Small Businesses

Simon Danczuk Excerpts

Thursday 28th November 2013 Commons Chamber

[Mary Macleod]

That is an absolutely brilliant example—that is something I would like to do to support my local businesses in west London.

I meet my Chiswick traders regularly. Last time, we met in Club Workspace, which I recommend to hon. Members. It is a much more creative and innovative way of allowing entrepreneurs to have the space to work. It is not as rigid and long-term as things used to be, but more flexible and modern. It is very effective.

I have also done apprenticeships seminars to encourage small businesses to take on apprentices. I met Mumpreneur, Athena and other groups that support small businesses.

Naturally, we are supporting small business Saturday. We will be doing lots of things during the day for it. It has galvanised my local businesses to work together. Between them, they came up with all sorts of things to do, which was brilliant to see. I have also run workshops on women and enterprise, because I believe we do not have enough female entrepreneurs, which I will address in a moment.

I wanted to mention to the Minister some of the issues that have been raised with me locally, including business rates, to which I will return, access to funding, legislation, red tape and parking. Where do businesses go to find help? More clarity and simplicity on helping small businesses would be useful.

I have a role in helping the Minister as a small business ambassador for London. Only yesterday, I went to the meeting of the London enterprise panel’s SME working group. It had four key priorities—finance and equity; the availability of work space; trade and exports; and business support—but added another at the meeting: the skills shortage. The suggestions that hon. Members have made to do more in schools, colleges and universities are important. Strangely enough, in Prime Minister’s questions this week, I asked him how we can create enterprise and business champions in each of our secondary schools—we could arguably do so before that, but perhaps we should start with secondary schools—to foster and inspire the next generation of entrepreneurs. We want young people to think of entrepreneurship as an option when they finish school, college or university. There are special financial packages for them.

Last week, I asked the Prime Minister about business rates—I was fortunate enough to have questions at Prime Minister’s questions two weeks in a row. I am glad to say that he has agreed to meet me next week to discuss reform of business rates.

[Simon Danczuk (Rochdale) (Lab)]

I support the hon. Lady in her concerns about business rates. Does she support the Labour leader’s proposals to freeze and then reduce business rates for smaller businesses?

[Mary Macleod]

I want reform of business rates and for them to be looked at very differently. In London, businesses are treated unfairly and we want fair taxation. The turnover of many small independent shops in my constituency is not as high as one might expect in London, so they are penalised by the high business rates in London. They also question what they get in return for business rates. That could be clearer—police, fire or other services. All they know is that the £27 billion raised from business rates is spread across the country. I favour a localised approach, so that we are able to reinvest in our local areas.

The Government have done a lot for local businesses. One of the big measures, which was mentioned by my hon. Friend the Member for Norwich North (Chloe Smith), was to remove £2,000 from national insurance bills. Other measures include: business mentors, £50 million- worth of £10,000 start-up loans and cutting red tape. The Prime Minister visited my constituency three years ago to meet Octink, another great local business in my patch, to consider how we can simplify employment legislation—another important issue for small businesses.

There are three key points in particular that I would like the Minister to consider. First, there should be enterprise education in schools. Businesses and entrepreneurs should be encouraged to allow students and pupils to do work experience in their businesses, and perhaps all hon. Members can help to facilitate that with their local schools. Secondly, we have already discussed business rates and I will be talking to the Prime Minister about that next week. Thirdly, returning to women and enterprise, if women were setting up businesses at the same rate as women in the US, we would have 600,000 more businesses. That would add £42 billion to the economy—a huge amount. I run workshops in my constituency, with the support of StartUp Britain and the chamber of commerce, to encourage women to think about setting up businesses. We have fabulous businesses, such as Shavata and My Plumber from Chiswick, and inspiring women who have done it for themselves and are successful.

The Government have done much and there is probably more that all of us as hon. Members can do to support the small business community. I look forward to encouraging more and more businesses in the months and years to come.

[Simon Danczuk (Rochdale) (Lab)]

It is a pleasure to follow the hon. Member for Brentford and Isleworth (Mary Macleod). I share many of her concerns about business rates and agree with some of the solutions she proposes. I thank the hon. Member for Newton Abbot (Anne Marie Morris), who has done an excellent job in securing the debate. It is important that it is taking place before the autumn statement, so I thank the Backbench Business Committee for helping to make that happen. Before I begin my comments proper, let me declare an interest. On small business Saturday, my wife and I will be opening a small business of our own: Danczuk’s Delicatessen in Rochdale. I encourage all hon. Members to visit and spend their hard-earned money.

[Huw Irranca-Davies]

I am aware of the opening of this fantastic new deli. I am sure my hon. Friend will be stocking exotic produce, but will he be making an effort to stock local produce—the food that makes his area special?

[Simon Danczuk]

We will stock a variety of local produce. There will be some continental produce, but there will be traditional Lancashire produce too. It will be well worth a visit and opens a week on Saturday.

The first thing to say in a debate about small businesses is what a great contribution they make not just to our economy, but to our culture, our communities and the way we live our lives. As the hon. Member for Newton Abbot said, we need to spend more time celebrating the work of smaller businesses and the people who run them. It is these business people who are the backbone of our economy. They create the vast majority of jobs, and export their goods and products across the world. They are at the heart of innovation, which is often copied by larger businesses, and drive growth throughout the United Kingdom. They also carry the burden of worry and stress of managing risk every day of the week. We need to do more to celebrate what they do.

Small businesses are vital to our economy, but they are also vital to our society: they are one of the most powerful forces for social mobility. Academics and politicians often talk about the importance of education with regard to social mobility. That is important, but by starting and growing businesses people can thrive and prosper. They are vital in encouraging and establishing social mobility.

[Mark Pawsey]

Was the hon. Gentleman as struck as I was by the assertion at a recent breakfast meeting that the top entrepreneurs were those people who had not been to university, did not have degrees and had had to work from the bottom up?

[Simon Danczuk]

I thank the hon. Gentleman for that comment, because that is exactly the point I am making about social mobility and supporting entrepreneurialism and the growth of small businesses.

Let me tell hon. Members about one of my constituents. Ian lives on the Falinge estate in Rochdale, which has achieved notoriety for having the highest number of benefit claimants in the country. Like others there, Ian was unemployed. He was determined to get out of that situation, so he decided to start his own business. He cashed in his pension and set up his own fish and chip shop. He learned the ropes by working for free in another nearby chippy and then set up his own shop in the town centre. I used to pop in and have a chat with him every now and again. He was making a good fist of it and there were always plenty of customers coming through the door. In his first year, he won an award at the town’s annual business awards. Despite all that success, Ian was forced recently to close his shop simply— I do not exaggerate—because of business rates. He was paying double in business rates what he was paying in rent, and that was not sustainable.

Ian’s case is a tragedy for him and for social mobility. It demonstrates that unrealistic business rates are damaging our economy and our society. The Government need to do more on business rates and should have gone ahead with the revaluation. Hon. Members will not be surprised to hear that I support the Labour leader’s proposals to freeze and then reduce business rates for smaller businesses in particular. Business rates are not the only issue, however. Let me provide another example: banking.

Hanson Springs, a very successful family business in my constituency, was in 2009 dragged by RBS into what we now know to be the Global Restructuring Group scandal. Let me briefly explain. RBS in my opinion deliberately undervalued a property it had a loan against and used that as an opportunity to push Hanson Springs into its Global Restructuring Group. At the first meeting with GRG, Hanson Springs was introduced to a solicitor who had been brought along to discuss taking an equity stake in this family business. GRG then forced a business review with Zolfo Cooper on to it at a cost of £20,000. Its GRG manager had previously worked for Zolfo Cooper—I am sure that was a coincidence. Hanson Springs was then given three options, none of which was acceptable. As the family pointed out to me, if the business had not been cash-flow rich and if they had not had the personal resolve, the company would have been forced to close.

Hanson Springs is now 50 years old—we have moved on four years. It turns over £20 million each year, employs 180 people, exports 85% of what it produces, and since the problems with RBS, has paid in excess of £l million in corporation tax. If RBS had had its way, we would have lost hundreds of jobs and the money from taxation, and we would have had people claiming benefits and yet more manufacturing moving abroad. Hanson Springs is a perfect example of business at its best. It is a great example of a family pulling together to create something great and is probably a perfect example of social mobility, but look how it nearly all went badly wrong because of RBS’s behaviour. Ultimately, it is down to us politicians to intervene and set up the right regulatory process to ensure that banks treat our businesses better.

Smaller businesses are exceptionally fragile entities. It is our responsibility not to take them for granted and our duty to remember that these businesses are the lifeblood of our country.

--- Later in debate ---

[Huw Irranca-Davies]

My hon. Friend makes a valid point. There has to be cross-party agreement to take this forward and to ensure that finance is available.

Let me mention one stark figure. Even though there are signs of optimism in some parts and some sectors of the Welsh economy, a recent survey of members of the Federation of Small Businesses in Wales showed 55% of them reporting that credit was unaffordable, while 65% said it was not only unaffordable but completely inaccessible. The idea that these businesses can grow by getting affordable and accessible lending is simply not happening, which is a tragedy.

[Simon Danczuk]

Is my hon. Friend aware that some small businesses are afraid of approaching their banks about credit or getting an extension of their overdraft because they fear that the banks will rein things in and make it even more difficult for them?

[Huw Irranca-Davies]

Yes, indeed. There is a big argument not only for more localisation of the traditional banks, but for the regional bank model that Labour Members support. When I made the point earlier that that model should not be bureaucratic and civil service-driven, I was speaking from experience based not only within this country but in other European countries. That model works best where it is very locally focused and entrepreneurial, with managers of the account streams fully understanding the businesses with which they deal. Access to finance is indeed a big issue.

I will not go over business rates again, as others have done so, but it is a real issue. I believe that the proposal from Opposition Front Benchers to freeze and then reduce them is a good one. As to Ministers saying we never did it, I simply say that the proposal is there on the table for them to support if they want to do so.

I turn my attention to one area about which I have particular knowledge and concerns. I refer to supporting small businesses where the potential for employment growth is the biggest—namely, through the application of green technologies, such as solar power or insulation for greater energy efficiency in homes, and so forth. I was intimately involved in the incubation phase of the Energy Bill that the Government brought forward, and I pointed out some of its potential pitfalls. If it had succeeded, however, particularly the green deal with the associated energy company obligation, it could have provided massive incentives for tens of thousands of small businesses. I am talking about all those people who have been installing loft insulation for years and those who have switched to installing solar panels with the feed-in tariffs. They could have had a new opportunity to take on apprentices, perhaps young people in my area who cannot find jobs. The green deal work could have produced a massive expansion of the sector.

We had to highlight the problems, however. We noted that the finances did not seem to work and that it might not be possible to sell the green deal to people. Consumers are pretty intelligent people who, as they look at it, will run a mile. We said, too, that there were rogues out there who would blacken the reputation of the green deal before it even took off and, with deep regret, I have to say that that has now come true. The Minister put forward an aspirational target of 10,000 installations linked to the green deal. That would have provided one of the biggest employment boosts in the small business sector right across the country and in every single community—rural, urban or whatever. Out of that 10,000, we now know that there have been just over 200 installations. It does not matter how many installations were in the plans; they have not taken place.

We are looking to find agreement on areas that require better support—through access to finance, for example. We might have different solutions—how best to enhance access to finance, to reform business rates and so forth—but a proposal that would make a material difference tomorrow, if we got it right, is dealing with cold homes and businesses that have runaway energy costs. That means getting energy-efficiency right and getting the energy installations right. We are failing—miserably—and companies are shutting their doors on the scheme. It is a tragedy. I am sure that the Government have all the best will in the world to turn this around, but we see no sign of them putting measures in place to achieve that.

There has been considerable agreement in today’s debate about the importance of small businesses. Some will choose to stay small, but many will grow and grow, and they will thrive. Tata Steel and Ford in south Wales have a huge impact on the local economy, but they are dwarfed by the impact of all the small and medium-sized businesses that need our support.