Economic Prosperity and Employment

Lord Cope of Berkeley Excerpts

Thursday 18th July 2013 Lords Chamber

[Lord Cope of Berkeley]

My Lords, the noble Lord, Lord Haskel, and I served together on the Select Committee on SME exports. We all warmly thank him for instituting this debate and, indeed, for the way in which he has introduced it.

My long-held view is that while economists argue continuously over monetary and fiscal policy, what really matters is whether SMEs flourish in home and overseas markets. That is what will decide whether our children and grandchildren live in prosperous times—I cannot help but mention that a fourth grandchild has just been born to my wife and me, to focus our attention even more on the future—but what the Government do about SMEs is crucial to the future.

Many business men and women when asked what government can do best for them say, “Keep out of the way”. I sympathise, but I do not agree. In 1967, I helped Lord Weatherill to write a pamphlet urging the Wilson Government to get much more involved in SMEs to emulate the small-business administration of America. A couple of years later, that Labour Government, to their credit and particularly to the credit of Harold Lever, took a few minutes off nationalising things and command and control and set up the Bolton committee on small businesses, the first authoritative study.

These days there is general recognition of the importance of SMEs. In support of continuity, to which the noble Lord, Lord Haskel, referred, the Government have taken over from their predecessors, UKTI—UK Trade & Investment—and it has grown in stature and effectiveness under my noble friend Lord Green of Hurstpierpoint. His energy, focus and constant travelling have contributed notably to UKTI’s success, and I am sorry that he is leaving later this year.

Since the debate on our SME report last month, my noble friend Lord Green has told us of two new initiatives: the Future 50 programme, to help 50 selected companies grow to the point of being listed on AIM, and the creation of an alliance of high-tech digital clusters similar to Tech City. These are excellent, but the first reaction of some will be: can the Government or their agencies successfully spot winners? We know that it is difficult to spot winners, not only for the Government but for the investment industry, whose job it is. The oldest mantra in investment, after all, is, “Spread your risk”. The reason is the difficulty of picking winners and avoiding losers. The Government should not be put off by that. If only some of the 50 succeed, it will be worth it.

Part of what SMEs mean when they say, “Keep out of our way”, is “Do not keep changing the rules”. The noble Lord, Lord Haskel, referred to this, too. SMEs understand that it is necessary to collect tax and regulate employment, health and safety, but they hate spending hours mugging up on the latest initiative that has just come to their attention.

The latest example is PAYE. From April 2013, or April 2014 for some small businesses, RTI—real-time information—has been introduced. New PAYE software —not all small businesses use software—triggers automatic direct debit payments for PAYE and national insurance on pay day. This is necessary to the smooth working of universal credit. But for the small business with few employees, some part-time probably, striving to remain legal over the minimum wage expressed in hourly rates and changing every October and/or bumping up against the lower earnings limit for PAYE expressed in weekly rates and changed every April, all this is complex and a complete overhead on top of actually selling things and earning a living for the employer and their staff, which is obviously what they have to do to succeed. It is all desirable, no doubt, and perhaps it will be simpler in the long run. Technology often works that way, but it does not mean that it is easy to grasp in the first instance. Changes for small businesses mean more hours of trying to understand new forms and procedures, simply to stay in line with the latest requirements.

My basic message is always that if SMEs flourish, the economy will flourish. We must nurture our entrepreneurs. Only some of them will succeed, but we need them to do so.