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Mr. Hain: I am probably testing the right hon. Gentleman's patience, but may I remind him that his predecessor imposed an external financing limit for the coming financial year which the right hon. Gentleman has now increased by £120 million? The Post Office cannot borrow on the open market because the Government will not let it. It has to invest from its own resources. Why is the right hon. Gentleman denying it the ability to do so and therefore denying it the ability to compete in Europe and become the best Post Office in Europe, not just the best Post Office in Britain?
Mr. Lang: We have an extremely good record on the performance of the Post Office. It is certainly not being starved of investment. It is an organisation which is spending, and should have the scope to continue to spend, at double the rate that it spent when the Government came into office. At constant prices, it spent a total of £800 million in the five years Labour was in power. Between 1989 and 1994, that figure increased to £1.7 billion. We have a good record on the Post Office and I am anxious to build on it as soon as circumstances allow.
I shall now revert to the benefits for business that my right hon. and learned Friend the Chancellor announced in his Budget. We have cut employers' national insurance
contributions by £500 million a year from April 1997 and we have cut the maximum real increase in business rates under the relief scheme by 2½ per cent. compared with last year's Budget, but the request that I hear most often from business is for low inflation.
All the major business organisations called for the safeguarding of the stable macro-economic environment that the Government have put in place. We have set a firm target for underlying inflation and we remain resolved to drive it down and keep it down. Inflation has now been below 4 per cent. for more than three and a half years and below 3 per cent. for much of that time. That is the best performance for 50 years. We are breaking the inflationary culture that the policies of the Labour party did so much to engender.
The stable and profitable climate for business that we are delivering is the surest way to encourage investment in our economy, but we have also been engaged in a programme of long-term structural change to the United Kingdom's economy. It involves reducing burdens on business, extending the scope of market forces, promoting competition at home and abroad and helping business to help itself.
We have at all times been concerned to create an economic climate that encourages and rewards enterprise. We recognised long ago the importance to our economy of a thriving small business sector. It is the backbone of our economy and the engine of growth and new jobs for the future. Today, there are more than 1 million more small businesses than there were in 1979.
Small business remains at the heart of our agenda, where it has always been. While the Labour party was opposing enterprise--or, as now, simply talking about it--we have, year after year, brought in measures to help small business. Through changes to PAYE, national insurance, income and corporation taxes, VAT, accounting and auditing requirements; and with loan guarantees, venture capital trusts and investment schemes and a host of other measures, we have shown our commitment to small business and we will continue to do so.
We have invited small firms representative bodies to organise a series of conferences to involve small businesses more directly in generating future policies to help them. We are participating fully in that programme, which will culminate in a national conference to be held in London next March.
We have established a new team of small firms Ministers across Whitehall. They are responsible for ensuring that the interests of the sector are taken into account in the development of all aspects of Government policy. The Budget contained a wide range of measures further to boost small businesses and enterprise. It cut taxes on profits. The reduction in the small companies rate of corporation tax will help 300,000 small companies, while the cut in the basic rate of income tax will reduce the tax burden on a very large number of unincorporated businesses.
The Budget helped small firms with the cost of business rates following revaluation. More than 800,000 smaller properties will benefit from the maximum real increase being cut from 7½ per cent. to 5 per cent. It cut the qualifying age for capital gains tax retirement relief, thereby encouraging and rewarding entrepreneurship, and
significantly extended the threshold before which assets will be liable for inheritance tax. It simplified the tax system and raised the VAT threshold.
However, it is not just through the taxation system that we are helping small business. We are also putting in place the most extensive and effective infrastructure to assist small business that the country has ever had. Business Link is a central element in our strategy to help small firms. It is reaching out to companies with a will to grow by providing long-term support tailored to the needs of individual firms. For the first time, local firms have a simple route to a comprehensive range of high-quality, integrated business support services in areas such as export planning, finance, design, innovation and modern technology.
More than 70 per cent. of the Business Link network is already in place, and by next April we expect some 250 outlets to be open, covering the whole of England. Scotland and Wales are developing similar networks known as Scottish Business Shops and Business Connect Wales.
Mr. Max Madden (Bradford, West):
The President of the Board of Trade has been talking at some length about all the help that the Government are giving small business. Does he include in that the proposal to introduce substantial penalties on employers who employ illegal entrants? Will not the inevitable consequence of that measure be that many small business people, fearful of such penalties, will refuse to employ anyone who comes from abroad, particularly anyone from an ethnic minority?
Mr. Lang:
I can assure the hon. Gentleman that, as with all the other measures that the Government introduce, the particular circumstances of small businesses will be taken into account.
Business has already given Business Link an overwhelming thumbs up. More than 4,000 businesses a week are using the network, and 95 per cent. of customers surveyed have expressed satisfaction with the service. The Budget provided funding to enable the Business Link network to be completed. The Budget has also allowed me to increase the funding for its services so that it can meet the demand from business for integrated, world-class business support services.
Bad regulation bears down disproportionately on small firms. Business men and women must be free to concentrate on creating wealth rather than filling in forms. We have sought out unnecessary regulations which raise prices, destroy jobs and stifle innovation and choice. Business has been brisk. We have found more than 1,000 such regulations and we shall have amended or repealed more than half of them by the end of the year, but we are by no means content to rest there. We are determined to continue to look positively at deregulation, particularly where regulation impinges on small business.
We shall continue to oppose the imposition of new burdens on small business. The policies of the Labour party--the national minimum wage, the social chapter and its payroll tax--would place intolerable new burdens on small business. It is clear that the needs of small business are the last thing on Labour's mind.
Deregulation and our policies to encourage enterprise have been essential elements of our long-term agenda to transform the competitiveness of the British economy.
The Government's privatisation programme is also a part of that agenda. Privatisation and liberalisation have revitalised huge swathes of the economy that lay moribund under state ownership. The success of our policies is reflected by the increasing number of countries of all political persuasions which are now following our lead. It is only in the British Labour party that abject short-termism and socialist dogma still prevail.
What is the Labour party's response to the growing success story? Its response is to seek revenge in the form of a windfall tax. At the time of the utilities' privatisation, the Labour party claimed that they were doomed to failure. Now that they have achieved greater efficiencies and success than Labour thought possible, Labour will penalise them with a windfall tax--which would be unfair, capricious and penalise success. It would also be retrospective.
Retrospective taxation destroys incentives to improve performance and make profits. If there are no profits, there are no funds for investment. If there is no investment, the quality of services in the utilities will be under threat and consumers will end up facing price increases rather than continuing to enjoy the downward trend in prices. Consumers would suffer as the quality of services fell and their cost rose.
Mr. Michael Clapham (Barnsley, West and Penistone):
The Secretary of State mentioned that the utilities had forced down prices. Is he aware that the price of electricity to large users has not changed at all? Can he tell us what he intends to do about that, as it clearly affects British competitiveness?
Mr. Lang:
I shall provide figures on prices in a moment. For the moment, let me continue on the topic of the windfall tax to which the Labour party is so committed. Indeed, it is one of the few identifiable commitments that we have managed to get out of the Labour party.
The Labour party implies that the windfall tax is a free tax and that no one will get hurt. There is no such thing as a free tax. I have already mentioned the cost to consumers of the tax, but it would also be a betrayal of all the investors in the privatised companies, because they would have to pay for it. It would be a tax on millions of small individual investors. It would be a tax on the pension funds and the life assurance companies on which individuals rely for their future security. They are the people who would be betrayed by the Labour party, and all because Labour needs to find money to finance its desires for higher spending. A windfall tax has nothing whatever to do with fairness.
A windfall tax is by definition a one-off tax. It cannot be used for recurring spending programmes, yet the Labour party plans to spend the proceeds of the tax not only year after year, but on 10 separate policy commitments. The Labour party's sums simply do not add up.
Let us examine the successes of the privatised industries, which Labour policies would put at risk. The regulatory system has turned the past profits of the utilities into price cuts for consumers. Telecommunications prices are down more than 35 per cent. in real terms since privatisation. With liberalisation and growing competition, customers can expect to continue to benefit from lower prices. Domestic gas
prices, excluding VAT, are down more than 23 per cent., and industrial gas prices are down 40 per cent. since privatisation. The deregulation of the gas market, which comes on stream next year, will mean that customers can expect prices to fall further still. Domestic electricity is down by 7 per cent. Next year, through tighter new price controls, the flotation of the National Grid and the phasing out of the nuclear levy, customers can expect, on average, about £90 off their bills.
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