Small Businesses

John Stevenson Excerpts

Thursday 28th November 2013 Commons Chamber

[Anne Marie Morris]

My hon. Friend makes a valuable point.

The next area that should be addressed is the VAT cliff: if a business’s turnover reaches £79,000, it is suddenly hit by having to find VAT. It will hardly want to increase prices to its customers by 20% overnight. We could have a ratchet mechanism or go to the EU, which would be perfectly possible. I urge the Government to do so, because we need a derogation.

The Government, but particularly the Treasury, should consider the removal of class 2 national insurance contributions. The self-employed have to pay two classes of contributions, and they find that incredibly confusing. We have a great record on corporation tax, but could we not do more, including by looking at a new, simplified flat tax for the smallest businesses?

We should talk not only about BIS and the Treasury, but the Department for Education, because education is critical to our having a true and sustainable supply of new small businesses. The Government’s introduction of financial education is a fantastic first step, but that is only one piece of the enterprise skill set that an entrepreneur needs.

It is great that apprenticeship schemes have grown under this Government, with 858,000 individuals participating in those schemes this year, but we need more. We need enterprise education for six to 60-year-olds. The World Economic Forum has recommended that there should be enterprise education in every country throughout the period of education. I suggest that we ask Ofsted, which looks at community engagement to measure what schools do, to consider not only that point but business engagement as well.

In relation to funding in the tertiary sector, we should also look at whether institutions are offering enterprise education, which I believe should be available whatever discipline students are reading. Although I applaud Lord Young’s comments about business schools taking a lead, we should remember that they are not the only such place. There is a role for universities to work much more closely with local enterprise partnerships, a point to which I shall return.

[John Stevenson (Carlisle) (Con)]

Does my hon. Friend agree that in many cases it would be beneficial for universities to be represented on LEP boards?

[Anne Marie Morris]

That is an excellent idea.

The Department for Work and Pensions also has a role to play. It has done some good things—it has delayed auto-enrolment for pensions, and we heard this morning that there may be a cap on pension charges—but the Work programme needs to offer the potential for proper self-employment. Research undertaken by the all-party group on micro-businesses has found that almost half of the businesses offering the Work programme did not have an adequate skill base to enable people to go back into work as self-employed individuals. The DWP could consider what it might do to help late returners. Organisations such as PRIME—the Prince’s Initiative for Mature Enterprise—help them to return to work, but there is very little else, although that matter is important.

Let us not forget the Department for Culture, Media and Sport. It has done some great things for businesses. High-speed broadband is absolutely critical, and the fact that there are now broadband connection vouchers for small businesses in 22 cities is very welcome. However, more is needed, because rural areas are really suffering.

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[John Stevenson (Carlisle) (Con)]

I congratulate my hon. Friend the Member for Newton Abbot (Anne Marie Morris) on securing this debate. She was absolutely right to highlight the importance of small businesses to the success not just of our national economy but of local economies up and down the country. Clearly, we all support small businesses and we all want to see them succeed. Indeed all large businesses were once small ones, and the big businesses of tomorrow are the start-ups and small businesses of today.

However, it is all very well to talk about support, but there needs to be practical advice and policies in place that give start-ups, sole traders and small businesses the full support that they need to prosper and succeed. Most businesses in this country are small. The vast majority of those people employed in the private sector work for small businesses. In many respects it is the owners and workers in those enterprises who are the unsung heroes of our economy.

Let me take, for example, a small business in my constituency of Carlisle, with, say, five employees. That business pays business rates, which helps the local and national economy, employer’s national insurance and corporation tax. It will collect VAT, and it may well pay VAT itself. It makes a huge contribution to the national economy. It also conducts business with other local enterprises, helping to create a more economically active local economy. In addition, it provides employment to five families, providing them with a standard of living and supporting their lifestyles. There is also often a wider benefit to the community. The business owner may well live in the area, contributing socially to the community through membership of other organisations. They are often on school boards, local charities and sports clubs.

My principal contribution to this debate relates to the role that local government should play in supporting small businesses. We should remember that the vast majority of business people will have absolutely nothing to do with central Government or Government Departments such as BIS and, with the greatest respect to the Minister, will probably never come in contact with a Minister. The most important people in government with whom business people are likely to come into contact will probably be from the local council, a local councillor or perhaps an MP.

I accept that much is made of the contribution, involvement and policy decisions of central Government. Central Government clearly have a significant if not central role to play. They set the general environment in which business can or should flourish and create a framework within which business will function. Nevertheless, we should not and must not underestimate the role that local government must play in supporting and encouraging small businesses to flourish and succeed in their area.

Local councils, local councillors and officers can make a substantial difference in a number of key areas. The obvious one is planning, where the local plan can be made as business-friendly as possible. The administration process should be as efficient as it can be and issues for small businesses should be highlighted early so that they do not incur unnecessary costs. The second such area is property ownership. Local councils are often property owners; for example Carlisle city council, believe it or not, has about £100 million worth of commercial property. It can make a difference by using that to good effect. The third area, as has been highlighted, is procurement. It is not necessarily the big contracts that matter; the small ones can make a real difference to small businesses. Local enterprise partnerships are also important. Councils have a role and are often on the boards, and LEPs need to be pro-business and to help develop policies that support small businesses in flourishing.

There are two other key points. We need small business support and engagement with those local professionals who can help businesses: surveyors, accountants, bankers and lawyers. Indeed, we should encourage relationships with the local chamber of commerce or the Federation of Small Businesses, with encouragement on business plans, finance, employment and other such matters that will help businesses to succeed.

Most importantly, local government can provide leadership. It can give local small businesses a sense that the council supports and will support them and that there is a vision and a sense of direction for the area of which the businesses are a part.

I want to highlight that the responsibility to engage with and support small business from a government point of view does not lie merely with central Government; it is important that local government plays its part.