Enterprise Initiative

Part of Prayers – in the House of Commons at 12:20 pm on 4th March 1988.

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Photo of Mr James Cran Mr James Cran , Beverley 12:20 pm, 4th March 1988

My hon. Friend has made an eloquent point, to which I do not think I need add. The facts speak for themselves.

I am an enthusiast for the enterprise initiative. I say that having had considerable dealings with the Department of Trade and Industry for some years. In the years before this Government and the White Paper of which the enterprise initiative is part, all that we had from the DTI was interventionism of one sort or another. We looked at certain sectors and decided how they could be improved. We spent £20 billion for 20 years on regional policy, and in the end I do not believe that any of us received the value for money that we wanted.

That is why I consider the White Paper quite revolutionary. This is the first time that I can remember that the DTI has been so strongly associated with the word that was used by my hon. Friend the Member for Welwyn Hatfield (Mr. Evans)—entrepreneurship. I am delighted at that, because I well remember trying to tell the CBI a few years ago that it should sponsor a crusade for entrepreneurship. I believe that this was the way to strengthen the regions of the United Kingdom, make more successful the businesses that were already there, and, indeed, to encourage more new businesses.

I could not interest the CBI in that proposition, for reasons that I need not go into here. In addition, the hon. Member for Yeovil (Mr. Ashdown), who is no longer in his place, spent a long time telling us that the practice of past Governments was right, and that we needed a formalised industrial strategy. What he did not tell us was that it is clear from consulting the business community, the CBI and the Association of British Chambers of Commerce that not a man jack of them wants that sort of industrial strategy.

What the business community wants and what it has got from the Government are the conditions in which it can take the marketing and strategic and other decisions necessary to decide the future of its businesses. I was disappointed that the hon. Member for Yeovil did not give a balanced picture and admit chat there are many people who do not want his concept of an industrial strategy. What we want—it is on offer in the White Paper—is the encouragement of enterprise.

Before the Government were elected to office one began to wonder whether the spark of enterprise had been extinguished from the British public. I almost believed that it had, but, my goodness, look at what has happened in the past 10 years. One can hardly believe that such a transformation was possible.

In the 1950s and 1960s many talented youngsters were not prepared to go into industry and business. I well remember conducting a survey with some sixth formers at the beginning of my career in industry. I asked them whether they would go into business and industry and whether, in due course, they would form their own businesses. I will never forget that 80 per cent. of them said that they were not prepared to go into business and industry, but wanted a nice, easy, cushy number in the Civil Service, the professions or whatever. The reasons for their choice were simple. They regarded employment in industry as dirty, not well paid and, more important, uncertain.

Against this background I congratulate the Government because they have wrought a cultural revolution in the outlook of youngsters and others in this country. The hon. Member for Yeovil did not mention that this revolution is reflected in the fact that since 1980 some 180,000 net new businesses have been established. That is an enormous achievement in comparison to the past.

No doubt some hon. Members would argue that such new businesses are all in the south-east, but that is seen not to be the case if one checks the record. Between 1984 and 1986, 20,000 new businesses were set up in the north of England. Therefore it is clear that this Government's approach is the correct way to proceed because we will not solve the problems of the regions by drafting in unwilling companies by way of regional policy. We will rejuvenate the regions by the "bottom up" approach, by encouraging existing businesses and encouraging people to establish new businesses.

I am aware that the Minister is not complacent about encouraging business. However, when one makes international comparisons—he and I appreciate that there are difficulties with such comparisons—it is clear that the Netherlands has four times our number of small businesses, France and Japan twice that number, and the United States and Germany one and a half times that number. Therefore, we have a fair way to go to make up the leeway, but that is not the Government's fault—it is the fault of previous Governments. I believe that the philosophy contained in the enterprise initiative will go a long way to enable us to catch up with those countries.

My hon. Friend the Member for Welwyn, Hatfield asked how the Government can encourage business. I believe that few previous Governments have known how to encourage business. Let us consider the problem of deregulation. We are all aware that business men resent having to comply with the onerous requirements that the Government and others place upon them. We are aware that the Government are unable to abolish all such requirements completely, but they must reduce them. Therefore, I was delighted to learn from the White Paper—tucked away in one or two lines—that we will receive a deregulation White Paper some time in the summer. That is first-class news, but, for goodness sake, let it not be a recitation of what the Government have already done.

I pay tribute to the Government for what they have done, but I want to see a radical approach in that White Paper. I wish that I had time to outline my proposals, but I must press on The White Paper on deregulation states: All new proposals for requirements on business are examined".

Obviously, that is to ensure that compliance requirements are minimised. That seems to be first-class. The document continues: Gradually,"— that is a word that always worries me— all existing requirements are being examined in the same way. Full marks to the Government for starting the process of gradually examining existing requirements. The problem is that all the difficulties stem from those existing requirements. Therefore, can the Minister tell us how gradually is "gradually" and whether he has a time frame within which the Government expect to go through existing legislation. We are all waiting with bated breath.

The White Paper also states: The system of assessing the compliance costs … is being further developed and departments are being encouraged"— another word which worries me— to identify more targets for regulatory reform. That approach is absolutely right. There is no doubt about that. However, that is passive language. Will the Minister and the Government tell us what it means? The Government's heart is in the right place, but will they move quickly enough? That is what the small business community wants to know.

Another aspect of the White Paper which appends to the initiative is the transfer of technology and co-operative research. We all agree that that is vital. When I represented the CBI — to make it clear to the hon. Member for Great Grimsby (Mr. Mitchell) that I am not ashamed of that — I was always amazed at the unwillingness of many companies — not all companies fall into that category — to innovate. That seems extraordinary because the future of industry is that it should innovate.

I was also worried about the unwillingness of many companies to spend on research and development. Many companies preferred to go to the Government cap in hand, saying that they would spend on research and development if the Government would pay part of the cost. That was excusable when industrial profits were at low levels, but that could not be said now when industrial profits are at the highest levels for many years.

Therefore, this atrocious situation, whereby United Kingdom industrially-funded research and development is lower than that of most of our competitors, should be reversed. That really has to be rectified. The onus is not on the Government; it is on the industrial community to be rather more aggressive. I welcome the innovation proposals. The mere stating of a solution — and it is stated most eloquently in the White Paper — is one thing; it is quite another to implement it.

In this regard I remember spending a lot of time trying to get industry and industrialists to go to universities so that the latter could tell the former what they had to offer. I can assure the very few hon. Members who are present that it was an uphill business. I could get them along only if I could say that there was money on the table. I could not simply say that they should go along and see how much they could get out of universities in terms of technological developments that occur in universities and elsewhere. At some point I should like to hear from the Minister what details he has to catalyse industry to make use of the enormous residue of facilities in universities and polytechnics. We must not forget polytechnics. In the country at large there are a number of first-class polytechnics that companies should also look to for advice and guidance.

Moving on to the core of what was said by my hon. Friend the Member for Carshalton and Wallington (Mr. Forman), I should like to talk about the enterprise initiative itself. I have enormous respect for small business men. Even though politicians stand for election every five years, we do not take the same risks. Small business men mortgage everything. Some even second mortgage their homes. The companies that they establish do not, however, have strength and depth. That is why the approach that is set out in the White Paper is correct. If a company has no spare resources, it is the Government's role to ask, "How can we help a small and, in some cases, weak business to transform itself into a stronger business that, in 20 or 30 years, may employ many people?" That is why the White Paper is correct.

We should recognise that many companies worry about consultants. They always consider that they are too costly and that, in any case, once they are let in through the front door, one cannot get them out through the back door. The approach of the White Paper will assuage such fears. The Government have generously contributed £50 million to fund the scheme. Some may say that they are not generous, but it should be noted that the Government are prepared to make more funds available in the following two years. Such funds will be welcomed and used by business men who recognise that, these days, the market place is extremely complex and is becoming more complex.

I was slightly worried when I read the section relating to design, marketing, and so on, because I did not see the word "communications". That surprised me. I have no doubt that that does not mean that it is not the Government's intention to encourage communications but rather that the document was written by somebody with a more academic approach than we have. Design is not academic or abstract. It means communicating with customers to ascertain what the customers want. That was not clear in the document. The same applies to marketing. Marketing is not just a sales force; it is a whole company, from top to bottom, being orientated towards selling what it produces. That means upward and downward communication. I hope that, when the initiative gets off the ground, this point will be understood.

In the past few years, my hon. Friend the Minister has played a great part in encouraging industry's awareness of the need for better quality. He knows more about quality than I do, but he and I know that it is not just a matter of computer-aided design and manufacturing but of management communicating with the work force. If one is building a car, one does not just shove on an ill-fitting component so that one can get another unit out of one's factory. Therefore, there is a tremendous need for communication at all levels within British industry.

The enterprise initiative is a solid, revolutionary concept, but many other things are needed to make it work. For example, it is much easier than it was, but it is still difficult for a small or growing business to get finance, particularly loan and equity finance between £50,000 and £100,000. The hon. Member for Yeovil correctly said that there is a shortage of patient money—that is, having to wait five years for one's return. The trouble is, however, that the hon. Gentleman was long on analyses of and short on solutions to the problems. That was fairly typical of the approach that we had from the Opposition Benches. One solution is the formation of local investment companies, which would take in equity and make long-term loans. My right hon. Friend the Chancellor of the Exchequer is not listening today, and may not even read on Monday what I am saying. Therefore, I might have to write to him about this. That said, I am reminded that my hon. Friend the member for Carshalton and Wallington is parliamentary private secretary to my right hon. Friend the Chancellor of the Exchequer, so perhaps I can rely on him to tell my right hon. Friend what is required. In fact, what is needed to make the idea possible are fiscal incentives for investors in local investment companies.

Taxation is always an irritantßževen to Members of Parliament—but it will always be with us. However, an increase in the threshold of corporation tax to £250,000 would be welcomed by the small and middle-sized business community.

Another great problem is inheritance tax. If there were more than one Opposition Member present, there would no doubt be a great hue and cry about my suggestion that there should be 100 per cent. relief for business assets. Far too many business men who build up a business over many years then find that it is taxed from under them, and that is quite wrong.

I congratulate the Government on a first-class document.