Self-Employment

Glyn Davies Excerpts

Tuesday 24th January 2012 Westminster Hall

[Mark Garnier (Wyre Forest) (Con)]

I thank my hon. Friend the Member for Watford (Richard Harrington) for his helpful and useful comments. As he said, I will speak about the slightly more tangible and gritty problems facing businesses. Before getting into the meat of my speech, I am struck by how many MPs are in the Chamber and the fact that I cannot see one who has not been in business. It is remarkable that the Chamber is so full, although I am sorry not to see more support for the shadow Minister with responsibility for small businesses. It is incredible to see so many politicians here, all of whom have extensive business experience.

As my hon. Friend said, I want to speak specifically about taxation, regulation, access to finance and cash-flow management. For the purposes of clarity, we are interested today in self-employed people and those who employ fewer than five members of staff—small businesses and micro-businesses. It would be wrong to start my speech without highlighting some of the initiatives that the Government are already taking.

On finance for businesses, the Government are introducing measures to increase the availability of equity finance through venture capital trusts and improvements to the enterprise initiative scheme. They are making regional growth fund allocations for business opportunities and addressing tax initiatives, such as rolling over capital gains into new venture funding. The national loan guarantee scheme is seeking to push debt finance further down the line, and the emergence of community finance organisations, which my hon. Friend the Member for Mid Norfolk (George Freeman) highlighted, is providing locally based informal financing opportunities.

On helping businesses with advice, my hon. Friend the Minister has recently announced three new websites. The Business Link website has an information section offering help on a range of business-related issues, including how to start up a new business. The “mentors me” website offers an opportunity not just for new businesses to find business mentors, but for business people to provide mentoring services. My hon. Friend the Member for Meon Valley (George Hollingbery) made the very good point that setting up a business is tough and that having the benefit of the experience of business people who have learned from their mistakes and can impart their wisdom to new businesses is incredibly important. Websites such as “mentors me” are a way of disseminating that information.

Finally, the improved Business Link website has a wide range of information on how to finance and grow a new or expanding business. However, were I to stand here praising the Government’s glorious achievements, many though they are, as I am sure all hon. Members agree, the Minister would have nothing to say, so I shall turn to some of the problems facing businesses. I hope that he will address some of them and explain how the Government can help and thereby reinforce the process of developing part of the economy that has so much potential for growth and is so liberating for a huge number of people.

I shall start with taxation. No one wants to pay tax, but if we all want to enjoy the wealth of services that the Government provide and to sort out the problems that we inherited, we accept that we must make a contribution to tax. But as we know, it is widely reported that the UK tax system is the most complex in the world. Whether that is true is a moot point, but irrespective of where we are in the ranking of complexity, the fact that we have tax complexity at all is completely at odds with any sort of entrepreneurial spirit that we may want to foster. The last thing a bright, young and enthusiastic business creator wants is to have that entrepreneurial spirit crushed by the dead hand of taxation regulation.

There are various simple answers. On national insurance, for example, the Chancellor has not only put in place a policy to help small businesses by giving employers a national insurance holiday for the first 10 employees, he is investigating doing away with that pointless and superfluous tax. That is definitely a noble direction, but things such as the accounting period for national insurance and PAYE and the fact that two forms must be filled in doubles the bureaucracy facing small businesses. Something as simple as dealing with that would be a quick fix.

We are familiar with the Federation of Small Businesses, which is an incredibly rich source of information on issues facing many small businesses. However, for micro-businesses and the self-employed, there is little specific data. The FSB definition of a small and medium-sized business is one with up to £25 million turnover and 250 employees. I do not know about other hon. Members, but certainly in Wyre Forest anybody bigger than that is quite a large employer locally, and there are few of them.

[Glyn Davies (Montgomeryshire) (Con)]

I agree from a standpoint of running a micro-business myself: I have been a farmer and my wife has been a restaurateur. Regulation, and the fear of it, is particularly damaging to a micro-business, because the individual running it simply has to have the capacity to deal with all these things. In a larger business, often other people can deal with such matters, but it is typical of the small and micro-businesses that we meet for one person to do so. That is incredibly difficult. Fear of regulation and not being able to deal with health and safety issues are probably more of a deterrent than anything else.

[Mark Garnier]

I will come to the regulatory burden in a minute. My hon. Friend is right. I have seen a turkey farm that has had to comply with huge industrial reporting requirements for toxic chemicals, because turkeys produce ammonia, but it also has to prove that it is not producing a great range of other chemicals. These are the unintended consequences of over-bureaucratic regulation.

The FSB provides a great deal of helpful data on business attitudes. Sticking with the taxation issue, 60% of FSB members—two thirds of businesses—complained that the UK tax system is not only too complex, but has a negative impact on their ability to take on more staff and expand.