Small Companies (Micro-Entities’ Accounts) Regulations 2013

Lord Cope of Berkeley Excerpts

Tuesday 26th November 2013 Grand Committee

[Baroness Donaghy (Lab)]

First, I welcome anything that makes life easier for small businesses. I have often felt that the definition of small and medium-sized enterprises that fits in with the European definition is somewhat misleading in our country because a medium enterprise as per the definition would be regarded as quite a large company in the UK, so to recognise micros in this way is more than welcome.

I have a question for the Minister that I suppose relates to the flexibility of the definitions of turnover, balance and staffing, referred to by the previous speaker. I hastily looked through both the impact assessment and the regulations and could not find anywhere how the updating of the turnovers and balances will take place. What length of time is considered reasonable? I believe that the issue of part-time equivalents is quite important, particularly for companies of this kind that might start off in a fairly informal way. It is actually written in to the regulations, which I presume means it is quite inflexible.

[Lord Cope of Berkeley (Con)]

My Lords, I just wanted to welcome this provision altogether. As my noble friend the Minister said, in some respects it is a first step that many people—myself included—have been urging for a very long time. It is particularly welcome because it flows from work done by the European Union and in Brussels, where there has long been an initiative to improve matters for small firms. “Think small” has been the watchword. It has not produced an awful lot of actual benefit, but this provision will produce a worthwhile benefit to a lot of very small companies.

I have no interests to declare in this matter. The only company of which I am a director is a charity, and, as my noble friend said, charities are excluded from these regulations. I think that is correct because, after all, one has to consider who has an interest in looking at the accounts. Obviously, those who have an interest, even in very small companies like this, include the shareholders, the employees and the others involved, as do those who might be thinking of lending them money or otherwise advancing credit to them and doing business with them. In the case of a charity, it is those who give money to the charity who have the biggest interest in ensuring that the money is spent on the charitable object that they have in mind when they give the money. Therefore, I think it is right in this statutory instrument to exclude charities, and I welcome it.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, this side also welcomes the statutory instrument. I will make one comment and then pose a number of questions. First, my comment may be slightly tongue-in-cheek, but this is all about helping very small companies. The impact assessment identifies transitional costs of, I believe, just below £500,000 for businesses and £200,000 for the public sector, which is very good as they are very small numbers. Therefore, it is perhaps a surprise that it took BIS 24 pages to be able to get to that. I hope that it was not really expecting all those small companies to be able to read all that and submit views. I should think that it took up a fair degree of civil servants’ time to go through the document that I now see arranged in front of us.

Some of the questions that I should like to pose are quite important, if not substantial. First, why was the consultation only three weeks long? That seems to be in breach of Cabinet Office best practice, particularly given that, in the words of the noble Viscount, Lord Younger, serious concerns were raised. Indeed, the explanation shows that the responses were only broadly supportive, so three weeks feels like an unnecessarily rushed job.