, the benefits to those with ideas for starting micro-businesses in particular are very marginal.

This issue is important because business start-ups are stagnating. I refer the Secretary of State—as I tried to do at the beginning of the debate—to the position in Scotland, which is in stark contrast to her somewhat complacent opening remarks. The Scottish Government's review of the business birth rate strategy shows that business start-ups in Scotland have been in steady decline since 1997. The number has fallen from 24,000 in 1997 to a disappointing 16,000 in 2001. That is a 31 per cent. decline in the number of new businesses in Scotland. The Secretary of State did allude to the fact that there is a lower propensity to create small businesses outwith the south-east of England, but the fact is that the situation is getting worse. Outwith the south-east of England, fewer and fewer people are trying to set up new businesses.

Of course, part of the reason why we need continually to set up an increasing number of new businesses is that we are losing an increasing number at the other end. In Scotland, 2,500 businesses were liquidated or declared bankrupt in the first half of 2002—an increase of almost 15 per cent. on the previous year. Why are businesses being regulated? It is in some respects because their eye has been taken off the ball in respect of having to cope with the endless stream of regulations from the Government.

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Every time I visit a small business in my constituency, I am struck by the marginal effort—the late night effort—that has to be taken into account when dealing with regulations. There is a belief within Government circles that introducing regulation will only have a marginal effect in itself, but the simple fact is, as my hon. Friend the Member for Tunbridge Wells said, that it has a cumulative effect. Another regulation is another half hour every month to complete a burden that can be so destructive of a small business's ability to compete in its marketplace.

On a visit to a small business in my constituency, I was struck by correspondence that described the chaos produced by having to deal with the Government's new system of tax credits. The horrendous effects of that change on those in receipt of tax benefits have been well documented, yet exactly the same chaos has ensued for businesses seeking to administer the system. In my constituent's case, the business employs a relatively small number of people, who have to act as the Government's Benefits Agency in implementing the changes consistently. Significantly, they have to disburse the funds before they receive them back from the Government. In some cases, including that of my constituent, it is a burden that small businesses could well have done without, as it severely impacts on their ability to conduct what they exist to do—generate business and income for themselves and their community.

I was struck by the dramatic nature of the figures on regulations—summed up by the fact that there are 14.8 new regulations every day. Scotland also has a Scottish Executive, which has implemented an additional 1,309 statutory instruments since it was created. That amounts to a level of regulation that, frankly, we can do without. Scottish business is being unnecessarily burdened and put at a competitive disadvantage, which inevitably has an effect on our wider economy. The Scottish economy is underperforming in the UK. Indeed, the Scottish economy has underperformed in the UK economy in every single quarter since 1998. We have lagged far behind the UK average for the past five years. The Scottish economy has expanded by less than 12 per cent. compared with nearly 19 per cent. at UK level. As Scottish Members know, the Scottish economy has been in decline for the past five successive months.

As I said in an intervention on the hon. Member for Weston-super-Mare (Brian Cotter), the position is made considerably worse because his Liberal Democrat colleagues colluded with the Labour-Liberal Executive to do away with the uniform business rate policy introduced under a Conservative Administration, which had provided a level playing field for Scottish business. The first thing that that Executive did on reaching Holyrood was to abolish it, to the extent that we now have a 9 per cent. surcharge on business in Scotland. That is unacceptable, because we end up with poorer businesses in Scotland and disincentives north of the border.

I conclude by alluding to one further issue, whose importance cannot be overestimated for the future—broadband, which has been mentioned in passing. My constituency is rural and none of my constituents is able to receive broadband services. There will come a point

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where two-speed Britain will become even more obvious than it is today. Businesses in my constituency do not have access to broadband services, so they cannot compete on a level playing field. Regenerating rural areas through the development of small and micro-businesses will not be possible without access to those services, so I urge the Government to take the extension of broadband far more seriously, particularly for the small percentage who do not have access and for whom there is currently no prospect of gaining access. It is an unacceptable position, which the Government should address.

Businesses in my constituency and throughout Scotland are operating with one hand tied behind their back. They are administering regulations left, right and centre for the Government and at some point that will have to stop. Small businesses deserve a fair deal.

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