2 February 2011
As the public sector contracts, it is essential that the private sector - and small businesses especially - are given every support to grow as fast as possible. Geoffrey Clifton-Brown calls on the Department for Business, Innovation and Skills to ensure that we have a legislative and regulatory structure that is ruthlessly pro-business.
Geoffrey Clifton-Brown (The Cotswolds) (Con): In America the official unemployment rate is 9.5%; unofficially, it is 13%. Americans face the worst fiscal deficit since the slump of the 1930s, and, despite the huge fiscal stimulus package introduced by President Obama, the US economy is not producing enough jobs to reduce those rates of unemployment, let alone to create enough jobs for new entrants to the job market.
Unfortunately, our economy faces similar conditions, and, as I said in my speech during the Budget debate on 23 June last year, it is essential that as the public sector contracts, everything is done to encourage the private sector to grow as fast as possible in order to take up the necessary slack and to create desperately needed jobs, particularly among the young. At this time, small and medium-sized enterprises collectively account for 99.9% of all enterprises, 59.8% of private sector employment and 49% of private sector turnover. It is clear that our economic recovery will be fuelled by those firms, to which the Government should provide all possible help. The Government have taken a number of steps to help in doing so. They have reduced corporation tax, both large and small; increased the threshold at which employers begin paying national insurance contributions; they are consulting on reforming employment tribunals; and there is a welcome and significant increase in apprenticeships.
There are significant problems out there, however. The banks are lending to certain favoured sectors, and even in other sectors their arrangement fees have increased hugely over the past year or so, thereby increasing borrowing costs. The introduction of regulation on flexible working and paternity leave, although desirable in themselves, could have serious negative implications for small businesses, which can ill afford to lose a member of staff for a considerable time. It is vital that the Department for Business, Innovation and Skills wins those arguments with other Departments, and that business policy is ruthlessly put first.
Julian Smith: Does my hon. Friend agree that on family-friendly policies, which are vital for supporting the improvement of children in our country, small businesses with very few employees need to be given special attention? They are special cases, and we need to look after their needs as much as possible.
Geoffrey Clifton-Brown: My hon. Friend is prescient, because I was about to move on to that subject. The European Union has what it calls a "Small Business Act", which requires the EU to look at every new regulation before it is introduced and consider its effect on small businesses to see whether very small firms might be exempted from it. We should do more of the same here.
The greatest challenges and opportunities lie in inward investment-foreign direct investment, FDI-and exports. As I identified when I was shadow Trade Minister, the previous Government's policies on those matters were incoherent, particularly with regard to the enormously expensive regional development authority offices that were based throughout the world, often in the same city, and competing for the same inward investment to UK. Thankfully, we have put a stop to that, and I am delighted to hear that my right hon. Friend the Secretary of State is about to produce a White Paper on trade. That will be very welcome, indeed, and I am sure it will address several measures that I am going to discuss in my speech.
If the newly created local enterprise partnerships are not to have any role in FDI, presumably UK Trade and Investment will deliver the policy centrally from London, with small teams on the ground in the regions, something that I have advocated. Perhaps the Minister, when he makes his winding-up speech, will confirm that, because FDI is a vital part of the economy. We must not only seek new FDI from throughout the world, but carefully look after what we have. I was alarmed to see that Hua Wei, one of the world's largest IT companies and based in Beijing, has just moved its European headquarters from Basingstoke to Düsseldorf. Eventually, that could affect 6,000 jobs, and the Pfizer decision today is another reminder of FDI's importance.
Alison McGovern: Will the hon. Gentleman give way?
Geoffrey Clifton-Brown: I shall, but the hon. Lady is the last person I am going to give way to.
Alison McGovern: The hon. Gentleman mentions FDI and UKTI-forgive me for using so many acronyms -and their role in bringing in inward investment. Will he comment on how successful centralised action to bring in FDI to regions of this country, such as the north-west and the north-east, was in the 1980s and the 1990s?
Geoffrey Clifton-Brown: The simple answer is that the previous Government were not as successful at doing that as they should have been, and their policies were not coherent enough.
I say to the Minister for Universities and Science that we also have to look at bringing in visas for a few very highly skilled people. The other day I visited a local plc. It employs several thousand people, but only a very few-about half a dozen-of the brightest and best people from around the world. It needs visas to get such people into this country-people who, with their ideas and innovation, can act as a multiplier for many other jobs.
Exports will be similarly vital to a growing economy. Recent estimates for the period 1996 to 2004 suggest that firms that are new to exporting experience, on average, a 34% increase in productivity in the year of entry, whereas companies that stopped exporting saw a drop in productivity of 7% to 8%. That is self-evident, because to export they have to be competitive. It is concerning that despite the weakness of the pound against the dollar and the euro, the UK's overall monthly trade deficit on goods and services for the month of November declined from £4.1 billion to £4 billion. We need to keep a watch on that.
Only 23% of small businesses export, and those that do are often stifled by the red tape inherited from the previous Government. Some 70% of our total exports go to the markets of North America and the EU. However, estimates suggest that by 2020 the EU's and the USA's share of global gross domestic product will have declined to less than 40%. It is therefore vital that we give more help to small businesses wishing to export to markets outside Europe and North America, particularly the growing markets of the BRIC countries-Brazil, Russia, India and China-although many other countries out there are also growing very fast.
It was encouraging to see that last year UKTI's budget was increased because of the Foreign Office administration programme, but its future is much less clear. I would say to my right hon. Friend the Minister that as it is about the only bit of government that makes money for the country, and it has a huge task to do, it would be folly to cut its budget.
The ministerial structure that we have at present is too fragmented. Exports and UKTI are handled by the new Minister for Trade and Investment, Lord Green. The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), handles the ECGD; and my golly, as my hon. Friend and neighbour, the Member for Stratford-on-Avon (Nadhim Zahawi), said, it desperately needs an overhaul, with 80%-he said 90%, which is even worse-of all its lending going to aerospace, mostly to Airbus. That is unacceptable. Other countries do much better with their equivalent bodies, and so should we. Local enterprise partnerships are handled by the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk). It is not yet clear what role LEPs will have in FDI and exports.
Export licensing is another area that we desperately need to overhaul. I have here a quote from Mark Ridgway of Group Rhodes, who says-I hope that my right hon. Friend the Minister will pay close attention to this-
We cannot afford, as a country, to go on like this. Either the export should be refused in a reasonable space of time, or it should be allowed.
In summary, our economy is fragile. The private sector must take up the slack of the public sector. It is vital that we have a legislative and regulatory structure that is ruthlessly pro-business. We must have a coherent plan for FDI and exports, as that is where economic growth is going to come from in the future.
Geoffrey Clifton-Brown (The Cotswolds) (Con): In America the official unemployment rate is 9.5%; unofficially, it is 13%. Americans face the worst fiscal deficit since the slump of the 1930s, and, despite the huge fiscal stimulus package introduced by President Obama, the US economy is not producing enough jobs to reduce those rates of unemployment, let alone to create enough jobs for new entrants to the job market.
Unfortunately, our economy faces similar conditions, and, as I said in my speech during the Budget debate on 23 June last year, it is essential that as the public sector contracts, everything is done to encourage the private sector to grow as fast as possible in order to take up the necessary slack and to create desperately needed jobs, particularly among the young. At this time, small and medium-sized enterprises collectively account for 99.9% of all enterprises, 59.8% of private sector employment and 49% of private sector turnover. It is clear that our economic recovery will be fuelled by those firms, to which the Government should provide all possible help. The Government have taken a number of steps to help in doing so. They have reduced corporation tax, both large and small; increased the threshold at which employers begin paying national insurance contributions; they are consulting on reforming employment tribunals; and there is a welcome and significant increase in apprenticeships.
There are significant problems out there, however. The banks are lending to certain favoured sectors, and even in other sectors their arrangement fees have increased hugely over the past year or so, thereby increasing borrowing costs. The introduction of regulation on flexible working and paternity leave, although desirable in themselves, could have serious negative implications for small businesses, which can ill afford to lose a member of staff for a considerable time. It is vital that the Department for Business, Innovation and Skills wins those arguments with other Departments, and that business policy is ruthlessly put first.
Julian Smith: Does my hon. Friend agree that on family-friendly policies, which are vital for supporting the improvement of children in our country, small businesses with very few employees need to be given special attention? They are special cases, and we need to look after their needs as much as possible.
Geoffrey Clifton-Brown: My hon. Friend is prescient, because I was about to move on to that subject. The European Union has what it calls a "Small Business Act", which requires the EU to look at every new regulation before it is introduced and consider its effect on small businesses to see whether very small firms might be exempted from it. We should do more of the same here.
The greatest challenges and opportunities lie in inward investment-foreign direct investment, FDI-and exports. As I identified when I was shadow Trade Minister, the previous Government's policies on those matters were incoherent, particularly with regard to the enormously expensive regional development authority offices that were based throughout the world, often in the same city, and competing for the same inward investment to UK. Thankfully, we have put a stop to that, and I am delighted to hear that my right hon. Friend the Secretary of State is about to produce a White Paper on trade. That will be very welcome, indeed, and I am sure it will address several measures that I am going to discuss in my speech.
If the newly created local enterprise partnerships are not to have any role in FDI, presumably UK Trade and Investment will deliver the policy centrally from London, with small teams on the ground in the regions, something that I have advocated. Perhaps the Minister, when he makes his winding-up speech, will confirm that, because FDI is a vital part of the economy. We must not only seek new FDI from throughout the world, but carefully look after what we have. I was alarmed to see that Hua Wei, one of the world's largest IT companies and based in Beijing, has just moved its European headquarters from Basingstoke to Düsseldorf. Eventually, that could affect 6,000 jobs, and the Pfizer decision today is another reminder of FDI's importance.
Alison McGovern: Will the hon. Gentleman give way?
Geoffrey Clifton-Brown: I shall, but the hon. Lady is the last person I am going to give way to.
Alison McGovern: The hon. Gentleman mentions FDI and UKTI-forgive me for using so many acronyms -and their role in bringing in inward investment. Will he comment on how successful centralised action to bring in FDI to regions of this country, such as the north-west and the north-east, was in the 1980s and the 1990s?
Geoffrey Clifton-Brown: The simple answer is that the previous Government were not as successful at doing that as they should have been, and their policies were not coherent enough.
I say to the Minister for Universities and Science that we also have to look at bringing in visas for a few very highly skilled people. The other day I visited a local plc. It employs several thousand people, but only a very few-about half a dozen-of the brightest and best people from around the world. It needs visas to get such people into this country-people who, with their ideas and innovation, can act as a multiplier for many other jobs.
Exports will be similarly vital to a growing economy. Recent estimates for the period 1996 to 2004 suggest that firms that are new to exporting experience, on average, a 34% increase in productivity in the year of entry, whereas companies that stopped exporting saw a drop in productivity of 7% to 8%. That is self-evident, because to export they have to be competitive. It is concerning that despite the weakness of the pound against the dollar and the euro, the UK's overall monthly trade deficit on goods and services for the month of November declined from £4.1 billion to £4 billion. We need to keep a watch on that.
Only 23% of small businesses export, and those that do are often stifled by the red tape inherited from the previous Government. Some 70% of our total exports go to the markets of North America and the EU. However, estimates suggest that by 2020 the EU's and the USA's share of global gross domestic product will have declined to less than 40%. It is therefore vital that we give more help to small businesses wishing to export to markets outside Europe and North America, particularly the growing markets of the BRIC countries-Brazil, Russia, India and China-although many other countries out there are also growing very fast.
It was encouraging to see that last year UKTI's budget was increased because of the Foreign Office administration programme, but its future is much less clear. I would say to my right hon. Friend the Minister that as it is about the only bit of government that makes money for the country, and it has a huge task to do, it would be folly to cut its budget.
The ministerial structure that we have at present is too fragmented. Exports and UKTI are handled by the new Minister for Trade and Investment, Lord Green. The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), handles the ECGD; and my golly, as my hon. Friend and neighbour, the Member for Stratford-on-Avon (Nadhim Zahawi), said, it desperately needs an overhaul, with 80%-he said 90%, which is even worse-of all its lending going to aerospace, mostly to Airbus. That is unacceptable. Other countries do much better with their equivalent bodies, and so should we. Local enterprise partnerships are handled by the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk). It is not yet clear what role LEPs will have in FDI and exports.
Export licensing is another area that we desperately need to overhaul. I have here a quote from Mark Ridgway of Group Rhodes, who says-I hope that my right hon. Friend the Minister will pay close attention to this-
"We are currently, for example, awaiting an export licence to Pakistan, for which we first applied over 3 months ago. The order will be lost before permission is granted."
We cannot afford, as a country, to go on like this. Either the export should be refused in a reasonable space of time, or it should be allowed.
In summary, our economy is fragile. The private sector must take up the slack of the public sector. It is vital that we have a legislative and regulatory structure that is ruthlessly pro-business. We must have a coherent plan for FDI and exports, as that is where economic growth is going to come from in the future.
