Economic Environment: Growth and Jobs

Viscount Chandos Excerpts

Thursday 11th July 2019 Lords Chamber

[Viscount Chandos (Lab)]

My Lords, I am full of admiration for the noble Baroness, Lady Neville-Rolfe, for her bravery in introducing this subject at this point in the Government’s management of the Brexit process and the ingenuity of her remarks in attempting to draw the House’s attention away from it. I draw the attention of the House to my entry in the register of interests, in particular my involvement in a number of small companies. This debate cannot be Brexit-free, but at least should be Brexit-lite.

The noble Baroness referred to the inevitable focus on Brexit over the next 100 days. Whether we leave the EU on 31 October or not, it is not 100 days. It may be 1,000 days, or 10,000, while the future trading arrangements with the EU are agreed. The uncertainty and confusion over Brexit overshadows everything. It has united the CBI and the TUC; it is to be welcomed in some ways but regretted in others.

The Government were unprepared for a no vote in the referendum and for the triggering of Article 50. We are now faced with the leadership contenders in a race to the bottom, competing to establish their macho credentials for contemplating leaving without a deal. As the noble Baroness, Lady Neville-Rolfe, acknowledged, even when Brexit is resolved, other issues are as important as tax if not more so. The more vibrant and vigorous a market is, the firmer regulation needs to be to address monopolistic and oligopolistic tendencies and to protect competition and the consumer. Other issues are education and training, migration and visa policy, and infrastructure.

Tax policy to encourage business growth and job creation is therefore a necessary but not a sufficient condition for a successful economy. As with regulation, a balance has to be struck between supporting business and fairness for all taxpayers and individuals. As the leadership race for the Conservative Party unfolds, I guess it is between the entrepreneur and the other candidate—I am not sure what he is; a comedian, a chameleon? One advocates a cut in corporation tax to 12.5%, even though, despite what other noble Lords have suggested, there is no firm evidence that the reduction from 28% to 19% has been beneficial to the economy. The other candidate advocates raising the threshold for higher rate income tax from £50,000 to £80,000. Whoever becomes leader of the party will perhaps, or presumably, become Prime Minister. Should the unwritten constitution not require that when the leader of the governing party changes, there is a vote of confidence—another confirmatory vote—in the House as a matter of course?

In contrast to the Conservative Party leadership candidates, in this debate I will concentrate my remarks about tax on the position of small businesses. The noble Lord, Lord Leigh, said that these Benches are not interested in, or supportive of, “the little guy”. When this House debated the report on RBS’s treatment of small businesses through the Global Restructuring Group, a couple of weeks ago, I was struck that there was no speaker from the Back Benches opposite. I love small businesses and start-ups and have worked with them for many years, as my entry in the register shows. I have worked with many different entrepreneurs, some of them even more successful than the Foreign Secretary, and some unsuccessful. I disagree with the noble Lord, Lord Leigh: the one common theme in my dealings with those entrepreneurs is that I have never seen any sign that tax ranks in the first five, or 10, considerations in their decision to start a business, to build it, and to do so in this country.

I finish by urging, as I have in previous speeches in this House, that the Government—the next Government or maybe the one after; it is too late for this Government—conduct a thorough review of the cost benefit of the myriad tax breaks for small businesses. I am hugely supportive of small businesses, as I have said, but if you aggregate the tax breaks of business property relief under inheritance tax, EIS, VCT and entrepreneurs’ relief, it is running at £10 billion of transactions per year, at a cost to the Exchequer of around £3 billion per annum. Do we get value, do small businesses even get value, from those reliefs?