Businesses: Small and Medium-Sized Enterprises

Lord Stevenson of Balmacara Excerpts

Tuesday 6th May 2014 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the noble Lord, Lord Cope, for securing this debate, which has been very interesting. It is obviously just my luck to follow the best speech. I seem to have a habit of finding myself in the list immediately after the noble Lord, Lord Grade of Yarmouth. This time I am going to turn it back on him, as he did not tell us whether the guy got the job, and without that I think that his story lacks a certain amount of credence. Nevertheless, he made a very good and important point which had not been made before—that somehow in our British make-up, we do not yet recognise that salesmanship ethic. I do not believe that this is a political point. We do not really understand what it is that people who trade do, nor do we embrace them. We also have problems with engineers and others who are at the heart of what we can make out of our society in terms of the growth, jobs, employment and prosperity that we hope will flow from that. That is a good context for what we have been listening to today.

I thank the noble Lord, Lord Cope, for getting us into the debate, although I understand that the earlier credit has to go to the noble Lord, Lord Popat, for suggesting this proposal. As my noble friend Lady Cohen said, this seems to be a report that gives and gives—which is nice as we have had a second chance to come back and look at the issues that were raised. They are important and I agree that they are not party political; these are issues that we can all get behind and support. The original report had a government response, and what we are looking at, in a sense, is that response. What have the Government made of the original report and how much has changed since then? We are grateful to the Government for doing that and particularly to the noble Lords, Lord Green and Lord Livingston, whose work in this field we all applaud because they have put a huge amount into it. Having done his stint the noble Lord, Lord Green, is now able to reflect and give us the elder statesman-like view, which was very nice, while I am sure that the noble Lord, Lord Livingston, has much more to give us.

However, one of the themes that comes through is that we do not really focus enough on SMEs—and it is “S” and “MEs”, because there are differences. As my noble friend Lord Haskel said, some of the original recommendations have not really picked up on some of the particularities in the report. In many cases, there is not quite enough detail on what we are doing. We are a trading nation and we cannot survive in the modern world without generating a much greater level of exports than we currently have. It is important, as the report makes clear, that attention is paid to small firms. That is not just because they export less while larger firms export more, which is obvious from both the macroeconomic and microeconomic side, but because of the potential that they have, being smaller, to grow and employ more—and to generate more wealth.

My noble friend Lord Giddens mentioned the different world that we are in: the age where we have the internet of things as well as the internet of ideas. As we know, in that world there are often real opportunities for small to be big without having to go through some of the difficulty with growth and the other difficulties in earlier traditions of the way in which the world of commerce and business works. I think we are agreed that there is a need for strong government intervention, working with partnerships and existing business organisations. As I have said, it is not a party-political point and we support that.

There are perhaps four areas which I would like to pick up because the list that the noble Lord, Lord Livingston, has to respond to is very long and covers a wide range of things. I would not want to particularly burden him but it might help him if I signposted the areas where there is some need to make points.

The noble Lords, Lord Cotter and Lord Green, and my noble friends Lady Cohen and Lord Haskel picked up on the need for more integration at a local level between SMEs, local enterprise partnerships, chambers of commerce, UKTI and UKEF—a point that was picked up originally in the report by the noble Lord, Lord Heseltine, No Stone Unturned—to ensure that the whole group of people who are involved in the process of getting exporting happening has a fructifying base of activity within those groups. It would be interesting if we could understand a little more about that, so perhaps we could have a comment from the Minister on what UKTI has been able to do with UKEF, the chambers of commerce and LEPs in relation to that work.

There is a point related to that which has been touched on only a couple of times but it is important: there has been a growth in the number of international trade advisers. My noble friend Lord Haskel asked for a bit more information about that. I tried to look this up beforehand—I keep bumping into people who say, “I’m off being a trade ambassador these days”, and, as has been said, they are from all parties and none—and it would be useful to have a list of them but I could not find one anywhere. I wonder if in fact it is published and perhaps it is just me who cannot find it. What exactly is the task that those ambassadors have and what performance indicators are they measuring up to? I am sure that they are a good thing but I lack some detail, and this subject was picked up in the report as something about which more information would be available.

The bulk of the comments received today have been on recommendations 5 to 8 about access to appropriate finance. It is a point that reaches way beyond the main focus of the report, which is about export, because it is also about import substitution, which my noble friend Lord Giddens spoke about, as well as general activity within the domestic market. Why are we so bad at financing those who seem to be able to generate wealth, who have full order books and who want to grow, in a way that will allow them to do that? The latest report that I was able to find was the NAO report on the combined Treasury and BIS work in relation to SMEs. It is interesting that that report comments that there have recently been reports about the flow of new bank term lending to SMEs. The latest figures show that it fell by 23% between 2009 and 2012; that 70% of SMEs whose loan applications are rejected can find no alternative finance, and the younger and smaller firms are obviously the worst affected by that; and that—this is quite an important figure—the funding gap, which the NAO defines as the difference between the funding required by SMEs and the funding available, is about £10 billion to £11 billion, and it may reach about £22 billion by 2017. The point being made by the NAO is that there are significant problems in this area. Not surprisingly, it concludes that there are a lot of data on SMEs seeking finance,

“and there has been a renewed focus on research into SME financing. Many of the individual schemes have been delivering against their individual targets. But BIS and HM Treasury have not managed the range of initiatives sufficiently as a unified programme, and have not clearly articulated what the schemes are intended to achieve as a whole, given the resources available. As a result … at present, value for money has not been demonstrated”.

That is a fairly critical point. Time has moved on since that report in 2012, but I would be grateful if the Minister could pick up on that point because I think we need a new fix on some of it.

It is easy to be critical about that, although clearly there is good work going on in UKEF, but maybe we need some new initiatives—perhaps more support for bodies such as the British Growth Fund, which seems to have been doing good work in getting companies from an early stage of development up to the next phase where they are developing greater coverage domestically and exporting. What about, as has been suggested in some areas, a tax break for those who wish to export? We currently have tax breaks in the entertainment industry, for instance, which is a good thing for film, high-end television, animation and now for games, but there is no tax break for exporting. I wonder if that is something that the Government might look at. I am sure that the Minister will say that that is a matter for the Treasury and not something that he could possibly dare comment on, but I hope that it might feed into thoughts in those areas.

The point made in recommendation 14 about language and cultural differences is one that often throws up problems for the relevant bodies. My noble friend Lady Cohen mentioned this and had a solution for how perhaps to get people up to the first stage of this, but there is a point in the original report asking for a language management strategy. I wondered how much progress had been made with that.

The noble Lord, Lord Storey, talked about skills training and particularly about apprenticeships. It is always important to ensure that the training elements that are required to see the current generation supported but also to help future generations to grow are in place, whatever the size of the organisation, so perhaps we could have some comments on that.

The final item in my list—although, of course, there are many others—is intellectual property. It was originally raised by the noble Lord, Lord Cope, and is something that I have had to spend some time on as it falls within my brief in my BIS activities.

There has been a significant number of changes in the way that the Government have approached intellectual property in the UK, and there are limited opportunities to make changes because we are subject to substantial international agreements, particularly European ones. That is not necessarily wrong, but what is wrong is the feeling that there is a lot you can do on this. I suspect that the grounds for movement are very small. However, I worry that the changes that are being brought forward are largely changes for change’s sake rather than part of a coherent approach. Given what has been said about the future of IP and the internet of things as well as of individuals’ thoughts, we need to get intellectual property right. I do not think that it needs a root-and-branch review, because there is limited scope, but it would be helpful to think again about the balance between innovation, the premium that you need in order to get people to innovate, the IP framework that is required to protect that innovation and the reward that comes from it. I wonder whether life plus 70 years is the right tariff for that equation. That is a big question. The original arrangements for design rights, which limited them to a more patent approach, have a lot going for them. It is a pity that we have seen government proposals moving away from that in the past couple of years. This is not an easy area, but we have to get our thinking absolutely right on IP and the way forward if we are to make a success of the new world.

There are a number of points that I am sure the Minister will want to cover in the brief time available to him. If there is not time for him to respond to them all, perhaps he will write to us, because this debate has been so good that it would be helpful to have more detail. I look forward to hearing from him.