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1.23 pm
Mr. John Butterfill (Bournemouth, West): I shall follow the example of my hon. Friend the Member for Rutland and Melton (Mr. Duncan) and declare my interests as recorded in the register. I am a partner in a family firm of consultancy on finance, corporate affairs and real estate. I am a director of Miller Non-Marine Ltd., which is one of the leading Lloyds insurance broking companies. I have a residual interest in Curchod and Company, a firm of chartered surveyors of which I was a senior partner before I entered the House. I have for many years been the parliamentary adviser to the British Venture Capital Association. I hope that, in some small way, I have contributed to the growth and success of the venture capital industry.
I have listened with great care to the speeches of Labour Members. Not everything that the Government have done to encourage industry and commerce has been entirely bad--some of their proposals have been helpful in principle. The changes to the capital gains tax regime are a step in the right direction. However, the abolition of indexation and the introduction of a 10-year taper will mean not just that an entrepreneur will be locked in for far longer, but that in most instances he will end up paying more tax. The taper is far too long, and the definition of business assets is far too narrowly drawn. I welcome the principle of a taper for capital gains, but I hope that the Government will look at the length of the taper, because it is not encouraging new investment at present. That is the view of the British Venture Capital Association, and the view of all other serious commentators.
I am worried about the general direction of policy in other respects, and I shall expand on that shortly. First, however, I think it worthwhile to consider the direction in which the country has moved since the last Labour Government. At that time, the British economy was largely a command economy. Huge swathes of industry were nationalised and in public hands. That economy was regarded as the sick man of Europe. Trade unions had massive power, and at the same time we had appalling industrial relations. We had one of the worst strike records among the western economies.
As a result of all that, our economy was steadily going down the tubes. If we had continued with the policies that were being pursued then, we would still be in that sorry state now. Fortunately, even this Labour Government no longer believe in most of those policies, but there are worrying signs that they are turning back in that direction.
The last Conservative Government changed everything. We reformed trade union legislation. We now have the best strike record in Europe, and the lowest levels of unemployment in Europe. We have privatised all those massive state industries. Who would want to return to the days when telephones were obtained from the Post Office? We could have any phone we liked, as long as it was black and had a funny circular dial. Today, we have an industry that is a world leader.
Who would want to return to the days of the old BEA and BOAC? The service was appalling, and the cost of the subsidy from the taxpayer was massive. Today's modern, dynamic industry boasts not just British Airways--probably the world's leading airline--but plenty of deregulated competitors, such as Virgin Airways, British Midland and easyJet. They have been an enormous success, and they have liberated the British economy.
The last Government's abolition of exchange controls, which was vehemently opposed by the Labour party, was probably the most important deregulatory step that could have been taken. No one would reverse that today. Indeed, all the deregulatory reforms undertaken by the last Government are being earnestly emulated throughout the world, even in the former Soviet bloc countries. In fact, many of those countries are deregulating rather more quickly than we are under the present Government.
I must confess, as a long-time enthusiast for the European Union, that my initial enthusiasm was born of two things. First, I felt that the EU's political objectives were highly desirable, in that they combined the free economies of Europe and would prevent our ever going to war again. The vision of people such as Mr. Schuman was outstanding in that respect. Secondly, during the days of the Labour Government--I have described the position of our economy under that Government--we saw the countries of the European Union, as it is now, as a bastion of free enterprise, innovation and harmonious working relations. We did not have that in this country. One therefore thought that, by joining the European Union, we could perhaps prevent the slide into state socialism that we were experiencing and, by that association, improve our economy.
Sadly, the situation in the European Union has rather changed. In various European countries, profoundly interventionist legislation has followed the election of a succession of socialist Governments. Those countries maintain very large parts of their economy within state control, and regulation has grown and grown. Today, a comparison between the European Union and the United Kingdom is not such an attractive prospect--certainly not the one that it was 20 years ago.
The change is perhaps exemplified by the non-wage costs imposed on employers in the European Union. In the United Kingdom, non-wage costs are 19 per cent. of wages, but, in France, they are 44 per cent.; in Spain, 35 per cent.; and, even in Germany, they are 27 per cent. Such costs are making the economies of those countries increasingly less competitive, which would not be totally disastrous were it not for the regulatory burden being imposed on European Union employers.
Year after year, more regulations are dreamt up by the Commissioners and imposed on industry and commerce across the EU. Now, the United Kingdom has adopted the working time directive, a minimum wage and the parental leave directive; and the Government are increasing trade union rights and enacting their Employment Relations Bill. All those changes are designed to increase the burden on employers, making industries less competitive.
If Labour Members do not believe that that is true, they have only to consider what has happened to United Kingdom inward investment--which has surpassed inward investment to all the other European Union
countries combined. Why have we received so much inward investment? It is not because we have an especially low-wage economy, or a particularly attractive climate, but because we offer a business climate that is far more attractive than that of the other EU countries.
Mr. Wills:
I wonder whether the hon. Gentleman is aware that, last year, under a new Labour Government, we had the best year ever for inward investment. Is he aware that that shows that those inward investors do not share his concerns?
Mr. Butterfill:
No, I am not aware that they do not share those concerns, because many of them say that they do share them, as do many leaders of British industry. Of course we are continuing to receive inward investment. The golden legacy that the Government inherited from the previous Conservative Government has created conditions that still make United Kingdom inward investment extremely attractive. I am concerned that the Government's actions are making it increasingly less attractive to invest here. If they continue down that road, they will achieve the end result of making it very unattractive to invest here--which is not their objective, I hope.
If the Minister doubts that, he has only to consider what has happened in the other countries of the European Union. German manufacturers, for example, are moving their manufacturing progressively out of Germany. Volkswagen is establishing itself in the Czech republic; BMW is investing in the United Kingdom and in the United States; and Mercedes-Benz is creating new plant capacity in the United States. French industries are acquiring British companies in ever growing numbers. Indeed, the French centres of learning such as ENA--Ecole Nationale d'Administration--and Science Po are extremely concerned. In the past, their brightest and best graduates used to go into French industry and commerce, now increasing numbers of them go to work in the United States or the United Kingdom. One has only to look around the City of London to see how many graduates of the prestigious French academic institutions are employed here rather than in France. The French Government are extremely worried about that.
I hope that Labour Members will heed those warning signals, because if they take us ever further down the road that certain people in the Commission, the European Union and certain political leaders in EU countries are advocating, they will achieve their objective of making us all suffer equally the misery suffered by employers in the EU. As a result, we shall become increasingly less competitive and lose the enormous advantage that the previous Conservative Government bequeathed to the country.
One particular measure that is especially worrying is the energy tax that the Labour Government intend to impose on British industry. The climate change levy is unnecessary as Britain has already done more than any other leading economy to reduce emissions. Of course I am sympathetic to the idea that we should continue to reduce emissions worldwide, but not unilaterally or in a way that will damage the British economy.
The United States has no intention of making serious moves in that direction--as was confirmed to me by an American business man only yesterday. Most of our
competitors are doing far less than we have already done. We need to look at the burdens that the proposed measure is likely to impose on British industry. According to British Steel, it will mean fuel price increases of 49 per cent. for coal, 40 per cent. for gas and 20 per cent. for electricity.
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