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21 Jan 2009 : Column 280WH—continued

So, it is clear that more needs to be done, and the right hon. Member for Oxford, East (Mr. Smith) was right to say that. May I say that I strongly support the mention of co-operatives? In this particular instance, they have an important role to play and he was right to touch on that. He was also right to mention home-based businesses.

Action needs to be taken, which is why in October and November we started to set out some practical ideas that could help small business. First, small and medium-sized enterprises need to be able to defer their VAT bills for up to six months. I recently met a logistics firm that is not dissimilar to the one already mentioned. It told me that the ability to defer VAT would be fantastic—after all, its quarterly VAT bill is about £90,000—and would provide immediate flexibility in relation to its bank balance.

Secondly, the smallest of employers—those with up to five employees—should be able to cut their payroll by 1 per cent. for at least six months. A typical firm with, for example, four employees would save about £600 over that period. That is not a huge amount, but as my hon. Friend the Member for Kettering said, for many businesses it is the difference between being in business or not being in business next month.

Thirdly, I have personally helped thousands of eligible small businesses claim the rates relief to which they are entitled. As we have heard, less than half of eligible small businesses claim that relief, yet it is worth up to £1,100 per annum. To help them, I have put on the web a simple online checker that even a technophobe such as myself can handle. It is very easy: someone puts in their details and their postcode, and they can see immediately whether they are eligible. They then print off the form and send it to their council. I am pleased to say that hundreds of firms have already used that service, which
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can be found at The point has been made that business rate relief should be automatic. As has been mentioned by a number of hon. Members, I hope that the Minister will respond to that directly. It is automatic in Wales, but what about England?

The actions I have talked about contrast sharply with what the Government have been doing. They have been talking a lot—there have been lots of announcements and press releases—but not doing much. For example, on funds from the European Investment Bank, which I think has been mentioned, the Prime Minister promised us in a press release of 10 September that he would get EIB funds flowing “as soon as possible”. In October, he said that again at the EU summit and repeated the pledge in November. Our competitors in France, for example, had already given €300 million to their businesses by the end of October. By December, the Italians, the Spanish and, indeed, the Czech Republic had handed more than €550m to their small firms. Yet when I asked the Minister in December how many millions of pounds our businesses had received, he was unable to give any examples. So, four months after that first press release, can the Minister tell me how many businesses have received the money and what proportion of the £1 billion due has been paid to British firms?

I have mentioned how Government dithering has failed to assist small firms, but unfortunately they have also put policies into practice that are actually hurting small firms in our constituencies. Let me offer three simple examples. First, the Government have changed the rules on capital gains tax, which will cost owner-managed businesses £250 million in this tax year alone. Secondly, as mentioned, they have levied business rates on empty properties, which will cost £700 million this year alone. Thirdly, as we have heard, we have, of course, also had the temporary cut in VAT announced in the pre-Budget report. We were told soundly by the Chancellor and, indeed, by the Prime Minister that that would kick-start retail sales and save the high street. Well, the British Retail Consortium has reported that December 2008 sales were the worst since records began—that was after the cut in VAT. Sir Stuart Rose at Marks and Spencer said it made “no material difference”. The cut in VAT not only failed to kick-start the high street, but cost business £300 million to implement. Those three policies—the change in VAT, the change in CGT, the rise and application of business rates to empty properties—mean a £1.25 billion increase in tax bills, just when businesses are facing one of the toughest economic climates that they can possibly imagine. I hope that the Minister will tell us how those policies have helped small firms.

This has been a timely debate and I know that hon. Members are keen to hear the ministerial reply. We have had some excellent contributions, which have highlighted the human aspect of what a recession is all about. I genuinely hope that the Government consider the outstanding suggestion of my hon. Friend the Member for Banbury that they should have a hotline and that Ministers, possibly including the noble Baroness Vadera, should have surgeries. That is important and I hope that the Minister responds to it positively. It might help ministerial work load as well as small firms, so I look forward to his positive reply.

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The bitter truth is that Labour’s schemes for small firms are not working. Recapitalisation failed to get credit flowing; the £1 billion that we were promised from the EIB has failed to materialise; and the VAT cut that was meant to help the high street has failed to do its job. Conservatives understand small businesses—often from our own practical experience—and we believe that they deserve better. They need practical help, their costs cut and Government off their back. Given the chance, we, as Conservatives, will help small businesses through the tough times and onward, once again, to prosper and get Britain working.

3.49 pm

The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): Thank you for your chairmanship this afternoon, Mr. Hancock. I, too, thank the hon. Member for Kettering (Mr. Hollobone) for successfully applying for this debate. He is absolutely correct to say that this is an issue of huge importance to our constituents and, indeed, to the whole country. He went through a number of examples of problems that individual small firms in his constituency face. If I gaze into my crystal ball, I can see some copies of Hansard being posted to various constituents and small businesses in the Kettering area, and, as Minister with responsibility for postal services, I look forward to that small increase in revenue for a very important national business. I also thank all parliamentary colleagues who have spoken today, raised various issues on behalf of constituents or small businesses and made suggestions. I shall try, in the limited time available to me, to set out the Government’s approach and to answer some of those points.

I must pick up on the onslaught about the number of Members in this debate. There have been, at different points in the debate, four Members on the Government Benches, and I can count four Conservative Members, two Liberal Democrat Members and one Member who sits as an independent. Small businesses are worried not so much about how many Members are sitting in the Chamber, but about their own fate. The hon. Member for Hertford and Stortford (Mr. Prisk) said that the Opposition understood small businesses. Well, that is a claim about which people will make their own judgment. All I can say is that many more small businesses exist now than when the Opposition were in power and that those businesses employ more people and contribute a huge amount to our national income. Some 13.5 million people—up by 1.3 million—are employed in small businesses, and they contribute about one half of our national output.

We heard in the debate that small businesses face significant problems due to the global credit crunch. First, we must remind ourselves of its extent and scope: the international banking system has been shaken to its very foundations in the past year; 1 million jobs have been lost in the United States in the past two months; Chinese exports are down; and the International Monetary Fund predicts that world output will fall this year—for the first time since the end of the second world war. The global economy has not experienced such shocks in modern times, and they are unprecedented in their scope, scale and confluence, which is why Governments throughout the world are having to act to support banking systems, credit and their economies.

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I turn to some of the measures that we have taken. In October 2008, we recapitalised the banks. There is an important point to make, because the hon. Member for Kettering talked about the large sums involved. It can be confusing to our constituents to hear sums that involve tens or hundreds of billions of pounds. First, however, it is not all direct Government expenditure but money that has been injected into the system in return for assets, charged at commercial rates, or taken the form of temporary loans. We should not give the public the impression that the huge sums announced represent normal Government expenditure that is spent once and never returned either to the Government or to the taxpayer.

Secondly, the recapitalisation was about intervening to save the banks not just for banks’ sake, but for the whole economy’s sake, because banks serve as the foundation of an efficient market economy and as the oil that allows the wheels to move. Without a stable banking system, I dread to think what the consequences would be for the small businesses about which the hon. Gentleman is quite rightly concerned.

The Ernst and Young ITEM Club’s chief economist noted recently:

That is the action that we took in October. We announced further measures in the pre-Budget report. I shall not go through them again here, but colleagues will know what they are: introducing empty property relief for properties with rateable values up to £15,000; and allowing businesses to apply for flexibility when paying tax bills. So far, more than 20,000 businesses that contacted the business payment support line have been given agreements to delay payment of tax, amounting to more than £350 million of tax. I thank the hon. Member for Croydon, Central (Mr. Pelling) for reflecting the positive impact that that has had on some businesses. As the Chancellor said at the time, it is important that Her Majesty’s Revenue and Customs shows some flexibility towards hard-pressed small businesses, and those figures show that that is happening and that there is some understanding of their difficulties.

I turn to the package that my noble Friend the Secretary of State for Business, Enterprise and Regulatory Reform announced last week.

Mr. Prisk: rose—

Mr. McFadden: But, before I do, I give way to the hon. Gentleman.

Mr. Prisk: I am grateful to the Minister, who is being generous with his time. He touched on rates, but will he respond to the question that several Members have asked—namely, are the Government minded to make business rate relief for small businesses automatic in England as it is in Wales?

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Mr. McFadden: I am always interested when the hon. Gentleman raises the issue of small business rate relief. I gently remind the House that the Opposition voted against the introduction of that relief, and that, when the vote took place, the hon. Gentleman was present in the Lobby trying to stop its introduction. I am interested in his conversion, which is always welcome, and, of course, we will consider representations on all those matters. I am sure that my colleagues at the Treasury and at the Department for Communities and Local Government will consider representations on the issue, but now, I shall return to the package that we announced last week.

We announced three measures, but I shall mention just two. First, there is the working capital scheme, which is about sharing risk between the Government and banks to free up lending. It is not a scheme to which individual companies apply, but it allows banks to put together portfolios of lending in which the Government can share the risk, freeing up lending to companies with turnovers of up to £500 million. Secondly, there is the enterprise finance guarantee, which will support up to £1.3 billion worth of bank loans to companies with a turnover of up to £25 million. That is a scheme to which companies can apply directly. Through all that, we are trying to free up lending to small businesses without replacing the proper banking function of judging who is entitled to a loan and who is not. We introduced those measures precisely because we understand the difficulties that small businesses face.

Turning to the issue of information and help for ordinary businesses and for hon. Members, I am quite happy to discuss with my colleague, Baroness Vadera—a Minister in the Department that covers small businesses— the suggestion that the hon. Member for Banbury (Tony Baldry) made. I agree that Members should be able to approach the Department, and I hope that it is clear that I am always available to Members of whatever political stripe if they wish to approach me about a constituency issue. That has always been the case, and we will do what we can on that front. Businesses should go to Business Link to check for information on the schemes. There is a website,, and a helpline, 0845 600 9006.

I have been able to respond only to some points, as is always the case with these debates, but, suffice it to say that we understand the importance of small businesses; we have taken action to support and to help them; and we will continue to do so in these difficult economic times.

Mr. Mike Hancock (in the Chair): Thank you very much, indeed, Minister. I thank all Members who took part in the debate for their courtesy to the Chair and to each other, which allowed everyone to get in. That co-operation is very helpful.

3.59 pm

Sitting suspended for a Division in the House.

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4.13 pm

Clare Short (Birmingham, Ladywood) (Ind Lab): I am grateful for the opportunity to report to the House on my recent visit to Gaza. Also, I wish to press the Government to do more to uphold international law.

It is my view, and that of many others, that if international law were upheld, there could and would be two states in Palestine, and we could look forward realistically to peace, but Israel constantly flouts international law, and the United States, the United Kingdom and the whole of the European Union collude in that. Thus, Israel concludes that might is right and uses its massive armaments to kill and bombard any who resist the constant expansion of its borders and land.

Currently, we face the prospect of decades of bloodshed, conflict and bitterness in the middle east. We also see the authority of international law and the moral authority of the United Nations being eroded. That, alongside growing environmental strains and population growth in the poorest countries, promises a grim and disorderly future if we continue on the path that we are on.

I reported briefly in the topical debate on Thursday 15 January on my visit to Gaza with a group of European parliamentarians in early November. I and other Back Benchers had six minutes to speak in the debate. Given that the Conservative and Labour leadership agree on the policy towards Israel but are out of tune with the views in the country, such limited time for Back-Bench dissent is unhealthy, but it is the reality that the House of Commons has experienced during the terrible crisis in Gaza.

I had a letter from a member of the public who was much distressed by events in Gaza. He watched the whole of the topical debate and was shocked that it ended with no vote and no action. I agree with him that the debate on Gaza demonstrated the weak and increasingly feeble state of the House of Commons.

During our visit to Gaza, we witnessed the shortages of food, paper and pens in the United Nations Relief and Works Agency schools, and shortages of water, pharmaceuticals and other medical necessities. Even more dreadful, the sewage systems are not adequate. Raw sewage is pumped into the sea. There are plans for new sewage treatment plants, civil engineers are available and donors’ funds have been committed, but Israel will not permit the materials to be imported. When it rains, sewage floods into people’s homes, and because the Israeli navy fire on the fishermen if they go beyond a five-mile limit, hungry people eat polluted fish and are constantly ill. Half the children of Gaza are anaemic, and, even before the recent bombardment, large numbers were severely traumatised by the endless threat of violent attack.

Israel also controls the import of EU-provided fuel for the power plant that gives light and power to Gaza. As everyone knows, Israel has partly bombed the power plant, but, as we left, it blocked all imports of fuel, and Gaza was cast into almost total darkness. The hospitals were run-down and lacking materials even before the terrible strains of coping with the injured from the three weeks of bombardment that have just ended.

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Gaza is a prison. It is a large, crowded Bantustan of 1.5 million people on a strip of land 25 miles by six or seven. Seventy per cent. of them are refugees who were ethnically cleansed by the Israelis from other parts of Palestine. Half of them are children. Israel withdrew its settlements in September 2005, but it controls the borders and access to the sea and air. It has bombed the airfield, which therefore cannot be used. Young people with scholarships cannot get out to take up their places, and sick people who cannot be treated locally cannot get out for medical care.

Gaza is a prison—and that, of course, is why the tunnels exist. We went to Rafah to see them. Yes, some explosives may come through, but mostly what comes through are the necessities of life. British prisoners in Nazi prisoner-of-war camps built tunnels; Sarajevo built a tunnel—imprisoned people build tunnels. Now Israel has destroyed Rafah and the tunnels. It wants complete control of Gaza and for the people to lie down abjectly and accept their imprisonment.

The tightening of the siege with full support from the EU, the UK and the US was the result of the Palestinian people daring to vote in internationally scrutinised elections for a majority of Hamas parliamentarians in January 2006. Following that, the Palestinians formed a Government of national unity, but Israel, supported by the US, did not want that. It is a matter of record that the policy supported by the UK was to incite division between Fatah and Hamas and to support fighting in Gaza. I understand that Britain supplied arms to the Fatah forces—that comes from authoritative sources.

In response, Hamas took over Gaza. UNRWA staff told us how much safer life was without the conflict and roadblocks, but then the world besieged Gaza, imposing collective punishment on the people. That is an offence in international law, which lays down how people should be treated in occupied territories, but, as I said, none of the high contracting parties to the Geneva convention, including the UK, stand up for international law in the occupied Palestinian territories.

Mr. Andrew Smith (Oxford, East) (Lab): I have listened with great interest to the description of the awful humanitarian situation in Gaza. Is it the case that the readiness to ensure that breaches of international law and alleged war crimes are investigated and prosecuted is critical not only to the future of the middle east, obviously, but to our many constituents who care about the matter, especially those in the Muslim community, and much more widely as well? The perception of double standards damages the prospects for international peace and can also sour relations between the Islamic world in general and the rest of the community. Building bridges by ending those double standards is critical for the way forward internationally and for solidarity at home.

Mr. Mike Hancock (in the Chair): Order. You are slightly pushing your luck, Mr. Smith.

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