HC Deb 28 February 1991 vol 186 cc1102-3
4. Mrs. Heal

To ask the Chancellor of the Exchequer how many letters he has received from small businesses about the high level of interest rates.

The Economic Secretary to the Treasury (Mr. John Maples)

My right hon. Friend has received a number of such letters.

Mrs. Heal

Despite the Conservative party's claim to be the party of small businesses, in the west midlands region business failures have increased by 36 per cent. and in Mid-Staffordshire many small businesses have either failed or are struggling to survive. For them, yesterday's announcement of a 0.5 per cent. cut in interest rates is welcome, but a mere drop in the ocean. When will the Minister announce even further cuts in interest rates and end the slow torture of small business men?

Mr. Maples

Once again, a representative of the Labour party is willing to play fast and loose with devaluation and inflation——

Mr. John Smith

That is not true.

Mr. Maples

It is what the hon. Lady said.

The fact is that there is still a substantial net increase in the number of new small businesses. In 1989, 87,000 more businesses were registered for VAT than left the register and in 1990, 50,000 more businesses registered than left the register. The failure rate is under 1½ per cent., whereas for the period 1983 to 1986 it was over 1½ per cent.

Sir William Clark

Does my hon. Friend agree that it is much better to reduce the base interest rate cautiously and thus avoid a fall in sterling which might mean that the rate would have to increase again? Is not it much better to reduce interest rates cautiously so that we can sustain a permanent reduction in the base rate?

Mr. Maples

My right hon. Friend is right. The purpose of our policy is to bear down on inflation. It would be completely counter-productive to take any risks with inflation.

Mrs. Beckett

Does the Minister recognise that the complacency of his reply will be a shock to small and large businesses alike? Is he aware of not only the "Trade Indemnity" results from last year, which showed a 77 per cent. increase in business failures in 1990, but the forecast of a further 25 per cent. increase in business failures in 1991? Is not that an indictment of the Government's handling of the economy?

Mr. Maples

Of course, it is sad when any business goes out of action. I merely sought to point out that the figures were not out of line with those for the mid-1980s. I do not remember the hon. Lady or any of her hon. Friends at that time making the point that she made today. We have noticed that her party is prepared to spend, borrow and cut interest rates on a reckless scale which would play fast and loose with inflation.

Mr. John Townend

Does my hon. Friend accept that many small businesses that were created in the enterprise culture of Thatcherism are suffering considerable pain as a result of interest rates—despite the recent welcome reductions—and a loss of demand? Will he persuade the Chancellor of the Exchequer to ease the pressure in his Budget by concentrating any tax reductions on the business sector and in particular to consider making the first £5,000 of retained tax profit of a small business tax free?

Mr. Maples

I am sure that my right hon. Friend the Chancellor heard my hon. Friend's Budget representation.