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28 Mar 2007 : Column 437WH—continued

That does not sound so good.

28 Mar 2007 : Column 438WH

The letter says “by the way” that the taxes and this Government are “a crock of”—well, it goes on further—and ends:

Clearly, that came from a very angry man, but a KPMG survey says that 70 per cent. of business regulation falls on businesses with fewer than10 employees. Calvin Coolidge famously said that the business of America was business. Without business and wealth generation, there is no national health service, no education system, no social security and no society as we know it. My hon. Friend said that we must make heroes and role models of people involved in business, and he was absolutely right. I am rather reassured to see “The Dragons’ Den”, a popular TV programme about entrepreneurs—I was surprised to see the Clerk of my Select Committee presenting a business idea—but not once have I heard anyone on that programme talk about the Government support and help that they have been given. Most people do not turn to Government agencies.

I mention “The Dragons’ Den” because of the excellent Richard report commissioned by my hon. Friend the Member for Hertford and Stortford (Mr. Prisk). I did not appreciate before reading the report a second time that Doug Richard was a dragon from “The Dragons’ Den”. The Richard report identified £12 billion in spending on support for small business. At the very best, there was no credible link between that expenditure and direct correlation. The Minister shakes her head. I have something from Southend that might in many ways support her point rather than mine—it speaks of the excellent work that Southend is doing at a micro level—and I am sure that she can reel off examples of individual cases that are doing very well, but that is an enormous sum. She might reflect that if that money were taken out of the taxation system, remaining with businesses for them to invest in themselves and the community, it might generate more tax revenue going forward.

I am concerned about the general direction of travel. The complexity of having two leaders is discussed a lot. In my patch, in the south-east, regeneration is a big issue. I become desperately concerned when Government bodies talk about their objectives of creating business, because regeneration organisations and councils do not generate business. That attitude pervades Parliament. A Member of Parliament once said to me, “Being an MP is rather like being a small business man, because we are running an office and we employ people.” That MP clearly does not understand business, because it is nothing like running a business. The main part of running a business is making a profit—that is healthy, and is a thing for heroes to do.

10.30 am

Lorely Burt (Solihull) (LD): I begin by congratulating the hon. Member for Northampton, South (Mr. Binley) on securing the debate on this immensely important subject, particularly in the light of yesterday’s debate on the Budget. The hon. Gentleman still runs two businesses. I had several, but was unable to juggle my business and parliamentary interests, so I congratulate him on being able to do that.

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Mr. Binley: I remain simply as chairman of the company that I founded in 1989, not as an executive officer. I hope that is clear.

Lorely Burt: I am grateful to the hon. Gentleman for that enlightenment. My point is that it is important that we have legislators who understand the challenges of business, particularly small business, from a practical standpoint.

The right hon. Member for Oxford, East (Mr. Smith) talked about a local study of small businesses, which was extremely interesting and useful. On average, 80 per cent. of small, local business revenue goes back into the community, so those businesses are absolutely vital to any community.

The right hon. Gentleman also talked about energy. It is regrettable that the Carbon Trust will not do free energy surveys for companies that spend less than £50,000 a year on energy bills. Will the Minister address that in her comments? Given that there are more than 1 million small businesses in Britain, would it not be sensible to give them more downward help with that? Such businesses are keen to play their part in conserving the environment and, of course, keen to cut their energy bills as much as possible.

I have a few things to say about the Budget. I do not have the depth of knowledge and understanding of these matters of some hon. Members who have spoken, but I think that it is extremely regrettable that £1 billion appears to have been taken away from small businesses to woo big businesses. That is the perception of many commentators. The idea is that there is balance and that the additional money that will be taken away in corporation tax will somehow be restored by the research and development tax credit and the new annual investment allowance of £50,000. However, many small businesses invest in people, not equipment.

James Duddridge: During the Budget debate, I picked up the Liberal Democrat policy change about flexible working being extended to people below the age of 18. What assessment has the hon. Lady made of the likely impact of that on business?

Lorely Burt: That is slightly off the subject that I am currently pursuing. I think that the hon. Gentleman refers to my speech on my ten-minute Bill yesterday, when I said that there should be a full impact assessment and a pilot with pre and post-implementation assessment before the right to request flexible working could be extended to all employees. I said that it would be beneficial to extend to the parents of children between the ages of six and 18 the right to request flexible working. If he reads Hansard, he will find that I quoted a number of studies into the beneficial effects that have been observed and measured by the Department of Trade and Industry and other reputable bodies, and other research.

I want to touch on the issue of skills. According to a Federation of Small Businesses survey, 25 per cent. of the people who apply for employment in small businesses have problems with numeracy and literacy. The British Chambers of Commerce commented that 22 pieces of paper have to be completed for an individual to take part in “train to gain”. We have to make education in numeracy and literacy easily accessible for people who do not have time to fill in paperwork.

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The FSB also discovered, in a survey of its members, that 35 per cent. of them do not employ anyone because of the perceived risks. The Government should simplify the work of employers and ensure that they are not burdened with being unpaid tax collectors and distributors of benefits or with other requirements. It is all too complicated. When I ran a business, I had to employ someone to do the wages because I could not cope with the complexity of having to do all that administration, which disproportionately increases the burden on small businesses.

Will the Minister comment on the fact that some management courses are not available to companies of fewer than 10 individuals? Embryonic, growing companies that seek to increase their expertise and competitiveness should be allowed to access that kind of help. I have a shopping list of things that the Government could do to help small businesses. They have done some work, with public procurement, to simplify and standardise the procurement process, but they could do more to encourage local authorities to use the expertise of local companies rather than continue the current, slightly lazy, approach of seeking to do all their business with a small number of larger companies. If local authorities offered smaller contracts to more local companies there would be a much greater benefit to their local areas, because of the benefits that local businesses pass on to the local community, which I mentioned earlier.

The hon. Member for Northampton, South talked about Government support. Some £12 billion is available, but small businesses have to know that it is there. An FSB survey found that 65 per cent. of small businesses were not aware of the R and D tax credit. Why are only incorporated businesses permitted to benefit from that tax credit?

Time is pressing, so I shall rattle through my final points, the first of which relates to the compliance burden. Is it possible to review the regime for compliance, because intervention should be proportionate to the degree of risk and cost? We could shave a lot from the regulations. On inspections, why cannot certificates with a definable period be issued, so that a company knows that it will not be inspected again for a long time? Can the roles of many of the inspectors be merged, because sometimes there is a long line of inspectors trotting along to a small business? Can we change the role of inspectors? Can we move them away from having a tick-box mentality towards a more supportive role that enables companies to comply, rather than one that catches them out when they do not? Can more people who have business experience be involved in undertaking things such as regulatory impact assessments?

The hon. Member for Northampton, South discussed the regulatory burden from Europe and gold-plating, and rightly acknowledged that we are doing this to ourselves, because although regulations are being handed down, we are making them worse. If people with real business experience, rather than Whitehall bureaucrats and lawyers, were undertaking the regulatory impact work, the Government would be in a better position to serve the interests of business.

10.41 am

Mr. Mark Prisk (Hertford and Stortford) (Con): I, too, commend my hon. Friend the Member for Northampton,
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South (Mr. Binley). As he often does, he spoke with passion and knowledge, giving us a comprehensive view of the issues to be addressed. He began by reminding us why small businesses matter. Economically speaking, they generate more than half our national income and employ 58 per cent. of the private work force, and so are crucial to the economy. As several hon. Members have said, they are often the key innovators—the ones who make crucial changes in technology and business development that help the economy move forward.

As the right hon. Member for Oxford, East (Mr. Smith) rightly said, small firms also make a social contribution. I, too, have read the excellent report by the Federation of Small Businesses team from Oxfordshire. I met the people involved last Friday and had the opportunity to examine what they have said. The right hon. Gentleman rightly said that it is often the local, small enterprise that makes a quiet, positive social contribution to the local community, and does so without wishing to seek publicity.

We have heard about how this Government have failed small businesses, and about the rise in the number of regulations. The equivalent of 15 new regulations are being made every working day. They have a disproportionate impact on the smallest employers. The FSB has shown that the burden of complying with red tape costs each small firm seven hours a week.

The tax system has become hideously complex under this Chancellor. Not only are businesses paying more than £50 billion extra, but the charge is made in a punitive way. As my hon. Friend the Member for Ludlow (Mr. Dunne) rightly pointed out, charges such as stamp duty land tax on long leases impact before a business even starts to trade.

While this Budget has welcome news for large companies, it has dismal news for many small businesses. Whatever Ministers may claim, the Chancellor is seeking an extra £820 million by 2009 from small companies. While it is true that the annual investment allowance will provide some support, it will be of no use to millions of small firms. The point is highlighted by a British Chambers of Commerce survey, which showed that 71 per cent. of small firms believed that.

I hope that the Minister will explain why only capital investment is regarded by the Treasury as legitimate. What about innovation? What about the investment in people that was mentioned by the right hon. Member for Oxford, East? Are those things not legitimate? What about shopkeepers, accountants and professional services? All of those small enterprises seek to innovate and change, but they will be completely excluded from any benefit under the allowance in question.

The Government’s attack on the self-employed is not limited to corporation tax. Their plans to limit managed service companies follows on from the clunking fist’s crude attempts with the IR35 legislation. No one is against preventing unreasonable tax evasion, but the crude way in which this Government seek to attack the self-employed damages legitimate enterprises, especially in fields such as IT, health care and professional services.

The Minister is meant to be the Minister for small business, so will she tell us what meetings she has held with the Chancellor in order to speak up for those businesses in this matter? Did she put their case? Did she ensure that their concerns were properly represented? We need to know the answers, as do they. As we have
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heard in this debate, small companies are affected by decisions made across Whitehall.

Let us consider the Department for Environment, Food and Rural Affairs, whose shameful incompetence over the single farm payment has severely damaged thousands of small family farms. Did the Minister for small business challenge DEFRA over its incompetence? Did she meet, question or hold to account that Department?

The Department for Culture, Media and Sport was responsible for a huge rise in bureaucracy when it introduced the Licensing Act 2003. Thousands of small pubs, clubs and bars have been severely affected, but did the Minister for small business meet her colleagues? Did she ask why they were introducing the measures? Did she seek reductions in the bureaucracy?

Let us consider the Department of Trade and Industry itself. It is seeking to oversee the closure of more than 2,000 sub-post offices. Many of those businesses tell us that they would dearly love the opportunity to widen the services that they offer, to be able to compete in the market and to offer new services, but Royal Mail and the Minister’s departmental colleagues are refusing to allow them to do so. Why is that the case? What has the Minister done to stand up for those enterprises? Has she put their case? She must tell us, and them, what she has done to deserve the title of Minister for small business.

Time prevents me from mentioning a number of issues, but I should mention start-ups. Most start-ups occur not in commercial premises but in a home. Home-based businesses offer many advantages, as the right hon. Member for Oxford, East mentioned. Will the Minister tell us what she has done specifically to help home-based businesses? Just as important, will she tell us which issues the Government are considering in this field? Such businesses are great for female entrepreneurs, given the particular opportunity that exists to get the right work-life balance. I should be interested to hear the Minister’s response.

Another part of the Department’s remit is business support, which has been mentioned. Sadly, although much money is spent, Ministers all too often have no idea whether their programmes have any effect. The CBI has stated:

My hon. Friend the Member for Rochford and Southend, East (James Duddridge) mentioned an interim report that was published last month. The work was done by a small business taskforce led by the entrepreneur Doug Richard, who is an American citizen. It found that overall the Government are spending roughly £12 billion on small business support, but that they cannot, or will not, say whether the money is working. Part of the problem is the fact that the system has got out of control. Roughly 3,000 schemes are being run by approximately 2,000 public bodies and their contractors. Just as concerning as that complex maze is the value that we are getting, because at best, a third of the money is disappearing in administration. In some cases, all of the money goes towards paying an individual, and there is no money left to be handed out.

Equally, business confidence in state advisory services is low. The FSB has shown that just 4 per cent. of small
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businesses use Government-funded support, whereas more than half consult people such as accountants and those in the private sector. Given the amount of money spent it is remarkable—although sadly, less surprising—that the Government can have so little to show for it.

As we have heard in this debate, small businesses matter, but sadly—I say this with no enthusiasm—all too often this Government have failed them. Ministers do not understand them, and are taxing and regulating them without recognising that those same enterprises generate the wealth that pays for the schools and hospitals on which the rest of us rely.

Last week’s Budget typifies what is wrong, because the Chancellor is increasing small company taxes and continuing to tie firms up in red tape, while DTI Ministers are silent on these issues. They have shown themselves to be either of no influence in the Government, or so fearful of the clunking fist at the Treasury that they are unwilling to stand up for small businesses. Conservative Members believe that it is time for a fairer deal for small firms. We want a simpler, fairer tax system, and we believe that it is time to reduce the regulatory burden, and that the Government have failed to provide either an effective or an efficient business support system.

In her reply, the Minister must explain herself. She must show us and small businesses what she has done to defend their interests, and why she is supporting the Budget tax hike on more than 1 million small companies.

10.50 am

The Minister for Industry and the Regions (Margaret Hodge): I join other hon. Members in congratulating the hon. Member for Northampton, South (Mr. Binley) on securing this debate, and the way in which he made his contribution in the best tradition of the House.

I have only nine minutes, so I shall deal quickly with some of the issues that were raised. The most important contribution that any Government can make to ensure the well-being and prosperity of the small business sector is to manage the macro-economic environment responsibly and successfully, and that is what we have done. We have had 58 consecutive quarters of growth, and no stop-go, which we experienced under the previous Conservative Government. We have had low inflation and a huge increase of 2.6 million in employment. That good macro-environment has led to success in the small business sector. I could not disagree more with the hon. Member for Hertford and Stortford (Mr. Prisk), who does not represent the small business interest well in pretending that this is an environment in which it cannot prosper. I far preferred the contributions of some of his Back-Bench colleagues who celebrate the success of the small business sector in contributing to UK growth and prosperity.

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