Budget Resolutions and Economic Situation

Debate between Rishi Sunak and Neil Parish

Tuesday 22nd March 2016 Commons Chamber

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

I am grateful for the opportunity to support this one nation, responsible and pro-enterprise Budget. Tucked among the beautiful Yorkshire dales in my constituency is a thriving community that is built on the jobs provided by our small and medium-sized businesses—businesses such as the Wensleydale Creamery, whose cheese has taken a slice of Yorkshire to kitchen tables around the globe, or Tennants Auctioneers, a fourth-generation family business that is now one of the UK’s largest private auction houses.

Before I arrived in this place, I spent my career investing around the world in companies such as those, and providing the capital to help them grow. I am delighted that this Budget recognises what my own experience has taught me: for growing SMEs, there are few more important ingredients for success than solid access to finance. Indeed, there are few more important ingredients for our nation’s success than growing SMEs. Small and medium-sized businesses account for more than half of private sector employment. They are responsible for three quarters of the jobs created since the recession. They are also delivering social justice—the unemployed are six times more likely to find work with a smaller company.

Those companies need the fuel of deep capital markets to power their growth, but despite improvements, it is still not always easy for SMEs to get the funding they need. The challenges they face fall into two distinct categories: debt and equity. For debt finance, companies can go either to banks or to the corporate bond market, but our bond markets are underdeveloped. Europe’s economy is the same size as that of the United States, yet its bond market is only a third as big, which means that our companies are too reliant on banks for their debt needs. Indeed, they are four times more reliant on banks than their American counterparts. At a time when banks are rightly deleveraging, the reality for British companies is that far too many loan applications go without success.

There are also problems for companies wishing to access equity finance. Although we are a European leader, the UK’s venture capital market still has room to grow. Adjusted for GDP, the US’s VC market is seven times the size of the UK’s. We also lag behind Sweden, South Africa, Ireland and Israel. That matters because equity is the kind of capital that SMEs need to grow beyond their early stages. Thanks in part to the policies of this Chancellor, our nation has become one of the world’s start-up capitals, but we must now focus our energy on growing those start-ups, for just 3% of British companies manage to expand beyond 10 employees, which is half the success rate of companies in the United States.

The Government have consistently shown that they understand those challenges, which is why they created the seed enterprise investment scheme, which has helped more than 3,000 companies to raise early-stage finance; why they launched the funding for lending programme to ease credit for SMEs; and why they fund the British Business Bank to power our growing companies.

[Neil Parish (Tiverton and Honiton) (Con)]

I agree wholeheartedly with my hon. Friend. Getting enough capital, and venture capital in particular, and allowing small businesses to grow, especially those that traditional banking systems do not necessarily support, is key to stimulating more growth in our economy. I very much welcome his comments.

[Rishi Sunak]

I am grateful to my colleague, the Chair of the Select Committee on Environment, Food and Rural Affairs, for those comments. I will go on to some of those points in due course.

I am delighted that the Budget goes even further to encourage investment in our businesses and our job creators. I am confident that reducing capital gains tax rates together with a brand-new 10% rate for long-term investments in private businesses will unlock millions in much needed funding. From speaking with investors this past week, it is clear that those policies have cut through and generated a fresh wave of enthusiasm for investing in British companies. On debt, I welcome the Budget’s further help for businesses rejected by traditional banks, which will now more easily be able to access alternative providers of finance.

Whether it is cheesemakers in the Yorkshire dales or FinTech companies in Old Street, the Chancellor has always backed the aspirations of Britain’s growing companies. By continuing to close the tax loopholes that Labour left open, the Budget has another message: Britain is becoming not only the best place to do business, but the fairest place to do business. This is a Budget for the little guy, for a new generation of British ideas, and for a country where the rules do not bend for big balance sheets. It is a responsible, one nation, pro-enterprise Budget that will get our companies the vital funding they need to unleash their potential, and I commend it wholeheartedly to the House.