Economic Environment: Growth and Jobs

Lord Leigh of Hurley Excerpts

Thursday 11th July 2019 Lords Chamber

[Lord Leigh of Hurley (Con)]

My Lords, I too congratulate my noble friend Lady Neville-Rolfe on securing this debate. As President Ronald Reagan once said, you cannot be for big government, big taxes and big bureaucracy and still be for the little guy. It is exactly because we on this side of the House are for the little guy that our approach to business growth and tax is what it is.

As your Lordships discussed recently in an employment debate that I had the honour to lead, we know that the current low levels of tax are effective. Since 2010 our economy has grown by 18% and there are 1.2 million more businesses, with unemployment down by over 1 million in the same period. In fact, the UK unemployment rate is, at 3.8%, at its lowest since October 1974. We have 32.7 million people aged over 16 in employment, which again is a record since records began in 1971. As there are more people in work today than ever before and unemployment is at a record low, this means fewer workless households. Worklessness is the number one cause of poverty. No, it is not austerity or Brexit; it is households where there are no earners. That is what jobs do for households and why these numbers, as a direct result of the economic policies of this Government, should give us cheer.

We know that every Labour Government have left office with worse employment figures than they inherited from their Conservative predecessor; one has to ask why. Other than perhaps simple competence, one answer must be the levels of taxation. Let us look closely at some impacts of taxation. Our starting point should be that this is not the Government’s money, so it is not a question of tax giveaways; it is the people’s money. When a Government taxes they should tread extremely carefully; if we damage job creation, the bill comes right back to us through the benefits system.

This Government have been trending in the low-tax direction for some time now and the job statistics back this up. Labour has gone on record as wanting to increase taxation, not least by withdrawing what it calls loopholes and which everyone else sees as highly successful incentives to encourage new businesses to start and entrepreneurs to succeed. One jests but, to take a good example, entrepreneur’s relief has been specifically targeted by Labour. The latest HMRC figures show that it had 40,000 claimants last year, costing some £2.4 billion. I say “costing”, but that is to completely misunderstand the purpose and nature of this and other reliefs. Labour and others will claim that it is simply to benefit the rich, but it is of course available only to entrepreneurs such as me and the noble Lord, Lord Haskel.

To fully declare my interests, I started a business employing one person with my own money; eventually, when we had 45 employees, I took advantage of that relief. Like other entrepreneurs, I would like to do that again some day as I am prepared to take that risk, but not if my capital gain would be taxed at the same level as the salary I could otherwise obtain. Take that relief away and entrepreneurs like me will choose to start businesses in other jurisdictions more favourable to entrepreneurs.

Likewise, as we have heard, starting up businesses is central to our long-term success. The current EIS and SEIS schemes are excellent but too restrictive. Those restrictions come mainly from the EU, which regards these schemes as state aid. Can my noble friend the Minister assure the House that once we are out of the EU, he and his colleagues will look at these restrictions to streamline them, as this will lead to a dramatic uptick in new businesses?

As tax rates have been kept to modest rates, the total tax take has gone up from just over £400 billion in 2010 to £623 billion last year, so the economy flourishes in such circumstances.

I shall pick up the point of my noble friend Lady Neville-Rolfe about the high street, which we all know has been hard hit. Retail has changed beyond recognition. Many online platforms, such as Amazon, eBay and, more recently, Alibaba have facilitated an avalanche of low-cost, often dangerous, non-compliant imports and, more concerningly for us, wide abuse of the VAT system. Welcome measures have been adopted to date, but they do not go far enough. Despite the powers given to HMRC to take action, there are platforms such as Amazon where Chinese sellers with no VAT number sell products. Earlier this week, I was given the details of a Chinese company with no VAT number, despite HMRC saying that is not possible. This company was reported to Amazon in early June, yet is still openly trading with no VAT number. There are many others I could cite, so the current measures are not working.

This is obviously why the US, Australia, India and some European countries are now imposing the duty of collecting VAT on those platforms, correctly labelling them facilitators. Every month, a US state introduces a new marketplace facilitator tax, and the tax take goes up because Amazon and eBay are in the best place to collect that tax. This approach should be adopted in the UK if UK online retailers, let alone the high street, are to survive the huge and rapid changes in the retail landscape that would otherwise lead to massive job losses. Only the introduction of new, specific, targeted legislation will create an environment in which this new retail model allows the high street to survive.

But this criticism pales in comparison to that which I level at some commentators and some members of the party opposite, whose entire approach to taxation would do nothing to encourage either business growth or job creation. It would achieve the reverse. As we know, the shadow Chancellor described corporations as the real enemy. “Corporation” is a convenient pejorative; he is really describing employers and job creators. It is now Labour Party policy to raise corporation tax by seven percentage points. Economic commentators reckon that will cost 160,000 jobs. I ask: if these taxes hurt the little guy—and they will—whose side is Labour really on? The Opposition are fond of saying that they are for the many and not the few but, as far as I can see, unless they are referring to the many government quangos they want to start, the beneficiaries of these disastrous policies would not be UK jobs.

Frankly, I find some of the ideas emanating from the left petrifying. In the recent book People Get Ready! Preparing for a Corbyn Government, Christine Berry and Joe Guinan, who are well known to be close to Mr McDonnell, advocate capital controls, the nationalisation of private pensions and the banks, and the replacement of the Governor of the Bank of England and his senior staff, together with some Permanent Secretaries, with people more sympathetic to the current Labour leader’s views. There is a real risk that the Labour Party will be run by those who do not believe in a capitalist system. They believe that businesses and the economy should be run purely to maximise jobs, and that the return on capital should not be the determiner of the investment.

Fortunately, all Members of this House, I hope, know that this will lead to fewer jobs, more poverty, less tax revenue and poor infrastructure. Thankfully, this Government have remembered another of President Reagan’s mantras,

“whenever we lower the tax rates, our entire nation is better off”.

This is truly a policy for the many and not the few, and one to which I am glad the Government continue to subscribe.

Takeovers (Amendment) (EU Exit) Regulations 2019

Lord Leigh of Hurley Excerpts

Tuesday 15th January 2019 Lords Chamber

In conclusion, the Minister said that these regulations would have a negligible impact on the British economy. However, the notes state clearly that there will be an impact on 25 EEA companies and 10 UK companies. While everything averages itself out, that does not help you if you are on the downside of the averaging equation. Can the Minister give us some sense of the scope of the impact on those companies rather than on the overall economy?

[Lord Leigh of Hurley (Con)]

My Lords, I rise partly in response to the noble Lord, Lord Fox, who I was worried at one point was about to decimate the industry from which I have made a modest living for some years—albeit in the private sector rather than in the public sector. I declare my interests as set out in the register and that some 10 years ago I sat on the appeal committee of the Takeover Panel.

The Takeover Panel has been a remarkable success. The way in which it resolves difficulties and issues instantaneously without litigation is envied around the world. If it did not exist, we would most certainly seek to create it. Everything that can be done to ensure its effectiveness must be applauded, including this statutory instrument.

My question to the Minister is about shared jurisdiction. Because so many companies want to be covered by the Takeover Panel, and indeed cannot be included in various listings unless they are covered by it and thus want to have more shareholders invest in them, does this mean that companies which at the moment are not satisfying the residency test will move their business to the UK to ensure that they do cover the residency test, thereby bringing more employment and more business to the United Kingdom?

[Lord Stevenson of Balmacara (Lab)]

My Lords, I will pick up on a couple of points raised by the noble Lord, Lord Fox, and respond in part to some of the points made by the Minister in his introduction of this memorandum, about which we have very little of substance to complain because it does what it says it is going to do on the tin, as they say.

I first reinforce the wider context, which—although I think it sent shivers through a number of those sitting opposite me—we will have to return to before too long in one context or another. The arrangements under which company takeovers and mergers are taken are complex. This is bedevilled by the fact that some are statutory and some not. The role of the statutory bodies does not always fit perfectly with those of the listing arrangements under the Stock Exchange rules. The problems bedevilling British industry, which are too well known to need rehearsing here—short-termism and often acting without regard to national interest—have been raised by the Government over a number of years, but we still do not have their final conclusion or decisions, and we await them with some interest.

Having said that, this SI has similarities with a number we discussed in previous weeks. Only yesterday we talked about intellectual property. I am struck by the difference in approach taken by the department in this SI on takeovers and those we discussed yesterday on intellectual property, patents and trademarks. Does the Minister agree that one of the underlying themes of the debate yesterday on intellectual property was what appeared to be a fairly clear steer by the department that it wished to bring into play regulations that would future-proof discussions that may emerge should there be some form of deal or, even if there is not a deal, some sort of discussions and debates about how the country would wish to engage with partners in the EU on intellectual property, trademarks and patents? Is he struck, as I am, by the fact that the asymmetric approach taken yesterday in those SIs is not being picked up today?

The issue here is whether there should be some form of joint supervision and some mutual recognition of arrangements and structures. Companies increasingly operate across borders. It may not always be easy to identify precisely where the headquarters are. Indeed, some companies have made a virtue of having more than one headquartered operation in a number of countries. Simply doing it on a numerical basis of where securities are listed is not going to get to the same conclusion, as the SI admits. So we have a potential problem, in a sense not dissimilar to that addressed in the SIs we dealt with yesterday, which could perhaps provide an opportunity for further discussion. Does he therefore agree that this SI, as we have it before us, does not meet the asymmetry test in the terms we discussed?

On a slightly different line, consultation was raised extensively and has been raised in all these EU exit regulations. I can understand why the Minister will respond by saying that the consultation was appropriate for the circumstances. But in this case the only consultation I can see mentioned is with the Takeover Panel itself. There has been no attempt to try to look out to a wider interest—for example, to consumer interests, trade union interests or employee interests more directly—in the way these operations take place. There is no reference to the CBI or the FSB. I am a bit surprised about that, and I wonder if he would like to comment on whether he felt the department had the best advice possible in circumstances where so few people were consulted.

My final point is the question raised earlier this evening, which is relevant again now. There is nothing in the SI itself or the Explanatory Memorandum to confirm whether this statutory instrument will continue in the event that there is no no deal. As mentioned in the last debate, I wonder where the poison pill lies in this. What are the circumstances under which elements of this SI will fall away, and how will that be achieved? Does it require a further debate and discussion? Does it require a new statutory instrument? I would be grateful if we could be put in the picture. It would be interesting, if somewhat frustrating, to feel that all the effort we are putting into these statutory instruments today is simply a rehearsal for going back and redoing them should no no deal take place. We should presumably know in about 20 minutes whether that is likely to be the case.

In conclusion, it may be that elements of this SI would continue to any deal scenario. The Secondary Legislation Scrutiny Committee pointed this out on another SI that we will discuss shortly. I wonder if that is the case here and, if so, if the Minister could identify which elements of this would continue in any future discussions and negotiations.

Small Businesses: Late Payments

Lord Leigh of Hurley Excerpts

Monday 11th September 2017 Lords Chamber

[Lord Prior of Brampton]

My Lords, there is a natural reluctance for any Government to get in between supplier and customer in commercial relationships. If there is a problem, it is much better if it can be sorted out. As my noble friend Lord Hamilton pointed out, there are ways of getting redress. I am not sure what the figures are, but I imagine that, going back 30 years, you would find that the average number of days outstanding for commercial debts has come down considerably.

[Lord Leigh of Hurley (Con)]

Does the Minister agree that part of the problem is that the SME community is underbanked? Nearly half are permanent non-borrowers and 90% of the SMEs which do borrow do so from the big four banks. Surely the answer to the credit problem is further steps like those that the Government have taken in establishing the British Business Bank and encouraging the growth of alternative finance. I declare my interests to your Lordships’ House.

[Lord Prior of Brampton]

My Lords, the British Business Bank is not a commercial lender in the way that Barclays or NatWest is. Alternative sources of finance, be it equity or quasi-equity, and making smaller companies’ balance sheets stronger are clearly a good way forward.

Queen’s Speech

Lord Leigh of Hurley Excerpts

Monday 26th June 2017 Lords Chamber

[Lord Leigh of Hurley (Con)]

My Lords, it is always an honour to speak in such an auspicious debate and at a crucial juncture, having heard two excellent maiden speeches. I welcome my noble friend Lord Callanan to his new position.

Even though it did not fare as well with voters as we on this side of the House had hoped, there was much in the Conservative Party’s election manifesto to be commended, and we must hope that some of it, as appears to be the case from the Address, will be carried forward in legislation. I am reminded of President Truman, who said “Herbert Hoover once ran on the slogan, Two cars in every garage. The Republican this year is running on the slogan Two families in every garage.” It did not quite go as expected but we have some significant proposals in the manifesto, beginning of course with Brexit.

I have spoken before in this Chamber about the importance of international trade and the opportunity that Brexit will bring to set our own approach and pursue our own bilateral deals. It is worth reminding noble Lords again that being part of the EU bloc has meant that, to date, free trade deals struck with third countries have not necessarily been designed with Britain’s economy in mind. It is to be welcomed that the Address indicates that there will be a trade Bill, meaning that we will ultimately leave the customs union and strike out on our own, even if, as the Chancellor suggests—and even as a Brexiteer, I agree with him—there may need to be a transitional period inside the customs union.

Elsewhere, and closer to my own patch—I refer your Lordships to my interests listed in the register—I want to touch on corporate finance and the importance of ensuring that growing businesses have access to the capital they need. This should begin with announcing a new mandate for the British Business Bank to give it more capacity to invest in the UK through venture capital.

Similarly, I believe that it is not too early to consider how we might plan to make more of EIS and VCTs to help them finance larger companies. As your Lordships may be aware, the limit is currently £15 million, which of course is a restriction due to European state aid rules. I am not sure where the national productivity fund and promise to help SMEs win more government contracts, as in the Conservative manifesto, went in the Queen’s Speech. Perhaps my noble friend the Minister can assure us that they will be kept in the Government’s plans. Gone too are the corporate governance and executive pay restrictions and the inhibitions on FDI by changing the current takeover rules. This is welcome and, I believe, marks a turning point.

As my noble friend Lady Rock said, government is now listening to the voice of business, which frankly, as Luke Johnson recently wrote in the Sunday Times business section, needs to be less timid and more forthright. The business community has a responsibility to stand up and explain to all its stakeholders the devastation to the economy that a Labour Party Queen’s Speech would have wrought. It promised unaffordable borrowing, crude executive pay caps, trashing the flexible labour market, nationalisation of key industries at unspecified cost and increasing corporate tax, among many other measures, which, all the evidence suggests, by increasing the rate, would have reduced the tax take. Business has a right to be heard and an obligation to speak up. Neither has happened recently; thus, big business is currently considering making the easy move overseas if a change of Government were to arise. SMEs are also petrified of this eventuality and all businesses look to this Government for assurances that they are valued as a key contributor to our political economy.

There is some light ahead. I look forward to the findings from Sir Damon Buffini’s review into patient capital. I hope he finds creative ways to encourage pension funds to invest in venture capital. Elsewhere in the manifesto and the Address we continue to pursue regulation that ensures good and fair competition in markets, not least in energy. Ensuring that markets work for consumers is quintessentially Tory and something we on this side of the House should never lose sight of. We must keep up with corporate tax reductions as a clear signal to business that it continues to be welcome here.

In short, this is of course an Address that rightly focuses on Brexit, and the decision to extend Parliament to a two-year Session is wholly justified. I hope noble Lords will seek to work across party divides to ensure legislation is passed that enhances our current very competitive position, which is in part due to our low taxes and our flexible labour market. We need to strive to help existing and aspiring entrepreneurs to create wealth for all UK citizens. We have a Government who are, as my noble friend Lord Flight said, spending more not less, who are cutting the deficit, and who have seen the highest employment rates and fastest growth rates of any comparable country in the world. How is that? It is because they have a vibrant and entrepreneurial business community.

I look forward to that energy coming back into government to help our economy with legislation focused on ensuring business, and thus economic, success. We have shown we can do it; let us not stop now.