Businesses and SMEs

Lord Palmer of Childs Hill Excerpts

Thursday 6th July 2017 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the noble Lord, Lord Leigh, for recognising the place that businesses, in particular small and medium-sized enterprises, play in the success of the economy. He was absolutely right to draw attention to this and we all recognise his successful business career, which adds to the lustre of this House. But recognising the contribution made by SMEs is not the same as helping them to maintain their place and to achieve more in order to help both themselves and the country. Our nation’s prospects depend in no small part on the strength of our small businesses. My question for the Minister is this: do the Government really listen to the concerns of small and medium-sized enterprises?

I was pleased to hear the words of the noble Baroness, Lady Neville-Rolfe, who sent a nod of appreciation for what small businesses do and acknowledged the non-appreciation by Governments of all colours, although I am not sure that I need to go as far back in history as the Long Parliament of 1640 to decide on the policies of the present Government. As the noble Baroness pointed out, sometimes it is about embracing the novel idea of asking small businesses what they actually want. I do not think Governments do—I spend my life advising small businesses—and I do not think that we ask the right questions. What small business wants most of all is certainty. Business wants to know what is going to happen next week, next month and next year. At present, with the prospect of Brexit in one form or another, the uncertainty is worrying many small and indeed large businesses.

The noble Lord, Lord Leigh, talked about there not being government spending because business is better at it than the state, something we have just heard about again. But my analysis is that it should be about a combination of the two. Neither one is either good or bad; it is about the combination. Too often both in local and in national government we talk about market forces. Market forces are fine, but they are not the be-all and end-all. In local government, which has been referred to in the debate, we have a situation where outsourcing has become almost the norm, but it does not necessarily deliver benefits for the local community or indeed for the business of a local authority.

The noble Lord, Lord Leigh, mentioned that Goldman Sachs had given a donation to the remain campaign, so obviously it supports staying in the European Union. I have a great deal of respect for Goldman Sachs and what it knows about business. Unhappily, events may show that its advice was right. The noble Lord, Lord Leigh, went on to mention many other things, most of which I agree with. Apprentice schemes are the right way to go, and education has been mentioned by other noble Lords. Really, it should not be just university or just apprentice schemes. There should be the right course for the right people, which business can take advantage of.

My noble friend Lord Shipley spoke about starting up business and about start-up allowances. One of the policies in the Liberal Democrat manifesto, which sadly we are not in a position to implement, was these start-up allowances. When you go to start up a business your main worry—as we heard from the noble Baroness, Lady Lane-Fox—is how you pay the rent that week or keep your house together. One suggestion is that a sum of, say, £100 per week for six months could be available for those who have the temerity or experience to go and start up their new business. When you start up a business, as I did at one stage, there is no money coming in. We need to do something to appeal to those entrepreneurs.

I use the word “entrepreneurs”. The noble Lord, Lord Leigh, mentioned that we have entrepreneurial relief. We also have entrepreneurial visas. During the general election, I was on a panel with small businesses for a successful debate. Someone from the audience who had an American accent said she had come over here on the entrepreneur’s visa. She had—and still has—a successful business but was having extreme difficulty in renewing that entrepreneur’s visa. That needs to be looked at.

The noble Lord, Lord Leigh, spoke about aggressive tax planning. I believe the Government are beginning to look towards those people who set up such schemes as being culpable, as well as those who use them.

We also spoke about community activity and the difficulty for small companies in doing that. It is all very well to talk about community activity, but if you are just on your own or with two or three people—perhaps even up to 50 people—you might want to digress from your actual business to do community activity but you do not have a department set up for it. We must find ways to bridge that gap.

Plastic bags were used as a great example of success. Indeed that was successful but it is strange that the Government have not looked beyond the large companies. If you go into any smaller supermarket, grocer’s or whatever, they load you with plastic bags. You say, “No, I don’t want them”.

The noble Baroness, Lady Dean, raised another aspect in this debate. When we talk about business, small or large, the building of homes is one such business. It is there, employs people and helps the community in all ways. The ability of housing associations to contribute to that is to be admired. She also talked about education, as did the noble Baroness, Lady Rock. If we are talking about small business, we need an educated workforce that knows how to do business in any way. We have not managed that. My noble friend Lord Shipley spoke about social benefits being higher up the agenda. The Government need to promote that.

My noble friend also spoke on a matter I raised in 2015, 2016 and 2017 in your Lordships’ House: the legislation passed in the 2015 Budget insisting that all companies do quarterly digital tax returns. That in fact means they must do five tax returns, as they do an annual return, too. I link that to what the noble Baroness, Lady Lane-Fox, spoke about so ably: the digital economy. Many of those small business people do not have the ability to do these returns. I speak as an accountant; they will employ outside accountants to do five digital tax returns a year. This is an imposition on those businesses, one that cannot be for the benefit of those businesses, the country or the economy. The other side of that coin is what the noble Baroness, Lady Lane-Fox, spoke about: the lack of skills in business. The digital economy is the way forward. It is no longer a niche but is a big industry, whether that is cyber or any other aspect of the digital economy. That needs to be pursued.

The noble Baroness, Lady Bloomfield, quoted Maimonides. When I walk past his statue in the square in Córdoba, I will think of her words in your Lordships’ House. That brings me to some other quick points. Export is the life-blood of this country. Do the SMEs have the expertise to contribute to that? How much more expertise will they need with a hard or even soft Brexit, when we find ourselves outside the single market and customs union? What are the Government doing to help SMEs through this maze of world trading tariffs and the new experiences of export guarantees and tackling EU regulations from outside? Big businesses will find that a problem; small businesses will find it an insuperable barrier. That will be even more critical post Brexit, when we depend more on a competitive domestic economy.

Then there is another aspect of Brexit: freedom of movement. Skills are needed, very often from outside these shores. We worry that those skills will be turned off. The noble Baroness, Lady Lane-Fox, cited the problems in the digital economy. That is a good example of those skills we need. One-fifth of small and medium-sized enterprises have EU citizens on their staff. There is also a great need to help the retention of international students in this country. Not much has been made of this but there is also a great need for the British Business Bank and access to it by small businesses. On corporation tax, we need to look not so much at reducing or increasing the rate by 1% or 2% but at having a rate for smaller businesses so that they can earn up to a level at a smaller rate of corporation tax and know the certainty of what is happening.

Finally, I hope the Government will look at a systemic review of the business rate system. At the moment, particularly on our high streets in London with which I am most familiar, small shops will be required to pay usurious business rates which will mean their closure and the opening of more charity shops, bookmakers—I should say turf accountants—and office premises. Their business is taken up by the warehouses opening on industrial sites which pay business rates at a far lower level. We need a systemic review of that. Once again, I thank the noble Lord, Lord Leigh, for initiating this debate.