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Mr. Lansley: In the light of the hon. Gentleman's remarks, how does he explain the Government's own

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figures, which suggest that growth of 3.5 per cent. in 1997 is to be turned into growth of about 2.5 per cent. next year and 1.75 per cent. the year after? It is hardly a new era.

Mr. Davies: We have been in government for only seven months and already we are seeing the first blossoms of economic success, with employment growing. The single move by the Chancellor to delegate responsibility for setting interest rates to the Bank of England reduced overnight the cost of borrowing on gilts by 0.29 per cent. In the first year, that will save the taxpayer £50 million and, as those bonds mature, the saving will be about £750 million per year to the taxpayer. That is just one move.

Mr. Tim Loughton (East Worthing and Shoreham): Will the hon. Gentleman give way?

Mr. Davies: I will give way later.

We have the lowest corporation tax in Europe: the second major reduction was announced last week. It is good for business and for Britain.

Several hon. Members rose--

Mr. Davies: I am provoking a lot of Conservative Members now. I have to take one intervention.

Mr. Letwin: Is the hon. Gentleman aware of the cash flow effects of the Government's change in corporation tax? Does he deny the analysis that the change will cost the whole of British industry about £2 billion?

Mr. Davies: As always, the Government have the long-term interest of business in mind. I am of course aware of the position in relation to cash flow management in the next few years, but, in sharp contrast with the previous Government, we are looking towards the long term.

We have embarked on the new deal, funded by a one-off levy. Business likes that. In Croydon, a major economic engine for south London, we are already persuading the business community to take on the idea of the new deal, which gives new people new opportunities for new business success. Much play was made by the hon. Member for Buckingham (Mr. Bercow) about small business.

Mr. Campbell-Savours: Who is Buckingham?

Mr. Davies: It is that chap over there. My hon. Friend probably does not know him. He is not very famous.

Small business can take on the long-term unemployed at a reduction of £75 a week for the over-25s, or £60 a week for the under-25s. That is a major reduction in labour costs. It enables small business to make one-off, critical mass growth, and a breakthrough in terms of size and prosperity. That is why the proposal has been welcomed so widely.

The advent of regional development agencies is cherished by the business community. Only the other evening, I was having dinner with senior members of the Confederation of British Industry in London. [Hon. Members: "Oh."] I know that Conservative Members were not invited, but that is a sign of the times. Those CBI

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representatives welcomed the new, planned, coherent approach to economic development on a regional basis, and the Labour party's initiatives.

Mr. Philip Hammond (Runnymede and Weybridge): Did the hon. Gentleman have an opportunity, during that dinner with senior members of the CBI, to discuss their outright opposition to the minimum wage?

Mr. Davies: No, I did not. We were too busy talking about the need for British business to prepare for economic and monetary union, which the Conservatives completely overlooked. It was pointed out to me at that dinner that having the old Tories still in power, arguing among themselves, would have been a hopeless catastrophe for businesses trying to prepare for the emerging Europe. The minimum wage did not feature in the discussions, partly because it is not a serious issue for the main players in the CBI. The idea of the minimum wage is to encourage skilling, added value and productivity. In a modern economy, our ambition is not to become the new China.

Moving on to more serious points than those raised by the hon. Member for Runnymede and Weybridge (Mr. Hammond), the new Labour Government have inherited an economy characterised by millions of people on the dole, unable to pay tax, and the rest paying higher taxes simply to keep people on the dole.

Now there is a new opportunities culture. We are giving thousands and thousands of people a new opportunity to add value to the economy, to contribute and to become stakeholders. That new deal, that welfare to work, that investment in macro-economic stability, with help for small and medium-sized enterprises and all economic stakeholders in a planned and strategic way marks the rebirth of a new Britain for a new millennium. The name of the game is partnership. We are the friend of business, and prosperity is on the way.

9.21 pm

Mr. David Ruffley (Bury St. Edmunds): The motion refers to action and inaction on the part of Ministers. My hon. Friend the Member for Buckingham (Mr. Bercow) gave a distinguished explanation of the Government's damaging actions on wider union powers, a statutory minimum wage and the social chapter. I should like to draw attention to the inaction of Ministers on the important subject of business rates.

I am disappointed that the Minister for Small Firms, Trade and Industry is not here, because she was very vocal before and during the election campaign in her alleged support for small business. Not a week went by at any of the main London business forums without a visit from her, talking about how she would reduce the burden on small businesses. She spent a lot of time talking a great game. That has been proved to be full of hollow words.

Let us examine the pledge on business rates that the Labour party has broken. We all know why business rates are important. They comprise a large proportion of the turnover and profit of many small businesses in my part of Suffolk as elsewhere. That is why the Labour manifesto said:

"we will make no change to the present system . . . without full consultation with business."

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A press release on 25 July said that Labour would take a look at Government finance and business rates,


"consulting with business fully about returning the business rate to local control."

I have news for Labour Members. Local chambers of trade in my part of East Anglia have not had one piece of paper from the Government on the reform of business rates and how the burden of business rates may be reduced. You have said that you would consult, but you have patently failed to do so. In failing to consult, Labour has broken yet another pledge.

Let us examine the burden that local businesses face. It is clear that small businesses face a disproportionate burden as a result of business rates. The Government have said that they will do something about it, but are failing to do so. The Conservatives had a concrete proposal to give businesses a tax-free allowance for the first £1,000 of rateable value. That was in our manifesto. We had concrete proposals that the Government have not even attempted to follow. You have not consulted when you said that you would.

Mr. Deputy Speaker: Order. It ought to be possible for hon. Members to remember for a little while what I said.

Mr. Ruffley: The Government have singularly failed to live up to their manifesto pledges since 1 May.

Many small businesses in my part of Suffolkare particularly concerned about the Government's commitment to remove the universal council tax cap in due course. Their manifesto says absolutely nothing about a capping mechanism in respect of business rates.

In the absence of any details on that important subject from any Ministers in any Department, particularly the Minister for Small Firms, Trade and Industry, there is a great deal of speculation, which is worrying the small business community, particularly in the provinces. In particular, it is worried about the gossip and the spin that is being applied by Government advisers to the effect that the local business rate, if returned to council control, would be linked to domestic council tax levels.

That is what Ministers' advisers are putting around. That is not a great comfort to local businesses, because they know that, if local businesses are tied to local council tax levels, there is only one way in which business rates can go--up. A report, which I am sure is right, shows that an increase of up to 10 per cent. in domestic council tax is winging its way to council tax payers in the next financial year.

Mr. Borrow: Does the hon. Gentleman accept that many businesses foresee a return to a closer relationship and partnership with local government, but would welcome a link between a local business rate and the council tax, so that any increase for council tax payers is matched by the increase for business rate payers rather than divorcing one from the other, as that would risk local government increasing the council tax by a different percentage from that applied to the business rate? Or is he saying that a central, nationalised business rate should remain?

Mr. Ruffley: I wish that such erudition on the subject of local government finance was shown by Government

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Front Benchers. They say nothing on this subject, which is precisely why local business men complain to me about an absence of consultation and understanding.

The whole basis on which local council tax business rate setting is returned to local authorities, and the linking of it to the domestic council tax, will inevitably shift the gearing downwards. As we all know, at present a 5 per cent. increase in council tax will have an upward impact of only 1 per cent. on local authority budgets. At the moment, that provides a disincentive for local politicians to jack up rates. The change that the Government propose would reduce the gearing, making it very much more attractive to raise local finance--not just the domestic council tax, but local business rate tax. That is what the Government's manifesto proposals mean.

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