The Economy

David Rutley Excerpts

Tuesday 6th December 2011 Commons Chamber

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

The Office for Budget Responsibility has shown clearly that productivity is slowing, and our recovery therefore depends on getting productivity moving forward faster. I suggest that one of the key barriers is over-regulation, which I think is borne out by many of the surveys that the Federation of Small Businesses and the Forum of Private Business have carried out.

The sector of the economy that is perhaps most affected by over-regulation consists of the very smallest of our businesses: the micro-businesses. A micro-business, for the most part, suffers from the same level of regulation but has less resource, by virtue of its size, to deal with it.

So why should we worry about micro-businesses? Because research has indicated that 90% of new jobs after a recession come out of that sector, and because it is in our rural communities that many of those micro-businesses exist. They are critical to the economic viability of our rural communities. We should also be concerned about the existence of micro-businesses in deprived urban communities, where, again, they play a key role in terms of cohesion.

What is a micro-business? The EU defines it as an organisation with fewer than 10 employees, but in fact, 90% of our businesses have fewer than five employees. Therefore, they have very little managerial support and expertise.

The Government have done their level best to help small and medium-sized businesses, and specific provision has been made to help the micro-business. So why do micro-businesses feel unloved and, in the words of one, invisible? Perhaps I may make some suggestions to the Treasury on how we can rectify that and support the sector better. We have given a three-year moratorium on new regulation for our micro-businesses, but the challenge is that they are still subject to existing regulation, a lot of which comes from Europe, and if they have only two or three people in the business, that is a very heavy burden. We need a “keep it simple” system for micros.

On employment, the Government have helpfully provided a national insurance break for start-up businesses. We have also examined the tribunal system and considered a simplified system for smaller businesses, but we must remember that businesses with no employees comprise 70% of all our businesses—or about 3 million businesses altogether—and if we gave those very small businesses national insurance relief, we would go a long way towards solving our unemployment problem.

On finance, I am delighted that we have the new seed enterprise investment scheme, as it will make a big difference. The point I would make to the Treasury is that we need to examine who is going to use that type of support. It will be the fast-growth entrepreneur who is looking for external investment, but what about social enterprises and what about the plumber who is setting up, having just been made redundant? Some of the money that they will be seeking could be offered by their families, but they are excluded from the scheme.

[David Rutley (Macclesfield) (Con)]

My hon. Friend is a passionate advocate for micro-businesses and I commend her for her extraordinary efforts. Does she agree that it is vital that our micro-businesses are better at articulating the problems they are facing, so that the Government can more effectively strip back the regulation that she and I both want removed?

[Anne Marie Morris]

I agree with my hon. Friend absolutely, and that brings me nicely to the challenge that we face in getting some of the main schemes to assist with finance. Project Merlin, the enterprise finance guarantee scheme and the regional growth fund have all been aimed at the smaller business. The problem is that in practice, because there is no carve-out and no requirement that any percentage of those schemes goes to our very smallest businesses, these businesses by and large get left out. That is because they are perceived to be invisible, too difficult or too small, or it is perceived that they cannot write a business case or are not after a big enough loan. I hope that when we examine the new credit easing arrangements, we might consider a carve-out specifically for micros.

Even some of our institutions that are supposed to be looking at our small businesses exclude them. I have spoken to officials in UK Trade & Investment, and it appears that a small business of fewer than five employees is, unfortunately, beyond its notice. I have talked to those in the National Apprenticeship Service, which now has a small business unit, and they say that a micro-business with fewer than five employees is, again, outside its remit.

May I suggest to the Treasury that the solution, is, first, that we should properly recognise this group for what they are? Let us define them properly as organisations with four or fewer employees, as is happening around the world, and let us devise a scheme specifically for this group. That is perfectly possible, as the French have come up with such a scheme for their smallest micro-businesses. It provides limited liability, a very simple form of establishing a business, simple accounting procedures and a very simple tax system, and it also provides for very simple sets of regulation, particularly in respect of employment. So something simple for our smallest micro-businesses is just what we need.

In the last minute available to me, I suggest also that, because much of the regulatory burden comes from Europe, there is a case to be made for considering an exclusion for micro-businesses from European regulation. I commend that to the Treasury and the Chancellor, if and when we come to treaty negotiations, as something that might be usefully traded.

--- Later in debate ---

[David Rutley (Macclesfield) (Con)]

It is an honour to follow the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), a member of the “rowdy” Bench, perhaps better known as Snow White and what were four grumpy Members.

In the current economic climate rebalancing the economy is a critical task, and I am pleased that the Government are taking urgent action in this direction. We need to create the conditions in which sectors vital to the nation’s growth have the best possible chance of success. Yesterday’s launch of the UK’s strategy for life sciences was an important step in improving the competitiveness of life sciences and pharmaceuticals, which are vital to the UK and to the local economy in Macclesfield, where AstraZeneca employs some 2,000 people. Across the country, those sectors employ about 160,000 people and have a combined turnover of roughly £50 billion.

The launch set out important positive policies for the life sciences sector: it will create new research partnerships with companies such as AstraZeneca to cut the time between the development of new treatments and their application; it will introduce a £180 million catalyst fund for the most promising medical treatments; it will reduce the time for the first recruitment of patients for clinical trials to 70 days from a staggering 600 days; it will ensure that medicines approved by the National Institute for Health and Clinical Excellence are automatically approved for use in hospitals; and it will establish an early access scheme that will allow thousands of seriously ill patients to get access to cutting-edge drugs up to a year earlier than they can now. Those steps will not only help to reaffirm the competitiveness of the UK’s life sciences industry, but will encourage major pharmaceutical businesses to stay based in the UK and materially help to rebalance the economy. But the approach goes further, because it will enable patients who have simply been waiting for far too long for new medicines to get them earlier. The Government are absolutely right to tackle that unacceptable situation.

Our approach is not just about rebalancing the economy, because we need to rebalance our skills set too. There has never been a more important time to prepare a generation of young men and women for a future in business and enterprise.

[Charlie Elphicke]

Does my hon. Friend agree that apprenticeships have been a real step forward and have made a massive difference to our young people?

[David Rutley]

I completely agree with my hon. Friend, and I will come on to talk about the impact in Macclesfield, and no doubt in Dover too. Apprenticeships have been a phenomenal step forward.

A crucial priority for us now is getting to grips with reshaping the life chances of millions of young people and helping to improve the long-term economic prospects of the United Kingdom. There is clearly a lot to do. A recent survey of 3,000 parents with children aged 11 and under found that the top career aspirations for their children were: first, being a sports star; secondly, being a pop star; and thirdly, being an actor or actress. Going into business did not even feature in the top 10. More worryingly, those aspirations are increasingly reflected in the subject choices in school, with business-related subjects lagging far behind in the popularity stakes.

[Pat Glass (North West Durham) (Lab)]

Does the hon. Gentleman believe that the Government’s policy of putting a hierarchy of subjects into their English baccalaureate, so that classical Judaism comes above subjects such as business studies and IT, will help that situation?

[David Rutley]

It is good to hear from those on the rowdy Bench again.

[Pat Glass]

I was not rowdy; I listened.

[David Rutley]

It is good to hear that, and the hon. Lady makes an important point. Of course vocational skills are important and, as my hon. Friend the Member for Dover (Charlie Elphicke) was saying, the Government have taken important steps on vocational training. But it is also important to raise academic standards across the board in education, which is why it is vital that the English baccalaureate is being put in place.

To return to the theme that I was discussing, it is vital that employers get confidence in the education being given to our young people; in a recent survey, 70% said that not enough business awareness was demonstrated by school leavers. In June an Ofsted report on business education went further, saying that students taking part in business-related education often had

“only vague ideas about the economy, interest rates and their impact”.

That is clearly concerning and it will be an important spur to addressing business-related subjects in the much-needed national curriculum review in the months and years ahead.

The focus on business education needs to be improved in universities as well. Management, economics and accounting were much less popular than media studies and sociology in 2010, and the growth in media studies—15% over the past five years—continues to outstrip the growth in both management science and economics, the figures for which were 5% and 12% respectively. At a time when companies are crying out for commercial talent, it is troubling that the upcoming generation is not demonstrating an interest in business education, which is clearly growing in other countries.

So how can we begin to address those long-standing trends? Much can be done back at school. That same Ofsted report highlighted the fact that more than a third of schools failed to provide sufficient opportunities for students to engage directly with businesses.

[Mrs Chapman]

How can the hon. Gentleman possibly square that point with the dramatic nose-dive this year in applications for education from kids in the north-east post-16? What does he put that down to?

[David Rutley]

I am not familiar with circumstances in the north-east; I am making the point that too few students want a career in business because until now they have not had the right education, and we need to get them back on to a better path. [Interruption.] Apprenticeships are clearly one of the ways forward.

One of the key things we have to do is expose young people to more local business leaders. We have to get those people into the classroom to make the case for business, and we have to make sure that they provide positive role models. Work experience programmes go further, acting as an important way of helping children to apply and develop skills learned in school. In Cheshire, Bentley has created a successful work experience scheme with local schools; more than 850 pupils have gone through the programme over the last five years. We need more such schemes. KPMG, Tesco, Morrisons and others are starting to sponsor students at university. More needs to be done to engage businesses at university level.

As my hon. Friend the Member for Dover pointed out, it is vital to look at alternative ways for young people to get business skills. Apprenticeships are one of those ways, and we are seeing real success not just in shop floor disciplines but across a wider range of business skills, such as accounting apprenticeships. Macclesfield college is working with Elior, a French catering group, achieving real success not just for the business but for the young people involved. The Government are doing well in putting forward the case for apprenticeships, and I commend them.

Although it is vital to rebalance the economy and our skills base, the most important thing we need to do in the long term is to rebalance and raise the ambitions of future generations. I encourage the Government in those efforts.