Jobs and Growth

Guto Bebb Excerpts

Wednesday 12th October 2011 Commons Chamber

[Guto Bebb (Aberconwy) (Con)]

I hope that the five-minute time limit was not brought in because I was the next speaker. It is a pleasure to follow the considered comments of the hon. Member for Middlesbrough (Sir Stuart Bell). In particular, I welcome his comments about enterprise zones, which were also mentioned by my hon. Friend the Member for South Staffordshire (Gavin Williamson). The Jaguar Land Rover investment that he mentioned was bid for by Wales, too. It is a great shame that, as Tim Williams from the Welsh Automotive Forum stated, one reason why Wales lost out on that investment was the foot-dragging of the Labour Welsh Assembly Government, who refused to implement the enterprise zone process in Wales because it was a Westminster Government proposal.

The comments of the hon. Member for Middlesbrough were much more positive and balanced than those of the right hon. Member for Holborn and St Pancras (Frank Dobson), who decided to attack the credibility of bankers. He might be right, but when one is making a point in the House about the credibility of individuals, one should ask about the credibility of the shadow Chancellor, who advised the former Prime Minister to sell our gold reserves at a very low price. If we want to talk about credibility, we should remember the actions of Members on our own side as well.

This debate is about jobs and growth. I represent a constituency in north Wales where we have a significant small business community. That means that we have a lower dependency on public sector jobs in the Aberconwy constituency than in most of north Wales and most of Wales. That is not to say that the public sector is not important. I regret every single job lost in the public sector, but we have to acknowledge the fact that we must live within our means. The small business community in my part of north Wales has broadly welcomed the actions of the coalition Government. It has seen a credible approach to reducing debt, dealing with the financial crisis that we are facing, and creating a stable economic environment that will allow it to invest and create real employment opportunities for the people I represent.

However, in the context of the debate it is important to point out that there are issues that cause concern for small businesses. When I mention small businesses, I am talking about what most Members would describe as micro-businesses. In the 1980s, when we saw Wales recover so dramatically from the loss of the heavy industries, that recovery was based on the fact that Wales created more new businesses than any other part of the United Kingdom. I am certain that there are businesses in Wales that are willing to take that challenge forward, but there are issues that we need to deal with.

Those issues might not look very important to people dealing with swaps in the market in London and so forth. For example, one of the issues that small businesses in the tourism sector in my constituency resent is the VAT threshold. Most people would say, “What’s he going on about?”, but the VAT threshold is a barrier to growth. Someone setting up a small business in the tourism sector reaches a turnover level of £73,000 and faces a cliff edge—the fact that if they go on to turn over more than £73,000 a year, they are penalised by the system. Anyone who visited Llandudno this week would see cafes that have closed for the winter, bed and breakfast businesses—

[Mel Stride (Central Devon) (Con)]

My hon. Friend is making a powerful point about VAT and tourism. Does he accept that it is wrong that our tourist businesses, particularly those offering accommodation, are handicapped because VAT rates are higher in this country than in many of our continental competitors?

--- Later in debate ---

[Guto Bebb]

I am grateful for that intervention. It is my next point.

Let me finish on the subject of the threshold. When small businesses hit a turnover of £70,000, they are about to reach the point where they need to start employing staff. A system that penalises growth is something that we need to re-examine. I know that we have to do so in the context of the current financial situation, but small businesses in my constituency would be delighted if we could do something about the VAT threshold.

On the tourism sector, I am told I have more hotel beds in my constituency than the rest of Wales put together, so I am occasionally accused of pleading on behalf of the tourism sector when I say that it is a real concern that VAT rates on hotel bedrooms, for example, are being reduced to 7% or 6% in other parts of Europe, such as Ireland, Germany and France, yet in Wales we still have a 20% VAT rate. I have spoken with members of the Government about this and I have been told that we need to provide proof that a reduction in the VAT rate in the tourism sector would be beneficial.

A report that I have obtained from Deloitte indicates that if, for example, the VAT rate on hotel bedrooms was reduced from 20% to 5%, there would be an immediate cost of about £1.2 billion in the short term, but over the period of a Parliament, there would be a net benefit of £2.4 billion to the UK economy. When we recall that the Prime Minister stated that tourism should be a driver for growth in our economy and that tourism is a sector that employs people on a very large scale, we need to consider that. I would be grateful if we could receive some comment from the Treasury in due course on the issue and the need to examine it.

Finally, in the spirit of cross-party co-operation, which some Members have mentioned, the fact that Labour Front Benchers have decided to take on board the concerns of the construction sector is not a reason to dismiss the option of changing the rate of VAT charged on work to existing buildings. Many small construction companies argue that the current situation, in which there is a zero rate of VAT on new build but a 20% rate on refurbishment, is an anomaly that we must look at. There are figures that indicate that reducing VAT on refurbishment would be economically beneficial, and the fact that the Labour party has adopted it is not a reason to say no.