Economy: Budget Statement

Baroness McGregor-Smith Excerpts

Tuesday 13th November 2018 Lords Chamber

[Baroness McGregor-Smith (Con)]

My Lords, I declare my interests, as set out in the register of interests, in a number of businesses that would benefit from a strong economy. It is a pleasure to be able to speak today.

As I read through the Budget Statement, I was struck by the Chancellor’s comment that,

“the era of austerity is finally coming to an end”.—[Official Report, Commons, 29/10/18; col. 653.]

I really hope we can move away from the word “austerity” now, as many millennials have grown up in the UK and deserve much more positive commentary going forward.

Having spent my career working in business, I feel there needs to be a relentless focus on enterprise, and that is what I shall focus my comments on today. It is absolutely at the heart of economic growth and prosperity. The excitement that comes from running and growing businesses is truly exciting, and we need to excite more of our citizens to want to do this.

I shall start with some reflections on start-ups. Start-up companies are critical to our future success in the UK. StartUp Britain has said that over 650,000 businesses were started in 2016. I would like to see that number double. The transformation for our businesses through technology and AI provides us with an opportunity to invest significantly more into start-ups in the UK and deliver on the industrial strategy. I welcome the announcement on the new Industrial Strategy Council, which will hold the Government to account, and urge its members to look closely at the positive impact that start-up companies and our continued investment in them have on the economy.

I also welcome the announcement in the Budget to extend the start-up loans programme, backing up to 10,000 entrepreneurs, but I would like to see even more done, particularly on mentoring and the financial encouragement for more and more people to start and grow their own businesses here. The House of Commons Business Statistics paper, published in December 2017, says there were 5.7 million businesses in the UK, with over 99% of them being small and medium-sized businesses employing up to 249 people. Of those, 96% were microbusinesses employing up to nine people, and microbusinesses account for 33% of employment in the UK. As so many of us are aware, 74% of all SME businesses are service businesses, a sector that I have worked in throughout my whole career.

The investment that we make over the next few years in young emerging businesses, particularly on the technology and AI side, is critical to our future economic success. We need to be creating technology enterprise zones in every town in the United Kingdom. Please let us create a wave of excitement now about the art of the possible and ensure that the next generation of tech giants starts here.

I note many other key investments in a number of areas in the Budget, including the annual investment allowance and more incentives for business to spend on buildings, which I truly welcome. I also note the end to PFI projects. My only question here is what new commercial structures will exist to deliver large-scale projects for the Government. I ask that the provisions of the social value Act are put at the heart of all public procurement going forward.

On taxation, I was delighted that we will deliver the lowest corporation tax rate in the G20. We must continue to be mindful of the fact that inward investment to the UK from many companies around the world will always consider our tax regime, and it must continue to be attractive. However, I was pleased to see the introduction of the new digital tax, which I think is a little low, despite my fundamental belief in low taxes for business. This tax must be introduced and increase while the international corporate tax framework is further developed, but that needs to be urgently assessed.

On some of the investments being made by the Government, I urge them to remember our rural areas as well as our cities. We need our rural economy for so many small businesses to thrive, and digital connectivity is still a challenge for many. The Countryside Alliance estimates that 1.1 million premises still have no access to decent broadband, meaning that 17% of our rural homes and businesses cannot receive decent broadband and 82% do not receive a 4G signal. In this environment, businesses will be driven to invest where there is excellent connectivity, and this will challenge the rural economy even further.

I also note the Future Telecoms Infrastructure Review, which sets out the changes needed to give the majority of our population access to 5G, connect 15 million premises to full-fibre broadband by 2025 and provide full-fibre coverage across all of the UK by 2033. However, the funding strategy is still not clearly defined after 2021, and I urge that be done now. That would really support the growth of our economy.

On business rates, I am pleased that we have made a start, with premises with a rateable value of up to £51,000 being given one-third off their business rates for the next two financial years, but I urge the Government to go even further. A review of the business rate is urgently due because of the changing dynamics of the high street. As much as I am pleased that we have the new future high streets fund, I am concerned about the challenges of those who have a presence on the high street in the uncharted waters of digitalisation and online buying. As consumer buying habits fundamentally change, we cannot allow more and more organisations to fail. I agree with the evidence given by Rain Newton-Smith, chief economist of the CBI to the House of Commons Treasury Select Committee, when she described the business rates system as a “real barrier to investment”. This needs to be listened to.

Finally, on housing, it was pleasing to see that the housing infrastructure fund will be increased to £500 million and that the housing revenue cap will be abolished. That is ultimately positive for enterprise, but let us not underestimate the challenges that remain to build enough homes—successive Governments have not found this easy—and a housing strategy council to hold the Government to account on the number of houses needed, where and for whom, should be set up now to hold all of us to account.

In conclusion, from a business perspective, I saw the Budget as positive, but let us ensure that all our businesses, particularly those in the SME community, feel that every level of support is being given to them and that they are truly excited by what they can now achieve. Let us ensure that, throughout any transition on Brexit, businesses are given the continued ability to grow and prosper. We need to support them, give them certainty and put no barriers in their way. Their success is critical to the UK economy, and that will increase critical funding to all our public services.