Foreign Direct Investment 2016-17

Debate between Alister Jack and Rishi Sunak

Tuesday 12th September 2017 Westminster Hall

[Rishi Sunak (Richmond (Yorks)) (Con)]

It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate my hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) on securing this important debate. He made an excellent speech surveying the issues before us today.

We have already heard that, a year after Britain chose to leave the European Union, FDI into our country is higher than it has ever been. The good news is that that is not just the case this year: Britain is consistently one of the world’s leading destinations for inward investment. While the UK accounts for just 3% of global GDP, we are able to attract up to 15%—five times as much—of the world’s foreign direct investment. We must always remember, however, that foreign direct investment is not just some financial statistic on a piece of paper. FDI creates real jobs—some 70,000 last year alone, of which 70% were outside London. FDI raises productivity with new management practices. FDI drives innovation, which fuels our future prosperity.

Having spent my professional life before politics working with and investing in businesses from California to India, I know that while our future trading relationship with the EU will of course influence FDI decisions, it is important to put that one factor into proper context. The pages of the Financial Times may talk of little else these days, but it turns out that only 20% of FTSE 100 annual reports even mentioned Brexit this year.

Mr Gray, imagine yourself in the shoes of a CEO of a global company deciding where to make your international investment. When you look at all the factors that drive that company’s investment decisions, you will soon see that Britain is excelling in almost all the areas relevant to you.

[Mr Jack]

My hon. Friend makes a valid point. When businesses look to relocate, they pay attention to corporation tax, but they also think about the tax that their employees will pay. Does he agree that it is a mistake for Nicola Sturgeon to make Scotland the most overtaxed society in the United Kingdom?

[Rishi Sunak]

I could not agree more with my hon. Friend, who makes an excellent point. I am about to come to the various factors that drive such decisions. A competitive tax regime, particularly for employee taxation, is a key part of that.

When it comes to human capital and a research base, Britain is home to four of the world’s best 10 universities. When it comes to a competitive corporate tax regime, our corporation tax rate of 19%, as we have heard, is the lowest in the G7. When it comes to supporting entrepreneurs, our enterprise investment scheme, seed enterprise investment scheme and entrepreneurs’ capital gains tax relief are second to none. When it comes to the regulatory costs facing companies, Britain is ranked by the World Economic Forum among the best large economies in the world. When it comes to getting a company the finances it needs, Britain boasts the most liquid capital markets anywhere in the world.

Lastly, when it comes to a legal framework that people can rely on to protect their investment, a third of the world’s population lives under the security of the English common-law system. Those are the key drivers of foreign direct investment, and I am proud to say that on every measure a Conservative Government have delivered, ensuring our universities are well funded, reducing corporate tax rates while increasing tax revenues, creating the SEIS and EIS programmes to fund hundreds of thousands of new businesses, and cutting pages and pages of unnecessary red tape. We can look at the outcome of all of that. Today, almost half of Europe’s billion-dollar start-ups were founded here in the United Kingdom, and the World Bank ranks Britain as the best major economy in the world to do business in: better than in the United States, Germany and France.

Although taking Britain out of the EU on the best possible terms is, of course, an important task, more important still will be the task that lies beyond it. Just as Britain never owed its success to Brussels in the past, we cannot expect Brexit to guarantee our success in the future. Staying at the world’s cutting edge will require constant dynamism from the Government. From my own experience, I point Ministers to three areas. First, at 1.7% of GDP, our research and development investment is still below the OECD average of 2.4% and half the rate found in Germany. Secondly, our nation’s infrastructure, from mobile telecoms to runways and airports, has not kept pace with the growth of our prosperity, and, according to the World Economic Forum, deters investment. We rank very low among large growing economies.

Lastly, our skills base lacks enough young adults with technical qualifications. Only 10% of adults hold such a qualification, putting us towards the bottom of the OECD league table. It is a shame that, among 16 to 24-year-olds, literacy and numeracy are no higher today than they are among people in their late 50s and 60s. I am confident that the Government understand those three challenges. Their new industrial strategy has the potential to keep Britain on the cutting edge.

However, I remind the Minister that we do not live in a static world. Everywhere we look, countries are innovating and looking at ways to attract human and financial capital and corporations to their shores, and we ourselves must constantly innovate. We need to look at smart regulations and infrastructure decisions that hold things up. We must continue, in spite of the current climate, to support free enterprise, for it is the best way to ensure our nation’s future prosperity, raise living standards and pay for the public services that we value.

The $250 billion that overseas businesses invested on our shores last year were not brought here by Brussels decree. That capital came because international investors know that our citizens’ ingenuity, our Government’s leadership and our nation’s world-class institutions will always provide them with a return. I am confident that, under this Conservative Government, that will continue to be the case for many years to come.