HC Deb 24 July 1996 vol 282 cc335-7
4. Ms Janet Anderson

To ask the Secretary of State for Education and Employment what assessment she has made of the impact of the failure rate in new businesses on employment opportunities in the United Kingdom. [37268]

Mr. Paice

No direct assessment has been made, but research shows that new business survival, and hence employment potential, is affected by the level of business management skills and experience of the proprietor.

Ms Anderson

Is not investment crucial to the long-term success of new businesses and the creation of jobs? Does the Minister accept that Britain now has a lower level of investment than in 1989? Could that be why the number of jobs in manufacturing has fallen by 500,000 over the past five years?

Mr. Paice

The hon. Lady falls into the trap of equating numbers of jobs in a sector—particularly manufacturing—with the health of the sector. For decades, jobs have been shed in manufacturing because of automation and technology. That does not mean that the sector is less advanced or profitable—probably the reverse. All businesses need to invest, both in equipment—which is a matter for my right hon. and learned Friend the Chancellor—and in their work force—which is my responsibility. That is why the Government have made a range of proposals targeted at small businesses and businesses generally to encourage them to invest in their work force.

Sir John Cope

We all support reductions in the failure rate of small businesses. The Government are doing a great deal—through business links and other schemes—to reduce that failure rate. Does my hon. Friend not deplore, as I do, the emphasis that the question places on the failure rate? The main employment effect of small businesses has been a massive increase in employment as a result of the massive increase in the number of small businesses since 1979 of about 1 million.

Mr. Paice

My right hon. Friend is entirely right. There are now more than 50 per cent. more businesses than there were in 1979. That in itself is good for employment. He is also right that we should not dwell on what are often described as failures. Just because a business may cease to operate does not mean that it is a failure. [Laughter.] In their laughter, the Opposition demonstrate how little they understand about businesses. A business may stop trading in the same name because it has been sold or because the proprietor has retired, or for a whole range of reasons. The NatWest survey of small businesses demonstrated that 73 per cent. of cessations were for reasons not associated with bankruptcy or solvency.

Mr. Meacher

May I associate myself and the Opposition with the words of concern and sympathy expressed by the Secretary of State about the tragic death of Caroline Dickinson last week?

Will the Minister confirm that the company failure rate, which we believe is significant, is running at nearly 1,000 a week and increasing, and that, each day, in the first three months of 1996, 2,500 people lost their jobs? Will he also confirm that, contrary to the impression that Ministers like to give—that unemployment is falling—the more accurate labour force survey shows that the number of people in employment fell by 74,000 in the first three months of this year and that there are still 1 million people fewer in jobs than there were the day that the Prime Minister entered Downing street? Is he not ashamed that, since 1979, Britain has had the worst job creation record of any major industrial nation?

Mr. Paice

I am glad that the hon. Gentleman took so long in asking his question because as he did so his facts became more and more obscure. Unemployment has been falling consistently for a considerable time, thanks not only to the Government's economic policies but to our resistance of policies that would have damaged employment prospects: the social chapter and the minimum wage. Those are the Labour party's policies and they would destroy employment. Wherever the hon. Gentleman would care to look throughout the rest of Europe, he will find countries suffering from those problems. Unemployment in the major European countries is much higher than ours, and is often still rising.

Mr. Batiste

Is it not inevitable that, if there is a substantial increase in new business start-ups, there will also be a corresponding increase in the number of business failures? Is not the creation of new businesses the best way of increasing employment? Will my hon. Friend commit himself and the Government to maintaining that momentum by opposing the national minimum wage and the social chapter, which are so destructive to businesses and so often lead to failure on the continent?

Mr. Paice

My hon. Friend is entirely right. It is important that we do whatever we can to encourage small businesses and the spirit of innovation and entrepreneurship that leads to their success. That is what the Government's policies are directed at. He is also right to remind us again about the minimum wage. Conservative Members have always been amazed by the fact that the Opposition have never said how they would resolve the problem of the restoration of differentials—a problem that is underlying the minimum wage and would destroy more jobs than anything else. We await with interest to see how they plan to address that issue.