Finance (No. 2) Bill

Bim Afolami Excerpts

2nd reading
Tuesday 13th April 2021 Commons Chamber

[Bim Afolami (Hitchin and Harpenden) (Con)]

I welcome the Bill. It is worth trying to get under the skin of Budgets, because it is so difficult. There are so many documents, there is a huge build-up, and large parts of it are incomprehensible to anybody other than the Financial Secretary. As Members of Parliament, we have to try to get under the skin of what, fundamentally, is going on here—what are the Government trying to do with the key measures?

In my view, the Chancellor is fundamentally trying to deal with one big thing that has not got enough attention in the House: our productivity problem. He is dealing with some of our deep-seated, deep-rooted economic productivity problems in two principal ways. The flashier one—and there has been some discussion of it today—is the super deduction, but I will not linger on that. In particular, I want to talk about the Help to Grow scheme, which is fundamental, transformative and can make a big difference to businesses across my constituency, Hertfordshire and, indeed, the whole United Kingdom.

On the super deduction, from listening to some of the criticism from Opposition Members, I do not think they really understand the nature of what is going on. One of the biggest economic problems that we have had for a very long time is a lack of private sector investment compared with our neighbours. That private sector investment has been further damaged by the covid pandemic for obvious reasons, as everybody appreciates. The super deduction is an inventive, creative, clever new way of turbocharging and increasing private sector investment and moving it forward so that we can help build back better during this very difficult phase that we are trying to come out of.

The hon. Member for Ealing North (James Murray) kept going on about tech companies. Well, I am afraid that he obviously has not read the detail. The super deduction is about plant and equipment. Plant and equipment tends to impact manufacturing businesses. I know that the Labour party is going through all sorts of internal difficulty and transformation at the moment, but it is a sad day when the Labour party cannot welcome measures that will benefit manufacturing businesses up and down this country.

[Sammy Wilson]

Furthermore, had the hon. Member for Ealing North read the detail of the Bill, he would know that the super deduction is on new capital equipment, not on second-hand capital equipment. So even the manufacturing of equipment, provided it is made here in the United Kingdom, will generate jobs and income for firms here in the United Kingdom, which will then, as the hon. Member for Hitchin and Harpenden (Bim Afolami) pointed out, increase productivity in the firms that invest in the machinery.

[Bim Afolami]

I welcome that intervention. Opposition Members have also been saying, “This is only going to benefit the big companies, and the poor small companies won’t benefit.” First, it does benefit all companies if they qualify. The smaller companies already have the annual investment allowance, which is continuing and has been welcomed by everybody, including by them. And—whisper it—big companies are important for our productivity too! Big companies employ lots of people, so it would be negligent of the Government to say, “We are not going to bring forward a measure that will help our economy because it might benefit big employers that employ thousands of our constituents.”

[Kevin Hollinrake]

May I add another point to my hon. Friend’s list of positives? Lots of the money spent because of the super deduction will be spent in the supply chain, thereby helping SMEs.

[Bim Afolami]

Indeed. I am having too much fun on the super deduction—I will talk about the Help to Grow scheme in a moment—so I shall finish on it. The super deduction is not something that the Chancellor just thought up as something that it might be a good idea to try; it is backed by fundamental economic analysis by people as eminent as Andy Haldane, the chief economist of the Bank of England, who I saw today has been appointed chief executive of the Royal Society of Arts. He is an incredibly able guy who has done a huge amount of work and thinking on this issue and is one of the many economists who have talked about investment being a key problem for our economy.

That brings me to the second key thing that the Budget will do for productivity: the Help to Grow scheme. So much of what we talk about in this place is the big numbers—the massive infrastructure projects, the huge budgets for the public services and all of that, which is all very important—but specific measures for small and medium-sized businesses often do not reach the Floor of the House. They are either hyper-localised in one’s constituency or they appear to be too big and too macro. The Help to Grow scheme could be really important, because it does two things that will directly help small and medium-sized businesses such as the family business that my wife runs, which employs five people, and hundreds of thousands of other companies like that.

First, the Help to Grow scheme helps to deal with our economic difficulty—pointed out by Andy Haldane, among others—which is that in most areas of the economy and of the country, we have an incredibly well-performing top 10% of highly innovative, successful companies, and we have our poorest-performing companies, and the gap between those two groups is greater than it is among all our competitors. That gap is around 80% larger in the United Kingdom compared with France and Germany. That is a significant economic difficulty for us. The question is: why is that the case?

The Bank of England’s analysis points out two key things among lots of different things. The first is technology adoption. In effect, the most successful, innovative companies adopt the newest technology and use it well, and the companies at the bottom end do not. The Government are trying to address that diffusing of knowledge throughout the economy and throughout different regions with the Help to Grow scheme. How? The Government are providing grants and assistance for productivity-enhancing software for companies in every single sector and the ability for them to get online help and advice on what technology to adopt. That could make a huge difference to hundreds of thousands of businesses all around the country and should be welcomed by everybody in this House.

The second aspect of our productivity difficulty is management and our utilisation of human capital—that is, the people who work in businesses up and down the country. How are we dealing with that? The Chancellor has an MBA from one of the best MBA schools—if not the best—in the world, Stamford, and went on to have a very successful career in finance. Not everybody will be able to do that or has the time and ability to do that, but everybody—right down to the small companies in each of our constituencies—can get huge benefit from access to high-quality management training provided by the very good local business schools up and down the country. The Help to Grow scheme gives the individual managers and owners of SMEs the ability to access that sort of knowledge, which is the sort of knowledge that most people running SMEs do not get.

If we combine that improved management capability—by the way, the Bank of England has identified that management capability is poorer in this country than it is in our competitors—with the adoption of technology, we have a ready-made mix of policies directly targeted to improve the most difficult aspects of our productivity problem. I do not know whether Help to Grow will deal with everything—I suspect it will not—but it will make a big difference, and it is a shame that so few Opposition Members have managed to understand and see the depth of seriousness of the Chancellor’s approach in that regard. That really needs to be brought out.

I shall finish—[Interruption.] Yes, I know I should finish. Hanging over us today is not just as an unusually cold April but the spectre of inflation potentially coming back in the next year, two, three or four years. There are many people warning about this from all over the world. If inflation does come back to whatever degree, interest rates may need to go up in future. If interest rates do go up, lest the House forgets, the need for fiscal responsibility will not have gone away. Small rises in interest rates do not just affect households trying to get mortgages or businesses trying to expand or to get debt; they also affect the Government hugely. Underpinning the Chancellor’s approach across everything I have said and lots of other things that have been talked about is a core understanding that fiscal responsibility matters. This Finance Bill helps to keep that in check, reminds the House of that, puts us on the right course and deals with our productivity problems, and I welcome its Second Reading.