REALITY BITES: It's time to call the bluff of the small business lobby. It is outrageous to argue that the employees of small firms are less entitled to rights than others

REALITY BITES: It's time to call the bluff of the small business lobby. It is outrageous to argue that the employees of small firms are less entitled to rights than others - Tony Blair has a message for his ministers: Think small. This may sound odd comin

by RICHARD REEVES, a consultant and business writer
Last Updated: 31 Aug 2010

Tony Blair has a message for his ministers: Think small. This may sound odd coming from a PM who excels at grandiose rhetoric and who is not shy of spelling out a new moral order for the entire world. But in this instance he is pushing one of the hot buttons of political discourse, using a preface to a report by the Small Business Council to demonstrate his small-is-beautiful credentials to the business community.

It's not a new trick, of course: politicians of all political stripes have long been required to heap praise, encouragement and all too often favours on the men and women running the UK's smallest firms. The governments of the grocer's daughter were required to worship at the shop doors of the small retailer.

You know the small-is-beautiful story: small firms are the little platoons of the economy, providing more than half the jobs and most of the entrepreneurial spirit. They are bullied by the big corporates, who pay them late, and discriminated against by the big banks, who refuse them credit or charge them through the nose for it. They are sinking under the weight of government red tape and burdened by laws protecting workers. Yet they valiantly soldier on, keeping the wheels of commerce turning.

They have a lobby that most sectors would die for. Between them, the Federation of Small Businesses and the British Chambers of Commerce create more headlines than Big Brother, mostly aimed at the Government and along the lines of You Just Don't Understand Me. Among the litany of SME complaints are: the Working Families Tax Credit (which increases the standard of living of their lowest-paid workers), restrictions on long working hours, VAT, parental leave, stakeholder pensions, the right to request flexible working, the minimum wage and new laws on consulting workers. In short, anything that is good for workers is apparently bad for small business.

If the small-businesses lobby had its way, the UK would have a two-tier labour market, with the rights of workers contingent on the number of people their boss happens to employ. They wanted exemptions from the minimum wage, working time restrictions and laws on flexible working. And they have won successes: very small firms are not obliged to offer stakeholder pensions, and maternity leave is refunded at above 100% to smaller enterprises. Gordon Brown has offered, and looks set to increase, a battery of tax incentives for our lonely heroes.

It is time to call their bluff. For a start, they are no longer the job-generators of lore. True, in 1992, SMEs provided 62% of private-sector jobs, up from 52% in 1980. But by 2000 this proportion was down to 56% again. It looks now as though the importance of small business was artificially inflated by the recessions of the 1980s and early 19 90s, which hit large firms very hard.

But now, big is beautiful: according to DTI research, of the top 15 wealth-creating firms in Europe, five - Shell, BP, HSBC, GlaxoSmithKline and BT - are from the UK.

It is in any case simply outrageous to argue that the employees of small companies are less entitled to employment rights than others. If the Government goes along with the request from the BCC and FSB to allow smaller firms to be exempt from new laws requiring firms to consult with their staff on major changes, there must surely be a human rights case on the cards. (Or possibly even a sex discrimination one, given that women are very much more likely to work for small firms.)

Of course, not all small firms are of a Thatcherite mindset. Many of them recognize that they have a huge responsibility for the welfare of their employees, and provide benefits beyond what many of the larger players offer. But these hippy havens - a current example is Innocent drinks are the exception that proves the unappealing rule.

People working for smaller firms generally get paid less, are less likely to be offered a company pension, are more likely to get hurt at work and less likely to receive training. If anything, the small-business sector needs to be more heavily regulated than the rest, not less.

The regulation obsession of the lobby groups does not even reflect the concerns of their own members: recent research by the small business research centre at Warwick University showed that just 1500 of small firms said red tape was their biggest concern - compared with six out of 10 that said attracting the right calibre of staff was their main concern. How odd that talented people are not flocking to join a sector that seems to view the abdication of responsibility to workers as a mark of success!

The small-business community has to face up to some hard truths. Business exists not only to create wealth but also to provide decent employment. If the only way a company can remain in business is by denying its employees the rights and benefits available to others, then it simply shouldn't be in business at all.

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