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I want to add to my hon. Friend’s comments by drawing to the attention of those on the Treasury Bench the reality faced by many small businesses. I make no apology for repeating some of the things I said in my contribution on Friday in support of the Bill promoted
by my hon. Friend the Member for Mid-Worcestershire. I am sorry the Bill was not accepted by the Government at that time.
The truth of the matter is that small business faces a harsh reality that is quite unique. It has never faced such a situation before. I worked in a small business in 1979-80 and created my own in 1989-90, and both those periods were pretty harsh. But believe me, this situation is unprecedented. Small businesses face problem upon problem, and I shall give just four examples.
Cash flow is a real problem, especially when caused by a one-off debt default. For a small business, it is a massive problem when someone does not pay a bill of £5,000 or £10,000. That might not seem a lot in the great world of the City, or in the portals of the headquarters of the CBI but in our market towns up and down the country, it is the blow that puts small businesses out of business, especially if the Government’s promised schemes are not forthcoming, which they are not at the moment. The truth is that the money is not getting through.
Debt repayment times are lengthening. For a small business—not in the cash business—that invoices every month and expects its money back in 35 days, the period is now extended to 60, 65 and 70 days. If businesses cannot get that working capital, that alone has the potential to put them out of business. Working capital is at a massive premium, and cash is king.
So what are businesses doing? They are reviewing staff—I said this on Friday, and I repeat it so that the current Front-Bench team can take note—and cutting staff. Small businesses with 10, 15, 20 or up to 140 or 150 people are asking themselves how they can make savings, because their working capital—their cash flow—is under great pressure. They are tightening credit controls—if they were invoicing every month, they are now invoicing every two weeks, and some are doing so every week, in an attempt to ensure that the cash flows in.
Finally, small businesses are cutting back on capital expenditure programmes, marketing and advertising budgets. All that tightening does not help the Government or the economy, because it means more unemployment, less spending and a deepening recession, and all for the sake of working capital and help with cash flow. The Government have been spreading new projects as though broadcasting or sowing in a field of corn, but most of those projects are not doing the job that the Government tell us that they are doing. The money is simply not getting through.
I urge the Government, as I have on several occasions, to tell me about their assessment and monitoring of those schemes. I have not had an answer, which suggests to me that we are not monitoring and assessing how those schemes are working. That is a major problem, and I urge the Minister to take that on board and ensure that the Government understand what is happening in the real world. Although their fine words are welcome, the fact that what they say is not being put into effect certainly is not. It is causing businesses to go to the wall.
BDO Stoy Hayward says that 33,900 small businesses will close this year. If that does not make the point that there is an urgent need, I do not know what does. Let me assure the Minister that for most small businesses there is only one game in town—survival. Their only objective is to be around this time next year. I urge the
Minister to take that on board most seriously, because as BDO Stoy Hayward and businessmen in our constituencies tell us, businesses are going to the wall for want of working capital and help with cash flow.
I am concerned about the sector, and about the lack of monitoring, accountability and assessment of how well the Department is doing. Let me give a couple of examples. In 2005, 11.6 per cent. of adults in Britain were considering going into business, and the Department made it an objective to turn that into 12.3 per cent. The Department’s 2007-08 report made it clear that there had been no change, but the reasons for that are simply not in the report. The Department does not know why it did not hit its targets or achieve its desired figures.
The audit report of August 2006 found that there were 3,000 national, regional and local government projects to support small and medium-sized businesses. The Government wanted to reduce that figure to 100. The report also criticised the Government for not assessing and evaluating the effectiveness of those projects. So what has happened? I have asked questions about the monitoring of the objective to cut the number of schemes from 3,000 to 100, and asked questions on three separate occasions. If Members can believe it, I phoned the Department today, and asked how many of the 3,000 had either been amalgamated or ceased to exist. I was told that the Department did not have a list of the 3,000. It defeats me totally how one can amalgamate, take over and carry out the work of 3,000 different projects if one does not know what they are. If one wants a cut to 100, it would seem essential to know the starting base. However, the Department simply does not know.
The Government can use fine words to tell us about their schemes again and again, but unless they are prepared to monitor and assess the effectiveness of those schemes, and to fine-tune them when the assessment tells them that they are not as successful as they need to be, the Department is wasting its time, and so are the Government. There is no way that they will achieve their objectives unless they know the performance of the schemes. It is no good just talking about new projects unless they also talk about the delivery vehicles, and assess and monitor their performance. The truth, however, is that that assessment and monitoring are simply not happening. I checked Lord Mandelson’s speech on the new schemes that he would put in place, and it contained not one word about how he would monitor or assess their performance.
I do not have to tell you, Mr. Deputy Speaker, how vital the small and medium-sized business sector is to the well-being of our country. I do not need to tell you that most of the job creativity over the past six or seven years has come from that sector. I do not need to tell you that most of the original thinking—about 70 per cent., it is estimated—has come from that sector. I do not need to tell you that the supply chains are totally dependent on small and medium-sized businesses. For example, Airbus, in this country, employs 13,000 people directly, but it employs a further 140,000 in 400 small and medium-sized businesses throughout the country. That simple fact underlines the vital importance of the sector to UK plc.
John Bercow (Buckingham) (Con): I am extremely grateful to my hon. Friend for giving way, because he is presenting us with the benefit of his considerable commercial acumen and experience.
Am I not right in recollecting that somewhat over 99 per cent. of businesses employ fewer than 100 people, that those businesses account for somewhat more than 50 per cent. of the private sector work force, and that they generate two fifths or thereabouts of our national output?
Mr. Binley: My hon. Friend is absolutely right. I am grateful to him for further emphasising the importance of the sector, thus helping me to make my point effectively.
When we talk about small and medium-sized businesses, we are talking about a sector that will lie at the very foundation of any recovery from recession when green shoots appear. We need to ensure that that sector is as healthy as it can be, we need to ensure that it retains its skills, and, most of all, we need to ensure that the necessary structure is in place.
Mr. Cash: My hon. Friend may be intending to deal with this point later, but in the light of the telling figures given by my hon. Friend the Member for Buckingham (John Bercow) and in the light of his own excellent speech, does he not agree that one of the most crippling problems for small businesses is over-regulation? They complain about that almost as much as anything else, and rightly so. Is it not in the Government’s gift to repeal legislation of this kind, whether it comes from their own Departments in the United Kingdom, from across the board or from the European Union, and does not the failure to do so let down small businesses? The Federation of Small Businesses, the Forum of Private Business and many similar organisations are leading in this regard, and they deserve full support.
Mr. Binley: I thank my hon. Friend for making that point. On a number of occasions I have called for sunset clauses to be included in every new regulation that the House accepts. I have also called on the Government to stop gold-plating, and have pointed out that they have been found to have gold-plated 62 per cent. of a number of sets of regulations. It is not only Europe that causes regulatory problems and increases the regulatory burden faced by business; it is our own Government as well. But of course we can do something about it in both quarters, and I hope that we will.
The Government have made promises about regulation, but again we have not seen the results. Indeed, we heard earlier in the debate that a supporter of the Government felt that some of the remarks made about cutting regulation were silly. I thought that a rather silly thing to say, because I know what businesses are feeling out there. They feel that they are being overburdened, week in week out, year in year out, by additional regulation that is costing them a great deal of money.
I call on the Government not only to consider the projects that they spread around, the new deals and the promises that they make to the wealth-producing sector, but to recognise that while it is easy for them to make promises, they increase frustration and cause immense concern in the business sector if they fail to keep those promises. When the Government say that something will be put into effect, businesses expect it to be in effect when the Government say that it will be. They said that their loan guarantee scheme would come into effect on 1 March, but it was not there on that date. People ask for papers and cannot obtain them: they do not exist.
I ask the Government, and the Department, to be particularly aware of the need to monitor, to assess and to fine-tune in a way that will help business, and to report to the House regularly on that monitoring. So far, they have failed to do so.
6.45 pm
John Penrose (Weston-super-Mare) (Con): Today’s debate has centred on two crucial issues: the accountability of the BERR ministerial team to this House of Parliament, and the Government’s ability to deliver and implement the various promises and initiatives that they have announced.
The debate was ably and lucidly kicked off by the Chairman of the Select Committee, my hon. Friend the Member for Mid-Worcestershire (Peter Luff), who set out the case admirably. He was followed by another Select Committee Chair—the hon. Member for Ellesmere Port and Neston (Andrew Miller), who is not here at the moment, although I am sure he will return soon—and was bolstered by others making the same points: the hon. Member for Winchester (Mr. Oaten), my hon. Friend the Member for Banbury (Tony Baldry) and, in a typically rumbustious and passionate contribution, my hon. Friend the Member for Northampton, South (Mr. Binley).
This is the crucial question relating to accountability: is the Department for Business, Enterprise and Regulatory Reform truly accountable to the House of Commons, the directly elected, most democratically legitimate Chamber of Parliament? I'm afraid the answer must be “not really”. Of the seven BERR Ministers, four—more than half—sit in the House of Lords, and five are part-timers shared with other Departments. During one of the most severe economic crises in a generation, possibly in several generations, the Government have just two full-time Business Ministers. They are led, of course, by Lord Mandelson, the puppetmaster controlling policy from a safe distance in the House of Lords, where he does not have to face Members of Parliament directly.
Mr. Angus MacNeil (Na h-Eileanan an Iar) (SNP): I am listening carefully to the hon. Gentleman’s speech. Is it his party’s policy to create an elected upper Chamber, if it were ever to come to power?
John Penrose: I am struggling to work out how that intervention is directly relevant to the BERR estimates. Perhaps the hon. Gentleman would like to take up the point with me later.
My hon. Friend the Member for Mid-Worcestershire presented the various options that might be pursued to improve the accountability of Lord Mandelson and other House of Lords Ministers to the House of Commons. He mentioned the excellent footnote in his Committee’s report stating when such a thing last happened. I understand that the Duke of Wellington was invited to answer questions here in the House of Commons. When he walked into the Chamber, the entire House rose spontaneously in a demonstration of admiration and support for the great man’s abilities. I just wonder whether the same would happen if Lord Mandelson turned up here. I know that Labour Members hold him in the highest regard, and that it is their great aim to make him loved by their party. Perhaps we could try it; then we would see how they genuinely feel.
Before we go any further, let me say that I am sure the Minister is eager to point out that in Lady Thatcher’s Government, the then Department of Trade and Industry was also led by a peer—Lord Young—for a time. The difference is that Lady Thatcher continued to ensure full House of Commons accountability by ensuring that the DTI was headed by not one but two Cabinet-level Ministers, one of whom—my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke)—is sitting next to me: one for the Commons and one for the Lords.
The comparison between then and now is not flattering. I mean no disrespect to the individual BERR ministers in the House of Commons, who I am sure are all assiduous and hard-working, but the plain fact is that their roles and authority have been reduced by this Government from one of the plum jobs in Westminster to the shrivelled and wrinkled parliamentary prune that we see today.
The second issue is delivery, and it was the subject of much debate.
Tony Baldry: Before my hon. Friend moves off the question of accountability, there is a second point that has been made by many Members in the Commons, which is that some of those Ministers who sit in the Commons also serve in other Departments. The future of business rates is one issue of current concern to businesses, particularly small-shop retailers. One would expect BERR Ministers at least to be advocates in that respect within Whitehall, but how can they be so if they are simultaneously Treasury Ministers, for example? They are totally schizophrenic on this issue because they seek to serve two Cabinet Ministers, which it is impossible to do properly.
John Penrose: I completely agree with my hon. Friend. The Chair of the Select Committee, my hon. Friend the Member for Mid-Worcestershire, made the same point, saying he thought Whitehall would work better if there were a tension between the Departments and each set of Ministers were putting across their view—not trying to reconcile internally, but batting for their own team properly.
The problem of delivery will be familiar to every business man and woman throughout the country. They can have the best, most expensive, glossiest strategy or business plan in the whole world, but it is not worth a penny if they cannot put it into practice. The Government’s record in this regard is spectacularly awful. Regulatory reform has been mentioned. In 2005, the Government promised to cut red tape by a quarter by 2010. We are now just a few months away from that deadline, but the British Chambers of Commerce “burdens barometer”, which tracks these things, tells us that the costs of red tape and regulation have got worse, rather than better, every year since it began.
It is not just red tape and regulation that have got worse. We are in a credit crunch, so the Government have rightly pledged to pay their suppliers promptly—within 10 or 14 days, depending on which announcement we believe—to help their cash flow. That is admirable, except that many NHS hospital trusts are, apparently, routinely failing to pay their suppliers within 30 days—far beyond Ministers’ much-hyped promises.
Even worse for Great Britain plc, what about all the different loan guarantee schemes, personally announced by Lord Mandelson, which are supposed to get the banks lending again, and which the Government have launched amid huge fanfare over the last few months? I am afraid it is clear that they have stalled. The working capital scheme was supposed to be the Government’s flagship measure for getting credit moving in the economy. It was announced way back in January, but as of last week it had not guaranteed a single loan. The enterprise finance guarantee scheme was supposed to help small firms. It was announced in January but, as we have heard from the hon. Member for Winchester, the Federation of Small Businesses says that only 8 per cent. of its members can find a bank that is actually offering it. The loan guarantees scheme for car manufacturers was announced in January, but the Government have only just asked for applications from firms needing help, and they have not disbursed a single penny so far. The Government’s guarantee scheme for asset-backed securities was announced in January, but will not start until April. The home owners mortgage support scheme was announced last December, but has not yet helped a single family that is falling behind with its mortgage. The recruitment subsidies scheme to get people into work was launched in January, but has so far not helped anyone to get a job, and the graduate internships scheme was announced in January, but has not even got a launch date yet.
For the Government who are supposed to be the voice of business to be so weak on delivery and implementation is scandalous. As Alan Sugar has repeatedly rightly said on “The Apprentice”, business men and women need to be practical. They need to be doers, not just talkers. They have to make things happen but, as this list of delay and failure shows, these Ministers and this Government are far better at press releases and glossy announcements than they are at the grubby, and often messy, business of delivery and implementation.
I suppose we should expect that from a Department led by Lord Mandelson. The PR and spin are excellent, but the follow-through is rubbish. If the Secretary of State and his team were applying for jobs on “The Apprentice”, I doubt that they would last 10 minutes. The electorate of this country have reached a decision, too. Their message to this Government is very simple: “You’re fired.”
6.55 pm
The Minister for Trade, Development and Consumer Affairs (Mr. Gareth Thomas): I, too, welcome the opportunity this debate provides to look at the measures that the Government, and particularly the Department for Business, Enterprise and Regulatory Reform, are taking to help our families and businesses through the current difficult economic times.
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