Enterprise Bill [HL]

Lord Sheikh Excerpts

Monday 12th October 2015 Lords Chamber

[Lord Sheikh (Con)]

My Lords, I speak as a businessman and as somebody who has employed many people through several business ventures. My business interests have related to insurance, financial services and property. I have spoken many times in your Lordships’ House and elsewhere on the importance of supporting small businesses. I am a great supporter of SMEs and in my business life have rendered them support, with the result that my company has flourished and the SMEs too have done well. I used to own a company which provided facilities for the placement of businesses on insurance schemes to more than 1,200 intermediaries. We found our sub-agents to be innovative and made good use of opportunities we were able to provide. There were mutual financial benefits.

Five years ago, the Government inherited a substantial budget deficit. Much progress has been made and our economy is growing once again, but there is still some way to go. Business and enterprise have been and will continue to be at the heart of our recovery. Our economy will only grow if business is allowed to grow. The Government have a responsibility to assist businesses where they can. We must make it as easy as possible for businesses to establish themselves, to build and to flourish for the long term. Above all else, we must make the United Kingdom the best place to grow and run a business. Our country has an entrepreneurial spirit. We must foster and encourage this, not least with our small and medium-sized businesses.

Many of the measures in the Bill will offer greater support for small businesses in particular. We need to fully understand the contributions of small businesses to appreciate the importance of this Bill. It has long been said that small businesses are the backbone of our economy. Last year there were estimated to be around 5 million small businesses in the UK. They in fact constitute more than 99% of our total businesses. They are responsible for 48% of private sector employment and around a third of private sector turnover. They not only drive growth and provide jobs in the wider sense, but also bring fresh ideas and open new markets. They often innovate by challenging the status quo.

The Royal Society of Arts recently published a report into the health of small businesses. It found that when comparing like-for-like long-standing firms, micro-businesses actually have higher productivity levels than larger firms in many cases. Micro-businesses in particular are booming, but they are also struggling. The number of micro-businesses has increased by nearly 50% in the last 15 years, so that they now account for a third of all private sector employment. The report also found that small businesses are more efficient at innovation. They create more innovation for every unit of research and development expenditure and extract more financial value from these developments. The workplace employment relations study has also found that small business employees are the most satisfied in the labour market. They score highly on job control, influence on decision-making and loyalty to the business.

With this in mind, it is imperative that we do all we can to assist and nurture small and medium-sized businesses. It is in all our interests that they thrive. In many respects they must be empowered to compete on a fair and level playing field with larger companies, as some of them often suffer from an imbalance in bargaining power. They are most vulnerable to unfair practices and often do not have the resources to challenge them. Meanwhile, they are also under greater pressure to protect their commercial relationships. In particular, smaller cash flows also mean that many small businesses experience problems with late payments.

The Small Business Commissioner will provide the reassurance and capabilities that small businesses need to deal with such problems. Our SMEs need to know that relevant advice and information is available to them, and where to find it. Where they require dispute resolution or need to file official complaints, they will now have a central resource to which they can turn. A commissioner will also encourage a change in the culture of how businesses deal with each other. There must be fair treatment for all businesses, large and small. It is particularly welcome that a voluntary mediation service will be provided through the commissioner. Where disputes need to be taken further, avoiding the need to go to court will save much time and money.

We need only look at the success of the Victoria Small Business Commissioner in Australia. Over half of cases dealt with by the commissioner have been successfully resolved. They cost businesses 30% or less of the cost of going through litigation. Over half of the complaints received have also been resolved within one week, and 80% within 12 weeks. Can my noble friend say what specific lessons have been learned from this success in Australia? In summary, the new commissioner will provide SMEs with the support they need to thrive in an often volatile market.

One of the biggest barriers to businesses is red tape and bureaucracy. This affects large corporations too, but small businesses are often disproportionately affected. They identify compliance as one of their biggest inhibitors to growth. I am extremely proud that our Government have committed to cut red tape, and that commitment must be appreciated. The business impact target forms a key part of implementing this pledge. It is an innovative way of holding government to account for regulations it introduces. However, this deals with only half the problem. It is clear from businesses that the actions of regulators are just as impactful as the legislation itself. It therefore makes sense to extend the business impact target to include regulators, as they hold just as much responsibility as government Ministers.

We must look not just at the rules, but at the way they are enforced. If extra costs are imposed on businesses by the behaviour of regulators, we must know about it. This will mean even greater transparency of the real impact that specific regulations have. Ultimately, I hope that this will reduce regulatory burdens on businesses even further than previously forecast. That in turn will free resources, increasing productivity further still. More widely, I also hope that businesses will continue to come forward and report burdens through the Government’s Cutting Red Tape programme.

It is also extremely important that all regulators are properly engaging with the growth duty and the Regulators’ Code. They must be consistent and proportional with the policies on enforcing different regulations. It is also important for businesses to see that regulators are behaving with integrity. I welcome that measures in the Bill will give businesses a voice in declaring how they are affected through regulators’ regard to these duties. Making regulators more accountable and transparent will provide reassurance and clarity to businesses. It will also ensure a more stable system of regulation in the long term.

I commend the extension and simplification of the primary authority scheme. It has proved very popular and has doubled its membership in each of the last five years. Having a single point of contact for robust and reliable advice reduces time, risk and complexity. This is particularly valuable for small businesses, which often do not have in-house expertise on regulatory issues. As many businesses as possible should be able to access the benefits of the scheme. Extending it to other areas of legislation will also mean that more regulators can participate. Simplifying the formation of primary authority co-ordinated partnerships is also particularly welcome. I understand that the Government reviewed the operation of the scheme with hundreds of businesses and authorities that use it. Such extensive consultation is to be commended.

As someone who has been involved in business in the insurance and financial services sectors, I am glad that the Bill proposes for insurance claims to be settled within a reasonable period. I support this in principle, but it needs to be looked into further. However, this was my own practice when I was in business: I used to instruct my staff and loss adjusters to settle claims as quickly as possible. The questions of liability and quantum need to be established, and if the claim is valid the payment should be made as soon as possible. By doing so we will create good will and compensate the policyholder when they need our help the most. I feel that a satisfied customer is your best method of advertising.

I also welcome the provisions regarding apprenticeships and the drive to use the public sector as a model employer in this respect. This will indeed enable the Government to meet their target of establishing 3 million extra apprenticeships in England over the next five years. We must continue to develop our financial services sector but we also need to enhance our manufacturing base to enable us to expand our economy and create more jobs. This can be achieved by expanding our apprenticeship programme, which will provide us with more trained staff to fulfil the needs of the various sectors in the country.

The Bill will make life much easier for businesses to operate and innovate. It will provide extra support where it is needed and eliminate bureaucracy where it is not wanted. It will cement the United Kingdom's position as the best place in Europe to start and grow a business. The Bill will have my support in principle.