SMEs (South of England)

Andrew Smith Excerpts

Wednesday 15th June 2011 Westminster Hall

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate the hon. Member for Gosport (Caroline Dinenage) on securing this debate, which raises important issues. As she said, they are important because small businesses are vital for jobs, sustainable growth and prosperity, and because it is crucial that our region does not become stereotyped by the Government or others to our disadvantage.

As the hon. Lady demonstrated by citing the statistics about her own constituency, the truth is that there are wide variations in employment, wage rates, small business formation and success within regions as well as between them. The particular needs of our region are not the same everywhere in the region. As well as being supportive of small businesses in general, policy needs to be sensitive to the particular circumstances of each local economy and its small businesses.

Judging by the experience of my constituency and local economy, we could be forgiven for thinking that the Government do not want economic growth in our region at all. Oxford is an incredibly vibrant economy, with lots of small businesses that have spun off from or are servicing our successful universities and hospitals, the Mini plant, and publishing and other high-tech enterprises, but some decisions that the Government have taken are limiting rather than encouraging growth, small business success and job generation.

One of the biggest constraints that we face in Oxford is housing and developable land. I have no doubt that our local economy could achieve much more economic growth if there were more houses for people to live in and more premises for small businesses, but one of the first things that this Government did was to scrap the south-east plan and set their face against any change to the Oxford green belt, thereby blocking both much-needed housing that was already being planned and the Magdalen college science park extension. The tight local authority boundaries that we have in Oxford give the neighbouring local authorities an absolute veto over our expansion, a veto that they do not hesitate to exercise, even on land of very limited ecological or amenity value.

The second hammer blow that I have to refer to is the incredibly ill-judged and damaging measures aimed at cutting the number of people coming from overseas to learn English here. That is a problem not only in Oxford, but in Bournemouth, Brighton and other southern coastal towns, and it will, I fear, inflict incalculable damage on English language courses and schools that have been generating about £1.5 billion for the UK economy, much of it in southern England. That all adds to the bureaucratic minefield for these kinds of educational businesses and colleges, and the Government’s much-vaunted moratorium on red tape clearly does not apply here. Much of the complexity, as English UK has said,

“results from the UK Border Agency trying to legislate in educational matters which are not its proper remit and where it neither has expertise nor has shown any great inclination to listen to those who do.”

As well as the economic and reputational damage that the changes will inflict on the wider international education sector in which the UK has an important strategic competitive advantage, they will hit the micro-businesses of many host families who supplement their income by accommodating overseas language students.

I come to the third hammer blow. The hon. Lady referred to the regionally discriminatory holiday on national insurance contributions for new businesses, and asked about the rationale for that. I have had a look at the Her Majesty’s Revenue and Customs website where there is a question and answer section. It asks:

“Why does the Holiday not apply in London, the South East and the East?”

and the answer given is:

“The scheme is intended to promote the formation of new businesses employing staff in those countries and regions most reliant on public sector employment. The proportion of jobs in the public sector is higher in other countries and regions than it is in the Greater South East (London, the South East and the East).”

Even if we accept the logic of that approach, it is obvious that the regional criterion is unfairly broad-brush because it must mean that new businesses in local economies in other parts of the UK that have low public sector employment will get the help, whereas areas in the south that are very reliant on public sector jobs, such as my own constituency and that of the hon. Lady, will not.

One of the biggest problems facing small businesses is access to credit, and the failure to hit the targets for bank lending to small and medium-sized enterprises under Project Merlin will hold back small business growth at the very time and in the very places where we need it most.

Business rates are another huge problem for small businesses. I acknowledge that the Government have tried to provide some help, but because of the high rental values in many parts of the south, business rates, which are based on them, tend to be higher, and therefore the costs of setting up and operating a small business have a double whammy effect on the cost of premises.

I could say a lot more, but I know that a number of other speakers are keen to get in. I have not yet mentioned the knock-on effect of cutting the teaching grant to universities by 80% and the trebling of fees, the alienation of other small business organisations by the preference given to the British Chambers of Commerce as co-ordinator of the local economic partnerships, the damage of cuts to investment in the transport infrastructure of the south—to which the hon. Lady also referred—and the interesting recent Institute of Directors report, which showed small businesses benefiting less from Government changes to business taxation than larger ones.

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

Was the right hon. Gentleman hoping to get on to the £500 million investment by BMW in his constituency, and the important help that the company has cited as coming from the Government to enable the investment?

[Mr Smith]

If we are being absolutely honest here there is an important continuity in automotive policy concerning the building blocks of that investment. The hon. Gentleman may seek to make a party political point but I will not. We all have to pull together for the success of the automotive industry, and I am enormously proud of what BMW has achieved with the Mini, and of the strength of the partnership with the work force and the local community, which is making such a success of the initiative. I have already referred to the Mini plant as an important source of business for small enterprises in our area. Those enterprises benefit from the business that BMW generates in the supply chain, and from the spending power of the work force.

I conclude by underlining that it is wrong to see small business support as a zero-sum game between the south and other parts of the UK. The south is an engine of the UK economy, and the wealth that we generate benefits directly and indirectly other parts of the country, just as we will benefit from successful regeneration and from tackling deprivation elsewhere. We need a proper sustainable growth strategy for small businesses in the south, as in other regions, which focuses on improving skills and infrastructure, cutting unnecessary red tape, nurturing enterprise, keeping down taxes and overhead costs, and ensuring that the planning system facilitates rather than strangles sustainable growth and small business formation. By initiating this debate, the hon. Lady has done us a particular service by calling to wider attention the danger that complacent generalisations about the state of the small business economy in the south risk killing the geese that are laying the golden eggs.

[Several hon. Members]

rose—