Tim Yeo

As the Conservative Party meets for its annual conference in Blackpool, shadow secretary for the Department of Trade and Industry, Tim Yeo MP, means business.

Talking exclusively to Startups.co.uk he explains why businesses need someone championing their cause in government – and why that person isn’t Patricia Hewitt.

What did you think of Patricia Hewitt’s speech at the Labour conference?

It was pretty thin stuff, I’m afraid. What she should be doing is addressing the needs of British business, which is facing a challenging period now. She should be saying she’s going to dismantle some of the barriers to growing companies and she should be championing the role of wealth creation within the whole economy.

If you want better healthcare, better education, more secure pensions and a better environment, all those things, then you require the wealth business creates, and only business can create that wealth.

I’m really disappointed that she is so reluctant to do that in any of her speeches. It was a good opportunity for her to do it, but she didn’t take it. She’s missed other opportunities to do it recently also, so I was extremely disappointed.

She failed to address, despite heavy prompting, the issues of whether or not to continue Britain’s opt-out from a 48-hour maximum working week and right of employees in small businesses to trades’ union recognition. What do think about these issues?

They’re two crucial issues. My view is that small firms particularly need as much flexibility in the way that they can work as possible and too much of the employment law, whether it’s European or British, has reduced that flexibility in the last six years.

I’ve run a small business myself, I’ve been involved with other people who have run small businesses, I know that they are very good at looking after their own workers; they have to in a small business even more so than in a big business and startups, particularly, are usually characterised by tremendous enthusiasm, not just on the part of the boss or the entrepreneur, but the other people that work with that person and to constrain them by some artificial regulation is very harmful.

The trouble started when the government gave up the opt-out that we’d won from the social chapter: a lot has followed from that. It would be a tragedy for small business and the enterprise which they’re able to show if that was inhibited by this kind of restriction, so I’m dismayed by that.

Trades’ union representation is quite inappropriate for companies of that size. We are critical of the way the government has slightly tilted the balance back to union leaders. Obviously we perfectly happy to see workers of any organisation be members of unions, but forcing a small firm with only a handful of people to acknowledge trades unions if they don’t want to doesn’t serve any purpose at all. It can be burdensome, and we should be helping these firms create wealth not pile obligations on them.

There seems to be a conflict between the idea of setting business free from regulation but still maintaining workers’ rights. How would strike the balance?

I start from the point that the most basic right of any worker is the right to have a job and that small businesses particularly are the engines of job creation. So if you want to help workers you need to make it easier not harder for small businesses to create jobs.

I think that we should be quite prepared for a lighter regulatory regime for smaller organisations. We would want to reverse the way in which the government has reduced the freshold at which union recognition can be compulsory and what to restore the position it was at in 1997.

But there are other examples where we think it is better to simply exempt small firms altogether from certain obligations. Of course we want to see workers enjoy the best possible conditions, which goes without saying, but it’s a question of how you do that.

I think that, as far as possible, the voluntary approach is best. The majority of employers know that their greatest asset is their workforce and they therefore look after them and do everything they can. Small firms are particularly flexible and will do everything they can. But you do that by encouraging good practise not by encouraging more and more onerous and intrusive laws.

The reason why I am concerned by some of the measures the government has taken is that if you go on putting obligations and burdens on employers you actually don’t help the position of employees.

The changes that I want to make are entirely to help employees and I think that those organisations that represent employees, like unions, ought to come together and analyse just what type of effect these measures will have. The law of unintended consequences applies very strongly in the employment field. People do things with very good intentions, but if the consequence is to destroy the job that isn’t making it better for the workforce at all.

You have experienced starting and running a small business firsthand. Patricia Hewitt and many within the DTI haven’t, how important is that?

I think it’s helpful to have direct experience. I wouldn’t say it’s essential but I do think it’s helpful because I have a natural sympathy for businesses and entrepreneurs.

The excitement you get from watching a business grow from the brink of disaster is great. I think that makes me, first of all sympathetic to the needs of business, and secondly I understand the problems more easily than someone that’s never been involved at all. I’m not saying it’s impossible for them to understand it, but it’s harder for them to understand it.

One of the thing I’ve enjoyed in the year of being doing this job is the opportunity I’ve got to talk to lots and lots of businesses from all different sectors and industries of all sizes and it’s really interesting - and I think I can talk some of the same language.

The Lib Dems want to scrap the Department of Trade and Industry. What do think about that?

I’ve worked in government and opposition and if you look around Whitehall, apart from the DTI, there’s no department to speak up for business and yet the policies of many department affect business; transport, education, pensions, home office, they all affect business.

If you don’t have a DTI who is going to say to the transport department, ‘have you worked out what that is going to do to our competitive position?’, or ask the education minister what employers need out of the education system? So there needs to be someone inside the government whose main job it is to speak for business and you have to have a DTI to do that in my view.

It doesn’t need to be as big as the present DTI; I want it slimmed down a bit. It should be changed, made better and made smaller, but to say you’re going to get rid of it altogether, well, I just wonder if the Liberals did that what would happen. I think you’d find all sorts of other policies then coming out of Whitehall which really harm business because there’s no one there to act as a kind of brake.

Is there a need for a small business minister in the cabinet?

I think that it’s the job of the DTI secretary to represent the interests of business at cabinet level. The cabinet is a small body and I think it’s already too large, so it’s difficult to justify having another person.

One of the most cynical bits of spin the Labour government has been guilty of has been the way that they posed as the friend of business. If you look what they’ve done - increasing tax; increasing red tape; making life harder for growing companies - I can understand why small businesses feel they need someone identifiable as their champion. But a good secretary of DTI could play that role.

Would you like to see more DTI money decentralised and pushed straight out to regional development agencies and local councils?

We’re still looking at that and it’s a very important question how you make the services you provide to business most effective. In principal, I’m always keen to see them devolved as far as I can, but whether it’s right to do that through the RDAs I’m not convinced.

I think some of the trade bodies could have a bigger role. We’ve got some very good Chambers of Commerce around the country and a lot of private sector experience is available. I think that and some of the other bodies like the Confederation of British Industry could be used more.

The danger in using the RDAs is that you get a kind of public sector culture going in. We’re in dialogue with a lot of SMEs about how they’d like to see the services government provides become more effective from their point of view.

How do you go about speaking to businesses?

In a variety of ways. We’ve got good dialogues with the main employer representatives and trade bodies – CBI; Chambers of Commerce; Engineering Employers’ Federation; Forum of Private Businesses; Federation of Small Businesses, etc – and I talk to them on a very regular basis. We do it partly because people are contacting us. They’re saying we’ve given Labour six years and given them the benefit of the doubt and we’d actually like to hear what you’d do for us.

I’ve got a panel of regulation advisers, a group of advisers on human resources, a small business network and those are pulling people in that I can I talk to directly. There are quite a few sources available to us and I think that if our policy are to be accepted they need to be formed on a detailed understanding of the needs of businesses and I think we’ll achieve that.

What would be the priorities for business under a Conservative government?

Firstly to halt the rise in business tax, which has hit businesses of all sizes. Secondly to simplify and reduce the burden of regulation. I do passionately believe that regulation should always be in proportion to the risks involved – that you should never regulate by law if you could do a voluntary approach instead; that you should never make EU rules tougher in this country than they are elsewhere in Europe; and that the smaller the organiser the lighter the touch.

The third thing we’d do is realise business needs a modern infrastructure. You can’t expect to be competitive in Britain if we’ve got a third world transport system. The amount time and costs because of our outdated transport system is becoming really serious. We’ve got to keep up with things like broadband as well.

And fourthly, it’s about skills. The world is changing and the type of competition we face from other countries is much more intense. We’ve got to help British businesses succeed in areas where a mature economy can still succeed and a lot of that is about providing workers with the right skills. I’m not convinced the government are focussing on that sufficiently.

Overall, we also want to make sure we’re making life easier for startups and growing companies. If you do what the present government has done which is to try to reduce corporation tax but pay for that by putting the tax on business costs, that actually, in some ways, makes life harder for startups than corporation tax does. You pay business rates before you’ve made a penny of profits, you pay NI on the wages you pay before you‘ve generated any revenue.

How would the Conservatives improve the skills problem?

I don’t pretend this is an easy problem. I do think we need to be a bit smarter at trying to encourage youngsters into studying in areas where we’re short of people. I think modern apprenticeships haven’t worked as well as people might have hoped, but I think they’re still capable of working. I still need to consult a bit more with employers so my views aren’t quite yet formulated, but I recognise it as one of the absolute key roles for government. It’s an urgent priority and it needs to be done in consultation with business itself.

What would you say to the 2,500 Amicus workers that last week protested for manufacturing jobs to be saved?

We certainly share the concern about manufacturing. I set Patricia Hewitt five tests this year. Trade balance worst since records began; productivity only rising at half the rate it was in the previous six years; more strikes last year than for ten years; collapse of business investment; and since Labour came in 2,000 manufacturing jobs lost each week – that’s a worrying set of indicators.

On manufacturing, I recognise that there are some industries where the competition from abroad may make it very hard to reverse the loss of jobs. In some of the less skilled, big labour cost areas it’s hard for us to compete because they’re from parts of the world where wages are much lower. We can’t say there is any magic wand we can wave which will bring certain industries back here.

What we can do is to help those manufacturers which are still here and getting to the point where they’re thinking if they want to stay here, and a big part of that is about minimising the costs we’re putting on to them – it just does not help to keep loading costs whether it’s national insurance contributions, business rates or fuel taxes, climate change regulation: all these things are a burden on manufacturers in the country.

I also think there are some tax changes that would help a bit and certainly some regulatory changes that would help to make them more competitive. If you’ve got a threat from abroad, which a lot of manufacturing certainly has, you’ve got to try to improve the competitive position of Britain and too much of what the government has done, far from improving it, has actually made the position worse. The most crucial thing for manufacturing is trying to make it more competitive.

Should we be more like Europe by embracing workers’ rights, more like America in encouraging enterprise, or as Gordon Brown envisaged us last week, ‘the beacon between the two’?

Ha! He may call it the ‘beacon’; some people in business might say we’ve got the worst of both worlds. I think it’s difficult to generalise and say we should be more like one than the other.

In terms of Europe we do need to be very aware of the dangers of the sclerosis that sets in if you have a lot of Brussels driven law. We can see the way which in Germany unemployment has risen, we must be careful that Britain doesn’t got the same way.

I think the crucial thing for Britain is not to regulate in a more onerous, intrusive, burdensome way than the rest of the EU. One of the other principles, as far as I’m concerned, is not to enforce EU regulations in this country if they’re not enforced elsewhere. I’m determined I will not destroy jobs by forcing our small businesses to play by rules other countries are allowed to ignore – that’s a very important principle.

In America there is much I admire, although I’m concerned they’re quite bureaucratic in some respects. I particularly admire the mobility in their labour market and their entrepreneurial spirit: the fact that people who start and grow businesses and get rich are admired and are held as fine examples. They regard wealth creation in the way I would like it be regarded and that is something I would like to model.

The government often talks of making the UK ‘the best place in the world to start a business’. How does it rank at the moment?

Well, they claim that because they’ve reduced the number of forms you fill in or something. When someone starts a business they don’t worry about the number of forms, they worry whether their business plan is credible, whether they can get the money to get it started and whether they then feel they’ve got the chance to make a go of it.

That really depends on the business-friendly nature of the tax and regulatory system; it depends on the state of the economy generally. It’s about general considerations, not the technical process – although it’s right to try and simplify that. But if the government thinks that’s the main issue they’re not showing a real misunderstanding of what makes small business people tick, and what helps or hinders them.

I think one of the things that could his country a good place to start a business would be a sense that the government believed in business, respected business and sympathised with the concerns of business people and that within the cabinet there was a real champion of business.

What do you think of the support services available to people starting their own business, such as Business Link?

From the dialogue we’ve had with business people themselves we get mixed reports. Some of the services and the people that provide those services are well regarded, but a significant figure is not.

I think with something like business a lot depends on the calibre of individuals. As far as possible I’d try to increase the proportion of the advice and services that the DTI helps other business people make available.

I think if you’re in business you are likely to benefit most from talking to another business person. It may be bank manager, professional advisor, someone from a trade body, a mentor – someone who you’re on the same wavelength with more quickly than someone you look on as an official, civil servant or administrator.

That’s the change I’d make, but in the end, it’s a bit like teachers: if the individual is good that’s the most important thing. It’s doesn’t matter what badge or label they wear.

The TUC released a report earlier this year discussing what it claimed is the ‘myth of small business’ and the disproportionate amount of time and money spent on small businesses rather than large.

I disagree with that. A third of the workforce is employed in companies with less than 20 people and new jobs are created disproportionately by small companies rather than large ones. I’m disappointed with the TUC don’t appear to recognise that when they make statements of that sort.

Of course, big business is important. It employs a lot people, it contributes a lot of tax revenue, a lot of exports come from big business and so on, so I don’t, in any way, denigrate big business. But I do think the engine room, the growth of the economy and employment particularly, does depend on having a thriving small business sector as well. You can’t hope to have a successful, vibrant dynamic growing economy unless you have a vibrant small business sector.

The Conservative Party was against the National Minimum Wage when it was introduced, what are your views now?

We’ve accepted that the national minimum wage is not going to be damaging if it’s kept at a manageable level, and at the moment it’s at a level that is not destroying jobs.

I accept that evidence and about three years a go we changed our policy so we were not seen to want to abolish it. However, if it rose to a level where individuals were being denied the right to work we might want to be more explicit; but in principal we are not opposed to it we just want to keep an eye on the effect it’s having.

Gordon Brown said it’ll go to £5 in 2004, Brendan Barber thinks £5.30 would be a good level now. Do those levels concern you?

If it rose very very sharpy we’d want to look at the effect it would have on the jobs market. I start of from a passionate desire to give all people a decent job and whether it’s the minimum wage or any other bit of employment law, I have a pragmatic approach. I’m not going to say if £5.30 would be right or wrong, we’d have to look at the results.

What are your views on joining the Euro?

The business community is divided, like almost every group that I know, political parties are divided, families are divided, professions are divided. I think my judgement is that big business is a bit more sympathetic to the euro, and small business a bit less.

I think if you look at the performance of the British economy, it’s quite hard to argue that we’ve suffered for being out of the euro. In fact, I think the Bank of England is doing a good job with our monetary policy. I think one of the best decisions Gordon Brown has made was giving the bank independence in 1997 and again, we’ve accepted that and we’d want to continue it.

I don’t see, myself, any short-term benefits to British business joining the Euro though I recognise that there are some individual companies and possibly industries to whom a fixed exchange rate would be helpful. But overall the loss of discretion over our own interest rates would be a handicap and increasingly I think we’ll see those countries that are in the Euro taking that view. There isn’t a convergence of all the economies that are in the Euro and some of those countries are going to be landed with an interest rate that is not appropriate to their needs.

So I’m very comfortable that we’re outside the euro, and as a practical matter the referendum in Sweden means it’s extremely unlikely that the government will want to have a referendum in the foreseeable future, anyway.

What advice would you give to someone starting a business today?

Have someone else look at your business plan; someone who’s hard-headed with a bit of experience and try and have someone to talk to. It’s very difficult if you’re working on your own – have someone outside you that you can have a chat with every now and again. It might be as minority shareholder, non-executive director or just someone who is a friend.

Surviving as a business depends on delivering a service or product to someone at a price they can afford. It depends on watching your cash at all time: lots of good businesses with good products go down because they haven’t been watching their cashflow. It depends on keeping your costs down.

Why should business owners vote for the Conservatives at the next general election?

They should vote for The Conservatives because we are the party, the only party of the main parties, who really do believe in business, who respect the process of wealth creation for it’s own sakes as well as being the source of other things.

We’re the only ones that have a sufficient understanding of the challenges businesses face now, which in many ways are more acute than they’ve been before and are certainly more international. We are prepared to make the changes to policy that is needed if business is to be competitive.

I believe business is one of the areas that when we get towards the next election, people will see that we have a different approach from Labour or the Liberals and that our approach is the one that more closely meets the needs of business.

Tim Yeo was being interviewed by Matt Thomas