Self-Employment

Lord Harrington of Watford Excerpts

Tuesday 24th January 2012 Westminster Hall

[Richard Harrington (Watford) (Con)]

It is a pleasure to serve under your chairmanship, Mrs Riordan, and I am pleased to see so many hon. Members present, particularly the Minister for Further Education, Skills and Lifelong Learning and the shadow Minister, the hon. Member for Chesterfield (Toby Perkins).

This debate came about as a result of a conversation between me and my hon. Friend the Member for Wyre Forest (Mark Garnier), who is sitting next to me, about people in this country setting up their own businesses. We reached the conclusion that not enough people do so. Everybody knows the benefits of people setting up their own businesses, but there is a certain culture against self-employment and business in this country, notwithstanding everything that this and the previous Government have tried to do. Politicians brand the terms “entrepreneur,” “small and medium-sized enterprises” and similar without really understanding what they are about. My hon. Friend and I have, therefore, decided to focus the debate on how Governments can change attitudes.

Like so many people of my generation, I was the first member of my family ever to go to university. Few people at that time had the idea of setting up their own business, and I do not think that much has changed. I have two sons, one in his late teens and the other in his early 20s, and from what I have observed of my family life, as well as that of my sons’ friends and during my constituency duty of visiting schools—some very good, others not so good—and further education colleges, there is very little idea, culture or yearning among people, from the most academically gifted to the least so, to set up their own business. However, I commend people such as my hon. Friend the Member for Newton Abbot (Anne Marie Morris), whom I am pleased to see and who is co-chair of the all-party group on micro-businesses. Others have also tried very hard in the main Chamber, as well as elsewhere in the Palace of Westminster and throughout the country, to help the cause of small business. The Government themselves have also made a lot of effort, and I do not feel that it would be right for me to criticise them.

This debate will be divided into two halves. I will deal with social, cultural and educational barriers, and what I think the Government might do about them. My hon. Friend the Member for Wyre Forest will then deal with taxation, regulation and other more direct governmental aspects. It is also nice to see so many other hon. Members present who want to take part.

On the face of it, self-employment seems to be going well. Recent figures show that 300,000 people have become self-employed in the past year, which means that they are registered with Her Majesty’s Revenue and Customs as being self-employed, but I do not think that that necessarily means that they have set up their own business. Some of them will, legitimately, have taken on part-time functions that classify as self-employment. I do not want to get into a political debate about whether that is self-employment or not, or whether the recession is to blame, because I want to focus on a culture that will give ambitious young people the desire to set up their own business.

The education system is the most important opinion-former for young people, and many aspects of it are encouraging. Like many other hon. Members, I have Young Enterprise groups in my constituency. We have Hertfordshire Young Enterprise in Watford, and I have seen many teams of young people setting up little businesses at school. They are largely supported by voluntary contributions from local businesses and they get mentors. In fact, only last Saturday, there was a display of the best teams at the Harlequin centre in Watford, which is well known to some Members present and to those more illustrious alumnae of the better Watford girls school—without naming names—whom I am also pleased to see present. It is interesting to see that these teams set up real businesses, producing bracelets, handbooks and all sorts of things. Some of the products make them a bit of money, and it is good to see local businesspeople helping them. This, however, is only useful if it gives those young people a desire to say that, when they graduate—assuming that they want to go to university; I am not saying that that is necessarily the most important thing—they want to set up a business, but I do not find that to be the case.

I recently visited Watford grammar school for boys, which is one of the better schools in the country— 30 boys are going to Oxford or Cambridge this year. After I finish my talk to the sixth form, I always ask them what they want to do after university—most of them go to university, but I would ask a similar question at a school where not so many pupils do so. When I ask how many want to be lawyers, accountants or involved in advertising or the media, many hands go up, but when I ask who wants to set up their own business, very few want to do so, including those who have taken part in the education system’s successful schemes.

[Toby Perkins (Chesterfield) (Lab)]

The hon. Gentleman is making an important case for the role that education can play. Another part of getting young people excited about running their own business is the experience of those who do so at the moment. Today’s Financial Times includes an article on an Aviva report that involved interviewing 500 owners of SMEs for its research. A quarter of them said that they were considering returning to work as an employee, because of how difficult it is at the moment to run a small business. When people who actually run their own business find it that difficult, will it not be more difficult to persuade young people to do so?

[Richard Harrington]

The shadow Minister makes a valid point. I read that article in the Financial Times online—if I cannot sleep at 3 o’clock in the morning, I find that that is the best way to get back to sleep. It focused on the general problems of the economy and how much more difficult it is for people who are self-employed and have their own business. Some of those people look towards employment as an answer, and I do not disagree with anything that was said. I am sure that some people want to go back to the comparative security of employment, but I do not think that that changes my main argument. People becoming self-employed and setting up their own businesses is one of the most important things for this country to expand the economy.

[Priti Patel (Witham) (Con)]

I come from a small business family. My parents were immigrants to this country and it is interesting to see the number of immigrants who are self-employed. My hon. Friend’s premise is to get young people engaged in self-employment. Does he agree that part of the challenge is getting started, which is always very difficult, particularly for young people who feel insecure about doing so? Does he also agree with the concept of a youth investment fund to provide Government funding or incentives that give people a cushion and confidence to develop their own ideas to become self-employed?

[Richard Harrington]

I appreciate that comment, because I intend to address the youth investment fund, which is important. Indeed, Sir Richard Branson has expressed an interest in this debate. He is elsewhere in the House at the moment and will join us later. The fund is important, but it is just one aspect and I hope to come back to it shortly.

On the education system, it frightens me that 60,000 people a year do GCSE business studies—this was true of my own sons—and are forced to learn accounting ratios, liquidity ratios and the difference between US generally accepted accounting principles and British accounting standards, but there is nothing whatsoever that will give any of them any desire or incentive to relate to business as they see it, which is buying a product and selling it at a profit, or providing a service for which people will pay. That is a real gap in the system, which, at the moment, is filled by Young Enterprise and various other very good schemes. However, that does not change the deep cultural point that people in this country do not perceive business as something to do that is either socially or economically worth while.

[Mrs Helen Grant (Maidstone and The Weald) (Con)]

On igniting the flame of desire for a young person to start a business, does my hon. Friend agree that it would help if we had better, bolder, more ambitious career advice encompassing enterprise for our kids and young people at school and university?

[Richard Harrington]

That is a very valid point. It could help and it is part of the whole picture that I want to build up in this brief speech.

We have to tell young people that setting up a business and employing people is socially acceptable and good for the country, and that they will make a lot of money. If they want fast cars, big houses and all that stuff, providing they pay their taxes, well done to them. It is very easy in politics to take examples of capitalism not working, of people being paid large amounts of money without doing much work for it and of people avoiding tax. We all have our views on those things and I think that everyone would agree that many of those issues need correcting. However, my fear is that such matters help to fuel the view among young people that business is not a very cool thing to be in, which is not right.

A socially responsible young person should be told, “Yes, you can do the kind of occupation that is directly socially responsible. You can be a teacher; you can be a nurse; you can qualify as a doctor and help to cure cancer; you can be a social worker. Those are all very good. But if you decide that you want to go into business and employ people, providing you pay your taxes, that is as much use to the country, if not more, because you are helping many people in their way of life. You are helping to fund the teachers, the doctors and the social workers and it is a very, very creditable thing to do.” Society should say to such a young person, “Well done to you. You have done something that is very worth while. Do not believe the stuff about Gordon Gekko and greed is bad. Actually, greed is quite good. Providing you pay your taxes and employ people, you are really contributing a lot to society.”

One of the big problems in this country is leaping over that barrier to make people think. Let us consider the notion of wanting things. People will only go into business to make money. I did it to make money. I did it because I did not have any money, and I did not like not having it. There is nothing wrong with that. People have to understand that going into business is a good thing to do. When I got my business to the level of employing 600 people, it was a constant nightmare. I was often worried. I did not sleep at night for thinking, “Have I done the right thing?” My wife once told me at 4 o’clock in the morning—she did not help matters; she never says things at 4 o’clock in the morning that help matters—that I was directly responsible for the lives of nearly 2,000 people. That is quite a burden of responsibility. People might think, “He’s filthy rich,” or, “He makes loads of money.” However, whatever people think and say about those in business, they do not believe that they are performing a socially responsible function.

I want the Government and all of us who are in the opinion-forming business—that is what politics is, irrespective of what party hon. Members belong to—to realise that something has to be done to change that attitude, because it is in the national interest.

[Julian Smith (Skipton and Ripon) (Con)]

Does my hon. Friend agree that teachers have a major role to play? What does he think teachers need to be doing and saying to young people on the subject of enterprise?

[Richard Harrington]

I thank my hon. Friend for that comment. The problem is that teachers by definition have chosen teaching as a career, so it is very hard for them to communicate on that. I do not want to take much more of this Chamber’s time, but I will come on to a proposal that I think answers my hon. Friend’s question.

I am not being critical of what the Government are doing. Yesterday, the Prime Minister and other Ministers made an announcement about this year being the year of the business and said that a minibus will go around different institutions, helping to give people the idea to set up businesses. All that is very good, but the cream of young people who are thinking, “I’m going to go to Goldman Sachs,” or, “I’m going to become a top man or woman at the Bar,” or, “I’m going to be a partner at Deloitte,” need to think, “Actually, the status of my setting up my own business and employing people will launch me to a higher level in society. I will be applauded and not thought of as a person who tries to avoid taxes and should hide the fact they have bought a decent car.”

The last vestige of the class system in this country is contained in the attitude that business is a bit grubby, something to be looked down and not something that proper chaps do. Until we change that attitude, we will not have enough people setting up businesses, employing people and providing the growth that we need in the future.

[George Freeman (Mid Norfolk) (Con)]

rose—

[Richard Harrington]

I will give way, after which hon. Members will be relieved to know that I shall be brief with my comments.

[George Freeman]

I congratulate my hon. Friend and my hon. Friend the Member for Wyre Forest (Mark Garnier) on raising this important debate. I also congratulate Virgin on the support and work that it is doing in this field. Like many hon. Members here, I am sure that he agrees—he has touched on this—that part of what we must do is to help those youngsters who do not have the experience of entrepreneurship and self-employment through their family, so that they can experience it through schools. Many of us in our constituencies can help and, indeed, are helping with schemes. In my constituency, we have set up a programme called the Norfolk Way enterprise bursary and we are linking school leavers with local businesses, which can be very empowering. Lastly, does my hon. Friend agree that it is very striking that some of our best entrepreneurs, for example, Richard Branson and Bill Gates, are not graduates? They started their businesses pre-university, which sends a very powerful message to youngsters who are feeling disillusioned and disengaged by the mainstream curriculum. Some of our most deprived communities could benefit hugely from such initiatives.

[Richard Harrington]

My hon. Friend makes very valid points. I hope that I speak for all hon. Members involved in this debate when I point out that Richard Branson and Bill Gates are examples of people whom we would regard as being very successful and would look up to. Both Richard Branson and Bill Gates were rejects from the mainstream academic system. Obviously, when I say “rejects”, I do not mean that they were not up to it, but that they were, through whatever personality they had or whatever came about, not part of it. My hon. Friend’s helpful intervention supports my argument, rather than the other way round.

In my constituency of Watford, there are some excellent initiatives. For example, Wenta, which is run by Chris Pichon and Sharon Gaffney, has many schemes to help schools give young children the opportunity to become entrepreneurs and to create an incubator for people who are without a job to help them set up their own business. Lots of good efforts are happening, but the fundamental point is to ask people to think culturally, socially and educationally. There is still a feeling against the acceptability of business in this country that is not present in Germany or the United States. As I have said, such an attitude is a result of hundreds of years of looking down on business.

[David Morris (Morecambe and Lunesdale) (Con)]

I agree with everything my hon. Friend has said. Back in the 1980s, the manpower allowances service scheme was brought in by Margaret Thatcher’s Government. That scheme took people who were on the unemployment register and gave them twice the amount of unemployment benefit, so that they could go self-employed. Indeed, I was one of those people, and I built up a business that employed more than 100 people and experienced the same sleepless nights as my hon. Friend.

--- Later in debate ---

[Richard Harrington]

I absolutely agree. Indeed, I was also one of those people. My hon. Friend is talking about a business start-up scheme whereby if someone was unemployed, they got £100 a week. If they did well, they paid tax on it. That scheme helped a lot of people to start their business. I think that my hon. Friend the Member for Wyre Forest will discuss many of the schemes that the Government are doing.

I have a final proposal for the Minister. There should be an institution at university level—whether it is called a university technical college, a special university college or whether it is part of an existing university, such as the university of Hertfordshire, which does a lot of work in the field of business studies and management training—that exists entirely to train and help people to set up businesses. The course should be run predominantly by people who are successful in business and who are prepared to give up their time to do that, rather than by people who have taken business studies. At least half the course should involve practical work on how to set up a business. Sir Richard Branson’s scheme for the youth investment fund could help to fund it, as perhaps could the Government if local business people were to become involved. Students may include mature students as well as those from sixth forms going into the normal higher education system, and when they graduate they should have set up a business that either works and is doing well, or does not work. If it does not work, it should not mean that they do not graduate, because many people in business try things that do not work.

[George Hollingbery (Meon Valley) (Con)]

rose—

[Mrs Grant]

rose—

[Richard Harrington]

I give way first to my hon. Friend the Member for Meon Valley (George Hollingbery).

[George Hollingbery]

I have set up several businesses, some of which were not successful, but one of which was, and I am very aware of the shadow Minister’s reasonable point that 25% of people are seeking to go back into employment because of the difficulty in starting a business. Does my hon. Friend agree that we must be careful not to sugar-coat setting up a business? It is a difficult career, full of challenges, and if we teach it in schools and universities, we must be realistic. People must understand that failure is part of the education process, and that although it may lead to success, the road on the way will be bumpy.

[Richard Harrington]

That is an exceptionally good point, and I am sorry that my hon. Friend, like me, in later life has had to do the job that we are doing now instead of being in business. However, I know that he, like me, benefited greatly from his time in business. His serious point was well made. The alternative of salaried employment for a company is not secure either, and many people lose their jobs. My generation may be the last one that believed that the professions provided a job for life. There is a risk element now.

I return to my university college, which I hope the Minister will immediately decide should be located in Watford, because that is the obvious place for it. Watford is a good example for small businesses. It used to depend on two heavy industries—printing and lorries—but it now has more than 1,600 small businesses, and the employment background is small business, so Watford would be a suitable place for the college. It would be an ideal location because of being well known internationally as a centre for commerce, culture, intellect and so on.

My serious point is that the Government, with all the excellent measures that they are taking, should consider introducing a degree on setting up a business—obviously, that is not what it would be called—helped by local business people who would agree to take part for perhaps two or three days a week. Students could set up real businesses that would go on to provide real employment for people. That is where academia should meet the practicality of setting up a business.

[Toby Perkins]

rose—

[Richard Harrington]

I will happily give way to the hon. Gentleman, but my hon. Friend the Member for Maidstone and The Weald (Mrs Grant) rose first.

[Mrs Grant]

Does my hon. Friend agree that banks need to be more reasonable in their behaviour and attitude to businesses and potential business clients, and that if they were, that would encourage business and future enterprise? At the moment, banks are so overly cautious that they are impeding business.

[Richard Harrington]

I agree with my hon. Friend, and my hon. Friend the Member for Wyre Forest will speak about that.

[Toby Perkins]

I want to explore the hon. Gentleman’s idea. He has rightly identified that many successful entrepreneurs with great business careers were not academically inclined, and perhaps those who have that motivation and spark do not sit well with long periods of study. How does he square that argument with his idea that people should undertake three or four years of study to set up a small business, when many of the best small business people have been instinctively brilliant rather than studiously and academically brilliant?

[Richard Harrington]

I have to accept the logic of that point. Not everyone who wants to go into business would go to the sort of college that I am proposing. Many people would start businesses as happens now. Many people who have been in employment may decide when they become a bit older that that is for them. There are different routes to the same objective. However, I believe that an all-star college with teaching by people such as Sir Richard Branson and senior politicians and business people—people who have been in business—would show that the Government are serious, and that the status of such a course is as good as those at Oxford, Cambridge and so on. It is wrong for people of my age to use the expressions of younger people, but that would show that it is cool to set up a business, and just as good as anything else. In addition to the many other things that the Government do, they could help with that, and it would not cost too much money.