Small Businesses

Lord Leigh of Hurley Excerpts

Tuesday 3rd February 2015 Lords Chamber

[Lord Leigh of Hurley (Con)]

I congratulate my noble friend Lord Risby on securing this debate. As we have heard, small businesses are the lifeblood of our economy. Small businesses are often worthy of our praise, just as they are deserving of policy support from government. I declare my interests as recorded in the register of interests.

The register shows that I have started a small business which, 26 years later, remains a small business, sadly, but, none the less has a modicum of success and is not to be confused with my noble friend Lord Cavendish, despite the similarity of name. So when I heard the leader of the Opposition suggest scrapping our proposed reduction of corporation tax for large businesses to support a rate cut for small businesses, I realised that the right honourable gentleman had missed the point entirely and had misunderstood the mentality of the entrepreneur and the small businessman. The point is that many small businesses do not want to stay small. They want to grow, open new sites and stores, invest in new products and hire new staff. As anyone who is concerned with the state of the public finances—we on these Benches certainly are—will know, larger businesses pay more tax. I am pleased to say that this Government have recognised this point and introduced a succession of targeted measures throughout this Parliament to assist SMEs. We have seen entrepreneurs’ relief increase dramatically from £2 million a year to £10 million a year in tax-free lifetime gains—or tax at 10% for lifetime gains—meaning that founders and entrepreneurs can keep more of the wealth they have created by taking a risk and starting a new business.

As has been mentioned, the start-up loans scheme has helped thousands of individuals start their own businesses, often moving people away from welfare and into their very first new business. So far it has made 25,000 loans worth some £130 million. As the Federation of Small Businesses has said, this Government have made it easier not just to start a small business but to run one. In particular, the changes in the laws on employment tribunals and extending the qualifying period for unfair dismissal will help individuals by giving them more opportunities to enter the labour market, and mean that employers such as me will take a chance and employ an extra person. We in Britain now benefit from one of the most liberal labour markets in the developed world and one of the world’s most competitive tax systems. The Government have abolished Labour’s jobs tax, cutting employer NI by £2,000, meaning that 450,000 small businesses—that is nearly one-third of all employers—pay no jobs tax in the current financial year.

As has been mentioned, the Government are committed to helping further through their powerful procurement footprint, securing 25% of all spend going to SMEs. But there is still more to be done. I would welcome the Minister’s comment on the recent study by the Association of Accounting Technicians, which has found that the UK’s complex tax system is costing SMEs £9.9 billion a year in compliance, whereas it costs larger firms only £100 million. I note the work of the Office of Tax Simplification—it is looking to simplify our tax code to make it easier—and only encourage it to look particularly at aspects affecting small businesses.

As we encourage people to found and work in small businesses and make them cheaper to operate, we must help them grow by encouraging more investment and, of course, exports. It is pleasing to see the Prime Minister take a personal interest in that in promoting SMEs on all his trade trips. The enterprise investment scheme has been expanded to offer tax reliefs of 30% for the investor— up from 20%—and the aggregate limit to which a single company can take such investment has increased from £2 million to £5 million. Likewise, for companies using money from venture capital trusts, the individual company limit has increased to £5 million, as opposed to £2 million previously, and the maximum number of employees for eligible companies has increased from 50 to 250.

We have incentives and encouragement to start a business, help in bearing down on costs and policies to help businesses grow. This represents a joined-up approach to business policy, one that understands the complete business ecosystem and, in particular, the challenges and opportunities of running a small business that wants to grow and one day become a large one. It is no wonder that businesses are lining up to point out how disastrous a change of government could be for SMEs, the economy and the country.