Small Businesses

Lord Borwick Excerpts

Tuesday 3rd February 2015 Lords Chamber

[Lord Borwick (Con)]

My Lords, I thank my noble friend for raising an important debate. I declare my interests in several small companies. I have run several businesses. I have always found it quite thrilling: the chase after a new customer, a new product or a profit—that is real fun. The best thing that government could do to encourage business is to show that government understands business by running government the way a businessman would. The best thing to inspire business is to get the background of the country right, with low taxes and certainly with underspending, but also with respect for business and enterprise; a supply of smart, numerate school leavers who can read and write; and a culture that applauds success and encourages failures to try again.

The general health of the UK economy is improving, with good figures on growth and jobs. It is interesting, however, to find out exactly where that growth and job creation is coming from. Last year, a report by the Centre for Economics and Business Research, commissioned by Octopus Investments, found that 68% of employment growth and 36% of economic growth was created by just 1% of UK businesses. These businesses are all high-growth small businesses with an annual turnover of between £1 million and £20 million. It is quite remarkable: small businesses really are driving the economic recovery.

The Octopus Investments report suggests several ways in which we can further support the sector. One of those is allowing corporation tax deferral in order to provide more capital investment to support growth, along with other tax breaks. The report also suggests an overhaul of regional funding. I think that low, simple and predictable tax rates for all businesses are preferable to tax breaks and funding through grants.

We could also do more on business rates, which are often higher than rents, and employers’ national insurance, which stops firms hiring more people. Some good things have been done. If, however, we are to implement tax breaks, they should be targeted at high-growth small businesses.

Overall, when I read reports like that of the CEBR and take part in debates like this, I am heartened to be reminded just how entrepreneurial this country is. I want that to continue. A big part of it will be inspiring young people about the world of business. There are great examples of organisations looking to engage young people and interest them in business. Indeed, every year 180,000 young people in England and Wales take on a real business challenge with Young Enterprise, an educational charity that I support. Mentored by a member of the local business community, they find out first hand what running a business involves and how much fun it can be. I have had the pleasure of meeting many of the wonderful young people who have done well in their competitions, and I hope that they all go on to start a high-growth small business. Young Enterprise plans to be in 50% of secondary schools this year. It should be in all of them.