The Economy

Lord Sheikh Excerpts

Thursday 28th April 2016 Lords Chamber

[Lord Sheikh (Con)]

My Lords, the past six years has seen great progress in rebalancing and rebuilding our economy. This Government have made some remarkable achievements in repairing the damage caused by the recession and by Labour’s financial mismanagement.

Since 2010, our budget deficit has been more than halved and more than 2 million jobs have been created. Employment now stands at a record rate of 74%. This year, we are forecast to grow faster than any other major economy. It is clear that our long-term economic plan is paying off, but we are still living through uncertain times and potentially turbulent waters lie ahead. Global growth is slowing, with concerns about productivity and levels of debt. We are also facing the possibility of global deflation if forecasts do not improve. Even emerging economies now face increased risks, not least with falling oil prices and China’s attempts to rebalance.

In such a tightly interconnected global economy, it is perhaps more important than ever that we maintain financial discipline. Precisely because Britain is an open and well-connected economy, we are vulnerable to changes in other parts of the world. As the Chancellor has continuously made clear, we must always maintain an economic strategy of “act now so that we do not pay later”. I am pleased that the Government’s policies ensure that we are indeed taking appropriate measures. I continue to applaud the further increases in the personal tax allowance, which is set to reach £11,500 in 2017-18. Allowing more people to keep more of their own money gives them more to invest in our economy through spending and saving. With regard to saving, it is important that we encourage people to save by making it as flexible and accessible as possible. Increasing ISA limits is also most welcome. Moreover, the announcement of a new lifetime ISA, with bonuses from government, is generous and practical. It will encourage people to invest in their own long-term stability for the purposes of home ownership and retirement.

An area where the United Kingdom holds specific concern is with our weak productivity growth. This is also the case in many other major advanced economies. The way to address this is by supporting business and enterprise. Announcements in last month’s Budget Statement sought to do just this. Perhaps most notably, the further cut in corporation tax to 17% in 2020 will benefit more than 1 million companies both large and small. Significant cuts in capital gains tax will also reduce the burden on businesses, allowing them to reinvest more. In a world where businesses can so easily move between borders, we must also try to attract and retain the best. I believe such competitive corporate tax rates will serve to welcome businesses to the UK.

We must remember that small businesses are the backbone of our economy. Last year there were more than 5 million small businesses in the United Kingdom. They account for 47% of all private sector turnover and 60% of private sector employment. Again, measures recently announced in the Budget, including cutting business rates on properties, will specifically benefit smaller firms. In fact, 600,000 small businesses will pay no rates from next year. Reforms of stamp duty land tax on non-residential property transactions will also help many small businesses to reduce their costs.

An instrumental part of building a strong economy for the future is investing in the education of future generations. The better educated our society is, the more innovative and productive we will be. If our education system does not compete with others around the world, ultimately our economy will not compete either. This Government have done much to improve the integrity of our education system and to enhance our skills base. I hope that continues. I also applaud the Government’s continued drive on apprenticeships. Eighty-three per cent of apprentices say that their career prospects have improved, and 70% of employers say that apprenticeships have improved the quality of their products and services. It has been established that apprenticeship training pays for itself within two years of completion through increased productivity. Therefore, young people gain skills while our economy becomes more productive.

I would now like to mention the importance of our membership of the European Union. I believe that this gives us significant economic benefit. The single market gives businesses free access to 500 million customers. The EU has signed trade deals with many other countries. Therefore, remaining a part of the union provides us with advantages within and outside the region. Renegotiating our trade relationships with so many countries would bring uncertainty and instability to our business climate. It would also bring extensive costs and use valuable resources. It could prove very damaging in the long term and undo much of the Government’s hard work. I commend the efforts of the Prime Minister and others in working towards us retaining our place in Europe.

I have raised on many occasions the need for us to undertake more trade with overseas countries. Indeed, bilateral trading relationships should be seen as a way of providing mutual benefit to all countries involved and of building economies on both sides. I applaud the announcement in January by UKTI of a new cross-departmental approach to boosting British exports. It is important that everyone in our Government is mobilised to work towards the same goal and can share knowledge and expertise where necessary. I note that this scheme will focus on priority markets and sectors.

In particular, I continue to place a great focus on trade with the African continent. Africa is home to many fast-growing, emerging economies. Some of these countries contain many untapped resources and opportunities. I have visited several African countries to look at issues relating to business and trade. I recently led a delegation to Sudan, during which we discussed matters of trade and investment, among other issues. We learned of many opportunities in agriculture, mineral extraction, infrastructure development and community services. I prepared a report detailing my findings, which has been very well received. We should be investigating such opportunities in places where clearly the global marketplace has not done so. International sanctions are currently hampering Sudan, and I hope that they can be looked into further by the Foreign Office.

Towards the end of last year, I was a member of a delegation to Ethiopia. I met the British ambassador in Addis Ababa, as well as the Ethiopian Trade Minister and several businesspeople, and visited several factories. Again, I was told of the numerous and diverse investment opportunities across a number of sectors, including fisheries, textile manufacturing, hydro-electric generation and construction projects. These opportunities run alongside the significant progress and growth Ethiopia is already making for itself. I also prepared a report following that visit, which has been sent to UKTI and the FCO.

When visiting those countries, I was encouraged that there was already a lot of joined-up thinking between our representatives from DfID, the FCO and UKTI. Our embassies served as cross-departmental hubs in this respect and are very well geared towards building our trade links. I congratulate the Government on their efforts to achieve that.

Last year I also visited Kenya, Tanzania and Zanzibar, and looked into investment in those countries. Here in the UK, I have recently met representatives from Kenya, Uganda, Nigeria and Ghana, and we looked at ways that trading relationships between our countries could be improved. I commend the Prime Minister on his appointment of trade envoys for different countries. If we involve those countries in trade and business, they can become self-sustaining. In turn, that will present us with further opportunities for trade in the longer period.

I would also like to mention the important role that Islamic finance plays in our economy. I declare my interest as co-chair of the All-Party Parliamentary Group on Islamic Finance. The UK has the largest Islamic finance industry outside the Muslim world. UK sharia-compliant assets now exceed $20 billion. Worldwide, the industry is worth approximately $2 trillion. I commend the Government on the active role that they have played in the development of Islamic finance in this country. In 2013 the Prime Minister confirmed the issue of a sovereign sukuk for £200 million. He also mentioned student loans and start-up loans on a sharia-compliant basis. We must accelerate the good hand that we already hold in what is one of the world’s fastest-growing industries. What intentions do the Government have to expand Islamic finance and consider the issuance of another sukuk? The previous one was 10 times oversubscribed.

I pay tribute to the work of the Government in rebuilding our nation’s finances, but I recognise that there is more to be done to ensure that our economy is secure for the future.