---

6.40 pm

Mr. Henry Bellingham (North-West Norfolk): First, I wish to declare my interests, which appear in the register. I also wish to welcome my hon. Friends the Members for Lichfield (Michael Fabricant) and for Tewkesbury (Mr. Robertson) to the shadow DTI team. Both have substantial business and industrial experience and will add much to what we are doing.

This has been an excellent short debate, with some well-informed contributions, many from Members who have business experience and have read balance sheets in anger. In that connection, I refer to the hon. Member for Weston-super-Mare (Brian Cotter), who has much experience as a small business man, the hon. Member for Leeds, West (Mr. Battle), a distinguished former Minister at the Department who gave us a colourful tour of his constituency, complete with an explanation of geophysical barriers, and my hon. Friend the Member for Tunbridge Wells (Mr. Norman), who probably has more large business experience than any other hon. Member. I am sorry that I had to miss the start of the speech by my near neighbour, the hon. Member for Norwich, North (Dr. Gibson), but no one in the House knows more about knowledge transfer, so whenever he speaks on business matters he is always listened to—as, indeed, he is listened to whenever he speaks in Norfolk. We all know that my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Duncan) has had much experience in different businesses and his comments about Scotland were worthwhile and constructive.

I also wish to pay tribute to the various small firms groups that lobby Members assiduously. They include the Federation of Small Businesses, under the inimitable Stephen Alambritis; the Forum of Private Business, for which Garry Parker is extremely energetic in telling us what his members feel; the all-party small business group, under John May and Alan Cleverly; and the CBI small business team, under Matthew Fell. They all do a very good job of ensuring that we are properly briefed.

One key theme that kept recurring in the debate is the ever-growing burden of red tape and tax on small businesses. As my hon. Friend the Member for South Suffolk (Mr. Yeo) pointed out, that burden falls disproportionately on small businesses. He mentioned the total burden of £20 billion and pointed out that, proportionately, the cost to very small businesses of

2 Jul 2003 : Column 485

complying with employment legislation is up to 50 times more than it is for larger businesses. As my hon. Friend the Member for Tunbridge Wells pointed out, using his Asda experience, more regulation normally helps bigger firms in their competition with smaller firms, because of the way in which the burden falls. My hon. Friend the Member for Hertford and Stortford (Mr. Prisk) pointed out that, on average, small businesses now spend between 25 and 28 hours a month dealing with paperwork.

It is not the individual burdens, the different regulations and statutory instruments and new taxes that are show stoppers or deal breakers by themselves, but it is the combined, collective and accumulated weight that is now causing every business grave concern. As my hon. Friend the Member for Tunbridge Wells said, there is now a real cultural problem. There is also a systemic problem, because of the ratchet effect. My hon. Friend put it colourfully when he said that we are tackling an avalanche with a toothpick.

On that point, Martin Temple of the Engineering Employers Federation said recently that the accumulated burden of regulations and taxes is now destroying jobs. He stated:

"Manufacturing competes globally and the government has a clear choice between protecting our competitive advantage, or continuing the trend of the last few years of the gradual erosion of our flexible, low-cost environment.


If we continue to make the UK a less welcoming environment for manufacturing companies"—

and small businesses—

"then business will simply vote with its feet and the movement abroad of our manufacturing base will accelerate."

When we raise the point about red tape and burdens with the Government, they tell us that, because unemployment is still so low, it does not really matter. It does matter, though: 660,000 jobs in manufacturing have been lost since 1997. The recent CBI trends survey showed that 40 per cent. of small firms experienced a drop in new orders over the previous four months, and 39 per cent. said that output had declined. Jobs have been lost, but what about the thousands of jobs that small firms could have created had they not been deterred from taking on extra staff?

My hon. Friend the Member for South Suffolk and his team went to Manchester the other day and met a number of small business men. When we asked what their two main concerns were, they cited the recent increase in national insurance contributions and tax, and the cost of taking on more staff. There is therefore an opportunity cost in the jobs that have been lost and in the ones that were never created in the first place.

Are the Government listening? New burdens are still being placed on business. The Criminal Records Bureau has just announced very big increases in its charges for vetting care homes personnel. I received a letter dated 16 June from a well-known care and nursing home in my constituency. It stated:

"Without consultation and almost without notice, the CRB is about to start charging nearly three times more than it does currently for checking the records of our future employees."

This excellent proprietor goes on to say:

"There is one further very sore point to raise with you. Originally, the statutory regulations required all nursing homes to complete statutory checks on all their staff by April 2003.

2 Jul 2003 : Column 486

However, because the CRB was struggling so much to meet its responsibilities, we were asked to postpone having these checks done until October 2004. Ironically, we will now have to pay dearly for our co-operation on this. We will now be charged the much higher new fee for checks which would previously have been carried out a much lower fee."

We are talking about an extra cost to the care homes sector of £14 million. That is another burden on business that will be appearing in the very near future.

My hon. Friend the Member for South-West Bedfordshire (Andrew Selous) referred to a matter that was also raised by a number of other hon. Members—the great increase in the number of industrial tribunal cases. Last year, there were 130,000 tribunal cases in this country. How many more will there be this year?

The Secretary of State talked about the work-life balance, and people's right to flexible contracts. That is a minefield: if an employer fails to follow the procedure to the letter, the employee has recourse to an industrial tribunal. The fear shared by many Opposition Members is that we are talking about a disgruntled employees' charter.

What action is the Department taking? There are some well-intentioned schemes. We support the small firms loan guarantee scheme, but have the Government delivered joined-up government on behalf of small businesses through the Small Business Service? Has that service been, throughout government, a proper champion of small businesses? If it is to act as a genuine voice for small businesses at the heart of government, surely the service needs to report direct to the Prime Minister, and to be separate from the DTI? The Opposition feel very strongly that much of the service's £400 million budget needs to be properly evaluated, and put under closer scrutiny.

Many different schemes are covered by section 8 of the Industrial Development (Financial Assistance) Act 1982. Although the Secretary of State said recently that there has been proper evaluation of the small firms loans guarantee scheme, what about the regional venture capital funds, the UK high-tech fund, and the community development finance institutions? What about the bridges fund and the community development venture fund? I am not saying that those are bad schemes, but no proper evaluation has been done. When will the Government perform that evaluation?

My final point is very simple. The Secretary of State's hands are tied—by other Departments that keep putting more burdens on business, and by Europe. The Conservative Government put a huge amount of effort into successfully negotiating an opt-out from a job-destroying social chapter. Within days of taking office, the Government gave up the opt-out. In respect of the agency workers directive, the CBI stated recently that, had we kept the opt-out, all the fuss over the directive would have been irrelevant, as Britain would have sat on the sidelines while our European colleagues "squabbled away".

Why cannot the Secretary of State make the day of every small business man in the country and say that the Government will renegotiate our social chapter opt-out? Unless the Government take radical action to reverse that trend, small businesses will never receive a really fair deal. That is why I urge hon. Members to support our motion.

2 Jul 2003 : Column 487

6.50 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths): I join the hon. Member for North-West Norfolk (Mr. Bellingham) in congratulating his colleagues who have been promoted to the Front Bench. I pay tribute to Britain's 3.7 million small businesses, which are responsible for generating £1 trillion in our economy and employ 12 million people.

I give thanks to the organisations that represent them and that have become my close advisers: the British Chambers of Commerce; the Federation of Small Businesses, especially its driving force, its chair, John Emmins; the Institute of Directors; the CBI SME Council and the Forum of Private Business. I also thank the Small Business Service, which in three short years has made a real mark on behalf of businesses for Britain. Incidentally, the SBS produces an annual report; I think that the hon. Member for Galloway and Upper Nithsdale (Mr. Duncan) suggested that it did not. The Small Business Council also produces reports and, in November last year, we produced our own report, "The Way Forward", which was widely welcomed by small businesses.

I like to get out of the Department of Trade and Industry every week if I can and I visit small businesses throughout the country, so I have a good understanding of the problems that they experience. The hon. Member for South Suffolk (Mr. Yeo) said that the Forum of Private Business had told him that its members expected lower growth than at any time since the Labour Government came to power. Although that vexes me, it is in stark contrast to the situation a decade ago, when the forum expected no growth at all. Its membership was falling and its members were going to the wall.

Several contributors to the debate made claims about the volume of companies going bankrupt, but I think that their figures were from Conservative central office, rather than from Barclays and others who have conducted proper surveys. The hon. Member for Tunbridge Wells (Mr. Norman) said that the stock of businesses was reducing. That is not true. The latest Barclays figures state that start-ups in the first quarter of 2003 totalled 107,000—12 per cent. up on the same period last year. Those are important facts.

---