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1.58 pm
The Minister for Small Firms, Trade and Industry (Mr. Michael Wills): We have had an interesting debate today on an important subject and I thank all the hon. Members who have taken part. The hon. Member for
Rutland and Melton (Mr. Duncan), whom I welcome to the Front Bench, gave a fascinating display of ideological zeal. I look forward to hearing more of his interesting visions in the coming months.
My hon. Friend the Member for Eastwood (Mr. Murphy) highlighted the importance of the minimum wage and spoke of the need for seedcorn support for R and D. He also spoke passionately about the need to support young entrepreneurs. The hon. Member for Eastleigh (Mr. Chidgey) agreed that the role of the Government was to find a third way between the old-fashioned interventionism of the post-war period and the crude laissez-faire approach that the Conservative party seems still to espouse. He spoke eloquently of the importance of R and D and mentioned the trade deficit. However, he omitted to mention that, in the late 1980s, the deficit was 4 per cent. of gross domestic product and is now down to 1.5 per cent. of GDP, but perhaps that would have ruined his argument. The hon. Gentleman also inquired about various policies and I am delighted to say that they are either on their way already, or they will be shortly. I welcome his support for the Small Business Service, consultation on which will be launched next week.
My hon. Friend the Member for Stevenage(Barbara Follett) spoke of the British genius for innovation and of the need to continue to combine it with entrepreneurial talent and drive. She gave a compelling picture of how her constituency shows the need to give everyone the opportunity to innovate and to grow a business.
We heard a remarkable 45-minute monologue from the hon. Member for Buckingham (Mr. Bercow), who began with effusive congratulations for the hon. Member for Rutland and Melton. I noticed that the hon. Gentleman used no notes, and I congratulate him on that. He gave a sparkling defence of zealotry. He was against the right to a decent minimum wage, against the right to paid holidays, against help for children and against help for child care. He has not yet written his manifesto, but I look forward to reading all that again.
Mr. Bercow:
I feel sure that the Minister's misrepresentation of my speech is entirely inadvertent, but I challenge him to identify in Hansard on Monday morning the column at which I object to paid holidays. If he can do so, I shall happily donate £100 to charity. If not, I hope that he will do the same.
Mr. Wills:
I had misunderstood the hon. Gentleman, and I now understand that he favours the working time directive.
Mr. Wills:
The hon. Gentleman is not in favour of the working time directive. I look forward to continuing this discussion with him.
Mr. Gareth R. Thomas:
The hon. Member for Buckingham (Mr. Bercow) mentioned Hansard on Monday morning, so I would take him up on his bet, because we were not sitting then.
Mr. Wills:
I thank my hon. Friend.
The hon. Member for Buckingham spent a lot of time rehearsing the arguments of his ten-minute Bill. I am happy to agree that regulations can be burdensome for business. Indeed, the Government led by the right hon. Member for Huntingdon (Mr. Major), whom the hon. Gentleman supported, added 10,000 regulations in their final three years. With the greatest of respect to the hon. Gentleman, I have to say that his remedies are either mere debating points or already on their way. I shall not delay the House now, but shall happily explain later to the hon. Gentleman which of his remedies fall into which category.
My hon. Friend the Member for Croydon, Central (Mr. Davies) rightly drew attention to the needs to encourage responsible risk taking and to develop regional venture capital funds, as we are doing. I was pleased to hear him highlight the central importance of new information and communication technologies and the importance of the internet to the growth and prosperity of small businesses.
The hon. Member for Bournemouth, West (Mr. Butterfill) offered welcome support for Government policy, and I am pleased that he shared his views on the European Union. He mentioned the climate change levy--the so-called energy tax--on which I should like to reassure him. We are aware of competitiveness issues, but we must take every measure to produce sustainable development and preserve the environment. First, the new levy will entail no overall increase in the burden of tax on business. Secondly, we intend to set significantly lower rates for the energy-intensive sectors. We are in negotiation with the sectors involved, including steel. I hope that the hon. Gentleman can take some comfort from all that.
Mr. Butterfill:
The Minister says that there will be no overall increase, and I assume that he is referring to the offset from national insurance changes, but British Steel estimates that only 4 per cent. of its costs will be met by the national insurance reductions.
Mr. Wills:
I can only repeat what I have said. There will be no overall increase in the burden of tax on business. To take one company as a negation of that point is to miss the point.
I welcome the support of my hon. Friend the Member for Lancaster and Wyre (Mr. Dawson) for Government policy on science, innovation and enterprise. He gave a glowing description of his beautiful constituency. I was interested by his cogent analysis of how what the Government are doing will help his constituency.
The most interesting feature of the debate was the way in which it revealed a stark dividing line between the Government and the Conservatives about how best to promote innovation and enterprise. They are motherhood words; we all accept that they need to be encouraged. The difference is about how to do it. The Conservatives still rest on their record in government. They hanker after a largely mythical 19th century vision of laissez-faire. That was encapsulated in the contemptuous rejection by the hon. Member for Rutland and Melton of the idea of partnership. I was surprised by his scorn for something to which I thought that we could all subscribe. It reveals the extremism rooted in the Conservatives that they can reject partnership as incompatible with their laissez-faire vision.
Mr. Duncan:
Does the Minister accept the Conservative view that innovation and enterprise in commerce are predominantly private sector phenomena?
Mr. Wills:
I am happy to enlighten the hon. Gentleman about our view of the respective roles of Government and the private sector. We differ on the role of Government. We all agree that business must do what business does best, but we believe that there is a role for Government.
Some Conservative Members mentioned IR35 but they did not mention that it is a measure to tackle tax avoidance. I would have hoped that Conservative Members could have joined us in agreeing that we should try to reduce the scope for tax avoidance--indeed, that is the job of Government. When taxes are levied democratically through this House, we should all agree that people should pay them. Nor did Conservative Members mention that there is nothing in IR35 to stop agency working or individuals setting up service companies, which lies at the root of their objections. I am happy to be corrected, but they appear to be against any Government action to reduce the scope for tax avoidance. That is typical of their dogmatic, extreme approach.
Mr. Wills:
If the Conservatives are prepared to support us in trying to reduce the scope for tax avoidance, I shall happily give way.
Mr. Duncan:
We are against the Government deeming something to be tax avoidance to make people pay more tax.
Mr. Wills:
I am not sure that I am wholly clear about the hon. Gentleman's position on tax avoidance. We will return to the subject in the months ahead.
The fundamental dividing line between us is the role of Government. The hon. Member for Rutland and Melton has intervened on that already. We believe that the Government have a clear and necessary role in supporting business and promoting innovation and enterprise. The Government cannot absent themselves from the field. They must underwrite the essential conditions for growth and prosperity and tear down the barriers to growth that inevitably arise in any market. They must help create the conditions in which business can flourish.
The Government must first create the essential platform for innovation and enterprise: a stable and supportive economic environment. Under the Conservatives, Britain was probably the most volatile economy in Europe, as a Lloyds bank survey showed before the last general election. Interest rates rocketed to 15 per cent. in the early 1990s and inflation to 10 per cent. Boom and bust is the worst possible environment for business to plan ahead.
The hon. Member for Rutland and Melton mentioned investment. Between 1990 and 1993, business investment fell by 18 per cent. That is the worst possible environment for innovation and enterprise. This Government have taken the tough action needed to create the stable and supportive environment that business needs.
We have given the Bank of England operational independence to set interest rates. As my hon. Friend the Member for Eastwood so cogently pointed out, the Tories still cannot make up their minds whether they support that
or whether they will reverse it. Over the past two years, we have reduced public borrowing by £32 billion. As a result of the measures that we have taken, inflation has remained at, or around, the Government's target of 2.5 per cent. for the past 11 months. Base rates are now at 5 per cent.--that is the lowest level for 22 years. Mortgage rates are now at their lowest level for 33 years. Last year, business investment rose by 7 per cent.
We have also acted to give back to business the resources needed for innovation. The hon. Member for Rutland and Melton mentioned tax. As my right hon. Friend the Minister of State, Department of Trade and Industry pointed out, the hon. Gentleman omitted to mention the fact that corporation tax has been cut to 30 per cent.--its lowest ever level. The starting rate for small firms has also been cut to its lowest level ever--10 per cent. The ratio of tax to gross domestic product is lower this year than it was last year; over the next two years, it will be lower than it is this year. The total corporate tax burden on business in this country is lower than in most EU countries.
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