Lord Leigh of Hurley (Con)

My Lords, it is a great honour to follow my noble friend Lady Noakes and the noble Lord, Lord Londesborough. My noble friend and I worked on the Small Business, Enterprise and Employment Act, which I am pleased has provided good use here on in. Of course, she has a most distinguished business career, not just, as we all know, in very large financial services companies but as my president at the Institute of Chartered Accountants, where she interacted with many small and medium-sized businesses. The noble Lord, Lord Londesborough, and I spent the turn of the year discussing the Bill and its ramifications. I speak as someone who takes a particular interest in SMEs, for reasons I will explain. I am, of course, in full support of this small group of amendments—as are, I think, all business representative bodies. The FSB, which is the UK’s largest employer group, has said that this will “wreak havoc on our already fragile economy”. We have had survey after survey: 1,270 companies were surveyed. Two-thirds of them said that they will curb hiring, and one-third said that they would reduce staff as a result of this Bill. The aforementioned Chartered Institute of Personnel and Development discovered that 25% of its members will be considering lay-offs as a direct result of this Bill. The Institute of Directors called it “a sledgehammer to crack a nut.” As I mentioned, I am particularly close to the SME sector, not least because, in 1989, I started a small business with one partner and one assistant. I should therefore declare an interest that I still own a chunk of shares in that small business, which, when we started, was called Cavendish Corporate Finance and is now Cavendish plc. At this point I normally take a pot-shot at the Labour Front Bench as not having any business experience to talk of—certainly not in the other place—but I have to be much more deferential in this Chamber, not least because the noble Lord, Lord Leong, two years after I started Cavendish Corporate Finance, started Cavendish Publishing, except, of course, that he had much greater success than me. According to Wikipedia, in his first year made £250,000 profit, which is very impressive, because in my first year I lost money, so I have to be suitably deferential. None the less, I am sure the noble Lord will remember those formative years of starting a business, when one was focused on nothing else but that business. Clearly, we desperately need people to do the same as the noble Lord and me: to take the risk, start a business, have a go and then employ people. The decision to employ a person is a very big one. It is the toughest decision for the first person, but it is still tough for the second, third, fourth and fifth. As it happens, we now have 220 people employed at Cavendish, but it took a long time to get there and we had to merge with a number of other companies so to do. For many years my small business would have been covered by my noble friend Lady Noakes’s exemption, and it would need it because, to take on people in a small business, you are recruiting someone not just to do a job of work but to join your culture and your aspirations, and to fit in. Sometimes it works and sometimes it does not, and when it does not you have to make difficult decisions to make changes. The fact that we are now allowed to let people go relatively easily encourages people such as me to take a chance and employ someone where I would not otherwise do so. I am very worried that this Bill will lead to a reduction in business growth and, in particular, in employment. Its main burdens will be borne by small businesses. I think the Minister cited five companies that she said were broadly supportive of the Bill. All but one were larger companies, and one was actually the Co-op—I am not sure that entirely counts. Another was IKEA, but I would be very grateful if the Minister could cite the support from IKEA, because I cannot find it. The SME sector realises that the financial burden that the Bill imposes of some £5 billion will largely fall on it, and it is very worried. So the first issue is financial. The second issue is operational. SMEs do not have an HR department. They simply do not have the facility to wade through this enormous amount of legislation about how they are supposed to treat their staff. The only way round it is, of course, to deploy an agency at great expense to advise and consult every time there is any HR issue, and it is just another cost for businesses which are, for the most part, feeling pretty fragile, and much more fragile after the horrendous NIC increases that are being imposed on them. The third hammer blow is that those business just will not hire. They just will not take the risk of hiring new employees, which will, of course, restrict their growth, because the only way a business can grow is to recruit new people with fresh blood, fresh ideas and fresh reach. It is impossible for a business to grow without making hires. Fourthly, the Bill will make businesses risk averse. The Institute of Chartered Accountants in England and Wales has specifically said that this will make businesses risk averse in all their decisions, because of the extra risks that are imposed on those businesses by the Bill because of the costs and burdens they have to undertake. Lastly, the fifth problem with the Bill is the lack of consultation. It has been rushed through to meet the 100-day deadline and, as a result, there has not been proper consultation and we are wading through a vast number of amendments that we are trying to get our heads round. For all those reasons, one accepts that the Bill is in the manifesto and that it has to happen—it is in, in many ways appropriate that it does—but please can we leave out the SME businesses that will struggle with this Bill? Maybe we can bring it in later, suitably amended, but not now.