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Baroness Byford: My Lords, I thank the Minister for giving way. I believe the Minister said he was in business between 1965 and 1995. I am sorry to interrupt, but my reason for doing so is to say that we have had a plethora of regulations coming in, within the UK and particularly from abroad. The noble Lord would therefore find it much more frustrating now than he did then.

Lord McIntosh of Haringey: My Lords, I shall come to the numbers. However, I have to say now that this is a timed debate and I shall not be able to give way to interventions as I was able to do on Monday on the Employment Relations Bill.

As I said, the second difficulty of being a small business was in finding skilled staff. It was not employment relations that were the problem--they were in place for nearly all of the period in which I was in business very much as they are now--it was the lack of skills in the workforce in this country and the lack of continuing education and training for adults. That was certainly the responsibility of the last government, but probably goes back to previous Labour governments as well. I do not want to make a point of that. I was fascinated by the research described by the noble Baroness, Lady Sharp, and I shall have to read carefully what she said, think about it and write to her if I can make any positive contribution to her points.

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So I simply do not recognise what is described as being the position of a large number of small businesses. That is not because in any way I underestimate the importance of small businesses to our economy. The noble Lords, Lord Vinson and Lord Kimball, and the noble Baroness, Lady Sharp, all referred to the statistics. Our figures say that 99 per cent of UK businesses employ fewer than 50 people; that they provide 46 per cent of jobs in the private sector and account for 42 per cent of turnover. If we add that to the job creation figures of the noble Baroness, Lady Sharp, we see how important they are.

Let us be clear. The Government cannot make small businesses succeed; but we can help in three ways. We can give help to ensure that those with the will to succeed have a fair chance to do so by providing a supportive and stable economic environment. The most fundamental difficulties I had in those 30 years were the huge swings in business confidence that undermined our customer base in the market research business, which some noble Lords might think is a little remote but it certainly is not. Then we can tackle specific barriers to performance and growth, including regulation, and provide high quality support services. We are committed to doing all three of those.

First, the stable macro-economic environment is already paying dividends. Inflation is under control. Interest rates have come down 2.25 per cent since last October. Long-term interest rates are at their lowest level for 40 years and the public finances are in good order. Of course there have been difficulties for some time with the strength of the pound. That is a problem which exists in many parts of the world. Manufacturers in Europe are struggling as a result of the global downturn and the decline of exports to the Far East. But the figures seem to suggest that this is getting better. However, we still need to take action to address the longer-term performance of the economy and in order to do that we have to close our performance gap with our competitors through productivity and enhancing businesses' ability to innovate ahead of the market. That is what small businesses in particular can contribute to the process.

So we must encourage enterprise. That was the first of my suggestions of things that we could do. We have created the Enterprise Fund, a new fund to support the financing needs of small and medium-sized enterprises. It is worth £160 million over three years and includes a more cost-effective Small Firms Loan Guarantee Scheme and support for regional venture capital funds specialising in the provision of small-scale equity. We also intend to provide tailored business advice and support to at least 10,000 innovative high growth potential start-ups by 2001. Funding of £20 million will be available for that over the next three years, together with a further £20 million to help small firms realise the benefits of communication and information technology.

When I think back to when I started in business, I sometimes wonder how we ever managed without PCs, accountancy programs, payroll programs, VAT programs and even a photocopier. Surely it must be a

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minimum aim that any small business which comes within the scope of regulation should have the benefit of electronic processing.

In addition, we have heard much talk about costs. The Budget contained a raft of measures aimed specifically at the business community: the reduction in the starting rate of corporation tax at 10 per cent; the cut in the small companies' tax rate to 20p. in the pound, down from 23p. as at the election; a 10p. starter rate of income tax for the self-employed; and a 1p. cut in the basic rate for next year. All small businesses will benefit from the additional £325 million being set aside for small and medium-sized enterprises to write off 40 per cent of all they invest in plant and machinery in the coming year. There is also the new Enterprise Management incentive scheme to provide more generous tax-advantaged equity-based incentives to attract successful managers to the new companies that our economy needs. Smaller businesses should also benefit from the new R&D tax credit for small and medium-sized enterprises--a boost of some £150 million a year.

I do not deny some of the figures as regards the cost of regulation, but they must be set against the help which is being directed specifically to small businesses. We are of course aware of the burden of regulation. We know that the burden is harder to bear for small businesses. We inherited regulatory control systems from the previous administration and we have gradually come--perhaps too gradually--to the conclusion that that administration did not deliver what it wanted to achieve. It tended to come into play too late in the policy-making process and looked at individual measures in isolation, with little appreciation of the cumulative effect on business.

I believe that we addressed the latter in the Modernising Government White Paper published in March, which includes improvements to the Regulatory Impact Assessment system. That means that the Cabinet Office Regulatory Impact Unit will have to be consulted on all regulatory impact assessments on both primary and secondary legislation. There will be a forward programme of regulatory proposals over the next three years, including European Union proposals, to enable Ministers to decide collectively on the overall shape of the regulatory programme and how to cut it down. We have asked the Better Regulation Task Force, led by my noble friend Lord Haskins, to spearhead the Government's drive to remove unnecessary regulation from the statute book. So there is no doubt that we are trying in many ways, through central government, to relieve the burden of regulation which has been described.

The third element that I referred to was advice and support. That is why we decided to set up a new Small Business Service. We found that traditional government structures have not worked to the advantage of small business. We agree with the noble Baroness, Lady Sharp, that what we should be doing is helping small firms to comply, and not setting targets for prosecution. Therefore, for the first time we are creating an institutional structure which reflects the importance of small business. The new body will have three main functions: first, it will improve the quality and

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coherence of government support programmes; secondly, it will help firms meet the demands of regulation, working with the Regulatory Impact Unit and the Task Force; and, thirdly, it will act as a strong voice for small business at the heart of government.

I will have to race through the answers to specific questions, but I shall do my best. Perhaps I may, first, talk about the number of regulations. The noble Baroness, Lady Byford, intervened at one point, but I was interested in the question put by the noble Lord, Lord Taylor, namely, "Who's counting?" Well, we are counting; and, indeed, we have counted. In terms of the total number of regulations, including those which do not impact on business, the numbers have varied over the past five years between 3,200 and 3,400 and there is no pattern of increase whatever. The number of regulations imposing costs on business in 1995 was 180, in 1996 it was 209, in 1997 it was 168 and in 1998 it was 199. Therefore, there is no good evidence to show a significant increase in the number of regulations. I say that in the face of what has been said by a number of speakers about surveys on the impact of new regulations.

One of my favourite surveys is one which was not referred to in the debate, but it has been quoted in a number of press reports during the past month. It was produced by Peninsula Business Services and the first question was:


    "Do you wish that employment legislation was easier to implement?" I have to tell your Lordships that 16 per cent of those surveyed wished that it were easier to implement while 84 per cent appear to have said, "No"--so presumably they wanted it to be made more difficult. We shall not satisfy them.

On the cost of implementation, it seemed to me that the noble Baroness, Lady Byford, simply did not believe my figures on the Employment Relations Bill. I think that the Opposition had better look at the Regulatory Impact Assessment. No criticism was made of it when it was possible to do so on Second Reading. We will welcome debate on the assessment. The amount of £60 million a year is small compared with the benefits which we have been able to introduce as a result of the last two Budgets.

I had hoped to say a few words about enforcement, but no speaker referred to it. I wanted to do so because I wanted to congratulate the noble Lord, Lord Vinson, on his work at the time of the Deregulation and Contracting Out Act 1994 and on his contribution to the creation of Sections 5 and 6 which very much improved the enforcement provisions. I hope that the noble Lord will be pleased to hear that we are looking at them again in the hope of improving them further.

On the issue of small firms exemptions, the noble Lord, Lord Vinson, asked for a blanket exemption for small firms, while the noble Lord, Lord Taylor, asked for a freeze until the end of the year. However, I believe that my noble friend Lord Haskins answered that. With all the contact that he has had with small businesses, he simply said that small firms are not looking for that. Of

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course, there are many exemptions for small firms, for example, there is a threshold for company accounts below which companies only need to file abbreviated accounts, and there is also a threshold below which there is no statutory requirement to have accounts audited. Moreover, in comparison with most other European countries, there is a very high VAT registration threshold and there are of course the lower rates of corporation tax to which I referred. There is a threshold for statutory union recognition under the Employment Relations Bill. Indeed, there are plenty of examples of tempering the wind to the shorn lamb, but that does not appear to be a major issue in the representations being made to the task force.

The noble Lords, Lord Vinson and Rowallan, made particular points about employment tribunals. We certainly recognise that there is always a possibility of what we call "blackmail applications" being made to employment tribunals. The Employment Rights (Dispute Resolution) Act 1998, to which my noble friend Lord Haskins referred, encourages alternative forms of dispute resolution. It enables ACAS to find and promote a scheme for the arbitration of unfair dismissal as a speedy, formal and private alternative to tribunal proceedings. Much has been said about the Employment Relations Bill. Perhaps it would be better to leave discussion of that Bill until the lengthy debates that will undoubtedly take place.

In responding to the noble Baroness, Lady Miller, I failed to give her a definition of "domestic incidents". I am not able to give her a definition but I can give her examples of what is in and what is out. What is in are certainly things such as the sickness of family members and others or being called to a school; what is certainly out is being called to the TV repairman, as the noble Baroness suggested. I was going to use the example of the lost hamster.

I am surprised that the noble Lord, Lord Kimball, in particular, should repeat the canard that we are tied to trade union paymasters. If he looked at the history of the Employment Relations Bill he would recognise that it has arrived as a result of 18 months intensive consultation with employers' organisations and with trade unions. He will find that, in general, employers' organisations are as satisfied with the provisions as the trade union organisations. I will pass on from that Bill because there is so much we can debate on another occasion.

The noble Baroness, Lady Anelay of St. Johns, asked me about the tourism industry. Yes, of course we recognise the position of the tourism industry. She is wrong in thinking that Tomorrow's Tourism is a government statement only. It is a government statement in association with the industry itself, which was responsible for a very large part of it. It is very much an independent report on what needs to be done.

The noble Baroness mentioned particularly the British Activity Holiday Association and the problem raised by Peter Ainsworth about the £20 accommodation offset. That has been referred to the Low Pay Commission, which recommended that there should be no immediate change. However, there will be further monitoring, a

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further report and further evidence from the new earnings survey of 1999. In contrast with the statistics of the noble Baroness, the report issued by Coopers and Lybrand and the London Business School identifies low pay in the tourism industry as a factor which undermines morale in the industry rather than a factor in the other direction. As to the working time directive, as I am sure the noble Baroness will now recognise, the regulations do not require the keeping of logs of hours worked--and, yes, the forum will continue.

I shall have to write to the noble Countess, Lady Mar, the noble Baroness, Lady Byford, and the noble Lord, Lord De L'Isle, about sector-specific cases. It would have been impossible for me to have been briefed on such cases. The noble Countess made many points about the plight of small farms, the Meat Hygiene Service and so on. With the help of MAFF, I shall write to her on those points.

We accept and understand some of the criticisms of the way the working time regulations were introduced in the first instance. We recognise that the original leaflets were too long, too complicated and sometimes even wrong, a point made by the noble Lord, Lord Taylor. But we are making changes to the guidance to reduce the burden on employers. We have made every effort to deal with the undoubted difficulties which arose then. Fortunately, they do not appear to be arising with the national minimum wage.

I have taken longer than I wanted in reply to the debate because I try to answer as fully as possible the points made by noble Lords. However, I cannot reply to the noble Baroness, Lady Byford, about French local government boundaries. That is a little bit beyond my remit.


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