Small Businesses

– in the House of Commons at 4:50 pm on 2nd July 2003.

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Question again proposed.

Photo of Mr Brian Cotter Mr Brian Cotter Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson 5:29 pm, 2nd July 2003

I very much agree with Mr. Yeo, who is rushing out of the Chamber, that there is a need for this debate. I am glad that the Secretary of State is here to listen to it, as a commitment was given some years ago that there would be an annual debate on small business; I hope that we can reinstate that in the future.

I declare an interest, which is in the register, as managing director of a small business—a manufacturing company.

One of the strongest calls from small businesses is that Government and politicians should get off their back. They want a business-friendly environment so that they can get on with the job. As managing director of a company, I certainly support that.

Photo of Mr Peter Duncan Mr Peter Duncan Conservative, Galloway and Upper Nithsdale

I am pleased that the hon. Gentleman now espouses a policy of getting off the back of business. Can he justify his party's position in Edinburgh, where as part of the coalition it is imposing a 9 per cent. surcharge on business rates for businesses in Scotland?

Photo of Mr Brian Cotter Mr Brian Cotter Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

I am not aware of that particular policy in the devolved area, although I am aware of policies in Scotland that are extremely beneficial for business. Lacking the knowledge to pursue it, that is all I have to say on the subject, but I shall happily look into at another date.

The Secretary of State will recognise that the backdrop for business is the economy. Yes, the Government have brought stability to the economy and, to date, we have got away from the boom and bust that we experienced under the Conservatives. However, there are great concerns at present. For example, the high value of the pound causes problems for the manufacturing sector. As managing director of a manufacturing company, I very much share those concerns and can speak with personal knowledge of the cable industry, which has suffered badly from the high value of the pound. I have been in business for about 40 years and I have never known a time when so many products in that category were being imported. That is now an established fact owing to the high value of the pound and our economic climate.

Photo of John Bercow John Bercow Conservative, Buckingham

Given that the hon. Gentleman laments the impact of the exchange rate on business competitiveness, will he clear up a little point of uncertainty? Is it the stance of the Liberal Democrats that Britain should enter the euro at ERM mid rates?

Photo of Mr Brian Cotter Mr Brian Cotter Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

I do not want to be diverted to that subject, although I should be happy to spend longer talking about it—[Interruption.] The hon. Gentleman knows that we have a clear policy on euro entry. The matter relates to the high value of the pound; euro entry should have been looked into four years ago and we should now be advanced in our thinking. The rate will be addressed at the time. I shall proceed with my speech, as other Members want to speak.

It is worrying to learn from figures published by the Centre for Business Research at Cambridge university that business failures have trebled since 1999. By any standards, that is of great concern. Furthermore, Dun and Bradstreet show insolvency figures as at their highest for eight years. There are worrying signs in the economic backdrop and they have a strong impact on business.

On top of all that, the UK scores badly in terms of entrepreneurial activity. In the UK, 8 per cent. of the population are currently engaged in business start-ups, whereas the figure is 16 per cent. in Australia and New Zealand, and 12 per cent. in the United States. Obviously, the Secretary of State is aware of that issue, but she must share my concern.

I will not repeat the arguments about insurance that have been made this afternoon, because the Secretary of State will know that I have made them before. I have tabled an early-day motion on the issue, and I have done a lot of work in meeting the insurance companies, as well as other businesses. I will simply say that the Secretary of State said a moment ago that the problem lies in the insurance market, but the problem does not end there, as that implies that the Government are absolving themselves of responsibility.

The Department for Work and Pensions eagerly awaited review was published in April, but it was a grave disappointment because it simply rehearsed the problems and spoke about the Government returning to the issue in the autumn. I find that very unsatisfactory, as do businesses, and the Government need to engage in the issue now. Far from businesses being helped to meet their insurance premiums, to which the Secretary of State referred a moment ago, I have an example of a business that has had to pay 40 per cent. extra this year, and it says that it will go out of business if there is any increase next year. So I alert the Secretary of State to the fact that that issue has not been dealt with, and we expect it to be dealt with sooner than the autumn.

The Government must address other issues, such as business rates. The Government's proposed rate relief scheme will help small businesses to an extent, but only a few of them. The Local Government Bill will set the rate relief threshold at £8,000 of rateable value, so an enormous number of small businesses in England will have no relief at all. The Liberal Democrats' scheme is much more positive: businesses with a rateable value below £25,000 would be given an immediate relief, which would be funded by the biggest companies paying an extra amount. Our scheme would reach between 80 to 85 per cent. of small businesses in the country, so I urge the Government to look again at their scheme, which is only part of the answer to a very big problem.

The Secretary of State is aware that the small business community is concerned by a lot of issues, not the least of which relates to pharmacies. The Office of Fair Trading report has been promised shortly, in the next few days, and I hope that the Secretary of State will respond. She has said that she acknowledges the problem, but it is very worrying that she continues to say that competition must be brought into the industry. Many people are uncertain about whether she will respect the fact that pharmacies are part of the health service, that they are small businesses and that they need to be given the opportunity to survive and expand.

A number of issues remain to be dealt with in relation to regulation and red tape, and I wish to make a general comment on the temporary agency workers directive and the working time directive. We need to ensure better consultation when addressing such issues, because businesses are entitled to propose constructive and clear points of concern. The impression given sometimes is that the Government just say, "These rules have been agreed and are being implemented despite what they will do to hit business." In the hope that the Minister espouses the idea that small businesses are the vital engine of the economy, we must hope that the Government will address both the temporary agency workers directive and the working time directive.

The Government have spoken frequently about the need for joined-up government, and I want to refer to one issue for the Secretary of State's attention. Currently, under the planning legislation going through the House, an issue is raised—it seems very small but it is not—in relation to planning applications and the addition of mezzanine floors to supermarkets, with which I am sure she will be familiar. The Asda Group has identified 40 supermarkets throughout the country that can be adapted in that way. The concern, which I hope she will pass on to her colleagues, is that that can be done without any fresh planning application. Many reports on the issue of small shops and businesses have indicated that large supermarkets are taking more and more of their business away. If there has to be a planning application, that can be monitored, but if not, local shopping centres can suffer badly. In terms of joined-up government, I therefore hope that the Secretary of State will raise that issue with the appropriate Departments.

Red tape is continually raised as an issue for business, and I agree, with my background in manufacturing, that it is a severe problem. A short while ago, the Secretary of State said that it would be useful to her if people who had examples of red tape or burdens on business brought them to her attention. I want to draw her attention to the experience of a small business in Stockport called Trolex Sensors, which pointed out in a letter that, under existing regulations, it and many other firms must comply with a whole list of requirements. Under the Statistics of Trade Act 1947, they are required to fill in the following: a quarterly capital expenditure inquiry, an annual business inquiry parts 1 and 2, a monthly wages and salaries survey, a quarterly stocks inquiry, an annual survey of research and development, an annual register inquiry, an annual inquiry into international trade in services, an annual/quarterly production inquiry, and a sales quarterly inquiry. The Government must justify that list alone. Is it necessary for firms to be burdened with such a list of requirements? In addition, in the case of the company concerned, when it said it had had enough, and refrained from filling in the forms, it was told that it would be referred to an enforcement squad, which I presume would rush in—what action it would take I do not know—and require it to fill out all those forms. I hope that the Secretary of State will take on board the concerns of those of us in manufacturing and business in that regard.

I hope that the Secretary of State will bear in mind—it has been alluded to already—the fact that, in terms of regulation, there can be two solutions. First, sunset regulations can be used more and more in relation to business to ensure that such regulations drop away without renewal. Secondly, and most importantly, the Government can ensure—this did not happen under the previous Government, and still does not happen under this Government—that impact assessments are meaningful, accurate and clear, both in the early stages of regulation and when Bills are considered in Committee and on the Floor of the House. I urge the Secretary of State, as I have in the past, to consider introducing an independent system like Actal in the Netherlands, so that regulations could be assessed independently and efficiently from a detached viewpoint. Much as it might seem acceptable for departmental officials to do the work, there would be nothing better than having an independent organisation to examine regulations and ensure that impact assessments are done.

Much work has been done on regulatory impact assessments. The British Chambers of Commerce says:

"RIAs did not lead to any regulations being removed from the statute book"— of course, that is true. However, the real issue that it mentions is:

"The quantification of costs and benefits of regulations is also patchy leading to the possibility of these estimates being used to promote" regulations rather than alerting people to the problems associated with them. It adds:

"Costs and benefits for business were quantified in 69 per cent. and 20 per cent. of RIAs".

The British Chambers of Commerce accepts the benefit of impact assessments, but the work is not being done sufficiently rigorously.

I shall press on to other matters relating to red tape. Will the Secretary of State address such issues as health and safety? It is laudable that this country has good health and safety regulations, although most hon. Members would agree that some are a little over the top and others should be further enforced. However, understanding all the different health and safety regulations is one of the biggest problems faced by business. The Secretary of State might recall that I said that Liberal Democrats want a single inspectorate operating with a light touch, rather than the plethora of different inspectors who visit businesses to acquaint them with the different regulations. The ministerial response to my suggestion was to ask how a single inspector could possibly understand all the regulations and give advice on them. However, businesses themselves are supposed to understand all the regulations. I hope that the Secretary of State will take on board the need to re-examine the inspection procedure and consider whether the Small Business Service could institute a service so that firms would be given a better understanding of what they must achieve.

I read many reports on the Small Business Service. Liberal Democrats worked on the service when it was first proposed, but I am disappointed that it is not as we envisaged. When I visited the Department of Trade and Industry to meet Ministers, I was somewhat disconcerted to learn—perhaps I should have known—that the service was based in an office down the corridor. Our understanding was that the Small Business Service would be rigorous, independent, robust and detached from the Government. We thought that it would have a critical frame of mind and more connection with business than the Government. Notwithstanding the difficulties that the Government faced while getting the service up and running properly, I am gravely worried that it is too much under their control.

We need to reduce the burden on business and increase the possibility for business to influence the Government and to know exactly what is in the arena for business. That is why Liberal Democrats want decentralisation to be stepped up and more work to be done through regional government, in due course, and regional development agencies. I am worried about the make-up of several RDAs. Although they want to be representative of business, they should have a democratic aspect so that they are representative of the electorate. The RDAs are reasonably effective in some areas, but not at all in others. I urge the Minister to consider the structures associated with the RDAs to ensure that business is properly represented. A new organisation, Business West, has been established in my part of the country. It combines the chambers of commerce in an endeavour to influence the RDA locally. We need to help business organisations to influence the Government effectively.

There is still a problem of red tape. In February 2002, the Government promised 250 measures to reduce the burden placed on business. I asked what progress was being made, and for a description of them. The problem with Governments is that some of the things they do sound good—they are doing this, that and the other—but there is no clear answer to what is going on beneath the surface. Despite asking for details of those 250 measures, I was given only two or three examples. In her response, the Paymaster General also said:

"In Budget 2003, the Chancellor announced that the Government had identified over 500 . . . regulatory measures"—[Hansard, 19 May 2003; Vol. 405, c. 574W.]

Those included 250 to do with business. Perhaps the Secretary of State can help me to get the details of those measures. If they do exist, can they be implemented soon? They are part of a scheme that the Government introduced to deregulate business and to reduce the burdens on it.

I welcome the debate. I hope that the Government ensure that we have such a debate every year and that there is an annual report on the impact of regulations on small business. Liberal Democrats have called for that for a long time. I cannot understand why that request should not be granted. Every year we should re-assess how regulations have affected business. A system of sunset clauses would enable us to abandon regulations that are not helping anyone. Again, I express concern about the latest figures on insolvency, which is three times the 1999 level. The Secretary of State must be worried that the signs for the economy and small business do not look good. I hope that we hear more about that.

Photo of John Battle John Battle Labour, Leeds West 5:53 pm, 2nd July 2003

I, too, welcome the debate, especially the words in the amendment that acknowledge the crucial role of small businesses. The Secretary of State amplified that in her comments. The amendment also contains the phrase:

"applauds the Government for improving access to finance for small . . . businesses".

I want to explore that access to finance in the context of what my right hon. Friend said about start-up rates in poorer neighbourhoods and the need to increase small business activity among women and ethnic minorities, and in communities that still have high unemployment.

Perhaps it will help if I say a little about the small business characteristics of my constituency. My approach is not to focus on the macro-figures, but to see how the micro-economy matches up to those macro-figures. I want to look at recent Government initiatives, such as community interest companies, and explore new ideas for supporting small businesses which could radically decentralise the provision of services and goods and start to build a local, sustainable economy, even in inner-city neighbourhoods.

To give the House a snapshot of my constituency, I can describe it as a series of tightly knit urban villages. Armley, Wortley, Bramley, Stanningley, Farnley, Burley and Kirkstall see themselves not as Leeds, but as having their own identities. My constituency forms a wedge, like a pizza slice, from the business area of the city centre out to the south-west. The problem is that the people who live in that wedge have always had problems getting into Leeds because it is south of the River Aire, the canal and the railway, and there are only three points at which one can cross the canal and the river. We have what the planners now call geophysical barriers.

In practice, my constituency has been cut off from the city centre and, as a result, in the 20th century it developed as a semi-autonomous region within the city. It was characterised by small family businesses, mostly with fewer than 20 people, engaged, in particular, in engineering, printing, textiles and distribution. Those firms were located on industrial sites with street fronts clustered around those urban villages, so local people grew up and went to work in a family firm nearby.

Some of those firms are still with us. They include Pennine Castings, Browns of Bramley, which is a fourth-generation suit-making firm, and Aagard Hanley's, a quality plastering business. F.J. Rogers, which makes organ pipes and sells them worldwide, has been there since 1897. There are new small businesses in the new technologies, such as Northern Instruments, which makes industrial thermometers, and MEI, a medical industrial engineering company, and there are new restaurants, including the brilliant, award-winning organic Millrace. By and large, however, there has not been a small business renaissance in the neighbourhood.

As a result, the challenge that we face is that, although the Leeds economy as a whole has been renewed and reinvigorated, and companies that work in the new technologies and the finance and service sectors have replaced larger, traditional manufacturing companies, there has not been a great expansion in local, family businesses in Leeds, West in the last 10 years. That means that there is now higher than average unemployment. More important, however, is the lack of aspiration and the loss of the skills involved in setting up a small business that used to be passed on through the family.

The challenge is to revive that tradition, to reignite the entrepreneurial spark to rebuild our economy locally, rather than to hope for salvation from one major investment in central Leeds. As the detailed ongoing surveys in the "Life in Leeds" features in the Yorkshire Evening Post have illustrated, we cannot all easily travel into the centre of Leeds and cash in on the booming sector of the economy. In addition, call centres in Leeds will not provide high levels of employment for ever. The voice recognition chip will displace many call centre jobs in the next 10 years.

What can we do to develop the momentum behind a vibrant local economy and build economies in those urban villages from the ground up? Can we revive the tradition of the small family business? We have resources, and we spend and invest money, but as the New Economics Foundation has argued, we suffer leakages of our money because it goes elsewhere—it is spent and invested outside our neighbourhood. The foundation's paper "Ghost Town Britain: The threat from economic globalisation to livelihoods, liberty and local economic freedom" argued that we are in danger if local economies decline, reducing our neighbourhoods to ghost towns. I therefore welcome the Government's consultation paper, which was published in March and invited responses to proposals on community interest companies by the middle of June. In a remarkable piece of integrated government, the Secretary of State for Trade and Industry, the Home Secretary and the Chancellor launched the paper, which was entitled "Enterprise for Communities: Proposals for a Community Interest Company." It builds on both the DTI's work on social enterprise and work in the Prime Minister's strategy unit on private action and public benefit, and floats the idea of a new type of company, which I should like to explore.

The document suggests that community interest companies should be set up to pursue local economic objectives, regenerate poorer areas, empower local communities and introduce innovative local services. Not only are community interest companies a means for raising capital for the public good locally but their assets such as building and land are dedicated to that good. It is suggested that those new companies could invest in community transport, fair trade, child care provision, leisure and social housing. They could make the delivery of local services more dynamic and focused on the needs of local communities and provide new opportunities for new forms of partnership, both public and private.

We need new social enterprises. The Government have set up the Phoenix fund, and there are community development finance institutions and community investment tax relief, but they need to be pulled together under a local neighbourhood banner if there is to be any sustained local economic development. We should develop local economic communities, clustered around a few streets in those small urban villages. Perhaps community investment companies could provide that overarching umbrella. They could pull initiatives together and form a new framework for new positive partnerships with local government. They could experiment by building up capacity and developing sustainable businesses at the local level.

May I make a few suggestions? We should take a radical look at local service provision, including care of the elderly, the sick and children in our neighbourhoods. Why should meals on wheels, cooked centrally and chill-frozen, be brought into our neighbourhood from somewhere miles away? Could we not use the cooking skills of someone in our own street to provide those meals and save transport costs? Can we not provide more local child care and after-school care, perhaps in a neighbour's home? We could provide proper training and pay people to do work in the neighbourhood that they live in, thus radically decentralising statutory provision. Similarly, we could look at recycling projects and the management of waste facilities.

We could do much more locally and look, for example, at local shared transport schemes in the neighbourhood. Why can we not get the steel shutters off boarded-up shops and reintroduce new locally owned community shops, such as health food and healthy living shops, providing goods and services for the local community on the doorstep? We should look again at security and insurance. Instead of every household taking out individual insurance, why not develop community insurance schemes, which would not only reduce premiums and organise the collection of pooled payments but release capital for local investment in neighbourhood safety and care schemes? We could even invest in local broadband schemes as a new security tool. We should look at radically reshaping investment and fund local services to meet local needs. We should pull together assets and resources so that they are focused much more on the locality. Community interest companies could be used as a catalyst for that.

In conclusion, I urge the Department to consider how those ideas can be translated into practice. It could set up a unit, and consider in detail the way in which pilot schemes could pull such initiatives together. My constituency offers fertile soil for small business development, of which we should take advantage. "Enterprise for Communities" states:

"The promotion of enterprise, in every part of society and every corner of our country, is at the heart of Government's agenda. Entrepreneurial talent is essential to deliver social justice, locally and nationally."

I agree, but we need integrated action to try that out in practice. It can be done, but we need to demonstrate that.

Photo of Mr Archie Norman Mr Archie Norman Conservative, Tunbridge Wells 6:04 pm, 2nd July 2003

It is a great pleasure to follow Mr. Battle not only because he made a thoughtful and constructive speech, but because he referred to an area south of the River Aire in Leeds to which I hope I made some minor contribution, though perhaps not in a small business capacity.

I draw the attention of the House to my entry in the Register of Members' Interests, which does not relate directly to small businesses, but which is relevant, none the less.

The Secretary of State made a glossily optimistic speech. I understand why she did so and why she wants to portray the state of small business in an optimistic light, but it was totally unreflective of the opinion of small business organisations, such as the Federation of Small Businesses, and of the Institute of Directors. If small business people read her speech, the effect will be to emphasise the gulf that exists between the political and Government world and the business world. It is a gulf of culture and understanding, which is becoming increasingly serious.

I shall concentrate my remarks on regulation, an issue that is misunderstood by Governments of both complexions. It is viewed as an issue of individual regulations, the deregulation taskforce and so on, but the problem is much more profound. It is a chronic problem, owing to the nature of government in this country—the fact that we have a Government who systemically add to the regulatory burden, because of the nature of our political system. Few Ministers get promoted for other than adding to the statute book. It is not glamorous to withdraw legislation or introduce light-touch legislation. It is glamorous to appease some lobby group and bring in new regulations. Also, we have the additional burden of European regulation, which is introduced and enforced, often against the wishes of Governments and parties of any complexion, in a form that lacks proper regulatory scrutiny in the House.

Regulation is a chronic problem that requires systemic solutions, and unless we address ourselves to that, nothing much will happen. The difficulty has affected successive Governments, as my hon. Friend Mrs. Browning was quoted as acknowledging. The regulatory burden grew under the last Conservative Government as well, but it has accelerated dramatically under the Labour Government. Under all Governments over the past 10 years, we have spoken of deregulation, better regulation taskforces and the deregulation taskforce, on which I served, but all those measures are like standing in the way of an avalanche armed with a toothpick.

It is no good trying to find a bit of regulation that one can liberalise or remove from the statute book. That will not help, because the volume of incremental regulation far outweighs anything that can be removed, and what is removed tends to be innocuous detail, whereas what is imposed is substantive and cost-additive. It is worth bearing in mind the quantum of what has happened over the past five years. I am not making a partisan point; there is a serious problem affecting our competitiveness.

In the recent IOD survey, 84 per cent. of small businesses stated that the payroll burden on them had increased significantly, and 93 per cent. said that the burden of employment law had increased significantly in the past five years. There have been 19,332 new regulations in the past five years. Whether that figure is exactly right I do not know, but the number has been substantial. The estimated cost, according to a firm of lawyers, Penninsula, is £21 billion over the course of five or six years. However one estimates it, the cost is considerable. In the past five years the rate of introduction of new regulation on business has been 53 per cent. up on the previous five years, which is substantial. The impact on business is progressive and cumulative. The effect is to reduce the gene pool of new start-ups and small businesses. That is not in anyone's interest. The 2002 figures for the small business population are not available, but the DTI statistics for 1995 to 2001 show that the population of businesses in this country was stagnant at about 3.7 million. That means that there was also no increase in our capacity to generate innovation and growth. The one thing that we know about 2002 is that there has been a significant acceleration in the mortality rate of small businesses, as some 16,000 went out of business—the highest level since 1994. That is partly due to the general economy, but it is also due to the impact of regulation.

We also know that the fastest growing part of the economy today is the public sector and public sector expenditure. What does the Minister think is the impact of public sector investment on the small business community? Public sector procurement is very small business-unfriendly. The amount of red tape, including all the ISO 9000s and other qualifications that businesses have to complete to supply to the public sector, is a major deterrent. Typically, the public sector is very risk-averse in its procurement. As a result, it tends to reinforce the competitive power of big business, not small business. The DTI could do a great deal to improve that situation.

The hon. Member for Leeds, West also referred to call centres. I was looking the other day at the statistics on call centre competitiveness worldwide. We now have among the most expensive call centres in the world. We may think that that is based on a comparison with India; indeed, our costs are three times those in India. However, this country now operates call centres at a higher cost than the United States and Canada. That is substantially because they are employment-intensive services. This country has imposed employment costs and rigidity on a peaking and troughing type of business. As a result, we are now completely uncompetitive. The consequence relates not only to cost. It is important to recognise, although we now have regulatory impact assessments and so on, that the consequence of regulation for business is profound, as it affects the culture of entrepreneurship, the attitude to innovation and the pace of change. It is in that regard that the competitive damage is especially serious.

Of course, we think that each regulation is individually warranted and defensible. The Secretary of State referred to family-friendly working practices, which are difficult to argue against and which most business people favour. However, the cumulative impact is to make our businesses more sclerotic. Although I favour family-friendly working practices and can see that there is a strong case for them, I point out that that is not what they are doing in South Korea. The consequence is that, in each instance, we must ask ourselves how we will compare with the new overseas competition and what the regulation will do to future profitability, investment and employment. That is what will determine whether people have rewarding careers and jobs. It is a question of whether we are competitive, not what legislation we have.

The first thing to recognise about regulation is that it almost invariably reinforces economies of scale. Big business can afford whatever regulation is imposed. When I was running Asda, we reckoned that, to introduce a new Asda brand own-label product on the shelves, we had to go through 17 different items of legislation. I had a department to do that work, but a small shopkeeper or someone with a little chain of shops would not have had a prayer in respect of the administrative, legal and other support required. The net result is that we could introduce own-label products at a lower price for our customers, but the small retailer could not.

That is an illustration of how all regulation, however well meaning, and including food labelling and so on, will reinforce the role of the established larger company and limit the capacity of the little guy to compete. The same is true in relation to health and safety, fire and building regulations, on which companies can employ any number of experts, whereas the little business would have to employ some expensive lawyer from outside and simply cannot afford to do so.

Photo of Hugo Swire Hugo Swire Opposition Whip (Commons)

I am very interested in my hon. Friend's remarks. Is he not saying that larger businesses can, on the whole, offload and absorb some of those costs, but smaller businesses have only a small number of options—first, to make people redundant, secondly, to go bankrupt and, thirdly, to pass on the increased costs to the consumer?

Photo of Mr Archie Norman Mr Archie Norman Conservative, Tunbridge Wells

That reinforces my point; my hon. Friend puts it succinctly.

Regulation not only affects economies of scale but slows the pace of innovation. It means that it is much harder to introduce new products in line with other countries and that it is much harder to produce technical innovation. We have such a backlog—an archaeology—of legislation on the statute book that a lot of it is of absolutely no relevance today, but rather slows the pace of change. For example, the prescribed quantities legislation that was introduced in the 1920s still limits the size and weight of goods that can be sold. Products such as flaked cereals, ground coffee, and even bottles of wine can be sold only in certain sizes. One is not allowed to sell loaves of bread other than in weights of 600 g and 1,200 g, so it is illegal to sell a 900 g loaf of bread. I know that because at Asda we once wanted to sell 900 g loaves, so we had the great idea of selling 600 g with 300 g free. Then, of course, the trading standards officers prosecuted us. I make the point in a humorous vein, but it illustrates the fact that such regulation slows the pace of innovation and change and erodes the entrepreneurial culture, and it all has a ratchet effect. Our problem is that we lay legislation on legislation, and it all goes back a very long way—so far back that, for instance, all small shopkeepers who want to sell a pheasant have to have a game licence. That presumably relates back to something to do with poaching in the last century or the century before that, but it is completely irrelevant today and it should go. The trouble is that it is on nobody's priority list to make it go.

It is a question not only of the legislation on the statute book but of enforcement. In this country we are world-beaters when it comes to enforcement. We employ armies of enforcers who are expert in making sure that little businesses either go out of business or adding to their costs. As a result, we have very high standards. Although that is entirely desirable, we often enforce the means, not the ends. I can go into any supermarket or food shop in Holland or France and within five minutes find things that would be illegal in this country. That is not because they are selling unsafe food, but because of the way in which we enforce our regulations.

The situation is getting a lot worse; it has accelerated over the past five years. Even now, legislation is reaching the statute book that will be very damaging in accumulation. We need an approach to regulation that is systemically different—not just picking away, but a profoundly new approach. As Brian Cotter said, it must be based on proper regulatory impact assessments. In some cases, regulatory impact assessments are a complete disgrace; they must be externally audited so that we know that they are objective. We also need sunset clauses; a limit on the cost of form-filling and bureaucracy that the Government are entitled to impose on business without compensation; the ability to appeal against excessive and life-threatening enforcement; removal of the archaeology in the shape of a mechanism for sweeping away the outdated legislation that is no longer relevant; and proper scrutiny of European legislation—not just the legislation itself, but the way in which it will be enforced in this country.

I make these points not in a partisan way but because I feel that the Secretary of State's speech missed the point. We have a growing problem in this country: a decline in the competitiveness of small businesses and the rate of innovation. That must be tackled in a profound way to provide systemic solutions to a chronic problem.

Photo of Ian Gibson Ian Gibson Labour, Norwich North 6:18 pm, 2nd July 2003

I have a different tale to tell. As I wing my way through East Anglia and, indeed, the rest of the country and other parts of the world, visiting not only science-based small businesses but other small businesses, I can sense that the entrepreneurial spirit is alive. It is a time for small business to get excited and to expand. It is recognised that by the end of this decade some 2 million jobs will be created in the sector in areas such as biofuels, which are prominent and growing in small businesses in East Anglia, biotechnologies and nanotechnologies. Carbon and energy production will be another growing area. Through business links, the Government have interacted with about half a million small businesses—twice as many as two years ago. Seven policy strategies, which I have no time to describe, have been published and are being enacted.

Innovation is the key for science-based small businesses. We should concentrate on helping them not just to start and survive, but to innovate and grow. In a recent report on energy and an earlier one on engineering and physical sciences, the Select Committee on Science and Technology examined emerging engineering and physical science research by universities involving industry and its interaction with universities. Development of such knowledge to create a well-designed product that meets a market need gives rise to problems. Bringing about a conjunction of technology with market assessment is almost exclusively the job of industry, and is far more expensive and risky than research. All the evidence suggests that that part of the innovation process is seriously underfunded, and is not provided adequately in engineering and physical science-based companies. Market research and the provision of demonstrators of the final product are recognised as being critical to innovative success. Support for small businesses in particular is vital at that crucial stage.

Let me say something about spin-out companies, which can be seen in clusters. In research parks all over the country, innovative and entrepreneurial skills are developing. A new spirit is alive in the land. A higher education-business interaction survey showed a 22 per cent. increase on the previous year in the creation of spin-outs, with 248 graduate start-up companies and 69 staff start-ups. The number of staff in the higher education institutions' commercialisation offices had increased to 1,500 from a very low base. We may still be a bit behind the United States in terms of product development, but the Department of Trade and Industry's chief economic adviser on science tells me that in the past year there have been more spin-out companies.

Some problems are ascribed to red tape, but not the red tape that Conservative Members have described. It is when universities become active in the field of innovation that things begin to happen. The number of bright young people who are trained to use their brains for marketing purposes and to interact with industry, and who are excited by the prospect, is growing almost daily. In Leeds as elsewhere, new companies are beginning to spark and to develop. The White Paper deals with that.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

I raised this point earlier, but my hon. Friend is going into more detail. British universities are variable in terms of knowledge transfer. This may seem slightly regulatory, but might it not be valuable to apply it more consistently, and to allow more liaison between individuals who are responsible for it? Alternatively, universities could be grouped, geographically or according to discipline, so that they could work to common standards to achieve a critical mass that would facilitate knowledge transfer.

Photo of Ian Gibson Ian Gibson Labour, Norwich North

I entirely agree—regional interaction between universities through regional development agencies is a whole new unexplored territory.

Photo of Mr Kerry Pollard Mr Kerry Pollard Labour, St Albans

A recent survey by the Royal Bank of Scotland suggested that the eastern region, which my hon. Friend and I both represent, was the only region that was growing rapidly. Is that not due to the entrepreneurial and innovative spirit in our small business sector?

Photo of Ian Gibson Ian Gibson Labour, Norwich North

Indeed. In our region, it is not all about Cambridge university; it is about Cranfield—

Photo of Ian Gibson Ian Gibson Labour, Norwich North

Yes, and all the other new universities that are coming onstream and interacting. The higher education White Paper is not just about tuition fees and top-up fees; it is about the interaction between academia and industry. Richard Lambert, ex-editor of the Financial Times, is charged with feeding that White Paper with information from the study that he is carrying out. The work that he has released so far suggests that the position is not as bad as we think. We tend to think that academics are closeted in their ivory towers, but he says that there are signs of that interaction beginning to emerge. There is much more to do, but we can see the signs of that happening. The report will be extremely important.

Universities that have high research ratings seem to have the largest number of spin-out companies, so there is a correlation between research, function and good teaching, producing bright young brains to engage not just in further academic research but in the industrial exploitation of those ideas. We must welcome that.

To me, chemistry has always been the most boring subject in the world—dull people, always drunk on Friday and Saturday nights. The students never did much, but the Royal Society of Chemistry has published a report. Three groups were asked to complete a spin-out questionnaire: university technology transfer officers, heads of chemistry departments, and individuals involved in spin-outs. Twenty-nine UK chemistry departments have been involved in 65 spin-out companies in the past few years. What does the Royal Society say are the inhibitory factors? It is not red tape.

Photo of Mr Kerry Pollard Mr Kerry Pollard Labour, St Albans

Does my hon. Friend accept that we need to support not just the big scientific research but small research, which also has spin-outs? I am thinking in particular of small business research at Kingston university.

Photo of Ian Gibson Ian Gibson Labour, Norwich North

I agree. The other night, I was at the Institution of Chemical Engineers prize-giving ceremony at Alexandra palace. An amazing number of small businesses were vying for simple little prizes, but there was great excitement. It was hard to distinguish between all the enterprising projects in the oil and engineering industries.

The Royal Society report discovered after the discussions with all the groups I have mentioned that the major factor was encouragement and funding from the university, making spin-out activity a priority in the university. The White Paper on higher education will look at that as well. Another factor was support from the head of the department, saying "This is what we are going to do." That galvanises activity, enthuses the people in the department to take their ideas forward and makes the spin-out company possible.

Another factor was flexible working arrangements, so that the academic with the idea could get support and help, and get on with the business of moving the project into industry. The Royal Society said that those factors made it successful. One must have success and role models in the department, the university and the region. That is beginning to work. Another factor was mentors from industry to guide people in the department so that they could move their research forward.

Of course, there is pressure on those people, too: the research exercise. They must still be distinguished academics. They must keep research in the top flight. They must get research grants. If there is one red tape problem, it is filling in the forms to get money from Europe and elsewhere. Academics are good at filling in their expense forms—there are no problems there—but when it comes to filling in research grant forms from Europe, they have great problems and it drives them insane. They sometimes complain about the journey from the car park to the university being too long, but that is just a fringe activity in terms of what is happening and the entrepreneurial skills.

Formal training is going on with young people, and the higher education White Paper will develop that. It will move things forward at a great rate. The Government's incentives and interactions with banks are helping spin-out companies and making them work together—there are spin-out companies across the land.

I do not want one spin-out company in the part of the world that my hon. Friend Mr. Pollard represents. I want 50, fighting for the same space, talking to each other, drinking coffee together, coming up with sparky ideas. We have not touched the enthusiasm and intelligence of this country in that area yet, so I look forward in the next year to more spin-out companies. I want to see the Americans coming over here from California because we are good at it.

One thing may be important, and my hon. Friend the Minister may want to say something about it—I would welcome it if he did. We may need regulations on intellectual property. Who owns the patents? Should it be the university or the person who makes the discovery? What about the business that expands it? How does one develop that kind of relationship? That is a real issue. In the United States, the Bayh-Dole Act 1980 helped to solve that issue. It drove on US technology transfer. I hope that the Government will consider the need for such provision to ensure that new technologies push forward.

Photo of Mr Kerry Pollard Mr Kerry Pollard Labour, St Albans

My hon. Friend mentions the USA, which is held up as a model of excellence for small businesses. Does he realise that in this country it takes but a day to set up a new small business, yet in France and Belgium it takes eight weeks, in Germany it takes six weeks, and so on? That is what we are doing to encourage our small business sector and to ensure that it is easy for people to start small businesses.

Photo of Ian Gibson Ian Gibson Labour, Norwich North

Absolutely, and the same is true of products that have to be regulated and ratified. In the medical world, which I understand a little, the interaction of the National Institute of Clinical Excellence, in assessing whether a product is ready and safe for the market, is extremely important. We are not quite as fast as the Belgians in such matters, but we are getting there. We are learning to regulate speedily, and to ensure that our products are the best and the safest. So I welcome the Government's exciting initiatives.

Photo of Mr Peter Duncan Mr Peter Duncan Conservative, Galloway and Upper Nithsdale 6:30 pm, 2nd July 2003

I welcome the opportunity to contribute briefly to this important debate. As has been said, it is truly astonishing that this Labour Government are somewhat picky in terms of which manifesto commitments they choose to honour. They could have honoured the manifesto commitment to have an annual report on small business issues without unduly troubling the usual channels.

I have 12 years' experience in business, although at a different end of the spectrum from that of my hon. Friend Mr. Norman. I hope that I can contribute something to the debate, perhaps in the form of a reality check. Some of my colleagues in the small business community would be totally astonished to read the Government amendment to the motion, which

"welcomes the steps that the Government has taken to make it easier than ever before for people to start their own business", and states that

"the Government has created a pro-enterprise tax environment".

Those comments would cause considerable consternation in the small business community, and rightly so.

Small businesses are a vital part of our economy that we cannot choose to ignore lightly. I was struck by the new report by the Federation of Small Businesses, which suggests that without small businesses we would have no economy at all. Research shows that between 1995 and 1999, the net number of jobs created by small firms was 545,000, compared with just 218,000 created by large companies. Even more important, according to the report more than 1.5 million jobs were lost in established firms during that time, but new firms created 2.3 million jobs. That is the "churn" effect of business: as old businesses mature and eventually tail off, jobs are replenished, as my hon. Friend the Member for Tunbridge Wells said, from the gene pool of new businesses.

How do we create the next generation of new businesses? Frankly, we make it worth their while. Many in entrepreneurial circles believe that currently, the effort is not worth their while, given the endless taxation, regulation and means-testing of benefits. As a result, the benefits to those with ideas for starting micro-businesses in particular are very marginal.

This issue is important because business start-ups are stagnating. I refer the Secretary of State—as I tried to do at the beginning of the debate—to the position in Scotland, which is in stark contrast to her somewhat complacent opening remarks. The Scottish Government's review of the business birth rate strategy shows that business start-ups in Scotland have been in steady decline since 1997. The number has fallen from 24,000 in 1997 to a disappointing 16,000 in 2001. That is a 31 per cent. decline in the number of new businesses in Scotland. The Secretary of State did allude to the fact that there is a lower propensity to create small businesses outwith the south-east of England, but the fact is that the situation is getting worse. Outwith the south-east of England, fewer and fewer people are trying to set up new businesses.

Of course, part of the reason why we need continually to set up an increasing number of new businesses is that we are losing an increasing number at the other end. In Scotland, 2,500 businesses were liquidated or declared bankrupt in the first half of 2002—an increase of almost 15 per cent. on the previous year. Why are businesses being regulated? It is in some respects because their eye has been taken off the ball in respect of having to cope with the endless stream of regulations from the Government.

Every time I visit a small business in my constituency, I am struck by the marginal effort—the late night effort—that has to be taken into account when dealing with regulations. There is a belief within Government circles that introducing regulation will only have a marginal effect in itself, but the simple fact is, as my hon. Friend the Member for Tunbridge Wells said, that it has a cumulative effect. Another regulation is another half hour every month to complete a burden that can be so destructive of a small business's ability to compete in its marketplace.

On a visit to a small business in my constituency, I was struck by correspondence that described the chaos produced by having to deal with the Government's new system of tax credits. The horrendous effects of that change on those in receipt of tax benefits have been well documented, yet exactly the same chaos has ensued for businesses seeking to administer the system. In my constituent's case, the business employs a relatively small number of people, who have to act as the Government's Benefits Agency in implementing the changes consistently. Significantly, they have to disburse the funds before they receive them back from the Government. In some cases, including that of my constituent, it is a burden that small businesses could well have done without, as it severely impacts on their ability to conduct what they exist to do—generate business and income for themselves and their community.

I was struck by the dramatic nature of the figures on regulations—summed up by the fact that there are 14.8 new regulations every day. Scotland also has a Scottish Executive, which has implemented an additional 1,309 statutory instruments since it was created. That amounts to a level of regulation that, frankly, we can do without. Scottish business is being unnecessarily burdened and put at a competitive disadvantage, which inevitably has an effect on our wider economy. The Scottish economy is underperforming in the UK. Indeed, the Scottish economy has underperformed in the UK economy in every single quarter since 1998. We have lagged far behind the UK average for the past five years. The Scottish economy has expanded by less than 12 per cent. compared with nearly 19 per cent. at UK level. As Scottish Members know, the Scottish economy has been in decline for the past five successive months.

As I said in an intervention on Brian Cotter, the position is made considerably worse because his Liberal Democrat colleagues colluded with the Labour-Liberal Executive to do away with the uniform business rate policy introduced under a Conservative Administration, which had provided a level playing field for Scottish business. The first thing that that Executive did on reaching Holyrood was to abolish it, to the extent that we now have a 9 per cent. surcharge on business in Scotland. That is unacceptable, because we end up with poorer businesses in Scotland and disincentives north of the border.

I conclude by alluding to one further issue, whose importance cannot be overestimated for the future—broadband, which has been mentioned in passing. My constituency is rural and none of my constituents is able to receive broadband services. There will come a point where two-speed Britain will become even more obvious than it is today. Businesses in my constituency do not have access to broadband services, so they cannot compete on a level playing field. Regenerating rural areas through the development of small and micro-businesses will not be possible without access to those services, so I urge the Government to take the extension of broadband far more seriously, particularly for the small percentage who do not have access and for whom there is currently no prospect of gaining access. It is an unacceptable position, which the Government should address.

Businesses in my constituency and throughout Scotland are operating with one hand tied behind their back. They are administering regulations left, right and centre for the Government and at some point that will have to stop. Small businesses deserve a fair deal.

Photo of Henry Bellingham Henry Bellingham Shadow Minister (Business, Innovation and Skills), Shadow Minister 6:40 pm, 2nd July 2003

First, I wish to declare my interests, which appear in the register. I also wish to welcome my hon. Friends the Members for Lichfield (Michael Fabricant) and for Tewkesbury (Mr. Robertson) to the shadow DTI team. Both have substantial business and industrial experience and will add much to what we are doing.

This has been an excellent short debate, with some well-informed contributions, many from Members who have business experience and have read balance sheets in anger. In that connection, I refer to Brian Cotter, who has much experience as a small business man, Mr. Battle, a distinguished former Minister at the Department who gave us a colourful tour of his constituency, complete with an explanation of geophysical barriers, and my hon. Friend Mr. Norman, who probably has more large business experience than any other hon. Member. I am sorry that I had to miss the start of the speech by my near neighbour, Dr. Gibson, but no one in the House knows more about knowledge transfer, so whenever he speaks on business matters he is always listened to—as, indeed, he is listened to whenever he speaks in Norfolk. We all know that my hon. Friend Mr. Duncan has had much experience in different businesses and his comments about Scotland were worthwhile and constructive.

I also wish to pay tribute to the various small firms groups that lobby Members assiduously. They include the Federation of Small Businesses, under the inimitable Stephen Alambritis; the Forum of Private Business, for which Garry Parker is extremely energetic in telling us what his members feel; the all-party small business group, under John May and Alan Cleverly; and the CBI small business team, under Matthew Fell. They all do a very good job of ensuring that we are properly briefed.

One key theme that kept recurring in the debate is the ever-growing burden of red tape and tax on small businesses. As my hon. Friend Mr. Yeo pointed out, that burden falls disproportionately on small businesses. He mentioned the total burden of £20 billion and pointed out that, proportionately, the cost to very small businesses of complying with employment legislation is up to 50 times more than it is for larger businesses. As my hon. Friend the Member for Tunbridge Wells pointed out, using his Asda experience, more regulation normally helps bigger firms in their competition with smaller firms, because of the way in which the burden falls. My hon. Friend Mr. Prisk pointed out that, on average, small businesses now spend between 25 and 28 hours a month dealing with paperwork.

It is not the individual burdens, the different regulations and statutory instruments and new taxes that are show stoppers or deal breakers by themselves, but it is the combined, collective and accumulated weight that is now causing every business grave concern. As my hon. Friend the Member for Tunbridge Wells said, there is now a real cultural problem. There is also a systemic problem, because of the ratchet effect. My hon. Friend put it colourfully when he said that we are tackling an avalanche with a toothpick.

On that point, Martin Temple of the Engineering Employers Federation said recently that the accumulated burden of regulations and taxes is now destroying jobs. He stated:

"Manufacturing competes globally and the government has a clear choice between protecting our competitive advantage, or continuing the trend of the last few years of the gradual erosion of our flexible, low-cost environment.

If we continue to make the UK a less welcoming environment for manufacturing companies"— and small businesses—

"then business will simply vote with its feet and the movement abroad of our manufacturing base will accelerate."

When we raise the point about red tape and burdens with the Government, they tell us that, because unemployment is still so low, it does not really matter. It does matter, though: 660,000 jobs in manufacturing have been lost since 1997. The recent CBI trends survey showed that 40 per cent. of small firms experienced a drop in new orders over the previous four months, and 39 per cent. said that output had declined. Jobs have been lost, but what about the thousands of jobs that small firms could have created had they not been deterred from taking on extra staff?

My hon. Friend the Member for South Suffolk and his team went to Manchester the other day and met a number of small business men. When we asked what their two main concerns were, they cited the recent increase in national insurance contributions and tax, and the cost of taking on more staff. There is therefore an opportunity cost in the jobs that have been lost and in the ones that were never created in the first place.

Are the Government listening? New burdens are still being placed on business. The Criminal Records Bureau has just announced very big increases in its charges for vetting care homes personnel. I received a letter dated 16 June from a well-known care and nursing home in my constituency. It stated:

"Without consultation and almost without notice, the CRB is about to start charging nearly three times more than it does currently for checking the records of our future employees."

This excellent proprietor goes on to say:

"There is one further very sore point to raise with you. Originally, the statutory regulations required all nursing homes to complete statutory checks on all their staff by April 2003. However, because the CRB was struggling so much to meet its responsibilities, we were asked to postpone having these checks done until October 2004. Ironically, we will now have to pay dearly for our co-operation on this. We will now be charged the much higher new fee for checks which would previously have been carried out a much lower fee."

We are talking about an extra cost to the care homes sector of £14 million. That is another burden on business that will be appearing in the very near future.

My hon. Friend Andrew Selous referred to a matter that was also raised by a number of other hon. Members—the great increase in the number of industrial tribunal cases. Last year, there were 130,000 tribunal cases in this country. How many more will there be this year?

The Secretary of State talked about the work-life balance, and people's right to flexible contracts. That is a minefield: if an employer fails to follow the procedure to the letter, the employee has recourse to an industrial tribunal. The fear shared by many Opposition Members is that we are talking about a disgruntled employees' charter.

What action is the Department taking? There are some well-intentioned schemes. We support the small firms loan guarantee scheme, but have the Government delivered joined-up government on behalf of small businesses through the Small Business Service? Has that service been, throughout government, a proper champion of small businesses? If it is to act as a genuine voice for small businesses at the heart of government, surely the service needs to report direct to the Prime Minister, and to be separate from the DTI? The Opposition feel very strongly that much of the service's £400 million budget needs to be properly evaluated, and put under closer scrutiny.

Many different schemes are covered by section 8 of the Industrial Development (Financial Assistance) Act 1982. Although the Secretary of State said recently that there has been proper evaluation of the small firms loans guarantee scheme, what about the regional venture capital funds, the UK high-tech fund, and the community development finance institutions? What about the bridges fund and the community development venture fund? I am not saying that those are bad schemes, but no proper evaluation has been done. When will the Government perform that evaluation?

My final point is very simple. The Secretary of State's hands are tied—by other Departments that keep putting more burdens on business, and by Europe. The Conservative Government put a huge amount of effort into successfully negotiating an opt-out from a job-destroying social chapter. Within days of taking office, the Government gave up the opt-out. In respect of the agency workers directive, the CBI stated recently that, had we kept the opt-out, all the fuss over the directive would have been irrelevant, as Britain would have sat on the sidelines while our European colleagues "squabbled away".

Why cannot the Secretary of State make the day of every small business man in the country and say that the Government will renegotiate our social chapter opt-out? Unless the Government take radical action to reverse that trend, small businesses will never receive a really fair deal. That is why I urge hon. Members to support our motion.

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry 6:50 pm, 2nd July 2003

I join Mr. Bellingham in congratulating his colleagues who have been promoted to the Front Bench. I pay tribute to Britain's 3.7 million small businesses, which are responsible for generating £1 trillion in our economy and employ 12 million people.

I give thanks to the organisations that represent them and that have become my close advisers: the British Chambers of Commerce; the Federation of Small Businesses, especially its driving force, its chair, John Emmins; the Institute of Directors; the CBI SME Council and the Forum of Private Business. I also thank the Small Business Service, which in three short years has made a real mark on behalf of businesses for Britain. Incidentally, the SBS produces an annual report; I think that Mr. Duncan suggested that it did not. The Small Business Council also produces reports and, in November last year, we produced our own report, "The Way Forward", which was widely welcomed by small businesses.

I like to get out of the Department of Trade and Industry every week if I can and I visit small businesses throughout the country, so I have a good understanding of the problems that they experience. Mr. Yeo said that the Forum of Private Business had told him that its members expected lower growth than at any time since the Labour Government came to power. Although that vexes me, it is in stark contrast to the situation a decade ago, when the forum expected no growth at all. Its membership was falling and its members were going to the wall.

Several contributors to the debate made claims about the volume of companies going bankrupt, but I think that their figures were from Conservative central office, rather than from Barclays and others who have conducted proper surveys. Mr. Norman said that the stock of businesses was reducing. That is not true. The latest Barclays figures state that start-ups in the first quarter of 2003 totalled 107,000—12 per cent. up on the same period last year. Those are important facts.

Photo of Mr Archie Norman Mr Archie Norman Conservative, Tunbridge Wells

The Minister may be aware that he is misquoting me. The stock of businesses is not just a function of the new businesses created but also of the number of fatalities—people who have gone out of business. I was quoting figures not from Conservative central office but from the DTI, which show that the stock of small businesses is stable—there has been no increase in the last five years.

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

I have the figures to which the hon. Gentleman referred. He is being rather selective. On closures, the most recent annual figure, which indeed comes from the DTI, is 435,000. That is considerably less than the comparable figure a decade ago in 1992 when more than half a million companies went to the wall; the same number went to the wall in the previous year. In fact, the start-up market is healthy and, even better, the survival rate is the best for a decade. The House should take those important facts into account.

Photo of Mr Peter Duncan Mr Peter Duncan Conservative, Galloway and Upper Nithsdale

Is the Minister proud of his record in Scotland, where 31 per cent. fewer businesses are being set up this year than at the start of the Labour Administration?

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

It is important that companies and practices in Scotland parallel the best practices in the rest of the United Kingdom, and I am happy to showcase them.

The hon. Member for Galloway and Upper Nithsdale stated, first, that there was no annual report on small business, and he was wrong. Secondly, he criticised the Government's broadband policy, but did not acknowledge that £30 million is going to regional broadband projects. That includes a substantial sum for Perth, the Western Isles and south-west Scotland, if not for his constituency. Thirdly, he said that it was more difficult now than ever before to start a business because of red tape, but he should consider the problems that people face. The Inland Revenue has now produced a form for start-up businesses—it is a five-page booklet, but we inherited a 44-page booklet.

Again, the figures for the regulations and statutory instruments that are now produced are greatly in our favour: 1,452 general SIs were produced in the most recent year; 10 years ago, the figure was 1,692. In 10 years, there has been a substantial drop in the number of new regulations, so we do not take lessons on new regulations from the Opposition.

Photo of Mark Prisk Mark Prisk Shadow Paymaster General

Is the hon. Gentleman denying figures that come directly from the Library, which clearly show that, under this Government, the number of regulations has gone up by 50 per cent.?

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

Absolute rubbish! I have the figures in front of me, and I have quoted them. If the hon. Gentleman wants to hear the total, in case he thought that I was being too specific in referring to general SIs, I shall add in the local SIs. The figure now is 2,221. The figure that we inherited is 3,291, and the figure for 10 years ago is 3,359.

The difficulty of starting a company was mentioned, but let me quote a previous, respected figure:

"when this reaches the point where you may need 28 separate licences, certificates and registrations just to start a business, then I say again: this thing must stop."

That was the noble Lord Major, speaking at a Conservative party conference in 1992. [Hon. Members: "He is not a lord."] He is a noble person anyway.

It now takes one day and less than £85 to start up a business in Britain—our record is among the best in Europe. It is interesting that, in a motion that seeks to undermine small businesses, the Conservative party pays no respect to the position of small businesses, the role that they have played and the help that they have been given. Compared with when we took office, people in 700,000 fewer small businesses have to fill in VAT forms on their tables on Sundays, because we have raised the VAT threshold. In addition, raising the statutory audit requirement to more than £1 million has helped 150,000 small businesses. Small businesses have made a real difference to this country.

My hon. Friend Mr. Battle made a very powerful plea for ensuring that there are more social enterprises and that more is done in line with the Phoenix fund and other regional funds to help not only small businesses to start up locally, but local communities too. When I launched the OneLondon initiative yesterday, I was able to pay tribute to a Brixton-based company that was refused money—

Photo of David Maclean David Maclean Shadow Chief Whip (Commons), Opposition Chief Whip (Commons)

In order to save the Minister's career, I beg to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the original words stand part of the Question:—

The House divided: Ayes 190, Noes 343.

Division number 273 Small Businesses

Aye: 190 MPs

No: 343 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments):—

The House divided: Ayes 323, Noes 185.

Division number 274 Small Businesses

Aye: 322 MPs

No: 185 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly agreed to.

Mr. Deputy Speaker forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House agrees that small and medium-sized businesses are crucial to the prosperity of the nation and will be responsible for many of the new jobs and much of the future innovation in the economy; welcomes the steps that the Government has taken to make it easier than ever before for people to start their own business; acknowledges that the Government has created the economic conditions of macro-economic stability and low and stable interest rates in which small business can grown and prosper; believes that the Government has created a pro-enterprise tax environment; and applauds the Government for improving access to finance for small and medium-sized businesses, removing unnecessary regulations and providing world class business support.

Photo of Peter Luff Peter Luff Opposition Whip (Commons)

On a point of order, Mr. Deputy Speaker. Yesterday, as you know, the House passed a draconian and very tight programme motion on the Hunting Bill for its recommittal to the old Standing Committee, requiring that Committee to report by Monday next week. The first opportunity for the Programming Sub-Committee to meet, for the convenience of the Chairman and the Clerk, was at 6.15 this evening.

The Programming Sub-Committee met, it was not a particularly easy meeting, and the motion was controversial. Eventually, at about 6.50 this evening it was agreed that the Committee would probably meet at 9.25 am tomorrow, and the Clerk left the Committee Room to ensure that the cards were put on the board so that members of the Committee were aware of the decision of the Programming Sub-Committee. At that stage, it was an informal decision on which no vote had taken place. It was an attempt to ensure that hon. Members were aware of the fact that the Committee would meet tomorrow.

I have just been to the board and the cards are still not there, so no member of the Committee can know formally that the Committee is to meet tomorrow, at what time or where. Furthermore, the time of the meeting has been changed from the usual time of 8.55 am to 9.25 am. There will be considerable confusion tomorrow morning, as a result of the excessively tight programme motion. As no formal notification has been given to members of the Committee that the Committee is to meet, can it properly meet?

Photo of James Gray James Gray Conservative, North Wiltshire

Further to that point of order, Mr. Deputy Speaker. Is that not symptomatic of the fact that, contrary to any precedent that I can find in "Erskine May" or anywhere else, the recommittal of the Bill to Committee has taken far less time than any previous recommittal and is greatly more controversial than other recommittal? Most recommittals are only for technical matters that need to be corrected by the Committee. This is the first occasion that I can find, in any precedent that I have looked at, on which such a controversial and difficult matter has been returned to the Committee in this way.

Giving us only two days in which to table amendments, write speaking notes and consult outside bodies is an extraordinary way to treat the matter. Symptomatic of it is the fact that the Clerks have asked for extra time tomorrow morning. They have asked us to sit at 9.25 am to allow them extra time to get the amendments, and so on, in order before the Committee sits. Surely it would be more proper for us to come back to the House to request that the Committee sit next week, so that we have more time properly to consider the difficult amendments to such a controversial matter?

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

May I say to Mr. Gray that the House has taken a clear decision on recommittal, and that is not for the Chair to comment on this evening? With regard to the cards that were the subject of the first point of order, that is entirely a matter for the Chairman of the Committee. I understand the concern of Mr. Luff, and I understand that every effort is being made to get the cards in place as quickly as possible. We must now move on.

Photo of John Whittingdale John Whittingdale Shadow Secretary of State for Culture, Media and Sport

On a point of order, Mr. Deputy Speaker. We understand that tomorrow the Government intend to publish a White Paper that will contain major policy announcements about the future of the national lottery. We further understand that the Secretary of State for Culture, Media and Sport is to give a press conference and a major speech on the matter, but given previous rulings by Mr. Speaker, I am sure you would deprecate it if such announcements were made at press conferences and on the "Today" programme, but not through a statement in the House. Have you had any indication that the Secretary of State intends to make a statement to the House?

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

I have no information as far that point is concerned, but Mr. Speaker has made his views on these matters very clear on many occasions and the hon. Gentleman has now put his point firmly on record.

Photo of Eric Forth Eric Forth Conservative, Bromley and Chislehurst

Further to that point of order, Mr. Deputy Speaker. If what my hon. Friend Mr. Whittingdale says is true, it would be very helpful and reassuring to the House if you were prepared, through your good offices, to let it be known to the Secretary of State for Culture, Media and Sport that there should be no question of her touring the studios or giving a press conference before coming to the House in order to make herself available to be questioned about the White Paper, which is, by definition, a major policy statement. Mr. Speaker has repeatedly made it clear—he did so recently—that on policy statements above all, the Secretary of State must come to this House first. It would be helpful—I do not think that this is an unreasonable request—if you now made that very clear, to ensure that the Secretary of State is under no illusions about the views of Mr. Speaker.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

I can only repeat to the right hon. Gentleman the point that I have already made. Mr. Speaker feels extremely strongly about these matters and I have no doubt that those on the Government Front Bench will have heard the points that have been made.