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The Government need to look further at support for social enterprise. Who lives and breathes the creation of profit and of employment and enterprise? It is social enterprises. If we are concerned, as we must be, about small businesses laying off staff, with all the implications that has for unemployment, who are the least likely to lay off staff? It is social enterprises. Their focus on the triple bottom line means that they will support those
retaining people in employment, and many of them are all about the creation of more employment and help for those who are unemployed.
Returning to the evidence base for what I am saying, Business in the Community has done research that shows that small companies that manage their environmental and social impact in a more efficient way are better able to cope with future economic challenges. It found that, in a declining market, the companies it measured which were involved in corporate social responsibility were outperforming their counterparts by 3.7 per cent. between June 2001 and June 2004, and that a further group were outperforming their peers by 72 per cent. in the same period. Those businesses found such involvement had a practical, bottom-line impact.
The evidence from the Social Enterprise Coalition is that social enterprise lenders provide better liquidity where it is most needed and, in many instances, they have increased their lending to those that need it mostlook at community finance development institutions and credit unions. They are resilient businesses, delivering the jobs, skills and services most needed in times of economic crisis in communities. Their reservoir of skills and local expertise is an asset for recovering regional economies that should not be wasted at this time. We must not lose their experience in building in that triple-bottom-line benefit, including the social and environmental experience that they bring.
There are opportunities for us to think anew about the new kind of business that people wantresponsible and not fly-by-night. We need to help to bolster such new businesses, to build support with business, consumers and customers. By providing greater support to small businesses within the CSR agenda, and providing greater support to social enterprise, we could see a new vision of the kind of small business that we want. Those businesses will have the energy and initiative to bring wider benefits to the local and national economy.
Anne Main (St. Albans) (Con): I am pleased to follow someone else who is in the east of England, but I was amazed at her complacency about some of the things that have affected the east of England. I am no great fan of development agencies or regional assemblies. It is interesting, however, to note that those are the Governments delivery vehicles for grants. We cannot ignore the fact that the Government have decided to take away a substantial amount of money from the grants directly affecting businesses, and have used it to prop up the housing market. Only in August, we were told by the then Exchequer Secretary to the Treasury:
The East of England is being affected by global uncertainty...so here in the East of England we are determined the government along with regional and local agencies such as EEDA will all work together to ensure that businesses get the support they need.
In these difficult times we must keep calm and continue to work to our strengths. I am confident that the regions innovative businesses, which are investing so heavily in the skills of their staff, have the right approach. But, more can always be done,
working with the business community to make sure that everyone is equipped to meet the challenges.
That was in August. In October the Government did a big U-turn, pinching a large amount of money £300 millionfrom those very businesses, and believe me, Madam Deputy Speaker, they think that that is a problem. As David Kingham, the managing director of Oxford Innovation, one of the countrys leading providers of managed work spaces, puts it:
We have a problem in banking, clearly, and an impact in the housing market. But the last thing we want is the cost of that to start to damage small business investment.
Within the last week, because of...funding of first-time buyers, we have been squeezed by the testicles,
Needless to say, when the Select Committee on Communities and Local Government looked into the auditing of how things were going in the east of England, I asked the question. I said that small businesses might be finding it difficult. I said that there had been some criticisms from small businesses locally, which have said that money has been taken away from business development through the RDA to prop up the housing market. I asked how that could be justified. What research had been done into the impact on struggling small businesses?
ministers took that decision very carefully and with some degree of reluctance. It was a decision taken in consultation with the Prime Minister and with John Hutton as well as by ministers in our Department; it was not a unilateral decision.
Therefore a conscious decision was taken to fund an initiative
because that money is all about buying their completed stock as well as helping first time buyers who cannot access a home at the moment. I think that despite it being difficult and painful for ministers, it does something which helps industry and helps first time buyers now.
I asked the Minister in an earlier intervention what he thought about that, but all he said was, Oh, Im glad to see that youre all supporting RDAs now, focusing his attention always on the delivery vehicle, not on the grants that are being stolen. The Government have decided to put money towards house building, investing in propping up the housing market, at the expense of small businesses.
Barry Gardiner: I am extremely grateful to the hon. Lady. Does she appreciate that putting money into the housing market is one of the best possible ways of supporting electricians, tilers, plumbers, joiners, roofers, handymen, carpet layers and all the other small businesses that go with housing?
Anne Main: I am very sorry that I took that intervention. The fact that the Government are going ahead with hundreds of thousands of extra houses that are under dispute in our area is more about saving their house building programme.
It cannot possibly be right that small businesses should be used as the whipping boy. They have put up with an awful lot of economic pressures already. They have been regulated to death and now, in their hour of need, they are unfortunately being seen as a ready pot of investment that can be taken away. What is more, the Government are being so quiet about all this. It seems that no matter whom I ask, they all say, Oh, were all in favour of regional assemblies and RDAs now, are we? That is not what we are talking about; that is the delivery mechanism.
I look forward to seeing the Secretary of State come back tonight and tell us whether he has made any calculations of the impact that taking away that future investment will have on small businesses that were looking to receive it from the Government. As far as I know, there have been no such calculations. I have been told nothing other than that the decision was a difficult one. I would love to know what information informed it.
Stephen Hesford (Wirral, West) (Lab): Before I retrace our steps to see how we got into the international credit crunch, I should like to say something more positive. This is a debate of genuine concern for small businesses, and for the enterprise sector generally, but I have not heard a lot from the Opposition about how we can talk the economy up instead of talking it down. For example, the national chairman of the Federation of Small Businesses came to Liverpool recently to host a lunch in that magnificent city. It was the first visit to the city by the national chairman of the federation. He gave the very positive message about the enterprising benefit that the federation was gaining from the city being the capital of culture. As hon. Members will know, Liverpool is the European capital of culture this year. He said that he wanted to look forward to what Liverpool and the sub-region of Merseyside could do, not only this year but in the future. He wanted to build in to the region not only the fantastic year that we are having with the capital of culture but the benefits that will survive beyond this year and go forward.
The Federation of Small Businesses was amazed, having done some thinking outside the boxto use a rather ugly phraseto have become so involved with the creative industries, as it had not really thought of doing so. Liverpool has long been well known for its creative industries. The message was that, yes, this is undoubtedly a difficult climate, but if they think positively, there are ways for small and medium-sized enterprises upwards to build confidence. Rather than talking down the region, we need to talk it up.
I should add, in parenthesis, that the Tories favourite think-tankfrom which I understand many of their as yet unspoken policies might yet emergeproduced a
report during the recess that recommended that people who lived in Merseyside and Liverpool should forget the area and move to the south-east. That appeared to be the apotheosis of Tory policy. Other hon. Members have noted the apparent change in Tory policyI do not know whether that is what we are witnessingand their new interest in regional development associations. Labour Members will certainly not ignore the regions, however, as some of my hon. Friends have already said.
I want to retrace our steps in regard to the analysis of the credit crunch. I have put it to the hon. Member for Tatton (Mr. Osborne) that he had previously admitted that the tsunami of the credit crunch and the toxic sub-prime mortgages could not have been foreseen. That is certainly the case, and it is the reason why we are now in the middle of this global crisis, so it is completely disingenuous of the Opposition to keep talking down the situation and trying to blame these foreign circumstances on my right hon. Friend the Prime Minister. If people think that I am wrong about that, perhaps I may pray in aid Mr. David Smith, the economics editor of The Sunday Times. He describes the Tory claimwhich I do not have time fully to reiteratethat everything lies at the door of my right hon. Friend as just plain daft [Interruption.] The hon. Member for Northampton, South (Mr. Binley) says that he has not made such a claim, but those on his Front Bench have done so. They repeated that calumny tonight.
What David Smith goes on to say is that we have to recognise that the normal tools of central banking are sometimes not adequate for the crisis that comes alonga crisis that the hon. Member for Tatton said could not have been foreseen. He goes on to explain that what we have experienced is an extreme version of market behaviour built around derivatives and toxic financial products, with which we are now stuck.
Mr. Andrew Pelling (Croydon, Central) (Ind): It was impressive that the Government were determined to take action quickly, but is not one of the problems that they have not dealt with those toxic assets on bank balance sheets? It would have been better if they had arranged more debt with the banks in order to remove the toxic debts from their balance sheets and repair their wounds.
Stephen Hesford: The hon. Gentleman is absolutely wrong. The Americans tried that, raising $700 billion with the idea of buying toxic debt, but it simply did not work. The markets hated it and Wall street crashed on the back of that wrong action; the right way of doing it is what my right hon. Friend the Prime Minister suggestedrecapitalising the banks and putting liquidity back into the system. The hon. Gentleman is, as I said, absolutely wrong. I am glad that we did not take his advice and I am glad that we ignored the advice of other Conservative Members on a number of issues such as Northern Rock and Bradford & Bingley. Had we taken it, we would have done a Lehmans and the problem would have been even worse.
Conservative Members argued earlier that we cannot afford to borrow or to use good old-fashioned Keynesian economics to help the economy through these hard times. Well, Maurice Fitzpatrick of Grant Thornton points out that Britains public debt position, which is better than any other G7 country, gives us a big advantage.
Even a UK debt figure of between 40 per cent. and 50 per cent. of gross domestic product is half the G7 average of 93 per cent.; America is on 61 per cent., Germany on 63 per cent.; France on 64 per cent., Canada on 68 per cent., Italy on 104 per cent., and Japan on 195 per cent. We are in as good a place as any to be able to afford the borrowing that my right hon. Friend the Prime Minister has put in place.
As for us having a big public deficit [Interruption.] I would be grateful if the hon. Member for St. Albans (Anne Main) did me the courtesy of listening to what I am saying. These are serious matters, but she is grinning all over her face [Interruption.]
partial nationalisations (taxpayer stakes in banks)... do not add to public-sector net borrowing... They are... below-the-line financial transactions,
In conclusion, on the micro-way of supporting small businesses, I welcome what my hon. Friend the Minister said earlier in opening for the Government. We will not talk down the economy; we look forward to the measures that the central Government have suggested to their suppliers to pay within 10 days; we look forward to the increased support for Train to Gain; and we welcome further initiatives on local Business Links. I agree with what my noble Friend the new Business Secretary said:
We understand that small and medium sized businesses are facing tough times as a result of the global economic squeeze... The Government has taken steps to ensure that banks are properly capitalised and can start lending again.
The general public would not believe, if they had tuned into the parliamentary channel for the first time, that the Government had been in power for 11 years. We have had 11 years of Labour misrule. For the first 10 years, the Chancellor, now the Prime Minister, told us all that he had abolished boom and bust, and that the economic miracle being experienced by the UK was entirely down to his stewardshipthat it was nothing to do with a strong global economy, and that it was down
to his guidance and supervision. He is a bit like Macavityas soon as things go wrong, as was bound to happen after his spending splurge and 10 years of debt-fuelled extravagance at the taxpayers expense, he says, Its not my fault, guv. Its nothing to do with me. Im totally misunderstood. Its all to do with these horrible Americans and the sub-prime debt market.
Mr. Walker: I am sorry. I am unable to give way to the hon. Member for Wirral, West. He forgets that Bradford & Bingley and Northern Rock were lending not in the United States of America, but in the United Kingdom. They were advancing people mortgages of five or six times their annual earnings. They were allowing self-certification, and lending money to people who had no hope of paying it back. They have caused human misery on an enormous scale.
Today, 80,000 homes are under order of repossession. What will the figure be in 2010, when it is estimated that house prices will have fallen by 35 per cent. from their peak? The Government should at least say sorry to the hundreds of thousands if not millions of people whom their policies will drive out of work. Their policies will cause significant unemployment over the next three or four years.
It is all very well to talk about history lessons, about 1997 and 1979, but those years are exactly thathistory. This is the here and now. The problems have happened under this Governments watch. The Prime Minister must face up to the fact that he has driven this country to the edge of financial crisis. A lot of very good businesses will pay the price of his mismanagement.
Let us remind ourselves of the figures. The banks are being underwritten by £500 billion of taxpayers money. That is an astronomical figurehalf a trillion pounds. The Government only manage to spend £650 billion a year, so nearly 80 per cent. of that, which they raise from the taxpayer and the debt markets, now underpins our banking system. If that is not a financial disaster, I do not know what is.
I also point out to the hon. Member for Wirral, West and the hon. Member for Brent, North (Barry Gardiner)before the last reshuffle he was the forestry ambassador, not that it was a ministerial positionthat the £500 billion must be paid back at some time in the future. Guess who will be paying it backthe taxpayer, for generations to come. That will not be easily forgotten.
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