§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Goodlad.]9.47 am
§ The Under-Secretary of State for Trade and Industry (Mr. David Trippier)
It is nearly 12 months since the House had the opportunity to debate small firms policy in detail. There have been major developments during that period to which I shall draw attention later in my speech. The first change I should comment on, however, is the one nearest home — the change in Ministers concerned with small firms policy.
This is an appropriate time to pay tribute to the sterling work of my hon. Friend the Member for Norfolk, South (Mr. MacGregor) whilst small firms Minister in the then Department of Industry. I have heard much praise of him wherever I go. I pay tribute also to his predecessor, my hon. Friend the Member for Hampshire, North-West (Mr. Mitchell) who achieved so much in the past.
However, in the relatively short time that I have been looking after small firms' interests, I have already found my previous experience of entrepreneurs and their problems invaluable, particularly the experience I gained in setting up one of the first local enterprise agencies in the Rossendale area of Lancashire.
My right hon. Friend the new Secretary of State for Trade and Industry is also familiar with the problems of the small firm. During his time at the Department of Employment he was particularly concerned about the burden of employment protection legislation on industry and introduced specific concessions for the very small firm. Now he will be actively representing the small business man's interests at Cabinet level.
I am convinced that small firms will benefit from the new combined Department of Trade and Industry. They are equally concerned with many of the functions of the former Department of Trade as with the functions of the former Department of Industry. The Department's small firms division is now able to work that much more closely with the regulatory and export promotion activities of the new Department, and the influence which it has on other bodies is enhanced. Small firms are recognised as a major contributor to our industrial and trading performance, and their interests will be represented where decisions affecting industry as a whole are made. They will not be allowed to be relegated to a minor compartmentalised role in the backwaters of Government.
It still surprises some people that about 95 per cent. of all United Kingdom firms are small. But we should not be complacent about this figure. Recent work by the Department's small firms statistician has shown that the United Kingdom has a relatively low number of small firms and they make a more modest contribution to manufacturing activity than in our major competitor countries. Small firms represent a source of innovation, diversity and flexibility that cannot be ignored by any country interested in securing a profitable future for its industry. They are capable of playing a major role in promoting wealth creation in the industrialised world. We in the United Kingdom are learning that lesson but it has probably taken us rather longer than some other countries. We had become over-dependent on the large company and 1097 many of our regions were relying on too narrow an industrial base for generating their employment prosperity.
There are hopeful signs, however. Over the period 1980–82, based on VAT returns, 20,000 more United Kingdom firms started trading than went out of business. I hope and expect that this increase will continue through the first half of 1983. The number of self-employed also rose to 9 per cent. of the work force in mid-1981—the highest level since continuous recording began in 1959 — and published estimates for 1983 figures show a further increase to 10 per cent.
Much hearsay is being laid to rest as my Department continues to improve the level of our statistical information about small firms' activity. I mentioned the main conclusion from the work done recently on international comparisons. We have also carried out a special study from VAT returns of the rate of business failures. This indicates that, while failures are high during the first years of life, many businesses are still found to be trading after 10 years.
This Government have worked harder than any of their predecessors to ensure that more small firms stay in business longer and grow and develop. There has been much talk about numbers of measures. I prefer to emphasise the work done to improve the climate for small businesses. Since the Conservatives came to power in May 1979 we have gone a long way down the road of rolling back the disincentives which were crippling small firms' ability to compete. The most important of these has been the progress we have made in controlling inflation. Loan finance is now more easily available, equity participation has been stimulated and tax burdens have been eased. There are now more premises, more extensive advisory and counselling services and fewer forms and procedures.
Major problems remain, and I shall say more about those later. The level of business rates, for example, continues to be a major source of complaint, and the House is aware of the efforts that we have made and continue to make in that area. Overall, however, there has been a major improvement, and I shall highlight the main developments that have occurred since the last debate on this issue.
We were glad that the Chancellor was able this year to introduce a further Budget with a strong enterprise theme. Corporation tax for the vast majority of companies was again reduced, this time to as low as 38 per cent. The national insurance surcharge was reduced to only 1 per cent. and many other tax reliefs were improved or increased.
Perhaps the most dramatic announcement, however, was the introduction of the business expansion scheme. Most outside investors in unquoted companies can now claim full tax relief—at up to 75 per cent.—for the cost of newly-issued ordinary shares. The signs are that this generous measure is encouraging an unprecedented increase in equity investment in small and medium-sized enterprises. Other measures introduced in this year's Budget included tax reliefs for those borrowing money to enable them to take part in employee buy-outs. Exemption levels on capital gains tax and capital transfer tax were also increased, as was the registration limit for VAT.
Amendments to the industrial buildings allowance have concentrated the reliefs available under the small workshops scheme to where the need is greatest. This allowance now applies to the capital costs of converting 1098 a building where the average size of industrial units does not exceed 1,250 sq ft. This is the size of workshop where there is reason to think that the supply is far from meeting demand. Up to 25 per cent. of a workshop may also now be used for a non-qualifying purpose without affecting entitlement to the 100 per cent. initial allowance. Hon. Members will be pleased to know that since the small workshops scheme was introduced in 1980 it has been estimated that the number of workshops up to 2,500 sq ft. built each year has tripled.
The business expansion scheme and its predecessor, the business start up scheme, has been one of the most innovative measures introduced by the Government to help small firms; by that I mean that it has not been tried before, in the United Kingdom or anywhere else. Another exciting development has been the enterprise allowance scheme. Thousands of unemployed people throughout Great Britain are being helped to start their own businesses under this scheme, which is being run by the Manpower Services Commission.
It was introduced early last year on a pilot basis in five areas to test whether unemployed people wishing to start up their own businesses were being deterred from doing so by the prospect of loss of benefits. The pilots are being reviewed carefully, but early results were sufficiently encouraging to allow us to extend the scheme nationwide from 1 August 1983 to provide support for a further 25,000 people in the period to March 1984. In all, about 3,300 benefited from the pilot scheme and by the end of October almost 13,000 had started to receive the allowance under the extended scheme.
My Department provides a small firms advisory service which is offering three free individual counselling sessions to those embarking on the scheme. The Council for Small Industries in Rural Areas and local enterprise agencies are also offering assistance. Particularly gratifying is not only the considerable amount of careful preparatory work that most applicants are undertaking before applying for the scheme, but the wide range of businesses setting up, varying from skilled craftsmen to the high technology firm. For example, a small business embroidering church vestments has received help and, at the other end of the spectrum, an anti-corrosion industrial and commercial engineering firm has been helped.
We hope that many businesses set up with help from the enterprise allowance scheme will thrive and generate jobs for others, and there is evidence to show that this is beginning to happen. Overall, my colleagues at the Department of Employment and I have been encouraged by the response to the scheme so far and by its achievements. We hope soon to be able to come to a decision soon about its future. We hope to come to a final decision, too, on the co-operative development agency. It is too early to speculate on that decision, but a Bill will be introduced some time this Session.
If the keynote of our efforts in the past 12 months has been the improvement of incentives, it has also been awareness. There is no point in having a wide range of schemes and services available if people do not know about them or have false preconceptions about them. Good products deserve good marketing. We therefore ran a high-profile advertising campaign earlier this year to tell existing businesses, and their professional advisers, particularly bankers and accountants, about the help that is available. Many hon. Members will have seen the television advertisements and the booklet we produced to 1099 back the campaign, "How to Make Your Business Grow". We stimulated as a result a huge response in inquiries and the booklet has been highly praised. I consider it the best publication ever to come from a Government Department.
I am also confident that we have affected the attitudes and improved the knowledge of professional advisers through the extensive programme of seminars that was mounted. Knowing that many hon. Members receive requests for advice from small firms in their constituencies, we also arranged an exhibition in the House in July this year at which information was available.
But the job of awareness does not end there. We must build on the success of our first advertising campaign. I am sure that we have raised awareness of what the Government have to offer, although more evidence should be available from work which is being undertaken of the level of awareness of my Department's advisory and consultancy services. It is clear, however, that we must provide more detailed information about how to make the best use of our advisory services and the other resources which are at the disposal of growing businesses. This does not just mean continuous publicity.
We must package the schemes and services more simply and eliminate the confusion that currently surrounds all our different business advisory services, grant schemes, awareness drives and other services. We must make sure that both red tape and delay are kept to a minimum. Above all, we must persuade owner-managers not to think only in terms of cash handouts. Some grants are available but they are mainly intended to encourage innovation throughout the country, or expansion in the assisted areas. Smaller businesses must also consider using other services from training schemes for start-ups, through free technical and production advisory services to a wide range of export schemes. We must make it easy for them to find out about them and to use them.
That leads me on to the vital area of advice. We have one sure barometer of how much small firms value impartial information and advice, which is the increasing use made of the Department of Trade and Industry's small firms service. In the financial year 1982–83 the service handled some 250,000 inquiries and held 20,000 counselling sessions. This year it is on target to exceed 300,000 inquiries and we have been increasing its resources to help it meet this need. This year I opened the first new regional centre since the early 1970s. It is located at Reading and it is already proving a valuable addition to the service.
The small firms service is being increasingly complemented and strengthened by the activities of local enterprise agencies and other organisations providing assistance to small firms. We estimate that there are now about 160 of these agencies, and I have set a target of 300 within three years. Most concentrate on giving advice and information to start-ups, and, of course, they must provide a quality service. The market potential for this form of assistance is vast and we could not expect the small firms service and the Council for Small Industries in Rural Areas to cope alone.
The emphasis is on complementary and not competing, advisory services. The strengths of the small firms service are information and counselling. The strengths of local enterprise agencies are the experience and expertise of 1100 their private sector sponsors and their detailed local knowledge. I look to local enterprise agencies to refer their clients to the small firms service where counsellors' skills are appropriate and to the small firms service to refer clients to local enterprise agencies where local knowledge is essential. We shall certainly be considering ways of strengthening the links between local enterprise agencies and the small firms service. At the same time, I should like to see more local enterprise agencies, with the assistance of their private sector sponsors, developing schemes to fill the gaps in helping small firms in their areas. Such schemes might be the provision of managed workshops; management and skill training courses; matching investors with small firms under the business expansion scheme; business clubs, more industry-education liaison, including links with colleges; and marketing schemes.
The Government have continued encouraging private sector sponsorship in local enterprise agencies through tax relief on contributions to approved agencies and 114 have been approved to date. We are also working with Business in the Community to persuade more large firms to back local enterprise agencies with finance, secondments and premises. "Business in the Community" has just produced a video called "It's People That Make Things Happen" to show the benefits of seconding staff to local enterprise agencies, and I have also launched our own video, produced with the help of "Business in the Community", called "Help Yourself', about how to set up a local enterprise agency.
I have talked at some length about giving information and advice but there is another side to that process, which is receiving information. In my first months at the Department of Trade and Industry I have already benefited from talking to many small firms, visiting a number of local enterprise agencies throughout the country, and discussing policy with organisations representing small firms' interests.
As a new Minister, the main question that is put to me in such discussions is what are my priorities for the future. My early months in this job have served only to reinforce my initial view that much more needs to be done. In particular there is a need for consolidation of our schemes to enable us to build on what we have achieved so far.
Awareness is vital, and I have already spoken of our plans in this area, which will involve a determined effort to reduce the potential for confusion in applying for assistance.
The Government's role in areas such as management education and training must be more than just awareness. We need to convince small firms of the long-term value to their businesses of undertaking appropriate courses, and I hope that local institutions will endeavour to structure their provision so that it is both accessible and relevant to the needs of small firms in their area. Much good work has already been done and I am particularly happy to compliment the Manpower Services Commission on the many initiatives that it has successfully taken in small business training.
Another area where we need to encourage small firms is that of innovation. The Department's support for innovation scheme already welcomes applications from small firms, and appraisal procedures for these cases have been simplified. Our small firms technical inquiry service has proved very successful, and since it started last year nearly 3,500 firms have benefited from it. In addition, we gave a specific boost to small engineering companies to 1101 instal advanced equipment through the small engineering firms investment scheme, which we reintroduced for a limited period this year. Under both SEFIS 1 and SEFIS 2 about 7,750 firms have applied for the generous grants.
As is well known, about 1,750 of these were under SEFIS 1, when £30 million was committed within eight and a half weeks. The remaining 6,000 under SEFIS 2 represent project costs of almost £300 million of which about 2,000 were received in the last week that the scheme was open. Obviously it is far too early for us to be sure of the final spend for SEFIS 2, but I can assure hon. Members that the applications will be considered as soon as possible. To date, however, about £20 million has been paid under both schemes towards the purchase of advanced equipment.
The Government are not interested only in small firms involved in manufacturing. The service industries are an important sector of the economy, and it is intersting to note that over 50 per cent. of all inquiries made to the small firms service are from this sector, with one in five coming specifically from retailers. Again, over 50 per cent. of the businesses which have benefited from the loan guarantee scheme also come from the service sector, accounting for nearly £200 million worth of lending.
I have mentioned examples of ways in which the Department has improved the climate for small firms and we shall continue to put emphasis on improving it by bringing forward incentives, where they seem appropriate, and by reducing burdens where they are hindering growth and development.
We have always attached great importance to getting rid of administrative and legislative burdens which impose disproportionate financial and managerial demands on small firms. Since 1979 significant reductions have been achieved in such areas as employment legislation, statistical form-filling and planning procedures. Nonetheless, I recognise that many small firms continue to feel that they face too much red tape. I shall therefore be discussing with ministerial colleagues and their officials how we might make further inroads in this area in future.
As I am often reminded, burdens and disincentives affecting industry do not all originate in the United Kingdom. We must be as vigilant in identifying them in Brussels as in Whitehall. The European Community has a vital role in helping the small firm by reducing barriers and freeing the market. I hope that the European Year of Small and Medium-sized Enterprises, which is now drawing to a close, has given impetus to those efforts.
Finance is another major area where we have sought to improve the position of the independent business man. I think it is fair to say that attitudes among banks and financial institutions have changed and are continuing to develop. They are now providing a wider range of schemes and services suited to the smaller firm's needs than was available five years ago. The Government's main direct contribution has been the loan guarantee scheme. It was introduced in June 1981 for a three-year experimental period, subject to an overall limit on the amount of lending under the scheme. This is currently £600 million. It is interesting to recall that in June 1981 there was no clear evidence that there was a need for a guarantee scheme of this sort. Nevertheless, there were enough doubts to suggest that an experimental scheme should be established 1102 to test the various views that had been put forward on the adequacy of conventional medium-term financial arrangements for smaller firms.
In terms of demand, the scheme has certainly demonstrated that there was a "gap" that the scheme is now helping to fill. At the end of September—the latest date for which figures are available–12,231 guarantees had been issued in respect of over £400 million of bank lending. In value terms this has been split roughly half and half between new and existing businesses. New applications are reaching my Department at the rate of 500 to 600 each month.
It must be remembered that the scheme is very much a pilot scheme and we must be prepared to learn from our experience. I should therefore like to announce that over the next few months I shall be carrying out a fundamental review of the operation of this phase of the scheme, which is due to end in May 1984. This review will form the basis of any decisions on its future. At this stage I cannot prejudge the results of this review. But I shall look closely at a wide range of issues relevant to the scheme's performance including the extent to which scheme lending has been genuinely additional to what the banks would have undertaken under conventional terms and the effect of the scheme on the structure and performance of scheme borrowers. I shall want to consider also the impact of the scheme on bank lending practices, including the effect of any tightening up by the banks after their early experience, in particular in relation to the personal contribution of scheme borrowers.
During the review I shall want to assess any available statistical information and to examine the results of a further sample telephone survey carried out by my Department. I have also Commissioned a second detailed analysis of scheme borrowers by outside consultants Robson Rhodes, who have been asked to look in depth at 150 scheme borrowers, 50 of which have been subject to a claim under the guarantee arrangements, and 100 cases where the business is continuing to operate.
§ Mr. Andrew Rowe (Mid-Kent)
Will the Minister be looking at the effect of the premium charged within the scheme to see whether it can be reduced?
§ Mr. Trippier
I can give my hon. Friend that assurance. I shall be holding a series of meetings with banks and financial institutions involved in the scheme and with the main small firm representative organisations. I shall also take full account of the many comments and representaions from hon. Members, including the one that has just been made, my Department's small firms service and individual small businesses.
I have set out to show how I see the preoccupations of small firms policy developing in the near future. But the main message is continuity commitment. I can assure the House that the Government's determination to stimulate the small firms sector and help it realise its innovative, competitive and employment creating strength is undiminished.
§ Mrs. Ann Winterton (Congleton)
Mr. Deputy Speaker, I am most grateful to you for calling me to deliver my maiden speech so early in the debate.
I represent the brand-new constituency of Congleton which lies in south-east Cheshire and comprises parts from 1103 four former constituencies. I pay tribute to all my predecessors for their service to their constituents both in the House and elsewhere, and I am delighted to see at least one of them in the Chamber this morning. I refer, of course, to my hon. Friend the Member for Macclesfield (Mr. Winterton).
The constituency of Congleton is part rural and part urban. Our many thriving communities each have an independent character, be it the old Cheshire salt town of Middlewich which is bounded on three sides by canals; the thriving market town of Sandbach, which is well known all over the world for the manufacture of heavy commercial vehicles by such companies as ERF Ltd. and for the skills of its work force which have been handed down from father to son. There are also the largely residential villages of Alsager with its beautiful mere, Holmes Chapel and Haslington which, with its surrounding parishes, is the only part of the constitueny to come within the Crewe and Nantwich borough council. The major part of the constituency falls of course within the Congleton borough council.
Last, but not least, we come to Congleton itself which is well known locally for its biannual carnival and military tattoo, which, incidentally, is the largest in the north-west and, I think, outside London. We are very proud of it, and also of its clothing, textile and narrow fabric industries.
Many years ago, Congleton attracted some notoriety which is summed up in the old rhyme:Congleton rare, Congleton rare, Sold the Bible to buy a bear".I believe that the story is that, sadly, the town bear suddenly died just before Congleton Wakes, and the 16 shillings put aside by the good townspeople to buy a new town Bible was used to purchase a new bear to take part in the bear-baiting, which was a very popular spectator sport in those days—I suspect that it is quite popular in the House these days in another form! However, history does not tell whether the good townsfolk saved up another 16 shillings to buy another Bible, but I am sure that they did.
Each of the places in my constituency that I have mentioned is set in attractive and well-husbanded farm lands where the farming community plays such an important role in rural life. We have some of the most efficient and productive dairy farms in Europe. They are not producing the surpluses, and they are certainly not very happy with the Government's proposal to admit sterilised milk and pasteurised cream, in addition to UHT milk, which we have been obliged to admit from the EC.
Coming from a small family business background and representing a constituency which contains within it many diverse small to medium-sized businesses, it was natural that I should wish to contribute to today's debate. I commend the Government for doing much to encourage the setting up of new, small business ventures because they recognise, as I do, that these will be the seed corn of our economic recovery and will, as they become established and expand, provide opportunities for future employment.
Many of the more successful companies in my constituency started some time ago, often as family concerns. They have expanded over the years to become major employers locally and successfully to export their goods all over the world. One such example is Berisfords, the ribbon manufacturer, based in Congleton, which this 1104 year is celebrating the 125th anniversary of its founding, and I am glad to say that there are still members of the original family running it today.
During the recess, I had the opportunity of visiting local business and industry of every size—small, medium and large. Some had been set up relatively recently as a direct result of the Government's incentives—for example, the loan guarantee scheme — and others, more firmly established, survived the depression by mammoth capital investment and modernisation, although sadly, but inevitably, with a cut in the size of the work force. I do not believe that on the whole people realise that we have been, and still are, living through an industrial revolution, the effects of which, unlike previous industrial changes, have been cushioned by unemployment benefit and the welfare state.
In the future, industry must be more competitive and make a realistic profit to help pay for those who are out of work or schemes which may help alleviate the problem, such as the youth training scheme, early or flexible retirement or even work sharing. These schemes and palliatives — admirable though they may be — are extremely costly, and we must look to industry and commerce to provide more jobs, especially in manufacturing, which I believe is the real wealth creator, and also in service industries so that jobs are available for young and old.
It would be foolhardy for anyone to suggest that we shall ever again see unemployment down to 598,000, which was the level that prevailed when the Conservatives lost office in 1974. For many reasons, which time does not permit me to describe today, unemployment is unlikely to fall below the 2 million mark.
However, so often, once these new small business ventures have become established and are in production, they enter the second and most difficult phase of their development which arises as a direct result of undercapitalisation. They are almost in a Catch 22 position, only just surviving and paying their suppliers but being unable to raise sufficient capital for further development and expansion or even the promotion of their goods to encourage sales which often proves to be a formidable expense. It is those expanded sales which are vital to bring down the cost of manufacture so that the goods they produce will be competitive in the market place.
The banks have not been as helpful as they might have been in a number of instances which have been brought to my attention. The merchant banks and the money market nearly always demand equity, which erodes the position of those who founded the company. I find it disturbing that the banks have not done more to invest in manufacturing in the United Kingdom rather than just pile up interest by moving money around to attract the best rates, or, alternatively, by investing overseas.
Similarly, the Government must create the right climate for business to expand. Interest rates and all the overhead costs which come under Government control either directly or indirectly—whether the Government admit it or not—are important here. All that industry asks is that it should meet fair competition and operate on equal terms with our overseas competitors. It asks for no favours.
As a result of the world depression, smaller businesses have had to cut to the bone but still find that they are beaten on overheads—for example, telephone and postal charges, rates and exorbitant energy costs.
1105 I had hoped that the Government in their wisdom would do more than tinker with the rating problem but, instead, they propose half measures which I consider will not be much help to business or commerce. I remind the House that commerce and industry pay the majority of the rate income raised locally, yet they still have no meaningful say in local government.
High rates amount to yet another tax on employment. Surely it is not beyond the wit of man to devise a fairer system. Possibly in the future, the funding of national services such as education, fire and police could be transferred from the local to the national purse, while leaving the decisions as to how those funds should be administered to a local committee, served—I hasten to add—by a modest, inexpensive secretariat, which would reflect local needs and differences.
As for energy, many companies in my constituency, especially those in the chemical and paper board industries, have been extremely hard hit by this cost. How can we compete with our European partners when, although they have few indigenous fuel supplies, they can supply their industries with cut-price energy? On the one hand the Government, say, "Compete", but on the other they are not providing the conditions under which fair competition is possible.
One subject raised with me time and time again by those who run small businesses is employment legislation. Until the conditions are created where a company can take on and, unfortunately when economically necessary, lay off men without running the risk of having to spare precious executive time in court justifying their decisions and having to meet heavy redundancy payments, there will inbe no overall answer to the high unemployment problem.
When the day dawns that a would-be employer can take on extra staff, and take a risk with them, it will augur well for future employment prospects. The Employment Protection Act legislates against employment and should be scrapped or substantially amended.
The Government have started on the right path with their measures to encourage enterprise and endeavour, but they must follow through with their principles to the bitter end, displaying a more pragmatic and, I firmly believe, a more patriotic approach to smaller businesses. They must tackle the problems which face smaller businesses much more vigorously, especially those in the manufacturing sector. This country cannot live on the service industries alone, as they in turn feed and prosper because of the bedrock of our manufacturing base. With the generation of new real wealth so produced, this country would be in a better position to lower taxation and to provide the better services in education and health care, among others, which both sides of the House wish to see.
The Government must not simply pay lip service; they must set both the climate and the example. If they think British and buy British, small businesses in particular and all of us in general will prosper.
§ Mr. Paddy Ashdown (Yeovil)
It gives me especial pleasure to congratulate and follow the hon. Member for Congleton (Mrs. Winterton) on a carefully delivered and competent speech.
§ Mr. Ashdown
I should not say entirely that, but she managed to introduce an element of independence which I am sure will mean that her future contributions will be heard in the same spirit as this was. It was a good speech, and having recently passed through the same hurdle I know how she must feel.
§ Mr. Ashdown
We on these Benches welcome the debate, although it is a pity that once again the Government have consigned this important subject to a Friday. The Minister drew attention to the fact that we debated the subject a year ago. Perhaps I should draw his attention to the fact that it was a private Member's motion and not taken in Government time. The last debate in Government time that we had on this subject, which is vital to the British economy, was two years ago and that again was on a Friday. We feel that the subject deserves to be seen as more important than that.
The House knows that the Liberal party has few Supply days, but we chose to devote a whole Supply day to this subject, so I believe that we are reasonably fireproof.
The Liberal commitment to small businesses considerably predates their present elevation to a fashionable political matter. We have been committed to the regeneration of the small business sector for a number of years. Perhaps the best example of that is our contribution during the Lib-Lab pact, when it was Liberal pressure which brought about the appointment of a Cabinet Minister with responsbsility for small businesses. While in no way wishing to demean or underwrite the Minister's abilities or dedication, it is a pity that that position to some extent has been downgraded. We believe that there remains a need for a Cabinet Minister to look after the interests of small businesses, not least because it appears to us that much of what is going on at present is ill coordinated. I should like to take a step back into the past. The Minister mentioned the importance of small businesses, but it is important to recognise how the position has changed. It is calculated that in 1900 the top 100 firms were responsible for only 15 per cent. of manufacturing output. They are now responsible for 50 per cent. of that output. Up to 1953, small firms produced more than 50 per cent. of manufacturing output. That was the crossover point. They now produce 22.6 per cent. of manufacturing output, compared with 68 per cent. in Japan. Those figures come from the CBI's survey on small firms in the economy. Even within the EC, this country has a significantly smaller small firms sector than any other country. Firms with one to 99 employees represent 17.3 per cent. of the labour market, which is half the figure in Denmark, the Netherlands and even Ireland.
In a balanced economy there should be an almost straight line graph of growth from the industrial seed bed through medium-sized firms to industrial giants. In Britain that graph is practically flat at the beginning, with a huge step up to the industrial giants, which stand in large measure inflexible and ailing as giant trees dominating the landscape. For that reason we often have to look to the importation of large firms from the outside into our deprived areas—we rely on what might be termed the descent of the archangel of Nissan—to provide jobs in these areas. Some people say that we are moving into the 1107 post-industrial society. In some cases the erosion of our small firms sector has thrust us back into the pre-industrial society.
We believe that there is a fundamental need to shift the industrial base of Britain and that the current position of world trade and our position within it are changing. There will be a need to change the fundamental base of the British economy. Just as the small firms, the innovators and the entrepreneurs brought that about in the industrial revolution in the 19th century, so that flexible element of our economy will bring about these changes. The Government have recognised that, too.
That leads me to the Government's record. We welcome many of the Government's initiatives, particularly because many followed Liberal suggestions. [Laughter.] Hon. Members may laugh but one has only to look back at Liberal party manifestos to see that it has come up with many of those ideas. I shall come to the Conservative manifesto.
Given the scale of the problem that I have outlined and the need to bring about change, we believe that what the Government have done is not enough and has not been done quickly enough. Too much of what the Government have done has been piecemeal and ill-co-ordinated. Conservative Members do not seem to be able to break out of the large firm mentality. As a result, many of their much-trumpeted 100 measures to help small businesses are inappropriate to the need of the small business sector.
I draw a direct contrast between what was said by the Under-Secretary of State and by the chairman of the National Federation of Self-Employed and Small Businesses, Dr. Bernard Juby. He said in a letter to the Prime Minister that was published in the latest edition of First Voice:Dear Prime Minister,I am compelled to write to you since there is a strong impression that government, in putting its faith in small businesses, is failing to recognise the overall character of the small business sector. … The vast bulk and nature of existing small businesses have been ignored and the 108 so-called measures of help have either gone over the heads of this sector or have been lost … broad brush legislation put together by the CBI, TUC and government with big business in mind, is positively damaging to small, small businesses.We could not have put it better ourselves.
The Association of Independent Businesses, in a recent brief produced for the debate, concludes with this statement:It is far too easy to conclude that, with over 100 measures since 1979, all is well with small businesses. This is far from the truth.The Under-Secretary gave the number of small businesses that have survived. We welcome that. Much of that survival has been due to the Government's initiatives. However, that is not the whole position, as one sees when one looks at the figures. In 1980, 1981 and 1982 there were 363,000 starts and 342,000 business deaths. The difference between those figures gives a 20,000 survival rate. That means that there is a 95 per cent. death rate and a 5 per cent. survival rate. I remind the House that each of those deaths is a personal tragedy. All too frequently small business men put their houses and much of their family finance into the business.
I was delighted to hear the Under-Secretary mention this. It is time to concentrate, not less on starts, because we want to create an environment in which we can 1108 continue to encourage new starts, but more on ensuring that the survival rate begins to rise. I remind the House that a receivers' report of the early 1970s estimated that no less than 67 per cent. of business failures were the result of management failings rather than insufficient capital.
§ Mr. Ashdown
I am afraid that I cannot tell the hon. Gentleman that. I believe that even the Department of Industry cannot tell him that. I asked the Department, as have my colleagues on previous occasions, for the figures on small business starts, but the Department does not keep them in that category. It keeps only starts and failures. Therefore, neither I nor the Government can supply those figures.
In the light of the incidence of management failure as a contribution to the failure of our small businesses, I welcome the Minister's comments about the need to continue with advice and the servicing of the small business sector. Those comments also put my mind somewhat at rest, but I hope that the Minister will give us further clarification when he replies to the debate.
An article in the Financial Times of 5 October 1983 reported the then Secretary of State as saying thatgovernment support for many industry advice and aid schemes now operating may not last too much longer.At a conference on industrial design at the National Exhibition Centre, near Birmingham, Mr. Parkinson said that he hoped the Government could 'eventually get out of the business' of industrial aid in this form.That is in stark contrast to what the Under-Secretary said. I tried to get a copy of the speech. I even spoke to the journalist who wrote the article. He told me that the then Secretary of State was speaking off the cuff. That may be so, but it gives us an idea of his underlying thinking, and perhaps even the Government's underlying thinking. The House and the small business sector are entitled to know the Government's intentions. I hope that the Minister's reply will make that clear.
We have always recognised that small businesses do not exist in a vacuum. They are part of the general economy. The Conservative manifesto of 1979 recognised that too, stating thatthe creation of new jobs depends to a great extent on the success of smaller businesses … our cuts in direct taxation, the simplification of VAT and our general economic policies are the key to their future.So they have been. The rundown of the economy and the lack of cuts in personal taxation have created the very circumstances in which so many small businesses have paid the price in bankruptcies. The sheer scale of the British decline is still insufficiently recognised. The Tories cannot be blamed for all of it, nor do I seek to blame them, but they can be blamed for the fact that the decline has accelerated enormously under their rule.
I have the figures for living standards in Britain. We are talking about disposable income to be used by small businesses. At $8,500 a year in Britain, the figure is lower than in the Netherlands, Iceland, Austria, Luxembourg, Belgium, Denmark and Finland, 50 per cent. less than in Norway and Sweden and 70 per cent. less than in the United States and Switzerland. Britain's economic growth, which is the lowest of the top 10 nations, has increased by only 18 per cent. since 1970. Our economic 1109 growth is two thirds less than that of Spain, half that of the Netherlands, half that of Italy and a third less than that of Australia and France.
Britain's growth in productivity—a matter to which the Government like to refer in supporting their programmes and to show their success—is half that of Italy, a third of West Germany's, a quarter of the Netherlands' and one fifth of Japan's. As so much damage has been done to our economic base, we fear that when recovery takes place Britain will be unable to take advantage of the recovery. Therefore, the reduction in Britain's share of world trade cannot but affect the climate for all industries, and small businesses, which are most vulnerable, are likely to suffer most. The Liberal party has called, and will continue to do so, for a measure of controlled expansion of the economy, without which any measures to help the small industry sector will be unsuccessful.
§ Mr. Nicholas Winterton (Macclesfield)
Does the hon. Gentleman agree that too much emphasis is being placed on the importance of service industries and that too many Treasury officials and Ministers seem to underestimate the continuing and future importance of our manufacturing industry, which creates the real wealth of this country?
§ Mr. Ashdown
I am grateful to the hon. Gentleman for that remark, and I agree entirely with him. The erosion of our manufacturing base gives me the greatest cause for concern.
I wish to review the Government's assistance schemes, as I take a slightly different view from that of the Under-Secretary of State for Trade and Industry. I believe that the small firms loan guarantee scheme has been a qualified success, and we recognise the Government's part in its institution. I agree with the hon. Member for Congleton, who spoke of the need to educate the clearing banks. I am unhappy with some of the ways in which they operate when dealing with the scheme. A wide variation occurs not just over how the scheme is applied between different banks, but between the same bank in different areas. I possess evidence to show that two branches of the same bank in the same town operated in a different way, and in some cases the banks have been inflexible in their application of the scheme.
I also have in my possession a letter written by a small business man in London, which gives a small but interesting history — a microcosm — of what he experienced. The letter refers to his experience of what took place and I wish to read it to the House. He said:My company applied initially for a small business loan in February of this year. It took quite a while to fill in the forms, work out the cash flow projections, compile the management accounts etc. All this done our bank said 'You do not need a loan, we can give you an overdraft to cover this.' But we did want a loan, we wished to expand, we needed capital, we had little security.So we went through the whole process again rewriting the cash flow projection in an attempt to justify a loan. When we went to the bank with our accountant he pointed out that our projection resulted in a £30,000 loss. So off we went again.By now its early September, third time lucky we thought. This time the bank said in view of our stock level they could take a debenture of £10,000 on our stock and we could have an overdraft. So again we did not need a loan. I do not know why we bother.I welcome the assurance of the Under-Secretary of State that he will conduct a review and an analysis of the current operation of the small firms loan guarantee scheme.
1110 I was concerned and disappointed that the Under-Secretary of State did not say that he would agree to the scheme continuing in principle at the end of the pilot period. We do not expect him at present, to confirm that the detailed scheme in its present form will continue. However, I think that a commitment from the Under-Secretary of State that a scheme of a similar nature will continue, based on the success of the present scheme, is important.
§ Mr. Trippier
It is not possible for me to make such a decison, as I am sure the hon. Gentleman realises that at the end of the day we are dealing with a Treasury scheme.
§ Mr. Ashdown
The Under-Secretary of State is speaking on behalf of the Government. He must be able to say whether they intend continuing the scheme. Surely he does not wish to take refuge behind the argument that it is a Treasury scheme.
§ Mr. Trippier
I do not think I gave any indication that the scheme would draw to a close. I very much support the scheme, as I understand the hon. Gentleman does.
§ Mr. Ashdown
I have asked the Under-Secretary of State to give a commitment that the Government believe that the present or a similar scheme will continue at the end of the pilot period. It seems that he is not prepared to do that.
We believe that the Under-Secretary of State should consider some changes in the scheme, especially the fact that there should be less stress on the additionality element and that the increase in the scheme's limit, which is currently £75,000, should be index-linked, and if adjusted to June 1984 levels it would be £90,000.
We are also worried about the business expansion scheme to which the Under-Secretary of State briefly referred. Contrary to what he said, we do not believe that that scheme is tailored to meet the needs of small firms, and I should be grateful if the hon. Gentleman would consider reviewing the director and associate rules and changes in the limitation of direct investment, and accept that revision may be needed to the Companies Act, which would deal with minority interests.
The Government must be congratulated on the enterprise allowance scheme, as it plays a useful part in assisting small businesses but I wish to bring to the attention of the House an anomaly in the scheme. When a person applies for assistance under the scheme, he must provide £1,000, although it may now come from any source and not just from his own funds. That is a significant relaxation, which we welcome. He is not allowed to include his stock or capital equipment against the £1,000. That means that many people who wish to start a business and who are working for another firm, who commence their business in their own time and have invested money in stock and equipment, are not allowed to count their stock or equipment against the initial £1,000 input. Will the Minister consider dealing with that anomaly?
I wish now to refer to some changes which could be made to existing structures before touching on some proposals for the future. First, I was delighted to hear the Under-Secretary mention the important role of the European Community. I am sure that he and other hon. Members are aware that the EC is introducing a European 1111 loan scheme capable of introducing about £60 million worth of interest-free loans to small businesses in the first few years of their lives. A principal intention of the scheme is to encourage innovation.
The economic and social committee of the European Community, when passing this matter to the Council of Ministers, recommended that the scheme should be implemented as quickly as possible. Will the Government support such a scheme and, if so, will they ensure that they resist the inevitable dead hand of the Treasury being placed in this vital and exciting EC initiative?
I agree with what the hon. Member for Congleton said about interest rates. We believe that they have remained at far too high a level, especially when measured in relative terms against the level of inflation.
A need exists for a reform in the tariff structure, especially in regard to computer components. I am sure hon. Members know that there is a 17 per cent. tariff on components that are assembled in the United Kingdom and also on the small parts that are imported for assembly into microcomputers. At the same time, there is only a 5 to 6 per cent. tariff on completed computers imported into Britain. That is a major disincentive to the British microcomputer manufacturing industry. The British small business computer market suffers from a 90 per cent. import penetration.
We believe that a recent NEDC draft report has recommended the equalisation of these unfair tariffs. Mr. Nigel Smith, the chairman of the British Micro-computer Manufacturing Group, in referring to this recommendation, called ita clear mandate to the Government to tackle Brussels on this unfair tariff system.Do the Government view the problem in that way?
We are also concerned that some aspects of current regional policy are killing established small industries. In my constituency, a highly successful shirt manufacturing business which is highly respected in the market place is being killed off because it cannot compete with Northern Ireland shirt manufacturers who have the benefit of subventions. We are worried that some aspects of regional policy encourage multinational grant hunters rather than small industry, with the result that small industries are being killed off in some areas.
The Inland Revenue is currently conducting a campaign to reclassify the self-employed and small businesses and has already taken 107,000 people into PAYE as a result. That seems entirely contrary to the rest of the Government's efforts and in our view is further evidence of the power of the Treasury over the Department of Trade and Industry.
The Under-Secretary referred to domestic rates, as did the hon. Member for Congleton. The Minister referred to the Government's efforts to reform domestic rates. He said, "The House is aware of the efforts we have made." What the House is aware of is that the Conservatives have made a commitment radically to reform domestic rates, and have then abandoned it on every occasion. The matter cannot be left much longer. The recent White Paper does nothing to help small businesses. It contains proposals to de-rate empty industrial property, but not empty commercial property, of which there is nine times as much.
1112 At the last election, the alliance programme proposed 10 per cent. relief for non-domestic rates. That is now a necessity. Some firms in London pay the equivalent of £1,000 per employee per year in rates. That cannot all be blamed on Ken Livingstone. There is something wrong with the rating system. Of the 25 million voters in Britain, only 16 million pay rates, so too many people do not feel the effect of their votes in the rate burden.
A recent issue of First Voice, the journal of the National Federation of Self Employed and Small Businesses, states:The Federation wishes to remind the Government that many promises have been made to help the small businessman, but the only one that has really been kept is the provision of hundreds more opportunities to borrow money which is promptly extracted out of business by local authorities and government.There is a clear need for rate reform. We believe that local income tax is also needed, but there is certainly a desperate need, in the interests of small businesses, to reform the non-domestic rate if no other.
We wish to propose a number of new initiatives. First, however, there must be a clear definition of what constitutes a small business. The current definitions, which are largely those in the Bolton report, must be updated. Without a clear definition, the effort and assistance directed towards small businesses will not reach the right people or will become so diffuse as to be virtually meaningless.
Assistance is now needed for the second stage development and survival of small businesses. Much is being done to help starts, so most of our proposed initiatives are directed towards the second stage.
There is a case for abolition of VAT between registered firms. I am told that some £750 million is wasted through passing money backwards and forwards between such firms. That could be dealt with at no cost to the Exchequer.
Action is urgently needed on discriminatory discounts. We should prefer a code of practice, but there is a useful model in the United States system whereby firms are liable to civil action if they give discounts which cannot be related to price savings. Many small firms, especially retail outlets in rural areas, are being killed off by the discriminatory discount system operated by some large firms.
The building societies should have a role in investment in small firms so that second mortgages can be used to provide investment funds. Again, there would be no cost to the Exchequer. This would involve little extra work for the building societies and there would be no legal problems. If the business then goes wrong, the burden on the person investing the money is only the burden of his mortgage repayments and not the loss of his house and his livelihood.
We welcome the Government's moves towards pension transferability. Such a development is vital to encourage bright people into self-employment. Too many bright people in large firms cannot leave because they are tied by their pension arrangements.
Corporation tax arrangements should be examined with a view to establishing a capital equipment reserve so that small businesses can call on their past seven years of profits for the re-equipment of their industrial enterprises.
Greater encouragement should be given to local government initiatives. As the Under-Secretary of State said, we look too much to central Government for handouts. The Isle of Wight has a scheme which uses the ICFC, subvented with a certain amount of the authority's 1113 own money, to offer small firms guaranteed loans at 4 or 5 per cent. below the prevailing rate. My own area of Yeovil is considering establishing a community development trust to help small businesses. Much of the Government's present policy, however, especially their rate-capping legislation, limits the capacity of local government to take such initiatives to assist small businesses locally.
With regard to large firms holding back on payment of bills and taking their 28-day discounts, I am told by the EC economic intelligence unit that the credit position for small businesses has worsened significantly during the recession. The European Year of Small and Independent Businesses conference in Edinburgh this month will discuss that problem. I hope that the Government will take account of its views. We believe that there is a case for establishing a code of practice on the payment of bills.
My hon. Friend the Member for Stockton, South (Mr. Wrigglesworth) has referred on previous occasions to the reform of insolvency law. That, too, has an important part to play.
I was delighted that the Under-Secretary of State referred to relief of the paperwork burden on small businesses. That is urgently needed in relation to the sick pay scheme as well as to VAT.
The transfer of training costs must also be re-examined. A small business man recently told me that the most important thing that the Government could do for him would be to help with his training costs. That would help employment more than anything else. Yet current moves seem to be in the opposite direction.
Equity risk capital should be provided through small firms investment companies. Such companies might also provide a channel for management expertise into the small business sector.
There should be an urban counter part to COSIRA. We should also encourage more co-operative and co-partnership schemes. I look forward to the Minister's comments in due course on the Co-operative Development Agency.
There is a case for tax incentives for managers of private companies to take up shares in the firms for which they work. Grants should be earmarked for research and development in small and medium-sized firms. Regional community enterprises, development trusts or agencies, including development authorities and the Land Bank, would be useful in developing new mechanisms for subventing and helping small industries.
Our proposals represent more than just a shopping list. Taken together, they form a comprehensive programme to achieve what no other party has been able to achieve although all pay lip-service to it—the regeneration of the small business sector in Britain. We believe that the successful reshaping of the British economy depends in large measure on the small business sector. However, that is not all. Small businesses can also lead the way to better industrial relations, greater efficiency, the spreading of wealth, higher employment and the creation of a job-owning, rather than just a property-owning, democracy which is so fundamental a part of the pluralist democracy to which we are committed.
§ Mr. Michael Grylls (Surrey, North-West)
I am happy to be the first Conservative Member to congratulate my hon. Friend the Member for Congleton (Mrs. Winterton) 1114 on her remarkable maiden speech. Those of us who know my hon. Friend the Member for Macclesfield (Mr. Winterton) are aware that fortune smiles on Cheshire. That fortune should smile twice on the same family in Cheshire is a double blessing which has been proved today by my hon. Friend's speech. Her presence here is good for the House and good for Cheshire.
My hon. Friend mentioned bear-baiting. She might be aware that there is a parliamentary equivalent— Front Bench baiting—and probably knows who has developed that pastime well. No doubt my hon. Friend the Member for Macclesfield will tutor her well in it. She made a fluent and knowledgeable speech which included good humour. That is an essential ingredient for the parliamentary pudding.
I warmly welcome the new Minister. This is the first debate of its type in which he has appeared in his present capacity. Everyone who knows him knows that he is driving hard for the cause of small businesses. That is necessary. There is a danger that, as many measures to improve the climate for small businesses were introduced in the previous Parliament, people will say that the momentum has slowed down. It would be unfair to say that and the importance of a debate such as this is to prove that the momentum remains strong and that the Government remain determined to find new means of improving the climate for small businesses. I was delighted to hear the Minister say that much more needs to be done. The hon. Member for Yeovil (Mr. Ashdown) outlined many things which need to be done. Many Conservative Members agree with some of the measures that he espouses.
Until 1979 the small firm sector had been in steep decline. Some would say that it had been in terminal decline as compared with the performance of that sector in our trading partners' countries. That decline is now being reversed and the figures which the Minister quoted today prove that. However, it is not enough to reverse the trend—we must encourage the small firms sector to grow rapidly. The figures remain stark. Japan has twice our population and five times as many small firms. West Germany has roughly the same population as Britain but has 40 per cent. more small firms. We must not be complacent. Small businesses want change but change that is aimed at what they need rather than what politicians, civil servants and the Inland Revenue want. We must be careful to tune in with the needs of small businesses. We must see through their eyes.
One of the major advances made by the previous Parliament was the loan guarantee scheme. Business men used to lobby us—I hope that not so many do now—saying that they had a viable project and had tried to advance it but that, because they did not have enough personal security, they had not been able to raise the money to develop that project. That was the reason for guaranteeing 80 per cent. of loans under the scheme. That was what small business needed.
The climate has been improved, we have been told, in 108 ways. They might be small but they are all nuts and bolts improvements. The present Parliament must convince more hon. Members, more people in Whitehall and more people in big firms that there is a desperate need for positive discrimination in favour of small businesses. If we do not discriminate in favour of them we shall in fact discriminate against them. Small firms are discriminated 1115 against in procurement and in getting a share of orders for Government, local government, nationalised and private industries.
I hope that my hon. Friend the Minister will convince his colleagues that we should discriminate in favour of small businesses and that procurement is probably the best tool. Most measures have been aimed at improving the supply side, but that is pointless if small businesses do not have demand.
Most other industrialised countries such as Japan, Germany, France and the United States have announced that they will discriminate in favour of small firms in procurement. The mechanism could be to give firms a second chance or to allow them to re-submit a tender, as in the case in France. The mechanism is unimportant. The Ministry of Defence has increased the number of firms on tender documents. That is a step forward. We should do much more, however, to ensure that small businesses get a fair share of the orders.
§ 11.7 am
§ Mr. Geoffrey Robinson (Coventry)
I understand that there are to be many more maiden speeches today. I wish those hon. Members every success. Unfortunately, I shall not be able to stay for the whole debate as I have constituency engagements.
I should like to congratulate the hon. Member for Congleton (Mrs. Winterton) on her maiden speech. The House will be interested to see whether she chooses the path of robust and at times fearless dissidence trodden by the hon. Member for Macclesfield (Mr. Winterton) rather than that of preferment to office. Her speech was full of humour and I hope that we shall hear from her often.
I declare my interest as a principal of a company which has taken up the loan guarantee scheme and a map C grant under the Department of Industry scheme. I am grateful, therefore, for what the Government have done. I am grateful to the Minister for sparing us a recital of the 147 measures which the Library has informed me that the Government have introduced. That is not what this debate is about, and although the hon. Member for Yeovil (Mr. Ashdown) was anxious to list his 108 measures, I shall concentrate on the essence of the debate.
The climate for small companies has not been changed by the introduction of those measures. They are helpful, and I and many of my former colleagues in industry have made use of them. Many young graduates who have left our engineering faculties, I hope, will be anxious to take them up, and I am sure that they will play a role in altering the imbalance of the industrial structure. Far too much of our industrial employment and output is concentrated in too few large firms.
However, only a change in the economic climate will resolve the problems of small companies. I can speak from the experience of having launched a successful microprocessor-based generator whose control technology is a world-leading product, but for which there is little demand in the United Kingdom. The reality is that, since the Government took office in 1979, bankruptcies have increased dramatically from 3,500 in 1979–80, to 4,500 in 1980–81, 5,200 in 1981–82 and to more than 6,000 in 1982–83. This year the rate is approaching 7,000. The number of liquidations is even more horrific, with 5,000 1116 in 1979–80, 8,000 in 1980–81 and 9,500 in 1981–82. Each successive year has set a new record, and in 1982–83 there were no fewer than 12,500 liquidations.
Many small companies must try to sell their products to large companies that are investing. I associate myself with the comment of the hon. Member for Yeovil that bankruptcies and liquidations are often personal tragedies caused by dramatic changes in Government economic policy. It is astonishing that between 1979 and 1983 manufacturing investment dropped by no less than 40 per cent. That is the climate in which small companies must establish themselves, and entrepreneurs are being asked to invest family fortunes, to take up guaranteed loan schemes, to take out second mortgages and to risk their entire future. Unless and until that is altered we shall achieve neither growth in the economy as a whole nor the restructuring of the industrial base and the growth in the number of small and medium-sized companies that we need.
The hon. Member for Surrey, North-West (Mr. Grylls) said that the Government should do much more about public procurement, especially in defence. It would be churlish for any hon. Member to say that the many schemes available are irrelevant, but far too much of the public procurement policy in the massive defence expenditure is concentrated on too few companies, all of which are large and most of which are part of larger conglomerates. The Government's priority should be a unit set up in the Ministry of Defence to seek means by which the Ministry's procurement officers can place contracts not with well-established and well-tried companies, which also consume so much of the Government's research and development expenditure, but with smaller companies.
I draw the House's attention to a CBI document entitled "Small Firms in the Economy Survey, 1983", which makes four valid points that put into perspective the role of the small and medium-sized company in the economy. On job creation, which is uppermost at least in the minds of Opposition Members, the CBI states categorically:Official statistics about the contribution of smaller firms to the creation of new jobs are almost non-existent.The report also states that statistical evidence is such that, however successful we are in creating new companies, they stand no chance of replacing the employment or the output lost from our traditional industries. We ignore the importance of the traditional industries at our peril, and we put in jeopardy the prospects of growth in smaller companies.
The CBI report also states:Statistical evidence, particularly in the UK, about the employment creation potential of small firms is obviously too sparse to enable definite conclusions to be drawn … no evidence has been produced so far to suggest that small firms in manufacturing industry will make a significant contribution to the reduction of unemployment.If we are worried, as are most hon. Members, about the intolerably high unemployment that exists not only in traditional industries, whose regions have known it for so long, but which has come to the heartland of industry—in my constitutency in Coventry and the west midlands as a whole, during the last four years, unemployment has increased by more than 200 per cent.—we are playing a cruel joke on those engaged in industry if we suggest that any range of measures such as those will in themselves make a significant contribution to increasing employment or output.
1117 I agree with the hon. Member for Yeovil that the present range of measures offered by the Government is directed towards new companies as opposed to existing small companies. The Minister will be aware of the Wilson committee's recommendation in that respect; far more output and employment could be generated if the measures were angled towards or simply made available to small companies which are already in existence but may be in trouble or wishing to expand.
That is the one criticism of the way in which the range of measures and help now available is lacking. Therefore, I strongly urge that the small firms' investment companies recommended by Wilson should be taken up by the Government. Those two things might make much more of an impact than the present range. Despite the fact that the Government dislike intervention in industry and despite everything they said when they were in opposition, I compliment them on introducing these measures and would ask them to look at those two other areas.
We are in the middle of a microelectronics revolution. We have seen a change in scale in terms both of cost and size that is unparalleled in the history of industrial development. In 20 years' time, perhaps we shall see a similar industrial revolution taking place at an unparalleled speed in the area of biotechnology. However, unless we have the large companies to use such technologies and unless the structural steel and process plant companies are still thriving and growing, and unless we have a machine tool, steel and motor car industry that can use the microprocessor and microelectronic-based inventions of today, the small companies and young entrepreneurs will not be able to survive and expand. Equally, without those main line industries, we would not have the companies to generate the output, net exports and employment on which we all depend.
Therefore, we should go ahead and extend the range of help available. That aid should be extended to the small existing companies, and at the same time new companies should be encouraged into existence.
In addition, let us realise that we must create a climate in which the importance of our traditional mainstay industries is recognised for the microelectronics revolution of today. I refer, for example, to heavy industry and medium-sized engineering industries. We must of course look to the future, and invest in the seed corn of our small companies. However, it is no use their going through the whole inventive process, taking up their loan guarantees and being successful in putting a new idea on the market which is based on one of the new technologies unless there is a market for their products.
Only one factor will make large or small companies invest. All Governments have tried capital allowances and investment grants. The Labour party prefers investment grants, while Conservative Members usually prefer capital allowances. However, the simple fact is that manufacturing investment is down 40 per cent. since 1979. I speak from direct experience when I say that the only thing that will make industrialists invest is demand and the prospect of being able to sell the end product. Whatever the range of help available for small industries and however beneficial it may be, we shall not achieve the rate of increase in the new small companies or the growth of existing industries required without investment.
I have been brief— [Interruption]. By comparison with the hon. Member for Yeovil, I should have thought that my brevity was self-evident. Nevertheless, I apologise 1118 to those hon. Members waiting to make their maiden speeches and to my hon. Friend the Member for Dagenham (Mr. Gould), who is to make his maiden speech today from the Dispatch Box. I am sorry that I will not hear them, because of my constituency engagements, but I wanted to say those few words, and I am grateful to the House for its attention.
§ Mr. Michael Lord (Suffolk, Central)
Thank you, Mr. Speaker, for giving me this opportunity to make my maiden speech in this debate on small businesses. I do so with a mixture of pride and humility. I am proud simply to be a Member of this House, and I am proud, too, of my constituency of Suffolk, Central. However, I am also acutely aware of the stature and achievements of my predecessors, of the enormous challenge which that presents, and of the responsibility that it places on my shoulders.
Suffolk, Central is an entirely new constituency, lying between Ipswich and Bury St. Edmunds. The A45 crosses it east to west towards its southern boundary, and the A140 runs northwards through the centre of the constituency, to the Norfolk-Suffolk border. It is made up from parts of three other constituencies: the old Eye constituency, which now no longer exists, and Bury St. Edmunds and Ipswich which, of course, still do. The largest central part of the constituency is derived from the old Eye division and contains, as well as the town of Eye, Stowmarket, Needham Market, Debenham and many other delightful market towns and villages. On the western boundary my constituency includes part of the old Bury St. Edmunds constituency, which has given to it places such as Woolpit, with its beautiful church which is a landmark in the area, Thurston and Elmswell.
The Ipswich constituency contributes approximately a quarter of the town to the new constituency, in the form of the wards of Broom Hill, Castle Hill, Whitehouse and Whitton. Ipswich is perhaps best known nationally for Ipswich Town, its famous football team. On the industrial front, it is served by Ipswich docks, and as well as large companies such as the Guardian Royal Exchange providing employment for my constituents there are many other companies with traditional links with the surrounding farming areas.
The hon. Members representing the three constituencies from which mine is made up are all still in the House. My hon. Friend the former Member for Eye in the last Parliament is now the hon. Member for Suffolk, Coastal (Mr. Gummer). He is regarded with great affection in my part of Suffolk, and has been extremely kind and helpful to me personally during the past few months. For that I am most grateful. My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) is well known to the House, and still serves that constituency with vigour and distinction, as he has done for a great many years. The hon. Member for Ipswich (Mr. Weetch) is also well known and well thought of by the House, and is spoken of with the highest regard wherever I go in that town.
A large part of the constituency of Suffolk, Central is beautiful open rolling farmland, criss-crossed by roads of all kinds, which are now being used in increasing numbers by the enormous lorries that convey an ever-increasing amount of traffic to the highly successful and expanding east coast ports. Sadly, that is putting intolerable pressures on, and bringing very real dangers to, many of the Suffolk 1119 towns and villages whose narrow high streets and twisting roads were simply never designed to cope with such traffic. I very much hope that those responsible for these matters are aware of how essential it is that some new and fresh thought should be given urgently to this issue before some of the villages, and the village way of life that they support, are destroyed for ever.
Suffolk, Central has large businesses such as ICI Paints, and Munton and Fison Maltsters — both in Stowmarket — and Took's bakery in Ipswich. But we also have a very large number of small businesses. Many of them are based on our small industrial estates, but without doubt the principal small business in central Suffolk is agriculture. The farming industry seems to be coming increasingly under public scrutiny on a variety of fronts, but I hope that we shall not lose sight of just how successful our farmers have been as small businesses. Throughout very many difficult years, their efficiency, productivity and excellent relationships with their work force have been one of the success stories of our time. We must never forget, either, how many other industries are dependent on the success of the farmers, such as the merchants, the chemical and fertiliser manufacturers and the agricultural engineers. Thousands of companies and many more thousands of employees are entirely dependent on the demand for their goods and services created by our successful farmers.
To continue the agricultural theme, small businesses are the seed corn from which larger businesses grow. They represent the best prospects for new jobs. If each of the many thousands of small businesses took on just one additional person, the effect on unemployment would be far more significant than the starting up of any number of large firms.
Small businesses grow from a smaller, often sounder, base. They have great commitment and, perhaps more importantly, a closer and happier relationship between employer and employee than is found in many larger companies. That is crucial. Many of our nation's problems during the past 40 years have stemmed from the chasm that has developed between employer and employee in the huge, impersonal, monolithic companies that arose during that time. Into that chasm, almost inevitably, came doubt and distrust—followed just as inevitably by irrational disputes, disruption and, ultimately, inefficiency and decay.
Napoleon called us a nation of shopkeepers, which he no doubt meant as an insult. I do not see it in that way. Shops and small businesses of every kind are usually run by people of independent mind and spirit, prepared to take risks, work hard and rely on themselves and their judgment. If, as Napoleon suggested, this nation has such people in abundance, how fortunate we are.
It is most important at this time to ensure that those energies and abilities are set free to develop small businesses, which they will undoubtedly do if unhampered by too many rules and regulations. Much has already been done to help in that area, as hon. Members have mentioned this morning. Financial assistance is available to those who wish to start their own companies; VAT registration levels have been altered and advice is available from all quarters in all sorts of different ways. I fear, however, that there is still too much red tape. Every effort must be made 1120 urgently to reduce that to a minimum. When I speak to small business men their plea is usually not for more help from the state, but for less hindrance.
Until recently I ran a small business, which I started myself. My qualifications and experience are in agriculture, forestry and tree care. I humbly venture to suggest that I am the only arboricultural expert in the House. It follows that I have a deep interest both in food production and in the environment in which we live.
I hope that the House will permit me briefly to make two separate and special pleas, linked very much to the businesses, both large and small, that I have been talking about. For Europe to be complaining about mountains of surplus grain, and for farmers in the United States to be paid to leave millions of fertile acres empty while a huge proportion of the world's population is starving, is a quite unpardonable state of affairs. Why should we inhibit successful food production when there is a desperate need for that food? Surely it is not beyond the wit of man to solve the problems, mostly political, that prevent those most in need of food from benefiting from the advances we have made in modern fanning techniques.
I am deeply concerned that our generation, with the industrial processes and waste products that we have created, has it in its power, as never before, either to preserve and enhance our environment for future generations or, possibly, to ruin it beyond repair. I hope that we have the will and the strength to take the former course—not only to preserve what we have, but to use our modern technological advances with care and imagination. Wherever possible, we must use them to improve the world in which we live, and not use them to despoil it.
Both of these are issues in which I shall, in the fullness of time, seek to play a part, in the hope that my generation will be thanked and not cursed by those to come.
§ Sir Anthony Grant (Cambridgeshire, South-West)
It is with genuine pleasure that I congratulate my hon. Friend the Member for Suffolk, Central (Mr. Lord) on a most distinguished and excellent speech. He represents a beautiful constituency in East Anglia, almost as beautiful as south-west Cambridgeshire. I am sure that his constituents will recognise that they have a new Member of Parliament who will render them and the House outstanding service.
My hon. Friend spoke humbly and from personal experience, which is always appreciated by the House. Apart from being an arboricultural consultant, he is also a distinguished rugby player—for Cambridge university, of course. He said that he was proud to be a Member of this House. If his speech is a foretaste of things to come, this House and his constituents will be proud of him.
I am glad to welcome my hon. Friend the Under-Secretary of State for Trade and Industry to his new post at the Dispatch Box. He will remember that a decade ago I was virtually the first Minister with responsibility for small firms. Having been unceremoniously ejected from office by an ungrateful electorate in 1974, I took on other responsibilities that entailed responsibility for parliamentary candidates. There is no doubt that one of the outstanding candidates at that time was my hon. Friend. I forecast that he would have a distinguished ministerial career, and I believe that to be the case now. I wish him every success in his new role.
1121 My hon. Friend may not realise it, but when I held his responsibility for small firms they were not as fashionable as they are today. I was very much a pioneer crying in the wilderness. It was the era following the Minister of Technology, and Mr. Benn, when everything that was bigger was inevitably better. As you will know, Mr. Speaker—with total impartiality, as no one did more for the cause of small firms than you—it was difficult to arouse interest in small firms, either in Government or in other circles. The Confederation of British Industry used to pat small business men on the head, as did senior Treasury Ministers, and say, "Well done young man, good luck." They would not take small firms seriously.
There has been a change of climate. My hon. Friend has more clout in both industry and Government circles. There has been a complete change of view in our society. Small firms have always been important, but they are now fashionable also. But my hon. Friend will still have to battle hard within the Treasury and other Departments. I know that he is big enough and capable enough to do that.
I set up the first small firms information centres, and I am glad to hear that that service of Government is proceeding well. I always stressed that they were for information purposes only, to help small firms obtain information that they could not otherwise obtain. They were never intended, and should not be intended, for civil servants to tell small business men how to run their businesses. Civil servants do not know how to run businesses and are not in a position to give such advice. They are there to provide a valuable service to help the small business man through the maze and labyrinth of Government forms, legislation and regulations.
I am pleased that the Departments of Trade and Industry have been merged. That is of great help not only to small firms but to industry as a whole. When I was in office, the DTIs as they were called embraced energy, consumers and heaven knows what. That Department was too large and cumbersome. We got the balance right when energy was hived off to a separate Department. Unfortunately, the Department was fragmented in to separate Departments. A return to one Department will be of value to industry, trade and commerce.
When I was transformed by the Boundary Commission into the Member of Parliament for Cambridgeshire, South-West, I discovered that that constituency not only has the finest agriculture in the nation—if not in the world—but contains a surprising number of very small, independent firms working without subsidy or aid—and without whining or yelling for help—on advanced, dynamic, technological processes, as one would expect, since it is so close to one of our greatest universities.
During the general election campaign when unemployment was a tremendously important issue I was constantly struck by the number of small firms I visited which said that they were crying out for people to work for them. As my hon. Friend the Member for Suffolk, Central pointed out, if every small firm took on one more person, the unemployment problem would be solved overnight. At one small firm I visited, I found the managing director working away at the bench. I said, "How are things going?" He said, "I am fed up." When I asked what the matter was he said, "I am fed up wasting money on advertisements and not getting staff." I said, "Dash it. There are millions of unemployed. It is a big issue now.
1122 Why can you not get them?" He said, "With all respect, I do not want labourers from Liverpool; I want people who are trained or are prepared to be trained."
One of the difficulties is the lack of skilled or semiskilled labour. I hope, therefore, that my hon. Friend will give full backing in every way he can to the Departments that are responsible for encouraging and improving training, particularly of young people.
§ Mr. Edward Leigh (Gainsborough and Horncastle)
Does my hon. Friend accept that the activities of the wages councils often restrict opportunities for young people and that perhaps those activities should be restricted to people over the age of 21, so that young people are not priced out of the market?
§ Sir Anthony Grant
I agree with my hon. Friend.
We sometimes underestimate what is called the black economy. The Treasury thinks that is running at 12 per cent. Some people think the figure is higher. There is nothing wrong with young people in this country—they work as hard as anyone else—but many of them, the young entrepreneurs, are keen to work only outside the system, for cash only, and will not get involved in forming small firms, with all the burdens and complications involved. That is damaging to society and I believe that it is the task of Government and of my hon. Friend to make the climate such that, far from young entrepreneurs and some of the keenest people in our society rushing around outside the system and working for cash only, they would wish to be involved in the system in the whole.
There are still far too many impediments to people starting up in business. Forms—what I call the burden of bumf—have already been mentioned. A great deal has been done in this respect, but for a keen, active young person who runs a business, who is trying to manufacture and sell his product, there are still far too many regulations and too much legislation and form filling to be done. That must be reduced and I rely on my hon. Friend to go like a scythe through other Departments and make a bonfire of all these wretched forms.
The hon. Member for Yeovil (Mr. Ashdown) mentioned an important point about which I was concerned a decade ago— what I call the credit game. Far too many large firms play the skilful game of pushing their subcontractors and small firms to the absolute limit. It is a disgrace that they should do that. Armed with computers and staff they run subcontractors and small firms right up to court proceedings. They terrify them. At times of high interest rates it is an appalling burden for small firms. I have looked into this matter and I have discovered that it is not possible to pass a law requiring companies to pay their debts, but what we can do, and what I hope my hon. Friend will do, is to be robust with these large firms, particularly if they have the benefit of Government money or Government contracts. We should say to them that they will not receive any more largesse if they do not pay their subcontractors speedily and on time and meet the small firm's credit requirement. I hope my hon. Friend will do that.
Rates are another impediment to small firms. The burden of rates in many areas, especially in London, affects small firms. Rates discourage them and they will move away from areas where rates are outrageously high because of the loony policies of certain authorities. Therefore, I wholeheartedly support everything that the 1123 Government and the Department of the Environment are doing to try to bring common sense to this issue. However, in the process they must be careful not to hit those people who have been trying to follow Government policy and be prudent and thrifty.
I know that Cambridgeshire and many other counties which have been prudent in earlier years, in 1978 and 1979, are now being penalised by Government policy under the rate support grant. As a result, there have been many complaints, particularly from small firms, both in my constituency and in many other parts of the country. I hope that my hon. Friend will put our case strongly from a small business point of view to the Department of the Environment and fight this one out. I give him notice that there will be a battle over this, certainly from Cambridgeshire.
My hon. Friend has an exciting role—one of the most important roles in government. While there have been many useful schemes—the loan guarantee scheme has been a successful initiative — I beg him not to mollycoddle small firms. Many small firms will go to the wall—that is tough and painful—but in the same way that those who live by the sword die by the sword, those who live by risk must die by risk. In a healthy economic environment, firms will inevitably go to the wall and other firms will spring up. They do not benefit from mollycoddling or wet-nursing. If my hon. Friend tailors his philosophy to making the whole of Britain an enterprise zone, small firms will flourish without being nambypambied and will make the outstanding contribution to the future of our nation and our economy that we all desire.
§ Mr. Henry Bellingham (Norfolk, North-West)
I thank you, Mr. Deputy Speaker, for calling me to speak in this important debate on small businesses. I should like to congratulate my two new colleagues, my hon. Friends the Members for Congleton (Mrs. Winterton) and for Suffolk, Central (Mr. Lord), on their excellent maiden speeches, which it will be difficult to follow.
It is a great honour to make a speech as a Member of Parliament, but it is doubly gratifying to speak as the representative of one of the great historic constituencies of this country. Many hon. Members of greater experience will recall the trepidation of a maiden speech, but in my case it is magnified because I am not the first Bellingham to make a mark in this House. Indeed, one John Bellingham made an appalling impact in this House not 30 yards from where I stand. In 1812 he became the first man in history to assassinate a British Prime Minister. It is fair to say that my name is somewhat tarnished at least in respectable circles and one of my aims in the near future will be to remove some of that blemish.
Perhaps the best way to achieve that aim is to emulate some of my illustrious predecessors in my constituency. King's Lynn, as the constituency was previously called, has always set its Members exacting standards and there has always been a great tradition of the local representative serving everyone in the constituency. Our country's first Prime Minister, Sir Robert Walpole, was Member for King's Lynn from 1701 to 1716. For many generations his family dominated the local political scene. The subsequent list of Members of Parliament is long and distinguished.
1124 More recently men such as Lord Fermoy, Commander Scott-Miller, Fred Wise and Derek Page have all followed in this tradition. Indeed, Derek Page continues to serve his country in another place and will be well known to Opposition Members.
Special tribute is due to my immediate predecessor, Christopher Brocklebank-Fowler, who served as Member of Parliament for the constituency from 1970 until last June. If anyone followed the Walpole family motto "Say what you think", surely it was he. Numerous Conservative Members and, no doubt, many of my party workers harbour animosity against Christopher Brocklebank-Fowler for crossing the Floor of the House. If he had not defected to the alliance, I should not be here today. He always worked hard for the people of his constituency and for 13 years he served their interests with commitment and determination, and his large personal following was a major factor in our general election contest.
King's Lynn is the undisputed centre of the constituency and many hon. Members will be aware of its historic architecture, based on what was once the third port in the country. King's Lynn still has a thriving port and trade with Scandinavia, Germany and the Low Countries is buoyant. In the last 20 years King's Lynn has been transformed from a sleepy market and provincial town into an impressive light industrial centre. Partly that has been due to an overspill agreement with London, but partly to the entrepreneurial drive and innovation of local small business men, many of whom have set up small businesses which now trade throughout the world.
Norfolk is probably best known in agricultural circles. Indeed, it was the very cradle of the agricultural revolution. Many of the great pioneers of modern agriculture came from north-west Norfolk; the Cokes of Holkham and the Townshends of Raynham were to agriculture what George Stephenson was to steam power and what my hon. Friend the Member for Luton, South (Mr. Bright) is to video nasties — great reforming zealots. Their high standards are maintained to this day and Norfolk farmers are admired throughout the land.
If one heads north-west from King's Lynn one enters the famous marshland area which has a unique charm all its own. Reclaimed by Dutch engineers in the 17th and 18th centuries, it is now one of the most intensive and fertile farming areas in Britain. Its inhabitants are fiercely independent and many of them are successful horticulturists, fruit farmers and small intensive arable farmers. That end of the constituency reaches into the suburbs of Wisbech, the well-known capital of the Fens and the famous capital of the land of Pedigree Chum. I regret that my neighbour, the hon. Member for Cambridgeshire, North-East (Mr. Freud), is not in this place. I am fortunate to represent this famous constituency and I feel even more privileged in that it is my home constituency because few hon. Members are fortunate enough to represent their home constituencies.
Perhaps I am running the risk of mentioning only the good things about my constituency. Relative to other parts of the country we have not suffered the worst ravages of the recession. Nevertheless, the last eight years have seen many of our larger firms embark on a process of rationalisation which has resulted in the shedding of a great deal of labour. Indeed, two large firms fell victim to the recession and had to close.
Unemployment, particularly youth unemployment, has risen to intolerable levels, and it is only now that there is 1125 real hope on the horizon. Our road network, and particularly our road communications with London, the north and the midlands still cry out for improvement. Recently the Al7 received a major new bypass, but we still have a long way to go. Our fisher fleet, based on the well-known Wash shell fisheries, is in desperate need of modern facilities.
Those are a few of the matters which I shall be raising in the House in the months and years ahead. We face daunting problems, but the people of north-west Norfolk, as well as being independent and imaginative, realise that their plight is nothing unique as the nation faces one of the most difficult times in its history. Our business men, industrialists, local government officers, trade unionists, farmers and fishermen are facing great challenges. I am looking forward to working with them and for them.
One reason for my enthusiasm is my sure knowledge that things are improving. Despite what the hon. Members for Yeovil (Mr. Ashdown) and for Coventry, North-West (Mr. Robinson) said, the prospects are now better than they have been for many years and the Government's economic policy has laid a sound and secure foundation for a resurgence in employment and prosperity in my constituency.
The cornerstone of Government economic policy, as the Under-Secretary said, is the continued reduction of inflation and interest rates, and what happens on those two fronts is of paramount importance to the small business men in my constituency. During the election campaign, many local small business men kept telling me that what they feared most was a rise in either inflation or interest rates, and in that context the national picture is now very encouraging indeed.
In addition, during the last four years the Government have done a great deal on the supply side of the economy to improve the conditions and climate in which existing small businesses operate and in which new small businesses can have a chance to start up. Above all, during the last four years we have had a small business policy, and north-west Norfolk has benefited a great deal from that policy. I go so far as to say that small businesses are the key to our future locally.
Time and again I have told people that we cannot expect subsidiaries of multinationals to locate in King's Lynn when they can go to, say, Corby or Humberside and enjoy all the privileges of an enterprise zone regime. That is why we depend totally on new small business starting up and existing ones expanding, and that is why I have such a vested interest in the Government's small business policy. I recall the Minister of State, Ministry of Agriculture, Fisheries and Food saying at the Brighton conference a year ago:The nation will not benefit from these schemes unless the customer, the small business firm itself, knows about them and is prepared to take advantage of them.That point was succinctly put by the Minister in opening the debate today. Time and again in recent years people have said to me, "If only we had known about this scheme. We knew about it too late." That is why, despite the business opportunities programme which was launched successfully two years ago and despite the department's excellent booklet, "How to Make Your Business Grow", the Government have a long way to go in disseminating information to the public about what is on offer.
It is not all in the Government's court, because the small business man has a major part to play in 1126 disseminating the information, and that is why I welcome the growth and development of the local enterprise agency concept. The concept is simple because it is really only the pooling of resources and talent in a community and making them available to small business men.
When business men in my constituency come to me complaining and whingeing about the Government — they are not doing that so much now, with good reason — I reply, "Cannot we start a local enterprise agency here? That would be one way in which you could play a constructive role in tackling unemployment and helping small businesses." For that reason I am convinced that local enterprise agencies have a great future, and I welcome the firm support which has been given to them by the Under-Secretary.
The Minister and the hon. Member for Yeovil referred to the small firms service. I am a great critic of Government regional policy. If money can be saved by a major restructuring of that policy, then money spent extending the small firms service will be money well spent, because at present it is too thinly spread throughout the country. Small business men in my constituency who wish to make use of the service may have a free phone, but they must otherwise go all the way to Cambridge. I therefore urge the Minister to do all he can to extend the service.
The Minister should also give his attention to Government contracts. We talk a great deal about value for money and cost effectiveness, and this is an area where the taxpayer need not be put to extra expense. Central Government Departments are responsible for generating a huge amount of business in the economy, but for too long smaller firms have not had a proper look-in. In 1971 the Bolton report highlighted this point and showed how countries such as Japan and America possessed advanced procurement programmes geared to the small firms sector. Alas, since 1971 progress in this sphere has been far from encouraging. The trend was reversed somewhat earlier this year when the Minister of State, Ministry of Agriculture, Fisheries and Food announced that he would facilitate the access of small firms to Government contracts and simplify the tendering and approval procedures, and recently the Minister of Defence decided that all the order documents shall include an entry showing the number of employees in the firm carrying out the order.
It will now be possible actively to study the proportion of defence work that is being done by small and medium-sized firms. This represents a great improvement and I am glad that the Minister of Defence has produced an excellent document entitled "Selling to the MOD". It is a pity that the hon. Member for Coventry, North-West (Mr. Robinson) is not in his place to hear about the document, which goes into much detail on the exact procedure that small firms should adopt when tendering. It lists a number of points of contact with the Ministry of Defence and gives many useful hints. As my right hon. Friend the Secretary of State for Defence observes in the forward to the booklet:at the end of the day, it is still up to the individual firm to win our custom by establishing that it can provide what the armed forces need on time and at the right price. But we on our part must do all we can to explain to firms what our requirements are and how we expect them to be met and especially to small firms, who may not know how to get into the system to find out.I am pleased to pass a copy of the booklet to my hon. Friend the Minister, who is probably an author of it.
We are not asking for statutory positive discrimination in favour of small firms. I am certainly not advocating a 1127 statutory set aside. However, many other Departments could show the same originality and imagination as the Ministry of Defence in its dealings with small firms. I urge my hon. Friend the Minister to push this point home.
The revamped British Technology Group must be far more imaginative in backing small companies that are in the centre of the current technological revolution. I hope that the BTG will be working hard to promote an increase in the share of state research and development contracts awarded to the small firms sector.
The past four years have seen a staggering growth in the Government's awareness of the importance of the small firm sector. Ministers are rightly proud of the 100 or so specific measures that they have introduced since 1979. All Conservative Members made great play of these measure during the election campaign and great credit is due to my hon. Friends the Members for Hampshire, North-West (Mr. Mitchell) and for Norfolk, South (Mr. MacGregor), who are now the Under-Secretary of State for Transport and the Minister of State, Ministry of Agriculture, Fisheries and Food respectively.
By far the most significant achievement is much less tangible. During the past four years my hon. Friends have encouraged the idea of entrepreneurship and have placed self-employment and small businesses on an entirely different plane of respectability. There has been a radical transformation in Britain's perception of the small business sector. Great things are expected of my hon. Friend the Under-Secretary of State and he will have the support of the Conservative Back Bench committee. I am certain that he will enjoy great personal success.
§ 12.5 pm
§ Mr. Ian Mikardo (Bow and Poplar)
We have had a hat trick of maiden speeches, all of which have gained a welcome and the commendation of the House. I want especially to extend my congratulations to the hon. Member for Norfolk, North-West (Mr. Bellingham) on his maiden speech. The hon. Gentleman held the attention of the House throughout his speech in a way that not all maiden speakers achieve. He gave us an absorbing account of the history of his constituency and a splendid description of many of its local features. However, he omitted one feature. It is a little while since I drove around the area, but if I recall right it has some of the nicest pubs in the country. I hope that the hon. Gentleman's omission to refer to that feature in his catalogue was due to a lapse of memory and not to any failure to get his priorities right.
While I am in a characteristically expansive and congratulatory mood, I wish to tell the Minister how much I enjoyed and welcomed his speech. The hon. Gentleman told us a great deal about what the Government are doing and all the further actions that they are thinking of taking in the small business sector. I gained the impression that he was treating small businesses with a certain amount of dedication, that he was absorbed in his work and that he was not treating it merely as a job. If I am right in that estimation, I am sure that we shall all be glad of it and wish him well and every success in furthering the interests of the small business sector.
I am glad that the Minister mentioned the local enterprise agencies, advisory services and resource organisations that are being established. Their contribution in the areas that they serve is much greater than that of the 1128 small firms sector of the Department. This is because they are handy and people know that they are there. They know where they are and they can walk into the joints. They do not have to go through telephone exchanges to reach them.
I have been the chairman of the Tower Hamlets Centre for Small Business since its formation three years ago. It was one of the first centres to be established and it is one of the liveliest and most successful. About 50 small firms come to the centre for advice every month. The number of firms seeking that advice has trebled in the past two years. These local organisations are handy for those who need them. Chaps can pop in and out as often as they like and they can meet their advisers in a friendly atmosphere. I do not altogether agree with the argument of the hon. Member for Cambridgeshire, South-West (Sir A. Grant) that small business men should not be told how to run their business. My experience is that they often ask how they should run them.
For example, in my area a chap might start a business making reproduction furniture. He is probably a splendid craftsman in wood. Some of the work that these chaps turn out is brilliant. However, the man who starts his own business probably knows nothing about cost accounting or estimating. He certainly will not know anything about how to sell his furniture on the continent of Europe, including the completion of export forms. He will certainly want advice on how to go about his business. Most of all, he will need telling what "cash flow" means and how to manage it.
The Minister listed a range of wider activities that local voluntary organisations could adopt. I hope that he will carry out his promise to try to get more and more of these activities adopted. I suggest that he should add one to his list, which is one we are exploring in Tower Hamlets. I refer to the possibility — obviously this will be within limits — of applying to small businesses some of the higher grade technology which small business men think they cannot afford and which they think is available only to large businesses. This technology can sometimes be made available to them by means of a pooling system involving a number of firms.
In Tower Hamlets we have carried out a feasibility study into the application of high technology to small-scale garment manufacturers. These people cannot afford laser beam cutters, but there is no reason why one should not be available to them for use by the hour. There could be a common cutter for a number of firms. Another example is grading. Grading is now done by computer, but a small firm cannot adopt that practice. However, there is no reason why there cannot be a computer-organised grader in a central place which a number of firms can use on a part-time basis. All that is required is the organisation to set up such a system and to make its availability known. If the Minister wishes to see what is being done in Tower Hamlets, he will be welcome to do so. We shall see whether we can apply high technology in the furniture industry as we have in the garment industry.
We have heard a good deal of mythology about small businesses. Most of it is put around by big business men, politicians and journalists who have never been inside a small, and sometimes any business. One myth which is believed by everyone, except those who are in daily contact with small business, is that high rates are the main worry of small businesses. Although no one likes to pay rates, that factor does not loom largely in small business men's minds. The Under-Secretary mentioned this in a 1129 throwaway line—yesterday we called this a "laid back" manner — and showed that he did not attach any importance to it. He was just chucking out a little bone for his supporters to growl over.
Rates represent 3 per cent. of the weighting in the retail prices index — a much smaller percentage than many other factors that are not mentioned. They are much lower than many on-costs, such as rent and transport, energy, post and telephones whose high levels stem directly from Government policy. Each of these has its costs fixed by the Government and not by the public corporations that run them.
Rates are much lower than taxation, which is fixed by the Government. Hon. Members should look the facts in the face. In business, rates represent 0.5 per cent. of gross output, 1.5 per cent. of gross added value—the key figure—and 3 per cent. of wages and salaries. I have seen at first hand many small firms used as stalking horses by large firms through the actions of the Confederation of British Industry and the chambers of commerce whose professional propagandists and lobbyists are appointed by large firms to look after their existence. They make a song and dance about the burden of rates on small firms. The trouble with rates is that they are the only unavoidable tax; the others have been put at the mercy of the tax avoidance industry, which is the fastest growing in the country. The biggest companies pay no corporation tax. They hire able and expensive people to organise their accounts. I remember that when I became involved in British industry more than half a century ago, the chief planning engineer had the highest status, the biggest salary and was most esteemed. He knew how to lay out a production line to achieve the best production. The position is no longer the same. The person with the highest status, the largest salary and who is esteemed most is the one who knows how to lay out company accounts to attract the least tax. He cannot do the same with rates. That is why large companies are obsessed with rates and use small companies to bell-wether for them.
A survey of firms that had moved from London over five years was carried out. They were asked why they had moved. They gave 23 reasons for moving—this is not surprising, because firms differ, just as individuals differ. Four per cent. of them said that they moved because rates in London were too high or rates were lower in another area—one firm in 25 moved because of rates and 24 out of 25 moved for other reasons. Hon. Members have mentioned some of the factors that are worrying small businesses more than others. One is the inadequate access to capital. The Under-Secretary correctly said that in recent years there had been some improvement. What was once called the Macmillan gap is still wide. One of the reasons why the development of business, especially small business, in Britain is not as good as in Europe is to be found in the different banking practices in their dealings with small scale industry in particular.
It is still to some extent true that a small business man who wants to set up or expand a business and who wants some capital can get it only through copper-bottomed guarantees. British banks look at the previous three years' accounts or the guarantee of public funds. I do not believe that any banker can win a medal or claim that he is more entrepreneurial because he is lending more money when he is demanding that four-fifths of his risks be guaranteed. I am glad that we have the scheme, and I agree with all 1130 that the Under-Secretary said, but it is not an occasion for the bankers to pin medals on their chests. They only lend money.
The difference between British joint stock banks and those in France, Germany, Holland, Switzerland and other countries is that the foreign banks lend money on considerations other than the previous three years' accounts or a public guarantee. The foreign banks will lend money after an assessment of a man's production and his prospects and a management audit rather than an accountancy audit. When those banks have lent money, they provide the borrower with some help and guidance.
The hon. Member for Congleton (Mrs. Winterton)— one hesitates to criticise a maiden speaker; she said many things with which we agree and which we enjoyed—said something with which I profoundly disagreed. I am sorry that she is not here, but I hope that she will read what I say in Hansard. She said that it was wrong for banks to lend money and then to insist on taking equity in the company. The best thing that can happen to a small business man is for one of the powerful banks to take a 20 per cent. equity. It then keeps an eye on the business to protect its equity to ensure that it will not lose its money. The bank will then stop the chap from engaging in activities which are likely to run him out of cash and will give him some help when he seems to be in difficulty over export controls and the like. That is what banks do in other countries, but do not do here.
Years ago, when I was Chairman of one of the Select Committees and we were studying the Bank of England, we went to see some of the other national banks to compare them. I had a pleasant talk with the president of the Bundesbank of West Germany. He said, "The trouble with Great Britain, Mr. Mikardo, is that we have banks and you have money lenders." That is too near the truth to be comfortable.
I must pay tribute to the Co-operative bank, which is the one bank which is willing to lend money to small enterprises without imposing conditions which are too difficult for them to fulfil. The bank will lend pound for pound without conditions to any newly set up producer co-operative—as much capital as the members of the cooperative put in. I was glad to hear the Minister say that he hopes to continue with the CDA. I believe that producer co-operatives have a great future with small businesses. Producer co-operatives are developing rapidly and their growth is significant.
I have been trying for years to persuade groups of three or four dockers who take early retirement and receive redundancy pay to get together and pool half their redundancy pay—they could pile up a few thousand quid that way— obtain a loan from the Co-operative bank equal to the same few thousand quid and start in a co-operative business of their own. There is great potential for such development.
I hope that what the Minister said about the CDA shows that he will be willing to study the small producer cooperative to see what help he can give. That is the first of the three major problems which affect the small business sector.
The second is the cost of capital. Interest rates, which have been mentioned by a number of hon. Members, bear hard on start-up businesses. It is a funny thing that we will lend substantial amounts of money to Governments and quasi-governmental agencies overseas and allow them a 1131 moratorium on the payment of interest for a time, but that there is no formula by which such a benefit can be applied to any internal operator. I have never seen the logic of that.
The third point is that made strongly by the hon. Member for Yeovil (Mr. Ashdown) and my hon. Friend the Member for Coventry, North-West (Mr. Robinson), that in the end what matters is the buoyancy of the economy and the level of demand. As long as we have monetarism ruling and the running down rather than the building up of economic activity as not merely the consequence but the objective of Government action, no new businesses will start and hold the ring. That is why we have a casualty rate among small businesses of more than 90 per cent., as spelt out by the hon. Member for Yeovil. He said that 20,000 out of about 300,000 survive per annum.
§ Mr. Trippier
I should like to correct the impression given by the hon. Member for Yeovil (Mr. Ashdown). He said that 363,000 births against 342,000 deaths between 1980 and 1982 was a 95 per cent. death rate. That is nonsense. If there are 342,000 deaths over three years, that is 120,000 per year. There are about 1.5 million small businesses, so the death rate is about 8 per cent. per annum.
§ Mr. Mikardo
I was quoting the hon. Member for Yeovil. I shall go away and do my own research and I shall be able to sit in impartial and authoritative judgment between the Minister and the hon. Member for Yeovil. I shall discover who is right. I could well find that they are both wrong and that the answer is somewhere in the middle. However, even if the Minister is correct, 8 per cent. is a tremendous death rate. Within my area the rate is higher. It is due to the fall in demand. Figures have been quoted all over the place, but one of the reasons for the bigger small business sector in Germany and Japan is not that more start, but that more survive. I am glad to see that I have the Minister's assent. The rate of survival and not the figures is the key question.
We must stop businesses bleeding away, and the only way to do that is by a surge in demand. The hon. Member for Norfolk, North-West said that he detected it in his area. I hope that he is right, but I recommend that he should keep his fingers tightly crossed. If he visits me in my parish, where we also have some nice pubs, he will find that the picture does not look at all like that.
In the small business sector, of which I have some experience, we always say to ourselves, "What we in the small business community are doing is running like mad up an escalator that is going down to stay in the same place." Of course, that is better than standing supinely on tha escalator being dumped in the basement and it is better than doing nothing.
Lack of demand ensures that in spite of all our fast running up the escalator we do not get higher. That is the core for the problem, as hon. Members including my hon. Friend the Member for Coventry, North-West have said. It does not matter whether businesses are big, medium or small—all they want is demand. Unless the Government do the necessary U-turn to give a surge to consumer demand in Great Britain, none of the array of things mentioned by the Under-Secretary will do a great deal of good. He deserves something better than running up an 1132 escalator going down in order to stand still. I ask him to give some thought to that point and to talk to his colleagues about it.
§ Mr. Graham Bright (Luton, South)
I congratulate my colleagues who have made maiden speeches, which were a pleasure to listen to. I congratulate my hon. Friend the Member for Norfolk, North-West (Mr. Bellingham). It was apt that he made his maiden speech on this subject, as he is now the secretary of the smaller businesses committee. I also congratulate him on the work that he is doing for small businesses.
Today's debate on the role of small businesses in today's economy is important for two reasons. Since the Government were elected in May 1979, the promotion of the prosperity of those businesses has been placed much higher up the list of national priorities than ever before. The House has a valuable opportunity at the beginning of this Parliament to review the major advances that we have made over the past four and a half years. It is equally important that we set out positive ideas for the development of our policies in the period ahead. I welcome what the Minister said, and his appointment to the post. He is a close friend and colleague of mine. I look forward to him promoting small businesses still more while he is in office, but I hasten to add that, although we are friends, I shall chase him as much as I can on the cause of small businesses.
The emphasis that the Government have placed on helping small businesses is entirely right. Small businesses are to be found across a whole range of industry and commerce — in manufacturing, construction, the distributive and retailing trades, agriculture, energy, transport and the professions. In many industries where the market is local or specialised, they have provided the best means of organising production. Traditionally, they have been the breeding ground for new products and services, the seed bed from which new industries have grown and the arena in which new managerial talent is tried and tested. That is an important aspect of small business.
Whatever the differences between the businesses in terms of size or the level of their capital investment, no Government could or should ignore a sector of the economy that contains 1.25 million small firms, employs 6 million people and accounts for one fifth of our total national output. However, the sad fact is that, despite the work of the Bolton committee that reported in 1971, little or nothing was done until 1979 to reverse the long-term decline of the small business sector. I accept that small businesses must respond successfully to market conditions. They must do so to survive. Some will and some will not. The Government cannot guarantee success for all.
I agree with what the hon. Member for Bow and Poplar (Mr. Mikardo) said about the misconception about small business men. When someone starts a small business, he is usually far removed from being a business man. He is a skilled craftsman; someone with a trade. We must recognise that we are not necessarily nannying business men. We are helping genuine people who want to be business men. It is important that we all understand that.
The Government could create an environment in which, through their policies on taxation and regulation, more businesses will be founded and will grow and prosper. That fact makes it vital that the Government stick to their 1133 overall economic policy. Public spending and borrowing must be restrained to reduce the burden that taxation and the cost of borrowing impose upon small businesses. Without further progress, our other programmes to help small businesses will he stifled. The implications are plain. We must aim to reduce the basic rate of income tax still further while continuing to index the thresholds in line with inflation.
The anomaly that capital gains tax is charged at a lower rate than income tax, thereby encouraging a small business man to sell his business at the end of his active career, must be removed by integrating the two taxes and charging them at the same rate. The penalty placed on owners who sell assets which were held or acquired between 1965 and 1982, and which increased in value because of the price rise in that period, should be abolished. The Government must seriously examine that anomaly.
The Government's long-term objective should be to help family firms pass from one generation to the next by making available index-linked certificates for the payment of capital transfer tax at a later date and by exempting gifts of shares in unquoted trading companies from capital transfer tax until either the donor or the recipient receives cash or readily marketable assets.
Having so courageously grasped the nettle of indexation for capital taxes, much could be gained from encouraging families to keep their assets and interests in wealth production rather than exposing them to extinction by taxes.
Companies must be able to reap the rewards offered by greater incentives. Evidence shows that corporation tax affects smaller firms more severely than the larger firms, which qualify for the bulk of Government aid and allowances. That fact was highlighted by the hon Member for Bow and Poplar. The impact of the lower rate tax and the scale by which it rises to the full rate is a deterrent to small firms as I know from experience. A graduated system of taxation, with an initial tranche of profits free from tax, followed by a rate of 10 per cent. on the next tranche, then 15 per cent., rising to the full rate, would be preferable.
The system could be supplemented by the creation of new enterprise bonds. I have spoken many times on this subject. Such funds could be held by the Government for 12 months and then returned to the companies to be used for capital investment or research projects. Unquoted trading companies could enjoy a significant improvement in the generation and employment of their own funds. A business man must be able to bank his own funds for future projects. At the end of each financial year a big crazy spend takes place, which is often a complete waste of money. Accountants try to help business men by saying, "Go and spend some money. Buy a bigger desk or a car." Such expenditure does not always relate to the prime function of the company but the money is spent just to avoid corporation tax. We must encourage business men to bank their money so that it can be used for worthwhile investment, research and future development.
Individuals and companies are still required to borrow or to seek external equity. The Government have an outstanding record for devising means of tackling these problems which have bedevilled small businesses since the 1930s. The business expansion scheme and the loan guarantee scheme have proved highly successful. They can and, I hope, will be developed further. Can the Under-Secretary explain why tax relief to individuals under the 1134 business expansion scheme should not be available when payment is made to an approved fund rather than when the fund makes the investment'? Why are there no small firm investment companies acting as an alternative intermediary to the approved funds? Such an arrangement would prove helpful to companies wishing to invest in small businesses. We must examine the limit on the maximum loans available under the loan guarantee scheme with a view to raising it. Could the rate of interest on such loans be reduced, as is the case in Germany? The options are open to the Government. Ideas for further progress exist.
Reform of taxation which falls on individuals and companies provides the key to generating incentives to small firms. That fact applies in whichever area small firms operate. However, that is not the only relevant factor. The demands of the Inland Revenue, of Customs and Excise, of Government, of local authority departments, and of statutory and regulatory bodies on the time of the self-employed business man can be absolutely crippling. I say that from the heart as someone who actively runs a small business.
Consolidation of the powers of entry to business premises enjoyed by more than 500 bodies is long overdue. I hope that my hon. Friend the Under-Secretary of State will give an assurance that the form filling required by the State will be further drastically reduced and the frequently arbitrary powers of officials regularised. I hope that my hon. Friend will also tell us that the purchasing policies of Government Departments, nationalised industries and local authorities are now generally more attuned to the capacity of small firms who supply them.
Britain's small business men have always known that they must work twice as hard as their counterparts to succeed in running up the escalator. They have no protection in terms of size or dominant position in the market. They cannot pass on increased costs to their customers with blithe disregard for the consequences. They have no trade unions to disguise economic reality for them. Their virtues are those of independence, self-reliance, ingenuity and determination—virtues that the nation has been rediscovering in the past four and a half years.
Only by practising those virtues as a nation can we exploit the opportunities that will open as economic recovery quickens. We must learn the lessons of past failures due to misguided taxation policies and craven appeasement of bureaucrats and trade unionists. We must move forward by moving those obstacles. Small businesses help themselves and help the country. The Government have proved that they can give the leadership that we need. It is time to be still bolder and to move further along the path of helping small businesses.
§ Sir Hector Monro (Dumfries)
I join my hon. Friend the Member for Luton, South (Mr. Bright) in offering warm congratulations on the outstanding maiden speeches that we have heard today. We have learned a great deal about new Members' constituencies. Their speeches also showed much humour and first-class common sense from people who had been intimately involved in small industries in their previous careers. That is most welcome. I am sure that my hon. Friend the Member for Luton, South will have a far larger audience for his debate next Friday and I wish him well on that occasion.
1135 I welcome this debate, especially the Minister's determination to cut as much red tape as possible. He has a great deal of cutting to do, as the form filling required by Government agencies needs experienced and qualified people with computers and goodness knows what else to achieve speedy results. Simplification and speed are therefore vital to help small business men to get their very bright and often most welcome ideas off the ground.
My hon. Friend the Under-Secretary of State rightly referred to the specific help given to small businesses in recent years. Out of the 100 or more examples, I stress the raising of the VAT threshold and the changes in capital transfer tax and capital gains tax, as well as the many schemes mentioned in today's debate. We should also not underestimate the part played by Government agencies such as the Scottish Development Agency and the Scottish Economic Planning Department.
I believe that the climb back from the present far too high unemployment will be spear-headed by small businesses. Such businesses, with shops, will form the base for economic recovery. The taking on of additional employees in ones, twos and threes will bring about a substantial change in future years. It is from small firms that big firms ultimately come. Businesses starting with five, 10 or 20 employees are vital to the economy. Let us not forget that William Morris and Henry Ford started out as one-man or two-men businesses.
I hope that my hon. Friend the Minister has noted how much more remains to be done about, for example, the Employment Protection Act 1975 and some of the wages councils which have been singularly unhelpful to shopkeepers in the past few years. A host of organisations are ready and willing to assist. Indeed, there are so many that it is often difficult for a new company to find its way through the forest to obtain the most valuable assistance. Simplicity and clarity are important and I am glad that my hon. Friend emphasised them throughout his speech.
We should also give a pat on the back to many local authorities which, usually through their industrial development committees, have done much to assist businesses in their areas. We should also congratulate national organisations such as the Federation of Self Employed and Small Businesses for their work.
I was glad that my hon. Friend the Minister emphasised the enterprise schemes and trusts that have been developed recently. As recently as last month an enterprise trust was developed in my constituency. As a result, regional and district authorities will assist by providing free advice and a wealth of valuable experience to those who are about to set up on their own. We must never underestimate the importance of a warm welcome for a business man when he visits an area with a view to setting up business there. He wants to be sure of such things as good education, key housing, recreational facilities and the general attractiveness of the area. All such information enters the computer in his head and it is upon such information that he decides where he wants to set up his business. Growth and the eventual taking on of an advanced factory depend on such small decisions. I warmly welcome the enterprise trust in my constituency and wish it well for the future.
I should like to put in a word for the Manpower Services Commission as it plays a larger part in helping small business men to decide where to locate their new businesses than is often understood. It has information 1136 about the numbers of unemployed and the availability of skilled labour in different areas. It therefore makes a worthwhile contribution to the debate about where a small business should be set up.
The small business man or industrialist must make many major decisions before making a final choice. Hon. Members have highlighted the importance of the economic climate. The Government's proposals are on the right lines but we still have some way to go before we can ease the purse strings to assist businesses still more. Inflation is an important factor. The Government have had outstanding successes in reducing inflation and interest rates. Interest rates are the first consideration in the minds of almost all small business men who are about to embark on manufacturing or setting up a shop. Today's reasonable interest rates as compared with those of a few years ago must be a great incentive to press ahead.
Local authority rates have also been highlighted. I am glad to represent an area in which rates have been reduced. That is a great incentive to local business men. Seeing the empty shops and the small businesses which are closing in Edinburgh and Glasgow entirely because of the level of rates must bring it home to councils that the level of rates is an important factor in Britain's industrial recovery.
Throughout my remarks the emphasis has been on manufacturing industry, but we have reached a time—I know that some hon. Members will disagree—when we must give greater assistance to service industries. At the end of the day we are looking for more jobs, and it is unimportant whether the industry being helped is a manufacturing or a service industry as long as we get people back to work. For the past 18 months I have been involved with a library servicing company, which created 60 new jobs in a Scottish Development Agency factory, but which received no assistance from the Government because it is a service industry. In trying to reduce unemployment, the Government must consider the narrow balance between service and manufacturing.
The Government are reviewing regional policy yet again, and it is important, but my hon. Friend must bear it in mind that there is some unfair competition between companies producing the same goods but where one is in an assisted area and the other is in a non-assisted area. It is unsatisfactory to move unemployment statistics round in circles, depending upon whether an area is assisted or not assisted. We should examine the United Kingdom total for unemployment rather than the individual areas. I accepted after the Local Employment Act 1963 that in areas of high unemployment — perhaps those suffering from pit closures where unemployment has been as high as 20 or 25 per cent.—in the old special development district days it was right to have special incentives to set up industry and to encourage new industry to come to those areas; but now we must be fair to as many industries as possible and not assist competition through regional policy and financial grants.
Many of the grants available from the European Community for infrastructure can be channelled only to areas that already receive regional assistance. Dumfries and Galloway is the most afforested region in Britain, but it cannot receive a forestation grant from the EC because it is not an assisted area. We must sweep away such anomalies if we are to produce as many jobs as possible.
I am delighted with the progress that the Government are making, and by the fact that we have a Minister who specialises in small industries. One of the Cabinet's great 1137 priorities is to assist small industries, which augurs well for the future, and I commend the efforts of the Minister and of the Government to the House.
§ Mr. Bryan Gould (Dagenham)
I add my congratulations to those that have been offered to the three hon. Members who made their maiden speeches in the debate. The hon. Member for Congleton (Mrs. Winterton) made a speech that was pleasing and graceful in its delivery, and sensible and well-judged in its content. I detected in it a flavour of the independence that we have come to expect from hon. Members with her surname. However, just because there was a flavour of independence about it, that does not mean that the Opposition agreed with everything the hon. Lady said, though we look forward to hearing more from her in that vein.
The hon. Member for Suffolk, Central (Mr. Lord) spoke with great knowledge of his area and the House will benefit enormously from his specialised knowledge as an arboreal consultant. I am sure that we shall hear more from him
The hon. Member for Norfolk, North-West (Mr. Bellingham), in a speech that was extremely fluent, confident and at times amusing, did a great deal, or at least took a substantial first step, towards restoring the family good name in this place.
As one newcomer to another, I welcome the Minister to the Dispatch Box in his new capacity. I am sure that we shall have some useful and valuable exchanges in the coming months.
After yet another turbulent week of being buffeted by issues of foreign policy and defence, it is perhaps not surprising that the Government should turn to the calmer waters of the domestic economy, and particularly to that part of the economy which the Conservative party has tried for many years to make its own.
For a long time we have heard from Conservative party sources that it is the party of small business, and small business men have responded by thinking that they are, perhaps, natural Conservatives. Perhaps the party is saying, in effect—if the paraphrase is not too cruel—"small businesses are safe with us." Just as that phrase may have a hollow sound in other contexts, so I suspect that the experience of small business men in the past four years has done much to dispel some of the cosy assumptions about the easy identity of interest between them and the Conservative party. During the past four years small business men have suffered quite distressing damage. In addition, the Conservative party has revealed that it may be more attached to the interests of big business than to those of small business. Sometimes it is extremely difficult for that party to ride both horses at once.
Although the rhetoric is still that small business men should identify their natural enemies amongst the ranks of trade unionists and bureaucrats, their painful experience is that their real enemy is often big business men. Small business men are the minnows to the big business pike. That issue is brought to the fore by the current controversy over the practice of discriminatory discounts. I need not describe the practice to hon. Members, but the matter calls for a response from the Government that has not yet been made.
Indeed, the nature of that response will tell us something about the Government's good faith in their protestations that they preserve and promote the interests 1138 of small business men. It will also tell us something of a little more general significance about the Government's general policy towards competition in the economy. Are the Government content to sit back and let market forces operate in the name of freedom until freedom for small business men is extinguished? We shall await with interest what the Government do on that important issue.
It may be that the myth of an alliance between the Conservative party and small business is gradually being dispelled, but there is another converse myth that is assiduously propagated — understandably enough — by many Conservative Members. I refer to the myth that the Labour party does not care about, and has no sympathy for, small business, and that there is some natural antipathy between it and the small business community. The fact that that myth has in some quarters, at any rate, taken hold is at least partly the fault of the Labour party, although not because of the actions that it took when in Government.
I think that the Minister would concede that many of the measures that he is rightly pushing forward have their origins in the Labour Government of 1974 to 1979. In that Government we also had a Minister responsible for small businesses, who did an excellent job. It is not so much that our actions have fallen short of giving proper support to small businesses as that we have sometimes failed to say sufficiently loudly and clearly that we, too, welcome small businesses, recognise their importance and want to see them make a greater contribution to the economy.
I shall do my small bit to dispel any doubt by saying once again that we want to see a prosperous and expanding small business sector. I claim the right to say that with perhaps a little more than usual authority from these Benches, because I am one of the few Labour Members to have had a good and fruitful relationship over the years with the National Federation of Self Employed and Small Businesses and other similar organisations.
Because the electorate wrongly and temporarily decided to dispose of my services, during the past four years I found myself running a small business. Small business men have suffered from the failures of the economy as a whole. In some senses, they are the economy. The Minister quite rightly said that up to 95 per cent. of British firms are small businesses. If the economy is performing badly, it is no great surprise to find small businesses in trouble.
Although they are an important element numerically, on other criteria, such as output and employment, small businesses make a smaller contribution than we would wish. It is certainly a smaller contribution than that made in other and more successful economies—for example, Japan. The relatively small contribution of small businesses to output and employment reflects the Government's bias — I accept that the Labour Government were concerned to build up greater concentrations of industrial power — towards large business.
Small businesses are not as important a factor as they should be. Whatever the dispute between the Minister and the hon. Member for Yeovil (Mr. Ashdown) about the precise number of small business failures, no one disputes that small businesses have formed a large proportion of the record number of business failures—unfortunately still rising—during the past four years. The figure is running at a record level, which I hope will diminish shortly.
1139 Small businesses are as much— if not more—the victims of the Government's monetarist policies as the remainder of the economy. They are the victims of the monetarist ratchet that has squeezed the economy until the pips have squeaked. The instrument chosen has been excessively high interest rates, which have been damaging to the economy. The monetarist ratchet has also produced an overvalued pound.
When the output of the economy, especially in manufacturing, has collapsed, small businesses have been part of it. They cannot be insulated against it. With the rising tide of imports, small businesses have suffered again. When the part of British industry that remains has suffered a 15 per cent. loss of competitiveness under the present Government, small businesses have again suffered a blow. As my hon. Friend the Member for Coventry, North-West (Mr. Robinson) said, when investment in manufacturing industry has fallen by 40 per cent., small businesses have suffered.
The Minister rightly said that, nevertheless, small businesses had shown a small comparative improvement in their relative position to the remainder of the economy during the past year or so. However, I argue strongly that that reflects not how well small businesses have done, but how badly the remainder of the economy has done.
Although small businesses have some advantages in a recession, such as flexibility, they are also unusually vulnerable. They depend largely for orders and customers on the remainder of the economy. If big businesses do badly — not necessarily going out of business, but cutting back — small businesses suffer. Perhaps the greatest single policy decision to help small businesses during recent years was the Labour Government's decision to support British Leyland and keep that major manufacturing company in existence. If they had not done so, the ranks of small businesses in the midlands would have been decimated.
Small businesses have suffered not only from the terrible damage done in the manufacturing sector as a whole, but from what has happened in the public sector. I know that it is convenient and fashionable on the Conservative Benches to argue as though the public sector was a separate piece of the economy, insulated against what was happening in the private sector, but, as the public sector has been squeezed and starved of money, small private business has very often borne the brunt, particularly in the construction industry. As building programmes have been cut back, small building firms have suffered enormously.
As large concerns have run into difficulties they have been able to slow down their payments and adjust their cash flows, but the knock-on effect of that has been enormously damaging to small businesses. They cannot so easily overcome cash flow problems. They need prompt payment, and when they have to run up debts to keep their companies afloat, because their customers are not paying on time, they run into another difficulty—the high cost of borrowing due to the Government's high interest rate policy. That is the familiar catalogue and sad litany of difficulties that business, especially small business, faces.
The Under-Secretary of State rightly drew attention to the many measures that the Government are introducing and have introduced to try to alleviate some of the problems. I should be the last person to cavil at the worth, 1140 merit and value of many of those schemes, but I raise an eyebrow when Government spokesmen claim credit for having introduced more that 100 special schemes. That is certainly a tribute to the Government's inventiveness, but there must surely be something radically wrong with the overall climate for small business in this country when we have to go to such complicated lengths, in the form of detailed definitions, restrictions and differences between one scheme and another, to try to make good the damage that has been done by the Government's overall economic policy. As my hon. Friend the Member for Bow and Poplar (Mr. Mikardo) said, the escalator is running downwards in one direction while the Government are trying to push small business men up it in the other direction.
We desperately need not only a change in economic policy, about which I shall speak in a moment, but some simplification of the bewildering variety of schemes that are now on offer. The position has become so complicated that I sometimes think a small business man would need a degree in business studies before he could even set about deciding which application form to try to complete. Even with this great proliferation of special schemes to help small business, the Government have still not identified all the ways, or even some of the more important ways, in which small businesses can be helped.
The Under-Secretary of State informed us that in many of these respects he was not the master of his own house. He pointed out—in reference to the prolongation of the loan guarantee scheme—that he was operating under the guiding control of the Treasury. We understand that. While we accept that he cannot himself shift the direction of the whole of macro-economic policy, we hope that he will fight his corner with Treasury Ministers, not just in the interests of a particular scheme, and say to them, "While some of the things I am doing are useful in themselves, what small business men really need is a change in overall economic policy and an improvement in the economic climate." I hope that the hon. Gentleman and others who think like him will make that point strongly.
In the meantime, small business men will be looking for specific measures. They would like to be relieved of the considerable and growing burden of being used as unpaid civil servants and tax collectors. Over several years now we have all become familiar with the burden faced by small business men in making their VAT returns. The VAT threshold should be raised substantially. There is no point, in terms of the revenue collected, in engaging in the enormous administrative difficulties and costs of collecting VAT at the present very low levels. The administrative costs do not fall on the Government. They are borne by the small business man, and there is no reason for burdening him with that duty and responsibility.
What most operates as a disincentive to a man thinking of starting up a business is the fear that he will lose his capital—that he will lose his life savings, that he will have to mortgage his house, that his redundancy pay will go—and that weighs heavily with him not just at the point when he is setting up his business, but in the longer term commitments which he might have to make in keeping that business afloat through difficult times. We need a range of Government measures that will make it easier for people to start up businesses. People should not have to lay out large sums of capital on buying premises.
In that context, the Minister referred to extensions of the workshop schemes. They are valuable, but we should like to see real money put into that sort of initiative. The 1141 Government have a great deal of money. After all, they are spending £17 billion, in one way or another, on unemployment. If we could put some of that into making it easier—through easy in, easy out rental purpose-built accommodation— for small businesses, that would be money well spent.
As others have said, we must stop loading on small business men a whole range of concealed tax increases, because that is what artificially fixed costs for gas, electricity, telephone and postal charges in effect are. They are not charges made necessarily in the commercial interests of those industries. They are charges made at the behest of the Government as a means of raising revenue, and they are therefore charges which operate exactly as a tax does, and they are a tax which bears particularly heavily on small businesses.
Perhaps the most important action that the Government could take for small business men would be to alleviate the considerable burden of excessively high interest rates. I wish that the Under-Secretary could bring about what I should like to see, which is a general reduction in interest rates as a result of a change in the Government's macroeconomic policy.
On the assumption—I fear an accurate one—that the monetary ratchet will not be set in reverse in the next few months, I echo the suggestion made by the hon. Member for Luton, South (Mr. Bright). Among the range of help offered to small business men, will the Government consider the possibility of subsidising interest rates? The banks would do the work for us. Indeed, one of the advantages of that step would be to encourage banks to look more closely and constructively at the financial needs of small business men. We could encourage banks, with such an element of Government intervention, to think in terms of longer-term financing for small businesses.
§ Mr. Mikardo
One point underlines the importance of what my hon. Friend is saying. The seasonal trades contain a disproportionately high number of small businesses in their ranks. I am thinking of garment manufacturers and makers of gloves, toys and so on. They are faced with the dilemma either that they must have varying and inefficient levels of production or they must make for stock and hold that stock for several months. The high interest rates on the cost of that stock breaks the backs of many of them.
§ Mr. Gould
I am grateful for my hon. Friend's support, because it adds point to the next issue I wish to raise in connection with interest rates, which is that the help that we give to small businesses should not go just to those who start up new firms, but should go also to those who are confronting the sort of problems to which my hon. Friend referred.
I should like the Government seriously to consider the following possibility. Where banks identify proper loanable projects, and where they are encouraged to make that finance available, perhaps on a more constructive and longer-term basis than they are used to providing, the Government should devise a scheme to subsidise the interest rate that is charged to the small business man to whom the loan has been made.
We are all familiar with the burden which national insurance contributions has imposed on business men generally, especially those with small businesses. The Labour party argued throughout the general election campaign that a great deal could be done to stimulate the 1142 economy by reducing national insurance contributions. Labour candidates urged that the surcharge should be reduced for both employers and employees.
§ Mr. Gould
We are talking now of 1983. There is no need to have any inhibitions when considering these issues afresh and recommending action that is appropriate to current circumstances. I urge the hon. Gentleman to take seriously the possibility of reducing the contributions. Such a step would stimulate demand, which would be extremely beneficial, and it would do so in a way that would reduce the direct labour costs of business, especially small businesses. From the viewpoint of those on Labour's side of the political argument, it would also have the great advantage of reducing the impact of what is essentially a regressive tax which operates in the present economic climate directly as a tax on jobs.
§ Mr. Richard Tracey (Surbiton)
Perhaps the hon. Gentleman will explain how he would fund increased costs within the National Health Service and the increased pensions which the Labour party is so often advocating if national insurance contributions were reduced.
§ Mr. Gould
The hon. Gentleman tempts me to answer the often put question, "Where will the money come from?" If we were running the economy at a full employment level, and if small business men were performing in a way that Conservative Members talk about, we would be producing each year additional goods and services to the value of £30 billion. It is unemployment that keeps us poor. The real issue is how we can continue to finance unemployment and not how we can finance expansion. That is the question that must be faced by Conservative Members.
There are some other small measures which I commend to the Government. For example, it would be useful to reconsider the structure of tax law, which for reasons of tax advantage compels many small business men, who would prefer to operate as sole proprietors or in partnerships, to establish limited liability companies. They find that for reasons of tax advantage they have to enter into the enormous complications and the onerous paperwork that is involved in becoming a corporate body as well as acting as business men in their own right.
Mention has been made of the EC's intervention and involvement in these matters. I should like the Government to think more carefully about the impact of some of the EC's harmonisation regulations on small businesses, which are often inappropriate to them. I should like the Government to give a fair wind to the expansion of co-operative arrangements.
The most important reaction would be for the Government to say to themselves, "If intervention on this micro-economic scale is so important to the small business sector, why should we not intervene on a much larger scale across the entire economy? Why should we not stimulate the economy and get it moving?" That stimulation and movement would really help small businesses. In the end, nothing else will really matter. It is time to put an end to the Elastoplast policy of sticking pieces of plaster on the economy. That policy is not good enough, and nor is spitting in the wind. The wind, which was created by the Government, has become a destructive gale. It is only by 1143 remedying the basic problems that face the economy that we shall establish a prosperous and growing small business sector.
I call on the Government to abandon their monetarist dogma and to pay attention to the real economy. There is no more real part of it than small businesses. I call upon small business men individually and through their organisations to cast aside their political blinkers and demand these measures from the Government, who claim to represent their interests.
§ Mr. Kenneth Hind (Lancashire, West)
I am grateful for the opportunity to make my maiden speech in this most important debate.
Lancashire, West was created out of three former constituencies—Crosby, Ince and the old constituency of Ormskirk. I pay tribute to my predecessors for their hard work and their diligence in representing the people whom I now represent.
I am proud to be here, and those Conservatives who come from Ormskirk and its surrounding villages take the view that for a number of years the area was merely loaned to the hon. Member for Knowsley, North (Mr. Kilroy-Silk) while the largely Labour-voting constituents of Kirby sustained him and overcame the great support in Ormskirk for the Conservative party.
West Lancashire is a microcosm of the country and highlights some of the problems of regional policy. An economy is strong if it contains a vital small business sector. Each of the three strongest economies in the Western world—West Germany, the United States and Japan— have much larger small business sectors than Britain. Therefore, we should follow their initiatives to create similar conditions.
It is all very well for the hon. Member for Dagenham (Mr. Gould) to say that we can raise money by returning to full employment, but he failed to point out how to achieve this and how rapidly it is possible to move from our present level of unemployment to full employment. I am sure that this is the question to which each hon. Member would like an answer as soon as possible. We are dealing with the present, not the possibly idyllic conditions of the future.
The old town of Ormskirk typifies what is happening. My constituency is divided into the towns of Ormskirk and Skelmersdale, which are generations apart. Ormskirk is an old market town situated in one of the largest belts of grade A farm land and surrounded by about 30 villages. It is a relatively prosperous area with a number of good shopping centres, and unemployment is 8 per cent. In the Ormskirk region the number of small businesses is far greater than in Skelmersdale, which is 20 years old and has an unemployment rate of 31.5 per cent. — 15,000 of a population of 43,000 are unemployed. We do not have to look far for the reason. When Skelmersdale began, all the eggs were put in one basket.
In 1974, during "the white heat of technology," the party of the hon. Member for Dagenham set up factories in Skelmersdale. We have seen the demise of two of them. The first to go was Courtaulds, when the bottom fell out of the man-made fibre industry and the factory went to the wall. Then, as a result of many problems, many of them related to union trouble, the Thorn EMI manufacture of 1144 television tubes also disappeared. Those two factories and a third, Dunlop, made many people redundant and caused an increase of 5,000 in unemployment in the mid-1970s. That was long before the recession, as we know it, began to bite.
Skelmersdale desperately needs new small businesses and gradually, slowly but surely, things have begun to improve. I have heard that Skelmersdale does not enjoy the best reputation in the House but I believe that that is unjustified, because the town is settling down. More houses in Skelmersdale, built by the development corporation, have been sold than in any other authority area in the north-west. The figure is over 2,000, which represents 20 per cent. of the housing stock. Private builders are building fast. Small factories employing more people are growing gradually. Perhaps the most significant pointer to the settling down of a new town is the fact that there is a low crime level. Our major crime is teenage burglary.
Skelmersdale has motorway connections north, south, east and west. The port of Liverpool is nearby. In addition, there are two airports within forty minutes' travelling time.
I am as proud to represent the people of Skelmersdale as they are to be part of that town. I must point out to the hon. Member for Dagenham who started the movement in favour of a small business policy that between 1974 and 1979 his party was in power but it did nothing of any consequence for small businesses. It was not until the Conservatives came to power in 1979 that the country became aware of the importance of the small business sector.
I point out to my hon. Friend the Minister the problems that some new town businesses have. I echo the statements that have been made by my hon. Friend the Member for Congleton (Mrs. Winterton) about the burden of paper work on small businesses, and the fact that rates, which we seem to forget, are an overhead that reduces employment. Problems are also caused by the Employment Protection Act. I ask the Minister to study all these matters carefully to see what help can be given to small businesses.
I should like the Minister to consider particularly one aspect of the business allowance scheme. It is a successful scheme and a number of my constituents have applied to join it. They have borrowed £1,000, and they have registered for the necessary length of time, but they have found that, because their wives are in employment, they are not entitled to claim the weekly allowance permitted under the scheme. I ask the Minister to consider that matter, as we are losing initiatives and potential businesses.
I also ask the Minister to consider small businesses' planning problems. When one starts from nothing, it is easier to operate from an upstairs room or a garage. Perhaps the Minister could relax planning legislation so that, providing small businesses do not cause noise or smell, or create traffic, they can in the short term operate in dwelling houses. The people who have signed on the scheme could benefit from that. I welcome my hon. Friend's enterprise agencies scheme. I hope that there will be one in Skelmersdale and Ormskirk. I shall do everything possible, as will hon. Members in their areas, to develop the enterprise agency in my area.
I echo what was said about the banks. Perhaps we could give the clearing banks a bit of a shake-up. They are too cautious. It has been said that many of them are merely 1145 moneylenders rather than bankers. We should urge them to be more like venture organisations and to consider how they can benefit their clients and assist them to expand. It is sad that the role that they should perform, which is performed in Germany, Japan and America, is being fulfilled by the British Technology Group and the Industrial and Commercial Finance Corporation. I urge my hon. Friend the Minister not to allow the investment function of BTG to be removed or eroded. In my area, a specialist development area with difficulties, BTG has played an important role, which has benefited the community a great deal. I hope that it continues in that role. As long as the banks fail in their duty to industry and small businesses, it will be necessary to have organisations such as BTG to fill the gap.
I ask my hon. Friend to consider the problems faced by the expanding small business in a new town. New town development corporations are tied to producing a specific return on their assets. It is difficult for the business to move from one factory to another. It is all right if the factory is owned by the development corporation, but many are being sold to the private sector, which is a sign that the town is maturing and becoming a greater part of our economy. I ask my hon. Friend to consider allowing some of those companies relief from 17 and 20-year leases so that they can move to other factories to expand. The burden should be put on the development corporations to lease those factories as best they can.
In old industrial areas, old factories can be broken down into smaller units and can provide cheap accommodation for industries that are starting up. The workshop scheme has operated in such premises. In a new town such as Skelmersdale we do not have such property; they have to be built and are expensive to rent. I ask the Minister to consider that problem. The people who are taking advantage of the business allowance scheme in the new towns cannot find the accommodation that is necessary to carry out a manufacturing function.
I hope that I speak for those hon. Members who represent the new towns when I say that I welcome the fact that, when some of the development corporations are wound up, the Commission for the New Towns will monitor and assist in small firm development in the industrial centres of those towns. We must also bear in mind the Infotech centres. We have referred to the service industries but we must not forget that the high-tech industries, be they in the service or manufacturing sphere, are also small businesses which have an important role.
It has been suggested that we should remain with the old industries. Britain cannot compete with the Third world in some forms of manufacturing process as our unit costs are too high. We must look to the new technologies. Skelmersdale will be looking towards the new technologies. The Government must assist in every possible way to develop such industries in the new towns.
The Government must be congratulated on their programme of 108 various schemes to help small businesses. Criticisms have been made that the schemes are too complicated. I advise the critics to acquire a copy of a document called "How to Make your Business Grow." The document is very simple. It tells business men whom to see and where to go for advice. Every small business man should have this document on his desk. For the hon. Member for Dagenham to say that the Government do not tell the small business man where to go for advice is wrong. This document is the answer.
1146 Development of the small business sector must never cease. We can never say that we have done enough. Development in that sector is continuing and can be improved. I urge the Government to continue as they have begun. I hope that they will accept some of the remarks which have been made as assisting them in furthering their policy.
§ Mr. Roger Freeman (Kettering)
I congratulate my hon. Friend the Member for Lancashire, West (Mr. Hind) on an extremely clear and interesting speech. I know that the more senior Members of the House will join me in congratulating my hon. Friend and looking forward to many contributions from him in the future.
At this advanced hour, I shall be brief. I shall focus my remarks on the very small firms which employ fewer than 20 people. I welcome what the hon. Member for Dagenham (Mr. Gould) said. He is also a Balliol man. This is not the first time that two Balliol men have debated with each other in the Chamber. Being a Balliol man, the hon. Gentleman is highly intelligent. It is only his judgment that I doubt.
Very small firms are important to my constituency, not only because of the contraction, as the Under-Secretary of State appreciates, of the footwear industry, but also because of the contraction of the steel works in the neighbouring constituency of Corby.
I wish to deal with the dissemination of information and advice to small firms. In Northamptonshire COSIRA and the small firms advisory service are working closely together. A good case can be made for the Civil Service writing a plain man's guide to Government aid for the very small firm. I have read most of the available documentation. My hon. Friend the Member for Lancashire, West (Mr. Hind) drew my attention to the excellent document entitled "How to Make your Business Grow". Perhaps a more simple document for the very small manufacturing firm would be useful.
On the need for advice rather than grants and aid, it is interesting that the Robson Rhodes survey of the first 50 failures under the loan guarantee scheme showed that only three had taken professional advice. Clearly, therefore, small firms seeking help, especially under the loan guarantee scheme, need advice. I declare an interest as a chartered accountant and I am pleased to note that my professional institute is taking steps to encourage accountants to advertise their services. I welcome that new development because I believe that small business men often need counselling when preparing documentation for their bank managers and for Government Departments and agencies.
Two simple changes in company law would also help. First, the filing requirements for very small incorporated businesses are still far too rigorous. Small businesses not planning to become unincorporated should be able to move to unincorporated status without incurring the present tax penalties. At present, the two major penalties are double assessment for capital gains and the fact that deferred tax balances become immediately payable. I appreciate that this is not the Minister's responsibility, but I hope that he will bring it to the attention of the relevant Treasury Minister.
I hope to establish an enterprise agency in my constituency and I know that the Under-Secretary of State 1147 is keen to see such developments in his own constituency and generally, following the excellent concessions of the Finance Act 1982.
I hope that the Minister will bear in mind three important factors when he travels about the country encouraging towns to set up such agencies. First, there must be co-ordination in both town and countryside. Local business men often come together in an admirable way to promote enterprise agencies but are almost in competition with district and county councils. Advice to small businesses must be co-ordinated far more effectively.
Secondly, there must be flexibility of approach in each enterprise agency. I pay tribute to the new Northamptonshire enterprise agency, which has a very flexible approach to the way in which advice should be given, be it through small business men's clubs, the publication of a newsletter or encouraging accountants to provide free initial counselling sessions for small business men.
Thirdly, the purpose of the loan guarantee scheme is to enable small business men to borrow money from commercial banks, but there is a need for local business people to come together, perhaps through enterprise funds, to provide equity finance for local business men in their own area whose operations they well understand. Marlow house in Desborough, an excellent community centre funded through the urban aid scheme, now needs equity finance which I believe can be provided only by local businesses and banks.
On the business exemption scheme, in two or three years' time the Opposition will be examining the performance of the scheme and drawing Ministers' attention to any abuses. I believe that one or two abuses are already brewing in the City, but that is no reason to throw out the baby with the bath water. I hope that the Opposition will look favourably upon the scheme and that the Minister will circulate to the civil servants involved the motto which I believe should apply to the evaluation of the scheme—"Abusus non tollit usum."
§ Mr. Keith Raffan (Delyn)
I am glad to speak for the first time in the House and I thank my constituents for giving me the opportunity to do so.
I have the honour to represent the people of Delyn. One of the local guides to the constituency begins its description somewhat baldly. It says:Situated in the most north easterly point of Wales this oblong area of land …".Delyn is indeed oblong but also much more. It is bounded on one side by the beautiful Clwydian hills with the river Alyn running at their foot and on the other by the Dee estuary. The name Delyn is a combination and abbreviation of the two names Dee and Alyn, fortuituously producing a Welsh word which means "harp".
As I represent a new constituency, I have two predecessors, both of whom remain Members of Parliament although they represent new constituencies. I have been lucky enough to inherit more than two thirds of the constituency which was formerly held by my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer). If I had not inherited that area from him I should not be here now. I am also lucky, because the area could not have been better represented or more carefully and 1148 caringly tended in the past 13 years. For that alone, I owe a debt of gratitude to my hon. Friend. That debt becomes all the greater in view of the kindness that he has shown me and the guidance he has given me since I came here.
The remaining third of my constituency was formerly represented by the hon. Member for Alyn and Deeside (Mr. Jones). I congratulate him on his election to the shadow Cabinet and his appointment as shadow Secretary of State for Wales. As he is one of my constituents, he is in an enviable position to make representations to his Member of Parliament. I count myself equally fortunate to have him as my parliamentary neighbour. I look forward to the boundary between our constituencies becoming one of the front lines in Welsh politics.
I have only one distinction upon entering the House. There can be few other hon. Members who have contested seats in each part of Great Britain. As so often happens in our political system, I now represent an area with which I have had no family or other connection but with which I already feel considerable empathy. I am the only Scotsman who represents a Welsh constituency although, in deference to the Leader of the Opposition, I must add that I am not the only Welsh Member of Scottish descent. There, any distinction I might conceivably claim comes to an abrupt end. I am not the first Scotsman to sit for my part of the old county of Flint. Samuel Smith, an Edinburgh-born cotton broker, had that honour way back in 1886. He was described at the time asA most benevolent, high minded Scotchman who, seems to be under the impression that he has been chosen by the electors of Flintshire to represent India in the House of Commons".That is a somewhat unkind reference to his first election campaign which he somehow managed to spend in the subcontinent. At the subsequent election, he was less nomadic. He referred to it briefly in his autobiography entitled, "My Life Work":I was not opposed and so got a welcome opportunity of a trip to the Highlands".Perhaps another fortunate by-product of the end of the empire is that Scotsmen now spend election cä Delyn is a diverse community of four towns and 34 villages. Prestatyn, on the north coast, is well known as a holiday and retirement town. Holywell, near the centre, is the borough headquarters and has the nearby tourist attractions of St. Winifrede's Well and the Greenfield valley. Flint, in the south-east corner on Deeside, is the industrial centre. Mold, a few miles to the west, is the bustling county town of Clwyd. Within that diversity, however, there is uniformity. Those areas, which differ widely in character, have one major problem in common — unemployment. Only five constituencies represented by Conservative Members have a higher rate of unemployment than that of my constituency. That is the dimension of the problem and of the challenge that the Government are doing their utmost to meet. The purpose of my intervention in the debate is to ensure that they continue to do so.
The employment difficulties of Delyn and Deeside are easily précis-ed. Until recently jobs were concentrated in only two major industries, textiles and steel. As those industries went into decline unemployment rose sharply, and that decline began well before the onset of the present recession. Major redundancies at the three Courtaulds works in the constituency occurred as long ago as 1973, reaching a peak of more than 1,500 in 1977. The earliest 1149 ones at Shotton, which is just outside my constituency, occurred between 1975 and 1976, when nearly 2,000 people lost their jobs.
Sadly, large-scale unemployment is not a recent phenomenon in my constituency; it goes back not four years but 10. It is a long-term problem that demands a long term strategy, which is just what Delyn has been given by the Government — a strategy to attract new, smaller, more diverse industry, businesses that will reduce the area's fatal over-dependence on the old major industries. It has been given not only a strategy, but the hard cash to implement it.
The Delyn enterprise zone at Flint is the springboard for the constituency's industrial regeneration. The Government have already provided £7.2 million to clear away the industrial dereliction of the past and prepare the land for new factories.
Next Tuesday my right hon. Friend the Secretary of State for Wales will visit the zone to demolish, all on his own, the last remaining vestiges of the industrial pasta 365 ft chimney that dominates the town of Flint. He will then visit the new — the £15 million Kimberley-Clark Kleenex manufacturing plant which is expected to employ at least 600 people by the end of the decade. It is a symbol of Delyn's economic future that has already attracted several companies to show keen interest in the zone.
Flint has an adult population of 10,000, yet since 1973 the town has lost nearly 2,500 jobs, producing a male unemployment rate of 40 per cent. The Government have responded to Flint's desperate needs with the enterprise zone strategy, and with the money to implement it, to provide the essential infrastructure for new industry. Delyn borough council has responded to the Government's efforts by giving its fullest co-operation. The council and its chief executive, John Packer, deserve much praise for the sensible and imaginative way in which they are handling the zone's development. I should add that I include the local Labour councillors in that tribute; they have shown a far more positive and constructive approach towards enterprise zones than have their colleagues on the Opposition Benches.
The work of attracting new industry has only just begun, but it has begun well. The Government have given a lead, and Delyn's economy is no longer drifting aimlessly. It now has a clear sense of direction. However, much remains to be done. I have come into contact with representatives of several new businesses who still do not know where to turn for the help and advice they badly need, especially when they must sift through the more than 100 measures introduced by the Government to encourage their growth. As a last resort they have turned to their Member of Parliament to provide the link with the Welsh Office and with the Welsh Development Agency. Even then they have experienced long delays in the processing of grant applications—delays that their cash flows can ill afford. Some have eventually succeeded. Others have been told to try their luck in the City, with no further directions given. New small businesses still encounter too much bureaucracy and not enough help. However, that does not detract seriously from the good beginning that has been made.
I thank hon. Members for their patience in listening to me today. I am only too conscious of the fact that it is not often that a piece of meat, however lean, is thrown down from the Press Gallery, so in those circumstances I am all the more appreciative of the House's generosity.
§ Mr. Ian Wrigglesworth (Stockton, South)
It is an unexpected pleasure to speak after the hon. Member for Delyn (Mr. Raffan), who has just made his maiden speech. I congratulate him on making a not unexpected, rather characteristic first speech. He is in the process of making a difficult transition. I can think of at least two of his colleagues in the Conservative party who have made a similar transition.
I am not sure whether the hon. Gentleman has come down from the Press Gallery or been elevated from it, but no doubt that will be determined in due course. However, if his speech and the way in which he spoke of his constituency and his experience there are anything to go by, he will have no difficulty in dealing with some of the darts that he may have aimed in the past, even at some of his colleagues, in the columns of his newspaper. I also recall that when I knew the hon. Gentleman some time ago he was chairman of an organisation called PEST — Pressure for Economic and Social Toryism. We shall all await with great interest to see whether he will be a pest to his own Front Bench or to the Opposition. His contribution today bodes well for the future, and we look forward to hearing many more speeches from him.
It is a pity that the hon. Member for Bow and Poplar (Mr. Mikardo) was not in the Chamber to hear the speech of the hon. Member for Kettering (Mr. Freeman). I think that I agreed with everything that the hon. Member for Kettering said. The hon. Member for Bow and Poplar said that accountants were the great growth industry and that they were doing great damage to businesses, but the hon. Member for Kettering has shown that that is not so. Clearly his profession has a great contribution to make to small businesses, and he demonstrated that today. I hope that the Minister will bear in mind his points.
I congratulate the hon. Member for Lancashire, West (Mr. Hind) on his maiden speech. Before I became a Member of Parliament, almost 10 years ago, I used to work in Ormskirk. In Skelmersdale and Ormskirk the hon. Gentleman straddles two very different areas. As he demonstrated this morning, with that experience he will be able to make valuable contributions to our debates.
I shall be as brief as possible, because I know that other hon. Members wish to speak. I shall concentrate on points which have been missed or have not been sufficiently stressed, or on issues which I feel strongly the House should consider and act upon. I agree that we cannot look at the small business sector in isolation from the rest of the economy. Contrary to the way in which some hon. Members paint them, small businesses will not be the answer to all our problems. I shall not go over the figures mentioned by my hon. Friend the Member for Yeovil (Mr. Ashdown), which demonstrate that small businesses are not making the contribution that we all want them to make or the contribution that is being made by them in other countries. However, they will not be able to make the major contribution that they can make unless the national economy is performing far better than it has done for some years.
We should not raise expectations about small businesses that cannot be realised. They have been an effective lobby in recent times, and it is a testimony to their success as a lobby and their importance that so many hon. Members have contributed both to today's debate and to previous ones. Across the party spectrum small 1151 businesses are recognised as an important part of our economy and industrial life. I hope they realise that hon. Members take them seriously. We on these Benches certainly take the whole matter very seriously indeed.
I should like to cover just three areas. First, I reiterate something that has been mentioned by other hon. Members and alluded to by the Minister. The major thrust for new businesses and the development of small businesses must come at local level. The development of enterprise agencies has been excellent, and I hope that there will be many more of them.
The small businesses in my area have successfully formed themselves into clubs. Indeed, my constituency has the largest and most successful small business club in the country. By its very nature, it has done far more than either this Government or the previous Government to help small businesses. The Teesside small business club has, for some years, made a contribution to Government thinking. Much more important, it has been a self-help organisation. For example, it has produced a directory of its members' services and products and it liaises with local authorities and big businesses to ensure that its members' products are being used. Indeed, a leaflet in its bulletin this month, published by the county council, states:You make a product: or you sell a service:—You are looking for customers:Have you thought of Cleveland county council?That practical lifeline to small businesses is a major encouragement to their growth. To have people asking their peers and neighbours for advice and help is often better than asking agencies, no matter how good they can be. It is of great help to them to talk to others who might be suffering similar problems and challenges.
Although I fully endorse what the Government are doing to encourage small businesses, there are other cost-effective ways to help. The Derwentside Development Agency is an effective means of job creation. I do not want to discuss regional policy, which we shall no doubt debate in the coming months, but that agency covers the old Consett steel works area, which closed with a disastrous effect on an area which could offer no other industry. During the past two or three years the agency has created employment opportunities at the pace of about 1,000 a year. I never thought it possible for anyone to do that in such an area. I suspect few others did either.
That shows how working at local level, with the support of the business community and county councils, and not looking to Whitehall or big business such as Nissan for jobs, is a cost-effective way to create jobs. That agency creates a job opportunity for about £40 rather than the £4,000 or £40,000 per job in other schemes. Therefore, I emphasise the importance of decentralising the functions of agencies and other bodies to local level.
One point that has not been mentioned in the debate is the importance of the Government changing the insolvency laws. I am sure that other hon. Members have received representations about that. Such a change would help small businesses, which are often the hardest hit when liquidations or bankruptcies occur. I link with that the terrible problem faced by small business in getting enterprises to pay their bills.
The Cork report was published a long time ago and I have been pressing the Secretary of State to implement its findings. It is important that delinquent directors should be 1152 prevented from winding up businesses and restarting them on the same day, with the consequent damage to creditors and small businesses. As most small businesses are unsecured creditors, it is vital that they should have a better claim on the resources of firms that are wound up. I hope that the Minister will act quickly to help small businesses.
§ Mr. Gould
I am grateful to the hon. Gentleman for allowing me to intervene and for raising this important point on which I gladly support him. Does he agree that the problem involves not only delinquent directors, but delinquent liquidators? The Cork report said that we must come to grips with the problem of cowboys coming in, ripping off companies and leaving small business men at the mercy of, in effect, criminals.
§ Mr. Wrigglesworth
I am grateful to the hon. Gentleman for making that point. I do not wish to go into a debate on the issue because I understand that the Government, rather belatedly, will be publishing a report in the new year. No doubt the House will discuss that in due course. The message that I wish to put across is that this is a vital matter for small businesses. I hope that the Minister will make that clear to his colleagues responsible for that area of policy.
We must try to improve the survival rate of small businesses. A carpenter may be good at making his furniture and may have all the skills for establishing his business, but he does not have the other skills, experience and training that are necessary to ensure that the business is a success. We must improve the quality of education and training for the whole of the population and prepare people not to get a job in a large enterprise—that has been our problem in the northern region—but to run businesses of their own.
In the past our people have always expected to go into the mining industry, or work for ICI, the British Steel Corporation or British Shipbuilders. Education and training have not prepared them and in many instances are still not preparing them for running businesses of their own or even thinking about running businesses of their own. During their education and training that thought is not put into their minds. We must train them to run businesses as well as providing the skills to make the product, to be able to sell it and to do the accountancy and all the other things that are necessary to make the business a success.
In addition to their plethora of schemes, I hope that the Government will consider introducing such education and training to ensure that people are given skills in schools and in colleges of further education that will enable them to run their own businesses, and accept in the education system that many of them will not only want to do that, but will need to do it if they are to have useful jobs in society when they leave school or college.
If the Minister with responsibility for small businesses can get some movement from his colleagues in the Department of Education and Science on that front, he will have made a major contribution to ensuring that the survival rate of small businesses is far greater than it is at present. If things do pick up in the economy, we will start to catch up with our competitors in other parts of the world where small businesses make a larger contribution to the economy and to the wealth of the countries involved.
§ Mr. Richard Alexander (Newark)
I congratulate my hon. Friend the Member for Delyn (Mr. Raffan) on making an able and lucid maiden speech, and I have no doubt that the House looks forward to hearing from him on many future occasions. I am sure that his constituents will be well served by his presence here for many years.
I am making a plea today for the survival of the small retail business. We have heard much about the place of the small business in our economic regeneration and about the Government's excellent measures, all 108 of them, but little about how we shall enable them to survive.
The October issue of the National Chamber of Trade News reported the results of a departmental analysis of the lifetime of small businesses, in particular retail trades, and concluded that the analysis had made it clear that only 55.1 per cent. of retail firms survived beyond nine years of existence. I hope that the Minister regards that statistic as depressing, so much so that we shall see more emphasis being placed on the survival of businesses rather than on the steps we are taking to set them up. Perhaps there needs to be a realignment of view and a realignment of what we are proposing to do.
This is a timely debate. At the beginning of a Parliament it is right that we should take stock of what has been, and should be, done for small businesses and, in particular, small retail businesses. The Association of British Chambers of Commerce, in a brief sent to hon. Members recently, stated:By placing such emphasis on small firms' ability to bring about Britain's economic salvation, such devotees risk discrediting the small firms sector if it proves unable to satisfy such high expectations.The small retailer feels disillusioned. He feels that success is not even round the corner and that his activities are circumscribed by forces over which he has no control, for example the employment protection legislation; employment which often an employee can use to deprive the employer of proper control over his business enterprise, and that enterprise in the hands of the retailer often seems to him to be a straitjacket.
Probably top of the hate list are wages councils. The National Chamber of Trade has just completed a questionnaire on the subject. It was circulated to all chambers and the response showed that not one chamber favoured the retention of wages councils in their present form. They never seem to consider what the market will bear when making demands on employers—only how much can be taken from the employer to pay the employee.
Employers' representation on most wages councils from the small retail sector is minimal, whereas the so-called independent members are often Left-wing academics whose hostility to business is as profound as their lack of knowledge of the constraints on running a business. Employers can put in objections, but what happened in the retail trade in, say, 1981? They objected to a whacking 20 per cent. increase. The 20 per cent. was not scrapped; the increase was given in two stages and that increase in two stages became the norm for the following year's award.
The small retail trader finds that the constraints that are imposed by others prevent him making a proper fist of his business. Those constraints threaten his survival. To own one's shop should be—it used to be—an honourable ambition. Shopkeeping is still an honourable calling, but the shopkeeper will be doomed to frustration, despair and 1154 often bankruptcy unless we can roll back the constraints of local authorities, Government and legislation. We should be showing more concern for the shopkeeper, and I hope that my hon. Friend the Minister will do so.
§ Mr. Trippier
First, I congratulate the hon. Member for Dagenham (Mr. Gould) on his appointment to the Opposition Front Bench. I hope that he stays there for a long time to come. I pay a warm tribute to those who have made their maiden speeches from the Back Benches—my hon. Friends the Members for Congleton (Mrs. Winterton), Suffolk, Central (Mr. Lord), Norfolk, North-West (Mr. Bellingham), Lancashire, West (Mr. Hind) and Delyn (Mr. Raffan). I cannot remember a day when the quality of speeches has been as high as today. The entire House will look forward to hearing many more contributions from my hon. Friends, as will their constituents.
This has been a most interesting and useful debate. It has been refreshing for me to hear so many positive contributions. So many Members recognise the importance of small firms to our economy. It is a welcome characteristic of Friday debates that the House sheds more light than heat on its deliberations. I think that we should all welcome that.
The Government's commitment to the cause of small businesses is not a fleeting one for they are fundamental to what we are trying to achieve. We are dedicated to providing an economic environment that will promote the formation of small businesss and allow existing ones to develop and expand.
It is clear that small businesses are becoming increasingly important to our economic future at a time when there is a real trend to smaller production units. Few people would rely upon large traditional companies employing many more people for the remainder of this century or even into the early part of the next. It is perhaps more likely that they will shed labour. My hon. Friend the Member for Lancashire, West touched on that.
Indeed, there has been a switch away from employment in the traditional industries, where the work force fell from 35 per cent. of total employment in 1974 to 28 per cent. in 1982, towards employment in service industries whose work force increased from 55 per cent. to 62 per cent. of total employment. This has given rise to other fashionable phrases like "post-industrial societies", which was used by the hon. Member for Yeovil (Mr. Ashdown). But these phrases serve to obscure the uncomfortable adjustment in the British economy and the contribution made by small firms. In the teeth of the recession, small manufacturing firms employing fewer than 200 people actually increased their share of employment from 23 per cent. to 26 per cent.
Having seen large manufacturing units in decline and employment opportunities shifting towards service industry, the small firms sector will become ever more important, and we must do all we can to encourage entrepreneurial flair. An individual takes considerable risks in starting up a small firm, and the Government are determined that the potential rewards should match those risks. This was touched on by my hon. Friend the Member for Suffolk, Central.
It is important to emphasise the contribution that the small firms sector makes to a healthy market economy by increasing the range of competition and choice and by its catalytic role as a potent source of invention and 1155 innovation. The sector's defensive qualities in helping to save worthwhile existing jobs have to be emphasised along with its offensive qualities in creating new and real jobs for the future.
We need the diversity and flexibility of small firms if we are to sustain and benefit from the industrial recovery for which Britain has worked so hard over the past four years. Several hon. Members have suggested that our economic decline has been caused by failure to reward risk taking and encourage initiative. While we strive to correct this imbalance, it is important that the Government do not give the impression that it is easy to start up in business. It is not. The decision to start and run a small business is one to pit wits against the outside world, possibly to accept hardship and to struggle to create wealth where it does not exist.
I agree with my hon. Friends the Members for Newark (Mr. Alexander), Congleton, Surrey, North-West (Mr. Grylls) and Dumfries (Sir H. Monro) that before 1979 the pendulum had swung too far against individual enterprise. That is why our policy since then has been to stimulate the development of small businesses and create an environment which will provide sustained growth.
While I detailed in my opening speech the specific measures designed to assist this process, our overall policy towards the small firms sector is clear. We aim to provide a supporting fiscal environment for the owners and managers of small firms, and investors in them, where risk and effort are adequately rewarded. At the same time, we must concentrate on the removal of unnecessary burdens and constraints to which several hon. Members have referred, most notably my hon. Friends the Members for Suffolk, Central, Luton, South (Mr. Bright), Cambridgeshire, South-West (Sir A. Grant) and Delyn. I again give a clear undertaking that I regard this as a top priority.
Some hon. Members—most notably my hon. Friends the Members for Surrey, North-West and Luton, South —have referred to public purchasing. It is important to stress that our policy is one not of positive discrimination in favour of small firms, but of designing measures to overcome the specific disadvantages of being small. There is the danger with positive discrimination of discouraging growth and distorting competition. Other hon. Members have referred to industrial premises for small firms—I especially remember the speech by my hon. Friend the Member for Lancashire, West. There is no doubt that property developers found it more attractive and profitable to build offices and sophisticated factory complexes, but in 1979 we discovered that most small firms needed workshop units. We did not have enough and those that existed were in the wrong place. We used tax incentives as a stimulant.
I referred to the threefold increase in the provision of small workshop units. Many of these have benefited also from the provision of common service facilities, such as secretarial and accounting support. One of the most interesting developments, especially during the past four years, has been the recognition by large companies of the vital importance of a healthy small firms sector. Many large industrial concerns have responded significantly to our pleas to pay more promptly the bills submitted to them 1156 by small companies. I urge all large firms to recognise the importance of paying accounts on time. It can make all the difference between survival and failure.
I was delighted that my hon. Friends the Members for Kettering (Mr. Freeman), Lancashire, West and Norfolk, North-West and the hon. Members for Bow and Poplar (Mr. Mikardo) and Stockton, South (Mr. Wrigglesworth) referred to local enterprise agencies because that is where large companies can help local communities to encourage start-ups and expand existing small firms. The strength of the agencies lies in having a nucleus of staffs, usually with a director seconded from the private sector who can call on a range of expertise from their commercial sponsors. Some of the agencies have not taken advantage of that, and we are anxious to encourage them to do so. The value is two-way. The seconded executive develops his business skills because he has to deal with the problems, needs and opportunities of the small firm without the protection of a large organisation.
Hon. Members, including the hon. Member for Coventry, North-West (Mr. Robinson), have referred to the value of the Government schemes for small firms. I was grateful to him and to my hon. Friends the Members for Surrey, North-West and for Norfolk, North-West who referred to awareness of these schemes.
While we have done much in a relatively short time to benefit small firms, the time has now come to draw the threads together and to consolidate the changes. It is the clear view of many contributors to the debate that we must ensure that small firms are aware of what help is available.
The value of the schemes is completely lost if people are ignorant of them, or are unaware of how to take advantage of them. That is why I am anxious to publicise our schemes more widely, and why I am anxious to repackage and simplify them wherever possible to make them more understandable and give the proposed publicity campaign a better chance of success. I will also concentrate more effort on public relations through local or provincial newspapers which will record the success of those small companies that have already taken advantage of our schemes.
What has been said in the debate reinforces my view that there is now a greater need than ever for good quality advice. Of course it sounds impressive for the Minister with responsibility for small firms to boast about last year's net increase in small firms of 7,000. That is net births over deaths. What interests me is how many of those firms recorded in the deaths column could have been saved if good quality advice had been given to them sooner. Many hon. Members referred to that point, so I believe that there is wide consensus on it. We need to improve quality advice, but it should not be left solely to local enterprise agencies, chambers of commerce or the small firms' service.
We need to improve advice also among professional advisers. That is why I hope early next year to publish a more sophisticated version of "How to make your business grow", specifically for the intermediaries, which will give greater details of the schemes. I am sure that that will please my hon. Friend the Member for Kettering. I am a recipient and beneficiary of good quality advice from the small firms division within the Department of Trade and Industry. I wish to pay tribute to the senior and junior officials within the division whose positive approach to solving the problems faced by small firms has impressed me enormously during the five months that I have held 1157 office. In addition, as I go round the country I repeatedly thank the small firms service—the staff in the centres and the business counsellors—for the work that it does.
Several hon. Members have referred to the business expansion scheme. The aim is to achieve a significant increase in the supply of genuinely additional equity for unquoted traders by tapping the potential of individual investors. Because we want to see this finance go into start-up and expansion schemes, we offer the generous tax relief of up to 75 per cent. to which I referred earlier. This is unique in industrial countries. No other country has tried it. We now find that the Inland Revenue has already approved 14 investment funds under the scheme, with a further 14 firm applications for approval in the pipeline.
The hon. Member for Dagenham and other Opposition Members must not be so chary in their praise of the Government's success in the small firms field. We understand their embarrassment at the success achieved by the Government in so short a time. We on the Government Benches are fascinated by the fact that the Labour party manifesto published for the 1979 general election did not mention small firms or their importance to the economy. That glaring omission was compounded in the Labour manifesto at the general election only five months ago.
The least that one could have expected was that in its four years in the political wilderness of Opposition the Labour party would have realised or acknowledged the importance of the small business man and recognised the role that he plays. Despite repeated evidence of the many successes of the small business man during that time, the Labour party greeted his efforts with overwhelming and enthusiastic indifference. It regards him as being of no importance. In direct contrast, we recognize——
§ It being half past Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.