SMALL BUSINESSES

HC Deb 30 July 1980 vol 989 cc1543-95

Mr. Speaker

I have selected the amendment in the name of the Prime Minister.

Mr. Stanley Orme () Salford, West

On a point of order, Mr. Speaker. I understand that the Liberal Party would accept the amendment of the official Opposition. If the Government oppose the motion and do not move their amendment, our amendment could be taken.

The Under-Secretary of State for Industry (Mr. David Mitchell)

Further to that point of order, Mr. Speaker. The Government have a constructive amendment on the Order Paper that we should like to be debated.

Mr. Speaker

In that case, I am afraid that my selection must stand.

4.51 pm

Mr. Stephen Ross () Isle of Wight

I beg to move, That this House deplores the indifference of Her Majesty's Government to the desperate plight of small enterprises in the United Kingdom. We have great sympathy with the hon. Member for Salford, West (Mr. Orme). He now knows what it is like to be a member of a minority party and not have one's amendment called.

It is a rare occasion on a half or even a quarter Supply day when the Liberal Party is invited by the official Opposition to choose the subject for debate. We are grateful to the official Opposition.

Today sees the publication of a sombre document by the CBI, showing that the morale of manufacturing companies is at its lowest ebb since 1974, when we had the three-day working week. No less than 91 per cent. of the firms that replied to the survey report a shortage of orders. No less than 72 per cent. are pessimistic about the future. Only 2 per cent. were optimistic, and 26 per cent. said that they were experiencing no change. Those are frightening statistics.

In a press release, Mr. Cleminson, chairman of the CBI's economic situation committee, said: The Survey results show that, as expected, both home and export demand have weakened. We cannot force people to buy British made products when they cost more than comparable products from other countries. The cost competitiveness of industry has deteriorated even further. The result of all this has been that output and employment in the UK have fallen and this decline is expected to continue at least as rapidly over the next few months. Mr. Bryan Rigby, the deputy director general of the CBI, said that he was worried about the effects on small firms. He went on to say: It is vitally important that the industrial base necessary for economic recovery is not prejudiced by irreversible damage to small suppliers and whilst the CBI is not pressing for interest rates to be reduced in advance of the necessary reduction in monetary growth, it does feel that a steady fall is essential to the well-being of manufacturing companies, whether they be large or small. We agree with the terms of the amendment in the name of the Leader of the Opposition, which highlights one more burden that the overpressed small business sector is being expected to carry. My hon. Friend the Member for Truro (Mr. Penhaligon) referred to the matter on 31 March in the House.

It may seem that the motion is a little unkind to the Under-Secretary of State, whose heart is known to be in the right place. However, I fear that he does not carry sufficient muscle to persuade those hard-faced men in the Treasury and the Prime Minister of the disaster hitting many of our smaller enterprises. I am glad to see so many Members on the Opposition Front Bench. We managed to persuade the previous Administration to give the job to a Cabinet Minister of known authority. With no disrespect to the Under-Secretary, we believe that that policy should have been continued by this Government.

The Government have carried out welcome reforms, particularly in regard to taxation, legislation and investment, but such reforms presuppose that firms are able to survive and make profits in what is now a hostile environment.

The Bolton report, published in 1971, defined small businesses as those with up to 200 employees. That appears to be the type of enterprise that the CBI and many Conservatives have in mind when they talk of small businesses. The other criterion appears to be firms with a turnover of £½ million or more. We wish to deal with firms that are very much smaller—the seed corn on which to base the future, if there is to be one.

I declare an interest. I am a very small business man. I am the proud owner of a china retail shop, with only one employee. My wife has a bookshop, with one and a half employees. I lease premises to a furniture manufacturer, a firm making double glazing, a potter and an architect. I lose on the deal because I have not dared to put up the rent for the past three years. My bank overdraft increases.

Mr. Russell Kerr () Feltham and Heston

The hon. Gentleman needs a business manager.

Mr. Ross

The hon. Gentleman is right. I am also a non-executive director of Pilotus Britten Norman, which employs about 235 people at Bembridge, on the Isle of Wight. It is a bit larger than the firms that we wish to discuss in this debate.

Mr. Toby Jessel () Twickenham

Will the hon. Gentleman give way?

Mr. Ross

I should like to continue.

I know from personal experience how infuriating it is to be on the margin of deciding whether to register for VAT, and I know the time that is spent dealing with returns. The lift in the Budget from £10,000 to £13,500 was not worth while. We were criticised for that when we were in the Lib-Lab pact. We should be pressing, through the EEC, to take that figure to £30,000 at the very least. The present figure is hardly worth collecting.

Mr. Bob Cryer () Keighley

The hon. Gentleman voted for the EEC.

Mr. Ross

What is wrong with that? I shall give way if the hon. Gentleman wishes to say something. He used to speak for small businesses in the previous Administration, although he did not do much for them.

My bank overdraft on the business always seems to be increasing. It gives a hard-working manager little heart when interest rates are running at 20 per cent. or more and other niggling charges ap- pear on the bank statement. Constantly escalating rate demands and heating and water charges continue to pour in without respite. I pay a water, sewerage and environmental charge to the Southern water authority on a store to which no water or soil drainage is connected. Under present legislation I am obliged to do so.

Hoteliers are having a poor season and are incensed at having to pay water rates on a domestic and not commercial tariff. The water authority has found out that the commercial tariff is lower. Hotels, however, are closed for about six months of the year. The Government should look into all these matters and try to remedy them.

Poor unfortunate glasshouse growers are consulting local NFU secretaries on the best way to make their already reduced work forces redundant. They dare not face a new planting season with the prospect of even more astronomical losses than at present. I doubt whether their banks will finance them much longer, anyway. The Dutch, Germans, French and probably Albanians, for all I know, are already giving their growers subsidies to cover the ever-increasing cost of energy. Our producers are efficient and have invested heavily in recent years, mostly with Government encouragement and grants. Will they be left to go to the wall, or is there a chance of a little compassion, even at this late hour? I beg the Minister to put his oar in on their behalf with both the Ministry of Agriculture and the Department of Energy.

The Government's amendment talks about policies which increase incentives … whilst reducing obstacles which discourage the establishment of small businesses. That really misses the point of the debate. The point is highlighted by examples provided to me by two of my constituents only last week. Incidentally, both constituents are paid-up members of the Conservative Party. They certainly did not vote for me in the last election. When I was canvassing they told me that they would not vote for a man who kept "that shower" at 10 Downing Street. I am sure that they have changed their minds now.

Those constituents have a small factory in South Hampshire designing and manufacturing helpful aids for desk and table tops which are sold through multiples, such as Boots and W. H. Smith. Their products are exported in quite large quantities to the United States. Until this year their turnover averaged about £300,000. Now it has fallen dramatically. Their goods are over-priced in the United States and they are replaced by cheaper imports at home.

My constituents are very indignant, and I quote from a letter that they sent a few days ago to the local chairman of the Conservative Association in their area. They said: Loyal Conservative businessmen all over the country are questioning not monetarist policies, which are largely doses of good old-fashioned deflation, but the Chancellor's interpretation—or misinterpretation—of their execution. Professor Milton Friedman, criticising the March Green Paper on Monetary Control, quotes the United Kingdom administration as an egregious example of misunderstanding. He is far from approving the application of his principles. We knew Geoffrey and Elspeth Howe, having lived and voted in Woldingham for 20 years. He is capable of being wrong like anyone else. What if he is? The Sunday Times says that the mechanism chosen is crude, slow and wasteful. What if they are right? Please do not tell me again that Wedgie Benn is the only alternative, so that we must therefore blindly accept everything that the present administration does without question. Moderation now would help to keep him out; it is not we who are putting him in: you are. Listen to a moderate man writing to The Daily Telegraph: 'If the price of beating inflation, which is clearly necessary, is to put private enterprises out of business, let the Government say so clearly, so that we can retire gracefully and with the minimum loss. For this was not in the election manifesto.' No it wasn't, was it! … Traditionally many small businessmen have been staunch Conservatives, which makes this casual betrayal by their own party even more despicable. Many of the Government's supporters were voting for their own self-destruction without being told from the election platforms. Being made bankrupt through no fault of one's own concentrates the mind wonderfully: there will be long memories and longer time to reflect; with bankrupt Tory businessmen for voters Conservatives may well find that their enemies outnumber their friends in 1984. It is hard for people like my constituents to be told by their local chairman, who is a retired military man with an inflation-proof pension, to "grin and bear it". There cannot be many hon. Members who are not being approached at ever more frequent intervals by small manufacturing enterprises in their constituencies who are unable to meet their PAYE or VAT payments and who now face imminent seizure of plant and machinery.

I must make it quite clear that I always get a sympathetic hearing when I contact the collector of taxes or the VAT collector and I plead for time for firms to pay. Usually they allow me that time. I wish to put that fact on record. But they have their job to do and they cannot wait for ever. Surely this is an area in which a sympathetic Government could help, perhaps by dropping the interest charges or putting a lien on the property. The answer does not lie in moving in and taking away the machinery that the company needs if it is to survive. Larger firms can help also by paying their bills more rapidly. I appreciate that the Minister has appealed to them in this respect.

The CBI bulletin of 18 July also highlights the problems that smaller firms face in this respect. Lower rates of tax, fewer planning controls and improved incentives for outside investors are to be welcomed, but they are of little interest to the business man who is fighting to survive on a week-to-week basis. He has had to contend with usuary rates of interest for far too long and he cannot survive much longer. He has been priced out of overseas markets, not because he is inefficient but because his goods are 30 per cent. dearer today, in competition with the Japanese and others, than they were 12 months ago. He can do absolutely nothing about that.

Of course we all want to see inflation brought down, but not totally at the expense of the creators in our midst. We should positively discriminate in favour of manufacturing industry. If that means some form of two-tier interest rates, so be it. I wish that we had discussed that in the House before now. Perhaps, we could give some relief on insurance payments. My right hon. Friend the leader of the Liberal Party suggested that yesterday. Perhaps such payments could be taken away immediately for employees under 21. The surcharge could also be removed, at least for certain businesses.

A Government who were really sincere in their desire to help the small man would devise ways to give temporary relief for rate payments to local authorities for firms that were facing excessive increases. This has been done before. It was done in 1929, and agricultural rate relief still exists. There is a case for considering whether we could give some rate relief to smaller commercial enterprises.

We should also ensure that there are no foreclosures through failure to pay VAT or PAYE where there is a real chance of the enterprise remaining viable. We must ensure that as far as possible our firms compete on equal terms with those in other countries. I hope that the auspices of COSIRA, the Development Commission and other development agencies will be used to provide a much more comprehensive service for financing small firms and for the presentation of their future intentions to bankers and others.

We should look much more closely at the whole area of co-operation. I am trying to save two small firms in my constituency through such a suggestion. I am trying to get the work force involved in a co-operative. The Government would do well to look at the Mondragon experiment in Spain, which is a really amazing story of the success of co-operation in that country. Let us look at what has happened in Northern Ireland through Ledus. That has been very successful. In an area that still has the highest unemployment in the country, it has nevertheless achieved a considerable amount.

There is a case for looking again at the small firms employment subsidy. I know that it has been run down, but it played a useful part. Owners of small firms have told me that if they could continue to employ with grant aid, some of the people whom they took on under the work experience programme, beyond the prescribed six months, they would do so. There should be some flexibility in that respect, although I realise that the idea is to give everyone an opportunity. A small grower in my constituency employs mentally handicapped people who are very good at that job. He hates having to lose them after six months, particularly those with special attributes. A small builder wrote to me recently saying that if only he could have a little financial help he would continue to employ a particular lad who had done extremely well in the firm. It seems a great shame to put that young man back on the dole.

I want to see small firms given greater opportunities for tendering for Government contracts. That happens in the United States—up to a certain percentage—and there is something to be said for having it here.

I was shopping in Norwich at the weekend and I was horrified to go into a tailor and to find that there was not one British shirt in the place. That firm used to sell only British shirts, but now it, seems to have only shirts from Taiwan, Hong Kong and India. I believe that shopkeepers should indicate in their windows the percentage of British goods on sale. That could be done without cost.

The Government could do a lot more by guaranteeing loans and subsidising interest rates, but after yesterday's debate there seems to be no hope of that.

Those are the sort of measures that are long overdue. They are not meant to be permanent, but unless first aid is provided now, the patient will be dead and buried before the year is out. With the collapse of our industrial base, everything else will go as well—social welfare, pension and education provision and so on. That is not a pleasant prospect and it should not be allowed to happen.

The Minister recently lunched at 10 Downing Street with several representatives of small enterprises from various parts of the country. I am sure that he knows about their worries. He receives deputations and he visits factories. He must know all about the problems, and he must be just as worried as we are. When will his Government react? Perhaps the Minister, too, has given up the ghost. We do not expect a total U-turn, but a little light relief would be very acceptable at this time.

5.10 pm

The Under-Secretary of State for Industry (Mr. David Mitchell)

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof: this House supports the Government's policies to increase incentives to entrepreneurs whilst reducing obstacles which discourage the start-up and growth of small businesses in the United Kingdom. The Government have made considerable progress with their programme to help small firms. I recognise that there is still much to do, but it is ridiculous to refer to us as indifferent to their problems. Before getting to the substance of what I have to say, I should like to consider the indifferent case that has been presented to the House. It is based upon a series of points with some of which I shall seek to deal at the beginning of my remarks and the rest as I develop my argument.

The hon. Member for Isle of Wight (Mr. Ross) referred to the gloomy forecasts of the CBI. I join with hon. Members on both sides of the House in their concern at the situation revealed by those forecasts. I notice, however, that the CBI is not calling for a change of policy; it is simply hoping that it will work soon. To that I say "Amen", as do many others. There is a subtle difference. This policy, pursued to its end, will work, and will produce what we need as a sound basis for growth by giving us sound money, not inflation, and lower interest rates. That combination is the basis for business growth. To follow the siren voices that press alternatives would simply restart the engine of inflation.

The hon. Gentleman called for a Cabinet Minister to be responsible for small business policy. I have to tell him that we have a Cabinet Minister responsible for small business policy. My right hon. Friend the Secretary of State for Industry has that task and responsibility. [HON. MEMBERS: "Where is he?"] My right hon. Friend was here earlier and intends to return shortly, but he has had to go to another engagement. The timing of the debate has not fallen when most hon. Members expected. We know that it has been delayed for good reasons. It is I who do the donkey work.

Mr. Russell Kerr

Very well put.

Mr. Mitchell

It is, therefore, perhaps appropriate that I should later reply to the debate.

The hon. Member for Isle of Wight asked that the VAT exemption limit should be raised to £30,000, yet he was one of those who supported the Lib-Lab pact. He was one of those who supported the EEC negotiation when the previous Government sold the pass and arranged that there would be no increase in VAT exemption greater than that sufficient to cover inflation.

Mr. Stephen Ross

Are the Government negotiating over the possibility of raising the exemption? We are never told these things. It is all very well to keep firing matters back. Are the Government negotiating to see whether the exemption can be raised?

Mr. Mitchell

That is a valid point and I shall answer it. There is no point in opening a negotiation when one knows that one has no prospect of winning it. We could get that change only with the consent of the other members of the EEC. The hon. Gentleman will know that we have the highest exemption within the EEC. There is no reason to think that we would get any response from the others to give us a higher exemption than any of them. I say without fear of contradiction that Opposition Members sold the pass when in office.

The hon. Gentleman talked of his own small businesses. I recognise that he talks with experience. I value the points that he made. He spoke about how his overdraft is growing year by year. In that respect, he speaks as the authentic voice of many small businesses with the same constant worrying problem. Why?

Mr. Kerr

They are being squeezed by the Government.

Mr. Mitchell

The reason is that inflation makes every small business cash hungry. One needs more money to do the same volume of business. That is why it is the top priority policy of the Government to attack the causes of inflation. It ill behoves those who left us the legacy of the Augean stables of inflation to complain about the size of the shovel that we have to use to clear up the mess left to us.

I should like to refer to two other amendments on the Order Paper. The amendment in the name of my hon. Friends the Members for Hertfordshire, South-West (Mr. Page), Upminster (Mr. Loveridge), Luton, East (Mr. Bright), Fareham (Mr. Lloyd), Bridlington (Mr. Townend) and others welcomes the enterprise package in the Finance Act 1980 and looks forward to more similar benefits. They have perhaps not overlooked the saying in politics that gratitude is a lively anticipation of further benefits to come.

The other amendment proposed by the official Opposition is extraordinary. It calls for the withdrawal of the consultancy paper on sickness pay. Surely the purpose of a consultancy paper is to enable people to make their views known and for the Government to take those views into account. We shall listen to what is said in the debate. To call for the withdrawal of the possibility of further consultation seems an extraordinary response to an invitation to make one's views known.

It is right and proper that I should report back to the House on the work that has been done in the small firms area. I shall not spend much time on the scene because the House is not unfamiliar with it. There is, however, a recognition on both sides of the House of the importance of small businesses as the seed corn from which wealth creation and many jobs in the future will come. We have far too few such businesses. We need many more. The balance between the incentives to start a business, the hurdles which face those who start and the burdens they have to carry has been tipped so far that the logical person has not felt it worth while to start a business.

The Government are engaged on a threefold task. The first is to identify the burdens and to pull them down, to identify the hurdles and to take them away, so that it is easier for people to start. Secondly, we have to increase incentives for them to do so. Thirdly, we have to look at the problems of financing those who have started, or are seeking to start, in terms of the money inside the business as well as incentive in terms of what one can take out in reward for success.

I should like to examine the burdens. The compliance cost of dealing with Government regulations and controls is much higher for the small business than for the large. The smaller the business, the higher up the management pyramid one goes. It is a case of "Mon Dieu et mon droit ", or, as my children translate it, "My God, I am right". In a small business, it is the working proprietor whose time is taken out from driving the business forward by having to deal with the cost of compliance. I invite the House to study what the Government have been doing and what has to be done.

For those who are starting a business, there is the problem of planning. Two central areas are involved. The first is the delay in getting a decision and the second is the decision itself. Planning is important. Most people starting a business begin in their own back yard. When their wives tell them to get off the kitchen table or out of the garden shed, they need sub-standard, low-cost second-hand premises in the neighbourhood—a double garage or something of that nature. At that point they come up against the planning regulations.

My right hon. Friend the Secretary of State for the Environment has made two changes to speed up planning decisions. First, there can be an appeal to him if no decision is taken by the local authority within eight weeks. Secondly, in many, although not all cases, inspectors will issue their decision at the time of their inquiry instead of waiting between three and six months.

An important question is the decision itself. I am able to say to the House that within six or eight weeks the Secretary of State for the Environment will be issuing a development control circular which will make considerable advances in relation to the ability of small firms to start up and to continue their businesses where they are not disturbing the neighbours. regardless of the zoning of the area in which they are operating. After the substandard starting stage a small firm needs purpose-built and modern premises of about 2,500 sq ft. A substantial survey conducted by Coopers and Lybrand and Drivers Jonas shows that there is an acute shortage of premises for small firms. It also shows that the absence of premises stops people from starting a business. The availability of premises is one of the catalysts which persuades a man to start a business. It is therefore important to get it right.

Mr. Michael Grylls () Surrey, North-West

Will my hon. Friend examine the over-stringent building regulations which result in new premises being built to such a high standard that their prices are much higher than comparable premises in California, for example? Premises there are built to a lower standard, but they are cheaper.

Mr. Mitchell

As chairman of the Small Business Bureau, my hon. Friend is in touch with the problems from which small business men suffer. I take my hon. Friend's advice on board.

We have made some progress. As a result of the survey, the Chancellor of the Exchequer introduced a 100 per cent. tax allowance for three years on new premises up to 2,500 sq ft, and on conversions. In the Budget £5 million was provided for the assisted areas. The Department of Industry has taken that money and found another £15 million in pension fund money from the private sector. With that we shall start building over 1,000 units up to 2,500 sq ft in the assisted areas this year. In addition, we have done a deal with Barclays Bank. It will invest £5 million in small firm premises in the assisted areas. That is hardly an indication of indifference.

I turn to the Employment Protection Act, which has been a major burden for small firms. We have made three significant changes. First, the tribunal procedures will be revised to take into account the size and resources of small firms. Secondly, people who present frivolous claims will be warned that they will be liable to pay costs. That is of major importance. It means that the chap who has no case will no longer be able to blackmail his employer to the tune of £400 or £500. Thirdly, for firms with up to 20 employees we have introduced a two-year qualifying period for unfair dismissal which aligns with the two-year qualifying period for redundancy payments. That removes one of the major worries of small firms which take on additional employees.

We have taken two further minor steps forward. First, we are allowing small businesses to pay rates in instalments. Some local authorities already allow that, but others do not. Secondly, we have also introduced fairer treatment for mixed hereditaments in relation to the domestic portion of such premises.

Mr. D. N. Campbell-Savours () Workington

Will the hon. Gentleman give way.

Mr. Mitchell

I am sure that the hon. Gentleman will be able to make his own speech. I have many things to say which I wish to get on to the record, and time is short.

The Under-Secretary of State for Trade has introduced a £1 million cut-off in terms of disclosure which reduced substantially the amount of disclosure for businesses with turnovers up to £1 million.

Mr. Richard Wainwright () Colne Valley

Will the hon. Gentleman give way?

Mr. Mitchell

I am sorry. My hon. Friends have asked what we are doing. I have been accused of being indifferent. Surely I should be allowed to explain what we are doing.

We have prevented over 1 million questionnaires going out. That will save a substantial amount of work which would have landed in buff envelopes on the desks of small firms. Office development permits have gone. IDCs do not affect small businesses now. We are sweeping away much of the frustrating paraphernalia, regulations and controls which have restricted small firms.

I do not need to remind the House of the substantial change in incentives contained in our first Budget. The change has increased from 17 per cent. to 40 per cent. the take-home pay of successful small business men. Changes in the Budget this year affect the pensions of the self-employed. Minor changes have been made in capital transfer tax, and further changes are to come.

Some of my hon. Friends are worried about finance inside businesses. Some progress has already been made and we hope for more. All the high street banks have in the last 12 months introduced some new form of loans for small businesses. Many banks are giving new options and new opportunities and several of them do not require the same degree of security which they have required in the past.

Mr. Campbell-Savours

At market rates.

Mr. Mitchell

Yes, at market rates. The banks have been moving in response to requests to extend the frontiers of their lending. We should welcome that. The European Investment Bank loans operate in the constituency of the hon. Member for Workington (Mr. Campbell-Savours). He will be glad to know that the rate has been reduced to 10 per cent. for interest over seven years. We have also reduced the size to a minimum of £15,000 compared with the previous £17,000 minimum. I hope that the hon. Gentleman will welcome those improvements.

The hon. Member for Isle of Wight referred to the problems in country areas. The Council for Small Industries in Rural Areas will have about £4 million to lend this year in its traditional role of lending to small firms in the rural areas. In addition, it has made arrangements for £9 million from either the Industrial and Commercial Finance Corporation or the banks to be made available to enterprises which it has vetted and to which it would have lent, so that if demand exceeds its resources that money will be available. That means that small businesses will be able to obtain the money that they need either direct from COSIRA or from the money that it can tap.

Pension funds are a major source of investment money. The problem is that they cannot cope with small investments when they are investing £1 million or more a day. We are using the Department of Industry's counselling service to make the assessments. In the East we are involved with the Post Office pension fund and in the North-West with the Norwich Union. We shall do the work through the counselling service and present the evidence to the investing institutions. That is a practical way in which we can bridge the gap in order to bring outside equity into the smaller firm.

However, the small enterprise needs a private backer to start. In the Budget this year the private backer was given the opportunity of having his interest allowed for tax. If he loses money on the investment, that can also be written off against income tax. The top tax on investment income has been cut from 98 per cent. to 75 per cent., so encouraging the private backer yet again.

If one adds to all that the other concessions such as lowering corporation tax, and doing away with the close company regulations and controls which prevent small businesses from accumulating money for investment, it comes to a substantial package of measures achieved.

I could go on much longer, but if I did I should be trespassing on the time of the House. I hope that I have opened up the area in such a way that my hon. Friends may suggest other things that we might do in the coming year. I hope that the House will say that the charge of indifference is not fair in view of our record of achievement.

5.30 pm

Mr. David Penhaligon () Truro

The Minister made an interesting speech. He sounded to me like a doctor who has been treating a patient for an annoying bunion when the patient was suffering a serious attack of cancer. The problems referred to clearly need attention.

During the general election I remember, while trying to persuade one of my farmer constituents not to desert me, telling him that we had persuaded the Labour Government to introduce rollover taxation relief for farmers. He replied "Ar boy, it would help if I had paid any tax in the last 15 years." His point was that this minor modification—no doubt useful to the agriculture industry—was of no real import if our economy was experiencing enormous difficulties.

My accusation against the Government is not that their heart lies in the wrong place but that the record of their performance during the past 15 months compares so miserably with their rhetoric in 1978 and 1979. Today we are discussing one of the greatest rip-offs by a political party in the history of British politics. The cynicism that has built up in this great nation towards politicians who have miserably failed to deliver what they promised is a matter for concern. The attitude of small business men towards the Government has to be seen to be believed and I do not doubt that there are Conservative Back Bench Members who know precisely how the owners of small businesses feel.

One of the most effective lines produced by the Conservatives during the general election was that if each small business in Britain took on one extra employee between one half and two-thirds of our unemployment problem would be eroded. We heard that slogan time after time. I do not know who thought it up, but I understand that the organisation that I suspect was its author has also got the sack.

When we compare the mood and the expectations created by that kind of electioneering to what has happened, it is obvious that the contrast is appalling. The Minister said that the Government's first intention was to get rid of inflation. I do not decry that as a major aim, but I recollect that at the end of October 1978 inflation was 9 per cent. At the general election I think, though I stand to be corrected, that it was 11 per cent. Inflation is now 17 per cent. and we are being told that it is a triumph that it is coming down. If we take out VAT the underlying inflation rate is currently 17 per cent.

I prefer the new index invented by the Government because it gives a truer indication of the level of inflation. It will be interesting to see whether the Government mention that index from the end of next month, because it will register a higher figure than the crude index of inflation that we formerly used. Inflation has almost doubled in the past 15 months. That fact hardly compares favourably with the rhetoric at the general election.

If one wishes to borrow money for a slight risk enterprise—that is what small businesses are engaged in—interest rates are 20 per cent. I pointed out to the House long ago that if inflation continued at 20 per cent. until the day I retired at 65, the average wage in Britain would be something like £45,000 a week. That is what compound interest at the rate of 20 per cent. produces.

Bankruptcies have hit appalling levels. More frightening than the levels recorded by current statistics is the feeling in one's own constituency that bankruptcies are on an upward trend. One gets the feeling that we have not reached the peak and, therefore, cannot expect an improvement. The feeling in one's constituency is that the situation is deteriorating. Clearly, business men wil not approach their Member of Parliament and tell him, just before it happens, that they are about to go bankrupt the following week. They can hardly allow that to become public knowledge if they believe that they can survive. One gets the feeling, talking to one's constituents and to owners of small businesses at all levels, that bankruptcies are escalating. The number of bankruptcies, it seems, has no real chance of being reduced in the near future.

My hon. Friend the Member for Isle of Wight (Mr. Ross) mentioned the ending of the small firms employment subsidy. I believe that that was one of the most useful aids afforded to genuine small firms. It also helped alleviate some of the unemployment experienced in far too many areas. I am pleased that the official Opposition have specifically referred to the ending of the sickness benefit scheme. That is what the Green Paper means. The idea that the Government should no longer make a major contribution to the sick during the first eight weeks of sickness heralds the end of the national insurance principle for working people. We all know that big firms—in which the Conservative Party is so interested—might well approve of the Government's new scheme. On the principle of swings and roundabouts they can virtually run their own sickness schemes for what they formerly cost the Government.

However, for a person employing two or three people, the scheme could be an unmitigated disaster if two of those three employees were sick at the same time. Such employers will not only have to pay the sickness benefit for the first eight weeks; they will need to employ someone else in the short-term to do the valuable work done by their regular employees. To have one out of three employees sick means, for the small business man, that one-third of his work force is missing, and in a small firm that is undesirable.

A side effect which does not affect small businesses but which is potentially desperately unfair in areas such as my constituency, where unemployment has long been a major problem, is that, given the new arrangements, many firms will be less willing to take on the person in his late forties or early fifties with a record of sickness. If the principle is included in legislation it could mean that small firms would not take on workers who were unable to produce an Al health record. That would be highly regrettable in a section of the community which already has enough troubles to deal with.

Will the Minister tell us what is the present position of sub-post offices? They are small businesses in rural areas and on urban estates. Some of them are the only elements of small business left in certain areas. Where do we stand in relation to current proposals, which, if fully implemented as originally outlined, would close down at least one-third of the sub-post offices in Britain? I gather that the Government have retreated somewhat on that issue. But how far have they retreated? Why do not the Government announce that the scheme has been chucked into the bin where it belongs?

Mr. W. R. Rees-Davies () Thanet, West

Has the hon. Member seen the Select Committee report on this matter? Having investigated the issue carefully we found that a considerable volume of agency work could be put in the way of sub-postmasters. They had been pressing for that. If that happens, the sub-postmasters will have substantial additional income from the Giro, the agencies, the electricity boards and the tourist board. Those issues were well and fully covered by the Select Committee and the sub-postmasters are happy about the future.

Mr. Penhaligon

I have to choose to argue with the hon. and learned Member. For many years I was a sub-postmaster and therefore have had some marginal experience of running such an office. The backbone of post office business, which the post offices are losing, is the payment of family income supplement and pensions and—tragically, in my part of the country at least—unemployment benefit. No agency work can make up for that loss. There is no agency work in the poorer parts of the country where these offices are the only small business enterprise. Obviously they would appreciate the extra agency income, and there are one or two areas in which it might be useful. What is the Government's position on this matter? Are they to give agency work? How much work is to be withdrawn?

In effect, the Government have wrecked the small insulation businesses that were growing up throughout the country. Insulation was one of the growth industries and it was badly needed in order to help the country make more use of its valuable energy resources. The Government wrecked that industry's prospects by substantially reducing the insulation scheme grants. The announcement about that reduction was made the day after the Government announced that they would find the money to build 10 pressurised water reactors at a total cost of £12,000 million. In reducing the grant, the Secre- tary of State for Energy told us that he was seeking to save £12 million. I shall never forget the sequence of events in the House on those two consecutive days.

Mr. David Alton () Liverpool, Edge Hill

In supporting my hon. Friend may I tell him of a firm in my constituency which has folded after only 12 months? It has provided jobs for six people installing domestic insulation. As well as providing employment it was helping do something about the energy problem. I agree with my hon. Friend, therefore, that on two fronts—employment and energy—the Government's actions are having a disastrous effect.

Mr. Penhaligon

I must indicate my basic agreement with my hon. Friend. If the Government want a stop-gap arrangement to combat unemployment, the labour-intensive household insulation schemes are probably the most sensible area for them to consider.

The crux of the matter is that there are two types of small business. There are those businesses that run on the internal economy—building, retailing, and so on—which compete with other businesses in this country. That section—apart from building—while not doing well, is surviving. The building industry is so dependent upon interest rates and confidence in being able to sell its products when they are constructed that it is a special case.

The section that is in desperate trouble is that which competes in the external economy, the economy which faces international competition. Sometimes the industries in the external economy do not conceive that they are competing with foreign interests. The tourist industry in my constituency is an example of that. Every year it says that it is having a bad season, but this year I am inclined to believe that it is. It is complaining about interest rates, but its true problem is the exchange rate. One has only to read the newspaper advertisements to see the trips to Spain, Portugal, Italy and even, under some incredible offers, to the United States, that are open to people who used traditionally to holiday in my part of the country and elsewhere in Britain. The tourist industry is being crippled by the exchange rate which the Government have imposed upon it.

The same argument can be made in respect of textiles, cars and other industries. The one big issue upon which the Government should be concentrating is the exchange rate. The current level is buoyed up by North Sea oil and the Government's interest rates policy. That rate is wreaking damage upon this country in a way that no other policy has done before.

It is all very well for the Government to say that they are cutting the economy back to enable it to grow forth more vigorously. The simple reality is that if they pursue that policy there will be very little basic industry and small business left to grow forth. The time has come for the Government to produce at least a Green Paper on possible ways of reducing the exchange rate to a more sensible and intelligent level. There is no way in which tourism and textiles, cars, and other manufacturing interests can survive if left to compete internationally on the basis of the current rate of exchange.

The one period during which unemployment fell during the past five years was when the pound was at a low level against other currencies. During that period, British industry was highly competitive. That is not, in splendid isolation, a solution to our problems. Clearly the sensible exchange rate is to be found somewhere between that low point and the current high level. Unless the Government bring the exchange rate down, they will wreck that part of the economy which competes internationally, the sector that provides the basis of our standard of living. The internal economy would collapse soon after because it is dependent in turn upon the external economy.

5.46 pm

Mr. John Loveridge () Upminster

I am glad to take part in the debate, and I congratulate the Liberal Party on its initiative in drawing attention to some of the requirements of small businesses. We on the Conservative side, particularly my hon. Friends who are officers of the small businesses committee, of which I have the honour to be chairman, believe that the smaller business sector can conquer unemployment. That is a big claim. Large firms will shed labour. In good times they will do so because of the silicon chip. In bad times they will do so for lack of demand. It is noticeable that in recent years small firms employing up to 100 staff have provided all the new jobs in the kingdom, net of those vacancies created by people leaving employment.

In this country our small business sector is too weak. It needs strengthening. There are 1.3 million firms in the United Kingdom compared with 5-2 million in Japan, which is twice as many as we have on a population basis. Likewise, Germany and America are also ahead of us. It is because they are ahead of us that their economies are so lively and adaptable. We need to build up our small business sector—in part by a transfer of resources from the public to the private sector. The private sector is repeatedly squeezed whenever there is an economic squeeze. It was well said that the construction industry formed the economic regulator for the economy.

The Budget this year has helped the small business sector. I hope that the Liberal Party will note that: an estimate in the Financial Times put the value of that help at £369 million. Since then the Government have added more. The combined measures are a great help to small businesses starting up. The small man has been helped by the Government. He is greatly encouraged to found new business.

Let me list just a few of the measures. There are tax cuts on income, stock relief measures, the removal of double taxation in respect of capital transfer tax and capital gains tax, employment protection improvements, planning improvements, enterprise zones, the provision of new premises, and encouragement to banks, which have responded well with new ideas, including a recent scheme to replace interest rates with royalties. Form filling has been cut, and there has been a Green Paper on the buying in of companies' shares.

Those are only a fraction of the measures that have been taken by the Government, but they form a goodly package. Some are measures in response to proposals put forward by members of the Conservative small businesses committee. Here I should like to recognise the work of the Minister responsible for small businesses. He has set up a regular system of consultations with outside organisations as well as those in the House. He has done more than any of his predecessors to keep in personal touch with organisations such as the Association of Independent Businesses, the Union of Independent Companies, the National Federation of the Self-Employed, the National Chambers of Trade and the small business section of the CBI, as well as the Smaller Business Bureau. This regular exchange of views is a great help to the whole of the small business sector.

I wish to put forward two specific proposals, one of which has already been touched upon by my hon. Friend the Member for Hertfordshire, South-West (Mr. Page). It is a proposal to set up an operations room within the Department of Industry where all those who are interested can see, set out dramatically, international comparisons, so that they may draw their own conclusions and see for themselves what is happening worldwide in this sector. Is Japan ahead because it has a larger small business sector? Is high taxation a disincentive? Which incentives have worked best, in which countries? There are too many partial studies, and no one central place in Government where information is gathered together, and where those people who are interested in this sector can make their own comparisons. Such research should be readily available to hon. Members and others who wish to know.

We have some clear guidance already. We know that medium-sized firms have been vanishing over the last 30 years. We know from the Wilson inquiry that there are 71,000 manufacturing firms with up to 100 staff, and only 3,000 firms with between 100 and 200 employees. Those figures are of the greatest importance, and I hope to be able to demonstrate why.

The famous Massachusetts Institute of Technology survey of 1969-76 showed that firms with fewer than 20 staff at the beginning of the survey provided, during the course of the survey, two-thirds of all jobs in the United States, and that most of those jobs were in new firms. Those figures have been widely quoted in the House. What is not as generally known is that the firms that grew from under 20 staff at the beginning of the survey to medium-sized firms employing 100 to 250 staff by the end of the survey provided most of the jobs. Thus, it can be seen that it is the fast-growing firm—from small to medum size—that can provide the jobs that are needed in this country, as in the United States. We can only conclude from the figures that the proper way in which to create new jobs and new demand within the economy is to build up the medium-sized firms sector as quickly as possible.

As I said, the Budget has done much for start-ups. The next step is to drive for expansion of existing firms. That requires a change of attitude, because so many of our firms stop growing at about 100 staff. First, we need easier access for the fast growers to capital in firms that do not involve the loss of equity. I ask the Government to examine closely the self-financing loan guarantee scheme that was put forward by the officers of my committee. I hope that the Government will in no way compare it with the schemes in the United States, which might put them off. Our scheme is self-financing and totally different.

Secondly, we want less fear of destruction of a firm by capital transfer tax. It is possible for medium-sized firms in the ownership of a man and wife to be hit to the point of destruction by the impact of capital transfer tax when the owners die. That cannot be right when we wish that sector to grow.

The Chancellor of the Exchequer has told us: We have, as I promised last year, subjected capital taxation to a thorough review … What I can do this year must be constrained by our financial position."—[Official Report, 26 March 1980; Vol. 980, c 1482.] Of course, he has done much to help the smallest companies. He has helped by removing the double taxation charge and raising the capital transfer tax threshold. That has freed any business with assets of £100,000 or less from any charge on the death of its owners. But was the Chancellor right when he said that he should be constrained this year over his review of capital taxation in relation to the medium-sized business? If, as the figures plainly show, it is to the medium-sized firms that we must look for the creation of new employment, should we not immediately and urgently act on all the questions relating to this sector, including capital taxation, which is radically reducing its growth and the will of individual firms to grow?

Thirdly, should we not remove anomalies, such as the so-called marginal relief for corporation tax? It is agreeable to have a 40 per cent. reduced rate for small businesses up to a certain level of profits. But what inconceivable folly then to throw in a band of taxation far above the normal. It suddenly leaps to 66 per cent., not to the 52 per cent. which is the normal rate of corporation tax. There is a very wide band at 66 per cent. Many firms have no desire to leap that band and go through that heavy tax area. That should be put right, even if it means reducing the threshold at which the 40 per cent. band operates so that the cost to the Government is not increased. The medium business sector is especially significant to job creation, and now is the time to push it, because it takes two or three years for any push to be activated. Firms do not grow overnight like mushrooms. They require effort and time.

Hon. Members have referred to the economy and to the effect of high interest rates, to firms failing through no fault of their own, and to the 64 per cent. in the CBI's latest survey of industrial trends which show that their volume of new orders is falling. In my constituency I have had complaints from people, who have had to wait to be paid for their goods, and the time they have had to wait has increased from 30 to 90 days. That is causing severe liquidity problems. It is an area in which the Government could and should help to take mitigating action. Likewise, although exports have kept up well, one of my constituents, the owner of a trucking company, told me that he had 380 lorries but had had to sell 70, and of the 310 that remain most are leaving the country empty and returning full. It cannot augur well if that trend is increased or becomes general. I do not know what delay there is in the export figures that come through to the Government, but at home it is time to increase demand, as inflation is brought under control, and a considerable improvement in this area should be seen this month. I hope that that improve- ment will be seized upon by the Government and that they will act urgently, as best they may, to increase demand in the private sector, which is so heavily hurt by the squeeze. In order to do this, they must keep their own housekeeping in good order in the public sector.

But the secret of the future of our country's expansion lies, I am sure, in developing the medium-sized firms. I do not think that this has been recognised before throughout the kingdom. There is evidence of it, and I hope that the Government will pursue this area of fast expansion and give it the stimulus that it requires.

6.1 pm

Mr. Bob Cryer () Keighley

I shall be as brief as I can because I know that a number of hon. Members wish to speak in the debate.

The hon. Member for Isle of Wight (Mr. Ross), the Liberal spokesman who introduced the debate, was rather scathing about the record of the Labour Government. It is worth mentioning that in 1977-78 we were responsible for what must have been a record number of improvements and opportunities for small firms. Indeed if that economic environment could be produced today small firms would very much welcome the improvement and the change.

We introduced the small firms' counselling service in 1976 and extended it throughout the country in the next two years. We introduced the market entry guarantee scheme to help small firms export abroad by guaranteeing them 50 per cent. of the cost We introduced the small firms employment subsidy, which has been mentioned by several Opposition Members in somewhat glowing terms. I shall return to that in a moment. We introduced improvements to the Council for Small Industries in Rural Areas—COSIRA. In the special set of measures announced in the following year, we introduced a number of tax concessions which were greatly welcomed by small firms. Above all, we created an economic environment which was not punishing to small firms. By contrast, the Conservative Government, as a deliberate act of policy, have created an environment in which there are swingeing rates of interest, which are crippling small firms and driving them to the wall.

I refer particularly to the small firms employment subsidy that we introduced. It was a product of collaboration between the Department of Industry and the Department of Employment. In my own constituency, over 50 jobs were created by that subsidy. Nationally, about 50,000 jobs were created by it.

If a Minister came to the Dispatch Box today and said "We have a scheme for creating 50,000 jobs nation-wide", Conservative Back Benchers would cheer him to the echo, because our present economic climate is the reverse of what it was under the Labour Government. Ministers now come to the Dispatch Box to announce measures that are putting 50,000 extra people on the dole month by month—and many of those redundancies relate to small firms.

The temporary short-time working compensation scheme was introduced by the Labour Government to replace the temporary employment subsidy, which was stopped by the EEC. That scheme was a great boon to small firms, but the Government have cut back the temporary short-time working compensation scheme by 50 per cent. as part of their public expenditure cuts, to enable them to reduce taxes for the better off.

The Under-Secretary of State for Industry talks in comatose terms about the position of the small firms sector and all the Conservative Government are supposed to have done, but they are not creating jobs. There are more and more people on the dole. Their numbers are increasing week by week. More and more small firms are going to the wall because they cannot succeed in the economic climate which the Secretary of State for Industry—who is barely awake—is creating, along with his other Cabinet cronies. He and his Cabinet cronies have a lot to answer for. They are deliberately creating the dole queues. They are deliberately smashing small firms to the wall. It is part of their policy, and it is time that we made that absolutely clear.

The cutbacks that the Government have introduced are severely affecting small firms. Many of the public contracts that are now being cut back were provided and fulfilled by small firms. The small firms in particular are suffering from the ricochet effect of Govern- ment policy, but we cannot leave large firms out of the debate, because small firms are often suppliers of components and services to the large firms.

I remind hon. Members that when the Labour Government saved British Ley-land and Chrysler, both actions were opposed by the Conservative Party, so we know its view about creating and retaining jobs. Conservative Members voted against those measures. When those companies were saved, 10,000 small firms were also saved, because they supply components and services to the two giants. When people buy a Mercedes or a Renault car, they might bear in mind that some of the components on the British cars that they are ignoring are supplied by small firms—perhaps small firms in their own constituencies.

I should like to refer briefly to the position in the textile industry, which was mentioned earlier in the debate, because it is affecting industries in every sector of manufacturing. I want to anticipate slightly and peripherally the debate that is to take place later. The textile industry, like the car industry and other manufacturing sectors, is facing great difficulties. It is an industry that has as its hallmark small manufacturing concerns employing fewer than 200 people.

I noticed in my local paper yesterday a not unusual announcement for these days, during which the country is led by the Conservatives. It stated: Textile firm cuts workforce by half", It went on to say: A Keighley textile firm is to make almost half its workforce redundant. Forty-one weavers and ancillary staff employed by Smith Bros, and Foster Ltd., worsted manufacturers, will lose their jobs during September and October. A sharp fall in demand for commission weaving is blamed for the redundancies. The Government could help small firms in the textile sector almost at a stroke by toughening up the multi-fibre arrangement and pressing the EEC to take action about dumped imports in this country. It is no good saying that there is an anti-dumping mechanism in the Department of Trade, because we know that that has been used as an excuse for inaction for far too long. It is something that the Government could do and ought to do to save small—and also large and medium-sized—textile firms.

My own constituency depends to a great degree on small firms. Under the Labour Government it was doing relatively well. The same newspaper reports: Unemployment is now at its highest since records began in 1945 with almost 9 per cent. of the local workforce on the dole. In addition, a growing number of firms are operating on short time and, according to Keighley Jobcentre manager, Mr. Vic Boyce, the immediate outlook is not very promising. He can say that again.

It is interesting to note that the textile industry has done everything that the Secretary of State for Industry—and the Prime Minister, whose thoughts he seems to control so well—desires from an industry. This point has been made by the general secretary of the National Union of Dyers, Bleachers and Textile Workers. He said: It has rationalised and reorganised. It has invested heavily in new plant and machinery. Its improvement in productivity is second to none. It has not been subject to exorbitant wage claims and its record of disputes is as good as any other industry and better than most. Yet, after a decade of doing what the Tories say we should do, the result in 1980 will be a loss of up to 100,000 jobs. That is what comes of conformity. As I said, many of the firms that are vitally affected are the commission weavers which I mentioned earlier. We cannot isolate the small firms sector from the general level of the economy, but we can say that small firms are affected more by high interest rates. They should be reduced to enable small firms to survive.

Some of the incentives to small firms that were of enormous benefit, such as the small firms employment subsidy, should be reintroduced if the Government are concerned about preserving jobs. The public expenditure cuts and the national schemes of assistance introduced by the Labour Government should be restored. It is not true that, for example, the schemes of assistance introduced under the Industry Act 1972 benefited only the large firms. The majority of the expenditure under the ferrous foundries scheme, for example, went to firms employing fewer than 200—the small firms sector about which we are talking. We need that kind of stimulus for the small firms sector.

The hon. Member for Upminster (Mr. Loveridge) said that it was time to provide a stimulus to demand, and he is right. As more money is put into workers' pockets they will demand products, many of which stem directly or indirectly from small firms which form an important and integral part of our economy.

In order not to suck in imports we shall need an effective system of selected import controls. I am sorry that the Secretary of State is leaving, because I am giving him an outline of what is necessary. It will not affect him, of course, because there will be no U-turns. The worst news for many decades for small firms and workers is that there will be no U-turns. The Government will go on to the bitter end. That means that many small firms will go to the wall and the dole queues will lengthen.

I started my remarks with the Labour Government's record. Many small business men did not regard the Labour Government with much approval and criticised them in many respects. We met some of those criticisms and had a far better record than many of them, with their views and attitudes, had any right to expect. If we could turn back the clock, many small business men would say "Give us back a Labour Government. They did a better job for us than the Tories."

It is no use the Tories shaking their heads. They know that it is true. [HON. MEMBERS: "It is not."] If they go round their constituencies with any regularity they will not get the praise that they were getting in May, because small business men are disappointed with the Government for which many of them voted. The letter read out by the hon. Member for Isle of Wight from two dedicated Conservatives is an illustration of that kind of change. They will be part of the move towards the restoration of sanity, decent economic principles and full employment, which will be brought about by the next Labour Government.

6.13 pm

Mr. Michael Grylls (Surrey, Northwest)

There seems to be no difference of view between the two sides of the House that small firms are suffering extremely from the effects of the measures to deal with inflation. Indeed, over the past few years they have suffered badly from inflation, but we should remind ourselves that the small business sector will gain the most when inflation is conquered and brought down. There is a major gain to be achieved.

I want to consider one aspect which I believe to be important to small business. I want to look critically—and I hope to take some Opposition Members with me on this matter—at the Government machinery that looks after the interests of small business and see whether it is adequate to defend those interests. Looking at it impartially, the answer must be a resounding "No". We do not have the machinery to ensure that small business has a proper hearing. I think that all would agree that over the years the over-regulation that has taken place in Britain, America and Western Europe has made it difficult for small business to exist and even to start. We are paying the price for that folly here and in America and Western Europe.

The pendulum has been pushed by both parties against the small business man through over-regulation. Therefore, the small business man has started at a grave disadvantage to the large firm. The large firm can employ tax lawyers and—dare I say it?—the services of a Member of Parliament as a consultant to help it through the maze of regulations and laws. The large firm can do that, but the small firm cannot.

There is a need—I hope that I take the hon. Member for Isle of Wight (Mr. Ross) with me on this matter because his speech was generally helpful—for positive and effective discrimination in favour of the small business man. The House would be wise to recognise that need.

Let us consider what the Government machine provides for small business. With no disrespect to the Minister, he is, unfortunately—not from his own choosing—an Under-Secretary of State, not a senior Minister. Therefore, we have one Minister only for small business, and he is a junior Minister.

In the Department of Industry there is the small firms division. It may surprise the House to know that the small firms division reports not to the Minister, but to the Secretary of State and the Permanent Secretary. The Secretary of State, poor man, has a very wide remit. He is like the beam of a lighthouse going round. Because there are only 24 hours in a day, he can think for only brief moments in the day about small business. So in no way is he a small business Minister.

In the small firms division there are 25 people. There are about 52 people in the small firms advisory service, spread throughout the country, and 130 part-time counsellors. That is all that Britain provides to counteract the disadvantages from which the small business suffers. There are 1¼ million small firms employing 5½ million people.

I want to compare that with what is provided for agriculture, which is not a bad example. There are 228,000 farms, employing 650,000 people. What do they have to look after their general interests and to protect them? There is a Cabinet Minister, two Ministers of State, one Parliamentary Secretary and 14,000 civil servants to look after the agriculture lobby—the farmers and farm workers. They do a good job, because agriculture is very productive. The small firms sector has just under 200 people, compared with 14,000 for agriculture.

There is a real need for a more effective body to defend the interests of small business. The representative bodies of small business—I am the chairman of the Small Business Bureau—which try to look after small business outside the Government machine are weak and fragmented. They do not operate together. There is no national agency, to coin an American expression, to fill the advocacy role for small business. That is perhaps the most effective part of the Washington bureaucracy in helping small firms. There is no one omnipotent part of the Government machine that can say "That regulation may be all right for the large firms, but it is no good for the small firms because it will damage them".

My hon. Friend the Under-Secretary of State has done a noble job in the year that he has been in office, but, for the reasons that I have put forward—that he does not control the civil servants in the small firms sector of the Department—how can he carry out the advocacy role? He has no one to do it with him. What he does is a miracle, but how much more could he do with the proper, modest staff to back him up? The small firms division, within the Government machine, is ill co-ordinated to know what is happening in other Departments about new regulations and laws. It has no responsibility over other Departments.

My right hon. Friend the Minister with responsibility for the disabled is listening to the debate. I am glad to see him here. There is no official link—and he would be the first to accept this—between his Department and that of my hon. Friend the Minister with responsibility for small business. What can we do about that? My proposal may appeal to the Opposition because it was made originally by the Wilson committee. It is a sensible proposal. We should establish a modest structure called the English Development Agency for small business. It should not be included in the Department of Industry, but should be in the Cabinet Office. A Minister of State would head that agency—I hope that it would be my hon. Friend, who deserves promotion. He would be able to go direct to my right hon. Friend the Prime Minister and say that other Departments were damaging the small business sector and that they must stop doing so. That happens in Washington. Vernon Weaver, the director of small business administration, has direct access to the President if he believes that action being taken in other areas may damage small business. If the Minister with responsibility for small business is to be really effective he must have direct access to my right hon. Friend the Prime Minister.

Under the Minister would come the small firms department—currently included in the Department of Industry. That should be included in the Cabinet Office. Directly under that department would come the really effective organisation—the Development Commission, which would continue to look after COSIRA, but not within the ambit of the Department of the Environment. That is an unsatisfactory and illogical place for COSIRA. I would place the Development Commission and COSIRA under the direction of the Minister, within the Cabinet Office. Alongside COSIRA I would establish the English development agency for small business.

There is an argument for a third office—the office of advocacy—which would do nothing other than comb every new and past regulation to judge its effect on small business. The English development agency would look after such matters as the inner urban decline, the small firms advisory service, and the working together of the public and private sectors to help small business generally.

In the few minutes available to me I have tried to put forward my proposals for an effective method of giving small business a positive discrimination at the heart of the Whitehall bureaucracy which parties of both political persuasions have built up, for good or ill, over the past few years. That would provide small business with a better opportunity to achieve what my hon. Friend the Minister wants it to achieve—and which it has started to achieve—namely, to cut away the shackles of restraint that make it difficult for small firms to start operations and for existing firms to expand. We all want to achieve that.

6.24 pm

Mr. J. W. Rooker () Birmingham, Perry Barr

I intervene briefly, out of necessity, to put some points on behalf of the Opposition. They are rather narrow points about the recent consultation paper on the change in sickness benefits, to which the Minister alluded in his speech. The Liberal Party spokesman, the hon. Member for Isle of Wight (Mr. Ross) intimated that he would have accepted our amendment, but Mr. Speaker, in his wisdom, did not select it.

The Minister said that he was surprised that our amendment called for the withdrawal of the Green Paper because it is a consultation paper. We know that it is a consultation paper, but, quite frankly, we are opposed to the change, root and branch. Perhaps the Minister would note that point for the future. We do not wish to consult about a change such as that proposed in the Green Paper. It undermines the national insurance principle and attacks the benefit entitlements of the sick.

The July Journal of Social Welfare Law states: These proposals will implement further structural discrimination against sick and disabled people. The proposals also invade privacy in doctor-patient relationships. The British Medical Association will tell the Government its views about that in strong terms.

We are concerned with the effect of the proposals on small business. They will be highly damaging to that sector. I would be the last to say that the Government have not considered the problem of small firms in respect of the change in sickness benefits. They have clearly done so, and that is spelt out in paragraphs 32 to 34 of the Green Paper. Paragraph 32 states: The Government's policy is to encourage small firms". It points out the infrequency of sickness pay schemes in small firms. It points out also that if there are only a few people on the staff it needs only one or two to be away from work and not only must the sickness benefit be paid but wages for the replacement temporary staff that are necessary because, without them, the business cannot function.

The Government have other problems in mind. For example, if an employee suffers a long spell of sickness at the end and beginning of a tax year, that could be highly damaging to a small firm. The Government are aware of the problems faced by small business when trying to impose a burden on employers to pay the first eight weeks of sickness benefit.

Paragraph 33 dismisses those arguments. Far from consultation, it appears firmly to close the door on any gateway for small firms to avoid being penalised by the legislation. Paragraphs 32 and 33 show that there is not an open mind on the part of the Government. They make the point that there is no obvious line to draw between small firms and others in the number of employees. Paragraph 33 states: Any definition would be arbitrary and would create inequity between those just within and just outside the definition. It goes on to argue: Many small firms are in industries, such as construction, where the work force is highly mobile. That is true, but they do not comprise the whole of the small firms sector. The Government also claim that it would not be possible to monitor small firms.

Our point is that none of those considerations applies to other changes that have been made in respect of small firms—some of which the Minister mentioned. The argument about where the line is drawn on numbers of employees did not figure when the Government introduced a limit of 20 when they changed the rules about unfair dismissal. They did not argue about firms employing 18, 21 or 22—they drew the line at 20 and stuck to it. Likewise, the argument did not apply when they set the limit of employees at five when they changed the rules about maternity leave. The Government cannot claim that there is no possibility of drawing a line on the number of employees in small firms so that they will not be discriminated against by legislation passed by the House.

When talking about equity and monitoring, there do not appear to be any problems when removing the rights of workers. That is all that the Government have done in their changes for small firms. It is not the same position for the sickness benefit scheme. The argument about not finding a dividing line does not hold water. The Government have closed off that possibility in paragraph 33.

More frightening, almost Orwellian, is that the Government claim that they have saved 1 million forms from being sent to small firms. They say that they do not want to impose burdens on small firms. I must put on record the final two sentences of paragraph 33. The Government say: And finally it must be recognised that any system of claiming reimbursement in respect of expenditure on individual employees, however streamlined it might be, would inevitably mean an increase in paperwork. This would fall, if small firms were involved, on just those employers who are least well equipped to cope with it and whom the Government are trying to relieve of such burdens. The Government are saying "We put the burden on you; we find a way of relieving the burden to get some of the money back; but you will have to fill in some paperwork. But we are also committed to reducing the paperwork burden on small firms, and therefore, in line with our policy, we cannot proceed". It is Catch-22. It is ridiculous for the Government to have put that statement in the Green Paper. That leads small firms to believe that there is no hope of changing the Government's mind about consultation.

There will be other problems over the changes in sickness benefits as they affect small firms. The trade unions that are organised in small firms will undoubtedly press for higher benefits. When the earnings-related supplements are abolished in 1982, that will have a catastrophic effect on small firms, as opposed to larger firms, because there will be an attempt to secure from the employer the benefits that have been taken away under the national insurance system.

There is another factor about which we complain, and we take this early opportunity to put it on record. In the Green Paper it is stated that employers will be relieved partly of the national insurance contribution—½ per cent.—because of what they will be doing for the Government. There is no mention of any reduction in national insurance contributions by employees, yet their benefit will be removed following a payment to the national insurance fund. Therefore, employees will again put pressure on small firms. That is where it will be felt, and more of them will go under.

The Minister mentioned the number of small firms' organisations with which he was in contact. One of those is the National Federation of Self Employed and Small Businesses Ltd. I want to quote briefly from the letter that I received from the West Midlands regional chairman, Dr. Juby, whose letter has been with the Minister of State since 9 July. In respect of the Green Paper he said: Federation members in your constituency (and indeed throughout the country) are becoming increasingly disturbed by the implications contained in the Government's Green Paper entitled "Income During Initial Sickness—A New Strategy." We see it not only as being potentially disastrous to employer/employee relations and a means of taxing yet again the self-employed and small businesses of this country but it also demonstrates quite clearly"— I am not quoting Labour voters— the total lack of understanding of the problems that face small business men and self-employed people today! That is what spokesmen of the self-employed and small business men are saying about proposals put forward by the present Government.

I wish to make one last point in respect of the Green Paper. It ought to be taken on board by Conservative Members who complained during the years when my party was in power about the growth of bureaucracy. The only way in which one can complain about the growth of public bureaucracy is by being able to know its size. When it is in the public sector, Members of Parliament can table questions and make points in debate, and therefore they can challenge the arguments because they have the facts.

In this Green Paper the Government are moving part of the public bureaucracy, namely, that in respect of payments of sickness benefit, to the private sector—private bureaucracy, in other words—where there will be no possibility of measuring the scale. The problem will not go away. The benefits will still have to be paid. There will still be problems of the number of days, waiting days, and so on. It is no good the Minister for Social Security shaking his head. He will have to take cognisance of this in the consultations that he is undertaking.

I quote again from the Journal of Social Welfare Law.

The Minister for Social Security (Mr. Reg Prentice)

rose—

Mr. Rooker

Perhaps I might just make this point, because I want to give way to the Liberal spokesman. It is the Liberal Party's debate, and a Liberal Member will be winding up the debate. I want to make this last quotation: By spreading the administrative burden amongst numerous employers it becomes impossible to see or discover the size of the private sector bureaucracy. There is no way out of that.

The Minister for Social Security may want to take up some time, but I do not see why I should give way to him. This is a consultation document, and we shall hear a winding-up speech from the Minister responsible for small firms. Let him answer the debate. I thank the Minister for Social Security for sitting in on the debate, but I do not think that he ought to take up time. Ministers have a collective responsibility. That is what it is all about. That is what we were always told about.

The House will not be in a position to know the scale of private bureaucracy when the Government hive off an important part of the public sector.

The Minister responsible for small firms has received many congratulations from his hon. Friends on what a good job he has done for small firms. From the speech of the hon. Member for Surrey, Northwest (Mr. Grylls), I was astonished to learn that the small firms unit in the Department does not report to the Minister responsible for small firms. That explains something that happened to me and to some of my constituents a few months ago. I do not intend to use my position at this Dispatch Box to lay out a constituency case, other than to say that the Minister knows that on 26 March I wrote to him about a serious case in my constituency of a small firm that could not get any electricity supply to a new factory unit. I received a letter—[Interruption.] Does the Minister of State, Department of Industry want to intervene?

The Minister of State, Department of Industry (Mr. Adam Butler)

indicated dissent.

Mr. Rooker

The Minister of State seemed to intervene from a sedentary position. If he has anything to say, he had better get up and say it. [HON. MEMBERS: "Get on with it."] No. If the Minister of State, Department of Industry wants to intervene on what has just been said from a sedentary position, let him do it. He obviously does not want to intervene.

The Under-Secretary knows that on 26 March I wrote to him about the serious problem regarding electricity supply. It took his office until 22 April to reply, in a lettter from him, and to say "Sorry, pass the problem over to the Department of Energy". Of course, I wrote back saying "You are the Minister for small firms. That is why I wrote to you in the first place". By the time that the Department of Energy wrote to me, six weeks later, my constituents said "Sorry, we cannot afford to go to that unit".

The Minister apologised. There had been a slip-up in the office. He wrote and told me that. I can understand why there was a slip-up in the office if the Government have a Minister responsible for small firms, but the small firms unit of the Department of Industry does not report to the Minister. It is no wonder I and other hon. Members have problems in pursing the difficulties of small businesses, irrespective of the arguments that I have put forward on sickness benefits.

I should have thought that the Secretary of State would take on board that point. Clearly, he is too busy to deal with all the minutiae of problems. That is why I did not bother him about it, but I do not see why my constituents should have to suffer in the way that they did if the departmental structure laid down by civil servants is incorrect for the workings of small business. I hope that the Minister will take that point on board, as I hope that the Government will take on board the rest of my points about their proposals to abolish another vital part of the national insurance fund.

6.37 pm

Mr. Richard Wainwright () Colne Valley

On parliamentary occasions such as debates on the Queen's Speech and the Budget, usually a special cupboard is opened, and, after a great deal of dusting down, a set of pious assurances and generalised promises are brought forward by some superior Government butler in the form of the treatment of small businesses. Eventually, this teapot is put back in the cupboard until the next great occasion. The Libera] Party has now sent for the whole tea-set off season, so to speak. It is not a teapot day. Unfortunately, all that has happened is that a very hardworking and diligent Government footman has had some difficulty in bringing out a lot of very broken and dilapidated china. Furthermore, I gather that the very same footman has the difficult task of taking it all back to the cupboard in a few minutes' time.

That is not what the Liberal Party wanted when it put down this motion, hoping that it was a service to the whole House. The essence of the many problems of new and small enterprises of all kinds, whether companies or cooperatives, or whether sole traders or the self-employed, derives from major policies of the Government, and is not confined to these minor matters of which the junior Minister spoke.

It seems that the Government—or at any rate the Department of Industry—are unable in this sphere to distinguish between a small irritant, on the one hand, and a poison. We had a long speech about the removal of certain irritants, based on the assumption that almost all small businesses are still making profits which cause them liability for tax. In our view—and this is why, out of many subjects which tempted us for the rare occasion of a Liberal Supply day, we chose this topic—it is the Government's central policies that are destroying small enterprise.

I am sure that the whole House is obliged to the hon. Member for Surrey, North-West (Mr. Grylls), speaking from an eminent position in his own party, for raising the central issue of the constitutional position with regard to enterprises that need special protection because they are not of a size that enables them to employ public relations lobbyists in this Palace, and so on. We heartily endorse most of the proposals that the hon. Gentleman made. I hope that he will forgive me if I say that we preceded him, because in July 1977, when the then Government were somewhat dependent upon Liberal support, we made a specific proposal to the then Prime Minister that the Chancellor of the Duchy of the time should be appointed, as a senior Cabinet Minister, with a completely roving commission throughout all Departments, for the protection and encouragement of new and small enterprises.

The Prime Minister of the day accepted that suggestion with some alacrity. It worked so successfully in collaboration with the Department of Industry—whose contribution in the shape of the hon. Member for Keighley (Mr. Cryer) I do not want to decry—that in April 1978 the leader of the Liberal Party wrote to the Prime Minister asking that this position be fully regularised and that it should become, so far as any Prime Minister can do it, a feature of the Cabinet. We asked that a senior Cabinet Minister, with a special title for the job and without responsibility for any other major Department, should be given the job of looking after the interests of new and small enterprises of all kinds and the needs of the self-employed.

Unfortunately, the Prime Minister at the time did not see his way to accepting that. Therefore, the way was open for the present Prime Minister to downgrade the whole proceeding, with the disastrous results that small businesses are now experiencing. I need scarcely repeat that it is not the arrival of buff envelopes, or the possibility of some minor bureaucratic fracas, that is destroying small businesses. It is the monstrous interest rates which were denounced by the right hon. and learned Member for Hexham (Mr. Rippon) as usurious only the other day, the chronic over-valuation of sterling, which makes it almost impossible to start a new export business at present and the chaos of pay bargaining, led by the Government's own cowboys, that is doing that. They have created a situation that is the despair of anyone wanting to build up a small labour force, yet on none of those issues have we so far heard a word today in respect of the Government's views.

The other feature that has contributed to the depression among small businesses has been the ample demonstration over the past 15 months that it is impossible to combine tax incentives with reliance upon rigid monetary control as the total arbiter of Government policy. Therefore, the dual promise which the Prime Minister held out at the election, of tax incentives and reduced inflation, has come to pieces in her hands, and small businesses are suffering accordingly.

As the hon. Member for Upminster (Mr. Loveridge) mentioned, there are also irritants of a major kind with which the Minister has not so far dealt. For instance, there is the national insurance surcharge, which means that before a small business man ever starts work, and as soon as he has signed a contract with his first employees, he is landed with the horrific poll tax of national insurance—20–5 per cent. of the employee's wage altogether—which most jungle chieftains would hesitate to impose upon members of their tribe.

The hon. Gentleman also pointed out that the Government have entirely reneged on their promise to reform capita] taxation. Therefore, those small businessess that are still managing to achieve something like success are scared stiff that the rewards will all be creamed off in the shape of an extremely unfair tax on inflation, known as capital gains tax.

Nothing has been said about Government purchasing. Surely we could be told that the Government are genuinely trying to get buying Departments to have regard for the smaller enterprises, even if only by insisting that the larger suppliers do a great deal of sub-contracting in the course of fulfilling Government requirements. Surely we should hear something about that from the Minister.

Mr. Michael Shersby () Uxbridge

rose—

Mr. Wainwright

I am sorry, but I am pressed for time. I hope that the hon. Gentleman will forgive me if I do not give way.

On VAT, there was a most extraordinary suggestion from the Minister that this country is unique in the threshold that it applies for VAT. Is the Minister really suggesting that throughout the length of Italy small traders account meticulously for the VAT on their sales, or is he suggesting that anywhere, except perhaps in the prim Duchy of Luxembourg, VAT is paid on the nail and in the right amounts by small traders? That is not the impression among European tax experts. To rely upon the letter of the statute in a matter such as that is wholly unreal.

There are other matters that weigh upon small traders, especially the iniquities of the rating system. It is within the recollection of hon. Members that when the present Prime Minister was in Opposition she promised that her party would abolish the rating system. That prospect was a shot in the arm for many small businessess. Instead, rates are soaring to unimagined heights, and a desperate Secretary of State for the Environment is now trying to chase after them when they already have a big start, are wearing roller skates and are likely to get away.

In the "no confidence" debate yesterday, the Prime Minister received a great ovation from Conservative Members for suggesting that she was about to set on foot seven small enterprise zones in a mere handful of towns in this country. It is the Liberal view that the people of Britain want the whole of these islands to be one enterprise zone. It is because the Government through their major policies—not simply the policies of a small section of the Department of Industry—are crushing enterprise throughout the length and breadth of the country that we condemn them as indifferent and will vote accordingly tonight.

6.47 pm

Mr. David Mitchell

We have had an interesting debate covering a wide range of subjects. [HON. MEMBERS: "With the leave of the House".] By leave of the House, I should like to reply to a number of points that have been particularly directed towards me.

The hon. Member for Truro (Mr. Penhaligon) started by contrasting the Conservative Party's election promises with performance. I hope that he will forgive me if I point out that we have not been in office for the lifetime of a parliament, and he can be assured that well before then we shall have fulfilled all of the promises relating specifically to small businesses that we made in our election manifesto.

I was fascinated—I am sure that the House was as well—by an important and beautifully illustrative remark that he made. The hon. Member referred to the fact that when he reached retiring age the average wage would be £45,000 a week if we continued as we are. Does not that underline how right it is for the Government to give absolute priority to dealing with the causes of inflation?

The hon. Member also asked about the pension work of sub-post offices. I can assure the hon. Gentleman that no pensioners will be forced to draw less often than weekly against their wishes. Therefore, there is an absolutely clear assurance on that. As to the various alternatives, such as electricity accounts and so on, being paid through sub-post offices, we are certainly studying what the options are.

The hon. Member also referred to cutbacks in relation to the insulation grant. I think that he will welcome, as I do, the new £4 million scheme that will come into operation in August. It will provide a 90 per cent. grant towards insulation improvements in the homes of old-age pensioners. I am sure that he will welcome that, not only because it will benefit pensioners but because it will provide extra work to those in the insulation and building industries.

Mr. Penhaligon

Does the Minister still intend to introduce a system that will make it far easier for those in receipt of a pension to have it paid directly into a bank account? That is the crunch of the matter. If that is made easier, one-third of the pensioners will probably opt for that system.

Mr. Mitchell

This is a complex matter and it is still under consideration. I cannot give the hon. Gentleman an answer today.

My hon. Friend the Member for Up-minster (Mr. Loveridge), who is also chairman of the smaller businesses committee, raised several important points. He drew attention to an item that time did not allow me to deal with earlier, namely, the assistance that the Government have given as regards stock relief. The Government have arranged for the first two years to be written off. In addition, the Government have arranged for the entire liability to be written off six years in arrears. My hon. Friend also raised an important point about the Green Paper, which my right hon. Friend the Secretary of State for Trade introduced, dealing with firms buying their own shares. He has put his finger on an important point. It is part of reality that empire builders in the world of business do not like outsiders muscling in on a share of that empire. This is one way in which temporary outside equity investment can be made. Those who own the business will know that they can buy them out later. I am sure that my hon. Friend was right to draw attention to that.

Mr. Clinton Davis () Hackney, Central

The Minister referred to some of the provisions proposed by the Department of Trade. How can it be in the interest of the small business man to abolish the registry of business names, upon which small creditors substantially rely?

Mr. Mitchell

Unfortunately, time is short and it is difficult to deal with that point in addition to the others that have been raised. I should be happy to discuss this matter with the hon. Gentleman, although it is primarily a subject for the Department of Trade. The existing register is very patchy in its impact. If I were to trade under my own name I would not appear in the register. Nobody would have any means of tracing me. If I were to disappear tomorrow after I had been trading in one town and living in another, nobody would know where to find me. They would have no means of tracing me. The register is very partial. I urge the hon. Gentleman not to go too far in his assumption that it plays an important part in the operation of credit security.

My hon. Friend the Member for Up-minster also drew attention to the importance of the middle-sized firm. He stressed some rather frightening figures. He pointed out that only 3,000 manufacturing firms employed between 100 and 200 employees. There are two reasons for that. First, a decade ago not enough small businesses started. Secondly, capital taxation means that many business men in their fifties decide that they cannot pass the business on to the next generation. Such business men ask themselves why the next generation should have the business when they are only going to be forced by taxation to sell it. They realise that they may as well sell the business and live on the proceeds in their old age. Because of the impact of capital taxation, far too many industries have become part of the ever-increasing concentration of British industry. My colleagues and I welcome the review carried out into capital taxation by the Treasury.

The hon. Member for Keighley (Mr. Cryer) mentioned the work done by the noble Lord Lever and the previous Labour Government. I should like to pay tribute to Lord Lever and to the work that he did. The hon. Gentleman also asked for sanity and sound economic principles. I found it slightly uproarious that such remarks should come from him. He also referred to the ferrous foundry scheme. That industry has sought grants to modernise plant and to increase production and productivity. It now seeks grants to rationalise the industry and to close down some of the units in production. Whether that is sanity and sound economic principles I do not know. I would take a certain amount of convincing. The hon. Gentleman then said that if more workers have more money in their pockets, they will want to spend it on the products of small businesses. Those workers will want to spend their money in a way that will give them the best value for money. The customer is king and he is the deciding factor. We must create the circumstances in which small businesses can provide the customer with the best value for money. One does not do that by artificially distorting the pattern of demand.

My hon. Friend the Member for Surrey, North-West (Mr. Grylls) spoke about the need to have a Cabinet Minister responsible for small businesses. We already have a Cabinet Minister responsible for small businesses and he is sitting on the Front Bench. I refer to my right hon. Friend the Secretary of State for Industry. I do the donkey work and I report to him direct on matters of small business policy. My hon. Friend pointed out that 14,000 civil servants are employed to look after small businesses in the agriculture industry. Indeed, that industry is dominated by small businesses. I hope that my hon. Friend did not seek to suggest that we should set up another empire of 14,000 civil servants to look after smaller businesses. That would conflict with his other objective of bringing about economies in Government expenditure.

The hon. Member for Birmingham, Perry Barr (Mr. Rooker) was concerned about the proposals for sickness benefit. He will know that the Government have issued a consultation paper. We shall bear in mind the hon. Gentleman's views, and the views of many of the organisations which represent small firms and that have written either to me or to the Secretary of State for Social Services. My right hon. Friend has sat here throughout the debate and the House will know that he has listened carefully to all the comments that have been made on this subject.

The Government have two significant goals, which they hope to achieve. First, we wish to save 5,000 civil servants, and the cost that that involves. Secondly, the Government seek to ensure that sickness benefit is paid through PAYE, as we wish to make certain that people are not better off sick than at work. The consultation document seeks to discover the most effective way of achieving that. I hope that we shall not in some way lose

sight of the substantial benefit to be gained from achieving that.

The hon. Member for Colne Valley (Mr. Wainwright) raised some important points and I am glad that he drew attention to them. Several of his points were raised by other hon. Members and I have tried to cover them. He also harked back to the suggestion that VAT exemption should be lifted to £30,000 or £40,000. It would appear that my earlier remarks did not go home. The Labour Government made an agreement in Brussels to the effect that the exemption would be no higher than £5,000, indexed for inflation. We cannot go back on such an agreement unless we secure the consent of the other Governments involved.

Mr. Richard Wainwright

rose—

Mr. Mitchell

Unfortunately, the clock is against me and I shall not give way. The small business community wants to see a return to sound money, and that is the Government's priority.

The business community wants lower interest rates. They will come as our attack on the causes of inflation succeeds. It seeks fewer hurdles. Of all the things that smaller businesses need, the most precious ingredient is motivation. There is a need for lower taxes so that the personal motivation of the individual may be harnessed with the national interest. That is the most powerful combination, and it is featured in our policies for small businesses.

I ask the House to support the Government's amendment and to reject the motion which suggests that we are indifferent to a community for which we have great concern.

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

The House Divided: Ayes 245, Noes 310.

Division No. 437]	AYES	[7 pm
Abse, Leo	Barnett, Rt Hon Joel (Heywood)	Brown, Ronald W. (Hackney S)
Adams, Allen	Benn, Rt Hon Anthony Wedgwood	Brown, Ron (Edinburgh, Leith)
Allaun, Frank	Bennett, Andrew (Stockport N)	Buchan, Norman
Alton, David	Bidwell, Sydney	Callaghan, Rt Hon J. (Cardiff SE)
Anderson, Donald	Booth, Rt Hon Albert	Callaghan, Jim (Middleton & P)
Archer, Rt Hon Peter	Boothroyd, Miss Betty	Campbell-Savours, Dale
Armstrong, Rt Hon Ernest	Bottomley, Rt Hon Arthur (M'brough)	Cant, R. B.
Ashley, Rt Hon Jack	Bradley, Tom	Carmichael, Nell
Atkinson, Norman (H'gey, Tott'ham)	Bray, Dr Jeremy	Carter-Jones, Lewis
Bagier, Gordon A. T.	Brown, Hugh D. (Provan)	Cartwright, John
Barnett, Guy (Greenwich)	Brown, Robert C. (Newcastle W)	Clark, Dr. David (South Shields)
Cocks, Rt Hon Michael (Bristol S)	Hooley, Frank	Powell, Raymond (Ogmore)
Cohen, Stanley	Horam, John	Prescott, John
Concannon, Rt Hon J. D.	Howell, Rt Hon Denis (B'ham, Sm H)	Price, Christopher (Lewisham West)
Cook, Robin F.	Huckfield, Les	Race, Reg
Cox, Tom (Wandsworth, Tooting)	Hudson Davies, Ednyfed (Caerphilly)	Radice, Giles
Craigen, J. M. (Glasgow, Maryhill)	Hughes, Mark (Durham)	Rees, Rt Hon Merlyn (Leeds South)
Crowther, J. S.	Hughes, Robert (Aberdeen North)	Richardson, Jo
Cryer, Bob	Hughes, Roy (Newport)	Roberts, Albert (Normanton)
Cunliffe, Lawrence	Janner, Hon Greville	Roberts, Allan (Bootle)
Cunningham, George (Islington S)	Jay, Rt Hon Douglas	Roberts, Gwilym (Cannock)
Dalyell, Tarn	John, Brynmor	Robinson, Geoffrey (Coventry NW)
Davidson, Arthur	Johnson, James (Hull West)	Rodgers, Rt Hon William
Davies, Rt Hon Denzil (Llanelli)	Johnson, Walter (Derby South)	Rooker, J. W.
Davies, Ifor (Gower)	Johnston, Russell (Inverness)	Roper, John
Davis, Clinton (Hackney Central)	Jones, Barry (East Flint)	Ross, Stephen (Isle of Wight)
Davis, Terry (B'rm'ham, Stechford)	Jones, Dan (Burnley)	Rowlands, Ted
Deakins, Eric	Kaufman, Rt Hon Gerald	Ryman, John
Dean, Joseph (Leeds West)	Kerr, Russell	Sandelson, Neville
Dempsey, James	Kilroy-Silk, Robert	Sever, John
Dewar, Donald	Kinnock, Neil	Sheerman, Barry
Dixon, Donald	Lambie, David	Sheldon, Rt Hon Robert (A'ton-u-L)
Dormand, Jack	Lamborn, Harry	Shore, Rt Hon Peter (Step and Pop)
Douglas, Dick	Leadbitter, Ted	Short, Mrs René e
Douglas-Mann, Bruce	Leighton, Ronald	Silkin, Rt Hon John (Deptford)
Dubs, Alfred	Lestor, Miss Joan (Eton & Slough)	Silkin, Rt Hon S. C. (Dulwich)
Duffy, A. E. P.	Lewis, Arthur (Newham North West)	Silverman, Julius
Dunn, James A. (Liverpool, Kirkdale)	Lofthouse, Geoffrey	Skinner, Dennis
Dunnett, Jack	Lyons, Edward (Bradford West)	Smith, Cyril (Rochdale)
Dunwoody, Mrs. Gwyneth	Mabon, Rt Hon Dr J. Dickson	Smith, Rt Hon J. (North Lanarkshire)
Eadie, Alex	McDonald, Dr Oonagh	Soley, Clive
Eastham, Ken	McElhone, Frank	Spearing, Nigel
Edwards, Robert (Wolv SE)	McKay, Allen (Penistone)	Stallard, A. W.
Ellis, Raymond (NE Derbyshire)	McKelvey, William	Steel, Rt Hon David
Ellis, Tom (Wrexham)	MacKenzle, Rt Hon Gregor	Stewart, Rt Hon Donald (W Isles)
English, Michael	Maclennan, Robert	Stoddard, David
Ennals, Rt Hon David	McNally, Thomas	Stott, Roger
Evans, Ioan (Aberdare)	McNamara, Kevin	Straw, Jack
Evans, John (Newton)	McQuade, John	Summerskill, Hon Dr Shirley
Faulds, Andrew	McWilliam, John	Taylor, Mrs Ann (Bolton West)
Field, Frank	Magee, Bryan	Thomas, Dafydd (Merioneth)
Fitch, Alan	Marks, Kenneth	Thomas, Jeffrey (Abertillery)
Fitt, Gerard	Marshall, David (Gl'sgow, Shottles'n)	Thomas, Mike (Newcastle East)
Flannery, Martin	Marshall, Dr Edmund (Goole)	Thomas, Dr Roger (Carmarthen)
Fletcher, L. R. (Ilkeston)	Marshall, Jim (Leicester south)	Thorne, Stan (Preston South)
Fletcher, Ted (Darlington)	Martin, Michael (Gl'gow, Springb'rn)	Tilley, John
Fool, Rt Hon Michael	Mason, Rt Hon Roy	Tinn, James
Ford, Ben	Maynard, Miss Joan	Torney, Tom
Forrester, John	Meacher, Michael	Urwin, Rt Hon Tom
Foster, Derek	Mellish, Rt Hon Robert	Varley, Rt Hon Eric G.
Foulkes, George	Mikardo, Ian	Wainwright, Edwin (Dearne Valley)
Fraser, John (Lambeth, Norwood)	Millan, Rt Hon Bruce	Wainwright, Richard (Colne Valley)
Garrett, John (Norwich S)	Miller, Dr M. S. (East Kilbride)	Walker, Rt Hon Harold (Doncaster)
Garrett, W. E. (Wallsend)	Mitchell, Austin (Grimsby)	Weetch, Ken
George, Bruce	Mitchell, R. C. (Soton, Itchen)	Welsh, Michael
Gilbert, Rt Hon Dr John	Morris, Rt Hon Alfred (Wythenshawe)	White, Frank R. (Bury & Radcliffe)
Ginsburg, David	Morris, Rt Hon Charles (Openshaw)	White, James (Glasgow, Pollok)
Golding, John	Morton, George	Whitehead, Phillip
Gourlay, Harry	Moyle, Rt Hon Roland	Whitlock, William
Graham, Ted	Newens, Stanley	Willey, Rt Hon Frederick
Grant, George (Morpeth)	Oakes, Rt Hon. Gordon	Williams, Rt Hon Alan (Swansea W)
Grimond, Rt Hon J.	Ogden, Eric	Williams, Sir Thomas (Warringon)
Hamilton, James (Bothwell)	O'Halloran, Michael	Wilson, William (Coventry SE)
Hamilton. W. W. (Central Fife)	Orme, Rt Hon Stanley	Winnick, David
Hardy, Peter	Owen, Rt Hon Dr David	Woodall, Alec
Harrison, Rt Hon Walter	Paisley, Rev Ian	Woolmer, Kenneth
Hattersley, Rt Hon Roy	Palmer, Arthur	Wriggiesworth, Ian
Haynes, Frank	Park, George	Wright, Sheila
Healey, Rt Hon Denis	Parker, John	Young, David (Bolton East)
Heffer, Eric S.	Parry, Robert
Holland, Stuart (L'beth, Vauxhall)	Pavitt, Laurie	TELLERS FOR THE AYES:
Home Robertson, John	Pendry, Tom	Mr. A. J. Beith and
Homewood, William	Penhaligon, David	Mr. Clement Freud.
NOES
Adley, Robert	Baker, Kenneth (St. Marylebone)	Biffen, Rt Hon John
Aitken, Jonathan	Baker, Nicholas (North Dorset)	Biggs-Davison, John
Alexander, Richard	Banks, Robert	Blackburn, John
Amery, Rt Hon Julian	Beaumont-Dark, Anthony	Body, Richard
Ancram, Michael	Bendall, Vivian	Bonsor, Sir Nicholas
Arnold, Tom	Bennett, Sir Frederic (Torbay)	Boscawen, Hon Robert
Atkins, Rt Hon H. (Spelthorne)	Benyon, Thomas (Abingdon)	Bottomley, Peter (Woolwich West)
Atkins, Robert (Preston North)	Benyon, W. (Buckingham)	Bowden, Andrew
Atkinson, David (B'mouth, East)	Bevan, David Gilroy	Boyson, Dr Rhodes
Braine, Sir Bernard	Grist, Ian	Morrison, Hon Charles (Devizes)
Bright, Graham	Grylis, Michael	Morrison, Hon Peter (City of Chester)
Brinton, Tim	Gummer, John Selwyn	Mudd, David
Brittan, Leon	Hamilton, Hon Archie (Eps'm&Ew'll)	Murphy, Christopher
Brocklebank-Fowler, Christopher	Hamilton, Michael (Salisbury)	Myles, David
Brooke, Hon Peter	Hampson, Dr Keith	Neale, Gerrard
Brotherton, Michael	Hannam, John	Needham, Richard
Brown, Michael (Brigg & Sc'thorpe)	Haselhurst, Alan	Nelson, Anthony
Browne, John (Winchester)	Hastings, Stephen	Neubert, Michael
Bruce-Gardyne, John	Havers, Rt Hon Sir Michael	Newton, Tony
Bryan, Sir Paul	Hawkins, Paul	Normanton, Tom
Buchanan-Smith, Hon Mick	Hawksley, Warren	Nott, Rt Hon John
Budgen, Nick	Heddle, John	Onslow, Cranley
Bulmer, Esmond	Henderson, Barry	Oppenheim, Rt Hon Mrs Sally
Butcher, John	Heseltine, Rt Hon Michael	Osborn, John
Butler, Hon Adam	Higgins, Rt Hon Terence L.	Page, John (Harrow, West)
Cadbury, Jocelyn	Hil, James	Page, Rt Hon Sir Graham (Crosby)
Carlisle, John (Luton West)	Hogg, Hon Douglas (Grantham)	Page, Richard (SW Hertfordshire)
Carlisle, Kenneth (Lincoln)	Holland, Philip (Carlton)	Parkinson, Cecil
Carlisle, Rt Hon Mark (Runcorn)	Hooson, Tom	Parris, Matthew
Chalker, Mrs. Lynda	Hordern, Peter	Patten, Christopher (Bath)
Channon, Paul	Howell, Rt Hon David (Guildford)	Patten, John (Oxford)
Chapman, Sydney	Howell, Ralph (North Norfolk)	Pattie, Geoffrey
Churchill, W. S.	Hunt, David (Wirral)	Pawsey, James
Clark, Hon Alan (Plymouth, Sutton)	Hunt, John (Ravensbourne)	Percival, Sir Ian
Clark, Sir William (Croydon South)	Hurd, Hon Douglas	Peyton, Rt Hon John
Clarke, Kenneth (Rushcliffe)	Irving, Charles (Cheltenham)	Pink, R. Bonner
Cockeram, Eric	Jenkin, Rt Hon Patrick	Pollock, Alexander
Colvin, Michael	Jessel, Toby	Porter, George
Cope, John	Johnson Smith, Geoffrey	Prentice, Rt Hon Reg
Cormack, Patrick	Jopling, Rt Hon Michael	Price, David (Eastleigh)
Corrie, John	Joseph, Rt Hon Sir Keith	Prior, Rt Hon James
Costain, A. P.	Kaberry, Sir Donald	Proctor, K. Harvey
Cranborne, Viscount	Kellett-Bowman, Mrs Elaine	Rathbone, Tim
Critchley, Julian	Kershaw, Anthony	Rees, Peter (Dover and Deal)
Crouch, David	King, Rt Hon Tom	Rees-Davies, W. R.
Dean, Paul (North Somerset)	Kitson, Sir Timothy	Renton, Tim
Dickens, Geoffrey	Knight, Mrs Jill	Rhodes James, Robert
Dorrell. Stephen	Knox, David	Ridsdale, Julian
Douglas-Hamilton, Lord James	Lamont, Norman	Rifkind, Malcolm
Dover, Denshore	Lang, Ian	Rippon, Rt Hon Geoffrey
du Cann, Rt Hon Edward	Langford-Holt, Sir John	Roberts, Michael (Cardiff NW)
Dunn, Robert (Dartford)	Latham, Michael	Roberts, Wyn (Conway)
Durant, Tony	Lawrence, Ivan	Rossi, Hugh
Dykes, Hugh	Lawson, Nigel	Rost, Peter
Eden, Rt Hon Sir John	Lee, John	Royle, Sir Anthony
Edwards, Rt Hon N. (Pembroke)	Lennox-Boyd, Hon Mark	Sainsbury, Hon Timothy
Eggar, Timothy	Lester, Jim (Beeston)	St. John-Stevas, Rt Hon Norman
Elliott, Sir William	Lewis, Kenneth (Rutland)	Scott, Nicholas
Emery, Peter	Lloyd, Ian (Havant & Waterloo)	Shaw, Giles (Pudsey)
Eyre, Reginald	Lloyd, Peter (Fareham)	Shaw, Michael (Scarborough)
Fairbairn, Nicholas	Loveridge, John	Shelton, William (Streatham)
Fairgrieve, Russell	Luce, Richard	Shepherd, Colin (Hereford)
Faith, Mrs Sheila	Lyell, Nicholas	Shepherd, Richard (Aldridge-Br hills)
Farr, John	McCrindle, Robert	Shersby, Michael
Fell, Anthony	Macfarlane, Neil	Silvester, Fred
Fenner, Mrs Peggy	MacGregor, John	Sims, Roger
Finsberg. Geoffrey	MacKay, John (Argyll)	Skeet, T. H. H.
Fisher, Sir Nigel	Macmillan, Rt Hon M. (Farnham)	Smith, Dudley (War. and Leam'ton)
Fletcher, Alexander (Edinburgh N)	McNair-Wilson, Michael (Newbury)	Speed, Keith
Fletcher-Cooke, Charles	McNair-Wilson, Patrick (New Forest)	Speller, Tony
Fookes, Miss Janet	McQuarrie, Albert	Spence, John
Forman, Nigel	Madel, David	Spicer, Jim (West Dorset)
Fowler, Rt Hon Norman	Major, John	Spicer, Michael (S Worcestershire)
Fox, Marcus	Marland, Paul	Sproat, lain
Fraser, Rt Hon H. (Stafford & St)	Marshall, Michael (Arundel)	Squire, Robin
Fraser, Peter (South Angus)	Marten, Neil (Banbury)	Stainton, Keith
Fry, Peter	Mates, Michael	Stanbrook, Ivor
Galbraith, Hon T. G. D.	Mather, Carol	Stanley, John
Gardiner, George (Reigate)	Maude, Rt Hon Angus	Steen, Anthony
Gardner, Edward (South Fylde)	Mawby, Ray	Stevens, Martin
Garel-Jones, Tristan	Mawhinney, Dr Brian	Stewart, Ian (Hitchin)
Ginsburg, David	Maxwell-Hyslop, Robin	Stewart, John (East Renfrewshire)
Glyn, Dr Alan	Mayhew, Patrick	Stokes, John
Goodhart, Philip	Mellor, David	Stradling Thomas, J.
Goodhew, Victor	Meyer, Sir Anthony	Tapsell, Peter
Goodlad. Alastair	Mills, lain (Meriden)	Taylor, Robert (Croydon NW)
Gorst, John	Mills, Peter (West Devon)	Taylor, Teddy (Southeno East)
Gow, Ian	Mitchell, David (Basingstoke)	Temple-Morris, Peter
Grant, Anthony (Harrow C)	Moate, Roger	Thatcher, Rt Hon Mrs Margaret
Gray, Hamish	Monro, Hector	Thomas, Rt Hon Peter (Hendon S)
Greenway, Harry	Montgomery, Fergus	Thompson, Donald
Grieve, Percy	Moore, John	Thomas, Neil (Ilford South)
Griffiths, Eldon (Bury St Edmunds)	Morgan, Geraint	Thornton, Malcolm
Griffiths, Peter (Portsmouth N)	Morris, Michael (Northampton, Sth)	Townend, John (Bridlington)
Trippier, David	Walters, Dennis	Wilkinson, John
van Straubenzee, W. R.	Ward, John	Williams, Delwyn (Montgomery)
Vaughan, Dr Gerard	Warren, Kenneth	Winterton, Nicholas
Viggers, Peter	Watson, John	Wolfson, Mark
Waddington, David	Weils, John (Maidstone)	Young, Sir George (Acton)
Wakeham, John	Wells, Bowen (Hert'rd & Stev'nage)	Younger, Rt Hon George
Waldegrave, Hon William	Wheeler, John
Walker, Rt Hon. Peter (Worcester)	Whitelaw, Rt Hon William	TELLERS FOR THE NOES
Walker, Bill (Perth & E Perthshire)	Whitney, Raymond	Mr. Spencer Le Marchant an
Walker-Smith, Rt Hon Sir Derek	Wickenden, Keith	Mr. Anthony Berry.
Waller, Gary	Wiggin, Jerry

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 32 (Questions on amendments), and agreed to.

Mr. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to, pursuant to Standing Order No. 18 (Business of Supply).

Resolved,

That this House supports the Government's policies to increase incentives to entrepreneurs whilst reducing obstacles which discourage the start-up and growth of small businesses in the United Kingdom.