Entrepreneurs’ Relief

Lord Newby Excerpts

Thursday 26th February 2015 Lords Chamber

[Lord Leigh of Hurley]

To ask Her Majesty’s Government what assessment they have made of the economic impact of the increase in Entrepreneurs’ Relief since May 2010.

[Lord Newby (LD)]

My Lords, no formal economic assessment has been made, but HMRC monitors and regularly publishes information on entrepreneurs’ relief and its take-up. The value of entrepreneurs’ relief is forecast to rise from £1.5 billion in 2010-11 to £3 billion in 2014-15. This Government have increased the lifetime limit from £2 million to £10 million and this is expected to benefit those who want to grow their business and reinvest their gains into new enterprises.

[Lord Leigh of Hurley (Con)]

My Lords, I thank my noble friend and draw your Lordships’ attention to my declaration in the register of interests. The great success of the UK economy has not happened by chance, but by the implementation of policies designed to encourage business. As mentioned, the increase in the cap from £2 million to £10 million has had a dramatic effect in allowing and encouraging entrepreneurs to start new businesses. However, many of them have gone through this cap, which is a lifetime amount. Will the Minister consider taking away that cap and possibly the 5% limitation as well?

[Lord Newby]

My Lords, as the noble Lord has pointed out, we have increased the cap fivefold. However, we believe at this point that the limit is necessary as part of the overall design of the relief and to ensure that the relief is well targeted and not open to misuse. As I said in my initial Answer, it is worth £3 billion already.

[Lord Shipley (LD)]

My Lords, in noting the success of government policies in entrepreneurialism and enterprise, may I draw my noble friend’s attention to the Burt report, entitled Inclusive Support for Women in Enterprise, produced by Lorely Burt MP, the government ambassador for women in enterprise? It has a particularly helpful set of recommendations, not least on the work—and the possibilities for additional work—done by local enterprise partnerships. Do the Government have any plans to give the Burt report their very full consideration?

[Lord Newby]

My Lords, the Burt report contains a whole raft of really interesting proposals, which the Government will consider. The latest figures that I have show that some 990,000 SMEs are led by women. At about 20% that is a record high, as far as I am aware.

[Lord Flight (Con)]

My Lords, are the Government aware of the tremendous success of entrepreneurial endeavour—

[Lord Flight]

Excuse me. I apologise for my extremely embarrassing mobile phone. Is the Treasury monitoring the extent of entrepreneurial activity and success in this country? Never in my lifetime have I known such an explosion of entrepreneurship, particularly among all the new technologies, where other government measures are helping. This is a sort of Schumpeterian thing that is happening, which ensures our future. I find it quite difficult to access detailed figures—for example, on how many of the 1.5 million new companies over the last two years are new enterprises or other things. Is the Treasury monitoring the amazing thing that is happening in this country?

[Lord Newby]

My Lords, the Treasury is keeping records and noting the number of businesses. There are a record number of private sector businesses in the country at the moment, with an increase of 760,000 compared to 2010. There is of course a whole raft of measures, from having a long-term economic plan that has kept interest rates low to much more specific measures to support small business, which is helping this phenomenal growth.

[Lord Liddle (Lab)]

My Lords, can the Minister, in praising the Government’s economic record, explain to the House why if entrepreneurship has flourished so much in this country we have one of the largest trade deficits in the world, at 6% of GDP?

[Lord Newby]

My Lords, we have had a trade deficit for a very considerable time. One of the reasons we have such a large deficit now is that the amount of net income from UK investments abroad has fallen dramatically, not least because a lot of foreign companies have been investing here. However, the Government have set an ambitious target for increasing exports. By common consent, UKTI is far more focused in what it is doing than it has ever been. We are seeing an increasing number of British companies exporting to an increasing number of countries.

[Lord Grocott (Lab)]

Did I hear the Minister refer to the Government’s “long-term economic plan”? I knew that, in the other place, Conservative Members of Parliament were obliged to say that in all their speeches on every conceivable occasion but I had not realised that the implant was operating in the brains of Liberal Democrats as well. Can he confirm whether that is the case?

[Lord Newby]

My Lords, I am always happy to educate the noble Lord.

[Lord Broers (CB)]

My Lords, I am sure the Minister realises that there is a point in the growth of new companies, especially high-tech companies, where they have gone through the first phase but their next phase requires not a few million pounds but perhaps £100 million. In Cambridge, we have certainly lost some very successful companies to US investors at that stage. In fact, it is quite a regular occurrence. Are the Government thinking about that, and about perhaps persuading our City to fund some of these new companies and not always leave it to the Americans?

[Lord Newby]

Yes, my Lords, but while the problem to which the noble Lord refers is of course a long-standing one in the UK, the Government have done a number of things. One is the growth of the enterprise investment scheme, which generated investment of £1 billion in 2012-13. The seed enterprise investment scheme is another, albeit for slightly smaller firms, and some of the initiatives of the Stock Exchange on AIM and the development of the retail bond market are also designed to help fill that funding gap.

[Lord Dobbs (Con)]

Is my noble friend able to cool fevered brows on opposite Benches and confirm that part of that long-term economic plan is to continue the extraordinarily successful growth of job creation, which has given this country an unemployment and employment record finer than any other economy in Europe?

[Lord Newby]

My Lords, it is far beyond my powers to cool the fevered brows opposite, but I repeat: we have been extremely successful in terms of private sector employment. Over 2 million additional private sector jobs have been created in this Parliament, which means that we now have more people employed in the UK than ever before, and the joint-highest rate of employment.

[Lord Davies of Oldham (Lab)]

My Lords, does the long-term economic plan, developed against a background where the Government have postponed the ability to eliminate the deficit, have as a constituent part no decision on the fundamental issue of aviation in terms of Heathrow or the third runway in the south-east? Does it also contain a commitment to continually run a low-wage economy and zero-hour contracts for an awful lot of the people who get new jobs?

[Lord Newby]

My Lords, growth in the UK this year is the highest in the G7. It will be, at worst, the second highest in the next year. Frankly, this is an economic position of which this Government are extremely proud.