Finance (No. 4) Bill

David Rutley Excerpts

Monday 16th April 2012 Commons Chamber

[David Rutley (Macclesfield) (Con)]

It is good to follow the hon. Member for Dumfries and Galloway (Mr Brown), who makes an important point about staycations. I recommend coming to Macclesfield for a staycation. Nestled beneath the Peak district, and enjoying tremendous views over the Cheshire plain, it is a great place to be. It even beats Retford; the hon. Member for Bassetlaw (John Mann) will know that.

[John Mann (Bassetlaw) (Lab)]

But Macclesfield is about to be relegated.

[David Rutley]

Let’s keep football out of this. Coming back to the Finance (No. 4) Bill, it is tremendous to have the opportunity to speak in this important debate. Now that we are nearly halfway through this Parliament, it is important to think about our direction of travel. It is clear that under this Government, Britain has returned to economic credibility, and is laying the foundation for private sector and business-led recovery. Despite views to the contrary among those on the Opposition Benches, my right hon. Friend the Chancellor of the Exchequer has been proved right to chart the course that he did at the beginning of the Parliament. He was right not just to tackle the deficit head on, but to put the private sector at the heart of the growth agenda, where it needs to be. It is a consistent theme that came through loud and clear in the emergency Budget and the 2011 Budget. Now, in the 2012 Finance (No. 4) Bill, it continues to be pivotal, and at the centre of what the Government are trying to achieve.

There are a number of important proposed tax changes, which we have heard discussed by hon. Members, but I want to focus on the measures that have been designed to support British businesses, which are critical to economic recovery. First and foremost, I welcome the Government’s move to accelerate the commitment to having the lowest corporation tax in the G7. It is strange that no Opposition Members took any time to mention that, because that is where we will create new jobs. Having corporation tax at 22% by 2014 will give us real competitive advantage in attracting the investment that we need for sustainable economic growth. This Government’s plans are bold and ambitious, bringing the effective rate of corporation tax to a level below that of developed countries such as France, where it is currently 36.1%, Germany, where the rate is 30% to 33% and Canada, where the rate is 25% to 31%. I understand that even the Republican party in the United States proposes an effective rate of 25%. The measures set out in clause 5 will help us to increase business investment and will help us on our trajectory. I understand that the forecast by the Treasury suggests £3.4 billion of extra investment by British businesses, which is vital for the country.

Through the Finance Bill the Government have recognised the vital roles that innovation will play in helping to strengthen the economy. That is clearly demonstrated by the Government’s corporate tax road map, which came out in November 2010, with the introduction of the patent box, which features in clause 19 and schedule 2, and by the above the line research and development tax credit, both of which will come into effect in April 2012. Such tax measures complement the work that the Government are doing to support vital innovative businesses and industries, such as pharmaceuticals. The recently launched life science strategy will also help industry in the UK to tackle global challenges that are being faced in the pharmaceutical sector and will help us to keep this important skilled work force in the UK, just as I am working with AstraZeneca to do in Macclesfield.

The Budget sets out important steps to help the small and medium-sized enterprise sector. The SMEs will be the vital engines for growth in the sector, as many of us on the Government Benches are aware. The Budget’s £20 billion national loan guarantee scheme will help to reduce the cost of credit for SMEs, which 60% of small firms believe is unaffordable, and will provide an opportunity for small firms to motor ahead. Both the Federation of Small Businesses and the British Chambers of Commerce have welcomed this important and ambitious scheme.

The reforms of corporation tax and of corporate tax more generally have been welcomed by business. The forecasts suggest that they will save business £6 billion a year by 2015. That is money that will be better invested by businesses in new initiatives, enabling them to get on with the job of creating the work that many of us on both sides of the House are keen to see come to fruition. That is why the Budget has been welcomed by so many business groups and by the business community.

The CBI says that

“by seizing the opportunity to make sure our corporate tax system is more internationally competitive, he”—

the Chancellor—

“has sent a powerful signal to companies to invest, do business and create jobs in the UK.”

The IOD goes further and says:

“The reduction of Corporation Tax faster than planned is a positive step in the right direction”.

These are important signals and key messages from the business community showing support for what the Government are doing in this important area.

Although the debate today is rightly focused primarily on the tax-related aspects of the Budget, I shall spend a few minutes considering the supply-side reforms which will also have important impacts on the economy. That is why it is right to acknowledge the work that is being done by the Government in reducing the regulatory burdens faced by our businesses. As Ronald Reagan once said:

“It’s hard when you’re up to your armpits in alligators to remember you came here to drain the swamp”,

but this Government have not forgotten, and are taking action to drain that swamp.

The UK has more than 21,000 regulations on its books, and the Institute of Directors has calculated that the cost of those regulations is approaching £112 billion a year. These figures clearly demonstrate that we will benefit from an approach to deregulation that is every bit as ambitious as the Government’s deficit reduction initiatives and their tax reform strategies that will create the optimal conditions for growth. That is far better and more constructive than the demands from the Opposition for yet more Government spending.

The size of the prize is huge. Cutting the regulatory burden on businesses by just 10% would save British businesses about £11 billion a year. That is the equivalent of cutting corporation tax and the small profit rate by a staggering eight percentage points. Even by the standards of the benefits provided by the Bill, that is a hugely positive contribution to business. That is why the Government are pressing ahead with their deregulatory agenda. The one-in, one-out rule has helped to stem the flow of new regulations, and the red tape challenge is tackling the stock of old regulations. Reforms of health and safety regulations will help to free British businesses from a culture that is damaging the well-being of our economy.

Churchill once said:

“If you have ten thousand regulations you destroy all respect for the law” ,

and, just as relevant today, destroy a nation’s competitiveness. Working together, the Government and the private sector should continue to seize the opportunity and put the deregulatory agenda in a higher gear. This approach will be critical to complement the important work set out for businesses in the Bill.

Representing the Ribble Valley, Mr Deputy Speaker, you will be aware that many of the pro-business policies in the Bill will help to rebalance the economy in the country and across the regions, including the north-west. We have become too dependent on the public sector to create jobs, and we must change that, as we are doing. Despite much grumbling from the Opposition, there is evidence of success. We see important progress at Jaguar Land Rover, where 1,000 jobs are being created at Halewood by a 24-hour production line, one of the few 24-hour facilities in Europe. BAE Systems has been named a key contractor for the F-35 joint strike fighter, which will bring about £30 billion to the UK economy and safeguard 25,000 jobs, many of which are based in the north-west, near Mr Deputy Speaker’s constituency.

We have seen other positive news in recent weeks. In Crewe, near Macclesfield, thanks to a £3 million regional growth fund investment, Bentley has announced that it will create 500 extra new jobs. All these steps show that private sector jobs are being created. As a result, more employers in the north-west are feeling more optimistic about job creation opportunities. According to a March 2012 Manpower survey, 6% more employers in the north-west say that they intend to hire this quarter than in the last quarter, which is welcome news for the region.

We have heard much from the Opposition about job creation. My concern as I look at their policies is that, yet again, they are calling for more jobs to be created by the public sector, which are not sustainable. The jobs that the Government seek to create are sustainable. They are based on a private sector-led recovery. As I listen to the arguments from the Opposition, it is ever more clear to me that the previous Government were overspent, overdrawn and over-awed by the challenge that they had helped to create. It has been left to this Government to clear up that mess.

As we approach the halfway point in this Parliament, we can take stock of the progress that is being made to back business. Important strides have been taken to tackle the deficit, to address supply-side constraints and in this, as in previous Finance Bills, to create a truly competitive corporate tax environment. Such changes are much needed. That is why I add my support to the Bill today.

--- Later in debate ---

[Julian Sturdy]

Obviously, as a north Yorkshire MP who represents a rural constituency, I understand the impact of fuel prices on rural areas and economies, and the Government must consider that. However, as I said, the Government have to consider the wider impact when they make such decisions. They would like to do many things, and I would like them to do a lot of things—I would like the 3p rise not to come in in August, and I hope that it will be kept under review if oil prices continue to rise—but they have to take a balanced view.

[David Rutley]

Is my hon. Friend aware that every penny reduction in the fuel duty allowance costs half a billion pounds? I wonder whether the hon. Member for Bassetlaw (John Mann) and other Opposition Members can tell us how they would fund such changes in fuel duty.

[Julian Sturdy]

My hon. Friend is right that any cut in fuel duty or reduction in potential rises that are coming down the line has a huge impact on the Treasury’s finances, and the money always has to be found elsewhere. However, I go back to my original point, which will have some resonance across the House: rural areas are particularly affected by high fuel prices and that has an impact on the rural economies. I ask the Exchequer Secretary to keep the matter constantly under consideration whenever he looks at increasing fuel prices.