David gave the following speech on the National Insurance Contributions Bill in the House of Commons on Monday 4th November:
It is an honour and a privilege to follow the impassioned speech of my hon. Friend the Member for Skipton and Ripon (Julian Smith).
I was fortunate enough to secure an Adjournment debate last week. The good news was that it was on the subject of supporting first-time employers, but the bad news was that I secured the 2.30 pm on a Friday afternoon slot, which is not always prime time in Parliament. I am therefore pleased to be able to return to the subject and debate it further in the presence of a few other colleagues.
Entrepreneurialism is a culture that spreads. Once a person is in it, they live it. They go native, as they say, and embrace risk-taking. Significantly, entrepreneurs are more likely than established businesses to take on workers from the ranks of the unemployed or the non-active, who often find the formalised application processes, let alone the working practices, of large firms restrictive. Established companies may tend to value the ability to adhere to existing processes and systems above the creativity, dynamism and individual flair that smaller businesses help to stimulate. Doing more to encourage the smallest firms to take on staff, particularly a first member of staff, has to be a step in the right direction.
Despite siren warnings from the unions and others that self-employed jobs are not proper jobs, there is clear evidence that the self-employed and those employed by them in the smallest companies enjoy better industrial relations. Data from the most recent workplace employment relations survey suggest that 67% of employees in the small and medium-sized enterprise sector strongly agree that managers treat them fairly, compared with 53% of those who work in large firms.
Furthermore, a survey by the TUC, no less, and YouGov has shown that a greater proportion of employees in small firms report the highest levels of job satisfaction, compared with employees in larger firms. However, as my hon. Friend the Member for Skipton and Ripon has said, there is still a tendency in Whitehall to prefer to deal with larger companies and to underestimate the burdens on the smallest businesses when introducing uniform regulations. The new employment allowance, however, shows that this Government understand the importance of measures that, though uniform, are of greatest benefit to the smallest operators, and that is why they should be commended.
Bob Stewart: I endorse my hon. Friend’s last point. It is clear that if the boss of a business works closely with his first employee, industrial relations should be excellent and there should be no problems. That is the reason for the 67% satisfaction rate.
David Rutley: My hon. Friend makes an important point. That is absolutely the case. This is about how we build good working relationships and a strong economic base through SMEs. That is far more sustainable than the approach adopted by the previous Government, which seemed to be underpinned by more and more public spending. That is completely unsustainable.
What a boost it will be for more of the growing army of the self-employed to become small employers. Indeed, if they all, or a vast proportion of them, took on one employee, that would make a huge dent—even bigger than the current one—in the unemployment figures. The number of self-employed people with no employees has increased, but the number of self-employed people with a small number of employees has not kept pace, and that is what the Bill seeks to address. In the past, the focus has been more on encouraging people to start up a business and less on taking the next step to becoming micro-employers. The Bill is an opportunity to further liberate the self-employed from barriers to growth and to nudge first-time entrepreneurs into becoming first-time employers. The prize is stronger, more sustainable economic growth.
Micro-businesses play an important role in Macclesfield, working in forums like Make it Macclesfield and the Poynton business forum. They make a huge contribution to strengthening the community and, at the same time, moving our economy forward by creating jobs.
Surveys and statistics abound to show that small businesses can be, and often are, job-creation machines. They also show that small businesses are more likely to employ the longer-term unemployed and those who may struggle to enter the job market as a result of a lack of formal qualifications or, indeed, their ethnic background. This is what the Federation of Small Businesses calls the “entrepreneurial pipeline” to what Professor Mark Hart calls “growth gazelles”. We need to encourage more growth gazelles. Essentially, this is about everyday entrepreneurs, street-level small businesses and office-share operators giving people a chance to work. Analysis by the FSB suggests that 74% of those who become self-employed and who have employees come from the self-employed who had no employee, and that a further 13% come from employees who had been working in micro-businesses. Clearly, there will be a multiplier effect once we get this right and start moving in the right direction.
The Government are absolutely right to introduce the new employment allowance. Slashing the cost of national insurance and taking many employees out of it completely will encourage more of the self-employed to become employers. However, this is not—and nor should it be—the only measure to increase the number of first-time employers. The Bill must be viewed in concert with the new enterprise allowance—for which Levi Roots is an ambassador for the Government—which seeks to encourage the longer-term unemployed into self-employment. The three-year moratorium on new regulations for small businesses is another important step in the right direction. I encourage Ministers at the Department for Business, Innovation and Skills to view it as a rolling moratorium.
Julian Smith: I thank my hon. Friend for giving way in his excellent speech. Does he agree that one of the most depressing things about the lack of Labour Members present is that, to make those schemes truly work, we all need to push them, whatever our political viewpoint, in order to ensure that those who are taking the risks hear about them and understand them?
David Rutley: Absolutely; there is a responsibility on all Members to do that. It is disappointing how few Opposition Members are present, and what they have said has been negative, rather than focused on the opportunities that are available. As Lord Young of Graffham has rightly argued, there are regulatory issues that we must deal with. The employment allowance will simplify the system for small businesses. We must also tackle the problems with culture and communication. Through careers advice in schools, we must help young people to realise that there are huge opportunities in small businesses. If people are familiar with SMEs and particularly micro-businesses early in their careers, they are more likely to stick with them and to take the step of setting up small businesses themselves.
There is certainly no lack of ambition. The Prince’s Trust has found that up to 30% of young people expect to be self-employed, and a YouGov poll has found that 43% of young people have made money through entrepreneurial activities, like selling their own products or working on a freelance basis. We must help them to achieve their ambitions. The Bill means that their aspirations will not just be pipe dreams. It is a can-do Bill for a can-do generation and it deserves our support.
Those who seek to regulate businesses or to complicate the tax system should recognise the consequences of doing so. Whitehall communications must take notice of business-to-business communications so that those communications can be strengthened. My hon. Friend the Member for Skipton and Ripon highlighted the importance of the work of HMRC on communicating more effectively. I would add to that the work of Directgov.
As Lord Young says, it is vital that the psychological barriers are broken down so that they do not stifle the ambition that is latent in the marketplace. If we are to create an aspiration nation, the road to running one’s own business must be a clearly signposted fast lane, not the last Labour Government’s minefield of forms, box ticking and regulations. Their approach reminded me of a sign that I saw once to a business park, which said, “Enterprise Way—Cul-de-sac”. We have to have a different perspective and that is what this Government are seeking to achieve.
In small firms, there is often less formality, more fluidity and greater flexibility. What we need, and what we now have, is a simple tax allowance that everybody can understand. That will create more jobs and more first-time employers. It is vital that the Government communicate the scheme creatively. I also say to the Minister that we must not listen to what is said by the Opposition. The idea that we have listened to them in designing the scheme is fanciful. After the deficit and flawed forecasts that they gave us, the chances of our listening to them are somewhere between no hope and Bob Hope. Their jobs tax, on top of the record deficit, would have been devastating for the economy.
In conclusion, I am delighted that the Government are champions of first-time entrepreneurs. I believe that the Bill will help us to encourage more of them to become first-time employers. I give the Bill my full support.