Small and Medium-sized Enterprises: Government Policy

Lord Harrison Excerpts

Thursday 17th June 2010 Lords Chamber

[Lord Harrison]

My Lords, many of your Lordships have run successfully big businesses. That is why I am encouraged to welcome my noble friend Lord Sugar, with his experience of small businesses, and the two succeeding speakers who also have knowledge of small businesses and the field of being hired and fired. If there is one thing that I could bequeath the business community in the United Kingdom, it would be the American approach, where to fail is not to fail. If you fail in one small business and fail in the next, you win in the one succeeding. If we could inculcate that view, we would go a long way towards establishing an even more successful small business community.

Labour’s record has been good; the noble Lord, Lord Haskel, detailed it well. Chancellor Brown had 10 years of stability, which is so essential for small business to grow. At the time of the global financial problems and instability, he it was who encouraged the G20 in 2008 to co-ordinate the stimulus which I think has worked and been successful. Indeed, there is evidence that it is working, albeit that the recovery may be fragile. That is why I say that the Government must be careful not to introduce precipitate, insensitive cuts which would cut off the recovery and, in turn, result in a double-dip recession. They should not resort to fondue economics, forever dipping in and out of recession. What businesses require above all is stability, because it gives SMEs the opportunities to plan, to invest and to expand. For 10 years, we had that stability, and we must recover it.

Labour’s record is good. There were 4.8 million private sector enterprises in the year for which they were last counted. That was 2.2 per cent higher than the year before and the highest number of small businesses since 1994. It is interesting that the stimulus in the last two years of the outgoing Government has resulted, perhaps unexpectedly, in fewer people being unemployed. There were threats of 3.5 million people being unemployed; the figure stands at just under 2.5 million. I think that that shows that the one thing that small businesses wanted to cling on to was people, relevant staff, who would lead them forward once the recession had been left behind. The Sunday Times reports that small businesses in Scotland were prepared to ban the use of first-class stamps or to phone around suppliers to cut by 10 per cent electricity, phone and internet costs, but they were determined to retain key workers, because small businesses rely on people, whether they are entrepreneurs or those who work with them. I ask the Minister to say what HMG can do to encourage the retention and expansion of the skills of small business people.

I want to be positive today. We have a new, alliance Government. This offers new opportunities, not least because the two parts of the alliance have had to bring together their ideas to form the coalition agreement, which contains a good section on small businesses. It is also good for our party after 13 years to have a period of reflection and renewal. We can be proud of what we have done, but we, too, need new ideas. We are therefore in a state of flux where new ideas can flourish. Where should they not flourish if not in small businesses?

I have analysed the coalition programme to see which parts are attributable to which of the two parties. It is a bit like dissecting the Beatles’ songs to see whether it was Lennon or McCartney who was the major contributor. The plangent bits are more Tory; the softer bits are more Lib Dem. That is illustrated in the vexed question of small business taxation, IR35, which has plangent elements and softer bits. I would be interested to hear the Minister dilate on the coalition programme and the elements of it which refer to small businesses.

I offer the noble Baroness, Lady Wilcox, my welcome. I know that she will be a feisty campaigner for small businesses and am very pleased that she is coming to address the Genesis Initiative, outlined in Britain’s Economic Revival. I shall raise some of the ideas expressed there. One initiative is that there should be a small business person within the Cabinet. Would she reflect on that? The legislation that applies to small businesses covers the whole field of government policy, and we need someone at the centre to see and understand that. Also, the noble Lord, Lord Taylor, has just mentioned that public sector contracts should be made more available to small businesses. That is a good idea, but how do the Government plan to achieve that in not too mechanistic a way—say, 25 per cent?

I have given the noble Baroness notice that I wanted to raise the question of succession planning. Too many small businesses fall by the wayside for the lack of having someone to take up the cause of the business when the proprietor retires. Certainly, when I was in Brussels speaking about small businesses, I remember the Commission producing a very important document highlighting that. Does the Minister have any figures on that? If I may be bold enough to suggest this to my noble friend Lord Sugar, it would be a very interesting area to explore, because we lose businesses that are absolutely viable for the want of someone who is in the know, who can take up such businesses and carry them to new heights.

I should also like the Minister to examine the world of audits, which my noble friend Lord Haskel mentioned, with regard to his period of looking after small businesses. Much was done by Labour to improve the situation, but a recent article by Anthony Hilton in the Evening Standard says that most audits are useless. I would not say that, but most audits coming from the big four on big business are questionable in the sense that they are so guarded and hedged that they do not provide proper information. However, a good audit for a small business is crucial for a better understanding by the entrepreneur of the business and its prospects. What ideas do the Government have for improving what I would hope could be meaningful audits that actually help the business to grow?

I want to mention red tape. The noble Lord, Lord Taylor, mentioned the “one in, one out” approach to red tape, but that can be naive and time-consuming, as well as too mechanical. We do indeed want to reduce red tape to ensure that it becomes the framework in which the invisible hand of the market can operate. However, you need a Government to frame and police the market. We have too little policing of the markets that are established, and we need to be careful about that.

I shall conclude on the European Union, and the biggest ambition, which I know that the noble Baroness, Lady Wilcox, will share with me, of achieving the single European market. If we were able to achieve that market, and make it viable for British businesses to use their expertise and energies in it, we would give them a wonderful opportunity to succeed. I shall give an example that the noble Baroness, Lady Wilcox, might like to take up. According to GE Capital, 60 per cent of UK businesses that export into Europe still only export and invoice in sterling. That is not good enough when you are dealing with customers.

I conclude by saying that I am very grateful to the noble Lord, Lord Sugar, for securing this debate. I hope that it can be a productive debate and flow with ideas and that the Government in both their parts can be athletic in responding to the genuine flourishing of 100 ideas, which I hope we hear today.