Prime Minister’s Questions:

Conservative MP Sam Gyimah spoke up for small businesses during Prime Minister’s Questions, yesterday.

The Government’s proposals for automatic enrolment in pension schemes will mean that, from 2012, all companies will be required to automatically enrol staff earning over £7,475 into anoccupational retirement fund, or into NEST (National Employment Savings Trust) if there is no workplace scheme.

The Federation of Small Businesses suggested that complying with the measures would create “administrative headache and extortionate costs” for small companies as they struggle to survive the cuts; forcing them to hire expensive consultants to help set up the schemes.

The Government suggested it would cost just £116 in year one for companies with between two and four employees to comply with auto-enrollment. There would then be an ongoing charge of £45 a year.

The MP for East Surrey, who gained the seat in the 2010 general election, pointed to likely effects that implementing the scheme will have on small businesses.  He said: “I welcome the Government's desire to encourage a savings culture.

However, for many small businesses, every new piece of legislation, no matter how small, has a significant impact on the bottom line. Will the Prime Minister introduce a scheme that allows us to road-test all new legislation and its impact on small businesses?”

David Cameron replied that his government was looking at ways to try to help small businesses to introduce the reforms without making them too onerous. 

He said: “The making automatic enrolment work review concluded that small businesses did need to be included in the reforms if we are to bring about the improvement in savings for retirement necessary to tackle the consequences of an ageing population and widespread under-saving for retirement. These reforms will give 1.2 million people who work for small businesses the opportunity to save for their retirement.”

The Prime Minister concluded: “My hon. Friend makes an extremely good point, and this policy will be road-tested on the bigger companies that must introduce it first. However, we must accept that there is a problem with only 10% of very small businesses having pension provision, so 1.2 million people will have the chance to save.

"We will look very carefully at the reforms, and they will not be introduced for small businesses until at least 2014.  We also have the one-in, one-out rule under which every new regulation must mean that another regulation is scrapped.”

By Davina Kirwan