SMEs (South of England)

David Simpson Excerpts

Wednesday 15th June 2011 Westminster Hall

[Caroline Dinenage]

My hon. Friend makes an excellent point. It is worth noting that between 2007 and 2010 the south-east experienced the highest increase in deprivation in the UK. Will the Minister tell us what criteria the Government used in making the decision to exclude the south-east from NI relief? Government responses to that question usually state that the focus is to support areas that have traditionally relied more heavily on public sector employment, and they are usually thought to be the north and the midlands. That same description, however, could also be applied to a number of constituencies in the south, including mine. Furthermore, the exclusion of the south-east has a doubly negative effect on Gosport, as it creates a disincentive to business to choose to locate in the area—which should be a prime area for regeneration according to the Government’s own objectives—over more affluent areas of the north that are indiscriminately provided with Government support that they might neither need nor warrant.

[David Simpson (Upper Bann) (DUP)]

May I declare that I have an interest in the business sector in Northern Ireland? I congratulate the hon. Lady on securing this debate. Earlier in her speech, she mentioned banks and credit to small businesses, and I am sure she will share my concern about some of the findings of recent research papers on banks and the money being loaned to small businesses. The bankers have stated that they never promised to meet the Government targets; they say that they only promised to make the money available. Leading economists say nothing has changed in the manufacturing sector. In fact, over the past 12 months under this new Government, we have not seen any change from the banks, and small businesses, which are the backbone of the UK economy, are suffering greatly.

[Caroline Dinenage]

The hon. Gentleman makes a strong point. Yesterday, I met a small business owner in my constituency who is on the brink of losing his business and his house. Against a property that is worth £500,000, the bank will only lend him £50,000, which goes nowhere near far enough towards supporting him in trying to keep his business and his family together.

Although the Government clearly recognise that there are pockets of need in the south-east, it is thought to be extremely difficult to target national insurance investment at a sub-regional level. That may be the case, but such difficulties are not insurmountable. My constituents should not have to accept not receiving help they badly need purely because it is felt that giving them that help would be too difficult.

--- Later in debate ---

[Mr Dominic Raab (Esher and Walton) (Con)]

Thank you, Mr Streeter, for the opportunity to speak in this debate. I join others in welcoming the ability of my hon. Friend the Member for Gosport (Caroline Dinenage) to secure it, and congratulate her on her excellent speech.

I welcome the various different fronts on which the Government have tried to lever up some economic recovery, through securing and retaining market confidence, which has brought us back from the cusp of default, and through some of the fiscal measures on corporation tax and the regulatory measures to which other Members have referred. None the less, it is worth pointing out some of the findings in the Institute of Directors policy paper that came out this week. It pointed out that the overall tax burden on small and medium-sized enterprises

“is a lot higher than the corporation tax rates of 20 and 26 per cent”—

it is closer to 32% and 43%—and that a business

“can expect to have to pay four or five months’ worth of profits to the state each year.”

That is worrying and, like the IOD, I would love to see the public finances permit a move towards the consolidation of national insurance, a reduction of the overall level of national insurance for employers and businesses, and further cuts in corporation tax.

That analytical view is bolstered by the feedback that I get regularly from local businesses in Elmbridge. They raise three major things with me. The first is credit—there is still not enough credit going to viable SMEs. The second is red tape. Like others, I would welcome it and congratulate the Government if they tackled some of the health and safety and employment law regulations. Thirdly, it is still too difficult to hire and fire in this country, and that is a major obstacle to growth. I would be grateful if the Minister could give an assessment of the one-in, one-out rule for the financial year 2010-11. How many regulations have come in and how many have been scaled back? It would be useful to know what practical progress has been made.

Like others, I welcome the cuts to both the main rate and the small business rate of corporation tax, but national insurance, as others have said, remains onerous. One aspect that is raised constantly with me as an MP for a constituency in the south-east is business rates and a feeling that our businesses are taxed more and more but get back less and less. Can the Minister give an indication of what progress has been made towards ensuring that local communities see a greater share of the revenue of the tax raised from businesses locally so that we can take some positive steps towards incentivising local business growth?

Much has been said already about the one-year national insurance holiday for start-up companies, but I understand that it is still not applicable in the south-east. Many Members present will recognise that we need to do far more to promote investment and infrastructure in other parts of the country that are not as well developed. Other measures of a more socio-economic nature, such as the pupil premium, encourage greater social mobility and economic development.

[David Simpson]

I have listened to every contribution. Does the hon. Gentleman agree that what we need to do in the whole of the United Kingdom is create the confidence that the business sector once had? Small businesses are fighting a rearguard action against the banks, the markets are not what they were, and small hauliers face opposition from and have to compete against hauliers coming in from Europe filled with cheaper fuel. We need to create the confidence whereby businesses of all sizes are prepared to take a risk again.

[Mr Raab]

I thank the hon. Gentleman for that contribution and I agree entirely with its sentiment and spirit. One of the concerns is that we will not get that business confidence back unless we do a bit more to bring down the regulatory and tax burden. On the national insurance holiday, I am concerned about the precedent of moving towards increasing regional tax subsidisation, which is, effectively, what we are talking about. Over the years, a wealth of research has shown that cutting business taxes may well increase revenue as a result of business growth. Is the Minister aware of whether any assessment was done of the fiscal impact of extending the national insurance holiday to all parts of the country, specifically in terms of what revenue would be gained back? Is that measure revenue neutral or even revenue positive? Such an approach would certainly be welcomed by businesses across my constituency.

In Elmbridge, I see a huge niche comparative advantage in high-tech start-ups—for example: Chelsea Technology, which pioneered the sensors that were used to clean up the oil slick in the gulf of Mexico; T R Control Solutions, which is a relatively small business that has pioneered the software being used in Whitehall to cut CO₂ emissions; Air Products, and Saville Consulting. There are many others. We are not going to rebuild the old manufacturing industries of the past, and there is no point harking back to the industrial revolution with doe-eyed nostalgia. What we can do, and what I hope we will do, is build and innovate in the areas of comparative advantage. The high-tech manufacturing industry is of particular comparative advantage in my constituency, in the south and for the country as a whole.

I am conscious of the time, so I will conclude my remarks. Again, I thank you, Mr Streeter, for giving me the opportunity to speak and I congratulate my hon. Friend the Member for Gosport on securing the debate. I hope that the Minister will address some of the specific points made when he replies.