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Small Businesses

Volume 417: debated on Thursday 26 February 1981

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3.17 p.m.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government how many new businesses were started in 1980 and whether they are satisfied with this rate as part of their overall economic and industrial policy.

My Lords, until the statistical work is much further advanced there are no reliable official figures of small business births and deaths. The Government recognise the importance of having reliable information about business formation, and work is proceeding on existing data, mainly VAT records. Where overall policy is concerned it remains as important as ever to contain public expenditure in order to release resources for business, large and small.

My Lords, would my noble friend bear in mind that, whereas no one would wish to put further paperwork on the shoulders of small business, the VAT returns would not in fact show up small businesses in their earlier years, which may well have a sales turnover of less than £10,000 a year? Secondly, in view of the very substantial redundancy payments that have been made—for example, £300 million last year by British Steel—would my noble friend consider the Manpower Services Commission making their facilities available to advise those in areas where there has been redundancy as to how they might form small businesses, using their redundancy payments?

My Lords, this service does exist. The Department of Industry, under my honourable friend the Parliamentary Under-Secretary, runs the small firms service, which counsels on the formation of small businesses; and the staffing of this service is businessmen, not officials. Joint ventures between the MSC and this service do take place.

My Lords, although the Government have not got any exact statistical evidence, would they tell the House if they have any idea whether the births are keeping pace with the deaths?

My Lords, the provisional information that I have is that the balance is about even; but, as I say, the information is not reliable and I prefer more work to be done on it.

My Lords, would the Minister not agree that the founding of new businesses, especially small ones, would do much to restore morale and confidence in the economy of this country; and if he so agrees, is he able to indicate what steps the Government are going to take now or in the near future to make this possible?

My Lords, I entirely agree with the right reverend Prelate. Of course, the problem is that businesses, large and small, public or private, are short of funds. There are many appeals to the Government for funds, or for help with funds; and that inevitably drives up interest rates, which of course also damage business. So it is very important to get the balance right.

My Lords, may I ask the Minister, as he cannot tell us how many new businesses have been started during the year, whether he can tell us how many businesses have gone bankrupt during the year as a result of the Government's economic policy?

My Lords, while not for a moment accepting the sting in the tail of that particular supplementary question, because trading conditions and other things are much more influential than economic policies, right or wrong, I rest on the answer I gave to the noble Lord on the Front Bench opposite, which is that the provisional information I have is that the figure is in balance, but I am not happy with the method of reaching this figure and I therefore want it looked at again.

My Lords, are the Government not aware of the growing practice with large and well-known businesses bringing pressure to bear on small businesses for prompt delivery and then refusing payment for very long periods? Could not the Government take some action to stop this?

My Lords, I was aware that there have been complaints on this score and the Department of Industry have made representations that there should be prompt payment of contracts. We have also tried to put our own house in order to see that Government pay their contractual bills more rapidly than they have been prone to do, which also affects business.

My Lords, is the noble Lord aware that the Government recently allowed the Development Commission in the rural areas to give half the costs—something like 50 per cent.—of building small industrial units to local authorities? It is a partnership system of encouraging local authorities to build the small units in which small businesses can make a start. Would the noble Earl have a look at whether this policy—which I applaud and greatly welcome—of helping local authorities to have a useful role in this way could be spread to the urban areas in some way as well as the rural ones? That is where most of the small businesses are going to make a start.

My Lords, I think in urban areas the ratio is 75 per cent., and I shall check that. I shall look at this aspect and I am most grateful to the noble Lord for making my bull points for me.

My Lords, in seeking to improve the statistical information, as the noble Lord indicated, will the Government ensure that the information points to those businesses which are registered as companies under the Companies Act, and the encouraging number of new businesses which are being registered as co-operative societies under the Industrial and Provident Societies Act? Will that distinction be borne in mind?

My Lords, I shall bring this to the attention of my right honourable friend the Secretary of State for Trade as it affects the Companies Act, and of course we shall be debating this Act this very afternoon in the House. I am sure that point can be fed in.

My Lords, is the noble Lord aware that one of the great stumbling blocks in the establishment of new small businesses in urban areas is the difficulty of obtaining small amounts of risk capital? There are available vast amounts of capital from institutions such as banks and the ICFC but it usually costs them far more to examine proposals than the amount of money requested. Will the Government therefore look urgently into the need for setting up an organisation in the towns to vet such applications at little or no cost?

My Lords, one cannot set up an organisation, large or small, at little or no cost. One must be careful about going down the road of setting up organisations, but I take the point that the noble Lord has said seriously. I have had meetings with banks to discuss how smaller amounts of investments or equity capital might be generated.