Lord Roberts of Conwy
To ask Her Majesty’s Government what is their strategy for promoting economic growth.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, today the Government have outlined their plan to support a private sector recovery and create the right environment for enterprise and sustainable growth. It will restore the UK’s international competitiveness through lower and simpler business taxation, and through cutting red tape. Fundamental to this strategy is tackling the budget deficit and providing the stable macroeconomic environment needed to underpin private sector investment and growth.
Lord Roberts of Conwy
I am grateful to my noble friend for that reply, supported as it is by the eximious Statement by the Chancellor of the Exchequer earlier today. Does my noble friend agree that, as we cut the record deficit left to us by a prodigal Government, one of the first essentials is to restore the confidence of the private sector to encourage businesses to invest, create jobs and bring about the prosperity that the country really needs?
Lord Sassoon
My Lords, I completely agree with my noble friend Lord Roberts of Conwy. Business confidence will now be underpinned by a credible deficit reduction plan, which will see the current structural deficit in balance by 2014-15. The public expenditure on infrastructure, which this country needs to underpin growth, is being protected and not further cut. Corporation tax will fall from 28 to 24 per cent over four years; entrepreneurs’ lifetime capital gains tax relief is being increased from £2 million to £5 million; the national insurance contribution threshold will increase by £21 per week above indexation; the enterprise finance guarantee is being expanded by £200 million to ensure that credit flows to business; and a new regional growth fund will be established. It is estimated that these and other policies will increase business investment by an additional £13 billion up to 2016.
Lord Hunt of Kings Heath
My Lords, as a result of the Budget, how many jobs will be lost and what will the reduction in growth in the economy be?
Lord Sassoon
My Lords, the independent figures that have been published alongside the Budget by the Office for Budget Responsibility today show that employment will grow in every year of the forecast period from 28.8 million in 2010-11 up to 30.1 million in 2015-16. Growth will also grow from 1.2 per cent in 2011 to 2.3, 2.8 and 2.9 per cent and then, still above trend, to 2.7 per cent in 2015-16.
Lord Broers
My Lords, does the Minister not agree that, if we are to have industrial growth, it is essential that the Government strongly support research budgets in engineering and science? Does he also agree that the recent delay in the funding decisions on some of our largest and most powerful science projects is highly disruptive to those projects? I declare my interest as chairman of the Diamond Light Source, which is Britain’s largest science project and strongly supports industry.
Lord Sassoon
My Lords, today my right honourable friend the Chancellor of the Exchequer announced that the spending review will be presented on20 October. As we go through the spending review, it is clearly important that the long-term prosperity and growth of this country are underpinned by appropriate decisions. We have announced today, as I said, that infrastructure will not be cut further. I take the point, put by the noble Lord, Lord Broers, that science spending is also very important to underpinning the long-term growth of the UK.
Lord Newby
My Lords, the Chancellor of the Exchequer said today that he was establishing a large regional growth fund to provide finance for regional capital projects. Can the Minister give some indication of what is meant by “large”? Can he also say whether there will be some private sector involvement in deciding priorities under the fund, a principle that underpins the RDAs, and that such decisions will not be put purely in the hands of unelected regional bureaucrats?
Lord Sassoon
My Lords, I thank my noble friend for drawing attention to the regional growth package in today’s Budget announcement. It is intended that the regional growth fund will pump prime investments into projects with significant growth potential. There will be a consultation later in the summer about how we plan for sub-national growth, which will include local economic partnerships. A White Paper will follow.
Baroness Farrington of Ribbleton
My Lords, will the Minister please tell the House how many jobs in the public sector, particularly in local government, the Government anticipate will be lost as a result of the cuts in public expenditure? How many jobs in the private sector will be lost because those private sector companies offer services to local authorities and to the public sector?
Lord Sassoon
My Lords, I have given the total employment numbers, which will rise in every year of the forecast period. The issue of jobs in the public sector, and indeed in the private sector, has to be put in the context of the enormous deficit-reduction programme that we have. For example, by the end of this period, on the new projections resulting from my right honourable friend’s Budget today, there will be an annual saving of £4 billion in interest payments alone by the end of the period, so you can see how that will translate into increased jobs in the public and private sectors.
Lord Bilimoria
My Lords, I am sure that the Minister would agree, as many do, that cuts are essential. Are the Government worried that increasing tax rises could hamper growth and lead to a double-dip recession? Do they genuinely believe that they are doing enough to generate the growth, particularly among SMEs, that is desperately required?
Lord Sassoon
My Lords, I thank the noble Lord, Lord Bilimoria, for reinforcing again the importance of growth. I stress that the overall Budget package includes a substantial number of measures that are intended to encourage growth by taking nearly a million people out of tax at the bottom end of the income scale and therefore encouraging them into jobs; by substantial reversals of the previous Government’s package on national insurance contributions; by having a regional element to the holiday on national insurance for young businesses; by ensuring that the capital gains tax provisions are sensitive to the needs of entrepreneurship; and, fundamentally, by reducing the corporation tax burden on companies through our reform of corporation tax, which will enable us to have the most competitive corporation tax regimes in the developed economies.