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28 Mar 2007 : Column 443WH—continued

To take a few figures, we have 600,000 more small businesses than 10 years ago, which is a cause for celebration for the many people who work hard in those businesses. The number of people working in small businesses has reached close to 1 million, and that, too, should be celebrated. Of those working in the private sector, 59 per cent. are employed in small and medium-sized enterprises. That is a cause for celebration. The SME sector now contributes as much as the large-business sector to UK
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output: 50 per cent. of gross value added and 51 per cent. in turnover. Start-ups have exceeded closures for 11 years running, which is good, and survival rates are much higher today than a decade ago. Small firms’ productivity growth has exceeded that of large firms over the past 10 years, and that is a cause for celebration. I agree with the hon. Member for Northampton, South that new businesses are the greatest single source of new jobs.

Unlike the hon. Member for Hertford and Stortford, I celebrate and congratulate the small business sector, and work with it to build on that good record rather than decrying it. I recognise that SMEs are the vital engine of growth in the UK economy; I recognise that they drive innovation; I recognise that they help to drive productivity growth by providing a competitive spur; and I recognise that they are the greatest single source of jobs.

I very much welcome the contribution of my right hon. Friend the Member for Oxford, East (Mr. Smith). I had the pleasure of meeting Sandy Lovatt at the Federation of Small Businesses annual conference and listened to his findings. Particularly important was the role that he recognises small businesses can make in their local community by contributing to employment growth and to economic growth through purchasing and selling within their local community.

The hon. Member for Solihull (Lorely Burt) referred to the Carbon Trust. In an interesting survey in the report, “The Economic Ecology of Small Businesses in Oxfordshire”, one of the respondents said of the Carbon Trust that they regarded it as

Special mention was made of its website and the respondent said that in the future he intends to take

That demonstrates the importance of the matter.

Turning to the Budget, I want to hit the nail on the head. Let me be clear again—we were trying to be clear last night—about what the Budget is about. We hear the same tedious narrative from the Opposition, full of misinformation and mistakes, which is not worthy of a responsible Opposition—an Opposition who, when they were in government, caused the two worst recessions since the second world war, allowed inflation to run at 10 per cent., let interest rates go up to 15 per cent. and oversaw an economy in which unemployment hit 1.3 million, and 1.5 million people had their lives destroyed by negative equity. That is not how we will run our Budget. The most important imperative in the Budget was to maintain a strong macro-economic environment and continued stability so that we could have continued growth. We will not return to the stop-go of the years of Tory mismanagement, which is why the Chancellor deliberately crafted his proposals in a fiscally neutral way. Let us see what those proposals achieve for the SME community.

There are 4.3 million SMEs, of which 3.4 million operate as sole traders. Those sole traders will not be affected by the changes in corporation tax for SMEs, but they will benefit from the 2p cut in income tax and will be better off. Two thirds of FSB members are self-employed businesses, and they will be better off. For small businesses, we have responded to exactly what the CBI and the FSB have told us and what we ourselves
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and I myself believe to be true: that Government support and fiscal policy should concentrate on supporting the growth of the SME sector. That is why, in a fiscally neutral way, we have transferred the resources to increase the tax credit for research and development to 175 per cent. for small businesses; that is why we introduced the annual investment allowance that will support that growth tax free; and that is why—the hon. Member for Hertford and Stortford chose not to mention this—we introduced the specific initiative asked for by the FSB to reduce business rate relief on empty industrial property.

My right hon. Friend the Secretary of State for Trade and Industry said last night that an SME must increase its investment only by £2,300 in 2009-10 to reduce its tax liability by £500 under the new regime. That will offset the tax increase through investment. Ninety per cent. of tax-paying companies would pay less tax if they invested less than a quarter of their profits back into the business, which is what we want them to do.

Mr. Prisk: Will the Minister give way?

Margaret Hodge: No. I am not interested, and I do not have time. I have heard the same speech from the hon. Gentleman three times in the past five days.

Mr. Martin Caton (in the Chair): Order. I have allowed a certain laxity to the hon. Gentleman who has made comments from a sedentary position, but I think the Minister should be allowed to finish now.

Margaret Hodge: I want to deal with the Opposition’s absurd report on regulation. First, the research comes from a Tory activist working from his flat—the same Tory hopeful who identified the £21 billion cuts in public expenditure that the Leader of the Opposition is now denying he supports. Those cuts included, interestingly, the abolition of tax credit for films, which would have hit manufacturing hard. The hon. Gentleman asked me what I do for the Department for Culture, Media and Sport. I certainly do not support doing away with that tax credit.

That report demonstrates yet again the Opposition’s complete inability to face in the same direction and display consistency for more than two minutes at a time. They criticise publicly funded support schemes by saying that on one hand we spend too much on admin, and on the other hand we should spend more on admin to ensure that we properly evaluate schemes. Those statements are wrong. First, we do not spend too much on administration—less than 10 per cent. through the regional development agencies—and we evaluate schemes because our entire policy is built on what works.

Of course we want to rationalise. We were there a year ago, and we knew that we needed to reduce from 3,000 schemes, which is why the Department of Trade and Industry has reduced from 100 to 10—

Mr. Martin Caton (in the Chair): Order. We must now move on to the next debate.

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Western Balkans

11 am

Mr. John Randall (Uxbridge) (Con): I am very grateful to Mr. Speaker for the opportunity to address once more the situation in the western Balkans. It is almost exactly eight years since NATO decided to intervene in the region with the bombardment of Kosovo, and of Yugoslavia, as it was then. We are entering a crucial period, with the Ahtisaari plan being put before the United Nations shortly. There is a meeting of the contact group today in London and, later this week, European Union Ministers will meet in Bremen, where Kosovo will be high on the agenda.

The Minister who is present visited the area recently, about a week before I and a cross-party delegation, sponsored by the Inter-Parliamentary Union, visited. All in the region very much welcomed the Minister’s visit. From what I heard, not only was it welcome, but very constructive discussions were held. Our group of four Members visited Serbia and Kosovo to find out what was going on. I thank the IPU for sponsoring our visit. I also thank the British embassy and our ambassador, Mr. Wordsworth; the British office in Pristina, and Mr. David Blunt and his staff; and the co-ordination centre for Kosovo and Metohia, and the person in charge there, Sanda Ra┼íkovic-Ivic.

It was interesting for me to visit Kosovo in particular, because I had not been there for some time. We went to see what had happened on the surface, and without making myself too unpopular in many quarters, I can say that most people—most people in Serbia, too—recognise that Kosovo has become de facto independent. All but the most extreme nationalists recognise that Serbia will not be in charge of administration or other such matters. We met a variety of politicians and members of civil society in Kosovo, and people acknowledge that there is a great deal of sincerity among the political class, the leaders of civil society, the law and the police force. There is a willingness to try to improve the situation, so that they come up to the standards that the west would like to see.

However, when one scratches the surface, people also acknowledge that there is still a huge challenge. What one sees in Pristina is not necessarily replicated in the countryside, and we can understand why. Many people in the city are educated, but the population is mainly rural. We all know—I shall not rerun history—that it is an area where there has been a great deal of conflict, and there are many scars.

People recognise more than ever before that Kosovo has become an autonomous—as I said, a de facto independent—area. It still has large enclaves of Serbs and other ethnic groups, and in Pristina we were impressed by the readiness of politicians to speak about their hopes. In Belgrade, all political parties bar one—the Liberal Democrats, which has very few members—want Kosovo to remain part of Serbia, in name at least. It goes back to United Nations resolution 1244, which stated that that would happen.

I am sure that the Minister is aware of one feeling that we experienced. We were in Pristina three days after a violent demonstration that ended in the deaths of two pro-independence demonstrators. Rubber bullets were fired into the crowd when it surged towards the Parliament
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building. We met Joachim R├1/4cker, head of the United Nations Interim Administration in Kosovo, who told us that he was waiting for the outcome of an inquiry into the demonstration in order to determine whether there was anything to be done. He said that he certainly would not call for any resignations, although the Interior Minister in Kosovo had resigned. However, we discovered—literally as we left the meeting—that Joachim R├1/4cker had called on the UN police commissioner, Mr. Stephen Curtis, to resign. It left ourselves, and many of the people whom we met subsequently, with the view that the UN was perhaps dancing to the tune of the Albanian politicians, and it concerned us. Mr. Curtis was treated very badly by that precipitate action.

While we were in Kosovo, we also visited some enclaves, particularly the area around Gracanica, and it was disturbing to see the centuries-old church having to be guarded by heavily armed Swedish soldiers. One of our party, which included two members of the Select Committee on Defence, is an expert on those matters, and he informed me that the sentries’ weaponry was very serious stuff indeed. It was not ceremonial or a warning; the sentries were prepared for serious problems.

Most worryingly, some of the people who were evicted from their homes during the events of March 2004 still live in what can be called small containers. Such container cities—there are several in Kosovo—are very concerning, and I am sure that the Minister agrees that there is no place for such cities in a modern Europe.

We met representatives of the Serb community, and in Belgrade we also met some of the internally displaced people who had to leave their homes, particularly in March 2004. We were surprised by their optimism, and their desire to return to their homes. They had left properties and farms, many of which had been in their families for generations, and they genuinely wanted to return. However, those people in the Serb community were very scared to return. That is something that I can understand. We had to change the number plates on our car as we crossed the border, because we had Belgrade plates on and we were told that it would be too dangerous for us to continue with them.

The incidents that are taking place in Kosovo indicate that, despite the best efforts of the international community, violence is sadly still prevalent. In fact, whether or not it was a personal statement, three days after we left our hotel in Pristina a hand grenade was launched into the said hotel’s car park. To judge from the websites of various news agencies in the region, grenade attacks seem to be quite common. Admittedly, such incidents take place on a small level—we are not talking about things of the sort that are regrettably going on in Afghanistan and Iraq. However, such incidents indicate that there are large amounts of munitions in the hands of people who would perhaps be better off without them.

That is why the Serbs feel so frightened. They said to us that, despite the assurances that the Kosovan Albanians had given them that they would be safe to return to an independent Kosovo, they genuinely felt that they would not be. Nothing that has happened in the past few years—not just since 1999, but since 2004, when there was quite a serious eruption of violence—has indicated to those Serbs that the assurances of those in authority that they were welcome and so on have been matched on
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the ground. Interestingly, some of the people we met had had personal experiences of the problems. For instance, we talked to an interpreter from the British office, who was a nice chap and very moderate. During our conversation he told us that his father had been kidnapped several years before and that no sign of him had ever been found. Of course there will be stories on the other side. Sadly, that is the nature of the place.

We are approaching the period when former President Ahtisaari’s plan is to be put to the United Nations. Over the past few years the Serbian Government appear to have put their head in the sand. They are rather like somebody with a debt who keeps hiding their bills in drawers, hoping that it will go away, but now the bailiff has arrived and they suddenly want to sort the situation out. There is pressure from those on the Kosovan side to try to get the situation resolved in the way that they want—in other words, independence.

We would of course all like the problem areas in the world to be solved, but we have waited years to get to where we happily are now in Northern Ireland. Cyprus is another example. However, we are still talking about trying to impose a solution if we cannot get both parties to agree. I cannot help feeling that that will just lead to further problems. I do not think that the two sides are so implacably opposed that we shall not achieve a solution. We might have said that about the political parties on either side in Northern Ireland a few years ago. However, this week we have seen two people who we never thought would be sharing power doing exactly that, and setting it up for May. I therefore urge the Government, along with other European Union countries, not to press ahead with haste.

There is of course another angle to the situation. I should be interested to hear what the Minister will say about the Russian influence. The Russians are talking about possibly vetoing the proposal at the United Nations Security Council, although my advice to the Serbian Government is not to necessarily rely on that possibility, which might not be what it appears. I should also be interested to hear from the Minister what other EU partners’ views on the issue are. Spain, Greece, Slovakia and other countries will have concerns. Those concerns are quite obvious—namely, that if we start effectively changing the borders of countries, whether as a result of military intervention or based on ethnicity, that will open the proverbial box of Pandora. There are areas throughout the world, including in Europe, where people will say, “If it’s good enough there, it could be good enough elsewhere”. Even within the Balkans, one only has to think of Republika Srpska, and the areas in Macedonia with a large Albanian population and the Presevo valley in Serbia, where those issues could become fundamental.

The British Government and the west say that what is proposed is a one-off, that the same would not happen elsewhere and that giving Kosovo independence would be a force for stability. The other side will say that the proposal is the very opposite and would bring instability. Therein lies the problem: nobody knows what the answer will be. We can make a guess at it—I have a different view from the Government on what will happen—but we are as one in saying that the situation must be resolved for the sake of Europe. The area is a fundamental part of Europe. In years to come the European Union will be part of the solution, but not yet.

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There are lots of organisations doing work out there, such as the Westminster Foundation for Democracy from this country, trying to help the political process in Serbia and Kosovo. However, some of the things that we should be doing are not necessarily at the political level. One charity that I should like to mention that has worked throughout the region, but has been particularly active in Serbia, is called SOS Kit Aid. It provides rugby kits and helps rugby clubs in Belgrade. Rugby is not a big sport in Serbia at the moment, but the charity helps to bring teams over. I talked to a deputy in Pristina who said that he had been encouraging similar things in Kosovo. There must be a way of bringing people together not only at the political level of arguing over things, but through sport and culture, although that might not necessarily be rugby. However, that will take time.

As I am keen to hear what the Minister has to say, I shall wind up. I labelled this debate as being on the western Balkans, but I have concentrated entirely on Kosovo. I have another question, to which I do not expect the Minister to have an answer. There is still a pressing problem with Macedonia and the frontier area, particularly around the villages of Debelbe, which are disputed. The problem is that the Macedonians have been told that the problem is a result of the break-up of Yugoslavia and that they have to talk to Belgrade. Other people say that the Macedonians have to talk to Pristina and that it is not for Belgrade to decide the international frontiers. Finally on the Macedonian situation, there is still a strong grievance from that country, which is a candidate for the EU, that even its diplomats and business men have to go through visa controls. My final message to the Minister is, please do not try to impose a solution so urgently that we lay up more problems for ourselves in the future.

11.18 am

The Minister for Europe (Mr. Geoffrey Hoon): I congratulate the hon. Member for Uxbridge (Mr. Randall) on securing this debate and on his continuing expert interest in the western Balkans. We may not always agree on the detail, but I acknowledge his real expertise on the questions involved.

The hon. Gentleman is right to remind us of the work that still needs to be done in the western Balkans, but it is also right to recall how much has been achieved in the region. Progress has been made since the wars of the 1990s. All the countries of the western Balkans are now somewhere on the path to eventual membership of the European Union and NATO; I visited Croatia on Monday and saw for myself the transformative effect of the EU accession process. I am confident that that will be repeated across the western Balkans.

Like the hon. Gentleman, I want to focus on Kosovo today. I remember my first visit there in 1999, when I witnessed the destruction and misery on the faces of Kosovo’s people—a shocking sight in modern Europe. However, Kosovo has come a long way since 1999, as I witnessed on my most recent visit last November. An elected Kosovo Government were gradually taking over responsibility for their own administration from the United Nations. I saw new buildings and new businesses in Pristina. Perhaps most importantly, people appeared more optimistic about their future.

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