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Mrs. Claire Curtis-Thomas (Crosby) (Lab): I welcome many of the measures in this Budget, but my contribution today will centre on small and medium-sized enterprises.
 
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I welcome the Government's announcement that SMEs' access to public sector procurement will be improved, as those businesses improve competition, drive innovation and therefore offer better value for money in the delivery of public services. I am also delighted that the Government intend to introduce the mandatory requirement that at least 2.5 per cent. of public sector extramural research and development will be devoted to SMEs. Many years ago, the Government introduced the research and development tax credit. That focused specifically on SMEs, and was subsequently extended to include larger businesses.

A number of derogatory remarks have been made today about the Small Business Service. I neither echo nor understand them. They do not match my experience of the SBS which, together with the regional development agencies and the Office of Government Commerce, will roll out nationwide the measures to improve SMEs' ability to tender effectively for public sector contracts. That roll-out will build on successful pilot projects in the west midlands and Haringey, which involved more than 1,600 businesses and increased the number of SMEs competing for public sector projects. They also raised the success rate of SMEs, including those run by people from the ethnic minorities.

I am sure that I am not the only hon. Member who was delighted to learn that 1,000 SMEs start up every day, and that the viability of such companies has improved considerably under this Government.

I am delighted that in the summer the OGC and the SBS will launch a national portal for low-value contracts, making it easier for SMEs to compete for business. I was especially pleased to learn that it is the Government's intention to improve the coverage and quality of information available on SMEs' participation and procurement opportunities through an annual review that will explore how to extend further those contracts to SMEs.

I want to touch briefly on retentions and what the Government have done to tackle a problem that faces many in the construction industry. For Members who do not know what retentions are, I will briefly explain. Historically, contracts in the construction industry were let with a retentions clause, whereby a sum of money is retained by the company or business, when a job is completed, until it is satisfied that there are no problems with the work. The contracting company can sometimes hold on to that money for years. There may be nothing wrong with the work undertaken, but the company letting the contract makes the contractor wait until the entire job is complete. If the project is small, such as a small office block, a small electrical company might have to wait for a year until the construction of the entire block is complete. If the construction is on a larger scale, for example a new technology park, the company might have to wait for years. Typically, retentions count for between 5 and 10 per cent. of a company's turnover and represent a significant loss of opportunity.

Retentions are an old-fashioned financial instrument that should have no place in today's construction industry. Their continued use inflates contract costs and can lead to some SMEs going into receivership, because
 
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the company that awarded the contract in the first place itself goes bust, leaving the contractor waiting in line for crumbs from the bankruptcy court.

The situation facing SMEs has not gone unnoticed by the Government, however, and some Departments have made great efforts to phase out retention clauses, especially the Department of Health, but much more remains to be done. My involvement in the matter is through the Electrical Contractors Association, whose representatives came to see me several years ago to talk about the problems their members were experiencing. I went to see my right hon. Friend the Chief Secretary, then the Financial Secretary, and the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Edinburgh, South (Nigel Griffiths), who had responsibility for construction and small business. Both Ministers spent an inordinate amount of time trying to address the problem, which is endemic in the construction industry. They established a working group that involves not only representatives from various Departments but also employers and the trade associations representing them. Thus far, significant progress has been made. A huge number of public contracts are awarded every year and small businesses would dearly like to be involved in them, but while the retentions problem remains their active involvement is seriously curtailed.

The measures introduced in the Budget substantially assist those businesses, in which I have an immense interest, but I ask my hon. Friends on the Front Bench to reconsider the retentions problem and to do more to ensure that small businesses, which we have grown and developed under a Labour Government, continue to flourish without that onerous financial burden.

4.03 pm

Mr. Kenneth Clarke (Rushcliffe) (Con): I draw the attention of the House to the business interests that I have listed in the Register of Members' Interests.

There was one measure that attracted the broad agreement of the majority of the House, in all three parties, when the Chancellor delivered his speech last week. A majority of all three parties fervently hoped that it would be the last Budget delivered by the present Chancellor of the Exchequer. In my case, that was not motivated by any animus. Personally, I get on well with the Chancellor and concede that he is by no means the worst Chancellor of the Exchequer that I have encountered in my political career, but there is a little animus among the Blairite element on the Labour Benches. Indeed, I think that the Prime Minister would wish to post the Chancellor as high commissioner to the Falkland Islands, if he could get him further away than the Chief Secretary—he would certainly like to see him away from the Treasury.

It may be that this was a valedictory Budget, and we have just heard a valedictory speech from my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard), who was a delightful and effective colleague. I am sorry to see her departing from our midst so shortly after she arrived here.

The Chancellor delivered his valedictory Budget in storming style, but he did not have a very good stage upon which to go out. He was in the unfortunate position of having to deliver a pre-election Budget,
 
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which I know from my experience can give rise to some unreal expectations on the part of one's colleagues and requires a certain amount of courage to be summoned up to bear in mind the national interest and to try to work out where one is going.

At the moment the Labour party is in a considerable panic, quite rightly, about the course of its election campaign, and it fondly imagined that something could be pulled out of the hat in order to buy them sufficient votes to win. The Chancellor did acknowledge that he could not afford that, and he produced a stirring performance, but one that will have no effect whatever on the course of the forthcoming election.

The Chancellor produced a smattering of electoral bribes that he managed to finance by an accounting device in order to have the minimum effect on the country's fiscal stance. I shall not speak about the bribes themselves, but bribes they plainly were, guided by focus groups towards parts of the electorate that are thought to be crucial to the forthcoming campaign.

The pensioners' bribe has been referred to, and it is not the first that they have received. Many hon. Members collect their winter fuel payment, which I regard as a small tax rebate. I do not quite qualify for the £200, supposedly off the council tax, but many hon. Members will collect it, and, I am glad to say, so will many of my constituents. I do not think that that will impress many pensioners; indeed, I do not think that they are impressed. They are being treated like 18th century electors, being offered little bits of cash in order to induce them to vote gratefully for a munificent Chancellor. I would advise them to follow the practice of all the more sensible 18th century electors, which is to accept the bribe but not to allow it to influence their judgment. It is no substitute whatever for serious reform of the pension system, which is in a critical state in this country, and if that is the approach that the Government are taking to the position of pensioners at the moment, I welcome the fact that we will be able, I hope, under a new Government, to have a serious look at pensions in the light of Adair Turner's report as early as possible in the next Parliament.

Mr. Salmond: How does the Chancellor's £200 bribe differ in principle from the Conservative party's £500 bribe to pensioners on council tax, except, of course, that the Conservative party's bribe will not apply in Scotland?

Mr. Clarke: Ours will recur and be a permanent reduction from the council tax; the Chancellor's is a one-off in the pre-election moment with no guarantee of its recurring.

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