Ian Murray
Main Page: Ian Murray (Labour - Edinburgh South)(13 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Gyimah
Sorry, I do not have much time.
Another thing that the Government can do, in particular, is look at cash flow. One of the biggest things that determines the fate of a small and growing business is the amount of cash flow, and national insurance and VAT are the key drivers of that. The Government have made the right decision by giving certain businesses national insurance holidays, but it would be great if we could extend that to more businesses.
Mr Gyimah
Sorry, I have to push on.
We need to look at not only national insurance, but the VAT threshold. Ideally, it would be helpful to small businesses if we raised the threshold, but that is not going to be easy in the current environment, so perhaps we should ensure that Her Majesty’s Revenue and Customs, with its “Time To Pay” policy, does not clamp down too hard on small businesses that are trying to keep their business going, keep people employed and do the right thing. That is absolutely essential.
Let me turn to research and development grants. The representatives of a thriving business in my constituency came to my advice surgery and told me that, to get any R and D grant from the Government, they would have to move to Cornwall. They are willing to put a significant amount of personal capital into their business, but because R and D grants are organised regionally and targeted at certain regions, and they are in the south-east, they lose out. We should have a flexible system in which the money follows innovation and ideas and is not just targeted at certain regions.
My right hon. Friend the Member for Wokingham (Mr Redwood) mentioned the regulatory regime. A big challenge for small businesses is employment legislation. If every time an employer uses an agency worker they have to calculate after 12 weeks whether they can take on the cost of employing them, we end up with perverse incentives whereby businesses try to make their employees self-employed when they are in fact full employees. The employer is trying to avoid either getting sued if something goes wrong on the employment side or paying national insurance. That does not help the business, nor does it help the Exchequer. I strongly encourage the Government to consider using the freedom Bill to deal with the “one in, one out” policy in relation to legislation for small businesses.
Another factor is access to visas for highly talented people. Many internet and technology businesses who employ computer scientists and require people from all over the world are struggling because of the current visa regime. The Government must consider that, especially as last week the Prime Minister said that we want to create a silicon valley in the east end of London. However, for many of these businesses it is not just about having a cluster in that location, but about whether they can get the talent they need to grow their business. Their revenue profile is such that it takes them a very long time to start gaining revenues. They have a long period where they are investing and testing their technology, and then, if they are successful, they start getting in revenue. If our regulatory regime is such that they are incurring huge costs, whether in national insurance, VAT or statutory employment costs, before they are a viable business, we are not giving them the chance to succeed in this country.
I thank my right hon. Friend the Member for Wokingham for pushing for this debate. If we really want to be pro-business, we should put our money where our mouths are, take away all this legislation, and make the funding regime better for small businesses.
Ian Murray (Edinburgh South) (Lab)
Let me start by congratulating the right hon. Member for Wokingham (Mr Redwood) on securing this important debate. I must confess that I could listen to him all day, for two reasons: first, he is one of the most engaging speakers in the Chamber; and secondly, if he were to speak all day, I am sure he would eventually say something that I might agree with.
The international financial crisis has affected every Government the world over, and getting back to sustained economic growth is the only real way to reduce the deficit and clear the financial crisis for good. The problem with this Government is that their Budget and comprehensive spending review have resulted in a set of conditions that harm growth. I would like to mention a few aspects of that which I am seeing locally in my constituency. As someone who runs his own small business—I have done so since I left university—I should say that many of the points that I will make concern things that I have experienced myself.
The first aspect is business confidence, particularly the small business confidence which, as many Members have said, is so important to economic growth. Many small business owners in my constituency currently see a quadruple whammy coming from the Government, which is not just stopping potential growth but risks causing contraction in the economy, with a real danger of pushing us back into recession.
First, there is a greater degree of nervousness among small businesses’ customers, who are concerned for their jobs and those of their families. They are therefore spending less and see no light at the end of that particular tunnel. In fact, the Government’s own figures, published by the Office for Budget Responsibility, show that 500,000 public sector jobs will go as a result of decisions made by the Government, and of course PricewaterhouseCoopers has projected another 500,000 job losses in the private sector. Many commentators are saying that that may be slightly on the low side.
Ian Murray
I will make some progress, if I may.
The instability of the job market is causing customers great uncertainty. All in all, they do not see the Government doing anything to assist in the job sector.
Secondly, such problems are always compounded by personal finance, which undoubtedly affects confidence in the small business sector. Products and services will be hit hard by any increase in VAT in January. I am disappointed that the hon. Member for East Surrey (Mr Gyimah) is no longer in his place, because he mentioned cash flow for small businesses, which is a critical factor in how they operate. Many of them go under not because they are not profitable but because of cash-flow issues. One of the main effects on cash flow of what this Government have put in place will come from the increase in VAT in January.
Many people have forgotten the other hidden increase that the Government have imposed on people, which will hit confidence even further. They say that they are not introducing a jobs tax, but they are keeping the national insurance increase for employees, which will compound the problem of confidence in personal finances even further. Individual families see job insecurity, significant job cuts, increasing VAT and less pay in their pay packets, so bottom-up growth through the small business sector, and particularly the service sector, will be sluggish at best.
Thirdly, despite the warm words of the senior bankers whom we have all spoken to over the past few months, businesses and particularly small businesses are not able to borrow to enable growth. Not even in Edinburgh, which is at the forefront of financial services in Scotland and one of the biggest financial services centres in Europe, can small businesses access financial services.
To be slightly fair to the banks—I never thought I would say that in the Chamber—that may be partly a matter of perception. They tell Members that they have adequate funds to lend, but small businesses are not coming forward and creating demand. The Government and all Members have to do more to get rid of the perception that banks will not lend. While it still hangs around, small businesses will not approach banks and their business managers to access finance. Let us call the banks’ bluff. If they are telling us that the funding is there, let us all encourage small business to go and see their banks as soon as possible to have conversations about how they can borrow and therefore enable growth.
Fourthly, many businesses in my constituency rely on the public sector for contracts. If the public sector shrinks at the rate the Government wish, even though they want the private sector to take over, growth will be severely damaged by businesses not being able to access many billions of pounds of public sector contracts.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
Like others, I congratulate the right hon. Member for Wokingham (Mr Redwood) on securing the debate. Like my hon. Friend the Member for Edinburgh South (Ian Murray), I enjoy listening to the right hon. Gentleman’s contributions and—I have to admit—occasionally reading them on his website. I do not often agree with him, but they are enlightening none the less.
What has been good about today’s debate is that, with a couple of exceptions, speeches have been made and issues have been raised that do not necessarily follow the scripts that people get from time to time. People have discussed some real and serious matters and there has been agreement across the Chamber on a number of issues. In particular, I was struck by the speech of the hon. Member for Northampton South (Mr Binley), who I know has a strong interest in manufacturing. In the couple of minutes I have available, I want to make a few points about manufacturing and that part of industry.
The Government frequently talk about rebalancing the economy and they are right to do so. It is crucial that we learn some of the lessons of the past. One of the lessons, frankly, despite the amount of wealth that the financial services sector might create, is that being over-exposed in one sector causes immense damage. We need to rebalance the economy and we need to do that by looking for export markets. That is why I am quite pleased that the Government have taken the initiative in going to India and China to develop those markets. I hope that they will go to other places, too.
Crucially, we are not the only country trying to do that. Every developed economy is looking to the developing economies and BRIC economies—those of Brazil, Russia, India and China—to develop export markets. We need investment in the technology to get the products that people want and to develop the skills that we need and the technology that people want to buy. That is crucial and brings us to the points made in this debate about levels of investment in particular.
Anyone who was in the Chamber during Energy and Climate Change questions earlier will have heard Ministers waxing lyrical about the huge potential of the green economy. That potential can be realised only with the right investment, including from banks. The green investment bank should be up and running as quickly as possible and should be running as a bank, not as some grant-giving body. I hope that the relevant bits of the Government—whether that is the Treasury, the Department of Energy and Climate Change or the Department for Business, Innovation and Skills—get on with that as quickly as possibly because it is crucial. It is particularly crucial in constituencies such as mine, which has had a proud manufacturing past and deserves to have a future. Economic growth and our growth in manufacturing cannot be driven towards just one part of the country. As others have said, it needs to take place across the whole country and that is why it is very important that we get the green investment bank up and running.
Ian Murray
I know we are tight for time, but this is a crucial point. Is it not strange that no Members from the Scottish National party have been in the Chamber for the entirety of this wonderful debate on growth and how the UK economy should grow?