Date: 2023-04-18
Emma Hardy: What an interesting debate it has been. I have found myself slightly amused numerous times by comments from Conservative Members, especially when have they tried to make out that theirs is the party of low taxes, when taxes as a share of GDP are heading to a post-war high. The public are not stupid. A recent poll in The Spectator showed that the public associate the Conservative party with higher taxes. The reason is that the Conservatives keep putting their taxes up. Another problem that I have seen play out this afternoon as I have sat here is that the Conservative party is inherently divided. Different parts of the governing party are pulling in different directions. That is seen in the seven Chancellors we have had since 2010. As different factions have taken over the leadership, those seven Chancellors have pulled the party in different ways, creating uncertainty. Uncertainty is one of the key things that businesses say leads to a lack of investment. It is not just businesses telling us of the problem of uncertainty, but economists. They tell us about the difficulty with uncertainty and why the UK is uniquely impacted by a lack of investment. Torsten Bell said that if we go back to 2010 when the Conservatives first came to power--13 long years ago--we initially see a relatively good bounce back from the financial crisis, but then "we basically miss out on all of the investment growth that other countries saw in the second half of that decade. We flatlined, everyone else soared. In so far as there was a global boom going  on, that is when it happened. We did not see that. There have been some revisions to the data recently that make the bounce back from the pandemic on business investment less grim than they looked before, but they are still pretty bad." That is one economist. Another economist, Professor Coyle, said: "Tax will make a difference, but it is not the only thing that matters, and surveys of employers tend to highlight poor infrastructure"-- something that anyone who spends any time travelling by rail around the north is only too aware of-- "and lack of skills, which we've already been talking about. Lining up all the different things that matter is obviously part of the challenge--so, consistency"-- that word again-- "and making the system work as a whole." Another economist, Paul Johnson, said: "The lack of consistency in policy is clearly a problem. Something that we talked about--perhaps it is not the right place to talk about it--is that the political instability is a problem for companies looking to invest". Seven Chancellors and a divided governing party that does not know which direction to take the economy and our country. Businesses are seeing that, voting with their feet and choosing not to invest in the UK. Professor Coyle went on to say: "If you look at the past decade or so, what has been happening to firms, even within a given industry, is that the dispersion of productivity has increased. There are some very productive firms. Their productivity growth has slowed down, but they are pulling further and further ahead of...the rest. Firms that are operating outside London and the south-east tend to be the ones in the low productivity part of that distribution." As we have said before, the issue goes back to infrastructure. The constant under-investment in Northern Powerhouse Rail, with different Prime Ministers making decisions about whether we will or will not have it, will have an impact on business investment and influence whether businesses choose to invest in our country. Professor Coyle went on to say: "I do not mind whether it is called an industrial strategy or not, but we need some kind of long-term perspective--some kind of strategic approach to managing the economy." Hear, hear, Professor Coyle. I agree and so does the Labour party, which is why the Labour party has a long-term plan for growth in the country and why I am speaking in support of new clause 3. If businesses cannot have certainty from the governing party or understand which Chancellor is going to introduce which measure in what way, or which faction is the latest to take over the governing party, then they need that certainty from the Labour party, because they are really struggling. I have met with local businesses in my constituency and they gave me a very clear message: it is incredibly difficult. The Chancellor may boast--boast, ha!--that we are not in a technical recession, but try telling that to the small businesses in my constituency that are finding life incredibly difficult. As we walk around different high streets, we can see the number of shops that are closing. Although the review of business rates does not go as far as the Labour party wants--we want to get rid of business rates altogether--hopefully Members from across the House can support such a fundamental review. Let us look at what we can do to support businesses, especially small businesses. I am sure each and every  one of us has been lobbied hard by the Federation of Small Businesses and heard directly from small businesses about how difficult they are finding things. I will comment briefly on new clause 7 about research and development tax relief, which is proposed by Liberal Democrat Members. It is well worth reading the TaxWatch report into the levels of fraud associated with R&D tax reliefs. We may want to support businesses with R&D tax reliefs--I am not saying that we should not do that--but we need to take the issue of fraud more seriously. The OBR predicts that the total cost of R&D reliefs will increase from PS6.8 billion in 2021 to PS9.2 billion in 2026-27, but fraud and error in that scheme totals over PS1.1 billion in the last three years.