Queen’s Speech

Lord Leigh of Hurley Excerpts

Thursday 4th June 2015 Lords Chamber

[Lord Leigh of Hurley (Con)]

My Lords, I am delighted to be speaking today on the Queen’s Speech debate on business and the economy, and declare all my business interests as in the register. The noble Lord, Lord Teverson, will be pleased to note that most of my remarks focus on middle-sized businesses.

I am delighted to be speaking, not least because it could have all been so very different. Instead of a Government who recognise the role that business plays in our economy and our communities, we could have had one who saw business as inherently bad; one seeking to split businesses up into producers and predators and pit large businesses against small; a Government whose principal role was perceived as regulating rather than enabling businesses to excel. I am thankful that those of us in business do not have to contend with the radical proposals made by the party opposite, such as the extraordinary suggestion to force business owners to give employees first dibs on buying a business put up for sale by its owners, or the proposal mooted by the leader at the time for compulsory work councils for businesses employing over 49 people. I am thankful that we do not have to contend with a Government intervening on pricing or with other anti-business measures, particularly the idea of greater taxation on medium and larger businesses, which would be to the detriment of small businesses. Those of us on this side of the House who understand aspiration know that that aspiration applies equally in business. However, I will leave it to the party opposite to explain those proposals and confirm that it no longer supports them.

As the Minister knows, this does not mean that there are not challenges ahead and important issues that need to be addressed by this Government. I would like to run through just a few of these that I hope might be picked up in the legislation introduced by the gracious Speech.

First, we need to keep our foot to the floor in encouraging entrepreneurship and making sure that the UK is seen as the place to start a business and grow it; otherwise, the momentum gained in the last Parliament could stall. One way to do this is to liberalise the entrepreneurs’ relief, which, to their credit, was brought in by the last Labour Government. Currently, a 5% minimum shareholding is required to be eligible for that relief. This discriminates against smaller shareholders and distorts economic activity. Indeed, I have seen one company recently refuse to take in fresh equity because it would dilute certain shareholders below 5%. The employment test for that relief should be scrapped. Business mentors, angel investors and academics who invest not just capital but time and advice should not be prejudiced against being eligible for that relief.

Specifically, the absurd lifetime cap of £10 million should be abolished. We are talking about creating a market for the world’s most ambitious entrepreneurs, who want to start not just one business but many, some of which will be global titans. Scrapping the limit will encourage them to do this in the UK.

To further support entrepreneurship and the growth of companies, I am delighted to see the inclusion in the Queen’s Speech of the enterprise Bill, promising as it does to cut down on red tape and, as we have heard, saving businesses £10 billion in this Parliament. I was a member of the DTI—as it was it then—deregulation task force in 1996 and the area that I focused on, as it happens, was business rates. I am therefore delighted to hear that this matter is finally going to be addressed and use this opportunity to welcome to the House the noble Lord, Lord O’Neill of Gatley, whose appointment is welcomed not just here but by the business community and the financial community worldwide as recognition of the importance attributed to this area by this Government. I am also delighted that my noble friend Lord Maude of Horsham, who created the DTI deregulation task force, will be at the forefront of BIS and will, with the Minister, continue our efforts to spread the wings of UK business still further.

In addition to cutting red tape, the Bill should enforce greater transparency with respect to regulators to make sure that they comply with their statutory obligations. I want to emphasise that the reach of the Bill must extend to the financial services, as I am sure that the noble Lord, Lord O’Neill, will recognise, and in particular to the FCA. After a financial crisis such as we have had, it is vital that the regulator acts to restore trust in what is still a very important industry in the UK, yet I am increasingly concerned that the FCA is pursuing an agenda that, at least in respect of smaller firms, is lacking in transparency and accountability. Decisions made by an ombudsman or individual within the FCA can have extremely wide implications and affect the availability of financial products to the detriment of both consumer and provider. I ask the Minister to ensure that the enterprise Bill looks at this area, which is threatening growth in the UK’s financial services industry.

I have expressed concern in this House in the past that insolvency practitioners become administrators. I hope that this will be addressed. I would also like to lend my support to the trade unions Bill. To improve business confidence further, our labour laws must work in the interests of employers and employees alike, not the trade union bosses. Introducing a 50% minimum voter turnout threshold for strike action is therefore fair and proportionate. I accept the assertion made by the noble Lord, Lord Mendelsohn, that he is not personally financed by unions, but others are.

Having just come through a credit crunch, we need to look again at the supply of business finance in our economy, so hats off to the Government for creating the British Business Bank and the business growth fund, mainly on the equity side, but we should be concerned about the return of “covenant-light” lending from the banks and, specifically, from debt funds. Some of these covenant-light loans are originated on the assumption that if they turn bad they can later be offloaded to vulture funds without any cost to the debt providers. This is bad news for the borrower. It is far better to make sure that the terms of the loans do not allow their sale and are more responsible in the first place. This is crucial for financial stability. We need to learn from 2007-08 that covenant-light loans will inevitably lead to reckless borrowing. I am sorry to advise your Lordships’ House that such loans are back in the market. I therefore urge the Treasury and the Bank of England to revisit controls over covenant-light lending with some urgency. I at this point express my great delight that the noble Lord, Lord King of Lothbury, a world expert on this matter and to whom this country owes so much, has made his maiden speech today.

Likewise, it is time to take a serious look at tightening the rules on tax deductibility of debt interest, because what we have now is simply an incentive to load debt on to the balance sheet of companies. This is not in the interests of the long-term viability of the businesses concerned or of the country as a whole. With the OECD looking at this issue, in a piece of work championed by the Prime Minister no less, it is time for the UK to come in from the cold and bring its approach more into line with the emerging global consensus on debt relief, where at least deductions are limited.

Therefore, there is much still to be done. One thing we can be sure of is that the election result and the Queen’s Speech that has followed are undeniably good news for business and the UK economy. I believe that the growth that we have enjoyed recently will continue unabated and we should be proud that Britain has shown the way in how to run a competitive economy that benefits all its people, businesses and workers alike. Long may this continue.