Amendment of the Law

Mark Hoban Excerpts

Monday 28th March 2011 Commons Chamber

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

We knew that the Labour party was in denial about the deficit and the difficult decisions that the country has had to take as a consequence of its legacy, but every one of the 16 speeches we heard from Opposition Members today reiterated that same denial. They claim that 250,000 people were out at the weekend to find an alternative, but there is clearly no alternative from those on the Opposition Benches. In speech after speech, Labour Members denied the reality of the economic situation they left the country. They have forgotten that when they were in Government the manufacturing sector halved in size while financial engineering replaced real engineering, and that our share of world trade fell as we failed to take advantage of growth in the global economy. The gap between the north and the south grew on their watch, and under their stewardship red tape, whether regulation or the length of the tax code, ballooned, acting as a dead weight on business. Their legacy to this country is an economy that needs reform if we are to have stable and sustainable growth, if every part of this nation is to prosper and if we are to compete with the best in the world. That is the agenda of reform that we set out in the Budget last week.

We want the UK to become the best place in Europe to start, finance and grow a business, but in the past decade alone countries such as Germany, Denmark and Finland have overtaken us in international rankings for competitiveness. In our plan for growth we have therefore taken action to abolish £350 million-worth of specific regulations, to implement in full Lord Young’s recommendations on health and safety laws and to impose a moratorium, exempting businesses employing fewer than 10 people and all genuine start-ups from new domestic regulations for the next 10 years. These measures were welcomed by my hon. Friends the Members for Aberconwy (Guto Bebb), for Mid Dorset and North Poole (Annette Brooke) and for City of Chester (Stephen Mosley). No longer will British business be tied down by wasteful red tape.

We are going to tackle what every Government have identified as a chronic obstacle to economic growth in Britain but have never done anything about: the planning system. Councils are spending 13% more in real terms on planning permissions than they did five years ago, despite the fact that applications have fallen by a third. Yes, communities should have a greater say in planning, but as a result of the Budget we will expect all bodies involved in planning to put jobs and growth first, and we will introduce a new presumption in favour of sustainable development so that the default answer to development is yes.

We will protect the greenbelt, but we will also remove the nationally imposed targets on the use of previously developed land. We will streamline the planning process. I welcome the support from the hon. Member for Bristol East (Kerry McCarthy), who wants to stop applications being bogged down for years, which I think will free up the economy. I am pleased that there is at least one measure in the Budget that Labour Front Benchers will support. No longer will cumbersome planning rules and bad regulation stand in the way of job creation up and down this country.

There has been a lot of talk about enterprise zones. The hon. Member for Nottingham East (Chris Leslie) was dismissive of them, so I think that he should speak to his friends the hon. Members for Blyth Valley (Mr Campbell), for Telford (David Wright) and for Coventry South (Mr Cunningham), who all want to see enterprise zones in their constituencies because they want to see the benefit that will flow as a result. We have already announced four new enterprise zones: Mersey Waters in Liverpool; the Royal docks in Newham; Manchester city airport, which was welcomed by the right hon. Member for Wythenshawe and Sale East (Paul Goggins); and the Boots campus in Nottingham. There are 17 more to follow. The only Member who did not call for an enterprise zone in his constituency was my hon. Friend the Member for Colchester (Bob Russell), who went one further and called for Colchester to become a city. I do not know whether city status will offer the same benefit as enterprise zones, but I wish him well in that bid.

There was some discussion among Opposition Members about the problems of youth unemployment. We know that under the previous Government youth unemployment increased. Let me remind the House what the Chancellor announced in the Budget last week: 80,000 additional work experience placements and a doubling of the number of university technology colleges from 12 to 24. He announced 50,000 additional apprenticeships, taking the number introduced by this Government to 250,000 in total, compared with the plans left us by the previous Government.

We also need to make sure that we have a competitive tax system. Britain used to have the third lowest corporate tax rate in Europe; now we have the sixth highest. At the same time, our tax code has become so complex that it has overtaken India’s to become the longest in the world. As my hon. Friends the Members for Mid Sussex (Nicholas Soames) and for Wolverhampton South West (Paul Uppal) said, we have to address that issue.

Our taxes should be efficient and support growth, be fair and predictable, simple to understand and easy to comply with. That is why from April the corporation tax rate will be reduced not just by 1 percentage point as we announced last June, but by 2 percentage points, and by 1 percentage point for each of the next three years, taking our rate down to 23%—16 percentage points lower than in America, 11 lower than in France and 7 lower than in Germany, giving us the lowest corporation tax rate in the G7.

A competitive tax system is not just about lower rates, however; it is also about the way in which we make tax policy and cut the cost of compliance. That is why last July we set up the Office of Tax Simplification to give advice on how to reduce the complexity of the tax system; and that is why we are going to reduce no fewer than 43 complex reliefs, from Black Beer to Angostura Bitters and late-night taxis to luncheon vouchers. We are ridding the tax system of unnecessary legislation and taking out 100 pages from our tax code, which is a good step towards creating a simpler tax system and reducing the cost of compliance for small businesses.

We need to go further, however. For decades, we have operated separate systems for income tax and for national insurance, with two completely different systems of administration and two different periods and bases of charge. That imposes unnecessary costs on our country’s employers, and that is why this Government will consult on merging the operation of national insurance and income tax to create a simpler, more competitive and more stable tax system that is an asset to our economy.

Several hon. Friends talked about the importance of small businesses having access to finance, and we should not ignore the problems that businesses face in that regard. Small businesses in particular have been innocent victims of the credit crunch. They have seen the flow of affordable credit dry up, their overdrafts squeezed and lending conditions deteriorate. That is why we have agreed with the nation’s banks a 15% increase in the availability of credit to small businesses.

But that is not the end of the story. As my hon. Friends the Members for Stratford-on-Avon (Nadhim Zahawi) and for South Northamptonshire (Andrea Leadsom) said, we need tax incentives to encourage entrepreneurial activity, and that is why it was good to see Sir Ronald Cohen and a number of venture capitalists and business angels praise the measures we announced in the Budget last week to double the size of entrepreneurs relief to £10 million and to increase income tax relief to 30%. That is how we will provide finance to the nation’s small businesses in order to help them to grow and create the jobs that we will need in the future; and that will help Britain to become the best place in Europe to start, grow and finance a business.

The issue is not just about financing start-ups and smaller businesses. We are pleased that the banks have agreed to increase the size of business growth funds to £2.5 billion, and to provide more equity investments for small and medium-sized businesses that want to grow and become the best in the world.

This Government are looking to right the wrongs of the past. We are going to reverse the trend of the past decade, a decade that saw manufacturing shrink, businesses tied down by red tape imposed by the previous Labour Government, the south grow faster than the north and growth balanced precariously on a mountain of debt. We will not repeat the mistakes of the previous Labour Government. We want to see growth built on firm foundations, with reforms that make our country more competitive and more business-friendly, with an economy exploiting new opportunities in the manufacturing, life sciences, digital and creative industries.

That is why the Budget has been greeted with acclaim throughout the country by business organisations that recognise the measures we have taken. That is why the strategy that my right hon. Friend the Chancellor set out, of tackling the deficit, has been supported by the OECD, the International Monetary Fund, the European Union, the CBI, the Institute of Directors, the Bank of England and 35 business leaders who wrote in support of our plans at the time of the spending review last year. Who can the Opposition claim in support of their plans? The Guardian. Is it not typical that, when this country needs far-reaching economic reform, the only answer that the Labour party has is a policy, which it knows is illegal, to cut the VAT rate on petrol?

We have set out measures to ensure that we tackle the mistakes of the past, that build a more dynamic, prosperous and sustainable economy that this country—