Businesses and SMEs - Motion to Take Note

Part of the debate – in the House of Lords at 1:57 pm on 6th July 2017.

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Photo of Lord Tunnicliffe Lord Tunnicliffe Opposition Deputy Chief Whip (Lords), Shadow Spokesperson (Defence), Shadow Spokesperson (Treasury) 1:57 pm, 6th July 2017

My Lords, I also thank the noble Lord, Lord Leigh, for initiating this debate. Indeed, I read the terms of the Motion and thought that this would be a bit of a love-in because it is essentially a statement of motherhood—do not get me wrong; I am in favour of motherhood—with which I and my party entirely agree. I enjoyed his speech. His critique of the worst of big, private business would have rocked the House had I made it, though his statements were all entirely accurate. The worst of big business is not very nice.

Underneath some ripples on the surface, there was quite a lot of consensus today. Many noble Lords seemed to be saying that business is the centre of our society et cetera. Nobody would disagree that you must create wealth to have welfare. That was very good. However, there was also a current that many businesses could do more to be more socially responsible and to have this concept of more stakeholders than just the profit stakeholder. There was also a bit of consensus that from SMEs you tend to get, perhaps through the business forces on them, better behaviour in terms of the breadth of the benefits and so on. Their natural behaviour is to spread their impact across society.

I want to be clear—as John McDonnell’s representative here on earth—that the Labour Party is in favour of successful business. I thought it was great that the noble Lord, Lord Leigh, put the Conservative Party manifesto in perspective when it came to business. I recommend that the noble Lord, Lord Fraser, look at our manifesto on business. It is a business-friendly and SME-friendly manifesto. I will now speak briefly on SMEs, because I agree with the noble Lord, Lord Palmer—indeed, I found myself agreeing with much of what he said; I am having an uncomfortable day.

Small businesses are very much at the heart of economic growth and innovation. Beyond economics, SMEs add vibrancy to our daily lives, knit local communities together and provide fulfilling work for millions of people and improve their lives. Particularly as we approach Brexit, it is vital that the Government do more to support small businesses and create an environment in which they can flourish.

Small businesses face a number of problems. The noble Lord, Lord Shipley, and the noble Baroness, Lady Couttie, mentioned late payment and supply chain bullying. The noble Baroness gave one or two examples, as will I. The Groceries Code Adjudicator last month described suppliers as feeling,

“in a constant state of jeopardy”,

while a recent survey by MarketInvoice found that five major businesses—John Lewis, Alliance Boots, Home Retail Group, Marks & Spencer and Kingfisher—paid 83% of their bills late. The new payment practice and reporting regulations are a welcome step but lack rigour in both their reporting requirements and the resources available to identify and take action against wrongdoers. Will the Minister clarify what the Government are doing to measure the success of their approach or must we depend on third-party surveys and anecdotes to judge their progress?

It was good to hear from the noble Baroness, Lady Neville-Rolfe—I missed her contribution to the Queen’s Speech—about her concern that all the good stuff she had done was not happening. We concur. We want to know how rapidly those measures will happen. We are particularly concerned about the Small Business Commissioner and their limited scope and resources. In Australia the model is to have a small business commissioner in every state and at the federal level. Their scope and flexibility help ensure strong support from the business community. The UK Government’s plans fall short on all these elements. Will the Minister provide an update on the recruitment of the Small Business Commissioner and their staff and when activities will begin?

SMEs play a crucial role in the development of new products, services and technologies. Investment in R&D—which, once again if you read our manifesto, we strongly support—is key to our future growth and never more so than in our current context. It is therefore concerning that the OBR showed a fall in business investment in 2016 and forecast a further fall in the future. Connecting SMEs to our world-class research base is more important than ever. In that respect, UK Research and Innovation and Innovate UK must assume greater significance in the years to come. We have a deep-seated productivity problem; boosting the capacity of business to engage in R&D will be central to overcoming that trend.

I agree that the complications of Brexit will be particularly difficult for SMEs. It is important that SMEs, particularly those that depend on exports to the EU, are not stifled in their activities. We are already seeing signs that many are holding off investment and plans for exports due to the current climate of uncertainty. Will the Minister clarify whether the Government are encouraging SMEs to continue with plans for exporting to the EU, and what support they are providing in this area?

A proper industrial strategy will be central to ensuring that business continues to thrive in the modern economy. I was struck by the Social Mobility Commission’s recent finding that:

“At current rates of progress, the Government’s ambition to create a high skill, high wage economy will never be met”.

Does the Minister agree with the commission’s suggestion that the Government’s industrial strategy should recognise the role of social mobility in increasing the UK’s competitiveness?

In order to flourish, businesses need a highly skilled workforce equipped to meet the challenges of tomorrow. For too long vocational education has been undermined. The UK ranks 16th out of 20 developed economies when it comes to how many people have a technical education. While we welcome the Government’s intention to simplify the process, it is more important to raise standards in the delivery and prestige of technical education, and drive up the quality and esteem of apprenticeships. Will the Minister clarify when the proposed T-levels will be introduced, and what consultation with business the Government are carrying out for their introduction? Will he also say what the Government are doing to prepare SMEs for the apprenticeships levy and encourage SMEs to make use of the financial support available for taking on young apprentices?

The gig economy is a worry. It is changing the way that many people work. The impact of technology and the gig economy are transforming many industries and the very nature of work itself. New platform technologies bring many benefits, as the noble Baroness said, but also many challenges, particularly for SMEs seeking to compete with large companies which in some cases fail to provide basic employment rights. In the new economy we must ensure not only fair treatment of workers but fair competition.

Finally, I will say a word or two about connectivity in the digital economy, which is so important to SMEs, through their role in delivering crucial infrastructure and the millions of SMEs making the most of opportunities that enhanced connectivity brings. It is concerning that half a million SMEs still do not have access to superfast broadband and are unable to participate fully in our digital economy. The UK has slipped down the EU rankings for broadband connectivity in recent years, and we are one of only three EU countries that have not matched the EU’s target of 30-megabit broadband for all by 2020 and at least 50% take-up of 100-megabit broadband. We need a far more ambitious approach to connectivity, particularly for our SMEs to prosper.

Earlier today the noble Lord, Lord Bates, accused me of being a pessimist. I am not usually a pessimist but I am afraid that I am becoming one. I do not think the country is in a very good way. A lot of recent trends are really quite worrying. But I make it absolutely clear that the Labour Party sees responsible business in partnership with government as a central plank of any positive future. We see the flourishing of SMEs as particularly important in this. We especially want to know how the help that SMEs deserve will be delivered by this Government.