Enterprise Bill [Lords]

Iain Wright Excerpts

Tuesday 2nd February 2016 Commons Chamber

[Mr Iain Wright (Hartlepool) (Lab)]

It is a pleasure to follow the hon. Member for Warwick and Leamington (Chris White), my colleague on the Business, Innovation and Skills Committee.

In the main, notwithstanding the concerning revelations about future unknown clauses relating to Sunday trading, this is not a bad Bill. There is a bold and lofty ambition to the rhetoric accompanying the Bill, which is, I would suggest, somewhat at odds with reality. I think even the Minister would have to accept that the impact of the Bill will be very marginal in promoting a step change to improve the productivity, profitability and competitiveness of firms.

It is excellent news that the number of UK business births has increased to 351,000—the highest number since comparable records began in 2000—and I am particularly pleased that the north-east has the highest proportion of new business starts, albeit from a smaller business base. The increase in the number of start-ups is a commendable achievement, and it would be churlish not to acknowledge the Government’s positive role in helping to bring it about.

The Government hope that the Bill will continue that trend, stating that it

“will cement the UK’s position as the best place in Europe to start and grow a business”.

I support that ambition, but I doubt it will be achieved. Although they have been successful in encouraging business start-ups, they have been less so in facilitating business survival and growth. It is difficult to see how the Bill will change that. In the same period as we saw a record number of business births, we also saw a marked increase in the number of business failures: the number of business deaths increased to 246,000, which was three times the rate of business births.

That could be seen as the natural churn of a dynamic economy—it is a function of a market that businesses are born and naturally die—but business survival rates are worrying. The UK does well on firms that survive their first year in business—the average of 93% is well above the EU average of 83%—but the more sustained survival rate for British enterprises is poor. Less than 40% of UK companies last more than five years. Only Latvia, Slovenia, Portugal and Lithuania fare worse. A failure to last for any length of time limits British companies’ ability to scale up and become more resilient, innovative and outward-looking, thereby taking market share, winning export orders and employing more people.

Sherry Coutu’s report on scale-ups showed that a 1% growth in firms scaling up in Britain would create an additional 238,000 jobs and add £38 billion in gross value added to the UK economy. Similarly, the recent report by Octopus Investments on high-growth small businesses showed that a tiny number of firms—22,740, or just 0.43% of the business stock in the UK—accounted for an unbelievable one in three new jobs in 2014 and 20% of all growth in the UK economy. These firms have the potential to do so much more, yet one in four finds it difficult to get the funding it needs and three quarters say that lack of access to funding is a significant barrier to growth. The problem of access to finance remains a pertinent issue for firms, which is why the Select Committee has launched an inquiry into it. If the Bill’s purpose is to make the UK the best place in Europe to grow a business, why does it not tackle access to finance? If the Government are serious about ensuring growth, why does the Bill not put in place measures to facilitate an expansion of scale-ups to power employment and economic growth?

A recent report by the RSA said that the complexities of the UK tax system, a lack of bank lending and the cost of running a business were the top reasons for failure and early corporate death. That being the case, why do the Government consider tax changes to be out of the scope of the Bill’s deregulatory activities? Given that complexity in the tax system is seen as a drag on economic and business growth, to the point of often fatally overwhelming firms, why is tax not considered part of the business impact targets? The Government propose to make small businesses file their tax returns on a quarterly basis. That will have an enormous impact on small firms and place a regulatory burden on business. Should that sort of thing not be within the scope of the Bill?

[Richard Fuller]

I thank the hon. Gentleman, a fellow member of the Select Committee, for giving way. His Front-Bench team talked about the Bill being more ambitious, and he is talking about cutting taxes and looking at ways to create more innovative financing. May I urge him to table his own amendments, from his own experience, so that the Government can come up with an even better Bill?

[Mr Wright]

I thank my colleague from the BIS Committee for his intervention. We share the same view about freeing businesses from unnecessary regulatory burdens. I want the Bill to be more ambitious and to bring about a step change. I mentioned the business impact target in clause 14. Is the Minister aware that, as drafted, the Bill imposes an additional cost on businesses? The accompanying impact assessment states that the best estimate of the cost of the business impact target is £10.5 million a year, with “no monetised benefits identified”. How can she justify that for a Bill that is intended to free up small businesses?

On taxation, small and medium-sized firms believe that the rules are applied rigidly against them, and that the larger and more powerful a company becomes, the more the payment of UK tax becomes almost an option—something like a casual thing to consider. That bullying and intimidation also applies to payment of suppliers by large companies. In that regard, the introduction in part 1 of the small business commissioner to handle complaints by small businesses about payment matters is a welcome step. I am pleased that the Government are establishing that.

As has already been said in the debate, the commissioner’s powers are rather narrow. Part 1 grants the SBC the power to provide only “advice and information” to small firms, rather than enforcement powers. The commissioner has the capacity to consider in the region of only 500 cases a year. I question whether that is appropriate, given the huge, often endemic and structural problems certain sectors face with late payment. As the hon. Member for Huntingdon (Mr Djanogly) mentioned in a good speech, the commissioner could be too limited in scope; something akin to the Small Business Administration in the US may be more appropriate. For over 60 years, the SBA has been a consistent part of the small business support ecosystem, providing funding, access to public procurement and mentoring to small businesses. Have the Government considered something similar here?

I shall finish with some comments about clause 21 and what can be defined as an apprenticeship. As the hon. Member for Warwick and Leamington, who sits on the Select Committee, said, this is a welcome step. Yesterday, we published our report on the Government’s productivity plan, and we welcome that part of Government policy, although we are slightly more critical of other parts. However, there is a risk. The Minister will want to do all he can to ensure that the 3 million apprenticeships target will be met by 2020. In that context, there may be a temptation to double-count or rebadge apprentice numbers. Is that still possible under the Bill? Subsection (2) of new section A11 in clause 21 states where employers do not commit an offence if they describe a non-statutory apprenticeship as an apprenticeship. Will the Minister reassure me that only statutory apprenticeships will be included in the 3 million target?

In the main, this is not a bad Bill. It will help in some ways around the edges, but it will not provide the step change that small businesses need to scale up.

--- Later in debate ---

[Alberto Costa]

I welcome any measure that cuts inappropriate regulation, whatever the source of that regulation.

Considerable progress was made under the last Government through initiatives such as “one in, two out” to help businesses achieve regulatory compliance while not hindering growth. My own local enterprise partnership, covering Leicester and Leicestershire, served as a pilot in various initiatives to strengthen the relationship between businesses and regulators, which ranged from considering ways of improving information-sharing between regulators to working with groups such as the Federation of Small Businesses and chambers of commerce. That has been a priority, and we have seen some early successes which the Bill will undoubtedly further encourage.

According to the 2015 Leicester and Leicestershire business survey, 94% of employers saw regulators as professional and courteous, but just 49% felt that they were consulted by regulators when developing policies. [Interruption.] Opposition Members might want to listen to this. They might learn a few things about the importance of the Bill.

Those findings showed that there was considerable scope for further joint working and improvements that might be made by means of the Bill. [Interruption.] “Listen and learn” is the key today. [Interruption.] Opposition Members are more than welcome to intervene.

The Small Business, Enterprise and Employment Act 2015 commits future Governments to publishing, and then reporting on, their performance against a deregulation target, the business impact target. Little has been said about that by the Members who are now chuntering from a sedentary position.

[Mr Iain Wright]

I have just mentioned it.

[Alberto Costa]

The hon. Gentleman is more than welcome to intervene and comment on its benefits if he wishes to do so.

The Bill will extend the business impact target to include the actions of statutory regulators, and will ensure that they must carry out assessments of the economic impacts on business of any changes in their regulatory practices or policies. That will provide a wider focus for the Government to reduce regulatory burdens on businesses, thus enabling them to free up resources and boost productivity. It will ensure that there is even greater transparency in relation to the impact of regulation on business, as opposed to the opaqueness that we saw during the 13 long years of Labour misrule. It will enable regulators to contribute to the Government’s deregulation target of £10 billion of regulatory savings during the current Parliament, and—very importantly—it will give regulators more incentives to design and deliver policies that better meet the needs of British business.

Bringing the activities of regulators into the scope of the business impact target will ensure that the impact imposed on business by regulators is routinely measured and reported on—a move that was scorned by Opposition Members a matter of hours or even minutes ago. It will increase the clarity of the system, and give businesses greater assurance that any costs and benefits that are imposed on them will be thoroughly assessed. Legislating to extend the business impact target will most comprehensively achieve the increase in transparency that I have mentioned, and will bring about the reduction in burdens on businesses that Conservative Members wish to achieve. It represents not a small ambition, but a significant ambitious development of previous policies designed to improve the ways in which regulations are enforced.

This Bill will help to make sure that our United Kingdom is the best place in Europe to start and grow a business, and that people who work hard and start and run a business have the opportunity to succeed without inappropriate regulatory burdens suffocating their much needed enterprise.