Business Start-Ups (Hansard, 6 February 1989)

§ The Parliamentary Under-Secretary of State, Department of Social Security (Lord Skelmersdale)
My Lords, in 1987, the latest year for which the most useful figures are available, the estimated number of new registrations for value-added tax was 205,000. The net increase in that year was 45,000, or nearly 900 a week on average. The indications are that the rate of increase during 1988 has been faster, perhaps as much as 1,200 per week.

The Viscount of Oxfuird
My Lords, I thank my noble friend for that Answer which is most encouraging. Does he not agree that the role of small businesses in creating jobs is most important and that, perhaps due to their dynamic or what other people may consider unstable position, they tend to need more support in terms of a reduction in bureaucratic imposition? Can my noble friend tell the House what the Government intend to do to reduce bureaucracy for smaller companies?

§ Lord Skelmersdale
My Lords, I am grateful to my noble friend. An important part of our approach to helping businesses has been to make it simpler for them to deal with regulations where they need to be retained. We have reduced the number of starter trial surveys and, more recently, started the one stop shops where small businessmen who by definition wear a large number of hats can make contact with all the major departments with which they need to deal.

§ Lord Stoddart of Swindon
My Lords, is not the best way to help small businesses a substantial and immediate reduction in interest rates?

§ Lord Skelmersdale
My Lords, what is important to small businesses is a stable exchange rate. Often one can only achieve that by temporary hikes in interest rates. Inflation is the key. This is one of the means by which inflation is controlled.

§ Lord Taylor of Blackburn
My Lords, when the Minister makes a statement of that nature is he referring to businesses that have been registered at Companies House or is he bringing in other figures about which we know nothing at all? Further, is the Minister aware that the exchange rate makes very little difference to small businesses and that it is more important to bring down the bank interest rate?

§ Lord Skelmersdale
My Lords, the registrations to which I referred come from Customs and Excise which administers VAT applications and returns. The Government's priority is to ensure that inflation remains under control. I agree that high interest rates can be unhelpful to businesses, but far more damage would be incurred if inflation were to return to past high levels.

§ Lord Nugent of Guildford
My Lords, is my noble friend aware that although high interest rates deter businesses of any size the reduction in the basic rate of income tax and the rate of corporation tax undertaken by this Government are far more important and have given a tremendous boost to the starting up of small businesses?

§ Lord Skelmersdale
My Lords, I am grateful to my noble friend whose supplementary question conveyed what I intended to say. I perhaps addressed the point rather badly. My noble friend is absolutely right.

Viscount St. Davids
My Lords, in further support of the Question put by the noble Viscount, would not a great deal of help be given if it were possible to expand the funds which are available for research more in the direction of products which are possibly immediately saleable, even if that meant a slight reduction in funds for rather more indirect research?

§ Lord Skelmersdale
My Lords, yes, I am well aware of the continued interest of noble Lords in the subject of research and in government funding for it. There are schemes encompassing research for which grants are available. This depends, of course, on the specific item of research in question.

§ Baroness Turner of Camden
My Lords, will the Minister be good enough to tell the House to what extent the new business loan guarantee scheme has had an effect on new start-ups? Will he also tell the House what the effect has been on employment and exactly where new employment has been created as a result of new start-ups?

§ Lord Skelmersdale
My Lords, I regret that I cannot give the noble Baroness the figures under the 1311 loan guarantee scheme. I can say that as part of the inner cities initiative the guarantee was increased in June from 70 per cent. to 85 per cent. in the 16 inner city task force areas.

§ Lord Mason of Barnsley
My Lords, as distinct from new start-ups, can the Minister inform the House what have been the bankruptcies in the two periods mentioned?

§ Lord Skelmersdale
No, my Lords, not as such. It may help the noble Lord if I tell him that under the enterprise allowance scheme, of those who complete 12 months of that scheme 74 per cent. are still trading 18 months after start-up and 65 per cent. are still trading three years after start-up. I understand that those results are broadly the same as for any other small businesses.

§ Lord Fraser of Kilmorack
My Lords, does my noble friend not agree that while the increase in startups in small businesses is most encouraging, there is a need for small businesses to export more? Does the Minister not further agree that if necessary the Government should encourage them to do so? It would be a great help to the balance of trade if this were so.

§ Lord Skelmersdale
My Lords, my noble friend is quite right. That is why last year the Government introduced improvements to the export guarantee scheme which is of great use to all exporting businesses.

§ Baroness Seear
My Lords, since the noble Lord has agreed that it is a good idea that small businesses should export, will he not think again about his reply that high interest rates improve the exchange rate and are therefore beneficial? Surely, a high exchange rate is not beneficial to people who are trying to export?

§ Lord Skelmersdale
My Lords, no. I thought my answer out fairly carefully. I believe that a stable exchange rate is what is needed in the export field.

§ Baroness Seear
My Lords, the noble Lord must agree that raising the level of interest rates does not lead to a stable exchange rate; it increases the value of the pound.

§ Lord Skelmersdale
My Lords, as noble Lords will know far better than I there is a complicated interrelationship between the rate of inflation, the exchange rate and the methods used to keep the one stable and the other down. At the moment one of the methods used is high interest rates.