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Businesses and the Regions

Volume 481: debated on Thursday 30 October 2008

I beg to move,

That this House has considered the matter of businesses and the regions.

It is right that we discuss how the current economic situation is affecting business in the great regions and cities of our country. In recent months, we have experienced what the International Monetary Fund has described as

“the largest global financial shock since the Great Depression”.

Last week, the Governor of the Bank of England said:

“Not since the beginning of the First World War has our banking system been so close to collapse.”

The crisis facing us is global, interconnected and unprecedented in recent times. The depth and global nature of the crisis means that it affects not only the City of London and the financial markets but the wider economy.

A properly functioning banking system is the vital foundation stone for a thriving wider economy. When we do not have that, as we have not in recent months, businesses find it hard to gain access to finance, investment decisions become more difficult, and confidence declines.

Kettering borough council is organising a credit crunch summit involving local businesses, residents, banks, building societies and housing associations. Will the Minister or one of his colleagues accept an invitation to attend or, if he or they cannot, will the regional Minister be able to support this initiative? Will the Minister take this opportunity to applaud Kettering borough council’s efforts in this regard?

I am sure that that will be carefully considered if the hon. Gentleman lets us know the date.

Last week, my noble and right hon. Friend the Secretary of State set out some of the measures that the Government are taking to help businesses through these difficult times. We are taking those steps because we are aware of the critical importance of small and medium-sized businesses to our economy—the wealth that they create, the creativity that they offer, and the contribution to the quality of life that they make. The Government are taking steps as regards cash flow, with early payment of bills; and on access to finance, with the important discussions between the Government and the banks relating to the availability of credit. Indeed, today my right hon. Friends the Chancellor and the Secretary of State are meeting the heads of the main banks, the European Investment Bank and business representatives to drive forward take-up of ElB’s loan facility for small and medium-sized enterprises. We also announced measures on access to training, advice and support, which are vital to businesses in these difficult times.

I welcome the re-announcement of the EIB money. However, as it originally occurred six weeks ago, why is that money yet to be received in any small firm’s account, even though the French Government have already issued the first tranche?

I can assure the House that the Chancellor and the Secretary of State are pressing ahead with this as quickly as possible in their discussions with the banks.

Last night, in the Mais lecture, the Chancellor set out further steps in our approach to the situation, particularly with regard to public spending. He said:

“When private activity slows, it is even more important to maintain wider public spending. This is why it is right to bring forward planned spending commitments—as with our housing package in September...We must also make sure we maintain public investment—in infrastructure, education and health”.

He also stressed that the Government will take the decisions necessary to ensure stability in the medium term to return borrowing and debt to a sustainable level.

These statements matter for businesses in our regions because many businesses depend on the Government as a customer. Those businesses supply the goods and labour that are necessary for the building of schools, roads, and so on. They include companies such as Hill and Smith in my constituency, which I visited on Friday. It makes crash barriers for our roads, and the Highways Agency is one of its main customers. Such companies are very interested in the level of public spending that is to take place.

Statements are welcome, but money would be nicer, from small firms’ point of view. Why have the French Government managed to get the money out and we have not?

The hon. Gentleman says that money would be nicer. Perhaps he could take that up with his colleague, the hon. Member for Rutland and Melton (Alan Duncan), who last week, having posed the question, “Where should we be?” told the House that we should have “lower spending”. There is quite a contrast between the position that the Chancellor set out last night and the position of the Conservative party.

The steps that we have announced on support for businesses and on public spending are measures aimed at benefiting the whole country. We want to see businesses prosper and opportunities created in every part of the country. For that reason, we reject the notion advanced by a right-wing think-tank over the summer that we should give up on certain parts of the country and that if people wanted a better life they would simply have to move to get it.

One of the announcements made last week concerned help for business through the way in which Her Majesty’s Revenue and Customs dealt with the collection of taxes and with companies in difficulty. At the time of the announcement, the Treasury Minister was unable to say whether new guidance would be placed in the Library on how that help would be achieved. Have there been any developments on exactly what message we can give in our constituencies that are facing trouble about how HMRC will put into effect the headlines on taking a more sympathetic approach at a time of economic crisis?

If my Treasury colleagues are ready to issue guidance, they will do so, but the statements from last week stand.

As I said, we are not about to give up on the great cities, the smaller industrial or market towns or the rural parts of our country, as the report over the summer suggested that we might. We believe that action at national and international level is necessary to respond to the current problems, given the global nature of the crisis, but so too is action at regional and local level. One important lever in that process is the network of regional development agencies.

On the regions, will the Minister acknowledge that there is a role for individual Ministers for each region to play in helping to encourage and foster good business conditions? If he accepts that proposition, could he explain why the Minister for the East of England, during the first 11 months of her tenure, never once stepped foot in the largest county in the east of England, Essex?

I believe that all the Ministers of the regions are doing a good job in working with business, and I include the Minister for the East of England.

It is now a decade since the Government created the regional development agencies, though I note that the Opposition voted against the Bill that created them. Those organisations, together with business, local authorities and other local partners, have played an important role in fostering economic development in their areas, be it the new media city in Salford, the North East Productivity Alliance aimed at lean manufacturing, or the east midlands redevelopment to create the UK’s largest bioscience and innovation centre. Wherever we go, we can see value-added examples in which those organisations have been important partners.

I thank my hon. Friend for giving way and for drawing attention to the role of the regional development agencies. He will be aware that marine skills and sciences are important to the south-west, particularly to Plymouth—there is a lot of international expertise. The RDA has been investing heavily in that area and supporting apprenticeships, which are important to small and medium-sized enterprises, of which there are many in the south-west, feeding into that industry. Will my hon. Friend give a commitment to ensuring that there is ongoing investment into RDAs to support apprenticeships in the south-west?

As I said, we can find good examples in each region, and my hon. Friend highlights such an example in the south-west.

I ask the Minister again whether he has evaluated the impact of removing £300 million-worth of investment via the RDAs from small businesses. The hon. Member for Plymouth, Devonport (Alison Seabeck) may well have wanted some of that investment. It was a painful decision; has he evaluated it, and would he like to tell us what he thought about it?

I have a couple of things to say to the hon. Lady, who has raised this point consistently during the past couple of weeks. First, it is not the case that that money has been removed from small business support. The RDAs will spend some £6 billion during the next three years. Some of that money is spending geared for 2010, which has been brought forward to spend on a housing package now which will make an impact in the regions. If she is worried about public spending, I suggest that she discuss the matter with the Members on her Front Bench. They said last week that we should have lower spending. Perhaps she might take up the matter with them.

I do not suggest for a moment that there is an equivalence of severity between today’s global shortage of funding and credit, and the collapse of MG Rover in the west midlands in 2001, but does my hon. Friend agree that in the aftermath of that collapse, which was severe for the region, the regional development agency, Advantage West Midlands, responded positively with support for the supply chain so that we did not lose the number of jobs that people thought we would? Is that not a model for the benefit that RDAs across the country can bring?

That is a good point. I highlighted some examples of ongoing regional development around the country. At times of crisis and economic shocks, RDAs have played an important role. For example, during last year’s floods, RDAs were able to get short-term help to businesses quickly and effectively. The example that my hon. Friend gave is absolutely right. In the west midlands, following the collapse of MG Rover, the RDA played a critical role in supporting businesses in the supply chain and in co-ordinating the retraining of the more than 6,000 workers affected. The result, not just of the RDAs’ efforts, but of all those concerned, was that by late 2006 fewer than 500 of the original 6,000-plus workers were still seeking alternative work.

In the current circumstances, RDAs play an important role in working with businesses through their own initiatives, and they have already worked with businesses and local authorities to create a more user-friendly system of business support. In the past, too many of those schemes grew up, however well intended they were. Last week, my noble Friend the Secretary of State announced that they would be slimmed down to 30 advice, grant and loan products, which collectively will deliver some £1.4 billion in support to businesses. In individual regions, help is being provided to businesses in the current environment—for example, One NorthEast’s efforts to match jobseekers with vacancies in the area or, in the south-east, the development agency’s efforts to help businesses reduce the cost of their energy needs.

Last week, when I said that the Opposition had placed a question mark over the future of the RDAs, the hon. Member for Rutland and Melton said it was not so, but I have checked the statements of Opposition Members on that issue. The Leader of the Opposition said, just a couple of months ago:

“let's abolish things like the regional assemblies and the West Midlands Regional Development Agency.”

He went on to say:

“I think the entire experiment with regional government, with regional assemblies, with many of the regional development agencies, I think that has been a complete waste and that should go.”

When asked about restructuring regional quangos, the Conservative local government spokesman, the hon. Member for Brentwood and Ongar (Mr. Pickles), said that:

“you could only possibly say we were looking towards restructuring them if you felt that Ann Boleyn received a restructuring from the guillotine. So in that sense there is going to be a sort of divvying up of the corpse”.

It is quite clear that the Opposition have placed at least a question mark—and that is putting it politely—over the future of RDAs.

Let us be clear: no commitment has been made to do one thing or the other. We recognise that the regional governance of this country has become a muddle, which is why the assemblies are going. If the Minister is so keen to hear our policies, why is he not willing to wait? We have made it clear when we will make the final announcement. Good things come to those who wait.

I do not think that the hon. Gentleman can gainsay the quotation of his own leader:

“many of the regional development agencies, I think that has been a complete waste and that should go.”

It is impossible to deny that that is a threat to the RDAs. The quotes stand, and if the hon. Gentleman thinks that the policy is in doubt, perhaps he should talk to his party leader—perhaps he has not been told. We appear to be hearing one thing from the hon. Gentleman and another from his party leader and his local government spokesman.

We will continue to help businesses through the current economic difficulties with national, regional and local action. Local authorities have an important role to play as a customer, as with national Government, and through the valuable economic focus that many have.

Business taxation has been mentioned in our debate about the best way in which to help business. The rate of corporation tax and the small business rate are lower than those that we inherited. It is important for business to know that the Conservative party proposes to reduce reliefs on investment in plant and machinery as well as to abolish the £50,000 annual investment allowance. That would have a direct impact on precisely the sort of investment decisions that businesses need to make during the downturn. It has been fairly said that, in the wake of the financial crisis, perhaps the country should rely less on financial services and do more to support manufacturing. However, abolishing or reducing the reliefs would hit precisely the sort of investment that the country needs to boost manufacturing. Given the part of the country that I represent, I believe that manufacturing is important and valuable to our economy.

There is no doubt that it is a difficult time for our businesses. We cannot insulate business or our country from the effects of a global downturn, prompted by a banking and financial crisis unprecedented in recent decades. However, we can say to businesses and their employees that we stand with them. Through the steps that we have taken internationally, nationally and regionally and locally, we will continue to stand with business to help it through. On the other side of the difficult economic period, we will work with business to ensure that the energy and creativity of British business, which is renowned throughout the world, can continue contributing to our country in future.

The debate comes, as the Minister suggested, at a time of great financial uncertainty. Businesses throughout the UK face falling demand, rising bills and—as was mentioned with regard to the banks—a squeeze on their finances. Throughout the country, businesses fear that the boom of the past 16 years is turning quickly to bust. The Prime Minister may be in denial, but many of our constituents do not have that option. They face potential redundancy, and the businesses that they have built up over many years face closure. That is why I believe that the Government should scrap their planned tax rises for small companies. What, for example, is the economic logic of increasing small company corporation tax by £370 million in this of all years? As business owners in Cornwall said to me recently, they need a tax rise like they need a hole in the head.

We need further action. The Government should cut payroll taxes for the smallest employers to help them save money and thus keep jobs. Conservative Members want to help more small firms claim business rates relief. The Local Government Association reckons that, across England, only half the eligible firms benefit from the relief, despite its being worth up to £1,100 per annum. More needs to be done to help eligible firms claim that money, and I am pleased to say that my party is leading the way.

May I bring to the Minister’s attention the concern about Government contracts that was raised with me when I met businesses in Birmingham last month? As he said, we have some excellent high-value manufacturers and service firms in the midlands. Yet some of the newer small businesses told me that they feel excluded from doing business with the Government because of the red tape around state procurement. The Government are the biggest purchaser of goods and services, spending roughly £125 billion this year alone.

What needs to change? First, the Government should scrap the rule that requires three years of audited accounts before firms can even be considered for bidding. Secondly, small firms in more remote locations need to be able to access contracts online more routinely than they can at the moment. Some contracts are online, but such a service is far from comprehensive. I have rural enterprises in east Hertfordshire, and their ability to keep track of Government contracts is limited, partly because of their location. Many Members will find that that applies to businesses in their constituencies if they are located away from major urban centres. To help them, all state contracts worth more than £10,000 should be published online as a matter of course, not on the current ad hoc basis.

Thirdly, there should be a single pre-qualification questionnaire for Government contracts that are worth less than £50,000. If a firm pre-qualifies for one Department, what is the logic behind making it go back to the beginning and reapply to another Department, given that it was clearly eligible for one Department? Taken together, those reasonably small steps could make a big difference to many businesses in my constituency and, indeed, in every region.

I understand and agree with many of the hon. Gentleman’s points. I am a great fan of the representative bodies, large and small, of business—the CBI, the British Chambers of Commerce, the Federation of Small Businesses. Does he agree that, with some co-operation from the public sector, those organisations would be great engines of support for the sort of the businesses that experience the difficulties that he described?

I regularly meet representatives of those organisations and others. The hon. Gentleman is right that it is important that they have a strong voice. However, many of them are extremely good at doing what he suggests and it is important that the Government work closely with them. Indeed, several of my points came directly from the FSB, the CBI and other organisations.

Since the second world war, London has become a great world city. However, when we look at our international competitors, it becomes clear that some of our other cities have slipped behind. For example, Manchester, Birmingham and Newcastle, which are fantastic urban centres and have made great strides in recent years, have slipped behind their competitors in many major European countries, especially in GDP per head. That does not mean that we are a poor country, rather that we have become more divided between a Greater London metropolis and the rest. In the past 16 years of growth, the south-eastern economic powerhouse has moved further away from the rest of the UK.

Ten years ago, the Government presented their plans for regional development agencies. Yet from the start, those agencies were set two contradictory agendas: one collaborative, the other competitive. On the one hand, they are meant to help national Government close the gap between them, but, on the other, they are meant to promote their own prosperity. The most obvious example of that contradiction is the way in which RDAs compete abroad for inward investment.

If one travels abroad to the major centres of economic activity, one almost invariably finds different RDAs, with different offices, staff and budgets, each vying for the same inward investment. For example, in May, I went to Shanghai with nine other Members from different parties. There, we discovered that, in addition to the British consul and the team from UK Trade & Investment, there were four separate RDA teams, all bidding for the same projects. That makes absolutely no sense, and was completely bewildering to Chinese investors and businesses. I made representations to the Minister in May and June and I am told that some progress has been made. I hope that, following those representations, the nonsense has been resolved—perhaps he can tell us.

The hon. Gentleman describes offices abroad organised by the RDAs as “nonsense”. Will he say whether his colleague, the Mayor of London, intends to close all the London Development Agency’s offices abroad, as he suggested during his election campaign?

If that is the best response that the Minister can make, we are scraping the barrel. The Mayor of London rightly has his own agenda and will do what he thinks is right. I am talking about the Minister and his responsibilities. When we made representations in the past two years, he and his predecessors failed to make changes. I asked in May and June whether business in Shanghai had changed. Will he confirm that?

We believe that such offices work well with UKTI. Indeed, we recently commissioned a review into how they were working by the independent consultants Arthur D. Little. What I am interested in is whether, as well as hanging the guillotine over the RDAs, to use the phrase that the hon. Member for Brentwood and Ongar (Mr. Pickles) used, the hon. Gentleman is still committed to closing all the RDA offices abroad.

I have told the Minister what should be done. There should be one strong team working in all the key economic centres that pools our resources and uses the strengths in UK Government, so that when investors are thinking about coming to this country, they get a clear and consistent view. The current muddle causes conflict.

Let me reiterate my hon. Friend’s point. My experience as an exporter and as someone who has helped UKTI is that the RDAs’ approach has fundamentally eroded any concept of UK plc. That approach has meant that this country cannot exercise the muscle that the countries that have maintained a country approach can. For me, that was illustrated by a businessman returning from a mission to China. He said that it had been a disaster, because the Chinese had failed to appreciate the difference between the east and west midlands.

I can reiterate that point. I had a peculiar discussion in which I had to try to explain why two separate representations were being made to the same business about why Coventry was better than Leicester. Wonderful as those cities are, to someone in Shanghai that competition is confusing. The result is that the business went to Germany in the end. The Minister might be happy with that competition between our cities, but it is not productive. I am keen to ensure that we have the most effective UK voice. I am happy for it to draw on the talents across the regions, but there must be a single operation and one powerful voice.

If the Minister is going to promise that he will provide that voice and remove such competition, I shall be happy to give way.

The regional offices should work with UKTI, but the hon. Gentleman is singularly failing to answer a simple policy question. Given the chance, would his party close the regional offices or keep them open?

We believe that UKTI must be the lead voice abroad. The Minister can draw from that exactly what I mean. If the RDAs wish to participate, that is fine. However, there should be no competing offices and no competing resources; rather, there should be one powerful voice abroad. I hope that that answers his point.

My main concern is not only the confusion in the Government’s policy of having competing bids abroad, but the fact that after nine years and £13 billion, the RDAs have failed to close the regional gap. Independent statistics show that, outside the greater south-east, England’s regions grew faster in the seven years before the RDAs were introduced than in the seven years afterwards. Indeed, the rate of business creation in some of those regions is static. The result is that whereas the seven regions outside the greater south-east represented 64 per cent. of the nation’s economic output in 1992, by 2006, the latest year for which we have statistics, that figure had dropped to 56 per cent.

I am not saying that everything that has been done has been wrong or that every pound spent has been wasted. However, the fact remains that the economic divide, which logically lies at the heart of a regional economy policy, is worse today than when those agencies began their work.

My hon. Friend is being very generous with his time. He has illustrated that the RDAs have struggled to cope with the economic agenda that they have been given, but they have been given additional things to do, because of the failure of the regional assemblies and regional government, and have now been tossed the bone of new planning powers. Has my hon. Friend found any RDA that welcomes the new opportunity that it has been given?

My hon. Friend is prescient as always, because that is precisely my next point.

The question is: what should the Government do now to help business in the regions? First—this relates to my hon. Friend’s point—they should not dilute agencies that are meant to aid business by loading on to them functions that they neither want nor need. I have had a string of meetings with RDAs, all of which made it clear that they do not want the planning powers. I look forward to meeting an RDA that does want them, but none has contacted me yet. As the regional assemblies are collapsed, the idea of transferring planning powers to the RDAs makes no sense. That is why we propose instead that responsibility for the regional spatial strategies should return to the hands of local government—to people who are directly accountable to the communities that they serve.

Secondly, the quality and accessibility of business support needs to be sharply improved. The Minister confirmed that the Government had announced a reduction in the number of business support schemes last week, but I am yet to be convinced that Ministers really understand how and why business support must be business led, not Whitehall driven.

It is also clear, however, that we need to look ahead to see how we can strengthen the economies beyond the south-east. To do that we need to ensure that the future of economic development is closer to the real centres of economic activity. After all, the administrative boundaries of the regions rarely reflect local economies. Let us take my county of Hertfordshire as an example. Hertfordshire’s economy faces south towards London, but we are lumped in with East Anglia. The M27 corridor along the south coast, for example, is a natural travel-to-work area, but the Government have split it into two regions. The future lies not in Whitehall-led policies, with artificial boundaries, but in enabling closer co-operation both between local authorities and between councils and businesses.

After 16 years of continuous economic growth, business is facing the harsh prospect of declining demand and shrinking cash flow. It is vital for businesses, in whatever region they lie, that we focus on how we can help them to survive. That is why my party has set out positive ideas to help them to cut costs, keep jobs and ease cash flow. That is also why the Government should strip their procurement budget of needless red tape, to enable small businesses to compete for this valuable work. I hope that Ministers will consider carefully the suggestions that we have made in this debate. All tiers of government have a part to play in the coming months to help businesses survive. Like the rest of us in the public sector, the Government must not forget that it is not they who create wealth, but business. Business creates the wealth and jobs on which the rest of us rely. It is important that Government Members remember that.

It is a pleasure to follow the hon. Member for Hertford and Stortford (Mr. Prisk), who was unfortunately unable to attend the meeting last night in Committee Room 10, which was organised by the Industry and Parliament Trust. Parliamentarians had a good discussion with representatives, owners and managers of and professional advisers to small businesses throughout the country.

The event was very useful and showed that the small business sector is in a healthy position, representing as it does 99 per cent. by number of the enterprises in this country—about half our enterprise employment and more than one third of the total earnings of the sector. People said last night that they felt they were entering this difficult time in a much better position than in 1990, when they were net borrowers. Now they are net depositors. Now they feel better managed and are more flexible and ready to respond to the situation.

Partly as a result of last night, I want to dwell on two things. One is the big picture of British enterprise in a global economy. The other is the more immediate issue of access to funds, especially when credit and funding have all but dried up. I want to start with British business’s global position by saying, “Let’s hear it for the entrepreneurial spirit in this country. Let’s hear it for the businesses and entrepreneurs who battle and who, with the right support, can carry the world with them, however global the markets in which they operate are.”

The people attending last night’s event were up for the struggle ahead and for seeing our way through to calmer waters, when the current difficulties will be over. We ought to respect the position of people who are willing to put their all into making this country a great place to do business and a great success in world markets. As policymakers and those who make decisions that affect their world, what do we need to do to make them competitive in a global economy? For us, this means being globally competitive in the areas that affect businesses, including regulation, taxation levels and, in better times, access to funding. This country ought to be well placed in respect of those factors. The Hampton review set us on the road towards world-class, risk-based, proportionate regulation. I might offer a word of caution, however, in that, as a result of what has happened to the banks and financial institutions recently, the appetite for deregulation and light-touch regulation has changed. It will be a challenge for us, as law makers and rule makers, when we come out on the other side of the present crisis, to resist the calls for heavier regulation, and to stay true to the Hampton review agenda of risk-based, proportionate regulation. Of course, the definition of “proportionate” might be different after the experiences that we are all feeling so keenly and deeply at this time.

I should like to make a further point about regulation, although it admittedly relates more to the time when we come out of the present difficulty than to the present circumstances. Since 1994, we in this place have tried three times to set up a legislative fast track for getting rid of regulations that we accept are more burdensome than beneficial to British businesses. The first two attempts were well intentioned, but resulted in hardly any noticeable change. Last year, we made a further attempt, and we now have a Regulatory Reform Committee. The challenge for us, and for the business representatives and businesses that I mentioned earlier, is to work out a programme for sweeping away the regulations that we agree are too burdensome and provide too little benefit. We need to make use of the system that we in this House and the other place have established for fast-tracking the removal of those regulations from our system.

The hon. Gentleman is right to say that red tape is a burden that particularly affects small businesses. Does he share my concern that, according to the Federation of Small Businesses, the cost of complying with the tax system is now estimated to be about £8,700 per firm? Should not that be looked at?

Yes. We receive great advice from many sources about simplifying the tax system, and we should listen closely to it. There are gains to be made in relation to the detail of complying with our tax systems and, yes, there is progress to be made on that.

I should like to make a plea regarding our decisions on which regulations we no longer want. The most recent survey by the Forum of Private Business—which was recently reported to us, as legislators—asked its members to identify the most significant barriers to their businesses. The No. 1 barrier was health and safety regulation. Personally, I think there are great benefits to be derived from health and safety regulation for the safety of the businesses, their work forces and their consumers. Back in July, the Public Accounts Committee cited a telling statistic that should make this country proud of its health and safety record, which is the best in Europe: in 1974, 1,000 people died in their place of work in this country; in 2006, the figure was 250. We should not throw out with the bathwater the baby that is the reason why we have regulation in the first place. There are benefits, and we must not lose sight of them.

A long-term, and perhaps rather techie, point from a legislator such as myself is that it is quite difficult for any business, but particularly small businesses these days, to follow the laws that Parliament has said they must abide by. We are constantly amending primary legislation, and passing secondary legislation that amends other secondary legislation. This is often difficult to follow. My solution would be to have very general primary legislation that permits things to be done through a secondary legislation system. A lot of the law that results from that should be codified. We should have up-to-date codes to which people can have access, so that they can find out everything they need to know about their subject. That is my long-term desire, and I hope we can achieve it one day.

I want to say a bit more about our global competitiveness and the taxation system. We need to be globally competitive through the tax rates that we charge in this country, compared with others. It is important for us, as legislators and tax raisers, to raise our eyes beyond the borders of our own country and be aware of the changes taking place in other parts of the world, to ensure that we remain competitive to the people who make simple decisions to move their investments from one place to another in this globally competitive world.

On the big subject of Britain in the global market, I would like to praise the workers and managers of JCB for their recent decision to work a four-day week to protect a larger number of the work force from redundancy. Perhaps some Opposition Members are not too keen on the involvement of trade unions in workplace negotiations, but I want to praise the GMB, in particular, for effectively brokering that deal and persuading the work force to vote for it.

Does my hon. Friend think that a company such as JCB would be helped by the abolition of reliefs on investment in plant and machinery?

I am quite proud of some of the reliefs and allowances that we have introduced since 1997. Reliefs on capital expenditure on equipment, and research and development tax credits, are positive things that we should not lose. I understand why my hon. Friend makes that point.

I should like to make a general point about JCB, which also applies to other employers. By making such a decision to keep together its skilled work force, the company is maximising its ability to respond when the upturn inevitably comes. It still has its skilled work force ready, rather than letting them go, which could result in their skills degrading or their getting other jobs and being unavailable to a world-class company such as JCB when the upturn comes. JCB is a creditable example of the British enterprise spirit, with its skilled work force and its trade union acting as a social partner in the workplace.

I turn now to the issue of access to funding and credit. Inevitably, instead of being part of a general discussion, this is now the No. 1 issue for everyone, because of the problems that we are all facing. The top issue for businesses in my constituency is their cash flow. It has always been important, but it is now critical. At the top of the list of problems is late payment. Businesses strongly believe that it is up to other businesses, like them, to pay their bills on time. They are also worried about the stories emerging of big players—the larger companies—slowing down their payments to others in the supply chain in order to protect their own financial position. They want to hear us say that that is unacceptable, and that organisations large and small should pay their bills on time. I am certainly happy to send that message clearly.

As a result of those problems, an old chestnut has re-emerged: the speed with which banks clear cheques and other payments into people’s accounts. When people see countries such as Sweden clearing payments within 24 hours, they cannot understand why their bank is still telling them to wait for up to five days. Over the years that I have been an MP, I feel that we have been strung along by the banks. They have always said that, tomorrow, with the right technology, they will be able to whizz these payments into people’s accounts. However, I am still hearing that that is not happening. This is something that the banks could quickly get on top of and do something about. Now that the Government are a shareholder in several of our banks, I hope that our representatives on their boards will raise that issue at meetings, so that the banks in which we have a say can start clearing cheques into people’s accounts as quickly as they can. I should like to see the corporate giants of our economy, which pride themselves on their social responsibility, making a point of paying their bills quickly and on time, and doing so in a visible manner. That would set an example to others.

The Government are also an important buyer of goods, services and major contracts. They therefore have many bills to pay. It is pleasing to hear them say that they are committing themselves to paying those bills as quickly as possible and, in any event, within 10 days. I want the Minister to say that we can have regular updates to show that that is happening. In good years, we have accounts from Departments about their performance, and it is fair to say that even with a target of 30 days, they have not always shone with 100 per cent. success in meeting that deadline. In such times, it is crucial that we, the scrutinisers of Government, have the necessary information.

The Government are an important part of the public sector, but there is a big public sector beyond them, and it is important that we urge everyone to adopt the same responsible approach of paying bills as quickly as possible. One thing that we can do as individual Members of Parliament is to chase up the public sector organisations in our constituencies and urge them to pay their bills quickly. I have written to the health trusts, the primary care trust and so on in my constituency to urge them to pay their bills as quickly as possible.

When there are such pressures on access to credit and funding, people are concerned about the apparent drying up of access to funds at banks and banks unilaterally changing conditions of trade with their business customers. People have told us about loans that they thought would be rolled over but will now not be, or of loans that will be rolled over but on higher interest rates. As legislators, we should look at the terms that banks are going to use to do business with small and medium-sized enterprises from now on. The investment that we have made in some banks from public funds means that we should have a say in their performance. At Question Time today, some of us asked the Chancellor and his team about the promise that the banks which have been recapitalised using public funds will keep their lending at 2007 levels. We need to understand what that means for businesses.

I can understand issuing a caution about not wanting to repeat the mistakes of the past and have irresponsible lending—the idea that asking banks to hit a target could lead to pressure to make the same mistakes—but lending to businesses has nearly always been responsible in this country. There is no reason to think that there should be any falling off in levels of lending to companies as long as businesses and banks continue the relationship that they had.

On a final point about access to funding, and one that is beyond the Government, we heard an exchange between the Front-Bench spokesmen about making money from the European Investment Bank accessible to businesses as quickly as possible. I join the hon. Member for Hertford and Stortford in urging that we act quickly on that. To reprise the point that I made to the Minister about Advantage West Midlands, there was a huge shock to manufacturing in the region when MG Rover collapsed in 2001. There was a great deal of worry about the supply chain, which was extensive throughout the region, and about huge job losses as a consequence. Advantage West Midlands responsibly stepped up to the plate and made transitional loans available for businesses that were trying to find work to replace what they had lost with the collapse of MG Rover. As a result of that scheme, there were far fewer job losses than any of us had feared would be the case. The scheme was wound up when it had done its job, but because of the current situation, its time has come again. In fact, I can think of an individual case in my constituency which would benefit now, today, from access to similar funding. I certainly urge the Minister to make moves to see whether such money could be made available in the west midlands and across the country.

The public sector as a whole is a huge procurer of services and should not drop its guard when it offers contracts to businesses in this country. I recently chaired an inquiry that produced the report “Sustainable Procurement”. Despite its title, it is not a green document, but is about the sustainability—economical, environmental and social—of the procurement power of the public sector. I recommend it to the Minister. It includes pointers that would help British businesses to secure British contracts.

There is such pressure on businesses that, inevitably, they will look at their skills training budget and ask whether it should be cut in these times of difficulty. That would be a dangerous thing to do and I urge them not to cut back on training now, because in the longer term, when the upturn comes and we need the skills of a better trained work force, they will miss not having made that investment. I hope that they will see the sense in maintaining their skills investment.

It is always a pleasure to follow the hon. Member for Stafford (Mr. Kidney) who, as usual, spoke with great common sense. I am tempted to follow him down the route of discussing health and safety regulation, because it is important, but I do not think that the time allowed permits me to do so. I shall therefore follow the major thrust of the end of his speech on the availability of finance, which is the critical issue for all businesses throughout all the regions and nations of the United Kingdom.

First, however, I want to comment on the discussion about inward investment and the regional development agencies, and point to the nations as opposed to the regions. Scotland has one body responsible for inward investment, and it operates reasonably well. However, those of us in the more outlying areas find it useful to have our own personnel to go abroad and win business. Thurso is not, perhaps, the first port of call for a Japanese battery manufacturer, but we were successful in winning that business, and an important part of our local business it is. Perhaps that is a lesson for the RDAs.

I have no doubt that when the figures are published early next year, we will find that we are currently in recession. The only questions are how savage it will be and how long. As in any recession, the core question that every business is asking is how to maintain its cash flow and how to survive. In past recessions, frankly, if we are honest, the policy levers available for helping businesses at any level were, to an extent, curtailed, because what was really needed was to get the economy going again. However, one lever is available in this recession that has not been available before. Owing to the financial crisis and the fact that the Government are now owners of some banks and substantial shareholders in others, they have an ability to affect the outcome of how those banks deal with businesses.

We have heard in debates on business over the past week of banks increasing interest rates, increasing fees and curtailing facilities. I have recently had some concrete examples of where loan-to-value covenants have been breached. The bank has called in the facility on the basis of that breach, there has been a requirement to charge more interest, which in turn has breached the interest covenant, and the company is threatened with going into receivership, notwithstanding the fact that it is fully profitable and can carry on. Obviously, I could give details of the company involved, but the point is that sound companies are threatened with being put into administration.

Today, I understand that the Chancellor of the Exchequer and Lord Mandelson, the Secretary of State for Business, Enterprise and Regulatory Reform, are meeting the chiefs of the banks. I again ask the Government to consider having a proper and spelt-out memorandum of understanding, clearly stating not the detail of one particular loan, but how in principle the banks are going to deal with companies. I suggest that that simple memorandum of understanding would cover several things. The first is the ability of banks to withdraw overdraft facilities on demand. They should agree to a 28-day period from notification to when they would put it into effect. The second concerns covenants on capital values and interest to cover the point that I have just made. The third is to agree not to increase the current interest margins and fee charges that sound companies are paying. Another is to cover the point that the Chancellor made in an article that I read this morning, which says that he

“has promised to step in if banks were found to be ‘recklessly withholding money’”.

Clearly there must be a way that the problem can be dealt with before the company has gone under, and that needs to be spelt out as well.

I suggest to the Minister that one of the main things that we need is clarification from the Chancellor and Lord Mandelson about precisely what is meant. At present there is merely an open aspiration that credit will be available at 2007 levels, and until clear principles are established demonstrating what that means to businesses, it will not be a great deal of help to them. While I accept that summits, forums and meetings are of some use to businesses, what is really required from the Government at this time is leadership and clear direction, and that means setting out the principles on which the banks will operate over the next two years.

I agree with some of what has just been said by the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso). I recently asked my local chamber of commerce what challenges faced businesses in St. Albans. It listed a wide range of problems, but most of them involved cash flow. Banks in my constituency are aware of the problems facing businesses, but there is a domino effect: when Peter does not pay Paul, no one can pay anyone. That is a big problem, and it will become no easier as time goes by. If other Members have not asked their local chambers of commerce the same question, I can tell them that there is a lot of hurt out there, and people in my constituency are certainly letting me know about it.

I listened with interest to the Minister’s praise for regional development agencies, but let me redress the balance somewhat by drawing attention to the concerns that exist. It is true that the RDAs’ statutory purposes are, among other things, to

“further economic development and regeneration”


“to promote business efficiency, investment and competitiveness”.

However, in evidence given to the Select Committee on Business and Enterprise in October, the Institute of Directors expressed the rather different view that

“with the exception of the Regional Economic Strategy, this work”

—the work done by the RDAs—

“could have been done just as well by a properly staffed Government Office. From the viewpoint of business in the broader sense of the word, the benefit of the RDAs has been their business focus. Unfortunately as the years have gone by, that focus has diminished in the Region”.

That strikes me as quite a worrying comment.

The RDAs have proved somewhat controversial and somewhat political, and the criticism has often been made that they are spreading themselves far too thinly without making a concentrated effort to tackle underlying problems. Let me say to the Minister again—and I will continue to say it—that the fact that funds that were to be directed towards business via the RDAs have been pinched to prop up the housing market is yet another problem. There will now be even less money for the RDAs to divert to small businesses, especially in my area, which makes me question whether there is any point to RDAs in general.

The RDAs have also been accused of being too political, not just by the Conservatives but by business representatives. In its evidence to the Select Committee, the Institute of Directors also said that Government were

“making the roles of the RDAs less business orientated, and more overtly political”.

There are concerns about the operation of the RDAs and about their ever-escalating budget, which has increased steadily since their creation. It stood at £2.44 billion in 2008, but that amount was not divided equally among the regions. Although the east of England is seen as a cash cow by the Government, my area received only £159 million worth of the pie.

It could be asked why the Government have chosen to put the money where they are putting it. There are more small business start-ups in the east of England than anywhere else, and we are seen to be giving a huge amount to the Chancellor, which he redistributes to—I would say—his friends elsewhere; yet we receive very small amounts of the budget. That too causes me to question the role of the RDAs. The position seems bizarre to me, and, as I have said, I keep asking the same question.

I have been told that the decision to take money from the east of England was painful and reluctant, but I do not think that the Minister has addressed it at all. We receive less than any other region, but £300 million has been taken from the RDAs’ budget, and some of that is coming from the east of England. If the decision was indeed painful and reluctant, and if it was made in the knowledge that it would be an issue, may I ask what evaluation was made of the impact on businesses? I should really like an answer to that. It is particularly worrying that we are still feeding the delivery system although our budget has been taken away.

As I said at the outset, businesses in my constituency are hurting. There are huge worries about the economy, and about how the area will fare. We are seen as being wealthy in St. Albans. While I dispute that—there are multiple poverty indices in parts of the area—it must also be said that we are not doing too badly. However, a recent survey by Oxford Economics, the commercial wing of Oxford university, placed St. Albans 16th out of 408 areas in the United Kingdom in terms of how badly it would fare as a result of the possible impact of the credit crunch. If the fact that we are the 16th most vulnerable area in the UK does not worry the Minister and other Government officials who tell us that we are wealthy, it ought to.

We may be wealthy according to certain indicators, but we are also vulnerable when things start going wrong. Our area is very exposed, and particularly vulnerable in an economic downturn. The average credit card debt among St. Albans residents is £1,871, which makes us, in terms of credit cards, the fourth most indebted area in the country as well as the 16th most vulnerable to a credit crunch.

I believe that we need a better form of delivery, enabling investment to go directly to the people who need it most. I was amazed to learn that—as my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) mentioned earlier—the RDAs have cost the taxpayer £13 billion: £600 for every household. We must ask ourselves whether this is the best way of delivering money, not only to small businesses but to local people who are struggling economically. I would happily scrap these bloated quangos. I do not believe that we need a regional solution to local problems. That is not to say that there is no role for regions, but all too often we look to people in a distant place to deliver local solutions, and the businesses in my area feel that they do not always get it right.

If we are going to spend so much money on a delivery body, let us make sure that we do get it right. If we believe that this is the right way in which to do things, let us not rob the pot when it is convenient. Surely the money that has been spent in this way could be better spent on reducing small businesses’ national insurance contributions, cutting small-company corporation tax, and tackling all the red tape and bureaucracy to which other Members have referred and which is tying my small businesses in knots.

By a process of elimination, I note that it is now my turn to speak.

I feel that the issue of small businesses warrants more than a topical debate lasting an hour and a half, and I do not think that it says a great deal for topical debates that this great amphitheatre of our democracy is so sparsely attended. I hope that the House will consider the future of topical debates, which are about as relevant to this place as a peanut is to a dinner party. They add so little to parliamentary life that the experiment has probably run its course. However, I have listened with great interest to the contributions of Members on both sides of the House. I particularly enjoyed those of my hon. Friend the Member for St. Albans (Anne Main) and the hon. Member for Stafford (Mr. Kidney). Both made very thoughtful speeches.

Let me say gently to the Minister that, while we all accept that the credit crunch is a global problem, we must also accept that the problem with small businesses is that banks in this country are simply not lending them money; or, if they are lending them money, they are raising the interest rates at which the money is to be paid back. I have made that point twice before in the House, and I think that if it is worth making twice, it is probably worth making a third time.

All Members are probably aware that when interest rate periods end, banks are going back to their clients, the small businesses, and renegotiating the rates upwards, often to a significant extent—from, perhaps, 6 or 7 per cent. to 15 per cent. or more. That is putting huge stress on small businesses.

It would be churlish not to welcome the fact that the Chancellor is sitting down with the banks today to try to get them to ease their lending terms. But I am concerned that this is the third or fourth such meeting he has had with the banks, who do not seem to be taking seriously his treaties on the matter. This should be the banks’ last chance. If they do not improve their lending terms to small businesses after today’s meetings, next week the Chancellor should be a little more forceful with them. After all, their balance sheets are being shored up by taxpayers, many of whom own small businesses.

Small businesses encounter problems when creating jobs. A sole trader in my constituency makes a very good living helping people to create more storage space in their homes. As can be imagined, he is quite busy at the moment with people choosing not to move house and to do a conversion or to make use of the space they have instead. He told me that he would very much like to take on another person to work with him but he is put off by the increase in paperwork and the regulatory burden that that would create for him. That is a great sadness.

We talk about corporate social responsibility within small businesses; there is nothing more responsible than allowing small businesses to create employment opportunities. Most employment opportunities I believe—I could be wrong; if so, I am sorry for misleading the House—are still created by businesses employing fewer than 10 people. I would be truly grateful if the Government went away and thought about how they could help the very smallest businesses to create additional jobs.

It might help my hon. Friend and, indeed, the House if I said that it is my understanding that, over the past 10 years, the proportion of small businesses that employ people has fallen; now, seven out of 10 small businesses employ absolutely no one.

If those figures are correct—I have no reason to believe that they are not—that is a great sadness. This House recognises that small businesses should be the engine room of the economy. If we have a healthy small business sector, we have a healthy, growing and expanding economy.

I conclude by making a plea to the Bank of England. If anyone at the Bank is watching proceedings here today, will they please take on board that small businesses need their interest rates reduced? We need to get interest rates down and to reduce the costs of borrowing and of capital. We need to give small businesses a fighting chance to have a prosperous future.

I will not detain the House for long, but I wish to make a few concluding points. I thank all hon. Members for taking part in the debate on what we all agree is an important issue. It is the second time in two weeks that the House has discussed it and I agree with the hon. Member for Broxbourne (Mr. Walker) about its importance.

The hon. Member for Hertford and Stortford (Mr. Prisk) spoke about small businesses and public sector procurement. It is not the case that businesses need to show three years of full accounts to bid for public sector contracts. How to enable more small businesses to bid for those contracts is a legitimate issue to consider, and the Glover review, which we commissioned to look into that, should report next month.

The House will have noted the evasive responses of the hon. Member for Hertford and Stortford when asked three times whether his party would keep or close the regional development agency offices overseas. Perhaps I can enlighten him with a quote from the hon. Member for Rutland and Melton (Alan Duncan) who said:

“We will end the practice of agencies establishing overseas offices.”

If the hon. Gentleman was unenlightened about his party leader’s position on RDAs, he is now enlightened about the position on overseas offices.

My hon. Friend the Member for Stafford (Mr. Kidney) quite rightly praised good companies such as JCB which do an excellent job in this country and abroad. He also raised important issues to do with cash flow and credit—matters of significant concern for businesses at the moment.

On credit, will the Minister answer the question that was put earlier? Why is it that in France the first tranche of money has already been given to small firms but, in this country, the Government are still dealing with the paperwork?

As I said to the hon. Gentleman earlier, this very day the Chancellor and my noble Friend the Secretary of State are meeting the European Investment Bank and other banks to progress this matter, and I assure him that it will be done with all due speed.

The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) spoke about the value of having representation abroad for a rural area such as his and also raised the important issue of access to finance. As the Chancellor said at Treasury questions earlier, this point is taken extremely seriously by the Government.

The hon. Member for St. Albans (Anne Main) agreed with her party leader that the RDAs should be scrapped. My only point with regard to the benefits and costs to the east of England of various expenditures is that the east of England, too, will benefit from increased expenditure on housing. I suspect that housing is an issue in the east of England and the £1 billion package announced last month will bring benefit to the area.

On small businesses and employment, raised by the hon. Member for Broxbourne, not only are there significantly more small businesses in the country than there were a decade ago, but they employ 1.5 million more people than they did a decade ago. We have more small businesses and we have more employment in those businesses thanks to the stable economy and growth that we have enjoyed.

In conclusion, we will keep working with both banks and businesses to see the economy through the coming months.

Question put and agreed to.


That this House has considered the matter of businesses and the regions.