The Economy

Like my hon. Friend the Member for Birmingham, Northfield (Richard Burden), I want to drill down a wee bit to the impact of the current situation on many small businesses in my constituency, and perhaps replicate the experience of other hon. Members, probably on both sides of the House. We need to recognise that while we hold big strategic debates, there are actually real people out there who are deeply concerned about what is happening. When I heard the hon. Member for Tatton (Mr. Osborne) talking about the golden legacy of 1997, I remembered what that "golden legacy" was built on. It was built on the destruction of Ravenscraig and of Hillington and Bathgate in Scotland; it was built on the destruction of a mining industry and the decimation of a shipbuilding industry; and it was built on the fact that one in three of this country's children were living in poverty. We should never forget the practical implications of that so-called golden legacy. If there is one thing I hope the people of this country will congratulate my Government on, it is that we were not prepared to walk by on the other side when there were dire straits. Sometimes when I look across to the Opposition Benches, I realise why I was angry in 1997 when I first came to this House. It was because of what I had seen—and some of the very right hon. and hon. Members sitting in their places today were part of the architecture that created the decimation of communities, not just in Scotland but right across the United Kingdom. Frankly, our Government have had to pick up that legacy over the last 12 years. Let me return to the local circumstances, as I want to reinforce the House's knowledge that the majority of businesses in this country are from the small and medium-sized enterprise sector; certainly in Scotland, they comprise about 90 per cent. of all businesses, while 93 per cent. of all Scottish firms employ fewer than 10 staff. It is their size, agility and adaptability that make small businesses so ideally placed to react to market conditions. Unfortunately, as many of us recognise, size is also a weakness. When it comes to the circumstances we are facing just now, small businesses' room for manoeuvre is a little less flexible than it is for some larger businesses. I think we all recognise that credit provides the oxygen that allows these businesses to survive. As someone once said, small businesses are the sort of economic equivalent of the canary in the mine: they are the first to suffer when credit dries up, and they are a good indicator of whether help is getting through. The Federation of Small Businesses in Scotland surveyed its members at the beginning of this year, and found three main reasons why they are suffering. Yes, they have seen a drop in demand; yes, they have also seen an increase in the length of time they have to wait for payment of invoices; and, lastly, they have seen their credit decrease over the last few months. In some cases, credit is almost impossible to come by. My contribution to this debate is not based only on surveys—no matter how credible—but on the experiences of businesses in my constituency. One of my constituents has a small export business, employing 30 people, and has had a long-standing and little used credit facility withdrawn by the Royal Bank of Scotland. I am told that the business is not insolvent, but as an export business, it depends from time to time on overdraft facilities, which the bank will simply not renew this year. Another of my constituents runs a small commercial property consultancy and has banked with the Bank of Scotland for 24 years. The business turns over a modest profit and, against the trend in the property sector, it is projected to break even this year, yet its overdraft facility has been reduced by 20 per cent. and it has been charged a fee for the privilege. Another example is from the tourism industry in my constituency. For those who have never visited Stirling, I suggest they do as it is a massive tourist magnet. Every battle ever fought in Scotland appears to have been fought in my constituency: there are the battles of Bannockburn and Stirling Bridge, and the ghost of William Wallace runs around the area. The tourism industry is thus crucial to the local economy, but the tourism businesses have had their "comfort" facilities withdrawn, making it very difficult for them to meet contingencies during the winter and early spring period when there are so few tourists around to generate income. I welcome the Government's clear agenda of getting help out there as soon as possible. As has been said on many occasions on this side of the House, it stands in stark contrast to what the Opposition would have done, as they would have let the recession take its course and done nothing. I also know that my right hon. Friend the Chancellor is committed to continue to take whatever action is necessary to bring Britain through the downturn—hopefully stronger and hopefully soon. However, I need to impress on ministerial colleagues the fact that, according to the feedback I am getting from the businesses in my constituency, there appears to be a singular lack of knowledge among the banks of the help that is available. Certainly according to actual stories given to me and anecdotal evidence from the Federation of Small Businesses in Scotland, it appears that high street banks are either not aware of the Government schemes that we have spoken about this afternoon or they do not know how they operate. I understand from reading some of the reports produced after the Treasury Select Committee's tour of SMEs around the country that the same message was given to them. Yes, it is fine for us to have strategic discussions and take strategic decisions here, but we have to recognise that information must get through to the grassroots businesses that are so crucial to the existence of our local communities. I know that there is some evidence that the Royal Bank of Scotland is beginning actively to promote schemes and to offer to work more closely with the business community, which is obviously welcome. Let me make this concluding point. There is now a level of expectation of what the banks, particularly those in which the taxpayer has majority control, can and should do—and I think the banks need to be aware of that expectation. That should apply not just to their dealings with small businesses, but to how they conduct their own business. To use one final example from my constituency, I received a communication from a small IT company that had a successful relationship with the Royal Bank of Scotland over some years. According to my constituent, it is now a stated aim of RBS to seek offshore services to replace suppliers such as his company—regardless of the logic and, in some cases, in complete disregard of the business case. He accepts the need to get the best price for the job, but is aggrieved—and, I have to say to my right hon. and hon. Friends, with some justification—that firms such as his are being excluded by a bank that he feels he has a stake in. I hope that Ministers will continue to use the influence we have on banks under our majority control to ensure that we not only exercise that control, but exercise it in the best interests of British business at a time when it is facing major difficulties. Finally, let me say that small businesses did not cause the recession, but they will be vital in getting us out of it. I know that my Government will continue to take all necessary action to ensure that small businesses are supported through these difficult times, but let me make one final plea: we can talk all we like about this, but the partners—the banks, the business gateways, the local authorities—must ensure that the information is getting through. Otherwise, if there is a complete disconnect between what we say nationally and what is happening locally, we will undermine the credibility of all of us, and perhaps make this situation last longer than necessary.