LEADING ARTICLE: Thorny bouquet for small business

The Prime Minister is worried about small businesses, as well he might, given the political mess his ministers have made of the issue in recent weeks. His initiatives yesterday were a welcome sign of interest in an vital part of the economy. But it did not get near offering a serious new approach to fostering small businesses amid the uncertainty of the Nineties and so it will not shore up the Tory party's battered relationship with the swelling entrepreneurial classes.

Recent ministerial pronouncements on small businesses have been clumsy. First the Deputy Prime Minister, Michael Heseltine, appeared to endorse late payment of bills. Then persistent questioning from Labour's Barbara Roche revealed that government departments were delaying payments to contractors. Finally last week we discovered that members of the Cabinet were squabbling over Michael Heseltine's desire to remove employment rights from anyone working for small businesses.

Given this backdrop, the Prime Minister's soothing words of affection for small businesses were politically timely. His strongest new recommendation - to shame businesses out of late payment - is a sensible measure. If companies are forced to publish their payment record alongside their accounts, some may be embarrassed into settling up on time. The Government should consider going further. Giving firms a statutory right to claim interest on late payments, or making it easier to pursue their debtors through the courts might prove more effective.

Beyond this however, there was little in Mr Major's speech to resolve the contradictions in the Government's treatment of small businesses. The Prime Minister restated his determination to "bin rules" which burden businesses. Yet at the same time some policy changes in the last few months will do exactly the opposite. The Asylum Bill, for example, will force all employers to investigate the immigration status of their workers.

Moreover deregulation is not always good for business. Mr Major was right to resist Mr Heseltine's proposal on employment rights: allowing small firms to indulge in discrimination is not the way to promote competition. Government has a positive role to play too. Small businesses have genuine and distinctive needs. Their relatively small turnover and insigificant market power makes them more vulnerable to the changing behaviour of the economy, larger firms and the government. They need distinctive measures of support. Small businesses have serious trouble finding the skilled staff they need - and they rely far more than larger companies on government training and education policies to help them solve the problem.

Finding a coherent and effective approach to the problems of small businesses is important to the Government's political position. Small business owners have long been a traditional bedrock of support for the Conservative Party. But the composition of the self-employed is changing. In the past, owners of small businesses were predominantly the sons of other small business owners. Changes in the labour market, including higher unemployment, downsizing and sub-contracting, mean that the self-employed today are a more diverse and less predictable group of people. Warm words about traditional Tory values, and the importance of the market are no longer sufficient to capture small business votes. Mr Major will need something more substantial to win them over.