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1984 Feb 8 We
Margaret Thatcher

Speech to Small Business Bureau Conference

Document type:public statement
Document kind:Speech
Venue:Lakeside Country Club, Frimley, Surrey
Source:Thatcher Archive: press release
Journalist:-
Editorial comments:MT left for the Conference at 1030 and was expected to return to No.10 at 1345.
Importance ranking:Major
Word count:2543
Themes:Autobiography (childhood), Conservatism, Economy (general discussions), Employment, Industry, Monetary policy, Pay, Public spending and borrowing, Taxation, Local government finance, Media, Trade union law reform

I. Opening Remarks

I think all of you will know that I have a special sympathy with small businesses because I was brought up in one.

There was no 9 to 5 routine. We seemed to be on the go the whole time. Number 10 is like that, and I still live over the shop. But then many of our large companies began life that way.[fo 1]

So, today, I want to pay tribute to the work and achievements of the Small Business Bureau, which is certainly not small and certainly not bureaucratic, but is most definitely businesslike.

I want to pay special tribute to Michael Grylls—a tireless advocate of your cause. He and the bureau felt there should be a special conference at which your voice could be heard.[fo 2]

I am reminded of some lines which might easily have been spoken by someone just starting up his own business:

"You'd scarce expect one of my age
To speak in public on the stage;
And if I chance to fall below
Demosthenes or Cicero,
Don't view me with a critic's eye,
But pass my imperfections by.
Large streams from little fountains flow,
Line missing[fo 3]

Governments never do everything you want. But I hope you find this Government—and the Minister responsible, David Trippier—always ready to listen and quick to respond.[fo 4]

Why does Government believe in small business?

This Government believes in small business. Not in an attempt to turn the clock back to the days of yeomen and craftsmen, although they derived enormous satisfaction from their work. But because small firms are indispensable to the creation of jobs and of wealth.

Firms with fewer than 200 employees produce about a fifth of our national income; employ one in four of the total workforce; and provide one job in three in the private sector.

Those are impressive figures. But nothing like so large as in other industrialised countries.

We must learn the lessons of their success and we are beginning to do so. Look around and you will see the part that small firms are playing in economic recovery and creating jobs.

There is a company in Middlesbrough, established with the help of the British Steel Corporation. It is now running a successful pattern-making service for industry. Many of its staff had previously been made redundant by a larger firm making precisely the same products. How did the small firm seize the opportunities which the large firm missed? By taking decisions quickly, by keeping overheads low and by abandoning restrictive practices. There is no room for demarcation disputes in the small firm.

Small firms can be a seed-bed for new ideas and a testing ground for new ways of working. They often lead the way in new products and new services. They put the customer first. They have to, to survive in a fast-changing world.

In the small firm, it's not "them" and "us". All pull together in the same team. You may have seen the case of Readhead's Ship Repairers in South Shields. Following a management buy-out, the company worked through the Christmas break to complete an order on time. Three cheers for such people.

We support small businesses because they embody freedom and independence. They are the roots of a free society. For in the words of one American President:[fo 5]

"Energy in a nation is like sap in a tree; it rises from the bottom up; it does not come from the top down." ( Woodrow Wilson 1912).

We seek a society

— where people make their own choices and take responsibility for their decisions.

— where rewards are related directly to one's efforts.

— where people have a stake in its success.

— where individual initiative rather than the diktat of Government provides the driving force.

What we have achieved?

You will ask what the Government is doing for small firms. The Government is providing positive help. This is not to create dependence on government. That's the last thing we want. And it's the last thing you want. Our objective is fair competition, with no loading of the dice in favour of large business or of government. You are busy enough without having to dance to the tune of government departments. "Too many forms", you say. I agree. So we have already scrapped hundreds of returns. And there is a further bonfire to come.

We have introduced new employment laws to prevent a powerful union from oppressing a small company. As we saw recently in Mr. Shah, a businessman with courage can exercise these new rights in the face of the strongest pressure.

To help small firms gain access to finance, we created the Loan Guarantee Scheme. So far, it has enabled over 13,000 small businesses to borrow around £440 million.

£25 million of new equity money has already been raised for small business through the Business Expansion Scheme. It is now up to you to make full use of this imaginative scheme.[fo 6]

And the Enterprise Allowance Scheme—since it went national last August—has allowed 23,000 people who were unemployed to become self-employed.

The Government has speeded up the slow machinery of local planning applications. We intend to keep the pace brisk.

Of course, too many schemes can be confusing. You don't know quite where to start. So a major exercise is now under way to group more than sixty of them into a small number, each with its own clear purpose. I have asked for this to be done by May.

Industry too is doing much to help itself. Many of you, I know, take part in local enterprise agencies, showing people how and where to start. With 187 enterprise agencies already in existence, and another 50 now in the pipeline, we are well on the way to 300 in three years. I want to thank large firms for all the support they give to enterprise agencies.

Procurement

There are major opportunities too for small firms in government purchasing. But they must compete for them. Rightly so, as government purchasing depends on obtaining value for money. No taxpayer would ever wish selling to government to be a soft option for any part of the business community.

But in selling to government, as in other activities, small firms can face particular disadvantages. We are overcoming these by simplifying the procedures and by telling you more about the opportunities which exist. The Department of Trade and Industry and the Ministry of Defence have produced special booklets on how to go about it.

We need to know more about just how successful small firms have been in attracting public sector business. A study is under way and once we know the facts, we will come forward with more proposals.[fo 7]

All of these different measures help in their own way. And even at a time of recession, a firm can achieve its own recovery. But what happens in the wider economy, at home and abroad, matters most of all. So how do I see our economic prospects?

The Economy

Many things are going well. Today we have the lowest rate of inflation since the 1960s. Rising activity, which was patchy at first, is spreading across the economy. We now have the highest rate of growth in the Community. Recent CBI surveys have shown optimism growing with each successive month. Last year was a record for consumer demand, 1983 the best ever for new car sales.

These successes are a victory for honest money. For years UK governments tried to beg and borrow their way to economic success. Instead, they fathered a massive inflation and destroyed both jobs and growth. We fell a long way behind our competitors.

Our present recovery is not based on a high and unsustainable government deficit. It is not a short-lived boom on the back of inflation. At last we are beginning to perform more like our better overseas competitors.

Productivity is growing rapidly. Our goods are becoming more competitive. We have a healthy balance of payments surplus. We have paid off many of our overseas debts. Capital investment is thriving, with companies transforming their operations by buying new machinery.

It's all very different from the inflationary boom which petered out in the winter of discontent. This time there are no prices or incomes controls waiting to release their coiled spring and knock recovery on the head. There is now a government dedicated to making markets work again: a Government with many years ahead, if I have my way.

But why as our economy recovers does unemployment stay obstinately high? Why are new jobs coming in profusion in the US[fo 8] whilst in Europe and the UK unemployment is still rising?

In the last twenty years jobs in the US increased from 71 million to 103 million, a faster growth even than the population. In the last ten years in Japan jobs have risen from 51 million to 56 million.

Yet in Western Europe though the workforce has grown, there are three million fewer jobs than in 1974.

Practically all those new jobs in the US came in small and medium sized businesses. They came because the US still has an enterprise culture. Creating wealth is a virtue not a vice. Their markets work more smoothly than ours, pricing people into jobs quickly and allowing them to move around the country more freely.

We must do the same. We have begun the task of changing attitudes and breaking the shackles on the market. We have brought down inflation but we must go further. Our costs are rising only slowly, but in this world doing better than last year is not enough. Our competitors are also getting better year by year. We must not fritter away our opportunity in another expensive round of wage increases, giving more to those in jobs at the expense of those who need jobs. It is no earthly use if wages are so high that you cannot sell the goods. That is the way, not to prosperity, but to penury.

We know increased employment will not be secured by high government spending. We have rediscovered an old truth. It was the 1944 White Paper on Employment Policy which said:

"Without a rising standard of industrial efficiency, we cannot achieve a high level of employment with a rising standard of living."

The pattern of our economy is changing. It is changing with pain. But there is no future in trying to rebuild the industry of a past age. But change frightens many, spawning dangerous fallacies.[fo 9]

Some seem to think that the only real job consists in making something. Build a ship, assemble a car, make furniture and you have a proper job. Earning a dollar abroad from financial services, from making a film, or running an airline, is not a real job. But you know that jobs come from meeting a market need, producing what the customer wants at a price he will pay. Services are every bit as important as making things.

Some foster the fallacy that technology destroys jobs. Of course, the power loom and the spinning jenny put paid to cottage industry; and the railways the canals. No doubt the coming of the motor car put many blacksmiths out of work. But technology creates new jobs as well. There were more jobs in textiles in this country after the discovery of the power loom than before. Who fifty years ago would have predicted all of today's jobs in television or air travel?

Some see new jobs coming only in the hi-tech industries. But, as US experience shows, many jobs have appeared in traditional services such as catering and retailing. Some divide industry into the sunrise and the sunset. But this division ignores the power of technology to revitalise older industries such as textiles. Only by putting the microchip and the computer into textiles or motor assembly do those industries stand a chance of survival.

Finally, let me dispel the fallacy that there is only so much work to be done. Some think that as productivity increases, the work must be parcelled out, through early retirement and work-sharing. In truth, better working practices lead to higher wages, which in turn increase demand.

Why does Japan have such a low rate of unemployment when it has such a high rate of productivity growth? Because they know that embracing change is the key to new jobs; work is not limited for those who compete successfully.

In the past, the forces of technology increased concentration and favoured large enterprise. In the industrial revolution, production was drawn to the sources of power and raw materials.[fo 10] The revolution of the motor car was capital-intensive, requiring large assembly plants and refineries.

Today the telephone and the computer terminal are reversing those trends. In promoting small businesses, the Government is working with the tide of technology. The revolution of information technology can usher in a golden age for smaller firms.

There are already signs that our efforts to promote small business are bearing fruit. Despite the recession, 20,000 more businesses registered for VAT in the three years to 1982 and the number of self-employed, having fallen for many years, rose from 1.9 million in 1979 to 2.3 million in 1983.

Taxation

Running a small business involves great risks. But to run those risks the rewards must be there. That means that taxes must be cut.

We have already reduced the rates of income tax. We have increased personal tax allowances by more than inflation. Had we left untouched Labour's income tax regime you would be paying £1½ billion more in income tax today. We have kept our promise to cut income tax. At the same time we have cut Labour's pernicious tax on jobs—the National Insurance Surcharge—from 3½ to 1 per cent. A reduction worth some £2 billion a year to the private sector.

If we are to reduce taxation, we must hold down public expenditure. Almost every week at Question Time in the House of Commons, I am asked by Opposition MPs both to increase spending and cut taxes. It has never been part of this Government's economic policy to repeal the laws of arithmetic.

The pressures for more public spending are remorseless. But the Government will resist them. Even though we may be opposed by powerful interests our duty is to speak up as well for the taxpayer, the ratepayer, the businessman, the wealth-creator. In a free society, government must leave more in the pockets of the people, to spend as they decide.[fo 11]

We need your support for this. It is not enough to raise your voices in protest at high taxes whilst joining the clamour for more public spending. If you will the end you must also will the means.

The same goes for our rate-capping legislation. Loud are the cries from the local authority unions and the free-spending councils. Rates are the largest single tax that business pays. But the domestic ratepayer pays only two-fifths of all rates. You, the businesses of Britain, pay three-fifths. I look for your vocal support in the fierce debates ahead.

Conclusion

I came to office with one deliberate intent: to change Britain from a dependent to a self-reliant society—from a give-it-to-me, to a do-it-yourself nation.

A get-up-and-go, instead of a sit-back-and-wait-for-it Britain.

This means creating a new culture—an enterprise culture—which accords a new status to the entrepreneur and offers him the rewards to match; which breeds a new generation of men and women who create jobs for others instead of waiting for others to create jobs for them.

That is why this Government has given so much attention to the promotion of the small business.

It is not simply that tall oaks from little acorns grow. Small businesses are the very embodiment of a free society—the mechanism by which the individual can turn his leadership and talents to the benefit of both himself and the nation.

The freer the society, the more small businesses there will be. And the more small businesses there are, the freer and more enterprising that society is bound to be.

So my message to you today is quite simple: we will do our best for you, so that you can do your best for Britain.