Small Business, Enterprise and Employment Bill

Stephen Metcalfe Excerpts

Wednesday 16th July 2014 Commons Chamber

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

Will my hon. Friend give way?

[Mr Binley]

I had better not, or Madam Deputy Speaker will have words with me privately later.

I conclude simply by urging the Minister to reconsider the option proposed by the Business, Innovation and Skills Committee in its report. The Secretary of State initially seemed to accept it, but I fear that the Treasury oar then had an impact, smacking him—

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[Mr William Bain (Glasgow North East) (Lab)]

Small business needs a Bill that unlocks new finance to help businesses grow, gives new impetus to business investment, boosts science and research, and provides fairness and clarity on rights at work, while removing the worst abuses of zero-hours contracts. Sadly, judging by the Bill before the House today, the real radicalism of this Government is expended on the frenzy of briefing against each other, rather than on dealing with the underlying problems that affect the sustainability of the recovery and small businesses: a serious skills shortage, a growing trade deficit, still modest business investment, stagnant productivity threatening permanently lower living standards, short-termism on infrastructure, and chronic insecurity at work.

The Bill falls short on the challenge of putting optimism back into business in Britain for several key reasons. First, it fails to address the crisis of young people, work and skills identified by the OECD in its study last autumn. Small businesses are struggling to find employees with the required skills in our weakened labour market. In the production sector alone, 25% find the availability of workers with non-management skills worse than the year before. A third of small firms say skill shortages are stifling growth. When four out of five manufacturers in this country say that they are finding it difficult to find employees with the right skill set, and two thirds of those go on to say that that is because of a lack of technical skills, we in this House should listen.

[Stephen Metcalfe]

Does the hon. Gentleman not accept that the skills shortage cannot possibly have happened in the past four years alone? There must have been a deficit going back to the previous Government for there not to be any skilled employees around now.

[Mr Bain]

That is an interesting point, but to answer it I advise the hon. Gentleman to listen to what businesses are actually saying, which is that the problem is getting worse on this Government’s watch. What are the Government doing to deal with it and what will the Bill do to deal with it? Precious little.

The Government should be doing more to support small businesses to improve the technical skills of their staff. They should be looking at the idea the Opposition proposed to introduce technical degrees, which would give hundreds of thousands of people the opportunity to get the degree-level skills that small businesses are looking for while they are still in work.

Secondly, the Bill fails the test of promoting small businesses because of a lack of any substantial measures to improve access to finance. The £1.5 billion direct lending scheme, launched by the Government in autumn 2013, received only 15 inquiries by April 2014; just one firm applied for support under a scheme first announced in the previous year’s autumn statement. The £5 billion export refinancing scheme was launched in July 2012 as part of the Treasury’s UK guarantees scheme. As of April this year, not a single business has been helped by that scheme. As welcome as clause 4 is on the sharing of data on small and medium-sized businesses between challenger banks, the Bill does nothing to create additional competition in the banking system to repair broken financial pipelines that would mean that corporate surpluses can find a home in productive investment in our economy. Just one third of SMEs are using external finance and only a third of applications for first-time loans are being accepted.

Thirdly, on access to broadband, the Bill fails to remove some of the practical barriers many firms suffer from, particularly in remote areas, and fails to promote competition in ways recommended by the recent report on broadband by the Federation of Small Businesses.

Fourthly, on zero-hours contracts, as many as 1.4 million people, plus those who work in agencies, will still have insecure working hours despite the provisions in the Bill. There is no commitment that people who have been consistently employed for a year or more will receive guaranteed hours at work. I recently met a constituent in Blackhill in my constituency who has worked for 15 months with the same employer. He can see his weekly hours fluctuate from zero to as many as 74 hours via text and with minimal notice. The provisions in this Bill will not help him. They are weak and easy to evade.

Some of the faces on the Treasury Bench may be different, but it appears that the mindset of this Government remains closed to new ideas. There may be new voices at the Dispatch Box, but on policy this is a no-change Government, dominated by the same old Tories. For a lasting recovery that will genuinely benefit ordinary people and small businesses alike, next May’s general election and a Labour Government cannot come soon enough.

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[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

I shall try to keep my remarks as brief as I can.

My hon. Friend the Member for City of Chester (Stephen Mosley) laid out much of what I wanted to say about the importance of small businesses as a sector. We ignore them at our peril as they are, as we have heard, the backbone of our economy and have, I think, played a vital part in driving down the claimant count in my constituency by nearly 36%, driving youth unemployment down by nearly 45% and upping the number of apprenticeships by nearly 60%. They play an important part and we must do all we can to support them.

Although perhaps not everything we have done as a Government has been helpful to small businesses, I truly believe that the Bill is helpful. It takes steps towards helping secure their future and addressing the challenges they face. We could go one step further, perhaps, by creating a US-style small business administration unit within the heart of Government to ensure that the impact on small businesses of every piece of legislation that goes through this House is taken into account.

There is one issue in particular that I want to speak about that might not be covered elsewhere, and that is clause 117. It relates to the Government’s proposal to create a reserve power to prohibit pre-pack administration sales to connected parties if certain criteria are not met. I want to talk about that in the context of the printing industry. I should declare an interest and refer people to my entry in the Register of Members’ Financial Interests, where they will find that I am a shareholder in a small family printing business.

The printing industry is particularly vulnerable to the impact of pre-packaged sales in administration. Printing is an over-capacity industry dominated by small companies. Consequently, the incidence of pre-pack administrations in the industry has been relatively high and the damage caused to creditors and competitors alike has been significant. Those controversial business rescue arrangements enable the debts of previous owners to be written off and have attracted criticism from creditors and competitors. When there is a connected party—that is, when the owners of the new company are the same as those who ran the old company—creditors are aggrieved because they have lost money owed to them and competitors are aggrieved because they face a rival who now has an unfair trading advantage.

The British Printing Industries Federation believes that an insolvency practitioner, or IP, who has previously provided advice to a company on the potential for a pre-packaged sale in administration has an inherent conflict of interest should they later accept a formal appointment as administrator with a view subsequently to execute a pre-pack sale. The BPIF therefore considers that an IP advising a company prior to a pre-pack sale should be precluded from becoming the administrator for the company concerned, to curb the incidence of cases where an IP attempts to secure new business by inviting distressed businesses to enter a pre-pack before other options, such as seeking an alternative operator for the business or a potential sale, are properly explored.

The introduction of a requirement for a different IP to accept appointment as administrator would improve confidence that pre-packs are used only in appropriate circumstances by ensuring that conflicts of interest were avoided. That would enhance the confidence of creditors in the insolvency practitioner’s handling of the administration. I realise that this is a technical issue, but it is a big issue for the printing industry and, I suspect, other industries, too. I have no pecuniary interest in the business any more as I am no longer a director and no longer receive any payment from it. I would like the Minister to look hard at this issue and ensure that we have covered every option in the clause to ensure that it works the way we think that it does.

I would have liked to have said much more, Madam Deputy Speaker, but I am sure that it will all be covered elsewhere or can wait until another day.