Government Support for Business

Wednesday 26th February 2020 Westminster Hall

11:00

[Andrew Griffith (Arundel and South Downs) (Con)]

I beg to move,

That this House has considered Government support for business.

It is a pleasure to hold this debate under your chairmanship, Mr Bone. I declare an interest as a former member of the boards of Sky and Just Eat. I also recently visited the US on an all-party parliamentary group visit in the company of British-based space businesses.

The timing of the debate is auspicious. It falls in the narrow window of time during which we will decide how to make our way in the world, liberated from the chains and anchors of a protectionist trading bloc that has often poorly served the entrepreneurial and fast-growing nature of the businesses with which the United Kingdom is blessed. The good ship GB is tugging at its moorings with upward buoyancy and a new captain, my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy, standing astride its helm. Like my hon. Friend the Minister for Business and Industry, who is in his place, the Secretary of State has personal roots that stretch beyond these shores into the overseas markets that represent an outsized opportunity to create growth and employment for generations to come.

To a degree, we have the wind at our backs. Our exports are growing. We are the world’s 10th largest exporter, despite not ranking in the top 20 most populous countries. Our economy has grown for nine straight years. We are Europe’s leading destination for foreign direct investment, attracting more capital than France and Germany put together. But we must not be blind to the challenges. We are approaching the end of a decade-long recovery cycle. Globally, protectionist forces are in the ascendancy. We must not repeat the mistakes of growth built on the shaky foundations of too much debt or imported cheap labour.

Our natural advantages as a location to start, grow and run a business are immense: we have a world-class legal system with a strong respect for the rule of law; we sit between the Asian and American time zones; we have a flexible and educated workforce; and, of course, English is our own, but increasingly the world’s, language. In fact, 20% of the world’s population of 1.2 billion people now speak English. There are more English speakers in China than people in England. English is the official language of the European Union, the United Nations, the African Union and the Association of Southeast Asian Nations. The world is pregnant with opportunity, so what support does business need from the Government?

In my experience, business needs the Government to do three things: to facilitate access to markets for our products and services; to remove points of friction and barriers to doing business; and to provide the right fiscal framework. I spoke recently in the global Britain debate—as did you, Mr Bone—on facilitating access to markets. I talked about the opportunity to help the 90% of British firms that do not export to do so through better market access, more boots on the ground and having more of Her Majesty’s trade commissioners, and by expanding the export credit guarantee scheme and getting the Foreign and Commonwealth Office and our aid policy to support British businesses.

Rather than revisit that point, I will turn to my second point about the important role that the Government can play in removing points of friction and knocking down barriers to doing business. The only way to truly level up the whole of the United Kingdom is with an enterprise-led renaissance. It is only business that will create the real jobs, opportunities and wealth that will make our future school and university leavers look askance at the idea of ever leaving our great northern cities to move south. Investment in infrastructure can provide the connective tissue, but it is business that fires the neurons between the nodes and provides a two-way flow of activity, motion, growth and employment.

There is no more productive and supportive infrastructure for small businesses than making gigabit broadband a reality by 2025, so I welcome the former Chancellor’s commitment of £5 billion for that purpose. We must rapidly turn plans into action and promises into reality. There is no time to waste, with just under 50 months to go and a huge amount of planning, procurement, construction and connection to be done. I strongly welcome the decision by West Sussex County Council last week to commit funding to projects under its full fibre programme and to shift that to the next phase of delivery for businesses across West Sussex.

My hon. Friend the Minister shares my enthusiasm for reducing the burden of regulation on small business. I do not know how familiar he is with the Better Regulation Executive within his Department, but this is the perfect time to give that initiative a much-needed boost. In a measure that is bound to prove popular with its members, he should send it on a round-the-world fact-finding trip to see the excellent work that is being done in New Zealand, Australia, the US, Singapore and, although it pains me to say it, France.

I congratulate the Minister on his new business support campaign to bring all the support together in one place at businesssupport.gov.uk, which is just the sort of practical measure that business needs. I encourage the Government to go further and to look again at a merger between Her Majesty’s Revenue and Customs and Companies House to give business a single online identity and a true one-stop shop.

There is also room for a modern industrial policy that is as much about knocking down barriers to scaling fast as it is about picking winners. It should focus on a small set of opportunities, each capable of spawning multibillion-pound industries, and making sure that when we get behind something, we align everyone behind it, from No. 10 down.

I commend the support that the Minister’s Department is already giving to genomics, artificial intelligence, space, fusion, zero-emission mobility and quantum computing. With the National Physical Laboratory, the Stevenage Bioscience Catalyst, the Faraday Institution and the Culham Centre for Fusion Energy, it is no exaggeration to say that the UK is genuinely world-leading in each of those areas. UK-based companies are at the heart of the technology that the Solar Orbiter satellite probe, which blasted off into space last month, will carry all the way to the sun. When quantum physicists the world over want lasers with the purest light, they come here.

But others are catching up fast. It is equally true to say that the next 24 months are critical and will determine whether we succeed or the opportunity is lost to us forever. As the UK is such an attractive place to do business, we should be competitive, but have the self-confidence not to compete on always having the lowest rate of tax. As those of us who have lived the reality of business know, the burden of tax is about much more than the rate; it is about complexity, certainty and the approach to compliance.

There is an opportunity to unleash further potential from Britain’s businesses. The World Bank ranks us eighth in the world for ease of doing business, but only 27th for ease of paying taxes. How have we managed to create, but not to have solved, such complexity? To simplify it, we should tax an enterprise’s profits, not its inputs. To use a baking metaphor, we should tax the cake, not the raisins, flour and eggs.

There is an increasing recognition across the House that the current structure of business rates is a burden, particularly for small enterprises. It taxes businesses before they have had a chance to make their first pound of turnover, and penalises those that remain anchored in their local communities, such as on high streets in the small market towns of Arundel, Hurstpierpoint, Storrington and Petworth in my constituency. That has rightly been recognised by a series of reliefs for the smallest and other particular types of business, but I welcome the commitment to a fundamental review. I encourage the Minister to be a radical and uninhibited voice for business in that review, as I shall be. It is my belief that in the 21st century huge benefits would flow from unifying the income tax and national insurance regimes and from clarifying once and for all the ambiguities that lie around employment status. Perhaps the Minister will raise that with the Chancellor as well.

This is a critical subject at a critical time. We may never have such a window of opportunity again. The business leaders and entrepreneurs to whom I speak every day have placed their trust in us. We could be at the start of a new renaissance of British businesses seizing and leading in all the sectors that will define the economy in the 21st century; of knocking down barriers to enterprise and inspiring a new generation of entrepreneurs in every corner of the country and from every country of the globe to base themselves here; of rekindling the swashbuckling spirit and appetite for risk that saw our ancestors sail over the edge of the oceans in pursuit of profits from new markets. Or we could fail. We could be too timid in our ambition, too encumbered in our thinking and too slow to seize the opportunity. We must be the change we wish to see. Now is the time. The opportunities are tantalising and tangible, and they could be ours for the taking.

11:10

[Duncan Baker (North Norfolk) (Con)]

The high street is a passion of mine, given that I worked in retail in my home of North Norfolk before becoming an MP, and the high street is dying at an alarming rate. That is not new, but the decline is continuing year after year, and I see little in the way of a long-term strategy to deal with it. Although I welcome the changes to business rates and the Government’s £3.6 billion towns fund, I do not feel, sadly, that that is the finished answer. It is a temporary sticking plaster, when major structural change and reform is urgently required.

What we are seeing is a fundamental technological shift that has enabled shopping habits to alter through technology. I am not one to stand in the way, but I feel that the Government need to intervene to level up what has now become a completely unfair playing field. Bricks-and-mortar stores are seeing costs rising at an exponentially high rate, through wages, rent, pensions and energy, while their frontline sales growth continues to contract. By contrast, the internet giants buy in enormous bulk, lowering costs, and they do not have the same cost base as companies in what we term A1 retail space.

The high street not only employs millions of people; it also contributes major social and economic value to the country. Boarded up, vacant towns will have a major impact on our health and wellbeing. We should think of the isolation and loneliness that people suffer if they cannot go out to the shops and add that social value to their lives.

Internet sales over the years have rocketed, from around 5% when the data was first collected to around 20% of all retail sales now. That is an alarming rate of growth. Last July the proportion of all shops on the high street that were empty reached 10.3%, the highest level since January 2015, also relatively recent.

Every year we see major chains being lost. House of Fraser, for instance, was narrowly saved. Many go bust, and if they do not, the restructuring deals mean that hundreds of shops are closed instead. We witness thousands of job losses each year, particularly after Christmas, which is a crucial period for many retailers, which either sink or swim after that.

When an industry leader such as John Lewis, which is seen as the bellwether for the high street, is struggling and announcing further potential job losses, we have to recognise that structural change is required. John Lewis has the luxury of Waitrose, and cash from the supermarket division enables it to reinvest in the department stores. Most businesses on the high street do not have that. When John Lewis is struggling, we have to recognise how hard it must be.

All the indications are that footfall is continuing to decline on the high street, potentially at around 2% every single year. That is pretty depressing news. There is a declining customer base and shifting consumer habits; we have all witnessed that managed decline in our lifetimes. We must act now with some kind of intervention to change the playing field before we see communities and high streets really lost, and enormous unemployment off the back of that loss.

What are the suggestions for change? For starters, we need to consider some kind of internet sales tax, specifically on online shopping. Great Britain is renowned for its backbone of small shopkeepers. Some kind of online tax would give high street retailers, whose overheads are high and who employ local people, a better chance of being able to survive. Similarly, some kind of higher rate VAT-style tax should be considered. If we do nothing, the trends that are already happening in front of our eyes will continue. In a time when the Treasury is looking for ways to generate income, why not consider such changes? They are staring us in the face.

We absolutely must tax the internet giants that are contributing to the demise of our towns and cities by not paying their fair share of tax. Only when we do that, as my hon. Friend the Member for Arundel and South Downs (Andrew Griffith) has said, can we start to support the business rates reductions that we hugely welcome.

People say to me, “Why should the Government intervene? It is not their job to interfere in industry change; it is an evolution that we are seeing led by technology.” There is a reasonably simple answer to that: we have done it before. For instance, we have subsidised agriculture for many years, even though the payments system is now being altered. We now have a chance to put some kind of support mechanism in place while retail adjusts.

We are partly to blame for the situation, because we have not sorted out some of the hopelessly lax planning decisions and policies that we have had over the years. Unfair competition from out-of-town stores has created a further threat to our beleaguered traditional town centres. Had previous Governments applied a policy for every supermarket to be restricted to the sale of food items, our high streets would have had a remaining viable use. Furthermore, the modern practice of supermarkets developing instore bakeries, fish counters, butchery departments and so on has led, through that competition, to many smaller businesses on the high street disappearing, almost on a weekly basis—particularly greengrocers. Stringent planning policies must be put in place to curtail some of the supermarket growth that has led to the demise.

The decline of our high streets is a complex problem with a vast array of contributory factors, but the rise of the internet is at the very crux of it. We have to start tackling the problem now. To use our favourite term of the moment, we need to do some levelling-up of our beleaguered high streets.

11:18

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Nadhim Zahawi)]

It is an absolute pleasure to serve under your chairmanship, Mr Bone. I thank my hon. Friends the Members for Arundel and South Downs (Andrew Griffith) and for North Norfolk (Duncan Baker). The quality of Conservative Back-Bench Members is clearly incredibly high. If the subs bench is of this quality, it keeps Ministers on their toes to keep performing. That is one great outcome of the general election where the Prime Minister Boris Johnson led us to that wonderful victory.

I congratulate my hon. Friend the Member for Arundel and South Downs on securing this debate. I assure the House that the Government are committed to supporting business. Of course, seizing opportunities now that we have left the EU is absolutely crucial to that. As my hon. Friend rightly pointed out, we will soon have a new relationship with our European friends, inspired by our shared history and values. We will have recovered our economic and political independence, which will enable us to control our own laws and of course our own trade—that is clearly what he is so passionate about. We will be able to strike new trade deals with partners around the world, helping our small and large businesses to export and grow on the global stage.

Hon. Members do not need to take my word for it, or that of my hon. Friend. The Global Entrepreneurship and Development Institute ranks the UK as the second most entrepreneurial economy in Europe and the fourth most entrepreneurial in the world. We rank higher than all other G7 countries except Canada on the World Bank’s “starting a business” list, although I take on board my hon. Friend’s comments about the ease of taxation, where we do less well. As someone who has started and run my own business, I can say that the UK is a great place to do so.

As my hon. Friend points out, we should remove friction and barriers to doing business and support our companies and entrepreneurs to succeed. That is why no permission is required to establish a business in the United Kingdom, there are no minimum capital requirements, and new companies can be registered online within just 24 hours for as little as £12. That is why, as my hon. Friend mentioned, only last week we launched a new website, businesssupport.gov.uk, which brings together information, support and advice for small businesses. It is why programmes operated by the Government-owned British Business Bank are supporting firms with finance. As of December 2019, more than £7 billion has been delivered to support over 91,000 small businesses in the UK, including £730,000 to 76 entrepreneurs in my hon. Friend’s constituency. Given his energy and how assiduous he is, I am sure he will endeavour to meet each and every one of the 76 beneficiaries of that support.

We are working together across Government to create smoother processes and the best environments for business, and I am pleased to say that we have already gone a long way towards integrating the customer interface with Companies House and HMRC. The streamlined company registration service was launched in 2018; it allows new companies to incorporate and to register for PAYE and corporation tax through a single portal. As my hon. Friend rightly reminded us, there is undoubtedly more work to be done to reduce the burden of tax, but HMRC is making progress, including through establishing a new VAT registration service.

We have also committed to a fundamental review of the business rates system. My hon. Friend the Member for North Norfolk quite rightly highlighted this issue, and challenge is important in this area. He is right to say that we need a holistic approach. The Treasury will provide more details about the business rates review in due course, but we have already provided reforms and reliefs to business rates worth £13 billion over the next five years. The Prime Minister has announced a towns fund of over £3.5 billion, including an accelerated £1 billion to support local areas in England to renew and reshape town centres and high streets. Through the taskforce giving expert advice on how to adapt and thrive, we are supporting local leaders and encouraging them to think differently about their high streets and to discover their unique selling points.

[Andrew Griffith]

May I contrast the Minister’s comprehensive programme of activity that is designed to improve the lot of small businesses in this country with the paucity of attendance on the Opposition Benches? Not a single member of any of the Opposition parties has deigned to grace us with their presence this morning.

[Nadhim Zahawi]

It is a shame and disappointing not to see any representation.

As part of my personal mission to improve the business environment, I am working across Government, including with the Department of Health and Social Care, on life sciences, which my hon. Friend described as one of the real future growth areas for jobs in our country, supporting collaboration across industry, Government and the NHS. With the Ministry of Housing, Communities and Local Government, we are developing plans to level up the regions across our great nation, with business and the economy at the heart of our plans.

My hon. Friend made an astute point about the importance of regulation and broadband access to business. Our pioneering regulatory regime has made the UK the go-to location for science, research and innovation for decades, and we are absolutely committed to learning from international best practice. The Better Regulation Executive has recently invited the OECD to undertake a review of our international regulatory co-operation, which will be published soon, but my hon. Friend makes a good point about getting them on an aeroplane to visit places such as Singapore or, dare I say, just across the channel in France. We are also committed to delivering nationwide coverage of gigabit-capable networks as soon as possible. The Prime Minister made that promise during the election and it was delivered as soon as he was returned to office, with £5 billion of public funding to close the digital divide and ensure that rural areas such as my constituency of Stratford-on-Avon and that of my hon. Friend the Member for Arundel and South Downs are not left behind.

As well as ensuring businesses across the country have the conditions they need to thrive, we are supporting sectors to ensure UK leadership in the industries of the future—as my hon. Friend points out, they are critical. Our study into tech competitiveness is due to report to Ministers this spring. We are supporting quantum with initiatives such as the quantum technologies challenge, providing up to £153 million of innovation funding for industry-led activities. The UK National Quantum Technologies Programme is set to invest over £1 billion of public and private investment over its lifetime.

We are also supporting life sciences, making a huge difference to people’s lives and to the NHS and how it delivers for people. Life sciences is an area of UK excellence and personal passion for me, with almost 6,000 businesses, 250,000 people employed and annual turnover of £74 billion. The Government have invested around £1 billion in a host of ambitious life sciences initiatives, with around a further £3 billion pledged by industry, including through our life sciences sector deal, which is part of the industrial strategy. That is one of 11 deals to drive productivity, innovation and growth across 10 sectors in the UK, from artificial intelligence to offshore wind, including a combined investment of £3 billion. Today we account for 36% of all offshore wind production on this planet, and we plan to go even further. That is this Government’s ambition, and that is what we will do.

My hon. Friend the Member for North Norfolk spoke about the high street. We are committed to conducting the review that I talked about earlier, but the reforms have already delivered the £13 billion that I mentioned. Although I will not deny that there are still challenges ahead for the high street and for small businesses, there are also fantastic opportunities. We talked about the towns fund, but local leaders need to be innovative. I see that in some local authorities that are returning people to live on our high streets. For far too long, retailers took on leases on our high street but left the upper parts vacant. We need to do much more to encourage people to live and work on our high streets in order to revive them; if people are living there, they will shop there and do many other things. I see it in my high street in Stratford-on-Avon, where we are beginning to think innovatively about how we deliver that—for example, with Shakespeare’s school, the King Edward VI School, where the great bard studied and learnt his craft. We have been looking at how we bring international students into some of the vacant properties to study over longer periods in the summer. Again, that would help the high street to deliver.

I thank my hon. Friend the Member for Arundel and South Downs for securing the debate, and I wish we had a lot longer to debate this issue. We need to ensure that—across our country, whether it is the Scottish Government or our Labour Opposition—we take business seriously. Ultimately, it is the lifeblood of the British economy.

Question put and agreed to.

11:29

Sitting suspended.