Economy and Finance — House of Lords, 2016-06-09
Topic: Macroeconomics
Howard Leigh (Conservative, Centre-right): My Lords, it is as always a great honour to speak in this debate on the economy, and I congratulate the noble Lord, Lord Haskel, on securing it. Between this and his other recent erudite contributions on the economy, he has consistently been carrying the torch of rational economic arguments for the Opposition that some would say has been strangely discarded by his colleagues in the other place. His contribution today was extremely well measured, and I hope that the rest of the debate does not descend into a rant about the forthcoming referendum or views on the EU, but focuses on the questions he has raised We are asked today to consider the UK’s economic and financial prospects—no small matter indeed. Having said all that I have and meant it, I of course do not agree with everything the noble Lord said. I am happy to say that, thanks to the enduring wisdom of the British electorate, our prospects are good. Not content with a coalition Government who made great strides in restoring our economic credibility, they voted for more of the same in 2015: a resounding mandate to continue the restoration of our public finances and improve the competiveness of our business climate. "Why would they not?", we might well ask. The UK economy is on the right track. Employment is up, bringing 2.5 million new jobs to the UK, giving to so many the dignity of a job and a means to support their family. As the noble Lord has observed, the deficit is down from a record post-war high to less than 3% this year, and this morning’s trade figures show a reduction in the trade deficit and an increase in exports I believe that FDI is actually of great benefit to this country. The noble Lord asked a Question on 25 May about the current account deficit. The point was made that if we had more FDI externally into other countries from UK investors, the current account deficit would close. However, analysis of the UK economy is to some extent best left to experts—specifically those of the IMF, which said in its assessment of our prospects: "The UK’s recent economic performance has been strong, and considerable progress has been achieved in addressing underlying vulnerabilities. Growth has been robust, the unemployment rate has fallen substantially, employment has reached an historic high, the fiscal deficit has been reduced, and financial sector resilience has increased" Those are the IMF’s words, and we continue to grow, create jobs and attract inward investment. I, too, quote from the OECD, which forecast that we would have the fastest-growing major advanced economy this year The debate today specifically asks: what of our prospects? To that I say: if this reverse of Labour’s economic management can be achieved over the past six years, imagine what we can do in six more. There are clouds on the horizon. Falling oil prices have plunged Russia and Brazil into recession, and China’s rebalancing has led to lower growth in many economies. So the risks are great and we cannot rest on our laurels. Since some in the party opposite want to question the whole basis of capitalism back to the time of Chairman Mao instead of looking forward, we should at least ask ourselves what is next. In response to that I would like to say a few things specifically about the SME business sector—small and medium-sized businesses—and what can be done to enable it to play a bigger role in our economic future The House may be aware that SMEs are a constituency worth looking after, since in 2015 they were responsible for half of employment and a third of turnover in the private sector. Furthermore, a recent interesting online survey by eBay showed that two-thirds of small businesses in the UK are planning to increase investment in the period 2016-17. Let us help them help the British economy Budget 2016 set out important measures to help our small businesses thrive. Lower corporation tax, down to 17% in 2020, encourages entrepreneurship and economic activity in small and medium-sized businesses. That it is the lowest in the G20 serves as a lighthouse, gathering small, entrepreneurial ships to our shores to innovate and create jobs. Small business rate relief—I declare an interest, as noted in the register, as a director of a retailer—has also helped, as the relief for small businesses is being doubled to 100%. We have also seen cuts to capital gains tax—again, I declare an interest as an adviser to businesses which are seeking an exit. This cut in capital gains tax, in combination with continued improvements to entrepreneurs’ relief, which I particularly welcome, will encourage investment in small businesses and start-ups. So we will create the world-class tech businesses that the noble Lord, Lord Haskel, wants to see emanating from these shores Most importantly, I am pleased to see tax avoidance being addressed. As I have said in previous debates—I believe that Members in all parts of the House are keen to see this—it is important that large companies are made to pay their fair share but also that the tax system is made easier to use for those who are less well resourced: our small businesses and entrepreneurs. Thanks to measures in the Finance Bill, the self-employed will enjoy simpler treatment through digital filing, and investment in HMRC will help. I hope there will be more to come in this Parliament to support small businesses further However, I think the EU referendum is the right call because it is clear from the level of debate in the country that there is a need to discuss many issues. It has been alleged that there is a disparity of views between small and large businesses, with large businesses preferring to remain in the EU—for debatable reasons—and small businesses preferring to come out. I am not sure that that is the correct distinction. To my mind, it is more significant—and the distinction perhaps easier to make—to look at the owners of those businesses. We can look no further than Members of our own House—the people who invest in their own businesses, such as my noble friends Lord Harris of Peckham, Lord Wolfson, Lord Borwick and Lord Bamford, and Lord Edmiston, who has recently retired. They are all entrepreneurs who, in the true definition of entrepreneurship, have invested their own money in their businesses, and they have made their views clear. I only hope that, whatever the result of the referendum and whichever direction we go in, the Government will have listened to the debate and to the businesses that have said changes need to happen We have a competitive policy and regulatory climate for small businesses that is attractive. It is not easily built up but it is easily destroyed. We must not return to the old approach of a new regulation here and a new tax rise there. I urge the Government to stick to their strategy of setting out a clear direction of travel for business tax and regulation, one that survives the buffeting of global economic events. If they do this, to return to the subject of our debate today, our prospects look bright indeed.