Small Businesses: Condition (Hansard, 14 February 1992)

§ The Parliamentary Under-Secretary of State, Department of Employment (Viscount Ullswater)
My Lords, redundancies and economic hardship in businesses of any size are to be regretted. Training and enterprise councils (TECs) and local enterprise companies (LECs) in Scotland, working in partnership with other relevant agencies, continue to reinforce the progress that the Government have made in supporting and developing small firms. The level of business start-ups remains buoyant. Insolvencies still represent only 2 per cent. of all businesses. All the essential ingredients for recovery are now in place: low inflation and lower interest rates. The Government are proud to have one of the most favourable tax regimes for small firms in Europe.

§ Lord Molloy
My Lords, I am grateful to the noble Viscount for the research that went into that reply. However, it is a pity that he left out some vital features; for example, the fact that the chairman of CBI Small Companies has said that the past four months have been really dreadful, that the CBI itself says that there is no hope for recovery and that some of our primary economists, especially the Oxford economists, say that at this rate, and with the Government's policy, we shall have almost 3 million unemployed by 1993.
Why do the Government not take notice of such factors? We do not wish to keep harping on such matters, but we shall continue to do so because we have to; indeed, this sort of Question is a very suitable instrument. Perhaps the Government will start listening to what we have to say. If we did not wish to see recovery in the country, then both sides of the House would be totally irresponsible. I do not believe that that is the case. I believe that we must listen to one another's argument.

§ Viscount Ullswater
My Lords, it is important to show the dynamism in the economy. I believe that there is a great deal of it. Since 1979, there have been over 2 million new registrations for VAT. In 1991, the National Westminster Bank estimates that there was a total of 460,000 new business starts; that is only slightly fewer than the half million in 1990. Moreover, throughout 1991, around 1,000 new starts have taken 928 place each week under the enterprise allowance. That shows that people are not afraid of starting up in business.

§ Lord Boyd-Carpenter
My Lords, the encouraging point about what my noble friend has just said is the fact that a very large number of people seem to judge the situation appropriate for starting a small or, indeed, a large business. Will my noble friend continue to give them such encouragement?

§ Viscount Ullswater
Yes, my Lords. My noble friend makes an important point. I believe that it is also important to note that the number of self-employed has risen by over 70 per cent. since 1979. That is a great encouragement.

§ Lord Judd
My Lords, does the Minister not realise that there is growing exasperation with the Government's complacent attitude? The state of small businesses and their prospects depend upon the general condition of the economy. What are the Government going to do about a situation in which investment in manufacturing industry dropped by 15 per cent. in 1991? That is the largest drop for 10 years. Is that not grave news for the whole economy of the nation?

§ Viscount Ullswater
My Lords, if there is a fall from an all-time record, one is bound to show a drop. It is important to get the economic situation right. Bearing down on inflation, and the use of interest rates to do so, has proved to be successful.

§ Lord Hooson
My Lords, is it not be possible for the Government to stimulate the domestic economy? I have in mind small businesses such as building firms. Can they not be stimulated by releasing the funds that are available to local government for the purpose of more housebuilding? That would stimulate the domestic economy. With the so-called world recession, there is no chance of an export-led recovery from the recession. Therefore, the domestic economy must be encouraged.

§ Viscount Ullswater
My Lords, I believe that the situation as regards such receipts is being carefully looked into. However, I am sure the noble Lord realises that councils have amassed a considerable amount of debt which also has to be paid by the taxpayer and the charge payer.

§ Lord Renton
My Lords, is it not clear from the answer that my noble friend has already given that there are thousands—perhaps tens of thousands—more small businesses in operation and solvent now compared with 1979? Does my noble friend have any figure which indicates the present number of such businesses compared with the situation in 1979?

§ Viscount Ullswater
My Lords, I do not think that I have the number at my fingertips. However, I shall endeavour to find out the information and write to my noble friend. The most important thing to which he referred is that the impression is always given that every small business is in debt. It is right to say that at least half of them are in credit at the bank.

§ Baroness Phillips
My Lords, if everything is going so well—I must confess that I thought the Minister was speaking about another part of the world—why are there shops closed in Oxford Street, Regent Street and the New Kings Road? That is something that I have never seen in my lifetime. Why are they closed? Are those businesses doing so well that they are able to close their shops?

§ Viscount Ullswater
My Lords, I do not think, from this Dispatch Box, that I can give reasons for shop closures in any particular area. However, there is no doubting the fact that businesses are doing well in all sorts of areas, although there are temporary problems with the recession.

§ Baroness Turner of Camden
My Lords, is the Minister—

§ The Earl of Lauderdale
My Lords,—

Noble Lords
Front Bench!

§ The Lord Privy Seal (Lord Waddington)
My Lords, I believe that the convention of the House requires that my noble friend should have the opportunity to speak next.

§ The Earl of Lauderdale
My Lords, when writing to my noble friend Lord Renton, will my noble friend the Minister take steps to make his reply more widely available so that we may all know these happy figures?

§ Viscount Ullswater
My Lords, I have now found the figure for which I was searching. Since 1979 there have been over 2 million new registrations for VAT. That indicates the size of the increase in the number of small businesses.

§ Baroness Turner of Camden
My Lords, is the Minister aware that during the 1980s a very large number of people invested redundancy payments in starting up small businesses because they were tempted into the enterprise culture? A large number of those businesses have failed. Can something not be done to assist people in that situation? For example, can the banks not assist through schemes like the small business loan guarantee scheme? Those people are in a worse situation now than they would have been if they had never attempted to start small businesses.

§ Viscount Ullswater
Yes, my Lords. The noble Baroness mentioned the banks. The banks are taking a very responsible attitude towards assisting small businesses. Only today I saw an advertisement in the Daily Telegraph for a small business guide which is available, free of charge, from Barclays Bank. The guide explains the ins and outs of profit and loss accounts, cash flow forecasts and business plans. Not only the Government, but the banks also are assisting enormously with small businesses.

§ Lord Molloy
My Lords, does the Minister agree that the Government should consider the appalling social effects of what we have been talking about on ordinary people? We realise that repossessions are now increasing simply because the breadwinner is out of work. We acknowledge that the increase in National Health Service prescription charges is going 930 to hit the family when the breadwinner is out of work. Those are some of the effects of the disastrous policy this Government are following. It is about time they considered the ordinary people of this country.

§ Viscount Ullswater
My Lords, I do not believe that the Government are being quiet on that. We have paid over £600 million in 1991 for mortgage interest through income support. Three hundred and ten thousand mortgages were helped in that way. The increase in repossessions is now slowing down significantly. All the measures taken together, including the measures taken by the building societies, will save some 40,000 repossessions this year.

§ Lord St. John of Fawsley
My Lords, is the Minister aware that among the small businesses that have disappeared is Jarrolds of Knightsbridge, in the Brompton Arcade? It has disappeared with a great number of photographs which I left there to be framed, and other people's pictures—wedding photographs, and so on. What can be done to get those photographs back? What is my noble friend prepared to do about it?

§ Viscount Ullswater
My Lords, I deeply regret the obvious sadness that my noble friend has experienced in that disappearance. I shall take steps to see what I can do.

§ Lord Mackie of Benshie
My Lords, I appreciate what the enterprise groups are doing in Scotland and England. Is the Minister aware that their efforts are being totally frustrated by the general state of the economy? Following the point made my noble friend Lord Hooson that a stimulation is needed, does he agree that small businesses do not need a penny off income tax or anything like that. What they need is the ability to pay income tax—in other words, to make a profit. A stimulation in the economy is the only way that they will get out of the mess.

§ Viscount Ullswater
My Lords, conquering inflation remains the Government's priority. High inflation is far more damaging to the profits of small firms than high interest rates. The stimulation will return within the next months and small businesses will be greatly assisted by that.

§ Lord Mowbray and Stourton
My Lords, if affairs in this country are as bad as noble Lords opposite would have us believe, why are the Japanese able to invest here? They are finding the climate good for investment. For example, their Nissan company is not only manufacturing new cars over here, but selling them at a profit. Can the Government also confirm that Nissan is producing more cars per man hour than other car manufacturers in this country?

§ Viscount Ullswater
Yes, my Lords. The investment demonstrates the ability of the workforce in this country to produce a good product. The United Kingdom remains a favourite location for inward investment. More than half of the inward investment into the European Community was received during 1990. I now understand that it is the favourite location for German investment as well.