Finance (No. 2) Bill

Rishi Sunak Excerpts

2nd reading: House of Commons
Tuesday 18th April 2017 Commons Chamber

[Dr Davies]

Indeed. I strongly believe that the measures outlined in the Bill go some way to tackling that situation.

Perhaps the main health effect of obesity among children is tooth decay. It is the main source of hospital admissions for five to nine-year-olds, with some 26,000 admissions, probably in England alone, and 179,000 teeth—if not more—extracted among the age group each year. Some 25% of children in the age group have tooth decay, and 90% of those cases are estimated to be preventable. Of course, sugar is a key cause of the problem. As for older children, 46% of 15-year-olds have tooth decay, and £129 million was spent on the extraction of teeth in under-18s between 2012 and 2016.

The impact of obesity on adults is even more concerning with tooth decay and, in no particular order, type 2 diabetes mellitus, cardiovascular disease, gastro-oesophageal reflux disease, gallstones, osteoarthritis, sleep apnoea, infertility, pregnancy problems, mental health problems, liver and kidney disease, and—last but certainly not least—cancer. At least 13 types of cancer have been implicated with obesity. In fact, obesity is thought to be the biggest cause of preventable cancer after smoking. More than 18,100 cases of cancer in the UK per year are estimated to be thanks to obesity. Those types of cancer include some well-known ones such as breast, bowel, endometrial, oesophageal and pancreatic. There is an impact on the NHS of an estimated £5.1 billion per annum, and a cost to the economy in general—£27 billion a year down to lost productivity, unemployment, early retirement and welfare benefits.

It is vital that we recognise the extent of the problem posed to the health and wellbeing of ever-rising numbers of people by the obesity crisis. How should we target this? Well, it is believed that there is a genetic susceptibility to obesity. That is not to say that all obesity is down to genetics, but it is thought that the inheritance of several genes—polygenic susceptibility—leads some to an increased drive to eat. Much has been said over the past decades about personal responsibility, education and exercise. Education and exercise do have an important place, but the reality is that they have not succeeded as the main way to target the problem.

We have an issue with more sedentary lifestyles and an obesogenic environment, whereby unhealthy, high-calorie foods are so easily available around us. Calorie intake sadly overwhelms most people’s efforts to exercise those calories off. Personal responsibility certainly drives many—perhaps those with the intellectual and financial resources to follow the path to deal with the problems they face —but it is not easy. In any case, children cannot be expected to exercise personal responsibility, because they do not have their own freedom of choice. Various measures are important in tackling the crisis, including reformulation targets by Public Health England and others, which will reduce sugar, fat, calories and so on in the foods that children eat.

Advertising is also important. Advertising restrictions have recently been expanded from television to other media such as social media and advergames, but more could be done if necessary. Labelling is important, and Brexit offers an opportunity in more flexibility in labelling our products. Promotions and discounts in supermarkets and elsewhere are critical. The issue of local authorities’ planning powers for takeaways and so on has been mentioned on a number of occasions.

[Rishi Sunak (Richmond (Yorks)) (Con)]

My hon. Friend makes an excellent point about the freedom for better labelling after we leave the European Union. Does he agree that one sector that could benefit from that is the dairy sector and dairy farming? Those products could have better country of origin labelling, which would help British shoppers to choose British dairy products and support British farmers.

[Dr Davies]

That is a very good point. A point has also been made about the flexibility to include information on labels such as the number of teaspoons of sugar in a product, which we are currently unable to do. A wide range of benefits could arise, which is interesting.

The soft drinks industry levy has a key role. Soft drinks are the biggest source of dietary sugar for children, but they contain little, if any, dietary benefit. Five-year-olds are believed to consume their own weight in sugar per year, and four to 10-year-olds each consume half a bathtub of sugary drinks per year. That is food for thought. The Scientific Advisory Committee on Nutrition and the World Health Organisation advise that free sugars should comprise less than 5% of daily energy intake; yet the estimated intake among our children is two to three times that figure.

The proposed mechanisms of the levy relate to producers and importers of packaged soft drinks with added sugar. The levy is designed primarily to encourage reformulation, as has been mentioned. The implementation date of April next year gives manufacturers time to pursue reformulation, and many have been doing an excellent job in achieving that. The levy drives manufacturers to reduce portion sizes and to market their low-sugar alternatives. It will be tiered, whereby 18p per litre is levied when the total sugar content of the drink exceeds 5 grams per 100 ml, and 24p per litre is levied when the total sugar content exceeds 8 grams per 100 ml. According to my mathematics, that is about 6p to 8p per can of drink. The levy will apply to drinks as ready-prepared or diluted as directed on the packaging.

The hope is that the levy will be passed on to consumers in the same proportion as applied. In other words, there will be no cross-subsidy. One concern raised by the Health Committee was that low or zero-sugar drinks might end up picking up some of the extra costs levied on manufacturers by their sugary alternatives. If that were to take place, it would be a missed opportunity to maximise the positive impact of the levy.

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[Rishi Sunak (Richmond (Yorks)) (Con)]

From the discovery of Australia to the invention of the cat’s eye, the history of Yorkshire’s people is nothing if not entrepreneurial. That spirit is alive and well in my constituency in particular. From Heck sausages to Tennants auction house and the Wensleydale Creamery, ambitious SMEs are at the heart of our community and economy. Before I arrived in this place, I spent my career investing, backing businesses like those with the capital they needed to grow. I am delighted that this Finance Bill recognises what my years in the investment industry taught me—that ready access to finance is the fuel of success for ambitious SMEs, just as successful SMEs are the fuel of a prosperous economy. Yet, as I have said in the House before, the UK funding landscape for growth businesses presents challenges.

Just 3% of British companies manage to expand beyond 10 employees—half the success rate of businesses in America. The UK has a relatively shallow bond market for early stage businesses, and a venture capital sector that is just a seventh the size of America’s. British entrepreneurs often face an uphill struggle to attract equity risk capital. That is why the Government have enhanced the enterprise investment scheme and created the seed enterprise investment scheme. Since their inception, these programmes have together helped more than 3,000 companies to raise more than £15 billion in early stage finance. The Finance Bill builds on that success to ensure that these schemes help even more small businesses to access investment, grow and create jobs.

Under the current regulations, shares with a right to future conversion are unfortunately regarded as a pre-arranged exit, making them ineligible for EIS and SEIS. But that goes against the reality of conversion arrangements. Far from opening the door to tax avoiders, conversions are often a crucial mechanism for facilitating an initial public offering. If an SME has the ambition to accelerate its growth through accessing the public markets, the Government should not stand in the way. I am pleased to say that the Bill addresses that anomaly. However, there is more we can do.

Many lawyers, accountants, investors and entrepreneurs say that the EIS process is often too complicated and takes too long. The Government’s recent consultation on the advance assurance service, which lets HMRC assess a firm’s EIS eligibility before it seeks funding was welcome, and provoked ideas about what we can do to speed things up. First, I can see the logic for introducing some form of fee for advance assurance. This would help to raise the resources necessary for HMRC to provide a smoother service with greater transparency around processing times and specific dates for document review. Secondly, we could look at the use of standardised documentation, which would save time and money for all participants, enabling HMRC to speed up its approvals.

Thirdly, we must look at how to simplify the EIS rules and their interpretation. Of course, provisions must be made to stop tax avoidance, but the widespread view of practitioners is that the pendulum has swung too far the other way. In the words of one leading venture capital lawyer, there are now “too many gotchas” in the current set of rules. In general, it is the view of the EIS Association, admirably chaired by Lord Flight, that a large part of the reason for this complexity is the need for our laws to comply with EU state aid rules. I hope that when we leave the European Union, the Government will have the opportunity to look at simplifying the EIS rules and ensure that our SMEs get the capital they need to flourish.

I will briefly touch on two other points in the Bill: tax reliefs for sports clubs and companies donating to them; and museums and touring exhibitions. The internet enables us to be so much closer, but we cannot replicate the presence of being close to a Barbara Hepworth sculpture or looking at Shakespeare’s first folio. The Government’s incentives to take exhibitions around the country will enable us all to share in our cultural history and heritage.

When it comes to backing small businesses, this Finance Bill—like the others that came before it—shows wholeheartedly why this Government’s record is unmatched. As the British voters decide in the next few weeks who can best steward Britain’s economy, I commend this Bill to the House.