The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
As someone who was in business myself, starting and scaling up businesses for 30 years prior to entering Parliament, it is a privilege to open this debate on behalf of the Government.
For any ambitious entrepreneur, “growth” is the most exciting word in the lexicon. The Chancellor’s autumn statement contains 110 separate measures to help businesses achieve exactly that. It will help to close the UK’s productivity gap by boosting investment by £20 billion a year in a decade. That is why I am wholly unsurprised by the positive response it has received from some of our most prominent business organisations.
The Federation of Small Businesses described the autumn statement as “game-changing”, adding:
“The Chancellor and his Treasury team deserve credit for driving pro-small business change and…acting to help build future prosperity.”
UK Finance said the autumn statement
“demonstrates a continued commitment to growth”.
And the manufacturing trade body Make UK said:
“This was a bold statement by the Chancellor who has”—
delivered—
“a transformational strategy designed to turbo charge investment.”
As the Chancellor rightly said, this is indeed an autumn statement for growth, but it is also clearly an autumn statement for business. I am very proud that my Department has been at the heart of developing these measures, which will have such a profoundly positive impact on this country. Our autumn statement will enable businesses to confidently invest in their futures. It will cut their costs through lower taxes and strip away burdensome red tape. Any of these measures in isolation would be a reason to be cheerful, but taken together, and alongside measures from the spring, they are expected to permanently increase the size of our economy, raise investment, reduce inflation, increase GDP and get more people into work.
On this side of the House, we know that the best way to grow the UK’s finances is not to embrace big government and high spending, but to boost businesses and boost competition—this is the so-called “supply side” of the economy. We will provide our innovators and risk takers with the right infrastructure, regulations and support, so that they can lead this country to greater prosperity.
As the Chancellor said yesterday, every big business was once a small business. For me, those words could not ring more true. This House will know about my passion for promoting the entrepreneurs, start-ups and independent shop owners that are the life and soul of our communities and economies alike. These businesses need investment so that they can flourish. They need freedom from overly burdensome taxes and regulations so that they can grow.
Paula Barker (Liverpool, Wavertree) (Lab)
I am delighted with the feedback that the Chancellor has received from businesses, but analysis by the Resolution Foundation finds that households will be £1,900 poorer at the end of this Parliament than they were at the start of it. That means people in our communities have less to spend in these businesses. So is it not the case that families are worse off under this Government?
Kevin Hollinrake
There is no doubt that we have had to take some difficult measures because of the hundreds of billions of pounds—about £500 billion—we put into the economy to protect people from the effects of covid and the cost of living. Conservative Members know that money does not grow on trees; that money has to be paid back. We have had to take those difficult decisions but we are improving the lives of the people the hon. Lady mentions—for example, through the national living wage. It has had a record increase this year to a record level of £11.44. That will put about £1,800 annually on the table for some of the people she mentions. That minimum wage is now double what it was in 2010. We are doing many, many things, including raising the personal tax threshold. Along with her colleagues, including the Front Benchers, she has to reflect on what the Labour Front-Bench team are going to do about the tax thresholds—this is the impact she is talking about. Are they going to increase those thresholds? Please say—[Interruption.] It is no good just standing on the sidelines and criticising. You’ve got to say what you’re actually going to do. [Interruption.] The shadow Minister says he is going to do that, which is great. The cost of doing what we are talking about here is £25 billion a year by 2025, so you are going to do that? [Interruption.]
Madam Deputy Speaker (Dame Rosie Winterton)
Order. I am slightly worried that we are getting into a “you”, “you” exchange across the Chamber. As the Members know, they should speak through the Chair and when they say “you”, that means me. I think the Minister is trying to say “the shadow Secretary of State” and so on.
Kevin Hollinrake
I do apologise, Madam Deputy Speaker. Obviously, I am speaking through you—but I apologise. I was getting carried away, because this is such an important point. It is important that if people have different ideas about how we run the economy, they should explain exactly what they are going to do and how they are going to pay for it. The cost of the measures that are being proposed is £25 billion a year, and that comes on top of other spending commitments that the Opposition have made, including £28 billion a year in green investment. Labour Members should be clear about what their plans would be, rather than just objecting.
Lilian Greenwood (Nottingham South) (Lab)
I welcome the Minister’s commitment to being clear—so will he be clear and confirm that over this Parliament living standards are going to fall by 3%? That is the biggest hit to living standards on record. Will he be clear and confirm that that is the case?
Kevin Hollinrake
As I said, there is no doubt that we have been through difficult times, but the hon. Lady should look forward optimistically to the rise in the national living wage and the probability that inflation will be halved again by this time next year, having already been halved. She needs to take a more optimistic view about will happen in the economy next year. I am very optimistic that people will see better times ahead, which is what we all want to see, but the Government are realistic. We have spent £500 billion providing support, saving jobs and businesses, and helping people during covid and the cost of living crisis, but that money has to be paid back. The Opposition need to explain how they are going to do that, if they were ever given charge of the economy.
Small businesses also need protection from late payers, so that they can safeguard their precious time and resources. The measures in the autumn statement seek to achieve all that and more, transforming the fortunes of businesses up and down the country. The statement contains a multitude of measures that will give businesses easier access to investments.
The UK has been something of a start-up miracle—we are second out of the 39 countries in the OECD for start-ups and seventh for scale-ups, which is still a good performance in relative terms but one that we need to improve. Capital holds the key. This Government could not be clearer about that fact and have introduced measures in that regard.
Jim Shannon (Strangford) (DUP)
I thank the Minister for his positive attitude in response to the measures that have been put forward, but I have a request on behalf of my constituents who work in the hospitality sector. Rates and alcohol duties have been frozen for another year, including those on spirits, meaning it will not cost people any more to go out to pubs and other venues in the hospitality sector, but Colin Neill from Hospitality Ulster has expressed concerns about energy prices. Do the Government intend to do anything about them?
Kevin Hollinrake
The hon. Gentleman raises a good point. I chair the Hospitality Sector Council and meet large and small hospitality businesses regularly, so I understand the pressure they are under. The hon. Gentleman has some such businesses in his constituency and I do too, so we know that is a problem. We have put a huge amount into supporting businesses with their energy costs, halving the cost of energy for most businesses. Energy is much more affordable than it was this time last year, which was an incredibly difficult time, but some businesses are locked into expensive energy contracts from the backend of last year, when prices were very high. If the hon. Gentleman has any examples of such businesses, he should bring them to me, as we have commitments from the energy suppliers, so we can challenge them and try to smooth the contracts over a longer period to ease the pain. I am happy to help him with any individual cases in his constituency.
On capital investment, the Prime Minister and the Secretary of State for Business and Trade will host 200 of the world’s leading investors at the Global Investment Summit this weekend and on Monday, which I hope to attend. It will showcase the UK as one of the world’s best places to do business, and drive billions of pounds of new and strategic investment into every corner of the economy.
The autumn statement has a host of innovative measures that will unlock investment and fuel growth. For example, our pension reforms will help unlock an extra £75 billion of financing for high-growth companies, while providing an even better deal for savers. Plans include a new growth fund within the British Business Bank to crowd in pension fund capital to the UK’s most promising businesses.
Another example is our plan for further funding for two British Business Bank programmes, including the long-term investment for technology and science competition. That will make £250 million available to successful bidders to increase investment in key science and technology sectors, with the private sector contributing at least as much again. Not only that—we have made £50 million available to extend the future fund breakthrough scheme, which backs businesses focusing heavily on research and development.
Although the Chancellor did not mention it yesterday, we have also introduced important measures for equity investments, including a 10-year extension to the enterprise investment scheme and the venture capital trust scheme, giving investors and businesses the confidence, certainty and stability to invest, which underpins the system.
Secondly, this autumn statement contains a series of measures that will provide smaller businesses with practical help. As we prepare to mark Small Business Saturday next weekend—I am sure that Members across the House will visit their small businesses on 2 December—it could not be a more timely moment to announce our business rates support package. It will help high streets and protect smaller firms, which are the life blood of our local communities, saving the average independent pub more than £12,000 a year, and the average independent shop over £20,000.
In addition, the autumn statement will include measures to toughen our regulations to tackle late payments. I have seen at first hand how this scourge can crush even the most determined of business owners’ dreams, so it is right that we act.
The Procurement Act 2023 means that the 30-day payment terms, which are already set for public sector contracts, will automatically apply through the subcontract supply chain. From April next year, any company bidding for large Government contracts will have to be able to demonstrate that they pay their own invoices within an average of 55 days and that will reduce progressively to 30 days.
Peter Grant (Glenrothes) (SNP)
I am grateful to the Minister for the steps that he has announced today, but of course the proof of the pudding lies in the enforcement. Sex discrimination at work has been illegal for almost 50 years, but it still happens. The Minister will be aware that, as well as calling for action on late payment generally, I have often raised an issue that we get in the construction and civil engineering sectors, where the main contractor is paid on time but keeps the money for an inordinate length of time. If the main contractor then does a Carillion and goes down, all the money becomes part of its administration and very often the subcontractors get nothing. Can we have legislation, a code of practice or something to protect small business subcontractors from being dragged down when the main contractor goes under?
Kevin Hollinrake
I know that the hon. Gentleman has campaigned on this for some time and I have great regard for the work he does. It is worth him reading the “Payment and Cash Flow Review”, which was published yesterday alongside the autumn statement. It includes some references to retentions, to which he refers. There are other measures from the small business commissioner as well as more transparency on late payments. I am happy to engage with him further on this issue.
Although taxes pay for vital public services, this Government are clear that they must not stifle business owners’ ambitions. Quite simply, our economy relies on those ready to take risks and to innovate. Time and again, these entrepreneurs tell me that a simpler tax system would make life easier for them. This autumn statement will not just reduce tax but reform it, while putting more money into employees’ pockets.
The abolition of class 2 national insurance will save the average self-employed person £192 a year. Alongside the 1% reduction in the rate of class 4 national insurance, some 2 million self-employed people will be saving an average of £350 a year from next April.
In addition, from next year we will merge the existing research and development expenditure credit and the small and medium-sized enterprise R&D scheme. This will allow companies to claim back a proportion of their spending in this area through their tax bill, further simplifying the system and boosting innovation.
Finally, and very significantly, we have unveiled game-changing plans to make full expensing permanent. As the Chancellor set out yesterday, expensing aims to stimulate investment by giving larger companies £250,000 off their tax bill for every £1 million they invest. It was introduced, as hon. Members know, by the Chancellor in the spring and was set to last for three years, but it has been such a success, and the calls for it to continue have been so loud and clear that yesterday the Chancellor made it a permanent policy. This is the largest single tax cut in modern British history. It means that we now have not just the lowest headline corporation tax rate in the G7, but the most generous capital allowances too. That is hugely appealing to any business looking for a home in a global market.
The Office for Budget Responsibility tells us that this move alone will increase annual investment by around £3 billion a year, and by £14 billion over the forecast period. We are able to do this only because we have met our borrowing rules early, have more than halved inflation, and are seeing our debt go down every year.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Going back to the tax regime in general, one of the measures in the autumn statement—line 50 of table 5.1—was entitled “HMRC: Investment in Debt Management Capability”. According to the statement, investment of £160 million into the debt management facility of His Majesty’s Revenue and Customs will somehow unlock £1 billion a year in debt recovery. What is that investment, why was it not undertaken previously and how will it realise an extra £1 billion of income for HMRC?
Kevin Hollinrake
HMRC has a responsibility to be understanding and compassionate when it comes to business difficulties, but if debts are owed to the taxpayer it is only right that we seek to return them. Many more businesses may have that difficulty because of difficulties in recent years, but if the hon. Member is implying that we should not chase debts owed to the taxpayer—
Kevin Hollinrake
Perhaps we should have a conversation offline about that. I think it makes perfect sense to invest in reclaiming debt owed to the taxpayer.
I wish to turn now to another of my Department’s spending measures: the advanced manufacturing plan. The UK is a global advanced manufacturing hub. Recently—this is not a statistic that is often quoted in the media—we overtook France to become the world’s eighth-largest manufacturing nation. What is not to like about that? While we have a strong story to tell, there is fierce global competition. Already my Department has been instrumental in attracting significant global investment to our key future-leaning industries, including Tata’s £4 billion gigafactory and a £600 million investment to build the next generation of electric Minis.
Our £4.5 billion advanced manufacturing plan will help to safeguard the sector’s future and seal our reputation as the best place to start and grow a manufacturing business and to invest in this industry. It includes over £2 billion for the automotive industry—the single biggest Government investment ever in the UK sector—alongside £975 million for aerospace and £960 million for a green industries growth accelerator to support clean energy manufacturing. In short, the plan will ensure that our manufacturing success story can begin its most exciting chapter yet.
This is a Government who know business. We are for business because we are from business. This is a Government who believe in business. This is a Government who back business. Our autumn statement could not be a clearer illustration of those facts. Have no doubt that it will provide our most promising companies with the capital, certainty and support that they need to thrive long into the future. That is why I commend its measures to the House.
Madam Deputy Speaker (Dame Rosie Winterton)
I call the shadow Secretary of State.
Jonathan Reynolds
Unsurprisingly, I agree with part of what the hon. Member said. We could have a lengthy and robust debate on the weaknesses of Conservative Governments in the 1980s and the consequences of their short-term decisions. I would—
Jonathan Reynolds
I would simply say to SNP colleagues that their own independence White Paper made the fair case for a UK-wide energy market. That is because, as in many areas of policy, a UK-wide energy market is the best way to deliver for my constituents in England and for the constituents of the hon. Member for Kilmarnock and Loudoun (Alan Brown) in Scotland. That is a reality that I think SNP colleagues do not accept.
I think the Minister would like a second bite, so let us bring him in to see what he has to say.
Kevin Hollinrake
On the point about industrial strategy, can the hon. Gentleman answer a simple question with a yes or no? Will he reinstate the plans for HS2?
The Exchequer Secretary to the Treasury (Gareth Davies)
I think this is my first opportunity to welcome the hon. Member for Slough (Mr Dhesi) to his position, and I wish him well in it, but obviously not too well.
I pay tribute to the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who opened this debate brilliantly. He is someone who knows business because he comes from business. I also want to thank all right hon. and hon. Members from across the House who have spoken for their very detailed and thoughtful contributions, and I will try to respond to as many points as I can.
Before I do that, I want to reflect on the measures that we are here to discuss and which were set out in the Chancellor’s autumn statement yesterday. I take the view that everyone in this House wants the best for their communities and the people of this country, and I think we broadly agree on several points in that regard. I think we agree that we want a thriving economy, with well-paid reliable work available in every corner of the country for years to come. We want households to be better off than they were in years gone by, and we want opportunities for everyone to progress in life and to provide for the people they care about. If we can agree on that, I would hope that we all agree that this is an autumn statement that delivers, and principally delivers growth.
This autumn statement announces a range of measures to grow the supply side of our economy by supporting increased business investment. Taken together, these measures will build over time to raise business investment by some £20 billion per year and reduce the business investment gap that has grown to what we have today. It is because we are backing business—British businesses—that our economy and our investment levels will rise. It is business that creates jobs, which raise household incomes. It is businesses that design and build the technologies of tomorrow, and level up our towns, our committee and our villages. It is businesses that contribute billions and billions in tax revenue, which pays for our public services. To back our businesses is to back our economy and our country’s prospects for the future.
Businesses are vital to our future technology and our future ambitions when it comes to net zero, as was mentioned by the hon. Member for Bath (Wera Hobhouse). The £4.5 billion we are making available to our strategic manufacturing sectors over five years will mean more zero-emission vehicles. It will mean more aerospace and life sciences technologies, and more green energy solutions built right here in this United Kingdom. We are providing £960 million for the green industries growth accelerator, pushing even further on our advantages in offshore wind, nuclear, CCUS and hydrogen. I just say to the hon. Member for Kilmarnock and Loudoun (Alan Brown), who is a long-standing campaigner on energy, that we do need a balanced mix in our energy provision, and that is key to our national security as part of our energy security.
Businesses are vital for our high streets, so we have extended the 75% business rates discount for retail, hospitality and leisure businesses for another year, saving the average pub more than £12,800 next year. I pay tribute to my hon. Friend the Member for Broxtowe (Darren Henry) not just for the speech he made, but for the campaign he led on that measure. Businesses are vital for spreading opportunities, so my right hon. Friend the Chancellor has extended the investment zones programme and the freeport tax reliefs from five years to 10 years. He announced plans to set up a new £150 million investment opportunity fund to capitalise further investment in that programme. That goes alongside the 13 new investment zones—in west Yorkshire, the east midlands, the west midlands, Greater Manchester, Wrexham and Flintshire and several other places—which will generate billions of pounds in investment and create thousands of jobs throughout the country.
However, what is most eye-catching for all businesses is that we have listened to the asks of the CBI, Make UK, Siemens and more than 200 business leaders and industry bodies who said that the single most transformational thing we could do for business and investment growth was make full expensing permanent, so that is exactly what we did. It is something we can only do because of the strong economic position we have built in this country, and I pay tribute to my right hon. Friend the Member for Suffolk Coastal (Dr Coffey) for her support for this measure. Every £1 million a company invests as a result of this measure means they will get £250,000 off their tax bill the very same year. This gives us the lowest headline corporation tax in the G7, as well as the most generous plant and machinery capital allowance anywhere. Again, the OBR says that this will make a huge contribution to our economy, increasing annual investment by £3 billion a year and a total of £14 billion in the forecast period.
While the United States, Canada and Australia are all dispensing with full expensing, we are making this a cornerstone of our economic approach, giving a clear welcome to international businesses that want to come here, set up and employ our people. Coupled with the headline recommendations of the Harrington review, this can make the UK a brilliant place for international investment—even more so than it already is today.
But our plans are not only for large businesses. By cutting class 4 national insurance by 1%—again, as referenced by my hon. Friend the Member for Broxtowe—and abolishing the class 2 national insurance entirely, we are saving some 2 million self-employed people an average of £350 a year from April. Together with our national insurance cut for 27 million workers, this is proof that, whether people work for themselves or for someone else, under this Government work will always be rewarded.
We on the Conservative side of the House believe in the dignity of work and the security of a regular pay cheque. That is why we did not just cut national insurance; we have increased the national living wage by a record amount. But we know that inflation has hit families hard. It has hit individuals and businesses throughout this country. Inflation makes everybody poorer. It was caused by a global pandemic and a global energy shock, and although we have seen it come down, we need to keep on going.
The hon. Member for Leeds East (Richard Burgon), the right hon. Member for Hayes and Harlington (John McDonnell), the hon. Member for Glenrothes (Peter Grant) and others have all raised concerns about living standards, and I share them. It is why we have increased pensions by 8.5%, as referenced by my hon. Friend the Member for Poole (Sir Robert Syms), it is why we have uprated benefits by 6.7%, and it is why we have uprated the local housing allowance. That is on top of the £94 billion on energy support and the £900 cost of living payments that are going out throughout the country.
Peter Grant
Is it correct that the prediction that we are going to see the biggest fall in living standards that most of us have ever lived through is after all the things in the autumn statement the Minister has just referred to, so even taking into account all the good measures he has mentioned today and his colleague the Chancellor outlined yesterday, people are going to be poorer, with the biggest drop in living standards that any of us has ever seen?
Gareth Davies
As I have said, we know that families have suffered through a period of dramatic inflation. It peaked at 11%. We made a commitment at the start of this year to cut it in half and we met that commitment last week. The No. 1 thing we can do to make people feel better is bring down inflation. The provisions in the autumn statement will undoubtedly put money in the pockets of the people who need it most, but ultimately on this side of the House we believe in the dignity of work; we believe that the best route out of poverty is through a job, and the growth that we will boost through these measures will help achieve that.
We have made inflation our top priority and we have delivered on that commitment, as I just mentioned to the hon. Gentleman. I want to pick up, however, on one point raised throughout the debate, not least from the Opposition, who implied that the Government had done nothing to bring down inflation and that was nothing to do with this Government. I want to stress that the International Monetary Fund disagrees with them. The IMF has said that we have taken decisive action to bring down inflation, complementing the Bank of England. The Bank of England has the primary monetary policy tool of interest rates, but we in the Treasury and across Government have taken incredibly difficult decisions to ensure that we do not exacerbate inflation. We have also introduced measures such as the energy price guarantee, which essentially paid for half of people’s energy bills across the country. That, by the way, was referenced by the OBR as knocking 2% off headline inflation.
Matt Western
I welcome the hon. Gentleman to his place. He was talking about the Government having a role in inflation and responsibility for it, but he must accept that the decisions made a year ago with that kamikaze Budget fuelled inflation. That is why we have an inflation premium compared with other nations.
Gareth Davies
I am grateful that the hon. Gentleman raises that point, as I looked into it, and there is zero evidence for what he suggests. If he has evidence, he should provide it. We know that inflation was caused by two major factors, and I am happy to go through that in detail at another time. Global inflation was caused by global factors caused by the impact of a global pandemic. Supply chain shortages have caused prices to rise across the world, and then we had the war in mainland Europe, caused by Putin’s invasion of Ukraine, which caused energy prices to spike, and gas prices went up around the world. We in the UK are particularly dependent on gas, which is why inflation increased. It is also why we stepped in with the energy price guarantee to cut every constituent’s bills in half.
Gareth Davies
I do not know how they want to fight it out. I will take the hon. Member for Glenrothes (Peter Grant).
Peter Grant
On the question of dependency on gas, the Minister’s country might be dependent on imported gas, but can he explain to constituents in Scotland how a country that has more energy than it needs should be so badly affected when the price of that energy increases?
Gareth Davies
I simply point out that that did not stop the Scottish Government accepting our energy price guarantee for Scottish households, where we paid half of energy Bills. However, the hon. Member makes a broader point about energy supply. We on the Government Benches fully support the Scottish oil and gas industry. We believe that we will need oil and gas for years to come, and we will support the 200,000 jobs that the industry supports.
Gareth Davies
I will make a bit more progress, if that is all right.
I also want to address the comments of the hon. Member for Warwick and Leamington (Matt Western) on France. It is a great country, but I have to tell him that since 2010 the UK has grown faster than France. Indeed, the IMF has forecast that the UK will grow faster than Germany, France and Japan by 2028, so I do not recognise his comparisons. However, he is right that productivity is a problem in this country, which is why we are investing in our businesses to grow and improve productivity, but in order to boost growth sustainably we need to focus on business investment, and that is what this statement does.
This statement backs business to create jobs, to innovate and to ensure that as a country we can go from strength to strength. That is why I will be proud to vote for its many measures to support the entire country.
Ordered, That the debate be now adjourned.—(Joy Morrissey.)
Debate to be resumed on Monday 27 November.