Business Links

HC Deb 11 January 1996 vol 269 cc357-84

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Streeter.]

4.54 pm

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

There is a belief in some quarters that it is easier to run a small business than a big one—it is thought that the bigger the company, the more the problems and the more the difficulties. There is nothing further from the truth. The small business man or woman must be an expert at absolutely everything. They must be knowledgeable when the Health and Safety Executive official appears; they must have tax information at their fingertips when the Inland Revenue inspector knocks; they must be skilled in the details of value added tax when the VAT man calls. They must work through the many layers of officialdom that are needed to run a complex society, and let us not forget that that business man or woman has not yet got around to running his or her business.

Another range of skills is needed: to be skilled in design to produce an attractive product; to be a purchasing agent and to ensure that the raw materials are bought at the best price; to be a production engineer to ensure that the assembly line works effectively and that goods are made to price and quality; and, of course, to be a financial wizard to ensure that the cash flow is under control and that the bank manager is kept happy.

Having done all that, the business man or woman has not even got around to selling anything yet, which is the whole object of the exercise and where another raft of skills is needed: in marketing, sales and, again, in credit control. By contrast, a manager in a large company has a simple life. He can monitor the overall scene and subcontract in and out where necessary, when he thinks that he needs expert advice. Who could possibly believe that running a small business is easy? I do not and the Government do not, which is why, over the years, there has been sympathy from and appreciation by the Government for the work undertaken by the small business sector.

The best thing that any Government can do for a business man or woman is to provide a stable, solid economic environment of low taxation, low interest rates and low inflation—that is what the Government are delivering for the small business sector. Added to that, for the first time we are providing stable exchange rates. I know from hard personal experience that small business is more affected by the swings and changes of inflation and interest rates than large ones, which have the capability to hedge. Small businesses do not have the resources to protect themselves against such future changes. That is why, as I said, the best service that any Government can give to the small business sector is a stable economy.

Of course, having said that, it is too easy to forget what, over the years, we have done for the small business sector: small companies' corporation tax rate has been reduced from 42 to 24 per cent.; simplified accounts procedures for very small firms have been introduced; tax rules for the self-employed have been simplified; inheritance tax has been reformed; VAT thresholds have been increased. I could go on. There is, however, more to it than that.

Mr. Barry Sheerman (Huddersfield)

To be entirely honest, should not the Minister also mention that small businesses and medium-sized enterprises did not want a three-year recession after the 1992 election, which hit so many small businesses and sent them into liquidation?

Mr. Page

Obviously no business wants a recession, but it does want to have a sensible recovery. For the first time for years, the Government have got us out of the boom-bust cycle—vast growth and vast inflation, which then go back down again. Each time we came out of recovery, we found ourselves that bit further down the world economic league table. That is why the Government have given the best basis for any organisation's continual growth that this country has seen since the second world war.

The Prime Minister recognises small businesses' importance to this country's economy and stability, which is why, at a Downing street launch in October, he enthusiastically endorsed a programme of conferences for small businesses throughout this country's length and breadth. The conferences, called "Your Business Matters", are organised and run by the leading associations for small businesses. They bring together everybody involved in the small business sector in the biggest and most comprehensive consultation exercise that anyone can recall. They provide an opportunity for small businesses to have their voices heard and to influence policy, and a report will be given at a final conference in London in March.

Mr. Sheerman

Will the report address the concern that hon. Members have heard consistently at their surgeries since the abolition of the enterprise allowance? If the Prime Minister meant what he said at the Conservative party conference about small businesses being central to the country's prosperity, why will he not bring back an enterprise allowance, which would give so many people the chance to start a small business?

Mr. Page

The hon. Gentleman exhibits all the traits of old Labour. The purpose of the conferences is not to allow the Government to dictate to business what it should have, but to allow small business men and women to tell Government what they want. At the final conference, we shall hear not what the hon. Gentleman says that businesses want but what they say they want, and there is a vital difference. That is a philosophical divide that the hon. Gentleman has yet to cross in coming to terms with the modern competitive world in which we live.

My right hon. Friend the President of the Board of Trade gave a further commitment last October that there would be a Minister with responsibility for small business in every Department to watch out for anything that might harm small businesses. On 29 January, I shall chair a meeting of a group that will review progress since its inception. We want to help small businesses to be more efficient and to give customers what they want in quality, price, design and delivery.

We have come a long way in the past few years. The efficiency of British business has taken a leap forward, but we live in an increasingly international and competitive world. Goods can be traded in as easily as they can be traded out. Businesses that think that they can plod on, unchanged and uncaring are heading for a rude awakening. Increasingly, professionals are passing the enthusiastic amateur. Smaller companies are able to adapt and change, to diversify and to grow, and we have seen some of the advantages of that. The number of small firms in the United Kingdom has been steadily increasing for the past 20 years. At the beginning of the 1980s, there were some 2.4 million; there are now 3.6 million—an increase of more than 1 million. Ten million people work in small businesses that employ fewer than 100 staff. Such employment is vital to the United Kingdom's economy.

Growth in the small firms sector has been rapid. The start-up rate for small businesses has been some 500,000 a year, and hurrah for that, but it is not all good news. The number of firms going out of business is far too high, but the Government are addressing that by urging, supporting and training small businesses to be professional.

In other countries, small business men and women experience problems getting started unless they can show that they have appropriate qualifications. In this country, anybody—qualified or unqualified—can start a business. In other countries, the ability to trade depends on securing approval from the chamber of commerce, and the ability to borrow money is subject to strict scrutiny.

I do not want to stifle the traditional entrepreneurial spirit of the British people, which is well known and respected. We should give as much help as possible to a business start-up or expansion to ensure that it has the best chance of success and to weed out the "impossibles", thus saving all the heartache that occurs when the dreams come crashing down about the ears of a business's owner.

When such dreams collapse, it is not just the small business man or woman who is hurt but their families and other small businesses, which are not paid for services and goods supplied. It is tough in the business jungle, as I know well.

I am aware that goods are more easily traded internationally than ever before. The single market is a great opportunity. We talk of the opportunity of having 300 million-plus people with whom to trade, but it is a two-way street. Anyone who believes that he or she can operate in business without constantly evaluating its efficiency is destined for a rude awakening.

To be a small business man or woman, one must be different—one must be an individualist. Their desire to run their own business sets them apart. They must have that little bit extra—that independence to do their own thing and that individualism not to be part of a crowd. That independence is all very well, but with it must come the realisation that the small business man or woman cannot be expert at everything. They cannot keep up to date with the latest technology, watch the credit control, market survey the effect of the latest designs, investigate export markets, monitor cash flow, and so on—unless, of course, they are super-human, and few of us are. For mere mortals, therefore, the odds are that it will be difficult. The chances are that they might do some of those tasks—if not most of them—badly.

Now help is at hand. A revolution in small business support is sweeping the country. It went largely unnoticed at the beginning of last year, but it grows in stature daily. Last October, the President of the Board of Trade formally launched business link to deliver business support services in England. In Scotland and Wales, the business shop and business connect initiatives are developing in similar ways.

All Governments—I look at the hon. Member for Hornsey and Wood Green (Mrs. Roche) when I say this—have had the interests of the small business at heart and have provided a range of services in a variety of ways. I must say, however, that the present Government, who are no different from previous Governments, have done so with confusing systems, with one Department for this and another for that. The small business man or woman, with precious little time to spare, often threw his or her hands up in despair and did what all small business men and women have always done—got on with doing his or her own thing.

The Government have realised that, and in introducing business link have set in train the most exciting support system for small business that the country has ever seen. For the first time, firms have a single local point of access for a wide range of high-quality services. Some 180 business links are open throughout England, and the number is growing daily. By the middle of this year, there should be some 260.

Mr. Peter L. Pike (Burnley)

The Minister will know that East Lancashire still does not have a business link, despite the overwhelming feeling that we should have one. Will he put pressure on Eltec—East Lancashire training and enterprise council—to get the business link off the skids and under way as soon as possible, because people want to see it in action? We cannot afford to waste time.

Mr. Page

I shall deal with that point in a moment, when I shall respond to the hon. Gentleman. I must say, however, that I agree, I agree and I agree.

Business links are designed to meet local needs. I should have liked more business links to be in place sooner, and I freely admit that I set ambitious targets, but the business link national assessment panel quite rightly will not approve any proposal to set up a business link until it is satisfied that there is a solid basis for continued success.

I come now to the point made by the hon. Member for Burnley (Mr. Pike). I am told that the business plan of only one TEC area remains to be approved. The hon. Gentleman has correctly identified it and it is my hope and wish that all the partners in the area will come together to ensure that England has 100 per cent. coverage. I am doing what I can to bring about exactly what the hon. Gentleman has requested.

Mr. Pike

I thank the Minister for that. I do not wish to apportion blame for the delay. If I can help in any way to achieve that objective, I shall be most happy to do so.

Mr. Page

Faced with the combined wrath of myself and the hon. Gentleman, East Lancashire will probably roll over and agree to proposals in a remarkably short space of time. I thank the hon. Gentleman for that kind offer.

The business links are a coming together of all the local support services for small and medium-sized businesses. They include the TECs, chambers of commerce, local authorities, enterprise agencies and export clubs. They will provide one focused support system for the small business men and women of Britain. There will be one contact point, one doorway, one information source and one telephone number rather than the confusion of addresses, numbers and systems of the past.

In addition, in the further interests of simplicity, I have decided that from April 1996 the diagnostic and consultancy service will be integrated with the other similar services presently available through business link. That will help to reduce the number of separate schemes with which business link will have to deal.

It would be helpful if I were to give the House an update of business link's position today. Eighty per cent. of VAT registered businesses are now covered by operational business links. Some 64 business link companies are in business, running 180 outlets. When complete, there will be in the region of 267 outlets. Of the 195 towns and cities with populations of more than 50,000, 141 are covered by business link. At the moment, there are in post 460 personal business advisers, 30 innovation and technology counsellors, 20 export development counsellors and 18 design counsellors. The impact of business link grows literally daily.

The figures for the quarterly assessment for July to September 1995—the only ones available—when only 120 business links were in place show that at that time some 391,000 businesses were registered on the business link databases; more than 4,000 businesses a week were using business link; 7,000 businesses were advised by personal business advisers; more than 1,000 businesses were provided with diagnostic or health check services; more than 8,000 businesses were receiving counselling and more than 1,000 businesses were advised by innovation, technology, design and export counsellors.

Most important of all—and something to which I shall refer on more than one occasion—is the high level of customer satisfaction. For business link to be successful, there must be quality in every outlet—quality of information and service. Quality must be the watchword. It must be in every aspect of the organisation. Just as the name of a seaside resort runs through a stick of rock from beginning to end, quality and business link must be synonymous. That is why business link is required to undergo a tough accreditation process based on the internationally recognised system ISO9001. There will be a third-party assessment by approved certification bodies, independent, I hasten to add, of Government.

Monitoring and evaluations are necessary buttresses to the process to ensure that quality is high. That means quarterly monitoring information covering the number of businesses using the business links, the number of businesses provided with information by business links and the number of businesses advised by personal business advisers—the PBAs—and specialist advisers, as well as customer satisfaction. In addition, Ernst and Young is evaluating the earliest business links, the results of which I hope to have to hand in the near future.

The objectives are to provide early information on business link's effectiveness, to assess the added value of business link and to identify critical issues in the first years of business link's life. In addition, as if that were not enough to ensure high standards and quality, MORI is operating a business link tracking survey to measure firms' awareness, perception and use of business link. Furthermore, an impact indicators feasibility study—a rather grand phrase—will track the performances of firms helped by business link against a control group. There is also the wild card in the pack, a mystery inquirer exercise, to analyse the quality of the information and service received by businesses from business link.

I have gone through everything that is happening, the numbers involved and the growth rate of business link, and I have emphasised the importance of quality. But what does all that mean in the tough marketplace out there in which every business must take part? I have here a wodge of literally hundreds of cases of companies which have been helped by business link. I pull out a couple, purely at random, and surprise, surprise, one happens to be in the constituency of the Leader of the Opposition.

That is a company called Minicraft, a management buy-out company making miniature power tools in Durham. The management team of Neil Stentiford and Neil McPherson met the personal business adviser in Durham, Eddie Jonas, with the result that they have received help in staff training and in overseas exhibitions and their sponsorship. As I understand it, that business link partnership will continue and the company is now forecasting a 50 per cent. increase in activity during the next three years.

The other case that I have by chance selected concerns a company called Med-Lab in the constituency of the shadow Secretary of State for Trade and Industry, the right hon. Member for Derby, South (Mrs. Beckett). Med-Lab is a supplier of materials to the aircraft industry and monitoring equipment to the petrochemical industry. The area PBA, Caroline Feneley, worked with the managing director, Steve Exon, helping to introduce electronic data interchange. As a result, the company now has a simpler ordering process for its materials, cutting time and cost and giving it a competitive edge. The managing director, Mr. Exon, concluded: Business Link have been of invaluable help during this period of development. Those experiences come from the real world where one lives or dies depending on how well a business is run. As I say, I have literally hundreds of examples here and I know that there are even more at each individual business link.

But when we look to the future, everything comes back, as I said, to the quality of service. The more businesses there are with experience of the high-quality help and advice provided by business link, the greater will be the snowball effect in terms of awareness.

I am under no illusions. The challenges are formidable, but we must meet them if business links are to achieve the potential of which they and British businesses are capable. That will require continual commitment from all. It will require the commitment of partners to set aside occasional unproductive rivalry—I look at the hon. Member for Burnley as I say that—and concentrate on the needs of customers, the commitment of business link to continued improvement and high-quality services and the commitment of customers to spread the word. In addition, there must be commitment from Government to help to develop the network and fund the continuing provision of services.

The country's wealth was built on trade. Small business men and women went to every corner of the globe to sell British products, beating foreign competition and creating this nation. I believe that a resurgence of small business will enable the country to claw its way back up the economic table and create more jobs and wealth, and to aid the expansion of a caring society. Only small businesses—not the big boys—will bring that about.

I strongly believe in the concept of business links' pulling together all the partners that I have mentioned. I think that, when the political history of the 1990s is written, the start of business links will rank among the Government's finest achievements. The spirit that motivates the small business man and woman is at the heart of the nation: it is a spirit to be cared for and nurtured. I will not forget that, and nor will the Government.

5.20 pm

Mrs. Barbara Roche (Hornsey and Wood Green)

The Opposition welcome the debate. I shall begin on a harmonious note. The idea of business links is undoubtedly good, and I agree with the Minister that small businesses are the backbone of our economy as both wealth creators and employers; but they face a formidable task. All too often they lose out to big business in the attempt to obtain finance from the banks at the right time, and to cope with the compliance burden placed on them by government.

I welcomed the Minister's frank admission that the country needs to claw its way back up the economic table. Britain has fallen behind in the world prosperity league, and enabling small businesses to grow and prosper is one way in which we shall be able to claw our way up. It is good to hear a Minister admit what the Opposition have been saying for some time.

As my right hon. Friend the Leader of the Opposition—the next Prime Minister—said in Singapore on Monday, stakeholders in a modern economy will today, more frequently than ever before, be self employed or small businesses. We should encourage this, diversify the range of help and advice for those wanting to start out on their own and use the huge potential of a developing technology to allow them to do so successfully". I say with conviction that business links are a good idea because they were Labour's idea. The idea was set out in our manifesto, in which we promised to establish a network of one-stop advice centres providing small and growing businesses with access to high-quality specialist assistance. Such a network was badly needed: small businesses were faced with a chaotic maze when it came to obtaining support and help. Should they go to the local training and enterprise council, the local enterprise agency, a high street bank, the economic development unit of the local council, an accountancy firm or some other body? Daunted by the prospect of trailing around all of them, a small business might decide that it would be better off managing on its own. Because they do not know where to go, many small businesses fail to realise their potential for growth.

Opposition Members welcome the Government's decision to take Labour's good advice and introduce a network of one stop shops. Unfortunately, Ministers have handled the implementation of that decision incompetently, hastily and in a manner that—according to the Department of Trade and Industry's own internal auditors—exposed the Department to financial risk and potential embarrassment". The report was written a year ago, in January 1995, by four members of the DTI's internal audit team, and it makes chilling reading. It reveals that the current Deputy Prime Minister was so desperate to get the business links programme up and running that he ignored the warnings of officials, sidestepped proper procedures, authorised ultra vires payments and exposed the Department to financial risk and embarrassment.

According to the report, the first BL projects were pilots, but there was insufficient time for full evaluation and the establishment of best practice…On a number of occasions the Guidelines for Officials and other appraisal procedures were not rigorously observed, so that, for example, BL outlets could meet target opening dates. Those observations were borne out by a conversation that I had recently with the chairman of a business link, who told me that, if he had followed DTI guidelines, his organisation would have gone into liquidation.

The report also states: Financial appraisal of BL business plans has not been sufficiently rigorous. The auditors found instances where Government Office accountants had questioned the future viability of a BL as proposed, and although the accountants' caution had been noted, the business plan proceeded. The auditors considered that the lack of rigour in financial appraisal and approval…may have contributed to the parlous financial state of many Business Links. A damning sentence reads: Many of the problems stem from policy decisions outside the control of DTI officials". Those decisions were clearly taken by Ministers.

For some reason, Ministers do not seem to want to discuss the report. When asked about it on 5 April, the current Deputy Prime Minister told my hon. Friend the Member for Leeds, East (Mr. Mudie): the hon. Gentleman should respect the rights of Ministers to conduct internal investigations into projects which they are establishing…I do not think that it adds to the confidence in the regimes that we are establishing if reports are leaked before time and if misjudgments are then paraded in newspaper headlines."—[Official Report, 5 April 1995; Vol. 257, c. 1727.] That is an extraordinary view for a Minister—a Deputy Prime Minister—who proclaims that he is in favour of open government.

When I wrote to the President of the Board of Trade to express my concern, I was told: funds used in the Business Link programme have not been, and will not be, jeopardised by a lack of financial appraisal and control". Although every hon. Member would like to believe that assurance, the letter seems to express a remarkably ostrich-like view of the statement in the report that the then President of the Board of Trade's behaviour resulted in ultra vires payments, and the DTI's possible exposure to financial risk and potential embarrassment". Nor could the Minister give me any assurances that what was described as a "parlous financial state" in the internal auditors' report had improved, and that a similar situation would not arise again.

The report highlighted financial problems and risks because 55 outlets had been opened in 16 months. Since then, 121 outlets have opened in a year. Can the Minister explain what has changed to ensure that those risks do not continue?

I must also ask about financial management. Given that the internal auditors' report referred to accountants' concern about the ignoring of the viability of business plans, and in view of the collapse of the South Thames training and enterprise council, which left huge debts, most members of the public would want to think that the DTI had considered what to do in the event of the financial collapse of a business link, but when my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) asked about the matter in July, he was told in a written answer that the DTI has not considered arrangements to respond to the financial collapse of an individual business link because the Department is not aware of any instances where a business link is facing or is likely to face this situation."—[Official Report, 18 July 1995; Vol. 263, c. 1223.] In view of the internal auditors' remarks, I find that reply astonishing.

Despite Government mismanagement on what most people—certainly taxpayers—would consider a fairly major scale, there is some good news about business links. Some are providing businesses with effective and helpful services. That is a tribute to their staff, many of whom are working hard to give the best possible service and to make the one stop shop network a reality.

Yesterday, I visited the London, City, Hackney and Islington business link in Old street, where I met members of staff whose commitment, ideas and record were admirable. Staff are working in difficult circumstances, and I was impressed with what I saw.

I travel around and speak to people. I must tell the Minister that a senior person, who until recently was working with another new business link, told me recently that she had felt that she was living in a "bureaucratic nightmare", so the Department still has much work to do. The overwhelming picture of business links that has emerged so far suggests that the service is patchy and the quality extremely variable.

When the Minister told us about the evaluation exercise that is to involve Ernst and Young, he said that a "mystery shopper" would be used. That is an excellent idea, and earlier this week I carried out my own mystery shopper exercise. The business link signpost line was launched with a flurry in October by the then President of the Board of Trade. Its aim was to ensure that, with one quick telephone call, members of the public could find out where their nearest business link was.

That is a good idea, but how does it work in practice? I decided to use the mystery shopper technique and find out. On Tuesday, I asked someone in my office to telephone the line and ask where the nearest business link office to Parliament street was. The person who telephoned was told most politely that the database was finding it difficult to cope at the moment, and that the inquiry taker would have to refer her to a freephone number.

The official could not find the freephone number, so she promised to call back. We have heard nothing since. As the member of staff had been on the line for five minutes while the freephone number was being sought, the person from my office asked whether the signpost line was free. The reply was that it probably was free, but that the official was not entirely sure.

When the Deputy Prime Minister launched the line in October, he said: It will not be Government or partner organisations which will ultimately judge whether Business Links are successful. Business customers will judge the effectiveness of services and determine their success. I agree, but on the basis of the experience of this mystery shopper, the judgment is not a happy one.

I am not the only person who has found the service unhelpful. Today's issue of Design Week carries a letter from a woman who runs a small design consultancy in central London, and who contacted her local business link to find out the type of advice and information that it offered on local design consultancies.

The letter, which reveals an astonishing practice, says: Presumably Business Links' service is focused on saving businesses both time and expense locating specific resources, so you can imagine my bewilderment when I received numerous photocopied sheets from their local Thomson Directory. The listing included services from Artists to Interior Designers, incorporating the categories: Dental Technicians, Interpreters and Invalid Equipment and Services. This piece of literature, although no doubt fascinating reading, may prove in the long term to be limited in its ability to enlighten business managers. As the Minister knows, design is a sensitive area for business links. According to the Minister's own admission, the ill-fated consultancy brokerage service wasted almost £3 million of public money when it was scrapped before it was launched. I understood from the Minister's reply, when I raised the matter with him, that the fact that the service collapsed before it was even started was partly the fault of the press. Apparently, hurtful articles had been written about the service and its mismanagement. Perhaps when he replies the Minister will enlighten us further.

I have given some examples of what makes small businesses loth to trust business link initiatives, and what makes the public rightly suspicious about the way in which public money is being spent.

A final concern is the extent to which firms know about business links. One of the Forum of Private Business's quarterly surveys last year asked respondents to rate the help that they had received from various support agencies and organisations in categories ranging from "significant help" to "no contact".

Of all the agencies listed—including enterprise agencies, TECs, local enterprise companies, banks, local authorities, colleges and others—business links had the lowest level of contact with small firms. Only 9.7 per cent. of respondents had had any contact with a business link.

Of course, members of the Forum of Private Business are typically at the small end of the range of small businesses and one must bear in mind the fact that the business links network is quite new and not yet complete, but it is worrying that such a small percentage of businesses had any contact with it.

Another major concern is the service that business links provide, or do not provide, for very small businesses with fewer than 10 employees which, according to the figures that the Department of Trade and Industry published last June, account for 94.4 per cent. of firms. Again, it appears that the service to them is patchy.

The bottom line of what business links must provide is spelt out in the business link service guide, published in October 1995, as: an enquiry, information and referral service to start up and microfirms". The manual does not encourage business links to consider that firms with fewer than 10 employees have growth potential. It suggests that a way of targeting firms with growth potential is the database approach—segmenting by size, possibly starting with all firms with more than ten employees. We know that many firms—indeed, most small businesses—have fewer than 10 employees. We talk about small businesses being the backbone of our economy; we must remember that firms that employ fewer than 10 people often have tremendous growth potential and provide a significant proportion of the wealth of this country.

The manual continues: The national partners recognise that as a result of recent public funding changes some areas will offer typical start-up firms very limited services. Although only a small proportion of all start ups have traditionally received publicly funded support, in some areas this proportion will fall further and it will probably be impossible to achieve the suggested service options. Business link's own manual makes the startling admission that there will be a decrease in service to small firms. I know that both the Federation of Small Businesses and the Forum of Private Business are rightly much concerned about that. The whole House, too, will be concerned about it. As constituency Members of Parliament, we frequently encounter such firms, and there will be much apprehension if it is felt that the service for them will be "very limited".

The Prince's Youth Business Trust has also expressed anxieties. Everyone agrees that that trust has an excellent record. Indeed, I remember the Minister of State for the Armed Forces saying on television that the Prince's Youth Business Trust's record in creating small businesses and dealing with unemployment was much better than that of the Government. The trust's excellent work in helping more than 24,000 18 to 29-year-olds set up small firms is well documented. The top 100 businesses started with the support of the trust employ more than 2,000 people and have a total turnover of £50 million a year.

In the past, young people who were helped to set up a business had recourse to enterprise allowance to get them over the period when they were no longer receiving benefit but when money was taking some time to come in from the new business that they had started up. Now that the business start-up scheme has been subsumed into the single regeneration budget, its national coverage is again extremely patchy. The trust found that only one third of TECs provide any form of grant for business start-ups. On top of that, it is estimated that the number of training places for new start-ups has reduced by approximately half. I would be extremely grateful if the Minister would address these points.

The uneven and inadequate provision hardly fits in with the Deputy Prime Minister's vision—he announced the beginning of business links as the highest calibre…business support arrangements in each area of the country. Another worry in this regard was expressed by the Trade and Industry Committee, which reported that the unwillingness of business links to assist the smallest firms might encourage the establishment of a new range of services outside the BL network, particularly in regions where a higher rate of business start-ups is regarded as an important aim". Since I had the honour to take on my shadow post, I have gone up and down the country to talk to small businesses. I have been struck by the number of small business networks that are purely self-help operations. For them, the local TEC or business link means very little. When I ask someone involved in a small business whether they have any relationship with the TEC or business link, I am often greeted with, at the very least, a lift of a sceptical eyebrow. There is a problem—in that the Government do not appear to be reaching the people who need the services.

At the beginning of my speech, I said that small businesses were the lifeblood of the country. They are absolutely essential to growth and—like the Minister—I salute the men and women who work in small businesses for every hour God sends to provide for their families and their communities. While we welcome the setting up of business links, the sad fact is that the Government's mismanagement of the scheme means that the picture has not changed for far too many small businesses. A good idea has been mishandled by the Government, who have been described by the ex-deputy chairman of the Conservative party as ineffectual and unable to deliver its promises. No wonder John Maples said that small businessmen in particular feel let down". I can assure the House that the next Labour Government will not let them down.

5.43 pm

Sir John Cope (Northavon)

I am glad that the debate gives me an opportunity to applaud business links, as the hon. Member for Hornsey and Wood Green (Mrs. Roche) did—at least in principle. But I shall go further, as I wish to welcome the progress that has been made, more of which has been announced by my hon. Friend the Minister this afternoon.

My hon. Friend said that business links were the first single point of contact for small firms. I know what he means, but he is not quite right about that, as ideas on the subject have been developed over many years. In 1967—a long time before I became a Member of Parliament—I helped my noble Friend Lord Weatherill, who was then a new Back-Bench Member, to write a pamphlet on small firms called "Acorns to Oaks". At the time, that seemed to be a novel and sparkling title.

In the pamphlet, we advocated a one-stop shop for advice and counselling centres for small firms, to be based on the American model of the Small Business Administration and to be provided or backed by the Government. I am glad to say that the Government's small firms service came into being under the Conservative Government a few years later. I believe that the service did an excellent job, both in signposting those who contacted it to all sorts of other services and Government Departments and through the counselling and advice service that it built up over the years.

Subsequently, the enterprise agency movement began to grow in the private sector, and an excellent movement it has proved to be. It was encouraged and financially supported in the early years by the Government, and it was doing a broadly similar job in many respects to the small firms service. A multiplicity of provision grew up, which became more and more confusing as time went on. The services provided by the agency were added to those of the chambers of commerce and chambers of trade, which in many cases had existed for a long time and were providing advice and other services to all kinds of businesses. That is particularly true in the case of chambers of trade, which provided assistance to the smallest businesses and continue to do so effectively.

Twenty years after helping to write that pamphlet, I became the Minister with responsibility for small firms. While I was in that job, we created the training and enterprise councils, to build a partnership between the public and private sectors. The Government gave them responsibility for fostering enterprise, and business links have developed from the initiative taken at that time. The importance of business links is due partly to the concept of a one-stop shop. Information of the broadest kind on anything that a business might wish to know about—often in a signposting form—should be available in a single place for small firms. I believe that that is of particular value to the smallest type of firm—to which the hon. Lady was referring—which is least likely to have contacts and specialist expertise at its fingertips.

The TECs also provide training, counselling and guidance to small firms. My hon. Friend the Minister emphasised that far too high a proportion of small firms which start do not go on to succeed. We need a higher success rate, and we also need more of the firms that now exist to grow and expand. The hon. Lady made that point as well. I believe that advice and training are essential if that is to occur.

One of the difficult things about trying to run a small business is the breadth of matters with which a small business man or woman has to deal on any business day. Those involved must deal not only with the business, selling products and hiring staff, but with premises, machinery and production. A small business man must also deal with all the various agencies, and there is an enormous list of Government and local government agencies with which every small firm has to deal at one time or another. Those include the taxation agencies and revenue collectors to which my hon. Friend the Minister drew attention. There are also the local government controls of one sort or another that apply to different businesses—many of them apply to all businesses—and the various employment regulations and tribunals are also important.

There is a huge spectrum of matters with which a single person trying to run a small business has to deal, making life difficult for a small firm. A large firm has a finance director to deal with finance matters and to argue with the bank, a production director to deal with the production side, a marketing director to deal with marketing and specialists in different skills. Outside specialists, in the form of accountants and lawyers, can also be brought into play when required. The larger firm, with all its expertise, has a much better chance of mastering all the regulations.

The, small firm has the crucial difficulty of trying to cover such a wide spectrum of necessary expertise, which is why training and guidance are so important. One cannot train someone in everything, across the board, in a single set of training sessions. That is why a place to go for expert and follow-up advice when trouble occurs or when a part of the business needs to be developed—as well as a place for initial and further training once the business develops—is so important. The link between training, advice and a successful enterprise was part of the logic at the heart of the idea behind training and enterprise councils, which combine training and enterprise under a single council that is composed of the leaders of local industry and commerce.

I cannot speak for the way in which business links are developing in the rest of the country, but I have been keeping an eye on the one that serves my part of the country—Bristol and the surrounding area. As far as I can see, our business link is doing extremely well. It is still early days though, as it is for any business link.

The business link in my constituency is rightly based in Bristol, but it has three outstations up and running. I very much hope that my hon. Friend the Minister will come and help us open the South Gloucestershire business link. Recently the Northavon chamber of commerce has rightly changed its name, in anticipation of the local government changes, to the South Gloucestershire chamber of commerce. The South Gloucestershire business link is due to be launched later this year and will provide a further service in what has been, up to now, the county of Avon. It will have the full backing of the South Gloucestershire chamber of commerce, of which I have the honour to be the president, as well as the support of the enterprising university of the West of England and the excellent New Work Trust, which is an enterprise agency of great vigour, and the other people who are backing the main business link in Bristol.

Wholehearted backing is extremely important. The Bristol business link is doing so well because of the wholehearted involvement of the main players: the Bristol chamber of commerce initiative, the TEC, and the local offices of Government Departments.

The revitalisation of the Bristol chamber of commerce, which took place two or three years ago, is of great importance. It is part of a whole new spirit that I detect in Bristol, which has been stimulated by developments such as the Bristol development corporation and the port of Bristol. I believe that the abolition of the county of Avon has also helped to revive the spirit of an enterprising city, which Bristol has been for many centuries.

The Bristol business link is situated in the chamber of commerce's own premises. It has an agency agreement with the chamber of commerce by means of which about £750,000 a year of services that were previously provided directly by the chamber of commerce are now being provided through and by the business link. That shows how much the chamber of commerce has been prepared to put its eggs into the business link basket. WESTEC, the West of England TEC, similarly provides its enterprise services and training through the business link. The Department of Transport has done the same in relation to its export services locally. That commitment by Bristol business link's backers is crucial to its success.

We heard earlier from the hon. Member for Burnley (Mr. Pike) about the difficulties in his part of the country. Any hon. Members who are having difficulty with their TEC should look carefully to see whether the business link has the wholehearted commitment of the chamber of commerce and the TEC. If not, they should do everything possible to encourage that support.

The hon. Member for Hornsey and Wood Green endorsed the idea, as do I, that the customers will ultimately judge whether business links are successful. In that respect, business links are exactly like any other business. The customers decide in the end whether a business is successful by deciding whether to purchase its services or goods. Bristol business link is receiving about 1,500 calls each month, and I gather that there is a high level of satisfaction among the callers when their wide range of queries are dealt with. I believe that that is a success story.

It was good to hear the hon. Member for Hornsey and Wood Green speak in support, admittedly in general terms, of small firms and to know that the Labour party has taken on board the importance of small firms. I take that as part of its lurch to the right, which has been going on firmly during the past year or so. To somebody like me, however, who has been a Member of Parliament for quite a while, in some senses it is rather surprising to hear the Labour party say such things.

Mrs. Roche

The right hon. Gentleman had the great good fortune to be a Minister with responsibility for small business. I am sure that he will agree that the first small business Minister was the late Lord Lever, which demonstrates Labour's commitment to small firms. The right hon. Gentleman will remember that the Bolton committee on small firms was set up under a Labour Government.

Sir John Cope

I—[Interruption.] My hon. Friend the Minister points out that Lord Lever really had his finger on the pulse of small firms; but I would certainly not take away from him the credit for having been the first small firms Minister. The Bolton report was not produced entirely in response to the pamphlet that I mentioned earlier, but the pamphlet was part of a movement that built up the pressure of small businesses. Harold Wilson's way of escaping that pressure was, first, to delegate the matter to Lord Lever and, secondly, to set up a committee to go away and look into it for a long while. The report that the Bolton committee produced was much more erudite, much larger and thicker and had many more appendices than our pamphlet, but our pamphlet read like a summary of the report even though it had been written two or three years earlier. The Bolton committee report came to the same conclusions, but by that time the Labour Government had been defeated and were unable to implement it.

What the Labour Government did do—I have no doubt that they would do so again if they had the opportunity, which I hope they do not—was to load burdens on to small firms. I believe that if Labour again had the chance, the steam would go out of the deregulation initiative, for example. We know that it would sign up for the social chapter and introduce a minimum wage, and we are told that it wants to give councils the opportunity to raise extra money from business rates instead of raising it from the voters through council tax.

Those measures are anti-small business and would make life extremely difficult. There is no doubt that in due course Labour would think of ways to discriminate against the self-employed, as it did in the past, in matters such as national insurance. That is no way to help small businesses flourish and grow. The proof of that is in the way in which small firms, as my hon. Friend the Minister said, have grown and flourished since the Labour Government were defeated in 1979 and all the various bits of discrimination that I described have been unravelled.

It is important that small businesses flourish, as both the hon. Member for Hornsey and Wood Green and my hon. Friend the Minister said, because it is only the smaller firms that can provide the employment growth that we need, as well as a great deal of dynamism and flexibility in the economy. For the sake of the British economy and people, it is essential that we do all that we can to support small and medium-sized businesses and help them grow. Business links are an important core of that work and it is good to hear from my hon. Friend the Minister of the progress that they are making.

5.59 pm

Mr. Barry Sheerman (Huddersfield)

I, too, congratulate whoever decided that there would be a debate on business links, in which I am most interested. We have rather a select little group in the House this evening. As I am a former shadow spokesperson on small business, it seems that most of us have had some role in the subject.

The right hon. Member for Northavon (Sir J. Cope) spoilt an otherwise excellent contribution when at the end of his speech he had to make a party-political onslaught. He misled the House in one slight sense. The fact is that all parties have neglected small business over a long period because they all had the view that the big companies—the big corporations, the massive employers—were the way to regenerate our economy, make ourselves more competitive, sell more abroad and bring our wealth creation and production to bear on our problems. All parties started to realise at about the same time that that was not going to happen. The number of large companies, and the number of people they employed, declined. Their percentage impact on our economy declined. That is dramatically demonstrated by recruitment.

Any university vice chancellor who was asked about graduate recruitment would say that the days of the big companies, the ICIs and the Unilevers, which recruited hundreds of graduates on the milk round, have gone. All political parties realised that future employment and wealth creation would come more from small and medium-sized firms and less from the big companies. Sometimes we are not honest enough to say that those are the facts of history. So often we, as politicians, do not lead the trend but follow it. Many people in business were saying that small and medium-sized enterprises would be the salvation of our country long before any political party or Government grasped that nettle.

Business links have arrived, as history shows, with all-party support. We all wanted some mechanism through which we could stimulate small and medium-sized enterprise. Over time, all the parties have committed themselves in their manifestos and working party documents to creating something like Business Links. It was not all in search of a one-stop shop. I have seen all the literature and know all the speeches about one-stop shops. Of course, it is good to have available one place to go to telephone and either get information there or access to information held there that leads on to advice from elsewhere.

Let us be honest about the fact that all Ministers, and potential Ministers, wanted a direct delivery system through which the Department of Trade and Industry could intervene in the small and medium-sized enterprise world. That is the truth of the matter. The Opposition wanted it, and the Government also wanted it, but the DTI never had a reliable mechanism through which it could operate at grass roots level.

The quality of economic development units of local authorities was patchy: some were good, some were excellent, some were average and a lot were pretty awful. The training and enterprise councils—late entrants—were patchy. One did not know whether they were still bound by civil servants who had not quite come into the enterprise economy, or who had done so but could not quite come to terms with it. The TECs were not exactly what was wanted by a DTI Minister.

The chambers of commerce were also patchy. Some of us have marvellous chambers of commerce—in mid-Yorkshire we have one of the best in the country—but in some places they are described as lawyers' luncheon clubs and they certainly do not have the ability to deliver.

Mr. Denis MacShane (Rotherham)

My hon. Friend means that they are Conservative party dining clubs.

Mr. Sheerman

I dare not say that as my friends in the chamber of commerce movement would never forgive me.

Whatever agency one looked at from No. 1 Victoria street, there was a deficiency. The creation of business links got all-party support when the then President of the Board of Trade made the announcement in December 1992 because we all looked at Germany and the statutory chambers of commerce and talked of having a mechanism as good as that at delivering policy on the ground. Let us get history accurate in respect of the all-party support and why it existed.

To add a little salt and pepper of party-political debate, the Conservative Government's track record since 1979 on small business is pretty quiet. With all respect to the former Minister for small business, the right hon. Member for Northavon, my impression, in Opposition and as shadow Minister, was that the non-interventionist stance of the Thatcher years meant that there was little desire to get out there and intervene. Indeed, both sides of the House recognise that after Lady Thatcher ceased to be Prime Minister and we got a new President of the Board of Trade—who said that he was going to intervene before breakfast, after breakfast, before lunch, after lunch, and so on—the business links scheme was part of a change in the Conservative party, which recognised late in the day that it needed to be able not only to intervene but to intervene at grass roots level.

Sir John Cope

I absolutely disagree with much of what the hon. Gentleman said about the history of the matter. In the first place, the small firms service, which was set up under the previous Conservative Government, was a much more direct intervention by the DTI than were the TECs or business links, because they were Government offices full of Government employees. They did not have the partnership approach which has since developed.

Secondly, I disagree with the hon. Gentleman's description of what happened under my noble Friend Baroness Thatcher when she was Prime Minister. If he wants proof of that, he should consider the increase in the number of small firms and the huge list of things that were done on tax—some of which my hon. Friend the Minister mentioned—and on regulation, as well as the setting up of training and enterprise councils.

Mr. Sheerman

The hon. Gentleman and I can disagree on the history. Many would say that the restrictions under which small business operated through the 1980s became greater and that it became more difficult to run a small start-up business.

Let us consider business links in a positive spirit because we must make them successful. If they provide quality advice, they will survive and thrive. The only element of discord that I have picked up is the constant reiteration, "But that is always linked to being a business and making a profit". One of the biggest question marks over business links is where the medium and long-term funding will come from and whether the DTI's commitment will remain once the initial finance period, which I understand was for three years, dries up.

We must be careful, however, because while businesses will be able to stand on their own feet in our big cities, in constituencies such as yours, Mr. Deputy Speaker, and mine, it will be more difficult, if not impossible, for businesses to be a commercial success. That does not mean that business links are not doing a marvellous job by delivering quality and a service that helps small business. They are worth while and should be supported, but the Government and the forthcoming Labour Government must face that problem.

The business links programme delivers three kinds of specific advice: on exporting, design, and information technology, all of which are vital. The most fascinating and encouraging of those is advice on design. The Design Council's input is probably the secret of the programme's success because the local design networks that support the design counsellor give advice on which he or she can rely and a lot of information issued by the Design Council through publications and networking. That is how to maintain quality.

It is still early days and it will take time to get that aspect of the business links programme established. Criticisms are inevitable as the system gets up and running, but the design counsellor aspect is the secret of business links' success. If we want quality we must ensure that management and advice are monitored, and the Design Council has a role to play in that respect. I am not sure how the Minister intends to proceed in terms of the other two areas of expertise, exports and information technology, but those, too, need to be monitored.

If quality is to be maintained, we must ensure that the personal business advisers at the heart of this concept are of good quality. If they are the sort of managers who failed to run their own enterprise and could find nothing else to do, business links will not work. There has been a tendency to employ such people in some of the agencies that have been set up over a number of years. We need dedication to get the best personal business advisers. They must therefore be trained and, if we are to train them well, we must engage the best business schools, and economics and management departments.

We must also involve the best of the high quality private sector. I see an interesting synthesis in linking our business schools to some of this country's great consultancies, such as Price Waterhouse and KPMG, so that they can participate in training personal business managers and then monitor their performance. If that is not done, small business people in the business link scheme will say that they received duff advice. Members of Parliament know that the business network in any town or city is the best network possible because business people tell their friends, and once a scheme gets a bad reputation it will not be resuscitated without a total relaunch and new name. So whichever party runs business links, it must ensure that quality is maintained.

The success of the scheme also depends on partnership. One reason why business links came into operation was that the partnership was not good enough. Chambers of commerce may not have talked to local universities, and local universities may not have been on speaking terms with their local authorities' economic development units. There were rivalries and a lack of ability to work together. Given that business links has funding and all sorts of advantages, it must be seen to be able to draw that partnership together and make it work. It must not be seen as a representative big brother—or big sister—of the DTI that will impose its will. A little frisson is coming from some sectors—

Mr. Page

indicated dissent.

Mr. Sheerman

The Minister may shake his head, but a little frisson is already coming from some areas. No one is perfect and, given that 180 business links have now been commenced, one would not expect no disharmony whatever. A careful balance must be struck and local politicians and Ministers must do all that they can to encourage the partners to work together and ensure that the business link group does not get a reputation for trying to get its own way. Politicians know that that is not how to achieve an effective partnership and good results. We must make small and medium-sized firms understand that concept.

I strongly agreed with my hon. Friend the Member for Hornsey and Wood Green (Mrs. Roche) that the scheme must not be geared only to where the Government think that they will achieve the quickest results. We all know that business schools and researchers have told the Government how to achieve the quickest fix and double the size of medium-sized businesses, but we must make the scheme appeal to and help small as well as large enterprises. I remember when the former President of the Board of Trade introduced the first pilot scheme in December 1992, which was designed for very small as well as large enterprises. Those small enterprises must be helped, which is why I made the jibe to the Minister when he introduced this debate that it is a pity that enterprise allowance has been lost. Helping small businesses to start up remains vital to their life blood.

Small and medium-sized businesses need help and good-quality advice, and the business link programme can deliver that. It is odd that I have been described as "old Labour" as the other day someone trying to be rude to me in a meeting said that I was a Blairite before Blair. I believe that the private sector should not be shut out.

Many of our constituents work as accountants, in the financial services sector or as bank managers and, over the years, have given high quality advice. They, too, must be brought into the partnership and not treated badly, although I agree that they must be monitored. Part of a Member of Parliament's job is to signpost good solicitors, lawyers and accountants to our constituents, so we do a monitoring job in that respect. All those partners must be given respect, evaluated and encouraged. In that way, business links can make a real contribution to wealth creation and the success of our country.

6.19 pm

Mr. David Chidgey (Eastleigh)

I have listened to the debate with increasing fascination because we appear almost to be running a parallel debate. All hon. Members who have spoken appear to agree, which is obviously causing confusion. It appears that we are witnessing the Government and the official Opposition debating not whether the business links is a good idea, but who thought of it first. It is vastly entertaining.

I am always tempted to scurry out of the Chamber and fetch the famous Liberal yellow book of the early years of the present century and demonstrate that all the good ideas emanated from my party, but that might test the patience of the House too much. [HON. MEMBERS: "Hear, hear."] I shall therefore refrain from embarking on what I believe would be a sterile exercise—my words would fall on deaf ears, at least.

I listened to the Minister's remarks with great interest. Although I cannot quite accept some of the glowing sentiments that he expressed, I can agree that the one stop shop—the business links—is a good idea that deserves support from both sides of the House. By concentrating services and help for small business in one place which, one hopes, is accessible by one telephone call, business links is a vast improvement on the confusing plethora of services from different sources that existed previously. Organisations that were trying to make their way in business might previously have found it too daunting to seek help, and returned to doing whatever they did previously.

I shall discuss several matters that show that we should not be complacent. I hope that the Minister will direct attention to those matters of concern in the months ahead. Specifically, I shall speak about the help that is needed by very small businesses, about which several hon. Members have spoken. I shall also discuss the amount that the business link is likely to charge small businesses for its services, and the best way in which to streamline the services that are provided by chambers of commerce, training and enterprise councils and other organisations. I do not believe that streamlining is quite as easy as might have been inferred from some hon. Members' speeches.

We must emphasise the importance of micro-businesses—businesses with one to nine employees. Several hon. Members have mentioned them. As the hon. Member for Hornsey and Wood Green (Mrs. Roche) said, they represent nearly 95 per cent. of all the firms in the country. Equally important is the fact that they represent more than 28 per cent. of the work force. They make an important contribution to our economy.

The Minister emphasised the importance of small businesses to the economy. Their needs should be addressed carefully and specifically and they should be vigorous supported.

The small business has great difficulty employing key staff to cope with the management tasks that are taken on as a matter of course by larger enterprises. I remember, from my professional experience running my own office with a few staff—slightly more than 10, but certainly not in the wider range—becoming a multi-skilled person, not because I wanted to but because I had to. That is a common experience. People spend many long hours trying to do the accountant's job after most others have gone home, and hope that they have got it right.

A great problem for micro-businesses, as I call them, is having skills in-house, training their staff and undertaking financial planning, business development and the essential management task of marketing. The problem is that, although they recognise that they do not have skills in-house, they often do not have the financial resources to buy in expertise either. They are too busy trying to make a turn on their day-to-day business. Whatever profit they make might be kept for the days when the orders do not come in; it is not automatically spent on buying in expertise on matters that are separate from their main function.

Many small business are very suspicious of consultants. I am an ex-consulting engineer, so I know. The people who earn their living on the knife edge often say, "If you ask a consultant the time, the first thing he will do is borrow your watch". A politician would probably not give it back. The key point is that many small businesses operate at the margins, and cling on by their fingertips to survive. They do not have the fat in their financial operations that enables them to employ outside expertise.

Under the current regulations, many firms have little opportunity to take up the services offered by business links. It is not only a question of cost. Small firms with four or five employees—there are many of them—cannot spare the employee time involved in making contact with business links.

We must introduce imaginative ways of delivering business links services. We must use distance learning techniques, set up support networks—as other hon. Members have said, that is happening informally—and use new technology. If business link is to succeed, it must be based on imaginative and time and resource efficient techniques to enable very small businesses to take advantage of it.

I should like to mention cost comparison. I mentioned that small businesses are conscious of the margins on their resources. We must come to grips with the fact that many small businesses will take a very critical look at the charges that will eventually flow from using business link services.

We know that the highest growth in new businesses is in the service sector which, basically, involves selling people's time and expertise. The hourly rates chargeable for people's time have inevitably been driven down by the recession and by fierce competition, not only in the United Kingdom but world wide. We now confront global competition through the information super-highway. That competition will have a strong impact on the profitability—and the soundness—of small businesses in the service sector.

It is now possible, in no more time than it takes to go down the road to a local supplier, to buy in computer programming and project design from centres as far away as India, where overheads and wage costs are much lower. A company that sells a product that depends on a person's time, finds itself competing—somewhat unfairly, one might say—with companies whose costs are dramatically lower but whose products are as available because they are on tap on the information super-highway.

The charges for business link services must reflect that super-competitive environment. If clients or potential clients of business links who are in the service sector find that, when pricing their products, they cannot do more than double the salary costs to cover overheads, social costs and perhaps some profit, they will not be prepared to pay business links charges approaching those that management consultants like to charge. Business links must be able to operate sympathetically to small businesses and at rates that clients consider reasonable and worth while. Their clients are at the sharp end and know how tight the margins are.

I shall now discuss combining the skills of the chambers of commerce with those of the TECs. Following that avenue to concentrate services is an attractive option because one draws in established skills and the other draws in organisations that are well known in the business community and supported by it. It would be wrong, however, if the House were to assume that that course would be a panacea. Much depends on the location and culture of the business community being served.

When I was the Liberal Democrat spokesman for employment and training, I had the opportunity to visit Northampton. I was much impressed by the results of the Northamptonshire TEC's merging with the Northamptonshire chamber of commerce. There were some remarkable results in training programmes, but that is a subject for another day. The important factor is that both bodies served the county of Northamptonshire. Their boundaries were coterminous, so, when they merged, the synergy between the two was obvious and the chamber of commerce's representatives on the board of the new organisation were elected from the membership of the old chamber of commerce—something that is unusual, but to be encouraged.

In Hampshire, such easy merging and synergy is probably a long way away. We have two major cities, Portsmouth and Southampton, which have distinctly different cultures. There is a long history of fierce competition between them, perhaps going back to the civil war when, as I remember, they were on different sides. That competition runs through everything from their soccer teams to their universities. Each city has a powerful chamber of commerce that competes with the other for Government assistance, business development and export trade.

Hampshire TEC, however, has to serve the needs of both cities fairly and without favouritism—and they are two completely different areas. The day that the Hampshire TEC and the chambers of commerce of Portsmouth and Southampton contemplate a merger is so far away as to be out of sight.

I have received feedback from the business community in Hampshire, where business link is due to be launched in 1996. During the past couple of years, much effort has been expended on ensuring that we set in place effective working partnerships for the benefit of the business community of Hampshire. I have received feedback that suggests that, at times, the efforts have been plagued by shifting goalposts as the DTI's objectives change to respond to the problems that it encounters in other parts of the country. I accept that the process is iterative, but that creates extra problems for the TEC which is trying to set business links in place.

The primary concern in Hampshire in the run-up to the launch of business links is its longer-term financial viability, which hon. Members touched on earlier. It is intended that, after three years of DTI pump-priming, funding should end. The DTI's view seems to be that, by that time, sponsor and partner contributions and the income generated from services will be sufficient to allow the organisation to survive independently. That might be right, but it is difficult to see where the profits will be made. Will they be made from making margins on DTI service contracts? For that to happen, the DTI will have to be happy with the level of margin made, bearing in mind the value-for-money responsibilities rightly attached to Government funding. The DTI will not want business links to make excessive profits on contracts. Will the profits come from charging customers for services, in full or in part, taking due regard to the European Union's state aid rules?

We are only too aware—I think that the DTI is learning by experience of business links elsewhere—of the reluctance of small businesses to pay for anything they do not have to pay for. Some services will continue to be funded, in part or in full, by the DTI, but that funding will not cover the costs of operating even the most cost-effective business links. The worry is that the business links network is only now beginning to confront the DTI with the reality of business plans and the likely funding gap in the fourth year of operation.

The DTI recognises that some of the assumptions of growth in income from customers are at best over-optimistic and at worst totally unrealistic. It cannot have it both ways: either such growth will occur or the DTI must be prepared either to invest more money or to allow business links to make bigger margins on publicly funded services. More realism is essential if business links is to work.

6.34 pm

Mr. Denis MacShane (Rotherham)

I have enjoyed our debate, which has been held in a relatively uncrowded House. I particularly enjoyed the imagery of acorns and oaks used by the right hon. Member for Northavon (Sir J. Cope). The evidence on the ground in Rotherham and South Yorkshire is that the Government's support for business has remained very much at the acorn stage in terms of creating new jobs or new businesses.

I also enjoyed the honesty of the Minister for Small Business, Industry and Energy, as I think that we heard for the first time from the Government Front Bench an open admission of the dismay and shame that all hon. Members should feel at the dramatic slump in the United Kingdom's standing in world competitive league tables. We have dropped from 12th when Labour was last in office to 18th today—and we are still falling fast. Investment as a percentage of gross domestic product—along with demand, that is one of the key components for sustaining any small business culture—is about 17 per cent. compared to 23 per cent. in Australia, 25 per cent. in Switzerland and 29 per cent. in Japan. The Government's lack of commitment to jobs and business is reflected in the number of small businesses that we have.

I am grateful to the Minister for a written reply that he provided to me just before Christmas in which he said that in Yorkshire and Humberside the number of VAT registrations, which is the only real measure we have for small businesses, dropped from 17,100 in 1990 to 13,300 in 1994—a slump of 25 per cent. Even taking into account the change in the VAT threshold, the Yorkshire figures show an absolute decline. The significant problem faced in South Yorkshire is the slump in small businesses.

One reason why small businesses fail to get off the ground in Rotherham and South Yorkshire is that so many organisations purport to help them. I was pleased to hear my hon. Friend the Member for Hornsey and Wood Green (Mrs. Roche), the shadow Minister with responsibility for small businesses, draw attention to the plethora of organisations that purport to represent businesses. There are TECs, chambers of commerce and, in the industrial sector, the Engineering Employers Federation. Companies may belong to the Confederation of British Industry or they may belong to the Institute of Directors. The sum of the parts of business representation, guidance and advice never seems to add up to a convincing whole.

We have to take a special test to drive a bus, practise law or build a house. But the Minister proclaimed with pride that no test, qualification, proof of financial commitment or willingness to join an organisation that might provide guidance and help was necessary for anyone wishing to start a business. I do not wish to put hoops in the way of individuals who wish to form any sort of business, but we must look at our more successful competitor partners and be modest enough to learn from their experience.

There are 12,000 unemployed people in Rotherham and approximately 4,000 firms can be identified in the borough. The question that I continually ask myself is: how can policies be shaped allowing each firm to take on one extra employee—which would mean that unemployment in Rotherham would drop by one third—or even two extra employees? It is not a simple mechanical, arithmetical progression, but if we endeavour to help small businesses, perhaps we shall tackle the pressing problem of unemployment in my constituency and those of my hon. Friends who also represent Rotherham.

The social chapter is quite irrelevant as it expressly excludes small businesse. Low wages, however, are vital. Rotherham employment service advertises jobs paying £1.80, £2, £2.50 and £3.50 per hour. Anyone who accepts those low-paid jobs then has to be subsidised through the welfare system by the taxpayers of Rotherham. That is why the tremendous echo that is reverberating around the country was created not by Baroness Thatcher in a speech designed to divide the Conservative party, as we shall hear later tonight, but by my right hon. Friend the Leader of the Opposition in his speech on the need for a stakeholder economy. That speech was based on the idea of partnership.

The Minister for Small Business, Industry and Energy will reply to the debate. His predecessor as the Minister for acorns, now the Minister for Science and Technology, the hon. Member for Esher (Mr. Taylor), was formerly at the Department of Employment, where he poured sulphuric acid over all notions of partnership.

In the dynamic economies of Asia and the more successful partner competitors of Europe, partnership is built into the world of work. In Britain, even at the lowest level, there is immense ideological hostility to partnership in the workplace. That is the abiding legacy of modern Toryism. Instead of drawing on the talent, knowledge and commitment to their firm of employees through their representative organisations, we have suffered from the denial of partnership and a complete disinterest in the idea of the stakeholder economy.

During a recent visit to the Bundesbank in Germany, I was interested to discover that the strongest component element of the Bundesbank was the 4,000 co-operative banks based in the region. Representatives of those banks take the decisions that often have a great impact on our own economy, such as those on the interest rates set in Germany. There is a much stronger regional identity there and its banks and institutions are closer to the ground than our highly centralised, London-focused economy. That is why the chances of support for small business are so much better.

My hon. Friends have mentioned that the business links chain is unable to provide any help to the micro-businesses with fewer than 10 employees. Those businesses are the acorns that need fertilising, nurturing, guiding, sheltering from the sun or exposing to the rain, to continue down the metaphorical path of gardening, which is one of my favourite hobbies.

The excellent staff at business link in Rotherham are unable to provide the advice to the small firms in Rotherham that should receive backing. To reiterate the point made by my hon. Friend the Member for Huddersfield (Mr. Sheerman), they find it difficult to support innovation and invention because the destruction of the apprenticeship schemes, which are the core of successful small businesses in so many of our competitive partner countries, has produced a shortage of skilled intermediate workers—low, medium and high-tech workers.

I pay tribute to the staff of business link at Templeborough in Rotherham, which occupies a wonderful site open to inward investment. I hope that representatives of all companies here and abroad reading Hansard tomorrow will speed to Rotherham, where they will find a warm welcome.

I also pray in aid the Deputy Prime Minister, whose performance this afternoon, when he kept a straight face while commenting on his support for the former Prime Minister, Baroness Thatcher, was a remarkable example of a still-lipped rictus such as I have never seen in the House of Commons.

When the Deputy Prime Minister was President of the Board of Trade—before he was replaced in that post by an invisible kilt—he wrote to me expressing support for the merger of the Rotherham chamber of commerce and the TEC. Voting for that process is now under way and I would like to place it on record that all three Members representing Rotherham support the merger, as do the leaders of the TEC, the business community and the trade union movement in Rotherham. We hope that all relevant companies will vote in favour of the merger. It will create a successful and vibrant Chamtec, as it will be called, which, together with the Rotherham economic partnership—which includes the local authority and business link—will work to promote the interests of the people and businesses of Rotherham. In essence, there is a sense of partnership and the creation in outline of a stakeholder economy and community in which everybody is invited to participate. No one is excluded for ideological reasons, as has been the case since 1979.

Labour's commitment to small businesses is clear. We are and always have been the party of the little person, in the sense of the men and women who are oppressed by stronger, more authoritarian, richer and more powerful elements in our society. We are also placing ourselves closely in common cause with the interests of small business in Rotherham and throughout the country.

6.46 pm

Mr. Page

With the leave of the House, I shall make a few comments in reply to the debate, which has been helpful and supportive. I welcome some of the words of the hon. Member for Hornsey and Wood Green (Mrs. Roche). I was not surprised that she claimed business link as a Labour idea. Labour has tried to pinch, beg and borrow practically all our other clothes, and this will be no exception, so its attempts to acquire business link as part of Labour party policy is no surprise.

I am not quite so sure about Labour's latest claims. The stakeholder gimmick sounds more like a return to the minimum wage, the social chapter and more trade union rights—but that would be moving away from the purpose of the debate.

When the hon. Lady has a chance to review her speech, she will note that she made very little allowance for the fact that many of the business links are freshly formed and still feeling their way. I wonder whether anybody working up a new business link will find encouragement and understanding in her words.

The hon. Lady's criticism of London is grossly unfair. She is obviously not aware that business links are not yet open throughout the capital and the overarching central link for London is still not fully in place. Therefore, I am not surprised that she did not receive the immediate, quality service that should be available when everything is in place.

The hon. Lady is absolutely correct about the consultancy brokerage service. It was an attempt to provide an unified listing service on a national basis. It was conceived with all the best of intentions, but when I took up my present post it was obvious that business links were planning that service on a regional basis. I am sure that the hon. Lady would not want me to pursue and continue a scheme that the business links did not wish to see operate.

Mrs. Roche

I am grateful to the Minister for giving way and I am interested in what he said about the consultancy brokerage service. My point was not that more public money should have been allocated but that the Minister or his predecessor should have taken responsibility for the decision, rather than blaming the press for its demise and the loss of almost £3 million in public money.

Mr. Page

I can say little other than reiterate that I have taken responsibility for that decision. When I assumed my current post, I said that the scheme would not receive the support of all the business links and that therefore it should be closed. That is exactly what we did, and I cannot follow the hon. Lady's logic.

The hon. Lady also made great play of a conspiracy theory regarding the internal audit report. The Department of Trade and Industry informed the commission about the pilot project and later informed the commission that we were working up a fully fledged scheme. It was believed to be important to sustain the momentum of the development of the business network while awaiting the commission's formal approval, which I understand came through on 6 September 1994.

I turn now to the comments of the hon. Member for Huddersfield (Mr. Sheerman), who has explained to me that he meant no discourtesy in disappearing from the Chamber, as he had a pressing engagement. I was very grateful for his contribution to the debate and I agreed with much of what he said. I thought he adopted a very positive approach to business link. In teasing him about his contribution—I hope that he will read my remarks in Hansard—I shall not comment on his attempts to rewrite history. However, I agree with him—and I return to my opening remarks—that we must have quality. He has obviously recognised fully the speed at which a business link can lose its good reputation with the local business community, and I am also only too well aware of that fact.

What can I say to my right hon. Friend the Member for Northavon (Sir J. Cope)? He is a previous and most successful small business Minister and he has forgotten more about the small business scene than I shall ever know. I can only recommend that hon. Members read his words again and again, because they are wise, knowledgeable and skilful.

I thank the hon. Member for Eastleigh (Mr. Chidgey) for his support. He is correct to draw attention to the future financing of business link. The Government have given a commitment for the three-year programme and we shall look beyond that when the time comes. I am convinced that there must be some element of charging. However, as we can see from the support programmes, more than £100 million will be available in 1998–99 from the Department of Trade and Industry for services.

The comment was made that small business people do not like to make any payment unless they have to do so. I understand that, but if business link can establish a reputation for quality and for being a sensible investment for small business to make, I believe that people will be prepared to contribute to making their businesses even more viable and profitable.

I acknowledge what the hon. Member for Eastleigh said about Northampton; however, I am conscious of the fact that in this Chamber there is someone, in the form of our Deputy Speaker, who has vast knowledge, skill and influence with regard to the merger to which the hon. Gentleman referred.

I am glad that the hon. Member for Rotherham (Mr. MacShane) supported business link once again. He managed to plug his constituency business link in Rotherham and he referred to the merger between the training and enterprise council and the chamber of commerce. I leave it to the local partners to identify how unified delivery of service to business men and women in the area can be best achieved.

I shall not follow the hon. Gentleman by making international comparisons, as I could spend a considerable time pointing to the huge success of inward investment in this country: hundreds of thousands of jobs have been created and we now have one of the lowest unemployment rates in the European Union. However, that would be contentious and I would hate to introduce a discordant note at this stage of the debate. I take on board the fact that there must be support services for the micro-business. Obviously, micro-businesses grow into small and then medium-sized businesses. Huge, successful businesses that have developed from a standing start are few and far between.

I am glad that there is broad consensus in the House about the issue. It must be a good idea when every party claims credit for introducing and developing it. However, I must point out that it is this Government who have put business links in place. On a serious note, business links face formidable challenges. It will need the commitment of all the partners, political parties and customers in order to spread the word. As I understand it, the message from the House tonight is, "Well done so far. We look forward to seeing business links achieve so much more in the future."

I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.