HC Deb 30 March 1999 vol 328 cc882-920

  1. .'—(1) The additional individual rights conferred by sections 8 to 21 of, and Schedule 3 to, this Act shall not apply to any worker unless the employer of that worker, taken with any associated employer or employers, employs—
    1. (a) at least 51 workers on the day in respect of which the employee claims the right, or
    2. (b) an average of at least 51 workers in the 13 weeks ending with that day, to be determined in accordance with the methodology established under paragraph 6(2) of Schedule 1 to this Act.
  2. (2) The lower of the two figures in subsection 1(a) or 1(b) shall be known as the qualifying limit.
  3. (3) The Secretary of State may make an Order modifying the qualifying limit for workers, or applying, varying or disapplying any rights conferred under this Act for workers employed in numbers below the qualifying limit, but no such order may be made unless a draft of it has been laid before, and approved by a resolution of, each House of Parliament.
  4. (4) An Order under subsection 3 may make provision for the continuation of employment rights mentioned in subsection (1) and already enjoyed by an individual worker or workers at the time of the passing of this Act.'.—[Mr. Redwood.]

Brought up, and read the First time.

Mr. John Redwood (Wokingham)

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this, it will be convenient to discuss the following: New clause 2—Microbusiness exemption

  1. '.—(1) Subject to subsection (2) below, the Secretary of State may by Order disapply or modify such rights of individual workers under the Employment Rights Act 1996 (but excluding any rights conferred under that Act by the provisions of this Act) as he deems appropriate in the interests of businesses employing 10 or fewer workers (or such lesser or greater number as he may by Order specify from time to time).
  2. (2) An Order under subsection (1) shall not apply to rights already enjoyed by individual workers at the time at the passing of this Act.
  3. 883
  4. (3) No Order under subsection (1) shall be made unless a draft of it has been laid before, and approved by a Resolution of, each House of Parliament.'.

Amendment No. 5, in schedule 1, page 19, line 39, leave out '21' and insert '51'.

Amendment No. 6, in page 19, line 40, leave out '21' and insert '51'.

Government amendments Nos. 66 to 68.

Mr. Redwood

Amendments Nos. 5 and 6 are consequential on new clause 1, should the House agree to that, and I have no objection to Government amendments Nos. 66 to 68, subject to anything that the Secretary of State or the Under-Secretary may wish to say by explanation.

I remind the House that I have declared an interest in certain companies in the Register of Members' Interests. I am not speaking on their behalf or at their request today, but all companies are obviously affected by these new clauses and amendments, so it is right that I should remind the House of those interests.

I thought it curious that the Secretary of State was so generous to whistleblowers but not others until I remembered that it is to a whistleblower that he owes his job. We were grateful to the whistleblower who exposed the goings-on at the Department under the right hon. Gentleman's predecessor. It was good that we were able to find common cause on the issue of whistleblowers in the first exchanges.

I hope that we can make similar progress by tempting the Secretary of State to live up to the fine rhetoric that he has placed in the newspapers in recent weeks about the need to deregulate. Some of the words which have been planted in the press, perhaps at his request, allegedly on his behalf, could have been uttered by me. They were fine deregulatory statements, saying that the costs of business must be cut, that the burdens on business must be reduced, that the Government have at last got the deregulatory message coming loud and clear from businesses, small, medium and large.

Mr. Fabricant

Does my right hon. Friend think that, with regard to deregulation, that is just rhetoric, not actual delivery? Could that be why Joachim Milberg today said that BMW is thinking of moving the Longbridge operation to Hungary, where there is not only little regulation but low pay and no excessive charges on top of employment?

Mr. Deputy Speaker

Order. Perhaps the right hon. Member for Wokingham (Mr. Redwood) will take a gentle reminder from me that that can hardly be answered in the context of small employers.

Mr. Redwood

I take your warning, Mr. Deputy Speaker. My hon. Friend is noted for his persistence and I know that he has the interests of all British business at heart. With your permission, I shall answer within order by saying that I fear that, on the issue of deregulation in general, and deregulation for small businesses in particular, there will be many more words than actions from the Secretary of State.

The right hon. Gentleman has a marvellous opportunity tonight to prove me wrong. if he would like to intervene at this moment and welcome the new clause, I would forgo the advantage of the rest of my speech, congratulate him warmly and say that he has at last understood some of our message on deregulation. However, I see the right hon. Gentleman is not about to leap to his feet, so I fear that we must tease him a little further about the big gap that is growing between the rhetoric, the spin, in the unattributable briefings in the press and the reality of a Government who put cost upon cost, burden upon burden, regulatory requirement upon regulatory requirement upon small and big businesses alike.

Mr. Bercow

My right hon. Friend, as the House knows, is renowned for his generosity of spirit, but on this occasion, I hope that he will not over-egg the rhetorical pudding. To that end, does my right hon. Friend recall that, in the course of 46 minutes of speech from the Secretary of State during the Budget debate—a 36-minute opening speech and a 10-minute statement on enterprise and competition—the word "deregulation" did not come forth from his lips once?

Mr. Redwood

My hon. Friend has a better memory than I do, but I am sure that he is right. It would be a notable omission to go through such a speech with no reference to deregulation. But that is symptomatic. There has been no such reference in the House of Commons because my hon. Friends or I might cross-examine the right hon. Gentleman and discover that there is no back-up to the rhetoric that he wishes business chiefs outside to believe. This is a regulatory Government who are presiding over an industrial crisis. We propose this modest measure of relief for small business because we are worried by the climate now confronting small industrial companies in particular.

5 pm

Let us consider today's news. The pound hit a new high against the euro this morning: there has been a 7 per cent. or more devaluation of the euro in three months. BMW says that it still has not settled its future at Longbridge despite long and protracted negotiations, and that threatens many firms that depend on the jobs at that most important plant. Four hundred jobs have disappeared at Marks and Spencer, and there is a strike at National Power. What is the Government's answer to all that? Yet more regulations, which interfere with the rather good employee relations we left the Government when we were removed from office, and yet more costs to be placed on small and big business at a time when it is already too dear to make certain products in Britain. The Government have gone out of their way to make it too dear to make goods in Britain by having a high exchange rate, high interest rate, high tax and high regulatory cost policies, which they have pursued come hell or high water over the whole of their two years in office.

In the lifetime of this Parliament, small and big firms face £8 billion of extra charges from the national minimum wage bureaucracy and policy; £6.65 billion extra costs for the working time directive; £85 million for European works councils; £110 million extra for parental leave; and £90 million extra for the Food Standards Agency. That is on top of the massive stealth taxes, wealth taxes and company income taxes that have been imposed through the back door in three successive Budgets. It is no wonder that small business now finds it extremely difficult to prosper, and we see factory closure after factory closure day after day, and redundancy after redundancy as the full impact of these taxes and extra costs is felt.

Worse still, from the Secretary of State's point of view, is the fact that the big impact is in his constituency and in the constituencies of his right hon. and hon. Friends in the northern and midlands manufacturing heartlands. I am glad to say that it is not being felt in my constituency.

Mr. Byers

The right hon. Gentleman should stand against me.

Mr. Redwood

The Secretary of State rather foolishly says that I should stand against him in his constituency. Why should I let my constituents down? Why should I throw away all that hard work for them, and why should I have to apologise to him for the fact that, despite Labour Government policies, they are prosperous and succeeding and do not have an unemployment problem? I have every right, as a member of the shadow Cabinet, to speak out for his constituents if he fails to do so. The industrialists and the industrial employees in his constituency and in neighbouring areas are getting tired of the Government, who are long on promises and short on delivery. They are unable to understand that their policies are doing enormous damage to industry and companies in that part of the world.

The Secretary of State, in his rhetoric, says that this legislation is about a new culture of partnership. How can he believe that, when the Bill is about compelling people and companies to do things that they otherwise would not voluntarily agree among themselves to do? His idea of partnership is like the idea of partnership entered into between the chicken and the pig for the breakfast business: it might be all right for the chicken, but not very good for the pig. The Government have such a partnership in mind in this legislation.

Our proposal would exempt all small firms with 50 employees or fewer from the impact of the Bill. It would not prevent them from going ahead by voluntary agreement with best or better practice than is recommended in the legislation. It would not prevent them from offering even better terms and conditions of employment to their staff. Many of them already do, and I hope that many of them will be able to do so in the future.

Does the Secretary of State realise that if a firm has fewer than 50 employees it is possible for the boss to know them all, to like them all, to have individual business relationships with every one of them, to understand their requirements and needs and to negotiate with each of them on what is best in their circumstances? He can negotiate individually on hours, pay, conditions and family circumstances. There can be give and take between employees and the employer: employees understand that in a small firm there has to be more give and take on their part as well. If there is not, the life of the small firm may be jeopardised.

Mr. Geraint Davies (Croydon, Central)

Why did the right hon. Gentleman not opt for a limit of 100, 150 or 200 rather than 50, given what he has said? If he were sincere, he would admit that he does not want any of this legislation: he does not want any additional rights for any workers, or the partnership and prosperity in industry that it envisages. Why does he not come clean and say that we should get rid of the 50 limit and abolish the lot?

Mr. Redwood

If the hon. Gentleman reads the new clause, he will see that it gives power for the number to be varied. My right hon. and hon. Friends and I discussed the matter, and decided to go for a modest proposal. We are offering it seriously, because we hoped that the Government might accept it. We had read all the rhetoric suggesting that they were now very worried about small firms.

As I have just explained, in a company employing 50 people or fewer, it is normal for the employer to know all those individuals, to have hired them personally and to be able to negotiate with them separately. That might be a little more difficult with 100 or more employees. Personally, I favour the 100 figure, and some small business organisations have made representations to us suggesting that we opt for it, but we chose the more modest figure, because it can be convincingly argued that, in a firm employing 50 people or fewer, the problems resulting from the introduction of a statutory framework applying to much bigger companies will be greater. In a company with 50 or fewer employees, employer and employee will obviously know each other, and will be able to work things out on an individual basis.

The hon. Member for Croydon, Central (Mr. Davies) and his right hon. and hon. Friends may be interested to hear some of the views of the business community, if they are not sure about my powers of persuasion. The London chamber of commerce and industry is very worried by the alarming increase in costs. In one of its recent press releases, it says that the Government's measures will result in added costs and bureaucracy for firms when they are already having to comply with the Working Time regulations and preparing for the minimum wage legislation… Furthermore, measures such as the introduction of parental leave will be a greater burden on small firms than on large ones. We want the Government to lighten these burdens on small firms".

Surely the Government want London to prosper. Do they not understand that jobs are more likely to be created in the difficult areas of London by small firms than by large ones? That is the historical experience, and it is the likelihood for the future. Jobs are created much more in the United States of America, where there is a larger population of small firms, than on the continent of Europe, which relies on large firms and ends up with mass unemployment.

Mr. John Wilkinson (Ruislip-Northwood)

My right hon. Friend is making an particularly important point about London following the representations that he has received from the London chamber of commerce and industry, which—as I know from my former professional capacity—does an excellent job.

The LCCI has further cause for concern. Not only will these measures hit small businesses in the capital; there will also be road user charges and parking charges. Let us at least get these measures right, so that small businesses can survive to face the other imposts that the Government have in mind.

Mr. Redwood

My hon. Friend has considerable knowledge of London. As he knows, there is high unemployment in parts of the capital, which will be particularly badly hit by yet more costs of the kind that he describes, in addition to those that we are discussing. They will have a bigger impact on many businesses that would otherwise be able to create some of the jobs that we all want to see.

The Government love quoting the Confederation of British Industry, with which they seem to think they have a special relationship. I do not think that they can have been reading the CBI policy statements of recent months; if they had, they would have noted that on most issues the CBI is now more in line with the Opposition than with the Government, because of the damage that the Government have been doing to the interests of larger as well as smaller companies.

According to the most recent statement by the CBI's director general, published in the Financial Times this month: Good employee relations should be built on trust and this is not best fostered if collective bargaining has been imposed on an employer by a trade union. Collective bargaining can work where it has two willing partners, but not where there is only one. No real improvements in industrial relations occurred the last time we had compulsion in the 1970s and indeed the legislation proved to be unworkable. Exactly. I am worried that the Bill will prove to be most unworkable in the sector that is most at risk: the smaller firms sector.

Mr. Fabricant

My right hon. Friend will be aware that I used to run a broadcast electronics company: one might say, an engineering company. Is he aware that the Engineering Employers Federation says that small engineering companies will be stifled by the Bill? Is he further aware that the CBI is also saying that the Department of Trade and Industry has over-egged the directives from Brussels and that there can be no future for engineering if such small firms are stifled at birth?

Mr. Redwood

My hon. Friend is ahead of me because I was going to refer to the plight of engineering firms. He is right to say that the Engineering Employers Federation is worried by the changes. It stated in January: The proposed changes to the law on industrial action will inevitably change the industrial relations climate and may make industrial action more common. It said elsewhere that it was against the measures because it feared that they would be yet another blow to the independence and success of small and large engineering companies alike.

The Institute of Directors has been even tougher in its opposition to the Bill. That may come as no surprise to the Secretary of State, but the IOD may be right; he should bear that in mind as a possibility. It has stated: The Bill is entirely inconsistent with its"— the Government's— objective of creating a competitive economy. The legislation imposes a raft of new costs and burdens on firms, including compulsory trade union recognition, higher compensation for unfair dismissal and the Parental Leave Directive. These measures will sap the competitiveness of British Firms. The Institute of Personnel Directors is against the proposals. The Chemical Industries Association has also said that it is worried about the measures. It says that it does not welcome the Bill and thinks that there are alternative ways in which to promote partnership which fall short of the compulsion in the Bill.

On the specific matter of small firm exemption, the CBI proposed that the threshold should be raised to 50—another part of our case in going for the lower number, rather than 100. The CBI says: Members believe that direct relations between management and employees is the norm in businesses with far more than 20 employees. It proposes 50 as a reasonable, prudent guess of a sensible limit. The British Chambers of Commerce has also said that 50 is a reasonable limit, rather than the 20 in the Bill.

The Federation of Small Businesses has proposed a threshold of 100 and would obviously prefer 50 to the threshold in the legislation. It is worth dwelling on its quotes because it speaks for many small businesses. Its voice should be heard in our important debate. In a press release in February, the federation stated: Small firms are now being over-regulated to such a degree that it is too costly and too risky to employ staff … The provisions of the Employment Relations Bill will place them under further pressure and the introduction of the Working Families Tax Credit will mean the onus of administering more benefits falling on to employers. In an earlier submission, it made it clear that it was against the union measures in the White Paper and draft legislation. Firms across the spectrum—the CBI, the IOD, small firms and chambers of commerce—are saying that they do not want the legislation and that, if we have to have it, small firms must be exempted because they behave differently and would be particularly vulnerable to its measures. Will not the Government listen?

The Government came to office saying that they were going to be different, that they would listen and understand, that they cared about companies. We now have the united voice of business. We have the united voice of the Opposition. We are all telling the Secretary of State the same thing. We are telling him that his rhetoric in the newspapers on deregulation is promising, but that the actions in the Bill show that he does not mean a word of it. We are giving him a simple way out of the conundrum by asking for a modest improvement: an exemption of small firms with up to 50 employees.

5.15 pm

We have just heard from the Minister for the Cabinet Office something about "joined-up government". That is an extraordinary idea from this Government, who have nothing joined up about them at all and who make disjointed statements from day to day, based on their idea of media management and what might make a good headline or news story the following day.

We are told that there is to be a regulatory impact assessment for every new measure that is proposed. Whoopee, Mr. Deputy Speaker; but that is not new. There have been cost assessments of regulations for many years. We want the Government to produce honest assessments, rather than fiddled ones, and then to understand what the assessments are telling them. The regulatory cost assessments of these and other measures that the Government have introduced should be telling them that they are taking too much money out of British business, and that the reason why factories are closing and people are being sacked day by day in the industrial sector has something to do with the Government's policy.

If the Government take out too much in tax and regulation and push sterling too high, it will become difficult to compete and jobs will be lost. We do not want more regulatory impact assessments. We want the Government to come up with some honest figures, to understand the voice of business, to understand what business is saying and to do something about it.

The Secretary of State's usual defence is to say that the previous Government introduced regulations. That is quite true; they did, and those regulations also increased costs. However, the Secretary of State is proposing far more expensive and damaging regulations than did the previous Government, on top of the regulations introduced by that Government. If the Secretary of State wished to identify regulations introduced by the previous Government that he thought we could do without, nobody would be more delighted than I. I am sure that I could persuade my right hon. and hon. Friends to see the wisdom of repealing those regulations, as well as those that he is proposing. We would be delighted. Rather the sinner repenteth before it is too late than that the sinner should go on to his inevitable doom.

We are giving the Secretary of State a chance to repent with new clause 2. As we are prepared to trust him in this respect, we are offering him the power to choose those items in the Employment Rights Act 1996 that he thinks should no longer apply to very small firms: those employing 10 people or fewer. We are leaving it to his judgment. He will be in a good position to consult and to find out from business which parts of the legislation are most damaging and which could be removed without doing overwhelming damage—something that he and I would not want. We are being true to our word. We are happy to look at past as well as future legislation.

The main burden of the Opposition's charge is simple. There are already too many regulations. The Government have introduced some big and expensive ones already which business is having to digest, the minimum wage and the working time directive being two of the most obvious and expensive. We say to the Government, "Please do not put on top of that all the additional requirements of the Bill. Please exempt small firms. Please do something for very small firms."

If the Secretary of State does nothing for those categories, it will reveal that he is not interested in deregulation or British business, that he does not understand the catastrophe in modern British industry and that he will do absolutely nothing to stop those job losses and factory closures.

Mr. Bercow

I support new clauses 1 and 2, which offer a lifeline to the small businesses of this country. What my right hon. Friend the Member for Wokingham (Mr. Redwood) had to say in support of the clauses demonstrated beyond doubt that, in the context of this Bill—as in other aspects of Government legislation and public debate—the official Opposition are on the side of small business and the Government are working against it.

Six reasons occur to me why the new clauses should be accepted. The first is the background to them. The circumstances in which we find ourselves are serious indeed for the small business sector of our economy. In 1998, 38,000 small businesses in this country closed. That represented a 6 per cent. increase on the figure for 1997. I hope that the House will be interested to know, and disturbed to learn, that in the first quarter of this year, no fewer than 11,000 small companies have ceased to trade. There are a variety of reasons for closures and cessation of trade, but two reasons are paramount. [Interruption.] Before the hon. Member for Eccles (Mr. Stewart) chunters on any further, for all the world as if his main ambition this afternoon were to resemble the village idiot, let me favour him with the facts—[Interruption.] I shall continue to be as polite as I ordinarily am. Let me favour the hon. Gentleman with the evidence of the Federation of Small Businesses. As he was a doughty contributor to the proceedings of the Standing Committee, I hope that he will be interested to know the verdict of that organisation, which is the authentic voice of small and medium-sized enterprises in the United Kingdom.

The federation says—not anecdotally, but on the basis of all the evidence of its members—that there are two main problems. One is cash flow; the other is the burden of regulation on enterprises. In the context of the first reason, to prove that I am being scrupulously fair, I say at the outset that although far too many of the companies that have ceased to trade have gone bust, several of them have not.

Some of those companies—especially micro-businesses, although larger businesses are also involved—have made the decision to cease to trade while still relatively profitable, because they think that the odds are stacked against them, and that the Government seek to thwart rather than to assist them.

Some relatively successful business people, suffering the avalanche of additional regulation that the Government have produced in their first 22 months, have said to themselves—or rather to their employees—"I am sorry, but this is no longer a culture in which I feel comfortable to continue. I no longer want to get up and face the problems, surmount the challenges, market and sell products, make profits, keep you in work as my employees, and say to others, 'Come and work for me.'"

I hope that the Secretary of State will realise that if we believe that small businesses will be the engine of employment growth and commercial advance for the United Kingdom in the 21st century, the anxiety of those business people should be uppermost in his mind. Many of them are saying, "We don't want to face that burden any longer. We'll sell the company; we'll retire; we'll go and play an extra round of golf or buy an apartment in Marbella—but we don't want to operate small and medium-sized enterprises in the United Kingdom when Ministers don't seem to want us to do so."

Mr. Wilkinson

My hon. Friend is making an important point. It is in the micro and small business sector, among the family businesses, that personal sentiment is most prevalent. Our constituents who have been in that sector, and who have come to tell us that the game is not worth the candle, are absolutely right. They are sick to death of the hassle, and they do not see why they and their families should be subjected to health risks and protracted aggravation for so little benefit.

Mr. Bercow

My hon. Friend, as usual, is right. I can testify to the truth of what he says not only on the basis of the comments and evidence of the Federation of Small Businesses, but from personal experience in my constituency. The small business sector is well developed in my constituency, in Milton Keynes and in the rest of north Buckinghamshire.

Time and again, people say to me, "We don't think Ministers are on our side. They utter soothing words, but they do not will the means to help us." What my hon. Friend said reflects what people in business at the grass roots are really saying.

Mr. Ian Bruce (South Dorset)

I am worried that we have already persuaded Ministers on this point and that my hon. Friend may therefore be over-egging the pudding. Does he not remember the excellent speech made by the Minister for Small Firms, Trade and Industry—an unpaid Under-Secretary—who said, when he was asked by the Liberal Democrats for further regulations on discrimination against people on age grounds, that they would not be appropriate? That statement came during the last part of the Standing Committee's deliberations. Does my hon. Friend think that the Government have at long last realised the damaging effect of all their regulations and may accept the new clause?

Mr. Bercow

I should like to think so, and hope springs eternal, but although I pay tribute to my hon. Friend's truly elephantine memory, I cannot in all candour pay similar tribute to his judgment or his generosity of spirit. I should be delighted to be disabused of my suspicion, but I fear that Ministers will not be willing to accept our new clause. If I am wrong, I shall happily donate £100 to my hon. Friend's favourite charity, but I do not think that I am likely to be so impoverished.

The second reason why new clauses 1 and 2 should be accepted lies in the pronouncements of senior Labour Members before and since the election. Before the election, the Chancellor of the Exchequer said, in the foreword to Labour's business manifesto: We will not impose burdensome regulations upon business because we understand that successful businesses must keep costs down. That statement was supposed to betoken a light-touch regulatory approach which has not been reflected in practice. As my right hon. Friend the Member for Wokingham pointed out, the Government have imposed 2,400 additional regulations on business during their first 22 months in office. They have discarded only 20 regulations, which makes a net increase of 2,380.

If the Government want to honour their pre-election commitment, they should be prepared to accept the new clause as it would remove burdens otherwise imposed on small companies. I am particularly sorry that the right hon. Member for Hartlepool (Mr. Mandelson) has wafted out of the Chamber. I thought that he might be good enough to stay for the exchanges on new clause 1, because, as he does on other matters, the right hon. Gentleman has form on this subject. Under the protection of parliamentary privilege, I can even go so far as to say without fear of a writ for defamation that the right hon. Gentleman has previous convictions on the subject of regulation.

If the right hon. Gentleman were here, I am sure that he would not mind my reminding him that when he was Secretary of State, he said that: we have no intention of introducing any legislation that presents a burden on business and reduces the competitiveness of British firms."—[Official Report, 25 November 1998; Vol. 321, c. 214.]

Mr. Tim Collins (Westmorland and Lonsdale)

My hon. Friend may wish to know, as a point of information, that the right hon. Member for Hartlepool (Mr. Mandelson) is sitting in the No Lobby, where he is, perhaps, preparing to vote no on Third Reading for the reasons outlined by my hon. Friend.

Mr. Deputy Speaker

Order. Comments should relate entirely to what is taking place in the Chamber.

Mr. Bercow

I shall confine myself, Mr. Deputy Speaker, to the hope that the right hon. Member for Hartlepool will prove to be a sinner who repenteth, and that he will join us in the Division Lobby. He need be in no fear of being traduced or attacked if he does so. If it would be helpful for him, I shall, on this one occasion, make the very dangerous commitment to hold his hand as we walk through the Lobby in support of new clause 1, at the risk of considerable damage to my own reputation. I should be happy to do that for the benefit of having the right hon. Gentleman on side.

It is entirely characteristic of my hon. Friend the Member for Westmorland and Lonsdale (Mr. Collins), as a member of the Opposition Whips Office, that he should be the source of such invaluable information. The information of the Whips is always the most up-to-date of all.

The commitment made by the right hon. Member for Hartlepool on 25 November has not been followed. What I find most extraordinary about the Government is the wholly laid-back way in which they make commitments, do not honour them and then think that there is something curious about our pointing out the contradictions between rhetoric and reality. In days gone by, there was at least some assumption that people would follow their commitments with action, but that does not happen under this Administration.

5.30 pm
Mr. Graham Brady (Altrincham and Sale, West)

It is not only Conservative Members who have noted the Government's practice. The director-general of the Engineering Employers Federation said in February that the Government appeared to be doing one thing and saying another on the Bill.

Mr. Bercow

My hon. Friend reinforces my point. He is right and he would have been right also to allude to the evidence of the president of the Confederation of British Industry. Exactly 22 days before the right hon. Member for Hartlepool, the former Secretary of State, made his declaratory statement about not introducing burdensome regulation, the president of the CBI, Sir Clive Thompson, said that there was a creeping paralysis of regulation on British industry and commerce, and that unless the Government took action to arrest and reverse that trend, regulation would be the only growth marker in the British economy in 1999. I challenged the Secretary of State on that point following his statement on enterprise and competition on the day after the Budget. With respect, his response on that occasion—for a rising star of the Blairite faction—was limp in the extreme. He told me that his statement was not about the Budget and, therefore, he did not propose directly to respond to my challenge. If the Government want to reverse the tide of regulation and the creeping paralysis from which business is suffering, they should accept the new clauses and free small and medium-sized enterprises from their impact.

The third reason why the Government should accept new clauses 1 and 2 was given by my right hon. Friend the Member for Wokingham and reflects the opinion of the business organisations. I understand that Governments have to take account of a variety of representations about the content of Bills. Some will be for a proposal and others against. The task of Government is to exercise judgment. They have to make the decisions, defend them in Parliament and seek approval for them, and I do not cavil at that. If business opinion were mixed on the subject, the Government could opt for their own preferences in the Bill. However, business opinion on family friendly policies is not mixed. The business organisations are against the thrust of the Government's policies and are supportive of the thrust of the proposed improvements to the Bill contained in new clauses 1 and 2.

My right hon. Friend the Member for Wokingham referred to the opinions of some of the business organisations. For example, the Institute of Directors has said that the Government's proposals would sap the competitiveness of United Kingdom firms. Ministers have not offered a response to that. They have not justified their position or shown why the Institute of Directors, one of the foremost business organisations in this country, is wrong. If the Government have an answer, we would be fascinated to hear it. They have not offered an answer to the British Chambers of Commerce, which has predicted that the proposals, if not withdrawn or amended, will slow or stop growth in the small business sector. The Government have not provided an answer to the observation by the Federation of Small Businesses that, as a result of these proposals, it will become too costly and too risky to employ staff. The Government have offered no rebuttal of the view of the Forum of Private Business, which is that the proposals could be "disastrous" for small firms. What answer has the Secretary of State or his hon. Friend the Minister for Small Firms, Trade and Industry to the London chamber of commerce and industry, which fears the impact of the proposals and has said that they will be more damaging and burdensome to small firms than to their larger counterparts, and that action is needed now to help those small firms? We do not get answers from Ministers. They merely blithely assure us that the injurious effects that we predict will result from the legislation will not occur. That is not good enough, and that is why it is necessary to have the new clauses.

The fourth reason why the new clauses are necessary is that the Government are guilty of gold-plating the parental leave directive, which will be burdensome to British firms. I say without apology that Ministers were naive in the extreme to sign up to the European social chapter, which has obliged them to accept in toto the content of the parental leave directive, because the chapter is subject to qualified majority voting. A Conservative Government would not have signed up to the social chapter in this Parliament any more than we did in the last. We would not have been subject to the directive's damaging effects. It was the Government's choice to sign up to the chapter and the directive that flowed from it.

It is unfortunate that instead of interpreting the directive in its least damaging form for British micro, small and medium-sized enterprises, the Government have overzealously interpreted it, especially in relation to time off for domestic incidents.

Mr. Fabricant

I would not like to accuse my hon. Friend of plagiarism, but the House should know that it was not he who said that the directive was being gold-plated, but the CBI.

Mr. Bercow

I am grateful to my hon. Friend. I, too, have had the benefit of the excellent, copious CBI brief, which speaks for itself. It is particularly lamentable that the Minister for Small Firms, Trade and Industry sits on the Front Bench without offering any answer. With no disrespect to the Secretary of State, I hope that the Minister will reply to the new clauses, or at least make his views known at some point in our exchanges. It is a matter of great importance because he is responsible for small firms. We need to know why he rejects the view of the authentic representatives of British business that small companies will be damaged by the proposals.

Gold-plating is unhelpful and unnecessary. It probably results from Ministers' lack of control of their officials. A good Minister guides officials. One has to assume from Ministers' rhetoric since 1 May 1997 that they do not want to gold-plate. If they do not want to, they should keep control of the process. If they wish to gold-plate, and I have underestimated their zeal in these matters, the logical corollary is that they have no right to claim to be small business-friendly. They cannot have it both ways. Whichever way they have it, they are the losers.

Miss Julie Kirkbride (Bromsgrove)

My hon. Friend is perhaps a little unfair to officials. The Government do not understand what they signed up to with the European social chapter. The right hon. Member for Hartlepool (Mr. Mandelson), having signed it on behalf of the British Government, said that he would not accept any regulations that he did not like the look of. He clearly did not understand what he was talking about.

Mr. Bercow

I am grateful to my hon. Friend. The right hon. Member for Hartlepool is a man of the broad brush. Far be it from me to accuse him of excessive preoccupation with detail or to suggest that beads of sweat appeared on his brow late at night as he ploughed through his red boxes, attending in the greatest detail to every feature of the legislation that he would subsequently have to defend in the House. He is a man of the general principle—the grand, high-falutin' declaration. Others have to pick up the debris from the ill-informed, misguided judgments that he habitually made as a Minister.

My hon. Friend the Member for Bromsgrove (Miss Kirkbride), who accused me of being a little ungenerous—perhaps I was—to officials, should not understate her case.

Not only the former Secretary of State for Trade and Industry was naive and ill-informed on these matters. The Prime Minister himself is and has long been singularly under-briefed on the contents of the proposals and treaties to which he has given his signature. It is precisely because the Prime Minister frequently imagined that he did not have to sign up to or accept things that he did have to accept that it has been necessary for the Conservative Opposition to table the new clauses. The Prime Minister sometimes fondly imagines that if he goes to a summit or conference and says that he is against something, it will not happen in this country. That simply is not the case.

We all know that there is an agenda in the European Union. The Foreign Secretary certainly knows it. It is called the European social model. EU countries want to impose it on us and export to Britain the high costs, slothful growth and increasing unemployment that they have long suffered. We are in favour of lower costs, better growth and higher employment, not unemployment. That is why we are against the Government's proposals and in favour of the sensible new clauses tabled by the Opposition.

Mr. Redwood

While my hon. Friend is speculating on Secretaries of State of the broad brush and what they may have read in their red boxes, will he answer this question? Does he think that in recent days, when the Secretary of State received a copy of the oral statement that the Minister for the Cabinet Office was to give on modernising government, he read it, saw that it was a strong statement of the need to remove unnecessary regulation and fired off a letter to the Minister saying that the statement would embarrass him greatly today as he was unable to accept sensible deregulation proposals in new clauses tabled to the Bill? Or does my hon. Friend think that the Secretary of State just did not bother to read it?

Mr. Bercow

I do not know what accounts for this extraordinary state of affairs, but my right hon. Friend, as usual, makes a highly pertinent point. The Minister for the Cabinet Office made a statement only a couple of hours ago on the modernisation of government and said, in response to questions, that regulations should be proportionate. That was the word that he used. It is a good word, and one that I commend to the House—proportionate—

Mr. Redwood

And necessary.

Mr. Bercow

And necessary, as my right hon. Friend helpfully points out from a sedentary position. I commend it to the House. The Secretary of State was no doubt genning up on his remarks for the afternoon at that point so whether he had the benefit of hearing from the Minister for the Cabinet Office, I know not, but he should have seen in exchanges of letters between Cabinet colleagues what the Minister proposed to say. In the light of that, it is extraordinary that the Secretary of State has not put his hands up this afternoon and said to my right hon. Friend, "You are absolutely right. We agree to the new clauses. We can proceed to make further progress on the Report stage of the Bill."

Mr. Boswell

Is not one of the difficulties that the Secretary of State faces the fact that some of his other clients or friends take a different view. For example, the TUC explicitly acknowledges: The arrival of the full Social Chapter procedure is both timely and crucial for the creation of a European system of industrial relations. It goes on at length in exactly the same vein.

Mr. Bercow

I am not surprised to hear what my hon. Friend says because we have always known that the cloth-capped colonels of the TUC are enthusiasts for greater regulation. As they could not get it through the front door because of the admirable stewardship of this country's affairs by my noble Friend Baroness Thatcher of Kesteven, they decided some time ago that if they could usher it in through the back Delors, they would happily do so. They have made strenuous efforts to see that they are on the winning side as often as possible. Now that they have a Government in office who are sympathetic to their general viewpoint, they are determined to extract the maximum in return for the enormous donations that they made to that party when it was in opposition for 18 years. What my hon. Friend says is highly relevant to our proceedings.

I referred a moment ago to the statement by the Minister for the Cabinet Office about the proportionality of regulations. That is relevant to what I have to say about my fifth reason why the new clauses should be accepted by the House this afternoon. My fifth reason is the regulations that flow from the Bill.

It is important that the public outside this place should be aware that the Bill is substantially a skeleton Bill. The devil is in the detail, and it is a lamentable abdication of responsibility on the part of the Government that there will be no opportunity to debate on the Floor of the House the detail of the regulations that will implement the Government's intentions as set out in the Bill. I am extremely anxious about the burden that the regulations will impose and that is a further reason why the new clauses should be accepted.

The regulations will be burdensome in terms of time. Companies will have to devote much time to familiarising themselves —

5.45 pm
Mr. Deputy Speaker

Order. I have been extremely generous in allowing the hon. Gentleman to make certain general points in relation to the new clause, but I have reached the limit of my patience. The hon. Gentleman is now moving away from the kernel of this particular group of new clauses; the new clauses relate to exemptions for small businesses rather than to general matters in the Bill.

Mr. Bercow

As you would expect, Mr. Deputy Speaker, I shall immediately comply with your helpful guidance. That is why I say that we should support the new clauses. If they are passed, they will give small businesses an exemption from the regulations that will accompany the Bill. That seems to be at the heart of the debate.

In Committee, we explored the whole subject and discussed the possibility of exemptions for small firms. One of the reasons we did so was that, as Ministers are aware, the regulations flowing from the working time directive, which will have an impact on small and medium-sized enterprises in Britain, currently stretch to 72 pages of A4 paper. If people outside this place are surprised to learn that, they will be even more surprised to learn that the regulations that flow from the requirement to impose a national minimum wage—a requirement that is as applicable to small and medium-sized enterprises as it is to others—stretch to no fewer than 112 pages of A4 paper. Part of the rationale behind the introduction of the new clauses is that the Opposition are the friends of small and medium-sized enterprises and do not think that they should have to face that burden. Quite apart from the work that those in such enterprises do to keep their companies afloat, to make them profitable, to sell products, to keep and, if possible, increase their staff, why should they have to devote a great deal of time to studying the regulations to see that their companies conform to them? That is a key weakness of the Bill as it stands and a good reason why the new clauses are required to improve it.

The cost of compliance—and the cost of discovering whether one is complying—will be a further burden on micro, small and medium-sized companies. Although business organisations have been almost uniformly critical of those aspects of the Bill, little attention has been paid to the comments of our old friends the lawyers. I am not a lawyer—I say that with pride—but I am aware that many make their living from the practice of the legal profession. A leading member of Bevan Ashford said recently that the passage of the Bill would result in a great deal more work for him unless certain provisions were removed or amended.

The reason why that greater work will result is that companies will not know whether or not they are in conformity with the regulations, they will naturally consult and pay lawyers, time will be taken, and references to the courts will be required—none of which activity is remotely relevant to the overriding task of a small business, which is to stay afloat, make a profit and keep its staff. It is precisely because of that damage that we need to act.

The sixth and final reason why we should embrace the new clauses with enthusiasm is that, if we do so, we emulate the spirit and the practice of the United States of America. In an important recent speech, the Secretary of State said that the creation of wealth was now more important than its redistribution. I welcomed that statement and congratulate the right hon. Gentleman on having made it, but I want it to be reflected in practice. If we are to adopt a policy under the Bill that is helpful to SMEs, we have to free them from the burden I have described. The reason why I refer to it in the context of the new clauses is that, when my right hon. and hon. Friends discussed this matter before coming to the House today, we became conscious of a pattern of which the Secretary of State is one part, and the former Secretary of State, the right hon. Member for Hartlepool and the Prime Minister are two other important parts.

I see that the former Secretary of State has been jolted from his private conversation with the deputy Chief Whip. The right hon. Gentleman will know that as Secretary of State, when talking about business growth, he made frequent references to the importance of learning from the United States—indeed, in the course of one speech, he referred several times to visits he had paid to the United States. He will recall that I raised the matter with him, because I thought it important, in the Select Committee on Trade and Industry on 4 November last year. I politely challenged him about what appeared to me to be the conflict between the commitment to American practice and the reality of Government policies—

Mr. Deputy Speaker

Order. The hon. Gentleman is spinning wide of the scope of this group of new clauses and amendments. I suggest that he gets back to the main subject very quickly.

Mr. Bercow

I shall come back to it immediately, Mr. Deputy Speaker. I had not thought that I had strayed, but I accept your judgment in these matters.

We need light-touch regulation and, in some cases, businesses to be free of regulation altogether, in line with the American model. The direct relevance of that, if I may say so, Mr. Deputy Speaker, will now be blindingly obvious to every right hon. and hon. Member present. The relevance of my invocation of the example of the United States is that there, a directly comparable provision on parental leave is applied very differently from the way it is to be applied in this country. That is the relevance, Mr. Deputy Speaker, and I hope that you will accept that it is within the scope of the new clauses.

In the United States, as I have reminded the Minister for Small Firms and the Minister of State, Department of Trade and Industry, the right hon. Member for Makerfield (Mr. McCartney), there is legislation on family and medical leave—the Family and Medical Leave Act 1993. Moreover, that legislation does indeed provide for 12 weeks unpaid leave for parents and guardians in certain circumstances. However, it does not apply to firms with fewer than 50 employees, which is one good reason why we adopted the figure of 50 as the basis of our new clauses. I ask a simple question of the Secretary of State: why talk about American practice unless he is prepared to emulate it? It is not good enough for the Minister for Small Firms to tell me in his letter of 25 March that, in incorporating American ideas in the British context, one has to take account of British traditions and institutions, as an excuse for not doing in this country that which works extremely well in that country.

Mr. Deputy Speaker, as ever, you have been a model of tolerance and I am grateful to you for that, as it has enabled me to give six reasons—of the no doubt 666 reasons—why the new clauses should be accepted by the Government.

Mr. Wilkinson

The previous speech was a tour de force and I shall not attempt to emulate it. Nor could I emulate the authority with which my right hon. Friend the Member for Wokingham (Mr. Redwood) spoke. Suffice it to say, if I can be forgiven for being subjective, that my impressions of the merits of the new clauses stem less from long hours in Standing Committee—I applaud my right hon. Friend and his colleagues for their persistence in trying to amend the Bill in Committee, and regret that we have had to return to these issues on Report—than from my experience of running a small company of my own for 12 years.

I cannot believe that, in the current climate, it will be easy to induce people to enter the small business sector, because everything is stacked against them. The background is grim. Given that we have an overvalued currency, following the plunge of the euro, and given the imposts and directives under which a small business has to labour, those who run such businesses face an exceptionally difficult task. However, the Government should show willing and at least recognise that it is time to match their rhetoric with action. The new clauses contain proposals that are exactly in line with best practice, to use the current jargon, in the United States, as my hon. Friend the Member for Buckingham (Mr. Bercow) clearly explained. I cannot see any reason other than bigotry and dogma why the Government should not wholeheartedly embrace the new clauses. I cannot see what they would lose by so doing.

Speaking as a London Member, I am grieved that the Bill will have an especially hard impact on family businesses, which in my constituency in the north-west of the capital are often run by members of the ethnic community. We hear time and again from the Government protestations that they are on the side of the ethnic community and that their legislation is drafted to demonstrate that commitment. However, members of the ethnic community who start up small businesses will be extremely vulnerable to the complications of the plethora of burdens that are inherent in the Bill. Those who run a family business do not need explicit provisions on parental leave, because they know what is appropriate in their family's circumstances and in the interests of the business. I find the Government's prescriptive, dogmatic attitude objectionable.

Likewise, there is a huge divergence between the Government's protestations and rhetoric and their actions in respect of women, who will suffer especially from the Bill as it stands. Part-time workers, a large proportion of whom are women, are less likely to be taken on by small businesses because of the provisions of the Bill. This is exceptionally sad.

It is the experience of every economy that, time and again, small businesses prove to be the engine for growth. If they are to be fundamentally inhibited, the chances of our getting out of the proto-recession into which we have slumped under the current Administration will be fatally compromised. The process of emerging from the proto-recession will be protracted, more difficult and more painful. Many people would lose their jobs unnecessarily.

I do not understand why the Government refuse to listen to the wise counsel of my right hon. Friend and those who support the new clause. The Government should accept it wholeheartedly and demonstrate thereby that they are genuinely on the side of business. They should not use small business simply as a slogan in an attempt to beguile the electorate into acquiescing to their policies. My constituents in the small business sector tell me that the Government's rhetoric is all very well, but the prescriptive nature of their regulations is a disincentive. It is about time that that disincentive was removed.

6 pm

Mr. Christopher Gill (Ludlow)

My family has run a business in Wolverhampton for five generations, but I am somewhat diffident about taking part in this debate when I see so many experts aligned on the other side of the Chamber. However, the Government and I have different perspectives. I have run a business and converted a small enterprise into a bigger one, facing many trials and tribulations in the process. My son continues that business—he is the sixth generation family member to do so—and we have a joke in our family that I am here running the country while he is at home running the business. [HON. MEMBERS: "Hear, hear."] I must admit that my son is having much more success than I—but not because of this Government. The Labour Government have continued to put obstacles in his way, as they are doing tonight.

There is a huge gulf between those who come from the public sector and big business and those who come from a small business background. Small business operators recognise that employment relations problems exist and that the Government wish to tackle them. However, as my right hon. Friend the Member for Wokingham (Mr. Redwood) has been at pains to point out tonight, many of those problems either do not affect small business or cannot be solved by legislative means. Legislation is singularly inappropriate in many cases, given that so many small businesses are struggling to keep their heads above water because of the existing legislative burden.

In my earlier days, I ran my own business when there were industrial training boards. I had served in the Royal Navy—the finest training organisation in the world—and, when I returned from sea, I was intent upon training my employees. The industrial training boards killed my enthusiasm and destroyed my involvement in training by imposing a huge bureaucracy upon that vital work. As a consequence, I had to employ a training officer and training personnel to assume those duties. The situation led eventually to an industrial tribunal hearing, which I won. I could tell you much about that case, Mr. Deputy Speaker, but I must not digress.

The consequence of the Bill will be a downsizing of private businesses. Private businesses have no incentive to employ a lot of labour. The burden of employment laws—which are being added to tonight—leads many entrepreneurs to seek constantly to diversify into areas where they do not have to employ so many workers. The unemployment that results from such practices affects almost exclusively the least qualified section of society: those employees with fewer skills and qualifications.

For the benefit of the Secretary of State, I point out that the only practical difference between a successful business and an unsuccessful business is the people we employ. Many of us in the marketplace buy the same raw materials to which we do the same things and then sell them to the same customers, often at the same price. The difference between success and failure is our people. I do not need the Secretary of State or a Labour Government to tell me about the importance of personnel: any small business man knows that his success depends upon his employees. For that reason, my right hon. Friend is absolutely right to make an impassioned plea that businesses employing fewer than 51 people be excluded from the legislation.

The reality of running a small business—this may be entirely alien to the Secretary of State's life experience—is that the owner is the production manager, the sales manager, the administrator and the personnel manager. He must also perform a raft of other functions. The more legislation of this sort that we impose upon the owner, the more difficult it is for him to attend to his most important function: creating a product to sell on the market at a profit, thereby generating wealth for the nation and employment in our constituencies.

My hon. Friend the Member for Buckingham (Mr. Bercow) was absolutely correct to refer to the difference between this Government's rhetoric and the reality. That difference was summed up for me on Budget day. The Chancellor of the Exchequer stood at the Dispatch Box and told us that he was keen to encourage small business and to do his best to keep overheads down. However, he went on to say that he was reducing employers national insurance by 0.5 per cent. I do not know how the Government do their arithmetic, but employers national insurance presently stands at 10 per cent. and will be 11.7 per cent. as a result of the Budget. That does not help small businesses.

Mr. Bercow

Does my hon. Friend recall that, shortly after the Chancellor's Budget speech, the Secretary of State said, in what should have been a joke but apparently was not: I am reviewing arrangements for business rescues"?—[Official Report, 10 March 1999; Vol. 327, c. 367.] Was that not a good idea, given the likely exponential increase in the number of candidates requiring rescue as a result of the Government's policies?

Mr. Gill

I understand my hon. Friend's very good point. Most business people do not want help from the Government, but neither do they want hindrance of the sort represented by the legislation before the House today.

The Secretary of State may say, with some justification, that he receives relatively few complaints from the small business sector. I understand that, and I shall explain why that is so. The small business man is employed every waking hour trying to keep his business afloat and successful. They do not want to waste time appealing to politicians—particularly those from the Government party—because they know that their appeals will fall on deaf ears.

I am conscious of the fact that my hon. Friends wish to speak in the debate, so I shall conclude by informing the Secretary of State that I and my family have survived in business not because of Government, but in spite of them.

Mr. Fabricant

Does my hon. Friend the Member for Ludlow (Mr. Gill) think that his comments have fallen on deaf ears? Although the Secretary of State and his Ministers are quite charming, they have had no experience in business. A few years spent working as a polytechnic lecturer or working for a large public corporation does not equate with building a business for oneself.

When I rose on Second Reading, I spoke about Abraham Lincoln, and there was talk earlier about the American message for us, which is often seized on by the Labour party in its bid not only to gain power, but to hold on to power. Abraham Lincoln said, "You cannot make a poor man rich by making a rich man poor." That applies not only to large corporations, but to small businesses, which the Bill will strangle at birth. The legislation owes much to the tenet that he who pays the piper calls the tune. Where does most of the Labour party's money come from? It comes from the trade union movement.

My hon. Friend the Member for Buckingham (Mr. Bercow) pointed out that, in this quarter alone, 11,000 small businesses have gone bust. They needed to be rescued from the Secretary of State for Trade and Industry. I anticipate that, when he winds up the debate, he will say, "Ah, but many new small businesses have been formed." Let me pre-empt him. Information from Dun and Bradstreet reveals that the net losses in that quarter are the greatest for the first quarter of the year since the depths of the world recession—I emphasise the word "world"—of six or seven years ago. It is no use the Secretary of State saying that small businesses are being formed to compensate for the 11,000 that have gone bust—that is not so.

Mr. Byers

The hon. Gentleman rightly says that the Dun and Bradstreet report reveals that 11,000 businesses have gone bust in the first quarter and that the last time the figure was considerably higher was back in 1992, when the right hon. Member for Wokingham, the Conservative Front-Bench spokesman, was Under-Secretary of State for Corporate Affairs. The fact that records were far worse then than they are now owes much to his legacy.

Mr. Fabricant

The Secretary of State points out that the figures were worse in 1992, but I repeat that we were in the middle of a world recession, and that was at the time of the exchange rate mechanism. Does the Secretary of State not take Cabinet responsibility for his Prime Minister, who, far from gearing up for the ERM, which at least allowed us some latitude, wants to gear up for a common currency, which will make pressures on small businesses far worse?

I shall return to the new clause. The CBI, as hon. Members have already pointed out, says that the directives on parental leave that will apply to small businesses are gold-plating the EU directive. I shall let the House into a little secret. I recall that, soon after I entered the House in 1992, early in the Parliament, the Secretary of State's predecessor and then President of the Board of Trade, my right hon. Friend the Member for Henley (Mr. Heseltine), faced a similar situation with an EU directive that was not desirable for small businesses. He was advised by his officials that he had no choice in the matter—the directive had to be introduced. A few months later, the draft legislation appeared, and, like this Bill, it was gold-plated.

I therefore give the Secretary of State advice about gold-plating, which he could take from the former President of the Board of Trade. My right hon. Friend asked his civil servants, "Why is the document so thick? Why have we gold-plated the legislation?" They answered, "If we did not gold-plate it, it would be unenforceable. There would be too many loopholes." As I understand it, my right hon. Friend said, "Great! We do not want the legislation. Let us put it through Parliament without gold-plating it." It was passed and it was unenforceable.

Far be it from me to suggest that Parliament should occasionally pass laws that are unenforceable and contain loopholes; but, when they are forced on our nation by unreasonable, ill-thought-out diktats from Brussels which will result in not only small, but large businesses going under, let us pass such legislation for the sake of businesses at home. That is exactly what France, Italy and Spain do. They have to do that because they want to keep their businesses solvent.

6.15 pm

Earlier in the debate, the hon. Member for Croydon, Central (Mr. Davies), who has now left the Chamber, asked a perfectly reasonable question of my right hon. Friend the Member for Wokingham (Mr. Redwood), the shadow Secretary of State. He asked, "Why is the threshold in the new clause set at 50? Why not 20 or 100?" One of the reasons is that many of the states in the US use the threshold of 50.

The Secretary of State's view is that 20 is a reasonable figure, and that is backed up by all those who are concerned with the welfare of small businesses. However, let me tell the Secretary of State, if he does not already know, that a survey conducted by the members of the Institute of Directors said that 28 per cent. of respondents believed that firms employing up to 50 people should be exempted and only 13 per cent. were happy with the Government's definition of a small firm.

Mr. Bercow

Does my hon. Friend agree that the Government are inconsistent in their approach? Is he aware that, although the Government have opted, in this context, for the definition of a small firm as one that employs no more than 20 employees, Ministers have chosen the threshold of 50 employees for the purposes of the Late Payment of Commercial Debts (Interest) Act 1998? Why can they not make up their minds?

Mr. Fabricant

My hon. Friend is right. I could talk about the National Minimum Wage Act 1998. I shall not say much about that because I know that you will rule me out of order, Mr. Deputy Speaker, if I talk about it at length.

Mr. Deputy Speaker

Or, indeed, almost at all.

Mr. Boswell

While my hon. Friend is getting his angle straight, I remind him that in the United States, to which he has referred, the minimum wage is comparatively acceptable precisely because it is set at a reasonable rate and not applied to small businesses.

Mr. Fabricant

My hon. Friend anticipated my next point, and I am delighted that you did not rule him out of order, Mr. Deputy Speaker.

The Institute of Directors "Fairness at Work" research paper of September 1998 quoted a company that said: We employ less than 20 people at present and with the Government's current attitude we're likely to stay that way". That echoes the words of my hon. Friend the Member for Ludlow, who asked what incentive there was for a small business to expand. The Bill is absolutely symptomatic of the Government: they are full of bright ideas that are never thought through. They do not empathise with business, because their paymasters are the trade unions and because they do not come from a business background.

As I said on Second Reading, one can read about and study business as much as one likes, but, if one has not immersed oneself in it, one cannot understand the pressures that small businesses are under.

I shall quote a business man—I anticipate that I will be receiving a brown envelope from Hansard—whose name I shall try to pronounce correctly. Mr. Darsghan Thiara, a clothes factory owner from Birmingham who has a staff of 85, was reported in the Financial Times in January as saying: "Overall it"—this legislation— puts a big pressure on employment; we are seriously considering cutting the number of people we employ. We must ask ourselves what the company will do. Will it cut staff to 20 or 19 to try to avoid the provisions of this legislation?

Ministers, who are used to teams of civil servants, believe that understanding and implementing legislation are easy. They think that civil servants have all the time in the world. I know—this is certainly the experience in the Treasury—that civil servants work all the hours that God gives them. Ministers arrogantly take such an attitude, but small firms simply do not have such teams of people. As has been pointed out, the managing director is often the finance director, and often also the personnel director—or the director of human resources, as they now call it. The Government Front-Bench team will like that term because they like modern jargon and slogans.

Mr. Lindsay Hoyle (Chorley)

Like joined-up thinking.

Mr. Fabricant

We have joined-up running of companies simply because one poor guy has to do it all. On top of that, such people will have to try to implement the Bill's provisions.

Mr. Ian Bruce

Is my hon. Friend not being too generous about the Government Front-Bench team? Ministers completely ignore the regulations that they introduce. They do not seem to worry about the working time directive. We even have a Minister—the Minister for Small Firms, Trade and Industry—who is working for nothing, despite the minimum wage regulations which are coming into force on 1 April.

Mr. Fabricant

The Minister is to be complimented on working for nothing. Under minimum wage legislation, one can be paid nothing, such as when one works for a charity. Of course, when people are paid under £3.60, it does not exactly help other charities—but I will not go into that, because it would be out of order.

The legislation will put people in a very difficult position. The whole situation was summed up by Mel Lambert, who is head of human resources at IVEC/Fiat, when he said—I do not have the memory of my hon. Friend the Member for Buckingham, who can quote from a marvellous mind without referring to paperwork, so I shall use my notes for accuracy: It puts these (small) companies in a very difficult position. They are minnows compared to union professionals. In the short term, trade unions will fight for the so-called rights of their employees; in many ways, that is laudable, but it will be at the expense of their long-term security and long-term employment. The House should mark my words: these provisions will be a long way from fostering the growth of small business. Let us remember that it is the small business that becomes the large business. ICI did not suddenly appear out of the blue. It was originally a small company which was set up in the 19th century. Even BT was once a very small corporation.

Mr. Bruce

And Sainsbury.

Mr. Fabricant

My hon. Friend reminds me that Sainsbury plc started as a small corner shop.

Mr. Stephen Day (Cheadle)

And Marks and Spencer.

Mr. Fabricant


Mr. Deputy Speaker

Order. That is quite enough of historical tales.

Mr. Fabricant

All large businesses start as small businesses. If small businesses are strangled at birth, there will not be large businesses. Without large businesses, unemployment will grow. That is, of course, what we have been experiencing over the past two years.

This Government are fond of using clichés; I shall use one that is accurate. They inherited a golden economic legacy, they have started to ruin it, and it will be destroyed still further by this thoughtless, pernicious, vindictive legislation.

Miss Kirkbride

I rise to continue the plea from the Opposition Benches for the Government finally to listen to our concerns and adopt our amendments, so that some of the most onerous restrictions on business will not be placed on those that employ 50 or fewer employees. We on these Benches feel so passionately because we cannot understand why the Government, having learned many lessons from the previous Conservative Government—we should bear in mind some of the programmes that they have instituted and some of the messages that they gave the electorate during the general election campaign—cannot learn one of the most serious ones from our period in government and our record on employment.

When the Labour party was elected in May 1997, it inherited rapidly falling unemployment. In 1995, it had a programme to put 250,000 young people back to work. By the time it came to office, half those young people were already in work. We must ask ourselves why that happened. Unlike countries on the continent, we in the United Kingdom have a relatively unregulated economy. Obviously, we have provisions on health and safety at work and the right conditions for people at work, but we do not have the onerous regulation that has resulted in unemployment of about 12 per cent. in comparable countries on the continent. Over here in the UK, unemployment is 6 per cent. Indeed, due to our inheritance, there has been some further success in reducing unemployment and increasing employment.

Some of us on the Opposition Benches, who, sadly, have been considering these regulations in great detail over the past few months, see the Government's complete failure to understand why they inherited such a fantastically performing economy. We fear that we are seeing the trade unions' payback after years of a Labour Opposition.

Mr. John Hayes (South Holland and The Deepings)

My hon. Friend talks about the Government failing to learn such an important lesson. Perhaps our hon. Friend the Member for Lichfield (Mr. Fabricant) was right in saying that such a lesson cannot be learned academically, but must be learned through experience and gathered wisdom. Does my hon. Friend the Member for Bromsgrove (Miss Kirkbride) agree that, as not a member of the Cabinet has ever bought or sold anything for a living in business, they are very unlikely to have that necessary experience and wisdom?

Miss Kirkbride

My hon. Friend is entirely accurate. One would have thought that the Government might be capable of learning from our experience in power and from our record on employment when we started getting things right—sadly, that is not so.

Mr. Ian Bruce

Has my hon. Friend seen the long-term unemployment and youth unemployment statistics? After six months of the new deal, youth unemployment rose by 9,000—for the first time for almost four years. After nine months of the new deal, it went up by another 22,000. That surely demonstrates that the Government have not a clue when it comes to creating jobs.

Miss Kirkbride

I pay tribute to my hon. Friend, who has been very assiduous in studying the real statistics on the new deal and youth unemployment. Despite Government statistics, which are deliberately intended to confuse the picture, the record on youth unemployment is not anything like the Government pretend it to be in public pronouncements.

In considering the new clause, and bearing in mind all the debates in Committee on the new regulations, I think of all the people in my constituency whom I meet in the Conservative club, on the street or in my surgery, or who write to me. They, like my hon. Friend the Member for Ludlow (Mr. Gill), are the unsung heroes of our community. They make our communities tick. They provide employment for the people we represent and the wealth that the Government redistribute. They are the people who make this country work. When I think of them and what is about to be imposed on them, I feel desperately sad and desperately frustrated that we clearly are unable to make the Government understand what they are doing.

6.30 pm

I shall provide some elucidation. A couple of weeks ago, I spoke at a business breakfast club, and I was pleased at the attendance for a speech by a Conservative Member of Parliament. Indeed, the number of people turning up to listen to a speech by a politician at 8.30 am was much greater than normal. I wonder whether that was because the message about how unfriendly the Government are to business is finally getting through. I told the people there many things that the Government propose to do and gave them a copy of the 76-page working time directive, to which my hon. Friend the Member for Buckingham (Mr. Bercow) referred. I suggested that they might want to go home and read it, because they would certainly have to know of its provisions.

Sadly, I was not able to give the people present a copy of the 112-page minimum wage regulations. They had not been published, despite the fact that the minimum wage is being introduced on Thursday, and were not even available two weeks ago for my constituents to read so that they might be aware of the conditions.

Then I began to tell my constituents what else was coming down the track, which was unfair: it was Friday morning and they were looking forward to the weekend, but I was busy telling them that, if all that was not enough, they had to consider other measures, such as three months paternity leave for staff: a small business may have secured a big contract, but the production manager may want his three months paternity leave. One can think of legioned examples where dislocation and huge upset would be caused for small businesses, denting their production and wealth-creating capacity.

Mr. Bercow

My hon. Friend is developing an extremely powerful argument. Given that the Secretary of State did not dispute in the debate on Second Reading on 9 February that America's job creation record is superior to that of the European Union, can she fathom why he wants to incorporate the EU method for family friendly policies, rather than that of America?

Miss Kirkbride

My hon. Friend again makes an excellent point that goes to the heart of our concerns about the Bill. We hear one thing from the Government, but we get another. We hear that they are against regulation, but the regulations that they are introducing are so fantastically complicated and expensive that they are sufficient to make our eyes water. We hear that they think that America has some really good ideas about how to do things, but they suggest that the American model is not the one that they are introducing to the United Kingdom.

Labour Members often said that America has a minimum wage, but we were never told that it does not apply to small firms or that it was considerably less than the minimum wage that the Government intend to set in the United Kingdom. Although some of the provisions that the Government intend to introduce through the Bill are in force in America, others achieve precisely what we hope to achieve through the new clause: they exempt from regulations small firms employing fewer than 50 people.

The impact is obvious for us all to see. Over the past 20 years, there has been no net creation of private sector jobs in the EU. Some companies have gone to the wall and others have been created, but the private sector has not created any extra jobs. America's record on net job creation runs into millions. If we are to have a successful and prosperous future—not only in the United Kingdom, but throughout the whole EU—we have to get real. We must understand that the world is changing and that many other countries seek a standard of living similar to ours. We are being caught up, rapidly.

The Secretary of State will be only too well aware of the situation that we face in respect of Rover. Serious threats are being made by BMW about taking to Hungary the car-making capacity that we all want to go to Longbridge. Why is BMW making those threats? Because Hungary does not have anything like the number of employment regulations that we have, and it certainly does not have the restrictions and regulations that the Government will introduce through the Bill.

I ask the Secretary of State to hear the pleas of Conservative Members, which are earnest and honest. This is not the right way forward. The Government will impoverish our constituents by introducing the Bill. We do not necessarily dispute the point that the Government are seeking to help our constituents, but they are misguided in seeking to help them in this way.

Mr. Bercow

Well-meaning fools.

Miss Kirkbride

Sadly, I cannot disagree.

What the Government are seeking to do will have such an impact and import. I hope that they will listen to Conservative Members. I hope that, if they must go ahead on this basis, firms with fewer than 50 employees will not be affected by these provisions.

Mr. Brady

It is a great pleasure to speak after my hon. Friend the Member for Bromsgrove (Miss Kirkbride), as it must have been a great pleasure for the many business people in her constituency to attend her business breakfast and see her smiling face at 8.30 am—until, of course, she embarked on telling them the most devastating news about what the Government are seeking to do to damage the businesses on which her constituents and, indeed, people throughout the country depend for their well-being.

I shall be brief, not only because my right hon. Friend the Member for Fylde (Mr. Jack) is keen to speak, but because as many as four Labour Back Benchers of the dozen or so who were members of the Standing Committee have managed to come to the Chamber to see the Bill through. I am pleased that they are here, although a little disappointed—

Mr. Bercow

As my hon. Friend knows, I always seek to be fair to Government Back Benchers, so it is only right to point out that five Labour Back Benchers who were members of the Standing Committee are present.

Mr. Deputy Speaker (Mr. Michael J. Martin)

Order. The presence of hon. Members has nothing to do with the new clause; we must come to a discussion of it.

Mr. Brady

I am grateful to you, Mr. Deputy Speaker. I am also grateful to my hon. Friend. I wish to pay tribute to one or two Labour Members who made worthwhile comments in Committee, and I hope that they will make further helpful and intelligent contributions to our debates tonight.

I am keen to contribute, albeit briefly, because new clauses 1 and 2 are central to the question of the Government's belief in enterprise and whether their protestations about that are to be taken seriously. I have witnessed the repeated onslaught of new regulatory burdens, particularly on smaller businesses. As many of my hon. Friends have said, the burden being placed on people who run businesses—particularly smaller businesses with no recourse to professional advice, no human resources manager and no means to afford the best advice from employment lawyers—is enormous. In turn, that has enormous implications for employment in the small business sector. I hope that Ministers will start to understand the damage that their proposals will do to that sector, which is critically important in the current economic climate.

Those burdens are relevant to the road haulage industry, which has many small businesses. The contrast between what Ministers say about that industry and what they are doing to cause problems for it is quite staggering. It is also instructive in the context of the Bill. In response to complaints that road fuel duty is driving people out of business, or forcing them to reflag their businesses on the continent, the Government say that other costs here are lower than those on the continent. The Bill, however, contains precisely the measures that will remove any current competitive advantage that those small businesses enjoy over their European competitors. That will therefore compound the difficulties that the Government are already causing for that industry.

I suspect that the apparent absurdity of the Government's position is due to a fundamental misunderstanding of what we are dealing with here and its implications for businesses in what many hon. Members may choose to call the real world. That was illustrated by the Under-Secretary, in response to an amendment which I tabled in Committee seeking to limit the practice of gold-plating, when he said: I would like to give some examples of the benefits that businesses with a positive attitude to family-friendly work can gain from the regulations. They gain a competitive edge, as we have said many times during the progress of the Bill. They gain improved returns on investments, because by offering good working practices they can attract the right people".—[Official Report, Standing Committee E, 23 March 1999; c. 551.] I shall not quote at length because the point is made.

Ministers labour under the delusion that, far from the Bill costing jobs and being a burden and additional cost on businesses, particularly small businesses, it will do the small business sector a favour, improving returns and reducing costs by increasing regulation. That is palpable nonsense, but Ministers appear to be wedded to it.

Mr. Nicholas Soames (Mid-Sussex)

Does my hon. Friend also understand the further ludicrous nature of the Government's position in that almost all the bodies that represent small and medium businesses in Britain have repeatedly pointed out to the Government the ridiculous error of what they are doing and how damaging it will be to the competitiveness of the sector of our economy that has the greatest capacity to create jobs? How will that help the British economy?

Mr. Brady

My hon. Friend makes an important point in his usual magnificent style. The important point that has been made during the debate is that small businesses, business generally, business organisations and Conservative Members understand the damage that the Government will do by refusing to accept our commonsense new clauses and amendments. But Labour Members and Ministers refuse to accept what is simple logic and common sense.

As other hon. Members wish to speak, I shall bring my remarks to a close, but I hope that Ministers will think again before causing irreparable damage to the small business sector.

Mr. Michael Jack (Fylde)

I am deeply surprised that the Government do not welcome the new clauses and the consequential amendments. The Secretary of State recently addressed the Federation of Small Businesses conference in Blackpool, where he was heckled, booed and hissed because small businesses felt that that was the only way tangibly to demonstrate their revulsion of yet more regulations.

I recently met representatives of the Lancashire branch of the Engineering Employers Federation, and they told me that their main worry at present was overburdensome regulations. They said, "We are relatively small-scale enterprises and we have enough problems as it is dealing with the strength of the pound. Please, no more regulation." They said that, to deal with the working time directive alone, the federation had had to issue a 200-page guidance document. They are struggling so much that the Minister for the Cabinet Office has agreed to see a delegation from the federation to try to sort out the mess.

The federation would, to use common parlance, freak out if it saw schedule 3, to which the new clause relates. That is what the Government will impose on small businesses with fewer than 50 employees if the new clause is not agreed to.

I always worry when Ministers smile at Opposition Members as though we had a screw loose. On this occasion, we do not. Many Conservative Members, such as myself, were involved in modest enterprises before we entered the House. We understand that if a key member of staff is sick, or absent for maternity purposes, someone else must do the job or be brought in. Ministers do not seem to understand the impact that schedule 3 will have on such businesses.

The Government are fond of talking about the rights of individuals, but it is no good individual employees being affected by these proposals if they are not working because their former company has said that enough is enough in terms of the burden of these regulations. It is at that level that the Government have failed to put forward coherent, well-argued points to support their reasons for placing these additional cost burdens on this sector of industry. If the Secretary of State wants to avoid being booed again next year in Blackpool, he should adopt our proposals.

6.45 pm
Mr. Byers

I enjoyed my morning in Blackpool speaking to the Federation of Small Businesses. I was told by an official there that the reaction to my speech was one of the most positive ever given to a Minister. As the hon. Member for Ludlow (Mr. Gill) said, the very nature of small businesses means that they do not care too much for Governments of any political persuasion. Apparently, when the right hon. Member for Henley (Mr. Heseltine) addressed the conference as President of the Board of Trade, the reaction was far more hostile than anything I had to suffer. The federation made me feel very much at home.

Government amendments Nos. 66, 67 and 68 simply mean that workers who ordinarily work in the United Kingdom will count towards the minimum of 21 workers required for the purposes of statutory recognition. At present, the Bill does not clarify that point and these three rather technical amendments seek to do precisely that. I hope that the House will agree to them.

With regard to new clauses 1 and 2, Conservative Members failed to reflect on issues to do with interest rates, inflation and sound public finances. Small, medium and large businesses want economic stability and an economic climate in which they can plan ahead with certainty.

Mr. Fabricant

Will the right hon. Gentleman give way?

Mr. Byers

In a minute.

Those are the issues that concern business, but there was not one reference to them this evening.

Mr. Bercow

Will the right hon. Gentleman give way?

Mr. Byers

I want to make some progress. We have had a long debate and I know that the House wishes to divide.

That is why it is important to create the right economic climate so that businesses can plan ahead with certainty. Particularly noticeable was the reference to the Dun and Bradstreet survey, which showed that there was some 11,000 business failures in the first quarter of this year. I shall take that on board and reflect on it. However, it is worth noting that one quarter of the world is in recession and Japan, the world's second largest economy, is in the depths of a deep depression. That is bound to have consequences for the United Kingdom.

But 11,000 business failures in the first quarter of this year pales into insignificance compared with the 62,000 business failures in 1992 when the right hon. Member for Wokingham (Mr. Redwood) was the Under-Secretary of State for Corporate Affairs. That is the right hon. Gentleman's golden legacy.

Mr. Fabricant

The right hon. Gentleman made that point earlier, but surely, when my right hon. Friend the Member for Wokingham (Mr. Redwood) was Minister there was a world recession. If people lose their jobs now, it will not be because of a world recession but because of this Secretary of State's legislation.

Mr. Byers

The problem was that we were going through a Tory boom and bust. Interest rates were at 15 per cent., inflation at 10 per cent. and we had lost more than 1 million manufacturing jobs. That was the right hon. Gentleman's legacy as a Minister in the Department of Trade and Industry, and I shall not let him forget it. He has form: he has a record, and people need to be reminded of it.

Mr. Redwood

That is a tired old erroneous charge. Does the Secretary of State agree that the problem was caused by our membership of the exchange rate mechanism? The Labour party supported that policy. Will he now apologise, as the Conservative party has done, for the fact that that policy went wrong?

Mr. Byers

The right hon. Gentleman fails to acknowledge the fact that he was a Minister who signed up to the ERM. He could have stood by his principles and resigned office, but he failed to do so. We do not judge people by the apologies that they make five years too late: we judge them by their actions at the time. The right hon. Gentleman could have resigned from his ministerial position and stood by his principles. He failed to do so, and he put his personal position before a principled approach. In 1992, he did not resign: he held on to his ministerial position. That is his record, and he will be reminded of it.

Mr. Deputy Speaker

Order. We are straying from the subject of small businesses.

Mr. Byers

Yes, we must come back to the debate, Mr. Deputy Speaker, and I shall do so.

When the right hon. Gentleman moved new clause 1, which would exempt companies employing 50 or fewer people, he admitted that that was not his personal option—he would favour an exemption for firms employing 100 or fewer. I am bound to ask whose policy it is that we are debating. Is it the right hon. Gentleman's policy, although he personally favours exemption for companies employing 100 or fewer, or is it the policy of the Conservative party? We need to know whose policy it is. I shall give way to the right hon. Gentleman to allow him to clarify the position.

Mr. Redwood

I have said that the Opposition would welcome an exemption for companies employing fewer than 50. We moved the new clause because we thought that we were more likely to get an exemption for those companies than we were to get an exemption for companies employing fewer than 100 people. If the Secretary of State were to offer an exemption for companies employing fewer than 100, I would be very grateful.

Mr. Byers

So the official spokesman for the Opposition favours one position—that is worth noting—but moves an amendment that takes another. The figure of 100 is relevant because such an exemption would cover well over half the working population. Those people would be denied the basic entitlements provided by the Bill.

What are these basic entitlements that are apparently so dangerous to the future of small business in the United Kingdom? One entitlement is time off for a parent whose child is sick. Is the right hon. Gentleman saying that parents should not be able to have time off if they happen to work in an organisation that employs 50 or fewer? That is the implication of the new clause moved by the right hon. Gentleman. A mother with concerns about the welfare of her child would not be able to have emergency leave to look after that child.

We are providing the right for part-timers no longer to be discriminated against, but Opposition Members are seeking to take that right away from millions of employees. The provision of unpaid parental leave to carry out the responsibilities of bringing up a child would be denied if the Opposition succeeded with their new clause. Millions of people would be denied those basic entitlements. We shall resist the new clause, because it would discriminate against millions of people in the most gross and unfair way.

Mr. Bercow

Will the right hon. Gentleman give way?

Mr. Byers

No, I shall not.

Opposition Members raised the genuine issue of the burden of regulation. The Government must address that issue, and we intend to do so. During questions last week, I said that the Department of Trade and Industry is reviewing every regulation to see whether it is worth while and, in the words of my right hon. Friend the Minister for the Cabinet Office this afternoon, to ensure that it is proportionate and necessary. That is the Government's policy, and it applies across all Departments.

Mr. Bercow

Will the right hon. Gentleman give way?

Mr. Byers

No, I want to make this point, because it is important.

That is why, just 10 days ago, I met representatives of business to identify an agenda on which we can jointly make progress on regulation and the steps that need to be taken. What we have heard tonight from Conservative Members reminded me of the debates that were held when the House debated the Equal Pay Bill, which became the Equal Pay Act 1970. Conservative Members said that that legislation would destroy jobs for women: that was their constant refrain. It has not done so, and women in the workplace have gone from strength to strength.

Mr. Bercow


Mr. Ian Bruce


Mr. Byers

No, I shall not give way.

Conservative Members sought to talk down small business. They spoke about small businesses being in a desperate situation because of measures introduced by the Government. They spoke of business failures. This year, 400,000 new businesses will be established because of the framework that we have created in government. Barclays bank says that the small business population has risen by 58,000 in the past two years. More importantly, survival rates are now improving. More than 80 per cent. of new businesses now survive their first year of trading compared with 75 per cent. in 1994. That is because we are creating the right climate and the right framework for businesses to prosper.

There will be support for innovation, and we shall work to increase finance for small businesses. We introduced legislation to tackle late payment of commercial debts. The Conservative party in government did nothing to address those issues.

If the new clause were to be introduced, millions of workers would lose basic entitlements. Part-timers would be denied minimum rights. Parents would denied the security of knowing that they could take time off to look after their children.

Ours is a balanced approach that recognises the needs of small, medium and large businesses. We also recognise the responsibility that we have to ensure that all workers, whatever the size of the firm for which they work, have decent minimum standards of employment. The new clause seeks to deny that, which is why we shall resist it and vote against it in the Lobby.

Mr. Redwood

I pay tribute to my hon. Friend the Member for Daventry (Mr. Boswell) for the leadership that he has shown on this and other issues in Committee. I also pay tribute to my hon. Friends who not only worked hard in Committee in the interests of all businesses, but have been present in this debate, unlike some of the Labour Members who were on the Committee. They either did not come to the Chamber for the debate or came but said absolutely nothing either in defence of the Government's policy, which is indefensible, or in support of our new clauses, which would make life a lot better.

Mr. Ian Stewart

The right hon. Gentleman is not aware that at times in Committee not one Conservative Back Bencher was present behind his hon. Friends on the Front Bench.

Mr. Redwood

I am well aware from the evidence of those Committee sittings that my hon. Friends made all the running. They had all the good ideas, took the debate to the Government, and Labour Members were remarkably silent on most of the important issues, as they have been today.

My hon. Friend the Member for Buckingham (Mr. Bercow) produced a tour de force and gave six very important reasons why these new clauses should be accepted. I shall not repeat them, but I remind the House of the strong case he made. My hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) set out why it mattered to London that small businesses should be exempted so that they had more chance of flourishing and creating the jobs that parts of London still desperately need. My hon. Friend the Member for Ludlow (Mr. Gill) made a passionate case on behalf of small business, drawing on his own experience and that of his son, who now runs their successful family business despite the many burdens and costs imposed on it by the Government's policies.

7 pm

My hon. Friend the Member for Lichfield (Mr. Fabricant) put up a robust performance in support of the new clause and amendments, explaining why it was important for us to emulate the American model. We hear from Labour Members that they have been converted to parts of American enterprise capitalism, but they still do not seem to understand that small businesses are flourishing in the United States of America because they are exempt from most of the regulation that Labour proposes to inflict on British business in this and related legislation.

My hon. Friend the Member for Bromsgrove (Miss Kirkbride) made a strong case for businesses in her area, drawing on her constituency experience. My hon. Friend always puts the case for her local people with passion and skill. My hon. Friend the Member for Altrincham and Sale, West (Mr. Brady) explained how absurd it was for the Government to claim that they believed in deregulation, while introducing measure after measure that imposes cost after cost on business—which in turn creates job loss after job loss, as we see every day.

My right hon. Friend the Member for Fylde (Mr. Jack) said that the Secretary of State had been heckled at a recent small business conference. I am not surprised that he was heckled; it was entirely predictable. If he had listened to small businesses, as we have in recent months, he would know how angry they are about this legislation, and about all the legislation that has already been foisted on them by a Government who do not understand their requirements.

The Secretary of State tells us that he now knows that small business wants more deregulation. He has promised small firms a pow-wow—a conference with him, enabling them to explain the ways in which they want more deregulation. We have been telling the right hon. Gentleman for months that they want more deregulation, and tonight, we have offered him a chance to show how that can be done. We have tabled two new clauses. If he accepts them after this short debate—he can do so, even at the eleventh hour—he will show not only that he has begun to understand that business is cross, but that he wants to do something about it. He should be saying sorry for the regulations that he has introduced, and for those introduced by his two predecessors, the two previous Presidents of the Board of Trade—as they liked to be known. Instead, we see a Secretary of State who has learned nothing, and who wants to do nothing to help the business cause that he should be furthering.

Mr. Bercow

Will my right hon. Friend reflect on the fact that, despite the Secretary of State's honeyed words in the Chamber tonight, his hon. Friend the Minister for Small Firms, Trade and Industry has refused to give any undertaking that the regulations resulting from the Bill will be shorter than those relating to the working time directive and the national minimum wage, which fill 72 and 112 pages respectively?

Mr. Redwood

They will doubtless be as long or longer. The Secretary of State clearly finds that amusing. He should try responding to that degree of regulation while running a small enterprise with only a few staff, and trying to make ends meet under Labour's economic policies.

The Secretary of State does not seem to understand that the problems caused by high interest rates, high exchange rates and high taxes—all of which I mentioned in my opening remarks—are being greatly compounded by legislation such as this, which leaves business chronically short of the cash that it needs to employ people, to invest in the future and to modernise—something of which the present Government might be expected to approve. We have heard a series of cheap, juvenile debating points from the right hon. Gentleman, which we have heard many times before and to which we have responded adequately in the past. Yes, there were job losses and closures in 1992; but when will the Labour party apologise for supporting the policies that were being pursued then, and when will it learn from them? When will it understand that it is beginning to replicate exactly the conditions that obtained at that time? We have listened; we have learned; we know that the present position is wrong. Why cannot the Secretary of State appreciate the damage that his rerun is doing to industry in this country?

Mr. Ian Stewart

It is a bit rich for the right hon. Gentleman to say that, given the inheritance left by his Government. One family in five in this country contains not one working person, and that does not include pensioners.

Mr. Redwood

We left a golden economic legacy of falling unemployment, low inflation, growth and prosperity, and a flourishing small business enterprise culture. That is being destroyed by this Government—by their wanton economic policies, and by the regulation and laws that they are introducing.

The Secretary of State says that I should show a little less passion, but I will not. This matters. The Secretary of State should try listening. He should understand that many livelihoods are being destroyed by this Government's policies, and he should wake up and do something about it.

The Minister for Small Firms, Trade and Industry dared to smile when it was suggested that he should be worried about the shrinking of the small business sector as small businesses went under. He smiles again, in a rather lacklustre way. I assume that he is giggling now because he realises that the small business sector will not shrink. For every firm that goes under while this Government are in office, another medium-sized firm will shrink and replace it, becoming a new small firm. That is the Minister's small firms policy: if the medium-sized firms are damaged, he will have more candidates to preside over in his inimitable way.

The overwhelming weight of evidence from business organisations, Members of Parliament and constituents in businesses who lobby us points in the same direction. It suggests that small business must be exempted from these and any other regulations introduced by the Government. Does the Secretary of State understand that, if a firm with 21 employees which will be caught by the legislation in its present form needs one extra person to handle all the regulation and bureaucracy, that will constitute a 5 per cent. increase in its costs? For a firm with 1,000 employees, which may need only three extra people to handle the bureaucracy, the increase in costs will amount to only 0.3 per cent.—not welcome, but much less serious than the impact on the small firm. Is that fair? Does the Secretary of State wish to encumber small firms in such a way, allowing big firms a competitive advantage? That is one of our main reasons for proposing this important exemption.

An entrepreneur in a business with 20 or 30 employees may be the leader of a sales team. He may supervise production. He may be involved in design. He cannot take on more; yet the Secretary of State expects him to implement these measures, and supervise the company's response to a new range of statutory requirements.

The right hon. Gentleman asks whether my hon. Friends and I want people to be denied leave when their children are ill. Of course we do not—that is an outrageous suggestion—but in a small business, in which employer and employee have an individual relationship, such matters can be sorted out without the law intruding. The law is far too clumsy. Resort to lawyers will not help relationships in small firms; it will hinder them. It will generate another unnecessary cost for a small firm that may go under as a result, because the burdens will be far too great.

It is not good enough for the Secretary of State to promise some new review of the regulatory burdens that he and his predecessors have introduced. It is not good enough for him to blame past Governments. The burden is much greater now, the protest is much stronger now, and the small business community is much angrier now, because of the huge burdens imposed by taxes and regulations under the present Government. They are throwing away our golden economic legacy. They are making it too dear to make things in Britain.

Labour is undoubtedly bad for business. If this Secretary of State wants to do some deregulating, he should start now by instructing his team of Members to back our new clauses.

Question put, That the clause be read a Second time:—

The House divided: Ayes 131, Noes 348.

Division No. 133] [7.8 pm
Ainsworth, Peter (E Surrey) Brady, Graham
Amess, David Brazier, Julian
Ancram, Rt Hon Michael Brooke, Rt Hon Peter
Arbuthnot, Rt Hon James Browning, Mrs Angela
Baldry, Tony Bruce, Ian (S Dorset)
Beggs, Roy Burns, Simon
Bercow, John Butterfill, John
Beresford, Sir Paul Chapman, Sir Sydney
Blunt, Crispin (Chipping Barnet)
Body, Sir Richard Chope, Christopher
Boswell, Tim Clappison, James
Bottomley, Peter (Worthing W) Clark, Rt Hon Alan (Kensington)
Clark, Dr Michael (Rayleigh) Maclean, Rt Hon David
Clifton-Brown, Geoffrey McLoughlin, Patrick
Collins, Tim Madel, Sir David
Colvin, Michael Malins, Humfrey
Cormack, Sir Patrick Maples, John
Cran, James Maude, Rt Hon Francis
Curry, Rt Hon David May, Mrs Theresa
Davies, Quentin (Grantham) Moss, Malcolm
Davis, Rt Hon David (Haltemprice Nicholls, Patrick
& Howden) Norman, Archie
Dorrell, Rt Hon Stephen Ottaway, Richard
Duncan, Alan Page, Richard
Duncan Smith, Iain Paice, James
Faber, David Pickles, Eric
Fabricant, Michael Prior, David
Fallon, Michael Randall, John
Flight, Howard Redwood, Rt Hon John
Forsythe, Clifford Robertson, Laurence (Tewk'b'ry)
Forth, Rt Hon Eric Rowe, Andrew (Faversham)
Gale, Roger Ruffley, David
Gibb, Nick St Aubyn, Nick
Gill, Christopher Sayeed, Jonathan
Goodlad, Rt Hon Sir Alastair Shephard, Rt Hon Mrs Gillian
Gorman, Mrs Teresa Shepherd, Richard
Gray, James Simpson, Keith (Mid-Norfolk)
Green, Damian Soames, Nicholas
Greenway, John Spelman, Mrs Caroline
Grieve, Dominic Spring, Richard
Hague, Rt Hon William Stanley, Rt Hon Sir John
Hamilton, Rt Hon Sir Archie Steen, Anthony
Hammond, Philip Swayne, Desmond
Hawkins, Nick Syms, Robert
Hayes, John Tapsell, Sir Peter
Heald, Oliver Taylor, Ian (Esher & Walton)
Hogg, Rt Hon Douglas Taylor, John M (Solihull)
Horam, John Taylor, Sir Teddy
Howarth, Gerald (Aldershot) Townend, John
Hunter, Andrew Tredinnick, David
Jack, Rt Hon Michael Trend, Michael
Jackson, Robert (Wantage) Tyrie, Andrew
Jenkin, Bernard Viggers, Peter
Johnson Smith, Rt Hon Sir Geoffrey Wardle, Charles
Waterson, Nigel
Key, Robert Wells, Bowen
King, Rt Hon Tom (Bridgwater) Whitney, Sir Raymond
Kirkbride, Miss Julie Whittingdale, John
Lait, Mrs Jacqui Widdecombe, Rt Hon Miss Ann
Lansley, Andrew Wilkinson, John
Leigh, Edward Winterton, Mrs Ann (Congleton)
Letwin, Oliver Winterton, Nicholas (Macclesfield)
Lewis, Dr Julian (New Forest E) Woodward, Shaun
Lidington, David Yeo, Tim
Lloyd, Rt Hon Sir Peter (Fareham) Young, Rt Hon Sir George
Loughton, Tim
Luff, Peter Tellers for the Ayes:
McIntosh, Miss Anne Mrs. Eleanor Laing and Mr. Stephen Day.
MacKay, Rt Hon Andrew
Abbott, Ms Diane Bell, Martin (Tatton)
Ainger, Nick Bell, Stuart (Middlesbrough)
Ainsworth, Robert (Cov'try NE) Bennett, Andrew F
Allan, Richard Benton, Joe
Allen, Graham Bermingham, Gerald
Anderson, Donald (Swansea E) Berry, Roger
Atherton, Ms Candy Best, Harold
Atkins, Charlotte Betts, Clive
Austin, John Blackman, Liz
Baker, Norman Blears, Ms Hazel
Banks, Tony Blizzard, Bob
Barnes, Harry Borrow, David
Barron, Kevin Bradley, Keith (Withington)
Battle, John Bradley, Peter (The Wrekin)
Bayley, Hugh Bradshaw, Ben
Beard, Nigel Brinton, Mrs Helen
Beckett, Rt Hon Mrs Margaret Brown, Russell (Dumfries)
Browne, Desmond Foster, Michael J (Worcester)
Bruce, Malcolm (Gordon) Fyfe, Maria
Buck, Ms Karen Gapes, Mike
Burden, Richard Gardiner, Barry
Burgon, Colin George, Andrew (St Ives)
Burstow, Paul George, Bruce (Walsall S)
Butler, Mrs Christine Gerrard, Neil
Byers, Rt Hon Stephen Gibson, Dr Ian
Caborn, Richard Gilroy, Mrs Linda
Campbell, Alan (Tynemouth) Godman, Dr Norman A
Campbell, Mrs Anne (C'bridge) Godsiff, Roger
Campbell, Ronnie (Blyth V) Goggins, Paul
Campbell-Savours, Dale Golding, Mrs Llin
Canavan, Dennis Gordon, Mrs Eileen
Cann, Jamie Griffiths, Nigel (Edinburgh S)
Caplin, Ivor Griffiths, Win (Bridgend)
Cawsey, Ian Grocott, Bruce
Chapman, Ben (Wirral S) Grogan, John
Chaytor, David Hain, Peter
Chidgey, David Hall, Mike (Weaver Vale)
Clapham, Michael Hall, Patrick (Bedford)
Clark, Rt Hon Dr David (S Shields) Hancock, Mike
Clark, Dr Lynda Hanson, David
(Edinburgh Pentlands) Harman, Rt Hon Ms Harriet
Clark, Paul (Gillingham) Heal, Mrs Sylvia
Clarke, Charles (Norwich S) Healey, John
Clarke, Tony (Northampton S) Heath, David (Somerton & Frome)
Clwyd, Ann Henderson, Ivan (Harwich)
Coaker, Vernon Hepburn, Stephen
Coffey, Ms Ann Heppell, John
Cohen, Harry Hesford, Stephen
Coleman, Iain Hill, Keith
Colman, Tony Hinchliffe, David
Connarty, Michael Hodge, Ms Margaret
Cooper, Yvette Hoey, Kate
Corbett, Robin Home Robertson, John
Corbyn, Jeremy Hood, Jimmy
Cotter, Brian Hoon, Geoffrey
Cousins, Jim Hope, Phil
Cranston, Ross Hopkins, Kelvin
Crausby, David Howells, Dr Kim
Cryer, Mrs Ann (Keighley) Hoyle, Lindsay
Cryer, John (Hornchurch) Hughes, Ms Beverley (Stretford)
Cummings, John Hughes, Kevin (Doncaster N)
Cunningham, Jim (Cov'try S) Humble, Mrs Joan
Curtis-Thomas, Mrs Claire Hurst, Alan
Dafis, Cynog Hutton, John
Dalyell, Tam Iddon, Dr Brian
Darvill, Keith Illsley, Eric
Davey, Edward (Kingston) Jackson, Ms Glenda (Hampstead)
Davey, Valerie (Bristol W) Jackson, Helen (Hillsborough)
Davidson, Ian Jenkins, Brian
Davies, Rt Hon Denzil (Llanelli) Johnson, Alan (Hull W & Hessle)
Davies, Geraint (Croydon C) Johnson, Miss Melanie
Dawson, Hilton (Welwyn Hatfield)
Denham, John Jones, Barry (Alyn & Deeside)
Dismore, Andrew Jones, Helen (Warrington N)
Dobbin, Jim Jones, Ms Jenny
Donohoe, Brian H (Wolverh'ton SW)
Dowd, Jim Jones, Jon Owen (Cardiff C)
Drown, Ms Julia Jones, Dr Lynne (Selly Oak)
Eagle, Maria (L'pool Garston) Jones, Martyn (Clwyd S)
Edwards, Huw Jowell, Rt Hon Ms Tessa
Efford, Clive Keeble, Ms Sally
Ellman, Mrs Louise Keen, Alan (Feltham & Heston)
Ennis, Jeff Keen, Ann (Brentford & Isleworth)
Etherington, Bill Kelly, Ms Ruth
Ewing, Mrs Margaret Kemp, Fraser
Fearn, Ronnie Kennedy, Jane (Wavertree)
Fisher, Mark Khabra, Piara S
Fitzpatrick, Jim Kidney, David
Fitzsimons, Lorna King, Andy (Rugby & Kenilworth)
Flint, Caroline King, Ms Oona (Bethnal Green)
Flynn, Paul Kingham, Ms Tess
Follett, Barbara Kirkwood, Archy
Foster, Rt Hon Derek Ladyman, Dr Stephen
Laxton, Bob Quin, Rt Hon Ms Joyce
Lepper, David Quinn, Lawrie
Leslie, Christopher Radice, Giles
Levitt, Tom Rammell, Bill
Lewis, Ivan (Bury S) Rapson, Syd
Lewis, Terry (Worsley) Raynsford, Nick
Linton, Martin Reid, Rt Hon Dr John (Hamilton N)
Livingstone, Ken Rendel, David
Livsey, Richard Roche, Mrs Barbara
Lloyd, Tony (Manchester C) Rogers, Allan
Llwyd, Elfyn Rooney, Terry
Lock, David Ross, Ernie (Dundee W)
Love, Andrew Rowlands, Ted
McAvoy, Thomas Roy, Frank
McCabe, Steve Ruane, Chris
McDonagh, Siobhain Ruddock, Joan
Macdonald, Calum Russell, Bob (Colchester)
McDonnell, John Russell, Ms Christine (Chester)
McGuire, Mrs Anne Ryan, Ms Joan
McIsaac, Shona Sanders, Adrian
McKenna, Mrs Rosemary Sarwar, Mohammad
Mackinlay, Andrew Sawford, Phil
McLeish, Henry Shaw, Jonathan
McNamara, Kevin Sheerman, Barry
McNulty, Tony Sheldon, Rt Hon Robert
MacShane, Denis Shipley, Ms Debra
Mactaggart, Fiona Simpson, Alan (Nottingham S)
McWalter, Tony Singh, Marsha
McWilliam, John Skinner, Dennis
Mahon, Mrs Alice Smith, Rt Hon Andrew (Oxford E)
Mallaber, Judy Smith, Angela (Basildon)
Mandelson, Rt Hon Peter Smith, Jacqui (Redditch)
Marsden, Gordon (Blackpool S) Smith, John (Glamorgan)
Marsden, Paul (Shrewsbury) Smith, Llew (Blaenau Gwent)
Marshall, Jim (Leicester S) Smith, Sir Robert (W Ab'd'ns)
Martlew, Eric Snape, Peter
Maxton, John Soley, Clive
Meacher, Rt Hon Michael Southworth, Ms Helen
Merron, Gillian Spellar, John
Michie, Bill (Shef'ld Heeley) Squire, Ms Rachel
Milburn, Rt Hon Alan Starkey, Dr Phyllis
Miller, Andrew Steinberg, Gerry
Mitchell, Austin Stevenson, George
Moffatt, Laura Stewart, David (Inverness E)
Moonie, Dr Lewis Stewart, Ian (Eccles)
Moran, Ms Margaret Stinchcombe, Paul
Morgan, Ms Julie (Cardiff N) Stoate, Dr Howard
Morgan, Rhodri (Cardiff W) Stott, Roger
Morris, Ms Estelle (B'ham Yardley) Stringer, Graham
Mountford, Kali Stunell, Andrew
Mullin, Chris Sutcliffe, Gerry
Murphy, Denis (Wansbeck) Taylor, Rt Hon Mrs Ann
Murphy, Jim (Eastwood) (Dewsbury)
Naysmith, Dr Doug Taylor, Ms Dari (Stockton S)
Norris, Dan Taylor, David (NW Leics)
O'Brien, Bill (Normanton) Temple-Morris, Peter
O'Brien, Mike (N Warks) Thomas, Gareth R (Harrow W)
O'Hara, Eddie Timms, Stephen
Olner, Bill Tipping, Paddy
O'Neill, Martin Todd, Mark
Palmer, Dr Nick Tonge, Dr Jenny
Pearson, Ian Touhig, Don
Pendry, Tom Trickett, Jon
Perham, Ms Linda Truswell, Paul
Pickthall, Colin Turner, Dennis (Wolverh'ton SE)
Pike, Peter L Turner, Dr Desmond (Kemptown)
Plaskitt, James Twigg, Derek (Halton)
Pollard, Kerry Twigg, Stephen (Enfield)
Pope, Greg Vaz, Keith
Pound, Stephen Vis, Dr Rudi
Powell, Sir Raymond Wallace, James
Prentice, Ms Bridget (Lewisham E) Walley, Ms Joan
Prentice, Gordon (Pendle) Ward, Ms Claire
Prescott, Rt Hon John Wareing, Robert N
Prosser, Gwyn Watts, David
Purchase, Ken Webb, Steve
Welsh, Andrew Winnick, David
White, Brian Winterton, Ms Rosie (Doncaster C)
Whitehead, Dr Alan Wood, Mike
Worthington, Tony
Wicks, Malcolm Wray, James
Williams, Rt Hon Alan Wright, Dr Tony (Cannock)
(Swansea W)
Williams, Alan W (E Carmarthen) Tellers for the Noes:
Willis, Phil Mr. David Jamieson and Mr. David Clelland.
Wills, Michael

Question accordingly negatived.

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