My Lords, there is yet another glaring omission in the gracious Speech and supporting documentation. It is the lack of understanding of small and medium-sized businesses and how they are a major component of the success or failure of the UK’s businesses and the UK economy. This Government have failed to understand how smaller businesses work and thrive. Smaller businesses need to concentrate on their core activities of providing services, production and sales, and the rest of their activities is incidental.
I have, in 2015 and 2016, spoken in your Lordships’ House on the Conservative policy of MTD, making tax digital. This was apparently seen, prior to the 2015 spring Budget, as a means of simplifying our tax system, being a step change in the ways records are kept and tax collected. This will mean that the self-employed, landlords and businesses will have to keep digital tax records. All right so far, but they will have to send four digital returns to HMRC, plus a year-end return, every year: five digital returns a year. For gurus in Whitehall or 10 Downing Street this might seem a simplification, but for most small businesses, in practice, it means employing a firm of external accountants—I declare an interest there—in order to comply; expensive, unless you are an accountant. Those in business who should be concentrating on production and turnover will be overwhelmed by the digital requirements. Please, Government, think again.
Another problem faced by small and medium-sized businesses, particularly in our high streets, is the obscene rise in business rates mentioned earlier by the noble Lord, Lord Naseby. Liberal Democrats want a systemic review of the business rates system, prioritising reforms that recognise the increased role of the digital economy. We want small businesses and high street shops to remain competitive. It cannot be right and fair that an out-of-town mail order house or a retail warehouse on an industrial site pays less rates than a small shop on my local high street. Have the Government any plans to address this major problem?
I would like to see a greater acknowledgement of the courage of individuals starting their own businesses. Liberal Democrats have proposed a £100 per week start-up allowance for six months to give support with basic living costs to entrepreneurs starting a new business. Further, we need to expand the British Business Bank, introduced in 2014 by Vince Cable when he was Secretary of State, to provide more equity capital for growing firms. I would welcome an assurance from the Minister on this.
Leaving the European Union will be, in the words of “Yes Minister”, “a courageous decision”, but whether we are in or out of the single market and customs union, I trust that central government procurement is used as a tool to drive local growth and community development. Can the Minister say whether government departments, local and national, will purchase from diverse sources and use local labour, goods and services where possible? Too often, government contracts go for apparent safety with a large firm, since if that firm goes belly-up, those who commissioned the work can say, “Don’t blame me, guv—I went to a large firm”. Small firms need to get a look-in on this business.
Inevitably, most speeches will come back to Brexit, that ill-advised leap in the dark. When trade negotiations start—assuming that by then we have experienced and able trade negotiators in the UK—I believe that those negotiations should focus on start-ups, the tech sector, data movement and tariffs, and the protection of intellectual property. A hard Brexit will lock Britain out of the world’s largest free-market area and will impose another huge administrative burden on SMEs seeking to export. If no free trade agreement is reached, the UK will be subject to WTO tariffs, which range from 4.1% on natural gas to 9.8% on cars and, horror of horrors, to 32% on wine. The Centre for European Reform estimates that this would cost the UK more than £40 billion.
Further, have the Government made any assessment of the additional costs to UK businesses of the overhaul of data protection rules? These EU-generated rules, which are going to be brought into UK legislation, will mean a change in how companies process information, such as customer lists and employee records, and will come into force, unless something happens, in May 2018. It is clear that many businesses will fail to comply. Will the Minister say how businesses are being made aware of these rules and whether next spring we will see a plethora of firms paying fines? Will the Minister confirm that fining will be a last resort?