Industry (Government Support)

Tony Baldry Excerpts

Wednesday 16th June 2010 Commons Chamber

[Mr McFadden]

No—I have already given way to my hon. Friend and I want to make progress.

Support for industry is not just about specific interventions, but about having the right measures in place to foster investment and innovation, and I want to ask the Secretary of State where we stand on some of the key measures in that area, such as capital allowances, which the Government provide to encourage investment in new plant and machinery. The allowances are vital to manufacturing companies, particularly when we want them to be moving to lower carbon production. For those reasons, we doubled investment allowances in our last Budget, which meant that the new allowance—of £100,000—covers some 99% of capital investments made by companies every year.

The new Government, however, are pledged to cut those allowances to pay for their planned cut in corporation tax, a move described by the Engineering Employers Federation as “a disaster”. It has said that if those plans went ahead:

“Any business would have to think twice about investing in the UK.”

Before the election, the Chancellor said that that plan would involve the removal of allowances amounting to £3.5 billion, which would otherwise support manufacturing. Can the Secretary of State confirm that it remains the Government’s policy to cut investment allowances for manufacturing industry?

Another issue is supporting research and development. We are all agreed that we want research and development, and the manufacturing associated with it, to take place here in the UK. For that reason, the previous Government introduced the idea of a patent box—a corporation tax rate of just 10% on future profits made from patents. When we announced that policy, Andrew Witty, chief executive of GlaxoSmithKline said:

“The patent box is exactly the sort of active, long-term and creative support that we need from the government to ensure that the UK remains an attractive place for highly skilled sectors such as pharmaceuticals.”

When the Secretary of State was asked about that a couple of weeks ago, he did not answer, but I want to give him another chance to do so today. If the new Government believe so much in a lower rate of corporation tax, will he now tell the House whether they support that proposal for an extra-low corporation tax rate for that part of the economy engaged in research and development here in the UK?

On innovation, can the Secretary of State tell us where we stand on the Hauser report and Labour’s plans for innovation centres to help the crossover of ideas between academia and industry?

Let me say a word about the regional development agencies. These were introduced by the Labour Government a decade ago because we had seen the success of the Scottish and Welsh development agencies. They have, for the most part, performed well, with independent evaluation showing that for every £1 spent, regional economies benefited on average by £4.50. I know that the Secretary of State agrees that every part of the country should share in future economic growth. Before the election, he said that

“efficiency has become the new politically correct word for sacking people and cutting services”.

But one of his first acts, together with other Departments, was to take £300 million out of the RDAs, so I know that he will not claim that that was about efficiency. Will he admit that that will have a real impact, with business support cut, projects cancelled and delayed, and—as my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) said, less private investment levered in to those projects?

[Tony Baldry (Banbury) (Con)]

Earlier, the right hon. Gentleman accepted the need to control the budget deficit. Is there any area in which he thinks public spending should be reduced? Can he share just one such area with the House?

[Mr McFadden]

The previous Government set out many proposals, including some £900 million over the next few years in the expenditure of the Department in which I was a Minister. We also said that we would save billions more than that on public sector pay and pensions, and we set out many other proposals. I do not stand here as someone who says that there should never be cuts. My point today is that cuts must be made in a way that supports a strategy for growth, not in a way that militates against it. That is why I raised the issue of industrial support and regional development.

Apart from the Budget, what about the future of the RDAs themselves? Government policy on this is in a total mess. We have had statements that they will be abolished, that they will be replaced, and that their replacements will both be different and look the same. Can the Secretary of State tell the House today exactly what the position is and how he is going to make a judgment on this? He talks of business and local authorities deciding in particular regions. How will that be done? Will it be one vote per council or one vote per business? Will it need a 55% majority? If it will be up to the region, how will he make the judgment on this important issue?

--- Later in debate ---

[Tony Baldry (Banbury) (Con)]

I congratulate my hon. Friend the Member for Bracknell (Dr Lee) on a truly outstanding maiden speech.

This Parliament will be overshadowed and dominated by the budget deficit and the consequent need to make cuts in public spending, but we should never forget that it is a Labour deficit and that these will be Labour cuts. The speeches made today by Labour Members have displayed a total inability to recognise that we have a serious budget deficit and that action needs to be taken as a result. The only comments made by those on the Labour Benches—I suspect that this will be the same throughout this debate—have been in support of more public spending. They do not appear to have recognised that that is not sustainable any longer.

We need to examine what businesses in our constituencies want. I think that we are all agreed that, as the motion says, we need

“a clear deficit reduction plan, and that such a plan must have at its heart measures to foster growth and create the conditions for a strong business-led recovery”.

What do businesses want? First, they want access to bank lending. The coalition agreement clearly states:

“We will develop effective proposals to ensure the flow of credit to viable SMEs. This will include consideration of both a major loan guarantee scheme and the use of net lending targets for the nationalised banks.”

So the Government are going to address the issue of ensuring access to bank lending for businesses.

The vast majority of businesses in my constituency want to see red tape cut and the burden of regulation lifted from businesses. The coalition agreement clearly states:

“We will cut red tape by introducing a ‘one-in, one-out’ rule whereby no new regulation is brought in without other regulation being cut by a greater amount”.

It continues:

We will end the culture of ‘tick-box’ regulation…We will end the so-called ‘gold-plating’ of EU rules, so that British businesses are not disadvantaged relative to their European competitors…We will give the public the opportunity to challenge the worst regulations.”

Small and medium-sized businesses in my constituency have been crying out for all those things for many years.

Businesses want a simplified tax system. The coalition agreement clearly states:

“We will find a practical way to make small business rate relief automatic.”

It continues:

“We will reform the corporate tax system by simplifying reliefs and allowances, and tackling avoidance, in order to reduce headline rates. Our aim is to create the most competitive corporate tax regime in the G20, while protecting manufacturing industries.”

Again, that is very much welcomed by the business community.

What will also be welcomed in a business-led growth approach is the following coalition Government intention:

“We will make it easier for people to set up new enterprises by cutting the time it takes to start a new business. Our ambition is to make the UK one of the fastest countries in the world to start up a new business.”

That is excellent.

I shall now discuss the regional development agencies. I must say, as the Member for Banbury, which is on the edge of three geographical regions—the west midlands, the east midlands and the south-east—that RDAs have been of almost no use to my constituency. They have been inflexible, rigid and expensive. The creation of local enterprise partnerships—joint local authority-business bodies introduced by local authorities to promote local economic development—will ensure much more flexibility. My local district council is currently in negotiations with another district council, which lies in another geographical area but is contiguous to us, and the new arrangement will give us a lot more flexibility. It also goes with the grain of what local people want.

It is also excellent news that this Government will try to encourage more green industry and green-collar jobs and the creation of a green investment bank in my constituency. We hope that we will see the start of a new eco-town at Bicester, because things can be built upon green-collar jobs.

We are therefore going to see access to money, a reduction in the regulatory burden and the other thing that most businesses in my constituency want: improved and enhanced skills. An excellent start has been made with funding for 50,000 apprenticeships having already been made available. In addition, the Government are going to seek ways to support the creation of apprenticeships, work pairing, and college and working training places, as part of our wider programme to get Britain working. I am going to ensure that my constituency gets as many of those apprenticeships as possible, because it is incredibly important to enhance the skills base.

We will not be able to spend or tax our way out of the current situation. What we must do is have a business-led recovery, which also means having an export-led recovery. I very much welcome what my hon. Friend the Member for Bracknell said about the space industry, but this country can take the lead in exports in all sorts of other areas. Only a very small amount of what we produce goes to China. We need to tackle the huge markets that exist in the world, and China is just one example. Since the election, I have started to establish a north Oxfordshire export club in my constituency, so that everyone in the constituency can share advice and collaborate to see how we can collectively help to promote exports and to try to ensure that a far larger part of our output goes overseas. It is those exports—the hard cash earnings that we get from exporting goods overseas—that will help to pay for the recovery here.

This Government have a positive agenda that is going to help a business-led recovery. They are doing and proposing to do the sorts of things for which businesses in my constituency have been crying out for a very long time, and I wish the Government well in their endeavours.