Growth Strategy

Kevin Hollinrake Excerpts

Tuesday 21st January 2020 Westminster Hall

[John Redwood]

Indeed, and I welcome the emphasis placed on that by the Prime Minister and Ministers. I hope that we can give them some more ideas on how that can become realistic policy. I am just setting the scene: there has been a big change in the aim of policy, which I warmly welcome. I suggest to the Minister and others that lower taxes might be an important way of trying to develop that aim. The experiment conducted on both sides of the Atlantic seems to suggest that countries with the ambition and desire to cut taxes on working incomes and businesses will experience more growth and success. We have seen a lot of money repatriated to the United States of America by big businesses, which now find the tax rates acceptable and therefore do not require the same legal structures—I am sure they were behaving legally—to keep the money offshore or not to pay taxes for the time being in the United States.

The United Kingdom Government have, even during difficult times, decided on lower corporation tax rates. I think we have a competitive corporation tax structure. Our lack of tax competitiveness rests in the treatment of individuals and income, and employment costs, rather than corporation tax, where we have done a good job relative to continental Europe. We are benefiting from that. It was good to hear it announced this week that the UK is now the third preferred destination for technology investment after only the United States and China—two economies much larger than our own—and that we are attracting more investment than the combined totals of France and Germany, so we must be getting something right in our approach to business investment and the taxation of business profits.

The Government have already set out a new fiscal framework, which I welcome, because they understand that it is not sufficient just to set a new aim for policy—they need a fiscal framework to deliver it. They have directly addressed the issue of state debt, saying that they will not spend money on revenue matters that is not covered by taxation—a prudent control on the situation—but they have also said that there is nothing wrong with the budget deficit expanding from just over 1% to 3%, if the purpose is for good investment, especially given the very low rates that the Government now have to pay to borrow money.

I think that is a sensible compromise that gives us a bit of scope in the public sector. I trust it will also leave us scope to lower tax rates, which is important for getting extra growth from the private sector, where much of the growth will come from. Today, the Government’s 10-year borrowing rate—if they needed to borrow more money from the market—is 0.63%. One would assume that the public sector can find investment projects and get a return considerably above 0.63%, so I fully endorse what they are trying to do.

I hope we can accept the new policy aims and the new fiscal framework, which give us flexibility, and think about what additional policies the Government might need to adopt to boost that growth rate. I have been predicting for some time that we would have a marked slowdown in the United Kingdom, as a result of the fiscal tightening that we have experienced until now and the monetary tightening that the Bank of England has implemented. It has been very curious that the Bank of England has detached itself from the world’s central banks over this recent very marked slowdown in world activity. The slowdown was led by an actual recession in manufacturing in most parts of the world; the centre of the storm has been in the motor industry, but it has also extended more widely into the consumer and service areas.

The rest of the world’s central banks are busily fighting that, and so we have seen a succession of interest rate cuts in countries with interest rates that could still be cut. We have also seen a resumption of quantitative easing programmes in the European Union, after it perhaps rather foolishly abandoned them at the end of the previous year; we have seen continuous large quantitative easing programmes in Japan; and in China, we have seen a big reduction in the required capital of banks, so that those banks can lend more to the private sector and expand China’s economy, which has also slowed quite markedly.

I suggest to the Treasury Front-Bench team that they look very carefully at the centre of the downturn that we have seen worldwide and mirrored here in the United Kingdom, and in particular at the motor industry. The motor industry was hit by higher taxes on consumers in China; it was hit by changed emission regulations on the continent of Europe; it was hit in the United Kingdom by increases in vehicle excise duty in the 2017 Budget; and it was also held back by Bank of England guidance warning banks against lending too much money for car purchases, in a market where practically everybody buys a car on credit, rather than their having the cash to pay the considerable sums that cars cost these days. So there was a very predictable slowing of the UK car market, in parallel with the slowing going on elsewhere.

That was compounded by the fact that the UK had been incredibly successful at building a very large diesel car industry, and in particular a diesel car engine-making industry in the United Kingdom, just in time for the EU and the UK to become very hostile to diesels and send out the message that people really should not buy diesels, and that in future diesels may even be taxed or regulated off the road. There could also be new controls on diesels, with the Government, in common with the EU and other Governments, wanting people to buy electric cars before they felt confident enough in electric cars, or before the prices of electric cars come down to a more realistic level for them to be a feasible opportunity for people. So we have seen in the UK, as in China and in Europe, a big decline in the sale of traditional diesels, and there has not been an off-set in sufficient numbers by the new vehicles that are being introduced.

So the Government need to look at the car industry and recognise that the issues affecting it are a combination of taxation, availability of credit, and messages about what kind of car people are allowed to buy and drive. The industry needs to be given some time to complete the transition that Governments want, and it is not yet in a state where it can sell enough electric cars to immediately replace the lost capacity that it is experiencing on diesels.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I thank my right hon. Friend for securing this very important and wide-ranging debate. He mentioned the car industry, which is largely based in the north-east of England, but it based itself there because clear incentives for it to do so were provided by the Government at the time. Does he agree that if we are going to rebalance this economy and level it up, we will need some incentives for businesses to start up in or relocate to some of these areas?

[John Redwood]

Yes, I am happy for there to be attractive reasons why people should go to the parts of the economy that have been less heavily invested in and that are less pressurised. However, with cars the issue is demand; there is not enough demand for the very good cars that the industry currently makes. The Government want to change the kind of cars that people buy, but it will take time for Britain, or anywhere else for that matter, to be able to produce the millions of electric cars that the Government want us to buy, at a price and to a specification that people like.

So, this is a top-down revolution and the public are not yet fully engaged in it in the way that the Government would like them to be. When polled, the public say that electric cars are a very good idea. However, when they are then asked, “Well, when are you buying your electric car?”, the answer is, “Well, not yet. Not me. I want a better subsidy on the car, I want a lower price, I want a higher range”—whatever it is.

There are still issues about engaging the public, which is why we are getting this industrial dislocation. China has experienced exactly the same thing and one would have thought that China would have continuous growth in cars, because it is coming from a much lower level of car ownership and individual income. However, even in China car volume is down, because of the regulatory changes and the dislocation involved in going from traditional product to electric product.

In addition, the Minister and his colleagues should look at the issue of property. Property is a very important part of the UK economy. It is often an asset base for people to borrow against in order to develop their business, and it is often the main way in which individuals hold their personal wealth. By buying a house on a mortgage and gradually paying the mortgage off, property often becomes people’s principal asset, which gives them some wealth and financial stability.

However, we have a property market in the UK that has been damaged by the very high stamp duties that were introduced under the previous Government, and the Government should look at that issue very carefully. I do not think that the Government are even maximising the revenues from stamp duties, and it might not be a bad idea for them to ask, “What are the rates that would maximise the revenues?” At the higher price levels in property, transactions have been very badly affected; indeed, they have been massively reduced by the very high rates at the top end of the market. So, the Treasury constantly has to revise down its forecasts of how much revenue it collects from stamp duty.

A more free-flowing property market would be a very good thing, because it would create all sorts of other work for people who are in the refurbishment and removals business, and above all it would allow people to fit their property needs more closely to the property that they have. A lot of potential switching in the market is being frustrated: some people have houses too big for them but they do not fancy paying the stamp duty on the trade-down property, and other people would like a bigger property, but the stamp duty would be just such a big addition to the higher price that they would have to pay for that property.

[John Redwood]

Most people buy a house because they want somewhere to live that is theirs, and that they can then do up and change in the way they see fit, subject to planning. But yes, of course, it is also a way of holding wealth, and I repeat what I said: for many people it becomes their largest single asset. I do not think that is a bad thing. I do not think that people are treating their main property as a trading counter; it is where they wish to live, and they will only move when they want a different house, mainly for living purposes. People would only be able to buy property speculatively if the property was their second or third house, and not many people are in the fortunate position of having such wealth.

There is no absolute protection against house prices going down; they do from time to time, as the hon. Member for Glenrothes (Peter Grant) pointed out. However, if someone’s aim is to live in a house long term, and if they have taken out an affordable mortgage, temporary fluctuations in house prices are not life-threatening or wealth-threatening to any worrying extent, and they will just live through the period when house prices dip because there has been a recession, or whatever.

Fortunately, we do not seem to be looking at such a situation in the immediate future, and it is very important that we have a growth strategy, so that the slowdown in the economy that we have experienced in recent months is turned around quickly and does not become something worse, which could have negative consequences in the way that the hon. Gentleman talked about.

So my No.1 message to the Government is not to underestimate the damage that clumsy taxes can do, and they may even end up costing the Treasury, as stamp duty has done, because it is not collecting as much as it should. That is probably the case with vehicle excise duty as well, because of the volume impact on new cars, which relates to a whole series of factors; it does not just relate to the vehicle excise duty, but that was another complication in the situation.

As the Minister has this particular responsibility, I urge him to look again at IR35. We want a very flexible economy in which people can choose flexible employment, rather than have it forced on them. We have had a relatively flexible small business sector, but it is being damaged by the top-down imposition of the IR35 rules. I hear all sorts of stories from across the country of people having to stop their contracting business or losing contracts because the big companies that might employ them are worried they might get dragged into a retrospective tax increase in employer and employee national insurance. That is damaging the small contracting sector, and I urge the Government not to carry on doing that when we want to encourage more self-employment and allow self-employed people to go on to build bigger businesses.

One of the Office for National Statistics figures I saw recently, which I found fascinating, was that in London there are more than 1,500 businesses per 10,000 people, whereas in the lower income parts of the country there are half that number. There is a huge gap between the volume of enterprise in London, which is the richest part of the country in terms of average incomes, and much of the rest of the country, where incomes could be higher. It is not easy to break into why there are so many more businesses in London. In part, it is because people are better off and have more spending money—demand is important in setting up a business—but it is also to do with the general business environment and the concentration of people, talent, enterprise and spending power that we see in the capital. We need to do something similar in other parts of the country. Building more businesses is crucial, and IR35 is getting in the way of doing that.

Some 4.5 million people in the country who work for themselves do not have any employees, and they are afraid of taking on an extra employee because of the implications, whether for regulation, tax or otherwise, or because they think it will be too difficult to manage. We need to look at that step up in building a business, when someone goes from just working for themselves to having an employee or two. It is important that we make that step as easy as possible, because if another million self-employed people decided that they wanted a single employee, that would be transformational. That would obviously create a lot of extra demand in the labour market.

We need to look at taxes on employment and the complications of employment. Anything that the Government can do to reduce the tax on employment is a very good idea. We cannot collect tax revenue just by taxing things we do not like, but where we have a choice, it is better to tax things we do not like rather than things we do like. All parties in the House like the ideas of well-paid jobs and of more work, so we need to work away in Government to see how we can reduce the burden of taxes on work such as the apprentice levy, the national insurance levy on both the employee and the employer and other concealed taxes on work.

We also need to look at taxes on entrepreneurship. A larger population of people who have great ideas, who can change markets and who can persuade others that they have something people might want to buy is vital to the process of creating a more prosperous United Kingdom. We need to ensure that the offer on capital gains tax in particular is a fair one. People who have built a business over the years should not feel that they will be taxed again on it all, because they have been taxed on the activity in the business. Capital gains has to be a fair regime, and I urge the Government to keep the enterprise allowance arrangements so that entrepreneurs can keep a lot of the benefits from building their business.

It is said that our productivity performance in recent years has been disappointing and that that is a puzzle. I do not quite understand why it is a puzzle; it is exactly what we would expect. We have had a major reduction in North sea oil output. The way the figures are calculated means that it is one of the most productive sectors, because labour productivity is based on the amount of revenue or value-added generated by an individual, and an individual in the oil industry produces a huge amount of revenue due to the windfall element in the oil price. We had a very big squeeze on many of the activities in the City that were apparently profitable before 2008. Those activities flattered the productivity figures, but some of the profits turned out not to be genuine, and a lot of them have been squeezed out. Again, a high-earning, apparently highly productive part of the economy has gone through a big change, and we have lost that.

We have been a successful economy—this is a strength—in creating lots of new jobs, but a lot of them are relatively low paid so they do not score very well under productivity scoring. If we compare our productivity with that for continental countries with unemployment rates two or three times as high as ours, their productivity is higher, because people we are employing on low pay here would be unemployed there, and the unemployed do not count in the productivity figures—they are just ignored as if they do not exist.

[Kevin Hollinrake]

My right hon. Friend is making some very good points, but is productivity not principally a regional problem? The gross value added per capita in London is about £50,000 a year. In the north-east, the north-west and Yorkshire, it is about £20,000 a year. Is that not where we have to level up, because that would drive productivity right across the UK?

[John Redwood]

I agree, and one of the things I hope will happen as we pursue policies that spread prosperity more widely is that some of the higher value-added activities that people come to London for will be carried out in other cities around the country. If somebody established a manufacturing business in a great northern city, it would be good if they had their media advice, public relations, legal advice, accountancy advice, consultancy advice and all the rest of it from firms in northern cities that specialised in those things, rather than the current model, where many of them come to London to take advantage of the excellent business and professional services available there.

In attracting more industry to the northern and western cities and towns, we need also to be conscious of encouraging the cluster of service businesses around them that can add value in other ways. In modern manufacturing, a lot of the traditional work is now done by machines and robots, so the individual plant does not attract a large number of jobs; the jobs are in all the other things—marketing, PR, services, legal, accountancy, invoicing and so forth—and we want to make sure that enough of those jobs come with the factory to the local area. That is where we have to see what other policies we need to put in place to spread such jobs more widely around the country.

The productivity puzzle is also caused by the public sector not innovating enough and not raising its productivity. It has been noticeable under Labour and Conservative Governments and the coalition that public sector productivity has stalled. That is disappointing, and we have a large public sector, so we need to get the Government to direct their attention to that, because the one bit of the productivity puzzle they can actually manage is the public sector, and Ministers have various powers to encourage and promote innovation.

I was interested to hear the Secretary of State for Health and Social Care talking last night about the role of innovation, new ideas and smaller businesses in the health service. There is huge scope for better partnership between innovative smaller and medium-sized companies and the public sector. The current contracting rules do not work well for many small businesses. It is difficult, because often the public sector wants a large solution for an awful lot of locations, and the small business can only handle so much and cannot scale up quickly enough. I hope that the Government will have another look at how the best of the private sector can be harnessed for the productivity increase we need from better innovation and better technology in big areas of the public services.

We must make sure that we see the technological revolution as a potential friend and not a potential threat. I was quite surprised this morning when reading the background papers for Davos—a meeting that I was not invited to and did not want to go to—to see how negative they were about technology. It was seen as a threat to be tamed and slowed down; as something that was going to destroy jobs and be very disruptive. It talked about the endless dislocations, whereas the public see much of technology as their friend. Why does America have huge success with trillion-dollar companies? Some of them are, and some of them seem to be trillion-dollar companies. Where have Facebook, Apple, Amazon and Netflix got their strength from? They have got it because they have public support. It is all very well for a politician to say, “They are wrong about this and wrong about that, and we need to regulate them and stop them doing this”, but it is a bottom-up revolution that we should not ignore. Those are things that people want. They have completely changed how people lead their lives.

People now go out to restaurants together and sit there with their iPods or smartphones not talking to each other. I am not sure that that is a great development for human relationships, but it shows that the technology has been transformative for people’s lives. They have much more instant information and much more ability to communicate to set out their views. It is not just what the BBC tells us; it is what we push back through social media these days, which some of us welcome. So we have a new model, and there is a danger that the Davos elite see it as a threat to their control over everybody. They are getting out of touch with what the public want. We should broadly welcome the technological revolution. I understand that a lot of our constituents like its services and products. We need to learn to live with it and co-operate with it in a sensible way.

As we come out of the EU, there are huge opportunities for us. Contrary to the misleading comments that some people have made, I have always taken the view that we can be better off as we leave the EU, not worse off. I have never understood why people are so negative about it all. I will simply end with a few obvious points about how we can be better off in certain areas. We can have a much bigger fishing industry. I hope it will be a prime task this year to create the conditions for that. We certainly do not want to keep on sacrificing our fish to over-exploitation by continental trawlers. We want to land more of our own fish while having a good conservation policy for stocks as a total, and that should then lead to onshore activities for fish processing and food manufacturers based on the excellent fish stock that we have available.

There are huge opportunities in farming. A lot of people would like to buy more local produce for all sorts of reasons. We like to support local farms. We are conscious of wanting to cut down food miles. We often like the flavours and benefits of locally produced food. We can do more of that, and there are ways in which, as we come out of the common agricultural policy, we could aim to get back to the levels of self-sufficiency in food that we enjoyed before our period in the common agricultural policy lowered it quite considerably.

We should also concentrate on our defence industries. We are making a commitment to spend more each year on defence so that we are more secure, but we are not truly secure unless we can make all the weapons and defence goods that we need in time of war. We must not be dependent on other people’s technology that we cannot access independently, or on imports over perilous sea lanes in times of conflict. We need to be able to scale up, and I urge all those involved in defence to see a big opportunity for us to make more of our own defence equipment. We should certainly make sure that we have control so that if the need ever arose, which I hope it does not, we would be able to scale up quickly without major issues.

I have gone on for rather a long time and I know that colleagues wish to debate these matters, so I will leave my other ideas for another time, but my conclusions are that we should not underestimate the damage that high tax rates do; that we should not underestimate the ability to generate more revenue, if we are brave on tax rates, by getting them down; and that we should pay particular attention to the big ticket items—homes and cars—that have been damaged by a variety of negative forces in recent years. I say a big thank you for the change in fiscal strategy. I hope that the Bank of England will join the party in wanting to promote growth as well, because that would make a considerable difference. It has been going in the wrong direction for some time, unfortunately. Let us make sure that all the obvious opportunities from Brexit, particularly in sectors that have been under strong EU control, are grasped warmly because they would give us some early wins.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to speak in the debate; I congratulate my right hon. Friend the Member for Wokingham (John Redwood) on introducing it.

I will start with a modern-day parable from a book called “The 7 Habits of Highly Effective People”. A man is walking through a wood and comes across a lumberjack who is trying to saw down a tree and not getting very far. He walks up to the lumberjack, taps him on the shoulder and says, “Excuse me. Your saw is blunt. You’d be better off stopping and sharpening it.” The lumberjack says, “No, no—don’t bother me. I’m sawing down the tree.” He tries again: “Excuse me. Just sharpen your saw and you’ll cut that tree down much more quickly.” The lumberjack says, “I haven’t got time to sharpen the saw.”

That parable has stood me in good stead in my business. I draw the House’s attention to my entry in the Register of Members’ Financial Interests, as I am still in business today. The most expensive and the most vital resource of any business is the people who work in it. It is important always to ensure that they are not working with worn-out tools, and that they are effective and as productive as possible.

The key to the UK growth strategy has to be productivity. I do not disagree with my right hon. Friend: it is a simple issue to solve. However, it will require significant investment, both from the public sector and, crucially, from the private sector. Public sector investment alone will simply not do it.

The reality is that across the north and the midlands we have been working with worn-out tools for too long. According to Andy Haldane, the chief economist at the Bank of England, of the six factors that drive prosperity and productivity the No. 1 factor is connectivity. Large swathes of the country, particularly the north and the midlands, but virtually all regions outside London and the south-east, are very poorly connected. That is because we have underspent in those areas for too long. I know that our excellent Minister will say that the Government are now investing equal amounts in the north as in other parts of the country. That is true to some extent, in terms of central investment. However, other regions, particularly London and the south-east, are very good at aggregating different forms of investment, including private sector and local authority spending. If we add all that up, for every £1 that is spent on infrastructure per capita in the north, about £3 is spent in London and the south-east. That is why those regions are phenomenally productive and therefore phenomenally prosperous. When I talk about more public sector investment, it is not about a grievance that we in the north or the midlands have not had our fair share; it is about sound economics.

I will quote a few leading economists, beginning with Lord O’Neill, a former cities Minister who was also the chief economist at Goldman Sachs at one point. He was an ardent remainer, but said that being in or out of the EU was

“not the most important thing”;

the most important thing was

“our productivity performance and our geographic inequality”.

Andy Haldane highlighted in a recent speech exactly the same figures as my hon. Friend the Member for Derby North (Amanda Solloway): the gap in average incomes between the richest and poorest regions is now larger than it has been at any time since the early 20th century. Amazingly, as my hon. Friend said, the prosperity gap in average incomes between the richest and poorest regions is about 2.5 times, and that figure is almost identical to the gross value added per person, which is the productivity measure. If we drive productivity, we drive prosperity around the country. That would not only help UK plc’s tax receipts, which pay for all our public services, but would level up throughout the UK. I love the phrase “level up”; it is what we should have been doing for decades. The fact that we have not been investing right across the country is not a failure of this Government, but a failure of Governments of all persuasions over decades.

However, the economist David Smith recently made a very interesting point in The Sunday Times regarding the Government’s grand plans to invest more across the country. In his words,

“public investment works only when it operates in harmony with private investment.”

That mirrors an article written by Mark Littlewood of the Institute of Economic Affairs. Members will be aware of some of his articles; he is not really a big spender, and when he was discussing the Government’s planned investment in infrastructure around the UK, he was quite scathing. He asked why, if this is such a wonderful idea and it is going to produce such a good return, MPs do not invest their pensions in it. One of the examples he gives of why this might not be the right thing to do, which I disagree with, is Doncaster. He writes that Doncaster is one of the best connected towns in the country, yet it is not very prosperous, so connectivity alone will not do the job. Public sector investment alone will not do the job.

However, I totally support what I think the Government are planning, which is to invest about £100 billion to £120 billion in the economy over the next few decades. I very much hope that they will support Transport for the North’s £120 billion 30-year plan to deliver projects such as Northern Powerhouse Rail, all the way from the east coast to the west coast, as well as lots of smaller projects such as the dualling of the A64 in my constituency, which are equally vital.

We need to incentivise private sector investment; this cannot just be about taxpayers’ money. If we look at what was done in eastern Germany during the reunification of that country, a huge amount of public sector money was put into East Germany, but the German Government also created incentives for businesses to relocate or start up in eastern Germany. It was a very simple measure, but over time, it was phenomenally successful. I absolutely agree with my hon. Friend the Member for Derby North about free ports and enterprise zones, and tax incentives for businesses to move to those regions.

My right hon. Friend the Member for Wokingham said rightly that the number of businesses set up per capita in London is way higher than in the north. I would like to see a SME revolution across the north; many more small businesses need to be set up, and the No. 1 factor in businesses setting up is access to finance. A troubling story in The Times today stated that the reduction in lending to SMEs in the north is five times greater than in London. That trend is going the wrong way at the moment, and we need to make sure that SMEs right across the country have access to finance.

As many hon. Members know, I am very concerned about the concentration of business lending among four big banks in the UK. That is completely the opposite of what has happened in places such as Germany, where there are 1,500 mutual banks across the SME sector. We should certainly consider encouraging regional mutual banks, in order to make sure that SMEs have access to capital, and should also consider whether public sector procurement should favour more local SMEs. Preston City Council has done an excellent exercise, spending more money with SMEs and less with some larger companies, because that council knows that SMEs spend much more of their money in the local community. It is a virtuous circle.

We should also decentralise agencies’ jobs and spread some of those public sector jobs around the country. I do not know whether the House of Lords will come to York—I think probably not—but decentralising jobs away from our wonderful capital and right across the country has to be the right thing to do. Finally, we should devolve powers and money so that we can get excellent local mayors, such as Ben Houchen in the Tees Valley. We want more people like him, including a York city region mayor and a Leeds city region mayor, so that we can devolve powers and money back to people who really understand the local communities and are willing to undertake a revolution in how we structure our economy, making sure that we get not only more public sector investment, but more private sector investment.

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[Kevin Hollinrake]

The hon. Lady makes a fair point, but she must understand the starting position. The great financial crash was much more severe in the UK in relative terms than in any other developed country.

[Anneliese Dodds]

It was more severe, for reasons that I will come back to later that relate to some of the hon. Member’s work on the balance of investment in our economy and the impact that the slowdown had particularly on our property industry, which is such a significant part of our economy and which led to that particularly severe impact. We should not forget about that.

The very slow recovery has also been in evidence when it comes to living standards. Real wages are still not, on average, at the levels they were back in 2008. That is another significant difference between the UK and many comparable nations and one that we should not forget.

I welcome some of the discussion that we have had on productivity, which underlies some of the brakes on the growth rates that we would have liked to have seen in recent years. On the drivers of our productivity issues, other nations that are highly dependent on oil revenue, for example, have not necessarily seen the same kind of slowdown in productivity growth. Norway, for example, has much lower working hours than the UK and some people have linked issues of work-life balance to productivity as well—but that is just an aside.

It is critical that we look at the points about skills that the hon. Members for Strangford (Jim Shannon) and for Glenrothes (Peter Grant) rightly made. We have seen significant change to further education in recent years; major cuts have been made to colleges and sixth forms. I welcome the fact that the Government seem to be changing tack in that regard; it is absolutely critical that they do so, because when I talk to firms, the biggest issue they tend to mention is the lack of a skilled workforce, so we really need to focus on that.

We also need to talk about investment, as the hon. Member for Thirsk and Malton (Kevin Hollinrake) rightly mentioned—both public and private investment. We have seen some negative developments in that regard, particularly in areas that are critical to future growth. Clean energy investments have plummeted since 2015. In 2018, annual clean energy investment was at its lowest level since 2008. There are a range of factors, but I would include the regulatory uncertainty in the sector. We have seen some big changes over time, and we need certainty.

We need to have an appropriate environment for small businesses and to encourage entrepreneurship; I agree with some of what the right hon. Member for Wokingham said about threshold effects. We need to learn from other countries. It is possible to calibrate the tax system far more closely to profits and to not have big cut-offs, such as those we have, for example, in relation to VAT. I would encourage Her Majesty’s Revenue and Customs to look at that as the tax collection authority—if it has the resource to do so, which is a significant issue.

On IR35, the elephant in the room is that our unemployment regulations are not calibrated with tax regulations; definitions are not the same in the two systems. I have not seen the kind of grasp of that issue that I had hoped for from the Government. IR35 and other measures are trying to plaster over some of the issues caused by the lack of consistency in definitions, but we need a longer term approach from Government.

The right hon. Member for Wokingham spoke in some detail about tax cuts. On corporation tax, some of the changes we have seen in the US have resulted from funds being moved out of tax havens—let us call a spade a spade here—but they have also resulted from much more aggressive pursuance of corporation tax equivalents by the US authorities. When it comes to the UK case—this seems to be a debate that we have just about every day in this House; I suspect that it is getting slightly boring for people reading Hansard—the evidence indicates, and commentators have said time and again, that the reduced rate of corporation tax has not led to increased growth in investment in the UK and that it has coincided with a reduction in the growth of investment and, above all, with a significant reduction in revenue, which has a knock-on impact on the possibility of boosting skills and so forth, and other drivers of productivity.

I think the UK population is very aware of that situation. The recent British Social Attitudes survey indicated that 60% of people want to see taxes boosted, if that could lead to more sustainable public finances and spending. Only 4% of people want to see them fall.

On the issue of free ports, which was mentioned by the hon. Member for Derby North, we need to tread with care and look at the research and the international evidence, much of which indicates that those kinds of structures can be very good at moving economic activity around but they are not always as good at promoting new economic activity—it tends to be the factor endowment in different areas that will promote development sustainably, the level of skills in the workforce and the level of investment in plant and so on. I very much enjoyed the hon. Member’s speech, particularly her focus on regional disparities; the hon. Member for Thirsk and Malton also concentrated on that. We need to go much further. It is a shame that we have not seen a commitment from the Government to shift economic activity that is under their control to other areas. Labour said during the election that we would like to see part of the Bank of England being moved up to Birmingham. I hope that we might see some more bold measures coming from the UK Government in that regard.

In relation to the claims that tax cuts will necessarily promote investment in economic activity, when it comes to the drivers of entrepreneurship among less well-off people, it is actually regulatory measures that can really make the difference—for example, minimum wages and rights at work.

Finally, on the comments by the right hon. Member for Wokingham about the drivers of risks in the world economy and the activities of the Bank, I was surprised that he did not make any mention of the impact of tariffs and so on in China and the US on the automotive industry. Most commentators would say that they played a significant part, and they would also talk about the fact that the wiggle room for policy activity by the Bank is of course reduced by the very low interest rates that we have. That is a significant issue for the UK, where we have that rather unbalanced situation with so much economic activity tied up in property.