Small Businesses and the Self-employed

HC Deb 31 January 1990 vol 166 cc364-404 7.15 pm

Mr. Matthew Taylor (Truro)

I beg to move, That this House believes that the undermining effect of high interest rates combined with the impact of the Uniform Business Rate and revaluation in England and Wales, will have a catastrophic effect on small businesses and the self-employed; further believes that the effects of bureaucracy, employee poll tax defaulters and the late payment of debt will increase the number of bankruptcies within the small business sector throughout the counties and regions and nations of the United Kingdom; and urges Her Majesty's Government to take immediate steps to extend the relief associated with the introduction of the Uniform Business Rate, to take the opportunity of the Budget to improve the fiscal climate for small businesses and to enter the Exchange Rate Mechanism of the European Monetary System in order to improve the economic environment within which small businesses and the self-employed operate.

Mr. Deputy Speaker (Sir Paul Dean)

Mr. Speaker has selected the amendment in the name of the Prime Minister.

Mr. Taylor

I welcome the opportunity afforded by the Liberal Democrats to debate the needs and difficulties of small businesses. Just before the debate the Minister told me privately that he also welcomed today's debate because we rarely have the opportunity to discuss these matters. The Liberal Democrats tabled the motion because we believe that there are important issues, developments and difficulties facing small businesses and we wanted to give the House the opportunity to debate them. I hope to suggest some practical measures to relieve the difficulties that small businesses are experiencing.

The Government claim that a number of advances for businesses have taken place since they took office. We certainly acknowledge that there have been advances for monopolies and the privatisation of monopolies. There have also been some advances for other businesses—I would not wish to pretend otherwise—but recently the Government have created significant difficulties, particularly for small businesses. In election after election the Government described themselves as friends of small businesses, but business men and women tell me that the Government's present policies prove them to be anything but that. It would be interesting to see an opinion poll showing the reactions of small business men to the pressures of interest rates, business rate changes and new bureaucracy and red tape that are being imposed on them by the Government.

The economic situation is worsening for businesses of all sizes, but small companies that are particularly vulnerable to those changes and are in a relatively weak position to negotiate with banks and to defend themselves against those changes suffer especially. After 10 years of Conservative government which were ushered in on the grounds that we had to tackle inflation and promote competition, we now have an inflation rate comparable to that which obtained at the end of the Lib-Lab Administration. For all that Ministers say, our competitiveness cannot be described as good either, for we have a record trade deficit—the only obvious accurate way of measuring whether our businesses can compete effectively with businesses abroad.

The latest quarterly report from the Confederation of British Industry suggests that Britain is once more on the brink of a recession. We are smitten with high interest rates and high inflation. For all the Government's boasts about new businesses, there was an increase in business failures in 1989 for the first time in five years. The latest CBI survey shows that business failures in 1989 rose to 18,000, which was a 10 per cent. increase over 1988. The CBI also states that we may see a substantial rise in bankruptcies, a further 1 per cent. rise in inflation and a £2 billion shortfall in investment, all due to the Government's policies. That is hardly a sign that Thatcherism has overcome the inherent weaknesses in the economy.

From a Government to whom they once looked for support, small businesses now face the uniform business rate, revaluation, continued high interest rates, skill shortages, increased administrative burdens and an unsustainable exchange rate. The National Federation of Self Employed and Small Businesses states that high interest rates are proving a huge burden on small businesses. They create a climate of uncertainty and make it harder for those businesses to expand.

The federation cites a number of examples of the way in which businesses have been hit. For example, a small manufacturing company with six employees in Berkshire is behind with orders. It cannot reinvest in new equipment and is having to turn down orders. A 20-year-old family business in Mid Glamorgan is prepared to state publicly that it is threatened with liquidation within two years if interest rates remain at the present level or are raised.

I have spoken to business men in my constituency and I am aware of a dramatic change over the past few months in their attitude to the Government. Local businesses have called a meeting in my constituency on Saturday evening because they have been made desperate by the Government's policies. Those are the problems that small businesses face in this enterprise culture.

Mr. Peter Thurnham (Bolton, North-East)

When the hon. Gentleman spoke to small business men in his constituency, did he find that they valued the fact that his party—under one name or another—helped to keep the Labour party in government for four years with all the great "benefits" that that Government gave to small businesses which were closing down then far quicker than they are now?

Mr. Taylor

Small businesses look back on the influences that the Liberals were able to exert on that Labour Government. They are aware of the cuts in inflation that happened then. They are also aware of the fact that the Liberals managed to have a Minister responsible for small businesses appointed to the Cabinet. That Cabinet post has disappeared and the responsibility has been moved from the Department of Trade and Industry to the Department of Employment. Obviously the Government do not consider small businesses to be a vital part of our industrial base or its power house. They regard them simply as a vehicle for employment legislation.

Mr. Roger Knapman (Stroud)

Since the Liberal party was the power house at the time, will the hon. Gentleman explain why currently there is an increase of 1,200 new small businesses every week, while under the Lib-Lab pact there was a decrease of 100 businesses a week?

Mr. Taylor

One of the peculiarities of the Government's boasts about the growth in businesses is that they ignore the fact that the businesses that are created are often tax shelters and not real businesses. Other people trying to create real new enterprises, for example, through the enterprise allowance scheme, find it increasingly difficult to do so. People trying to maintain their self-employed status are also having difficulties.

Mr. Alex Carlile (Montgomery)

Does my hon. Friend agree that the only fair way to judge the statistics about small businesses is to look at all the figures, including the number of liquidations? Does he agree that bankruptcies and liquidations among small businesses are running at record levels and that that is a direct consequence of the Government's economic policies that are crippling the small business man's cash flow?

Mr. Taylor

Many people have told me that they are threatened with bankruptcy and liquidation—[Interruption.] Small business men will not respect Conservative Members if they laugh as I describe their problems. Small business men will also not be amused by the Government's shilly-shallying and ducking of the measures that could reduce inflation and interest rates.

The Government must seriously consider the need to join the exchange rate mechanism of the European monetary system. That policy option is staring the Government in the face. Whenever a Minister leaves the Cabinet, it seems it is only a matter of days before he announces publicly that we should have joined the ERM of the EMS, although the Minister was not allowed to say that while he was in the Cabinet. That stubbornness is illogical and it is not supported by the serious economists and business groups. It is also patently damaging to the prospects for British business in Europe and to our ability to play a full part in developments in Europe.

The Liberal Democrats have consistently favoured membership of the ERM. The Conservative party has said consistently that it favours membership one day, but it sets blocking conditions, and every time the Cabinet meets we know that membership will not be on the agenda. Unfortunately, the Labour party's position is no better as it ducks and blocks the issue. We hear fine words, but no real intention to act on them.

The most important step that we can take to help businesses in this country at the moment is to reduce interest rates. We can do precisely that by joining the ERM.

Mr. Jeremy Hanley (Richmond and Barnes)

The hon. Gentleman will recall the White Paper which the Government published five or six years ago entitled "Lifting the Burden". It listed certain burdens on small businesses. The hon. Gentleman will be aware that the vast majority of those burdens have now been lifted as a result of Government legislation. However, one burden—statutory audit for small companies—has not been lifted. What is the policy of the hon. Gentleman's party on that?

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

I wonder what the Government's policy on it is.

Mr. Taylor

Perhaps the Minister can tell us later what the Government's policy is. I intend later to outline a number of measures that I would like to introduce to cut the red tape and bureaucracy which currently face businesses.

The problems of interest rates have been debated endlessly in the House. Therefore, I want now to turn to considering the blow falling on many businesses, especially in the south and south-west, caused by the introduction of the uniform business rate and revaluation.

For all Ministers' claims, the UBR will have devastating consequences for small businesses. Indeed, the largest part of my mail bag comprises letters about the UBR. In introducing the UBR, the Government have moved the initiative away from small businesses back to the Inland Revenue. The changes cut the links with local councils and they remove the right of local businesses to appeal after six months, and that latter change is inexplicable because only the Inland Revenue will benefit.

A good example of the problems caused by the UBR and the revaluation can be found in a family hardware business in the heart of Truro. In my constituency, the UBR has meant an increase of nearly 10 per cent. over the old rating system. That extra money, which is being levied from our local businesses, is to pay not for extra local services, which perhaps those businesses could accept, but for cuts in rate levels in other parts of the country where service levels will continue to be protected. Taking money from one of the poorest parts of the country to fund areas with high levels of services is regarded by people in my area as quite unacceptable and inexcusable.

Mr. David Nicholson (Taunton)

What would the hon. Gentleman say to small businesses in my constituency? They are facing difficulties, not from the UBR which, on present rateable values, would be lower than the present rates in Somerset, but from the revaluation. Would his party abolish them or postpone the revaluations still further?

Mr. Taylor

If the hon. Gentleman gives me a moment, I shall answer his question.

The proposed transitional relief scheme goes some way to helping small businesses. It was precisely because I foresaw the massive difficulties when I served on the Committees that considered the Local Government Finance Bill and the Local Government and Housing Bill that I have consistently pressed for transitional relief measures, and we have only gradually seen the Government start to introduce them. Today we have outlined a series of measures further to help businesses facing massive revaluation problems. First, we strongly believe that transitional relief should be applied to all businesses that exist in April 1990, regardless of whether they subsequently move their premises. There are several important reasons for doing that.

It will cause great difficulties for businesses that need to move, for whatever reason, to be outside the relief scheme as soon as they leave their current premises. That serves as a hindrance to business expansion and it will cause difficulties for businesses seeking to sell premises as buyers will be few and far between if relief will not apply to them. It will also hit businesses that are trying to trade down as a result of the increase in their rate bills. By moving to smaller premises, they may still end up paying the same or greater rates than they pay in their existing premises because they will not get transitional relief. Also, the people from whom they are renting premises will be put in a strong bargaining position.

Any decreases in rents that might otherwise have arisen from the changes will not take place because people involved in leasing premises and rent negotiations will know that if a business moves they will lose transitional protection. Most ironic of all is the fact that, although the Government have not extended transitional protection to them, a business moving to an office where it will gain from the changes will still get gains phased in over a period. It is a no-win situation. Every which way they go, it seems that they will have to pay more than they paid before. They cannot escape that. I wonder whether Ministers intended that or whether they understand the impact that it will have on small businesses.

Secondly, I call on the Treasury to contribute funds to ease the implementation process. I should like it to undertake a series of measures to help to ease burdens on companies that are being hit most by the revaluation process. I do not believe that there is any logic in doing that unless the Treasury is prepared to take on at least a part of the burden, otherwise other companies that may deserve to benefit from the changes will see their benefit put off even further into the future. It is an obvious moment for the Treasury to make a contribution to earning the money that it will claim from businesses at a later date. [HON. MEMBERS: "The taxpayer, the taxpayer."]

Mr. Simon Hughes (Southwark and Bermondsey)

My hon. Friend is being interrupted by Conservative Members saying, "The taxpayer, the taxpayer," from a sedentary position. Would they like honestly to answer the question raised by the hon. Members for Richmond and Barnes (Mr. Hanley), for Beaconsfield (Mr. Smith) and so on? Would they prefer the taxpayer to assist the transitional arrangements, or would their constituencies, with an increase of more than 140 per cent. because of revaluation, prefer that there is no taxpayer assistance and that businesses should bear the whole burden? Unless they can answer that question, they should support my hon Friend and our proposals.

Mr. Taylor

That is precisely the point that I have been making. My hon. Friend is quite right.

Mrs. Edwina Currie (Derbyshire, South)

rose—

Mr. Taylor

I think that an eager volunteer wishes to respond.

Mrs. Currie

If the hon. Gentleman has heard me speak on this subject before, he will know that my local business people face substantial reductions in the business rate. We are very grateful. It means that at last we can see the regeneration of our area. As for the point that the hon. Member for Southwark and Bermondsey (Mr. Hughes) invited the hon. Gentleman to make on his behalf, putting 2 billion quid back into the economy all in one go in the way that was suggested would be inflationary.

Mr. Taylor

I have mentioned several non-inflationary actions that we can take. It is inflationary for the Government to pay off their debts because they dare not spend the money that they are currently attracting. That is a mistake, and they should not be engaged in it. Nothing is more important than building up and protecting our existing businesses. It is no good for the country to help at the margins of inflation if, in the process, the Government again bankrupt businesses that will provide the dynamo for solving current problems.

Mr. Hanley

rose—

Mr. Gary Waller (Keighley)

rose—

Mr. Taylor

Conservative Members are seeking to intervene. I have given way a considerable number of times. I want to continue with my points on how we will tackle revaluation.

Thirdly, the relief scheme should be extended to cover more premises by adjusting the size of businesses for which transitional relief is available. Small business organisations have been pressing Ministers for that, and some have pressed for large increases, and possibly a doubling of the size of the premises involved. Although I would not necessarily argue for going the whole hog on that matter, we need increases. I suspect that all hon. Members are aware of businesses that have been hit and have been outside the small business category but yet, in every other sense, should surely be eligible for help.

Mr. Waller

Will the hon. Gentleman give way?

Mr. Taylor

I have already said that I wish to finish the points that I want to make on this subject.

Fourthly, relief should be increased. The limits on increases on rates—15 per cent. plus inflation for small businesses—should be further reduced to 10 per cent. Bearing inflation in mind, we are still talking about a crippling series of increases over a long period. Although some businesses can quite easily cope with such increases, others, mainly smaller local businesses with only one premises in town centres, are finding it extremly hard to cope. Frankly, there is little prospect of increasing their turnover or profits at a rate that would allow them to pay.

Fifthly, the transitional relief scheme should be extended to allow small businesses the necessary time to adjust. The present system covers most businesses. I applaud the Government for giving them some time to adjust. However, it does not allow for many businesses with large increases in their rates bills, which, even at the end of the period of transitional relief, will still find that they are faced with a large lump sum increase. During Prime Minister's Question Time last week, the Prime Minister said that the Government would look at that matter and might be amenable to extending the specified period. I hope that the Minister of State, Department of Employment will be able to elaborate on her comments and confirm that the Government will ensure that that is the case. That would provide a large measure of security to businesses that have been hardest hit by the changes.

Those proposals are positive measures to help businesses through the painful process of the introduction of the UBR and revaluation. However, they can only mitigate the effects of the UBR and revaluation. No amount of improvements can make ideal a system that was ill-conceived in the first place, though I put those suggestions before the House in the hope that Ministers will take some of them on board to provide a measure of relief.

We need, however, to review the system on which business rating is based. We should consider a system of land value taxation. That would broaden the base of the rating system and tackle some of the advantages that developers and speculators gain from the present system. As well as broadening the tax base, it would contribute to many other desirable improvements, such as the regeneration of our inner cities by removing the incentive for business men to hold on to inner city sites and not to develop them. It would also remove the fear that improving land and property would increase the rates burden and encourage improvement of buildings.

Administration would be easier because the system would not require intrusive checking on what improvements have been made. Crucially, the system would be run by local authorities. That would preserve an essential link between businesses and the community and ensure democratic local accountability. The uniform business rate destroys that principle and centralises power.

There should be an investigation into a rolling programme of revaluation to avoid lump sum changes and politically motivated delays which ultimately make the position worse. That is precisely what happens now. If we can overcome such delays through a rolling programme of revaluation, businesses will benefit.

Our proposals for the transitional relief scheme would bring great advantages to small businesses. Our preferred system of land value taxation, combined with full membership of the European monetary system, would create a programme for change that would give small businesses the backing that they deserve.

I said earlier that I wished to cover administration. I call on the Government to do three things. First, they should explain why, reportedly, Ministers will not support the Bill to be introduced by the hon. Member for Hampshire, East (Mr. Mates) on Friday to give companies a legal right to interest on unpaid bills. The phenomenal sums owed to businesses by major concerns and Government Departments are a disgrace. The Bill would provide a measure of relief from that.

Mr. Michael Mates (Hampshire, East)

I am grateful to the hon. Gentleman for mentioning my Bill. I thought that it was a relatively modest measure which would cause no trouble across the party divide and would be of help to small business men. Unfortunately, it is now clear that the Government are not in favour of it. I suppose that the cynic in me will say that it is because I propose to apply the measure to the Government so that they pay their bills on time. I understand the Treasury's reluctance to accede to the Bill. I hope that both Conservative and Opposition Members will be here on Friday to show the massive support of small business men throughout the country for my measure, which is designed purely and simply to help them in these difficult times.

Mr. Taylor

I hope that many of the hon. Gentleman's colleagues will be present on Friday. After all, they are the largest group in the House. If his Bill is not passed, we shall ensure that it is in our programme for the next election. I hope that he can convince his party that it should be in its programme for the next election.

I have probably spoken for longer than I should have. I cannot cover all the points that I had hoped to cover, but I believe that the Minister will find that I and my hon. Friends have outlined a programme to help small businesses through their present difficulties, which have been caused by the Government. It would bring a degree of cheer to businesses around the country if the Minister would say that he was prepared to accept it.

7.44 pm

The Minister of State, Department of Employment (Mr. Tim Eggar)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: congratulates the Government on creating an environment in which enterprise and small businesses are flourishing, and urges the Government to continue pursuing the policies which have led to a record increase in the numbers of self-employed and new business formations, as confirmed by the increase in registrations for value-added tax.".

I begin by congratulating the right hon. Member for Yeovil (Mr. Ashdown) and his hon. Friends on choosing this subject for debate. It is useful from time to time to have a discussion on small businesses and the self-employed. However, I regret the extraordinary wording of the motion. It completely ignores the tremendous success of the small firms sector over the past 10 years. That success shows in the business climate established by the Government's policies, which favours enterprise and rewards risk taking and initiative. The current climate is in dramatic contrast to that created by the previous Labour Government, supported, of course, by their Liberal allies. The climate of the late 1970s was one in which small businesses were held back by punitive taxation, record levels of inflation and excessive union power.

We took up the challenge to reinvigorate the economy by stimulating enterprise and encouraging innovation when we came to power in 1979. Over the past 10 years small firms have been, and will remain, a top priority for this Government. We have ensured that small businesses have been left free to get on with their role of creating wealth and jobs. The resurgence of small business in this country is described in the Employment Department's recent publication "Small Firms in Britain".

These are some of the facts. Self-employment has risen by more than 60 per cent. over the past 10 years to stand at over 3 million. The early signs are that VAT registrations in 1989 show a net increase of 80,000, an average net gain of over 1,500 businesses a week—nearly 25 per cent. higher than in 1988.

Mr. Alex Carlile

The Minister said that self-employment had increased. Of course, that is welcome. Does he agree that the strict rules imposed by the Inland Revenue on people who wish to be self-employed are restrictive and discourage self-employment? Many people work for one employer at a given time but would like to work for many others. The strict interpretation of the tax rules excludes them from doing that. I have written to Ministers about that on several occasions with no positive reply.

Mr. Eggar

I understand the hon. Gentleman's point. With respect, it does not detract from the considerable increase in self-employment. A 60 per cent. increase over the past 10 years is a major achievement. I do not understand why the motion does not give recognition to the Government for their achievement in creating small businesses and increasing the number of self-employed.

I said that indications showed a net increase in the number of businesses of over 1,500 a week over the past year. To set that in context, we estimate that there were 80,000 new VAT registrations last year alone. Between 1974 and 1979—the period of the last Labour Government—the net increase in VAT registrations over the whole five-year period was just 85,000. Last year alone there were almost as many new registrations as during the whole period during which the Labour Government were in power. During that time the hon. and learned Gentleman and his hon. Friends claimed to influence the Labour party for the better.

The "Small Firms in Britain" booklet showed that, of the estimated 2.5 million businesses in Great Britain, 96 per cent. are small firms employing fewer than 20 people. These now account for 36 per cent. of non-Government employment compared to only 27 per cent. in 1979, and make an enormous contribution to the economy. In addition, nearly half a million unemployed people have also been helped to set up their own business through my Department's enterprise allowance scheme.

We have achieved those remarkable figures by reducing taxation, scrapping unnecessary controls and cutting red tape. We have left business men free to make their own decisions and to take the rewards with the very minimum of Government interference.

Mr. James Wallace (Orkney and Shetland)

I do not in any way dispute the figures that the Minister has just given to show the increase in self-employment during the past 10 years, but does he accept that at a time of increasing unemployment—it has almost trebled since the time of the Lib-Lab pact—a large pool of people have been necessarily forced into self-employment because they have been forced out of employment?

Mr. Alex Carlile

That is the context.

Mr. Eggar

The hon. and learned Gentleman is wrong again—[Interruption.] Well, we have created nearly 3 million new jobs in this country since 1983. We now have over 1 million people more in employment or in self-employment than in 1979. The facts do not coincide in any way with the assertions made by the hon. Member for Orkney and Shetland (Mr. Wallace). I realise that he is short of research assistants, but he should learn the basic statistics. The response to our policies for small businesses and the creation of employment has been tremendous.

The achievement of the small firms sector is the achievement of these thousands—and now millions—of people who have made the conscious decision to branch out on their own during the past 10 years. They have made their own assessment that the conditions were favourable and have identified the needs of the market and of their customers. Hundreds of thousands of individuals have taken the opportunity to put their ideas into action.

Mr. John Lee (Pendle)

Would my hon. Friend care to comment on the fact that in this important debate on this important sector of the economy the Labour party has in the Chamber only its official spokesman, a Whip and one Back-Bench Member who himself is probably nearer a large than a small business?

Mr. Eggar

The vacant Opposition Benches obviously speak for themselves. While I was giving those figures for the net increase in business VAT registrations. I was indeed looking at the hon. Member for Great Grimsby (Mr. Mitchell) because he probably would have registered for VAT back in the early 1980s and so would not have featured in the net increase last year. The hon. Gentleman may wish to comment on that point when he seeks to address the House later.

As I have said, the Government have worked steadily to reduce the disincentives to business initiative that we inherited from the last Labour Government. Taxation has been reduced and simplified. Every Budget since 1979 has seen reductions in taxation of one form or another.

The reduction and removal of unnecessary and restrictive controls has been extended to other areas. Controls on prices, dividends and foreign exchange—so beloved of the Liberals—have all been abolished, and many other areas of legislation have been simplified. Since 1979 more than 2,000 Government forms have been abolished and Government statistical inquiries have been reduced by over 1 million. Every new proposal for regulation, originating in either Whitehall or in Brussels, is now carefully scrutinised for its likely impact on business costs.

New opportunities have been created for small business in the contracting out of central and local government services and in the liberalisation of areas such as bus services and telecommunications. This has enabled large numbers of new and expanding small businesses in these areas, and in others, to give better service and to create new wealth and new jobs.

Our policies for small business have not only set up the right economic framework within which small businesses can succeed; they have also created an enterprise culture and stimulated a marked change in attitudes towards small businesses over the past few years. Not only are there many more small businesses, but they are being set up by entrepreneurs from increasingly different and diverse backgrounds. The number of women who are self-employed has more than doubled over the past 10 years. Indeed, the number of women taking advantage of the enterprise allowance scheme has increased from just 11 per cent. of all participants in 1983 to over 34 per cent. now.

Furthermore, attitudes among young people towards business has changed to the extent that a recent MORI survey showed that 40 per cent. of young people were interested in running their own business and over a quarter—over 25 per cent.—fully expected to do so.

Mr. Matthew Taylor

Before the Minister moves on from the subject of women going into business, does he accept that, while large businesses can provide work place nurseries, that is not the case for small businesses? Does he agree that it would be appropriate to help women who want to go into business or who want to work by providing child care vouchers so that they can contribute towards the cost of looking after their children and so that we can make the position more equal between smaller businesses and larger businesses in terms of their ability to help people in that way?

Mr. Eggar

One option that is available to businesses of any size is to issue child care vouchers. Indeed, increasingly featuring in the enterprise allowance scheme are people who wish to start a business in helping and looking after children. I am sure that many more women will want to take part in creating businesses that set up creches. A number of options are therefore available to women, and businesses can take advantage of the scheme to which the hon. Gentleman has referred.

Mr. Taylor

The Minister has misunderstood me. I was suggesting that the Government should provide child care vouchers, not that that should fall on businesses because small businesses cannot become involved in the same way as large businesses. If the Minister is not prepared to accept that, does he at least accept that it cannot be right for such provisions to be taxed as they are at present?

Mr. Eggar

As the hon. Gentleman knows, tax matters are the responsibility of my right hon. Friend the Chancellor. The hon. Gentleman's speech and his intervention have shown what is, I suppose, an expected lack of any understanding of government. He has put forward all sorts of ideas, but has totally failed to show how they will be paid for. It is not possible simply to provide Government with bits of paper without somehow funding the ideas on them. It is all very well for the hon. Gentleman liberally and democratically to hand out the goodies—but if he were to produce the research to support them, perhaps he would have a little more credibility.

Mr. James Paice (Cambridgeshire, South-East)

Will my hon. Friend give way?

Mr. Eggar

I would rather not, but I will.

Mr. Paice

Well, in that case I am even more grateful to my hon. Friend. While he was commenting on the various points raised by the hon. Member for Truro (Mr. Taylor), did he pick up the slightly throwaway line about the introduction of a land value tax? Will my hon. Friend discuss the devastating effect that that would have on many businesses including agriculture—[HON. MEMBERS: "No."]—and farming— [Laughter.] Well, perhaps that answers the point if the Social and Liberal Democratic party has not thought the issue through. Every time a tax has been placed on land, such as the development land tax, it has caused inflation in the value of land.

Mr. Eggar

I am sure that my hon. Friend will wish to have fun exploring this point later in the debate, if he is lucky enough to catch your eye, Mr. Deputy Speaker. However, my hon. Friend the Under-Secretary has pleaded with me not to comment on that aspect of the speech made by the hon. Member for Truro, because he is looking forward to dealing with it himself. I hope my hon. Friend will forgive me if I do not go down that avenue.

The Government's success in fostering the remarkable increase in business formation cannot be disputed. Our policy now is to build on this success and focus attention on the many businesses that were started up in the last decade and that are now facing the problems and opportunities of growth. We are determined to encourage those businesses that have the potential and the desire to grow, without abandoning our commitment to business start-ups. We need to encourage small businesses to identify their needs and seek advice, and to encourage individuals who already have the necessary expertise to provide it when small businesses ask for it.

In addition, we have identified gaps in the market provision of services and in the advice available to small firms, and we have gone out of our way to fill those gaps. The loan guarantee scheme and the business expansion scheme are designed to meet the particular problems faced by small businesses when raising finance. The Training Agency offers a wide range of training for start-ups and growing businesses with a £50 million-plus commitment through business growth training. The small firms service and local enterprise agencies advise smaller businesses, while more specialised help is available through the DTI's enterprise initiative. Much of this help is delivered in partnership with the private sector.

The critical new factor in this process will be the setting up of the locally based and employer-led training and enterprise councils. I am surprised that the hon. Member for Truro, who has one of the first TECs in his region, did not comment on that or on the commitment by many leading business men in Devon and Cornwall to making a success of it. Perhaps he is not aware of what is going on.

Mr. Matthew Taylor

The Minister is aware that I cut short my speech because of the shortness of the debate and my desire to let other hon. Members speak. There is a rather higher proportion of Social and Liberal Democrats here than of any other party. I would otherwise have dealt with TECs. Therefore, the Minister can now answer a couple of queries about them. First, would it not be possible to increase the role of small businesses in the TECs? Secondly, would it not be better to free them from the restraints of Government control? I have had feed-back from a number of people involved in TECs, and they feel that the TECs are far too directed centrally, and thus are unable to take as many of their own decisions as they would like.

Mr. Eggar

I am not sure how well the hon. Gentleman understands the position in his TEC. I think that he is aware that the distinguished chairman of it is also the chairman of a smallish company and I would have thought that that is an obvious sign of the importance that we attach to the TECs being assisted by small businesses. As to the flexibility that the TECs need, this matter has been discussed—I have done so myself on at least two occasions—with the chairman of his local TEC. The hon. Gentleman will find, if he inquires, that a number of concerns expressed by the chairman about flexibility have been met satisfactorily. We have responded to the points towards which the hon. Gentleman was edging, and he may be a little out of date.

The Government recognise that most small businesses face problems, either at key phases in their development or as a result of external factors. We recognise too that interest rates are causing problems to some small businesses, although it is important to remember that, at the same time, about half of all small businesses are in credit with the bank. Nobody wants high interest rates for a moment longer than is necessary. Hon. Members should be under no illusion that, in the longer term, a period of high inflation would do far more damage to the viability of small firms and their ability to plan than the level of interest rates.

My hon. Friend the Member for Pendle (Mr. Lee) referred to the absence of Labour Members. I am not at all surprised by this. That the Labour party appointed the hon. Member for Bradford, South (Mr. Cryer) as the Minister responsible for small business is a sign of the importance that it attaches to that sector. The hon. Member for Berwick-upon-Tweed (Mr. Beith) said that the greatest achievement of the Liberal party was the sacking from that post of the hon. Member for Bradford, South. That is an interesting gain for the country, delivered through the Lib-Lab pact. If my memory serves me right, the hon. Member for Bradford, South gave other reasons for his departure from the Government, but I shall leave that dispute to him and the hon. Member for Berwick-upon-Tweed.

Mr. Beith

The Minister is putting words into my mouth, albeit in a genial way. I did not claim that as our most significant achievement. We forced the Government to appoint as the Minister with responsibility for small businesses somebody who understood what making a profit is about—the Right Hon. Harold Lever, and a very good job he did.

Mr. Eggar

I congratulate the hon. Gentleman on that achievement. I suppose that one can put that in the positive side of the balance. I am rather more concerned about the tremendous damage done to the country during the period of the Lib-Lab pact. That is what really matters, as it had a dramatically adverse effect on small firms.

Mr. Nicholas Winterton (Macclesfield)

My hon. Friend has spent two and a half minutes dealing with the hon. Member for Bradford, South but dealt with interest rates in less than 30 seconds. The problems facing businesses emanate primarily from high interest rates, and I hope that he will appreciate the great damage that these are doing to smaller businesses. I speak as someone who comes from a smaller business background, unlike half the lion. Members now present. High interest rates are crippling smaller businesses, adding to costs and making them less competitive against overseas manufacturers not only at home but in the export market.

Mr. Eggar

My hon. Friend's knowledge of, and expertise in, all matters that come before the House is well known.

Mr. Winterton

Too bloody sarcastic.

Mr. Eggar

I apologise to my hon. Friend if he misunderstood what I was trying to say. I said that we recognise that for some companies, although not for all, interest rates are a problem.

Mr. Winterton

Most of them.

Mr. Eggar

It is generally recognised that about half of small businesses are borrowers from the bank and about half are in credit with the bank. Therefore, it is logical to say that, roughly speaking, half of small businesses are not adversely affected by high interest rates.

Mr. Winterton

Try manufacturing.

Mr. Eggar

I do not want to get into a disagreement with my hon. Friend because I recognise, as I have said, that some small businesses are affected by high interest rates. However, allowing inflation to get out of control would be far worse for small businesses—be they manufacturing businesses or other small businesses. I am sure that my hon. Friend will make his own speech in his own way, and I shall listen with considerable care to the points—

Mr. Richard Shepherd (Aldridge-Brownhills)

Will my hon. Friend give way?

Mr. Eggar

If my hon. Friend insists.

Mr. Shepherd

I understand why my hon. Friend may want to slide over high interest rates, but the intention behind them is to dampen demand. A reduction in demand affects all businesses, and that is one of the ways in which small businesses are squeezed. So to state that 50 per cent. of them are not in debt understates the position. Perhaps my hon. Friend has not given sufficient weight to that.

Mr. Eggar

I know from conversations with my hon. Friend about his anxiety; he has particular expertise in the retail sector. Many small businesses in that sector are affected by high interest rates, in terms of borrowing and of lesser demand. I accept my hon. Friends point, but I was not trying to skate over the problem. It is only right to put that problem in context and I hope that I did so in a balanced way.

The Labour party's policy review shows that it is now even more hostile to small firms than ever before. Businesses would be required to pay a statutory national minimum wage—a recipe for destroying jobs and crippling fims as they are getting off the ground. All enterprises under the policy review, whatever their size, would have to contribute 0.5 per cent. of their pay rolls to a state training levy. Freedom to hire and manage staff would be effectively removed by a requirement to submit all personnel decisions to a joint union-employer body—

Mr. Henry McLeish (Fife, Central)

Rubbish.

Mr. Eggar

It is no good the hon. Gentleman laughing—that is what the policy review says.

Labour's policy would smother small firms and stifle individual enterprise. To consult Labour about small firms would be as useful and effective as seeking King Herod's advice on child care.

The Government will continue to encourage the small business sector. We shall continue to tackle the barriers to enterprise creation and to growth, whether they be in the form of attitudes to enterprise or of a lack of business knowledge and skills, or practical barriers in the form of red tape or restrictions on access to markets at home and in Europe. Conservatives do not only say that they are in favour of small businesses; we have proved by our actions and achievements that support for small businesses and enterprises is right at the centre of all our policies.

8.14 pm

Mr. Henry McLeish (Fife, Central)

We have heard a characteristically complacent speech by the Minister of State. It was interesting to see the little tiff about interest rates. The hon. Member for Macclesfield (Mr. Winterton) was right: the Government may want to take credit for blowing away lots of paperwork and Government inefficiencies, but the key problem facing small businesses is the crippling level of interest rates.

How long does the Minister think this level of interest rates will continue; and does he seriously maintain that only a small number of firms are affected by it? The small business sector, along with the wider business community, is facing a bill of an extra £3 billion if the rise from 7.5 per cent. to 15 per cent. continues for a year.

In view of jibes aimed at the Opposition today, I must point out that collective wisdom about small businesses has been invested this evening in my hon. Friends the Members for Great Grimsby (Mr. Mitchell) and for Jarrow (Mr. Dixon) and myself. I may add in passing that this is the first time I have been able to imagine someone leading a Conservative march in my constituency, and to look over his shoulder.

The Opposition appreciate the contribution of the small business sector to growth and output and to employment. It was interesting that the Minister, who is usually courteous, would not allow me to intervene on a small difference of opinion between him and the hon. and learned Member for Montgomery (Mr. Carlile) about the Government's claimed jobs miracle since 1983.

I have a small challenge for the Minister and his able advisers. From the figures provided by the Department of Employment, particularly in the labour force survey, it is clear that, between June 1979 and June 1989, the net increase in employment in this country was 978,000; but 440,000 were double jobbers, and 470,000 were people on training schemes. By my calculation that leaves a net increase of 68,000 in 10 years. What does the Minister think of that calculation? Will he at last assure the House that these figures will be examined and that we shall hear no more nonsense about a jobs miracle made up of an odd collection of training places, part-time and poor quality jobs, double jobs and other dubious statistics related to self-employment.

The small business sector employs about 6 million people, or one quarter of the work force. It is obviously a fairly powerful section of employment creation. The Government have argued, using labour force survey figures, that within this sector 3 million people are self-employed. Our research reveals that of the 1.2 million people who entered the self-employed sector between 1979 and 1989, to make up the total of 3 million, 900,000 pay no national insurance contributions. I challenge the Government to provide another set of statistics to verify that.

Mr. Eggar

I shall be delighted to respond to the hon. Gentleman at length in due course. One of the reasons why his figures are wrong is that he used figures for the wrong year. It is some time since I looked at assertions that the hon. Gentleman published just before Christmas, but I think I am right in saying that he related figures applying to 1987–88 to 1989. I shall be delighted to set the hon. Gentleman right with the other reasons in due course.

Mr. McLeish

I am delighted that the Minister acknowledges that our document, which was the focus of such merriment among Conservative Members the other day, has been read by his advisers. But he will not get off the hook by suggesting that extrapolating the figures for 1988 to 1989 makes up for the enormous difference between the Government's assertions about job creation and the true figures.

I hope that the question of the self-employed and the doubts now surrounding the figures will be looked into. I am willing to accept that, as a result of the enterprise allowance scheme and other schemes, there are in self-employment a number of people who do not register in any of the Government's statistics and are only picked up from the labour force survey, on which figures the Government base their figure of 3 million.

In the past, the small business sector has certainly been the focus of a political knockabout in this Chamber. There are certain reasons for that. When one takes into account the fact that one quarter of the work force are now engaged in small business development and that those people contribute about 20 per cent.—an enormous amount—to the gross domestic product, one realises that it is incumbent on all parties in this House not only to take very seriously the achievements in that sector but also to look at the potential there for further employment growth.

Before looking at some of the concerns of the small business community at present, I want to refer to the hype and rhetoric of the Minister of State. This is an area in which the Department of Employment too is becoming expert. It is intimidating to other hon. Members to have Ministers, in some respects, exploiting the small business community, using it to try to highlight what the deregulated market economy has produced.

But the Government's argument about small businesses falls apart when hon. Members such as the hon. Member for Macclesfield intervene to raise the question of interest rates. The hon. Member for Truro (Mr. Taylor) also mentioned the uniform business rate. This is a saga of two halves. The Government have been shuffling papers for a decade. They have seen a rise in the number of self-employed people and an increase in the small business sector. But we must see a new relationship developing. This Government and any future Government must take the small business sector far more seriously than has been suggested by some of the comments that we have heard tonight. The new relationship between Government and the small business sector must revolve around the issues that actually matter.

We have talked about crippling interest rates, but there are a number of other matters. It used to be the case that in any forum the Government could call upon the National Federation of Self Employed and Small Businesses to talk about issues and to reflect and support what the Government were attempting to do. In recent months, there has been a change in the attitude of those bodies. In my view, they now know that they were partly used by Lord Young during his sojourn in the corridors of power and by the Department of Employment, whose projection of what it is actually doing to improve the environment in which small businesses operate borders, at times, on the slightly dishonest.

Speaking at a seminar on corporate finance in the City on 24 May 1989, the Chancellor of the Exchequer outlined clearly what businesses need. He said that businesses needed three things from Government—first, a consistent framework; secondly, minimal interference; and thirdly, limited practical help.

Let us take the second issue first. Certainly we have now arrived at a situation of minimal interference, though I have to say that, when one speaks to people in small businesses about VAT and income tax, they put a different complexion on the situation. In March 1985, we had "Burdens on Business"; in July 1985, "Lifting the Burden"; in 1986, "Building Businesses—Not Barriers"; in 1987, "Encouraging Enterprise"; in 1988, "Releasing Enterprise"; and in 1989, "A New Tack on Red Tape". It is an annual event.

Mr. Tim Smith (Beaconsfield)

It needs to be.

Mr. McLeish

The hon. Member says that it needs to be.

In the early days of the development of the small business sector, there were real problems about the amount of red tape involved. What we now see is a ritualistic attempt to engage the small business sector, to create the impression that the problems that it faces are related to much of that, without actually addressing the crucial issues that have been raised in this House by hon. Members on both sides of the House.

Clearly, the first of these issues is the question of interest rates. The irony of crippling interest rates is that they actually hit the companies that are growing fastest. The Minister has made the point that the number of companies affected is small. In reality, however, the gearing ratio of a fast-growing small business is much more significant, and outgoings are much more significant.

If such a business is asked by this Government to participate by paying its share of the £3 billion increase in debt, surely that will have an impact on the business's growth potential and its ability to introduce new technology and to create employment—clearly something that is valuable for all of us.

But it is not only my opinion that high interest rates are hitting hard. I have here a press release from the National Federation of Self Employed and Small Businesses. Issued on 10 October, and headed "High Interest Rates Hitting Hard, Say Small Businesses", it says: Mr. Bill Knox, Chairman of the National Federation of Self Employed, said 'Every percentage increase costs small firms £200 million. The real cost of money is at least 18 per cent. (15 per cent. plus 3 per cent. over base). This is how much businesses are having to pay to finance past expansion, to create new jobs, or even to survive. Small businesses are viewing the future with real concern.'

Does the Minister view the future with the concern that the National Federation of Self Employed and Small Businesses seems to have? I will give the Minister an opportunity to talk about interest rates, to answer the question that was posed by the hon. Member for Macclesfield: how long will small businesses have to endure this crippling burden? Is no hon. Member on the Government side willing to intervene and give me, with my limited knowledge, a lecture about when interest rates will come down? [Interruption.] I have given hon. Members opposite a chance to intervene, but all that I have heard is murmurs, and all that I see is grim faces.

Mrs. Currie

Is the hon. Gentleman suggesting that we should return to the situation that prevailed not so long ago, under a Labour Government, in which the rate of inflation was regularly over 20 per cent? One has only to look at the results. Far more firms were going out of business entirely than were coming into existence. These days, despite all the problems and the pressures that the hon. Gentleman has described, far more businesses are being created week by week.

Mr. McLeish

It is amazing that a party that has no future always wants to dwell on the past.

My concern—[Interruption.] Let me explain the point that has been made by other hon. Members about inflation rates. In no country of the developed world—and certainly not among our European competitors—would the Finance Minister, the equivalent of the Chancellor, use one heavy blunt instrument to attack financial and trading difficulties. That is the crucial test for this Government.

There is another measure. Despite what Ministers have said, the number of receiverships jumped by over 40 per cent. last year as the squeeze hit. As a postscript to that, let me quote from an article in The Times of 12 January: The survey also shows that three accountancy firms established a clear lead over all others in the receiving and managing sector. Cork Gully, the specialist division of Coopers and Lybrand, was appointed to 150 firms, Grant Thornton to 110, and Peat Marwick to 107"— another set of statistics that the Government should be duly proud off.

The uniform business rate has been mentioned. I think that the hon. Member for Truro gave it sufficient airing and that therefore I need not to into great detail. While, in a very simplistic sense, the north will benefit signficantly and the south will have an extra burden imposed on it, it is quite clear, again from the National Federation of Self Employed and Small Businesses, that the impact of the transitional payments will disappear. Their phasing in is an illusion in terms of the impact that they will ultimately have on small businesses.

I again ask whether the Government are truly the friends of the small business community. The business rate will start in April and it appears that people in small businesses will have to go to the local authority to determine the current position about rateable value. Discussions should be taking place with the small business community. Day in and day out, the Government lecture us and say that they are the true friends of the small business and that any other party, Liberal or Labour, that speaks or even hints at an interest in the small business sector is frowned upon. Things are changing, and it is easy to see why.

The Minister talked about training and technology. The key issues for the future of small businesses are not only output and employment growth but whether the nation and the Government can link together to ensure that product development and innovation and training can be properly applied. Many small businesses do not have the resources to carry out those important tasks.

Training and enterprise councils were mentioned. The Government say that, as friends of the small business, they welcome small businesses to TECs. Why is it that the National Federation of Self Employed and Small Businesses put out a press release on 23 September which was headed: Small firms to lose out in Government training plans"? The press release said: 'We are concerned with the direction of training in Britain. Norman Fowler states that Training and Enterprise Councils (TEC's) will be big business. Our fear is that they will be for big business only', says Lyn Hadfield, Chairman of the NFSE's Training and Education Committee. 'The composition of the boards of TECs could well lead to specialised training for large companies at the expense of smaller firms.' It is interesting to note that the small business sector is lauded by the Government but never invited to the top table. It is crippled by interest rates and by the uniform business rate. It is supposed to be involved in training, but it will be excluded from virtually every TEC in England and Wales, and the situation is similar in Scotland.

Mr. Wallace

The hon. Gentleman has said that small firms have never been consulted. Will he comment on the fact that, as the poll tax comes into operation in England and Wales, employers will have to be involved in attaching the wages of employees? That unhappy burden has been placed on small business by the Government without the small business sector being consulted.

Mr. McLeish

The hon. Gentleman makes another valid point to add to our attack on the Government. The Government's attitude smacks of hypocrisy; we experienced a great deal of that in the Minister's characteristically complacent speech.

The Public Accounts Committee's eighth report on assistance to small firms said that the Government have machinery to do much more about training in small businesses. The training for enterprise concept is interesting, but the Public Accounts Committee criticized it because it was badly focused. There was no real idea of the return on the investment in terms of the impact that the scheme had on participants. If the Government value the contribution of small businesses, they should bring them into TECs and also discuss with them the extension of existing machinery in the Department of Employment to encourage small firms to expand their output and make a greater contribution not only to their employees, but to national welfare.

The nation requires a great deal of consensus on how we move forward in industry and on employment and economic performance. The National Federation of Self Employed and Small Businesses expects the Government to put forward policies that will help the NFSE. The firm statement to the Government is that crippling interest rates must be lowered. If they are not, the number of firms going into receivership will increase. Small businesses provide 6 million jobs—a quarter of Britain's work force. It also contributes one quarter of our gross national product. If the Government believe in small businesses, they must show that they want them to become involved by adjusting the TEC provision and making sure that they are allowed to speak to Government.

8.34 pm

Mr. Michael Grylls (Surrey, North-West)

The hon. Member for Fife, Central (Mr. McLeish) and the hon. Member for Truro (Mr. Taylor), who has just left the Chamber—briefly, I am sure—were scraping the barrel when they tried to attack the Government's policy on small firms. Clearly that is their job, but I listened carefully to their speeches and I sensed that they were finding it somewhat difficult to mount the case that the Government have failed to encourage small firms and foster their interests. Any disinterested observer would see that mounting such a case is impossible.

My hon. Friend the Minister was right to say that the climate has been totally transformed. Of course there are problems, and I shall come to them shortly. Entrepreneurs would not start businesses if they were not prepared to deal with problems. That is what sets such people apart from a corporate man or someone in the public sector who has a rather comfortable life. The entrepreneur recognises that life is tough and that he has to solve problems. I am sure that my hon. Friends will agree that the Minister mounted a most convincing case to show that the small firms sector has been transformed. The climate is totally different. There has been a great deal of deregulation, but there is still a long way to go. Much good has been done and the number of complications faced by small firms has been greatly reduced. That should encourage us to go further.

Taxes have been changed. The hon. Member for Fife, Central made much of interest rates. I shall deal with that before my hon. Friend the Member for Macclesfield (Mr. Winterton) leaves the Chamber. I see that he has slipped back into his seat. I remind the hon. Member for Fife, Central that in 1979 the rate of corporation tax for small firms was 42 per cent. The hon. Gentleman may have forgotten that. It is now down to 25 per cent. and we have every expectation that it will come down again in succeeding Conservative Budgets.

The rate of taxation for the sole trader, the self-employed person, went up to a maximum of 83 per cent. and it is now down to 40 per cent. Many capital taxes have been reduced, and that is important from the point of view of leaving money in a business so that it can expand. This is a serious subject and perhaps it was a little irresponsible of the hon. Member for Fife, Central to have political fun at the expense of the Government on the subject of interest rates.

There was a forest fire involving some of my hon. Friends a short time ago and my hon. Friend the Member for Macclesfield threw in a match to ensure that it was burning properly. However, he is quite right to say that interest rates are a problem for many small firms. My hon. Friend the Minister accepts that and does not need to speak for a quarter of an hour repeating that that is a problem for small firms. However, it is not a problem for all of them because we have to add to the equation the question of demand. Of course it is true that the high interest rates from which we are suffering will reduce demand. However, we must remember that we have had eight years of record growth and demand in the small firms sector. When that is coupled to the reductions in taxation and deregulation, it will be seen that it has contributed to a huge growth in the sector. We have run into the problem of inflation.

My hon. Friend the Member for Derbyshire, South (Mrs. Currie) was right to say that inflation is the real killer. It is the worst of the two problems. I note that my hon. Friend the Member for Macclesfield is nodding. He is a wise man who nods only when he agrees. He was nodding when the Minister spoke about inflation. Had we allowed inflation to continue at 20 per cent. for five years, that would have removed all the capital from businesses. It is not a very difficult or complicated mathematical equation; even I can work it out. Inflation is the worst evil. It is worth dealing with it in the short term because it must not get a real grip on the economy. I doubt that anything divides my hon. Friend and I on that point.

Mr. Nicholas Winterton

I believe high interest rates to be a major contributory factor to inflation. There should be a more selective weapon to deal with inflation than high interest rates, which kill the goose that lays the golden egg—which is manufacturing industry and industry in general.

Mr. Grylls

That is my hon. Friend's view. In 1980 inflation was running at 20 per cent. If we had not tackled it, it would have been the worst conceivable evil. We dealt with it again when it rose by a small degree in 1985. It has risen again in 1989–90, and I believe that the Government's policies that succeeded in 1980 and 1985 will succeed now. Of course, it would be dishonest to pretend that that cannot be achieved without a great deal of pain.

I want to contrast Britain with West Germany. During the past eight years Britain has had a higher rate of growth, but West Germany has had lower interest rates, especially now. It is a question of balance. Some aspects are better in West Germany but some are better in Britain. Like other hon. Members, I travel around the country and meet many small business men. They all say, "We must not have inflation because that will kill us."

We shall have the Budget in a few weeks, and there is room for the Government to make further changes in taxation that will help the cash position of businesses. Although corporation tax for small firms has fallen from 42 per cent. to 25 per cent., for a new and growing business it still means that a quarter of its profit is lost in taxation. That is too much. There should be a lower starting rate, at least for the newer businesses in their most fragile years—perhaps the first three years. Perhaps there should be a new rate band from nil to £25,000 or £30,000 of profit. That would give small companies the opportunity to move on to the next stage of development so that they could expand their premises and take on more employees.

If too much is taken out of profit—and I believe that 25 per cent. is too much—how can a company grow? The only way that it can grow—and this comes back to interest rates—is to borrow, which in itself creates a problem. It would make much more sense if the Chancellor left more money in the businesses so that they could grow from their internal cash generation. I hope that that will happen.

Another longer-term measure would be to cut even further the inheritance tax rates for businesses. If we sincerely believe, as we do, in the enterprise culture—in the encouragement of people to take risks and invest their money in firms—firms should be passed on from one generation to another. Most firms do not reach their optimum size in only one generation. Inheritance tax has been reduced to 20 per cent., which is better than it was—it was awful—but if a firm with an asset value of £1 million, which is not a great deal in current terms, is to be passed on to the next generation, some £200,000 in cash must be produced.

I sometimes think that the Treasury believes that small firms have pots of cash in drawers just waiting to be handed over when the firm is passed on to the next generation. That does not happen. A well-run business uses its cash to develop and to advance. We must make the Treasury understand that. Some may say that firms can take all sorts of fancy measures, such as consulting accountants and lawyers, avoiding tax, transferring assets outside the seven-year rule and so on—but that is not the point. The one thing that most entrepreneurs cannot decide is when they will die. That is something that even the Treasury cannot get round. Of course, I am not referring to private money—that is a different argument—but businesses should be passed on without an inheritance tax liability.

Another area in which the climate has been transformed is the provision of general finance, especially through venture capital, the highly successful loan guarantee scheme and the enterprise allowance scheme for very small new businesses. However, there is still a gap and we would be wise to consider the practice in West Germany, where small businesses have loans totalling the equivalent of £4.5 billion at interest rates below the going rate, which is very low anyway. West Germany has prudently looked after the Marshall plan money, which is still allowing small businesses to borrow at special rates of interest. Of course, we do not have Marshall plan money in Britain, but it is an aspect that should be considered.

Multinational companies can borrow in the Euro dollar market at quite low rates, even with the high interest rates in Britain, but small firms have to pay the maximum rates. That is rather like telling young children to stand on their own feet, but when they grow up putting them in a nursery. We should consider ways to give growing businesses a leg up with special interest rates. We could also offer subsidies and so on, but they are complicated.

In 1988 about £1.5 billion of venture capital was loaned to about 2,000 firms, so it has been a successful innovation. The hon. Member for Fife, Central was not in the House in 1979, but the venture capital market was almost unknown. It is all new money. However, it has tended to go to firms with a high growth rate. Perhaps we should worry about the plodding firms such as the good, steady engineering companies that do not have a high growth rate and so are more difficult to finance.

I am sure that the problem of high interest rates will be temporary, and I hope that most of our firms can cope with them. It is a problem of today, but it will not be the problem of 1991. I am not suggesting that we should pat ourselves on the back because there is always more to do. The small business sector suffered 40 years of neglect until 1979 which cannot be rectified in just 10 years. It needs another 10 years of Conservative government to improve the climate in the ways that my hon. Friend the Minister explained so convincingly in his speech. I hope that very shortly we shall be given the opportunity for that further 10 years.

8.49 pm

Mr. Geraint Howells (Ceredigion and Pembroke)

As a very small business man, Mr. Deputy Speaker, may I begin by declaring my interest, as usual, and thanking you for calling me in this important debate for the small business man. This country was built up by the vigour and enterprise of small businesses and the self-employed, but they are now being squeezed to death by the power of the big battalions and the lack of concern of the Government. My constituency has a higher percentage of self-employed than others. I am proud of their record. I know the problems at first hand, and I have become more and more concerned about the increase in pressure under which the self-employed work and live.

I listened with interest to the Minister, whom I respect in many ways. He must take more heed of what his hon. Friends have said about high interest rates. I should not like him to be sacked for not looking after the interests of small business men, but he should have a word with the Prime Minister because I believe that the hon. Member for Macclesfield (Mr. Winterton) would do a good job as a Minister responsible for small businesses and farmers.

Many hon. Members, like me, represent areas with a large number of self-employed. When I go back to my constituency in Cardiganshire and north Pembroke people never mention inflation, although it is a big problem. They always talk about high interest rates and their effect on farmers and small businesses. They may be wrong in thinking that high interest rates have more effect on their businesses than high inflation.

I have been in the Chamber since 7 o'clock. I think that only six hon. Members who have been here since the beginning of the debate were Members of the House in 1978. Human nature never changes. We always like to laugh at young Members who are up and coming politically, but I am ashamed that some Conservative Members laughed when my hon. Friend the Member for Truro (Mr. Taylor) was trying to make a good case for the self-employed and for small businesses.

Mrs. Currie

That is because he is an idiot.

Mr. Howells

The hon. Lady did not help many small businesses when she was a Minister.

I do not blame Conservative Members if they want to criticise the Lib-Lab pact. They may criticise the Liberals as much as they like, but we are still here. May I remind them that our former leader, my right hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel), did something for small businesses that other hon. Members did not achieve. During the first few days of the pact my former colleague, Richard Wainwright, who was then the hon. Member for Colne Valley, and I met the hon. Member for Bradford, South (Mr. Cryer), who was a Minister at the time. I shall not comment any more, but we were not pleased with the result of our meeting. On our return we had a word with our leader. In his wisdom he suggested that he and others should see Lord Callaghan, who was then Prime Minister, and press on him the need for a Cabinet Minister to look after the interests of the self-employed and small businesses. That was achieved.

If Conservative Members disagree with what I have said, I can tell them about a letter that I have in my office from Lord Plumb, the leader of the Conservative party in Europe. He wrote to me at the end of 1978 to congratulate the Liberal party and Members of the Lib-Lab pact because the 1978 Budget had been the best one ever for farmers and small businesses. [Laughter.] There is no need for the hon. Member for Derbyshire, South (Mrs. Currie) to laugh. These are the facts of life.

The hon. Member for Cambridgeshire, South-East (Mr. Paice), who has left the Chamber, said that the Liberal party was in favour of rating agricultural land. Other hon. Members have expressed the same view over the years. I advise the hon. Gentleman to have a chat with his hon. Friend the Member for Southend, East (Mr. Taylor) who decided a few years ago to introduce a ten-minute Bill on the rating of agricultural land. I opposed him. I am delighted that the majority of Conservative Members came into the Lobby with me and the Bill was defeated.

Lest any other Members want to jump up to support the rating of agricultural land, may I tell them that I have a letter of apology from an ex-Minister of Agriculture because he and others had misled hon. Members about our policy. I hope that hon Members who have come to the House over the last 10 years will realise what we Liberals stand for. We will stand by our policies. Conservative Members should not laugh at what we have done over the years or at our achievements under the Lib-Lab pact, of which I am proud.

I have been a farmer all my life, as well as a small business man. Yesterday the Minister of Agriculture, Fisheries and Food announced an extra payment of 75p for the hill livestock compensatory allowance for sheep. Perhaps hill farmers in Cardiganshire will make a collection for the Minister so that he can help the Government out. I think my constituents would be willing to do that.

Investment in United Kingdom agriculture has fallen by 40 per cent. in the last five years. Full-time employment in the industry has also fallen dramatically, with the loss of some 60,000 jobs in five years. Right hon. and hon. Members speak often about the environment, but it is the farmers on the highlands and marginal lands of Britain who are really responsible for looking after it. It is a great shame that so many of them are leaving the land and the rural areas of Britain, never to return. They have been the guardians of the countryside for generations. It is a great pity that the Government are unable to help the people who have looked after the interests of us all for generations.

My hon. Friend the Member for Truro mentioned at the beginning of his excellent speech the Interest on Debts Bill that is to be introduced by the hon. Member for Hampshire, East (Mr. Mates). There is great merit in his proposals. Dr. Emyr Roberts, the National Farmers Union deputy director for Wales, states: We very much welcome this Bill, which would help virtually all farm businesses. It would allow small and medium-size firms the statutory right to interest on overdue debts from central and local Government, nationalised industries and large firms. It would not affect small and medium-size businesses in their trading with each other, and a big company could not use it against a small firm. At a time of high interest rates, it is vital that small businesses such as farms are paid promptly, as they cannot withstand payment delays in the way that large firms can. The NFU will urge all Members of Parliament to support the Interest on Debts Bill. I hope that, Ministers also will support the hon. Member for Hampshire, East and his Bill, which will do a power of good to everyone in agriculture and in small businesses.

High interest rates are crippling farmers, shopkeepers, bus operators, and everyone concerned with rural, urban and city life. I hope that, when he replies, the Minister will reassure all those affected by the Government policy of high interest rates that he personally will persuade his right hon. and hon. Friends in Government to lower interest rates this coming year. If he will, the people of this country will be delighted to hear that news. Let us hope that small businesses and small farmers, who have been the backbone of this country, and still are, will be helped sooner rather than later.

9.1 pm

Mr. Graham Bright (Luton, South)

I welcome the fact that the topic for debate chosen by the Liberal Democrats is small businesses, because they have played a growing and more important role in the development of industry over the past 10 years. It is necessary not only to acknowledge that but to congratulate the Government on the work that they have done and to reflect on ways in which small businesses can be improved still further.

Like the hon. Member for Ceredigion and Pembroke, North (Mr. Howells), I am a small business man. That statement usually brings a laugh in view of my stature. The hon. Gentleman and I are similar in that respect. I have been a small business man for a number of years.

I was interested to hear about the Lib-Lab pact's one moment of glory, when it disposed of the small firms Minister. Mr. Harold Lever, without doubt, understood the problems of small businesses. The pity is that, while he was in office, and during the period of the Lib-Lab pact—and I am sorry to mention it again, because I know that it upsets Liberal Democrat Members—small businesses and business men still suffered increases in income tax, corporation tax, capital transfer tax and capital gains tax.

At the same time, legislation was introduced such as the Employment Protection Act 1975, which was nothing more than a form of appeasement to the unions. However appropriate it may have been for large firms, it imposed crippling requirements on small businesses. When debating the problems of small businesses, we must not only think of interest rates, because those problems cover a much broader spectrum.

It is surprising that the Liberal Democrats could not bring themselves to congratulate my right hon. and hon. Friends on the steady rise in the number of businesses that have registered for value added tax since 1979. The Minister has already spelt out the enormous growth in self-employment, which has risen from 1.8 million to 3 million. We now have more than 2.5 million small businesses. It is partly because so many new businesses have been created in the past year—the weekly rate has increased from 500 to more than 1,500—that there have been more business failures.

The hon. Member for Ceredigion and Pembroke, North talked about farming. I do not farm, but I am a business man who, like a farmer, sows seeds, in the form of investments. Business men, like farmers, do not always get it right, and some of the seeds fall by the wayside; but they till the ground and work hard to protect those that take root.

Hon. Members cannot simply point to interest rates. Lack of management expertise, poor marketing skills and bad financial practice often cause companies to go out of business, and I pay tribute to the Government for their investment in the small firms service.

Mr. Alex Carlile

The hon. Gentleman gives the impression that only incompetent managers "fall by the wayside" because of high interest rates. Does he not agree that many good, sound, careful, competent financial managers have seen their businesses collapse because of the crippling rise in interest rates?

Mr. Bright

The hon. and learned Gentleman should have listened more carefully. I accepted that high interest rates caused problems, and I shall say more about that in a moment, but I also emphasised the fact that there are many other reasons for business failures. Failure in business is a horrible thing: we do not share with the Americans the culture that accepts that seeds must be sown if growth is to follow. It is easy for those who fail to blame interest rates without considering the facts.

One of the reasons why I praise the Government's contribution to the small firms service is that thousands of people have gone into business for the first time. It is not easy to run a business. There is a considerable difference between having manufacturing or engineering skills, or a flair for art, pottery or tapestry weaving, and having the marketing expertise to sell the product. Business men must understand accounts and cash flow or the company is likely to get into trouble. The small firms service has recognised that they sometimes need their hands held, and is able to guide them through difficult times. It has enabled many companies that would have collapsed in the past to survive and succeed.

Let me join in the spirit of the debate and make some constructive and positive suggestions. We still have a long way to go in assisting small firms, and I should like to see a change in administrative methods within Government. I have argued for a long time that the small firms division of the Department of Employment should be enlarged and should deal with the enterprise and deregulation unit, and that its operations should include the Development Commission and the Council for Small Industries in Rural Areas, which are now the responsibility of the Department of the Environment. I should like all the small business organisations to be brought together.

The hon. Member for Fife, Central (Mr. McLeish) spoke about training. That is an important concern for small companies which are not attracting people with the right skills. Small businesses require people with multiple skills because a small company cannot afford to employ, for example, a maintenance man, an electrician, a plumber and a carpenter; it has to employ someone who can do all those jobs. We should emulate the Japanese and the Germans and employ people skilled in multiple disciplines, particularly in maintenance. We should look at our education system, and encourage fifth-year pupils in secondary schools to take vocational courses for industry. We should recognise the needs of small businesses and not encourage people to seek work only in large companies. Some of the initiatives to bring education closer to industry, such as the city technology colleges, are extremely important.

Two areas in which the Government have actively helped small businesses are the loan guarantee scheme and the enterprise allowance scheme. We should attach to any money handed out under those schemes the obligation that the people receiving the money should undergo some training to make sure that they are equipped to run a business. The enterprise allowance scheme brought many people into business for the first time and managed to keep them in business for a year, but when the allowance was taken away many businesses failed. Perhaps it would be a good idea to examine the training facilities available and make it obligatory that people understand the basic principles of running a business.

I accept that we have done a great deal to help by doing away with form-filling and mountains of forms, but we should consider the number of inspectors and officials who call on small firms as they are the bane of small business men. There is a powerful case for a single statute modelled on the Rights of Entry (Gas and Electricity Boards) Act 1954, defining the rights of access for everyone to understand. Those who have rights of access should declare who they are, why they are there and what authority they have to visit the factory. I should like an enlarged factory inspectorate to deal with a whole range of issues rather than having so many people appear on site. There is often friction, and that is extremely confusing for small business men.

The question of late payment has been mentioned, but the House will have ample opportunity to discuss that on Friday. In my view, by delaying payment large companies often weaken their suppliers, and that is not in their interests. However, I am sceptical about the introduction of legislation as it would not necessarily work in favour of small business men.

We should do more to encourage local government to open up contracts for small businesses. There are still far too many bogus and dubious so-called health and safety grounds that stop small businesses getting involved in supplying local government. Small businesses should be taking over some of the printing and other local government services.

I began by congratulating the Liberal Democrats on allowing us to discuss this subject. As soon as they saw the possibility of small business men crying with anguish about the interest rates, they tried to jump on the bandwagon. I have every confidence that interest rates will fall. However, like my hon. Friend the Member for Surrey, North-West (Mr. Grylls), I believe that we must consider the fact that large companies can borrow from abroad. Having talked to the banks, I can see no way in which that can be extended to smaller companies. We must consider that point carefully to see whether some special borrowing powers can be applied to small businesses to allow them to have a lower rate. There is nothing sacred about that, because many large businesses enjoy that privilege already. We are not trying to buck the system; we are trying to make the playing field level once more for small businesses.

I am confident that when people pass judgment on the Government the small business men will acclaim the past 10 years as being a period of enormous success for them, and the figures prove that.

9.16 pm

Mr. Austin Mitchell (Great Grimsby)

If small businesses look to this debate for salvation or hope, they would be better employed going bankrupt. Only my hon. Friend the Member for Fife, Central (Mr. McLeish), in his excellent speech from the Opposition Front Bench, displayed any understanding of the issue. Only he grappled with the problems. For the Government, the Minister turned a condescending sneer into a system of economics and Conservative Back Benchers whistled into the wind in an attempt to keep up their spirits as their majorities decline. They seemed only to say that, bad as things are, they would be worse under Labour. People do not believe that.

The Liberals have shown a unique skill in framing incomprehensible motions. Well, I call it a motion, but it is more of a skip into which they have shoved everything. Perhaps a skip is a bit big. It is more like a Tonka toy dumper truck into which they have placed all their quirks—interest rates, the uniform business rate, bureaucracy, debt and regular brushing of teeth. It is all there. The motion even includes several non-sequiturs, the most amazing of which is that they want the relief associated with the uniform business rate to be extended. So far as I understand it, that would mean the north subsidising the south. The Liberals appear to be claiming that the north should subsidise the south for some time.

I am no friend of the uniform business rate. However, I very much doubt whether the main topic of conversation on the Borders, in Berwick or in Southport is, "Good grief, what an awful time Harrods will have when the uniform business rate comes in. We must keep up our subsidy." If that is the extent of the Liberal's thinking on the matter, it is pathetic.

The other pathetic part of the ridiculous motion is that membership of the European monetary system is introduced as the Liberal's answer to everything. In the previous motion EMS was the answer to the situation in eastern Europe. They asked, "Are there problems in eastern Europe? Well, the EMS will solve them." The EMS is now the answer to the uniform business rate, to bureaucracy and to everything else. Why is the EMS not the answer to AIDS, the problems facing the National Health Service and vandalism?

The Liberals' view of the EMS is similar to a view expressed by Lord Randolph Churchill when he described Gladstone. Before the Liberal party became green, Gladstone used to spend his time at Hawarden chopping down trees. The Liberal faithful were brought round the grounds to catch a sight of the great man and they were all presented with a chip from those trees which they went home clutching. Lord Randolph Churchill asked, "What is Gladstone's answer to the problems facing the world? Chips. What is his answer to eastern Europe? Chips. What about the poor? Chips." His counterparts today, Gladstone's teenage heirs, offer businesses a pamphlet on the EMS as those businesses head towards the bankruptcy courts.

The Liberals portray a pathetic understanding of the EMS. The exchange rate mechanism ties other currencies to the deutschmark and uses them to keep the deutschmark down. The central problem with trading in Europe is that the Germans are generating a huge surplus and that means that the deutschmark should rise if we are to trade fairly. However, currencies are used as guy-ropes to keep the deutschmark down. That is why the exchange rate mechanism has had such a deflationary effect on the economies of France and Italy, in particular, with unemployment at 2.6 million and 2.9 million respectively. There has been a depressing, deflating effect. They are forced to deflate to get down to West Germany's abnormally low rate of inflation. Full membership of the exchange rate mechanism would have exactly the same effect here. It would become an engine of deflation.

The Liberals want to enter the EMS, whatever is the exchange rate. When the deutschmark was 2.80 to the pound, they said, "Join the EMS". When it was 3.20 they said, "Join the EMS." Now it is on its way down again, they still say, "Join the EMS." They are not bothered. Yet the real problem is the valuation at which we enter. If we enter at an unsustainable valuation, it will not keep interest rates down. We would be forced to throw every engine of the economy, particularly interest rates—it is the only one that the Government have—into maintaining an untenable exchange rate. That is exactly the effect. Interest rates would not go down; they would fluctuate more wildly in the ERM. That is why the Labour party has very wisely suggested four conditions for joining.

A rate will be determined by competitors who have a vested interest in access to our market and who want us to be over-valued so that they can send us more of their manufactured goods, and cause our industry to suffer. That is exactly the effect of membership. Deflation would be the inevitable result. Deflation is the real enemy of small business.

Mr. Eggar

rose—

Mr. Mitchell

I shall give way to another condescending sneer from the Minister.

Mr. Eggar

Is the hon. Gentleman in favour of our joining the exchange rate mechanism?

Mr. Mitchell

The Minister heard me say that the Labour party has suggested four conditions. Since I think that those four conditions are unattainable, that is my position.

Deflation inhibits the growth and development of small businesses. The Government's only achievement has been to make big businesses small and small businesses bankrupt, and to turn the unemployed into small business men by making them self-employed. That is their policy for small businesses.

The real problem for small businesses is that the economy is run not for the needs of business or for industry or manufacturing—not for making things—but for those who manipulate money. Big financial institutions are the main enemy of small businesses. Their attitude, not in advertisements but in reality, is to lend small business a brolly when it is sunny, to snatch it back as soon as it rains, and then to charge it for taking it back again. They would much rather buy estate agencies and banks in America. go bankrupt with them, and lend money to South America than lend it to small business in this country. That is the record of our financial institutions. If an economy is run for financial institutions, as ours is, it institutionalises over-valuation, because financial institutions' interests are in buying foreign assets cheaper and putting more money overseas than they are investing in this country. That is their record, and that is the way in which they run the economy. That is the way in which the economy has been run under this Government—for a high exchange rate, for high interest rates, and for the interests of financial institutions, not making things, selling things and surviving in a tough world.

We need an economy that is run for manufacturing, with a competitive exchange rate and cheap money, which allows business to invest, allows us to become competitive and allows us to export, which makes exports cheap and imports dear, and allows us to build national champions such as those that have been successful in competing economies, in particular those of West Germany and Japan—national champions to export. It is on the back of that that small business becomes prosperous and expands. It needs a healthy, competing manufacturing sector.

With deflation, small business shrinks. The Government began with a disastrous rate of inflation that crucified small businesses for four years and caused many of them to go bankrupt. They have never allowed manufacturing to expand its base so that it can do its job of supporting a national economy, provide jobs, generate growth, provide a surplus of spending power and provide the high-skill, high-wage economy that generates demand for small business. That is what it is all about.

The only way in which we shall have a successful small business sector is by having a successful economy. That is why there is such a high proportion of small businesses and why small businesses are so active in Germany and Japan. They have a successful manufacturing economy. That is what we have destroyed and undermined. Until we recreate that, it is no use the Government promising sops and diverting into side issues of more freedom, fewer inspectors—which was the suggestion from the hon. Member for Luton, South (Mr. Bright)—freeing business from controls and regulations and allowing them to fire staff, neglect training, and undermine the conditions in which staff work. Through all those side issues and the manipulation of emotive symbols the Government try to escape the fact that the economy is being run, not for industry, small business, survival, competitiveness and jobs, but for finance and deflation.

Under "Blabynomics", with the obsession of the previous Chancellor of the Exchequer with following the deutschmark, we should have had even higher interest rates. That was one Major gain from the change of Chancellors. It is now Government policy to let the pound fall while pretending to keep it up. They walk backwards towards a devaluation market pretending that it is not happening. Yet they are keeping interest rates too high—much higher than our competitors, higher than industry and small business can bear and far higher than investment requires.

With a trade deficit the size of ours, the pound must come down. Interest rates must come down, too, because we have to invest to survive. Unless we invest to rebuild and expand our industrial base, we shall not survive; it is as simple as that. It is no good the Government whistling in the wind and distracting small businesses from reality by the lures that they introduce.

This next year will be horrendous for small business. No one has denied that prospect tonight. The small business sector will be tortured by high interest rates. They will be prodded and their position will be made worse by the uniform business rate and higher charges for electricity, water and telephones to fatten up the privatised industries. Telephone charges are now far higher than those in most countries on the continent. Small busineses will be depressed by the decline in spending power as people grapple with inflation, as unemployment increases and as people fail to improve their wages. All that contributes to a general decline. One person's spending is another person's income: money circulates. The Government's policies are dedicated to deflating and squeezing the economy in a fashion which is reminiscent of the attitudes, jargon and lack of concern with which they went into the great deflation from 1979 to 1982 which was so ruinous to British industry and, particularly, for the small business sector.

We are, in business as in society, one of another. We advance together or we do not advance at all. One does not advance the interests of small business by allowing it to triumph over its workers, dodge restrictions, fire people and avoid its commitments to safety and training. We advance together with a healthy, prosperous industry which produces the skills, incomes and wages for people to spend in the shops on the products of small business, to activate the suppliers and small business so that we all grow together. That is true of the economy and of society.

That will not happen until we replace a Government who have been completely ignorant of the interests of business and industry and deferential to those of finance and money and those who manipulate money. We must replace them with a Government dedicated to the interests of jobs, expansion and growth and to working together for an expanding future in which we have a strong industrial base on which this country can survive, compete and hold its head high in the world. A Labour Government will rebuild the economic health and heart of Britain.

9.29 pm

Mr. Richard Shepherd (Aldridge-Brownhills)

I am aerobicised after the activities of the hon. Member for Great Grimsby (Mr. Mitchell). The agility with which he leapt from one theme to another would have put Saul Samuelson at a disadvantage. Nevertheless, the hon. Gentleman tackled some important and great themes.

I began as a very small business man after leaving university with a single shop in Earl's Court road. It has given me a modest prosperity and has enabled me to come here. As is said, "Those who can, do—and those who can't, teach.", so here I am prattling on about a subject that I have always been cautious about approaching.

I have always observed that small business men are essentially independent. The nature of their independence and the character of their spirit is instinctively Conservative. They draw from two great traditions that have little to do with Socialism. Their spirit may derive from the dissenters, the Quakers, the independent religions or from the great Conservative tradition. Most of the people with whom I have come into contact in my working life have been in small businesses and have been modest dissenters, who strike out on their own and build businesses. They are instinctively Conservative.

Mr. Beith

The hon. Gentleman seems to be missing the point slightly. What I have found most common among small business men is that they hate being ordered around. What attracts them to different political parties and away from the Labour party is that they are mistrustful of the intervention of the state. They are far more anti-Socialism than they are aligned to any other political views.

Mr. Shepherd

I accept that anti-Socialism is a strong theme among independent business men. Fear, experience and a whole variety of reasons such as the attitude, "I am independent and do not wish to be bossed around" lies behind their thinking. I accept that, but the natural home of most business men I have encountered during my working life has been the Conservative party.

Mrs. Currie

Will my hon. Friend give way?

Mr. Shepherd

Perhaps my hon. Friend will forgive me if I do not give way, but I want to speak only briefly.

Mrs. Currie

Will my hon. Friend please talk about business women as well?

Mr. Shepherd

I hear my hon. Friend and note what she has said.

Instinctive Conservatism is important to many small business men who have therefore looked to the Conservative party for understanding. However, during the 20 years that I have been a business man, which includes the 10 years before I became a Member of the House, I have noted that the Government are not particularly mindful of little business men. They take them for granted. I have nowhere else to go—I am an instinctive Conservative. I know that, "Those who can't teach—and those who can, get on with it", and the Government have taken for granted the attention and attendance of many small business men.

I shall say little on this subject because, like most of us, before being elected to the House I had never written a letter to a Member of Parliament and had never been associated with the National Federation of Self Employed and Small Businesses. I stood alone and the modest prosperity that I gained was by the efforts of those with whom I worked. Therefore, I am respectful towards that class of small business people.

I shall not deal with the wider subjects that have been raised, although I am grateful to the Social and Liberal Democratic party for initiating the debate. I shall consider just one narrow tax that the Government have stumbled upon and which is mentioned in the motion. I refer to the uniform business rate. I cannot imagine a Government choosing a tax without knowing how it will fall or where it will hit and pushing it through the House on assumptions that were manifestly wrong. It was paraded by my right hon. Friends the Members for Mole Valley (Mr. Baker), now the party chairman, and for Bristol, West (Mr. Waldegrave), who is now at the Foreign Office. The document is called, "Paying for Local Government". When one reads through what was written in ignorance and then sees what has happened, one realises that the distress is profound.

I first realised what we are about when the "Paying for Local Government" Green Paper suggested that the west midlands would pay more under the new system and that central London would pay less. I am a Member of Parliament for the west midlands and have seen the 'flu that hit our industry during the late 1970s and the early 1980s. I have also seen the collapse in commercial property values in manufacturing industry and it seemed to me that a tax predicated on that basis would lead to a reduction in manufacturing industry's overall contribution to domestic rates. I realised, therefore, that the idea had to be wrong.

I am a trader in London and have seen the march of commercial rents. The assumptions behind the Green Paper therefore caused me some confusion. The Government changed a locally based tax, predicated on the supply and demand of local shops to finance local communities, into a national tax and created a huge redistributive mechanism. That amounts to £1 billion in redistributed money, but they do not know where it is going and what effect it will have.

The Government should remember that the Landlord and Tenant Act 1985 imposes two conditions on small business men. They already pay a premium to get their businesses. I have no covenant. I have no plc behind me. When I am bidding for shop premises, I am invariably the last person whom a landlord would have by preference. We have now converted our high streets into some of the dreariest in western Europe because all the shops are owned by plcs. Each high street is replicated and one can buy only from these plcs. This nation of shopkeepers, as Napoleon called us, is reduced to a nation of about five plcs. That undermines the vitality of small business men who fight for their markets. They hold on long after the managing director of a plc quits with his pay-off and retires.

I am conscious of the bleak circumstances faced by small businesses. Furthermore, rent reviews are only upwards. Once a rent has got somewhere, the terms of the lease ensure that it never goes down, despite the fact that small business men have to pay extra just to get the lease and often have to offer personal guarantees.

In these circumstances, the Government decided to set up an £8 billion tax, and that will affect our national economy. Let us see how it falls. The Government suggested that central London would be a beneficiary but, over and above what businesses there would have had to pay to local authorities under the previous arrangements, they will have to pay some £610 million, of which £190 million will have to come from shops and £230 million from offices. A £610 million tax is being imposed on central London—I am not talking about outer London—and that will have some consequences quite apart from rent and balance of trade consequences. How does the retailer or small business man, the accountant or solicitor in his little office, recoup his share of that £610 million that the Government, without knowing that they were raising it and without knowing where it would go, have imposed? He has to raise prices. Therefore, I am worried about the inflationary impact at the time of the worst inflation that we have known in the last part of this decade. The tax will incite inflation.

Outer London—a smaller region, with a lesser base for rateable value—will pay an additional £30 million, which is not much, but £15 million for shops. The south-east—another Conservative heartland—will pay an additional £270 million, with £120 million from shops and £80 million from offices. The area from which the hon. Member for Truro (Mr. Taylor) comes—the south-west—will have to find another £60 million to distribute, £20 million of which will come from shops. Some £30 million will be shipped out of East Anglia—the Government did not know that—of which £20 million will come from shops.

Originally, I suggested that the Government go ahead with revaluation, because not many people dispute the need for that. However, I also suggested that they should not have redistribution until they had seen how the pattern fell and that they should be prudent. Instead, they embarked on this. As I have said, it will gee up inflation, but it will have other effects. The hon. Member for Great Grimsby (Mr. Mitchell) seemed to think that Britain was ruled from the City of London, but most small business men will recognise his general point that overall prosperity helps every business. A strong and successful City of London is undoubtedly important to whatever Government we have—whether Conservative, Labour or, should it ever happen, SLD.

Furthermore, 1992 is coming and the Government have constructed the highest cost office operating area in the Community. The additional burdens on the City of London will make firms wonder why they should locate there. By this measure, with £900 million exported from poor regions—without knowing the consequences of it—the Government will affect inflation and that is the most damaging result. This £900 million has to be paid for somehow—usually by raising prices. That is just an observation on which hon. Members must make their own judgments.

I do not know how the north of England will be affected, but I have tabled a question to the Department of the Environment asking how local authorities will lose or gain under the tax. The question relates to flows in and out of local authorities. There will be some surprised yelps from Conservative Members representing northern constituencies when they realise that their constituencies do not gain. I am talking about a destabilisation of the national economy which may have an influence on inflation.

I have been cautious. I have asked the Government to look at the Landlord and Tenant Act, which ratchets up prices to the highest rent last paid, never reflecting downward drifts in rents. So the costs for retailers, accountants or small business men always stay at the highest possible level. I predict that many businesses in central London will collapse. I am sorry that the Government have rejected the case put by retirement salesmen. The capital of a small business is often in the business. When these men reach the age of 65, 70 or even more, all they have for their pensions lies in the disposal or sale of their businesses. By imposing an arbitrary date of 1 April the Government have reduced the value of these businesses.

I have said that I was a small trader. I started a shop in Sloane street, renting it for £5,000 in 1973, with a 20-year lease and a five-yearly rent review. By 1983, the rent had risen to £15,000, and the latest rent request is for £100,000. Valuation under the Government's uniform business rate is £121,000, which entails the payment of £40,000.

I am not retiring or selling the business, because my brother runs it now. The whole business is now valued at £310,000 under the UBR. We bought the business from a retirement sale. A business sold on that basis now would have a greatly reduced value because from 1 April a tenant in gainful possession of the premises would pay £40,000 in rates, which would affect the rental value.

All this will prevent and confuse redevelopment in certain areas. The Government must urgently consider improving the position of retirement sales, and I suggest that a review of the Landlord and Tenant Act would provide a stimulus for small businesses.

I have tried to present my suggestions in a friendly way and in a condensed manner. The Government, in short, must be more mindful of those who are natural Conservatives.

9.43 pm

Mr. James Wallace (Orkney and Shetland)

This has been a good and necessary debate and it has been clear that, but for my right hon. and hon. Friends, we should have had to wait a long time for it.

Because of the twin problems of high interest rates and the introduction of the uniform business rate, about which the hon. Member for Aldridge-Brownhills (Mr. Shepherd) has just spoken so eloquently, the Government would have been reluctant to introduce a debate on this subject in their own time. Despite the valiant efforts of the hon. Members for Fife, Central (Mr. McLeish) and for Great Grimsby (Mr. Mitchell), there has been a singular lack of interest on the part of the Labour party, which suggests that we would have had to wait a long time for the Opposition to take the initiative, as well.

This has been the first opportunity in this Session for our party to nominate the business for the day, and we have used it to debate this important subject. The hon. Member for Aldridge-Brownhills pointed out, based on his contact with people in the small business and self-employed sectors, that they tend to be people with independent minds. Those in my party have a great deal of sympathy with such people. Many Social and Liberal Democrat constituencies have high percentages of self-employed people.

It is for that reason that we welcome the fact that there are more people in self-employment and in small businesses today than there were 10 years ago. Any development in that direction is to be welcomed. However, it is worth bearing in mind the fact that we still fall far short of the comparable figures in, for example, West Germany or the United States of America. So there is still some way to go.

What we have heard tonight from the Government does not give us much confidence that we are taking the right strides in that direction. The Minister, many times over, gave us the statistics for the increase—the welcome increase, I say once again. What he said was all very defensive: it was all about what had happened over the last 10 years. There was not really anything about the problems facing small businesses today, and less still about the problems and opportunities of small businesses tomorrow.

We heard too about the number of small businesses being registered, but we have to look beyond that. What happens after they have been registered? My hon. and learned Friend the Member for Montgomery (Mr. Carlile), in an intervention which was not answered properly by the Minister, pointed out, in respect of people who want to be self-employed—North sea divers, journalists, free-lance photographers, actors—that the Government are trying to make them not self-employed, to move them from schedule D to schedule E. Surely, under tax law, there must be some means of ensuring that people who want to be self-employed have their wish respected. The Minister did not answer that point. Perhaps he did not appreciate it. It is a serious point, and I hope that he and his Treasury colleagues will reflect on it.

One could also look at the barriers that the Department of Social Security puts in the way of those who wish to be self-employed. The hon. Member for Surrey, North-West Mr. Grylls) made a very valuable contribution. He referred to a number of areas in which the self-employed have problems—the increasing lack, these days, of venture capital being put into new small businesses; the need to look at the tax relief that might be applied to small family firms where profits are ploughed back.

The hon. Gentleman talked in terms of £1 million in the context of a particular small business. Many of the self-employed people in my constituency do not know what £1 million is like. A self-employed person who came to my constituency surgery last Saturday wanted to claim family credit. I have dealt with the cases of several self-employed people who find it increasingly difficult to claim family credit.

To his credit, the hon. Member for Fareham (Mr. Lloyd), when he was a junior Minister at the Department of Social Security, changed the rule that required audited accounts. Of course, that rule was nonsense in the context of self-employed people. One wonders who drafts these regulations. But now, even though accounts are allowed, and even though they have been properly prepared by accountants, they are very often sent back with umpteen questions.

One question that came to my notice in a recent case concerned the fact that farm insurance was not being allowed as a business expense, despite the fact that the farm was being insured as a business. Clearly some people in the family credit branch of the Department of Social Security do not understand what small business is about. That is another area in which a barrier is put in the way of people who want to enjoy self-employment.

The hon. Member for Aldridge-Brownhills expressed very well the fact that, for too long, the Government and Conservatives have taken small businesses and self-employed persons for granted. In an intervention, I referred to what is happening over the introduction of the poll tax. Employers whose employees do not, or cannot, pay the poll tax will be expected to attach their wages. That will undoubtedly put a further administrative burden on small employers. Indeed, they are allowed to charge the employee £1 for the service—for actually making a deduction from his wages. Who in the world thinks that that will make any contribution to good industrial relations in small companies?

But there are so many other ways in which the small business man has to act as the Government's tax collector. In a recent article in the Financial Times, Professor Sandford says: The biggest unfairness associated with tax compliance is the disproportionate burden it imposes on small companies. What might be called the regressiveness of tax compliance costs applies in its most extreme form to VAT … the lowest band of compulsorily registered traders … bore compliance costs which averaged £7.80 for every £1,000 of goods sold; the corresponding figure for companies with a turnover of £10 million was 3p. That shows quite clearly the burden that has been placed on small businesses.

Let us look at the Government policy of introducing student loans. What will be the reaction of the banks to a new graduate wanting to set up a business or become self-employed when that graduate already has a substantial loan hanging around his neck from his days at university? My hon. Friend the Member for Ceredigion and Pembroke, North (Mr. Howells), in his excellent speech, outlined the Government's policy on fishing and expecially on farming. Government policy in those areas is putting great pressure on the self-employed.

As I have said, high interest rates and the uniform business rate place a great burden on the self-employed small business man. The hon. Member for Macclesfield (Mr. Winterton) put his finger on the problem when he said that, in a glib but competent speech, the Minister of State tried to slide over the problem of high interest rates in some 30 seconds. Time and again, people in small businesses speak about the pressure of high interest rates not only on their own indebtedness, but on the spending power of those seeking their services or wishing to buy from them.

An economic outlook report yesterday from the Royal Bank of Scotland said that the difference between the present recession and that experienced during the early 1980s is that this time the impact will be felt by the service industries". It is in the service industries that we have seen such growth in small business and the self-employed. The Minister did not address that problem. The hon. Member for Great Grimsby said that the stock answer of my party is entry to the exchange rate mechanism of the EMS. Perhaps we say that time and again because we genuinely believe that it is the answer. Interestingly enough, when freed from the constraints of collective responsibility, Conservative Members have also said that.

If the Minister spoke for only 30 seconds about high interest rates, he said nothing at all in response to the point made by my hon. Friend the Member for Truro (Mr. Taylor) about the uniform business rate. That the House could have demanded more answers about that is shown by what the Prime Minister has said: The present transition period is five years, but that is not an absolute figure and it could he extended if need be."— [Official Report, 23 January 1990; Vol. 165, c. 737.] The state of the small business sector needs to be fleshed out. What do the Government intend to do? Those of us north of the border well remember the problems experienced by the small business sector in Scotland after revaluation. For months, the Government said that they would do nothing and then had to rush legislation through in a week or a fortnight to bring much-needed relief. They subsequently paid the political price for not having acted earlier. Great pressure will build up on Government to respond.

The hon. Member for Great Grimsby cannot say that this is purely a problem for the south. He represents a constituency in south Humberside and may not know that in north Humberside a hardware shop had rates in 1989–90 of £2,611.

Mr. Austin Mitchell

I said that it was a daft tax.

Mr. Wallace

Under the uniform business rate, that will increase to £3,740—an increase of 143 per cent.

The hon. Gentleman says that it is a daft tax, but businesses in the north will not be entirely exempt. We are not trying to provide exemption for Harrods. If he understood the transitional scheme and had listened to the speech of my hon. Friend the Member for Truro, he would know that our efforts are directed towards helping the small business community.

It is important to leave the Under-Secretary of State adequate time in which to reply to the debate. My party is committed to the interests of the small business. That was shown by my hon. Friend the Member for Ceredigion and Pembroke who said that when we had an opportunity to influence Government we brought about a profound change in the attitude of the Labour Government to the self-employed. In the local government areas where we have control we have helped small businesses. In Government we would carry through our promises and bring benefit to the self-employed and the small business sector.

9.54 pm

The Parliamentary Under-Secretary of State for Employment (Mr. Patrick Nicholls)

The hon. Member for Orkney and Shetland (Mr. Wallace), who has just made an eloquent speech, flatters me if he thinks that I can do justice to the debate in the six minutes that remain. I say to him what my hon. Friend the Minister of State said when he opened the debate—that we welcome the fact that the hon. Gentleman and his colleagues decided to choose this subject for debate. Although the debate has been short, it has been useful.

I shall deal first with the speech by the hon. Member for Fife, Central (Mr. McLeish) who had two limbs to his attack. One was what he described as the crippling rate of interest; and he also spoke about the effect of the uniform business rate.

It would be interesting to consider the careers of the hon. Gentleman and me. We are both virtually the same age, we appear to share the same sort of interests and we are both Members of this House. However, at a time when I was running a small business, the hon. Gentleman was earning his living in a quite different way. The hon. Gentleman spoke about interest rates as though they were far more important than the rate of inflation. When I was setting up my small business in the late 1970s, I was worried not about interest rates but about the rate of inflation. I must reiterate that the Government do not enjoy the current interest rate policy. No Government could enjoy the effect that it has on business in the country. However, it is the proven way to prevent inflation from getting back into the system.

I tried to run a business in the 1970s when inflation rates exceeded 20 per cent. at times. That was incomparably more important than the interest rate. The hon. Member for Truro (Mr. Taylor) said that people in his constituency were not talking to him about the rate of inflation. They would not be talking to him about that, because, even though it has peaked under this Government, it is still only at the low mark of the rates reached under the last Labour Government. The hon. Gentleman knows that I am well acquainted with his part of the world. I have a good memory, and I remember what people were talking about in parts of his constituency when the inflation rate was in excess of 20 per cent. If anything wrecks small businesses, it is the rate of inflation. If there is one proven instrument to deal with that, it is interest rates. It is not a comfortable instrument, but it works.

The hon. Member for Fife, Central spoke about the Labour party policy, but understandably he did not want to dwell on it overlong. Labour party policy is to support a property tax on business. I remind the hon. Gentleman what the hon. Member for Copeland (Dr. Cunningham) said: we support the revaluation of business property because we are in favour of a property tax."—[Official Report, Standing Committee E, 3 March 1988; c. 1186.] The Labour party should not shed crocodile tears. The hon. Member for Fife, Central does his homework well—much better, I suspect, than some who have spoken tonight. He knows that the uniform business rate produced seemingly large increases in certain areas, not because of the concept of the tax itself, but because of a lack of revaluation since 1973.

It is a matter of great personal grief to me that, in the three minutes remaining, I shall not have time systematically to take apart the spurious arguments of the hon. Member for Truro. I remind him that there has not been a revaluation since 1973. The first time that the revaluation was ducked was in 1978; the significance of that date is that it was the date of the Lib-Lab pact. Indeed, the Earl of Stockton once said that the Liberal party produced policies that were both interesting and original—the trouble was that none of the original policies was interesting and none of the interesting policies was original.

The hon. Member for Truro took the same approach today. He said nothing about any Liberal alternative to the uniform business rate. He told us about a man who kept coming to see him to complain, but he did not say that he had told him what the UBR was all about. He did not tell him about the lack of revaluation, because his party was opposed to it. He did not tell him that, on average, factory rates would come down by 31 per cent. and warehouse rates by 20 per cent. Obviously there is no such thing as a popular charge. There never is, and there never will be. There is no such thing as a popular tax either, but at the end of the day the uniform business rate will be the fairest form of charge. Bearing in mind the fact that the hon. Gentleman's policy is committed to a land revaluation tax as well, it is a bit thick that he should have criticised us today.

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

The House divided: Ayes 13, Noes 164.

Division No. 60]	[10.00 pm
AYES
Alton, David	Maclennan, Robert
Ashdown, Rt Hon Paddy	Michie, Mrs Ray (Arg'l & Bute)
Beith, A. J.	Steel, Rt Hon Sir David
Campbell, Menzies (Fife NE)	Taylor, Matthew (Truro)
Carlile, Alex (Mont'g)
Fearn, Ronald	Tellers for the Ayes:
Howells, Geraint	Mr. James Wallace and
Hughes, Simon (Southwark)	Mr. Malcolm Bruce.
Kirkwood, Archy

NOES
Alexander, Richard	Amess, David
Allason, Rupert	Amos, Alan

Arbuthnot, James	Jack, Michael
Arnold, Jacques (Gravesham)	Janman, Tim
Arnold, Tom (Hazel Grove)	Johnson Smith, Sir Geoffrey
Ashby, David	Jones, Robert B (Herts W)
Atkins, Robert	Jopling, Rt Hon Michael
Baker, Rt Hon K. (Mole Valley)	Kilfedder, James
Baker, Nicholas (Dorset N)	King, Roger (B'ham N'thfield)
Batiste, Spencer	Knapman, Roger
Beggs, Roy	Knight, Dame Jill (Edgbaston)
Bellingham, Henry	Knox, David
Bennett, Nicholas (Pembroke)	Lamont, Rt Hon Norman
Benyon, W.	Lawrence, Ivan
Bevan, David Gilroy	Lee, John (Pendle)
Biffen, Rt Hon John	Lightbown, David
Blackburn, Dr John G.	Lilley, Peter
Boscawen, Hon Robert	Macfarlane, Sir Neil
Boswell, Tim	MacKay, Andrew (E Berkshire)
Bottomley, Peter	Maclean, David
Braine, Rt Hon Sir Bernard	McLoughlin, Patrick
Bright, Graham	McNair-Wilson, Sir Michael
Brooke, Rt Hon Peter	Mans, Keith
Brown, Michael (Brigg & Cl't's)	Marlow, Tony
Buck, Sir Antony	Martin, David (Portsmouth S)
Budgen, Nicholas	Maude, Hon Francis
Burns, Simon	Maxwell-Hyslop, Robin
Burt, Alistair	Meyer, Sir Anthony
Carlisle, Kenneth (Lincoln)	Miller, Sir Hal
Carrington, Matthew	Mills, Iain
Carttiss, Michael	Miscampbell, Norman
Clark, Sir W. (Croydon S)	Mitchell, Andrew (Gedling)
Colvin, Michael	Moate, Roger
Coombs, Simon (Swindon)	Molyneaux, Rt Hon James
Cormack, Patrick	Monro, Sir Hector
Couchman, James	Montgomery, Sir Fergus
Cran, James	Morrison, Sir Charles
Currie, Mrs Edwina	Moss, Malcolm
Davis, David (Boothferry)	Neubert, Michael
Day, Stephen	Nicholls, Patrick
Devlin, Tim	Nicholson, David (Taunton)
Dorrell, Stephen	Paice, James
Douglas-Hamilton, Lord James	Patnick, Irvine
Dunn, Bob	Peacock, Mrs Elizabeth
Durant, Tony	Porter, David (Waveney)
Dykes, Hugh	Raison, Rt Hon Timothy
Eggar, Tim	Renton, Rt Hon Tim
Emery, Sir Peter	Rhodes James, Robert
Favell, Tony	Riddick, Graham
Fishburn, John Dudley	Ridley, Rt Hon Nicholas
Forman, Nigel	Ridsdale, Sir Julian
Forsyth, Michael (Stirling)	Rifkind, Rt Hon Malcolm
Forsythe, Clifford (Antrim S)	Ross, William (Londonderry E)
Forth, Eric	Ryder, Richard
Franks, Cecil	Sackville, Hon Tom
Freeman, Roger	Shaw, David (Dover)
Fry, Peter	Shaw, Sir Giles (Pudsey)
Garel-Jones, Tristan	Shaw, Sir Michael (Scarb')
Gill, Christopher	Shepherd, Colin (Hereford)
Glyn, Dr Sir Alan	Skeet, Sir Trevor
Goodlad, Alastair	Smith, Tim (Beaconsfield)
Greenway, Harry (Ealing N)	Squire, Robin
Greenway, John (Ryedale)	Stanbrook, Ivor
Gregory, Conal	Steen, Anthony
Griffiths, Peter (Portsmouth N)	Stevens, Lewis
Grylls, Michael	Stewart, Andy (Sherwood)
Hague, William	Stradling Thomas, Sir John
Hamilton, Hon Archie (Epsom)	Summerson, Hugo
Hampson, Dr Keith	Taylor, Rt Hon J. D. (S'ford)
Hargreaves, A. (B'ham H'll Gr')	Tebbit, Rt Hon Norman
Harris, David	Thompson, D. (Calder Valley)
Hayes, Jerry	Thompson, Patrick (Norwich N)
Hayhoe, Rt Hon Sir Barney	Thorne, Neil
Hayward, Robert	Thurnham, Peter
Hind, Kenneth	Twinn, Dr Ian
Hordern, Sir Peter	Walker, Bill (T'side North)
Howarth, G. (Cannock & B'wd)	Waller, Gary
Howell, Rt Hon David (G'dford)	Walters, Sir Dennis
Hunter, Andrew	Wheeler, Sir John
Irvine, Michael	Wiggin, Jerry

Winterton, Mrs Ann	Tellers for the Noes:
Winterton, Nicholas	Mr. Sydney Chapman and
Wood, Timothy	Mr. John M. Taylor.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments):—

The House divided: Ayes 139, Noes 30.

Division No. 61]	[10.11 pm
AYES
Alexander, Richard	Hicks, Robert (Cornwall SE)
Allason, Rupert	Hind, Kenneth
Amess, David	Howarth, G. (Cannock & B'wd)
Amos, Alan	Howell, Rt Hon David (G'dford)
Arbuthnot, James	Hunter, Andrew
Arnold, Jacques (Gravesham)	Irvine, Michael
Arnold, Tom (Hazel Grove)	Jack, Michael
Ashby, David	Janman, Tim
Baker, Rt Hon K. (Mole Valley)	Johnson Smith, Sir Geoffrey
Baker, Nicholas (Dorset N)	Jones, Robert B (Herts W)
Batiste, Spencer	Jopling, Rt Hon Michael
Beggs, Roy	Kilfedder, James
Bennett, Nicholas (Pembroke)	King, Roger (B'ham N'thfield)
Bevan, David Gilroy	Knight, Dame Jill (Edgbaston)
Blackburn, Dr John G.	Lamont, Rt Hon Norman
Boscawen, Hon Robert	Lawrence, Ivan
Boswell, Tim	Lee, John (Pendle)
Braine, Rt Hon Sir Bernard	Lightbown, David
Bright, Graham	Lilley, Peter
Brooke, Rt Hon Peter	Maclean, David
Brown, Michael (Brigg & Cl't's)	McLoughlin, Patrick
Buck, Sir Antony	McNair-Wilson, Sir Michael
Burns, Simon	Mans, Keith
Burt, Alistair	Marlow, Tony
Carlisle, Kenneth (Lincoln)	Martin, David (Portsmouth S)
Carrington, Matthew	Maude, Hon Francis
Chapman, Sydney	Meyer, Sir Anthony
Clark, Sir W. (Croydon S)	Miller, Sir Hal
Colvin, Michael	Mills, Iain
Coombs, Simon (Swindon)	Mitchell, Andrew (Gedling)
Cormack, Patrick	Moate, Roger
Couchman, James	Molyneaux, Rt Hon James
Cran, James	Monro, Sir Hector
Currie, Mrs Edwina	Morrison, Sir Charles
Davis, David (Boothferry)	Moss, Malcolm
Day, Stephen	Neubert, Michael
Devlin, Tim	Nicholls, Patrick
Dorrell, Stephen	Nicholson, David (Taunton)
Douglas-Hamilton, Lord James	Paice, James
Durant, Tony	Porter, David (Waveney)
Dykes, Hugh	Raison, Rt Hon Timothy
Eggar, Tim	Renton, Rt Hon Tim
Emery, Sir Peter	Rhodes James, Robert
Fallon, Michael	Ridley, Rt Hon Nicholas
Favell, Tony	Rifkind, Rt Hon Malcolm
Fishburn, John Dudley	Ross, William (Londonderry E)
Forman, Nigel	Ryder, Richard
Forsyth, Michael (Stirling)	Sackville, Hon Tom
Forsythe, Clifford (Antrim S)	Shaw, David (Dover)
Forth, Eric	Shaw, Sir Giles (Pudsey)
Franks, Cecil	Shaw, Sir Michael (Scarb')
Freeman, Roger	Shepherd, Colin (Hereford)
Garel-Jones, Tristan	Skeet, Sir Trevor
Gill, Christopher	Smith, Tim (Beaconsfield)
Glyn, Dr Sir Alan	Squire, Robin
Goodlad, Alastair	Stanbrook, Ivor
Greenway, Harry (Ealing N)	Stevens, Lewis
Greenway, John (Ryedale)	Stewart, Andy (Sherwood)
Gregory, Conal	Stradling Thomas, Sir John
Griffiths, Peter (Portsmouth N)	Summerson, Hugo
Hamilton, Hon Archie (Epsom)	Taylor, Rt Hon J. D. (S'ford)
Hargreaves, A. (B'ham H'll Gr')	Tebbit, Rt Hon Norman
Harris, David	Thompson, D. (Calder Valley)
Hayes, Jerry	Thompson, Patrick (Norwich N)
Hayhoe, Rt Hon Sir Barney	Thorne, Neil
Hayward, Robert	Twinn, Dr Ian

Walker, Bill (T'side North)	Wood, Timothy
Waller, Gary
Wheeler, Sir John	Tellers for the Ayes:
Winterton, Mrs Ann	Mr. John M. Taylor and
Winterton, Nicholas	Mr. Irvine Patrick.

NOES
Alton, David	Kirkwood, Archy
Ashdown, Rt Hon Paddy	McAllion, John
Barnes, Harry (Derbyshire NE)	McKay, Allen (Barnsley west)
Beith, A. J.	Martlew, Eric
Bradley, Keith	Meale, Alan
Bruce, Malcolm (Gordon)	Michie, Mrs Ray (Arg'l & Bute)
Buckley, George J.	Nellist, Dave
Campbell, Menzies (Fife NE)	Patchett, Terry
Clark, Dr David (S Shields)	Pike, Peter L.
Dixon, Don	Steel, Rt Hon Sir David
Dunnachie, Jimmy	Taylor, Matthew (Truro)
Fearn, Ronald	Wallace, James
Gordon, Mildred	Wareing, Robert N.
Home Robertson, John
Hood, Jimmy	Tellers for the Noes:
Howells, Geraint	Mr. Bob Cryer and
Hughes, Simon (Southwark)	Mr. Dennis Skinner.

Question accordingly agreed to.

MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to

Resolved, That this House congratulates the Government on creating an environment in which enterprise and small businesses are flourishing, and urges the Government to continue pursuing the policies which have led to a record increase in the numbers of self-employed and new business formations, as confirmed by the increase in registrations for value-added tax.