Small Business Saturday

William Bain Excerpts

Thursday 4th December 2014 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for City of Chester (Stephen Mosley) on securing this debate. I recall speaking in a similar debate last year, and I am pleased to reflect on the fact that we have had a welcome year of solid growth in small and medium-sized businesses since then, as well as a good deal of job creation. We should welcome and encourage that. Later in my remarks, I hope to set out some of the challenges that small businesses in my constituency—and across the country, through the Select Committee on Business, Innovation and Skills—have mentioned to me and on which they are seeking help from Government and all of us in politics.

There has been some discussion about the consistency of policy among Governments of different complexions. Some 77% of all employment growth between 1998 and 2010, when we were in government, was due to small and medium-sized businesses. All of us in this House have a huge commitment to recognising the economic and social contribution made by small businesses, and hopefully some good ideas will emerge from this debate about how we can strengthen them further.

I think of the bakeries, coffee shops and newsagents open long before we all get up in the morning, hard at work providing services and making a terrific contribution to the economy, but I also want to single out some of the important small businesses that have surged in the last few years in my constituency. One of them is Gaia-Wind, a manufacturer of small wind turbines in Port Dundas, which has hugely expanded the number of local Glasgow people it employs over the past five years. The company has now cracked open access to markets in Japan and Denmark, so its contribution in exports to the Scottish economy will be much larger.

Speaking with Gaia-Wind threw up some issues that many small businesses across the country still experience. The first is access to finance. According to the Bank of England’s most recent inflation report, SME lending is still falling. It has fallen every year during this Parliament, despite initiatives such as funding for lending. It illustrates the need for powerful structural reform of our banking sector and for a British investment bank that can provide finance to major infrastructure projects and strategically important industries in our economy. The green investment bank needs more powers to drive an increase in green investment that will benefit the entire economy and help us show the global leadership that we should be showing in decarbonising our energy supply by 2030.

We can learn from other countries such as Germany, which in both good periods of economic growth and periods of downturn have been able to keep funding going to small and medium-sized businesses in a way that the traditional banking system in this country has been unable to. I hope that in the next few years we will see more action for more regional banks. That would help.

[Seema Malhotra]

My hon. Friend is making an excellent speech. He rightly raises the issue of access to finance and creative ways in which banks might now start to provide that access. Does he agree that there might be more opportunity to think about how businesses are reached? When I was in India earlier this year, I met the founder of the Mann Deshi bank, which uses mobile banking—a bit like our chip and pin system—to go out into communities and deliver services on the doorstep. That makes a huge difference to people, particularly women, who are setting up their businesses.

[Mr Bain]

My hon. Friend makes an excellent point. Indeed, one of the trends that we have spotted in the last few years is the number of women becoming increasingly keen to start up their own businesses, which policy in politics and the financial system should seek to promote. She made her point very well indeed.

There is a need for structural banking reform and for the Government to emphasise more the role that our small and medium-sized businesses can play in terms of exports. It was disappointing yesterday, after the autumn statement, to read in the fiscal report by the Office for Budget Responsibility that it has had to downgrade its forecast for the contribution that net trade will make to growth in this country for each of the next five years. That is a desperate position and Members from all parts of the House should be concerned about it.

I urge the Government, following this debate, to take more steps to make UK Trade & Investment much more proactive, to build on the work that our excellent exporting SMEs are doing in all our constituencies, and to ensure that the Government not only react to businesses but proactively engage with them and open up new markets. That is what the small businesses in my constituency tell me is needed, and it is an urgent priority for the Government during the next year.

We have heard, quite rightly, tributes to my hon. Friend the Member for Streatham (Mr Umunna)—small business Saturday in this country is his initiative. However, we should also follow some examples that originated, in principle, in the United States. That would be helped by having a small business administration within the Department for Business, Innovation and Skills. When small businesses speak to me, too many of them say that they feel there is too much of a silo mentality in Government, with too many Ministers in different Departments but not enough working together to produce the best approach—particularly when it comes to our manufacturing exporters. I hope that a small business administration within BIS would begin to break down that silo mentality, so that we would see improvements.

Small and medium-sized businesses deserve other help from Government when it comes to procurement. This Government, I remember, came to office and pledged that a quarter of all Government procurement contracts would go to SMEs. That simply has not happened; that target has not been met. It is clear that the next Government, whichever complexion they have, will have to do substantially more to make up for the underperformance of the Cabinet Office during the last four and a half years. An emphasis across Government on how the procurement system can help SMEs has got to be a priority of Government policy.

Small businesses also tell me about the problem they face in gaining access to broadband. Again, the previous Government had a commitment to universal access to broadband by 2012. This Government decided to scrap that commitment; they made new commitments about superfast broadband, but in the last year or so those have been put back to 2017. With more and more people shopping online, even with local firms, it must be a priority of Government to ensure that as many people and as many small businesses are online as quickly as possible. That involves both getting support from the Department for Business, Innovation and Skills and dealing with issues such as payroll, tax and benefits. If we are to have an infrastructure in Britain that is fit for the 21st century, it is an absolute priority that we see businesses online as quickly as possible and with a good, reliable broadband speed; small businesses also regularly complain about their broadband speed.

Another issue critical to small businesses is Government policy on skills. Commenting after yesterday’s autumn statement, the National Institute of Adult Continuing Education said that it was disappointed that the measures in the statement did not tie up with rhetoric that we had heard beforehand. NIACE particularly points to the issue about adult skills and workplace training. The Minister and I have regularly conversed about it.

Given the OBR’s verdict on productivity and investment, it is absolutely critical for the future of small businesses that they have a willing partner in Government to ensure that investment in a skilled work force is a priority and is improved in the coming years. The Federation of Small Businesses, among others, is very concerned about this issue.

It has also become clear this week that there are still very disappointing numbers on earnings growth, and that is borne out by our experience as constituency MPs every weekend. If we consider the information that came out from the Office for National Statistics this week about the annual survey of hours and wages, we see that wage growth in SMEs is becoming a particular problem. The number of workers across Scotland and the rest of the UK being paid less than a living wage has risen this year compared with last. That makes the case for having a more proactive approach from Government, to support small businesses that want to pay the living wage and that will see the benefits coming from the Government’s taking more action on it.

I simply commend the idea of having a fiscal incentive. Labour Members have sought to put that incentive together in the form of “make work pay” contracts. The Government ought to be looking at that type of incentive as well, so that we can go ahead on a cross-party basis, as the hon. Member for City of Chester has asked us to. Such an incentive would do a great deal to help businesses feeling pressure from lack of access to finance to be able to benefit from the living wage, where that is affordable, as well as help the workers who do such great work for those businesses.

I am optimistic about the future of our small businesses. They have a huge amount to provide, not only for our domestic growth but for the export-led growth that all of us, from all parts of the House, want. However, we need a more active Government who take action on skills, finance, procurement and investment, and I hope that that will be one of the consequences that follows from this excellent debate this afternoon.