| Previous Section | Index | Home Page |
9 Apr 2003 : Column 313—continued
Norman Lamb : I wonder whether those companies have said anything to the hon. Gentleman about why the United Kingdom's share of inward investment into Europe has fallen so substantially as compared with the rest of Europe.
Mr. Plaskitt: Of course, we have had extensive discussions on that subject, but as I think the hon. Gentleman knows from our examinations of it on the Treasury Committee, those figures are largely influenced by the flows of merger and acquisition activity, which can be very volatile. He is right to say that there has been a dip in the proportion of foreign development investment that has come to the United Kingdom in the past two years. The figures change erratically from year to year. It would not be wise to draw inferences from two years' figures; we should look at the wider picture.
It is worth reminding the House of the recent report published by the Society of Motor Manufacturers and Traders Limited, "Strengthening the Supply Chain", which reminds us of the importance of the auto supply chain to the economy: 7,000 businesses, 140,000 jobs and half the businesses are small and medium-sized enterprises. The report points out that that sector is going through tough trading conditions at the moment because of the global downturn. It also emphasises the strength of the car industry in the United Kingdom. Each year during the 1980s, 1 million cars were built here on average, 1.5 million were built here in 2001, and
the industry confidently expects that 2 million will be constructed here by 2005. It is worth quoting the report, which says:
- "The comparatively strong performance of the UK economy and its relative stability provide an advantage for UK based operations and continues to offer an attractive proposition for potential inward investors."
The report also mentions some significant challenges that the industry faces. It looks to Government for a response on three challenges in particular: the need to do more to support apprenticeships; a single entry port for Government business support programmes; and more progress in achieving a low-carbon economy. I shall deal with all those in a moment, but the report also places great emphasis on, and calls the Government to do something about, ending the uncertainty over the euro. When I discussed that subject with businesses in my constituency, I found that their opinions were mixed. Some are not particularly interested in being in or out, some are desperately keen for us to get in, and some are opposed to entry. Irrespective of their position, however, they are all saying, "For goodness' sake, let's know where we are going on this." The SMMT report has this to say on the subject:
- "uncertainty about UK entry into the single currency also increases the risks associated with new investment. The government must move speedily towards a decision on membership of the single currency".
The second important area that companies in my constituency have been raising with me is the need to drive up productivity and close the skills gap. The Chancellor mentioned that in his statement today. There are disappointing factors in the UK's productivity performance, but it is encouraging to hear that the gaps are narrowing between us and some of our competitors, although there is still a significant gap between us and the United States.
I have asked many of my local companies for their views on productivity. Interestingly, many of them feel that their own company is doing all right and that there is no problem. They think that the fundamentals for eventual productivity improvement are in place. As my hon. Friend the Member for Dumbarton (Mr. McFall) said earlier, there is no doubt that our success in bringing more people into economic activity and in reaching historically high levels of such activity means that the improvement in productivity will be delayed. When the labour force is enlarged, increased
productivity tends to follow. That was the experience in the United States and it is likely to be the same in this country.There are also significant productivity gaps between the UK regions. The Treasury Committee, on which I serve, is investigating that and I hope that we can contribute to a fuller understanding of why those regional variations exist and why they have been so persistent. However, those variations confirm the need for an adaptive policy response in the regions, so I welcome what the Chancellor said about devolving some decisions on the local economy further down the scale and giving regional development agencies more freedoms. Those agencies are themselves devolving some matters to sub-regions, which is an important development.
I welcome the Chancellor's statement that there will be greater access to capital, new investment vehicles for small companies and further improvements to the research and development tax credit. Devolving employment policies to local job centres is also extremely good news.
Some of my local companies mentioned the skills problem. Many local firms have considerable difficulty with recruitment. The labour market is tight throughout Warwickshire; unemployment is 1.5 per cent. in my constituency so, unsurprisingly, recruitment is a problem. That is especially true for manufacturing companies where, to some extent, there is an image problem. School leavers and people in further and higher education tend not to be drawn to engineering careers.
Schools and further and higher education institutions should strengthen their links with engineering and manufacturing companies. Both sides should come together to make young people aware of the exciting and innovative things that are happening in our many successful manufacturing and engineering enterprises. Young people are not aware of them, so it is not surprising that they are not drawn to a career in that sector. The introduction of entrepreneurship in the curriculum is welcome and I hope that it will include advocacy of our remarkable engineering successes and the stimulating career opportunities that exist.
Companies want an expansion of modern apprenticeships. I am pleased that the Chancellor envisages that 320,000 of them will be up and running by 2006. Strong links with universities are important for manufacturing companies. They work well in my area, where many local companies have good links with both Warwick and Coventry universities. There is strong collaboration in terms of courses run by the universities and in the products manufactured by the companies.
Tax and red tape issues are certainly raised by companies in my constituency, but the particular points they make are of interest. Of course, no one would expect companies to be enthusiastic about the increase in national insurance that they faced and which is now in place, but they recognise that the overall corporate tax burden is reasonable. It is instructive to note the latest figures from the Organisation for Economic Co-operation and Development on that point. Total business taxes as a percentage of UK gross domestic product are 7.2 per cent.—the third best in the European Union. The comparable figure for Germany is 9.1 per
cent. and in France it is 14.5 per cent. Total business taxes as a percentage of total taxation are 19.2 per cent. in the UK, making us the second best in the EU. Furthermore, the figure is lower than that for the United States of America.
Mr. Andrew Tyrie (Chichester): Does the hon. Gentleman agree that it is more important to look at the total tax burden? After all, directly or indirectly, firms end up paying for that and it is reflected in labour costs.
Mr. Plaskitt: But the firms I talked to look at the overall picture, as the hon. Gentleman encourages me to do. I talked to them about the impact of national insurance and the overall level of business tax in the economy and the comparisons with our competitor countries—the comparisons are favourable. They point out that although there are some tax increases for business there are also some offsetting benefits owing to our success in managing the economy. They enjoy the benefits of lower interest rates and of the reforms that we introduced to VAT and accounting. Indeed, today, my right hon. Friend the Chancellor has added more benefits and more cost reductions for small firms.
Most companies were prepared to accept that the higher level of national insurance would be okay provided it was spent well—a point that we heard from the Opposition. Firms realise that the costs to employers of either private or social insurance-based systems are rising much more steeply elsewhere; for example, the cost burden imposed on French or German companies as they grapple with their public service problems is rising much faster than in this country. Firms that are part of a global operation are very aware of that.
I am pleased that firms do not consider only the tax bill; they are also asking what they are getting for their taxes—rightly so. Firms which have problems with recruitment and the skills base welcome the fact that we are investing extra money in the education system as that will help them to address the skills shortfall. They welcome the extra investment in transport. The right hon. Member for Wokingham denounced our transport system, but there have been significant improvements in the local transport network in and around my constituency. There are major road schemes and distinct improvements have been made to the rail link with London. Those significant investments are all welcomed by businesses in my constituency. They realise that there can be no extra funding for the transport system unless they contribute through taxation.
Companies also acknowledge the benefits to them of higher Government capital investment under the Labour Administration. Many of them have won contracts related to that investment. They are watching how the Government spend the money and assessing the degree to which it benefits industry, and they see that it does.
Companies frequently raise the issue of red tape—frequently. [Interruption.] I am not surprised to hear approving murmurs from the Opposition Benches. When companies raise the issue of red tape, however, they are not talking about the 4,000 or 5,000 new regulations introduced each year to which Opposition Members often refer. In fact, only 3 per cent. of those regulations attract any business costs; most of them are local transport or electoral measures and have nothing to do with companies.
What are the red tape issues that firms raise with me? At the top of the list are employment tribunals. Companies face increasing costs and time commitments and sharply increased lawyers' bills as they wrestle with increased numbers of tribunal cases. They want reform of the employment tribunal system and are anxious to know what will result from the Government's recent statements on the matter. They agree with the thrust of the reforms that the Government are trying to initiate: encouraging the resolution of disputes within firms before they even reach a tribunal; trying to spread the cost of liabilities so that they do not fall exclusively on companies; and discouraging frivolous claims. I believe that we should expect further Government announcements on the current investigations into the reform of tribunals, and the companies in my constituency are anxious to find out whether that reform will be the sort that they would like to see.
Another red tape issue raised is the regulations coming from the Financial Services Authority. Many of the companies in my constituency take the view that the FSA is now producing over-elaborate regulations, and they want us to get the balance right. Again, we will be happy to take up that challenge in the Treasury Committee, and we look forward to putting some of those points to the FSA's new chief executive to find out whether the response is the one that business would like to hear.
The difficulty of gaining access to Government business support schemes also appears under the heading of red tape. Undoubtedly, business would very much welcome it if we could evolve a single port of entry for the array of schemes that exist. Companies that have managed to gain access to the schemes have greatly appreciated them. They have done a number of very good things for a large number of companies in my constituency, but the time commitment in gaining access to them and understanding their criteria and complexity has deterred many businesses from coming forward and taking up the advantages that undoubtedly exist. So I urge the Government to consider creating a single access port for many of those schemes.
Finally, insurance costs come under the red tape heading. There is no doubt at all that many companies face a very steep increase in insurance costs, especially for liability insurance. Again, they are pleased that the Office of Fair Trading and the Department for Work and Pensions are looking into the workings of the insurance industry, and they eagerly await the outcome of those investigations. Those costs are undoubtedly rising sharply, and companies are looking to us to respond and to try to help them.
In summary, that survey of businesses in my constituency shows that they very much welcome the way that the economy has been managed and the Government's responsiveness. They have additional needs and problems, which they are putting to us, and I look forward to the Government's response to those issues in due course. As I say, top of their list is their appreciation of the fact that we remain one of the best performing economies in the G7. They appreciate the fact that we are managing public finances very soundly. They, along with my constituents, appreciate that we are on track to deliver both a strong economy and social
justice; and they, as companies, have just as much interest in that as any of my constituents, so I commend the Budget statement.
| Next Section
| Index | Home Page |