SMEs (South of England)

Debate between David Simpson and Dominic Raab

Wednesday 15th June 2011 Westminster Hall

[Mr Dominic Raab (Esher and Walton) (Con)]

Thank you, Mr Streeter, for the opportunity to speak in this debate. I join others in welcoming the ability of my hon. Friend the Member for Gosport (Caroline Dinenage) to secure it, and congratulate her on her excellent speech.

I welcome the various different fronts on which the Government have tried to lever up some economic recovery, through securing and retaining market confidence, which has brought us back from the cusp of default, and through some of the fiscal measures on corporation tax and the regulatory measures to which other Members have referred. None the less, it is worth pointing out some of the findings in the Institute of Directors policy paper that came out this week. It pointed out that the overall tax burden on small and medium-sized enterprises

“is a lot higher than the corporation tax rates of 20 and 26 per cent”—

it is closer to 32% and 43%—and that a business

“can expect to have to pay four or five months’ worth of profits to the state each year.”

That is worrying and, like the IOD, I would love to see the public finances permit a move towards the consolidation of national insurance, a reduction of the overall level of national insurance for employers and businesses, and further cuts in corporation tax.

That analytical view is bolstered by the feedback that I get regularly from local businesses in Elmbridge. They raise three major things with me. The first is credit—there is still not enough credit going to viable SMEs. The second is red tape. Like others, I would welcome it and congratulate the Government if they tackled some of the health and safety and employment law regulations. Thirdly, it is still too difficult to hire and fire in this country, and that is a major obstacle to growth. I would be grateful if the Minister could give an assessment of the one-in, one-out rule for the financial year 2010-11. How many regulations have come in and how many have been scaled back? It would be useful to know what practical progress has been made.

Like others, I welcome the cuts to both the main rate and the small business rate of corporation tax, but national insurance, as others have said, remains onerous. One aspect that is raised constantly with me as an MP for a constituency in the south-east is business rates and a feeling that our businesses are taxed more and more but get back less and less. Can the Minister give an indication of what progress has been made towards ensuring that local communities see a greater share of the revenue of the tax raised from businesses locally so that we can take some positive steps towards incentivising local business growth?

Much has been said already about the one-year national insurance holiday for start-up companies, but I understand that it is still not applicable in the south-east. Many Members present will recognise that we need to do far more to promote investment and infrastructure in other parts of the country that are not as well developed. Other measures of a more socio-economic nature, such as the pupil premium, encourage greater social mobility and economic development.

[David Simpson]

I have listened to every contribution. Does the hon. Gentleman agree that what we need to do in the whole of the United Kingdom is create the confidence that the business sector once had? Small businesses are fighting a rearguard action against the banks, the markets are not what they were, and small hauliers face opposition from and have to compete against hauliers coming in from Europe filled with cheaper fuel. We need to create the confidence whereby businesses of all sizes are prepared to take a risk again.

[Mr Raab]

I thank the hon. Gentleman for that contribution and I agree entirely with its sentiment and spirit. One of the concerns is that we will not get that business confidence back unless we do a bit more to bring down the regulatory and tax burden. On the national insurance holiday, I am concerned about the precedent of moving towards increasing regional tax subsidisation, which is, effectively, what we are talking about. Over the years, a wealth of research has shown that cutting business taxes may well increase revenue as a result of business growth. Is the Minister aware of whether any assessment was done of the fiscal impact of extending the national insurance holiday to all parts of the country, specifically in terms of what revenue would be gained back? Is that measure revenue neutral or even revenue positive? Such an approach would certainly be welcomed by businesses across my constituency.

In Elmbridge, I see a huge niche comparative advantage in high-tech start-ups—for example: Chelsea Technology, which pioneered the sensors that were used to clean up the oil slick in the gulf of Mexico; T R Control Solutions, which is a relatively small business that has pioneered the software being used in Whitehall to cut CO₂ emissions; Air Products, and Saville Consulting. There are many others. We are not going to rebuild the old manufacturing industries of the past, and there is no point harking back to the industrial revolution with doe-eyed nostalgia. What we can do, and what I hope we will do, is build and innovate in the areas of comparative advantage. The high-tech manufacturing industry is of particular comparative advantage in my constituency, in the south and for the country as a whole.

I am conscious of the time, so I will conclude my remarks. Again, I thank you, Mr Streeter, for giving me the opportunity to speak and I congratulate my hon. Friend the Member for Gosport on securing the debate. I hope that the Minister will address some of the specific points made when he replies.