Parliament debates small business

Small businesses were the subject of several hours of Parliamentary debate recently when Conservative DTI spokesman, Tim Yeo, MP for South Suffolk, and his front bench colleagues chose the subject for an Opposition Day debate.

Opposition Day

The motion "That this House deplores the impact of Government policy on small and medium-sized enterprises; condemns the Government for increasing the burden of regulation, taxation and bureaucracy, for blurring the economic and social agenda and for wasting money on Government branding and quangoes; and calls for fair treatment for small businesses to allow British enterprise to create jobs and wealth for the benefit of the whole community was ultimately defeated.

However, the purpose of these debates is not to secure a vote victory, but to raise a particular issue on the floor of the House and secure the attendance and response of the Minister with responsibility for the subject. In this case, both Secretary of State at the DTI, Patricia Hewitt, and Minister for Small Business, Nigel Griffiths attended and responded to the two hour debate.

Opposition Day Debates are Parliamentary procedures which allow members of the Opposition to choose a subject of interest. There is much competition from interested parties and among members of the Opposition to raise their subjects.

Tim Yeo pointed out this was the first time small businesses had been the subject of debate since the Secretary of State took office, although he claimed that they had been promised an annual debate on the subject. In the absence of a Government-led debate, the Opposition set aside half of its allotted time to debate the subject.

Opening the debate

Mr Yeo opened the proceedings by admonishing the Government for their perceived lack of interest in the subject. He said: "The Government's reluctance to discuss small business is in marked contrast to their enthusiasm for debating hunting. As there has not been a whisper of protest about that extraordinarily distorted set of priorities from the Secretary of State, people involved in small business must conclude that she agrees with her colleagues in the Government that considering the needs of small business is less urgent than pursuing the vendetta against field sports.

"The Government's unwillingness to debate the needs of small business is perhaps not surprising, given that many of the difficulties faced by small business today are directly or indirectly the result of the Government's actions and inactions."

The two and a half hour debate covered issues which affect small businesses including burdensome regulation; insurance; European-led legislation; national insurance contributions; employment tribunals; tax credits; access to finance; business rates; climate change levy; Red Tape; poor transport; broadband access for rural areas; R&D; education; child care; women; people with disabilities; the Small Business Services; pharmacies; and VAT issues.

Fair detail for small business

Mr Yeo said: "In the next few months, I shall set out in more detail what the Conservative fair deal for small business will include. This afternoon, in an attempt to promote constructive debate about these important issues, I invite the Secretary of State to agree that a fair deal for small business must start with the recognition of four fundamental principles.

Mr Yeo listed the four principles as:

• recognition that the most important thing a Government can do for any businesses is to create a stable macro-economic climate;
  
• recognition that the effectiveness of Government intervention is extremely limited;
  
• recognition that business is much more heavily taxed than when Labour came to power and no further increase in the tax burden on business should take place. Mr Yeo suggested that if the Secretary of State wanted to champion small business, she should make a commitment during this debate to fight publicly against any proposal by the Chancellor to raise tax on business and she should make it clear that if tax on business is raised again while she is Secretary of State, she will resign her office;
  
• recognise that the regulatory burden on small businesses cannot be increased any further.

Government amendment

The Secretary of State for Trade and Industry, Patricia Hewitt, began her response by tabling an amendment to the motion. Her amendment removed the text after the word 'House' and suggested a replacement, so the Government amendment read:

"That this House agrees that small and medium-sized businesses are crucial to the prosperity of the nation and will be responsible for many of the new jobs and much of the future innovation in the economy; welcomes the steps that the Government has taken to make it easier than ever before for people to start their own business; acknowledges that the Government has created the economic conditions of macro-economic stability and low and stable interest rates in which small business can grow and prosper; believes that the Government has created a pro-enterprise tax environment; and applauds the Government for improving access to finance for small and medium-sized businesses, removing unnecessary regulations and providing world class business support."

She began by illustrating some of the Government-led initiatives with case studies of small business success stories from around the country, particularly in the Leicester area where her own constituency is located.

In summing up after her examples, Ms Hewitt said: "Those are examples of outstanding entrepreneurs and businesses throughout our country. For me, they are the real heroes and heroines of our economy - entrepreneurs who work incredibly hard, invest their savings and often put their homes at risk in order to build up a team of people, create a great product and grow a business.

"I sometimes think that if somebody goes into a shop, buys a scratchcard and wins £1 million there is more public celebration of their success than if they grow a business from scratch through sheer hard work and determination.

"I hope that all Members on both sides of the House agree that we should celebrate our entrepreneurs, who do not get great rewards for great failure. If their business fails, they lose their savings and their livelihoods. I want to pay tribute to those millions of small businesses and the owner-managers who run them, who provide more than 12 million jobs, create more than half our national output and now generate nine out of 10 of all new business ideas. They have always been the bedrock of our economy. A century or so ago, we were called a nation of shopkeepers.

"Today, as the world becomes even more competitive and technology changes faster than ever before, small firms matter even more than they used to. Small businesses are much faster on their feet, much more likely to innovate and much closer to their customers, and they matter all the more in this competitive global economy.

"It is forecast that by the end of the decade the 3.7 million smaller businesses in our country today will have increased to more than 4.5 million. There will be nearly 1 million more of them, with 2 million new jobs between them. We celebrate our entrepreneurs, and no lectures are necessary from the Conservatives for us to understand that it is the Government's responsibility to help them to succeed.

Ms Hewitt also claimed that first and foremost the Government must deliver economic stability to our businesses and that is precisely what we have delivered.

Secondly, the Government has a responsibility to ensure that small firms can get access to the funding they need.

The third responsibility, according to Ms Hewitt is to ensure that we get the tax environment right. She said that the UK already has the lowest small firms tax rate in Europe and that this year's Budget contained a raft of further measures to help small firms.

At this point, David Burnside, Ulster Unionist MP for South Antrim asked if the Secretary of State would give a commitment on behalf of the Government to the House that there will be no increase in taxation through another hike in the national insurance surcharge.

Ms Hewitt replied: "We have made it absolutely clear that the one per cent increase in national insurance contributions that we have asked people to pay is needed to deliver the record levels of increased funding for the national health service. I draw the hon. Gentleman's attention to the fact that, compared with the costs either of private medical insurance in the United States or social insurance in France, the one per cent for the NHS that we have asked businesses, employees and the self-employed to pay is very small indeed. For a good health service, it is a bargain."

Ms Hewitt pointed to corporation tax as one of the successes of the Government, the Opposition has earlier claimed it wasn't one of the key issues affecting small businesses. She said: "On corporation tax, I should point out that the company law review that we instigated and published last year is based on the whole philosophy of think small first. As we institute a complete re-writing of our company law framework, we will make it far easier for small businesses to become incorporated and to take advantage of the tax benefits that we have already extended to those smaller companies.

She claimed that the fourth responsibility for the Government is to ensure that business gets the practical support that it needs and cited the work of British Trade International, the SMART awards and Business Links.

The fifth responsibility, according to the Secretary of State, is to ensure that the regulatory framework is right and that markets are open and competitive - she illustrated this point by promoting the Enterprise Act and making no apologies for the national minimum wage.

Ms Hewitt concluded her remarks by saying: "Much has been done, but much is still left to do. However, we must not understate the achievements of this Government. Above all, we must not run down our great British business. I am proud of the 2.5 million new businesses that have started in Britain since 1997. I am proud of the 107,000 new businesses that started in the first quarter of this year - up 12 per cent on the same period last year, despite the economic downturn. I am proud of the fact that we have the best survival rates, economic environment and regulatory framework for small businesses.

"We in this House should be proud of our small businesses. We should celebrate the work being done by the Government and the public sector in partnership with the private sector to support those entrepreneurs."

Regulation

MPs from all parties then had an opportunity to make their own case. Archie Norman, Conservative MP for Tunbridge Wells, and former ASDA boss, made two specific points - burdensome regulation and public-procurement.

He said: "Regulation is a chronic problem, due to the nature of Government in this country - the fact that we have a Government who systemically add to the regulatory burden, because of the nature of our political system. Few Ministers get promoted for other than adding to the statute book. It is not glamorous to withdraw legislation or introduce light-touch legislation. It is glamorous to appease some lobby group and bring in new regulations. Also, we have the additional burden of European regulation, which is introduced and enforced, often against the wishes of Governments and parties of any complexion, in a form that lacks proper regulatory scrutiny in the House.

"Regulation is a chronic problem that requires systemic solutions, and unless we address ourselves to that, nothing much will happen. Under all Governments over the past 10 years, we have spoken of deregulation, better regulation taskforces and the deregulation taskforce, on which I served, but all those measures are like standing in the way of an avalanche armed with a toothpick.

"It is no good trying to find a bit of regulation that one can liberalise or remove from the statute book. That will not help, because the volume of incremental regulation far outweighs anything that can be removed, and what is removed tends to be innocuous detail, whereas what is imposed is substantive and cost-additive.

"The one thing that we know about 2002 is that there has been a significant acceleration in the mortality rate of small businesses, as some 16,000 went out of business - the highest level since 1994. That is partly due to the general economy, but it is also due to the impact of regulation."

To demonstrate the effect on the UK's competitiveness, Mr Norman used the example of call centres world wide, claiming that the UK has the most expensive call centres in the world - three times higher than India and also more costly than the US and Canada.

Public procurement

Without specifically addressing freelancers, Mr Norman raised another issue which is central to their concerns, that of public procurement. He said: "We also know that the fastest growing part of the economy today is the public sector and public sector expenditure. What does the Minister think is the impact of public sector investment on the small business community? Public sector procurement is very small business-unfriendly. The amount of red tape, including all the ISO 9000s and other qualifications that businesses have to complete to supply to the public sector, is a major deterrent. Typically, the public sector is very risk-averse in its procurement. As a result, it tends to reinforce the competitive power of big business, not small business. The DTI could do a great deal to improve that situation.

Vote

The two and a half hour debate concluded with Henry Bellingham (MP for North-West Norfolk) winding up for the Opposition and Nigel Griffiths, Minister for Small Businesses concluding for the Government. Votes were held on the original motion (Tim Yeo's) and the Government's alternative (Patricia Hewitt's).

Tim Yeo's was defeated by 343 votes to 190.

The Government's amendment to the Opposition's Motion was carried by 323 votes to 185.

As a result, the outcome was that:

That this House agrees that small and medium-sized businesses are crucial to the prosperity of the nation and will be responsible for many of the new jobs and much of the future innovation in the economy; welcomes the steps that the Government has taken to make it easier than ever before for people to start their own business; acknowledges that the Government has created the economic conditions of macro-economic stability and low and stable interest rates in which small business can grow and prosper; believes that the Government has created a pro-enterprise tax environment; and applauds the Government for improving access to finance for small and medium-sized businesses, removing unnecessary regulations and providing world class business support.