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Mr. Graham Stuart:
My hon. Friend has told us the compelling tale of the start of his business. I can boast
having started mine a little earlier, when I was a student. Like my hon. Friend, I remember the bank envelopes: just the symbol of the bank was enough to start my hands sweating every time I looked at it. Those early years involved very long hours and very tight margins, and the real difficulty of maintaining a business and investing in people.
Is my hon. Friend aware that the three-point rise, whatever it means to Ministers who are so distant from the livelihoods of people running small businesses, constitutes a 16 per cent. increase in corporation tax for the smallest and most entrepreneurial businesses in the country?
Mr. Binley: I did not know that, but I am delighted to accept it from my hon. Friend, because I know of his concern about these matters and the work that he puts into them.
Dr. Rudi Vis (Finchley and Golders Green) (Lab): Are you suggesting that successful large companies—
Mr. Deputy Speaker: Order. I am not suggesting anything. Perhaps the hon. Gentleman would like to rephrase his question.
Dr. Vis: Do you accept, Mr. Deputy Speaker, that what the Gentleman is saying suggests that he is attacking large and successful companies?
Mr. Binley: I am delighted to tell the hon. Gentleman that that is total nonsense. He knows it, I know it and every other Member in the House knows it.
Not once during the first 10 years of either of my businesses did I come near to investing £50,000 in a given year. As I said, the initial equity from our home financed the start-up, and growth thereafter was financed from retained profit. That is another aspect of the creation of small businesses that should be taken into account. However, even with a deliberate policy of controlled growth, we faced serious problems on many occasions: problems caused by customers going bust, by debtors not paying up—not just not in time, but sometimes not at all—and by clients pulling work unexpectedly. Those are all major blows to a new, small, growing, developing business, and they place massive demands on good cash-flow management.
The fourth priority was to make friends with the bank. Had I not done so, the bank would not have been anywhere near as understanding as it was, and my business could have gone to the wall. However, I fear that today many banks are less compassionate. I know people who have tried to start small businesses and have found that aspect much more difficult. I was lucky: I made friends with my bank, which sustained us through some very difficult times. That is the reality of growing a small business. We faced risk, we faced hardship, we faced long hours, we faced sleepless nights—but we grew to a point at which we employed more than 220 people collectively. The Chancellor should be delighted with the work that we have done to service his income. We should be given a medal, but what do we get from him? Tragically, he kicks us where it hurts most, and where it hurts most small businesses—in our ability to manage good cash flow.
What should the Chancellor have taken into account when he made his decisions on this Budget? He should have recognised that small businesses employ more than 12 million people—that is 58 per cent. of the private sector employment figure. He should have recognised that adding that figure to the UK’s medium-sized businesses shows that together they will create more than 2 million jobs in a 10-year cycle. When he looks at UK plc, he will recognise that they will, conversely, shed 1.5 million jobs in the same period. One might have thought that he would see small business creators as his heroes—the people whom he needs to nurture, reward and support—yet he adds to our problems.
Why is that? I think that it is because he does not understand the small business sector, which creates jobs at a fraction of the cost wasted by the Government in their failed attempts to help it to do so. Listen to what my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) says about how small business views small business services run by the Department of Trade and Industry. Look at the cost of business support, in which small business plays a part—a staggering £12 billion per year according to the Richard review of small business and Government. Look at the National Audit Office report of 2006, which was scathing about Government support services, comprising 3,000 schemes that the Government now say that they are going to cut down to 100. I could go on to talk about the lack of skills and poor educational training as regards supporting the workplace.
The truth of the matter is that the Government have not been an outstanding success when it comes to small business, and small business is aware of that fact. Is it any wonder that they are not a greater success, given that I go to the Library and find that so few Labour Members have had business experience? Is it any wonder that they do not understand business generally and small business in particular?
David Taylor: I declare an interest as an accountant to small business in a long period leading up to 1997. What the hon. Gentleman has said is a masterclass in how to take the seed of an idea from a micro-business through to a small and then a medium-sized enterprise. Does he accept, however, that a basic element missing from his remarks is that organisations should not choose a business format for fiscal reasons? Is it not the case that artificial incorporation of small businesses has been a costly mistake, and that it was right for the Chancellor to tackle that abuse?
Mr. Binley: I am delighted to take an intervention from one of those Labour Members who has had business experience, which gives it greater credibility. Nevertheless, he will know that the Chancellor created the situation in the first place. The problem is not that people were taking advantage of a tax loophole—which I do not support, by the way—but that things could have been handled differently, thereby not harming small business in the process.
What has the Chancellor done in the Budget? We all know—he increased the rate of corporation tax for small business from 19 per cent. to 22 per cent. by 2009. He added an extra £820 million to the tax burden that
small businesses bear. He claimed that small business would claw that money back by claiming an annual investment allowance of £50,000 and benefiting from an increase in research and development allowances.
It being Ten o’clock, the debate stood adjourned.
Motion made, and Question put forthwith, pursuant to Standing Order No. 15 (Exempted business),
That, at this day’s sitting, the Business of the House: Northern Ireland (St. Andrews Agreement) (No. 2) Bill Motion made be proceeded with, though opposed, until any hour; and proceedings on the Motion in the name of Mr. Chancellor of the Exchequer relating to Ways and Means Amendment of the Law may continue until midnight.— [Mr. Cawsey.]
Mr. Binley: I was grateful for the chance to get my breath back.
I want to deal with giving with one hand and taking away with the other. I do not believe that the Chancellor took with one hand and gave with the other. Small business simply does not invest the sort of money that allows it to claim back its costs in extra corporation tax every year. The additional taxation that small business pays will not be offset. The Chancellor simply does not understand small business.
Mr. Andrew Love (Edmonton) (Lab/Co-op): Will the hon. Gentleman give way?
Mr. Binley: How can I refuse the hon. Gentleman who accompanied me to Sri Lanka?
Mr. Love: How do I answer that?
Does the hon. Gentleman agree that all the surveys of small businesses show that the most important factor for them is a stable and growing economy? Has not the Chancellor delivered that? Should not the hon. Gentleman therefore say what a good job the Government have done in creating the conditions for small businesses to grow?
Mr. Binley: Of course we all need a stable economy—every business and every family in the land needs that. However, I equally recognise that the first five years of the long period of stable economy were created by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who has now left his seat. We need to pay tribute to him, too.
I have said that the Chancellor does not understand small business. However, he fails to understand an even more important factor: small businesses mainly sustain growth from retained profit. It is as simple as that, and I am glad to see Labour Members nodding. Do not they realise that, by increasing the burden of taxation, they limit sustained growth because they limit the amount of retained profit? It is not difficult. Many hon. Members tell me that the Chancellor is the cleverest man to have held the office, so I would have thought that he understood the point that I have just made—but he does not. In failing to do that, he has harmed many small businesses in this country.
The Government have tried to spin their actions as help for small businesses and the wealth-producing sector. Let us consider the genuine reason for the Chancellor’s decision to increase corporation tax for smaller businesses. The Secretary of State for Trade and Industry let the cat out of the bag last Thursday, when he was questioned on the matter. Do you know what he said? He said that a
“number of people were incorporating and becoming small companies to avoid paying tax and national insurance.”—[ Official Report, 22 March 2007; Vol. 458, c. 933.]
There we have it. It is not about growing small businesses; they have to suffer because one-man operations are using incorporation, as you rightly say, as a loophole.
Mr. Deputy Speaker: Order. The hon. Gentleman must be careful about his phrasing, especially his use of the word “you”.
Mr. Binley: I accept that and thank you for your guidance, Mr. Deputy Speaker.
There we have it. As I said, it is not about growing business, but closing a loophole. Surely it is not beyond the wit of the very cleverest Chancellor of the Exchequer that the Labour party says it has ever had to create a system that solves that problem without harming small business. The truth is that this very clever man did not think about it; he did not think that it was worth his attention. I find that really rather ironic when this is the same Government who use those incorporations to boast about the growth of entrepreneurial activity. He wants it both ways as well, which is not the hallmark of a very clever Chancellor.
When I heard the Budget speech, I was a bit concerned that I might be over party political. I know that that might be difficult to understand, but I was concerned, so I wanted to check out what other people in business might have said about this Budget. I noticed that the hon. Member for Blaydon (Mr. Anderson) said that most business commentators supported the Budget. Well, let us test that theory.
Nick Golding, chief executive officer of the Forum of Private Business said:
“The Chancellor has used smoke and mirrors to disguise the fact that there is nothing in this budget to support small business.”
The Federation of Master Builders said:
“SMEs have enough to worry about with seemingly endless red tape and its disproportionate effect on small firms without having to stump up extra cash to subsidise a tax cut for the big boys.”
The Federation of Small Businesses said:
“After some welcome initiatives for our members he throws it all away with a tax hike aimed at small businesses”.
The British Chambers of Commerce said:
“He has also increased the amount of tax that those covered by the Small Companies Rate will have to pay by over £800 million. This is a substantial rise and will hit those looking to grow their businesses... many of our members will feel let down by today’s budget”.
The best quote of all comes from a gentleman I happen to see in my local public house most Friday evenings—a guy who has run a business for 30 years. What he said to me—I hope that this is parliamentary language, Mr. Deputy Speaker, but I am simply
repeating what he said—is: “He’s a snake oil salesman who makes out he’s doing you a favour when all the time he is covering up his own mistakes”. Should I withdraw that, Mr. Deputy Speaker, or is it acceptable?
What could the Chancellor have done to help small business?
Mr. Love: The hon. Gentleman did not mention the Institute of Directors or its director, Miles Templeman. Can he tell us about his comments on the Budget?
Mr. Binley: The truth is that I did not read the bit to which the hon. Gentleman refers, but after this debate, I will go and look at it. What I do know is that the Institute of Directors complained about the impact of the increase in corporation tax on small businesses.
How could the Chancellor have helped? It is a missed opportunity for a sector that needed his help and understanding, but did not get it. The Chancellor could have reintroduced a new starting band for corporation tax for the first £10,000 of profit, but he did not. He could have introduced a more efficient VAT registration process, but he did not. He could have integrated national insurance with income tax for schedule E taxpayers, but he did not. He could have linked the national minimum wage to the retail prices index, but he did not. He could have given businesses more influence with skills initiatives for small business, but he did not. He could have set aside a percentage of public procurement contracts for small business, but he did not. He simply placed a further £1 billion of extra tax on to businesses next year and more thereafter. “Thank you, Mr. Chancellor, from the business community. You have shown yet again that you simply do not understand the small business sector and, worse still, you have shown that you do not really care about it either.”
Small business feels let down. It is the dynamo of the economy, and it will provide jobs and innovation in the future. What a tragedy that this Chancellor does not understand.
10.10 pm
Mr. Graham Stuart (Beverley and Holderness) (Con): It is a great privilege to follow my hon. Friend the Member for Northampton, South (Mr. Binley), who has given a tour de force on behalf of small businesses that this House needed to hear, because of the impact on small business of this Budget. Too few Labour Members have ever worked in small business or understand small business. They cheered the Budget, which will harm small businesses such as corner shops. My hon. Friend could have mentioned that many post offices around the country will be hit by the increase in tax.
Like my hon. Friend, I plan to be relatively narrow in my focus tonight. I shall focus on the environment, the environmental impact of the Budget and the environmental record of this Chancellor of the Exchequer. I will then go on to discuss some of the local issues in the East Riding of Yorkshire, many of which affect other constituencies.
In 1997, the current Chancellor made his first pre-Budget report, in which he stated that
“nothing is more important than our approach to the environment.”—[ Official Report, 25 November 1997; Vol. 301, c. 779.]
This is the last of the Chancellor’s Budgets, so it is a suitable time to examine his record on the environment. I hope that I will not bore the House too much, but I shall leave hon. Members to judge that.
I am currently a member of the Environmental Audit Committee, which is a cross-party Committee dominated by Labour Members and which examines this Government’s environmental record. The Committee’s report on the pre-Budget report 2000 stated:
“The Committee has found no evidence that the Government has carried out a comprehensive environmental appraisal of its Pre-Budget measures which would even satisfy its own guidance in this area...The Government’s response to us on VAT and energy efficiency is not persuasive nor even credible.”
The Government’s failure on energy efficiency is sad. Those of us who want to see the carbon footprint of this country reduced know that the cheapest, most effective and quickest route to reducing emissions from this country is through energy efficiency.
What is the Chancellor’s record? The next report by the Environmental Audit Committee appeared in 2001. The Committee included many Labour Members, such as the right hon. Member for Oldham, West and Royton (Mr. Meacher), the former Members for Cardiff, Central and for Aberdeen, North, and the hon. Members for Wrexham (Ian Lucas), for Stoke-on-Trent, North (Joan Walley) and for Telford (David Wright). The report stated:
“We regret the fact that the Treasury has retreated from a strategic commitment to environmental tax reform...The Treasury is failing to provide adequate leadership and co-ordination across central Government...We strongly regret the refusal of the Treasury”—
this will be familiar to Select Committee members across Government—
“to provide us with the Spending Review main guidance. This...vividly demonstrates that the Treasury will only share what it does not value or consider important.”
That report came from a Labour-dominated Committee.
Were things improving in 2002? The 2002 Environmental Audit Committee report stated:
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