HL Deb 20 July 1990 vol 521 cc1117-8

11.20 a.m.

Baroness Ewart-Biggs asked Her Majesty's Government:

Whether the level of company failures is in line with their industrial policy.

The Minister of State, Department of Trade and Industry (Lord Trefgarne)

My Lords, the Government's policy is to promote a business climate in which the private sector is free to prosper by its own efforts. That policy is working. In a dynamic economy there will always be firms going out of business. What matters is the net position. The latest figures for VAT registrations, the best available measure of net change in the number of businesses, show continued strong net increases in registrations.

Baroness Ewart-Biggs

My Lords, I am pleased to hear the optimistic note in the Minister's Answer. Perhaps I might point to some other figures which show rather a different picture. Is the Minister aware that figures released recently show that 11,600 firms went into liquidation or were declared bankrupt in the first half of 1990, and that that is a 30 per cent. increase on the same period last year and the highest figure for 10 years? Is the Minister further aware that one of the reasons for that rise is the Government policy on the uniform business rate? Are the Government contemplating a U-turn on the setting of the UBR as they have with the poll tax?

Lord Trefgarne

My Lords, no, we are not contemplating any U-turns; the noble Baroness may be assured of that. The reasons why businesses go out of business are many and varied. Some of them relate to the standard of management. Companies sometimes cease to trade for respectable reasons; for example, in connection with amalgamations and such matters.

Lord Carr of Hadley

My Lords, will my noble friend confirm that in many areas of this country where there are bodies such as local enterprise agencies, a movement to which the Government have given a great deal of support, the rate of failure of new small businesses has been about halved in recent years?

Lord Trefgarne

My Lords, my noble friend is right. The position is far from consistent across the country. As he rightly pointed out, in some areas the rate of failure is much less than it is in others. What matters, as I said earlier, is the net position, and the fact is that substantially more businesses are opening these days than are closing down.

Lord Williams of Elvel

My Lords, it was interesting to hear the Government statement of their industrial policy, because until now I did not gather that they had one. Will the Minister confirm, however, that that industrial policy which he has just set out is wholly at variance with the Government's counter-inflation policy? A counter-inflation policy, after all, demands, according to them, high interest rates. Is it not those high interest rates which are driving small companies into bankruptcy?

Lord Trefgarne

My Lords, nothing is worse for small businesses than high inflation. It is our policy to reduce inflation through the measures that we have taken, and that will be of great benefit to all industries, small and large alike.

Viscount St. Davids

My Lords, is the Minister aware that Japan is the business failure capital of the world at the moment, closely followed by the United States and West Germany and then us, and that at the other end of the scale come North Korea and Albania? Is it clear in which direction we should be going?

Lord Trefgarne

My Lords, the noble Viscount draws your Lordships' attention to some interesting statistics upon which I should like to reflect, if I may.