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Mr. Prisk: It is a pleasure to follow my right hon. Friend the Member for Wokingham (Mr. Redwood), who, like every other speaker in the debate, supported new clause 1. I trust that the Minister will make it a full house and I look forward to his contribution on that basis.
New clause 1 is an eminently sensible provision. I do not often associate the Prime Minister with being eminently sensible, but it follows his original idea last year of a one-in, one-out approach to regulation, to which hon. Members have referred.
The background to the new clause is crucial. The administrative costs of the regulatory burden are especially important to the smaller employer. All hon. Members recognise that, for a smaller business, the costs are disproportionate to any perceived benefits. Conservative Members support the principle of the Bill, which aims to get the right balance between work and families. That is not questioned. The debate is about how to strike the balance and why the Government's original promise that they would seek to cover the administrative costs aspect of the deal has changed. That is at the heart of the new clause.
The administrative burden is already becoming difficult for small businesses to bear. The Federation of Small Businesses has highlighted the fact that each small business has to put aside an average of 28 hours a month to comply with Government information requirements and regulations. Given that, according to Government figureswe shall trust them for the purpose of this exercisethere are some 4 million small businesses, that is bad not only for the individual enterprise but for the productivity of the United Kingdom's economy. It cannot be right that so much time is spent on dealing with Government requirements and not on generating wealth.
Let us imagine what those businesses could achieve without losing that time. They could spend it generating prosperity and especially in employing new people or to
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generate new products and services. As the hon. Member for Angus (Mr. Weir) highlighted, that time is also lost to the families of those who run small businesses. If we are to be fair and balanced in ensuring that we help families, we cannot ignore the rights of the self-employed mother and father.
The payroll burden is of especial concern to smaller businesses. Other hon. Members dealt with the administrative burden, so I shall not allude to it in detail. However, there is also the difficulty in a small family business of employers, who may know their staff well, having to ask the difficult questions about relationships that are essential if they are to run a payroll system properly. That is often ignored and overlooked. My hon. Friend the Member for Peterborough (Mr. Jackson) eloquently highlighted that we must not forget that those who run small businesses have families. That is a key point.
Let us consider new clause 1 and why I support it. I hope that the Minister can provide some thorough replies to my questions. First, I believe that the burden should be lifted on a quid pro quo basis. Is it no longer the principle that one regulation should be removed for another? The new clause would achieve that and I am therefore interested in the Minister's reply to that question.
Secondly, the point has been made, especially by the hon. Member for North Norfolk (Norman Lamb), about cash flow. As politicians, we often assume that the most important monetary aspect of a business is profit, and we are wrong. The most important aspect for small businesses is often cash flow. If cash flow is negative, sooner or later, there will be no small business. That point is often forgotten, so I want to stress it. A direct payment scheme will free up significant cash flow in small businesses and may be the one thing that prevents them from going out of business. I hope that the Minister will bear that in mind.
Thirdly, let us consider the controversy about costs. To refresh my memory, I read what the Minister told us in Committee. For the benefit of hon. Members who did not serve on the Committee, I shall quote him. He said:
"I said that the costs of the direct payment scheme were estimated to be up to £75 million in set-up costs and £50 million in annual running costs . . . the benefits for employers were estimated to be around £1 million per year, of which only £400,000 would accrue to small employers."[Official Report, Standing Committee A, 13 December 2005; c. 52.]
Does the Minister really mean that small businesses can do something for £400,000 that costs the Government £50 million annually? Where does the figure of £38 million come from? What is the difference between that and the figure of £50 million?
That reaffirms my concern because of the difference between an apparent benefit of £1 million to employers, who can clearly run the scheme for that sum, and £50 million, which the Government have to spend on running it instead. Even if we put aside the £75 million of set-up costs, we are still considering an extraordinary difference in efficiency. As my right hon. Friend the Member for Wokingham said, that tells us an
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enormous amount about either the extraordinary efficiency of the private sector and why we should support it or the extraordinary inefficiency of the Government. Or perhaps it tells us something else: that the Government do not wish to engage in the process, are embarrassed by the promise that they appear to have made and therefore accentuate a difference that is not quite what the Minister claims.
I am interested in the Minister's explanation of the illogic of a position whereby one organisation can spend £50 million on administering something that many other organisations, which, one would assume, would be a little less efficient because there are many of them, can do for only £1 million. That is illogical and I hope that the Minister can enlighten us about that in his usual fashion.
My final point, which is of especial concern to business representatives, is to ask why the Government have reneged on what businesses regard as a promise. In all my talks with various business organisationsthe Forum of Private Business, the Federation of Small Businesses or the CBIthey were crystal clear months ago about the fact that they had an agreement with the Government. Their phraseology was that the Bill was "part of a package" and they were willing to support it on that basis. They have changed their position because it appears that the package is no longer available. They perceive that the Government have reneged on it.
We have seen what was written in the Labour party manifesto. Business has been given some assurances and now we find a different settlement. When the Minister responds, will he tell us exactly what he or the Secretary of State agreed with business representatives, especially the CBI, so that we can better understand why they feel so aggrieved?
Fairness is at the heart of the new clause, which tries to ensure that we can allow families who work for small businesses to have a sensible balance in their lives, with the quid pro quo of ensuring that the smallest businesses that are run by people who have families can have some of the burden lifted. People in business believed that the Government were making that promise. The purpose of the new clause is to fulfil it.
I thank the hon. Member for North Norfolk (Norman Lamb) for tabling new clause 1. It was not unexpected, given the extent to which we debated the issue in Committee, and there are strong views among the Opposition parties, who have come together to support the new clause and clearly wanted to pursue the matter further. Those views were emphasised by the CBI, which wrote to my right hon. Friend the Secretary of State just before Christmas withdrawing its support for the Bill because the direct payment issue had not been resolved to its satisfaction. Understandably, a number of Opposition Members spoke in support of the new clause today, but in raising the issue of regulation in general, as the right hon. Member for Wokingham (Mr. Redwood) did, they lost sight of the balance that we are trying to achieve in the Bill and of the issue of direct payment. We consulted fully on the Bill, and sought the opinions of a range of organisations in the
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business community and the voluntary sector, as well as of stakeholders on whom the measure will impact. In fact, the Government were congratulated on the consultation and on the time that we took before introducing the Bill.
Norman Lamb: Does the Minister accept that, as a result of the consultation the employers' representatives to whom the Government talked supported our approach? The paper by Her Majesty's Revenue and Customs says:
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