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21 Jan 2009 : Column 273WH—continued

It is imperative to support small local shops. In my village of Shawbury, I always make a point of going to Citadel Farms, which is run by a local farmer, Chris Williamson, and his wife. Their farm shop sells only
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locally produced food and meat. When supermarkets such as Tesco, Sainsbury’s and others are making huge profits, it is important that we all play our part in supporting our small local shops, rather than always going to supermarkets.

Our farming community is facing epidemic problems. While preparing for this debate, I spoke with many farmers who said that they are struggling with huge amounts of red tape. What with the Rural Payments Agency and the Department for Business, Enterprise and Regulatory Reform, they have reams of paperwork to fill out.

The BBC website has an article today entitled “Small firms fighting the economy blues”, which includes 10 or 12 case studies. I often criticise the BBC—I refer to it as the liberal elite—for being in another world. The case studies show how small firms are persevering and doing extremely well in this economy. The BBC is so detached from reality that it does not comprehend the appalling situation faced by our small businesses, which is, as my hon. Friends have said, unprecedented. I look forward to hearing from the Minister about what direct steps the Government will take to help small businesses.

Mr. Mike Hancock (in the Chair): Three Members want to speak. Will hon. Members promise to look at the clock in order to give everyone a chance to have at least three or four minutes? Can we be that generous to each other?

3.20 pm

John Barrett (Edinburgh, West) (LD): Thank you, Mr. Hancock, and I will do my best to be very brief.

Support for small businesses is absolutely vital, as everyone here today has said. Before I came into Parliament, I ran two separate small businesses, but I cannot believe that there is one Member in any party in the House who has not been contacted by a business that needs some help at this time.

Recent events should have brought the banks, businesses small and large, finance companies and leasing companies together. However, what has happened has bewildered many people, as banks have received billions of pounds of public funding while at the same time tightening the screws on small businesses. The banks have not been supportive or passed on interest rate cuts. Instead, they have done the opposite by raising charges, withdrawing services and removing facilities.

Many years ago, when I was in the States, the motto of the Fleet Bank of America was that a bank should be more than a source for money; it should be a force for positive good. However, we are seeing the complete opposite of that today. In my constituency, Royal Bank of Scotland and Halifax Bank of Scotland are two of the largest employers, yet, at the same time, I am constantly contacted by businesses that use those two banks saying that their bank is not only failing to support their business but being an absolute hindrance by changing the terms of their loans and pulling back on facilities.

Ironically, the owners of a business based in the Chancellor of the Exchequer’s constituency—Edinburgh, South-West—live in my constituency, and that business has been affected. I have contacted the Chancellor and will be delighted to provide the Minister with the full
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details today, because what is unfolding in the Chancellor’s constituency is an absolute outrage. The banks are receiving billions of pounds of our money, which includes the employees of that certain company, but unless the banks do something that business is in serious danger.

We have seen public money going into the banks to keep them in business, but those benefits have not been passed on. We cannot continue to pump money into the banking system without an assurance that the banks will take immediate action to support small businesses. Time is of the essence.

Today, record levels of unemployment have been announced, and I fear that many companies north and south of the border and across the width of the country are close to the edge. We have an opportunity to keep a lot of small businesses in business, if the Government get together with the leading lights in the banks to ensure that the money works its way into businesses. Those businesses are not asking for charity; they are asking for a level playing field, so that they can provide work and services, employ their employees and pay their taxes, including their company taxes.

Many of these small businesses are running at a profit, but they face severe cash-flow problems. I would be grateful if the Minister, when he is winding up today, were to assure me that the Government will do everything that they can do to ensure that the banks support these businesses. We are not asking the banks to loan money to businesses that are not good investments. Unfortunately, however, unless things change, very good businesses will not be able to trade, because of the banking system’s lack of co-operation.

3.23 pm

Tony Baldry (Banbury) (Con): In the past, owners of small businesses and self-employed people, as mentioned by the right hon. Member for Oxford, East (Mr. Smith), went to the banks and raised money on the collateral of the equity in their homes. That is clearly not happening; the value of homes is going down and the banks have just not been lending. As has been said throughout this debate, what is actually needed is credit. The Government have come forward with a scheme—the enterprise finance guarantee scheme—but that scheme still requires the banks to guarantee 25 per cent. of the loans involved; the Government will guarantee 75 per cent., but the banks will have to guarantee 25 per cent.

This afternoon’s debate is not the opportunity or the occasion for a general beat-up on Ministers. Over the next few months, as the unemployment figures creep up, we will all encounter individual constituency cases where people have problems. I have the hotline numbers for Jobcentre Plus and Her Majesty’s Revenue and Customs, but what I want to know from the Minister is who, given his Department’s responsibilities, will give me authoritative answers to questions relating to small businesses and small business programmes? In other words, if the owner of a small business in my constituency comes to me and says, “I have been to the bank for the enterprise finance guarantee scheme and it has turned me down,” I do not want to spend two months writing to the Minister, getting a letter back from his private office and so on and so forth. I want someone locally. Is that person in the South East England Development Agency, or are they in Business Link? Who has the
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authority of the Minister and his Department to talk to Members of Parliament and get such matters sorted, because we are in the business of problem solving?

It would be helpful if the Minister were to take up my idea of having occasional surgeries for small businesses. I appreciate that his Department is pretty stretched at the moment in terms of Ministers, because the Secretary of State is in the House of Lords, one Under-Secretary of State is in the Commons and two other Ministers are shared with other Departments. I understand that quite a heavy work load has fallen on his shoulders. However, rather than feeling that the only way in which Members can get heard is to secure Adjournment debates, if we were to have regular surgeries to bring generic problems to him, it would help us, and I suspect that it would help him and his officials.

3.25 pm

Mr. Andrew Pelling (Croydon, Central) (Ind): It is a great pleasure to serve under your chairmanship, Mr. Hancock. I particularly want to thank the hon. Members for Banbury (Tony Baldry) and for Edinburgh, West (John Barrett) for their courtesy in providing me with the time to speak in the last few minutes before comments from the Front-Bench spokesmen and the Minister.

Debates such as this provide an opportunity to give constructive feedback to Ministers about how their initiatives to provide support for both small businesses and the economy as a whole are having an effect or otherwise. I think that the Government are determined to move as quickly as possible in fast-moving markets to provide effective support. However, it also needs to be borne in mind that the uncertainty that is created for small businesses, which are perhaps awaiting yet further radical action by the Government, often means that such businesses wait before making decisions, which in itself leads to a reduction in economic activity.

It is clear from the feedback that I have received from smaller businesses in Croydon that there is a real welcome for the announcement by the Government on the delay of corporate taxation payments. That announcement is going down very well, and it is certainly helping to oil the wheels of business. However, I have received another important piece of feedback from businesses about the Government’s new loan guarantee scheme. The immediate impression is that the maximum amount of turnover to qualify as a small business under the scheme, which is £25 million, means that many banks are putting an emphasis on those companies that have turnovers between £20 million and £25 million, which means that businesses with lower turnovers are not necessarily seeing the benefit of that important Government initiative. Perhaps further consideration needs to be given to the fine tuning of the operation of the scheme when, in effect, the very generous approach that the Government have taken in providing money is not necessarily delivering the improvement that they would like to see.

For small businesses dealing with financial exigencies in the coming months, because they will no longer have the assets to call upon to provide support for their businesses, it is likely that there will be more company voluntary arrangements, or CVAS, whether those are personal arrangements or some kind of compromise in terms of the business. That is a very real problem.

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I am very grateful for the input that I have received from Croydon Business and from other businesses within Croydon. In many ways, Croydon is an useful example to consider in order to gain an immediate view of how the Government’s initiatives are getting on. We have a large public sector and some very large businesses, such as Nestlé, but south London is typified by a huge range of very small businesses and even micro-businesses. It is interesting to see the way in which Government policy is having a positive or negative effect on the performance of all those businesses. I am particularly grateful for the work that is being done by a gentleman called Jeremy Frost, whose business is much busier than many others because it deals with the challenges of potential insolvency, which is unfortunately a growth business in Croydon.

It was suggested earlier that the effect of the VAT cut has been very small, and I think that that is the case in terms of the efficacy of the approach. However, that does not necessarily mean that that approach to helping retailers is a bad policy; it is just a matter of scale. The Government need to remember that a £20 billion stimulus to the economy is in fact very small, when one considers that the effect of the decision to crash Lehmans into an emergency default, rather than a managed default, is estimated to have cost about £70 billion in unexpected losses.

Often, it is a matter of degree. Perhaps Government policy on helping small businesses and the economy as a whole is developing with the realisation that it has to be about scale. However, I do not understand and would be interested to know why the Government did not feel able to pursue the bad bank solution in dealing with this week’s crisis in the financial markets.

3.30 pm

Lorely Burt (Solihull) (LD): I congratulate the hon. Member for Kettering (Mr. Hollobone) on securing this important debate. He has presented a moving and clear picture of the plight of small businesses, as have other hon. Members, so I shall not prolong the agony by describing small businesses in my constituency. Instead, I shall comment on the solutions that hon. Members have suggested and shall give a couple of my own.

The hon. Member for Mid-Worcestershire (Peter Luff) talked about the small business rate relief being paid automatically to small businesses. That was a valuable suggestion, and I should like the Minister to comment on why that would not be possible, because it seems an obvious thing to do. The smallest businesses are often those with the least access to information about the help available to them, so it is incumbent on the Government to help them as much as possible, as they need help the most and are the least likely to know about it.

Empty property rate relief has been mentioned, and I have tabled an early-day motion on that today. The rate relief for rateable values of up to £15,000 is extremely welcome, but one does not get much, in terms of rateable value, for £15,000. If one is in a town centre, or is lucky enough to be in the beautiful constituency of Solihull, that £15,000 really does not cut it. Today, I have asked hon. Members to sign my early-day motion, which says that we should consider extending that upper limit of £15,000. Perfectly good properties are being demolished and other properties are being offered for peppercorn
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rents by property owners who are unable to afford the rates on properties that are not generating any revenue. A gentleman in my constituency is offering warehouse space at 50p a square foot. That is unbelievable, and we must do something, otherwise there will be no empty properties available, come the upturn, to facilitate all the things that we need.

We have heard some tragic stories about the banks. I shall not single out the particularly guilty ones, but their insensitive and inflexible treatment of some small businesses beggars belief. They are not doing what they have been asked to do and are reducing overdrafts even when they are not being used. They are reducing credit terms and increasing costs. They are withdrawing credit and loans altogether, without even letting people know and without considering what effect those actions will have on jobs and on people’s lives.

The hon. Member for Kettering mentioned cash flow and the lengthening of payment dates. Small businesses are being squeezed in both directions—by the banks and by the companies that they supply, which are increasing how long they take to pay—so they are stuck between a rock and a hard place.

On solutions, the Government have done a number of brave things to try to help business, and we should acknowledge all that they are trying to do. For small businesses, in particular, we have had the enterprise finance guarantee scheme, which will be okay as long as the money flows through. I am worried about how long it often takes for Government-initiative money to reach the individuals who desperately need it. If someone has been in a road accident and is bleeding to death, one would not make them fill in a long questionnaire before applying the tourniquet. It is important to make sure that that money reaches those small businesses as quickly as possible.

The Government’s initiatives support small and medium-sized business, but not large business. I mention large business because every large business has a supply chain of small businesses, and those supply chains are suffering at the moment—none more so than the motor industry. For every job with a car manufacturer, there are about five in the supply chain, so it is of great concern that the Government have not made any announcements about the car industry. That is a particular concern in my constituency, where Land Rover has already laid people off, and we have heard about Honda postponing further production for another two months. The situation could not be more urgent for all employees in the UK.

The Government have said that they will spend £10 million on development, but only 16 per cent. of contracts with Government bodies go to small business. The Federation of Small Businesses has suggested that organisations that spend our taxpayers’ money could make tender contracts smaller. As I said to the hon. Member for Kettering earlier, if the Government intend to pay on time, that must be conditional on a faster payment passing down the supply chain, so that the big fish do not get fatter at the expense of the small individuals who, if I may mix my metaphors, are trying to get the crumbs from the table. Will the Minister tell us how many shovel-ready contracts the Government are in the process of giving the green light to?

On procurement, the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) talked about the barriers to becoming an approved supplier. There is
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something called the small business concordat, which has been signed up to by a small number of local authorities. In a recent White Paper, the Government expressed the aspiration that 30 per cent. of their procurement should go to small local businesses. Will the Minister report on how they are doing on that target and how that is being measured? They are spending our money, so will the Government consider improving the procurement requirement that often closes the door in the face of small business?

Trade credit insurance has been mentioned, and it is terribly, disproportionately damaging to small businesses that cannot ensure their credit sources. The Government have promised to look at improving the situation, so will the Minister tell us what progress is being made?

On apprenticeships, there is another Government initiative to create more. Some 69 per cent. of all apprenticeships are with small business, but the FSB has found that only 5 per cent. of its members are aware of potential wage contributions toward apprenticeships. We have talked about automatic payments. Could not whatever a business is entitled to when it takes on an apprentice be levied automatically?

On flexible working, it is much easier for a small business to agree flexible, part-time working than to lose people altogether. By doing so, they can keep skilled workers on stream and at least keep people in some work if not in full-time work. The FSB has asked for tax exemptions for people working for up to 15 hours. Will the Minister ask for suggestions for tax relief, especially for small businesses, so that flexible working can easily be facilitated? As we know, administration is five times more time-consuming for a small business than for a larger business.

In conclusion, nothing is going to affect this economy until the banks start lending again. The British taxpayer is now in hock for unspecified millions of pounds, and the Government have written a blank cheque. We already own 70 per cent. of the Royal Bank of Scotland. If we nationalise the weaker banks, it could release the stranglehold on lending that we have in this country. The Government can do lots more, and hon. Members have provided many good suggestions. I will sit down now to allow the final speaker to contribute and the Minister to give, I hope, constructive suggestions in his response.

Mr. Mike Hancock (in the Chair): I am delighted that you have kept to your time. I call Mark Prisk.

3.40 pm

Mr. Mark Prisk (Hertford and Stortford) (Con): I also congratulate my hon. Friend the Member for Kettering (Mr. Hollobone) on securing this timely debate. As all of us know, he is an assiduous Member who works comprehensively for his constituents; they are fortunate to have such an effective representative.

A number of contributions have described how many constituents’ small businesses are facing a harsh economic winter and how falling demand and shrinking credit means many fear for their survival. The contributions of my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) and, obviously, my hon. Friend the Member for Kettering brought out the human cost of what a recession really means. No wonder,
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therefore, that ministerial talk of green shoots was met with such derision last week. The problem is that such comments say to the public that the Government are now detached from their world.

As someone who started my own firm at the bottom of the last recession, I understand the stress and strain that many of the small firms that we have talked about today are facing. That is why last October, my Conservative colleagues and I called for action to help cash flow and action on working capital. That is why last November, we called for a national loan guarantee scheme of £50 billion to underpin bank lending to business. The scheme was simple and open to all businesses in all sectors. Its aim was to support good firms through tough times. My hon. Friend the Member for Banbury (Tony Baldry) rightly highlighted the importance of that issue.

Last week, the Government finally offered us a pale imitation of that scheme. I am pleased that they have finally realised the need for it, but why has it taken so long? The Federation of Small Businesses has told us that 10 businesses go bust every day. Why has it taken Ministers two months to draw the scheme together, and why limit the scheme to cover for £20 billion, not £50 billion? Also, why limit its remit to selected firms, as the hon. Member for Solihull (Lorely Burt) pointed out? Martin Weale of the National Institute of Economic and Social Research has said:

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