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Lord Beaumont of Whitley: My Lords, before the noble Lord sits down, will he undertake to write to the noble Countess, Lady Mar, and other noble Lords, who raised the extremely important point about the scandal of the slaughterhouses? That is a major problem at present and we need a quick answer from the Government.
Lord Hunt of Kings Heath: My Lords, before we move to the Statement on enterprise and competition, I take this opportunity to remind the House that the Companion indicates that discussion on the Statement should be confined to brief comments and questions for clarification. Peers who speak at length do so at the expense of other noble Lords.
The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Trade and Industry. Documents referred to in the Statement as being available in the Vote Office are available in the Printed Paper Office. The Statement is as follows:
"First, I am publishing a detailed implementation plan for our White Paper on the knowledge-driven economy. For each commitment, we have set a series of targets, a timetable, and the contact details of the officials in my department responsible for delivering these commitments. This unprecedented step demonstrates our belief in open government, our desire to work closely in partnership with business, and our determination to deliver on our commitments.
"I am also publishing today a strategic framework for the DTI, setting out the objectives for my department, and the work we will undertake in pursuit of those objectives. Copies of both documents have been put in the Library and the Vote Office.
"The policies in the White Paper we published before Christmas apply to all sectors--traditional and high-tech, manufacturing and services. Work is well under way on many of the proposals contained in that White Paper. I have established a review of bankruptcy and insolvency law--examining whether
"Separately, I am reviewing arrangements for business rescues to see if the law should be changed to give businesses in difficulties more chance and more time to turn things round. I shall announce our conclusions in the summer.
"This afternoon I want to announce four new funds to support business. First, we will be providing £20 million to support our target of high quality support for 10,000 start-ups by 2001.The programme will be launched this summer.
"Secondly, a new enterprise fund will stimulate the availability of finance for the SME sector. I have increased the fund to £160 million. It will lever in £350 million from the private sector ensuring that over half a billion pounds is available to support: loan guarantees for small firms; support for regional venture capital funds aimed at the provision of small scale equity; and a national scheme to support high-tech businesses.
"Thirdly, following the Chancellor's announcement yesterday of a further £20 million for high-tech venture capital investment, we will create a new fund operating across the UK. This will focus on young high-tech firms needing small amounts of equity.
"And finally and fourthly, I can announce today that I have decided to expand the successful 'Smart' scheme. From April of this year, a wider range of individuals and businesses, in particular those in the manufacturing sector, will be able to get help to research or acquire technologies needed to turn good ideas into commercial reality. We shall increase annual spending by over a third and provide almost £100 million over the next three years.
"Science and the commercial exploitation of scientific research have a key role to play in improving Britain's competitive position. That is why we will develop a strategy to improve knowledge transfer, stimulate the flow of scientists and engineers into industry and encourage knowledge-based industries. We will publish our proposals in this key area by the end of the year.
"The introduction of a tax credit for research and development will be a major step on the road to raising the UK's performance, giving real help to those thousands of smaller firms working to introduce new products and processes. It will underwrite almost one-third of R&D costs for small business, giving this sector a boost of some £150 million a year.
"We will also be publishing today our proposals on corporate venturing and tax reform for intellectual property. Together these papers demonstrate our commitment to a framework in which small business can thrive.
"But small and medium-sized firms need practical help too. I intend to establish a new body--the Small Business Service--specifically designed to meet the needs of smaller businesses. I can announce to the House this afternoon that it will have funds of over £100 million new money to support its important work.
"This body, which will report to me, will be headed by a high profile chief executive and will have two key responsibilities: to act as a strong voice for small business at the heart of government; and also to improve the quality and coherence of delivery of government support programmes for small business and ensure that they address their needs.
"Some of the areas in which I expect the service to be involved include the following: a new payroll service for all new SMEs; supporting the Revenue in providing business support to discuss problems with small businesses; give advice with Customs and Excise for exporters and importers; working with the Revenue on Internet filing of tax returns. Consideration will need to be given regarding the relationship between the service and the newly-established regional development agencies.
"Finally, a modern, effective competition regime is necessary to reward innovation and enterprise, and to bring real benefits to consumers. The Director-General of Fair Trading is already investigating a number of areas, such as cars, supermarkets, and private medical insurance, and he has also referred over-the-counter medicines to the Restrictive Practices Court for examination.
"But I believe more needs to be done. I have therefore decided that I will be exercising the powers I have under Section 12 of the Fair Trading Act to give the director-general directions indicating considerations which he should take into account in determining his priorities, and my power under Section 13 of the Competition Act 1980 to ask the director-general to investigate particular prices.
"In relation to prices, there is widespread concern that prices paid in the UK for goods are higher than in other countries. I have begun today a study on international price comparisons, which will help competition authorities to identify markets which require their attention. It will be made public, so that consumers and others can comment. I will then decide which prices I will ask the director-general to investigate.
"We are also taking action to provide a modern framework for utility regulation. Electricity standing charges are a matter of pressing concern--they account for around 13 per cent. of a typical household bill and can rise to 20 per cent. for low volume users. Figures which I am publishing today show a wide variance in standing charges by region and method of
"I also believe that the time is right to modernise the merger regime. Businesses need stability and confidence that decisions in this important area are not taken for short-term political considerations. I believe the system could be improved if merger decisions were normally taken by independent competition authorities against a competition-based test. A small minority of cases will raise important wider public interest issues, such as those in relation to the defence industries, and Ministers should continue to have a role in this decision-taking process. I intend to publish a consultation document to initiate a full debate.
"To secure real competition we need knowledgeable and well informed consumers. To that end we shall be publishing a consumer strategy White Paper before the summer. But there is one area of particular concern. A mortgage is the largest and most complex financial commitment most people will ever enter into. I have today announced proposals to improve the information available to customers in relation to the marketing of mortgages and other credit. Our proposals will give them access to clear, comparable information about the interest rates on offer.
"I believe the measures announced today show our determination to support enterprise and to succeed in the knowledge-driven economy of the future. They complement the radical proposals set out yesterday by the Chancellor and I commend this Statement to the House."
Baroness Miller of Hendon: My Lords, I thank the Minister for repeating the Statement on enterprise and competition which, as he said, announces measures complementary to those announced yesterday by the Chancellor.
Of course, as a general principle we support competition and enterprise, and we welcome the initiatives for small and medium businesses. However, I have a few questions for the noble Lord with which I hope he will be able to help us. While we would support changes that would assist business rescues, is the Minister aware that many companies find themselves placed in difficulties by debtors who become bankrupt but who then turn up at the bankruptcy sale or go to the liquidator to buy equipment and start up again under another name?
While we also welcome the new availability of finance for SMEs--although it does seem as though that finance has been announced several times--would not the Minister agree that what SMEs really need is fewer increases in hidden taxes, a diminution of regulation and lower business transport costs? Also, hiking up the national insurance contributions of the self-employed will surely not be particularly helpful. I know the
Can the Minister also tell the House whether there is any significance in the fact that the Statement today refers to prices for goods in the United Kingdom being higher than in other countries, whereas yesterday's Budget Statement said:
The Minister mentioned modernising the merger regime by setting up an independent competition authority, although that seems to be a way of simply ridding himself of responsibilities for these matters--the "not me, guv" syndrome, similar to the way in which the Government hived off the setting of interest rates to the Bank of England. Would not the setting up of such an authority strip the Secretary of State of the power to rule in high profile takeovers such as the BSkyB bid for Manchester United? Given the Government's excellent spin-doctoring and wooing of the press, is that not one reason why there has been no statement, either now or previously, on the Government's policy on these matters?
Will the Minister please confirm that the Secretary of State will retain his personal powers in the case of newspaper mergers under the Fair Trading Act? Also, why is there nothing in today's Statement about the very important matter mentioned by the Chancellor yesterday, that obstructing investigations into the matter of cartels and restrictive behaviour will become a criminal offence?
Finally, the Chancellor announced yesterday that the Deputy Prime Minister was to review competition at airports. There is no mention of that today. Can the noble Lord say whether that means an investigation into the British Airports Authority's monopoly of London and other airports--because obviously the shareholders will want to know--or whether it will be an investigation into landing slots, in which many carriers consider that British Airways has a monopoly?
Lord Razzall: My Lords, I join the noble Baroness in thanking the Minister for repeating the Statement, not only because it raises a number of important matters but also because, certainly in the view of these Benches, it represents a clear account of the new role of the DTI as a proactive enabler and empowerer of the business community. It is very nice to see that the department has clearly abandoned the rather depressing laissez-faire approach of the previous administration.
If I were to make an overall comment, it would be that the Statement is long on what the Government are going to do and rather short on what has been done. We have already had two Secretaries of State in the department and are now on the third. It is almost as if we were running a race and had had two false starts, and were starting again for the third time--the Minister smiles.
The Statement is very detailed and I do not want to bore your Lordships by going through every item, but perhaps I could take two of the major issues. The Minister touched upon two major points. The first was "Rip-off Britain!", to coin the phrase used by various newspapers. The Statement refers to the fact that the British consumer is being overcharged in comparison with our foreign competitors. We are, after all, more than halfway through the period between the last election and the next election, and I would welcome the Minister's confirmation that words will be replaced by actions and recommendations in this area. The Government are long on benchmarking and timing, but when will an answer be given to the allegations about "Rip-off Britain"?
The second area which is touched on in the Statement is the regulation of the utilities. How they are regulated is clearly a major issue which the Labour Party in their manifesto were very concerned about. At this point we would like to know when the Government are going to decide finally exactly how the utilities are going to be regulated. Will they be regulated primarily by competition and, if so, what sort of competition will be introduced into the regulations--or is it going to be left to the great regulator in the sky to determine how these issues are going to be resolved?
Perhaps I may make two final points, on which the Statement touches but does not deal in detail. The first relates to mortgages. It is interesting that the Statement refers to a mortgage as being the largest and most complex financial commitment that most people will ever make. It is interesting also that the DTI is now beginning to take an interest in mortgages. I should like the Minister to indicate whether the DTI will go further and whether there is an agenda to try to control this and to move more people into fixed-rate mortgages. There would be an obvious advantage to the Government in doing that with regard to their approach to the decision on the euro. Moving more towards a European model, with more people having a fixed-rate mortgage, would remove the concentration on short-term interest rates. Will the Minister confirm that beyond the agenda of transparency is a further agenda of trying to encourage people to take out fixed-rate mortgages?
I refer secondly to small and medium-sized enterprises. When concentrating on that sector, we often disregard those small and medium-sized listed companies which are not quoted, but which form part of the alternative investment market. Those companies are often ignored in terms of DTI business activity, but they provide a large motor for employment in this country and account for much economic activity. I know that the Treasury and the DTI have both been concerned about the fact that that sector of the stock market has not done as well as the large company sector, with which the
Lord Simon of Highbury: My Lords, I thank both the noble Baroness, Lady Miller of Hendon, and the noble Lord, Lord Razzall, for their general welcome of the direction of the Statement. I think that we are in general agreement. I sense from their responses that we all recognise that we now need a better deal for enterprise and small business in this country. That is a fundamental part of improving productivity, of better applying new technology, and of stimulating employment. I think that we all agree that, in the small and medium-sized enterprise sector, attention, the right encouragement and the right policies will bring dividends.
Given that we all agree broadly on the principle that, through a more competitive marketplace, we can encourage enterprise, innovation and particularly the development of small businesses, perhaps I may comment, as did both speakers, on certain elements of that in policy terms.
I very much agree with the noble Baroness that the key issues for the smaller business community are lower taxes, less regulation and lower running costs. We have certainly done what we can in terms of lower taxes, with a lower rate of 20 per cent. and a lowest rate of 10 per cent. being introduced for small businesses. That will benefit all businesses up to a £50,000 profit level. As the noble Baroness will know, that will help very many small businesses. In terms of regulation, we are certainly not aiming to achieve the high levels of regulation achieved by the previous government. We are trying to avoid that, but we must have a balance between a sensible structure and fairness within the community.
We are also trying to ensure better research and development funding possibilities for small businesses by giving rebates and tax credits against their R&D spend. We hope that that will mean that such businesses are better able to use R&D early in their lives. A tax credit is a most effective way of achieving that because many such businesses do not make great profits on which to carry forward such expenditure. A tax credit would therefore be a big advantage to them. We very much want to encourage the small end of the market by recognising that we need a low tax base, the least regulatory structure that we can achieve while maintaining fairness in competitive terms for small businesses, and a better application of R&D and new technology early in the life of a business.
In that context and while thinking about small businesses and how best to help them, perhaps I may comment now on the noble Lord's helpful intervention about the role of the DTI. The role of the DTI is not
Both the noble Baroness and the noble Lord referred to prices, as did the Statement. That was because there is much concern about the potential relationship of prices internationally. As the noble Baroness pointed out, this matter does not involve only the USA. Although we know that selective goods are priced much more cheaply in the USA, we are thinking also about the European context. There is much hearsay and interesting publicity on this, but there is not enough good, current information about comparative international pricing. We shall be conducting more work on this matter, building on the work carried out by the European Commission, in order to establish a good database. If we are asking the Director-General of Fair Trading to look more carefully at what can be done about pricing, it is important that we work from a sensible database. Achieving that is our first intention.
I was also asked about the utilities. It is clear that the regulators must look more carefully at the competitive pricing structure in certain sectors. I am sure that that will receive the support of the House.
I was also asked about mortgages and the attempt to provide more transparency not only in the mortgage market, but also in other lending markets, for the benefit of consumers. The noble Lord, Lord Razzall, made a good point in referring to fixed-rate, as opposed to variable-rate, mortgages. I would say that the marketplace is making the decision easier for the customer. More fixed-rate mortgages are now being taken out because we have a low interest rate regime and a Budget which gives people hope that that regime will be sustainable. That is one of the most important things that the Budget has attempted to lock in; that is, sound and sustainable low inflation and low interest rates. We will always let the customer and the market-place decide what choice consumers make about their mortgages. The outcome the noble Lord is seeking--a higher, fixed rate proportion--is likely to be the outcome of the sound budgetary policies that we are continuing to pursue.
In summary, this is a Statement for innovation, enterprise, better competition, particularly for small businesses which we need to see become more successful if we want sustainable growth and higher employment in this economy.
Lord Clinton-Davis: My Lords, I welcome the Statement that has been repeated by my noble friend. However, yesterday, my right honourable friend the Chancellor announced in his Budget speech an employee shares-for-all scheme as part of the quest for generating greater enterprise in our economy. Nothing was said about that in this Statement. Will my noble friend indicate what steps the Government propose to take to give further details to the House and to the country about the scheme? Is it to be subject to further consultation? If so, who is to be consulted? What is to be the scope of that consultation? And within what period is it to take place?
Finally, will my noble friend agree that this ambitious but necessary scheme requires to be assisted by giving incentives to employers to provide shares for their employees? Failing which, it is difficult to see how it will be implemented successfully.
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