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The Exchequer Secretary to the Treasury (Robert Jenrick)
I thank my hon. Friend the Member for Stirling (Stephen Kerr) for raising this important issue and for exhorting the United Kingdom Treasury to look to all parts of our Union. If my history of the Treasury serves me correctly, I think the last Treasurer of Scotland was in 1708; he was sent to the Tower and then to the House of Lords, as happened in those days. But since then, the Treasury has firmly been an institution of the whole of the United Kingdom and long may it continue to be.
My hon. Friend made some very important points this afternoon, encouraging us above all to look to the long term and to ensure that both Government and the private sector are constantly trying to ensure the free flow of long-term capital, which will grow the economy and drive the country forward.
Since we came to power in 2010, we have made it easier for people in this country to found a business and grow it, scaling up British businesses so that the UK is one of the best places in the world to be an entrepreneur. A new business is created in this country every 75 seconds and there are now 1.2 million more businesses in the UK than in 2010, creating jobs and prosperity.
However, we are not complacent. We understand the need to increase access to long-term capital, to address the structural challenges facing the British economy, including our productivity gap, and to make the UK more globally competitive. So I thank my hon. Friend for his comments today, particularly his thoughts on a national investment bank, to which I will return shortly.
It is important to remember that in the UK we already have a strong equity finance market. It is one of the engines of the economy, and a national and indeed international asset for the UK. We continue to be the top destination for venture capital investment in Europe, attracting around a third of total European VC investment in 2018.
There was the patient capital review of 2017, which my hon. Friend referenced and which we commissioned and reported back on in 2017, and the Budget in 2017. We updated it again in the most recent Budget with a one-year-on update. They provided the response that he has referred to, with the panel and the experts at the Treasury who we commissioned to investigate this issue. That review concluded that there is more for the UK to do to close the funding gap and help our most innovative firms to reach their true potential.
At the Budget in 2017, my right hon. Friend the Chancellor unveiled a plan to unlock over £20 billion of additional finance for those innovative firms over the next 10 years. Since then, we have launched British Patient Capital, the vehicle that my hon. Friend the Member for Stirling referred to, and seeded it with £2.5 billion of public money. We have expanded the investment limits for venture capital trusts and for the Enterprise Investment Scheme, doubling the amount of money that the UK’s most innovative businesses can raise. And we have announced the creation of a knowledge-intensive EIS fund structure, to help stimulate further investment in research and development-intensive firms, and to concentrate our incentives on those firms that we think will be of the greatest benefit to the British economy.
We have worked with representatives across the industry to unlock pensions investment in patient capital, through our pensions investment taskforce. With total assets under management in the UK expected to exceed £1 trillion by 2025, we know that defined contribution, DC, pension schemes are set to be one of our most important institutional investors, which is why, in this year’s Budget, the Chancellor announced a pensions investment package to enable DC pension providers to invest in long-term innovative UK companies, as part, of course, of a balanced portfolio. We do not believe that it is the Government’s role to instruct independent pension trustees on how to invest on behalf of the pension holder, but we do believe that encouraging them and breaking down barriers will ensure a greater flow of capital for venture capital and for long-term and somewhat higher-risk investments that will drive the economy forward.
We have done a number of things to take forward that agenda. First, we announced that the Financial Conduct Authority would carry out a consultation on small tweaks to its permitted links rules, which was published in December 2018. We also announced that the Department for Work and Pensions would consult this year on making the pension charge cap flexible enough to accommodate the performance fees that are often associated with patient capital investment. Finally, we announced that some of the largest DC pension providers in the UK would now work with the British Business Bank to develop a blueprint for pooled investment in patient capital. That will enable those who are perhaps too small, or do not yet have the appetite required, to take part in this important form of illiquid investment. We believe that those measures will have a great impact in the years ahead.
We are not limiting our efforts to equity funding, however. We are also committed to ensuring that businesses can seek the right finance for their growth needs, which is exactly why the British Business Bank, which we have heard about today, was launched some time ago. The bank is rolling out a UK network, including in Scotland, to resolve regional issues and increase its cut-through with businesspeople and entrepreneurs throughout the Union. It operates through partners, such as high street banks, business angels and venture capital, and it will be doing that, as it should, in all parts of the UK. To give hon. Members some of the most recent statistics, as of November 2018, in Scotland the bank had provided almost £900 million of finance to more than 9,000 small and medium-sized enterprises, in Northern Ireland the figure was £114 million to more than 2,200 SMEs, and in Wales almost £500 million was provided to more than 6,000 such businesses. We hope that that will continue and that the bank will take its responsibility to operate in all parts of the UK seriously. I encourage hon. Members to engage with the British Business Bank, if they have not done so already.
On infrastructure, which we have heard about today, as a Government we have made an important decision—one of the Chancellor’s first decisions on taking up his position two and a half years ago—to significantly increase public investment in our economic infrastructure. Over this Parliament, such investment, including in digital and transport, will reach levels not seen in this country since the early 1970s. We want to ensure that that feeds through into the private sector, and if we want to deliver on those plans—we now have a £600 billion pipeline of infrastructure investment—there will need to be a partnership with the private sector, financed and delivered privately. So a thriving private sector is extremely important, and we need to consider that when taking into account some of the comments we heard earlier about political risk in this country, due to both a break-up of the Union and also the Opposition’s policies of nationalising utilities.
The Government support investment using a range of tools, including stable, independent regulation, of which we have some of the best and most admired in the world—there are, of course, ways in which we can improve it. In the Budget, we commissioned the National Infrastructure Commission to consider how we can make our independent regulators more innovative, and improve the regulatory model without throwing it aside. We use contracts for difference in renewable energy, and the £40 billion Treasury UK guarantee scheme plays an important role. As we announced in the Budget, we are now reviewing our existing support for infrastructure finance, to ensure that as we leave the European Union we continue to guarantee that good projects in the UK receive the finance they deserve. We are also making a number of interventions to support new technologies, in which we believe the public and private sectors can work together, with the public investing to crowd in private sector investments. Two notable examples are a recent intervention on digital infrastructure, and also one on electric car charge points, in which the Government have invested £200 million. We believe that there is more scope for that in the future.
On the European Investment Bank, the EIB, it is important to remember that a significant funding gap has not emerged since the referendum. We have very mature markets in the UK for infrastructure investment, for privatised utilities for example, but the Chancellor has made it clear, and we noted this again in the political declaration, that we are actively exploring options for a future relationship with the EIB, just as the bank does with other third countries. One cannot be a member of the bank if one is not a member state. We are interested in the proposal to create a UK infrastructure investment bank, for which my hon. Friend the Member for Stirling laid out some of the arguments. We think that there are important arguments there, and we will consider the proposal as part of the review of infrastructure finance announced in the Budget, about which we will give more details shortly. We think that that can play an important role and, although I would not overstate the EIB’s impact on the British economy or our infrastructure finance, there are reasons to believe that it played an important role. We believe that we can find our own way forward as we leave the European Union.
On smaller businesses, helping them to scale up is extremely important, as we have heard. The UK has a good record of creating start-up businesses, but not as good a record as we would like of ensuring that they scale up and create jobs and prosperity for all parts of the UK. That is a challenge that we have set the British Business Bank, of working to support investment such as creating regional pools of capital, which we have done with the midlands engine and the northern powerhouse, and there may be further scope for doing that in the future. We are very engaged with such questions. We are engaged also with the question of the geographical spread of venture capital and business angels, as was mentioned by my hon. Friend the Member for Ochil and South Perthshire (Luke Graham), to ensure that individuals and entrepreneurs have access to capital wherever they choose to set up their business and do not feel the need to come to London or the south-east.
Finally, through the tax system, we continue to make the UK the most competitive environment we can for entrepreneurs and investors. We are doing that through entrepreneurs’ relief, the seed enterprise investment scheme, the enterprise investment scheme and venture capital trusts, which we are continually trying to improve, to ensure that in the UK we have the most competitive market we can, directly comparing ourselves, and renewing those comparisons, with the US, France and Germany.
I am grateful to my hon. Friend the Member for Stirling and to other Members who participated in the debate. I hope that they can recognise the Government’s commitment to the agenda, and the intense work we have done over the past two years, and will continue to do in the months and years ahead. We will continue to welcome thoughts and contributions to inform those future decisions.