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Westminster Hall
Thursday 4 May 2006
[John Bercow in the Chair]
Enterprise
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Heppell.]
2.30 pm
The Minister for Industry and the Regions (Alun Michael) : May I confess at the start that I am slightly disappointed, Mr. Bercow? This is the first time that I have sat under your chairmanship, and I sincerely trust that it will not be a humbling experience. However, it also means that I will not be able to enjoy your usual vigorous interventions, and I am tempted to say that putting you in the Chair is probably the only way to keep you in order. None the less, a poacher turned gamekeeper can demonstrate characteristics that have not previously been seen, and I am sure that you will be strict. Sincerely, though, I am pleased to speak under your chairmanship for the first time.
Enterprise is a term that covers the formation of new businesses and the expansion of existing businesses, and being seen as enterprising is of great importance if an area is to attract businesses. To take a personal perspective, the issue is important to me because I entered Parliament as a result of the frustration that I felt working with unemployed young people in parts of Cardiff, including parts that are now in my constituency. Those young people had no hope, no future, no inspiration and, therefore, no enterprise, but that situation has been transformed over recent years as a result of the strength of the economy and initiatives such as the new deal. Such initiatives have given young people opportunities and encouragement as a result of a genuine partnership between the Government and business. That underlines the fact that many of society's problems cannot be adequately dealt with without successful businesses, a strong economy or enterprise.
In essence, enterprise is about having a can-do attitude to life, whether people are motivated by the wish to run a business, to be the best at something or to change the world around them for the better. Many successful business people are inspired by all three of those factors, as well as by the motivation of making money, and there are also enterprising people in the public sector and the third sector. There is evidence that we can inspire young people to be entrepreneurial—to have that can-do attitude—and encourage business growth if we create the right environment, and that is certainly the Government's aim.
The UK has great enterprise potential, and a recent World Bank study, for instance, places us in the top 10 of the world's top 30 economies in terms of business-friendly regulation, but that does not mean that we should rest on our laurels. We are committed to one of the world's most ambitious programmes of reducing the burden of regulation on business, and steps to do so are well in hand. We are simplifying our regulatory approach and our enforcement structure, we are
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reducing the number of enforcement bodies from 31 to seven and we are consulting on new measures to ensure that enforcement and penalties strike the right balance. Such issues rightly come up every time I meet representatives from different sectors of industry and business, and they agree with our engagement, but always encourage us to go further.
The other side of the equation is also extremely important. Government procurement is enormously important in encouraging business, which is why we are working to simplify the way in which businesses can get into the business of supplying the Government. The Supply2.gov portal provides an opportunity to reduce the duplication that is such a burden on small businesses and increase opportunities for them to be part of public sector procurement. Sometimes, the problem is that everything is too complicated, and sometimes things have genuinely been too burdensome, but sometimes the problems are a matter of perception. By providing a simpler methodology and making use of the internet and web-based opportunities, we can genuinely open up the possibilities for small businesses.
That is crucial because small businesses represent 99 per cent. of all businesses in the UK and are the backbone of the UK economy. At the beginning of 2004, there were 4.3 million small and medium-sized enterprises, and the majority were small, with fewer than 50 employees. That was up from 4 million in the same period in 2003, so there has been an increase in the number of small businesses, and that in itself reflects a growth in enterprise.
As I said in respect of regulation, we need to strike the right balance. Balance offers opportunities. Women comprise 51 per cent. of the UK population and 46 per cent. of those who are active in the labour market. Nearly 1 million women are self-employed, but only 27 per cent. of all self-employed people are women. The Government recognise that the pace of development needs to accelerate if we are to tap the massive economic potential represented by the development of women's enterprise. Indeed, at Department of Trade and Industry questions earlier today, one of my Back-Bench colleagues made a comparison with the USA, and my hon. Friend the Minister for Women and Equality said that we would have about half a million extra businesses in the UK if we had the same level of entrepreneurship and start-ups among women as the United States of America. However, she also said that things have improved, as not so long ago the figure would have been 750,000 extra businesses, so there has been progress.
Given that we have been missing out on many women's potential contribution to the economy, my right hon. Friend the Secretary of State for Trade and Industry approved the setting up of the taskforce on women's enterprise. It is to be operational in June and its objective is to provide high-profile leadership to accelerate women's enterprise development and promote confidence and a can-do attitude among the many women who have the talents and ability to contribute to the economy. The taskforce will be light on process and heavy on delivery to achieve the greatest impact in the shortest time.
Throughout the UK, more than 250,000 black and ethnic minority enterprises contribute £13 billion a year to the British economy, and many of them are high-quality and growing businesses. Despite so much entrepreneurial activity, however, a great many people
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are still disadvantaged because of their ethnicity or gender or because they live in deprived neighbourhoods, and they need our help. To use a business term, we need to segment our approach to ethnic minority communities, because some have a background in business and more ready family experience of it than others. We need to develop an inclusive approach to encourage those who do not have such a family or community background to go into business.
In December 2004, the Chancellor asked the National Employment Panel what could be done to increase the employment and business growth of ethnic minority and faith groups. The panel, working with the DTI's Ethnic Minority Business Forum, made 10 recommendations at the conclusion of its work. The Chancellor accepted them, and a cross-Whitehall working group is taking them forward as part of a larger taskforce, which is looking at ethnic minority employment issues in general.
A key barrier for black and ethnic minority entrepreneurs is access to finance. That is why the DTI's Small Business Service is undertaking an ethnic minority booster survey as part of the in-depth Bank of England-led Big Survey, which will compare results from five key ethnic minority groups with the experience of white-owned businesses. The evidence from the booster survey will help us to understand the implications of ethnicity, and perhaps some of its diversity, for raising finance and it will inform future action on the issue.
The Small Business Service is committed to working with banks and financial institutions to break down barriers and increase the availability of start-up finance, loans and risk capital. From 1 April, regional development agencies became responsible for community development finance initiatives. Incidentally, they also became responsible for the local delivery of Business Link in their regions, which is a welcome step forward. We want the Business Link brand to be provided consistently in every part of the country, and a regional emphasis on performance can drive that agenda forward. However, on the community development finance initiatives, I am pleased that there are signs that the financial needs of the Muslim community are being recognised by the private sector. The Islamic Bank of Britain has been created and at least one international bank is now advertising sharia-compliant financial products.
I want to include a word about social enterprise. People start a business for many different reasons, as I mentioned earlier. Some are inspired to use a business model to solve what they see as a social or environmental problem. They want to do good as much as they want to make money, and feel that they can do that better by independently generating the finance to run a genuine business than by depending on charitable means or public subscriptions.
The Government have a strategy to support and raise awareness of the strength and contribution of social enterprises. Department of Trade and Industry research on social enterprise last year revealed that there are at least 15,000 social enterprises in the UK employing more than 450,000 people and contributing more than £5 billion a year to gross domestic product. It is difficult to be totally sure about the figures, because there is not
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one model for social enterprise. Some enterprises will be registered as companies, some will be partnerships, and some will be owned almost individually or by associations.
Mr. Mark Prisk (Hertford and Stortford) (Con): I have just been reviewing some of the Government's decisions, and I noticed that the figure given in the document "Match Winners" that the Minister issued to Members a few months ago, which I commend as extremely positive, is £18 billion a year. He has mentioned a figure of £5 billion. Which is correct?
Alun Michael : It depends on whether one is referring to contribution to GDP or turnover. The "Match Winners" publication and the research last year to which I referred are an attempt to bottom out the contribution that is made. At the moment we can say that it is big and has the capacity to become much bigger. I would hesitate to claim that our figures are totally accurate; we are getting towards providing a quantum. I would certainly be happy to give the hon. Gentleman more detail about specific figures and how they compare.
I am grateful to the hon. Gentleman for referring to "Match Winners", because when that publication arrived on my desk I was delighted with it. It profiles several organisations and demonstrates in an inspiring way what can be done. Often that inspiration is needed. When people read the examples in the document, they say to themselves, "Well, I could do that." Enterprise is about having the confidence to do things.
The main point to be made about social enterprise is the extent to which it acts as a powerful motor in the UK economy. Social enterprises are also an important source of jobs. We know that they employ some 750,000 people, of whom about two thirds are employed full-time, so they are serious businesses. About 300,000 people work for social enterprises as volunteers.
The vast majority of social enterprises exist to help particular groups of people, either through employment or by providing goods and services. Sometimes they hit the triple bottom line very effectively. Perhaps I may mention in that context Track 2000 in my constituency. The recycling of materials is one of the positive benefits that it brings about. It employs adults with learning difficulties, who can therefore make a real contribution in a real job. Recycled goods—particularly white goods—sold at a low price make a serious contribution to the needs of young people, for example, who have been homeless and are trying to get back on their feet and establish a new home, perhaps after a period recovering from alcoholism or drug abuse. That one little organisation is not just hitting the triple bottom line. It is scoring hits on four or five economic, social and environmental benefits. There are many more like that in the country. I speak of the one in my constituency with affection, because it has been going for several years and has been remarkably resilient in continuing, but I am sure that other hon. Members could cite examples from their constituencies.
The groups most commonly helped by such enterprises are people with disabilities, young people, the elderly and people on low incomes. Nearly a quarter of the social enterprises that were surveyed also had
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environmental objectives, as well as social objectives. It is difficult, however, to overestimate the impact of enabling people who otherwise would not be part of the economy to participate in it by having jobs, giving them pride and self-worth.
Social enterprises are often particularly well placed to contribute to economic regeneration activities through their community focus. For example, the Shoreditch Trust is using social enterprise to deliver its succession strategy for regeneration. The aim is to ensure revenue streams to support continuing services beyond the new deal for communities' 10-year funding programme. By forming partnerships with market leaders, each venture is ensured access to public sector and commercial expertise. Another example is the Eaga partnership, which delivers an environmental benefit and warmth to poorer families and pensioners throughout the country and is now a large, effective and successful commercial organisation. However, it remains a social enterprise.
I could mention many other such enterprises, but shall refer to just one more now. I shared a platform with someone from Antur Tawe who showed us a photograph of demonstrators outside the local council building. They were demonstrating about a wind farm, but not against it; they were objecting to the local authority's intention to turn it down, because it was a project on which they had been engaged. That community was not having things done to it; it wanted the benefit of environmentally friendly energy and a contribution to the wider community.
Enterprise needs to be seen and understood as a positive and worthwhile activity, and it should be seen in that light, not just by young people thinking about their futures but by people of all ages making career choices, and by society at large, so that those who choose to engage in enterprise are supported and encouraged. However, as John Maynard Keynes once observed,
"The difficulty lies, not in the new ideas, but in escaping the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds."
We talk too easily about enterprise, and business in general, as an activity that stands alone. It does not. Enterprise must be about something—making and selling something, or giving or selling a service. Social enterprise is about improving society or protecting the environment, but doing so commercially. It is vital that enterprise activity should be encouraged in the UK. That encouragement starts with the creation of the right mindset across all communities and at all ages. That means giving people a can-do attitude in all walks of life—not just in connection with wanting to start a business.
We are working hard to tackle the perception of young people, and looking for ways to build an enterprising culture in our next generation of potential entrepreneurs. That is happening in schools, stimulated by the provision of enterprise entitlement funding for pupils at key stage 4. It is also happening outside the classroom, particularly through the enterprise week initiatives. Last year, enterprise week, which promotes enterprise to young people, was held in November. It was two and a half times bigger than it had been the previous year, and 408,000 people from around the UK attended the 2,215 events that were held. I hope that the hon. Member for Hertford and Stortford (Mr. Prisk) will not respond to me in too challenging a way about
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those statistics; I think that they are right, but it might have been 2,216 or even 2,214. Certainly, a very large number of events were held, and a lot of people were involved.
Mr. Prisk : I shall go in another direction, if I may, rather than contesting the details of the statistics. Many of the measures that the Minister has described are worthy and entail good ambitions. However, how much does he personally feel one can teach entrepreneurship? To what extent is it in a person's instinct or nature?
Alun Michael : For many years people thought that enterprise could not be taught, and that either people were born with a capacity for business or they were not. In recent years those ideas have been challenged in business and social enterprise. One might ask, "Why have business schools if you can't teach business skills?" One of the people who challenged the ideas was Lord Young of Dartington, that great social entrepreneur and man of ideas who, among other things, wrote the 1945 Labour party manifesto and inspired Dartington hall, the Open university, the Baby Naming Society and the School for Social Entrepreneurs. I attended the graduation ceremony of the social entrepreneurs who had been through the school's course. It was quite stunning to see people who had not only been inspired to become social entrepreneurs, but been given the skills and professionalism to take that forward.
Two things can be done. One is to provide the skills, so that people do not have to make too many mistakes or fail too many times, although it is generally recognised that a willingness to take risks and therefore fail in business is a prerequisite for long-term success. The second thing is to develop the aspiration. There is a great deal of evidence that engaging young people with the idea that they might set up their own business and making that part of the culture can make a big difference.
The enterprise week events—which, if I am right, will have a significant cumulative effect over the coming years—were run by 722 organisations. That is a significant engagement across the country. They in turn were helped by 3,874 businesses. Enterprise week is the annual focal point of the "Make your mark" campaign, which aims to raise awareness of the value and relevance of developing entrepreneurial capacity and to foster an entrepreneurial culture among young people and the people who influence them. We want people in schools to be talking about enterprise not theoretically, as though it were a branch of economics or business studies, but as something that engages the imagination. That is the hope in developing the enterprise work in schools.
The campaign is co-ordinated by Enterprise Insight, which was founded by the Confederation of British Industry, the British Chambers of Commerce, the Institute of Directors and the Federation of Small Businesses, with the DTI as a partner providing significant and increasing funding to enterprise week. I am delighted that that is the case.
To return to the point that the hon. Member for Hertford and Stortford made, the effect of such interventions can be staggering. The Global Entrepreneurship Monitor found that the proportion of
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adults expecting to found a business increases by more than 100 per cent. if they have experienced enterprise education or enterprise training earlier in life, and that the proportion who actually start businesses increases by more than 75 per cent. That is powerful evidence of the value of saying that we do not have to wait for entrepreneurs to appear and that we can encourage more of them to come forward and more people to have the confidence to think that that might be them. I was therefore particularly heartened to hear that the global chief executive of GEM has said that a cultural change is evident in the UK:
"Since 2002, there does appear to be a step change in attitudes towards entrepreneurship especially among the young".
I am certain that seeing entrepreneurship as something that we all want to encourage, inspire and celebrate will make a long-term difference to the UK economy and to our international competitiveness. I have been inspired when meeting young people in the national awards ceremony and hearing about the work that they did to reach the regional and national final. I also saw one of the early rounds of last year's competition at a venue in Yorkshire, where eight schools were present.
A lot of the work comes down to the basic level of putting the idea in people's minds. The other side of that coin is the big difference in how many 17 to 20-year-olds in various regions think that they might set up their own business. In one group, none thought that they would set up their own business, although with a bit of probing I discovered that one wanted to start a rock band and that another wanted to become a hairdresser. I suggest that both of those involve setting up businesses. However, the culture in another group was different, with three quarters thinking that they might do so. Those young people were not different socially or in terms of educational background, but they were in terms of their environment and self-confidence.
If we can spread to all our young people, to all the different communities that make up our mixed society, to every region and to women as well as to men the idea that they might succeed, our future in an increasingly competitive global market, in which nothing can be taken for granted, will be bright. Therefore, we need entrepreneurship. We need our young people to be successful entrepreneurs and, to be able to compete in the world, we need to offer such inspiration. There is much more that I could say, but I should stop now. I look forward to hearing other contributions to the debate.
2.56 pm
Mr. Mark Prisk (Hertford and Stortford) (Con): I should like to match the Minister—or perhaps not match, otherwise we could be here for the full three hours—in saying that it is a pleasure to see you in the Chair as our steward this afternoon, Mr. Bercow. I suspect that our sitting will not be too rowdy, although I cannot speak for all hon. Members, so we shall see how we do. I hope that if we lack in quantity, we shall at least have a degree of quality and that you will steer us appropriately, Mr. Bercow.
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Many of the sentiments that the Minister expressed are shared on the Opposition Benches. However, I start by saying that the first and overriding objective of enterprise is to generate wealth; that is the principal contribution of enterprise to our society. Enterprise, after all, pays for our schooling, our health care, our salaries as public servants, and the policing and security services that we all desire. One should therefore begin by recognising that business and enterprise are first and foremost about wealth creation. This debate is about the wider role of enterprise. As the Minister highlighted, businesses can help to build and sustain communities in a range of ways; but those social ambitions, to which I shall allude later, however worthy, must come after a recognition of the principal objective of generating wealth.
In 2000 the Government set themselves the target of making this country the best place in which to set up and run one's own business by 2005. That deadline has come and gone, and sadly the target is far from being achieved, although it would be churlish not to recognise that there has been progress in some areas. However, I am afraid that in other areas things are getting worse, not better.
Recent research by Barclays Bank shows that the number of business start-ups fell last year by 13 per cent., which is the largest fall in a decade. This country's start-up rate for small businesses remains half that of the United States of America. That is not the only problem, however. Since 1997, this country's competitiveness ranking in the world has dropped from fourth to 13th. All hon. Members would recognise that we need to reverse that pattern, but I am concerned that the Government are, to a degree, taking the creation of wealth and economic growth for granted. Of course, Governments do not run businesses—the Minister would not claim that. Nor do they create wealth, but they can set the environment in which we can maximise those two processes. That is where I would contend that the Government are failing, and that is not just my view.
I refer the House to a survey published today by the London chamber of commerce, in which 78 per cent. of company directors say that is now harder for a small business to survive than it was in 1997, and 62 per cent. say that starting a new business is more difficult than it was nine years ago. I suspect that the Minister will agree that those figures are rather depressing; one would have hoped for rapid change and progress and not for people in business to have the perception that, for them, things have got worse.
To prosper, business needs clarity in the law and certainty that it can plan ahead, yet the watchword in politics is change, not continuity. Indeed, the Chancellor is forever meddling and tinkering, constantly changing and adjusting the tax system. The result is a hideously complex and overly burdensome system, which in some instances deters the very people whom it is meant to encourage. I shall give a simple example.
The entirely sensible idea of a tax credit to encourage research and development has sadly not produced the benefits that it might have done, and I contend that that is partly because the rules have been changed in every Budget since its inception. The result is that research and
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development spending by United Kingdom businesses has dropped by 3 per cent. since 1997 as a proportion of the gross domestic product.
Alun Michael : The hon. Gentleman referred to spending, but does he not agree that the R and D tax credit has provided £795 million of Government support for small and medium-sized enterprises since its inception, the majority going to small and medium-sized manufacturers?
Mr. Prisk : That money is welcome, but if the total spend by businesses had not fallen, how much more could have been achieved? In that sense, the Government are restricted in their original and worthy intention of encouraging the process because the Treasury constantly changes the rules. I know that the Minister is not a Treasury Minister, but I am sure that he will do his best to challenge the Treasury and to ensure that it understands that when it tinkers with the system it makes people hesitate when trying to work out whether or not to invest over a two or three-year period. It is not what we seek, and I am sure that it is not what the Government intend, but that drop in R and D spend concerns us all.
The Minister referred to the fact that the Government have made a number of promises about the burden of regulation. In some instances, but not all, their actions belie their words. For example, in its latest study on the subject, the British Chambers of Commerce found that the burden of extra regulation since Labour came to power in 1997 had cost business nearly £52 billion. Indeed, when trying to total up the numbers, one finds that nearly 20,000 new regulations have been made since 2001, but that only 27 have been amended or repealed.
The Government are now moving to better regulation, and with those figures one can understand why. However, tinkering around with improved parliamentary procedures under the Legislative and Regulatory Reform Bill will not deal with the fundamental problem. We need a serious and rounded consideration of what drives the tide of regulation. One fundamental driver of regulation is that Whitehall has little understanding or experience of what running a small or medium-sized business is all about. The culture of Whitehall is concerned with output, not with the effect of its actions. New laws and regulations are frequently the first resort, but I suggest that they should be the last resort. Changing the culture of Whitehall—of both Ministers and civil servants—is an ambition that I seek to fulfil in my present role.
Another area that needs change in order to encourage enterprise in society is the Government's support for business. The CBI recently said that about £8 billion was spent every year supporting small business. Much of that sum goes to the agricultural community. Of more concern is the number of Government schemes. Some months ago, when I took on my present job, I decided to check the number. Indeed, it is confirmed in the Red Book—I know that you will be familiar with it, Mr. Bercow—which details some of the trickier issues in its latter pages. It is a staggering figure; approximately 3,000 separate Government support schemes, grants, initiatives, tax reliefs—call them what you will—are currently in operation. That maze of money is expensive to administer and wasteful in practice; and because it is
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complicated and because time is precious to them, small businesses are often deterred from participating in schemes rather than encouraged to proceed. That is a symptom of a Government who often struggle to understand the practical needs of business.
In March, the Chancellor told us that the Government recognised the problem. Hallelujah! But what are they going to do? They want to reduce the number of schemes from 3,000 to no more than 100 by 2010, and they will do it through a marvellous process called deproliferation. Without wishing to rush to the Oxford English Dictionary, I am keen to know what it will mean in practice. I am sure that the Minister will tell us. I want to know whether the change will reflect the needs of business or the diktats of the Treasury. I am thrilled that the Minister is about to enlighten us.
Alun Michael : I was about to offer the hon. Gentleman an opportunity to reflect on what has already been done. When I was at the Department for Environment, Food and Rural Affairs, well over 100 strands of finance were reduced in a process of deproliferation to three strands. It was not easy, because those strands had grown up over several Governments and had decades of background. And the Department of Trade and Industry has brought 100 schemes together into eight. I would be happy to send him details of work that has been successfully accomplished.
Mr. Prisk : I am delighted that the Minister can demonstrate such a record and I hope that he will able to bring it to bear in his current role. To that end, I have some questions for him. Which of the current schemes does he think are underperforming? Which does he feel are highly effective? Which schemes does he intend to keep, and which does he feel should be scrapped? In particular, business will want to know whether the overall amount of money spent in support of business will remain the same, or whether the Government intend to deproliferate the amount of money as well as the number of schemes. If he catches your eye again in this packed debate, Mr. Bercow, it will be super if the Minister enlightens us.
As the debate is about enterprise and its contribution to society, I turn to the social contribution that enterprise can make. The Government have rightly made much of their targets to encourage enterprise among disadvantaged communities and under-represented groups. Given the Minister's experience, he alluded to those matters thoroughly and effectively. Unfortunately, however, the Government have failed to meet some of those targets.
Women and ethnic minorities are still significantly under-represented among the self-employed. Although 4 per cent. of women are now self-employed compared to 3.6 in 2000, the proportion of women among the self-employed dropped from 27.8 per cent. to 26.7 per cent. between 2000 and 2005. The proportion of women entrepreneurs has fallen. The result is that nearly twice as many men as women expect to start a business. The gap between male and female self-employment is widening.
The Minister touched on the question of access to finance, and I am aware that Ministers plan a meeting on financial access for women entrepreneurs. Given the importance of this issue, will the Minister agree to report back to the House on the results of that meeting?
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In his opening remarks, the Minister mentioned the taskforce on women's enterprise and said that it would be light on process, heavy on delivery. What a marvellous phrase; I must use it at some point.
Alun Michael : I am sure you will.
Mr. Prisk : Probably when I am trying to persuade my wife that I have done all the things that I was meant to do. I suspect that I will have to pay a fee for the patent on that remark, given that it is the Minister's.
So the taskforce will be light on process, heavy on delivery. To that end, when can we expect tangible changes that women entrepreneurs will see in the marketplace?
Success at increasing ethnic minority entrepreneurship has also been limited. Again, the Minister touched on that, but glided over it rather professionally. Although the total number of people from ethnic minorities who are self-employed has increased, the population of ethnic minorities has increased at a higher rate, so the proportion of our ethnic minority communities who are self-employed has again fallen. That is a concern. Will the Minister give us his thoughts on why the policies are not succeeding?
The Minister talked about perception, which is crucial. Getting more people to consider working for themselves is a challenge, particularly if the perception of business, entrepreneurship and capitalism is negative. It is fair to say that until recently the broadcast media was either indifferent or rather cynical about the business world. Few programmes dealt with the question of business, and almost none tried to understand what makes business people tick. I vaguely recall—perhaps you can assist me with the title, Mr. Bercow—that Sir John Harvey-Jones used to do a rather good programme about this in the '80s, but there has been little else since. That is why programmes such as "Dragons' Den" on BBC 2 have been immensely helpful. I understand that nearly 3 million people watch that programme, which is about entrepreneurship. It is quite cut and thrust, but it demonstrates—along with "The Apprentice", "Make Me a Million" and other such programmes, which I am obviously far too busy to watch, but try to see when I can—that there is an appetite to learn more about how business works. It also demonstrates that anyone—I stress anyone—can become their own boss.
Countering that positive step is the anti-enterprise language that we hear from too many journalists and some politicians. Those who break the law in business must be brought to book, but some politicians and, sadly, senior Ministers, are far too quick to use terms such as "fat cats" to bash business. Bashing business might produce popular headlines, but it undermines the goal of promoting enterprise. I hope that the Minister will, if the Chancellor is again tempted to make negative remarks, immediately correct him on them. I look forward to that moment perhaps less than he does.
Being positive about business is important, particularly if we are to foster more social enterprises. The Minister and I had a small exchange on that subject. As he pointed out, a social enterprise is a business with
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primarily social objectives. There are over 15,000 such businesses in the UK, which, I have written in my notes, generate approximately £18 billion per annum. Having checked this with the Minister earlier, I will say simply that they deliver many billions of pounds per annum to the economy and employ nearly half a million people.
The Government have made some hopeful and positive steps in fostering more social enterprises. My party and I share that ambition wholeheartedly. We need to encourage more bold resourcefulness—to use the definition of enterprise—in creating opportunities for the young and employed, protecting our environment and renewing our communities. For example, Jamie Oliver has, with his London restaurant, Fifteen, seen 37 graduates, many of whom come from disadvantaged or broken homes, through the process of becoming chefs. That is to be applauded. As a Cornishman, I am delighted that he is taking that idea to Watergate bay in Cornwall, where he hopes to repeat the process. I add my support to that welcome idea.
We must actively encourage the work of people such as Jamie Oliver and of familiar social enterprises such as Cafédirect and The Big Issue, which is, I suppose, a pioneer in this field. I believe that the Government intend to publish an update to their social enterprise policy on 18 May. Perhaps the Minister can confirm that. If it is the case, we very much wish to engage positively with the Government in that area. If we can do so in a way that will help to encourage more social enterprises, I would very much welcome the opportunity to have whatever discussions the right hon. Gentleman thinks appropriate to find areas of bipartisanship that will enable us to push forward that worthy process.
One sector that makes a significant contribution to the economy but is often overlooked is people who run their own businesses or provide services from home. That is different from home working, which involves people working for employers. According to Microsoft, about 8 million people run their own businesses from home. Approximately 2,000 people each week start a new business from home. When one looks at the demographics, one finds that those are the very people whom the Government wish to encourage. They are often parents, older people and women, who find it particularly helpful.
The advantages of home-based businesses are significant and various. Being based at home allows owners to work flexibly, which means that they can much more effectively juggle their many other family commitments such as bringing up young children or caring for elderly relatives. That type of working brings wider benefits to society. People working from home are more likely to spend their money in their local communities, and less likely to commute, thus reducing congestion and CO 2 emissions.
Such working also has an impact on neighbourhood safety. I used to have a home-based business and worked at home, travelling for my clients when I needed to, as technology allowed me to work in that way. That meant that along my road, there was always someone around in the day, as I was one of about three such people in a street of 20 homes. I know from talking to my local police that burglaries happen pre-eminently during the working day. People working from home make it far more difficult for burglars to break into homes with impunity.
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Another benefit to having a home-based enterprise is improved quality of life. In this House, we talk a great deal about the work-life balance, and rightly so. What better solution for many people than to be able to work from home? That is a rarely recognised, hidden benefit. For all those reasons, and as technology develops, it is interesting that the home is now the preferred location from which to start a small business. That is often not recognised in this place or the economy as a whole, but it is time that the Government recognised it, and acted to ensure that home-based businesses are encouraged and supported. Regulatory barriers need to be reduced, and the benefits to individuals and communities that I have mentioned should be recognised and promoted.
Sadly, the Treasury has, in recent years, been the enemy of the home-based business. Measures such as IR35 make it far harder for people to be self-employed. I hope that the Minister will have the courage to recognise the real worth of home-based enterprises and the self-employed, and positively champion their needs to the Treasury and the Chancellor. I have decided to make some progress on this, and will meet representatives of home-based businesses such as the Professional Contractors Group and Shout99, and organisations such as Enterprise Nation, to make sure that the Conservatives fully understand the contribution of that sector. We intend to identify how a future Conservative Government could help.
Let me turn to the role of another group in the community. Local enterprise supports communities in many ways, but that support is best illustrated by the retail sector, particularly small, independent shops. Whether in rural, suburban or, for that matter, urban communities, small shops are often the focal point. They can provide much more than just services. I tend to think of my constituency, where in many communities, whether they be small towns or villages, small shops provide the personal contact that is missing elsewhere. The owner will often know the customer, their family background and their trials and tribulations, and will be able to engage with them. They are therefore able to provide the personal touch that communities, frankly, need more than ever.
The Government have a duty to consider how their actions affect small independent shops. About six weeks or so ago, I called on the Minister's colleague, the Under-Secretary of State for Trade and Industry, the hon. Member for Bradford, South (Mr. Sutcliffe), to try to lead a debate on the future of small shops. Sadly, nothing has happened to date. Many independent businesses are getting frustrated and they feel that they are running out of time.
I have tried to take the lead, organising a summit of the industry's representative bodies to discuss the challenges that face independent retailers. There are many issues. We can consider Sunday trading, supermarkets, local parking schemes, planning and the fact that business crime is not included in police force statistics; they all impinge on small shops.
I was encouraged by the positive wish across the political spectrum to see a set of sensible and balanced policies that encourage consumers to recognise the value of their shops, and encourage small shops to be able to compete better, whether by removing the barriers that Government create locally and nationally or by trying to ensure that large players do not abuse their position. That is why I have made it clear that my party and I
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strongly support a full and comprehensive investigation by the Competition Commission to ensure that we resolve once and for all whether allegations made against the large players in the grocery market, the supermarkets, are correct and, if they are, that they are acted on.
I do not know whether those allegations are correct, but I do know that a restricted inquiry, which considers planning or land banks but not the broader questions of the supply chain, late payments and so on, will satisfy no one. It will not be in the interests of consumers or of shops, large or small. Those are all reasons why the issue needs to move forward, and I hope that the Minister will take back to his colleagues in the Department a genuine wish to seek out the steps that we can take to help small shops.
In recent weeks, following on from that summit, I have tried to do a number of other things. I have been actively involved in supporting the Evening Standard's excellent "Save our Small Shops" campaign. My party and I have endorsed the Friends of the Earth "Shop Local First" campaign. Those campaigns are simply about encouraging people to recognise the value of those shops and to realise that unless they use them, they will lose them.
Enterprise has many roles in society. First and foremost, it generates the wealth that pays for the services on which the rest of us rely, but its values run deeper. Entrepreneurs epitomise one of the reasons why I came into politics and why I am a member of the Conservative party. No matter who someone is, whatever their background, colour, creed, race or gender, if they have the ability, ambition and will to work they can be their own boss and can make their own living in the world. That value applies to all forms of enterprise, whether they are home-based, local shops, the self-employed, large and small enterprises, or social enterprises. Fostering and nurturing that sense of aspiration and enterprise should be the role of Government, not stifling entrepreneurship through undue regulation and an unhealthy aversion to risk.
Making this country the best place in which to set up and run one's own business has so far eluded the Government. I hope that they will recognise their mistakes and change course. If they are prepared to do so, the Conservatives will be the first to commend them.
3.24 pm
Jenny Willott (Cardiff, Central) (LD): I was glad to hear the Minister say that failing and then succeeding often leads to long-term success in enterprise. I hope that the same applies to political careers.
At the risk of stating the obvious, enterprise is a good thing and has an impact on many different sectors in our lives, as mentioned by the Minister and the hon. Member for Hertford and Stortford (Mr. Prisk). It has a huge financial impact on employment, local economies and local societies. Without wealth creation, there is no wealth to spread. Enterprise also introduces invention and innovation, and can make the economy more dynamic, as it introduces new ideas and allows a large proportion of small firms to be innovative.
Small businesses, as has been mentioned, often give job opportunities to people who would not necessarily be able to get jobs elsewhere—women, ethnic minorities
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and those who are disabled. Social enterprises play an important role, and, as we represent neighbouring constituencies, I would like to associate myself with the Minister's comment about Track 2000, which has a successful operation across Cardiff. Such organisations play an important role in the communities where they operate.
I would like to consider three issues in particular. The first is the increasing burden of regulation on businesses, particularly small businesses. The second is the battle for the grocery sector. The third is the social role and impact of big businesses, which we must not overlook.
The Government's role should be to encourage enterprise and to interfere much less in the day-to-day operation of businesses, whether large or small. The burden of regulation placed on businesses increased by £10 billion last year in the UK—a staggering amount—and the total burden estimated by the British Chambers of Commerce is now £50 billion. That clearly has a stifling impact on businesses' ability to grow and prosper.
Regulation is probably the biggest issue for businesses, although it is not all the fault of the UK Government, as 50 per cent. of regulation comes from the European Union. That clearly has an impact. As the Minister will know, the Liberal Democrats have been calling for a while now for the Government to adopt the Dutch approach to deregulation. We were delighted to hear in the recent Budget announcement that they had decided to do that. However, in Holland each Government Department aims to cut regulation by 25 per cent. per annum, and a Minister is specifically responsible for overseeing that. The Department of Trade and Industry plans to cut UK regulation by 1 per cent. by 2010, which is not on the same scale as the Dutch approach. As the burden increased by £10 billion last year, that is a start, but there is clearly a long way to go.
The burden of regulation affects small businesses disproportionately, since they lack the staff and often the financial resources to deal with filling in numerous forms and so on. Over-regulation is inhibiting the competitiveness of a number of small firms in the UK. We would like to see the Government do more to reduce the burden. They should make more use of sunset clauses and post-implementation reviews and possibly take a one-in, one-out approach to legislation. They should set higher targets to reduce regulation and have a Minister take overall responsibility.
Alun Michael : I am grateful to the hon. Lady for espousing a Government policy—the one-in, one-out approach. I am delighted to hear that we will have her support as we continue to take that approach to regulation.
Jenny Willott : I hope that that will go on from here, so that there is a definite one-in, one-out approach. If that is the case, I am certain that both Liberal Democrat and Conservative Members will support that.
We would also like to see the Government take on board the recommendations from the Prime Minister's Better Regulation Task Force report and implement them fully.
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One issue, which the hon. Member for Hertford and Stortford raised earlier, is that, although we recognise that the Government are making an attempt to tackle over-regulation with the Legislative and Regulatory Reform Bill, it goes too far. Some Members have nicknamed it the Abolition of Parliament Bill, which is not inappropriate. In practice, it would move powers to amend legislation in almost any area from Parliament to Ministers. Although everyone agrees with the aims of the exercise, as was shown by the fact that the Bill was passed on Second Reading with no opposition, the Government's proposals have been disproportionate. It would be a shame if the valid intention of deregulation was derailed by the Government's trying to take too much power away from Parliament. I hope that when the Bill returns to the Floor of the House, it is returned to its original intentions and does not overstep the mark so much.
The grocery battle is exercising many people at the moment, as has already been mentioned. I have received letters from a number of keepers of small shops—as I am sure all hon. Members have—including one from the managers of every single Spar store in my constituency, which raises their concerns about the possible increase in Sunday trading hours for supermarkets. They are worried about the impact that that will have on their businesses and their ability to stay afloat.
The power of the supermarkets is having a huge impact not only on other retailers but on small businesses across the country that produce and process food, such as businesses in the agriculture sector, abattoirs, small-scale processors and so on. That is a worrying development. I would like to see a better balance between small and large businesses. It is not in the interest of our communities to allow small retailers, processors and producers to be squeezed out by much larger businesses—the balance between the two needs to be right.
As has already been mentioned, smaller retailers, such as Spar and other convenience stores, play a crucial role in our communities that should not be underestimated. My constituency is a mix of inner-city urban areas and suburban ones, and for those with mobility problems and the elderly, such shops are much easier to get to than out-of-town superstores. They are a very important part of those people's lives. In rural areas, such as the one where my parents live, there are large supermarkets, but they may be an extremely long way away from where people live. Local shops and convenience stores are the heart of the local community, and if they are put out of business, that could have a devastating impact. Because of their economic role, the important social function that they fulfil must be protected.
We would like the Government to introduce more proactive measures to tackle the current situation. Deregulation and lifting the burden of paperwork would be a good start, but as the hon. Member for Hertford and Stortford said, we would like the Competition Commission to investigate all the issues fully. We would like more and better use to be made of the existing set-up at the Office of Fair Trading, which could consider the issues proactively.
In the long-run, the Lib Dems would like an independent ombudsman to be created, to take up complaints confidentially and hold inquiries into market fixing, supermarket supply chains and so on, so
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that smaller producers and retailers do not have to put their neck on the block. There is a lot of evidence that the businesses of people who complain publicly end up having major problems afterwards. Therefore, we would like there to be a confidential route by which people can complain so that investigations can be carried out.
Please do not take my words as being anti-big business. Big businesses play a crucial, although different, role in our societies. Without the jobs, investment, services and products that they provide, our economy would grind to a halt. Large businesses ensure that we have a vibrant and flourishing economy and the Government need to work through all Departments to ensure that those businesses have the well-educated and healthy work force that they need to keep operating.
I represent an inner-city seat and there are a large number of big enterprises in my constituency. They contribute a massive amount to the life of the city, in terms of jobs and financial impact, but also by their charitable and social involvement. Several of them involve their work force in local projects: they work with local charities and make many financial donations to local organisations. There are some very interesting examples of work in local schools. For example, bank employees will spend an hour during their lunch break once a week to help children learn to read in schools.
A big impact can be made by employers who are open-minded and take on board their wider social responsibilities by getting involved in the local community. That is definitely to be encouraged. That is one of the reasons why the Lib Dems were so supportive of the requirement for an operating and financial review of listed companies, which we felt was an example of good regulation. As hon. Members will know, most listed companies already produce this information informally—a lot of companies provide it as part of their commitment to corporate social responsibility—and the proposals were widely welcomed at the time.
Operating and Financial Reviews are a good way to ensure that businesses consider and account for the social, ethical, community and environmental impact of their operations. In an increasingly global economy, it is a question not just of the impact that businesses have in the UK but of their broader impact wherever they operate in the world. We support the reduction of the regulatory burden on business, but that should not be done by chucking out good regulation before it is introduced. It should be done by getting rid of over-regulation and bad regulation.
Alun Michael : The hon. Lady has probably not had the opportunity to see how we are responding to the consultation that took place as a result of the decision to remove the OFR requirement—and thus the duplication and cost involved in that process. We did so precisely for the reasons that she mentions. We want to ensure that there is better narrative reporting, without placing an excessive burden on industry. Many of the things that she wants to encourage are not prevented by the change. It is a question of making sure that best practice is encouraged and that an excessive burden is not placed on business. That idea underlies the
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amendments to the Legislative and Regulatory Reform Bill that will be discussed in another place before it returns to this House.
Jenny Willott : Much of that is indeed the case, but my concern is that companies that already operate best practice, which are very involved and take on their responsibilities, already account for themselves and provide annual reporting. The companies that might have slightly less to boast about might not do so if they are not required to account for their activities,. I am optimistic that something good may come out of the process currently under way.
Governments do not have a great track record in creating wealth directly. The role of the Government should be to ensure competition, encourage corporate social responsibility and create an economic and regulatory climate that enables enterprise to flourish—a supportive role, in other words. Heavy-handed, interfering government can make it difficult for business, especially small business, to create the wealth that is important for the health of our economy and our communities. We need to get rid of swathes of unnecessary regulation, provide support for small businesses to flourish and grow, and enable big businesses to operate in a healthy economic environment with an appropriately skilled work force, so that they can play a full part in the communities in which they are based and are supported in that. I look forward to hearing the Minister's response.
3.39 pm
Alun Michael : I thank the hon. Member for Hertford and Stortford (Mr. Prisk) and my neighbour, the hon. Member for Cardiff, Central (Jenny Willott), for their constructive contributions to the discussion. Some of the things that they said were challenging to the Government, which is entirely right.
I entirely agree with the point about the role of Government with which the hon. Lady concluded her remarks. Our role is to work with business and nurture enterprise, rather than to take a top-down domineering approach in which we assume that we can do everything ourselves. It is clear that we need to create the right environment. As the hon. Gentleman said, we have the ambition to make this country the best place to do business, and we have made considerable progress with that aspiration.
Both hon. Members referred to regulation. I recognise that reducing regulation and cutting down the strands of OFRs are difficult challenges for the Government. In terms of regulation, one must consider the instinct not only of the Government but of Parliament. Whenever a problem appears, the instinct of Members from all parties is to demand that Parliament deal with the issue. We need to be careful of that. I am fond of quoting Gibbon's remark in "Decline and Fall of the Roman Empire":
My philosophy and that of the Government is to consider where we can work with business to find the right response to a problem, and to ask ourselves whether it needs legislation, a new organisation, a new requirement, or whether there are more intelligent ways of dealing with it.
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I can point to a couple of examples from my own experience. The Gangmasters (Licensing) Act 2004 was a response to what all parties agreed was a human tragedy. The practice had existed in many rural communities for many years, but it was brought to public prominence and attention by the events in Morecambe bay. The legislation was designed in conjunction with all sides of industry, and industry representatives now sit on the agency that was created to implement the 2004 Act. It is a good example of co-operative legislation.
Another stunning example concerns something that all Members abhor: internet child pornography—or child abuse, because behind every example of child pornography is an example of actual abuse. It has been acknowledged that we have achieved more in a year or so without legislation than we could have achieved in five years with legislation. The reason is that people in industry, who for a long time said, "It's impossible to regulate this issue effectively," sat down with the Government, child protection agencies, children's charities, the police to find a way of cutting off access to the more horrific sites. I underline the engagement of business in that process.
There are plenty of other examples, but Members from all parties must acknowledge that the temptation is always to add to the burden of regulation as soon as something goes wrong. It may be that a small percentage of business is engaged in an activity that causes problems. Our question is, can we deal with, let us say, the 10 per cent. of people who are doing the wrong thing, without creating a bureaucracy that imposes on others? The challenge to all of us as parliamentarians is to bear that in mind, as well as to tackle the mischief that our constituents bring to our attention.
Mr. Prisk : The Minister mentioned Gibbon; I might mention Henry VIII. Although I entirely accept that the cry of "something must be done" habitually echoes throughout the House, and that Westminster must therefore have a role, the source of regulations is Government, whether UK or European. Given that, will the right hon. Gentleman explain why regulation has risen by more than 50 per cent. annually since 1997?
Alun Michael : The hon. Gentleman seeks to place all responsibility on the Government. Often, the pressure comes from parliamentarians and, behind them, constituents to deal with a particular mischief. I invite him to consider the number of calls for legislation that Members of Parliament make, and the number of early-day motions that call for legislative action. They are far in excess of the amount of regulation and legislation that we have introduced. I do not say that in a partisan way. It is almost human nature, and it is the nature of the environment that has developed in Parliament over many years.
Both hon. Members are right to challenge the Government about their performance in reducing regulation, but all parliamentarians have a collective responsibility to create a different, more engaged environment in which we consider the best ways of dealing with the mischief without providing the burden. That more holistic approach should commend itself to us all.
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In my opening speech I said that the UK has great enterprise potential, but I acknowledged that all is not yet well. In spite of our potential, entrepreneurial activity in the UK remains lower than in some of our G7 competitors, and we have almost 50 per cent. less entrepreneurial activity as a proportion of the population than the United States. I referred to the statistics for women's enterprise. There is a significant challenge in closing that enterprise gap between ourselves and our competitors.
The Government can find figures that point to the good things, and the Opposition can find those that point to the bad things or the failures in what we set out to do. So rather than bandy about figures, we should work together to try to improve performance and target the right improvements. That has been the atmosphere of today's debate: it has had quality, if not quantity. It is in all our interests that the economy succeeds and entrepreneurship grows.
On the positive side, the UK economy is strong. Employment has increased by more than 2.3 million since 1997. Inflation is low and stable, and interest rates remain low by historical standards. In the period since 1997, GDP growth in the UK has been more stable than in any other G7 country. By contrast, between 1979 and 1996, growth in the UK was the most volatile in the G7, with the exception of Canada. We must work together to ensure that we make the most of the stable situation, and ensure that it continues for the long term.
Comparisons are sometimes made between ourselves and our European colleagues—or friends, neighbours or competitors, depending on which relationship one favours most—and it is sometimes suggested that we do not perform to the best of our ability. However, unemployment is below the EU average and redundancies are at an all-time low. The employment rate in France is 63.1 per cent. on 2004 figures, compared with almost 75 per cent. in the UK. The unemployment rate in France is 9.3 per cent. compared with 5.1 per cent. in the UK. While we consider the plusses and minuses, of which there are always some in any comparison, we should bear in mind that overarching strategic position.
Mr. Prisk : I understand the Minister's point, but I wish that our ambition was greater than to be better than the French economy, and more positive than to try to surpass our friends in Italy. They are going through dreadful problems, and they need to wake up and realise that the world does not owe them a living any more than it does us. Does the right hon. Gentleman realise that to aim simply to compare ourselves with our European neighbours is to sell this country short? We should be focused on competing with nations throughout the globe—China, India, America and Japan. Should not that be our ambition?
Alun Michael : The hon. Gentleman might have the generosity to acknowledge that the comparison I made about enterprise activity generally and about women's activity was with the United States of America, because I said that we ought to aspire to reach those levels. In relation to China, India, Korea and a variety of other countries, I have said on several occasions that our ambition must be not to worry or to treat them as people who will undermine our economy because they operate
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at a low pay level and can therefore undercut us, but to compete on the basis of quality. We should recognise that China and India aspire to compete with us on research and development—high output activity—and that should not be seen as a threat. China, with its fourfold growth over 20 years, presents us with an enormous opportunity as well as a challenge. I hope that the hon. Gentleman acknowledges that the Government's level of aspiration is almost boundless, and certainly as high as he would wish.
I turn now to manufacturing. It is sometimes said that it has slid down the order of priorities in this country, but it certainly has not as far as the Government are concerned. It is true that manufacturing has been declining as a percentage of gross domestic product, but it still accounts for one sixth of our national output. It produces more than half of our exports and employs more than 3 million people—that is far from insignificant. Because manufacturing has such an important role in the UK economy, it is important that the Government's manufacturing strategy is monitored and driven forward effectively—those activities will benefit from the interest and engagement of Opposition Members—and that is why we formed the manufacturing forum in December 2004.
The forum predates my current role as the Minister for Industry and the Regions, but, frankly, I have found my engagement with it exciting. It is jointly chaired by Kevin Smith, the chief executive of GKN, and me, and it brings together representatives from industry, the trade unions, academia, regional development agencies and organisations such as the Engineering Employers Federation and the CBI.
In its first year, the forum focused on three priority areas: skills, image and public procurement. It has stimulated new actions, including the development of a national manufacturing skills academy, which will be of enormous importance across a range of manufacturing industries in the future, and the proposal for a manufacturing media centre, which will ensure that accurate information is provided about what is being done by manufacturing businesses. The forum is about to establish a working group to look at barriers to investment, which is also an important issue for manufacturing companies.
On the stimulation of enterprise, this year I asked Enterprise Insight to develop a significant manufacturing element in the "make your mark" campaign. There will be a manufacturing day during enterprise week, and the forum will support this important opportunity effectively to engage young people in modern manufacturing. I have had very positive responses from large businesses such as European Aeronautic Defence and Space Company and from the CBI. The current approach is to find existing initiatives that work with schools and industries throughout the year so that Enterprise Insight can support, expand and showcase them.
However, the enterprise gap between us and our competitors is not our only concern. There are significant differences in the rates of enterprise across and within our own regions, and that is also something that we must tackle. Based on my experience in both regeneration and enterprise development at a local level, I strongly believe that the two are closely related. We cannot have social regeneration without economic
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development, and we cannot have economic development without social regeneration that involves the community and its aspirations.
Therefore, to promote enterprise and jobs in deprived areas, we launched the local enterprise growth initiative, which is jointly supported by the Department of Trade and Industry, the Office of the Deputy Prime Minister and the Treasury. My hon. Friends the Minister for Local Government and the Financial Secretary share my vision that enterprise can be used as a tool to tackle deprivation, as well as being worth while in itself, and the objectives of wealth creation that the hon. Member for Hertford and Stortford rightly underlined in his remarks.
The local enterprise growth initiative, or LEGI, as it is becoming known—I do not do acronyms, but I suspect that that one will stick—will be worth £50 million in 2006–07. It has the principal aim of releasing the economic and productivity potential of our most deprived local areas through enterprise and investment. The funds will be channelled through the economic development and enterprise block in local area agreements and will be linked with the work of local authorities and their partners. The programme provides an opportunity for complementary funding for successful bids that reach across to other policy areas.
The emphasis in developing LEGI has been on quality. We ran a process that engaged private sector partners to choose those bids that appeared to have a real prospect of making transformational change and of stimulating enterprise. The best of the bids were excellent and will make a real difference in some of the lowest performing local economies in the country, but we want to go a step further. We want the money to make a real difference by showing how to achieve real change. If the team in an area that has low enterprise activity failed to produce a high-quality bid, it could be evidence of a double whammy of low economic activity and low-quality strategic thinking or leadership, which could trap a community at the bottom of the pile. Therefore, we will put even more effort into challenging and helping some unsuccessful local teams to lift their game in the next round of LEGI bids, and we will do that with a great sense of urgency.
The Government are serious about real change being effected in the most deprived areas, and about the part that enterprise can play in that. LEGI has the potential to be a vital element in regeneration and increasing business activity, but we want to avoid duplication and to pursue simplification—or de-proliferation, as the hon. Gentleman rightly termed it earlier. There are too many strands of business support duplicating each other's work, so we do not want LEGI to make matters worse. There must be one front door on which people knock to get help in starting or growing a business. Business Link, with the support of the regional development agency, must be at the heart of local initiatives.
The importance of enterprise should not be underestimated. Whether it is the formation of new businesses, the expansion of existing ones or attracting businesses to an area, enterprise is a key driver of the economy. I referred to the fact that small and medium-sized enterprises employ more than 50 per cent. of our private-sector work force. They account for more than £1 trillion of private-sector turnover each year. But of
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course it is the potential for growth of those businesses, as well as replication, that is essential for long-term success.
Mr. Prisk : I listened with interest to the information about the initiative to which the Minister referred. When does its funding stop? Is it next April or the April afterwards?
Alun Michael : No, we are planning a three-year programme of funding—there will be continuity in it.
LEGI is also an opportunity for regional development agencies and local government to focus on the areas that perform least well in enterprise activity to see how they can be lifted. The lessons that come out of LEGI will be significant for local authorities' civic leadership in the economy and for regional development as well as for business partners. As with the work on encouraging enterprise activity and ambition among young people, there will be lessons learned that we will expect to roll out much more widely as time goes on.
Both hon. Members made specific comments that were quite significant. The hon. Gentleman underlined the importance of enterprise in generating wealth, and I agree with him entirely. Indeed, my first point was that without economic prosperity and the creation of wealth, there will not be jobs, and without jobs there will not be local prosperity. There is no difference between us on that.
The hon. Gentleman also said that many company directors believe that it is harder to run a business. I suspect that that is true. It is a tough climate for business, and that is caused not just by Government regulation but by the amount of competition faced by businesses of all sizes. We are going through a period of intense change and major global competition, to which he referred. I believe that the Government have done more than he acknowledged to strip away regulation and relieve regulatory burdens. We have exempted nearly 900,000 companies from audit requirements on their accounts by raising the annual turnover threshold from £1 million to £5.6 million. That saves companies at least £94 million a year. We have provided the highest VAT threshold in Europe: from 1 April 2006, firms with a turnover of £61,000 or less do not have to register for or pay VAT. We have reduced payroll burdens for 1.2 million businesses, and there has been £300 million-worth of savings for businesses through reforms to tax administration in the 2005 pre-Budget report.
Efforts are being made to speed up the planning system. The introduction of financial incentives for SMEs to file payroll returns online has benefits for the Government and businesses. A new, simplified self-assessment return for those whose affairs are simple—for example, self-employed people with a turnover of less than £15,000 as well as employees and pensioners—is being developed. Forty pieces of out-of-date excise duty legislation were withdrawn or simplified on 1 March 2006. It is important to provide clearer information for businesses on regulatory changes and we have set up the www.businesslink.gov.uk website to help SMEs to find out how regulations apply to them
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and to engage with businesses and, through that, to link with the Supply2.gov.uk portal to simplify the opportunities for SMEs.
I am not suggesting that everything in the garden is wonderful. There is a lot of work to do and both hon. Members referred to some of the things that we need to do, but I hope that it is clear from that list that significant developments have continued to remove burdens on small businesses. We will certainly continue to work on de-proliferation and I am glad that we shall have the support of the hon. Member for Hertford and Stortford when trying to deal with the many strands of support that have been built up by successive Governments. I know from my experience at DEFRA that it is not easy to tackle those issues, but it is worth trying.
The hon. Gentleman asked which current schemes are under-performing and which should be scrapped, but he missed out those that should be combined. In some cases it would be possible to combine a number of different strands in a broader strand so that people can receive a more flexible response. In the longer term, there will be enlightenment on some of the issues that he raised as a result of the comprehensive spending review, which is considering how to lighten the burden of regulation as well as looking at where the benefits are greatest.
I am happy to respond positively to the hon. Gentleman's request to keep the House informed about the progress of the women's enterprise taskforce. I know that my hon. Friend the Minister for Women and Equality will be enthusiastic about doing so. The hon. Gentleman referred to failures; that is a matter of deciding whether the glass is half full or half empty. Almost 1 million women are self-employed, which is up 10 per cent. over the past four years. Of newly self-employed people, 36 per cent. are women compared with 27 per cent. of the currently self-employed. There is a particularly high increase in female entrepreneurial activity in the east of England, Scotland and the south-west, and we must look at why that is happening in some regions and not all. It is difficult to provide figures, but many women seem to be taking leadership roles in social enterprises. That may be due to a more value-driven approach and the link between that and their approach to family and community. That contribution can be valuable.
Over the past year I have found it inspiring that many business leaders are willing to try to inspire others. I have referred to Kevin Smith of GKN, Duncan Mitchell of Cisco and other senior people who have engaged with the information age partnership. It is essential that that area grows if we are to achieve the levels of productivity that all hon. Members in the Chamber aspire to. Roger Putnam of Ford is putting in time to improve the quality and reputation of the supply side of the motor industry. Those businesses and others have worked with us on the company law reform agenda and the "think small first" philosophy which is built into that.
Business leaders in the construction industry have been working on the TrustMark scheme to try to provide assurance for consumers as well as a level playing field of a higher quality within the industry. We have also seen business leadership among the chairs of the regional development agencies.
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The hon. Gentleman referred to home as the place in which to start a business. He is right, but that should be balanced with the mutual stimulus and shared learning that is available when individuals who are starting up in business work together in nursery facilities.
The hon. Gentleman also referred to the effect of crime on the retail industry. I sponsored the shopfront security group in the House of Commons when we tried to persuade a Conservative Government to take the issue seriously, and I welcome his comments. There are schemes such as the crime reduction partnership under the Crime and Disorder Act 1998 and police community support officers, who often engage with retail businesses, particularly on estates, and in smaller shopping areas and smaller towns. The Clean Neighbourhoods and Environment Act 2005 was another of my babies and provides support for local authorities in partnership with business. I can also claim parentage of antisocial behaviour orders. All are important in helping business in relation to the crime that is a challenge to them. It was interesting that that was a topic, with healthy eating, at the Retail Consortium's parliamentary event which I attended in the House only last week.
Mr. Prisk : Given the Minister's interest and experience in the effect of crime on businesses, does he believe that it is wrong for police authorities and forces not to include business crime in their statistics? Inevitably, the targets that they are chasing exclude that, which will make business crime a secondary matter. Does he agree that many businesses would gain
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confidence, given what they pay to those authorities in taxes, to see business crime given the same level of priority and made a target?
Alun Michael : I am not going to enter into the Home Office's area of responsibility in measuring crime. However, I know that my colleagues in the Home Office have placed great emphasis on tackling crime in our high streets and its impact on businesses. That is why it was such an interesting topic of conversation. If the hon. Gentleman had heard the contribution from the assistant commissioner last week he would have had no doubt that it is high on the agenda of the Metropolitan police to work in partnership with industry and the wider community to reduce the impact of crime on the retail trade.
We have had an interesting and constructive debate and I hope that I have managed to address at least some of the issues that were raised by hon. Members. I will examine the record to see whether I left out anything and will, as I promised, provide information to all hon. Members present on the couple of points that I could not answer.
The hon. Member for Hertford and Stortford offered to commend the Government when we get things right. I welcome that balanced approach, which will keep him very busy.
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