Business and the Economy

George Howarth Excerpts

Monday 14th May 2012 Commons Chamber

[Mr George Howarth (Knowsley) (Lab)]

It is a pleasure to follow the hon. Member for Wirral West (Esther McVey). She will not be surprised to learn that I do not share all of her analysis of the problems, but I hope to refer to some of the points she made about the banking system.

When I was considering what I wanted to say in today’s debate, I was struck by a depressing familiarity—not about what I wanted to say, but about some of the relevant issues—as what I am about to say about youth unemployment in my constituency could have been said in the 1980s and in the first half of the 1990s. As of March, 16.3% of 18 to 24-year-olds in Knowlsey were jobseeker’s allowance claimants. To bring that into a more human focus, I should say that that amounts to 1,725 young people in that age range. Even though the figures were even worse in the 1980s, that is alarming enough. The question I wish to address in the time available to me is: what is going to happen as a result of this Queen’s Speech or the Budget that preceded it that will give those young people hope that opportunities are available to them?

In that regard, I wish to discuss a couple of possibilities, the first of which is apprenticeships. The Government make frequent broadcasts about how much they have invested in apprenticeships. Perhaps unusually for someone in this House these days, I actually was an apprentice—I served a five-year engineering apprenticeship—and the opportunities now being called “apprenticeships” are not what my generation knew as apprenticeships; they are training opportunities, but they do not have any of the characteristics of the apprenticeships of my day.

I have to say—this was as true of my Government as it is of this one—that the whole training system is in a complete muddle. I chair a local charity—the Knowsley Skills Academy—that trains young people who would struggle to find a place in the job market. Unless they are on sweet terms with such wonderful organisations as A4e, it is nigh on impossible for them to get any funding for that kind of training. The situation is not unique to this Government—my own Government got this wrong too—but it is time that we woke up to the fact that the national training systems do not work and that what we want to do is fund and support local organisations that actually can provide realistic training for young people.

[Sheila Gilmore]

Does my right hon. Friend agree that one of the problems with the way that things such as the Work programme are being funded is that the local organisations at the end of the supply chain are not getting the work at the moment and may go out of business altogether, along with their expertise?

[Mr Howarth]

Of course I agree entirely with my hon. Friend. What she says brings me on to my second point: what in the Government’s programme will be attractive to small and medium-sized enterprises? Last October, the Department for Business, Innovation and Skills carried out a survey of 500 SMEs, in which they listed the things they found to be obstacles to success. Some 45% cited the state of the economy; 12% cited obtaining finance, and I wish to discuss that in a moment; and 6%—it was there but it was mentioned by only that number—cited the issue of regulation. I want to talk about small businesses, because they could provide the work opportunity that young people in my constituency and elsewhere need.

I wish to discuss a firm in my constituency, Sterling Services. Its owner, Mr Blennerhassett, has been to see me to talk about the problem he faces. He described how he has been in business for 28 years, has always been in the black and has never had any financial problems with the banks. He told me what happened when he tried to get a loan of £70,000 from the Royal Bank of Scotland to employ two full-time adult employees and two apprentices, to pay for two vans and to make some minor adjustments to his premises. The response he got from RBS was, “We don’t have a flavour for construction at the moment.” So the possibility of him taking on two young people and giving them a real apprenticeship has been closed off by RBS.

Higher education might offer another opportunity for young people. I want to refer briefly to the so-called core and margin model mentioned by my hon. Friend the Member for West Bromwich West (Mr Bailey), which effectively means that universities charging £9,000 in fees will have a proportion of their students directed to lower fee higher education institutions. Some universities will therefore have fewer places and the Government have provided no assessment of how they think that will work in practice. It might mean that opportunities in local higher education institutions will be closed off to young people, which would be a further obstacle in the way of their finding employment.

Finally, I talked earlier about regulation. If one were to compile a list of things that are important for creating jobs and getting the economy going again, I would think that the last place one would look would be regulation. The idea that making it easier to sack people will kick-start the economy is, to say the least, foolish. It is worse than that, however. If the Government really think that the most important priority for legislation is to make it easier to sack people, they should be ashamed.

--- Later in debate ---

[John Glen (Salisbury) (Con)]

I rise to speak in the debate this evening with the words of the recent public discussion between business leaders and my right hon. Friends on the Government Front Bench ringing in my ears.

The essence of that debate seemed from the business leaders’ side to be, “The Queen’s Speech did not do enough for business,” and from Government Front Benchers, “It is business, not Governments, that create jobs. Governments can create only the conditions for growth.” Frankly, both sides of the debate share a common aim: to see business prosper, more jobs created, more tax revenues and growth in our economy.

When we step beyond the headlines, which inevitably, as ever, over-simplify and polarise statements, we see that the issue before the country, as expressed by the Institute of Directors and other business organisations, is the pace and scope of reforms. Businesses want to see an extension of the sunset clauses for regulation and for the one-in, one-out regime. They might also like to see more moves towards no-fault dismissal and flexible structures, so that the decision to take on a permanent employee does not require so much deliberation. The CBI said:

“We hear a lot about regulatory reform, but the big prize for businesses would be to major on the new power for ‘sunset clauses’ on regulation and regulators. Every new bit of regulation should be time-limited and then reviewed.”

[Mr George Howarth]

Has the hon. Gentleman seen the Business Department’s own survey of small and medium-sized enterprises? The priorities that they cited were what was happening in the economy and what was happening in the banks, and only 6% responded by saying that regulation was an issue.

[John Glen]

I have seen plenty of businesses in my constituency which have argued consistently over the past two years that their real challenge is dealing with unnecessary regulation, and I agree. The Prime Minister, although in favour of no-fault dismissal, could not unfortunately persuade our coalition partners to agree, so it did not go forward.

Some primary legislation will be helpful and desirable, but I do not believe that in a Queen’s Speech the Government can legislate to create jobs, so I am somewhat confused by the logic of Justin King, who has questioned the consistency in Government policy. From the very first Budget, the Government have been consistent on the need to reduce corporation tax, but in 24 months there is only so much consistency that they can demonstrate.

Mr King says that he wants to know where the “big bets” will be placed, but he might like not only to reflect on the state of the public finances and on the limited room for such investments, but to grasp the fact that on High Speed 2, on health care and on schools the budgetary certainties were put in place a long time ago, and the announcements were made in the first few months of this Government. The reforms to planning, especially the radical simplification of planning regimes, should enable big employers such as Sainsbury’s to get on with their primary role of creating jobs.

Let us turn to small businesses, which constitute such a high proportion of the jobs in my constituency and throughout the UK economy. For them, the Queen’s Speech offers a great deal. The groceries code adjudicator should rebalance the relationship between small businesses and large supermarkets; perhaps a fear about that led Mr King to make his remarks last week. I am concerned, however, about how flexible maternity and paternity leave will work out in practice for small businesses.

Small businesses and small business people know how to look after their employees through good times and bad and life-changing events, and an employee has a reciprocal responsibility to work hard, providing dependability, a willingness to demonstrate responsibility and a responsiveness to economic conditions so that rewards are brought to him and his employer.

I hope that the Government consider the implications of the masses of paperwork that will be introduced if the measure is not considered and adopted carefully. As the Forum of Private Business said:

“The UK already has one of the most generous parental leave systems in the world”,

and small firms must not be

“stung financially at a time they can ill afford any more business costs being foisted on them.”

What happens when managers find themselves having to arbitrate on competing requests for flexible leave? Could not this time be better spent establishing new markets and growth opportunities?

A debate on business and the economy at the current time would not be complete without reference to the eurozone crisis. There can be no doubt that the uncertainty in European economies, centred around the state of the euro, is causing many in this country to put off vital investment decisions. Fear of a slide in equity values, anxiety over the dependency on hidden “toxic debts” in European banks, and frustration at the gap between the political will and the economic reality are draining our economy of a great deal of optimism. I always resist the simplistic call that the solution is, “Pull out of Europe and all will be well,” but I do feel that the Government, and politicians in all parts of this House, need to begin to explore what the world will be like when Greece defaults and leaves the euro. What will happen when the Hollande rhetoric cannot fix chronic indebtedness? We are not insulated from the euro; our economies are interdependent given that 48% of our trade is with the EU 27.

We should look to the future with some trepidation. The future will primarily be in the hands of business leaders, but the conditions for investment decisions need as much certainty as possible. All good business strategies have contingencies and reserves. The emerging challenge for the leaders of our Government is to demonstrate a contingency for the scenarios that are evolving in the eurozone.