Economic Environment: Growth and Jobs

Lord Suri Excerpts

Thursday 11th July 2019 Lords Chamber

[Lord Suri (Con)]

My Lords, I start by thanking my noble friend for securing the time for this debate. The tax system is a tricky thing. A former Chancellor of the Exchequer once described changing tax rates or introducing new taxes as pulling a piece of string tied on to five levers, with no guarantee of which would move or at what time. But we can look at the picture as a whole and note some long-term trends that point to where we could do better.

When I first came to this country, the tax burden ran at close to 40%. Lady Thatcher, formerly of this and the other place, got that down to 32%. But since that excellent progress was first made, the burden has been allowed to creep up, quietly but consistently. The TaxPayers’ Alliance has calculated that the tax burden is as high this fiscal year as in 1969-70. Put bluntly, we are paying more than ever in tax and struggling to eke enough out of existing taxes to reach our goals in matters such as infrastructure, the health service or social care.

But we can fix these issues by taking a proactive approach to reordering taxation. Take corporation tax, which is charged on profits. Out of profits, we pay workers for their labour and suppliers for their goods. Out of profits comes the reinvestment that drives productivity. Even if profits are put away in a bank, they are recirculated by lending. Profits drive growth, investment and lending. I am of course glad that corporation taxes have dropped steadily under this Government, but I would like to see them fall far more steeply. Lower corporation tax has actually boosted the tax take considerably. Will the Minister reiterate the Government’s commitment to further lower corporation tax and keep our rate at the lowest in the G7?

We should not shy away from radical solutions, either. The UK has struggled with weak productivity growth over the past decade, and the key to boosting productivity is boosting investment. It has long been recognised as a matter of sound accountancy that ongoing expenses should be deductible. But for investments that run through the long term, such as new plants, buildings or machines, companies can only deduct on a fractional basis. Because investments run down over the years, and inflation and interest charges reduce the value of assets, companies can recover at best a fraction of their investment, and almost never all of it. This matters, since investment in the long term is discouraged, as companies see it as a long-term cost. Full expensing is a tweak to the system. It allows companies to deduct those investments straightaway. This matters a great deal, as it provides a substantial incentive to invest, rather than hold back and spend one’s money or available loans elsewhere.

A 2017 study by Eric Ohrn looked at the difference between states in the USA that allowed full expensing and those that did not. Those that did increased investment by 17.5% and grew wages by 2.5%. Five years thereafter, the states that allowed full expensing had 10.5% higher productivity than those that did not. Full expensing would also allow the Government to pick asset classes to encourage, which may be useful as part of the industrial strategy. Will the Minister consider reviewing the evidence in favour of full expensing?

Artificial Intelligence (Select Committee Report)

Lord Suri Excerpts

Monday 19th November 2018 Lords Chamber

[Lord Suri (Con)]

My Lords, we have become used to seeing artificial intelligence as the enemy. Representations in popular culture have not helped in this. From “The Terminator” to the “Avengers” films, AI is presented as getting out of control and surpassing its creators. Authoritarian leaders seem obsessed with harnessing AI to bolster their military defences. Xi Jinping has pledged to become equal with the US in artificial intelligence by 2020 and overtake it by 2025. Vladimir Putin said last year that whichever country achieved dominance in AI would come to dominate global affairs. The combination of these threats, unknowns and challenges has come to fix in the public mind a mistrust of AI. I hope that this salient report and some of its recommendations can create a more positive image.

The uses of AI go far beyond military technology. Like the information revolution, AI is poised to sweep all before it and revolutionise working. This requires deep thinking and a proper strategy to cope with the loss of jobs. Many jobs can be created from AI, and the UK has the potential to become a global leader, but we must grasp the nettle as soon as possible. One of the biggest problems with Brexit is that it has swallowed up this Parliament and looks to swallow up the next one too. Germany has a full strategy in place for dealing with this new revolution while we have only just put ours into place. The Secretary of State for BEIS has made some good speeches but we need a dedicated Minister to really drive this package through, as with the industrial strategy.

Happily, we start from a position of strength. The reputation of our dedicated Technology and Construction Court and the flexibility of the common law have made the UK a regulatory leader, even if the legislative input has been slighter than might have been expected. Furthermore, our world-class universities have continued to churn out talented graduates who can attract existing firms and start them up themselves. AI is also one of the sectors that has spread wealth around the UK. AI firms are thriving in Leeds, Glasgow, Manchester and many other places without feeling the urge to clump in London.

One of the most significant threats I foresee is a fall in the number of people permitted to come to the UK to work in AI. More than almost any other sector, tech firms rely heavily on the ability to draw in talent from overseas. Post Brexit, our immigration policy must be totally focused on quality; AI represents unparalleled potential gains. The report shows that it could add an additional £630 billion to the economy by 2035. That is not an opportunity to pass up. We must be clear that those coming to work in AI are an enormous asset and we should be happy to welcome them.

The Government can also do more in their own affairs. In total, the Government produce more data than any other UK institution. When she was at Defra, the current Chief Secretary to the Treasury spearheaded a policy to release all its data in an open and machine-readable format. This was a stunning success and must be emulated across government. Obviously some sectors are more sensitive than others but, frankly, departments have a tendency to silo their data and not let private firms access it for free. We must look to ourselves first and do what we can to encourage domestic industry.

Science and Innovation Strategy

Lord Suri Excerpts

Monday 23rd October 2017 Lords Chamber

[Lord Suri (Con)]

My Lords, it has been my consistent position that throughout the Brexit process, there must be a clear recognition of the importance of economies of scale for our science and technology sectors. The nature of these industries means they stretch across borders to spur innovation. I thank the noble Lord, Lord Patel, for introducing this debate, and my noble friend Lord Prior for responding. I have not heard much about the industrial strategy since the last election, but I hope it includes an appreciation of this point.

I talked about wings in the last speech I made here, and I will reiterate the point. Airbus can compete with Boeing on a global scale only because it is a truly international endeavour. Had France, West Germany and the UK all attempted to build their own companies, they would have failed, as they lacked the continental leverage of the United States. Together, the idea took off and the manufacture of the planes is spread all across Europe. Britain specialises in the wings, which have been tremendously profitable, supported good engineering jobs and built up our expertise. We even now make the wings for Bombardier, whose tariff troubles appear to be coming to a sensible conclusion, as the Minister will no doubt confirm.

Noble Lords will know that high-tech industries with long payback periods and research-intense development are well supported by the EU. Embedded in the agencies and other bodies are services that bring together scientists, researchers and engineers so that nations can together punch above their weight: Euratom, Horizon 2020, Erasmus, the ESA—I could go on. Collaboration is king if we want to compete against titans such as China or the United States, so some of the dogma I see that prevents us safeguarding that frustrates me.

The row over Euratom made very little sense. There is no issue with allowing limited oversight by the European Court of Justice on these matters. This is not social policy, or fundamental fiscal or economic policy. Complex matters of research funding and collaboration will always need an arbitration body. I understand the frustration of some leavers who argue that the ECJ is an interfering and meddling court. In some ways they are correct, but in this area the ECJ seems to be fair-minded and reasonable. If the cost of continued participation is submitting to that court and a high entry fee, I think that fair enough. I support Brexit and see huge benefits, but I find it difficult to believe that any Brexiteers voted to see less science and technology co-operation, and to make ourselves poorer as a result.

This is particularly important for me because I see our post-Brexit future as a country that produces a higher grade of goods, and with a primarily service-based economy. The implications of cutting ourselves off from EU schemes would be disastrous for our prospects. Biotechnology, one of our blooming new growth markets, would be hammered, and swathes of expertise and capital would move to more hospitable places. Lowering regulations or taxes cannot compensate for access to these schemes. Such beggar-thy-neighbour policies would also remove good will from our allies. Will the Minister confirm that he will seek to remain a member of the programmes that I have already discussed—the ESA, Euratom and Erasmus?