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Small Businesses

Volume 516: debated on Thursday 21 October 2010

9. What discussions he has had with the Secretary of State for Business, Innovation and Skills on the effect on levels of employment in small businesses of reductions in his Department’s funding to local government. (18468)

The Secretary of State has had discussions on a number of topics with the Secretary of State for Business, Innovation and Skills. We are aware of the need to offer continued support to small businesses in this difficult economic climate. That is why we are committed to providing local authorities with the freedom to determine how best to allocate their resources to meet local priorities.

In many areas, the local authority is far and away the largest employer and as a result many small and medium enterprises depend heavily on it for contracts and to keep their businesses going. The tightening up that we will see will therefore inevitably lead to small businesses suffering as a result of what has happened in the last 24 hours.

I certainly agree with the first two thirds of what the hon. Gentleman says, but his conclusion is wrong. In the Secretary of State’s conversations with colleagues at the Department for Business, Innovation and Skills, they drew our attention—as did the Chancellor—to the small business rate relief, which gives 100% relief for properties, up to £6,000. There is also the holiday on national insurance contributions for the first three years of start-up companies, and this Department is responsible for the local enterprise partnerships, on which we are working closely with the Federation of Small Businesses to ensure that they can play an effective part.

I remind the hon. Gentleman that a large proportion of our housing programme, which will spend £6.5 billion, will of course involve the small construction sector. Our regional growth fund of £1.4 billion will also contribute. We are working hard to ensure that councils understand their role in procurement and delivery of services to ensure that small companies and the voluntary and community sector can be involved. If he asks the question—

Order. The comprehensiveness of the Minister’s answer is equalled only by its length. We need snappier answers from now on.

Does the reduction of 7% for four years in local government funding include the 3% efficiency target proposed by the previous Government, or does it exclude it?

The figures announced yesterday were in relation to a base that was set by the outgoing Labour Government. I do not know whether that is the complete answer my hon. Friend wants, but I am happy to write to him further if he needs me to.

PricewaterhouseCoopers estimates that on the back of the cuts announced yesterday, 82,000 jobs will go in Yorkshire. Could the Minister describe the mechanism to avoid a further double whammy for the city of Sheffield—its individuals, businesses and communities—from the 26% reduction in the overall grant to the city over the next four years and the 18% reduction in the area-based grant, which is theoretically being un-ring-fenced, but which will actually not exist at all unless there is a mechanism to retain it in the communities that were receiving it?

I thank the right hon. Gentleman for his question, but would remind him that the economy has shrunk by 6%, and that was before the general election. Many, many people in the private and public sectors have already faced the devastating consequences of that. We are setting that right.

Will the Minister confirm that there will be many opportunities for economic development in York and North Yorkshire, which have suffered owing to the mass investment in places such as Boeing in Sheffield, under the local economic partnerships?

I hope that each local economic partnership will be a focus for growth, jobs and development. Obviously there is competition, but we need every part of the country to grow quickly, to get back to the level of prosperity that we should have.

Small businesses all over Britain depend on £20 billion of local government procurement. PWC has predicted 500,000 job losses in the private sector, with 100,000 in the construction industry and 180,000 job losses in business services. Does the Minister therefore not agree that it is an abrogation of the Government’s responsibility to have failed to conduct an impact assessment study of the effect of their actions in the public sector on the private sector, thereby avoiding coming clean? Does he also agree that the evidence is clear: for every job that goes in local government, at least one will go in Britain’s small businesses?

Let me welcome the hon. Gentleman to his role, and say that I would have thought that, with his background, he would be the last person to put a lot of dependence on a private consultant’s report about what was going to happen next. From our point of view, we think that we have got the right remedy for Britain’s ills, and I believe that in a year’s time he will agree with us.