Oral Answers to Questions
Baroness Burt of Solihull Excerpts(13 years, 7 months ago)
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Mr Gauke
The OTS is looking at two areas. One is reliefs and exemptions, and although the timing of the publication is to be finalised and that is a matter for the OTS, there will be an interim report, I believe in November, on this area. With regard to the reform of small businesses, including IR35, the OTS intends to report in time for the Chancellor to take into account its views in preparation for the Budget.
Lorely Burt (Solihull) (LD)
12. What steps he is taking to make the tax system fairer.
The Exchequer Secretary to the Treasury (Mr David Gauke)
The Government believe that the tax system should give more support to those on low to middle incomes and reward the efforts of those who choose to work. At the June Budget, we announced a £1,000 increase in the personal allowance for 2011-12, which will remove 880,000 of the lowest-income taxpayers from tax altogether. Our longer-term goal is to raise the allowance to £10,000, with real-terms steps in that direction every year.
Lorely Burt
I am grateful for that answer. May I ask my hon. Friend what the coalition Government can do for my constituent Kath Hemmings and many like her? Kath is a single mum who has raised her daughter Victoria with no support and has at the same time worked hard and built her career. She is on the higher rate of tax by just a few pounds. Many children in Victoria’s class have two parents who earn under the top rate and have kept their benefit. What can we do to make things fairer for Kath, Victoria and many like them?
Mr Gauke
I understand the concern that my hon. Friend raises. The situation that we face is that there will be difficult decisions to get the deficit down—a point that Government Members appreciate. The difficulty is that looking at the issue on a household basis would mean creating a complex and large bureaucracy. We have come up with a proposal that will ensure that the poorest households are protected and will continue to receive child benefit.
Finance (No. 2) Bill
Baroness Burt of Solihull Excerpts(13 years, 7 months ago)
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Ms Eagle
My hon. Friend is right to point out that there are two sides to the deficit reduction equation. Clearly, one side of that is collecting the taxes that are due in an appropriate fashion, and I shall say more about that later in my speech. He is right that we need constantly to keep that side of things in mind.
I was about to pay tribute to the Institute of Chartered Accountants, which was one of the few organisations to submit comments on the Bill when many had fallen by the wayside. Perhaps it is up to the Opposition to be vigilant when others have taken their eyes off the ball.
As my hon. Friend said, it is odd that we are debating a seemingly uncontroversial and overwhelmingly technical Finance Bill in the midst of one of the most difficult and dangerous periods for the UK and world economies in many generations. We have lived through the largest banking and financial crisis in the global economy since the Wall street crash of 1929. It has caused a deep and painful global recession, and we are struggling with the aftermath of the rescue of the world financial system from the colossal market failure that was dramatised by the collapse of Lehman Brothers in 2008. That inevitably caused budget deficits to soar everywhere, but especially in the more advanced western economies.
The UK was particularly affected, in part because of the size of our banking and financial services sector. The concerted action co-ordinated at the London G20 conference averted a catastrophe, and we are now witnessing a tentative economic recovery. However, that recovery remains distinctly fragile.
Lorely Burt (Solihull) (LD)
We have the biggest budget deficit in the G20. What does the hon. Lady believe contributed to that? Could the previous Labour Government, of whom she was a member, have done a bit more to try to avoid that?
Ms Eagle
The hon. Lady must recognise that the budget deficits being suffered in all the more advanced economies result directly from the need to rescue the world financial system by underpinning it, the effect of automatic stabilisers and the loss of revenue caused by the recession that followed the credit crunch. I thank her for giving me the chance once more to put that on the record.
Equitable Life
Baroness Burt of Solihull Excerpts(13 years, 10 months ago)
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Mr Hoban
I may be old-fashioned, but I think that it is up to Parliament to decide amounts that are spent and taxes that are raised. The commission will have a role in designing the scheme, but it is important that Parliament takes a view about how much should be spent. I remind the right hon. Gentleman that the ombudsman herself said in her report that we need to take into account the impact of any compensation arrangements on the public purse.
Lorely Burt (Solihull) (LD)
My hon. Friend will know that EMAG and many Equitable Life members consider that Sir John Chadwick’s remit, which the Labour party set when it was in government, is deeply flawed. I am glad that my hon. Friend says that what he has announced will be only one building block. Why will Equitable Life members get only 20 to 25% of the absolute loss? Can he reassure me that retrospective payments for Equitable Life members who died waiting for justice will be honoured?
Mr Hoban
My hon. Friend makes two important points. She referred to the cap of 20 to 25%, which is Sir John’s assessment and proposal. I am conscious that others, including EMAG, have different views about what the proportion should be, but they accept the principle that some policyholders would have stayed with Equitable Life. Her second point, about the estates of deceased policyholders, is very important. I have given the commission wide terms of reference, with two exceptions. First, it must take into account the estates of deceased policyholders—that is fair. Secondly, there should be no means-testing.
Finance Bill
Baroness Burt of Solihull Excerpts(13 years, 10 months ago)
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Mr Chope
My right hon. Friend asks a pertinent question. I would prefer the tax to be much lower—indeed, perhaps there should be no tax at all—for particular insurance premiums. However, in order to try to carry as many people with me as possible in this debate, I thought that I would limit my ambition, by saying, “Why don’t we not increase the tax from 5% to 6% for specific types of insurance premiums?”
I have picked out a couple of examples of that, and I will come to another in a minute, but obviously the principles could apply much more widely. For example, many people are now taking out insurance against their long-term care needs. Indeed, the Conservative party said in its manifesto that for an £8,000 premium, a family would be able to secure themselves against the cost of having to fund long-term care. I do not know whether such a premium, if it were paid, would be subject to insurance premium tax, but perhaps my hon. Friend the Minister will be able to tell us about that. At the same time, perhaps he can let us know when he expects that part of the Conservative manifesto to be brought before the House for implementation in legislative form.
The principle of insurance is one that most Conservatives—most of my constituents—applaud. People can either self-insure, which means that they take the risks themselves, or they can pool that risk by buying an insurance policy, which many people do, by buying life insurance, pension insurance and so on. In the case of pension insurance, we are talking about incentives for saving; in the case of life insurance, we are trying to encourage people to ensure that if they die prematurely, their dependants have some support and are not wholly dependent on the state. Those examples do not fall within the scope of my amendments, but they would be covered by amendment 15, which goes rather wider. However, it is important that we should have this little debate, to try to tease out a bit more from the Government on these important issues.
Turning to my amendment 19, let me say that we have a real problem with motor insurance in this country. For young people, the price of motor insurance is almost prohibitive. Indeed, it is so high that people cannot afford to buy it. Instead, what happens is that young people might get their parents to put them on their policies, if they are lucky enough to have parents who will do so—sometimes in quite dubious circumstances, as we have been reading in the newspapers recently—but quite often they will take a risk and drive uninsured. I regard driving without insurance as an extremely serious motoring offence. It is reckless, and those who do pay for their motor insurance end up having to pick up the bill for those who cause accidents and injuries as a result of not buying insurance.
Lorely Burt (Solihull) (LD)
I am following the hon. Gentlemen’s argument, but when he says that the cost of insurance for young people is prohibitive, does he honestly believe that 1% either way is going to be a significant factor in a young person’s decision on whether to buy motor insurance?
Mr Chope
Well, 1% is 1%. I am sorry that the hon. Lady seems to be rather unsympathetic to the plight of people who are trying to get motor insurance. Lots of young people need a car to get to work. They find the cost of motoring increasing all the time and they find the cost of insurance also increasing, yet the proposal before us is to increase that cost further—not massively further, but to increase it nevertheless.
Mr Redwood
How wise you are, Mr Evans.
I was making the point that the Minister, in responding to this debate on the insurance premium tax, might assuage some of our grief if he were to say that the Government had looked at the total package of taxes on the motorist and that they were aware that this was yet another example of the piling high of taxes on the motorist. Although this individual tax increase will not be large for many motorists—it will be more penal for young drivers and high-risk drivers—it is none the less an additional burden. Even if the Minister cannot accept the amendment, I hope that he will look at other ways of dealing with the problem of fair motoring taxes.
Every time something like this happens to motorists—this time, it is the insurance tax levy—they say, “We are being sandbagged again. Where are those better roads? Where is that safer junction? Where is the wish to spend money on improving the flows on the roads so that we can travel in a more fuel-efficient, green manner of which the Environment Secretary would approve?” There never seems to be the money to do that. We know that this bit of taxation on the motorist, like most others, primarily goes not to making better roads but to a wide range of other purposes; it gets lost in the general coffers.
Lorely Burt
A number of speakers today have singled out specific kinds of insurance, but as I understand it, the Bill proposes to increase insurance premium tax on a whole range of insurance products, which we would encourage people to take in a responsible manner. I have every sympathy for young drivers and for other motorists, but why does the right hon. Gentleman feel that we should specifically single out motorists or people who take out private health insurance? Why should those people be specifically excluded?
Mr Redwood
That is what I am trying to explain, while remaining in order on this narrow amendment. The bottom line of my case is that motorists comprise a large category and, when polled, they say that they feel badly done by because they pay a disproportionate amount of tax and do not get much back. It is argued that motorists ought to pay more because they get the use of the roads, which are provided free at the point of use in most cases. It is not like that, however, because the bulk of the taxes levied on the motorist, including this insurance premium tax, are used for purposes other than roads and motoring. That is why motorists feel hard done by.
I hope that the Minister and his colleagues will consider carefully the general category of the motorist. I would love it if he could make a concession to my hon. Friend the Member for Christchurch, but if he cannot, it would help us and the people we represent if he could say that the Government were at least aware of the bad deal that the motorist has been getting in recent years, and that, where possible, they will do something about that. As we have heard, people in rural areas have no choice; they have to use their cars. People in urban and suburban areas also have no choice at certain times of the day or at weekends. People who work antisocial hours clearly need a car. Most MPs need a car, for example, because we still work antisocial hours.
Finance Bill
Baroness Burt of Solihull Excerpts(13 years, 10 months ago)
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John McDonnell
I agree wholeheartedly. I shall say more about that shortly, because it is one of the issues that we raised—I think—four years ago at the time of the merger of the departments. We hoped at that stage for a more detailed report on personnel management and the number of staff who would be employed to deal with tax evasion in particular.
The fact that Her Majesty’s Treasury does not distinguish between evasion and avoidance in its global figures suggests that the Treasury itself finds the distinction difficult to define. I tried to find a clear Treasury quantification of what is generally described as the tax gap in order to draft an amendment that would have some purchase in the real world, especially the world of Treasury practice.
Lorely Burt (Solihull) (LD)
I am interested in the discussion of avoidance and evasion, but does the hon. Gentleman not agree that neither problem has been improved by his own party’s complication of the tax rules, to the extent that ordinary people require a professional to help them to interpret those rules?
John McDonnell
Complication is certainly an issue. That is partly why I want the Chancellor to report to the House on the measures that will be used to tackle tax evasion and avoidance. We need a simplification of the process, but we also need to know how many staff the Government will employ for collection purposes.
Finance Bill
Baroness Burt of Solihull Excerpts(13 years, 11 months ago)
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Mr Byrne
Let me come to that point in a moment because—[Interruption.] I will answer the right hon. Gentleman’s question after touching for a moment on some of the questions that we will raise in this debate and in Committee next week. We will want to press the Government on their clause without a mandate. We will want to know what studies have been conducted, as will many Back-Bench Members in the coalition party, on the impact of the new VAT on Britain’s poorest families. We will want to know the impact on pensioners, children and child poverty. We will want to know whether all zero-rated goods will remain zero-rated for the course of the Parliament. We will want to know whether all exempt goods and services will remain exempt for the course of the Parliament. We will want to know how much the Chancellor has short-changed our pensioners by uprating pensions this September and then legislating for higher prices in January. We will want to know his estimate of the growth in black market trading by increasing the rewards for unregistered traders. We will press the Government on those questions during discussion of clause 3.
We will also want to know the answers to questions on other clauses. Why does clause 1 make corporation tax less certain when we were promised clarity? Why is the measure silent on the regime for North sea oil? Why does clause 2 complicate the tax system when we were promised simplicity? In respect of clause 4, what assessment has been made of the impact of insurance costs for low-income families? Will the reform of pension tax relief bring in as much as Labour budgeted for? Will the plan be as fair?
The great tragedy of the Budget and the Bill is that there is an alternative, so let me deal directly with some of the questions raised by Government Members. In March, my right hon. Friend the shadow Chancellor set out the fastest and clearest deficit reduction plan of any country in the G7.
Mr Byrne
I hear what the hon. Lady says, but she has of course read chapter 6 of the Budget of March 2010 and, like me, she will remember that there was £3.5 million in savings by holding down public sector pay; there was £1 billion in savings through the reform of public sector pensions; there was £5 billion in savings through cuts to lower-priority programmes; and there was £11 billion in savings by revolutionising Whitehall. There was also the promise of a benefits bill that would have been £14 billion lower through falling unemployment, which was only possible as a consequence of growth. She will also remember the precision with which we set out £19 billion-worth of tax increases, which unlike this Bill, did not hit the poorest in her constituency or mine.
We know that Governments have to govern, so our opposition to the Bill will be careful, but Labour Members will stand up for jobs and for fairness. That is why we will vote against the Second Reading of the Bill.
Lorely Burt (Solihull) (LD)
The Bill is short, and I will keep my remarks short in keeping with the Bill’s size. This is a coalition Bill, just as the Budget was a coalition Budget. It incorporates Liberal Democrat policies such as our policies on capital gains tax, raising the earnings threshold and the restoration of the earnings link. It also incorporates elements of Conservative policy, which is right because that is what a coalition does. In some respects it is a bit like Hovis, which calls its mix of white and brown bread “Best of both”. That is what we have in the Bill.
Among the Bill’s main elements is the capital gains tax increase from 18% to 28%. The Liberal Democrat policy would have taken it further, but we could run into the law of diminishing returns. We need to be not only practical but fair. It is fair because the well-off, who pay less tax than those who clean their offices, will start to pay a lot more tax. That loophole was never closed by the Labour party, and the measure will make a big difference in fairness and in the level at which those well-off people pay tax.
The entrepreneurs relief should be welcomed by hon. Members on both sides of the House.
Mr Kevan Jones
Does the hon. Lady agree with the Deputy Prime Minister, who before the election, on the Radio 4 “Today” programme on 7 April, described VAT as a “regressive tax”?
Lorely Burt
I am grateful to the hon. Gentleman for that intervention. I am dealing with entrepreneurs relief at the moment, but I will be pleased to deal with VAT, which I will speak about quite fully, later. I know that the Labour party has had great fun bashing the Liberal Democrats over VAT, so I look forward to being taken to task on that.
The entrepreneurs relief is the reward that business owners are due. They often put everything into building a business. That should be recognised. We greatly welcome the continuance of the 10% rate and the increase in the lifetime limit for gains from £2 million to £5 million.
On corporation tax, the reduction from 28% to 27% in 2011, the 1% reduction in each of the following three years to 24%, and the small business rate tax cut, contrast greatly with Labour’s tax on jobs. It means that we now have the ability to stimulate business, which generates the wealth that we need to pay for the services that we need. We need secure growth for business. Business needs the confidence to invest in that growth.
I come now to VAT. I am sure that the hon. Gentleman—
Mr Jones
Will the hon. Lady answer the question put by my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne), who said that the measure in the Bill is for one year only? How will that give confidence to any business wanting to invest? It will have to take decisions on a one-year basis.
Lorely Burt
I am glad that the hon. Gentleman raised that point, and that I gave way to him. This is a commitment. The four-year commitment is in the statement. It is in the Budget.
Lorely Burt
The four-year commitment is in the Budget itself. As the Chief Secretary said, the normal way of doing it is one year at a time. The hon. Gentleman can look forward next year, and the year after that and the year after that, to a further 1% reduction.
Jonathan Edwards
Does the hon. Lady agree that the regionalisation of corporation tax would be a more helpful way to assist the most disadvantaged parts of the United Kingdom?
Lorely Burt
The hon. Gentleman asked me about the regionalisation of corporation tax, but these are UK taxes so it is inappropriate to regionalise. He makes an interesting point that I have not considered before, but I am sure that my hon. Friends will take an interest in the idea if it has merit.
Simon Hughes
My hon. Friend is right. I just wish to say to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) that, as he knows, my party has been supportive of increasing autonomy and self-government in Scotland and in Wales. That has happened in Scotland and it is on the agenda for Wales, and he knows—[Interruption.] It is on the agenda for Wales; it is not agreed and it is not committed, but it is under discussion in relation to Wales. He knows that my party has always been positive towards the idea of allowing greater self-government, both in Scotland and in Wales, but that is different from the regionalisation of UK taxes such as corporation tax.
Mr Deputy Speaker (Mr Nigel Evans)
If I had seen anything out of order, I would have called hon. Members to order myself.
Lorely Burt
Thank you, Mr Deputy Speaker. The hon. Member for North Durham (Mr Jones) has intervened on me twice, so perhaps he would like to join me on these Benches and make his contribution. I am sure that he will be making his speech later, and I will have the greatest pleasure in intervening on him then.
VAT is to increase to 20% with effect from 4 January 2011. This is another issue on which the Liberal Democrat bashing by the Labour party has been lengthy.
Lorely Burt
Perhaps the hon. Gentleman would allow me to make a little progress first. [Interruption.] I am not giving way now, but I promise that I will do so. I might even say something that he likes; one never knows. Like my hon. Friend the Member for Bermondsey and Old Southwark, I do not think that anyone on either the Conservative Benches or the Liberal Democrat Benches is filled with any enthusiasm for increasing VAT. However, I am not going to rehearse all those arguments, because we know that Labour left the finances in a far worse state than we originally anticipated. The structural deficit is £12 billion greater than we were led to believe, so whichever way we look at it, the options are invidious. A VAT increase has therefore had to be the least worst option, as my hon. Friend has said. There are mitigating factors, because the VAT rise will not come into effect until 2011. Therefore there will be a short-term boost; consumers who want to spend money, particularly on large items, will be able to do so before that increase comes into effect.
Mrs McGuire
Is the hon. Lady seriously recommending that to mitigate the impact of the VAT increase to 20%, consumers should wander round Currys and all sorts of other places before Christmas buying up all the washing machines, tumble dryers, fridges and all the rest of it, just to salve her conscience?
Lorely Burt
The right hon. Lady answers her own question, although I was just coming on to this subject. When I had lunch with the manager of my local branch of John Lewis last week I asked him what difference the VAT increase would make to purchases at his store. He said, “Well, when it went down it didn’t make a whole lot of difference to sales. When it goes up we don’t necessarily think it’ll make a whole lot of difference, either.”
Lorely Burt
I have given way previously, so I ask hon. Members to allow me to make a little progress. A lot of people want to speak—[Interruption.]
Lorely Burt
Thank you, Mr Deputy Speaker. The other point that I want to make is that the purchases that represent more disproportionately a part of the income of lower-paid people tend to be zero-rated.
Kate Green
It is clear that this is the story that we are going to hear again and again: we are going to be told that the items that the poorest need to buy are zero-rated, so the VAT rise does not hurt them. How can the hon. Lady say that essentials for families, such as saucepans and clothes for work, are items that the poorest do not have to find the money for? This is a regressive tax.
Lorely Burt
The hon. Lady misunderstands me. I understand that people have to buy all those capital items, and I know that this is going to be regressive in that respect. [Hon. Members: “Oh!”] There is no question or doubt about that. I said to the House a moment ago that nobody likes the idea of having to increase VAT.
John Cryer (Leyton and Wanstead) (Lab)
The hon. Lady says that the VAT increase is the least worst option. Could she list the worst options?
Lorely Burt
Well, we could have some further job cuts; that would not help. We could just not stimulate business; that would not help. We could charge lower earners more income tax. Hon. Members should not forget that this is the coalition Government who have raised the level of tax for the lowest-paid earners—something that the Labour party did not do in 13 years of government.
Income tax is a very important area in addressing issues that the hon. Member for Stretford and Urmston (Kate Green) and several other Labour Members have raised. We want to ensure that people can keep more of their own money that they have earned. The raising of the income tax threshold towards our Liberal Democrat target of £10,000—it increases to £7,475—takes 880,000 people out of tax altogether and means that 23 million people will gain an average of £176. That is really important to local people.
Mr Iain Wright
Does the hon. Lady think that the coalition Government’s policy on personal allowances for the over-65s is the right approach?
Lorely Burt
As I understand it, they are unaffected. I wish to say a word about pensions: is it not strange that in Labour’s 13 years in government the earnings link was not restored? This coalition Government have introduced that in their first weeks in government. We have the triple lock: we have 2.5% or earnings or prices—
Lorely Burt
I am going to make a bit of progress. Before Labour Members leap to their feet to criticise, they should reflect on the fact that they had 13 years in power and they leave a shameful legacy. It required this coalition Government to come into office to introduce that, and we are doing so in such a short period.
Lorely Burt
I have given way to the right hon. Lady already, so I shall give way to the hon. Gentleman.
Mr MacNeil
I have listened to the hon. Lady’s arguments for accepting the VAT increase, but over the financial year the projected deficit fell by about £15 billion to £20 billion. Surely that blows apart the Liberal Democrat case for accepting a 2.5% increase in VAT.
Lorely Burt
Yes, the hon. Gentleman is right in saying that, but at the same time we have since discovered that a lot more money is not available to us for use. It is not there. Therefore, in order to balance the books it has been necessary to increase VAT.
Lorely Burt
I am not going to indulge the hon. Gentleman again, I am afraid.
We also welcome the postponement to 77 of when an individual can take an annuity, and of course we welcome the closing of loopholes and the anti-avoidance legislation; everyone should pay their share. That is something that we as a coalition Government will work hard to ensure.
We need tax to be simple and fair and to help us along the road to recovery. We need the stimulus for business, because business will be the engine that pulls us out of recession. We need fairness on income. We need to close the loopholes; they are already partially closed, although more work needs to be done. The least well-paid will at least be able to spend more of their own money. So we on these Benches support the Bill.
Toby Perkins
Was my hon. Friend as surprised as I was that during the Budget debate the hon. Member for Bromsgrove (Sajid Javid) said:
“Opposition Members have accused us of being ideological about the matter, but how can we be anything else? They are absolutely right, and there is no shame in it”?—[Official Report, 24 June 2010; Vol. 512, c. 515.]
He was clear that it was a Thatcherite Tory Budget that he was proud of. The Liberal Democrats are being used as a sort of human shield to defend a Budget that in other circumstances would have appalled them.
Clive Efford
Well, I am sorry, but the hon. Lady will hear it again and again, because it happens to be true.
During the general election the Prime Minister—he was Leader of the Opposition at the time—said to Jeremy Paxman on “Newsnight” on 23 April:
“We have absolutely no plans to raise VAT. Our first budget is all about recognising we need to get spending under control rather than putting up tax”.
In his closing remarks in the leaders’ debate, he said that he believed that the test of a good society is how it looks after the poorest and most vulnerable in difficult times. Well it did not take him long to fail that test. He promises good times ahead and a clean break. Who for? It is certainly not for the poorest in our communities.
The Deputy Prime Minister—I remind the House that he was the leader of the Liberal Democrats in opposition—said during the election campaign:
“The Conservatives have made a series of uncosted tax promises, tax bribes.”
That was referring to Tory promises to recognise marriage in the tax system, limit the national insurance rise, freeze council tax, and raise inheritance tax thresholds. He continued:
“The only way that they are going to deliver their tax promises is by dropping a tax bombshell, a VAT bombshell of £389 a year on every household in this country.”
What changed his mind? Was it when the ministerial Prius turned up outside his house or was it before that?
The Liberal Democrats launched their London election manifesto claiming that under them Londoners would save some £700 a year. They said that tax cuts would be paid for by “closing loopholes” and “increasing aviation pollution taxes”. They said their tax reform would be the most radical in a generation—any takers on the Conservative Benches for a radical change from the Liberal Democrats? I think not! Their manifesto also included a pledge
“to put 600 more police on the capital’s streets and an extra £520 million a year in London schools.”
Instead, however, we have seen a cut in Building Schools for the Future and in police numbers, and we are going to see a rise in unemployment as a result of their support for the Budget.
Economic Affairs and Work and Pensions
Baroness Burt of Solihull Excerpts(13 years, 12 months ago)
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Lorely Burt (Solihull) (LD)
It is a strange feeling to be standing here today—not only am I on this side of the Chamber, but I am speaking on Government proposals that incorporate the vast majority of policies that we, the Liberal Democrat business, innovation and skills team, produced as part of our general election manifesto. I know that many of those policies were in the Conservative manifesto as well, but it would be churlish to quibble about who thought of them first.
Both the Conservatives and the Liberal Democrats see themselves as being the party of business, so it is unsurprising that many of our policies chime together. I want to speak briefly about my hopes for the implementation of some of those policies, but first I want to mention two policies that did not make it into the agreement. Access to capital has been a great problem for business for some time, and with the banks taking a more cautious—ultra-cautious some might say—approach to lending, we thought up a couple of creative ideas to use equity as opposed to capital as a mechanism to fund growth. For start-ups, we devised a policy of local enterprise funds, which would be a tax-efficient way for local companies or individuals to plough capital back into their area in return for equity. They could also have offered added value by offering advice if appropriate.
In order for established companies to fund growth, we looked at the idea of having regional stock exchanges, which would be based on the same principles as national ones, but would be localised and geared up for smaller companies. They could use the regional stock exchanges to get cash for equity without the long-winded and exacting due diligence that would otherwise preclude them from entering the big boys’ national stock exchange league. I hope that the new coalition will still consider those ideas at some point.
There are great things in the agreement that, if properly implemented, will make a huge difference to the ability of business to do what it wants and needs to do, which is get on with the job. On regulation, I am greatly looking forward to seeing a system of one-in one-out, sunset clauses and an enforcement regime that seeks to help business meet regulatory requirements in a speedy and efficient way. I am glad to see that the Government will create a Star Chamber to bring those policies into being. Having been a member of the Select Committee on Regulatory Reform for three years, I know how easy it is for civil servants to focus on the smaller issues, and for the regulators and the regulated to cosy up in mutual congratulation. The star chamber must work on the plank, not the mote, in the regulatory eye.
Other welcome policies are simple but very important to those they affect, such as IR35, which has been an issue for micro-businesses for a long time. We will not let business avoid tax, but we will make the system simpler and more straightforward, and take away the anxiety of someone not knowing whether they are covered by the rules or not. We welcome the automatic rate relief for small businesses, as it will bring relief to the very businesses that will benefit most: those least conversant with the system.
One coalition Government policy—our plan for local enterprise partnerships—has been met with dismay by the regional development agencies, but RDAs that have done a good job can continue to work for enterprise in their regions. However, the policy will mean that we will have a form of organisation that is more accountable to the region that it serves and more flexible to its needs. Obviously, there are cuts in the proposals, but business knows what it means to cope with changing, more difficult circumstances and has been dealing with those since the beginning of the recession. RDAs must now deliver service to business more efficiently than ever before.
Lorely Burt
The hon. Gentleman is entirely mistaken. In fact, the policies of the two parties were almost identical. They were so similar, I wondered whether someone had been talking to someone else. We are at one on that.
Procurement is a big issue affecting the ability of businesses to survive and grow, and it was great to hear in the debate on the Humble Address the aspiration to contract 25% of Government procurement to small business. That will take some enforcing, and we must first get the bodies that spend our taxpayers’ money to take account of the size of companies from which they procure. While they are doing that, would it not be great to get them to have a look at whether the people from whom they are procuring look like the people they supply? Are we utilising the rich diversity of supply that we could utilise, including businesses owned by women and ethnic minorities?
I come from the west midlands, which is possibly the UK region that has been hardest hit by the recession. However, we in the west midlands do something special, and we do it well: we make things. We are very clever at making highly technical, high value-added products, many of which we export to the world. Although our car industry has suffered badly, not only do we produce two of the most iconic marques in the world—Jaguar and Land Rover—but they are thriving, both in the export and home markets.
I shall conclude on this point: for far too long, financial services—I understand that they are important—have held the Government in thrall. If I have anything to do with it, that will no longer happen. Despite the fact that manufacturing has been allowed to wither, the UK is still the sixth largest manufacturing country in the world. The time has come to talk manufacturing up, create a climate in which it can thrive, allow it access to finance, which is the lifeblood of business, and create a fair regulatory playing field. Then, we should get off the pitch, and let team Great Britain compete on the world stage.