Self-Employment

Anne Marie Morris Excerpts

Tuesday 24th January 2012 Westminster Hall

[Anne Marie Morris (Newton Abbot) (Con)]

I will be brief, given the number of hon. Members who want to speak. The UK Commission for Employment and Skills, which reported last August, said that we are at an all-time high; we have 4.1 million people in self-employment at the moment. That report was particularly interesting because it examined what drives the increase in self-employment, and it does not depend on the economy, as we might have thought. It is principally driven by looser regulation, access to finance and Government policy that specifically drives unemployed people into self-employment. The 1980s was a particularly fine example of that.

[Mr Gary Streeter in the Chair]

Let me deal with each of the three elements. With regard to Government policy, the new enterprise allowance has been a great step forwards; I endorse it entirely. The Government now need to consider whether, having extended it from young people to the whole working population, they should take away the requirement for a person to have been on jobseeker’s allowance for six months as a precursor to being eligible to receive it. Many people see unemployment as a bit of a stigma. They may want to come into employment after having brought up children or for many other reasons.

Equally, the Work programme is excellent. I am working with the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling), who is responsible for employment, to consider the extent to which the Work programme is enabling and encouraging individuals to become self-employed rather than going into employment.

I come now to the two other issues raised by the commission’s report. On regulation, the Government have clearly taken a very good first step by exempting micro-businesses from regulation for three years. However, I urge them to exert all their energies on getting the European Union to exempt micro-entities—that is a new definition for the very smallest businesses—from new regulation. I gather that that is being discussed, but I urge the Government to push it forward as a priority.

The Government’s red tape challenge has been extraordinarily useful and powerful. It has explored 12 different areas of red tape—12 sectors—and five more are to come. The Government have said that they will report on that three months after the closure of the consultation. I look forward to those results. I urge the Government to examine in particular those regulations that disproportionately disbenefit the self-employed and the very smallest businesses. The EU has recognised the need to simplify regulation for the very smallest businesses. I ask the Government to work hard at insisting that the EU has its own red tape challenge. It has examined simplification, but it has not considered root-and-branch removal, which is crucial.

Finance is the third issue. Points have been made clearly and well about the challenge faced by the self-employed and the small business in trying to access finance. Tributes have been paid to Business Link. A new portal, Business in You, sets out a number of schemes that are available. There are 851 of them. My advice to Government would be that it is a great idea, but some guidance is needed because it is quite difficult for a self-employed individual to work out which of those is particularly beneficial.

The real challenge is ensuring that a very small business can find information about the opportunities available. It is the case that 28% of micro-businesses are not online, so we need to make the information available in libraries and to encourage the chambers of commerce and the local enterprise partnerships to play a role in disseminating that information. Without that, we will not secure the change that we need.

There was mention of the Government schemes to support access to debt, equity and guarantees. Most of those schemes are aimed at the whole remit of the SME community, which takes us up to 250 employees. The banks, who are usually the people delivering the schemes, will go for the easy wins because they are in business to make money, and the easy wins are the bigger businesses with good business plans and a good track record. The Government need to ring-fence—perhaps they will do this with their credit-easing proposals—a pot specifically for the self-employed, recognising that they are looking for smaller pots of money and do not have well developed business plans.

Perhaps the best initiative has been the growth of the community development finance initiative. The Fredericks Foundation should be recognised for the work that it has done to provide loans to those businesses that cannot find money anywhere also. I also pay tribute to the Government for considering making credit unions able to lend to small businesses, rather than just making loans to individual people. In addition, the Virgin Media pioneers proposal to enable those wanting to set up a business to be given financing at the same rate as applies to a student loan is definitely to be welcomed.

I pay tribute to my hon. Friend the Member for Watford (Richard Harrington), who initiated the debate. He is absolutely right to say that culture change is the key. In the November report of the all-party parliamentary group for micro-businesses—I have to declare an interest here because I chair that group—the research that was supported by the London Business School, Lancaster university, Imperial and Manchester Metropolitan indicated that we needed an education change, not just at university level but at primary and secondary level. We need to consider how to inculcate the idea that setting up a business is a good, valuable and genuine alternative.

I am delighted with the Government’s support for the National Association of College and University Entrepreneurship, which has put in £500,000 to support the establishment of entrepreneur groups in universities across the country. It has succeeded in establishing groups in about three quarters of the universities across the country. It is now looking at colleges.

Finally, we need to enable the self-employed who are setting up small businesses to have bottom-up mentoring support. Although there is a Government scheme to create 40,000 mentors, a scheme that will require the banks to mentor those who get refused loans and the “mentors me” website, which is great, it is still not enough and we need to consider bottom-up volunteering, and, as has been suggested by the Virgin Group, we need local chambers of commerce and others to take some responsibility as well.

I look forward to hearing the Minister’s reply. I hope that I have not taken up too much time and I welcome the changed agenda that this debate heralds.

[Several hon. Members]

rose—