Previous SectionIndexHome Page

Business Taxation and Regulation

9. Patrick Mercer (Newark): What recent representations he has received from the British Chambers of Commerce regarding business taxation and regulation. [35750]

10. Mr. John Baron (Billericay): What recent representations he has received from the Federation of Small Businesses regarding business taxation and regulation of small businesses. [35751]

The Paymaster General (Dawn Primarolo): As is normal in the run-up to the Budget, the Government have received a number of representations from business organisations, including the Federation of Small Businesses and the British Chambers of Commerce.

Patrick Mercer: I am grateful to the Minister for her reply. Whenever I am in the chambers of commerce in either Retford or Newark, I receive constant questions about the burden of red tape that is being imposed on small businesses. May I remind the Minister of the Chancellor's promise given before the last election? He said:

Has that promise been kept? Has the level of red tape risen or fallen?

Dawn Primarolo: The answer to the—[Interruption.] I thought that the hon. Member for Buckingham (Mr. Bercow) was going to get up again. He bobs up and down all the time, and he confused me. If he will allow me to answer the question first, I am sure that he will be able to come in later.

The promise has been kept on a number of fronts. First, on the lowering of tax burdens and the lowering of pressure on small businesses through regulations, the Government have cut the tax bill for those small businesses and made a number of reforms. For example, we announced in the pre-Budget report the flat-rate payment for VAT, which will be enormously helpful to 300,000 small businesses. Furthermore, the Carter review, which is currently out for discussion, takes forward the

28 Feb 2002 : Column 833

discussions on how we can ensure that small businesses can operate efficiently with the minimum amount of requirements on them to comply with legislation.

Mr. Baron: As the number of new business regulations introduced by the Government stands at a record high, and as the findings of a survey last year by the largest employment firm in the country showed that employers spend on average the equivalent of one and a half days of the working week administering employment law and dealing with personnel issues, will the Minister accept the CBI's charge that the Government are a regulatory Government?

Dawn Primarolo: The hon. Gentleman does not mention that many regulations are about decent wages for employees, paid holiday and time off for employees to attend to family matters, and that many of them are requested by businesses to help them in their environment. The Government must strike a fair balance between the rights of employees, which are good for small and large businesses, and ensuring that businesses can operate efficiently without the burden being too great.

As the hon. Gentleman well knows—he might care to check the Inland Revenue website—a massive programme of regulatory reform is under way. It is examining everything that is requested of business to see whether it is still necessary, whether it can be streamlined and how we can ensure that the rights of business and employees are respected, and that businesses can flourish in an environment that is suitably regulated, not over-regulated.

3.30 pm

EU Growth and Stability Pact

1. Mr. Wayne David (Caerphilly): If he will make a statement on the operation of the EU growth and stability pact. [35742]

The Chancellor of the Exchequer (Mr. Gordon Brown): The United Kingdom believes that a prudent interpretation of the disciplines of the stability and growth pact should take into account the economic cycle, sustainability of debt and the important role of public investment. Our proposals for that and for reforms in European labour, product and capital markets on which we seek to make headway at the Barcelona summit are contained in the paper on European economic reform that the Treasury published today. Reforms are necessary so that Europe can successfully meet the challenge of large-scale employment creation, internal enlargement and global competition. Copies of the paper are already available in the Vote Office.

To increase competitive pressures and drive down prices for everyday goods across the European Union, we propose measures to open up markets in energy services, agriculture and the financial sector, and for a more rigorous, modernised competition policy and a reformed state aid regime. To tackle the low levels of venture capital in the EU and the high costs of banking for both individuals and businesses, we urge the creation of a single financial services market and a risk capital action plan to improve the provision of finance to small and start-out companies. To adopt a more strategic approach

28 Feb 2002 : Column 834

to research and development across the EU, we should develop better links between the science base and industry, and introduce an innovation-friendly Community patent.

We propose a debate at Barcelona on how best to reform EU labour markets, to gain the conditions for full employment and to tackle social exclusion. To expand transatlantic economic partnerships, we propose a Ceccini style report that would set out in detail the basis for growth, prosperity and jobs on both sides of the Atlantic, including a wide-ranging effort to end the remaining industrial tariffs multilaterally, remove unnecessary non-tariff barriers, and increase competition and develop more effective ways of pre-empting damaging transatlantic trade disputes.

Those measures complement our proposals to reform the stability and growth pact. As the White Paper says, being in Europe and leading in Europe is right for Britain and for British interests.

Mr. David: I thank my right hon. Friend for his full statement, and congratulate him on advocating a more flexible and prudent interpretation of the growth and stability pact. Does he agree that what is required is sustainable economic growth throughout the whole of the European Union? Will he give more details about precisely what the Government will argue for at the Barcelona summit?

Mr. Brown: If the world economy is to grow faster over the next few years, every continent must make its contribution. America must keep markets open, Japan must have structural banking reform and Europe must have the modernised labour, capital and product markets that we suggest. If we are to move ahead, there should be the reforms in the stability and growth pact that we propose. One of the messages that I took from the last European Council summit, where we were successful in overturning the Commission's recommendation against the United Kingdom and other countries, is that most countries now see the advantage of taking into account public investment, debt sustainability and the economic cycle in making decisions about what is essential for stability in the fiscal regime. I believe that Europe is ready to make reforms in that direction as well.

Mr. Michael Howard (Folkestone and Hythe): Is it not utterly disgraceful that a substantial White Paper such as this, setting out what the Chancellor clearly regards as an important policy initiative, should not be the subject of a separate statement in the House, allowing a proper opportunity for questioning and scrutiny and subject to all the normal courtesies such as advance notification of what is contained in the statement? That would have enabled us to begin to engage in the intelligent and open debate about the future of our relationship with the European Union for which the Government constantly call, for which the Minister for Europe called on the radio this morning, and which the Government do everything to talk about but nothing to provide or facilitate.

Is this not utterly inconsistent with the Government's very recent undertaking to the House and to you, Mr. Speaker, following the publication of the third report from the Select Committee on Public Administration, that they would no longer issue documents of this kind without

28 Feb 2002 : Column 835

first making full and comprehensive statements to the House? Is it not yet further evidence of the Government's complete contempt for the House of Commons?

As for the substance of the document, have we not heard all this before? After the Lisbon summit, the Prime Minister, no less, claimed:

Before the Stockholm summit, the Government claimed:

Yet, as we know, despite all those warm words nothing meaningful—nothing of any significance—happened. Indeed, the Commissioner responsible for the single market, Commissioner Bolkestein, himself said:

Is the Chancellor not even remotely aware of the irony of the fact that he and the Government call, in this document, for the European Union to cut unnecessary and expensive regulations, when the Government of whom the Chancellor is such a prominent member introduced into this country last year—according to the House of Commons Library—4,642 new regulations? That is not just a record number of regulations, but a 50 per cent. increase on the number introduced in 1997. Is it any wonder that the British Chambers of Commerce has said:

How can the Chancellor have the gall to lecture the European Union on the need to reduce regulation in this document, when his Government impose burdens on business in this country that cripple its ability to create the wealth on which we all depend?

Mr. Brown: I shall be delighted to answer the shadow Chancellor's points, although it seems that the Conservatives wish to avoid the subject of foxhunting by discussing Euro-baiting.

There is a lack of proportion in the shadow Chancellor's complaints. We sent the document to him an hour before Question Time, as we sent it to the Liberal Democrats. We have made it clear in the document that we are bringing together the announcements made by Ministers in past months in the run-up to the Barcelona summit. It is a bit much for the shadow Chancellor to complain that there is nothing new in the document, and then to say that there must be a statement because a statement is about new policy.

As far as the shadow Chancellor's individual points are concerned, we are the Government who secured changes in European policy—on taxation, with the savings directive, on value added tax on e-commerce, and on moving forward the single market in financial services. He should welcome the Lamfalussy report, which made a number of recommendations on that matter. We have persuaded the European Commission to look again at the question of state aids, and it is looking again at the

28 Feb 2002 : Column 836

question of competition policy. The takeovers directive is being re-examined as a result of actions that we and other countries have taken.

Therefore, as far as economic reform and the single market are concerned, we are pushing forward with the agenda necessary to opening up the single market. Conservative Members supported the start of the single market in the 1980s, and they should support the measures that we are proposing to complete it. However, whenever the word "Europe" is mentioned, Opposition Members say that they are against anything that is being done. They cannot bring themselves to support positive measures. They should welcome the fact that we are going to Barcelona with an aggressive and dynamic agenda for a job-creating Europe that is socially inclusive, and that opens up labour, product and capital markets to the benefit of British jobs, businesses and people.

Mr. Nigel Beard (Bexleyheath and Crayford): Will my right hon. Friend say how far the stability and growth of European economies depend on recovery in the world economy? In particular, what would be the impact if Japan sank into a 1930s-type depression, as foreseen in yesterday's edition of The Guardian? That newspaper ran an article headed "The Crunch: Japan's Credit Rating Could Fall Below Botswana's".

Mr. Brown: My hon. Friend is a member of the Select Committee on the Treasury, and he has looked at issues concerning the global economy. It is absolutely clear that we need the radical structural reform of the banking sector that the Japanese Government have promised. It is also clear that America must keep markets open. Those in America who wish to resort to protectionism in certain sectors should be dissuaded from doing so.

However, it is also clear that we must balance pro-expansion fiscal and monetary policies with structural reform in the European Union. That is why it is important that a message is sent by European leaders at Barcelona that they will move ahead with opening up the energy and financial services markets, and the utility markets as a whole. I believe that we will get that message from Barcelona.

Matthew Taylor (Truro and St. Austell): Is not it obvious that the Chancellor should have made a statement to the House and not adopted this awkward procedure, by which the Government have messed around with Question Time? That was made all the more obvious by the Chancellor's speed reading as he tried to get through a substantive statement in a matter of moments. The Chancellor's speed reading was exceeded only by that of both sets of Opposition spokesmen. We had to try and get through four documents that we received only a matter of minutes before the Chancellor made his statement—not the hour that he suggested. Moreover, we received notification that a statement was to be made only through the pages of The Times.

The document contains, in paragraph 1.13, a substantive apparent change in Government policy, in connection with the Government's approach to the growth and stability pact. Previously, the suggestion was that the Government supported the pact, but a rather different interpretation appears in the document, which is that the Government will support the pact only if it is interpreted in what they call a "prudent" way. Presumably, that means

28 Feb 2002 : Column 837

a way that suits the Chancellor. If it does not mean that, will he explain what is meant by the word "prudent", and how it differs from any previous interpretation placed on the matter by others, not least the European Union? Will he specify what is meant by the passage that states that the UK continues to discuss the matter with its EU partners?

Are the Government seeking reform of the growth and stability pact? What is the interpretation on which they are seeking agreement? What meetings have the Government had, and when does the Chancellor intend to report to the House either about what he is seeking to achieve, or whether he has achieved it?

Mr. Brown: I am grateful to the Liberal party's shadow Chancellor. The Government offer statements to the House of Commons when new policy is being announced. There is no new policy in the document, which brings together all the announcements that we have made in relation to the Barcelona economic reform summit. I believe that that will be to the benefit of the House, and the country, as we proceed to Barcelona. He is utterly wrong about the growth and stability pact. Since 1997, I have been making it clear, and I believe that he should support this, as his party supports increases in public investment, that we want a pact that takes account of the economic cycle, promotes public investment—and therefore, in certain circumstances, borrowing to support that—and deals with debt sustainability. When Italy, for example, has debts that are 110 per cent. of gross domestic product, while Britain's amount to only 30 per cent., it is clear that the treatment given to each country under the pact will and should be different.

I spoke about the three reforms of the growth and stability pact at the European Council only this week. More and more countries recognise that the procedure adopted by the Commission a few days ago was not the best way forward. Our position arises from the principle that these are matters that can improve the pact, and I believe that we are making progress. In trying to claim that this is new policy, when I have made it absolutely clear over the past few years that there was a need for reform of the growth and stability pact, the hon. Gentleman shows that he is out of touch with what is happening in Europe.

Mr. Barry Gardiner (Brent, North): I am grateful to the Chancellor for his statement, and I understand that there are two key elements to the stability and growth that he envisages for Europe. One is the reform of state aid in other countries. How does he think that we can tackle the anti-competitiveness in certain countries' shipbuilding industries, for example? Will he also consider the financial services markets, which are the other key element in the pact? We want a single financial services market, but how, when there are regulators such as Dr. Muller in Germany, who completely goes against the risk-based approach that this country has adopted and that is being so ably promoted by the Economic Secretary and the Financial Services Authority, can we achieve—

Mr. Speaker: Order. Questions should be brief.

Mr. Brown: Commissioner Monti has agreed to a further review of state aid, with a view to modernisation in line with the practices of the modern world. I believe that that is long overdue.

28 Feb 2002 : Column 838

I hope that all parties will welcome the Lamfalussy report. A few days ago, a new report from the business community said that the gains from opening up financial services could amount to about 0.5 per cent. additional GDP across the European Union. British insurance firms, banks and financial services firms would benefit from the opening up of the industries in other countries, and we, with our great success in that field, are in a position to gain maximum benefit. We will continue to pursue the reform of the financial services industry, as my hon. Friend suggests.

Mr. Michael Fallon (Sevenoaks): Why does the document call for greater transparency and accountability in the World Trade Organisation, for example, but not mention the more essential issue of accountability at the European Central Bank? Does the Chancellor recall making a speech on this subject last spring? Has he now dropped it from his agenda?

Mr. Brown: No, we have also discussed the future of the European Central Bank and I have welcomed the fact that the bank, which did not use to publish comprehensive minutes of its meetings is now doing so, in line with the practice of the Bank of England. Increasingly, it is making itself more accountable to both the Governments and the people of Europe. It must, of course, remain an independent central bank. Those of us who supported the making independent of the Bank of England recognise the importance of the European Central Bank being independent of the decision-making processes of politicians.

Ms Oona King (Bethnal Green and Bow): Is it not self-evident that we need rules relating to ourselves and our European partners on debt, and that those must take account of debt sustainability, and is not the essential point that, if we have political influence in Europe, we can renegotiate the rules to favour the interests of our country, and is it not the case that the Government can do that, whereas the Opposition can only squeal and squawk from the sidelines? In doing so, not only are they not acting in this country's interests, but they are being profoundly unpatriotic.

Mr. Brown: Indeed. At the European Council only a few days ago, we wrote into the German and Portuguese conclusions the importance of the debt reduction that they had agreed. Debt sustainability is now being recognised by the European Council as a major issue that must be tackled. I would have hoped that both sides of the House would support our proposed reforms of the growth and stability pact. They are good for growth, good for jobs and good for public investment. Of course, it was the previous Conservative Government who negotiated the stability pact in the first place. That pact needs reforming, and I hope that both sides of the House will support such reform.

Sir Peter Tapsell (Louth and Horncastle): I congratulate the Chancellor on the part that he has recently played, as I urged him to do, in undermining the so-called European growth and stability pact. Of course, to apply it in a recession one has to burn the books of Maynard Keynes and rescue the shroud of Philip Snowden from the Labour mausoleum. Does the

28 Feb 2002 : Column 839

Chancellor agree that strict application of the growth and stability pact's rules during a recession would make it much more difficult for a British Government to deal with rising and serious unemployment, as Germany is finding today?

Mr. Brown: I am grateful to the hon. Gentleman, who, in considering the economic events that should form part of our discussion, has yet to mention the return to the gold standard in 1925.

Mr. John Bercow (Buckingham): My hon. Friend knows all about it.

Mr. Brown: It is a lesson for economic policy making.

As far as the growth and stability pact is concerned, I agree with the hon. Member for Louth and Horncastle (Sir Peter Tapsell) that, as Keynesian economics teaches us, the pact should be reformed to recognise the economic cycle. The important point is that last summer, when the stability pact code was rewritten, account was taken of the economic cycle for perhaps the first time in the Council's deliberations on that matter. That is one reason why the Council felt unable to take action against Germany and Portugal in the past few days. Reform of the growth and stability pact is now accepted more widely than just in the United Kingdom, and such reform should extend to recognising the importance of public investment. I am glad that the hon. Gentleman is not one of those Conservative Members who use growth and stability pact discussions simply to push anti-European prejudices.

Roger Casale (Wimbledon): I welcome my right hon. Friend's statement. Britain can take the lead in Europe in economic reform, and the reforms that he has discussed will be strongly beneficial to British companies and jobs and the British economy—not least in areas where we have a comparative advantage, such as energy and financial services. In looking to make those structural changes, will he also continue to press—as he said that he would—to make the stability pact more flexible? Does he accept that many on the Government Benches will say to him that we did not liberate this country from years of cuts in public services imposed by the Conservative party only to see public investment restraints reimposed as a result of the growth and stability pact?

Mr. Brown: It is by pursuing sensible monetary and fiscal policies that we achieve both growth and future prosperity through rising investment. In addition to our proposed reforms in the growth and stability pact, our management of monetary policy, the European Union and the past year's interest rate reductions have also been very important in creating the conditions for the re-establishment of growth. We should remember not only

28 Feb 2002 : Column 840

that public investment is rising at the right time, which the Opposition have opposed throughout; we have also had the fastest growth in the G7 in the past year, the lowest inflation and interest rates for 40 years, and for the first time since the second world war, unemployment in Britain is lower than in Japan, America and Europe. I hope that both sides of the House will welcome that.

Mr. David Ruffley (Bury St. Edmunds): In the context of the White Paper, could the Chancellor explain why the United Kingdom has fallen from ninth to 19th in the world competitiveness league since 1997?

Mr. Brown: Under the Conservative Government, we were 23rd in the world competitiveness league to which the hon. Gentleman referred. [Interruption.] It is important to point out what happened under the Conservatives. I could quote all the surveys conducted by PricewaterhouseCoopers and other companies in the past few months, which show that we are the leading location for investment in Europe. The hon. Gentleman asked his question in the way that he did because he cannot escape the fact that we have had the fastest growth in the G7 in the past year, the lowest inflation for 40 years and employment rising in a way that it is not in other countries.

Mr. Kelvin Hopkins (Luton, North): Does my right hon. Friend agree that it is an irony that it was Germany that insisted on creating the growth and stability pact and is now in danger of being bitten by its own dog? Does he also agree that it is an irony that he himself intervened, very sensibly, to prevent the growth and stability pact strictures from being applied to Germany, and avoided its being criticised? Does he also agree that if Germany is to get out of its present recession—today's figures show that its output actually fell in the fourth quarter—it will have to break through the constraints of the growth and stability pact, which shows that the pact is nonsense as currently formulated?

Mr. Brown: No, I do not accept that. We support the growth and stability pact. We support the co-ordination of fiscal and monetary policy—that is absolutely essential—but we support the prudent interpretation of the stability and growth pact. [Hon. Members: "Ah!] Exactly. Unfortunately, Conservative Members did not insist on that interpretation when they were in government.

The reason that a prudent interpretation of the growth and stability pact is now being accepted is that, in our interpretation, it does recognise the importance of public investment, of the economic cycle and of taking debt into account. The growth and stability pact that we support is one that will take all these things into account. Therefore I am not against a growth and stability pact. I am in favour of a growth and stability pact, and one that takes account of public investment.

28 Feb 2002 : Column 841

Next Section

IndexHome Page