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House of Commons

Thursday 17 January 2008

The House met at half-past Ten o’clock


[Mr. Speaker in the Chair]

Oral Answers to Questions

Business, Enterprise and Regulatory Reform

The Secretary of State was asked—


1. Joan Walley (Stoke-on-Trent, North) (Lab): What steps he is taking to promote enterprise. [179521]

The Secretary of State for Business, Enterprise and Regulatory Reform (Mr. John Hutton): A strong enterprise culture is vital to the UK’s long-term economic prosperity and can help us meet some of our important social objectives.

Thanks to measures taken by the Government, there is a record number of small businesses in the UK and young people are increasingly looking to set up businesses as their chosen career path. More than 180,000 new businesses have been created each year since 1997 and new VAT registrations have exceeded de-registrations in each of those 10 years. We are working on strengthening our enterprise strategy and will publish a White Paper in the spring.

Joan Walley: I am grateful to my right hon. Friend for his reply. I welcome everything that the Government are doing to increase enterprise. We in Stoke-on-Trent, which is not traditionally renowned for the number of its small enterprises, are very proud that it was the winner of the Enterprising Britain award. I have been in touch with the “Make Your Mark” campaign and we have great hopes that, from now on, the Government will make Stoke-on-Trent a city of enterprise as valuable as Liverpool is as a city of culture, so that we can make progress on everything that they want to do for enterprise and encourage investors to come to Stoke-on-Trent because we are proud of our award.

Mr. Hutton: I am happy to endorse my hon. Friend’s comments about the North Staffordshire regeneration zone, which did a brilliant job in winning the national awards in 2007 and was a runner-up in the European competition. We will continue to do all we can to support enterprise in her constituency, which several initiatives can benefit. I am happy to say that my right hon. Friend the Minister for Competitiveness hopes to visit Port Vale soon to open some new enterprise units. As I said, we will continue to do all we can to support my hon. Friend’s excellent work.

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Mr. Brian Binley (Northampton, South) (Con): Enterprise relies on new business, as the Secretary of State mentioned. What is he doing to help enterprising people who start up new businesses, given the credit squeeze, which is having such an impact on their cash flow? Will he ask the banks to be sensitive at this difficult time?

Mr. Hutton: I accept much of what the hon. Gentleman says. We are in constant communication with the banks and others to monitor the impact of the financial upheaval in the markets that has taken place since the summer. So far, there has been little impact on banks’ borrowing practices in respect of small businesses, but we are keeping the situation under the closest supervision.

Sarah McCarthy-Fry (Portsmouth, North) (Lab/Co-op): In areas of deprivation, social and community enterprises are an excellent way in which communities can take control and get themselves out of deprivation. What assurance can the Secretary of State give that people in those communities will receive assistance to give them the capacity to start their own businesses and social and community enterprises?

Mr. Hutton: In our work on the new White Paper, we are closely considering the issue that my hon. Friend raises. In my response to my hon. Friend the Member for Stoke-on-Trent, North (Joan Walley), I said that enterprise is not only an economic issue, although it is a powerful one, but an important social tool that helps us reach into areas of disadvantage throughout the country. I am sure that a reinvigorated enterprise strategy can help areas in Britain that are under-represented in business start-ups to do better, and especially groups of people—for example, women—among whom the number of business start-ups is much lower than among other groups.

We are examining a range of measures—I shall not announce the detail of the White Paper today—but I assure my hon. Friend that we acknowledge her points and are tackling them directly in our work on the White Paper.

Mr. Jonathan Djanogly (Huntingdon) (Con): Does not the Secretary of State realise that most small businesses would laugh at his claim of championing enterprise? With Labour proposals to double capital taxes on business and abolish income sharing on dividends between spouses, with enterprise groaning under the weight of some 3,000 new regulations a year, with growing instability in the banking sector and now the high street, and with energy costs and inflation rising, how can he say that enterprise is being promoted?

Mr. Hutton: Because we use facts and evidence, not the hon. Gentleman’s empty huff-and-puff rhetoric. Policy should always be based on evidence, not ideology. He has made his party political point, which is all well and good, but I wonder what view business would take of a party that wants to cut research and development tax credits and business support schemes and introduce a new bureaucratic trading scheme for, for example, chocolate and fatty foods. That is evidence of a party that has totally lost touch with business reality in this country.

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Margaret Moran (Luton, South) (Lab): Following on from the question about social enterprise, I applaud the work that my right hon. Friend, the Department and the Office of the Third Sector in the Cabinet Office are doing to promote social enterprise. However, will he look closely at whether sufficient support is being given through Business Link branches, many of which are reformed? The support available is sporadic; in Luton, for example, we are under-resourced in terms of support and capacity building for social enterprise. That particularly affects those in black and minority ethnic communities who want to go into social enterprise, but do not have the advice and financial support to do so.

Mr. Hutton: In relation to Business Link, we are again considering all such issues in the context of our work on the White Paper. On social enterprise, I shall draw my hon. Friend’s comments to the attention of the Chancellor of the Duchy of Lancaster, because he is overseeing a lot of the Government’s work on social enterprise. It is important in all parts of the country that there should be an efficient, modern and private sector-led business support service that can provide bespoke and tailored business advice to businesses that are just getting going. That is very much our ambition for Business Link.

Business Competitiveness

2. Richard Ottaway (Croydon, South) (Con): What steps he plans to take to improve the competitiveness of business. [179522]

The Minister for Competitiveness (Mr. Stephen Timms): The UK continues to perform well on a wide variety of measures of competitiveness, including the best measure, which is productivity. The comprehensive spending review set out a number of measures to raise long-term productivity further.

Richard Ottaway: In an increasingly competitive world, with an explosion in globalisation and fierce competition from India and China, was the Minister as dismayed as I was to read the report by the institute of management and performance showing that the UK had slipped from ninth to 20th place in the competitiveness league? He is an intelligent Minister, so what assessment has he made of the Government policies that have contributed most to that downfall?

Mr. Timms: The hon. Gentleman is certainly right about the ferocity of the worldwide competition that UK companies face. There are a number of different indices, but some are rather volatile, partly because the methodology that is used changes from one year to the next. However, I refer him to the World Bank, which last year and the year before assessed the UK as sixth in the world for ease of doing business, and to the Organisation for Economic Co-operation and Development, which says that we have the lowest barriers to entrepreneurship of all the OECD countries. However, the best measure is productivity, on which we have closed the gap with Germany, as well as having been the only G7 country to keep pace with US productivity growth since 1995. We have done well on competitiveness, and the new stability in the economy over the past 10 years has been the key.

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Dr. Ashok Kumar (Middlesbrough, South and East Cleveland) (Lab): One sector that is competing well in the north-east is the biotechnology sector. Indeed, it is flourishing, with 50 start-ups being established in the past five years. I recently met members of the sector, who told me that they are facing difficulties, in that they need another 1,000 biotechnicians in the next few years. We need to address that issue as far as competitiveness is concerned. What are the Government going to do about it?

Mr. Timms: I am pleased that my hon. Friend has raised that important subject, because we are establishing a new innovation and growth team to focus on the biotech sector. He is absolutely right about the importance of the sector for the UK economy, particularly as addressing climate change is an increasingly important priority. The Sainsbury review last year made the point that the UK is well placed to do well globally in industries such as biotechnology. That is why we have committed extra resources to science, to train exactly the kind of people that that sector and others need. Given the ferocity of international competition in the biotech and other sectors, we will continue to ensure that the UK does well. Indeed, my right hon. Friend the Secretary of State is leaving immediately after questions to board a plane for India, and we will continue to battle for UK business.

Stewart Hosie (Dundee, East) (SNP): Competitiveness lies at the heart of many of our problems in Dundee over the past 12 months, with 1,600 job losses, including 1,000 in manufacturing, and the work directly transferred almost exclusively to more competitive economies in China and Hungary. I know that the Minister and the Secretary of State are aware of the difficulties in Dundee, so will they meet me and others who are concerned about the Dundee and wider Tayside economy with specific regard to the loss of manufacturing jobs? Will they also meet the local business community, if a request comes from the chamber of commerce to explore what the Government might be able to do in conjunction with the Scottish Executive?

Mr. Timms: The hon. Gentleman is absolutely right that the fierce international competition that we have been discussing applies nowhere more than in manufacturing. I would urge him to look at how the manufacturing sector as a whole has been performing over recent months. It has been doing well; I draw his attention to the fact that, for example, we made almost twice as many cars in Britain last year than we did 25 years ago. We want to take a fresh look at our manufacturing strategy. We introduced a strategy in 2002 that made a big contribution, not least through the manufacturing advisory service. However, as my right hon. Friend the Secretary of State announced in November, we will review our strategy between now and the summer. I would welcome the opportunity to meet the hon. Gentleman and representatives of the business community in his area to discuss such issues.

Mr. Michael Clapham (Barnsley, West and Penistone) (Lab): My right hon. Friend will be aware that one of the main elements in competition is the price of energy. He will also be aware that, last week, The Sunday Times reported that six energy companies were meeting to
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conspire to ensure high energy prices. What action will he take to ensure that British competitiveness is protected from the profiteering of the energy companies?

Mr. Timms: My hon. Friend is absolutely right about the importance of energy prices for competitiveness in the UK. He will be aware of the initiative taken by my right hon. Friend the Chancellor, and he will also know that Ofgem is looking closely at this issue. It is the case that the competitive market framework for energy in the UK has delivered energy prices that are among the lowest in Europe.

Mr. Mark Prisk (Hertford and Stortford) (Con): The Minister talks about the importance of improving competitiveness, not least among small companies. While he has been talking, however, the Chancellor has raised those companies’ corporation tax rates and increased their business rates, and he is now planning a £900 million tax hike on their capital gains. How can small firms remain competitive when the Chancellor is taxing them to death? Is the Minister’s Department going to stand up for those firms or simply let the Chancellor walk all over them?

Mr. Timms: I simply draw the hon. Gentleman’s attention to the fact that we have more small businesses in the UK today than we have ever had before. There are now 4.5 million of them, and there has been a 20 per cent. increase in the number of companies registered for VAT. I believe that the Chancellor is absolutely right to seek the simplification of capital gains tax. The combination of indexation and tapered relief had created a complex system, and he has proposed changes to address that. He is also listening to representations from small business organisations and he plans to make additional announcements.

Energy Supply

3. Mr. Philip Hollobone (Kettering) (Con): What assessment has been made of the impact on business efficiency of energy supply contracts which require 90 days’ notice of termination. [179523]

The Minister for Energy (Malcolm Wicks): The Office of Gas and Electricity Markets—Ofgem—is responsible for regulating gas and electricity supply, including supply to the business sector. Termination arrangements are a contractual matter between the supplier and the customer.

Mr. Hollobone: My constituent, Mr. Mark Middleton of Coppicemoor Farm, Pytchley, near Kettering, has an electricity supply contract with npower. npower wrote to him 30 days before the end of the contract to ask him whether he would like to renew it. He said that he would not, but npower said, “Tough. You should have given us 90 days’ notice.” So Mr. Middleton is now tied into his contract with npower for another 12 months, after which he will seek an alternative supplier. Will the Minister look into the notice periods that companies impose on their customers? This inability to switch easily between suppliers is creating a brake on business efficiency.

Malcolm Wicks: The general principle has to be that business customers can protect their own interests, and that includes monitoring the terms of their contracts
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and the expiry dates involved. We recognise, as was noted in an earlier question, that high energy costs are affecting businesses as well as domestic customers. For those reasons, I would be happy to bring the hon. Gentleman’s concerns to the attention of the chairman of Ofgem, with a request that he consider whether any changes to the rules governing business supply are required.

Miss Julie Kirkbride (Bromsgrove) (Con): Will the Minister give us his assessment of why energy prices have gone up so dramatically in the past few months? Is it simply to do with the price of oil? Does he have any evidence of the anti-competitive behaviour that was mentioned in a previous question? Or is it the failure of the EU energy markets to be properly competitive?

Malcolm Wicks: There are a range of factors. The major background factor has to be the huge global demand for energy in the emerging economies of India, China and many other countries, as well as the demand in the western economies. We have seen increases in the wholesale price of fossil fuels of between 50 and 80 per cent., and that has to be the major factor. The Chancellor is in discussions with Ofgem and the Secretary of State is also involved to make sure that the relationship between wholesale price increases and retail price increases is appropriate. We have a competitive energy market here; there is an issue in Europe, where we continue to press for the liberalisation of energy markets. The hon. Lady is right that that is another important factor.

4. Paddy Tipping (Sherwood) (Lab): What recent discussions he has had with energy supply companies on reducing fuel poverty. [179524]

The Secretary of State for Business, Enterprise and Regulatory Reform (Mr. John Hutton): My hon. Friend the Minister for Energy has met the chief executives of all the energy supply companies with a view to improving support to those at risk of fuel poverty. The level of support that companies are providing this winter has increased from £40 million to £56 million. The Minister for Energy and I will meet chief executives again shortly to discuss the best way to ensure continued support. Overall, the Government have provided £20 billion in support for the fuel poor since 2000, with 2 million households helped by our fuel poverty schemes and close to 12 million receiving winter fuel payments each year.

Paddy Tipping: That is a good record, but more needs to be done. Some householders face price increases of 27 per cent., which has clear implications for the Government’s fuel poverty targets. In his discussions with companies, will my right hon. Friend commend those that offer good social tariffs and reprimand those that do not, reminding them of the possibility of compulsion?

Mr. Hutton: I strongly support what my hon. Friend says. A number of electricity supply companies have done exemplary work in trying to address some of these issues, particularly with regard to those who rely on pre-payment meters. There is an issue there that is now being addressed. We have decided not to legislate in the Energy Bill to introduce mandatory social tariffs at this point, given the extra investment by companies
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and their commitment to continue it, but we will keep the matter under careful review.

Steve Webb (Northavon) (LD): Is it not the case that the amount of money that these companies spend on social tariffs is a pittance in comparison with their huge profits? Are not all these cosy conversations with the companies achieving practically nothing? With fuel poverty doubling over the last couple of years, is it not time to legislate to make poor people protected instead of hoping that companies will do what should be the Government’s job?

Mr. Hutton: We should intervene in the most effective way possible. I know that the hon. Gentleman’s instinct is always to regulate and to legislate, irrespective of the ability of other mechanisms to deliver. That is not our approach. We are making progress on fuel poverty. There is obviously a growing issue with rising energy prices, which is why in our talks with energy companies we will be redoubling our efforts to find a sensible way to proceed, particularly for elderly consumers of gas and electricity, for whom I accept there is a particular hazard.

Mark Lazarowicz (Edinburgh, North and Leith) (Lab/Co-op): One of the problems with social tariffs is that there is not just a difference, but a vast disparity, between the tariffs offered by different companies, which confuses consumers and others. That highlights the fact that some companies are doing a lot more than others, so I urge my right hon. Friend carefully to consider how to achieve not just an incremental increase in the amount of money going into the industry’s support for consumers, but a substantial increase right now, at a time when customers really need any extra support that they can get from a proper social tariffs programme.

Mr. Hutton: As I said, we are in discussions with the energy companies, and those discussions are continuing. They have all promised to maintain the support that they are providing over the next three years. We will discuss with them what more, if anything, can be done. From the Government’s point of view, I have already pointed out some of the areas where we are investing directly in this issue. It is important to keep the overall picture clearly in mind. We are providing direct financial help with energy costs for households and we are also investing more over the next spending review period on energy efficiency for domestic households. We must continue to wage this war on a number of fronts, but I can assure my hon. Friend and all hon. Members who are rightly concerned about this issue that the Government are very seized of the significance of these matters and are doing all they reasonably can to address the concerns that are being expressed.

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