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Mrs. Angela Browning (Tiverton and Honiton) (Con): The hon. Member for Hornchurch (John Cryer) touched on the difficulties encountered by small and medium-sized businesses in obtaining public liability insurance, and the punitive costs that they face when they want to renew their policies. We have discussed that matter in the House. Indeed, the Chancellor made a commitment that the Treasury would examine how other countries deal with similar problems.
The hon. Gentleman mentioned the fact that insurers cite the aftermath of 9/11 as a reason why premiums are increasing. A range of other arguments is also given, including the state of the UK and global stock markets. However, it is clear that when such policies come up for renewal, many people across the spectrum of small businesses find it difficult to obtain cover, which often licenses them to do the trade that they are registered to carry out.
A further sector of small businesses that is having difficulty because of a sudden and dramatic increase in insurance cover is small independent financial services that require professional indemnity insurance. I have received a lot of correspondence on that from independent financial services providers in my constituency. One provider wrote to me to say that in the past it paid a premium of between £2,000 and £3,000 per annum with a £1,000 claim excess, but that it is now faced with a premium of £100,000 with an excess of £50,000. That represents a huge increase for small businesses, and it is likely to put some out of business and to mean that people will practice without such cover. The problem is hitting a further sector of small businesses on our high streets. The sector includes financial planners and independent financial advisers and, as we know, it has been through a difficult time for a variety of reasons. The situation is likely to affect such businesses' ability to continue to practice, and, of course, Financial Services Authority rules insist on them having professional indemnity insurance.
Only two insurers in the whole of the UK provide cover for existing IFAs, plus one or two Lloyd's syndicates. New IFAs have no problem getting cover because they have no past book of business, so they can get much more attractive and favourable terms and obtain cover at a reasonable price. It is bizarre and quite wrong that although well-established practices are almost being put out of business, people with no track record who set up new businesses can get cover.
One of my constituents, Mr. Colin Langton, has practised in the sector for many years. He is well known in the west country and runs practices in both Devon and Cornwall. Indeed, he often writes for our regional newspapers to advise people on financial problems. He has put forward a suggestion that might help the industry. He says that the
"Industry Compensation Scheme—the FSCS—should be adapted to be the first line of cover for all"
independent financial advisers. At the moment, the scheme covers those that go into liquidation, which is a good thing, but he believes that it should be enhanced so
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that IFAs may obtain cover from it. He says that that would mean that small independent financial adviser companies would no longer be held to ransom by the few insurance providers. Given the increasing likelihood of companies operating with no cover or stupid excesses that they could not meet if challenged, they run the risk of going into liquidation or being stopped from trading altogether by the FSA. In either case, the financial services compensation scheme would ultimately pick up the bill, so giving companies the ability to access cover through the scheme would not only help to protect independent financial advisers, but offer greater protection to the general public who use their services. At the moment, businesses might not be covered and their customers would not know it.
Mr. Tyler: I entirely endorse the hon. Lady's point, which has been put very seriously by the gentleman to whom she refers. Does she agree that were this to come about, it would provide a form of prevention that is preferable to the inevitable post-something going wrong cure?
Mrs. Browning: That is exactly right. New legislation is required to enable it to happen. My plea to the Minister, on behalf of small businesses in this sector in my constituency and around the country, is for a piece of legislation—it would surely be very short; a tidying-up exercise if ever there was one—to bring about this necessary protection. An EU directive is pending that might precede any such legislation in this House. It is possible that several of my constituents in this very important sector will go out of business, and I hope that the Government will do all that they can to deal with the problem as quickly as possible.
My second topic is colleges of further education. I am a great fan of FE colleges, but they are often seen as the Cinderella of the education sector in terms of the lack of recognition that they receive for the huge contribution that they make, and could potentially make, towards education, training and skills. We recently received a delegation to the House of Commons from heads of those colleges who are concerned about a whole range of issues, especially their budgets in the forthcoming year. One head told me that although his overall budget is being increased, because of the change in the formula he is likely to lose most of the part that is allocated to child care, which is very important for adult students wanting to come back into education or to increase their learning and skills.
Three FE colleges serve my constituency: East Devon college in Tiverton; the nearby college in Exeter, which some of my constituents attend; and Bicton college of agriculture, which is in the constituency of my neighbour, my hon. Friend the Member for East Devon (Mr. Swire). Although that is a traditional agricultural college, it has expanded its curriculum and remit to cover courses based on the leisure and catering industries, and it now has a whole range over and above the core agricultural syllabus. Those colleges have served my constituency very well.
I am aware, too, of the extremely valuable work done by FE colleges outside my constituency. Most colleges of an average size have links with some 500 firms in their locality. That demonstrates the importance of such links in relation to the skills that are needed by local
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businesses and industry. On a more basic level, last year colleges helped about 0.3 million adults to improve their basic literacy and numeracy skills. The viability of our FE colleges, particularly those in my constituency, is a matter of great importance and interest to me. I have the privilege of being a patron of an FE college foundation—Bournemouth and Poole, which I attended many years ago.
It is worth remembering that, nationally, colleges award more than half of all vocational qualifications to some 500,000 individuals a year. An independent mass survey conducted by the Learning and Skills Council found that 93 per cent. of learners were satisfied with their learning experience in an FE college. It is only in recent years that the LSC has had responsibility for funding, inspection and standards in those colleges. I have recently seen its annual report and accounts for the year 2002–03, which produced some rather interesting figures.
The learning and skills council reported a surplus for 2002–03 of £83 million, yet in the previous year—2001–02—£202 million was clawed back from FE colleges. The budget for FE participation for 16 to 18-year-olds and the 19-plus age group increased by 3.3 per cent., yet the output in colleges greatly exceeded that.
The FE sector delivers growth of some 4.6 per cent. in the number of students that it teaches and trains, but with a 4.5 per cent. cash increase. Given inflation at 2.5 per cent. and a public sector pay settlement, with inflation of some 4 per cent., colleges have a difficult balancing act to perform. They have grown and committed to increase salaries on a real-terms decrease in their budget. They ask me, not unreasonably, why, when money has been clawed back from them and they have had to manage tight budgets, the LSC-reported surplus of £83 million has to revert to the Treasury. Why cannot they reinvest it in post-16 learning, bearing in mind that much money was clawed back from that sector? They feel sore about that.
FE colleges have a track record of managing on tight budgets, without real-terms increases. That has continued year after year, yet the way in which the LSC is managed means that the surplus cannot be ploughed back into FE colleges but must be returned to the Treasury. Given the way in which the LSC manages its budget, it is clear that its increase in spending on 16 to 18-year-olds and those who are 19 and older is only 3.3 per cent. However, it increased its budget for capital standards and other similar responsibilities by 38 per cent. One part of the LSC remit has an increased budget of 38 per cent., whereas the sharp-end money for FE colleges increases by only 3.3 per cent. Colleges have done a good job in achieving growth when they have effectively suffered a cut in their budget.
I draw the matter to the Minister's attention because, now that the LSCs have been in place for a few years, it is time to take another look at the way in which they apportion their budget. They appear to have a lot of money and to have increased their budget not for people learning but for checking up on people learning. That is wrong. I appreciate that LSCs are fairly new and have had to find their way for a year or two, but we should take a closer look at the disparity between the different parts of their budget.
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We should also consider what we want from the FE sector, which can address many problems that we regularly debate in the House. There is no traditional, classroom setting in FE colleges. Courses are relevant to people's everyday lives, whether they are basic numeracy and literacy for adults or specific skills learning for young people who perhaps cannot be contained in a traditional classroom setting. We often debate what we should do with stroppy 14 and 15-year-olds, whom people find difficult to manage in traditional schools.
The FE sector has quite a lot to offer in that regard. In my constituency, the East Devon college is doing an awful lot with children who have been excluded from the traditional classroom setting.
Somehow, however, we treat FE as the poor relation when it comes to education budgets and resources. My plea to the Minister, therefore, is that he ask his colleagues at the Department for Education and Skills to take another look at what the head teachers from FE colleges have been saying to them in the last week or two. It is clear that those head teachers have not been listened to in the past, but they should be listened to. We have not yet maximised the FE sector in this country, and a lot more could be done that we, as Members of Parliament, would find made a great difference to the education of our constituents and to the viability of many of the businesses in our constituencies.
4.50 pm
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