HC Deb 08 July 2004 vol 423 cc992-5
2. Mr. Archie Norman (Tunbridge Wells) (Con)

What proposals she has to encourage technology startup businesses. [182678]

The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths)

The university challenge seed fund, the grant for research and development and the UK high technology fund are three ways in which the Government help technology start-ups. As a result, some 17,000 start-ups are assisted every year.

Mr. Norman

Would the Minister like to comment on the report in today's edition of The Times that the Chancellor plans to cut £300 million from the DTI's business support division? Can he also confirm that flagship support for technology start-up schemes—the grant for research and development—has already been cut, that the number of grants will be reduced this year from 900 to 300, and that the waiting list for grants has already been extended from two months to five months? Does he not agree that if anything should be cut, it is the cost of running the DTI, rather than support for new start-ups?

Nigel Griffiths

The hon. Gentleman is wrong on both counts. On grants for research and development, over the last five years the number of applicants for grants—all accepted because the criteria were met—resulted in a 17 per cent. underspend on the allocation, and in the past two years we have been able to supplement the allocation by up to £10 million over and above what we expected to spend. The eight new products offered by the Department of Trade and Industry will guarantee future success. Our track record on start-ups is very good. On 31 March the Barclays survey of start-ups showed that 465,000 companies or businesses started up last year—a 19 per cent. increase on the previous year and the highest since Barclays started the survey in 1988. Our track record on start-ups is rather good.

Mr. David Chaytor (Bury, North) (Lab)

Does my hon. Friend accept that there is a risk of making it too easy to start up a small business? I would like to tell him about the scandal of the start-up and rapid collapse of Classic World of Fitness, a small private health club in my constituency. Its director, Mr. Robin Brown, who lives in Warwickshire—I have his address and details if anyone is interested—appears to be refusing to pay thousands of pounds to my constituents. If I provided my hon. Friend with the full details, would he be prepared to look further into the case?

Nigel Griffiths

I am happy to ensure that the appropriate authorities investigate that regrettable case. I am pleased to tell my hon. Friend and the House that that sort of case is an exception, but if the allegations are corroborated, we will be able to bring down all the resources of the law on the case. In the meantime, we want to make it easy for people who have good ideas to take them to market and to start up companies. As my previous answer showed, we have been able to help record numbers of people to start companies and I am pleased to tell the House that survival rates are very strong as well, but that will not deter us from ensuring proper consumer protection.

Mr. Julian Brazier (Canterbury) (Con)

Is it not the case that overall levels of business start-ups today are significantly lower than in the last three years of the last Conservative Government? Is not the major reason for that simply the ever-increasing burden of bureaucracy, which deters people from starting up companies?

Nigel Griffiths

rose—

Mr. Brazier

Come on.

Nigel Griffiths

I am puzzled about whether the hon. Gentleman has a comprehension problem or some other problem. Let me give him the facts. The Barclays survey of start-ups, which has been operating since 1988, shows that last year record numbers of businesses started up in this country. The figure is 465,000. If it is a record number of start-up companies, it will obviously be higher than under the last three years of the Conservative Government. We all remember—and we do not have to go back much more than a decade to find out—that 422,000 manufacturing jobs were lost in one year alone. If the hon. Gentleman wants a figure higher than 465,000, he could go back to the Conservative Government's first recession, during which 900,000 manufacturing jobs were lost in a single year. We are not going to take any lessons on start-ups from the hon. Gentleman. I will send him the details if he needs them to be repeated a third time.

Mr. Stephen O'Brien (Eddisbury) (Con)

Let us look into the outcomes of all these breathless claims from the Minister. He did not dare to mention the Chancellor's research and development tax credit, which is not surprising because the April KPMG survey established that 48 per cent. of small and medium-sized businesses either found that the tax credit was too complicated to apply for and administer or did not know about it at all. Only 3 per cent. of respondents said that it had been a significant benefit. How does the Minister reconcile his boasts with those depressing facts?

Nigel Griffiths

Let us provide the hon. Gentleman with the facts—not directly from me, but from the chief executive of Isis Innovation in Oxford, who commended the Government. He told the Financial Times that the Government had done a great deal to facilitate spin-outs from universities. I recognise that there is a problem with the tax change that was necessary to close a loophole. When I spoke to Tim Cook, the chief executive whom I have just mentioned, and to the director of Exeter Innovation Centre this morning, they told me that they accepted that the loophole had to be closed and agreed with me that we must work to ensure that, in closing it, the Inland Revenue in no way restricts our excellent track record of encouraging spin-outs. We are addressing the problem directly by talking to two of our most successful academic spin-out company directors. In contrast, I do not think the hon. Gentleman has spoken to either of them.

Mr. O'Brien

We can all read, as well as speak to people. Interestingly, the latest comments from the academic community suggest that the system is not working as the Minister claims, because spin-out companies do not have enough connection with that community. So the Government's proposals are flawed. It is important that Ministers are good at more than reading off jargon phrases in Hewitt-speak—but yet again, we have had another smug response.

On Monday next week, the Chancellor is due to announce cuts in the DTI's role and spending. In light of that, what urgent and independent post-audit process have the Secretary of State and the Minister ordered to be carried out to demonstrate how much of the Department's current £8 billion of expenditure has been wasted?

Nigel Griffiths

This Government have spent £3 billion on the science and innovation framework already, and that is due to increase. The Opposition propose to freeze or cut public expenditure, which means that that budget would be diminished. Over the past seven years, the Government have worked with people who have succeeded in starting important spinout companies. They tell us that they want the start that we have made, and the billions of pounds that the Government have invested, to continue and expand in the way that I have described. They do not want the cuts that the Opposition propose.