Business: International Competitiveness

Viscount Younger of Leckie Excerpts

Thursday 16th January 2014 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie) (Con)]

My Lords, I thank all those who have contributed today, and particularly congratulate my noble friend Lady Neville-Rolfe on initiating this important debate. Indeed, I understand that it was her first debate in this House.

In my remarks I will outline the measures that we are taking to meet our aspiration that the UK is seen as the best country in the world in which to do business. There is of course much to say on both enterprise and competitiveness, so I will focus only on some key areas; that is, improving access to finance, equipping people with the right skills, increasing our exports and simplifying both taxation and regulation—all subjects that have been alluded to today.

First, the Government’s growth and business plan for UK plc is set out in our industrial strategy. As part of this, we are implementing 11 sector strategies in partnership with business. My noble friend Lord Stoneham highlighted the importance of focusing on specific sectors. I am co-chairman of one of the sector councils—the Professional and Business Services Council. This is the UK’s largest economic sector, accounting for 12% of UK employment and 11% of gross value added.

We have been working on some exciting projects. The Government have invested, in partnership with industry, approximately £2 billion in the Aerospace Technology Institute and, as my noble friend Lord Stoneham mentioned, £1 billion in the automotive Advanced Propulsion Centre. The first projects for both will be launched later this year. We have also earmarked £600 million for eight technologies where the UK has the potential to be a world leader; we have announced a new £100 million employer ownership fund to co-finance investment in skills in key sectors and new technologies; and we are going to reform public sector procurement to make it more accessible to SMEs.

The Government are also taking steps to strengthen manufacturing by encouraging innovation, business investment, technology commercialisation, skills and exports. For example, the Advanced Manufacturing Supply Chain Initiative has made £245 million available to support manufacturing supply chains in England.

The Government are also committed to ensuring that businesses can access the finance that they need for investment and growth. The new British Business Bank brings together the management of existing government loan guarantee and investment schemes into a single, commercially minded institution. I am pleased to have broad support for this from the noble Lord, Lord Paul.

Business bank schemes are supporting £600 million-worth of lending and investment on an annualised basis. This includes the successful Start Up Loans programme, which has already provided £60 million of funding, helping more than 11,500 entrepreneurs to set up their own businesses. The business bank will use its funding to unlock up to £10 billion-worth of additional business lending and investment. It will achieve this by developing innovative programmes for smaller businesses and investing alongside the private sector.

Your Lordships will be aware that apprenticeship numbers continue to rise as we make it easier for employers to take on an apprentice. The noble Lord, Lord Bhattacharyya, and my noble friend Lady Neville-Rolfe, highlighted the importance of skills and education, as did the noble Lord, Lord Young of Norwood Green. We are equipping people with the skills that employers want—for example, 2.5 million adult learners achieved a government-funded further education qualification, representing an increase of 9% in 2012-13.

I now turn to exports. First, I pay tribute to my noble friend Lord Green, a tireless advocate for UK businesses. He recently vice-chaired the World Trade Organisation summit in Bali. The outcome of the summit is the first global trade deal in 20 years. It will add £100 billion to the global economy and will provide £1 billion of benefit to UK businesses annually.

As Trade Minister, my noble friend also encouraged UKTI to focus support on those sectors most important to the UK—for example, helping AugustaWestland to win a £1 billion helicopter contract with the Norwegian air force and safeguarding 3,000 jobs in Yeovil. It is also working with British chambers to deliver a one-stop shop of support services to UK companies in overseas markets.

As Minister for Intellectual Property, I should like to plug, rather unashamedly, the business support provided by our network of international IP attachés. They have directly helped almost 300 businesses since November 2012 and advised 2,600 in their outreach and business education work. My noble friend Lord Green raised the very important point about the continuation of the work that he started at UKTI. I reassure him that that very good work will continue and will be built on to achieve the challenging targets that he himself set and which are still the bedrock of what UKTI must achieve. For example, I understand that UKTI is on target to assist 50,000 businesses by the end of 2014-15, and it is making a major contribution towards achieving the target of £1 trillion of exports by 2020 and getting 100,000 more businesses exporting by the same date.

We have set out to reduce tax and provide a stable tax environment to encourage investment. We will be reducing corporation tax to 20% by 2015, which will be the joint lowest in the G20. We have introduced the Patent Box to encourage innovative businesses to invest in R&D in the UK, and to boost the research base we have made R&D tax relief more generous.

The Patent Box, which my noble friend Lord Lyell mentioned, provides a 10% rate of corporation tax with the full benefits being phased in over five years, starting last April. It has already been widely welcomed by businesses and by representative bodies, including the CBI, and is expected to benefit up to 5,000 companies including SMEs. R&D tax relief helped to support over £11.9 billion of R&D expenditure in around 12,000 companies in 2011-12, and we have built on the success of this scheme.

We have reformed our controlled foreign company rules to give British businesses more certainty in their international operations. We are now starting to see the results of our tax changes, with businesses coming to the UK, including WPP and AON, and companies which plan to invest more in research and manufacturing facilities in this country, such as GSK and AstraZeneca. I do agree with my noble friend Lord Lyell that pharmaceuticals are indeed a key sector in the UK, and, by the way, it was good to have a plug from him for the city of Dundee. He also raised the point about the importance of patents and education, and I can reassure my noble friend that as Minister for Intellectual Property, the communication of the importance of protecting IP is very high on my agenda. Last year, for example, the Intellectual Property Office contacted 25,000 businesses. The Patent Box helped secure an investment of £500 million by GSK, which will create 1,000 new jobs in Cumbria.

My noble friend Lord Borwick raised the issue of tax, and I agree with him that the wish for simpler tax laws is very high on our list. I am sure that tax legislation would be improved if it were subject to the wisdom which is endemic here in this Chamber. The Government’s aim is for a tax system that is simple to understand and easy to comply with, and we have taken action to modernise and simplify the tax system. The Government established the Office of Tax Simplification in July 2010 to provide independent advice on simplifying the tax system, and have acted on a range of its recommendations—for example, a new cash basis for calculating tax in April 2013 for up to 3 million of the smaller self-employed businesses, and investing £200 million to expand HMRC’s digital services over the next three years, making it easier and cheaper for all 4.8 million small and medium-sized businesses to deal with HMRC.

However, we must make life simpler for businesses. We continue to work hard to reduce bureaucracy. I am happy to report that our efforts on deregulation have already saved businesses over £1 billion per year. We are exempting micro-businesses and start-ups from new regulations. This has recently been extended to businesses with up to 50 employees through the new small and micro-business assessment. We have committed to scrap or improve at least 3,000 regulations through the Red Tape Challenge. This includes stopping unnecessary health and safety inspections for low-risk businesses and introducing fees for employment tribunals to help deter spurious and vexatious claims. I know, as she has said, that my noble friend Lady Neville-Rolfe takes a keen interest in deregulation and I particularly wanted to thank her for her valuable contribution to the better regulation strategy group chaired by the noble Lord, Lord Currie.

We all know how vital small and medium-sized enterprises are to the economy. That is why we published a document, on 7 December, Small Business: GREAT Ambition, which sets out our commitment to help them. It focuses on a number of areas where government can help, including financing business growth, hiring people, developing new ideas and products, expanding into new markets, and getting the right support at the right time. What this means, more generally, is letting businesses get on with doing business.

My noble friend Lady Neville-Rolfe emphasised the importance of where business headquarters are located. I am happy to report that Ernst & Young reported in December that 60 multinationals were looking to move to the UK in the following 18 months. KPMG’s recent tax competiveness survey confirmed for the second year running that companies believe Britain has a more attractive business tax system than key competitor countries.

My noble friend Lord Stoneham raised the issue of the creative industries and asked why they were not one of the key sectors, which is a fair point to raise. The Government take the interests of the creative industries extremely seriously. We have the Creative Industries Council, which is chaired by my right honourable friends in the other place, Vince Cable and Maria Miller. I attended one of its meetings last year and can testify to the great work that the Government and industry are achieving by working together in this particular sector.

We are listening to businesses and we are doing everything we can to make sure that they develop, prosper and flourish. The initiatives I have spoken about today are of course only a selection of what we are doing to help, and I believe it is working. Evidence shows that businesses are more confident. Since April 2013, the proportion of businesses that believe their output performance is higher than 12 months ago has been increasing each month. We know there is still much to do, and the noble Lord, Lord Young, mentioned a fragile recovery. I believe it is better than that, but there is much more to do. We will continue to work hard, first, to make sure that the UK is seen as the best place in the world to do business; secondly, to make sure that the quality of British goods are acknowledged as exceptional around the globe and that enterprising companies have the necessary opportunities for growth; and finally, to continue to push our way to the very top of the World Economic Forum and the World Bank’s ranking for ease of doing business.