Finance Bill
David Rutley Excerpts(10 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John Mann
The new clause is so modest and so moderate. How could any reasonable and rational Member of the House possibly not vote for it? I would go much further and give more robustness, including a great wealth of powers to ensure that those overseas territories and Crown dependencies were forced to give economic efficiency, justice and morality in return for the defence and everything else that they get from this country, but I recognise that one needs a majority in the House to do such things. Therefore, I appeal to those decent, sensible, smiling Back Benchers to join us in an historic vote tonight—vote with the Opposition.
David Rutley (Macclesfield) (Con)
I understand the real passion that the hon. Gentleman brings to the debate, as he often does, but I have some concerns. It is great to see a politician put his body on the line, wanting to ensure that he serves on the GAAR board, but is this now a bid for him better to represent the British overseas territories in Parliament as well? Has he consulted the residents of Retford and of Worksop to check whether they can spare him, given all the hard work that he is doing in the constituency?
John Mann
I fear that due to our expedition next year with injured British soldiers, which I expect to take place via the parliamentary mountaineering group, I will perhaps be too busy to make a big commitment of time other than to that great cause, which the hon. Gentleman and I hope to push forward with other mountaineers and injured servicemen.
The hon. Gentleman gives us a timely reminder of priorities. I give that reminder to those on the Treasury Bench. This is about priorities: their priorities in government, which are the wrong priorities, the failed priorities, letting down the small businesses and the honest taxpayers of Britain. That is who they are letting down tonight and who they have been letting down for three years. Here is a modest opportunity for those who wish to save their seats: join the Opposition, do the right thing—the modest, the moderate thing—and support new clause 12.
Spending Review
David Rutley Excerpts(10 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
I think good local councils can manage the ask we are making of them. Is the hon. Gentleman complaining? The Labour party has not made it clear whether or not it supports this total mandatory expenditure, so the Opposition cannot really complain about individual cuts unless they tell us whether they would make other cuts, and so far I have not heard of any.
David Rutley (Macclesfield) (Con)
Is not the main message from today’s statement that more can be done for less? Do we not need to move forward on that because of the mess left by Labour?
Mr Osborne
My hon. Friend is right: one of the central principles is that we can deliver more for less. Ultimately, we should not have to choose between public services we can afford and public services that deliver for people. We need both.
Economic Growth
David Rutley Excerpts(10 years, 12 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Ed Balls
The EU produced the latest growth figures today. The figures for France are disappointing. France has gone into recession. It is in the eurozone, trapped in austerity, and its economy is not growing. I looked at the figures today to see what French growth had been since the Chancellor’s spending review compared with the UK. Since the spending review in 2010, growth in France has been 1.1% and growth in the UK has been 1.1% as well, compared with Germany, which has had three times more growth, and America, which has had four times more growth. The eurozone is locked into austerity by virtue of those countries’ membership of the single currency. Our Chancellor imposed on our economy austerity that went too far, too fast, and what has happened? He has delivered the same growth performance over the last two years as that of the French economy, well behind that of Germany and America, where, as we now know, the deficit is coming down.
David Rutley (Macclesfield) (Con)
With the IMF in town, will the shadow Chancellor confirm that the IMF has forecast that the UK will be growing faster than France over the next two years?
Ed Balls
The hon. Gentleman should be congratulating me and the Labour Government on not taking us into the single currency in 2003. That is what he should be doing, but if he wants to have a debate about the IMF, this is what the IMF said in September 2011:
“If activity were to undershoot current expectations, countries that face historically low yields”—
such as Germany and the United Kingdom—
“should also consider delaying some of their planned adjustment”.
In April—just a month ago—it said:
“In the UK, where recovery is weak owing to lacklustre demand, consideration should be given to greater near-term flexibility in the fiscal adjustment path.”
That is technical language that means the Chancellor should slow the pace of deficit reduction, provide a stimulus and get the economy moving to get the deficit down. What do we hear from the Treasury? Treasury advisers, who a year ago were saying the IMF was on their side, now say that the Chancellor will ignore the IMF and plough on regardless with a failing plan.
David Rutley (Macclesfield) (Con)
The Queen’s Speech sets out a positive agenda—one that shows that Government Members are supporting hard-working people who want to get on in life and working to boost our national competitiveness to build the foundations for much needed sustainable economic growth.
The draft deregulation Bill rightly focuses on reducing the bureaucratic burden faced by all too many businesses. It is a subject on which I have campaigned long and hard during my time as a Member of Parliament. The Institute of Directors has calculated that the cost of regulation on business in this country is £110 billion a year. That is clearly too high. This Bill will make a difference by exempting from health and safety law the self-employed whose activities pose no potential risk to others. It will also give non-economic regulators a new duty—to have regard to the impact of their actions on growth. These are positive steps for businesses in Macclesfield and across the country.
Our ability to innovate has always been critical to our competitiveness. That is why it is indeed time to introduce the Intellectual Property Bill. I welcome the fact that the Federation of Small Businesses has said:
“Streamlining the patent system…will make it more cost effective for small businesses to protect their inventions.”
The Bill goes further by improving design protection, too. That is good news for this vital part of the UK economy, which accounts for more than 1% of gross domestic product.
As competitiveness improves, businesses will be better placed to create more jobs, and the national insurance contributions Bill clearly demonstrates the Government’s commitment to this vital task. The new £2,000 employment allowance will encourage in particular small businesses looking to take on more staff, and it will build on the Government’s proven track record of job creation, with over 1.2 million jobs created in the private sector since the election. I am pleased that we have the ambition to go further.
The Queen’s Speech sets out an important agenda that will improve our national competitiveness, but that ambition does not stop at the English channel—much to the disappointment of my hon. Friend the Member for Dover (Charlie Elphicke), who is no longer in his place. There is more work to be done within the EU and in wider international markets. As the UK’s competitiveness improves, we need British businesses exporting more. Britain needs to fall in love again with enterprise, entrepreneurs and exporting. Equally, businesses need to be more curious about exploiting opportunities overseas and follow the example of successful SME exporters such as J Tape in Macclesfield.
Trade associations and chambers of commerce should help raise awareness of the sources of support available to SMEs and they need to make sure that they are out there representing British businesses in vital growth markets such as Brazil and South Africa, where I suspect they are currently under-represented. British businesses should seize the day and make exports our business once again.
There have been reports in recent days of a real and growing appetite among my Conservative colleagues to address our relationship with the European Union. I can categorically confirm that those reports are true. It is increasingly clear that the public want the issue to be addressed as well. They understand that it is not just about sovereignty, but poses a clear and present danger to our real economy. I am pleased that the Conservative party, alone in the House, recognises that, and will offer an in/out referendum.
Pete Wishart
We have just learnt from The Spectator that the hon. Member for Mid Bedfordshire (Nadine Dorries) is talking about a UKIP-Conservative candidacy at the next general election. How many other Conservative Members are considering that, and does it constitute a new realignment of the right?
David Rutley
Whatever the hon. Gentleman may have read in the paper, and whatever blog may be in existence, there is no plan for any such coalition.
David Rutley
Absolutely. We are categorical about that. We have a very clear plan. We are the only party in the House that is presenting proposals for an in/out referendum, and things will stay that way. On the back of that, I am confident that we can secure an outright Conservative victory.
Angie Bray (Ealing Central and Acton) (Con)
Does my hon. Friend agree that it is essential for us to get the message across that only under a Conservative Government will the country have an EU referendum, and that the referendum will come after we have renegotiated our terms of membership with the EU? That is vital if we are to give people a proper choice and present them with the best options. The draft Bill that was published yesterday underlines that message very clearly.
Mr Speaker
Order. I must gently remind the House that interventions should be brief. A large number of colleagues are still seeking to contribute to the debate, and I am keen to accommodate them, but brevity is essential if I am to do so.
David Rutley
What my hon. Friend has said is absolutely right. It is crystal clear that if the public want an in/out referendum, it is only the Conservative party that will offer them the choice. That is why I support the Prime Minister’s position, and welcome the publication yesterday of the draft referendum Bill. It is entirely proper for the British people to have a right to vote and to make their views heard on this vital issue.
I am keen to see a fundamental realignment in our relationship with the European Union. Although I am half-Danish, to me our involvement with the EU is about hard-nosed economic benefit, and has nothing whatever to do with some woolly sentimentalism that others may consider important. We are not alone in Europe in wanting to bring about fundamental changes in the European Union. I recently went to the Bundestag and met members of the Christian Democratic Union and the Christian Social Union. It is clear that they too have concerns about the future direction of the EU. When the public can see that youth unemployment in Spain is now at 50%, it is clear that new solutions need to be found. That is critical for the United Kingdom, and vital for other member states.
The Prime Minister’s recent speech has served as an important catalyst in taking forward the debate. Urgent negotiations should follow in the months ahead. A Member asked earlier, from a sedentary position, when those negotiations should take place; they need to start immediately. Given the promise of a referendum, other member states should not underestimate our resolve. When those negotiations have been completed, it will be absolutely right to let the people have their say.
We are entirely clear and serious in our intent. The plans have been set out, and I hope that other member states will recognise that the clock has started ticking. It is time for action. The Queen’s Speech shows that we are taking action to improve our competitiveness and create jobs at home, and we need to see the same commitment to action in the EU.
Finance (No. 2) Bill
David Rutley Excerpts(11 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Chris Leslie (Nottingham East) (Lab/Co-op)
The Minister’s job was clearly to drill down into the technical details, rather than focus on the big picture of the Budget and the Finance Bill. [Interruption.] There is heckling already. It would have been nice to see a bit of life from the Minister during the debate. How to draw the sting from a Finance Bill? Send for the Exchequer Secretary. It is true that he is less provocative than the Chief Secretary to the Treasury; I will give him that.
It is true that the Government wanted to kill off any interest in the Bill and put it on the back burner. Towards the end the Minister tried to arouse the enthusiasm of his colleagues on the Back Benches for the Bill by saying that it was about building a fairer society and energising Britain, but it is not a Bill for building a fairer society or energising business. It is not a Bill for the economy. It is not about what is best for the country at all. It is a Bill totally designed around what the Chancellor thinks is best for him. As the weight of evidence mounts that his plan is failing, he flails around desperately to justify his strategy, casting around constantly to blame everyone and everything else for the fact that everything is going so badly wrong.
The Bill gives us a glimpse of just how desperate things must be getting inside the Treasury. For the Treasury team, it is all about the politics, but what about the economics? Let us be clear. There is no positive impact on economic growth from the Bill. The Government’s own Office for Budget Responsibility on page 46 of its report on the Budget states that it will have
“no impact on the level of GDP at the end of the forecast horizon.”
The OBR also says that
“these measures reduce GDP growth”
in 2013. After all that effort by the Chancellor, culminating in the Budget and this weighty Finance Bill, what is the impact on economic growth in this calendar year? It is negative.
It is no wonder that the Treasury’s plans and the OBR forecasts are on a slippery slope, constantly and continuously downgrading their projections for the economy while upgrading the size of the deficit. Those grandiose plans and supposedly tough decisions that the Chancellor set out three years ago have seen economic growth of just 0.8%, compared with the 5.3% that they forecast and promised at the time. All the while, our international competitors are moving forward, leaving us behind. Only two other G20 countries have grown more slowly than the UK since the 2010 spending review—Japan and Italy.
Chris Leslie
Let us not forget the double-dip recession, together with the shrinking economy in the last quarter for which figures are available.
I give way on the double-dip recession.
David Rutley
I thank the hon. Gentleman for giving way. I am pleased to see that he has departed from the vaudeville act that we normally see from the shadow Chancellor, and instead adopted the posture of Eeyore. Has he failed to notice that the IMF has projected that the growth in the UK for this year and next will be greater than that in both France and Germany?
Chris Leslie
I am sorry if I am upsetting the hon. Gentleman by having to emphasise some of the things that are going wrong in the Government’s plan, but somebody has to wake up the Back Benchers after the scintillating comments that were made from the Government Front Bench. If the hon. Gentleman thinks he has the capability to stand up and defend his Government’s record on economic growth, we would all be impressed. He must surely accept that it has been a massive and total failure and a disappointment which has not only hurt all our constituents, but has made the public finances far worse than the Government were predicting.
The Government said that they wanted to rebalance the UK economy, but look at the latest trade statistics, which showed our trade deficit increasing by £1 billion between January and February, with the balance of payments deficit for our country now at £36 billion. Despite the depreciation of sterling, our exports are shrinking, and despite the problems in the eurozone, our exports to other non-eurozone countries, such as the United States, are getting worse as well, and all that from the Chancellor who two years ago promised he would deliver
“a Britain carried aloft by the march of the makers.”
David Rutley (Macclesfield) (Con)
It is a pleasure to speak in today’s debate. This week, of all weeks, is an appropriate time to reflect on economic and fiscal policy, and particularly on the legacy of the free enterprise revolution led by the great Lady Thatcher. There is much in the Bill that will continue this Government’s work to revive the successes of Lady Thatcher’s approach to business, free enterprise and growth. I was fortunate enough to meet Lady Thatcher on the general election nights in 1983 and 1987. She inspired me and many others on this side of the House. She was a towering figure who was well respected across the world, and she richly deserved those election victories back in the 1980s. More than anything, she understood that individuals and Governments needed to live within their means, and that businesses were best placed to create jobs and deliver economic growth. She trusted them to do that, and created the right conditions for them to succeed. That is the proud legacy that the Bill seeks to build on. Indeed, there is a clear focus on freeing up small businesses from the burdens of tax.
Frank Dobson
Is the hon. Gentleman aware that the average economic growth during the time that Mrs Thatcher was Prime Minister was no higher than the average economic growth under Harold Wilson or Jim Callaghan?
David Rutley
The debate is about sustainable economic growth, and if we look at the record of the 13 years of the previous Labour Government and their promise of no return to boom and bust, the facts speak for themselves.
Andy Sawford
What is it about 63 consecutive quarters of economic growth that the hon. Gentleman does not recognise as a period of prosperity in this country?
David Rutley
As a member of the Treasury Select Committee, I have had the privilege of interviewing and putting to the test various former permanent secretaries. Lord Turnbull springs to mind. He worked in the Treasury under the Labour Government and supported Labour Ministers, and he is on record as saying that after those 63 successive quarters, what he called wishful thinking crept in—
David Rutley
According to the permanent secretary at the time, wishful thinking was prevalent across the Labour Government, and it led to the hyperbole that it was possible to bring about an end to boom and bust. Of course that did not come to pass; none of that Government’s work did. We are about sustainable growth and putting forward the positive action plan that was included in the Budget—[Interruption.] If the hon. Member for Airdrie and Shotts (Pamela Nash) wishes to intervene, she should please do so.
Pamela Nash
The hon. Gentleman says that my party is guilty of wishful thinking. At the moment, there is no growth in this country; we had 63 quarters of consecutive growth. How can he possibly compare the two?
David Rutley
If the hon. Lady had listened, she would know that I did not say that. The phrase about wishful thinking came from Lord Turnbull—one of Labour’s permanent secretaries, speaking for himself. The groupthink that pervaded the Treasury at the time led to the tragic results that we are having to clear up, and the Bill is taking steps to do that.
The Bill is a fitting tribute. It will promote competition and reduce barriers to entry for the ambitious and aspirational people of this country, who simply want the chance to work hard, compete and get on. The Chancellor’s Budget speech made it clear that the Bill will be followed by future measures that continue these efforts to free enterprise and remove the roadblocks to economic growth. That is a clear commitment from the Government.
It is worth reflecting on what enterprise actually means. It does not mean that people are on their own as some critics allege. As John Donne wrote:
“No man is an island, entire of itself.”
He could have written the same thing about enterprise, because free-market economics is not an atomistic pursuit, but recognition that we all advance by pooling our comparative advantages in a common free economy. We should remind ourselves of the common value and purpose of enterprise as we lay the foundations for future growth. It is not about state intervention, as Opposition Members suggest.
Business transactions must involve at least two parties—the supplier and the consumer—and the very word “enterprise” is derived from joint undertakings: enter from the French “entre”, meaning “between”, and “prise” from “prendre,” to take. It is suggested, perhaps rather dubiously, that President George Bush once said, “The problem with the French is that they have no word for entrepreneur.” Forgive my French, Mr Deputy Speaker, but although we do not have a word for entrepreneur, we on the Government Benches understand the meaning of enterprise, which is literally the joint seizure of opportunity for mutual advantage. The Bill sets out how the Government will encourage it.
Enterprise is voluntary, and therefore it carries for suppliers involved in business the element, and excitement, of risk that consumers for the service or product may not be found. Suppliers need to be flexible to survive and thrive in competitive markets where consumers, even usually loyal ones, are free at any time to say no. That is why the Government need to ensure that there is the freedom to be flexible and the confidence to be bold for enterprise to thrive and succeed.
Andy Sawford
What specific measures in the Budget will give enterprise in my constituency the confidence to be bold?
David Rutley
In 2014. [Interruption.] We have to take a stepped approach to rectify the changes Labour put through. The allowance is important and will be welcomed, and the other measures we are taking on the supply side, such as the reduction in corporation tax, will all help to create a platform for economic growth.
Sheila Gilmore
Is the hon. Gentleman aware that the enterprise allowance will be partly funded by the substantial increase in national insurance contributions that employers and employees will pay as a result of the flat-rate pension? That has been brought forward by a year—even though the Select Committee was told that it would be logistically difficult—to produce that extra income. In fact, the Government are just moving things around and a lot of people will find themselves a lot worse off when those higher national insurance contributions kick in.
David Rutley
It is sad to see such gloomy faces on the Opposition side of the Chamber. I accused the shadow Minister of being a bit Eeyore-like and I think it is catching on the Opposition Benches. Labour Members should cheer up a little and look at the reaction to the Budget. The Federation of Small Businesses says that it
“asked for a budget for small businesses and this is what has been delivered. This Budget opens the door for small firms to grow and create jobs.”
Andy Sawford
Would the hon. Gentleman write me a letter, which I could circulate among the young people in my constituency who are desperately trying to find work and the people hit by the bedroom tax who face poverty and homelessness, advising them to “cheer up a little”? Would he write to me in those terms? I would gladly circulate it and we could see what my constituents think.
David Rutley
In a spirit of co-operation I suggest that for a change the hon. Gentleman leaves Croydon—[Hon. Members: “ It is Corby.”] Wherever it may be —beginning with a C. The hon. Gentleman should come up to Macclesfield and see what we are doing with apprenticeships and our local college to encourage young people to get into work. It is about human endeavour and getting on with the job, not moaning and groaning as the Opposition are doing.
The Forum of Private Business speak of the Chancellor being “spot-on” with his “basic common sense” decision to freeze fuel duty. I hope Opposition Members at least welcome that. The Association of Convenience Stores welcomes measures that
“will benefit consumers and reduce some of the pressure on local shops.”
Barbara Keeley (Worsley and Eccles South) (Lab)
What would the hon. Gentleman say to the convenience stores in my constituency who are going to lose £4 million from our economy in Salford when the bedroom tax hits? That is £4 million less that people will have to spend in convenience stores and local shops. That is the real hit.
David Rutley
We have to tackle the deficit that faces this country. We know that welfare payments have spiralled out of control and we recognise that there is huge demand for scarce rooms. We have to address those things. I will give the hon. Lady a chance to say what she would do to tackle the welfare budget, but I have heard nothing. Does she want to stand up and tell us what Opposition policy will be?
Barbara Keeley
I will happily respond. We would actually bring some growth to the economy and get some of our young people back to work. We would use a levy on bankers, not in the way that the Government propose in the Bill, but to build houses and to get young people back to work. We would guarantee work for young people who have been unemployed for 12 months or more. Going back a few years—I do not think the hon. Gentleman had been elected at that point—we had the future jobs fund in my constituency and in Salford. That gave hundreds of jobs for young people. Then there was a future and they had hope; now they have nothing.
David Rutley
Much as I enjoy going to Salford and the hon. Lady’s constituency, some honesty is required about how growth should be funded in the north-west. I am sure Mr Deputy Speaker has a view on that too, but he cannot express it in the Chamber. Under the previous Government, in the 10-year period to 2010, 100,000 jobs were created in the public sector in the north-west. During the same period, there was a net reduction of 25,000 jobs in the private sector. That is completely unsustainable. What we are trying to do in the north-west and throughout the whole economy is to have a more sustainable approach to job creation, which has led to the creation of more than 1 million jobs in the private sector. That is a far better record than anything from Labour when it was in power.
David Rutley
No, I have given way enough. We have all enjoyed the debate, but I shall now finish my speech.
In Macclesfield, we have one of the highest rates of self-employment in the UK, and among women Macclesfield has the highest rate of self-employment in the north-west. This year, the Budget was above all for small businesses and entrepreneurs like them. The Bill is the first step to realising the series of measures that will be delivered by the Government, such as the widely welcomed—at least on the Government Benches—employment allowance.
Not just small businesses welcome the return to a solidly pro-enterprise, pro-competition, lower tax environment. The Institute of Directors and the CBI both welcomed the clear progress in the Chancellor’s continual, and continuing, efforts to lower corporation tax. Clause 4 of the Bill provides for a corporation tax rate of 21% in financial year 2014, which is the lowest in the G7. Perhaps it is part of Lady Thatcher’s legacy that these days clause 4 is something to be celebrated as useful to the economy and progressive for growth.
The Chancellor has gone one better. Under clause 6, we will see Britain’s main rate of corporation tax reduced to just 20% in financial year 2015, the lowest in the G20. This is a clear, determined agenda to incentivise business activity for jobs and growth. It is precisely that clarity and determination that gives businesses certainty and confidence that enterprise is worth conducting in the UK, and that, as the Chancellor said, Britain is once again open for business.
It is a mark of how vastly over-complicated our tax system has been allowed to become that there are far too many opportunities to avoid and even evade taxation, and that very complexity has made a general anti-abuse rule inevitable. Of course, the Government are well aware that they must take great care that such a rule does not undermine the certainty and confidence in the tax system that we need. It would be sad if the GAAR became an excuse for HMRC to become sloppy when drawing up future tax rules in the knowledge that, if it did not get the desired results, it could always apply the rule. I am sure that the Treasury is determined to avoid such a situation.
I am pleased by the Government’s commitment to simplifying the tax system at the same time that the anti-abuse rule is being planned. Fighting complexity with complexity is not a long-term solution, so I look forward to progress on simplification. It is encouraging, and to the Chancellor’s credit, that in just three years the Government have taken the UK from near the bottom of the KPMG league table of competitive tax regimes to the top. That is progress, and I applaud it. Ministers should also be praised for not only explicitly recognising that there is yet more to be done, but setting a path for getting that done, not least by increasing the personal allowance to £9,440 this tax year, with the clear target of hitting £10,000 next year.
The Bill includes a significant commitment under schedule 14 to research and development credits, even for those companies with no corporation tax liability. The Chancellor’s decision to increase to 10% the rate of credit for above-the-line R and D, as well as the new £700 million annual patent box, will help to tackle under-investment in knowledge-based industries. That is important for the life sciences sector, which is critical to Macclesfield’s local economy and vital for our national competitiveness. Those measures are in addition to the tenfold two-year increase in the annual investment allowance for qualifying investments in plant and machinery from £25,000 to £250,000, which will boost much needed business capital investment.
The global race is not a sprint, but a marathon, and the Government are wise to recognise that it will be easier for businesses to run without hurdles and barriers in their way. To be blunt, if we want businesses to thrive, we need to tax them less and minimise the bureaucratic burden. The result of that approach is real sustainable growth and new employment opportunities. This is not about Thatcherite dogma; it is actually happening and it is delivering positive results, such as by enabling private sector employment growth of more than 1 million jobs since 2010. That is a great achievement for the Government—
David Rutley
They are real jobs—not public sector jobs funded by taxpayers’ money, but ongoing and sustainable private sector jobs.
Glyn Davies (Montgomeryshire) (Con)
I congratulate my hon. Friend on making a positive speech and recognising that we have a coalition Government who are determined to clear up the mess made by the previous Government. All we hear from Opposition Members is whingeing and whining, and talk of more borrowing and debt, but that would exacerbate the problems that they created.
David Rutley
I thank my hon. Friend for those comments. We may be hearing Eeyore noises from Labour Members, but at least we have now had a sense of Tigger.
David Rutley
I cannot, because Mr Deputy Speaker is giving me dagger looks, so I need to make progress and finish my speech—[Interruption.] I know him well and he is not always like that.
The Bill meets the ambitions of those who want to work hard and get on. It cuts taxes and incentivises business to create jobs and economic growth. It is a plan of action and a signpost giving a clear direction of the work yet to be done. That work will be done by this Government, and I give the Bill my full support.
Budget Resolutions and Economic Situation
David Rutley Excerpts(11 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Tobias Ellwood (Bournemouth East) (Con)
It is a pleasure to participate in this important debate.
Labour has had its moment to spell out what it would do. We heard a lot of noise yesterday, and we have heard a lot today. What we thought was Keynesian economics was actually Hayek’s economic policy, because Labour is saying “Let’s do absolutely nothing.” It is welcome news that in the coalition’s fourth Budget, following the biggest financial crisis in our history, the deficit has been reduced by one third, employment is at record levels and private sector jobs are finally replacing those in the public sector by a ratio of 6:1. It is a difficult climate out there.
David Rutley (Macclesfield) (Con)
Does my hon. Friend think that one reason why Opposition Members are so gloomy is that they have failed to notice that the International Monetary Fund growth forecast for France and Germany for this year and next is lower than that for the UK?
Mr Ellwood
My hon. Friend makes the point I was about to come on to. We are suffering from international gloom. Along with other major economies around the world, such as France, Germany, Japan and the United States, we are faring better, despite the problems of high oil and commodity prices and the frustratingly slow resolution of the eurozone crisis. That is thanks to the Government’s strategy of monetary and fiscal responsibility, along with supply-side reform.
In layman’s terms, monetary policies reflect the price the Government pay to borrow money and the total supply of money itself. It is thanks to our low interest rates that the cost of borrowing for individuals, banks and the Government is low. That helps to keep inflation low and provides the stability that investors need for confidence in the markets. On fiscal policy—how much money goes into the pot through taxes, and what comes out to influence economic activity—this Government are smaller than the previous Government. They have cut waste and are costing the taxpayer less, which is very positive. Indeed, the public sector borrowing requirement is down by a third from its post-war peak, only three years ago, of 11.2% of GDP.
There are many incentives in the Budget to help influence economic activity. I will mention just three main measures: the introduction of the £10,000 personal allowance, which essentially is a £700 tax cut for 24 million people; the new £2,000 employment allowance; and a cut in corporation tax to just 20%, which makes us one of the most competitive economies in the G20. They are all signs that Britain is open again for business.
There is not enough time to go through the other key aspects of the Budget that were mentioned in yesterday’s debate. The Help to Buy scheme, the new mortgage guarantee scheme, the cancellation of the 3p rise in fuel duty and the introduction of tax-free child care are all very welcome. I particularly welcome the £3 billion capital spending commitment and the £1.6 billion of sector-targeted funding, some of which I hope will come to my constituency of Bournemouth East, and to Dorset, which is developing an international reputation in aerospace industries and the digital economy. Indeed, it is nicknamed the silicon beach of south England.
The 0.7% GDP target for overseas development assistance spending is an historic achievement and sends an important message to the rest of the world about our lead role in the international community. Unsurprisingly, given the waste and mismanagement under the last Government, some are sceptical about how the money is being spent, but it is clear how ODA funds can be spent. It matters not who signs the cheques; what matters is what the project does, although traditionally the Department for International Development has signed them. On the modern battlefield, however, it is no longer just about defeating the enemy, but about giving the people who have been liberated the skills to look after themselves. Clearly, war fighting does not qualify for ODA funding—that would be wrong—but peacekeeping and nation-building tasks do.
Andrew Griffiths (Burton) (Con)
I recognise that time is short so I will do my level best to keep my comments as brief as possible. I speak as the Member of Parliament for Burton, the home of British brewing, and as the chairman of the all-party parliamentary beer group. It is therefore incumbent on me to put on record my thanks, and those of the brewing industry, for the Chancellor’s momentous decision yesterday to scrap the beer duty escalator and cut beer duty by 1p. We cannot underestimate the importance of the decision for brewers, for publicans and for beer drinkers across the country.
In his speech today, the shadow Chancellor dismissed the 1p cut in a bit of a flippant way, but I think that the 1,745 people who are employed in brewing and pubs in his constituency will be hugely grateful to the Chancellor, who has shown himself to be on the side of the publicans and beer drinkers of this country. The previous Chancellor of the Exchequer appeared on posters in pubs up and down the country stating that he was “barred from this pub”, because his Government had chosen to introduce the beer duty escalator, which has resulted in beer duty rising by an incredible 42% since 2008. That has contributed to the closure of many of our communities’ pubs in that period.
I am therefore delighted to support a coalition Government who have done more for brewers and pubs than any other Government for a generation. I went to the House of Commons Library yesterday and spoke to the Treasury expert. I asked him when a Chancellor had last cut the duty on beer. He replied, “Mr Griffiths, this might take some time, as it was so long ago. I shall have to go away and research it.” He came back with the answer: Derick Heathcoat-Amory was the last Chancellor to cut the duty on beer, in 1959. Someone who was just old enough to enjoy a pint of great British beer at that reduced price in 1959 would now be 72 years old.
It is important to applaud the campaign that has led to these changes. As the chairman of the all-party parliamentary beer group, I want to thank colleagues from all across the House who have supported it. Members on both sides have worked incredibly hard on behalf of their brewers, publicans and beer lovers. We all recognise the importance of the community pub and the role it plays in the heart of our constituencies. This measure provides us with a real opportunity to support those pubs.
David Rutley
I join many others in paying tribute to the great work my hon. Friend has taken forward. I received one tweet yesterday from the Wharf in Macclesfield saying this was
“a good Budget for pubs, the brewing trade and all industry”.
Has my hon. Friend received similar plaudits from people across the country?
Andrew Griffiths
I thank my hon. Friend for the support he has given to pubs and breweries as part of this campaign. I agree: I have been overwhelmed by the number of publicans, brewers and members of the Campaign for Real Ale and beer lovers who have welcomed this announcement. He quotes one brewer and I will quote another—Belinda Sutton from Elgood & Sons in Wisbech in Cambridgeshire who said:
“The result could be the saving of our brewery, as this was just what we needed to…stimulate trade in our pubs and hopefully increase production.”
That is so important: every brewery and every pub in our constituency are important employers, so it is fantastic that we can give them this boost. I am absolutely sure that when this cut is introduced on Sunday, beer drinkers across the country will be raising a glass to the Chancellor and toasting his health.
I am hugely sorry that the Economic Secretary is not in his place on the Front Bench, as we owe him a huge debt of gratitude. Within days of him becoming a Minister—I think it was his first ministerial duty—he spoke in a Backbench Business Committee debate to which many Members contributed. He said then that he was listening. He is a listening Minister who has listened on behalf of pubs and brewers across the land.
I would also like to pay tribute to CAMRA and its thousands of supporters who took part in this campaign and who participated in the mass lobby organised by Emily Ryan and Jonathan Mail to explain to Members of Parliament just how important their community pubs and great British beer are to them. I commend, too, the work of the Beer and Pub Association, which works tirelessly to build a bright future for pubs and breweries across the country.
I end my comments there. Let me just say that this is a great Budget for brewers, a great Budget for beer and a great Budget for beer drinkers in Britain.
David Rutley (Macclesfield) (Con)
I am sorry to disappoint the House, but I will not be speaking about beer—[Hon. Members: “Oh!] I said I was sorry. I will not be speaking about spirits either, but I will—
David Rutley
I will indeed lift our spirits. Given the co-operation of my hon. Friend, I will also say a little about life sciences. Let me begin, however, by joining other Government Members in welcoming a Budget which has delivered a positive response that recognises the needs of hard-working people, and which, as others have pointed out, has clearly demonstrated that the doors of British business are firmly open.
It is sometimes wondered whether “To intervene, or not to intervene” is the question when it comes to industrial policy. I believe that in normal free, competitive markets intervention should be minimal, but that, given the burden of regulation that was imposed on the British economy for 13 years by the Labour Government, the question needs to change from whether there should be intervention to how that intervention can take place effectively. For me, the answer to that question is simple: we need to flatten the barriers to growth, which is exactly what Government Members are determined to do.
We need only consider the recent experience of our northern neighbours to see how that can be achieved. Sweden has enjoyed tremendous success since the mid-1990s with an ethos of deregulation across the economy. Estonia had 2,000 enterprises in 1992; by the end of 1994, the figure had ballooned to 70,000. By 2003, an economic basket case with inflation of 1,000% in 1992 had spawned the invention of Skype. There are clear lessons to be learnt from those northern neighbours, the most fundamental being that if industrial policy is to work, there needs to be a broadly “horizontal” approach. That does not mean being laid back, but it does mean having a more laissez-faire confidence in the ability of businesses to identify and satisfy customer demand—as they are best placed to do—and providing the right foundation for enterprise to flourish across the board, rather than backing policies in the sense of picking winners. That is the course the Government have charted, and I am delighted they are sticking to it.
We have an industrial policy with a foundation that encourages enterprise across the board and, in key sectors, focuses on the removal of the roadblocks that prevent growth, rather than the line-by-line, multi-targeting Brownite plan for daily tactical interventions that we have seen in so many parts of the public sector. We want that foundation to consist of low taxes, a high skills base and deregulated, competitive markets, and those are being put in place.
The Government are making good progress. Before the Budget, we were on track to have the lowest corporation tax in the G7; now, as a result of the Budget, we are on track to have the lowest corporation tax in the G20—20%—by 2015. The new £2,000 employment allowance will help to spur growth and build on the Government’s successful record of creating jobs in the private sector: the private sector, not the public sector. In an enterprising constituency such as Macclesfield, where an unusually high proportion of the population are self-employed, reforms like those can tip the balance for sole traders, encouraging them to incorporate themselves in businesses that can grow, and for the self-employed, encouraging them to become regular employers.
Those are positive steps, and the Red Book goes further. It provides an important update on the progress the Government are making with their industrial policy, and demonstrates that they are breaking down barriers in certain sectors of industry and in certain local areas. I welcome the creation of the single local growth fund, which will be devolved to local level through local growth deals.
Some industrial sectors will always have greater prospects for growth than others. The Government’s industrial strategy, announced last autumn, identified 11 broad sectors that the Government want to support, including advanced manufacturing, creative industries and life sciences. That approach is bearing fruit in the case of life sciences. The Government’s “One Year On” review shows that deregulation is helping to reduce the time taken to set up clinical trials from 600 days to a 70-day benchmark. Those are important steps which need to be mirrored in many other sectors.
This week we were given challenging news in AstraZeneca’s restructuring strategy statement. The good news is that, according to its plans, the Macclesfield manufacturing site will be secure, retaining 1,800 jobs which will be safeguarded for years to come. However, AstraZeneca also announced changes in the research and development plant at Alderley Park. The fact that 700 jobs have been safeguarded there is important, but the R and D facilities will move to Cambridge, which has created uncertainty for the employees. I am working with AstraZeneca to ensure that there are plans to provide them with proper careers advice and the support that they need.
The next priority—a vital priority for Alderley Park, for the sub-region, for the north-west and for the UK economy—is to ensure that the site has a vibrant future. The way in which to do that, and the way in which we are committed to doing it, is to provide a bio-science park where other businesses can go to work. We are working with the Government, and I am delighted to say that we have set up a taskforce. Evidence from other sites where the experience has been similar suggests that there will be spin-out operations.
We need to harness that energy, and ensure that we secure money from the regional growth fund on an emergency basis so that we can support this vital part of the UK’s life sciences sector. I am committed to doing that and to working with the Government, and I will knock on every door to make sure we receive the support that is required.
This Budget has been a huge success for British business, and I am sure that it will lead to further successes if we break down barriers, not just in life sciences but in many other sectors.
The Economy
David Rutley Excerpts(11 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
David Rutley (Macclesfield) (Con)
There is one form of climate change that would be welcomed on both sides of the House, and that is the creation of a climate in which enterprise can thrive and flourish. The autumn statement reconfirmed that this Government are committed to ensuring that those conditions are in place and have made positive strides in that direction.
The statement builds on the sound economic platform that has been in place for some time now. The deficit has been cut by a quarter and because of the tough action that had to be taken, the cost of borrowing is at historically low levels. What is more, 1.2 million jobs have been created in the private sector—something that was not mentioned by the hon. Member for Leeds West (Rachel Reeves)—and more jobs are being created in the private sector than are being lost in the public sector. That is true in the north-west, where I live, and across the whole country.
Last week’s policy announcements were well received by businesses and it is easy to see why. There was a further reduction in corporation tax from 28% to 21% in 2014 and a rise in the additional investment allowance from £25,000 to a whopping £255,000 for two years. That shows that, under this Government, Britain is definitely open for business.
The Government’s strategy for enterprise has strong foundations, much stronger than the so-called industrial strategies that have been debated for decades. Between the end of the second world war and the 1970s, Governments in this country and France tried to pick winners only to fail spectacularly. West Germany and the reunified Germany were much more resistant to that temptation. As Sir Geoffrey Owen of the London School of Economics recently wrote:
“The German economic miracle that began in the 1950s was not the result of industrial policy, but underpinned by a broader set of policies of which the promotion of competition and openness to foreign trade were probably the most important.”
He went on to advocate a “horizontal” approach in which competition is promoted, innovation is encouraged and industrial change is positively facilitated—as this Government are doing.
Hon. Members may have noticed how Sweden, which was so bedevilled by high taxes, high spending and massive inflation in the 1980s has coped well with the current global economic challenges. Rather than picking winners, the Swedish Government, who have driven forward a sector-by-sector approach, focused on deregulation, and that has spurred on their success. They have identified ways to deregulate banking, transport, power production, telecommunications, postal services and even food retailing.
Sweden’s Anders Borg is not the most conventional of Finance Ministers. While I would not advise the Chief Secretary to follow Mr Borg’s lead in sporting a ponytail and an earring, I think we can learn from Sweden’s approach. In a recent speech, Mr Borg explained:
“There was a very, very broad-based deregulation. Today, if you go to the OECD, going for growth report, they are looking at 8 different sectors, 6 out of those…have less regulatory burden than the US. So we have gone from being one of the heaviest regulated economies of Europe to one of the least regulated when it comes to product markets.”
As a result, Sweden’s economy is going from strength to strength.
In the UK, in “The Plan for Growth” published in March 2011, the Government set out actions to clear pathways in a number of important key sectors, including advanced manufacturing, digital and creative sectors and, importantly for Macclesfield and north-east Cheshire, life sciences. Both the Macclesfield and Tatton constituencies are home to AstraZeneca’s largest operations in the UK, which account for an amazing 2% of UK exports. I am delighted that, working together with my constituency neighbour the Chancellor, Cheshire East council and AstraZeneca, we were able to secure funding from the regional growth fund to create a bioscience park at the Alderley Park site, which is a positive step for the highly skilled work force in the area and a huge priority for the local economy.
As with Sweden, deregulation is a critical step for our enterprise agenda. Sadly, under the last Government, Britain fell from fourth to 89th in the World Economic Forum’s league table for countries with the lowest burden of regulation. Their lasting legacy was not just the deficit, as it was also the burden of regulation. I am proud that, under this Government, we have been able to claw back 17 places in those rankings—but we are not complacent. The Minister of State, Department for Business, Innovation and Skills, my right hon. Friend the Member for Sevenoaks (Michael Fallon) is leading the deregulatory charge. The autumn statement has built on that momentum and taken the deregulatory agenda to a much higher level. The innovative one-in, one-out strategy is being replaced with a one-in, two-out approach from January. In the spring, the second phase of the red tape challenge will be launched. This will give businesses another chance to highlight those regulations that are holding them back from delivering more for the economy.
The Government’s continuing commitment, refreshed with the energy of a new ministerial team, will be vital in making progress in engaging Whitehall Departments in this critical task. Again, there are lessons to be learned from overseas—whether it be from New Zealand, the Netherlands or even from Bosnia. My favourite example is looking at what has been happening with the “Bulldozer” deregulation initiative in Bosnia, which was particularly progressive. After the Bosnian war, the bulldozer programme was instigated by no less than Paddy Ashdown—one of our coalition colleagues—who was serving as a high-level diplomat in Bosnia at the time. The programme identified 50 roadblocks or regulations that were holding back the economy, and changes were pushed through in 150 days. The bulldozer committee, working with local entrepreneurs and businesses prioritised the areas for reform and worked with the Government to see them through.
I think that we can learn from others who have advocated intervention on behalf of business. I am not usually favourable towards that, but I think we can take a lesson from the Bosnian bulldozer approach, breaking down barriers to business—not intervening, but breaking down barriers before breakfast, before lunch, before tea and before dinner. I am pleased that the Government are taking a clear lead in that direction.
While the present Government are actively proceeding with their strategy for enterprise, the Labour party has offered no apology for their shocking record in office, and has certainly offered no alternative. The truth is that Labour has no clear plans for the economy, which is the single biggest issue facing the current Parliament. However, we can get a sense of what life would be like under a Labour Government by observing what is going on across the channel. President Hollande’s socialist economic policy is one that the Labour party would be proud to call its own, but matters have gone from challenging to absolutely disastrous. The Economist recently described France as a
“time-bomb at the heart of Europe.”
This Government are right to take a different course, and the autumn statement is an important step on that journey. Putting the public finances in order and implementing a strategy for enterprise by breaking down barriers for business and opening the doors to new opportunities in export markets is the right approach, and I commend it to the House.
Kwasi Kwarteng (Spelthorne) (Con)
Thank you, Mr Deputy Speaker. You have not been in the Chair for the whole of the afternoon, but I am pleased to see you there now.
Clearly, we have stated our positions at the beginning of this debate. The Labour Opposition have spoken eloquently about the need for growth and Government Members have commented on the mess in our public finances that we inherited in 2010. The gravity of the situation in 2010 should not be underestimated: our deficit to GDP ratio in 2010 was higher than it had ever been in peacetime conditions. That was a function of probably the worst management of public finances that this country ever had the misfortunate to live under.
I am very pleased to follow the right hon. Member for Edinburgh South West (Mr Darling), who served at the tail end of that Administration as Chancellor of the Exchequer. To use a cricketing metaphor, he was very much like the night-watchman who is sent in when the team has collapsed to 70-8 and the light is pretty dim. He did well in trying to steady the ship, but we have to look at the damage that had been caused in the public finances before he took over his post and at what the Labour Administration did not only from 1997, but in particular from 2001 to 2007, during which time they ran a deficit in each consecutive year for seven or eight years before the crisis happened. No academic textbook and no economic school of thought thinks that it is a good idea to run a deficit when the economy is growing. In 2004, the economy was growing at 3%; it was going at full rate, jobs were being created and investment was taking place. What was the deficit then? It was 3%; even under the Maastricht criteria, the previous Government would have failed. No Keynesian in his right mind, and certainly not John Maynard Keynes himself, would have ever contemplated running a deficit of more than 3% when the economy was growing at 3%.
David Rutley
Will my hon. Friend confirm that even former Prime Minister Tony Blair felt, on reflection, that Labour was spending too much when it was in office?
Kwasi Kwarteng
Absolutely. The former Prime Minister has said that on a number of occasions. I have been on record as saying that the first Labour Administration between 1997 and 2001 was, I freely admit, a very conservative fiscal Government. As the right hon. Member for Edinburgh South West well knows, during those four years the budget was never in deficit. We ran two years of surpluses and the budget in the other years was balanced. It was only after 2001 that the disaster occurred, that the wheels spun off the car and we suffered under a profligate traditional Labour tax and spend regime. I use the phrase “tax and spend” very gingerly, because the taxation never covered the spending.
That was precisely the reason why the Government ran those deficits—to pay for their projects, to pay for greater spending. They were required to borrow money. I remember that in 2001 one of their favourite columnists, Polly Toynbee, said that Labour would have to tax more in order to spend the money. At least that was an honest position. She was suggesting that Labour should try and balance the budget at a higher level of spending. I and my colleagues might want to balance the budget at a lower rate of spending, but both Polly Toynbee and those on the Government Benches would accept is that it is a road to disaster to borrow yet more money in order to spend on grand projects or whatever utopia the Government want to build in this country. We now have the consequence of this recklessness—of Government Ministers at the time spending more and more money and running 3% deficits.
Autumn Statement
David Rutley Excerpts(11 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
I am glad that the hon. Lady welcomes the announcement of ultra-fast broadband for Brighton and Hove. As for energy, we are increasing investment in renewable energy. We have set a levy control framework for the period up to 2020, which is a longer time frame than has been set by any Government before us, and that will increase the investment in renewable energy that the hon. Lady wants to see. However, I also think that it is fair for Britain to have a mix of energy sources, and for gas to be part of that. Gas is lower in carbon than the coal-fired generation that is being phased out. We want a proper mix, and we want to do what we can to keep bills down while at the same time allowing investment in new energy infrastructure.
David Rutley (Macclesfield) (Con)
It is often said that when a challenge must be faced, two Eds are better than one. Does the Chancellor believe that that applies to economic policy?
Mr Osborne
I am not sure that they will be such close friends today after the shadow Chancellor’s response to my statement. However, we do not need to guess what the economic policy of the Leader of the Opposition and the shadow Chancellor might be, because we have lived through it. They caused the biggest boom and the biggest bust in our history, despite advising the then Chancellor at the time to say that he would abolish boom and bust.
Oral Answers to Questions
David Rutley Excerpts(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gauke
The cost of implementation of the child benefit policy will be £100 million over five years, but it will bring in £1.7 billion in the first year. I should also point out that the likelihood is that the number of people in self-assessment next year will be no higher than the number in self-assessment last year.
David Rutley (Macclesfield) (Con)
Will my hon. Friend tell the House what steps he is taking better to support small and medium-sized enterprises through the tax system?
Mr Gauke
We have taken a number of measures, including reducing the small profits rate from 22%, which it would have been, to 20%. We have also introduced measures such as seed enterprise investment schemes and small business rate relief. We have taken such measures because we recognise that small businesses will be an engine for growth for our economy and in employment.
Beer Duty Escalator
David Rutley Excerpts(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Charlotte Leslie (Bristol North West) (Con)
It is great that so many Members are in the Chamber today despite a one-line Whip. Let me begin by congratulating my hon. Friends the Members for Burton (Andrew Griffiths) and for Leeds North West (Greg Mulholland) on being such staunch campaigners. I know that there are other campaigners on the Opposition Benches.
All of us probably enjoy a pint, but why is this debate so important? It is about a bit more than a pint in the pub, although of course that is very important to a lot of us. The debate is important for several reasons. First, if we are to talk about the big society, we should recognise that the pub is at the heart of it. It is a little-known fact that pubs donate more than £120 million a year to charitable causes. That is impressive stuff. My local pub, the Bear and Rugged Staff, raised over £1,000 recently to help Lisa Fry, a lady who had tragically been diagnosed with cancer. Pubs are where people come together, they often support local sports clubs, and—another little-known fact—27% of couples first met in the pub, so I do not know what we are all doing here.
Empowering people also happens in the pub. The Bristol free school, which was one of the first free schools in the country, was started as a result of a conversation between me and some parents—guess where? In the local pub. Thank you very much, the White Lion and the Mouse. Moreover, I am sure that I am not the only Member present who, wanting to find out what is happening in the constituency, goes first of all to the pub and enjoys a nice pint at the same time. Pubs are also where discussions take place. In many ways, they are the Chamber of the real world, where there are proper debates about real things.
I have mentioned the social value and the big society value of pubs, but what about the economic value? Pubs not only donate £120 million a year to good causes but contribute £21 billion a year to the economy, and, as has already been said, each pub contributes an average of £80,000 to the local economy.
David Rutley (Macclesfield) (Con)
We are very fortunate in Macclesfield. Passionate Pubs owns pubs such as the Wharf, the Vale Inn and the Snow Goose, and there are vibrant micro-breweries such as the Storm Brewing Company, Bollington Brewing and the Wincle Beer Company. They have helped to make Macclesfield an important and distinctive destination. Does my hon. Friend agree that it is easy to underestimate the impact of such institutions on the visitor economy as well as the wider economy?
Banking Competition
David Rutley Excerpts(11 years, 10 months ago)
Westminster HallRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
David Rutley (Macclesfield) (Con)
It is a pleasure to serve under your chairmanship today, Mr Davies—the first time I have done so.
I congratulate my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) on securing the debate. She is a champion of competition in banking, which she has consistently fought for and campaigned on as a Member of Parliament.
It is great to participate in the debate, because financial services are undoubtedly an important part of our economy, which we have all discussed. The sector is vital in its own right—10% of GDP, more than 1 million employees and a contribution of £53 billion in tax to the UK Exchequer in 2009-10—so we cannot afford not to pay attention to what goes on in it. More to the point, the sector has major implications for a sustainable recovery, because if we do not have a sound banking system that is trusted by all participants in the economy, we will not see the sustained economic growth that we all want and that we all champion—on the Government Benches at least.
According to the World Bank, the UK banking sector, and in particular its assets, is one of the most concentrated banking markets in the G8—if not the most concentrated market—with the combined assets of the three largest banks comprising 88% of the market; in the US, the three largest banks comprise 37% of the market, which is a fundamental difference. That state of affairs cannot be attributed to the financial crisis, because in 1993, almost 20 years earlier, the UK still had 86% of assets tied up in the three largest banks, while the US stood on a much lower total of 21%. For a market economy, which my hon. Friends and I fully support, such a situation is clearly sub-optimal and must be addressed, and I am delighted that the Government are taking it seriously.
I am pleased to see new entrants to the market. The hon. Member for Islwyn (Chris Evans) was concerned about the lack of new entrants and the over-emphasis on a sales culture. I understand such concerns, but the fundamental approach of Metro Bank on entering the market has been about customer service, and it is encouraging to see businesses trying to take a different approach and a different market niche. Not only Metro Bank has a presence in this important market but Virgin Money, Tesco, Sainsbury’s and Asda, my old employer—yours, too, Mr Davies. Their role is increasingly important in making life more challenging for those banks that have been all too comfortable about their position in the marketplace.
Recently, The Times reported on the retail financial services sector, and I will refer to that article, because to see what has been happening is important. Tesco bank now has 6.5 million customers; it started in 1997, after buying out RBS, and in the near future intends to offer mortgages—an important step by a non-traditional bank or retail financial services operation. Marks and Spencer, with 3 million customers, will soon open bank branches in its stores—again, a chance to make a bit of a difference and to move things on. Sainsbury’s has 1.4 million customers and Asda, which I had the chance to establish in financial services, has rebranded this past week as Asda Money and is looking to launch a new credit card.
There are moves afoot therefore, and given the new depths of the lows of trust in banks and financial services, businesses such as retailers have a clear opportunity to come in with their much higher levels of brand trust and to reassure customers that they have something different to offer. I wish them success in making progress; it is not all doom and gloom on increasing competition, but we need to get behind the providers offering new opportunities for customers.
I agree with my hon. Friends the Members for Wycombe (Steve Baker) and for South Northamptonshire about the portability of accounts and increasing the switching capability. It cannot be right that inertia is the basic building block of a business model. The model has to be more dynamic. We must ensure that dynamism and competition lead to profit, not inertia, which is insulting to customers, frankly. From our own experience we all know that trying to transfer banks is an absolute nightmare—that must be addressed.
United Kingdom Financial Investments has a real opportunity to contribute to shaking up the lack of competition in financial services. The paper by the Free Enterprise Group has set out some bold, radical alternatives—characteristic of the group—and UKFI should look carefully at how it disentangles taxpayers from the Lloyds Banking Group and RBS, to sell off business units and branches to enable the more competitive financial services marketplace that we all want and shout out for.
We also need a stronger foundation to enable that competitive environment to thrive and flourish, and it is worth while pointing out how fast the Government are moving on regulation to help put that into place. I applaud the Government for introducing the Financial Services Bill—it was an honour to be on the Committee—which will be critical to restoring accountability to the Bank of England and away from the completely failed tripartite model that was found so wanting in the previous crisis.
The Government also intend to introduce a banking reform Bill, on which they should be congratulated. Others will want it to go further, but it is important that the Bill will provide for the ring-fencing of investment banks, separating them from the retail banking functions in the same organisation. The LIBOR-fixing scandal is only further evidence for the importance of the proposed legislation, which has the potential to be a vehicle for change. The proposed parliamentary inquiry, which we could call the Tyrie commission, can use the Bill as a vehicle to bring about any recommendations, which are so urgently needed. I hope that my colleagues on the Treasury Committee will have a chance to play their role in that commission, to help restore the trust needed in the financial services sector.
Regulation alone will not help bring about the foundations for genuinely competitive and trusted markets. We need to look at the shareholders, who have been too absent in the past. They need to speak out. The shareholder spring of increased shareholder activism is to be applauded, and it was refreshing to see BlackRock, one of the major shareholders in Barclays, speak out quickly and urgently during the recent problems with leadership in the bank. We need to see more of that. Shareholders must not duck their responsibilities in recalculating and rebalancing reward for results. In my opinion, those excessive bonuses are discrediting the market and the trust that we have in our financial institutions.
Having said all that, Members present might find it odd for me to say that I agree with Bob. That is, I agree with something that Bob said on the “Today” programme business lecture in November 2011:
“Culture is difficult to define, I think it’s even more difficult to mandate—but for me the evidence of culture is how people behave when no-one is watching.”
Sadly, while thousands if not millions of our constituents are working professionally when no one is watching, or even when their customers are watching, the leaders of our banks—recently, of Barclays in particular—have not displayed those virtues. Ultimately, real leadership will be required, and I wish Barclays well in finding a successor to Bob Diamond—an individual who will help to create that culture.
As we proceed with many of the ideas we have discussed today—to put in place the regulatory foundations, proper shareholder activism and the right culture and leadership—we stand a chance to have a financial sector that we are proud of. We will only achieve that, however, when we have proper levels of competition. I support the efforts of my hon. Friend the Member for South Northamptonshire and urge the Minister to press forward with every effort and his strength of character to enable us to see the new measures put in place so that we have true competition in the financial services and banking sector.