The Economy

Sam Gyimah Excerpts

Thursday 24th October 2019 Commons Chamber

[Mr Sam Gyimah (East Surrey) (LD)]

This Queen’s Speech is a pre-election stunt, as many have acknowledged today. As such, it is long on spending promises—what some would call pork barrel politics—and short on a real plan for the economy. This Queen’s Speech has 25 words devoted to the economy, whereas the 2017 Queen’s Speech had five paragraphs and in the 2016 Queen’s Speech the economy was the main priority. This would be fine if our economy was going gangbusters, but let’ us all face it: 1.5% economic growth is not much to sing about, not to mention the problems of low productivity and wage growth that has been relatively low.

The reason for this is that the party of which I was a member, the Conservative party, has moved away from being the party of economic competence. There was a time when rising stars in that party were credited with coming up with ingenious ideas to create prosperity and growth, but now the minimum requirement to become a Minister is to support no deal. In other words, they are willing to throw the economic cards up in the air, and that is why the Conservative party is not emphasising the economy as much in this Queen’s Speech.

I was surprised when the Chancellor said that he was not going to produce an economic impact assessment for the Government’s Brexit plans. We can argue that we do not trust economic evaluations because they underestimate how great Brexit will be, or we can say that people care more about GDP, so economic evaluations of Brexit are irrelevant—but we cannot argue both, or we risk mimicking the 10 leaky buckets.

My main concern with the Queen’s Speech is that at the heart of it is a deceit, which Conservative Members know very well. Every election comes down to two things: it is either more of the same or time for change. The Conservatives are arguing that our country can have more of the same on the economy—to give them credit, they have done a lot of good work to rescue it from the financial crash, helped by the party that I am currently a member of—while at the same time taking the biggest gamble on our economy. They are effectively saying that people can still have all the benefits of leaving while retaining the benefits of remaining. That is what this Queen’s Speech suggests is possible, and we know that it is not, as my right hon. Friend the Member for Kingston and Surbiton (Sir Edward Davey) said.

When we come to the big economic divide in our country, between the north and the south, all the economic analysis shows that the recovery from the last recession has been unbalanced. Left-behind towns, post-industrial towns and seaside communities are all struggling, but they will not benefit from this Queen’s Speech. Yet the electoral strategy of the Conservative party is to win those people’s votes, to get an increased majority.

This Government have deprioritised the economy and are taking a huge gamble on it. Every assessment says that our growth will be lower. The Government will not be able to deliver these spending plans, and they will be going back to those same people who are crying out for change to ask for an increased majority. That is a serious deceit, and those of us on the Opposition Benches who stand for remain know that we can give the country what it needs to invest and grow.

Draft Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018

Sam Gyimah Excerpts

Monday 17th December 2018 General Committees

[John Glen]

I can absolutely give my right hon. Friend that assurance. I will go on to set out some of the additional safeguards.

[Mr Sam Gyimah (East Surrey) (Con)]

If the powers are temporary, it would be helpful to know what kind of regime we would have in the long term in the event of a no deal, and whether that would still make us competitive in this area.

[John Glen]

This SI onshores the existing MiFID II regime under the terms of the European Union (Withdrawal) Act 2018. Circumstances that the Government do not wish for—no deal—would clearly necessitate additional legislation in the next Session. I am working with officials to develop that legislation, so that we would maintain the most competitive regime possible in a no-deal situation, but that falls without the scope of this statutory instrument.

[Mr Gyimah]

Let me make sure that I fully understand. The no-deal context that we are talking about is the emergency of no deal, rather than a long-term settlement for a situation in which the UK does not have a deal with the EU.

[John Glen]

In a no-deal situation, there will be a variety of scenarios with respect to the nature of our relationship with the EU; the calibration of our long-term competitive regime for financial services would depend on the calibration of that relationship, and legislation would be brought forward in the light of that.

I will make progress. To be clear, the intention in granting these temporary powers is to enable the FCA to operate the transparency regime in the UK from exit day and beyond, and to maintain existing outcomes, as far as that is reasonably possible. The 2018 Act does not empower the Government to make non-deficiency-related policy changes to EU legislation. If the Treasury is satisfied that the FCA is ready to undertake its transparency functions, the four-year transitional period may be ended earlier by the Treasury by the issue of a direction that must be laid before both Houses and published.

Some longer-term flexibility will also be given to the FCA to reflect the fact that it may not have access to pan-EU trading data after exit, and therefore may need to use reliable trading data from other countries when calculating certain transparency thresholds.

Banking Competition

Sam Gyimah Excerpts

Thursday 12th July 2012 Westminster Hall

[Andrea Leadsom]

Absolutely. I agree with the hon. Gentleman. That is a very good move. Personally, I think that a reversal of the Lloyds-HBOS merger would be better.

Secondly, the issue of a complete separation of retail and investment banking should return to the agenda. It is right that the Government should be the ultimate guarantor of retail deposits, but that guarantee should not extend to high-risk transactions. If an investment bank goes under, the losses should be borne by those who were happy to take the profits in better times, something to which the Government are already committed. Vickers has proposed ring-fencing already, but we should be examining again the prospect of a total separation.

Thirdly, the key issue is that of competition. The Government need to take further steps to inject greater competition into the banking sector. People have lost faith in the banking industry. Small businesses are finding credit hard to come by, taxpayers are furious at the billions spent on the bail-outs, pay for bankers is too often unrelated to performance, and customer service levels are, in many cases, utterly appalling.

[Mr Sam Gyimah (East Surrey) (Con)]

I congratulate my hon. Friend and her colleagues on organising the debate, which is long overdue. I thank her very much for that. On the issue of competition, one of the challenges, especially from the business banking perspective, is that 90% of the market is held by the five major banks. That means that if a small business is looking for a loan, it will find it incredibly difficult to get one if it has been turned down by its main bank. Also, if someone is offered a loan, they often have to agree to switch their account to the new bank. That lack of competition is a serious problem in terms of getting lending to businesses in the market. However, does my hon. Friend agree that such competition should be about not only having more banks but the diversity of provision in the sector? It does not have to be a bank that lends to a business.

[Andrea Leadsom]

My hon. Friend is absolutely right. We need far more diversity of financial service providers. Some of the issues I am about to discuss will address that because bringing down barriers to entry will, by definition in a capitalist society, encourage new entrants of all different sorts.

Bank of England (Appointment of Governor) Bill

Sam Gyimah Excerpts

Friday 6th July 2012 Commons Chamber

[John McDonnell]

The decision in the case that my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) raised was not accepted. The Select Committee system has worked remarkably well, and when people have served on them, they have done so on a cross-party basis. However, the point the Minister makes still does not undermine the argument that it is better to have a group examining, interviewing and then coming to a decision about an appointment on a cross-party basis than to leave it in the hands of a single, party politician.

[Mr Sam Gyimah (East Surrey) (Con)]

rose—

[Mr Graham Brady (Altrincham and Sale West) (Con)]

rose—

[John McDonnell]

I have allowed large numbers of interventions. If I can press on, I will see whether I can allow further interventions later.

Let me go through the other arguments that the Chancellor has made. He also argued that involving the Treasury Committee in determining the appointment of the Governor would blur the lines of accountability, saying that

“it is proper that the Government of the day chooses the Bank Governor,”

and

“is held accountable for that choice”.

However, the reality is that the Governor’s term of office rarely coincides with a Government’s term of office. Many Governments inherit the Governor appointed by the previous Government and can therefore barely be held accountable for that appointment. The involvement of Parliament in the appointment would simply mean that both the Executive and Parliament would be held accountable for it. That is perfectly proper and appropriate.

Let me turn to Executive functions. When challenged over his decision to allow the Treasury Committee a veto over an appointment to the OBR, but to refuse it one over the appointment of the Governor, the Chancellor argued that

“the Governor…is carrying out executive functions on behalf of the State,”

such as setting monetary policy and monitoring financial stability. In the evidence session on 5 July 2011, the Chair of the Treasury Committee pointed out to him the contradiction between that argument and the argument that the Committee should have a veto over the OBR appointment precisely because it would be carrying out Executive functions. The Chancellor then made a rather bizarre distinction between different Executive functions, which was beyond the Committee’s comprehension.

The other argument, which was raised in the other place, concerned market sensitivity. The argument was that the appointment of the Governor was market sensitive and that involving the Committee in the process could have a detrimental impact on the markets by creating uncertainty over the appointment. It could just as easily be argued that OBR appointments are extremely market sensitive. However, whether the appointment of the new Governor is undertaken behind the closed doors of the Treasury or openly and transparently in the Committee, there will still be speculation in the markets about which candidate will be appointed and what the impact will be. If the post is so market sensitive, it is even more important that the appointee is seen to have the approval and confidence of both the Executive and Parliament.

[Mr Gyimah]

Let me take the hon. Gentleman back to his point about the Governor’s term of office, which would be a single, eight-year term. In other words, once appointed, the Governor does not have to seek reappointment and so can act independently. Therefore, we do not really need the Treasury Committee to be involved to ensure that independence.

[John McDonnell]

The key aspect is independence at the point at which that person is appointed, so it is critical that the new Governor, when they are appointed, is seen to be completely independent, and also carries the House as well as the Executive. That is the point I am making.

I have spoken long enough and many other Members wish to speak, so let me conclude. Over the coming period a new Governor of the Bank of England will be appointed. The new Governor will not only have more powers and responsibilities than any Governor before him or her, but will face the immense challenges of reforming and restoring confidence in our banking system and financial services. My view—and, I think, the view of others—is that it is therefore critical that the person appointed to this vital post has the credibility, independence and authority to meet those challenges. Engaging Parliament in determining the appointment, along with the Executive, will ensure that the new Governor has that credibility, independence and authority.

Those are the arguments, but let me say this to the House. I hear that there has been organising among Back Benchers to filibuster today and talk this Bill out. We have been here before, so let me say this to hon. Members. That is an extremely short-sighted approach, and it is not in the interests of the Government or good governance. If we get into the puerile antics that we have seen before, it just brings Parliament into disrepute and increasingly encourages people to judge this House to be degenerating into an irrelevant farce, especially on today of all days, when, outside this House, there are flood warnings across the country. Many hon. Members will want to return to their homes and their constituencies to be with their constituents. I therefore urge Members to take this matter seriously and ensure that their speeches are as brief as possible—I apologise for speaking too long myself—to enable the House to come to a decision that the Government can then consider. If the Bill gets talked out today, I will deeply regret that, but let me say this to the Government and to the House. This issue will not go away; it will return at a later date. I ask the Government and the House to seize this opportunity to make this reform. I hope that wiser counsels will prevail. I therefore commend this Bill to the House.

--- Later in debate ---

[Chris Leslie]

It is strange to hear ambitious and thrusting Government Back-Benchers seeking to continue to be neutered, saying, “No, please don’t give us any more of a say or any more powers. We don’t need any and it would be wrong for us to have any involvement whatsoever, even if that simply meant rubber-stamping the recommendations made by the Treasury Committee.” I am baffled that hon. Members should want to continue to hobble their role in such a way.

[Mr Gyimah]

rose—

[Chris Leslie]

I will give way to the former employee of Goldman Sachs.

[Mr Gyimah]

I thank the hon. Gentleman for being so well versed in my career history. I want to ask him about the substance of the issue that he is supposed to be discussing. Let me go back to his point about the United States: the big difference is that in the United States the Executive is not part of the legislature. Here, the Executive are part of the legislature, so when the Chancellor and the Treasury Committee appoint the Governor of the Bank of England, we still have a route of accountability via the Executive and the Select Committee. We do not need the same veto as Congress given how our constitution works.

[Chris Leslie]

We could have a long constitutional discussion, but essentially I do not think that anything is lost by airing more openly and transparently the background and the thinking of candidates for appointment as the Governor of the Bank of England in the Treasury Committee and then giving Parliament a say.

--- Later in debate ---

[Brandon Lewis]

I agree wholeheartedly with my hon. Friend. I attended a business forum meeting only 10 days ago and talked with businesses about the financial situation in our country. They were very optimistic and upbeat, but they were talking about what more we can do to make it easier for them to grow their businesses and create more jobs. Residents want to know what the Government are doing to allow more jobs to be created and to match the skills with the jobs that are available. They are not talking to me about how we choose the Governor of the Bank of England. They see a very clear difference—this relates to the interventions I have been enjoying from the hon. Member for Edmonton—between the Executive powers and the scrutiny powers and see that it is the Government’s job to set policy that will allow our economy to grow and, therefore, do not necessarily see, understand or have an interest in how the Governor of the Bank of England is appointed. They want to see that job being done properly and the Government setting out the economic policy correctly.

[Mr Gyimah]

On that point, is there therefore a risk that if the Treasury Committee were included in this process, to the extent of having a veto, ministerial responsibility could be blurred in relation to the appointment of the Governor of the Bank of England?

[Brandon Lewis]

My hon. Friend makes an interesting point, and not one that I had planned to make, so I hope that he will expand on it later.

In addition to the risk of having a Governor who is perceived to be a second choice or a lowest acceptable common denominator, which I hope I have outlined graphically, there is also the risk that that politicisation itself is part of the problem. In recent weeks many Members have made the point that we should focus our time and effort less on the process, which our constituents are not interested in, and more on the result and how we deliver for them and for our country. Suddenly giving a Select Committee the power to veto an appointment would detract from its ability, power and credibility to scrutinise what the Executive are doing to improve our country, because it would actually be focusing on being part of the Executive.

As I have said, the concern that our constituents might have about the Bank of England’s role in the banking and financial sectors, which is particularly prominent at the moment, is that its decisions are transparent. Any concerns they have about the Bank’s enhanced role under the Financial Services Bill focus on whether those functions are open to proper public scrutiny through Parliament. The inalienable political independence of the Bank of England is something that we, as Member of the House of Commons, should cherish, defend and uphold, which I think we do. When the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), published his insider’s account of the financial crisis that beset this country in 2008, I was alarmed at his suggestion that he considered overruling decisions made by the Governor of the Bank of England. He so seriously considered that course of action that he sought advice from Treasury officials to ascertain whether it was within his competences to do so as Chancellor of the Exchequer. If he had done so, the political uproar would have been enormous. The media and other commentators would and, no doubt rightly, could have criticised it as a blatant attempt at political interference, and, as Members will know, we had a debate along those lines just yesterday.

I urge Members to create no similar furore through this Bill, which blatantly attempts to assert direct parliamentary control over the appointment of the politically independent Governor of the Bank of England. Such unnecessary interference risks turning the appointment into a political football between the Executive and the legislature, which our financial markets would not tolerate or consider a sensible way forward. Indeed, they would, I believe, go into complete turmoil again, and our constituents would not thank us for being the ones who put them in that potential position.

The hon. Member for Hayes and Harlington said earlier—I made a note—that the Select Committee would seek consensus on the appointment, but our current system allows for that. The threat of a veto or the power to appoint moves things in a different direction, to an Executive role, and the appointment would therefore become an Executive one. It would be a mistake for the House to go down that route. Select Committees rightly have the power to scrutinise, but we must be clear about where the line is between the ability to scrutinise and comment as a critical friend and, from time to time, a non-friend, and the ability to adopt a decision-making power in an Executive role. That is something which rightly lies with the Executive—the Government—themselves, and I therefore oppose the Bill.

--- Later in debate ---

[Mark Durkan]

No. I have already been generous enough, and some Members were too greedy in terms of the length of their speeches.

The Treasury Committee would have a power of confirmation. Some hon. Members are saying that it would have a power of veto, but what appear to be powers on paper would not be exercised in that way.

Earlier we heard reference to appointments to the National Audit Office. Some appointments are notionally appointments by Parliament because they are subject to votes in this House—for example, appointments to bodies such as the National Audit Office and the Electoral Commission—and my hon. Friend the Member for Nottingham East would say that there could similarly be a vote on the appointment of the Governor of the Bank of England. However, I do not believe that that is a comparable situation. Given the significant extra powers and functions that the Governor will have, particularly after our experiences over the past few years and the allegations that we heard yesterday about the whole murky interface between the Government, the Bank of England and the City, it would be remiss of Parliament to say “We’re quite happy to leave this in that odd black box that exists somewhere between Whitehall and the City. We as Parliament do not want to step up to the plate and say, yes, when this appointment is made in future there will be a parliamentary stamp on it.” That is all that the Bill is asking for, and it would entrust and delegate that parliamentary stamp to the Treasury Committee.

[Mr Gyimah]

The hon. Gentleman seems to be ignoring the fact that the Treasury Committee already scrutinises the work and operations of the Bank of England. In fact, only last week the Governor gave evidence to the Committee. There is already parliamentary scrutiny of the substance of what the Bank of England does, and I do not see why we need to give the Treasury Committee this major constitutional power to veto the appointment as well.

[Mark Durkan]

I am not ignoring anything that the Treasury Committee does, but nor am I here to filibuster and rehearse everything that it does. The hon. Gentleman needs to recognise that the Committee itself has unanimously recommended this change.

We heard in yesterday’s debate, and we heard from the Chancellor on Monday, about the importance of a parliamentary Committee of inquiry being able to produce a unanimous report and about its being worth nothing if it is not unanimous. Here we have a unanimous recommendation from the Treasury Committee, and the very people who have been telling us about the power and significance of parliamentary Committees and the compelling power of unanimity are saying, “We don’t care about it, we don’t want to know.”

Amendment of the Law

Sam Gyimah Excerpts

Thursday 22nd March 2012 Commons Chamber

[Michael Fallon (Sevenoaks) (Con)]

I remind the House of my interests on the Register of Members’ Financial Interests. One of the most remarkable things about the Opposition’s response to this Budget is that we have not heard a single pledge to reverse any of the changes being proposed. We have heard a lot of carping and that they are going to vote against some of the measures on Monday, but they are not actually going to change them should they ever come back to power. When they do carp, they seem to be carping on behalf of some rather strange interests. They want the top 10% of households to keep their child benefit. They want the better-off pensioners to keep their age-related allowances. Indeed, they want the super-rich to go on enjoying some £65 million-worth of evasion of stamp duty and abuse of tax reliefs. That seems to me an extraordinary position for the Opposition to get into.

[Mr Sam Gyimah (East Surrey) (Con)]

Is it possible that the opposition to these measures we are hearing, which my hon. Friend has outlined, is opportunistic politics dressed up as principle?

[Michael Fallon]

My hon. Friend is on to something. We note that the shadow Chancellor could not answer the questions on whether Labour would restore the age-related allowances, the changes to which its Members have been moaning about today.

Where I hope there is common ground across the House is that we all want a dynamic, high-growth economy. In my view, that can be built only on sound public finances, fully flexible labour markets and rising productivity in both the private and public sectors.

I shall begin with the public finances. I welcome confirmation in the Budget that we remain on track to eliminate the structural deficit, with the result that, even in difficult trading circumstances both in the eurozone and globally, the Chancellor was able to avoid big increases in taxation or further increases within this spending round. A broadly neutral Budget confirms that we are on course, but keeping our public finances on course will require continued firm control of public spending.

I note that in cash terms public spending continues to rise each successive year that is illustrated in the Red Book. It may be that we have to have a fresh look at some of the entrenched spending targets of the previous Government. We may well need to ask ourselves whether specific targets, for example on child poverty or climate change, are the best way of focusing our spending where it is most needed.

I welcome moves towards flexible labour markets and more local pay. The hon. Member for Foyle (Mark Durkan) is right—this is not a new announcement. If you look back at the spending review of 2002, Mr Deputy Speaker, you will see that the then Government were committed to more flexible local and regional pay. You will find it in the Budget documents of 2003. You will also see it in the previous Prime Minister’s last Mansion House speech as Chancellor in 2006. Of course, the Labour Government did nothing about it; their union paymasters would not allow it. But local pay has applied for the past 25 years at least across the private sector, and it would be wrong to continue to rope off the public sector from the real differences in the associated costs of labour up and down the United Kingdom.

It is unfair to local businesses to have to compete for labour with public bodies and offices that pay well above the market rate. It is certainly unfair to the jobless in those labour markets, who are priced out of jobs as a result. I hope that the Chancellor will go on to tackle some of the other inequalities, such as the big differences in sickness pay between the public and private sectors and the real difficulties that young people under 25 have in getting that first job. One third of the unemployed are under 25. That is the legacy of the Labour party, and we have to do everything possible to help those people to get their first job, not least when at the moment we control their wages and other conditions that create so many disincentives for small companies to take on a single extra member of staff. Why should the state make it so difficult for young people to get into employment?

The test of all the Budget measures in the end is whether they will improve our productivity, as so many Labour Budgets and so much Labour spending signally failed to do. The Office for National Statistics figures for 2010 say it all and are a good summary of 13 years of Labour government. In terms of GDP per hour, France is 18% more productive, Germany is 19% more productive and the United States is 24% more productive. That shows the importance of improving incentives at every level and it is why I welcome the new incentives for the lower paid and middle earners that will be created by the changes to the personal allowance. Taking 2 million people out of tax altogether in two years will improve those incentives. That is a coalition achievement in which both parties on this side of the House can take real pride.

Sound public finances, more flexible labour markets and higher productivity are the keys to the future and to the jobs that our children need. I welcome the progress being made in this Budget towards them.

--- Later in debate ---

[Mr Sam Gyimah (East Surrey) (Con)]

Listening to today’s debate, I have heard little from Opposition Members to dissuade me from the conclusion I arrived at yesterday after hearing the Chancellor’s speech: that this is a fiscally responsible and fair Budget, but one that continues to build the foundations for our long-term growth and prosperity. What the Government are doing for growth and prosperity will be the focus of my speech. First, however, I want to make a few comments about fiscal responsibility allied to fairness.

I am pleased that the Chancellor chose to stick to the plan—a framework within which all the Government’s decisions are being made. At the beginning of this Parliament, the Chancellor made the right decision, to pay the debts of the past and, after a decade of uncontrolled borrowing, to tighten our belts. It is encouraging that the Chancellor continues to stick to that plan, which was initially unfashionable but has now entered the international mainstream.

The task facing us is not easy, and it will continue to be challenging. The gap between how much we earn and therefore take in and how much we spend has fallen from £156 billion—an all-time high, set just before the coalition came to office—to £126 billion. We have therefore made a lot of progress in balancing the books, but we must not take our foot off the gas, which is why I am glad the Chancellor continues to stick to his plan in this Budget.

It is interesting that Opposition Members no longer call for a plan B. A year or so ago not a day would pass without their calling for that. They are no longer calling for it because plan A is working: the deficit is falling and we are beginning to see private sector-led job creation. That is why the Chancellor is right to stick to his plan and to focus on being fiscally responsible. Very few western Governments could these days have announced the Budget that he has just delivered, and he has been able to achieve that because of his past decisions.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

The hon. Gentleman says plan A is working. Does he agree that it must have been an oversight not to mention at the outset that it would result in damaging growth and therefore pushing up unemployment and the costs of some areas of borrowing?

[Mr Gyimah]

It is precisely because plan A is working that in this Budget we can afford to lift 2 million people out of tax—2 million people who were penalised by the 10p tax introduced by the last Labour Government. Because plan A is working, 24 million of the 30 million workers in the UK can get a tax cut—a very important tax cut in very difficult times. The hon. Member for Birmingham, Erdington (Jack Dromey) said that he would compare his record with our record any day. I say to him that we are lifting 2 million of the poorest people out of tax, while the previous Labour Government penalised them. Our record certainly stands up to scrutiny on that.

Labour has now quietly dropped its plan B, and is instead opportunistically opposing our measure on the 50p tax rate. However, Labour does not say that it would reinstate that rate if it were elected to office tomorrow. It is also saying it would somehow give child benefit to higher rate tax payers.

[Mark Durkan]

If the need for deficit reduction was the justification for the temporary nature of the 50p tax rate and the withdrawal of child benefit, why has the 50p tax rate remained a temporary measure while the withdrawal of child benefit will be permanent?

[Mr Gyimah]

All three main parties agreed that the 50p tax rate was to be a temporary measure. Also, we must ensure that any tax that is imposed actually raises the required revenue for the Government coffers. If it does not do so, it would be irresponsible of a Government to carry on with that tax just because it is good politics. It is right for the Government to set that tax at a rate that discourages avoidance and encourages people to pay.

Fairness must not be the only test of this Budget. Economic growth is also very important. In truth, the Chancellor has very limited room for manoeuvre, and it is good that we have nevertheless done quite a lot for hard-working people, giving back to them more of their hard-earned cash. However, only economic growth will lift the prosperity of all of us. Today, we focus on who are the winners and losers from this Budget, but growth is the most important theme.

I was therefore encouraged to hear the Business Secretary talk about access to finance from the banks. My party colleagues and I know that more borrowing, spending and debt is not the way to get economic growth and to create jobs. We believe that the way to achieve that is through encouraging a spirit of enterprise and adventure, but we cannot encourage that unless we ensure that finance gets into the real economy.

One of the biggest challenges we face in coming out of the 2008 financial crisis is the concentration in our banking system. Some 90% of small business lending is concentrated among five banks. No matter what they say, that means that there is little price competition and it is important that the Government do a lot to ensure that we can get money into the real economy. That is why I welcome credit easing, because by using the Government’s balance sheet to enable banks to borrow and lend to businesses, we enable a situation whereby even if a business had a 1% interest rate discount, it could refresh loans that may otherwise not be refreshed.

[Richard Fuller]

My hon. Friend is talking about credit easing and the use of banks. Does he not also think there is scope for considering alternative mechanisms to provide financing to our small businesses?

--- Later in debate ---

[Mr Gyimah]

I very much agree with my hon. Friend that credit easing is a temporary measure. In the long term, the Government have to change the lending landscape for small businesses—that is the point I was driving at. We cannot continue to rely on five major banks, which is why I welcomed the business finance partnership, a £1.2 billion fund that the Government are using to support non-bank lending institutions that are closer to small businesses. Many of these are peer-to-peer lenders, such as MarketInvoice or Funding Circle, or more traditional institutions such as M&G Investments. It is absolutely right to diversify the lending landscape, so that businesses in my constituency and in many others do not just have to rely on the same bank manager and, more importantly, the computer, which will say no to them when they try to refresh a loan or get the credit that they need.

I welcome the fact that the Budget realises that debt finance should not be the only source of finance for businesses. Equity finance is very important, especially in the context of businesses that do not have the cash flows or the revenues to support debt. That is why I welcome a lot of the flexibility associated with the enterprise investment scheme, venture capital trusts and the seed enterprise investment scheme. Those are all schemes in the Budget that would not make the headlines; nobody is going to focus on them because they do not immediately tell people who are the winners and losers in the Budget. However, it is those measures that will ensure that individuals who want to take risk, to start businesses and to build up their companies are capable of doing so. Whether we are talking about The White Company, lastminute.com or The Body Shop, it is these British success stories that will get us out of where we are at the moment.

What would I like to see as the Chancellor reflects on his Budget, and I hope, takes it further? On the diversification of the lending landscape in this country, we need to be very careful not to stifle innovation as we examine banking regulation. So much of what we are doing on banking regulation is about dealing with the crisis of the past. We should make sure that, in doing so, we do not freeze our banking system in aspic so that new, enterprising and innovative companies that can get credit to small businesses fail to thrive. The Government have announced £20 billion of credit easing, but we probably need to consider doing more in that direction to help businesses.

[Mr Iain Wright]

Does the hon. Gentleman think that the massive downgrading in business investment growth forecasts over the medium term is a sign that plan A is working?

[Mr Gyimah]

Anyone who has been in business before, as the hon. Gentleman has—he was an accountant—and as I have been, will know that one of the most important things is confidence. For businesses to gain confidence, they need to know, first, that the Government are going to create an environment of certainty in which they can operate. They also need to know that the Government are going to balance their books and to create the right environment in which to invest. Lowering corporation tax is a clear signal that we are going to be creating the right environment for businesses to operate in. I am confident that once we have that macro-economic framework right, businesses will have the confidence to invest. It is only through business investment that we will generate the growth and the jobs that all Government Members want and are fighting for. The Chancellor is on the right side of this argument, because we cannot do this through more borrowing, more spending and more debt—that is more of the same and it is all I have heard from Labour Members today.

First-time Buyers

Sam Gyimah Excerpts

Wednesday 14th March 2012 Westminster Hall

[Steve Brine]

Yes, the FSA is monitoring the situation very carefully. There are some new lenders coming on to the market who are keen to step up to the plate, and the FSA is treating them with all the due care and diligence that we would expect. I know that as chair of the all-party parliamentary group on Citizens Advice, my hon. Friend takes a great interest in the matter, and I thank him for coming along this morning.

Nobody will get a mortgage who is not able to pay for it, not only at today’s low interest rates but at interest rates that will possibly rise at some future point. NewBuy is most welcome.

[Mr Sam Gyimah (East Surrey) (Con)]

I thank my hon. Friend for organising this debate. While we are on the sub-prime crisis, is it not the case that we need to ensure that we do not have a situation in which people are borrowing 120% of their salary, which they clearly cannot afford, or self-certifying their earnings? Those aspects of mortgage lending led to the sub-prime crisis. Here, the focus must be on affordability first.

[Steve Brine]

Absolutely. Affordability is the key word. One of the key lessons that must be learned from what happened in 2007 is that affordability must be at the heart of mortgage lending. That is why I am so pleased that the Council of Mortgage Lenders is backing this scheme. Obviously, through its lenders, responsible lending will be the watchword, but affordability is critical.

NewBuy is most welcome. I have taken great care to inform many of my constituents about it already and I understand that the website NewBuy.org.uk has, unsurprisingly, been very busy in its first 48 hours. Although I welcome it, I will just make this point to the Minister. Many first-time buyers will welcome any home, and a new build ticks many boxes, but I urge her to work with colleagues at the Treasury and in the Department for Communities and Local Government to explore ways in which we can extend NewBuy to not-so-new-buys because not all mature properties are thatched cottages worth a couple of million pounds, and sometimes first-time buyers do not want to choose a new build. There is much housing stock out there that could come on to the market, especially as we change the rules on assured tenancies.

Oral Answers to Questions

Sam Gyimah Excerpts

Tuesday 6th March 2012 Commons Chamber

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

The Department for Education is looking at this area. I am clear that the support that this Government have given to the Money Advice Service will ensure that people of all ages and all income levels receive the advice that they need to manage their money properly and prepare for their futures.

[Mr Sam Gyimah (East Surrey) (Con)]

T5. The Opposition’s policy of more spending, more borrowing and more debt is not credible and will result in higher interest rates. Will the Chancellor tell the House what impact just a 1% rise in interest rates would have on businesses, mortgages and the cost of servicing the colossal national debt racked up by the previous Government?

[Mr George Osborne]

I gave these figures to the House before and will give them again because they remind us how irresponsible the Labour party’s policy is: a 1% rise in mortgage rates would add £10 billion to family mortgage bills; a 1% rise in interest rate loans would cost businesses £7 billion; and a 1% rise in interest rates would add £21 billion to debt interest payments. The policy that the Labour party claims to pursue, at least this week, would definitely put market rates up, which is what has happened to other countries without a credible fiscal policy, and taxpayers, families and businesses would pay for the mess they got us into.

Living Standards

Sam Gyimah Excerpts

Monday 5th March 2012 Commons Chamber

[Rachel Reeves]

I am looking to the Government Front-Bench team for their solution, given the words that we have heard from Ministers over the past couple of days. The Labour party supports child benefit as a universal benefit. At the very least, the Government must iron out the anomaly that means that families earning £84,000 a year can still get child benefit, while a one-earner family on £43,000 cannot.

One month tomorrow, on Good Friday, 212,000 families stand to lose up to £4,000 because of changes to the working tax credit. The Government will say that people need only to increase the number of hours they work from 16 to 24. If they were in touch with working families and businesses, they would know that this is simply not an option for many people because the jobs are not there, and employers are laying people off and cutting hours, not increasing them.

[Mr Sam Gyimah (East Surrey) (Con)]

The hon. Lady is demonstrating to the House that she is a very good Opposition politician. What exactly would she do to address the problem that she is highlighting?

[Rachel Reeves]

I thank the hon. Gentleman for saying that I am a good Opposition politician; I hope, in due course, to be a good Government politician, so that we can put into practice measures to help families, pensioners and businesses facing the squeeze. But it is this Government’s mistakes and wrong-headed policies, which are callous, incompetent and unfair, that are penalising families trying to do the right thing. As I said to the right hon. Member for Wokingham (Mr Redwood), I would like child benefit kept as a universal benefit to help all families with the cost of bringing up a family. At the very least, however, the Govt must address the anomaly.

Eurozone

Sam Gyimah Excerpts

Monday 10th October 2011 Commons Chamber

[Mr Osborne]

We are also arguing strongly for a real freeze in the budget and—I alluded to this earlier—a change in the direction of European policy making so that we do not price this entire continent, including ourselves, out of the world market.

[Mr Sam Gyimah (East Surrey) (Con)]

Does the Chancellor agree that, in the short term, quantitative easing could produce a weaker pound, and that within clearly defined limits that could help to boost exports and therefore drive growth?

[Mr Osborne]

I have made it a policy not to comment on the value of sterling and I do not intend to break that policy right now.

Amendment of the Law

Sam Gyimah Excerpts

Thursday 24th March 2011 Commons Chamber

[Mr Sam Gyimah (East Surrey) (Con)]

I have sat here today with a sense of déjà vu, first because I sat here yesterday for a number of hours and did not make it into the debate—as it wore on today I felt that the same thing was going to happen—and secondly because of the arguments from the Opposition, especially those put forward by the right hon. Member for Morley and Outwood (Ed Balls). If we were to listen to him and completely ignore the fact that we had a general election in which they lost and we won and formed a coalition Government—[Interruption.] The British people clearly did not believe that Labour’s stewardship of the economy had been exemplary, which is why they were kicked out of office. That is why in places such as Erewash, a seat that Labour won in 1997, we had a 10% swing back to the Conservatives. Let us not allow Labour to pretend that their stewardship of the economy was somehow exemplary. Until they learn to accept, in front of the British public, that they made mistakes, they do not have the credibility to be part of the economic argument. Let us not allow the right hon. Gentleman to rewrite history.

I will take up the gauntlet laid down by the right hon. Member for Bath (Mr Foster). Rather than allowing Labour to push us into debating the fiscal plan that we set out last year and the implications for growth and interest rates now, let us talk about some of the excellent measures that are in “The Plan for Growth”, because Government Members owe it to the British people to explain them rather than letting the Opposition muddy the water on what happened in 2008-09, when they clearly mismanaged the economy and were kicked out of office.

[Mr Mark Field]

My hon. Friend is absolutely right. “The Plan for Growth”, particularly in relation to the smallest start-up businesses and the idea of exempting them from much of new regulation and legislation or putting a moratorium on it, is a very positive way forward. I hope he will explore that a little further.

[Mr Gyimah]

I agree with my hon. Friend entirely. One of the great things about “The Plan for Growth” is that the Chancellor did not try to say that there is a silver bullet for creating growth in the economy, or that we can pick winners. No bureaucracy or Government can really pick winners to generate economic growth. I am reminded of a story—perhaps apocryphal, but certainly instructive—about McKinsey, the strategy consultancy firm, which produced an economic outlook for the 2000s that completely omitted the internet when identifying the key drivers of economic growth. Today the internet is a massive sector worth, I think, £100 billion and employing thousands of people. It is right that we have not tried to pick winners.

Looking at what the Chancellor has done, I note that it is we, rather than Opposition Members, who recognise that growth will come from the private sector, not from a state-led programme. That is why I agree with the four objectives that he laid out: to be competitive on taxes; to be one of the best places to start, finance and grow a business; to encourage investment in exports as a route to a more balanced economy; and to create a more educated work force.

I will focus on just one of those areas—starting, financing and growing small businesses—partly because I have an interest in it because my constituency is full of small businesses. Nationally, however, there are 4.8 million small and medium-sized enterprises, and they are responsible for 50% of private sector output and 60% of jobs. If we really want to create the growth that drives jobs, we should surely look to do so from the private sector.

Research by the National Endowment for Science, Technology and the Arts points out that 6% of the fastest-growing companies create 50% of the jobs, not just in the south-east, but throughout all regions and sectors. In other words, the start-up, survival and eventual success of small companies is vital for public policy and for creating growth.

The hon. Member for Coventry North West (Mr Robinson) mentioned bank lending, but fast-growing companies’ revenues are often volatile and their cash flows can be unpredictable. Banks do not want to lend to them, so we need to be able to create an environment for equity lending. One thing we know in the UK is that, if people want to raise amounts below £2 million, they find it incredibly difficult to do so. Such risk capital, however, encourages businesses to take a risk—to take on the new plant, to hire new staff—so it is great that there are so many changes to the enterprise investment scheme in “The Plan for Growth”.

Increasing relief to 30% means that someone who is going to invest in a business knows that they can offset 30% of their investment against tax. It will encourage people to take sensible risks and invest in those companies that will drive growth. Raising the relevant annual limit to £1 million and to £10 million per company means that companies can seek capital from high net-worth and private individuals, not just from institutions. Anybody who is involved in small businesses knows that people often rely on friends and family to support their business in its early stages, so it is good to see the Government backing those who are ready and willing to take such risks.

Raising the limit on qualifying companies to 250 employees means that the measure will apply not just to start-up companies, where the failure rate can be quite high, but to well-established companies that need capital to grow. I would like to see what more the Government can do to allow connected persons to enjoy such tax reliefs, because connected persons—directors—cannot enjoy them at the moment, and that is where businesses get much of the expertise that they need. By making investment in small businesses easier, the Budget recognises and encourages people who are willing to take risks.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

I am listening very carefully to the hon. Gentleman. Does he agree that the real problem for small businesses is not in formation, as a number of them will inevitably die after a few years, but in taking a small business and making it into a larger business? I take his point about venture capital trusts, business angels and all the other mechanisms, but the only way in which we can achieve such growth is through bank lending. That is the real source of capital for small businesses, so how do we improve bank lending?

[Mr Gyimah]

I take the hon. Gentleman’s point and thank him very much for it. Anybody who has ever tried to start a business knows that banks do not lend to businesses with unpredictable revenues or cash flows. One has to raise equity to support small businesses, and the Budget includes a raft of measures to encourage individuals and institutions to invest in them. Entrepreneurs do not always mind whether it is a bank or an individual who is willing to invest in their business either in the early stages or when they need new plant; what they want is the money to grow their business and to hire new staff. That is how they look at it, and there are many appropriate measures in the Budget to address that.

The Budget also seeks, through the entrepreneurs’ relief and raising the cap on capital gains from £5 million to £10 million, to reward people who mortgage their home, take a low salary and start a business. That will not make the newspaper headlines, but in competitive terms it makes the UK a centre for investment. I have spoken to several people in the venture capital industry who say that they will now be thinking of coming to the UK to look for small business assets to invest in. It also means that an entrepreneur who lives in another country will come to the UK to set up a business such as Skype because he is more likely to attract investment—and yes, they might be from abroad, but they will employ UK residents. That is what is great about this Budget. Unless we understand that the engine of growth is enterprise—that it is individuals and their efforts who will drive growth—we will be barking up the wrong tree as we discuss this Budget.

In addition, we have measures such as the research and development tax credits; I cannot go through them all in the short time that I have available. It is good that small businesses that invest a lot in R and D can get some of that back in the form of a tax break. I am reminded of a husband and wife who came to my surgery. They had set up a business, having developed equipment to treat club foot, and needed R and D tax credits, but they had to move to Cornwall to do so. I hope that the tax relief that we are providing will not only be regionally based but that people will be able to access it wherever they are in the country.

Last week, Opposition Members came up with their growth plan—the right hon. Member for Morley and Outwood reiterated it today—which would levy the bank tax again and spend it on a series of Government programmes. What I like about this Budget is that it does not seek a Keynesian stimulus—we cannot have that because we have maxed out the credit card—but backs enterprise. It relies on the endeavour, the ingenuity and the efforts of the British people to get our country back on its feet again, in contrast to what the Opposition did, which was to get the country into a mess.