Small Businesses

HC Deb 17 April 1996 vol 275 cc693-7

1. Mr. William O'Brien

To ask the President of the Board of Trade what assistance is given by his Department to help small businesses; and if he will make a statement. [23915]

6. Mr. Llwyd

To ask the President of the Board of Trade what proposals his Department has to assist small and medium-sized businesses; and if he will make a statement. [23921]

The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Ian Lang)

The Government recognise the crucial role played by small firms and aim to assist them by keeping inflation and interest rates low and by reducing legislative, administrative and taxation burdens. A range of measures and schemes has been introduced to help small firms, in particular, the network of business link one-stop shops of which there are now more than 200 in operation.

Mr. O'Brien

Is the Secretary of State aware that in the recent referendum of small business people, 75 per cent. asked for competition in the installation of water meters and public utility services? Is he also aware of the anger and frustration that late payments have generated in the world of small business? Will he stress to his Cabinet colleagues the need for early legislation to help small business people in their campaign for fairness over late payments?

Mr. Lang

We are still on question No. 1, Madam Speaker, and question No. 2 deals with late payments, but since the hon. Gentleman started with a reference to referendums, I must point out that the majority of small business organisations are against statutory arrangements to deal with the late payment of debts. I warmly welcome the conversion of some Labour supporters to the importance of competition in the provision of goods and services. Competition has led to improved efficiency in electricity and the substantial reductions in gas prices in recent years.

Mr. Llwyd

Is the Minister aware that the latest European Business Monitor survey shows that two thirds of businesses monitored are of the opinion that economic growth will come from small and medium-sized enterprises? Given their important role in the economics of the United Kingdom, when will he offer some practical help? It is all very well talking about interest rates, and so on, but more important things should be done. What about the crippling effect of business rates on smaller businesses? What about the burden of value added tax? What about assisting small businesses to expand and take on new trainees and so forth? When are the Government going to do something and not just talk?

Mr. Lang

The hon. Gentleman does not know what is going on in the world. The Government long ago recognised the importance of small businesses in generating employment and economic activity. Unlike the Labour party, we have identified and implemented specific measures to help. The hon. Gentleman mentioned VAT. He may not realise that the VAT threshold was increased again in the last Budget; it is the highest in the European Union and has exempted 75,000 companies from VAT. He may not be aware of the changes made in auditing requirements, capital gains tax and inheritance tax, and the reduction in small firms' corporation tax. The Government have identified the problems of small business and found measures to help.

Sir John Cope

My right hon. Friend did a good job in organising the "Your Business Matters" conferences throughout the country, which concluded last month. Several important proposals came out of those. Can he tell us any more, particularly about the proposals to streamline local authority registration and controls on fire, planning and so forth into a one-stop shop affair and about single registration of new companies for income tax, VAT and other things?

Mr. Lang

I am grateful to my hon. Friend. That was an extremely successful series of conferences at which the Government consulted very closely with small businesses all round the country. A number of measures were announced by my right hon. Friend the Prime Minister at the final conference in London, including the streamlining of development controls, new rights in enforcement actions, and single notification for tax and national insurance arrangements for new businesses. In addition to those welcome measures announced at the conference, we made it clear that further announcements and a response to the input from all the conferences will be published with the competitiveness White Paper in June.

Mr. Dover

Is not the acid test how many small businesses are formed? Did not the number of small businesses grow from 2.5 million to 3.5 million between 1979 and 1993, showing the confidence that firms have in setting up under this Government? And did not the number of company insolvencies fall by 13 per cent. last year compared with the previous year?

Mr. Lang

My hon. Friend is right on both points. Between 1979 and 1993 the number of businesses in this country rose by 50 per cent.—an increase of 1.2 million—and it is clear that under this Government opportunity for enterprise, the building up of economic activity and the creation of small businesses has been greater than ever before.

Mrs. Roche

How can the President of the Board of Trade be so complacent about small firms and late payments in view of the Government's record? Whenever a survey on the statutory right to interest is conducted in the small business community—such as that conducted by Lloyd's Bank—such a right is overwhelmingly supported and 65 Conservative Members have signed an early-day motion supporting Labour party policy. How can the Minister be so complacent about the Government's record on small businesses when he now proposes to exclude more than 100,000 small catering firms from the loan guarantee scheme? Does not that proposal expose the gap between Government rhetoric and reality?

Mr. Lang

The hon. Lady is quite wrong. The loan guarantee scheme has been redesigned and extended in some important ways, but we are also avoiding displacement of existing economic activity by that scheme. On late payment of debts, the hon. Lady may like to know that eight out of nine business organisations are opposed to the introduction of statutory interest payments on late payment of debts. Government policy such as the requirement to disclose payment policy has been warmly welcomed and we are now consulting on disclosing payment practice. We are encouraging and are signing on for the Confederation of Business and Industry code of payment conduct. It is important to change the culture in relation to late payment of debt, because no amount of legislation will succeed unless the culture changes. That is what is happening under the Government.

Mr. Congdon

Is not the best assistance to small businesses the continuation of economic policies that have led to the creation of a stable macroeconomic framework, which has today led to a further reduction in unemployment of nearly 26,000 people? Is that not the right way to achieve benefits for small businesses, rather than imposing burdens on them such as the social chapter and the minimum wage?

Mr. Lang

My hon. Friend is absolutely right. Like him, I warmly welcome the further fall in unemployment this month of 25,700 people. Unemployment has now been falling at an average of 10,000 people per month and is now very substantially over 3 percentage points below the European average. My hon. Friend is also right to identify what would be the cause of job losses in very large numbers: the social chapter and the national minimum wage, which are policies supported by the Labour party.

2. Ms Lynne

To ask the President of the Board of Trade if he will list the recent meetings he has held with representatives of small businesses about late payment of commercial debt.[23917]

The Minister for Small Business, Industry and Energy (Mr. Richard Page)

The Prime Minister, the President of the Board of Trade and I were all present at the national "Your Business Matters" conference on 11 March, which was attended by representatives of all the major small firms organisations. A number of important issues were raised, including the late payment of commercial debt. In addition, I have recently consulted all the small firms' representative organisations on late payments and legislation for a statutory right to interest. The outcome will be published soon.

Ms Lynne

Is the Minister aware that some small businesses in Rochdale are facing increasing financial difficulty because of late payment of debt by many companies and by Government Departments? We know that he is currently consulting small businesses. If that consultation reveals that small businesses are in favour of interest being paid on late payment of debt, will the Government introduce legislation to make it possible?

Mr. Page

I have to put it delicately to the hon. Lady that she is labouring under a misconception. The problems being experienced by small firms are not caused by their not being paid by large firms. Research has shown that in fact the problem is that small firms are hitting other small firms. Research by Professor Wilson of Bradford university, which is to be published shortly, will confirm previous investigations. He found that the problem is caused by small firms themselves. He also concluded that some 40 per cent. of small firms do not undertake proper up-front credit control and that the companies which do have proper front-ending credit control have a 35 per cent. better chance of being paid promptly than those which do not. Small firms therefore have a management responsibility, too.

In specific response to the hon. Lady's question, consultation is under way. I shall be announcing the results shortly and any decisions will flow from those results.

Sir Michael Grylls

Does my hon. Friend agree that most small firms want less rather than more legislation and that they do not want legislation on the payment of debts? Does he agree that it would be much better to make public companies state in their accounts what their payment policy is and how promptly they pay their bills? Should we not get the Government and local government to pay small firms promptly? If that could be arranged, would not the problem largely be solved?

Mr. Page

As my right hon. Friend the President of the Board of Trade said, eight out of nine of the small firms' representative organisations have stated that they are against the introduction of a statutory right to interest on commercial late payment. I shall have to take that into account in evaluating the consultation.

As for payment practice and payment policy, it has already been agreed that public companies will have to put payment principle in their annual accounts. The Prime Minister has asked that consultation take place on payment practice, and I believe that is to happen in the next month or so.

Mr. Gunnell

A number of small firms in my area contributed to the consultation on the Latham report and wonder why nothing has happened as a result. Is the Minister promising legislation? Companies in my area think that the Government have been dilatory in this respect. They wanted something to happen urgently. They submitted evidence and the report was published, but nothing happened.

Mr. Page

I can give the hon. Gentleman some very good news. The Housing Grants, Construction and Regeneration Bill currently going through the House of Lords will for the first time introduce a proper payment practice for firms in the construction industry. It will prevent the pay-when-paid scandal and help small businesses immensely. It is a positive move in the right direction.

Mr. John Marshall

My hon. Friend referred to a recent meeting that he had with small business men. How many of them asked him to sign up to the social chapter and a national minimum wage or recommended that people earning £35,000 a year should pay more income tax?

Mr. Page

I have to chide my hon. Friend for being political, which is not a path that I wish to pursue. All I can say is that if we adopted a national minimum wage, unemployment would rise by nearly a million and small business men would be the hardest hit if the Labour party were successful and a national minimum wage were introduced.