SMALL BUSINESSES

HC Deb 30 July 1975 vol 896 cc1929-52

'This Act shall not apply to employers and employees where the number of employees is 12 or less'.—(Mr. David Mitchell.)

Brought up, and read the First time.

Mr. David Mitchell

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this we shall discuss new Clause 13—limited application to small businesses: 'This Act shall not apply to employers and employees where there are 12 or less employees in respect of sections 16 to 33 inclusive, sections 35 to 44 inclusive, sections 49 to 54 inclusive, and section 89.' We shall also take Government Amendment No. 92, and the following amendments:

No. 193, in Clause 107, page 86, line 21, at end insert: '(2A) The following provisions of this Act do not apply to employment by an employer where the number of employees is 12 or less, that is to say sections 16 to 33 inclusive, sections 35 to 44 inclusive, sections 49 to 54 inclusive, and section 89.' No. 194, in page 86, line 39, at end insert: '(5A) The following provisions of this Act do not apply to any employment in an undertaking in which immediately before the effective date of termination there were in the aggregate (including the dismissed employee) less than four employees who had been continuously employed for a period of not less than thirteen weeks, whether they are, or had been, all employed at the same place or are, or had been, all employed at the same place or are, or had been, employed at different places, that is to say, sections 38 to 46, 55, 64 to 70.'.

Mr. Mitchell

Small businesses provide over one-third of the employment in our economy outside the public sector. Small businesses are of importance to employment prospects. I know that worry is felt by all hon. Members on the subject of the rising level of unemployment. The figures have crept up from 700,000 to over 1 million unemployed, and is expected to reach 1½ million by early next year.

One of the biggest problems facing the Government, one about which we are all worried, is what can be done to prevent the unemployment figures from increasing. The Bill far from protecting employment, will increase unemployment in the small business sector.

I hope that the Minister will give an indication of the estimates which have been made by the Department of the number of jobs which will be lost as a result of the Bill. I should like to know how those estimates are made. It is easy for the Minister to shrug his shoulders and say that there will be no effect on employment, but we know that there will be an effect. The question is how carefully the Minister has assessed and analysed the situation, and on what figures he has based his conclusion.

There are three reasons why small firms are going out of business at an increasing rate. The first is that small businesses are enmeshed in a web of controls which frustrate their owners' efforts and take up time which owners would prefer to devote to running their businesses. They cannot keep pace with the paper work involved in Government legislation, controls and regulations. There is a long list. I refer to hire-purchase controls, the profit regulations, census returns, consumer protection, labelling regulations, trade descriptions, wages councils, Factories Acts, PAYE, training boards, contracts of employment, multiple VAT rates and the Remuneration, Grants and Charges Bill, which is almost on the statute book, and by which additional regulations for small businesses will be added next week.

We are now faced with the Employment Protection Bill. It may appear as though the regulations are of no great importance to small business men and that they can be ignored. That is not true. For example, under Clause 43, if a small business man fails to notify a temporary employee of his dismissal in writing, he must pay compensation. That is one example of how important it is for the small business man to read and understand the effect of these regulations.

Mr. Russell Kerr Can they write?

Mr. Mitchell

The hon. Gentleman may make bright quips from a sedentary position about whether the small business man can write. However, the problem facing the small business man is that so much of his time is taken up with reading and filling in forms for Government Departments that he is prevented from getting on with his work in his business.

9.45 p.m.

Many serious problems arise. If a female employee has gone on maternity leave, the replacement worker cannot be offered permanent employment. The type of person who works for a small business does not normally like doing temporary work. In London there are plenty of temporaries, but in rural areas it is difficult to get temporary employees. When a female employee leaves to have a baby the probability is that her job will be taken by a permanent employee and eventually she will have to take another job, probably with another firm.

The first reason for small businesses going out of business is the mass of legislation, with which they cannot cope. The Bill adds to that mass of legislation. The second reason is that they are going bankrupt. According to the figures published on Monday, the number of bankruptcies in the first quarter of this year compared with the first quarter of last year was up by over 40 per cent. That is a massive, if not unprecedented, increase in the number of bankruptcies among small businesses. They are going down like ninepins, and as they go down their employees add to the dole queue.

I know that the Minister shares my concern about the number of unemployed. I am trying to bring home to him the effect that this legislation will have in adding to the number of unemployed.

Considerable financial burdens will be imposed upon small businesses by the legislation. In introducing the Bill in the Second Reading debate the Minister dismissed the cost as if it were of small importance. He said that the legislation would cost between £100 million and £120 million over the country as a whole. He went on to say that that was £5 per employee per year. That implies that the cost to a firm which employs 10 people would be about £50 a year, but the reality is that, although the average cost might be £5 and the average cost to a small business employing 10 people might be £50, there are no average persons. Every one of us here is an individual: none is average. No small firm with 10 employees will be average. It cannot insure. It cannot pay £5 and shrug off its responsibility. It will have to pay up if caught.

Supposing an hon. Member's secretary becomes pregnant and she goes off to have a baby. The hon. Member will have to pay, say, £40 a week for six weeks' maternity leave, and that will amount to £240. The cost there will be not £5 but £240, and similarly with a small business. The cost for a firm with 10 employees will not be £50. Let us suppose that because of a strike in a firm which is supplying a small business there is temporarily no work. Again, the cost for a firm employing 10 people is not £50 but £400 a week.

The Minister must accept that there is an enormous difference between the average factory employing 1,000 people and a small business. The Minister is right in saying that for 1,000 people the cost will be an average of £5 a head. If a woman leaves to have a baby her absence can be covered quite easily as the staff can be shuffled and the woman's job will be available when she returns to work, but in the two, three or four-man business there can be no shuffling. The cost for that sort of business will be considerable. However, there is another cost outside financial terms—namely, the messing about in running a small business.

Let us suppose that an employee is the manager of a betting shop and decides to go on to the local council. Formerly the manager would have said "I am considering going on to the local council." The answer probably would have been "It cannot be fitted in on this job". The manager would then have known where he stood. The position now is that he will be able to go to his employer and say "I require the time off, and at 3.30 I shall be leaving to do council business".

What happens when the 3.30 winner comes in and the manager is not available to pay out? There may be some hon. Members who have an occasional bet, but I must admit that I am not a great supporter of the betting trade. However, given the circumstances that I have outlined, those who placed their bets would be somewhat disconcerted to find a notice saying "Closed, gone to the local council for my council business" when they went to collect their winnings.

Mr. A. J. Beith (Berwick-upon-Tweed)

Or there could be a notice saying "Pleace collect from the council offices".

Mr. Mitchell

I have dealt with the sort of practical problem that affects small businesses. Such problems do not have such an effect on large businesses, which can move managers round and produce a relief manager. Small businesses employing eight, 10 or 12 people do not have any relief staff. They are not carried in that size of business.

What worries me and many of my hon. Friends is the impracticability of many of the Bill's provisions that affect small businesses. I wonder how many bodies the Government consulted before they introduced this measure. They do not seem to be aware of the consequences of much of their actions. I know that the Government consulted the National Chamber of Trade and that they were recommended by the chamber that the Bill should have a cut-off at 10. It is academic that the amendment provides for 12 instead of 10. It is all very well consulting people, but if no notice is taken of the advice that is given there is no point in going through the charade of consulting in the first place. Was the Smaller Businesses Association consulted? Perhaps the Minister will tell us about the association's views and recommendations.

One of the matters that have been put to me most forcefully by those with practical experience of running small businesses is that there were many firms which used to have sick employees carried on the payroll in the days before the contract of employment legislation was placed on the statute book. However, once the matter was given a legal basis they said to themselves "I shall not commit myself to that." The result was that as a matter of policy there was no sickness carry-over beyond a short, limited period. In other words, many firms went for the legal minimum instead of the practical give and take of the friendly working relationship which exists between employer and employee in most small businesses. That reduction in benefit illustrates the difference between the small firm and the large firm.

The matter is highlighted in the case of a man who becomes a JP or local councillor. He may well work in a small business and may equally well be on Christian name terms with his employer. The employer may say "Joe I am jolly glad; good luck with it. We will work it out about finding the time that you need." Now, instead of it being a matter of luck, the boot is on the other food. The employee is entitled to say to the employer "I must take time off when my local authority meets, and that is that." This is a matter of concern in any small business. It was said in Committee by the hon. Member for South Ayrshire (Mr. Sillars) that the small business sector is probably least able to stand any squeeze. He implied that it would flood the labour market with a substantial number of young people. I agree with that view.

The number of small businesses which are going out of commission is increasing rapidly. Bankruptices are at a record level. A number of businesses are choosing to go out because they cannot carry the burden of legislation, controls and regulations. That number is increasing rapidly. How many small businesses will go out of commission as a result of this additional burden? This is part of the total burden, and that burden is far too heavy. The financial burdens will accelerate the number of small businesses which fall by the wayside. Therefore, we should oppose the imposition of any such burden on the existing small businesses.

Mr. Bulmer

I support the arguments of my hon. Friend the Member for Basingstoke (Mr. Mitchell). Yesterday the Leader of the Liberal Party challenged the Lord President of the Council about the number of bankruptcies among small businesses and said that 4,000 went out of business each year and were not being replaced. He was not challenged on that figure. The Lord President referred to the efforts made by the Government to ginger up the information centres for small businesses.

If the right hon. Gentleman cares to come to my constituency he will find rural areas of depopulation. In the villages the small employers—the garage, the village store or the market garden—are all being threatened out of existence following enormous increases in costs. Those increases in costs have been disproportionate. In my area in the last two and a half years we have had rate increases of about 300 per cent. We have to face the luxury of buying Welsh water. Furthermore, the cost of rural transport has increased because of the dramatic increase in oil prices.

My hon. Friend the Member for Basingstoke has mentioned the various impositions which the Government have put on the small employer in respect of the number of forms which he must complete. Local government has introduced similar burdens, and the effort required by elderly people to fill in VAT, and other tax forms is a major consideration and is perhaps not easily understood by those who ask for the forms to be completed. There is a loss of will among elderly people on whom a rural community often depends. There are fears among the same people about capital transfer tax and other measures which are to be introduced by the Labour Government. Therefore, on the debit side that aspect has to be considered.

On the credit side, what is there to be taken into account? There has been a small increase in wages but it nothing like approaches the national average. For people living on retirement pensions there has been no increase in discretionary spending, and anybody who depends upon dividends has suffered from the freeze. The small employers have to face a series of extra responsibilities which they are in no position to discharge. We would not quarrel with the fact that many of them are statutory obligations, but time is of the essence. There is a consequential effect on employment, and in rural areas the result will be nothing short of catastrophic.

My hon. Friend referred to many of the problems faced by small businesses, and I shall summarise some of them. The first concerns guaranteed pay. The small employer has no protection against the strikes in a nationalised industry which deprive him of the elementary services on which his activities depend. He very often has not the cash—

It being Ten o'clock, the debate stood adjourned.

Motion made, and Question put, That the Employment Protection Bill may be proceeded with at this day's Sitting, though opposed, until any hour.—[Mr. Dormand.]

The House divided: Ayes 256, Noes 210.

[For Division List 315 see cols. 1997–2002.]

Question accordingly agreed to.

Question again proposed, That the clause be read a Second time.

Mr. Bulmer

Another unfortunate effect will be that more people will be on the "lump" and that the small rural builder will be unable to afford to carry staff whom he might otherwise be able to keep through the winter.

I invite the Minister to say whether, if he were running a small village shop, he could afford to pay maternity benefit out of the income from that shop, faced as he would be, as the owner of the shop, with increased nationalised industry prices and all the other increases in costs which I have outlined. [Interruption.]

Mr. Speaker

Order. There are many conversations going on and I am having difficulty in hearing the hon. Member for Kidderminster (Mr. Bulmer).

Mr. Bulmer

Therefore, I ask the Minister to try to look at the problems of the rural community rather differently, perhaps, from the way in which he is accustomed to looking at industrial affairs and industry in general. There are many aspects of the Bill which are perfectly acceptable in large-scale industry but which in the countryside will present real problems. There is no doubt, as my hon. Friend the Member for Basingstoke has said, that temporary employees do not exist and it is virtually impossible to find somebody to come in for nine months of the year to do a particular job. It is also extremely unfair on somebody who may be available to do that job and who would wish to settle in it. The whole question of time off is—

Mr. D. E. Thomas (Merioneth)

The hon. Gentleman is arguing strongly the case of the rural employer. Will he take into account the case of the rural employee and the need for the rural employee to be allowed the same kind of protection under the Bill as the urban employee?

10.15 p.m.

Mr. Bulmer

The first protection that the rural employee wants is job security. That lies largely in the hands of the Minister of Agriculture.

There is considerable uncertainty surrounding what might be regarded as reasonable time off in the circumstances for, say, one of three employees who wished to become a justice of the peace. The time required by that job could mean that he would be unable to fulfil the position for which he was originally engaged.

Reasons for dismissal in small communities could provide areas of difficulty. Often people know each other extremely well, and, whatever reason may be given, it is likely to be the wrong one.

There is also the effect on rural areas adjacent to large and prosperous urban areas of Schedule 11 and Clause 89. Much of what I have said is true of market towns. They are suffering from different pressures. The small shopkeeper suffers from competition with the multiple, and, in a curious way, price control has increased that competition. Redevelopment has also brought its problems.

I fear that there is a tendency to assume that employers have bottomless purses. I think that in the next 12 months it will be clear to everybody that that is not so.

The rural employer is becoming a rare breed. It is vital for the health of the community that he should be preserved. If the Government had accepted the suggestion which we made that there should be a Minister for small businesses, it is inconceivable that they would not have supported the clause.

Mr. John Loveridge (Upminster)

I want to add a few comments in support of my hon. Friend the Member for Basingstoke (Mr. Mitchell), whose new clause suggests that exemption should be given to small firms with 12 or fewer employees.

The small firm is at a great disadvantage today. Enormous quantities of legislation have come out in recent years, particularly latterly, which affect all small business men. These people often learn as they try to expand their small businesses. They have to learn their businesses and about new business as they go along. They do not have sales departments, forecasting departments for finance, or even manufacturing departments. All these things and the requirements of administration have to be studied by these men as their businesses grow. They cannot do everything themselves, yet they must. Even in small businesses like my own which employ more than 12 persons and have some form of secretarial help, great difficulties are experienced in meeting the constant administrative burdens imposed by new legislation. The difficulties are even greater for the very small business man.

The bankruptcy figures show that some firms have gone bankrupt merely, it seems, because the men running them have not learned to forecast their liquidity ahead. They do not know enough about it. Yet they must learn about it not only for their own self-interest but because of their duty to those from whom they buy supplies and, indeed, to their own staff.

The new agencies which have been set up throughout the country will help the small business man, but nothing will help him over his time. He is desperate for time. He works very long hours, often with the help of his family, well into the night. It is not just this Act of Parliament which will affect him; it is the accumulation of many Acts of Parliament which place such impossible burdens upon him.

Imagine the situation of the farmer who perhaps has to go out at night to look for cows which have escaped from his fields. How on earth is that man to add yet another set of legal require- ments to his burden and still carry on effectively dealing fairly with those he employs and those to whom he supplies goods? It is not only VAT and PAYE that he has to contend with. There are a whole number of burdens upon him. Imagine the small shopkeeper who has payments to meet under the maternity provisions of the Bill, —and these are not the only obligations he must meet. How will he deal with the period when his staff are off work.

The whole position is one of increasing difficulty for small businesses. They provide so much of value to our country, both economically and in other ways. They preserve an independence of spirit which is of value and is recognised on both sides of the House as being of value. I hope that the Government will consider giving the very limited exemption proposed in the new clause.

Mr. John Cope (Gloucestershire, South)

I support my hon. Friend the Member for Basingstoke (Mr. Mitchell) and his new clause. My hon. Friend the Member for Upminster (Mr. Loveridge) has just referred to the extra burdens being imposed on small businesses at this time.

During the Committee stage the Under-Secretary referred to various other examples of onerous provisions from which small businesses were originally to be excluded by the Government. He mentioned the Equal Pay Act and the Race Relations Act and said that the Government had originally intended that they should be excluded. He used this as an argument in favour of doing the same thing with regard to this Bill and including small businesses. But that is a clear argument in precisely the opposite direction. It is the piling on of burden after burden which brings small businesses to their knees. Administrative burdens and financial burdens are being piled on top of inflation—the biggest burden of all—and these are the extra straws loaded on to the camel's back. Every extra straw weakens all camels and brings some of them to their knees.

Earlier, the hon. Member for Feltham and Heston (Mr. Kerr) intervened from a seated position during the speech of my hon. Friend the Member for Basingstoke and asked of small shopkeepers "Can they write?" That was a gratuitous insult to them. The question is not whether they can write but how far into the night they must go on writing in order to fulfil the requirements of the Government and keep pace with the legislation which is being placed upon them.

Shopkeepers will be greatly affected by the maternity provisions of the Bill. They are among the largest employers of female labour. I believe that the maternity provisions will in practice discriminate against young married women. Many employers will be reluctant to hire women who might leave to have a baby. Who can blame them for being reluctant? They will not entirely avoid these risks these days by hiring an unmarried woman instead of a married woman. We all know that. However, they will take a greater risk by hiring a young married woman who is more likely to have a child.

Obviously it cannot be made a condition of employment concerning either married or unmarried women that while in employment they should not have a baby. But employers will realise that this is a risk and that it will cost them more money. They will therefore tend to pay less to a woman who is in this position and who exposes them to this risk.

My hon. Friend the Member for Basingstoke referred to the position of the Member of Parliament who has to hire a secretary. I refer in no way to any particular Members' secretaries, and certainly not to my own. I think that my hon. Friend understated the expense which might fall upon a Member of Parliament if he found himself in the position that his secretary was having a baby. He put the cost at £240, which might be the total amount of wages he would have to pay for work not done. But that is not the end of the expense to the employer. He must hire alternative secretarial services, presumably from one of the agencies. They are much more expensive than hiring a regular secretary. An alternative course would be to hire a second secretary to replace the one who had left temporarily.

Sir Edward Brown

Will my hon. Friend comment on the situation which arises where the first secretary gets herself pregnant and a Member takes on a second secretary who also gets herself pregnant, and so the situation continues ad infinitum?

Mr. Cope

I would say—[Interruption.] The hon. Member for Isle of Ely (Mr. Freud) suggests that you might get a mileage allowance in those circumstances, but it seems to me that it would be wrong to describe you as being in that position, Mr. Deputy Speaker.

Mr. Deputy Speaker (Sir Myer Galpern)

I do not know what position I am supposed to be in, but I remind the hon. Member that we are not discussing the Abortion Bill.

Mr. Cope

I had better move on, therefore, to the next part of my argument. It amazes me that the Government should have put forward Amendment No. 92, because in Committee they accepted the proposals which the amendment seeks to delete. The amendment in Committee was made without a Division. Will the Minister explain why the Government did not oppose it? Were they convinced at the time by the arguments, and have they since changed their mind?

The greatest irony in one sense for small businesses is the aspect of time off to serve on councils. Many small businesses feel that they are carrying an unfair burden in respect of the rates, and in many cases their complaint is justified. I shall not develop now the argument about how rate assessments work unfairly on small businesses because that would be out of order, but they already feel this. In addition, they are now being asked—not merely asked, but told—to allow their employees time off in order to attend meetings of councils and, presumably, of their committees. This is an extra burden which small businesses should not be asked to carry. That is why I support the new clause and the amendments.

10.30 p.m.

Mr. Mather

I support my hon. Friend the Member for Basingstoke (Mr. Mitchell) in having put across so eloquently the case of small businesses and the self-employed. I support my hon. Friends who have also put across in very strong terms the case of this very important section of our community which will be so penalised by the Bill. After all, if it is an Employment Protection Bill it should relate to the protection of non-unionised labour as well as unionised labour.

I find that in my constituency, which is not a rural area, more and more high street shops are closing. I do many tours of the shopping areas to find out the particular problems of small shopkeepers. The story is always the same. It concerns the burden of taxes and paperwork and the fact that most high street shops have a fixed catchment area and cannot increase that area or the number of their customers yet their overheads are rising all the time. The latest burden is the increased rates. They are being squeezed to death.

I shall not follow my hon. Friend the Member for Gloucestershire, South (Mr. Cope) in his maternity stakes and his references to secretaries. He suggested that there might be a case for a mileage allowance. On the other hand, it might be an allowance for nights spent away from home. I do not know which would be the more suitable in the circumstances.

However, the point is that the Government have not faced up to this matter, which will affect large areas of the working population in ways which I am sure were not intended. It will cause absolute chaos. There is real danger of a breakdown in the retail system. The big firms are dependent on small shops as outlets for the distribution of their goods. If this process continues and if more and more burdens are loaded upon small business men, we shall be in serious danger of a breakdown.

In my constituency there are other problems which are putting small shopkeepers out of business—the problems of traffic and of parking. That is something quite different. In reading the clauses of the Bill, however, one wonders how all the headings will apply to the ordinary high street shop. One has only to glance at one or two clause headings for the mind to boggle in wondering how they will be worked out. There are 83 pages of schedules to the Bill. How will these be interpreted by those about whom we are talking? How will the Bill be administered and controlled? Who is to police the enforcement of the Bill as regards these people? Will it require vast armies of inspectors, or will the police themselves have a role to play?

In mentioning the police I ought to mention the enormous burdens which have been loaded upon their shoulders. At a recent police training college course it was said that in the last 10 years there have been 76 major pieces of legislation which they alone have to interpret and try to enforce.

I do not think that the Bill was intended to cover businesses with fewer than 12 employees. I hope that the Minister will look at it again for the sake of the enforcement of the Bill and to avoid bringing the law into disrepute.

Sir Raymond Gower

I hope that the Government will look at this matter not merely with sympathy but with the intention of taking action. That would be an earnest of their attitude towards small businesses. There is a temptation for Governments, of both political complexions, to think in terms of the big battalions, to believe that big units are best. This country, like other countries, has suffered from that thinking and may suffer even more in future. It is not without significance that some of the most successful countries in the world, including Switzerland and Japan, have many small industries serving and servicing the larger industries.

We take at our peril any steps which damage the smaller units. The Government's attitude towards this clause is important in explaining their approach to the future of the small units from which larger units can grow. It is not only a question of conserving the small units. We want to see larger units emerging. It is difficult to start any business nowadays. It must be a heart-breaking job to begin a new, small undertaking.

I recognise that the number of 12 employees may not be a perfect means of judging such a unit. Nevertheless, any unit as small as that could in most cases be justly described as a small business—the sort of business that cannot bear the varied and increasing burdens that are being imposed upon it by new legislation. It is in that context that I hope we shall send a message from the House tonight to the effect that small businesses have a future—we hope an improving future—and will be able to make a significant contribution to the recovery of the economy.

Mr. Harold Walker

The hon. Member for Basingstoke (Mr. Mitchell) seeks in his new clause to exclude small firms and their employees from the provisions of the Bill either in whole or in part. For the purposes of the clause he defines small firms as firms with 12 or fewer employees. We had a good run over this course in Committee and I do not want to inflict on the House the arguments used then except to say, that we have a great deal of sympathy with the problems of small businesses. I hope it is not being suggested by Tory Members that the problems of small businesses, such as parking and going out to tend the cows in the field at night, arise from this Bill or from the actions of the present Government.

While there have been powerful and eloquent arguments about the interests of small businesses, I could have wished that they had been interspersed with arguments about the interest of the employees of these concerns, about whom we have not heard a word except in one intervention by a Conservative Member.

Wholesale exemption of the kind proposed is a clumsy way of going about trying to help small firms. If adopted, the new clause would be deeply resented by large numbers of people to whom the hon. Member for Basingstoke drew attention and who would be affected.

At one time during the speech of the hon. Member for Gloucestershire, South (Mr. Cope)—when he referred to maternity provisions—I thought that my Department should be renamed the Ministry of Labour. I said in Committee that on the whole the attitude of the Government was to move towards the elimination from social legislation of such exemptions as we are discussing. The only area where a small firms exemption remains is the present draft of the Sex Discrimination Bill, which excludes from the provision on discrimination against employees employment where the number of persons employed by the employer, added to the number employed by any associated employers, does not exceed five. The Secretary of State has powers in that Bill to vary that provision by order. There was a small firms exclusion in the Race Relations Act 1968 but it has been phased out.

We have no evidence of any small firms exemption in Europe. The general pattern of legislation in EEC countries is to apply this kind of individual protection to all employees.

Mr. Bulmer

In Italy special provisions are made for the rural areas.

Mr. Walker

Generally in the EEC there is no small firms exemption of this kind. We must anticipate the possibility of difficulties in the context of any likely EEC moves towards harmonisation. It is my understanding that there is no EEC directive on this subject which contains an exclusion of this kind, no matter what the behaviour of individual member countries might be.

There are other difficulties, including the question of the dividing line between small firms and the remainder. The Opposition argue, with some justification, that the heavy burdens imposed on small businesses as a result of a series of legislative measures of different Governments have affected their competitive position. Their effect is roughly the same on all small businesses. The competitive position of small businesses as between each other should not have been substantially affected.

If it is said that larger firms have special staff to look after matters which small businesses must cope with on their own, and that these are added burdens for the small business man, I under stand that. I sympathise with small business men who must cope with those problems. But are the Opposition saying that one category of small employer should somehow be discriminated in favour of, to benefit his competitive position vis-à-vis all other employers? If so, they are asking in principle for a subsidy.

Mr. Mayhew

There are many small business men who will be unable to continue to employ their present workforce unless the discrimination which the Minister so deplores is granted to them. That is our point.

Mr. Walker

If the hon. and learned Gentleman is asking for deliberate discrimination in favour of small firms, we shall bear that in mind. He reflects the view of the Opposition that one group of business men should be discriminated against in favour of others. I do not share that view.

Mr. David Mitchell

The Minister has missed the point. The burden of performing these tasks, which must be borne by small and large businesses alike, falls heaviest on small businesses. The discrimination is made necessary as a result of the imposition of so many burdens on businesses.

Mr. Walker

We must consider the cut-off point and the effect of the discrimination on people on either side of it. In Committee the Opposition sought to exclude units of four or fewer employees. The hon. Gentleman now seeks to set the threshold limit at 12.

We were asked whether we had received representations from organisations representing business men. We received many representations, although we did not receive representations from the specific organisation to which the hon. Member for Basingstoke referred—the Small Businesses Association. We had representations from the Retail Consortium, a number of trade federations and the Small Firms Council of the CBI. Many of these organisations gave differing views. The National Federation of Meat Traders pressed for exemption for firms employing fewer than 10 people. In this capricious and arbitrary way the Opposition would deny the benefits and rights of this legislation to millions of workers.

10.45 p.m.

Mr. Loveridge

Is it not true that the staff working in these businesses are in a sense a part of the business? It has been suggested that the Opposition have taken only the interests of employers to heart, but that is not so. Our interest is with these firms taken as a whole, including those who work in them, who often work on the most friendly terms with the employer. It is the staff's interest as well as the interest of the employers that we put forward our plea.

Mr. Walker

I shall not make the mistake with the hon. Gentleman that I made with the hon. Member for Rochdale (Mr. Smith) in Committee in referring to him as a small business man. But on the assumption that the hon. Gentleman employs units of four or 10—or whichever arbitrary figure is chosen—will he confirm that he has consulted his employees and sought their views on whether they want to be excluded? That applies equally to all Opposition Members who have taken part in the debate. Will they assure me that they have sought the views of their employees and that their employees want to be excluded from the provisions of the Bill in the way they seek?

Mr. Loveridge

If the Minister will allow me, I must disclaim a personal interest here, because my businesses are larger than those mentioned. What I am saying applies to these smaller firms.

Mr. Walker

The hon. Gentleman does not speak from a direct interest in small firms, but I hope that he will consult the employees on whose behalf he is presumably speaking and also the employees of smaller firms. The House would have benefited from an indication of the views of the employees of small businesses.

If I recall correctly, the hon. Member for Basingstoke said that one-quarter of the working population worked in small firms. I do not dissent from that figure. I am prepared to take his word—

Mr. David Mitchell

The criterion of small businesses employing one-third of the working force in the country outside the public sector comes from the Bolton definition of 200 employees. I was describing small businesses in general. I have no figures in relation to firms with 12 employees.

Mr. Walker

I accept the hon. Gentleman's figures. My Department has no figures for employees in small firms, but the Census of Employment indicates that the total number of employees in units employing between one and four employees is 1.1 million, and in units employing between five and 10 employees 1.6 million, representing 5 per cent. and 7 per cent. respectively of the total labour force. That means that there are probably about 3 million employees in units employing between one and 10 persons. That is a very large slice of the total working force.

The amendments go further by setting the threshold at 12 persons. That gives some idea of the scale of exclusion which Opposition Members are seeking. They seek to exclude that substantial slice of the working force from the benefits, rights and provisions of the Bill. I repeat that there are problems. That is undeniable, but the problems can be exaggerated.

I shall refer to one or two provisions in the Bill which permit flexibility and will help small firms. First, the provisions on time off for trade union and public duties incorporate safeguards for employers' interests which take account of individual circumstances and should prove helpful to small businesses. The employer's duty under the new clause is limited to what is reasonable in all circumstances.

The provisions on time off for trade union duties and activities will be supported by detailed guidance to be issued in a code of practice by the ACAS. As regards time off for public duties, regard shall be had to many other factors such as the circumstances of the employer's business and the effect of the employee's absence.

As regards the maternity provisions, the Bill provides that to qualify for reinstatement an employee must notify the employer of her intention to return to work before leaving for confinement. The employee will also be required to give the employer at least a week's notice before resuming work after confinement. Additionally, the employer will be able to postpone the employee's return for up to another four weeks on notifying his reasons to the employee should he need more time to find a suitable post. These provisions will give the small employer a little more room for manoeuvre.

Sir Raymond Gower

Has the Minister considered the fact that in many cases some employees may be worse off? Has he recognised that some of the very small firms employing three or four people will studiously avoid employing a girl, for example, because of the sort of obligation he has just mentioned? Such provisions could operate and militate against the interests of the employee. Has the hon. Gentleman considered that?

Mr. Walker

That has not been the experience of other European countries which are ahead of us in this kind of protective legislation.

I was making the point that there are provisions in the Bill which will be helpful to small business men. I refer to the short-term employment exclusion which applies in respect of guarantee payments and the procedure for handling redundancies. Such provisions will help the many small employers in industries such as agriculture and horticulture and where-ever there is a need to use casual labour for limited periods to cope with peaks of demand or seasonal fluctuations.

I stress that there are problems. There will be problems in implementing many parts of the Bill, but they should not be deterrents to the need for action, nor should we exaggerate them. I believe that some of these matters have been exaggerated.

The provisions of the Bill, when enacted, will be introduced by order. It will be for my right hon. Friend to activate them. I have no doubt that he will have fully in mind in introducing the relevant provisions the economic circumstances applying at the time and the way in which they will bear on those who have to carry the burdens. I am sure he will have in mind the problems of small businessmen.

I am bound to say that to deny the rights and protection of the Bill would seem to be an arbitrary and capricious way of proceeding. To do so would be to deny the Bill's rights and protection to possibly millions of workers. That would be wrong and indefensible. We cannot divide workers into first-and second-class citizens in the way suggested in the new clause and as suggested in Conservative Members' speeches. I urge the House to reject the new clause.

Mr. David Model (Bedfordshire, South)

We have had a most interesting and useful debate on the problems of small businesses. The whole House will be grateful to my hon. Friend the Member for Basingstoke (Mr. Mitchell) for introducing the new clause. He has given us a chance to discuss the problems of small businesses in the summer of 1975 in detail.

The Minister began by saying that he was sympathetic towards our case, but he then used a most interesting phrase in quoting from the Bill—namely, "reasonable in all the circumstances". Indeed, what is meant by that phrase? It is because of the present circumstances and difficulties for small businesses that my hon. Friend introduced the new clause. The circumstances are very difficult for small businesses.

I hoped that the Minister would go much further towards meeting our anxieties bearing in mind all that was said in Committee. We are sorry not to see the hon. Member for South Ayrshire (Mr. Sillars) present because in Committee he waxed eloquently on the problems of small businesses in his constituency and the burdens that would be imposed upon them if the Bill went through unamended. For instance, he said: Small employers in my constituency could not face the burdens imposed by this legislation and it is unfair to impose on them a burden of this nature when we know they cannot undertake it. We have drawn lines before …"—[Official Report, Standing Committee F, 24th June 1975; c. 728.] I am glad to see the hon. Member for Liverpool, Garston (Mr. Loyden) present, because in Committee, as reported at col. 734, he touched on the difficulties of small businesses and maternity payments. However, we all regret the absence of the hon. Member for South Ayrshire because we hoped to have an ally tonight, having had one in Committee.

My hon. Friend the Member for Basingstoke has pointed out the enormous difficulties of small businesses with inflation and their difficulties with legislation when they do not have the facilities to make sure that the legislation is easily understood. My hon. Friend the Member for Kidderminster (Mr. Bulmer) pointed out the difficulties for small businesses when there is a strike among suppliers and how difficult it is to make a guaranteed payment. My hon. Friend spoke about giving time off to do public duties, but at the heart of the arguments was the increase in the number of bankruptcies which has overshadowed the debate. In the first quarter of 1974 there were 1,320 bankruptcies and in the first quarter of 1975 the number was 1,938. There is no evidence from the economic state of the country that the figures will get any better. They will get worse, and we shall continue to find that there are great difficulties for small businesses.

Much mention was made of the difficulties of alternative employment in rural areas when small firms fold up. The point was rightly made of the danger of discriminating against married women employees in small businesses if the Bill went through with the incorporation of Amendment 92, which we thought the Government would not insist upon, having granted the point to us in Committee.

As larger companies have increasingly got into difficulties and been forced to lay off people, it has often been small businesses which have provided employment for people who have been displaced because a larger company has got into difficulties.

Mention was rightly made of the increase in rates which small businesses face this year and will face next year. There is no evidence that the Layfield Committee is speeding to a conclusion that will bring relief to small firms.

If new Clause 11 is not accepted, there is bound to be a further increase in unemployment. The risk is great. We ask what damage a further increase in unemployment will do to society in general. It will do substantial damage to the Government and to society. Why should the Government make matters worse by not accepting the new clause? We do not want to make matters worse. We want to make them better by making it easier for small businesses to operate and less likely that they will go into liquidation. We have moved new Clause 11 because of our growing concern not to make matters worse. That is why I urge my hon. Friends to vote for the clause.

Question put, That the clause be read a Second time:—

The House divided: Ayes 191; Noes 211.

[For Division List 316 see cols. 2001–4.]

Question accordingly negatived.