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Small Businesses

Volume 485: debated on Thursday 18 December 2008

3. What assessment he has made of the likely effect on small businesses of the measures announced in the pre-Budget report. (244631)

The impact will be very strongly positive. The package addresses small businesses’ cash-flow problems, their access to credit and management of their tax liability. The fiscal stimulus will be crucial in encouraging economic recovery.

My constituency has a fair number of large multi-storey former cotton mills, the basements and upper floors of which are difficult to let. How temporary will the 70 per cent. relief on non-domestic properties be, and how will it affect a business man who owns one of those mills, pays the business rates and then sub-lets to a multitude of other smaller businesses?

My hon. Friend is right to draw attention to the benefits of this measure. It is a temporary increase, to £15,000, for next year only—2009-10—in the threshold at which empty property becomes liable for business rates. As he says, some 70 per cent. of empty properties will pay no rates next year as a result. He asked about subdivided properties. Their position will depend on the nature of the division and whether the property constitutes a separate, self-contained hereditament for ratings purposes. A landlord who is concerned should check the liability with the Valuation Office Agency.

Does the Minister accept that for small businesses this is a relatively small package compared with the overwhelming effect of the unwillingness of many banks to lend to them? Does he also accept that the Government mis-structured their huge package in such a way that the banks have an incentive to pay it off as quickly as possible and to get their loan books down rather than up? It is that circumstance that is driving the recession more than anything else.

No, that is not the case at all and the PBR package directly addresses those concerns. That is why the chairman of the Federation of Small Businesses said:

“This Pre-Budget Report is a sign of the importance of small businesses to the UK economy.”

It fully addresses their needs and that is why the package includes a £1 billion small business finance scheme, to encourage bank lending to small and medium enterprises, and an additional £1 billion facility to help smaller exporters. The range of measures is accurately targeted at the problems that small businesses are facing at the moment.

If the Government are to pump further taxpayers’ money through the banking system, can my right hon. Friend give the House an undertaking that that will be limited to the nationalised banking sector and specifically tied to extending loans to small and medium businesses?

My right hon. Friend will know that conditions addressing exactly that point have been attached to the Government recapitalisation contributions to the two major banks that have received them. We will of course continue to keep the position under review.

Will the Minister tell the House when he expects small businesses to be able to access the £1 billion fund? Many are in dire need at this moment at time.

Yes, I certainly do expect them to be able to access it. The full details of the new scheme will be set out at the beginning of the new year by my noble Friend the Secretary of State for Business, Enterprise and Regulatory Reform. Other measures that we have put in place are already effective, such as the small business support service for firms with a tax bill due that are facing temporary financial difficulty. They have been able for some weeks now to call up the HMRC hotline on 0845 302 1435, which is available seven days a week.

As well as Marston’s brewery, in my constituency there are many small businesses called pubs. They are extremely concerned about measures in the pre-Budget report relating to alcohol excise duty and the alcohol duty escalator. Would my right hon. Friend and his ministerial colleagues reconsider those measures because they are hurting pubs, which are vital to our communities?

The change in the VAT rate has been offset in the way that my hon. Friend describes. The position for the coming year is as my right hon. Friend the Chancellor has set out, and of course we will look at the future rates of alcohol duty in future Budgets in the normal way.

For the 1,500 people losing their jobs and the 60 small businesses going bust every single day, the Government are not tackling the recession. The Government’s small business loan guarantee scheme will not even be up and running until mid-January and even then it will not cover 99 per cent. of loans to companies. Does not the Minister agree that that is too little, too late, that he should get on with our national loan guarantee scheme and that Britain is facing the deepest recession of any G7 country because we have the most incompetent, ineffective Government?

The hon. Lady should have a word with some of her colleagues on her Front Bench. I agree with her that it is right for the Government to address these problems, but that contrasts with the policies of those on her Front Bench, which are the policies of do nothing. Those were the policies that we saw in the catastrophic recessions under the last Conservative Government and they are being repeated by Conservative Front Benchers now. The policies that we are putting in place are directly addressing precisely the challenges that small businesses are facing, and that is why such an ambitious and effective package was set out at the time of the pre-Budget report.

I have listened to my right hon. Friend’s response and to the questions from other hon. Members, but I want to inject a slightly more positive note into the discussion by flagging up the work of the Springboard Fund, an offshoot of Business Link based in Devon and Cornwall that resulted from the sale of Business Link. The fund has just had its 100th inquiry in the short time since it has been set up from a group of people who want to set up new businesses. There is real interest in setting up new businesses, despite the downturn. People are going to the Springboard Fund because the banks are not opening their doors—

Like my hon. Friend, I welcome and support the measures that the Government have in place and that the regional development agencies are supporting to encourage new enterprise. She is absolutely right that there are some very attractive opportunities for new businesses, even at this very difficult time. It is quite right that we should be working with those who are encouraging entrepreneurs to come forward and make a success of new businesses.