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Industry and Education

Part of the debate – in the House of Commons at 7:35 pm on 21st November 1994.

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Photo of Thomas McAvoy Thomas McAvoy , Glasgow Rutherglen 7:35 pm, 21st November 1994

Conservative Members claim that the Gracious Speech contained radical measures. It stretches the imagination to hear that repeated cry. They know full well that it is a holding operation—a "keep quiet" measure—for the coming year. They know in their hearts of hearts that that is the truth.

I want to concentrate on two aspects of today's debate—small businesses, and the co-operative sector of Britain's industrial and commercial world. A healthy and expanding small business sector is vital to a competitive economy. Small businesses are often the driving force of technical innovation, and they provide a vehicle by which individuals can contribute inventiveness and drive to the marketplace—although not a wholly free marketplace. Major corporations can compete internationally only if they are supplied and serviced by efficient, reliable small businesses, especially now that many large companies contract out many of their service functions.

We have two additional motives in backing small businesses. Obviously, the first is our commitment to full employment. I do not think that any hon. Member would deny that growth in jobs is most likely to come from small and medium-sized businesses. Over the past decade, 2.5 million jobs have been created by businesses with fewer than 20 employees. There is a lesson to be learnt there, especially when that growth in jobs is compared with that of the larger companies.

Our second motive is our commitment to local and regional economic development. The Scottish Development Agency was one of the most important post-war agencies to be created in Scotland. Its remit on investment, intervention in industry and industrial regeneration provided a powerful instrument for economic development. The impact of the SDA made significant advances and improvements possible. Its regeneration imprint can still be discerned in the Scottish economy. It played a role for Scotland and Europe in attracting inward investment.

Both Scottish Enterprise and the Highlands and Islands development board have the potential to be significantly stronger organisations with their additional powers and responsibilities for skills training and programmes for the unemployed. That wider remit should be encouraged, but instead the Scottish Office continually cuts the amount of money available to local enterprise companies. Scottish Office Ministers have admitted that fact.

We are looking for a greater role for those organisations, but that is only one side of our approach to Scottish industry. The other wing of that movement is the introduction of political devolution, through a Scottish Parliament that will work hand in hand with Scottish industry to rectify the considerable damage done in the past 15 years.

I have always felt sympathy for small businesses that suffer the late payment of debts, which creates huge pressures. Late payment seems to be an established culture among UK businesses. It may be all right for big companies to pressurise small firms to accept late payment, but that puts at risk the financial base of the small business that is trying to survive and expand. I am extremely disappointed that the Government did not support legislation for interest on late payments.

Lord Ferrers, the Minister for Consumer Affairs and Small Firms, wrote to me explaining the difficulties of implementing such a scheme. However, if the problem were approached positively, I am sure that the difficulties of a blanket approach could be examined, to ensure that small businesses do not continue to be disadvantaged by big companies. I would have strongly supported legislation to impose interest on late payments.

I am sponsored by the co-operative movement, and proud to be so. Many hon. Members in all parts of the House could learn from co-operative principles how to conduct themselves in business. Co-operatives provide an attractive model of corporate structure that I wish to encourage. I am pleased that members of my Front Bench will introduce a co-operatives Bill as part of the next Labour Government's strategy. That will create a level playing field for co-operatives, and allow them to expand in future.

The co-operative sector can be split into four main areas—mutually constituted enterprises such as insurance and finance, retail co-operative societies, farming co-operatives and employee-owned businesses. I will concentrate on the last of those.

Small and medium-sized enterprises are vital to economic development. There are more than 2 million UK businesses, and 96 per cent. of them employ fewer than 20 people. Those firms are the lifeblood of the economy. Conventional business structures discriminate against a huge proportion of people who would tackle running their own businesses if provided with the right mechanisms. Many unemployed people have usable skills, especially in recent times—but structural changes in the nature of management and in working practices mean that such people are effectively barred from entering into an enterprise by lack of finance and skills and from personal pressure.

Conventional logic suggests that the lone man or woman has the best chance of succeeding with a new enterprise, but that view is too simplistic, because it ignores the realities of business formation and personal circumstances. In practice, few people have access to even relatively small amounts of finance, or possess the wide range of skills necessary to establish and run a successful business with the capacity to grow and to employ others. Understandably, few people are prepared to take personal responsibility for finance or management.

The option of forming a co-operative business addresses those barriers. By bringing people together in an equitable way, personal financial commitment can be reduced and access to outside finance increased. More importantly, the greater the number of people involved, the better the chance of even higher levels of finance and of securing institutional finance. A group of people can also offer a wide range of experience and skills, thus increasing the chances of the business succeeding.

Dissipating the burdens of financial commitment and work load and establishing a peer group forum can create the energy to drive the business forward, with competency increased to a high level. Those factors combine to allow the enterprise entry point to be at a higher level—and the word "enterprise" is not the exclusive property of any party in the House. Larger, more credible businesses can be formed with a higher capital base and greater in-house expertise. The latter is particularly important if capital-intensive enterprises are to be established.

In Scotland, the concept of co-operative development has been embraced by local authorities, but has so far been shunned by the local enterprise networks. Those networks, which are governed by Scottish Office policies, must change. In this day and age, working co-operatively must be the corollary of good management practice, never mind anything else. Real commitment and motivation are derived from a sense of ownership. The higher output of a motivated and committed work force produces a successful and expanding business.

Development of the co-operative sector, however, is not a panacea. We in the co-operative world do not claim exclusively to have the answer to Britain's industrial problems, but we certainly believe that the rest of the United Kingdom could learn from the co-operative sector.