Finance (No. 3) Bill

Lord Harrington of Watford Excerpts

Tuesday 26th April 2011 Commons Chamber

[Richard Harrington (Watford) (Con)]

I came to this Second Reading debate to get an outline of the Government’s case on the Budget and the Finance Bill, as I heard from the Chief Secretary to the Treasury, and because I felt that the Opposition spokesperson, the hon. Member for Wallasey (Ms Eagle), would give us the Opposition’s view. I tried to follow her as best as I could, but we seemed instead to get a lengthy diatribe on any spats that there might have been over the AV referendum, and a repetition of the arguments used after the emergency Budget some several months ago about public spending cuts.

We heard the cliché that the coalition wishes to turn the country back as far as government is concerned into a “small state”, to use her expression. That ignores the fact that the size of the state in public expenditure terms after the five-year programme will be back to that of 2008, which I am sure the then Government would not have described as a “small state”. We heard also great support for the Liberal, Lord John Maynard Keynes, which I found interesting, and the blaming of everything on “a synchronised global recession”.

Those are yesterday’s arguments, however, because we are here to talk about this Budget and this Finance Bill. The debate is about one thing above all others: after the budget deficit is dealt with, the plan for which the Government explained clearly in the emergency Budget, how do we ensure that the economy can expand without the problems of the past? Such problems occur when the economy expands, imports are sucked in without a commensurate export boom and migrants come to work here because we have unemployed people who do not have the necessary skills or, indeed, ability to fill the available jobs. Whether it is because they are unwilling, live in a different part of the country or do not have the necessary skills, that has been a problem. In my constituency, about 2,000 people, including young people aged 18 to 24, are on jobseeker’s allowance, yet companies still have to bring in labour from Poland, because their alternative is to shut the factory and move it abroad. The long-term purpose of the Budget is to deal with such fundamental core problems.

It is not just a question of consumption. The media and, to some extent, the Opposition are obsessed with retail sales numbers, but in the past booming retail sales have led to some of our problems, with imports being sucked in and household debt expanding to fund consumption. Adam Smith, a great hero of Conservative Members who has some support even among Labour Members, said:

“Consumption is the sole end and purpose of all production”.

When he said that, the economy was far less sophisticated than it is today, and he did not mean that retail spending is the be-all and end-all. Indeed, the Office for Budget Responsibility expects British households to account for about a fifth of economic growth this year and about a third next year. There is a lot more to it than just consumption and what is spent in the shops.

The Daily Telegraph said in an editorial just after the Budget:

“The Chancellor bets on business coming to the rescue”.

That is absolutely true. The coalition’s strategy is based entirely on allowing business to produce the necessary jobs, exports and consumption so that the economy can expand, this time on a firm base rather than on the basis of property debt and financial services—although I am pleased to say that financial services, particularly international financial services, are very important for this country. Comments about the banking crisis and bankers’ bonuses tend to push to one side what I would regard as the core argument, which is how we can be competitive as an international financial centre. As the Chief Secretary to the Treasury said, the Government’s strategy is based on allowing us to be one of the best places in the world to do business and to be competitive. That includes the financial sector, but it does not exclude the rebalancing of the economy that is one of the main aspects of the Bill.

The test of the Bill is whether it facilitates real growth given that we have a skills shortage—there is no question about that—and a work force among whom some, particularly in the south of England, where there has been a shortage of labour, regard it as acceptable to be on jobseeker’s allowance for very lengthy periods. Watford is in the south of England, and it has 2,000 unemployed people. Does the Budget bring about a change in this climate to deal with people who lack of skills and those who lack an ability or a desire to get a job? I would argue strongly that it does. Many aspects of the Budget help with that through incentivising people to set up businesses and allowing investors more tax relief through the enterprise investment scheme and other schemes.

The Government’s approach to tax cuts has been the best that they can take in the economic climate that they inherited. The corporation tax reductions are a good start, as is the relief for investment in enterprise. However, tax is a major issue for businesses and individuals. I believe that the 50% tax rate will prove to be a disaster, first, in the money that it brings in—we are waiting for the numbers on that—and, secondly, in providing a disincentive. In one of the first speeches that I heard after the 50% rate was brought in, my right hon. Friend the Member for Wokingham (Mr Redwood) said that he feared that business people will, to use his expression, go on strike—that they will reach a certain age and say, “Why should I work harder if significantly more than half of what I earn is to be paid over to the Government?” My point is not to do with any principles of mine. I am very much in favour of taxation being used as a form of redistribution of wealth and of wealthier people paying a much higher amount than people at the lower end of the income scale, but the unfortunate fact is that it provides a disincentive. It is a free country, and when someone gets to a certain level of income they can decide whether to work a lot harder or to do what the Americans call “going to the beach”. I hope that I am wrong, but I believe that 50% tips the balance in the wrong way.

In the long term, it is in the best interests of this country for us to be able to provide the kind of public services that we all want to provide. Notwithstanding what the hon. Member for Wallasey said, a Conservative-led Government, just as much as a Labour Government, want to provide really good-quality public services. The way to do that in the long run is to reduce the burden of taxation to encourage people to enter new businesses or to work harder in the businesses that they are in. They will not do that in return for progressively higher amounts of tax. I wish it were not the case, but it is human nature and unfortunately we will see it happening.

Business is a bit lumbered, in a way, because there are no direct votes in business. In the past, it has been easy to impose taxes as a burden on business—high business rates, employers’ national insurance and corporation tax are the obvious examples, as well as many other taxes—because there is not the immediate reaction from business that there is from the public. We now have to decide that what is good for business is good for the country, because employees make up businesses. People who demonstrate against companies that pay a small amount of corporation tax forget the billions of pounds paid by the employees in their national insurance and income tax and the VAT on what they spend.

As for skills, the Red Book points out that unfortunately 9.4% of all 16 to 24-year-olds are unemployed and not in education. A few weeks ago, I visited a company in my constituency that makes lenses—Davin Optronics. The business is 100 years old. It has declined a lot in the past 10 years, but it still turns over £4 million and employs 50 people. I was told that its biggest problem is that its skilled work force are getting older. The managing director said, “Young people don’t want to work here. They want to work in Top Shop or TK Maxx, or wherever, but they don’t want to work in a factory.” I am very pleased about the apprenticeship scheme that was introduced in the Chancellor’s Budget. We must somehow make people regard qualifying to do a skilled job as being as important and high-status in society as getting a degree. The 80,000 extra work experience places and the extra apprenticeships are very good news.

Small businesses are different from large businesses, not only in relative size but because many do not have the facilities to set up training schemes to recruit in a systematic manner and to deal with local further education colleges as regards the training side of apprenticeships. I hope that what the Budget and the Bill are doing in relation to finances will be enhanced by the training of people at further education colleges, at Government expense, to find businesses that would never have dreamed of offering apprenticeships and to show them how good such apprenticeships are for those businesses.

Confidence is everything in the economy, and the measures that this Government have taken have done a lot for the confidence of employers. I read in that great oracle The Sunday Telegraph, no less, that according to its City editor business has got £71 billion of cash in reserves; presumably that is worked out by some piece of software that adds up everything on the balance sheets of all the companies at Companies House. That money needs to be invested. In bad times, companies hoard cash because they are frightened of what might happen if sales go down, there are problems with exports, and so on. It is confidence that will make those companies spend that cash in investment. The tax breaks help a lot, but the fundamental benefit of this Finance Bill is that it is employer confidence that will get these jobs provided.

We have to get the economy right, and I think that the Finance Bill passes that test. We have to get the tax regime right, and there have been great improvements on that, although I realise that it has to be done very slowly. We have to get the work force right, which means having skilled workers and incentivising people to work. If we can do all that and incentivise companies that make profits to keep and reinvest them, I think that the economy will enjoy a proper, genuine boom in time, and not one based just on debt or consumer spending. In my view, the Budget and the Bill go a long way towards achieving that.

Amendment of the Law

Lord Harrington of Watford Excerpts

Wednesday 23rd March 2011 Commons Chamber

[Richard Harrington (Watford) (Con)]

I assure you, Mr Deputy Speaker, that I will stick to the guidelines you have given. In fact, uniquely both in this House and in life generally, I find that I am speechless after listening to the hon. Member for Kingston upon Hull North (Diana Johnson). There is a holiday attraction somewhere called la-la land. I cannot remember who mentioned it but, obviously, it is nothing to do with Kingston upon Hull North. The picture the hon. Lady painted forgets who has been in power for the last 13 years and who has been responsible for a bloated public sector and a starved private sector, as well as for unemployment and all the other problems that many people, including the Chancellor, have spoken about today.

[Matthew Hancock (West Suffolk) (Con)]

Is my hon. Friend as confused as I am given that the previous speaker started her speech by saying there are new jobs at Siemens in Hull, thereby showing that manufacturing is expanding under this new Government?

[Richard Harrington]

My hon. Friend makes a good point, but we heard about Siemens so long ago that it had slipped my mind.

I shall restrict my comments to my experiences in business of dealing with the economy, and the experiences of my constituents and their businesses in Watford. Watford is not dissimilar to Kingston upon Hull. It has significant unemployment and shares all the same problems as many other parts of the country. Notwithstanding the Chancellor’s commendable statement today, the most significant factor in encouraging businesses to invest is the general macro-economic situation. Therefore, the most important aspects of this Budget and the last Budget are the measures for reducing the deficit.

[Alison McGovern]

The hon. Gentleman is making his speech in his usual eloquent style. Will he comment on why the growth forecasts have been revised downwards?

[Richard Harrington]

The comments that the hon. Lady somewhat generously applied to my erudition can also be applied to hers. To respond to her question on growth forecasts, we cannot select one figure and say that it makes a fundamental difference, because assessments of growth must be made over a period of time. In my experience, the most important factor for growth is the confidence people have in the economy, and that will definitely come about because of the Government’s sensible approach, as opposed to the reckless irresponsibility of their predecessor.

[Angie Bray (Ealing Central and Acton) (Con)]

Is it not the case that in almost every recession that this country has had to fight its way out of, there have been choppy times and there has never been a smooth upward trajectory? It is always the case that some quarters are better than others.

[Richard Harrington]

With the possible exception of the la-la land factor, my hon. Friend is absolutely right.

I want to talk about some specific factors that are important to business people, and therefore important to growth. There is a lot of talk about banks and the availability of capital, and about what the Government should do and what they have not done. Again, I want to comment based on my experiences in the constituency. The bank lending situation is getting better; there is no doubt about that, as the loans are beginning to come through. In Watford alone, under the enterprise finance guarantee loan scheme, 23 companies have already borrowed money amounting to £4 million. That is a comparatively small sample and it reassures me for the future that this scheme, which is to be expanded, does work, and that it does so in a comparatively short period of time.

It is very fortunate for us that interest rates are low, but the decisions made by businesses do not change when fluctuations are minor, such as 1% up or 2% down. Their decisions do change when the situation reaches a ludicrous point; I was once left with a loan on which I was paying 2% over base when the base rate was 15%. Variations such as 1%, 3% or 5% make little difference. Again, what matters is confidence in the economy and confidence that the Chancellor has done the right thing today. So I must encourage what the Government are doing on the fundamentals, because people and businesses will want to borrow money only when there is confidence in the future and confidence that we are doing the right thing.

My next point relates to the availability of skilled staff. Despite the fact that 3.7% of people in Watford—more than 2,000 people—are on jobseeker’s allowance and 700 or 800 young people there are not in education, employment or training, I visit factories and businesses that cannot recruit staff of the right calibre every week. A few weeks ago, I visited Davin Optronics, a manufacturing company that uses skilled labour to make lenses—it deals with complicated stuff. Its fear was that its work force were getting older and younger people did not want to join manufacturing businesses. That is a fundamental issue and we have to change attitudes.

[Helen Goodman]

How does the hon. Gentleman reconcile that situation with his Government’s policy on tuition fees and the fact that this week children in this country are being told that they cannot take three sciences at GCSE because of the cuts to school budgets?

[Richard Harrington]

The hon. Lady and I were at university at broadly the same time, so we were very privileged. We could debate tuition fees for hours, but no matter what one’s arguments on that, the new regime has not changed the current situation and we are, thus, dealing with Labour’s policy on tuition fees at the moment. I would be happy to debate tuition fees with her on another occasion, but the real issue is that we have young people and older people who are unemployed, and we have vacancies in jobs that people will not go into. The Government’s efforts on work experience for young people—today’s announcement on that was tremendous—and on expanding the apprenticeships scheme are very important, as are the technical universities. I commend those efforts because we must have a work force who have the right skills. That is not solely about graduates; it is also about people who are leaving school and are doing apprenticeships and further education courses. What the Government are doing to help will change the availability of staff.

[Mr Kevan Jones]

Will the hon. Gentleman give way?

[Richard Harrington]

No, I must make progress.

I normally agree with everything said by my right hon. Friend the Member for Wokingham (Mr Redwood), who is not in his place, and one might think that, as a Conservative Member, I would have an overwhelming interest in bureaucracy, labour laws, red tape and obstacles to business and that dealing with those things would be my top priority. However, important though they are, I think that they are secondary to the macro-economic factors—they are secondary to stability and the feeling of confidence. Germany is a classic example of that, because despite its labour laws and the fact that it has lots of regulation, manufacturing industry works well there. So I am very pleased that we are concentrating on the other issues.

I am keeping in mind your earlier comments, Mr Deputy Speaker, but I just wish to remind hon. Members that Watford is an average kind of constituency and so has 3,000 businesses, with eight being roughly the average number of people employed in them—these are predominantly small businesses. I believe that this Budget will help the long-term confidence for them, despite short-term growth forecasts, and so it is a Budget very much for the small business. It is also a Budget for the larger business, given the corporation tax measures. However, more importantly, it is a Budget for ordinary people and for their prospects. I believe that it is the best Budget that we could have, given the mess that the Government were left.

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the hon. Gentleman for his time restraint.

Oral Answers to Questions

Lord Harrington of Watford Excerpts

Tuesday 22nd March 2011 Commons Chamber

[Mr Osborne]

Our country’s credit rating was on negative watch when we came to office and as a country we did not have a credible plan to reduce the budget deficit. Since that plan has been put in place we have been able to see the effects because our market interest rates and our spreads over bunds have come down. We have interest rates that are closer to Germany’s despite, as I have said, having a budget deficit left to us that was higher than either Greece’s or Portugal’s.

[Richard Harrington (Watford) (Con)]

Would my right hon. Friend the Chancellor like to inform the House which organisations have made representations to him that the deficit should be halved over the course of this Parliament?

[Mr Osborne]

The Guardian newspaper.

National Insurance Contributions Bill

Lord Harrington of Watford Excerpts

Tuesday 23rd November 2010 Commons Chamber

[Mike Gapes (Ilford South) (Lab/Co-op)]

I wish to concentrate on the situation facing my constituents and many others in London. The House of Commons Library has published a note that is of great help to all who take an interest in the subject of today’s debate, and it says that, on the basis of International Labour Organisation measures of unemployment, the highest rates are in London, the north-east and Yorkshire and the Humber, where the figure is 9%. However, although the north-east and Yorkshire and the Humber are to benefit from the measures in question, London is entirely excluded.

As has already been made clear, a number of boroughs and constituencies in London have very high levels of deprivation and unemployment. My borough, the London borough of Redbridge, does not feature as one of the most deprived boroughs overall, but there are wards within it, including three in my constituency, that are in the lowest decile for deprivation and need. Therefore, the impact of any changes that discriminate against Londoners, against small businesses in London and against ethnic minority businesses in London—the population distribution in this country means that London has a much greater concentration of people from all ethnic minorities—has to be borne in mind. These proposals are inherently discriminatory; they are discriminatory in their own terms and they therefore need to be seriously questioned.

The Federation of Small Businesses has sent me some information about this matter. It points out how more than half the firms in London, 64% of small businesses in the south-east and 58% of firms in the east of England are likely to operating under capacity. It states that the regional discrimination involved in these proposals is based on

“a crude assessment as it does not account for areas within these regions that would really benefit from policies that would help bolster employment.”

If the FSB opposes the proposals, why on earth are the Government not listening to it, given that they claim always to be listening to small businesses? As I speak, the Essex FSB is having a meeting, which I am obviously not able to attend, and one of the issues it will discuss is precisely this discrimination against the east of England, the south of England and, in particular, London.

[Richard Harrington (Watford) (Con)]

The point needs to be made that the Minister has explained that a significant extra cost would be involved in making this a national programme. As the Member of Parliament for Watford, an area that faces significant unemployment problems, I would say that it would be very nice to have this programme, but the Minister has explained that the cost involved would be more £660 million. I am pleased to see this principle being used, because I believe that selective regional policy can be used in the future. I hope that the Government’s localisation agenda will mean that holidays and similar tax benefits for rates will be extended to specific areas. But for the moment, because of the mess that the Labour Government left us with—

[Madam Deputy Speaker]

Order. The hon. Gentleman will resume his seat. Interventions are supposed to be brief.

Financial Assistance (Ireland)

Lord Harrington of Watford Excerpts

Monday 22nd November 2010 Commons Chamber

[Mr Osborne]

Of course, an absolute precondition of the package being negotiated is that not just the UK but the IMF and others believe that it will work. An enormous amount of effort is going into putting together a package that will deal not just with the sovereign debt situation, but—the former Chancellor alluded to this—with the Irish banking situation. That is a key part of the package.

[Richard Harrington (Watford) (Con)]

Does my right hon. Friend agree that a main cause of the problems in Ireland is the pursuit of those very policies that Labour Members would have us carry out here—borrow, borrow, borrow and spend, spend, spend?

[Mr Osborne]

Ireland had over-leveraged banks, and they were poorly regulated. We are all picking up the pieces of something similar in the UK.

Comprehensive Spending Review

Lord Harrington of Watford Excerpts

Thursday 28th October 2010 Commons Chamber

[Richard Harrington (Watford) (Con)]

Does the hon. Lady agree that it is a basic principle that spending money we do not have does not create long-term jobs? It creates nothing but debt, which has to be paid back. That is what the Government are doing now. That is what we need to do.

[Ms Eagle]

Perhaps the hon. Gentleman will agree that in an advanced economy with a social security system, if there is a recession, deficits will rise. That is why the deficit rose. What he suggests, if taken to its logical extreme, means that he would not be in favour of paying unemployment benefit to those made unemployed. They tried that in the 1930s and it did not work.

--- Later in debate ---

[Richard Harrington (Watford) (Con)]

Like many hon. Members, I have listened all afternoon to the debate. If everyone examined the matter, they would know that the comprehensive spending review was necessary. The cuts amount to taking us back to 2007 expenditure levels. I will not repeat the arguments that we have heard this afternoon denying or not denying the effects.

[Mr Hanson]

rose—

[Richard Harrington]

Not at the moment.

I shall concentrate on two points that I do not believe have been mentioned. The first is the importance of how the cuts are implemented. My fear is that, for political reasons, some public bodies and some councils have every incentive to make the cuts go right to the bottom line. I remember how, in the years of the Conservative Government from 1979 onwards, Mrs Thatcher’s cuts, job reductions and so on were used politically by opposing parties.

[Kwasi Kwarteng]

I forget—how many general elections did Baroness Thatcher win? Will my hon. Friend remind the House?

[Richard Harrington]

Not enough.

The most important thing is that the cuts are made sensibly, and that the bloated management hierarchies of local government look at themselves and realise that this is a chance for much of the reduction in their field to come through management. Let me explain. In Hertfordshire county council—[Interruption.] Yes, Conservative, and proud to be Conservative.

In Hertfordshire county council the expected cuts, which have yet to be implemented, will be enhanced by the fact that £150 million of taxpayers’ money has been saved by sensible management changes that hardly affect the front line—£150 million—yet in my local council, Watford, a council with a turnover of £18 million, we have a chief executive who is paid roughly the same as the Prime Minister, a mayor who is paid exactly the same as Members of the House, and an entourage of management levels that defy belief compared to anything in private business life.

I was very pleased to hear what the Prime Minister said yesterday about growth being so important, but I remind Opposition Members that growth is achieved not by spending money that the Government do not have and never wonder how to repay, but by businesses, ranging from the smallest to the largest, having the confidence in the economy to decide to expand, to raise money through friends and family or the stock market, to borrow money from banks that are able to lend it to them and to use every resource that they have to employ extra people. I have every confidence in this Government, and it is most important that we reward people who create jobs. Those are the people who are at a premium, and those are the people who have been stifled in the past.

There has been lots of talk about the Government making banks lend more money, and I commend the new funds that have been discussed. The new equity scheme, which the banks are putting together to provide £1.5 billion of equity for business, is a very good idea, and some of the schemes that the previous Government started and this Government are reforming and expanding are of course commendable. However, the real point is that, unless the deficit is dealt with not just in this country but elsewhere, banks will have to keep on lending money to Governments. Government debt has stifled banks here and all over the world. In the US the argument used to be, “The deficit does not matter”, but it does, because banks start lending money to business in quantity when they have confidence in the future and do not have to lend to Governments. We should not forget that.

The greatest thing about the comprehensive spending review is that it deals with the problem on a one-off basis. It is not being shoved under the carpet, put off or held over until after a general election, and for that reason, above all others, the CSR is the most fundamental and best thing that the Government could have done. The problems need grasping. The world of delusion that we have lived in for the past few years—the world of expanding public expenditure, with managers appearing all over the place at a cost to the public purse that taxpayers cannot afford—is coming to an end, and I for one am delighted about that.

Comprehensive Spending Review

Lord Harrington of Watford Excerpts

Wednesday 20th October 2010 Commons Chamber

[Mr Osborne]

We are spending more on transport projects over the next four years than was spent during the last four years. I have made every effort to prioritise transport spending, which has led to other questions coming down the line. Given that the hon. Lady is a Liverpool MP, I thought she might at least welcome the Mersey Gateway project. I am an MP for the north-west, as is the right hon. Member for Blackburn (Mr Straw), and we have been talking about the Mersey Gateway project for an awful long time. It is going ahead.

[Richard Harrington (Watford) (Con)]

Will my right hon. Friend confirm to me and my constituents that the purpose of today’s announcement is to take public expenditure back to 2008 levels, not 1888 levels as some Opposition Members have implied?

Finance (No. 2) Bill

Lord Harrington of Watford Excerpts

Monday 11th October 2010 Commons Chamber

[Richard Harrington (Watford) (Con)]

I start by congratulating my hon. Friend the Member for Skipton and Ripon (Julian Smith) on making such an excellent maiden speech. He was erudite, and he was absolutely correct in what he said about David Curry, a man I know. My hon. Friend described his experience from his constituency and as a small business man, and I have had exactly the same experiences myself. I could not disagree with a word he said, and he said it very well indeed.

I have listened to a number of speeches today—in fact, I think I was five years younger when I got here, although it was only a few hours ago. I did not want us to repeat the debate that we had on the Budget before the recess, because this debate is to discuss what the hon. Member for Wallasey (Ms Eagle) described as technical innards. However, we have heard about a lot more than technical innards, and much has been said about the economy in general.

I must say that I cannot believe the advancing amnesia among the Opposition. They seem to be in denial about what happened. The right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), as Chancellor of the Exchequer, decided that he wanted dramatically to expand the economy by borrowing a huge amount of money and spending it on almost anything that there was to spend money on, but it did not work. As soon as the Opposition’s denial ends and they say, “Okay, we tried it, but as it turns out it was irresponsible and did not work”, we can have serious budget debates. Instead, we have heard arguments such as those from the hon. Member for Wirral South (Alison McGovern) about people putting signs up in restaurants about a small reduction in VAT, which was apparently the great fiscal stimulus. I would love her to find one person in her constituency or in the whole country who said, “Oh, VAT is about 2% less, we’ll go and eat tonight.” Such things just did not happen.

[Alison McGovern]

I feel moved to defend myself. The point is that a VAT reduction would give the economy an immediate boost and signal temporary Government action to get us through. I believe that the hon. Gentleman is wrong about the impact of VAT cuts, but if he knows of some statistics or evidence I would be very happy to hear it.

[Richard Harrington]

Well, the cut cost in excess of £300 million, and it is common sense that people do not change spending decisions based on a 2% difference.

I shall move on, because time is running short and I wish to talk about two parts of the Bill. The first relates to the British film industry. The Bill contains a technical adjustment to film funding to allow more leeway in calculating the amount that is surrenderable for tax credit. That sounds complicated, but it is sensible. The real issue is the need for appreciation by this House of the film industry’s economic contribution.

I must confess to having a constituency involvement, in that Leavesden film studios, where much of “Harry Potter” was filmed, are in my constituency. The American company Warner Bros has announced that it is acquiring the site, and that there will be a big increase in employment. Hopefully those studios, as well as Pinewood, Elstree and many others, will continue their prosperity.

[Mr James Clappison (Hertsmere) (Con)]

My hon. Friend’s mention of film studios tempts me to intervene. As he knows, Elstree studios are in my constituency in Hertfordshire, and Hertfordshire as a whole has a world-class tradition of film making. “Star Wars” was made partly in my constituency, as were many other famous films—he mentioned “Harry Potter”. Does he agree that through financial incentives it is possible to build on that tradition and create considerable employment opportunities for many young people in a growing industry?

[Richard Harrington]

I thank my hon. Friend, and of course I agree with him. Our part of Hertfordshire is rapidly becoming the Hollywood of southern England—or its Beverly Hills, in the case of his bit.

There is no doubt that taxation of the film industry is important. According to a recent Oxford Economics study, the industry employs 35,000 people and makes a direct contribution of £1.6 billion to the UK economy. It pays about £445 million in tax, even without any multiplier effect being applied. The £110 million in tax allowances for it in the Bill and in previous Acts of Parliament represent very good value for this country.

Why am I speaking about the film industry, given that as far as I am aware the main political parties agree about the need to provide that assistance? It is because the industry provides an example of not only some of the best uses of Government credits, but some of the worst. Following an earlier Act of Parliament, the accountancy tax avoidance industry used perfectly acceptable vehicles for investing in the film industry as tax avoidance methods. Film and television producers have told me that their films or programmes, which were effectively pre-sold so that there was no financial risk whatever, were used to provide large tax benefits through comparatively risk-free investments. That opportunity was correctly removed about two years ago, but that does not mean that the Government should ignore the perfectly reasonable demand for very high-risk investors to have a tax-efficient vehicle to invest in the film industry. That is good for this country and leads to vast amounts of money and a lot of high-quality employment being brought in. I accept that the Government have much greater priorities at the moment, but I ask them to consider introducing a proper, tax-efficient vehicle for venture capital investment in the film industry, in a way that does not allow it to be used as a method for tax avoidance, which is quite unacceptable.

Secondly, I feel that because of my experience in business and the continual discussion in the press and the House about whether the banks lend enough money to businesses, I should tell the House of my experiences in Watford. I have spoken to most of the major banks there and to nearly 100 small businesses to find out the exact position. Members will know that a Bank of England document shows that the monthly average of new loans has gone down from a peak of £991 million in 2008 to £564 million in 2010, which is a significant reduction.

However, the real question is not the volume of loans being granted but the percentage of loan applications that are rejected. That figure is never seen. The banks’ criteria for lending used to be entirely based on property. Many business loans were really property loans in disguise, because they involved guarantees based on the personal houses of people who were borrowing money. Now the banks do not like lending money on property, so for the first time they are looking at small businesses’ balance sheets, cash flow and business plans. They are treating them as stand-alone instruments.

I observed the figures in Barclays bank’s main business lending office only two weeks ago. I saw people borrowing money and businesses having money advanced, but the reality is that the property-based loans, for the moment, have gone. That is one reason—not a macro-economic reason, but a practical reason—why lending is low. There is money available for small businesses. I agree that management fees are high. That is because banks have to spend a lot of time on a £50,000 loan, instead of just saying, “He’s got a house worth half a million, so we are not worried about anything else.” As we know, the spreads are high because banks can lend money to Governments for 2% over the base rate, so to lend to a small business banks have to consider a spread greater than that. There is more to bank lending than meets the eye, and we should consider the number of applications compared to the number of rejections.

I see that it is 8 o’clock. I know that other Members want to speak, so I shall leave it at those two comments.

Office of Tax Simplification

Lord Harrington of Watford Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Gauke]

I am grateful to the hon. Gentleman for welcoming these measures. The intention is that the OTS will be neither a tax-raising nor a tax-cutting body but a tax simplification body. It will make recommendations, and our approach, wherever possible, is to broaden the base and lower the rate. If, for example, there are recommendations that reliefs should be withdrawn, we anticipate that the money saved could be recycled into tax cuts elsewhere. The OTS should not be seen as anything other than revenue-neutral.

[Richard Harrington (Watford) (Con)]

I thank the Exchequer Secretary for this initiative on behalf of businesses small and large in Watford and elsewhere—but not on behalf of the tax accountants, who have not contacted me to say how happy they are. Does he agree that measures such as this, when the public and small businesses find things simpler, are very much to the advantage both of them, and of the Exchequer purse?

[Mr Gauke]

I am grateful to my hon. Friend. I know some of the tax accountants of Watford, and I suspect that they too will welcome this measure.

Oral Answers to Questions

Lord Harrington of Watford Excerpts

Tuesday 13th July 2010 Commons Chamber

[Danny Alexander]

Of course we have invited groups involving local authorities and local businesses to submit proposals for the establishment of local enterprise partnerships in the hon. Gentleman’s area and across the country to replace the regional development agencies. Local businesses will be very involved in those and will help to lead them. To judge from the earlier exchange involving other Members from the north-west, it seems there has been a positive welcome for those steps.

[Richard Harrington (Watford) (Con)]

T6. In view of the importance of this issue to Opposition Members and their colleagues in the other place, can the Minister confirm that there are no plans for the Government to introduce VAT on the sale of hardback books?

[Mr Gauke]

I can assure my hon. Friend of that, and that newspapers—there was a very interesting one this morning—will not have VAT imposed on them either.