(2 years ago)
Lords ChamberMy Lords, as the chancellor of the University of Birmingham, I had the privilege to know the right reverend Prelate, David Urquhart, the ninth Bishop of Birmingham. In 2006, when he took office—taking over, of course, from John Sentamu, who went on to become Archbishop of York and now sits with us on the Cross Benches as the noble and right reverend Lord, Lord Sentamu—in his first sermon, he took out a mallet hidden under his cloak and smashed a clay jar in front of the whole congregation. His message was to demonstrate the fragility of human life in the world as a gift from God.
He has worked for the homeless. He has worked tirelessly for interfaith harmony. He has worked for the chamber of commerce, as somebody from a business background and with a business degree. He has been here in the House of Lords since 2010, and has been convenor since 2015. Note the word “convenor”. We on the Cross Benches do not have a leader, we have a convener, and the same goes for the Bishops. What a time, with the changes of Government and all the challenges. He is a knight of the Order of St Michael and St George.
Seventy is far too young an age to retire: you have just reached the middle of middle age. The right reverend Prelate always signed off as David Birmingham. Well, David Birmingham, the University of Birmingham, the city of Birmingham and this House will miss you enormously. Thank you for all you have done for all of us, and we wish you every success in your continued great work.
In February 2021, I said to the Chancellor at the time, Rishi Sunak, when I was president of the CBI, “Do not increase taxes. Increasing taxes will hamper the recovery and hamper growth.” What did he do? He kept putting taxes up, up and up, to the extent that they are the highest in 70 years.
Before the financial crisis in 2008-09, we in this country had a growth rate of 2.5%. Since then, we have had a decade of no growth, low productivity and low inflation. What a state to be in. We had austerity. That achieved nothing. So the Government are absolutely right to target a growth rate of 2.5%. They are absolutely right to reverse the 2.5%—1.25% and 1.25%—national insurance: it is a tax on jobs. Even the Labour Party said it would not have done that. The Government are absolutely right not to increase corporation tax from 19% to 25%. They are absolutely right with investment zones. They are absolutely right with the reform to IR35.
But—and there are “buts”—what about speeding up the move to alternative energy, such as small modular reactors? That is not being spoken about. What about investment: replacing the super-deduction of 130% that will go in April with a 100% write-off to encourage businesses to invest? What about labour shortages? We kept saying to the Government, “Activate the shortage occupation list.” Now the Government say they are going to do it. I ask the Government to confirm in their response that this will actually happen.
Then there was 23 September. It is a great lesson in life that it is not just what you do but how you do it. As the former Chancellor, now the noble and learned Lord, Lord Clarke, said, it is the first time a budget has caused a crisis. So much of what was intended was right. To go back to 40% as the top rate of tax is absolutely the right thing to do in the long run, but perhaps not now. As we have heard time and again, not having an OBR report to back it up was not a good thing; I am glad it is happening on the 31st.
People do not talk about the thresholds. The thresholds were frozen by Rishi Sunak and remain. That is the biggest tax increase happening in front of us now. Do the Government agree with it?
I am sorry that I am overrunning, because of paying the wonderful tribute that I was privileged to pay, but I have two more points. First, I have made the point time and again that we as business are grateful for the £400 billion of support that the Government gave through the pandemic that saved our businesses, our economy and our citizens, but you cannot stop there. If you play a tennis stroke and hit the ball—the £400 billion—to get the ball over the net you must follow through, and the Government must be prepared to follow through. Our debt-to-GDP ratio is not that high; it is the second lowest in the G7. Japan’s is at 250%; America’s is at almost 150%. We need to invest in skills and education, we need to reform the apprenticeship levy.
My final point is this. If the Government do not help now, SMEs, in particular, will not survive. They need help with business rates, with delaying their taxes and with cash flow. Hospitality needs a VAT reduction. If these measures are not taken, we will see businesses going bust. Defence expenditure needs to go up to 3% of GDP right now. On a positive note, when the Ukraine war ends, we will have boom time.
(3 years ago)
Lords ChamberMy Lords, in May, I was privileged, as chairman of the CBI, to chair the B7 before the G7 in June. I remember very clearly one of our speakers, Dr Gita Gopinath, chief economist of the IMF, saying that Britain was one of the countries around the world that would have a V-shaped recovery, because we had invested huge amounts. The Government had invested £400 billion in saving the economy, saving jobs and saving businesses, which in absolute terms or per capita terms was one of the highest in the world. Also, we had an excellent vaccination programme that, even by May, was progressing at speed. That was in May. What has happened since then?
We have had labour shortages. We all hear about lorry drivers, something that I mentioned in a speech over here in June; we have had shortages of butchers, something I mentioned in a speech for the CBI to the Employers Federation in June. In hospitality, in financial services, across the board, in just about every sector, we have had shortages.
I thank the noble Lord, Lord Bird, for introducing this debate. We are one of the wealthiest countries in the world. We are still the sixth largest economy in the world, yet you see poverty in your face in this country. I was born and brought up in India, and I have seen things there, but to see it here, in a country that is so wealthy, is unacceptable. We have food banks in one of the wealthiest countries in the world. We have homeless people in one of the wealthiest countries in the world—and, of course, what the noble Lord, Lord Bird, has done with the Big Issue is an inspiration to the whole world.
We have had the fuel crisis. We have had queues at petrol pumps. I remember driving back from Birmingham at midnight, seeing these queues and saying, “Is this real?” I pinched myself: “Is this really happening, in this country, today?” We have had the energy crisis. We nearly run out of CO2. Thankfully, the Government stepped in and got one of the manufacturers to start again. With my own business, Cobra Beer, without CO2 we cannot make our product, and there are many others like us.
We have had inflation now across the board. I remember asking the Chancellor, Rishi Sunak, in a meeting that I was hosting for the CBI in March, which he spoke at, whether he was worried about inflation. Now we see that inflation went up to 3.3%, then down to 3.2% but is predicted to go to 4%. Many are saying it will go even higher and wage inflation is much higher than that—almost double it or more.
I said to the Chancellor in March: “Follow the example of India”. At the Indian Budget in February, they did not increase taxes because, as they said clearly to me in a meeting which I held with the chief civil servant in charge of that Budget, “We didn’t increase taxes because businesses have suffered enough in this pandemic and we don’t want to endanger or stifle the recovery”. I said to our Indian-origin Chancellor “Listen to India”; well, he listened to an extent, but he announced that corporation tax would be going up from 19% to 25% in two years’ time. He announced the freezing of allowances, but he also announced the super-deduction—a fantastic measure with a 130% deduction to encourage investment by businesses.
Then we fast forward: we have had the announcement of national insurance going up by not 1.25% but 1.25% multiplied by two, because it covers employers as well as employees. Our country now has a tax burden that is at its highest in 70 years. We have had £400 billion of spending for the pandemic and we now have the highest level of spending since the 1970s. High spending and high taxes is not a good place to be.
On top of this we have had the £20 uplift in universal credit, which has now stopped. There were 5.8 million people on that credit. To put it in context, before the pandemic and the lockdown in March 2020 there were 3 million, so almost 3 million more people were having to use this help.
Interest rates are now at their lowest since the Bank of England was founded in 1694, at 0.1%. If that interest rate goes up, just 1% extra in interest rates adds £26 billion to the Government’s bills, because 25% of government debt is linked to interest rates. That will hit mortgages, consumers and businesses.
Going back to March last year, we had just been hit from nowhere by the pandemic. Nobody predicted that a global pandemic would happen. We had the ambiguity and uncertainty staring us in the face. I was then the vice-president of the CBI. I remember that we had a board meeting where I was asked, “Karan, you have been through some tough times in your business. What do you think we will need to do now?” I had nearly lost my business three times and I said “If we go into lockdown, businesses will shut. There will be many businesses that cannot operate if their sales dry up. If your sales dry up, then your cash dries up. You need cash, but if you go to the bank it will not lend any money to you because of the uncertainty in the environment”. The banks were going to have to have a guarantee from the Government to lend. I said, “If they guarantee 80% or 85%, that is not going to work. The banks will not be willing to take that risk of 15% to 20% exposure”.
The Government did not listen initially and the bank lending did not flow through. The CBILS loans started and I kept saying “You’ve got to guarantee the loans 100%”. We used the examples of Switzerland and Germany, which had started to guarantee 100% loans and the money was flowing through. Eventually, the Government listened and we had the bounce-back loans. Over 1 million businesses have received those loans. I give full credit to the British Business Bank; it had an £8 billion loan book before the pandemic but it has an £80 billion loan book today, and a big chunk of that is bounce-back loans.
Yesterday, I was in Teesside and I met its dynamic young mayor, Ben Houchen, who has plans to energise and bring investment into his region. I went from there to visit the oldest warship afloat in the world, except for the USS “Constitution”, which I do not count as it has been 99% rebuilt. It is HMS “Trincomalee”, built 200 years ago in Bombay by the Wadias, who were Zoroastrian Parsees like me. My great-aunt Sheru was a Wadia, so I was proud to go on board this ship that was built barely 20 years after the Battle of Trafalgar.
From there I went on to Crathorne Hall—the ancestral home of the noble Lord, Lord Crathorne—and spoke to the CBI north-east. At the end of my speech, the organiser came up to me and said, “The sound engineers would just like to have a word with you”, because I spoke about bounce-back loans in my speech. They were almost in tears, and they said, “We just want to thank you. Our business was shut for 18 months. We took a bounce-back loan, and that’s what saved us. Now we’ve got our business back, so thank you”. I could give your Lordships example after example of how these loans have helped.
One of the biggest restaurant caterers in the country and a customer of Cobra Beer, Madhu’s, shut for 18 months as there were no weddings or events. Three million people did not receive any help during the pandemic; they call themselves the “excluded”. Then we had this fantastic job retention scheme from our brilliant young Chancellor, Rishi Sunak. The JR scheme was meant to end in May last year—remember that? We said that it could not end and asked for it to be extended it to June. We said, “Are we going to have rolling cliff edges? Are we going to have a more flexible job retention scheme?” The Chancellor and the Government listened, and the CBI, the TUC, and all the other business organisations worked with the Government. When did the job retention scheme end? It was in September this year. It was fantastic: almost 12 million jobs, employed and self-employed, were saved—at a huge cost, there is no running away from that, but they were saved.
The Government gave support to retail and hospitality with rates relief. However, many did not get rates relief, including manufacturers and airports, which suffered so much during the pandemic. The rates bill of Heathrow Airport is over £100 million a year. Eventually they got some relief, but nowhere near enough. Aviation came to a standstill; it was down by 98% at one stage.
Business associations did their best. We at the CBI put out a free hub and not just for our members. We put out free webinars to everybody. We gave out free membership, with no obligation to join. We tried, and other organisations did similar things to help. The Government gave rent protection, saying that tenants could not be booted out if they could not pay their landlords. The Government tried their best.
Then we had that glimmer of sunshine when the economy opened up last summer. The Government listened and reduced social distancing from two metres to one metre. The difference was not twice as many people but four times as many—the difference between a business being viable and not viable. VAT was reduced from 20% to 5%; the Government listened on that. Then there was the Eat Out to Help Out scheme. Cobra Beer sales in August this year could not match our sales last year because that scheme was so successful in helping consumers go to restaurants, helping the restaurants and helping everybody.
The Government would not listen initially on lateral flow tests. Eventually they listened, and now any business or citizen can have lateral flow tests delivered for free. Those tests have been shown by Oxford, UCL and Havard to be very effective if you test regularly. Mass testing is better than mass isolation. I would go so far as to say that if we had applied those tests properly we might have even been able to avoid the second and third lockdowns.
The noble Lord, Lord Bird, mentioned debt from World War II. Debt to GDP after World War II went up to 250%, and it took until the early 1960s— 15 years later—to go down from 250% to 100%. We are now at just under 100%. This is a time of crisis. This is a time when we needed to do this.
When it comes to looking ahead, in 1942—in the midst of the crisis of World War II, when people did not know when it was going to end—Beveridge came up with a plan. When the war did eventually end in 1945, the Government implemented the Beveridge report and established the National Health Service and the welfare state. Similarly, the CBI has just produced, in the midst of the pandemic, our Seize the Moment strategy, looking ahead for 10 years. We think that there is an opportunity of £700 billion for this economy if we do certain things, looking at areas such as decarbonisation, skills, diversity and innovation, education, regional levelling up, health, well-being and global trade. All these things have to be put in place.
The Government have done so much to help us. The analogy I would use is that they have taken a big swing and they have hit the tennis ball, but if they stop at that stage and do not follow through, the ball will go into the net, not over it. Now is the time for the Government to follow through. We have suggested that the Government should set up a COBRA-style task force, with business and government working together. They have listened to an extent: there is the supply chain task force and the hospitality task force. We believe they should go further. We should have a joint task force dealing with the crisis now.
With the virus, we have a settlement that we suggest for the Government. Vaccinations and boosters should carry on. Hats off to the Prime Minister for empowering Kate Bingham to do what she did. Hats off to Nadhim Zahawi; what a fabulous vaccination programme he implemented. Today, 68% of the total population and 80% of over-12s have been double vaccinated.
Now, we just need to focus on innovation. We invest 1.7% of GDP but we need to invest 2.7% or 2.8%, like Germany or America, let alone Israel, at 4%. To do that would require £20 billion more a year—just imagine how that would power our productivity. We want high wages, but you cannot have high wages without high innovation, high skills and high productivity. So what we need now is growth. We need to encourage investment and growth. We do not need cuts and we do not need high taxes. We need growth, because it will generate the jobs that will generate the taxes that will pay down the debt.
On skills and apprenticeships, there was great news in the Budget about skills bootcamps, apprenticeships being much more flexible, and the Kickstart scheme. This is all fantastic stuff.
Business rates reform needs to happen desperately. Our business rates are four times higher than those in Germany and three times higher than the OECD average.
Next week, we have COP 26. The road to net zero is not a zero-sum game. Growth is now predicted to be 6.5%. There is good news and optimism. As Tony Danker, commenting on our Budget, said:
“the Chancellor has shown a genuine willingness to listen to business with measures that will get firms innovating and help the economy to grow … but … This Budget alone won’t seize the moment and transform the UK economy for a post-Brexit post-Covid world. Businesses remain in a high tax, low productivity economy with concerns about inflation. But the Budget will have a positive impact across the economy and makes several changes that will be welcomed by UK businesses.”
(3 years, 1 month ago)
Lords ChamberMy Lords, is it not serendipitous that we are having this debate at the time of a reshuffle? The Institute for Government paper, Professional Development for Ministers, states:
“New ministers have to pick up their duties almost immediately and have a limited time to make a mark. From 1997 to 2015, secretaries of state stayed in post for an average of two years and two months, with junior ministers only getting one year and eight months in the job.”
George Freeman, a former Minister, is quoted as saying:
“There’s no training, no guidebook, no manual, no induction! You leave the Cabinet room with promotion ringing in your ears … and walk straight into the department and start doing the job.”
In fact, in a survey carried out by the institute, the most frequently mentioned negative factors determining ministerial effectiveness were “Rapid turnover of Ministers” and
“Lack of adequate preparation, induction or development”.
I thank the noble Lord, Lord Norton, for initiating this timely debate. He said that Ministers matter. He said that Cabinet Ministers are the CEOs of their departmental empires. The noble Lord, Lord Maude, with all his experience, spoke about the tens of billions of pounds of expenditure and hundreds of thousands—millions, in the case of the Department of Health and Social Care—of employees that many Ministers have.
Yet it is a revolving door. The average tenure of a FTSE 100 chief executive is five and a half years. I am proud to be the chancellor of the University of Birmingham. Our vice-chancellor, Professor Sir David Eastwood, is about to retire after 13 years. Birmingham is among the top 100 universities in the world. He did not achieve that overnight; you need time to be able to do it. I served as the senior independent director of Booker. Charles Wilson, the chief executive, took Booker—including its board and its team—from being a £300-million, AIM-listed company, as it was when I joined in 2007, to merging with Tesco nine or 10 years later, with a value of £4 billion. It was not overnight; he needed the time to do it.
How many Ministers have genuine business experience? Look at people such as Nadhim Zahawi, who did such a fantastic job with the vaccination programme, or Sajid Javid, with his global experience working for American and German banks in east Asia, America and Europe. How many of them attended business school? The noble Lord, Lord Maude, talked about that. I have a degree from India and a law degree from Cambridge. I am a qualified chartered accountant. When I started Cobra Beer, I thought, “That’s it, I’ve done enough education for generations”. Then I realised the value of lifelong learning. I am now a proud alumnus of three business schools: the Cranfield School of Management, the London Business School and the Harvard Business School.
The Institute of Chartered Accountants in England and Wales, of which I am proud to be a fellow, says that the concept of continual professional development is embedded in you from the time you start as a trainee accountant right through to now, when I have to certify to that. In 2019, the CBI, of which I am president, produced the report Great Job: Solving the Productivity Puzzle Through the Power of People. It states:
“Great people practices make business sense. A business’s most important source of value is its people … firms that attract and retain people by improving leadership and management, and the practices that develop and engage staff, do better. Even small improvements in firms’ people practices are associated with sizable productivity increases … UK businesses primarily invest in staff development through training”.
It makes sense to do this.
The Commission for Smart Government had a piece about learning from the pandemic’s successes. I was very privileged to learn so much from my late father, Lieutenant General Bilimoria, who was commander-in-chief of the central Indian army, with 350,000 troops. One of the things he always said was that the true test of leadership is not in the good times but in adversity—and, wow, have we had the chance to learn about leadership from adversity. The report quotes Dame Kate Bingham:
“The instruction I was given by the Prime Minister was to save lives as soon as possible, so we had a very clear goal.”
And she did it, thanks to that empowerment. In eight months, she created what we have had: one of the best, most impressive vaccination programmes. So, we have had great lessons over here, and I have learned as well about the collaboration with business that we have carried out with the CBI.
This document—the Declaration on Government Reform—co-signed by the Prime Minister and the Cabinet Secretary is excellent news. The recommendation it makes about people, performance and partnership is fantastic. That is just what we need to do. Michael Gove spoke at the Ditchley Foundation, where I am proud to be a governor, last year. He made a speech on the Declaration on Government Reform and called for more training for both Ministers and officials to meet present and future challenges. He was absolutely right on that. On this document that both the Prime Minister and the Cabinet Secretary, Simon Case, signed, it says:
“We have superb people at every level of public service”,
which I could not endorse more, but that:
“We will invest in training for civil servants and for Ministers”.
Could the Minister update us on that?
The document also said:
“We will set a new standard for diversity and inclusion”.
I am proud to have launched Change the Race Ratio at the CBI to promote diversity across all business. I give full credit to this Government for diversity: just look at the Cabinet table and the diversity around it. I have always said that we will have a member of the ethnic minorities as a Prime Minister of this country. I have been saying that for years, and that day is imminent.
We should be sending our Ministers to the Blavatnik School of Government at Oxford, the Saïd Business School at Oxford, the Cambridge Judge Business School and the London Business School.
To conclude, I attended a virtual session with my fellow Harvard Business School alumnus, Prime Minister Mitsotakis of Greece. In this meeting last year, when Greece was doing very well with the pandemic, he said, “I am accused by my opponents of treating Greece like a company—and I take that as a compliment”.
(3 years, 3 months ago)
Lords ChamberMy Lords, the House of Lords Public Services Committee was established to consider the operation and future of public services, including health and education. It started work in February 2020, and the committee recognised very quickly, following the outbreak of Covid-19, that
“the pandemic would have an enormous impact on the delivery of public services in the years to come.”
Therefore, it set up an inquiry to examine what the experience of the coronavirus outbreak can tell us about the future role, priorities and shape of public services. The committee found five key weaknesses in public service provision, which it argued made the response to the pandemic more challenging. One of them was
“insufficient support for prevention and early intervention services,”
which I will come to.
The committee made various recommendations, and one of those that I want to focus on was:
“Recognising and supporting charities, community groups, volunteers, and the private sector as key public service providers.”
If one word stands out throughout the pandemic, it is “collaboration.” Last year, at the beginning of the pandemic, I was privileged to be appointed a trustee of the National Bereavement Partnership right from its outset. It has carried out inspirational work throughout the pandemic under the leadership of our inspirational CEO Michaela Willis. The National Bereavement Partnership has made a difference to the emotional well-being of callers. These are people who call in with very sad and tragic situations. The National Bereavement Partnership provides emotional support and therapeutic intervention and is a conduit between other services, enabling long-term well-being. It adds value to NHS services; it saves the Government money; and it keeps people out of the mental health system. So here we are where the public sector and charities work hand in hand to the benefit of each other.
When it comes to prevention and early intervention, the committee cited evidence highlighting the disproportionate impact of Covid-19 on BAME communities, including:
“almost a third of all patients critically ill with COVID-19 in hospitals were from BAME backgrounds—despite making up just 13 per cent of the UK population—
that is, almost double the proportion of the population being critically ill—
“and … people of Bangladeshi background in England were twice as likely as white British people to die if they contracted COVID-19.”
The committee recommended that the Government take an approach to public health that focused on preventing health inequalities over the longer term.
The pandemic has highlighted the potential of the NHS to drive forward large-scale change and new approaches in a short period of time. There are so many examples of this. The vaccines are a great example; we have a world-leading vaccine programme with Kate Bingham, a private sector individual, appointed by the Government in May last year. On 8 December, we had the first vaccination. We had six vaccines on order and 400 million doses for a population of 67 million. Today, almost 90% of the adult population have had their first dose and almost 70% have been double-jabbed.
Again, this could not have happened with the public sector on its own; it is due to the public sector working with the private sector, with Oxford University, with the university sector, and with the Serum Institute of India in Pune, the largest vaccine manufacturer in the world, which now has a 1 billion-dose contract with the Oxford AstraZeneca vaccine. Of course, it is international collaboration: AstraZeneca is a Swedish-British company headquartered in Cambridge.
The way we worked with the ventilator challenge was amazing. We got 20 years’ worth of essential ventilators in 12 weeks. So was the way we created the Nightingale hospitals, such as the 4,000-bed centre at the ExCeL centre—the first where you had the private sector, the Armed Forces, universities and the NHS all working together.
All this underlines the importance of the health and life sciences sector. As president of the CBI, we have launched our economic strategy for the next decade, called Seize the Moment. Within that, one of the pillars is:
“A healthier nation, with health the foundation of wellbeing and economic growth”,
which is absolutely crucial.
“COVID-19 has put the health of the nation under the spotlight. Firms have stepped up, with a significantly increased emphasis on the health and wellbeing of their employees. And, for us as a country, the crisis has been a wake-up call, bringing the pervasive impacts of health inequalities into stark focus, underlining the importance of health to people’s personal and professional success, and reinforcing just how vital our life sciences capability is to the UK’s progress now and in the future.”
Poor health is expensive: 63% of years lost to poor health are in the working-age population. This costs the UK £300 billion in lost economic output annually, excluding health costs. So, life sciences and health can be a major driver of economic success for the UK, with the global market in pharmaceuticals and medtech worth £1.2 trillion in 2020; and it is expected to see a strong growth of around 5% a year through to 2030. The secret, again, is collaboration between the public sector, charities and the private sector.
People talk about building back better. Well, I chaired a CBI event with the mayor of Athens, and he said, “We do not talk about building back better; we talk about building forward better.” So, let us build forward better.
(3 years, 4 months ago)
Lords ChamberBefore our UK Budget of 3 March, in February, I attended a virtual meeting with the senior civil servant in India in charge of the budget there, along with the director-general of the Confederation of Indian Industry, the sister organisation of the CBI, of which I am president. They both said categorically that India’s budget did not increase any taxes for two reasons. First, businesses had suffered so much already and, secondly, they did not want to stifle the recovery after the pandemic. After that, I implored our Indian-origin Chancellor, Rishi Sunak, to follow India’s lead and not increase any taxes in our Budget on 3 March. He listened and, on the whole, taxes were not increased. However, he announced that corporation tax would increase from 19% to 25% in 2023. Our businesses drew a huge gasp of breath at taxes going up by almost one-third in one go. With Ireland next door to us with a rate of 12.5%, this was a concern. Of course, in November 2019, we had heard Boris Johnson, the Prime Minister, announce at the CBI annual conference that a reduction in corporation tax in the UK, to 17% from 19%, would no longer go ahead. Inward investment is really important, so this is a worry: will it affect inward investment?
Fortunately, the Government seem to have resisted the suggestion by the Office of Tax Simplification to equate capital gains tax with income taxes. To do this would be suicide. It would deter investment, entrepreneurship and risk-taking. We need to encourage wealth creation. The UK is the second or third-largest recipient of inward investment in the world. We have a Minister responsible for inward investment at the DIT—our colleague, the noble Lord, Lord Grimstone. We need to be a magnet for inward investment, as we have been. We have left the EU but, of course, as I always say, we will never leave Europe. When we were in the EU, we were seen as a gateway for investment into the EU. Today we should be seen as a gateway to Europe for investment. So we must resist equating CGT with income tax. That will deter inward investment and domestic investment, there would be capital flight, and it would deter entrepreneurship and risk-taking, as I said earlier. It would be hugely damaging to listen to the OTS regarding CGT. Does the Minister agree?
The Chancellor listened and has not done this so far. Entrepreneurs’ relief has been cut by the Government, which was not a good step if it was meant to encourage entrepreneurship. On the other hand, the super deduction was a masterstroke by the Chancellor and the Treasury: to encourage investment by giving relief of 130% instead of 18%, to have 25% off your tax bill, and to encourage investment—wow! The Government are doing the right thing, but they have announced that this will be taken away in two years’ time, just at the time when corporation tax will go up. Should not the Government consider continuing with the super deduction? Will the Minister give us his opinion?
At the CBI, of which I am president, we welcome measures such as the super deduction, supporting business investment, the extended loss reliefs and supporting business cash flow. We hope that the current cap on carried-forward losses can be temporarily lifted to allow the many viable and vibrant businesses in the UK even greater flexibility in how they use their exceptional Covid-related losses, along with other policy measures already in place. This will help to support businesses of all sizes to recover and grow after the pandemic.
The CBI is also calling for a tax road map. We were disappointed, as was the Treasury Committee, that the Government have not yet consulted on producing this. We believe that the relative success of, for example, the corporation tax road map, demonstrates the value to businesses and people alike of laying out the direction of travel of the tax system and how the Government will use taxes to achieve their manifesto policy goals.
On green taxes, there is very little in the Budget about net zero and tax. We would like to see much more leadership on this from the Government, particularly leading up to COP 26. The CBI has produced a paper on greening the tax system that aims to start a discussion between the Government and business about how tax can best support net zero. This is a once-in-a-generation platform to boost climate-progressive industries, associated skills and innovation, to show that the UK can lead the world in the technologies of the future and accelerate our response to climate change. Devising suitable regulatory frameworks will be key, given the pressures on public finances, but fiscal measures, including environmental taxes and tax incentives, will also be an important lever in driving change. Does the Minister agree?
The £400 billion invested by the Government in supporting our economy and our businesses has been phenomenal. Whether in absolute terms or in per capita terms, it is one of the highest sums in the world. I was privileged to chair the B7 last month, which fed into the G7 this week. Dr Gita Gopinath, chief economist of the IMF, spoke to us, saying that in the global economy there will be a two-track recovery. Some economies, such as ours, have been fantastic with their vaccination programmes. Full credit goes to Nadhim Zahawi, our Vaccinations Minister, who has achieved a vaccination rate of 75%, with double doses at 50%. This is tremendous. Likewise, America is doing very well. With our huge £400 billion of support, we will be able to bounce back very quickly. Andy Haldane, chief economist of the Bank of England, has likened our economy to a coiled spring. On the other hand, sadly, many economies in the world have hardly vaccinated their citizens and have hardly been able to provide any support to them.
How will we pay for this £400 billion? How will we pay for the nearly 10% drop in our GDP, the worst performance in 300 years? I get asked this question a lot, and I believe that the way we pay for it is by generating growth and with the support the Government have given—for example, the furlough scheme, which has saved millions of jobs and businesses, and the 100% guaranteed loans. The British Business Bank, which had a loan book of £8 billion in February last year, today has a loan book of £80 billion. Hats off to it for giving these loans, which have saved so many businesses.
What about unemployment? In February last year, it was at 3.5%, one of its lowest levels; it is now at 4.8% because of all the measures that have been taken. We have to prevent unemployment, and youth unemployment in particular. Young people have suffered so much during this crisis. Some 50% of jobs lost, sadly, were among young people. If this coiled spring is to work, the supply side measures which encourage economic growth must be there. It means creating jobs. This will be the best way to pay for the £400 billion. It means not increasing taxes. We need to encourage inward investment as well as domestic investment. We need to create growth. This will create jobs which, in turn, will create the PAYE and the NI that make up the biggest proportion of taxes. The people who get those jobs will spend and that will generate VAT—which will be far more than the relatively small proportion generated by corporation tax. I give full credit to the Chancellor for leading the agreement by the G7 for the 15% minimum global tax rate. We have always said that, if there is to be a minimum tax rate, it must be agreed globally. Let us see what happens at the G20. However, we still need to encourage businesses to locate in the UK. We need to get the Amazons and the Googles to come here to create the thousands of jobs that will create the taxes.
At the CBI, we have a new director-general, Tony Danker. Six months into his role, we published Seize the Moment, our economic strategy for the United Kingdom during the next decade to 2030. It contains six pillars: a decarbonised and an innovative economy; science and technology; research, development and innovation; universities and businesses working together, and a globalised economy with the UK as a trading powerhouse. It encourages levelling up around the country in clusters such as between Cambridge University and AstraZeneca. We have also launched An Inclusive Economy to change the race ratio and promote ethnic minority diversity and inclusion across all businesses. McKinsey has shown that companies which embrace diversity and inclusion are more profitable; Deloitte has shown that they are more innovative.
Finally, we are promoting a healthier nation, including mental health and well-being, within an action plan that includes a long-term tax road map for the United Kingdom. To enable all this and for Andy Haldane’s coiled spring to happen, we need the supply side to be there. The United Kingdom needs a competitive tax system that will encourage investment and job creation—one which is globally competitive and super-effective.
(3 years, 6 months ago)
Lords ChamberI obviously agree with my noble friend that for international travel there have to be international discussions, and indeed there are. So far as his point on lockdown is concerned, lockdown is extremely hard. It is something that has been and is being done for the sake of the general good and has contributed to the situation we are now in. Of course, the Government never underestimate the mental health and other issues that arise and have arisen.
My Lords, the CBI, of which I am president, has submitted evidence to the Government asking for a principles-based approach, meaning that these certificates should be voluntary, time-limited, science-led and either/or, based on tests or someone’s vaccine status. That is for domestic. There should be alignment between domestic and international so that people can adapt and restore trade, business and tourism links. Does the Minister agree that we need urgent clarification about these intentions to instil confidence, allow preparations and give people, businesses and wider society time to adapt, alongside support for businesses?
My Lords, the Government have set out the intention and the timescale on which we intend to proceed. We have committed to setting out the conclusions of the review ahead of step 4, as set out in the Written Ministerial Statement that has been laid. Of course, businesses are among the interested groups with which the Government have engaged and will continue to engage.
(3 years, 6 months ago)
Lords ChamberMy Lords, these concepts are still being designed and I will be very happy to update the noble Lord when more information is available. However, the key emphasis of scale-up is to attract global talent and boost the fintech workforce, so it will be focused on the skills these people can offer our country.
The CBI, of which I am president, welcomes the recommendations set out in my friend Ron Kalifa’s fintech review to ensure the UK’s position as the best place in the world to start and grow fintech business. Do the Government agree that having a proportionate, innovation-friendly regulatory framework will help support economic growth, facilitate access to global markets and enhance competition? Do they also agree with the review’s recommendation that a centre for finance, innovation and technology be created?
My Lords, we are certainly keen to support the creation of a centre for finance, innovation and technology. In UK FinTech Week the Chancellor announced his support for the industry, and we certainly recognise a private sector-led centre for finance, innovation and technology’s potential as an accelerator of fintech sector growth. This can be achieved through research, thought leadership and working with regional fintech hubs and national fintech bodies. The Government are committed to working with industry to make this a reality.
(3 years, 6 months ago)
Lords ChamberI can only speculate on what that might be, but the important thing is to try to get as much harmonisation on rules for large multinational companies. That is why we were always keen on pillar 1, which ensures that the profits of large digital businesses are taxed in the countries where they make their sales. It is important because, as one of the largest economies in the world, we believe that these international companies should not be able to just come here and take all the advantages of the infrastructure that British taxpayers are contributing to the creation of.
My Lords, the CBI, of which I am president, welcomes the United States’ renewed commitment to engage with the OECD multilateral process, which, after a decade, has two pillars. One is a new regime for the largest companies; the other is on setting a minimum tax rate, which the US aims to see at 21%. Do the Government agree with this rate of 21%? Do they agree that we want to avoid a patchwork of unilateral action—for example, digital services taxes?
My Lords, the Treasury is assessing the statements recently made by the US Government on that tax rate, so we are not in a position to opine on those yet. We agree on the patchwork point: we introduced the digital services tax as an interim to plug at least some of the gaps and problems that exist, but we will certainly review that if we can reach an international consensus.
(3 years, 7 months ago)
Lords ChamberAgain, my noble friend asks me a question which goes well beyond my remit in the Cabinet Office. I note and respect what he says. The Government’s position is that, for some internships, early years in the labour market can help in securing work and gaining experience. However, he raises important issues. As for the task force issue, that is an independent matter for the task force.
The UK has a hard-won reputation, internationally,
“as a great place to set up and scale a business due to its stable and predictable regulatory environment, competitive product and labour markets and dynamic financial sector”.
Regarding the Taskforce on Innovation, Growth and Regulatory Reform, does the Minister agree that we should beware of opportunism at the expense of a more strategic approach and that regulation must be in the service of building a competitive, dynamic and future-focused economy, including net zero, digital, R&D and innovation, and life sciences, for example? Does he also agree that with the UK’s leadership of the G7 and COP 26, we have a chance to reinforce our commitment to international co-operation on equity standards and burnish our credentials as a leading innovator across international regulatory reforms?
I fear I was not able to catch all the matters to which the noble Lord referred. While I do not favour opportunism, I agree that there is great opportunity out there, which flows from the kind of innovation that he describes. Britain certainly intends to be a world leader.
(3 years, 7 months ago)
Lords ChamberMy Lords, the Chancellor’s spring Budget has succeeded in protecting the economy with a vital suite of measures: taking Covid-19 support spending to more than £400 billion; extending the job retention scheme to September and tapering government contributions from July; extending the 5% VAT cut for hospitality and tourism, which have suffered so much over the past year; extending the business rates holiday for hospitality, leisure and tourism for six months and then on a reduced basis until March 2022; and the business recovery loan scheme. However, there is disappointment for the aviation sector, where the support is unlikely to be enough, and for the 3 million excluded individuals who have received no support whatever over the past year.
In the build-up to the Budget, I said time and again to the Chancellor that the Government of India, who had their Budget a month ago, said they deliberately did not increase taxes because they did not want put more pressure on businesses which have suffered so much, and because they did not want to stifle the recovery. Against this backdrop, the Chancellor set out plans to increase corporation tax from 19% to 25% in two years’ time. This increase sends a worrying signal to those planning to invest in the UK, and Northern Ireland must compete with the Republic of Ireland next door, which has a rate of 12.5%. The leap of 6% in one go has caused a sharp intake of breath for firms. Britain is the second or third-largest recipient of inward investment in the world. We must not jeopardise that in any way.
In the meantime, the Chancellor’s super-deduction tax initiative over the next two years to bring forward business investment is a bold and positive move for the UK. Super-deduction will allow companies to cut their taxes by up to 25p in every £1 that they invest. The CBI, of which I am president, called for a focus on incentives to increase investment, and this is just the sort of thing we need to be doing in the UK. We were disappointed not to see fundamental reform of the unfair business rates system, or significant reform to the apprenticeship levy. On the other hand, the help-to-grow package is fantastic, offering free MBA-style management training for SMEs, and the new review of the R&D tax credit could make a big difference. The new infrastructure bank is fantastic, and the free ports idea could help with levelling up.
To conclude, with the phenomenally impressive performance of the UK in developing and delivering vaccines and the Chancellor’s priorities of protecting businesses and jobs and incentivising investment to help create growth, our economy is like a crouching lion, poised to spring and roar.