Amendment of the Law

Ian C. Lucas Excerpts

Thursday 24th March 2011 Commons Chamber

[Julian Smith]

My hon. Friend is absolutely right, but he will be facing stiff competition from the North Yorkshire local enterprise partnership, which will be seeking to get ahead of his proposal.

The most exciting aspect of yesterday’s Budget was the direction of travel the Chancellor set in respect of the conditions for business that he wants in Britain, because growth will ultimately be achieved through the individual efforts of business leaders, not through Government. The 2% cut in corporation tax signals to companies that Britain is once again open for business. It is now clear to every potential investor, in the UK and overseas, that this Government are committed to putting in place the best corporation tax rates in the G20 by the end of this Parliament. Overnight, global companies such as WPP have said that that will make a difference to their decisions on where to invest. That is great news.

The Budget also encourages those who want to set up a business to go for it. It contains a big nudge from the Government for people to give entrepreneurship a go. There is a golden carrot to dangle before those thinking of taking a risk: a 10% capital gains tax rate up to £10 million. The profit motive is a motivator, and the Budget clearly says, “If you believe in your business, take the risks and are successful, you will be much better off financially.” Therefore the message is, “Unless you’re a cracking singer or can dance like the Business Secretary, forget ‘The X Factor’ and ‘Strictly’; this Budget gives you a golden ticket to join start-up Britain.”

The moratorium on new legislation for small businesses with fewer than 10 employees will be a big relief for entrepreneurs, who need to be fully focused on jobs and growth rather than the latest wheeze from Whitehall. When I was a small business owner, dealing with employment law took more time than any other management responsibility. Employment laws and regulations have been piled on British business since 1997.

[Ian Lucas (Wrexham) (Lab)]

Will the hon. Gentleman give way?

[Julian Smith]

Not at the moment.

Let us be clear: employers want to get on with running their business. They want to allow their workers flexibility in their jobs and to give them training, but they also want to make decisions themselves. The changes in the Budget will provide welcome relief from administration, rules and red tape, which always come from new legislation. Opposition Members have already started putting about the myth of this being about “nasty Tories” who have no interest in equal rights. It is nothing of the sort. Labour took some good steps on employment, and we have accepted many of them, but the last Government ultimately failed to see that adding on regulation after regulation was counter-productive; they just did not know when to stop.

This Budget establishes two principles: first, that micro-business needs to be treated differently from other business, which is very important for my constituency; and, secondly, that creating jobs is more important than adding more regulations to existing ones. Everything we do should encourage business and make things easier for risk takers. Only by doing that will we get this country’s economy growing to its full potential. Jam-packed with other measures as well as the ones I have talked about, this Budget has set us firmly on the right course.

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[Michael Fallon (Sevenoaks) (Con)]

I remind the House of the interests recorded in the Register of Members’ Financial Interests.

I am sorry that the shadow Chancellor is no longer with us, because a couple of elements were missing from his speech. First, any sense of humility was lacking in one of the architects of banking supervision, who started with 10 well-funded banks and ended with only five. Secondly, there was no apology for the appalling deficit that we inherited. Let us be clear: it is 10 years to the month since the Labour Government balanced a Budget. That is nothing to do with something that happened in 2007 or 2008. They made the mistake of letting the deficit grow in the good years as well as the bad.

The Budget’s most important feature is that it does not change the fiscal consolidation plan. We remain on track to balance the budget again by removing the structural deficit by 2015. The Office for Budget Responsibility’s forecast is that we maintain our position on track to being able to do that.

Most of the meat of the Budget is also extremely welcome, and I am glad that Opposition Members have picked out pieces that they, too, can welcome as helping their constituencies. Simpler taxation and less regulation are the drivers of a successful economy. Businesses have enough to worry about at the moment; the Government should not be one of their worries. Reducing the weight of tax and red tape on our businesses is essential. I urge Ministers to stick to their task, regulation by regulation, tax by tax, until we can genuinely say that we have one of the most competitive economies in the west.

I also welcome the Budget’s emphasis on the longer term, backing the newer technologies, especially in energy and the environment, and taking the measures necessary to improve the employability of that huge pool that we inherited of people under 25 who are simply outside the labour market.

I am struck in my constituency by how many companies succeeded in growing even under the previous Government, without direct subsidy or specific grants. I visited three recently. The Sevenoaks energy academy, which I had the honour of opening last year, trains hundreds of engineers in renewable energies, providing courses in fitting solar panels, rainwater harvesting and so on. One of Sevenoaks’s most dynamic business women, Julie Walker, made a £1.5 million investment in that academy, and I welcome that.

[Ian Lucas]

Will the hon. Gentleman give way?

[Michael Fallon]

I will not, if the hon. Gentleman will excuse me.

Secondly, Vine Publishing is a new media company in my constituency that is heavily involved in all kinds of print and digital work. Its turnover now approaches more than £3.25 million and it employs 12 people. It was founded by three entrepreneurs, who dropped out of university because they preferred to go into business.

Thirdly, I attended the opening of the Ideal Waste Paper Company this month. It has built a major new recycling facility at Swanley—a £14 million investment, creating 60 new jobs and recycling more than 250,000 tonnes a year.

Those are examples of companies of the future, in the new technologies, the new energies and the new media. We should all ask ourselves how we get more of them. Of course, getting the long-term climate is right, but we must also address how to make it easier for people to set up such companies.

First, we must consider how we make it easier for them to start up. Like my hon. Friend and neighbour the Member for East Surrey (Mr Gyimah), who made an excellent speech, I support the Government’s enterprise incentive scheme, the entrepreneurs’ relief and the relaxation of planning. I would also like us to return to share ownership and consider how we can spread it more widely among those who work for start-up companies, particularly in the payment of dividends.

Secondly, we should consider how we make it easier for such companies to employ those who have been shut out of the labour market, and who might be viewed as too expensive or too risky to hire.

I welcome the Government’s initiative to reduce the number of cases going before employment tribunals. That is still a very serious barrier to employing more staff for small businesses. Finally, we need to make it easier for such companies to access the capital that they need; a number of hon. Members on both sides of the House have spoken about that.

I welcome the agreement on lending targets in the Merlin negotiations. Those need to be met, especially for smaller and medium-sized enterprises. Of course the banks are right to want more certainty on the capital and liquidity requirements, which are now being emphasised on all sides, from the Financial Services Authority to the G20 and so on, but I hope that there will be more focus on simpler business models with stronger regional networks, which can make lending to small businesses more worth while. We need such businesses to flourish, because they will create the jobs of the future.

The Chancellor was right in the Budget to help people to cope with the unexpected increases in the cost of living over the last few months, but I hope the Budget will also be welcomed for its long-term effects: keeping the public finances on track so that we eliminate the structural deficit that we inherited, putting Britain back into the black without huge changes in the tax and spending measures already announced, and helping to pump the oxygen of enterprise around the economy. It is nice, after 13 years under the previous Government, to welcome a Budget from a Government who believe in enterprise and are prepared to back it.

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[Ian Lucas (Wrexham) (Lab)]

We have had an important debate this afternoon on a vital subject, following on from yesterday’s Budget statement—a statement that, unfortunately, largely followed the course mapped out by the Tory Government, with their allies, in the announcements that they have made in the last year.

I hoped today that the long-trumpeted plan for growth, which has been so elusive as far as the Department for Business, Innovation and Skills is concerned, would be revealed in more detail. We have had the document, but the Secretary of State barely referred to it. In his speech he did not even mention enterprise zones, or provide any more detail or information to expand on the fairly threadbare set of initiatives in the document.

The Government inherited growth and have taken it away, they inherited falling unemployment and have caused it to rise, and they have squandered the low inflation that they inherited. The result, in constituencies up and down the country, is a profound lack of confidence in the future. The prospect of falling living standards is restricting demand, businesses are failing to invest, and as a consequence, joblessness continues to grow. The Government need to recognise the malign effects of their policies, but unfortunately the Budget offers more of the same—the same policies that have taken the country backwards, not forwards.

At least now the Government are talking of growth. They took a long time even to do that, and they have now given us a document, but that document takes us backwards again—back to a Thatcherite prescription for what is wrong with the economy, reheating policies that led to an unemployment count of 3.5 million twice under Tory Governments in the 1980s and 1990s. As we have just heard from my hon. Friend the Member for Streatham (Mr Umunna), the same thing is beginning to happen again. The OBR has identified that unemployment will be higher than it predicted last year because of the Government’s policies.

Lest we forget, the legacy of those years in the ’80s and ’90s was not success but a wasted generation of young people. What is so depressing about this Budget is the realisation that the Tories have learned nothing from history and intend to repeat it instead—and it is shameful that the Liberal Democrat allies they now have are acting as their accomplices. It makes me sick to the stomach to see the Liberal Democrats being more vehement than the Tories in their defence of Government policy in the Chamber, because they stood on the hustings and told the people who were fooled into voting for them exactly the opposite when they were asking for those people’s support.

The proposals put forward by the Government offer nothing new. Even the names bring back memories of the 1980s, with enterprise zones coming back from the dead. Those of us whose politics were defined by the mistakes of the 1980s remember that enterprise zones were not a success then. As Helen Miller, a senior research economist at the Institute for Fiscal Studies, said in response to the Budget:

“Past UK experience with enterprise zones suggests that their main effect may be to cause activity to relocate rather than to create new activity.”

We must recognise that the introduction of enterprise zones follows the dismantling of machinery to deliver regional growth. Local enterprise partnerships are still nascent and the Budget does nothing either to resource them adequately or to take them forward any further. They must do their work without assets or resources, and decisions on the allocation of resources are still being made not locally but centrally by the centralised regional growth fund. The hon. Member for Redcar (Ian Swales), who is not here today, pointed out in a debate in Westminster Hall earlier this week that 97% of grants given out by One North East were for less than £1 million, which is below the threshold for securing financial assistance from the regional growth fund. Where will small businesses secure the finance that was previously available to them? We must wait to see the detail of the proposal for enterprise zones, as we did not hear any more detail about them today, but I suggest that there is a vital gap in relation to small businesses, which needs to be dealt with.

The Budget is made in the context of a crisis in the construction industry, but the Secretary of State did not mention that industry in his statement. This week, the Federation of Master Builders reported that the proportion of firms reporting higher work loads fell from 22% in the fourth quarter of 2010 to 19% in the first quarter of 2011. Even this Government have finally recognised that their rhetoric on planning change and localism has had a profoundly negative effect on the construction sector and the housing market. Their move, in the Budget, to introduce a presumption in favour of development is a tacit admission of that fact. Equally, the crisis regarding first-time buyers, which the Government have ignored until now, is real and has had a profound impact. Any move to assist first-time buyers is welcome, but the help for only 10,000 for only one year is, as the Construction Products Association has today pointed out,

“a very modest step and is unlikely to make much of a dent in the 100,000 shortfall of new build that this sector is currently facing.”

We hear a lot of rhetoric from the Government about deregulation, but the action is less convincing. We have the “one in, one out” soundbite, but what about the groundwork—the hard work—of taking forward the regulation agenda of the Better Regulation Executive and the Regulatory Policy Committee? Where is the Government’s forward regulatory programme? Will what was produced by the previous Government finally come through? I would love to see that programme, because the Government need to come clean about the regulations that are going to be introduced.

[Gavin Williamson]

Will the hon. Gentleman give way?

[Ian Lucas]

I do not have any time to give way; I am sorry. I know that the hon. Gentleman had only three minutes, but I have only nine.

We agree that the country needs to rebalance the economy, and that is why the Labour Government set up the Advanced Manufacturing Centre in Rotherham and the National Composites Centre in Bristol. I encourage the Secretary of State not just to reannounce projects that were set up by the previous Government, but to support manufacturing with some projects of his own. We welcome the progress made on the back of favourable exchange rates, but there are worrying signs in leading companies such as Pfizer and Novartis that we may be losing the edge that we previously enjoyed in hi-tech industry. There are real concerns that cuts in our universities sector will threaten our primacy in science.

When this Government set their course last year they made the wrong choice. Labour’s plan to reduce the deficit was measured and it was working. The Tory Government’s plan is reckless and is not working, a fact evidenced by the ending of growth in the last quarter. The Budget’s downgrading of growth figures is also a fact. They have undermined the fundamentals needed to deliver growth—adequate demand and confidence in the economy—and replaced them with a lack of confidence among businesses and consumers. The result is that there is a real risk of slipping back into recession. We believe that the evidence is there to justify the need for the Government to take a different course. They must change course before they create a further Tory—and this time Liberal Democrat—wasted generation.