Policy for Growth

Mark Prisk Excerpts

Thursday 11th November 2010 Commons Chamber

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

May I congratulate my right hon. Friend the Member for Wokingham (Mr Redwood) not only on securing the debate, but on being generous enough to be concise in his remarks? I can see that I will have to join the fan club for those who enjoy his website. I shall try to have a look at it later this evening. We have heard from more than 30 speakers today, and despite the absence of our friends in the media, it has shown that the House is alive and well, and very keen to ensure that there is a cross-party debate on this crucial subject. Indeed, not only did we get the views of 30 Members, but I also appear to have got the detailed views of a barber in Bedford. I suspect I will not be going there for the weekend for that particular support and advice.

I shall now move to the centre of the debate. Hon. Members will appreciate that in order to allow my right hon. Friend to deliver the last few words, I will be unable to address all the issues raised by my 30 colleagues.

Returning the UK economy to balanced and sustainable growth is the overriding ambition of the coalition Government, but to achieve this we need a different model of economic growth—one that leaves behind the old reliance on spiralling Government spending, a handful of economic sectors and debt-fuelled consumption. In its place, we must ensure that we build an economy that is rooted in higher levels of business investment, more exports and a strong manufacturing base. As a number of hon. Members have said—including my hon. Friends the Members for Watford (Richard Harrington), for Battersea (Jane Ellison) and for Stafford (Jeremy Lefroy)—economic growth will be led by the private sector and entrepreneurs, not by the Government. However, the way in which the Government tax, spend and regulate has an impact on businesses and their ability to compete at home and abroad. We therefore have a responsibility to ensure that we create the best possible environment in which they can grow and flourish.

When this Government took office, the most urgent task that we faced was to restore macro-economic stability to the UK economy. A decade-long credit binge had left us with a record public sector deficit, leaving households and businesses perilously exposed, so that when the credit crunch came, Britain was especially vulnerable. The previous Government let people think that there were no consequences to unsustainable borrowing. Their attitude to the deficit led the way, so that by the end of the last financial year, £1 in every £4 that the Government spent was borrowed money. Thus, if we had done nothing about the problem and followed the advice of the previous Government, by the end of this Parliament we would be paying £70 billion in debt interest. That is more than we spend on either schools or defence. Without stability, the economy simply cannot function properly, let alone grow.

Let me turn to some of the issues that hon. Members have raised in this debate, and in particular those concerning small and medium-sized businesses, the tax system and the pressures and problems of regulation. The first point, which was raised by a number of Members, including my hon. Friend the Member for North West Leicestershire (Andrew Bridgen), was the fact that the tax regime is strangling innovation. The UK tax regime has become increasingly complex and burdensome. After 13 years of a Labour Government, we now have the world’s longest tax code. That is why we have put reforming the tax system, making it simpler and more predictable, at the forefront of our plans.

The issue of improving access to finance has been raised by many Members in this debate, including my hon. Friends the Members for Northampton South (Mr Binley) and for East Surrey (Mr Gyimah), and the hon. Member for Copeland (Mr Reed). We recognise that some viable businesses—especially small businesses—are struggling to finance investment and expansion. Unblocking the flow of credit and increasing the availability of debt and equity finance, as mentioned by a number of hon. Members, is a priority. Let me make it clear that the industry’s recent commitments to finance the economic recovery—commitments made through the British Bankers Association—are welcome. The proposals include a new and revised lending code for small businesses, and a new appeals process when finance is declined. Both are welcome. The BBA has also proposed creating a £1.5 billion business growth fund to provide flexible equity finance for established businesses with good growth prospects.

However, let me say this to hon. Members—and, therefore, to the businesses in their constituencies and the banks that should be working for them. Where unreasonable behaviour is shown we will challenge those banks, and we will do so vigorously. It is extremely important to ensure that we do that. However, a key part of the solution lies also in finding more diverse sources of finance, and greater competition. My hon. Friend the Member for Stourbridge (Margot James) rightly pointed out that if we ensure a wider range of choices for small businesses, that will be important in the medium and longer term. The Independent Commission on Banking is looking at those issues, and it will report next spring.

In the meantime, the Government are taking action. We are extending the enterprise finance guarantee scheme until 2015, unlocking up to £2 billion of additional lending over the next four years. I note the remarks of my hon. Friend the Member for Hove (Mike Weatherley), and I ask him to keep me closely informed if there is any evidence that a sector is being deliberately discriminated against.

We are also increasing the enterprise capital funds by £200 million over the next four years, potentially enabling more than £300 million of venture capital investment. That will help to fill the existing gap in equity provision for fledgling SMEs with strong growth potential—a gap that many Members have referred to. As my hon. Friend the Member for Stafford pointed out, business angels are a crucial part of the equation. We are keen to see an expansion in business angels, so we are looking into how to create a more investment-friendly climate for them. That may include reforming the rules governing the enterprise investment scheme.

In the few minutes remaining to me, I want to turn to the big matter that many hon. Members, including my right hon. Friend the Member for Wokingham, and my hon. Friends the Members for Stourbridge and for Skipton and Ripon (Julian Smith) raised—red tape. In recent years there has been an increasing rush to regulate. Under the previous Administration, we saw that peak at the equivalent of 14 new regulations every working day.

As a new Government, we are trying not just to tinker with and change a few regulations, but to deal with Whitehall’s prevailing culture. It is time for a different approach, so we have adopted a one-in, one-out system of control for new regulations. That means that before a Minister can introduce a new regulation, they must first examine the cost to business and identify a corresponding cut in existing regulations, so we will be able first to cap and then to cut the burden of regulation. I hope that that answers hon. Members’ questions about whether the system would merely retain the problem, or improve it.

We want to do a lot more. We have inherited a significant number of regulations that cause real problems for existing businesses. That is why the Department for Communities and Local Government is already examining building regulations to improve, simplify and overhaul them for the construction industry. It is also why the Government have already adopted the proposals in Lord Young’s excellent report on reforming and improving health and safety legislation. It is why the Prime Minister asked Lord Young to go further, and to review the whole burden of regulations throughout Whitehall, and how they impinge on the bottom line of small and medium-sized enterprises.

Together, those measures will begin the process of changing not just a few regulations—not just 20, 30 or 40 regulations—but the culture of Whitehall. I am not naive enough to believe that the task will be completed in a year, or a couple of years. It will be difficult, but let me tell the House in no uncertain terms that we are determined to ensure that we get it right, because that is crucial for our economic competitiveness.

I shall conclude by saying that the Government believe that private sector enterprise, innovation and investment are the keys to future growth. We believe that the Government’s job is not to tinker and meddle, but instead to create a stable macro-economic framework within which businesses have the confidence to invest. That means not picking winners, but ensuring that we have the right business environment in which the best will flourish. It means a simple, more predictable tax system that rewards endeavour. It means better access to both debt and equity finance. It means less red tape and fewer regulators, a skilled work force and more apprenticeships. It means sustainable investment in our infrastructure and support for exports to markets around the globe. In each case the Government have a role to play, and we intend to be an effective partner for business.