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Mr. Pelling:
The hon. Gentleman talks of the very large size of the £500 billion bail-out. In the light of that, is it not appropriate to ask whether the money was well spent? Reference was made earlier to whether the
use of debt and the removal of toxic assets from bank balance sheets constituted a better approach than recapitalisation through equity. After all, it is the innovative and very successful scheme recently established by the Swiss National Bank that allows the removal of those toxic assets, improving the quality of the bank and removing the Government from the embarrassment of constantly being asked—bearing in mind that they are a majority shareholder—what they will do about the minutiae of the management of those banks. Surely that would have been a better way to spend such substantial amounts.
Mr. Walker: My hon. Friend makes a good point, but the Government are asking us to take everything on trust. How can we trust a Government who have taken the country to the edge of financial ruin? No trust is left.
The hon. Member for Luton, South (Margaret Moran), who is no longer in the Chamber, talked of corporate social responsibility. I do not think she understands that the most responsible thing that small businesses can do now is try to retain their work forces—try to retain people in jobs so that they can put food on their tables. This is the level of the crisis facing small businesses.
I see the Minister of State making a few sedentary interventions. He really is living in cloud cuckoo land if he thinks that banks will lend at 2007 rates. Small businesses are having their loans renegotiated by banks at rates of upwards of 15 per cent. They are seeing their interest rates trebled, and that is pushing very good and viable businesses to the wall at this moment.
Mark Durkan: Will the hon. Gentleman give way?
Mr. Walker: I am sorry; I do not have time to give way to the hon. Gentleman.
I really believe that, after 11 years, the Government probably—or definitely— should have done a better job on the economy. For the last 11 years the Chancellor, now the Prime Minister, has said, “Trust me: I know what I am doing.” Well, clearly he has not had a clue. He has been making it up as he goes along.
The four Labour Members who spoke this evening will all lose their seats at the next general election. They will pay the price for the Prime Minister’s failure, and ultimately he will have to explain himself to them when they are looking for new jobs.
9.27 pm
Mr. Mark Prisk (Hertford and Stortford) (Con): This has been a short but timely debate. I know that it is of great concern to the millions of small businesses in our constituencies, and I am sure that many of them will have followed what has been said. I know that those in my constituency are keen to find out not only what we plan but what the Government’s response will be, so I look forward to the Minister’s reply.
The debate began with an excellent exposition from my hon. Friend the Member for Rutland and Melton (Alan Duncan). With his usual historical and indeed oratorical insight, he rightly exposed the way in which the Government’s policies have directly weakened the nation’s finances. In responding, the Minister mentioned a number of initiatives that the Government had taken—
although, on closer examination, I could not see any new money included over and above the current Government spending plans. While I believe that the Minister is a decent man, I was slightly saddened that, like other Ministers, he could not bring himself to accept that the Government had even a scintilla of responsibility for the events of recent months.
The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso), the Liberal Democrat spokesman, spoke with his usual charm, but also contributed some useful insights, not least because—like a number of those who have spoken—he has had experience of real businesses. I welcome his party’s support for our motion, although I understand that he may have a few caveats along the way.
My hon. Friend the Member for Northampton, South (Mr. Binley) brought his usual energy and insight to the debate—again, born of someone who has actually been involved in starting and running a business. He knows and understands what is actually involved.
We then had a number of varying contributions from Labour Members—from the hon. Members for Wirral, West (Stephen Hesford), for Luton, South (Margaret Moran) and for Crawley (Laura Moffatt). My worry is that I did not hear from a single Labour Back Bencher any mention of how the overdrafts and pressures on small businesses today are affecting their constituents. I hope that that was an oversight on their part. I am sure that their constituents hope that as well.
I turn lastly to my two neighbours in Hertfordshire. My hon. Friend the Member for St. Albans (Anne Main) rightly expressed her anger at the way in which the Government offer money to businesses and then quickly take it away. One cannot plan a small business if there is that constant merry-go-round of Government funds. That was a perfectly reasonable criticism which I hope the Minister will take on board.
Last but by no means least, we had the enthusiastic and energetic contribution from my good neighbour the hon. Member for Broxbourne (Mr. Walker). He was right to be angry and passionate about the issue. The frustration that many of our constituents feel is that, while Ministers try to pass the buck, the people who in the end will pay the price for the current problems are the taxpayers. We will pay for the Government’s mistakes.
For much of the past 16 years, the global economy has been growing. Here in the UK, it has been a boom that has lasted through two Governments and three Prime Ministers. Yet in the past decade we have seen this golden opportunity squandered, as the current Government have taxed and borrowed without ever preparing for the future. They have taken us from boom to bust. Thus, despite soaring tax revenues, as the IMF has noted, the national debt has climbed inexorably. Even before the downturn bites on Government revenues, we have a higher budget deficit than almost any other major country, unless of course one counts Pakistan, Egypt and Hungary.
Part of the problem has been the arrogance of a Chancellor, now Prime Minister, who believed that he had for ever ended the cycle of boom and bust. Indeed, in 1997, he promised that under his stewardship, our economy would
“be built not on the shifting sands of boom and bust, but on the bedrock of prudent and wise economic management for the long term.”
How hollow that boast must sound to the thousands of families in our constituencies whose homes are about to be repossessed.
Our economic performance has been slipping behind that of our competitors. Our productivity lags behind most G8 nations and the rising tax burden is pushing good firms abroad. According to the World Economic Forum, we have fallen from fourth to 12th in its key measure of international competitiveness. British business is doing its best, but all too often that is in spite of the Government, not because of it. Thus, since 1997, there have been over 100 stealth tax rises, which by 2010—an interesting date that is clearly in the minds of the Government—will have cost business £80 billion.
The tax system itself now has become a burden for businesses large and small. According to one of the leading independent surveys in the last year, the average small company now spends 50 hours every year just complying with the tax regulations, never mind the rest. It is this toxic combination of tax and red tape that has been strangling enterprise, despite all the promises and ministerial photo opportunities.
The Prime Minister, of course, likes to boast—the Minister repeated it today—that there are more small companies today than there were in 1997. Indeed, the numbers have grown, but at a slower rate than the increase in population. So for all the talk of an entrepreneurial culture, the net result is that today fewer of us are starting up a new business. It is just as concerning that fewer small businesses today employ people than was the case 10 years ago. Indeed by last year, seven out of 10 small firms no longer employed anybody. What a wasted opportunity.
Before I came into politics, I ran my own business for 10 years. I passionately believe in the importance of small and medium firms in our economy. It is they who generate £1,400 billion of our national wealth, and even now, despite the burden of this Government, they still employ more than 12 million people. I and my Conservative colleagues never forget that it is not the Government who create wealth and private sector jobs; it is the private and small businesses who create the wealth and the jobs on which the rest of us rely. That is why I have followed the events of recent months with a sense of foreboding, for as we have all watched the stock market screens turn red, I knew it would be the hard-working business owners and their staff who would pay.
We need to act fast to help these firms. The best start would be if the Government were to scrap their planned tax rises for small businesses. What is the economic logic of increasing small company corporation tax by more than £370 million in this of all years? The tax hike should be reversed, and if the Government do not do it, we will.
To be fair, it is true that over the past week or so we started to hear more positive noises from Ministers. They are right to highlight the importance of tackling late payment by central Government. Indeed, I am glad that Ministers are now following my party leader’s call to ensure that all levels of government—national, regional and local—pay due invoices within 20 days.
However, today’s announcement by the Government on staff training is not so promising. When we look closely, there is no new money and, indeed, most of the
elements of the scheme involve things that already exist, so what at first appeared to be a good idea turns out to be just spin. The problem with the Government at present is that with their new boss, Lord Mandelson, at the Department for Business, Enterprise and Regulatory Reform—and it is a pity he is not able to be present—we have spin rather than substance. As there is no new money and this scheme largely contains measures that already exist, I invite the Minister to intervene and tell us how much additional money on top of his current spending plans he intends to put in.
Mr. McFadden: Given that the hon. Gentleman is talking about the training budget, will he confirm that it is still his party’s policy to remove £1 billion from the Train to Gain budget?
Mr. Prisk: I would love to be standing on the other side of the Dispatch Box and be able to answer, as a Minister, the Opposition’s questions, but let us be clear: we will use the money that is put into training to most effect. That is why, for example, we will use some of it to give £2,000 to every small business, so that they can use that money properly.
I invite the Minister to intervene again, and let me ask him a simple question. Is the £350 million that his Secretary of State has talked about today new money or not? Does he not wish to answer? I think the House will note the silence of the Minister on the question of any new money.
Mr. Prisk: I am delighted to give way to the other Member for Wolverhampton. Perhaps he will be a little more eloquent than his colleague the Minister.
Rob Marris: I do not know about new money, but £37 billion sounds like a lot to me. The Opposition motion to which the hon. Gentleman is speaking tonight contains two measures—although I must say that I do not think they are sufficient. Can he tell us what those two measures will cost?
Mr. Prisk: I will tell the hon. Gentleman exactly that in a moment, because when I turn the page of my speech I will get into the details, and as he knows I like to make sure the details are right. I am happy to do that, therefore, but I am sure that the House has noted that there was no offer, even from the Labour Back Benches, of new money.
It is the noble Lord Mandelson’s birthday, so we should at least send him some greetings. The new Secretary of State for Business, Enterprise and Regulatory Reform was reported as having said yesterday that he had plans to delay a number of laws on flexible working, banking holidays and, indeed, paid maternity leave. Yet within hours the Chief Secretary to the Treasury said that that was not the case, and that the Government would not do anything to hurt decent working people. Indeed, the TUC went further, saying the reported plans were “astonishingly irrelevant”.
Who is right? What can small firms expect from the Government? We would love to ask the Secretary of State for Business, Enterprise and Regulatory Reform, but we cannot do so as he cannot be here because he sits in the other place, so perhaps the Minister can help. Is
his Department reviewing the laws, and when does he expect to implement them? Who counts more in this debate, the Secretary of State or the Labour party’s paymasters?
To answer the hon. Member for Wolverhampton, South-West (Rob Marris), our motion sets out the urgent need for positive action. I shall run through the actions that we propose. First, we will allow small and medium-sized enterprises to defer their VAT bills for up to six months. For a typical business with a VAT bill of a third of a million pounds, that could free up £90,000, which could be the difference between survival and failure for some businesses. As a jeweller in my constituency pointed out to me, they do not seek special treatment, they just want a little flexibility and a little understanding.
Secondly, we would cut payroll taxes for the smallest employers, to help them save money and so keep jobs. That would mean that a local firm with, say, four employees and a wage bill of £150,000 would save £100 each and every month. Thirdly, we will help small businesses, especially shops, to claim their small business rate relief. Just half of the firms that are eligible currently claim that relief, and we want to help them. That is why we will provide a new way for them to make their claims directly.
Another matter that has been mentioned is banking, which is crucial to small firms. The way in which small businesses are being dealt with by their banks is of great concern. We heard from my hon. Friend the Member for Northampton, South about how some long-established firms are finding their overdrafts being called in without warning, and from the hon. Member for Caithness, Sutherland and Easter Ross about how the rates on those overdrafts have suddenly increased significantly. It is not because those firms have become a riskier prospect; it is simply a direct result of the credit crunch.
In recent days, Ministers have said that unreasonable actions by the banks against mortgage holders will not be tolerated, but what about small businesses? What can they expect from the Government? I hope that the Minister will be able to tell us exactly what the Government regard as unreasonable action by the banks. After all, as a shareholder, or at least a putative shareholder, in some of the major high street names, the Government will no longer be able to walk on by. I would say to the banks that they need to think carefully about how they treat their customers. After all, we as taxpayers have bailed out the banking system. Pulling the rug from under good firms’ feet would be neither wise nor acceptable.
Businesses in this country face a severe challenge, and for some it may prove fatal. We will return in time to the fundamental question of why, after 16 continuous years of growth, the nation’s finances are so poor. At this moment, however, the priority is to reach out and help the millions of small businesses that are the backbone of our economy. My party has set out a positive plan for action, and just as Ministers have helped the banking system, so the Conservatives stand by small businesses. They need help to manage their cash flow; we will provide it. They need supportive banking; we will enable the Government to achieve that. They need help to cut their costs. We believe that our plans could make a real difference to millions of firms and their staff. I urge the Government to adopt our ideas—as their own, if they wish—and to work with us to help our businesses survive and prosper in the coming months.
9.43 pm
The Minister of State, Department for Business, Enterprise and Regulatory Reform (Mr. Gareth Thomas): I agree with the hon. Member for Hertford and Stortford (Mr. Prisk) to the extent that the priority for the House and the Government must be to concentrate on what we need to do to help small businesses through the difficult economic climate that we now face.
This has been an important, interesting and useful debate, and it has highlighted the regard in which small businesses are held—to be fair, Members of all parties have demonstrated that—and the remarkable contribution of innovation, creativity and competitive challenge that small businesses bring to our economy. The debate has allowed the Government to highlight our continuing sense of responsibility to assist small businesses in navigating the difficult economic times that we are entering.
If I may, I wish to take this opportunity to salute the contribution to that agenda of my immediate predecessor. Lord Jones is a great ambassador for business in the UK, and if at times he is occasionally controversial, he is also a real enthusiast. I cannot promise a similar style, but all of us in the Department for Business, Enterprise and Regulatory Reform will be just as passionate for British business as he was. Indeed, I relish the chance to champion the imagination, dynamism and ability of our business people. I should say that Lord Jones has agreed to be one of 14 business ambassadors who will help the Prime Minister and the Secretary of State for Business, Enterprise and Regulatory Reform to promote British business overseas—I will also be involved. I welcome all their commitment and contribution to this agenda.
My hon. Friend the Member for Luton, South (Margaret Moran) rightly reminded us that when we think about small businesses, we need also to consider in our analysis the contribution that social enterprises can make to the economy and their specific needs in the economic circumstances that we face. We will indeed do that. I join the right hon. Member for Rutland —[Interruption.] Okay, just the hon. Member for Rutland and Melton (Alan Duncan)—I apologise for exaggerating his importance. I join him in welcoming the campaigns by both The Sun and the Daily Mail to champion the needs of small business. I shall discuss some of the specific comments that they have made in due course.
As the Minister of State, Department for Business, Enterprise and Regulatory Reform, my hon. Friend the Member for Wolverhampton, South-East (Mr. McFadden), rightly noted, outside organisations, not least one as significant as the World Bank, have said that Britain is still among the best places in the world to do business—it is second in Europe and sixth in the world. Of course, we cannot relax about that business environment. We know that many small businesses are facing considerable difficulties and will face more difficulties over the current period, so there will be much more for the Government to do in the months to come.
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