Small Firms (Hansard, 8 March 1973)

§ Mr. Anthony Grant

In the following list, which brings up to date the list published on 15th May 1972, those which have been wholly or partly accepted are marked (A). We have stated our position on those without markings.

Organisation in Government (A)—1. A Small Firms Division should be created within the Department of Trade and Industry, responsible for the development, inter-departmental co-ordination and implementation of policy towards small firms and for the administration of such official services as are provided for them. (A)—2. A Minister of the Department of Trade and Industry should be expressly designated as the Minister responsible for small firms and oversee the work of the division. (A)—3. So far as is possible the separate identity of the Small Firms Division should be stressed and publicised. (A)—4. All other Departments with trade or industry sponsorship functions should designate an official with specific responsibility for liaison with the Small Firms Division of the Department of Trade and Industry, and for his Department's policy towards small firms. (A)—5. The Small Firms Division should endeavour, in co-operation with sponsoring Departments, to form a view of the present and future role of small firms in all industries in which they are important and should collect the statistical and other information needed to enable it to do so. 205W (A)—6. Immediate attention should be given by the Department of Trade and Industry to the study of the impact of entry into the EEC on small firms, and this question should be an urgent priority of the Small Firms Division. 7. Major purchasing Departments should have regard to the effects of their buying policies on the structure of industry in general and particularly on the small firm sector, in addition to their overall concern with achieving value for money. 8. The Small Firms Division should give early attention to the effect of official procurement policies on small firms, and promote policies designed to maximise competitive participation by small firms in suitable Government contracts.

Management Skills and Advisory Services (A)—9. Among the management advisory services we have considered we recognise none which meets our criteria for continuing subsidy. There is, however, a need for a pure "signposting" or referral service which could not, we believe, be made to pay for itself, and this the Government should provide. This could best be done by setting up a network of small firms advisory bureaux in important industrial centres. (A)—10. The functions of the small firms advisory bureaux should be to provide information in response to queries, and assistance on technical, financial and management problems by providing introductions to the appropriate sources of professional, commercial or official advice. These services should be available to firms in all industries. (a)—11. The advisory bureaux should report directly to the Small Firms Division of the Department of Trade and Industry—whose creation we recommend in chapter 9—and provide a source of first-hand information about the progress and problems of the small firm sector. (A)—12. Since small firms are most in need of a service of this kind, and since most of the approaches to the advisory bureaux will be made by them, it is desirable that the bureaux should be widely publicised as small firms advisory bureaux. However it is not necessary that their activities should be strictly confined to small firms as defined in this report.

Taxation (A)—13. We hope that when the rate for the new-style corporation tax is finally determined, account will be taken of the fact that the 50 per cent. rate suggested in the Green Paper would involve an additional burden on the small company, which because of its dependence on self-financing makes a lower average distribution than the larger company. (A)—14. Shortfall assessment on the trading income of close companies should be abolished and no parallel provisions should be included in the forthcoming revision of corporation tax. (A)—15. Section 20 of the Finance Act 1969, which disallowed interest on loans for the purchase of interest in close companies as a 206W deduction from income for tax purposes, should be repealed. (A)—16. The extra-statutory concession for loans made by close companies to pay estate duty should be continued and made as widely known as possible.

Industrial Training Levy (A)—17. We believe that the machinery set up under the Industrial Training Act is fundamentally inappropriate to the needs of most small firms and we therefore recommend that they should be exempted from the levy/grant system. Each training board, in consultation with the industry and the Department of Employment, should formulate an appropriate definition of the small firm in its industry and should establish an exemption limit designed to exempt them all from levy. Firms below these limits should be permitted to "opt in" to the levy/grant system if they wish. Training boards should consider the possibility of providing training services for small firms on a fee-paying basis.

Statistical Surveys (A)—18. The effect on small firms of all statistical surveys should be carefully considered and every effort made to extend the present practices of sampling and of exemption of smaller firms wherever possible. (A)—19. The Survey Control Unit of the CSO should be given power to amend or veto all statistical surveys not meeting with its approval on grounds of expense, necessity, coverage or design. (A)—20. This power should extend to all Departments of Government and to those quasi-Government bodies which commonly issue statistical inquiries. (A)—21. The use of statutory powers for the collection of statistics should be strictly controlled and in all cases explicitly justified. (A)—22. It should be clearly stated on every statistical inquiry whether or not its completion is obligatory. 23. The development of the Central Register of Businesses is strongly commended, and it is hoped that resources adequate to ensure rapid progress will be devoted to it. 24. In this context the CSO should consider the question of the preparation and publication of an enterprise census which would provide comprehensive coverage of all firms as soon as possible as part of its plans for the development of business statistics. (A)—25. The true cost of any statistical exercise, and not merely the often comparatively small proportion of cost falling on Government Estimates, should be fully taken into account before starting an inquiry, and methods chosen which involve the least total cost rather than least Government expenditure. (A)—26. Any proposal for a new or revised statistical exercise should include an estimate in man-hours of the time required by respondents to complete the form. (A)—27. All Departments should review all existing and proposed forms with an eye to their cost to industry—this review to extend 207W to a reconsideration of the policies and administrative procedures giving rise to the need for these forms. Departments should also accumulate the total costs to industry of the forms for which they are responsible and review them annually. 28. The Director of Statistics of every Department or agency should be charged with more specific responsibility for all administrative forms issued by his Department, and should be represented in all departmental deliberations about any policy or procedure with form-filling implications. (A)—29. Administrative forms should be designed wherever possible to serve statistical purposes, especially where this will permit the suppression or simplification of a statistical form. 30. All statutory barriers to the passage of statistics between different Departments should be stringently examined and demolished wherever possible. We regard this as of particular importance in the case of statistics collected by the Inland Revenue. 31. The Government should quickly establish within a central Department a powerful secretariat whose function would be to plan, in collaboration with the CSO, an integrated system of administrative and statistical returns based on a data bank to form the basis for a single and comprehensive system of business records.

Monopolies and Restrictive Trade Practices Legislation 32. In making future references to the Monopolies Commission greater emphasis should be placed on the effect of the monopoly or merger in question on the maintenance of a balanced industrial structure. 33. The whole subject of competition policy as it affects small firms clearly requires further study, and we recommend that this should be pursued by the Small Firms Division which we wish to see established within the Department of Trade and Industry. In the meantime, that is, until such studies are made, we can only recommend that a broad view should be taken by the registrar and the DTI whenever an agreement involving small firms is under consideration. 34. We feel that the view taken of agreements involving small firms should extend to the long term, and to the likely effects of the agreements under consideration in preserving in being the smaller firms which our industrial structure requires if it is to function efficiently.

The Disclosure Provisions of the Companies Act (A)—35. We recommend the exemption of private limited companies with annual turnover below £500,000 from the requirement to disclose the individual emoluments of directors, though firms should continue to show the total amount in the profit and loss account. (A)—36. We recommend that private companies be exempted from the requirement to disclose turnover when this is below £500,000 per annum.

208W

Development and Planning Controls (A)—37. Small firms throughout the country should be relieved of the need to apply for an IDC when their plans involve the creation of less than 10,000 square feet of industrial floor space, in accordance with the Hunt Committee's proposals. (A)—38. If it is considered that this should not be extended to all undertakings, the 10,000 square feet exemption limit should be extended to established small firms. 39. Local authorities should be prepared to use their powers under the Town and Country Planning (Development Plans) Direction 1965 to allow the establishment of small businesses in residential areas when this will not detract from these areas' amentities. 40. The present legal obligation of local authorities to provide suitable alternative accommodation to displaced firms should be strengthened, and the Department of the Environment and the Scottish and Welsh Offices should do more to encourage unhelpful local authorities to cater for the needs of small firms as effectively as other more enlightened authorities. (A)—41. The Landlord and Tenant Act 1954 should be changed so as to require local authorities to pay compensation for compulsory purchase which includes the value of the likelihood of a tenancy being renewed.