UK Economy

Debate between Kevin Hollinrake and James Cartlidge

Wednesday 29th June 2016 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to follow the right hon. Member for Birmingham, Hodge Hill (Liam Byrne), who made some fine points. I particularly liked the phrase he coined about moving from free movement to fair movement.

There is a time and a place to take a risk. I started my business in 1992. Many in the House will remember that year and, in particular, 16 September 1992. Unemployment was at 3 million; repossessions were running at 72,000—three times the normal average; and, on that single day, interest rates went from 10% to 12% to 15%. As the House will remember, the day after, we pulled out of something called the exchange rate mechanism, and that was the right thing to do. Many economists said it was the wrong thing to do—they said it was a big risk—but things could hardly have got worse, so it was absolutely the right thing to do.

Look at where we are today: we have one of the fastest-growing economies in the developed world and virtually full employment, meaning that all our young people and our older people can get a job. We had a saying in our business: hope is not a strategy. There was so little strategy from the Vote Leave campaign going beyond our exit from the EU, which was why most business organisations—the Institute of Directors, the CBI, the manufacturers’ federations, TheCityUK—said it was the wrong thing to do. Every leading economist—and even some not-very-leading economists—said it was the wrong thing to do. But of course this was seen as some kind of conspiracy.

It was not just business talking like that but the music industry, the science industry, our research organisations, our technology industry and so on. A report by the House of Lords called leaving the EU a huge risk because of the complexity of withdrawal. It will take at least two years from our giving notice under article 50, but it will take many more years to unwind all the connected legislation. A report in The Times last week said it would take 10 Queen’s Speeches to unwind the legislation. That breeds the uncertainty that businesses do not like.

This is also about trade deals, and not just about trading today with Europe but about opening new trade markets around the world. As the Chancellor said, that is a great opportunity, but businesses cannot simply move their supply and customer bases from one location to another overnight—yet that is what they are being asked to do.

[James Cartlidge]

Is not much of our trade with the rest of the world done through large international companies that locate in the UK because we are in the single market?

[Kevin Hollinrake]

My hon. Friend is absolutely right. A good example are the Swiss banks. Despite Switzerland’s being part of the European economic area, it cannot trade directly with the EU, so it has to base subsidiaries within the EU. Happily, firms such as Credit Suisse and UBS put them in London, as do US banks such as Goldman Sachs, J.P. Morgan and the like. That is why the head of TheCityUK said that the move could cost up to 100,000 jobs in the City of London. Yet this was never dealt with or answered by the Vote Leave campaign. [Interruption.] My hon. Friend the Member for North West Hampshire (Kit Malthouse) shakes his head. The risks are huge, yet the issue has not been properly dealt with.

The impact on car manufacturers has not been properly dealt with either. This is not simply about our opening new trade markets around the world; it is about a supply chain that is deeply embedded throughout Europe. A typical drive shaft for a family saloon car is manufactured in six different countries across Europe. What are car manufacturers to do if tariffs are applied between us and the EU? Just last evening, I was talking to a multinational retailer who had 3,000 members of staff but was moving to new premises with 5,000 members of staff. These people move from London to Frankfurt to Paris just as we would move from north Yorkshire to London, but they face the prospect of not being able to do that. How have we made this decision without talking about these issues and answering these questions?

There is an even bigger issue. Looking at the European Union in such a sensitive stage, I view it as a house of cards, and if the UK pulls our card from the bottom, there is a significant risk that the whole house will implode. A domestic economic risk then moves towards becoming an international and global economic risk, along with a political risk and a security risk. This country’s economy and our prospects for national security could be hugely affected.

We should recall that only a few years ago many European member states were totalitarian states behind the iron curtain, yet they are today free and fair democracies with the rule of law and freedom of the press. The European Union has presided over those member states, making sure that they are focused on prosperity and trade, rather than looking backwards or, even worse, eastwards towards Russia.

All these issues are in play, and there are many positive reasons for remaining part of the European Union. It is about the opportunity to live, work and study right across the continent; it is about peace and prosperity; and it is about tackling some of our huge challenges and economic risks—issues such as climate change, air pollution, drug resistance and tax evasion.

Of course, free movement of people and immigration are the biggest issues that need to be dealt with. I quite understand the public concern about those issues, and I believe that this was not a referendum on the European Union, but on immigration. I understand that we need to deal with it and now we have an opportunity to do so. As the right hon. Member for Birmingham, Hodge Hill and my hon. Friend the Member for South Suffolk (James Cartlidge) said, we need to deal with it in a proportionate way, and to look at the many different solutions to the problem, working together with our European neighbours.

Above all, we must have free and unfettered access to the single market, because the economic consequences of not having it are impossible—too severe—to contemplate. All the way through the referendum campaign, I wanted to remain and reform, but that option is no longer available. What we must now do is to work together with our European counterparts to make sure that we get reform. We must work collaboratively with our European partners to make sure that we have a fair economic settlement that works for both the European Union and for the United Kingdom.

Productivity

Debate between Kevin Hollinrake and James Cartlidge

Wednesday 17th June 2015 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I am grateful for the opportunity to speak in this important debate. It is also a pleasure to speak after the excellent maiden speeches we heard from the hon. Member for Sheffield, Brightside and Hillsborough (Harry Harpham) and my hon. Friend the Member for Hertsmere (Oliver Dowden).

It is important to look at productivity in the context of the overall economy. Productivity is not a means to an end, but an end itself. We must look at the reasons we have difficulties with productivity. We must avoid short-term thinking, let the positive effects of the past five years take hold and take a long-term approach to making progress on the issue. The overall economy is doing well; employment is up by 2 million since 2010, and in 2014 ours was the fastest growing major economy. On 8 June the CBI said that we should expect

“solid, steady and sustainable growth”

with rising incomes. Business investment is making a strong contribution to growth. It is important that we do not damage what we have already achieved. We need to look at the facts behind the data, including the fact that oil and financial services are skewing the figures on overall economic and productivity gains.

The key determinants of productivity are competition, regulation, investment and education. In my experience, the best way to drive productivity, efficiency and innovation is by encouraging competition. When a business person is faced with stiff new competition, time and again they raise their game, work harder and motivate their staff. Some 70,000 new private sector businesses were created in the previous Parliament, creating 2.3 million jobs. The Government are doing what they do best: setting the stage and letting business get on with creating the jobs.

On regulation, there is now less red tape in this country than there was five years ago. In 2010 we had the second highest level of red tape in the G7, but we now have the lowest. Some 50% of businesses want the Government to focus on reducing regulations. Labour introduced six new regulations every day. We must have a Government who understand business. This Government want to cut the costs of red tape by £10 billion over this Parliament.

We need to encourage investment. We must invest in human capital, have better links with schools and universities and move over time towards the living wage. Tax credits are an employment subsidy, and subsidies create complacency and inertia. We need a long and stable tax regime. Capital allowances must be consistent, because businesses need a long-term understanding.

[James Cartlidge (South Suffolk) (Con)]

My hon. Friend makes a brilliant point about tax credits. As a small business owner, I was shocked to receive a call from one of my staff saying that they did not want the pay rise I had just emailed them about because they would lose so much in tax credits. Is this not a crazy dependency culture that is holding back productivity?

[Kevin Hollinrake]

Absolutely. We need to move towards a living wage over time. Rushing to a living wage too quickly might put jobs under pressure, but I believe that we should move towards a living wage over time and in consultation with business.

We need low and consistent corporation tax, which is what the Government are delivering. Governments should do less, not more, and the tax regime should be the same not only in one year’s time, but in 10 years’ time. Of course we need investment in infrastructure, such as roads, railways and broadband. That is particularly important for those in the hardest-to-reach areas, because rural businesses want a level playing field with those in urban areas. The VAT threshold of £82,000 is prohibitive, because businesses that want to invest but do not want to go over the threshold do not take on new employees and do not invest in new technology for fear of losing a significant amount of their profits.

In conclusion, statistics are important, but they are no substitute for judgment. Our judgment, and the judgment of the people of Britain, is that things are getting better. This is certainly the most business-friendly Government I have ever known. They have done the right things to give businesses the chance to start, grow, prosper and produce more.