UK Economy

Debate between John Redwood and Bim Afolami

Monday 19th February 2024 Commons Chamber

[Bim Afolami]

I am coming to that.

The right hon. Lady started by talking about the Chancellor; as Economic Secretary, I am perfectly entitled to answer on behalf of the Department and I will do so today. The main thrust of her remarks was on growth; let me deal with that in detail.

The first point to recognise is the international context that we all find ourselves in. [Interruption.] It happens to be true. For example—to describe that international context—10 EU countries were in recession in 2023. In relation to forecasts, the Office for Budget Responsibility’s original forecast was that there would be a contraction of 1.5% in the economy; we have significantly outperformed that. As I have said, the Bank of England forecast the longest recession in 100 years; we have significantly outperformed that. On wages, I think this is the sixth month in a row when wages have been higher than inflation, which, as I have said, we have more than halved.

On the Chief Secretary, what she was explaining is that we were and are meeting our fiscal rule, which is that debt will be falling in the fifth year of the forecast excluding the Bank of England. That is what she explained, and that is what I am reiterating for the House. [Interruption.]

Labour Members do not like hearing this, but they have absolutely no plan on the economy. We have been clear about our plan, and it is starting to bear fruit with wages, with cutting taxes for working people starting in January, with higher business investment as a result of our full expensing in the autumn statement. The shadow Chancellor does not have to take it from me; the Office for Budget Responsibility said that the two fiscal events in 2023—the Budget and the autumn statement—would represent the largest increase to GDP that it has ever scored. What I say to her and the House is this: our plan is working; stick with the plan and do not throw it away with the Opposition.

[John Redwood (Wokingham) (Con)]

It is good news that unemployment has stayed low by European standards, and the economy is still generating plenty of job vacancies. Will the Government take more steps to help more people into those jobs, so that we can get faster growth, bring down the benefit bill and boost their incomes?

[Bim Afolami]

The whole House knows that my right hon. Friend is somewhat of an expert on matters relating to the economy. To answer his point specifically, the national insurance tax cut was scored at the last fiscal event—the autumn statement—as significantly increasing the number of people in work. Although I will not speculate on fiscal events, that point has been very much noted by me and the whole Treasury.

Digital Markets, Competition and Consumers Bill

Debate between John Redwood and Bim Afolami

2nd reading
Wednesday 17th May 2023 Commons Chamber

[John Redwood (Wokingham) (Con)]

Competition is by far and away the best regulator, and I pay tribute to all those in the House, including my hon. Friend the Member for Weston-super-Mare (John Penrose), who have pointed that out; I am delighted there is cross-party agreement. The point he made needs stressing: we are dealing with a limited number of regulators here today, but there are many other regulators and much of their task could be better done by following competition as the prime means of enforcing choice. I should say that I have declared my business interests in the register and none of my comments relate to financial services as a result.

The regulators would be well advised to heed that advice and, instead of intervening in detail and trying to make very difficult distinctions and definitions that affect a complex marketplace, with the interplay of so many different consumers and suppliers, just stress that if there is effective choice and challenge in the market, normally there can be no harm.

Labour has said that it could be that an online supplier of goods and services was not offering a good deal, but I am less worried about that if there are shops in my local high street, because I do not have to use the offer by the online provider. The online provider themselves will anyway be subject to the challenge of other online providers. One advantage that the online retailer has is that the cost of entry is so much less than that required by those who wish to set up a formal shop with a property. If an online retailer, however large they might become, starts to offer very poor deals or offers, there will be plenty of challenge to that emerging in the marketplace.

In a fast-changing world where the market is extremely good at challenging, developing and changing offers overnight, we need to be careful about becoming too prescriptive. We may come up with a perfect solution to perceived problems of some suppliers at the moment only to find that, tomorrow, there are very different problems from different suppliers and that much of it can be taken care of by that pursuit of competition.

My main concern about all of this for our country is that competition only works, in the benign way that we know it can, if we have sufficient capacity. There is a danger, encouraged by the Opposition and pursued by the Government, that today we are so keen to regulate, to intervene and to tax anybody who makes a good profit; to provide a subsidy to anybody who has a failing business; and to decide that the Government know best about what consumers ought to buy and ought to want, that we end up with too little capacity in a number of crucial areas. That means that, instead of helping the consumer, we hinder them. Instead of having moderate prices with few rises, we have even higher price rises because there is insufficient capacity to meet the market demand. Instead of providing that perfect background for entrepreneurial businesses, which Labour and Conservatives are united in wanting, we send a hostile message to businesses. Those businesses then find other places with greater freedoms and lower taxes as the ideal place in which to experiment, to set up and to seek to export from, rather than from the United Kingdom.

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

I thank my right hon. Friend for giving way. In relation to his very good point about capacity, what is his view about the need to ensure that we remain open for business internationally and remain an attractive place? Moreover, what is his view about the role of the regulators in that context, particularly the CMA, because of course capacity can come from other countries into our own market?

[John Redwood]

Indeed. I do not wish to go into the details of a recent case, because I have not studied all the documents, which would be necessary to do justice to both sides of the argument. Thinking back to when I was competition Minister—a good while ago now—when I was acting for the then Secretary of State, there was a difficult issue that arose over media challenge to the then existing limited number of media players where two of the new services wanted to merge together. I recommended, and we decided, that the two should be allowed to merge because they made a more effective competitor to what was already there, rather than taking the narrow pro-competition view that we needed to have two new challengers. The danger was that they would both fight each other to the death and leave the main media institutions—ITV and the BBC—unchallenged by alternative services.

The regulator has to understand that competition is not always furthered by blocking something; sometimes it can actually be furthered by encouraging the new. The main issue in competition law is often the definition of what is the market. I have already mentioned retail. If the market is online retail, we might want to stop a successful online retailer growing by acquisition, but if the market is retail, we might want a strong online competitor in order to challenge the previously dominant shop retailers. However, it is now coming to the point where it may be the other way around—where we need to be worried about the adequacy of the conventional retailer response.

Let me illustrate the importance of the central issue of capacity to the debate. One thing that has been extremely scarce—this has been blamed by many for the worst part of the inflation we have been experiencing—is energy. If the United Kingdom persists in saying that we do not want to get our own gas out of the North sea, we will not automatically transfer to green electricity; we will import gas from somewhere else. By doing so, not only will we damage our economy, as we forgo the jobs in the North sea and the cheaper gas, because the imported gas will be dearer; it will also be much worse for the environment, because by delaying or blocking the gas that we could get out, we will automatically import more liquefied natural gas. LNG generates at least twice as much CO₂ as burning our own gas down a pipe because of all the energy entailed in compressing a gas, liquefying it, transporting it and then converting it back to the gas that we need to use. It is therefore a doubly foolish policy.

We need to expand our capacity in energy where it is available and we need to understand that there are huge economic gains to producing our own. We also need to be worried about national resilience. If we wish to say that we can defend our country and its allies, it is terribly important that we produce enough for ourselves. Having energy self-sufficiency is always critical to having a country with resilience and strong defences.

The electrical revolution seems to be popular in most parts of the House of Commons, with people urging the Government to achieve a faster electrical revolution, switching more and more people from being predominantly users of fossil fuel—most of us predominantly use fossil fuel with a petrol or diesel car and a gas boiler—to using electrical means for our main energy uses. If we are to pursue that electrical revolution, there needs to be a massive expansion in grid capacity and in cable capacity into everybody’s homes, offices and shops. It is simply not possible at the moment to generate the competition that we want for electricity against fossil fuels, and within electricity for renewables against more traditional ways of producing electricity, because the new renewable ways are so grid intensive and need so much more grid and cable capacity—we have to time shift them because they are often not available—that we are not going to get very far.

Already, I have helped with a major investment in my constituency, which was very welcome. One possible stumbling block was that the electricity companies could not offer enough power for the particular business development. There had to be an agreement over how much power the development could have available, because there was not limitless power for it to buy. The issue was to do with grid capacity. We will find that that becomes more and more common if we do not get on with dealing with this particular issue.

A very topical issue today is capacity in motor vehicles. If we are to have a full range of choice and enough domestic production, it is not a good idea to ban the sale and therefore the manufacture of petrol and diesel cars as early as 2030, when no other major country in the world is doing so and when there will still be quite a lot of buyers who want petrol and diesel cars. I urge the Government to understand what competition choice means. It means that people will buy electric cars when they want to buy them. They will buy electric cars when they are cheaper and better, and when they believe that the range is right and that the necessary back-up facilities are in place. I have no doubt that electric vehicle sales will grow, but it would be quite wrong to have an artificial injection of policy to ban older cars and prevent capacity and choice.

If the UK does not have battery production capacity, all we will do by banning petrol and diesel cars is destroy the successful industry that we have, which makes extremely good petrol and diesel cars, without having the replacement industry in place. It is not a simple matter of switching the production line from a diesel car one day to an electric car the next; it is a totally different product, built in a totally different way. An electric car needs a battery, which may be 40% of its value, and currently we cannot produce those batteries in any numbers to replace the capacity that we wish to cancel. I urge the Government to think again about consumer choice, competition and investment flows, because there is no way that people will want to invest serious money in the UK motor industry if its regulatory environment is more hostile than those elsewhere.

I was pleased to see my right hon. Friend the Prime Minister take a great personal interest in food production. I believe he held a very successful seminar yesterday and asked the Secretary of State for Environment, Food and Rural Affairs to go away and work up a series of measures. I do not doubt the enthusiasm of my right hon. Friend the Secretary of State, which I fully share and have often promoted, for us to grow much more of our own food in this country and to offer that much more choice to people in our supermarkets. However, when I look at the package of measures the Department has brought forward, there is hardly anything in it that would carry that ambition through.

The Department still intends to spend most of its subsidy money, most of its exhortation and a great deal of its regulation on encouraging farmers not to produce food, to wild their land and to achieve great things on managing the landscape for us all. That is all very nice, but it is possible to have perfectly attractive fields growing food, and that is clearly what we need rather more of.

We need to back the new robotics, artificial intelligence and electromechanical technologies that could transform the production of fruit and vegetables and other market garden products, as they used to be called, where we have allowed our market share to fall dramatically in the last 30 or 40 years. We are now reliant on imports, which limits choice, drives up prices and puts our national food resilience more in doubt because, were there to be problems with the supply from our normal suppliers abroad, I am sure we would be towards the back of the queue when it came to getting to what we needed.

I am conscious that others wish to speak in the debate, so I will not go into every sector, but the Government need to review sector by sector what they are doing that could help to increase capacity. Can they not reposition their subsidies, grants and direct investments, which they are making around the place on a pretty colossal scale, in a way that promotes that capacity and thus eases the position for competition? There is a particularly worrying trend at the moment—one that is bad for public spending and bad for business—that we make so many confused interventions that we need another intervention to deal with the previous intervention.

I will finish on the issue of high energy usage industries—steel, ceramics and other similar industries—which are gravely at risk. We have lost colossal capacity and market share under Governments of all parties since I have been around watching such things. The danger is that that loss will accelerate from here because we decide to impose the highest carbon taxes of any advanced-world country, as far as I can see—another major problem for the cost base of industries that are struggling to compete—and we then draw back in horror when we see that there could be closures and job losses, so the Government put some subsidies back in and we have a subsidy trying to countervail the tax. However, the subsidy is usually not as much as all the taxes combined, because when we add the 31% corporation tax—should there be any profits, and unfortunately there often are not—on top of the windfall taxes on the energy companies and on top of the carbon taxes on the steel and ceramics businesses, the tax burden is colossal and would be punitive were businesses to succeed and start making money. The demand for subsidy then becomes greater.

To have a competitive market would be extremely welcome. We have a market that is not nearly competitive enough. I ask the Government to look at what they are doing, because I think they are in danger of doing counterproductive and contradictory things: taxing too much, subsidising not quite enough and then inventing rules that stop people doing business.

Finance Bill

Debate between John Redwood and Bim Afolami

Tuesday 31st October 2017 Commons Chamber

[Bim Afolami]

I am. The hon. Gentleman made some interesting remarks, but I am going to pick him up on one phrase, which we should think about and bear in mind as we look not only at the implications of new clause 1 but at the Bill as a whole. He said that the British public are no fools. As I listened to him expound on that, I thought to myself, “The British public in the public gallery and the many millions undoubtedly watching the debate at this moment are no fools and will realise that this Conservative Government, since 2010, have brought in more than £160 billion-worth of anti-avoidance and tax evasion measures.” The British public are no fools. They will realise that the Conservative Government, since 2010. have reduced the tax gap—the gap between what should be collected in tax and what actually is collected—to 6.5%, the lowest that has been recorded. The British public are no fools and will see that this Government, a Conservative Government, will abolish permanent non-dom status for the first time. Those are the practical achievements that the Bill helps to build on.

On the precise nature of new clause 1, I can do no better than agree with my dear and honourable Friend the Member for Chelmsford (Vicky Ford), who suggested entirely accurately that the timing of such a review may cause disruption. It may be a significant disincentive and difficult from a business perspective because of the Brexit negotiations and the situation at that time. It is also important for us, whatever party we represent, to recognise that this Government are making the case for a sustainable fiscal policy that makes sense in the modern world.

We have heard from many Members on both sides of the House about the international context in which we operate. We are in a smaller world; we all know the impact that technology and ease of travel are having on every aspect of life. Bearing that international context in mind, things are more competitive. We cannot rest on our laurels.

[John Redwood]

On that point, would my hon. Friend care to reflect on the issue of footballers? The Labour Front-Bench team was saying that footballers often got away with things under this heading, whereas I thought many people in Britain like the idea that very talented footballers could come to our country for a limited period of time under sensible arrangements for their tax affairs. Does my hon. Friend think that is reasonable?

[Bim Afolami]

Not only do I agree with my right hon. Friend about footballers, but I think that most people—among the millions watching this debate, as I have said—will recognise, because they see and enjoy the top-quality premier league football in this country, the impact that top foreign players make. It is not just footballers but music stars, artists, creatives, writers, financiers, businesspeople, entrepreneurs—all of them can be such an asset to this country. Footballers are a very visible example, but we should not forget the more hidden, less public face of that. Britain is good at attracting such people, and we should continue to be good at it, and be proud of that fact in this House.

On the Bill, the Government are making the case for a sustainable fiscal policy, and we must bear in mind the case for the simplification of taxes. The hon. Member for Aberdeen North (Kirsty Blackman) always makes good speeches, and made the point that simplifying taxes is a good aim that we should always think about. The Minister, the Government and everybody in this House should always be thinking of ways in which we can make things simpler. We should also always be thinking about ways in which we can make things fairer, and ensure there is a genuinely level playing field for all businesses that seek to work in this country. That is not only fair from an ethical perspective, but having a level playing field is an integral part of what makes Britain a good place to do business. We should focus on both simplifying our tax code and on making it fairer.

--- Later in debate ---

[Bim Afolami]

I hugely respect my hon. Friend. It is worth mentioning for the benefit of those who do not know it that he was a top tax lawyer, so he knows the value that complexity brings to tax lawyers in the City of London. On his point about the EU, I am no expert on these matters and defer to the Minister and other Members, but my view is that we must be more realistic and accept that a lot of things are of our own making; and with the advent of our leaving the EU we have the opportunity to make ourselves even better as a place to do business. I am sure that my hon. Friend and the Minister would support that.

[John Redwood]

The problem with the comments of the hon. Member for Aberdeen North (Kirsty Blackman) is that she wanted both a simpler tax code and to close loopholes. As I understand it, a great deal of its complexity and length has come from adding detailed ways of trying to close the loopholes, so there is a conflict there. Genuinely simpler tax codes have fewer taxes, which would be a great start, as would having lower rates with a common tax base. At present, however, we have too much complication, partly because of trying to close loopholes.

[Bim Afolami]

I accept that point. Members present appear to be reaching consensus that the Government should always be thinking of how to balance the need for fairness and simplicity with closing loopholes so that people do not take advantage of the fair laws in this country.

Many Members have discussed in the speeches made so far—I told you, Mr Speaker, that I was listening—the importance of businesses bringing in money to fund our public services. We all recognise that that is important; indeed, it is the reason why many, if not all, of us became Members of Parliament. However, it is also worth making the point that having a thriving economy in which individuals, on their own merit and through their own effort and time, can make the most of themselves is in and of itself a good thing. We should not always revert to thinking about business as something simply to be milked for the Exchequer; the Exchequer, the Government and Parliament should set, and are setting, a clear, simple, as-low-as-possible framework in which individuals and corporations can thrive. That is the sort of fiscal and economic policy that I support.