The Economy

William Cash Excerpts

Thursday 24th October 2019 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I listened carefully to the speeches made by the Chancellor of the Exchequer and the shadow Chancellor of the Exchequer. The shadow Chancellor said that there is too much inequality in the UK—I absolutely agree. As a one nation Conservative, I believe in equal opportunity for all, but I guess that the method of getting there is where we differ. In my view, we get there through a balance between free markets and capitalism, and a sensible amount of state intervention, to ensure that the free markets work for everybody, not just the privileged few. The difficulty is that, if we look at future challenges for the taxpayer, our scope for intervention will be very limited. Our current debt-to-GDP ratio is 80% of GDP. That is forecast to grow to 280% of GDP by 2060 unless we change our tax system. There are huge challenges ahead and huge burdens for the taxpayer, particularly in the areas of pensions, social care and healthcare. Free market opportunities will be more important than ever.

I agree with my right hon. Friend the Member for Sevenoaks (Sir Michael Fallon) about the reduction in the number of capitalists in this country for various reasons. G. K. Chesterton once wrote:

“Too much capitalism does not mean too many capitalists, but too few capitalists.”

If we look at where we normally get capitalists from in our society, we see that it is SMEs—young businesses starting up and building—and people getting into either the stock market or the housing market. Of those two cohorts, SMEs in particular face bigger challenges than ever in today’s economy because of the imbalances and unfairness. As other Members have said, larger companies—the Amazons, Tescos and Starbucks of this world—are able to take competitive advantage of the tax system, and as a consequence, the growth rate of SME start-ups has started to falter. Their growth rate today is lower than it has been for the last 10 years.

We know how important SMEs are. There are 5.7 million of them in the UK, and 99% of all businesses in the UK are SMEs. They employ 60% of the private sector work- force, and they are more productive in their start-up years than the rest of the economy. It is hugely important that we support the dynamic creation of new businesses.

With limited room for intervention, we have to ensure that the playing field is fair and level for all businesses. As I said in my earlier intervention, one of the imbalances is between SMEs and banks, which are so important to them, when things go wrong. We need a proper resolution process. We have seen disgraceful treatment of SMEs by banks. Where do they go when things go wrong? The new Business Banking Resolution Service is promising, and I am working with the steering group, but it unfairly excludes 85% of businesses that could apply for resolution of historical complaints. That cannot be fair.

[Sir William Cash (Stone) (Con)]

Does my hon. Friend accept that, during the transition period, it is essential that we protect ourselves from legislation from the European Union on tax and business, which could do enormous damage to our vital national interests?

[Kevin Hollinrake]

My focus in this speech is SMEs, and I will stick to that, but my hon. Friend raises an interesting point.

If we are to have a fair and level playing field, we must ensure that our investment is spread more fairly across the regions. It is wrong that this country is firing on one cylinder when it could be firing on three or four. This is not about the north-south divide; it is London versus the rest of the country. For every £3 spent per capita in London, only £1 is spent in the regions. We need a fairer deal to help to level up our economy in the UK.

Finally, it is a shame on this country that we do not do more about tax avoidance. New rules are coming in to try to level the playing field, such as the diverted profits tax, but we must do more to ensure that everybody in the business environment pays their fair share of tax. That is how we build a fair and level playing field, encourage more SMEs to start up and scale up, and become a more productive economy. That is how we get a bit less capitalism, but a lot more capitalists.