Budget Resolutions and Economic Situation

Neil Carmichael Excerpts

Wednesday 20th March 2013 Commons Chamber

[Neil Carmichael (Stroud) (Con)]

It is a pleasure to follow the hon. Member for Brent North (Barry Gardiner).

The Budget is first and foremost a Budget for the global competition that Britain is in. It equips Britain to compete properly with our partners and the rest of the world, including the BRIC economies. The second important element of the Budget is that it is about aspiration and the people who want to participate in that competition, as signalled by some of the measures on small and medium-sized enterprises. I want to talk first about the fiscal challenge and how it looks now before I move on to monetary activism, which is an appropriate phrase.

On the fiscal challenge, I welcome the fact that the NHS, Department for International Development and education revenue have all been protected. That is absolutely right and how things should be. Of course, it means there will be cuts elsewhere and a different state will emerge as regards our priorities in two or three years’ time, but that will prepare the ground for the entrepreneurial private sector growth that is so urgently needed in the immediate future.

On monetary activism, it is good that the Monetary Policy Committee has a new role in inflation, interest rates and growth. That will give us a lot of hope and the ability to think ahead more as we hear news and announcements vis-à-vis the inflation and interest rates. Linking them together is welcome.

The third really important issue, and the one I want to talk about most, is the supply side, which is so important to the prospects of the real economy. First, however, let me welcome the reduction in beer duty, the increase in the personal tax allowance to £10,000, and the measures to encourage people to buy their own houses. All those things are part of the aspiration that I mentioned.

On the supply-side argument, there is a test: we have a lot of problems, but does the Budget help those problems and come up with solutions to make them less significant, or even turn them into solutions? Our first problem is that we are not exporting enough. We have exported a large number of cars and produced 1.5 million of them, yet only 30% of those cars are constructed in Britain—they are assembled here, but their parts are often imported. My first question is whether the Budget will improve the supply chain by ensuring that it is more localised and therefore forms a greater part of the economic growth needed by the economy. I think the answer to that is yes, because measures such as the business bank and so on add up to appropriate support for small and medium-sized enterprises.

My second question is about credit—tooling-up for new projects is an expensive activity, especially for SMEs that need to get their hands on appropriate money. High street banks are not always the best place for that, and I like the idea that the business bank will effectively reinforce and assist new forms of investment in SMEs from private and innovative areas. That will give a huge boost to an SME’s ability to get the investment necessary to develop its products. The answer to my second question is yes.

We also have a problem with regional underperformance. That is a significant issue for Britain and Lord Heseltine’s report focuses on it well. His idea for local enterprise partnerships to have core funding is powerful and will mean that they can really focus on areas that are of interest to them and which they know about. I think we will be seeing much more forensic activity at that level, and around our cities and other areas where there are local enterprise partnerships. In Bristol, which is near Gloucestershire, or even in Gloucestershire itself, I can see how that would be useful. Such a measure is a recognition of regional underperformance, so again the answer is yes, the Budget actually helps.

Another area of concern is the profile of SMEs, which I have been thinking about for a long time. We have a large number of SMEs, many of which are extraordinarily small. They perform an important role in innovating and inventing but do not always have the critical mass to tackle large supply-chain issues. We must encourage smaller firms to become bigger ones. Does the Budget help with that? Yes, I think it does. Changes to corporation tax and basically having one rate may, I think, encourage small firms that in the past have seen the advantage of using two different forms of corporation tax to come together. Other reasons why firms might enlarge or unify include the industrial strategy, which is already part of our overall plans to boost aerospace. I would like to see that move into the automotive sector, which needs the same sort of treatment.

The final point that bothers me is that, although we have already found jobs for one and a quarter million people in the private sector—a fantastic achievement—our productivity has not increased by as much as we had hoped. The Bank of England’s report on inflation from February 2013 makes that point well. We must worry about how to improve the skills available to our work force—those already working and those who are going to start working—so that we get that extra boost to productivity. The Budget does good things in that respect. For example, it introduces the Technology Strategy Board and boosts sector councils. Both measures, and the Government’s strident determination to improve skills in our colleges and schools, are excellent.

Lord Heseltine was right to recommend that the Government make a huge effort to ensure that we have high standards and good quality courses that demand academic achievement in our colleges. That is what will encourage people to do the work and decrease the productivity gap, which has plagued our economy for too long.

In summary, the Budget is good for Britain and good for those problems.