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Mr. Page: In the real world, employers find the operation of the WFTC onerous and if an employerespecially in a small firmhas to choose between two applicants, one of whom is entitled to the WFTC, there is a strong temptation not to pick that applicant.
Geraint Davies: The reality is that the WFTC guarantees a minimum weekly income of more than £200 for a family. In the hon. Gentleman's example, the employee would be taking a job that paid less than that, and it is obvious that the small business person has a profit motive not to pay the WFTC on top of that. If the regulatory cost were more than the reduced wage saving, the employer would not take the employees on. In fact, employers who complain about the WFTC are those who are employing people at that level of pay. Those employees are now earning livable wages.
The Labour party believes in decent, basic wages as well as access to work, especially for people with young families. That is an important part of our legislation. If the burden were so heavy, more and more small firms would resist employing people entitled to the WFTC. The reality is that some of those employers want to pay slave wages and to have no regulation. In today's successful economy, wages are being bidded and, moreover,
Mr. Page: My point is that the Government are shifting responsibility that should be theirs on to companiesin the WFTC and in many other respects. We do not object to the WFTCI have been an advocate of such support for a long timebut it should be paid as a benefit. The companies should not have to pay it; the Government should do so.
Geraint Davies: My right hon. Friend the Chancellor would say, "Yes, Ronald Reagan thought that that was a great idea." I will not resort to that. The WFTC was test-marketed in the United States and found to be effective in drawing people into work, widening the labour pool and therefore lowering average labour costs.
I realise that the hon. Gentleman's point is that the WFTC should be managed through the benefit system and not the corporate system. The difference is that we are trying to empower people through work. The current system tells people, "You are working and you deserve this money, with a subsidy provided by the Government." The other way would be to say, "You should queue at the benefit agency for a hand-out." We are trying to achieve a cultural change by creating a work ethic and an entrepreneurial culture whereby Britain can succeed in a global economy, where it failed under the Conservatives.
I suggest that the hon. Gentleman could not provide a list of prospective employers who do not take people on because of the WFTC. When I ask people how their business is doing, whether it is profitable and whether they are employing more people, they say yes to all those questions but they still moan about the payroll. Most people in that position have some accountancy support that provides assistance to their business. Red tape is not a good thing, but regulation that leads to lower wage costs, higher engagement in the market and greater success for small businesses must be our priority. The hon. Gentleman's suggestion would be counter- productive.
Creating an entrepreneurial culture is easier said than done. We have already heard various pronouncements from the Government about encouraging an entrepreneurial culture in schools. We will have to create the space in the curriculum to do that and prioritise among the many excellent initiatives that we have introduced. Thanks to the rethink of the new AS-levels, we will be able to strip down the curriculum. If we genuinely want to introduce entrepreneurial opportunities in schools, we will have to think carefully about where they fit in.
New Addington, Croydon, which historically has not delivered the best education results, is now an education action zone and we have links with businessessome of which I initiatedthat enable mentoring and allow the pupils to experience working in small businesses. That gives them self-esteem and an opportunity to experience life beyond a traditional educational environment. We may wish to pursue that approach in other schools.
The next big economic challenge for the Government, after creating stability in the economy and an extra 1 million jobs, is to make those people who are in work more productive. That is the big prize. We all now know that average productivity in Britain is some 45 per cent.
The recent OECD report on the impact of investment in education on economic growth showed that some 0.4 per cent. of the annual growth of 2.5 per cent. that we enjoy can be attached to educational investment. In the case of the US, that figure falls to 0.07 per cent. Studies show a high return from investment in quality education in Britain and I hope that the Government will continue to increase investment in that area. It will increase from 4.9 per cent of gross domestic product now to 5.3 per cent. by 2003.
We also need to provide more access to higher education, with student debt relief and imaginative ways to enable people from poorer backgrounds to enter higher education. That will enable them to achieve higher productivity, not least in computing and the high-tech arena. That increased productivity is important to small businesses, because the internet and computer facilities enable them to overcome the hurdles of transport cost and distance. Computers enable speed of exchange and open up wider markets that were formerly available only to large businesses. For example, I was involved in setting up a business that has only a handful of people but services 130 countries with graphic design online. A few years ago, that would not have been possible. Higher education enables small businesses to access IT.
I mention transport in passing, and the Government have a 10-year transport plan of £180 billion. Any business that sells actual physical products is aware of the costs of delay and congestion, which are enormous burdens on productivity. The Government are now investing in tackling that issue.
Investment in health has not been mentioned, but it is very important for small businesses. If a small business person has a health problem that needs attention but has to wait six months for treatment, that will have an adverse effect on the business. Small business people feel that they cannot afford to become ill and spend time away from running their businesses. The Government intend to invest a quantum amount in health, but we should also consider the economic and productivity impact of different decisions made by the health service.
With regard to red tape, entrepreneurs do not want to spend all day filling in forms. It is important to achieve a balance. Through their competitive and profit-making objectives, big companies aim to compete with other big companies and crush smaller ones out of existence. It is in the interest of big companies to encourage red tape, because that hits small companies more than larger ones. We must recognise which companies have the ear of Government. Big companies, with their public affairs departments and consultancies, can penetrate an extremely complicated system and gain access to people with influence. That clearly has an impact on small business and thus on competitive choice.
The hon. Member for South-West Hertfordshire (Mr. Page) mentioned the sum of £10 billion as the red tape cost to business. That is a spurious figure thrown around by the British Chambers of Commerce. It is not helpful, as I pointed out earlier, because it includes the cost of the minimum wage and the working time directive, which there is no intention to change. However, there is a significant cost arising from red tape. I support any attempts by the Government to reduce the complexity of the payroll. Indeed, the Government have given a commitment to reduce payroll burdens and corporation tax, which I welcome.
With reference to the Inland Revenue and Customs and Excise, I do not want a large number of small businesses going bust because the Government move in for their money. When a company is having trouble paying its debts, it is often the Government rather than the banks or other firms to which it owes money who pull the rug from under it. When a company goes down and stops selling its products, its creditors do not have much chance of being paid. I know that the Government are reviewing the position and recently announced that Customs and Excise would no longer be the first creditor to be paid. More flexibility is needed.
Council tax has been mentioned. The Government are introducing a new system of subsidies, which will mean a 20 per cent. reduction in business council tax for 60 per cent. of companies. I welcome that.
We are not specifically discussing retail businesses, but my hon. Friend the Minister referred to ethnic small business. The evolution of ethnic small business is often from small retail businessesshopsto professions such as accountants and doctors in the second generation, and bigger business. I am acutely aware of the plight of the community shopping parade, where pharmacies have recently felt the squeeze from lower drug prices. The gradual but consistent and chronic erosion of community shopping facilities has social costs for poorer and older people and those who do not have access to transport.
There is a rolling programme of the concentration of power in the retail community. In my area, Tesco moved out of a large estate of 20,000 people after 31 years, undermining shopping facilities there. The Competition Commission has done a lengthy study of the competitive impact of supermarkets, but the output is not tough enough. The required codes are simply dreamed up by the suppliers and retailers. We should examine the situation carefully and perhaps offer more support to small retailers, through council tax and planning.
The Government intend to make planning more business-friendly, but I am not sure what that means. Councils need to study the composition of their boroughs and the relationship between larger and smaller companies there, especially retail businesses, and draw up plans to support small retail centres, rather than allowing them to fall away as a result of the power of large retailers, which rests in their ability to negotiate much lower unit costs. Transparency in that area is needed.
I am glad that the Government are taking initiatives on crime prevention and are aware of the problems of parking. Small retailers face multiple problems. The removal of small retail opportunities creates food deserts, which in turn result in health problems in many neighbourhoods where people cannot buy fresh food
On financing, I am glad that the regional development agencies are up and running. Part of their remit should be to examine small business innovation and competitiveness. I welcome the progress on regional venture capital funds, which traditionally have not taken much notice of small business. I hope that the reduction in capital gains tax will encourage more investment in smaller operations. There are other models that could be consideredfor example, German banks take shares in small businesses.
The first step is to put small business higher up the agenda for economic success. The Government have done that, and I am proud and pleased to be able to make a contribution to the debate, having a firm background in small business. I hope to encourage more support from the current Administration.