§ Mr. Roger King (Birmingham, Northfield)
This Adjournment debate on small businesses is extremely appropriate, because if there is one section of the economy in which the Government have been successful above all, and they have been successful in most, it is in assisting the development of small firms and businesses.
Since 1979 a record number of new businesses have been created. That has not happened by any accident: it has been brought about by the favourable economic climate and by people who have adopted an attitude which perhaps we had lost over the past half century. They realised that the opportunity exists for them to create what they wish to create easily and ably. Perhaps it is also now generally accepted that a self-employed person is not some sort of crook who is trying to deceive the tax man but someone who has an important role to play in our economy. He may create his little business employing just himself, whether as a decorator or a plumber, and develop it into something more substantial by building on his business experience and reputation within the community which he serves. To be self-employed—at one time, perhaps, denigrated—is now a respectable, laudable occupation. Such people can feel proud indeed to play their growing and important part in our economy.
The Labour party has always believed first and foremost in spending wealth, but it has paid little attention to the role of creating it. Unless we create wealth, we have none to spend. Over the past eight years the Government have been successful in creating the wealth which we can now spend on, for example, increased National Health Service expenditure. It is now running at record levels in real terms, let alone in money terms, and that has been brought about because more than any Government in the past we have paid attention to the role of the wealth-creating sector.
The wealth-creating sector is not merely big business. Many big businesses have had to rationalise and change their outlook. The huge number of small businesses created since 1979 has increased the Exchequer take from industry and commerce through paying their taxes which can then be redistributed in our social welfare benefit systems.
The legacy bequeathed to us in 1979 was a hopelessly unproductive economy. Let me make no bones about it. From the last war we inherited sloppy industrial relations and sloppy management and somehow the belief, still, that the world owed Britain a living. This Government had to take dramatic decisions. They had to say that the feather bedding must stop because we no longer had an empire or a Commonwealth and that we must make our own way in an increasingly competitive world. The Government had to make some very difficult decisions affecting many of our old established industries. Of course, that is nothing to be ashamed of.
From time immemorial the trade unions have been shouting for investment. Some of the leading trade unionists asked how could we compete with the rest of the world, including the Germans, the Japanese and the Americans, with outdated manufacturing processes and lack of investment in industry. They also pointed to the failure by management to spend the money necessary to 501 introduce the new equipment when, in the eyes of the trade unionists, that money was going into the pockets of shareholders in the form of profit taking.
§ Mr. William Cash (Stafford)
My hon. Friend must have made a slight slip of the tongue when he said that we no longer have a Commonwealth. What he possibly meant was that through the development and fostering of small businesses we have been able to generate common wealth among people as a whole. We certainly have a Commonwealth and I am sure that my hon. Friend would not want to see it reported in his local press that we have not.
§ Mr. King
I thank my hon. Friend for his comments and I take his chastisement. Perhaps I was interpreting commonwealth in the literal sense. As I understand it, Britain exchanged its manufactured goods for raw materials with the old empire that we called the Commonwealth. Of course we still have a Commonwealth of nations and long may it remain, because it has an important role to play in world affairs. Our industrial position in the world has been affected because many of the Commonwealth countries are looking at alternative sources of supply for their finished goods and for the materials that they require and are looking less towards the United Kingdom. We have an opportunity to provide much of what they want.
There is a well-recorded and documented recent incident about the Indian navy which wanted to place an order for a new type of warship. Two yards were suggested, one in Aberdeen I believe, and one in Korea. The Aberdeen yard was more competitive than the one in Korea, but by some sleight of hand somewhere the Koreans were able to reduce the price by about £6 million and the Indian navy gave the contract to the Korean yard.
In the way in which I used to understand the Commonwealth it is not now so much a Commonwealth in terms of tied markets for our goods and their raw materials, because we are very much in competition with the rest of the world. For some time trade unions have been demanding that British industry should improve its productivity and invest heavily. The Labour Government of the 1970s paid only lip service to the role of employment in industry. Initiative was taxed away and it was not worth a candle to speculate by investing heavily in new factory plant and equipment.
A substantial risk is involved in starting up a business. I know that because I went through the process in 1974. I started a business in October of that year on the day that Labour got elected. However, that was not a mistake, because the business prospered and a good portion of it is still there. The attitude of the Labour Government to taxing the individual deterred many new business starts. It is relevant that we should remember Labour's tax on jobs, the national insurance surcharge.
This Government are criticised for not cutting taxation enough, but our critics forget that about £3 billion of taxation, brought about by Labour's terrible surcharge, was placed upon the people who were employed and was nothing more than a tax on jobs. It had a dramatic effect in causing industry to shake out the people that it did not want. Industry was not prepared to take any chances and if people were surplus or even partly surplus to production capacity, industrialists were no longer prepared to pay the penal rates of national insurance, and people were made 502 redundant. That meant that in the dying throes of the Labour Government unemployment doubled. The Labour Government built up a momentum of unemployment that was difficult for us to stop when we came in to clear up the mess that Labour had made.
§ The Parliamentary Under-Secretary of State for Employment (Mr. David Trippier)
It is important to emphasise that during the period when Labour were in Government the number of self-employed people dropped by 100,000. That is an incredible figure.
§ Mr. King
My hon. Friend has made the point very lucidly. Of course Labour did not mention the small business man in 1979, or, indeed, in 1983. That species of business man, so essential for our wealth creating process, was totally ignored. I understand that Labour's manifesto for this election has been written on a postage stamp because Labour do not want to go into too much detail. I do not blame Labour for that, but I doubt if that manifesto will refer at all to what Labour intends to do, if it is elected, about continuing to build on the work that this Government have carried out in reconstituting small businesses as an important area of our economy.
Whether we like it or not the shake-out of jobs from large manufacturers has been inexorable and there is no point in trying to put back the clock. In the car industry in particular one can see what happens when the investment that the trade unions wanted has gone into manufacturing capacity. Robots have been installed and integrated manufacturing systems and computer-aided design and manufacture have enabled us completely to change our outlook on manufacturing. Those things have also changed our capacity to produce cars and other products, such as washing machines and refrigerators, on a par with the best of our competitors.
Investment has not proved to be the way forward in employment within our traditional industries. Therefore, we have had to pay a great deal more attention to other areas where any investment that is going can be used to create jobs. Over the past few years the modernisation of industry has gone ahead so fast that other sectors of industry have not been able to take up the many people who have lost employment. Happily, the take-up has now been increased because we are creating more real jobs than any other country.
Much comment is made about the relevance of unemployment, but yesterday more people went to work in Britian than at any time in our history. Today a few more will go to work and on Monday a few more still, the signs now are extremely encouraging and new businesses play an increasng part in creating new jobs. I take this opportunity to pay tribute to the Parliamentary Under-Secretary of State for Employment, my hon. Friend the Member for Rossendale and Darwen (Mr. Trippier). I almost said the so-called Minister for small firms. I am sure that my hon. Friend would be proud of that title, because for four years he has beavered away and has created an outstanding success story. The whole country is in his debt because he has striven for and obtained a better deal for the entrepreneur. That has not been easy, because it is difficult to break through the barriers of understanding confronting the person seeking to start off a business. That person sees before him the enormous challenge of getting his product to the market place, but he is also bewildered by the vast range of restrictions which 503 seemingly confront him, not least that of raising money and finding somewhere to locate his business. Those matters are substantial Eigers to climb, yet the Minister has played a major part in easing some of the difficulties which small businesses have hitherto had to face but which now perhaps are easier to overcome.
Many of our opponents denigrate the small business and laugh it off as the ice cream and candy floss part of our business sector. That is nothing less then an insult because it denigrates what may become a large business in the not-too-distant future.
In the west midlands we face criticism in the tourism sector. Tourism is a bastion of the small business, bearing in mind the number of guest houses, small hotels, small coaching companies, taxis, restaurants, pizza parlour and beefburger joints, as the Americans call them, that have been created as a result of the leisure and tourism sectors. It does not matter whether it be Alton Towers, which started as a small business and has become a large one, or the Severn Valley railway, which operates successfully between Bridgnorth and Kidderminster and employs a substantial number of young people on the community work schemes as well as having a hard core of permanent people. That railway did not exist 15 or 20 years ago when the late Sir Gerald Nabarro, as chairman, bought a few miles of derelict track to open one of the first standard gauge preserved lines. That is now an outstanding success in terms of tourism potential, yet it started off in a small way. Who did not say, "Well they are a lot of nutcases who are interested in chuff-chuffs; let them get on with it; it is irrelevant to our present economy"? The people involved with that railway have taken risks and bought more miles of surplus British Rail track and they now have a link with the main line at Kidderminster. That risk has been translated into a successful and thriving preservation society, with all that it means for the economies of Bridgnorth, Bewdley, Kidderminster and many of the little villages along the route of that line.
§ Mr. King
The hon. Member for Isle of Wight (Mr. Ross) knows the area well and I believe that he is returning there shortly. If he returns as a tourist he will be able to sample the delights of travelling along that line and seeing the jobs that have been created as a result of people taking risks when everybody else thought that it was a silly thing to do.
There have been spin-offs from that venture. We have a vintage car museum in Bridgnorth. That is a delightful town which is now open to the tourist potential that that railway has brought.
§ Mr. Cash
While my hon. Friend is describing the delights and the tremendous tourist potential of the west midlands, I hope that he will bear in mind that we are taking strong initiatives to develop tourism in Stafford with its ancient high house, the castle, its association with Izaak Walton, who was the greatest angler of all time and many other attractions. My hon. Friend may also wish to bear in mind Ironbridge. I am on the board of Ironbridge, which has recently been awarded the world heritage award, which is one of the most prestigious awards that can be given in the tourist sector. While we are dealing with the west midlands, we should bear in mind the 504 importance of the Heart of England tourist board and pay tribute to Roger Carter and the others who have helped so much with regard to the Severn Valley railway company, Alton Towers and all the other matters that my hon. Friend has mentioned.
§ Mr. King
My hon. Friend is right and has made a number of interesting points. His reference to Ironbridge is particularly relevant to me because as a small business man I operated in that area of Shropshire for a number of years and I became a part-time assistant—unpaid, I should add—in the squatter's cottage on the Blist hill site. In the very cold winters, we had a roaring fire going and people used to come from all over the world. I was promoted to the Mission church, which is a little tin shed, a traditional Mission church, where people used to come and expect me to deliver the sermon. On one occasion I was tempted to do just that, but it was part and parcel of a development in tourism which was self-funded. The state did not provide any money; it has been resourced by a number of grants from British industry.
Ironbridge, which is a little off the beaten track with no motorway going through it, has a large number of cafes, shops, restaurants, public houses and so on, which have sprung up as a result of the attraction that that museum is giving the area. All of those are small businesses.
§ Mr. King
I was not aware of that, but in the early days there were some difficulties, which happily have been resolved, and it is now a thriving and dynamic area. Hon. Members should pay homage to the cradle of the industrial revolution.
I must take up the point that my hon. Friend the Member for Stafford (Mr. Cash) made that Stafford is in the forefront of attracting tourists to its area. Birmingham and the west midlands are doing exactly the same. We have a tremendous amount to offer the tourist and we are going about it in a businesslike manner. It may interest the House to know that I was recently in Singapore and looking at, among other things, its tourism potential. There are parallels between Singapore, Birmingham and the west midlands in that neither area immediately leaps to mind as being a tourist trap. Both have a reputation of being industrial areas where one goes to do business, but not to spend time as a tourist. In Singapore, it has been calculated that if it could get the average businessman to stay one extra day, it could almost double its tourist ecenomy with a great deal more hotel occupancy than it has had hitherto. The way that is is attracting new businesses and tourist potential by recourse to the private sector and the entrepreneur lends lessons, if we need to learn that much, to similar areas of our country which are taking the first substantial but hesitant steps along the tourist trail.
My hon. Friend the Minister will know that our hon. Friend the hon. Member for Birmingham, Yardley (Mr. Bevan) is chairman of the Conservative back-bench tourism committee, and he does superb work in that sector. I have the honour of being one of its joint secretaries. What the Minister may not know is that my hon. Friend the Member for Yardley is contesting his seat 505 at the election with the chairman of the West Midlands enterprise board, which is an august body that has sought to invest in local industry and has done much successful work. However, we take exception to that gentleman when he says that tourism is an ice cream and candy floss industry which has little relevance to Birmingham and the west midlands. We deplore that attitude because tourism is relevant and will result in a substantial number of new jobs.
We deplore the fact that someone in that position says that the National Exhibition Centre and the proposed convention centre in Birmingham, which is being built, will not mean much to the area's economy. I assure the House that people in my constituency are seeking actively to capitalise on the opportunities that the convention centre will bring, with minibus tours throughout the area, small hotels and other accommodation and retail outlets. These will be needed to satisfy the demands of the substantial number of people who will come from all over the world to what will be the largest convention centre in this country. That centre will have all the benefits of being located in the centre of Britain's second city.
§ Mr. Andrew Rowe (Mid-Kent)
Do not such people show a lamentable understanding of history? In the middle ages, a substantial number of the most influential and important towns in Europe were based almost entirely on the tourist trade, although they were then, on the whole, called pilgrimages. All sorts of substantial economies whose prosperity has continued were founded on a tourist trade.
§ Mr. King
My hon. Friend has raised an interesting point which I had not addressed. He is right. Of course, people on pilgrimages and people wandering various parts of the country were basically tourists. That is an extremely relevant point.
The creation of new businesses, whether in tourism or elsewhere, has been going on apace in America. In the eight years to 1976, two thirds of all jobs created in America were created by companies with 20 or fewer employees. One can see how the Americans do it. There are rows of car washes where one can get one's car hand washed. One no longer has to run the risk of having the car scored by automatic car washers. These days, automatic car washers do a sophisticated job, but a good hand car wash and leather-off afterwards cannot be beaten. I do not care what anyone says; the constant use of a powered car wash will damage a car's paintwork over a period, but it is another case for a hand-washed car. That is the way to wash a car, but one cannot easily get one's car hand washed in Birmingham for love nor money, and I doubt very much whether it can be done in London either. In most American cities the customer is almost spoilt for choice. That job is very labour intensive and lends itself to the activities of a small entrepreneur.
The small entrepreneur has the problem of finding a location and obtaining the necessary permission from the local council. He must apply to the local water authority to ensure that the right sort of sediment traps and filters are used before the water drains into the sewerage system. It is right that that should be done, but it all adds to the costs and the problems associated with establishing a labour-intensive business. I know from speaking to people who run manual car washes in this country that they have difficulties in holding on to labour. I was told that, in the 506 black country, a person would work for 12 to 18 months before moving on. A similar exercise was tried in London. but people stayed in the job only two or three days before deciding that the work was too arduous.
About 1.4 million new businesses are now created in America each year compared with only about 90,000 a year in 1950. America has considerable experience in creating and developing new businesses. We are beginning to realise our investment because of the work that we have done in the past few years. We still have not tapped a great resource among people—the wish to get up and do their own thing. I hope that our policies will continue under the next Government to develop much of the ground work already done by my hon. Friend the Minister and his colleagues.
I was impressed by the leaflet on small businesses "The Success Story", which was prepared by the Department of Employment and which explains what the Government have been able to achieve and what that has meant. It identifies a number of the problems that the small business man faces.
§ Mr. Trippier
On a technicality, it is important that I make it clear that the leaflet was prepared not by my Department but by Conservative Central Office.
§ Mr. King
I am grateful for that correction. I should have looked at the small print at the bottom. The leaflet informs us of the problems that the small business man has faced which the Government have tackled successfully. Taxation has been one way of tackling those problems. Taxation changes mean that those starting small businesses will be adequately rewarded for the risk if they are successful. Of course, many are not, but a large number are. That is our fundamental belief. If the opportunity presents itself to get into a high income bracket and to retain much of one's income, it is worth aiming for and achieving. But that is less likely to happen if the Government take 98 per cent. of one's income. We have created the desire to take a chance to accumulate wealth for small business men, their families and employees.
Obviously, we need to reduce the burden of regulations facing the small business man. The Government have been keen to address their mind to that. They have ensured that planning authorities have been urged to help small businesses. Simpler and more flexible building regulations have come into force in England and Wales. Employment protection legislation affecting small businesses has been eased. A small business expands and takes on people. It is important to be able to release people from employment at relatively short notice and at little cost. If a small business is shackled to making substantial redundancy payments, development is hindered. Small businesses go up and down, up and down in their development cycle. They need to shed labour, take on labour, shed labour, and so on, and there is nothing wrong in that. Of course, it is unfortunate that many people are in the difficult position of being in work one day, and out the next, but they should be secure in the knowledge that other small businesses are taking on labour.
I am pleased to note that the Government have taken steps to establish an entrepreneurial outlook in our education system. We must step up our activities. A number of years ago, I talked to a class of about 30 16-year-olds on the subject of starting up one's own business. I asked, "What is the one thing that one needs 507 to start a small business?" All the students, save one, said, "You need money." To a certain degree, one does need money. But one person said, "You need an idea." We need to stimulate that sort of outlook. We need to broaden people's horizons and make them aware that there are limitless opportunities in the education system and that, once people have completed their education, they can go out in the world and take up the challenges and opportunities of creating their own businesses. Only if people have that attitude—in far too many places our education system is not engendering it—can we hope to create the entrepreneurial society and jobs that we desperately need.
§ Mr. Graham Bright (Luton, South)
I am pleased that my hon. Friend has come to this point. Does he agree that the most important requirement if a person is to run a successful small business is that he should have the training to do so? This usually means a broad-based education. The one thing that a small business man has to do and large business man does not is to be an expert in every activity. Does my hon. Friend agree that that is probably the most important thing needed if small businesses are to succeed? Anyone can start a business, but it is a different matter to make it succeed.
§ Mr. King
I agree with my hon. Friend the Member for Luton, South (Mr. Bright) that it is essential that our education system furnishes aspiring entrepreneurs with the basic qualifications to make decisions and understand the workings of the industrial and manufacturing business sectors.
Nothing concentrates the mind like the commitment that one must put into an enterprise. No matter how much education people receive, it is sometimes difficult for some to understand the relevance of a cash flow chart and production manufacturing methods. Such knowledge comes from knife and fork experience. It is not easy to educate young people to understand these things, and much more can be done. I am aware that, in many schools, business studies takes on the form of creating a business within the school environment. Such schools exist in Birmingham, and I am sure that there are more elsewhere in the country. I commend those schools, but we must step up our efforts to extend that practice.
Although some youngsters may not readily appear to be the sort of material capable of running their own businesses, those who have difficulty mastering the three Rs, they should not be written off, because nothing succeeds like experience. Although when some youngsters leave school they may not be ready to start their own business, within a few years, having undertaken a YTS and the opportunities of training, they may eventually move on to start up their own business. They will remember that, at school, they were taught to have broader horizons than the present narrower ones that pupils all too often receive.
After a meeting I had had in a youth club in my constituency the youth officer asked me to meet some of my constituents. I went into the side room of the club and met eight youngsters. I introduced myself and asked them how old they were. They were 16 and were about to leave school. I asked how many of them had got jobs. One of the youngsters put up his hand and said that he had an apprenticeship. I said that I could not believe that the rest of them had not got jobs and the others replied, "We are 508 on YTS, you know, slave labour." I am sure that most of us remember that when we left school many of us took up jobs at slave labour rates. I remember taking up an apprenticeship in the motor industry and the pay was absurd. Indeed, before I started previous apprentices had paid the company for the privelege of receiving training.
I asked the youngsters who were to start on the YTS what training they were to receive. One said that he was to be trained as a brickie and another said that he was to be trained as a plumber. I said that they should consider the training that they will receive not as slave labour or as a dead-end job. I said that they should try to become the best brickie or the best plumber in the area. I told them that they should keep their eyes open and their ears to the ground and that once they had trained themselves to become the best they should consider starting up on their own as a self-employed brickie or plumber. Indeed bricklayers are much in demand. I told them that they should aim higher instead of believing that after YTS they were washed up and finished. That is not the ease. The YTS furnishes people with ability and enables them to go out into the market place to use those skills working for someone or perhaps working for themselves.
The efforts that the Government have made to make young people more aware of the challenges of small business and widening their horizons at school is essential if we are to continue to create the number of new businesses that are currently being established.
Earlier I mentioned that I, too, was a small business man. I remember, way back in October 1974, starting a business manufacturing alloy road wheels. I had had some experience because, prior to that I had been selling the same type of product for another company. I realised that there was a gap in the market place. That is the key to success, one must have an idea on where one's product will go. I had identified a gap in the market place and together with two other colleagues I started up a small business. If one has an idea starting up in business is not difficult. I had the necessary capital from a house that I could sell—I had bought it on anticipation of getting married, but I had not done so—and my two colleagues already ran a small business and had the necessary investment stake to put into the business.
The problems occur for small businesses perhaps 12 months or two years later. By that time the business has established its product in the market place. The small business man's hunch has been correct, but the demand for the product is so great that he is facing an increasing order book, but a lack of capacity to meet those orders. Suppliers are rather reluctant to continue to extend credit because they do not want to suddenly find themselves with an insolvent company and to lose their money.
Our company experienced similar difficulties, but we got round it by introducing new money into the business. That money came from my family and from the existing business run by my colleagues. We got over that obstacle, but many people fall at that first hurdle when developing their business from the knife and fork stage into something more sophisticated.
In those days, 1974–76, it was difficult to find new premises for businesses to develop. We were based in Warwick and there was nowhere between the areas of Coventry, Birmingham, Walsall and Wolverhampton in which to develop. That seems incredible now. The only space that we could find was on the second and third floors of a derelict industrial unit. Indeed, that is one of the 509 problems faced in many inner-city areas. Because of the constraints on land space many factories have been built on the vertical rather than on the flat. It is no good passing products up and down a factory using a lift because it is inadequate and causes bottle necks in production. Factories need to spread out, but many of the factories built in the pre-war and immediate post-war period were built on the vertical. However, such buildings soon lay derelict, ready to be knocked down while the manufacturing industries moved away to one-storey buildings.
I did not want to be located on the second and third floors of a factory block in the middle of Birmingham so we moved to Telford new town. There was an adequate supply of factory premises on one level. One of the other advantages of moving to that area was that we were able to introduce more capital into the business.
I mentioned previously that, to start the business, I had sold my house and as a result I had been living with my parents. When we moved the firm to Telford I had nowhere to live and I certainly could not commute from Birmingham. However, in Telford there was plenty of good rented accommodation and my accommodation was very close to my factory. As a small businessman I found myself working all hours. It was not unusual to load up a lorry coming in from Holland at midnight to enable that lorry to get down to the docks first thing in the morning for shipment across to Europe. We were able to undertake such work because we lived virtually next door to the factory. Certainly, if the factory had been located in the centre of Birmingham or London it would have been extremely socially inconvenient to commute for 40 miles to carry out such loading, especially at about midnight. However, Telford offered marvellous opportunities for the business man located close to his factory. It offered a short commuting distance between one's place of work and rest.
We should build upon the opportunities that are available in such places as Telford. When one looks around one can readily identify the problems in the southeast. There are constraints upon development because of land space and property values are high. A modest detached house in the south-east may be worth £100,000—in the centre of London it may be worth a good deal more. That modest detached house, perhaps bought seven years ago, has probably made a capital gain of £50,000.
There are wonderful opportunities for the entrepreneur in the south-east to up sticks and move to the midlands, the north-east or the north-west. He can go there clutching £50,000 to put into a small business. Of course he must have somewhere to live, but the property that cost him £100,000 in the south-east would cost him only £45,000 in my constituency. If we offered decent rented accommodation to the entrepreneur, he could go to the midlands with a substantial sum to introduce into his business. If he has a friendly bank and a partner in a similar position to himself, there is no reason why he should not be able to put £100,000 into the business plus another £100,000 by way of an overdraft. Such pound-for-pound arrangements are not unusual.
It is a good idea for entrepreneurs in the south-east to give up the congestion and overcrowding, to sell up and go to the midlands—to Birmingham in particular where their capital appreciation would go a long way to realising their dreams of having a business. Life in Birmingham is pretty good. We might criticise the Labour authority there, 510 but it is defined as Right-wing and recognises business opportunities, although some of its high rating policies make one wonder how important they consider businesses.
The countryside in the area is wonderful. The city is open with leafy-laned housing estates and a symphony orchestra. Birmingham is not that big that it is impossible to get to know us well. We have an opportunity to attract the entrepreneur who is anxious to start his own business. The entrepreneur from the south-east can widen his horizons by moving north.
Some small business development estates could do with a major refit. There is no reason why industrial units should not have living accommodation built in. Why do starter factories not have living accommodation so that a family can live alongside the business? That happens in the garage industry, in pubs and the retail trade. Why should it not occur in the manufacturing sector? Why, historically, must people live up to 40 miles from their place of work? If we brought together work and living we could realise far more the resources and abilities of the young would-be entrepreneur. I am sure that we can do more for the small business man and I am confident that the next Conservative Government will build on all that has been achieved.
Nursery factory units with living accommodation could be one way forward, as could professional on-site assistance. In privately developed manufacturing estates it would be a good idea to house an on-site accountant and secretarial facilities. Initial assistance with typed letters, simple accounting and advice would be welcome to those starting up in business.
The retail sector is important. We have enterprise zones throughout the country. After a shaky start some are proving outstandingly successful. The Telford enterprise zone is successful and the Dudley enterprise zone is coming on well, albeit on a retail platform which was not originally envisaged. Vast numbers of jobs and opportunities are being provided.
Why cannot we establish enterprise shopping areas in the cities? Most cities have run down areas which could he turned into enterprise shopping areas where small businesses can thrive.
§ Mr. Jack Dormand (Easington)
The hon. Gentleman has made some sensible suggestions, but who is to provide the money? The Minister is a devotee of private enterprise. That is the Conservative's philosophy, but it is also the kind of policy for which the Labour party argues. I should have thought that the system itself, according to the lion. Gentleman's philosophy, would provide the opportunity and the money.
§ Mr. King
Building living accommodation into nursery units is a matter for private developers. Perhaps such a scheme has not occurred to them, or perhaps there is some reason why it cannot be done. No Government diktat is needed. The Government do not need to say, "Thou shalt build living accommodation onto industrial units over 2,000 sq ft." Private developers, of which there are many in the west midlands, should examine ways of providing on-site assistance. We already have a type of enterprise zone and I see no difficulty, perhaps through inner city partnerships, about developing enterprise shopping areas.
The hon. Member for Easington (Mr. Dormand) asked where the money would come from. There is a move towards hypermarket developments outside city centres. 511 Authorities could consent to planning permission on the understanding that the hypermarkets pay a levy to subsidise a small enterprise shopping area in the city centre. The hypermarket would help subsidise the small business which in some cases has to close because it cannot compete with the hypermarket. We have to get the balance right and adjusting the fiscal problems would be a step in the right direction. Our Asian and West Indian friends would be delighted to open more small businesses in cities but they are deferred by high rates. Government reforms in relation to the community charge and the national rating charge will encourage small businesses.
I am worried about our insolvency rules, particularly as they affect directors' responsibility. In my experience there are times when a small embryonic business is technically insolvent. A business can come unstuck if an accountant says that the business is insolvent at one particular time. He will say, "You took a risk, so you're for the high jump." That does not encourage the entrepreneur to take the risks necessary to put his tiny embryonic enterprise on to the bottom league of business. We should extend more benevolence to directors who fall foul of the insolvency laws. They should not be strung up as an example.
Much comment is made about the late payment of bills. I fear legislation which will make all businesses pay bills within a certain time. Many a small business has to decide which bills to pay. The business man might want to keep his raw materials coming in so he will pay his supplier but not pay the carton supplier. A time limit will create cash flow problems for the small business as it seeks to break out of the straightjacket of bills and costs.
Product liability also causes concern. The technical resources for innovation so that a business can break into the market place are limited. Some costs of product liability, particlarly when one is exporting to overseas countries such as the United States, are substantial. I am not sure how one can get round the problems of being refused an insurance policy to cover one's product liability. That is one of the big hurdles that a small business faces. In my experience it was difficult to get hold of the sort of liability cover that we wanted when making wheels and seats. We might have given up if the market in the United States had not been such a good one to go for.
There is still the difficulty of the gap between those with ideas and those with money. We need to encourage further steps to bring the two sides together. I am tempted to suggest the idea of a small firms broker, who would have the job of introducing those with money to those with businesses. Perhaps the banks should play a greater role by taking initiatives and saying publicly that they are in the business of creating small businesses and want to go hell for leather to that end. They must have special departments for that, and people to make the introductions on a friendly basis, rather than merely doling out money for cash-flow forecasts, and the nice talk of promoters, in some cases only to find that there are problems later on.
I also want to pay tribute to the work of Peat Marwick McLintock in the Midland areas, which has come out with a "Businessman's Guide to Grants and Incentives in the Midlands". It is an excellent booklet, which illustrates the 512 plethora of opportunities for assistance and grants that is available for small businesses in the midlands. That, too, goes a long way to helping small businesses develop.
All too often we hear of those who are not able to offer the security that is necessary for those who wish to lend money. A good idea can fall as a result of not obtaining the necessary funding. I wonder whether a special scheme could be introduced in inner city partnership areas under which the Government would allocate a small amount of risk capital for new business start-ups. That could work within the existing ICP scheme; perhaps a small firms board could be created within that scheme for the inner city areas. Such help would probably only be available after the first year of a new business's operations. Initially, people would be on their own, starting, say, a welding or accident repair business. I mention the inner city because many of our West Indian friends find it particularly hard to start a business. Perhaps, ultimately, those people hold the key to our inner city rejuvenation. I do not like the thought of zeroing in on a particular minority to give the people who comprise it special help that is not available to others—it should be available to everyone. However, in our inner city areas there are still opportunities for West Indians and Asians to create their own business—a far more difficult proposition than it is for the indigenous population.
The Government have a record of which they can be proud. One looks in vain for the ideas of other parties. One finds them wanting, if they are mentioned at all. We have made several significant steps over the past few years. I am sure that we shall make many more over the next five years, and progress should he maintained. Within the small business sector lies the hope and salvation of many of our people and great cities—small businesses with the skills that are necessary to drive us forward towards the latter part of the century into a post-industrial society, but nevetheless, a business-oriented society. I am convinced that the next Conservative Government will rise to the challenge.
§ Mr. Stephen Ross (Isle of Wight)
I have listened for nearly an hour to the hon. Member for Birmingham, Northfield (Mr. King) and have enjoyed at least some parts of his speech. On occasion, he was somewhat too party political and euphoric, because nobody in his right mind wants to discourage small businesses, which are the wealth of the nation and from which big businesses grow. My party and, I am sure, the Labour party want to encourage small businesses.
The hon. Member for Northfield had a tilt at the Labour party in the early part of his speech, saying that when the Labour party was in office it took no notice of small businesses. That is not true. Mr. Bob Cryer was a good Minister for small businesses. At the time of the Lib-Lab pact we persuaded the Prime Minister to make Lord Lever the Minister responsible in the Cabinet for small businesses. So efforts were made. It was not easy, because the country had been in a financial crisis.
I had a rant on this subject, as the Minister well knows, only three or four weeks ago. I do not want to bore him or the House by repeating myself. I have been involved with small businesses during the past 10 to 12 years, and I have tried to build up a few of them. I own a china shop and my wife has a bookshop. I own premises that I lease out to a man who makes furniture and to a person who 513 makes double glazing. I have a bakery which my son helps to run; it has been bankrupt twice, but it is now making money. I also have tenants involved with hairdressing and children's clothes. I also try to sell Isle of Wight products, which is the biggest mistake that I ever made. I try to sell Isle of Wight wine and biscuits, but nobody seems to want to buy them.
I speak as one who has borrowed freely from banks over the years. High interest rates still prevail. I know that they have come down, but far too often they still cripple small businesses. Inflation is levelling off at 4 per cent. and may fall slightly, but interest rates are still extremely high. Anything that we can do to get interest rates down will help small businesses more than anything else.
I shall have a go at the banks. I am grateful to them for helping me, but they seem to clap on all sorts of charges. I recently found another one on my bank statement a security charge for holding deeds of £9 or £10. That idea comes from the Americans. The banks charge arrangement fees and about 50p every time that we cash a cheque. Given that the National Westminster Bank has just made profits of more than £1 billion, the banks could be more helpful than they are.
I want to talk about the role of the Development Commission, and I know that the Minister will share my views on this. I pay tribute to the Minister, who has done a good job in the time that he has been in charge of small businesses. He has achieved a great deal. At one time, the Development Commission was under threat from the Government, but fortunately it survived and has an enormous role to play in rural areas such as my constituency. It has done much for us int the way of building nursery units, and it has recently spent just under £1 million on converting a boat yard into units in Cowes, which I hope will be let. However, the problem is that the commission's wings may well he clipped in future, and if we must look only to the private sector for the provision of such facilities, that simply cannot be done in the Isle of Wight, the west of England or in many other parts of the country. The private sector will not receive the return that it requires from the lettings—about £5 per foot in a constituency such as mine. The maximum will be about £2.50, which is not a feasible proposition for the private sector.
When seeking outside developers to build factory units, possibly for a small high-tech park, which is what my development board has in mind, the only way to do that is to allow them to build 100,000 sq ft of retail warehousing. That is crippling to the in-town retailers, but outside contractors require that incentive. There has been some glee on the Conservative Benches about the fact that we have just lost control of Medina borough council, but that was due not so much to a swing to the Conservative party but to the problems of planning and the question whether the island should have another Tesco superstore, which will go to Newport now. Consequently, we retained all the seats in Newport and lost them all in Ryde. Ryde thinks that it will lose out because the superstore is going to Newport. Now we are trying to build some factory units just outside Ryde, and the only way to do that is by putting up another 100,000 sq ft building of the B & Q superstore type. That will cripple the town centres. Planning decisions should not be taken under pressure of that kind.
The Development Commission is the body to which we must continue to look to supply the factory units that we 514 need and that are rapidly taken up. They are subsidised, and I believe that that subsidy must be met by central funds.
I criticise the Development Commission to some extent because it is a little bureaucratic, through the Council for Small Industries in Rural Areas, its subsidiary. It is occasionally probably too slow in reaching decisions. Sometimes it is very slow in bringing in accountancy advice. Apart from that, I have nothing but praise for the commission and its chairman. We owe it a great deal in my part of the world, as is the case elsewhere, I am sure.
The local authority can also play a vital role. I am a great believer in local government. It has had one hell of a time over the past few years with central Government withdrawing funds. Nevertheless, the local authority is always the body to which the smaller or bigger firm comes when it needs help. The hon. Member for Northfield talked about tourism. I could not agree with him more. About 8 million people visit the Isle of Wight every year, which is far more than the number of people who visit the Channel Islands. It is a bit below Devon and Blackpool. If the local authority is interested in encouraging tourism, it can do so by providing small amounts of funds and helping in other ways such as the provision of facilities. That is desperately needed because tourism has had a rough ride since 1979.
This year we had the special Olympics in the Isle of Wight. A great deal of work was done by the local authority. Sponsorship was given and some of the people who visited us from all parts of Europe and England were privately accommodated on the island. Nevertheless, the county council did most of the spadework. A little later this year we shall have a festival of the arts. I am staggered that it has come off. When it was suggested by a PR consultant who works in the House, I poured cold water on the idea. I thought that we would lose a lot of money. We lost money on a song contest. I did not think that, the festival would get off the ground. In fact, it has, and I am pleased to say that the Minister for the Arts, if he is still in office, will visit us. Sadler's Wells ballet, symphony orchestras, and so on are coming. It is amazing. The sponsorship has also surprised me. It has taken us a year and a half to build up the festival, but it will last for three to four weeks. We are using the grounds of Osborne house for the ballet and other events.
That would not have started if the present leader of the county council had not said, "We'll put £20,000 into the kitty so that Mr. Kevin West can be appointed to organise the festival." Mr. West has been extremely successful as the organiser, but basically the process started with the local authority. That is why I come back to the role that the local authority has and must continue to play. It is well known that the Minister is a great supporter of enterprise agencies. We established our enterprise agency through the local authority, although most of the money came from other sources. Through the local authority we have moved up a step to the development board, which is chaired by our former lord lieutenant.
I should like to make one plea to the Minister. We have kept our enterprise agency going because, through his efforts, he has persuaded the Chancellor of the Exchequer to encourage enterprise agencies by putting aside money that can be given to them if other funding comes from local sources. It doubled the amount. That was a good idea. It was floated for some time, and it has now come to fruition.
515 I should like to put this point to the Minister's boss, the Secretary of State for Employment, who was on the island recently. He should see whether the scheme can be made more flexible. We should like to merge our enterprise agency with our development board, but we cannot do it because we need the extra cash. That is why we shall hang on. I accept that there are some development boards that the Government suspect are not run on the lines that they would like. It is only right that the structure should be investigated, but if it comes up trumps I ask the Secretary of State to be a little more flexible. It would help us, and I believe that it would help others.
The development board has managed to bring together all political views. It has managed to get the three authorities on the island to agree on how we should proceed. It is doing very good work. I pay tribute to Sir John Nicholson, who has moved into areas in which I could not have operated. He does not mess about going through junior bank managers. He rings up the chairman himself and things begin to move. That is his ability.
The boards and enterprise agencies are there to help occassionally with finance. The hon. Member for Northfield talked about some sort of Government funding, perhaps at subsidised rates of interest. We on the Liberal Benches have promoted that idea for a long time. It will be in our manifesto, and is highly desirable. When I was leader of the county council, we had a budget of about £150,000. We were able to lend to small firms that had a bit of crisis, perhaps over a machine, and could not get the money from the bank. They were stretched too far. Small firms might have had a problem with marketing, so they received help with publicity. They were helped with all sorts of things, such as stands at shows on the mainland, and even in Germany and other countries. Those are areas where a little money can help enormously. It is not always forthcoming from banks—not by a long shot. I used to always ring up the bank managers, to find out why a firm was not being helped. We always had it double checked by the treasurer. We used to proceed through the enterprise agency. Such matters are now dealt with directly by the development board. I cannot remember one instance when we fell down. On the whole, that little stimulus helped enormously.
The role of accountants is vital. As the hon. Member for Northfield said, it is in the second or third year that one gets into difficulty. He mentioned Peat Marwick McLintock. Accountants should do a little more, if possible—even the local firms—to help small businesses, perhaps by not charging too big a fee to start with. They should keep a watchful eye on small businesses because things tend to go over the top. They get excited, orders come in, they can overstretch themselves and then they are in difficulty. The accountants can keep them on the strait and narrow. Such things can happen—for example, in the bakery to which I referred.
I should like to fly my kite, in that I am a great believer in the elected mayoral system. Birmingham should have a chief who is directly elected and who can make decisions. Incidentally, it would take one hell of a load off the backs of Members of Parliament. We would not be involved in matters that should rightly be subject to local decision. We would be able to do the work that we wanted to get on with. We are constantly being called to write to the local authorities or make pleas on behalf of constituents on 516 matters that should not be our concern. I believe that the leaders should be well paid and should have a team—of professional advisers. The Government would then have to listen when the mayor of Birmingham arrived. I should like the Lord Mayor of London to be a real Lord Mayor. I should have liked to be elected the mayor of the Isle of Wight. Then I could have done things that I have not been able to do in my 13 years in the House. But I have not managed to get that into our manifesto. I nearly won that battle, but not quite.
I agree with what the hon. Member for Northfield said about the problems of late payment. That matter has been discussed much in this Parliament. Surely the problem is that the big firms do not pay the small firms promptly. That happens on too many occasions, and sub-contractors suffer enormously when their bills are paid late. It could work the other way, and the hon. Gentleman is right to point that out.
We would like national insurance contributions to be cut by about 25 per cent. in assisted areas and unemployment black spots. That would help small businesses.
I do not agree with assisted areas, and I believe that the Secretary of State does not either. We should help small firms, wherever they are. If someone has a good idea, I say, for goodness sake, help to get that bloke off the ground. This country cannot afford to lose such people. People still have bright, fantastic ideas. Japanese products seem to be based on ideas that started here, although I agree that the Japanese are now giving some back to us. People come to my office with all sorts of amazing ideas recently even a cat trap. I must say that I did not see a future for that!
Those people should be helped, not necessarily just in assisted areas. I have bleated about that many times. Unemployment is at about 17 per cent. in the Isle of Wight and is more than that in winter. One feels bitter when one loses a firm to an assisted area. We have lost one or two, notably Desmond Norman. I feel strongly about all these matters.
Many niggling factors do not help small firms. I have great battles with our county surveyor because he tends to go around putting double yellow lines everywhere, often unnecessarily. It can hurt a small business, if, when it has just got going, suddenly yellow lines are painted along its road. People cannot park outside, so they tend to go elsewhere. Road repairs and unnecessary closures are another problem. We have had roads closed for weeks on end, and that can be damaging for a business's cash flow. Valuation officers should deal more quickly with rating reviews. Often they take a year and will not give an inch, even if a road has been closed for some weeks, or a redevelopment is going on opposite and affecting business.
There is too much fussiness about bill boards. Small firms up hack alleyways or in secondary trading positions, and suffering as a result, want to make themselves known. They put up decently decorated boards and the surveyors' department comes along and takes them away. It tells greengrocers that they are coming out on the pavement too much and should move back. Two greengrocers opened on the Broadway in Totland bay and they were served with such a notice. However, anyone who would open a greengrocers there in the middle of winter deserves a medal, because there is virtually nobody to serve. The department is crackers to behave like that. Such niggling 517 factors tend to come from authorities run by people who have never had their own business and know nothing of such problems as a weekly letter from the bank manager.
One major factor has risen recently about which I had no knowledge, although perhaps I should have realised what was going on. It results from the sort of regulations that we often pass in the House without debate. We recently passed one concerning the carrying of chemicals on roads and ferries, and quite rightly because many dangerous chemicals are being carried in this way but have not been declared.
However, many chemicals are desperately needed by firms in my constituency such as Plessey Truecast—a firm that the hon. Member for Northfield will know—which makes castings for the motor trade and racing cars, and paint makers, all of which are finding that the chemicals cannot come on the ferries because all the ferries take both passengers and lorries; there are no goods-only ferries. There is some dispensation when there are only 25 passengers on board, but ferries will almost always carry more than 25 passengers.
All this will cause problems and add to the firms' overheads. I have met with the Minister with responsibility for shipping, who happens to have a house on the island and so is aware of the problem, which is not an easy one to overcome. The cost of the Solent crossing is always a complaint, because it can add hundreds of pounds to a firm's costs, and there will now be the additional problems over these essential chemicals. Even the water authority is having trouble. I am not sure how we shall get over this difficult problem.
The House never debated the regulations, but perhaps it should have done and insisted on some dispensation for a longer period. I know that, as a result of the Zeebrugge 518 disaster, the problem of carrying chemicals is in everybody's mind and it is right that something should be done about it. However, the result has been another problem for small businesses in my constituency, some of which will move if the problem cannot be solved. Having gone through the traumas with Westland, Plessey and the recent Williams bid for Temperature, which is a company employing nearly 300 people in my constituency and having survived all those, we are now coming up against the problem of the chemicals. It is a good job that I am leaving the House, because I do not think that I could take very much more of this.
Finally, we want greater loyalty about buying British goods. I wish to goodness that people were a hit more loyal to their country. When I opened my business selling china, I determined that I would sell only British and Irish porcelain and glass, so I sell Wedgwood, Coalport, Waterford glass and so on. A salesman came in the other day and asked us to purchase some Czechoslovak glass and my manageress said, "Oh no, we sell only British Glass." He looked at some Caithness glass and said, "Well, that was made in France anyway." I checked with Lord MacKay, who was chairman of Caithness glass at the time, and asked whether the company got any glass from France. He said, "Of course we do. It is much cheaper. Then we inscribe it." One cannot win. We should try to encourage greater loyalty to buying British and buying locally. Perhaps we could persuade the public to do a bit more of that.
I am grateful to the House for putting up with me and for listening to this rant, and I am grateful to you, Mr. Speaker, for allowing me to make my last speech to the House.