HL Deb 21 February 1973 vol 339 cc154-73

4.0 p.m.

Debate resumed.

THE EARL OF COURTOWN

My Lords, I join with other noble Lords in giving a belated welcome to the Bolton Report. It contains much useful information and many recommendations. It emphasises the importance of small firms in the economy. I speak as one who has spent almost a lifetime in large scale industry. But even large scale industry is made up of many smaller bits and I have learned over the years to admire and study what small firms are doing. Although I have no interest now in a large company, I should perhaps declare an indirect interest in that I am Chairman of the Regional Management Centre Council based on Portsmouth Polytechnic.

In what I say to-day, I propose to concentrate on the problems of management in small firms, because it is on management—and good management in particular—that these firms either will or will not flourish. It has been brought out very clearly by previous speakers that it is difficult to make small firms accept a service, even if that service will he useful. There must be an atmosphere among small firms inducing them to make use of that service.

Small firms have many advantages. Management knows much more about all levels of the business. Decisions can be taken much more quickly, and so long as management is willing to change, it can make changes much more quickly. Small firms are also geared much more to the development of the entrepreneurial atmosphere—an atmosphere in which the good entrepreneur will flourish—and one of the things that large firms have to study is the extent to which they can establish a similar atmosphere within their own companies. Small firms have administrative simplicity. They can do without records and internal discussions, and there is hardly any need for writing internal memos, because one person often deals with a wide range of activities.

In industrial relations small firms have a good record. People at the top know those at the bottom, and vice versa. In the two years to 1969, the Report tells us, only 1½ per cent. of the small firms had any strikes. On the other hand, it is probably significant that two-thirds of small firms have no union representation at all, and only 8 per cent. of them are completely unionised. Large firms certainly try to obtain the advantages of small firms through the decentralisation and simplification of procedures; and they know full well that small firms concentrating on limited ranges of products are highly competitive.

As against this, small firms have their disadvantages, particularly in the manufacturing field. They can obviously spend much less on research and development, although in many industries there are useful research associations. They are unable to mount marketing and distribution activities on the same scale, especially in exports, and there is no doubt that it is in the export field that much of the difficulty arises. They have greater difficulties about finance, to which reference has already been made. In many industries the size of the economic production unit, in these days of advanced technology, is too large for the small firm to be able to finance. Also as has been mentioned before, Government regulations may take a great toll of the management's time in small firms, whereas the large firm can take such regulations in its stride by means of its own records and procedures.

The Common Market is undoubtedly going to bring pressure on firms to grow, or else go out of existence. It is in this area of growth that the problems of management will be most pressing, but there is still a place for small manufacturing firms in specialist activities. If they concentrate on fairly simple products, and on making them cheaply and well, they can flourish greatly in the Common Market. For example, I know one small company which concentrates on making mattress buttons and its business is world-wide. In fact, the managing director, whenever he stays in an hotel—even in the most distant pants of the world—pulls aside the sheet on his bed and often finds his firm's mattress buttons underneath. This is an example of how a small firm can be extremely successful in concentrating on the making of one fairly simple product and achieving a large output, with the economies of size and of large production, while remaining an efficient unit.

If, as I suggest, one of the main problems of small firms is that of growth, what are the difficulties attached to this? Entrepreneurial or technological skill often does not go easily with organising ability. People who have built up a small business quite often find that when it comes to delegating authority down the line they do not find it easy. Many small firms are perhaps run by only one, two or three people and there is a wide gap below them. High-grade, well-educated young men and women are not often tempted to go into such firms. They do not see regular chances of promotion, and the Bolton Report mentions that comparatively few members of management in these small firms have themselves any formal qualification. The merchant banks report that the commonest failing in small firms lies in their management ability.

It is undoubtedly important that there should be an atmosphere of improving management in these companies. How, then, can management be improved? I believe this can be linked under two headings: consultancy and management education. It is important that members of management in small firms should have people with whom they can consult regarding their various managerial problems. The Report tells us that the most likely people to whom they might go for advice are accountants, solicitors, bank managers, chambers of commerce and trade associations, in that order, and then there follow the business consultants and the C.B.I. What sort of advice can these people give? The Report does not tell us, but I suggest that very few of them are going to give advice and help on the problems of growth.

It is very often helpful to have a consultant to look at a business and make recommendations for reorganisation or for changes in the management and activities of that business; but it is much more useful to have a situation in which there is continuous contact with advisers. Management decisions are made through recognising the factors which affect the situation and then weighing these in the light of changing circumstances. Some of these factors can be quantified, but many cannot, and having someone, a consultant of some sort, in continuous contact with a concern, and with whom the management can discuss new problems and get his advice and help in weighing these factors, can be extremely useful. In many cases management consultants do not find small firms profitable to work with, except some firms who have specialised in small time consultancy with small firms of consultants. The universities, technical colleges and Research Associations are also mentioned in the Report. It is stated that the polytechnics and technical colleges stand in higher repute than the universities. That is natural, because the polytechnics and technical colleges are geared much more to post-experience work and part-time learning of one sort or another. More co-operation is recommended with these. Many of these colleges and, indeed, universities have started their own small firm centres as a means of communication with the small firms within their region.

So far as Government bodies are concerned, the industrial liaison service has been discontinued. This was based on local polytechnics, technical colleges and universities and, in some cases, the staff have been absorbed in those bodies. The Department of Trade and Industry have set up a small firms department and I shall be interested to hear from the Minister what the plans for this department are. And of course Government provide extremely useful export services.

Then, going on to management education, this has to be linked closely with consultancy. Management education is not something which can be done totally in any form of training college; it must be integrated with learning on the job. Most small firms, as the noble Lord, Lord Mottistone, implied, are not geared to send people on courses, but local courses are likely to be the best supported. The industrial training boards in many industries did not cater for small firms, particularly in management education. We now have the National Training Agency coming under the Department of Employment. This, as noble Lords know, was set up to provide the type of training which was not available through the training boards, and it was particularly mentioned that certain types of training were better done on a regional basis. I do not know whether the Minister can tell us anything about what the National Training Agency is doing about management education.

Then there are the regional management centres which have been set up, based in the main on polytechnics in various parts of the country. The noble Lord, Lord Drumalbyn, in a previous debate, gave the information that the Department of Education and Science is responsible for co-ordinating management education. One wonders, with so many Ministries interested in various aspects of this subject, what the D.E.S. are doing to co-ordinate it. I do not imply by this that there is need for any strong co-ordination, but at least we need to be sure that these new bodies that are being set up find out what is happening in other institutions within their neighbourhood.

To finish, I should like to emphasise that I believe small firms have an important place in the economy, and that it is right to encourage them. They have acute problems of management, many of which have been mentioned in this debate, but they have to realise what they need in management, and they have to find out how to help themselves. It is no good various bodies being set up to help them if they are not going to make use of those bodies. They have to get geared towards training themselves for growth and, in particular, for training future generations of managers. I shall be very interested to hear what the Minister is going to say, and what the Government are proposing to do in this field.

LORD DRUMALBYN

My Lords, it is my duty to inform the House that the Ministerial Statement and subsequent exchanges, for which this debate was recently interrupted, occupied 16 minutes of the House's time. The time limit for this debate is thereby advanced to 5.39 p.m.

4.16 p.m.

LORD JACQUES

My Lords, I apologise for intervening; I will be very brief and to the point. I wish to raise two issues of fiscal policy which tend to militate against the small firm. The first point is with reference to the encouragement of industry in the development areas. The previous Government relied very heavily upon cash grants. The policy of the present Government is to rely upon tax incentives. I know that there has been some change of mind in that respect, and I am probing to see how far that change of mind has gone. I think it will be accepted on all sides of the House that in new business in a development area it is highly likely that there will be losses in the first few years. It will take some time in order to make the business profitable. When you have a system of cash grants it means that the firm, whether large or small, can take advantage of those cash grants immediately. But when the incentive is not a cash grant but a tax incentive, it means that the small firm that has only the one factory in the development area gets no advantages because it has no profits against which to set the tax incentive. The large firm which has merely a branch factory in the development area will be able to use its tax incentive gained in the development area against profits which have been made elsewhere. It is clear, therefore, that the present policy of tax incentives in the development areas militates against the establishment of the small firm in the development areas. I ask that that point should be given further consideration.

The second point I wish to raise is with reference to corporation tax. The proposed changes in corporation tax will militate against the small firm. At the present time a company pays 40 per cent. in corporation tax but, in addition, the income tax which it deducts when distributing profits has to be accounted for to the Revenue so that the percentage of profits which goes to the Revenue is 40 plus. It is proposed that from 1972–73 there will be a change. The company will pay 50 per cent. in corporation tax but will not have to account to the Revenue for the income tax deducted from distributed profits. The position will be changed in that there will be a charge of 50 per cent. and that will be the end of the matter, whereas formerly it was 40 per cent. plus the income tax deducted from the distributed profits.

I should like to compare that change in its effects upon a private company and its effects upon a public company. In the case of the private company, it is relying upon retained profits for additional equity capital. The public company can get additional equity capital on the Stock Exchange. It is true of course that the private company can go to the bank and raise a loan, but often it will be relying upon future retained profits in order to repay that loan. Before 1972–73 a private company paid 40 per cent. in corporation tax and if it paid no dividends it had 60 per cent. of its profits left for expansion. If corporation tax is increased to 50 per cent., it means that the private company will have its corporation tax increased from 40 per cent. to 50 per cent.—an increase of 25 per cent. The profits which it retains for future expansion will be reduced by 17 per cent., so that it is quite clear that the small private company which retains its profit for future expansion is going to be badly hit by that change in taxation.

Let us compare that with the effect of that change in taxation upon a large public company. On the average, a public company pays 61 per cent. of its profits, after taxation, to the shareholders. In such a company, before the change in tax it would pay—and I will use only whole numbers; I will not go into decimals–21 per cent. to the shareholders; 23 per cent. would be available for expansion, and 54 per cent. would go in taxation. Now, 54 per cent. goes in taxation because the company is responsible to the Exchequer, not merely for the 40 per cent. corporation tax but for the tax which has been deducted from the dividends paid to shareholders. The net position is that 54 per cent. goes in taxation; 23 per cent. is available for expansion. But, when you have a 50 per cent. rate of corporation tax, and the company keeping the tax deducted from dividends, you have an entirely different position. Once again, 21 per cent. goes to the shareholders, but only 50 per cent. is paid in tax, not 54 per cent. as before. Consequently, 28 per cent., instead of 23 per cent., is left for expansion. So this change of policy in relation to corporation tax tends to hit the private company and tends to the advantage of the public company; and, generally speaking, that will tend to hit the small firm and to aid the large firm. I should like the Minister to comment on those two questions of fiscal policy and at least to promise that they will have some consideration.

4.24 p.m.

LORD DRUMALBYN

My Lords, we have had a very interesting debate and I should like to start by thanking my noble friend Lord Strathcona and Mount Royal for initiating it. It is now some time since the Bolton Committee reported. As has been said, the Bolton Committee was set up under the last Government in November, 1969, and I must compliment our predecessors on their choice of Chairman and members of the Committee. They were a most distinguished quartet, very well qualified for the task that they were given. It was no easy task and one that, as my noble friend Lord Mottistone said, had never been attempted before. They made a penetrating and objective analysis based upon a careful collection and sifting of the evidence (such as it was, one must add), resulting in some 56 recommendations. I say "such as it was", not because of any unwillingness of people to send in evidence but because the statistical facts were to a considerable extent not known. But we do know now a good deal more of the facts about small firms in this country, and we know also of their problems as well as their value to the community as a whole. May I say how grateful the Government are—it has been said before but I feel I must say it again, and I do so most willingly—to the Committee for their outstanding accomplishment.

The Government wholeheartedly accepted the Report and immediately went ahead with the task of evaluating and, where possible, implementing the recommendations contained in it. Indeed, some changes were made in the tax system on the basis of the Committee's interim findings in January, 1971, well before the Report was published in November, 1971. The Committee took the view that small firms, suffer from a number of inequitable and unnecessary disabilities, mostly imposed by Government, which amount to discrimination". They thought that Government had not imposed these difficulties deliberately, but had not sufficiently appreciated the importance of the small firms sector in the economy. Their complaint against Governments, they said, is simply that the interests of small firms are neglected because it is nobody's job to consider them". They therefore proposed, as their major recommendation, that a division should be created within the Department of Trade and Industry to ensure that the interests of the small firms sector and the maintenance of its ability to fulfil its proper role in the industrial structure are never allowed to go by default". They also recommended that a Minister of the Department of Trade and Industry should be expressly designated as the Minister responsible for small firms and to oversee the work of the division. These recommendations were implemented at once. One of the Under-Secretaries of State at the Department of Trade and Industry was given special responsibility for small firms, and a special division was set up to support him.

Since the Committee reported, first Mr. Ridley, then Mr. Grant, and members of their staff, have been having extensive consultation up and down the country with many kinds of organisations with an interest in small firms, with industrial firms and with individual people who in one way or another have an interest in the wellbeing of small firms. Before the Committee reported few of us could have realised that, despite all the mergers, amalgamations and takeovers since the war, there were still some 820,000 small firms, excluding agriculture and the professions, employing some 30 per cent. of industries concerned with review, and with a net output of one-fifth of the output of those industries; this one-fifth amounted to £3,500 million, so we are talking about a very substantial sector of the community. If, of course, one includes agriculture and the professions then the number of small firms is 11 million. Perhaps I should say that these 1¼ million small firms are estimated to employ nearly one-third of the people who work for their living, including the self-employed, and to account for nearly one-fifth of our gross national product. That is high. I find this reassuring because it means that the regenerative process must still be very much alive, and it must mean that the complications of our modern society and economic life have not deterred independently-minded entrepreneurs from launching out on their own, with their energy, their ideas and their savings, and in some cases, possibly, their "golden handshakes".

The outstanding conclusion of the Report was that although the small firm sector had been declining both in substance and in its share of economic activity, small firms had special inherent advantages which should ensure that they continued to survive in the foreseeable future and to make the important contribution that they are making to the organisation of our economic and our social life, provided that the disabilities which have been imposed on them are removed, and provided healthy and fair competition is encouraged throughout the economy. As some of my noble friends have mentioned, they did not recommend subsidies or subsidised services. They said We think it wrong in principle that firms should in effect be bribed to take action which, if it is worth while at all, will increase their profitability. They expressed the view that Government should only provide a service if it is needed and private enterprise cannot or will not provide it, and should only subsidise services if the economic benefit to the nation deriving from them is greater than their cost, and the users cannot pay or should not be expected to pay their full cost. They recognised that circumstances could arise in which it would be desirable to support small firms, but at present it should suffice to remove the disabilities and provide the one service that they believed was needed, namely, the "signposting" service. This has been commented on by a number of my noble friends and I shall come to it in a minute or two.

I have been invited to say something about the recommendations and about the way in which they have been met. There were 13 about taxation, a subject of great importance to small firms, for whom retained profits, as the noble Lord, Lord Jacques, has just been telling us, are an important source of investment capital; 15 about form-filling (a task which usually falls upon the proprietor) and five about planning matters, including compensation for compulsory purchase. The Committee also said that the industrial training levy/grant scheme was inappropriate for small firms; that the various systems of Government procurement ought to be examined centrally to see whether small firms get a fair crack of the whip; that a special study should be made of the immediate effects of joining the European Economic Communities; that the impact of our competition policy upon small firms ought to be re-examined; that we should raise the limits for the disclosure of companies' turnover and individual directors' fees, and that we should increase to 10,000 square feet the area of factory space below which an industrial development certificate is not required.

As soon as the Report was published the Minister and his staff went to work with a will on all the recommendations which I have mentioned. This was no easy task because many of the policies which they covered were not the responsibility of the Department of Trade and Industry and, as the Secretary of State made clear on November 4, 1971, the appointment of a Minister with special responsibilities did not imply any change in the accountability of other Ministers; nor, incidentally, was there to be any intervention by the Minister responsible between Ministries and those whom they served. However, 13 liaison officers have been appointed from other Departments to ensure adequate co-operation, and although not all the recommendations have been found fully acceptable, some were implemented in full and some in part.

For example, special provisions in the field of taxation were made in the 1971 and 1972 Finance Acts covering, among other things, the restoration of tax relief on loans and the assessment of close companies for shortfall and estate duty, which will benefit small firms. It is also of very special interest to small firms that a reduced rating of corporation tax was envisaged in the 1972 Act for companies whose profits do not exceed £25,000. My right honourable friend the Chancellor of the Exchequer was careful not to state firmly what the corporation tax is going to be, but he did say that there would be this advantage for firms whose annual profit did not exceed £15,000, with tapering relief for companies with profits up to £25,000. Another section provided for the payment of capital gains tax in the case of deemed disposals to be spread over eight years, and this also was important for small firms because it is in the giving of loans to up-and-coming people in the small firms that the managership interest in the company can pass from a sole holder to somebody else.

That has dealt with taxation. In addition, as the Committee recommended, the Companies Act was amended by Statutory Instrument in February 1972 to relieve firms of the obligation to disclose their turnover if it was not above £250,000, and their individual directors' fees if the total of them was not above £15,000. Perhaps I may say in passing that this was something that we pressed for from this side of the House when the Companies Act was passing through the House in 1968.

As announced in the White Paper on Industrial and Regional Development, we abolished industrial development certificates in the development areas and special development areas and raised the limits below which they are not required to 10,000 square feet in the South-East and 15,000 square feet elsewhere. This removes the long-standing grievance of small firms which want to expand but cannot afford, so to speak, to split themselves into two areas.

In the field of industrial training we agreed with the Bolton Committee that the levy/grant system had never really been suitable for small firms and the training boards are now discussing the appropriate exemption limits for each industry. We have looked at Government procurement across a wide field and have found no evidence of discrimination, and we have satisfied ourselves that our small firms have nothing to fear from our accession to the European Economic Communities. Indeed they may have a great deal to gain, for it is evident that small firms on the Continent gained through the coming together of the Six.

The arrangements for scrutinising all Departments' statistical forms are to be strengthened. The Central Statistical Office has now to be consulted on all new surveys and on any significant alterations in existing ones. We are also looking into the possibility of setting up a central register of business, which would help to avoid duplication, make sampling easier and allow for the maximum possible exemption of small firms. There are to be more explicit rules for the use of Departments' statutory powers to collect figures; we are going to distinguish between compulsory and non-compulsory forms; and aggregated statistical information will be freely interchanged between Departments. I emphasise the word "aggregated" because it is very important that individual confidentiality should be maintained. Whenever new inquiries are in prospect a special exercise is now mounted to assess what the burden will be upon individual companies; and much greater use is now being made of man-hour estimates—that is, how long it will take the average firm to fill in the form. In the past we have been too apt to think only of what is the cost to the Government.

An even larger and more intractable area is that of administrative forms, such as those which have to be filled in to obtain licences of various sorts or I.D.C.s or financial assistance. All Ministers are now doing everything they can to see that the burden of such forms is reduced. Whenever new forms are devised, the expenditure of time and effort by those who have to fill them in is to be assessed and taken into account and will be re-examined periodically, and the expertise of statisticians is to be fully utilised in designing such forms. However, we do not intend to implement the Bolton Committee's recommendation for a computerised central data bank because of the danger to individual privacy.

My Lords, I am not going to accept the invitation which was offered to me by the noble Earl, Lord Courtown, to go into future taxation, but I shall most certainly look at the record to see whether there is any point at which, at this delicate time in the period of our Parliamentary year, there is any comment I can make on it.

A question about industrial development has been raised. The noble Lord, Lord Jacques, talked about the possibility of encouragement to industries in the development areas. He said that the tax incentive system militates against small firms. We now have the buildings grant, the plant and machinery grant and, where there is need of special assistance, the possibility of giving this under the Industry Act, notably by way of loan. There is also the need to supply small firms with accommodation to which they can move quickly. One of my noble friends, I believe it was my noble friend Lord Auckland, mentioned the case of firms who have to move elsewhere from an area that is being cleared. On January 15 an announcement was made that there were to be thirty-three advance factories in England, all but three of which are of 15,000 square feet or less. In Scotland two out of ten are to be of 15,000 square feet or less, and in Wales, one out of ten is less than 15,000 square feet—and is in fact of 10,000 square feet.

In the related field of planning and compensation for compulsory purchase the Committee made five recommendations. Not all were accepted, but I would commend to your Lordships the White Paper on Development and Compensation, Putting People First. That contained a number of proposals of particular interest to small firms. For example, subject to the approval of Parliament the blight provisions are to be improved: there is to be a right to advance payments of up to 90 per cent. of compensation; there is to be special compensation for dispossessed elderly traders and businessmen so that they may retire instead of having to start again further down the road; and there will be payment, as of right, of compensation for disturbance for unprotected business tenants. Those are all useful improvements for small businesses. Local authorities have been asked by the Government to bear in mind the needs of small firms in areas which are being redeveloped and to use their powers to give sympathetic treatment to them when they are dispossessed. As I have said, the regional assistance under the Industry Act is available for small firms equally with large firms, and the same applies for dispossessed firms. The Government have sent several reminders to local authorities urging them to use their powers sympathetically in re-housing small firms displaced by re-development schemes.

I come now to the new signposting service which the Committee itself said was its major recommendation. The Bolton Committee drew attention to the wide range of advice and information available, if only small firms could be persuaded to use it. The Committee recommended that a network of small firms' advisory bureaux should be established by the Government in important industrial centres, and they described it as a pure signposting or referral service, or, one might say, as a bridge between those who want advice and help and those who are able to give it. They said that the service should be well publicised, and noble Lords have mentioned the fact that even the existence of the Small Firms Division is not sufficiently known just now. It will become better known undoubtedly through the centres. The Committee thought that such a service would provide information and would give assistance on technical, financial and management problems by providing introductions to the appropriate sources of professional, commercial or official advice. It would provide a source of firsthand information to the Small Firms Division about the progress and problems of the small firms sector. The Government accepted that advice: we shall be opening offices in London, Glasgow, Cardiff and Birmingham, and in six other centres in the Provinces. They will be known as Small Firm Information Centres and will be based on the Department of Trade and Industry's regional organisation. They will be run on a uniform basis at public expense. They are intended to be able to give advice personally, by telex, by telephone, or indeed by correspondence.

My own personal advice to firms would be to make personal contact first with the centres and after that they will find that it will be much easier to consult them by telephone, or by other means. They are not intended to supplant the wide range of advisory services which already exist—although I am bound to say that such services vary considerably in quantity, quality and type in different parts of the country. On the contrary, they are intended to help to make better use of them by referring inquiries to the appropriate sources of advice. It is our hope that the centres will, in this way, bring many new members to existing organisations—such as the Small Business Centre of Aston University, and the chambers of commerce which do such good work in many parts of the country. It is in this way, I would say to my noble friend Lord Courtown, that it will be possible to guide firms to appropriate assistance, whether it concerns management education or management consultancy. We hope also that these centres will fill another gap; that they will provide the Small Firms Division with a continuous flow of up-to-date information about the achievements as well as the difficulties of the small firms. In other words, if small firms use the centres, as we hope they will, and tell them where the shoe is pinching as well as asking for information, then that kind of information will go directly back to the Small Firms Division at the Department of Trade and Industry.

I took note of what was said about credit finance in this connection by my noble friend Lord Strathcona and Mount Royal. I have no doubt that if firms bring to the attention of the centres cases where they are being forced to give long credit to much larger firms, it will then be possible for the information to be collated at the Small Firms Division and no doubt appropriate action will then be taken.

My noble friend Lord Strathcona and Mount Royal asked whether assistance could be given to small firms to set up their own body. That really is a matter for small firms themselves, but we have the Devlin Report on Industrial and Commercial Representation, and as your Lordships will know this is a matter which is very much under consideration and debate at the present time. The noble Lord made a number of valuable suggestions; I have already referred to one. He spoke about applications to banks for credit. The Committee found that the banks themselves were doing more to educate their managers in the needs of small firms at the present time, although they gave the impression that there was still some way to go. I do not think that it would be right to encourage the idea that the Government themselves will provide short term loans. Several of my noble friends have referred to the sturdy independence of small businesses. One of the difficulties is that, generally speaking, the greater the distance they can put between themselves and Governments of all complexions, the happier they are.

We hope that through the measures I have mentioned we shall be able to break down to some extent their tendency to keep themselves apart from Government, because I am sure that with the steps we are taking they will realise that Government are ready and willing to help them in every way they can. He also mentioned the need to interpret the maze of regulations and spoke of a cascade of paper work, and he mentioned the difficulty firms may experience in deciding what charges for services they make in the light of the present counter inflation legislation. These are the sort of questions that the centres will no doubt be equipped to answer, although I entirely accept what my noble friend Lord Mottistone said, that the centres will themselves have to learn what it is that people want to know. I have already dealt with the question of form filling. In so far as the various changes that are coming about at the present time require it, again the centres will be able to give information on whatever it may be that will affect the small firm.

I hope I have answered my noble friend Lord Auckland on management consultancy work. He asked what role the small firms play in this country. It is very obvious that small firms play a very important role in many ways, some of them as satellites of larger firms sending most of what they produce to the larger firms, some of them in straight competition with larger firms. The noble Lord drew attention to the fact that historically, at any rate, large firms were once small firms, and he mentioned one in particular in the North of Scotland that we had not much difficulty in identifying. What we want to do, of course, is to make certain that such growth is always a possibility just as it has been in the case of that particular firm, which, after all, did not start so very long ago.

My noble friend Lord Mottistone said that the strength of the small firm lies in its independence; that it is not seeking for a subsidy and that it wants to be left alone. He asked what consultation there had been about the membership of the Consultative Committee on Company Law Review and on the Economic and Social Committee of the E.E.C. One of the difficulties about the small firms at the present time is that they are not wholly cohesive. But there are the two organisations: first of all, the Smaller Businesses Association, and secondly, the Smaller Firms Council of the C.B.I. It must not be thought, because there has not been anybody with special knowledge of the small firms nominated to either of those two bodies, that their interests were not taken into account at the time when the appointments were made. This certainly was done. The noble Lord says that the Government should think of the small firms. I can assure him that the Government are thinking of them at the present time and did think of them on those particular occasions.

I am grateful for the contributions of the noble Lord, Lord Jacques, in pointing out two of the difficulties of the small firms. I hope that I have dealt adequately with them, but if there is anything further, in the circumstances, perhaps I should say, of the impending Budget, I shall be glad to discuss the matter with him.

In conclusion may I say this. The Government have confidence in the ability of the small firm to survive and prosper, and, given their vigour and sturdy independence, each to work out its own salvation. We have already implemented most of the Bolton recommendations for the removal of disabilities. We are firmly committed to paying more regard to their special problems in the future than has been paid in the past. Our work is not finished, I can assure your Lordships, when we have given effect to all the recommendations in the Bolton Committee's Report we feel we can and should implement. We have not confined our attention to the interests of small firms to Bolton recommendations; for example, the Small Firms Division has worked with Her Majesty's Customs on V.A.T.; it has played its part in the planning and implementing of control of prices and incomes, and of the application of selective assistance under the Industry Act; and it is making its contribution on E.E.C. proposals which may affect small firms. In a word, we are not committed to maintaining the small firms sector at any particular level, but we are determined that no future inquiry will be able to accuse this Government of neglecting them. Small firms now have a voice to speak for them within Government, and it is a voice which is speaking; it is a Division in the D.T.I.; it is an officer in each of 13 other Departments to watch over their needs, and a network of offices all over the country to help them to look after themselves and to make their proper contribution to the economic and social life of the nation.

4.57 p.m.

LORD STRATHCONA AND MOUNT ROYAL

My Lords, this debate has been shorter than our allocated ration of time, and I do not wish to detain your Lordships much longer. I should like, first, to join with Lord Mottistone and Lord Drumalbyn in paying tribute to the work of John Bolton and his Committee, and to thank the Minister for his recognition of the importance of this sector. In a sense, I found his remarks perhaps a little too reassuring. I believe I should have been happier had he been slightly more alarmist over what we have been talking about. I am not totally convinced that we have nothing to fear from accession to the E.E.C., because I still worry about the threat of the cascade of paper in the small companies. However, we must welcome the rather belated recognition by the Government that not only does it cost the Government money to send out forms but it actually costs the companies money as well. If the debate has done nothing else than establish that. I welcome it.

I hope the noble Lord, Lord Auckland, was satisfied with the assurances given about advance factories and assistance to companies who have to move. I also welcome the remarks made about small firms centres, which were in line, I think, with the comments made by Lord Mottistone, that they will have to feel their way. I take heart that we shall receive a sympathetic hearing of any complaints made by small firms about unjust coercion by their bigger customers. We of course accept the Minister's statement that small firms still have a degree of suspicion of Government and perhaps wish to keep their distance. We hope that the small firms centres will gradually bridge this distance more effectively in the future.

I should, incidentally, have mentioned with particular gratitude the contribution of the noble Lord, Lord Jacques, and the answer that the Minister gave him, which I think perhaps went some way to removing the difference which Lord Jacques saw between the impact of taxation on the small company and its impact on the large one. This depends entirely upon the rate at which corporation tax for small companies is fixed by the Chancellor. That leaves me only to say that I willingly give two cheers to the Minister and to the Minister for small firms, and I hope that on a future occasion we may have the opportunity to give them three cheers. My Lords, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.