Equality of Opportunity for Young People

Lord Mawson Excerpts

Thursday 16th May 2019 Lords Chamber

[Lord Mawson (CB)]

My Lords, I thank the noble Baroness, Lady Grender, for calling this debate. I want to talk about SMEs and the army of young entrepreneurs being generated in the British economy, not only in London but across the north of England. Many of them are one-man or one-woman bands; many of them face a mountain to climb daily.

Over the last four years, I have been leading a programme in 10 towns and cities in some of our poorest communities across the north of England, which is now called Well North Enterprises. I declare my interest. In Denaby Main, an ex-mining town, we carried out over 400 conversations with residents in 2015. It was clear that the community was missing opportunities to thrive in an area defined by a dependency culture, long-term unemployment and double the borough average rates of employment support allowance. Get Denaby Enterprising was a way to offer non-traditional avenues into employment through self-employment, allowing young people to work and manage their condition.

By the end of year one, 24 SMEs were registered with HMRC and trading. A successful part of the approach was the establishment of a business club for new and established local businesses. The group grew quickly by word of mouth and relationship-building. The business club was used as a forum to celebrate these new businesses at the end of the first year. Each business was recognised for its hard work and success. In 2018, the programme widened to include four other communities across Doncaster, with 15 further SMEs. The business club continues to grow, with 32 members.

It is interesting how youth unemployment varies in the western world. The youth unemployment rate in the European Union averaged 19.05% from 2000 to 2019. Youth unemployment in Greece today is 39%; Italy, 33%; Spain, 32%; and France, 20%. By contrast, in the UK it is 11%, and in the US, 8.3%. This broadly suggests that those with the most regulated employment regimes have the highest youth unemployment. Why is this? Is it about unintended consequences or the awful paradox that, when Governments pass more regulations to protect workers’ rights and regulate the marketplace, the unintended consequence is often increased unemployment, especially for the young? This is not because legislators have the wrong motives; they have excellent motives. It is just that the consequences of some of our motives and values are often the opposite of those intended.

Total employment in SMEs in the UK is 16.3 million people, which is 60% of all private sector employment in the UK, contributing 47% of revenue to the UK economy. Damage this and you damage the employment prospects of young people for a generation.

I have been in correspondence with the Treasury over the last six months about a list of the 42 different pieces of red tape that I have discovered that any small single-handed business, church, charity or social enterprise has to pay attention to each day simply to operate legally. It is getting to the stage where hiring a local hall to run an exercise class, for example for two hours once a week, has become almost ridiculously complicated. Whether the person running the class is employed or not is now a highly complex question. What about their pension? Do they have a contract or holiday pay? What about tax and insurance? Have you complied with all the health and safety regulations? The list goes on.

I could imagine that hiring a hall will get caught up in regulations for the gig economy. Imagine you are going to sell food afterwards—another mountain of regulations to which we are about to add more. Imagine you make some sandwiches at home first—horror of horrors. If the class is going to involve children, forget it. Now imagine a young person wants to set this up, with little or no experience; it is likely that, after a few hours of research, they will just give up, or they could get it wrong and be hit by a disproportionate fine from HMRC. Imagine they are on universal credit and want to work out its impact on their benefits. Could any noble Lords in this Chamber work it out? These are the practical issues we are seeing in Doncaster and east London.

Those with family connections to help may find a way through but, if you come from a disadvantaged background like Denaby Main, and do not know anyone whom runs a small business who can help you, how likely are you to succeed? It is hardest for those trying to get going as young entrepreneurs.

Last week I was talking to a young builder in east London, whom I have known since childhood. Last Saturday, he was going to drive to Bristol and take out a large loan to buy a new van, because of the Mayor of London’s latest decree on clean air in the capital. Another young man I know gave up his own business in Hackney after 10 years and moved out of the country because, as he told me, every time he was starting to get a bit of a bank balance to help him grow the business, another bit of local, London or central government made yet another financial demand on him. Is that what the black cabs are trying to tell us with their horns each week, outside this building? It seemed, he said, like a hamster’s wheel that he could not get off. These things affect young people and their mental health. Those two young people cannot afford to buy their own homes where they grew up; one had to live with his parents.

This is the net effect of thousands of pieces of legislation—a salami-slice approach. Each one is perfectly valid in its own right, but the net effect can be completely stultifying. We are going to add a whole lot more: on zero-hours contracting and food labelling, and a ton of stuff around reducing carbon and online reporting to HMRC—to mention just a few.

What is it going to be like in a few years’ time for a young person in, let us say, Skelmersdale or Rotherham who wants to set up a small business? Is anybody thinking about them when we draft all this new legislation? Is anyone in the Civil Service interested in the cumulative effect of all this? We wonder why they do not trust Governments.

I expect that part of the problem is that most of us in the Palace of Westminster and the Civil Service have no experience of trying to run a business as a young person, and it is thus not surprising that the legislation does not work from their perspective. Perhaps we should involve those affected by legislation more directly in its drafting.

I suggest that this problem is partly because we have stopped listening to one another. If we are concerned about keeping a lid on the national debt and not passing it on to our children, we are accused of destroying communities through evil austerity. If on the other hand we are genuinely worried about the impact of reduced services on communities, we are unprincipled, unrealistic spendthrifts. The truth is that people hold both positions for perfectly valid reasons and they all genuinely care about our country’s future. Populist rhetoric on all sides seeks to amplify difference and simplify arguments, whereas the truth is often more complex and nuanced.

Is it possible to work together for the future for our young people, recognising the validity of a wide range of opinions and perspectives from across the political landscape? Can we all reduce the spin and talk and focus a bit more together on solving some of the practical problems that our young entrepreneurs face day in, day out? Would the Minister be willing to bring together some of his colleagues to look at these burdens placed on young businesses and explore how they might be reduced?