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7.9 pm
Tony Baldry (Banbury): I have entered my various interests in the Register of Members' Interests. I suspect that the Budget will be remembered as the bingo Budget; the Chancellor probably hopes that it will mean, "No. 10, Tony's den." However, it will require more than fiddling around with bingo prizes and reducing tax on beer in time for the World cup to persuade the country that the Chancellor has its best interests at heart.
Let us consider the Chancellor's intentions for small brewers. They are a classic example of giving the impression of helping a specific sector on Budget day when the small print shows that it is not being helped. The Hook Norton brewery is based in my constituency. It is an excellent, small, independent family brewery. I predict that the Budget proposals for brewers will not help it at all.
I suspect that the Chancellor told his policy advisers to go away and think the unthinkable for the Budget. Indeed, for many small and medium-sized businesses, the Budget is unthinkable not least because of the substantial extra tax burdens that they will have to bear. I shall examine with interest the unemployment figures in the constituencies of Labour Members who spoke in the debate. It will be interesting to watch unemployment increase there year after year through the impact of the burdens on business.
The problem is not so much what the Chancellor does as what he persistently fails to do. He said repeatedly that he supported an enterprise economy. I was struck by recent statements from the Treasury and Downing street. Last month, in an interview with the Financial Times, the Chancellor claimed that he would act
- "by encouraging people not just to make the most of their opportunities in education and employment but helping start businesses and being on the side of people as they strive to become self-employed or create a business".
I recently conducted a survey of every small and medium-sized business in my constituency. Almost all businesses complained to me about the excessive amounts of red tape that they have to tackle. Almost all believed that their businesses would be better off without the Treasury's burdensome intrusiveness. I commend to hon. Members three comments by business men in the Cherwell valley.
A well known international food manufacturer and an important local employer commented that
- "red tape impacts on every employee. Approximately 5 to 10 per cent. of work time is spent on red tape."
Another employer finds the forest of bureaucracy so daunting that he asserted:
- "If I tried to understand all the legislation it would take all my time. I therefore ignore it all and run my business in a professional, fair and honest way and hope that we work within the law".
- "at least two thirds of my time is wasted dealing with this. Without it I could be a much bigger company, generating significantly more taxable revenue".
I have cited the comments of employers from the Cherwell valley and north Oxfordshire, one of the most successful economic areas in the United Kingdom. If employers and businesses in my constituency are experiencing such difficulties, what must it be like in other parts of the country where there are greater problems for industry?
Notwithstanding the simplification of VAT forms for small businesses that the Chancellor announced, a massive void gapes between the fact of running businesses under the Government and the fantasy of the Chancellor's wild claims of help for employers.
Although I welcome the incentives that the Chancellor announced for employers who allow employees time off for training, they will sound hollow to many employers and people involved in training when they reflect on the experience of individual learning accounts. We have been here before, and not long ago. Individual learning accounts were scrapped because they were so successful and the Treasury discovered that they were costing more than they thought.
Mr. Hendrick: Will the hon. Gentleman give way?
Tony Baldry: No. I want to make progress and many hon. Members wish to speak.
The Chancellor presents a load of gimmicks, which resemble baubles on a Christmas tree. He hopes that they will appear attractive, but also that they will not be used or that they will prove so complicated that no one will work out how to use them a few days after the Budget statement. I suspect that they are intended to look good only in one of those little boxes in a newspaper. Like the hon. Member for Warwick and Leamington (Mr. Plaskitt), they give the impression that the Government are doing something. The hon. Gentleman's local newspaper will be able to say that the Government are doing something for Warwick university. It is not clear what they will do for universities, but that will not matter in a week because the right Budget headline and soundbite have been obtained.
One has only to glance at the latest growth rates for the UK to realise how sorely stimulus for business is needed. I understand that when the Chancellor took over at the
Treasury, overall growth in the UK was, at 3 per cent., second only to that of America. It was twice that of the eurozone's slightly dismal 1.5 per cent. It has now fallen by a significant 0.5 per cent. The UK has failed to keep up with America and the average growth of prosperous Organisation for Economic Co-operation and Development countries. We have even been overtaken by that notorious shire horse of an economy, France.The gulf that has grown between financial services and the manufacturing sector is especially worrying for businesses in north Oxfordshire and elsewhere in the country. Financial services have prospered better under the Chancellor's Budgets than manufacturing, but neither has prospered much.
Little in today's Budget will alter the decline in manufacturing industry. That is especially worrying for all businesses in the Cherwell valley and elsewhere for two reasons. First, it proves what they already know: not all parts of the UK economy have been doing well. Despite the Chancellor's mantra of no more boom and bust, there has been bust in manufacturing.
The Government produce their Red Book only on the day of the Budget. It is a pity that we do not have time to study it for longer. However, those who have had the opportunity to give it the most cursory glance know that the Government's Budget forecast makes it clear that even they expect manufacturing output to continue to contract and exports to continue to fall. We are a global trading nation; we have traditionally exported more per head of population than any other country in the world with the recent exception of Japan. If UK exports continue to decline, that is bad news for employment and all our constituencies, but especially for marginal seats represented by Labour Members. Those hon. Members may find that their seats become more marginal as a consequence of the Budget, which does not contain significant initiatives to redress the decline properly.
The second and more significant reason for manufacturing industry's poor performance under the Chancellor is that manufacturing businesses have too often borne the brunt of the Treasury's increasing burden of tax and bureaucracy.
May I give a simple example? One of the larger employers in my constituency is General Foods, which makes Maxwell House coffee. Over the years, it has probably invested millions of pounds in making its plant energy efficient. Notwithstanding that, it is still hit by the climate change levy, which is simply a tax on business and competitiveness.
We must read the small print, but the Chancellor announced that there will be help for those who invest in energy efficiency equipment. However, he must know that most major energy users have already invested substantially in such equipment. The policy sounds good, but take-up will be minimal because businesses such as General Foods have already invested in energy efficiency. Again, the contribution to their competitiveness is meaningless.
A recent Sunday Business article points out that legislation relating simply to taxation runs to more than 6,000 printed pages, and I sense that the north Oxfordshire business community is deeply concerned that financial services will suffer under the same burden of bureaucracy
as manufacturing. I ask the House to consider a letter from a financial services director, which responds to my pre-Budget survey by saying that
- "the entire financial services industry is about to suffer further regulation . . . this action is going to cause massive upheaval, with vast sums of money being wasted for regulation's sake. This action will inevitably cause more confusion for the consumer . . . at a time when the Government is meant to be encouraging free trade and the expansion of small businesses, this legislation is totally contradictory."
Independent forecasters such as the Institute for Fiscal Studies have said that productivity is down, investment is down and competitiveness is down. Thus, consider three other concerns of the Cherwell valley business community: corporation tax and capital gains tax, petrol tax, and stamp duty and national insurance contributions. I shall deal briefly with them, as they were dealt with by the Chancellor.
Candidly, corporation tax and capital gains tax have not recovered from the decisions taken by the Chancellor in previous Budgets, and clearly businesses needed a significant cut in both in this Budget. On the face of it, employers got that, but we see that it is not all that it seems if we look more closely. I am particularly concerned that the tapered system for capital gains tax introduced by the Treasury, rather than encouraging enterprise as intended, has stifled it with yet another convoluted and complicated tax system. So, while I welcome today's capital gains tax cut, the complicated resource-sapping system remains.
On corporation tax, advance corporation tax is perhaps the most recent concern, as the Government ended the tax credit system in a previous Budget. Clearly, the effect is "profound", as the Financial Times observed:
- "For a start, the hit to pension funds will be serious . . . those with personal or deferred contribution pensions will have to accept lower pensions or contribute more".
The Chancellor also said that he is doing something for research and development. Again, we must read the small print closely. On research and development tax relief and an approach by Treasury advisers, I ask the House to consider the fact that one company—a significant investor in research and development—said that
- "the sad and almost tragic reality is . . . none had realised the financial implications . . . and realised that 17 per cent. of the credit would go to one company and 60 per cent. to the top ten".
- "they may almost certainly have given a different response".
On petrol tax, the Chancellor's approach is cynical. The Budget freezes fuel duty, but we know that the Exchequer will maintain revenues from the tax because of rising oil
prices. The plain fact is that petrol tax is disproportionate to that in eurozone countries, so it is perhaps no surprise that our growth is declining compared with theirs.Stamp duty, which the Chancellor has removed in deprived areas, is effectively a mobility tax. Constituencies such as mine are desperately trying to attract key people to work in the public services—nurses, police officers and teachers—but stamp duty is simply a further tax that deters them from moving to such areas, where house prices are high. Therefore, the tax that must be paid on buying a house is also high, so it is perverse of the Chancellor to remove stamp duty from economic black spots. He should consider reducing or removing stamp duty in areas such as mine, because those who want to come and work in key sectors of the economy are finding that very difficult.
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