Industry (Government Support)

Lord Watson of Wyre Forest Excerpts

Wednesday 16th June 2010 Commons Chamber

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

I congratulate the hon. Member for North West Durham (Pat Glass) on her passionate speech about her constituency, and I am pleased to hear how attracted she is to the big society—she is always welcome on the Conservative Benches.

We all know that we are in times of deep economic hardship, but we are now heading in the right direction. A key reason is that we have already begun to fix the wrongs, and our first focus has been on balancing the books. For anyone in any doubt about whether this is the right strategy, I need only point to the commendations that my right hon. Friend the Chancellor received at the G20 summit in South Korea for his efforts in this area. However, although we have made an important start, there are of course many things that we need to do, and for me the importance of business cannot be underestimated. From my experience at YouGov, and from talking to businesses in Stratford, small or large, I know that there are three main areas that people want us to focus on: getting rid of bureaucracy and red tape, simplifying the tax system and giving small and medium-sized businesses tax incentives and easier access to funding. All those areas must be addressed, and I shall endeavour to discuss them today.

It is no coincidence that after 13 years of a Labour Government, business in this country feels bogged down by bureaucracy. I am delighted that one of the first things that we have done is introduce a one-in, one-out policy on regulation. That will change the culture of Whitehall and help those stuck in red tape to free themselves and get on with their business. Next, we need to focus our efforts on the need for a simpler and fairer tax system for business. It is not in our country’s interest for businesses to waste time and resources on decoding the hugely complicated tax system. Someone running a small business is the chief executive officer, the salesperson, the receptionist and the accountant, so the more time they spend on bureaucracy, the less they spend on building up their business.

The abolition of the employer’s contribution to national insurance must be commended. It is an excellent policy, and there are already businesses in my constituency, such as GreenMech, DCS Europe and the brilliant Purity Brewing, applauding this initiative. Even Lord Digby Jones, the previous Government’s adviser, warned against that anti-jobs policy in the other place.

One of the most difficult areas to address is the funding available to SMEs. The previous Government made steps in the right direction, but they did not work. The RDAs have clearly not worked, and they have wasted an enormous amount of taxpayers’ money on bureaucracy. Banks want to lend only when the sun is shining. The previous Administration failed to fix the roof during those times, and it was SMEs that paid a heavy price. However, I am pleased that we have already pledged to ensure that a flow of credit is available to viable SMEs, both by considering a national loans guarantee scheme and by the use of net lending targets for banks. In the future, we must continue to do more to help in that area.

I want to address another matter that is key to strengthening our business sector in this country. We must ensure that our employees of the future are equipped with the skills that can help them and their employers succeed. I for one always looked at the skill and expertise of a potential candidate, rather than just their university education. That is why I am such a strong believer in apprenticeships and the skills that they offer. In a previous life, I did a lot of work with a fantastic charity called Edge, and I applaud the Government’s focus on apprenticeships.

Making things and selling things to the world are going to be vital for our future. That is why we need to support engineering, whether it be mechanical, civil or software engineering. Engineering needs to be seen as an aspirational qualification again. We need only look at Germany, a nation proud of its engineers, to see what can be achieved. For me, we must focus on specific areas of business, in order to create a niche for ourselves as a nation.

[Mr Tom Watson (West Bromwich East) (Lab)]

I am grateful to the hon. Gentleman for giving way—I believe that this might be his first run at active combat in the Chamber, so he is welcome. He talked about software engineering, and his party made a commitment in the election to a tax relief system for the games industry, which is important in the sub-region that he represents. Does he still support that?

[Nadhim Zahawi]

It is important that we look at whatever area we can support, but at the same time—

[Mr Watson]

What do you think?

[Nadhim Zahawi]

I am going to answer the hon. Gentleman. At the same time, we have to remember that we are currently borrowing £500 million, and we have to cut our cloth accordingly.

We must focus on specific areas of business to create our niche. If we look at Britain in relation to our Chinese and Indian counterparts, we see that we can never hope to compete with them on production cost or quantity. That is why we must focus on intellectual property and innovations. We need only look at Formula 1 to see what talent we already have in innovation here in the United Kingdom. As politicians, we need to focus our energy on the recommendations of inventors such as Sir James Dyson. Sadly, however, we are tending to lose our best people to other nations where innovation is better funded. For example, Jonathan Ive, the designer of the iPod—such an iconic brand of our era—is British, but he works for a great American company. We must learn from the USA. Silicon valley is the home of US tech start-ups precisely because of the environment created there by the US Government and because of the support that start-ups receive. We should learn from that and create our own opportunity zones here in the United Kingdom.

I applaud the approach taken so far by the coalition Government, and it is important that we continue to do all we can to encourage growth in the private sector, so that we can continue to create jobs that are sustainable. That will be an important move away from the previous Government, whose policies led to an unsustainable and unrealistic bloating of the public sector. Our future lies in business and, for me, specifically in innovation. What we do now will affect the course of our business future, and I am confident that, with the coalition Government in place, we will succeed.

Let me end by saying that I support the amendment tabled in the name of the Prime Minister and colleagues.

--- Later in debate ---

[Nicky Morgan]

I entirely agree with my hon. Friend. I noticed a certain amount of eye rolling when an earlier speaker mentioned that she had worked in the financial services industry. As my hon. Friend has pointed out, however, the financial services industry’s growth over the past 13 years was huge. We will not take lessons from Labour Members in that regard.

In referring to industry, I think that Labour Members have been talking about larger companies—perhaps I will be corrected—but most people in this country work for smaller businesses, and in some cases very small businesses. They are the backbone of our economy, and their growth will drive the economy out of the current situation.

I want to talk about three aspects of support for business, some of which have been referred to already. First, more bank lending to businesses is necessary. As chamber of commerce research shows, small businesses are being penalised with higher rates of interest. In my constituency, two gentlemen running a small industrial company who rightly took out a mortgage to buy premises in 2007—when lenders were falling over themselves to lend their company money, as it was a very sound bet and had never failed to make repayments—have suddenly been told by the building society in question that the property has fallen in value and that the ratios are therefore wrong, so they will have to renegotiate the mortgage and pay higher interest rates that are clearly beyond them. That is exactly what banks should not be doing at this critical time in the economic cycle when businesses need support.

[Mr Watson]

Will the hon. Lady suggest how Government might intervene to stop that?

[Nicky Morgan]

Obviously I am not running the Treasury, and I am not the Chancellor of the Exchequer. [Hon. Members: “Not yet.”] That is too kind.

I contacted the chief executive of the building society I mentioned and asked for an explanation, but I sometimes wonder whether decisions are made at a lower level of management and without any real thought or understanding. We heard a statement earlier about the directors of banks. I should like to know whether all directors are fully informed of the way in which their bank is running its business, and whether they realise that they are putting the squeeze on businesses which, although sound, cannot afford to make higher repayments at this stage of the economic cycle while they are also trying to stay afloat and keep people employed.

Much has already been said about the increase in regulation. According to the Federation of Small Businesses, small firms spend seven hours a week dealing with red tape. I welcome the Government’s decision to introduce a “one in, one out” system. I do not know whether other Members have been receiving surveys, but I received one recently asking what law I would like to introduce. Actually, I do not want to introduce any more laws. I should like to see fewer laws. I should like laws and regulations to be simplified, both for businesses and for individuals.

Members have mentioned the gold-plating of European Union legislation, which goes on all the time. I sincerely hope that following the change of Government, we shall see an instruction that regulations are no longer to be gold-plated.