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Madam Deputy Speaker (Sylvia Heal): Order. The hon. Gentleman's time is up.
5.25 pm
Mr. Piara S. Khabra (Ealing, Southall) (Lab): I am pleased to have the opportunity to speak in today's debate on economic affairs, and I hope to raise a few useful and specific points with the Treasury team. Many of the proposals covered by the debate will not capture the same headlines or create the same controversy as top-up fees or Lords reform, but the issues that we are
dealing with are fundamental to the health of the nation's economy, which in turn will affect our ability to invest in public services.I am pleased to see that the United Kingdom has held up well in the troubled economic waters of the past year or two. In a report last month, the Organisation for Economic Co-operation and Development noted that
- "the UK economy continues to exhibit greater resilience than most other OECD countries"
- "inflation and unemployment are internationally low".
The Chancellor has done an excellent job in difficult circumstances—perhaps the best in this country's history, and better than any of his predecessors. My constituents have not forgotten the days of high inflation, high interest rates and unemployment, and of bankruptcies and the repossession of properties: the boom and bust period of the previous Conservative Government. Indeed, I have seen the devastating effect that that period had on my constituents.
A CBI statement issued last month pointed out that
- "business confidence has risen in every English region and in Wales over the last six months as the global economic recovery has taken hold"
If we are to ensure that investors can have confidence in doing business in the UK, and with UK firms, we must strengthen our system of governance, particularly the rules on accounting standards. This country already has a great deal to offer to businesses. Indeed, in a survey published in July, the Economist Intelligence Unit ranked the United Kingdom as the fourth best country in the world in which to do business. But if we are to keep that position, we need to maintain confidence in our systems. I therefore welcome the proposed companies Bill, which will tighten the regulation of auditing, increase the powers to investigate companies, and allow the Inland Revenue to pass on any information on suspect accounts that it discovers during its investigations. That is important for the growth of the economy and for people in general, and it will lend welcome clarity to require directors to state that they have not withheld any relevant information from the auditors.
None the less, I hope that the Government will consider going a little further in some areas. Five years ago we had the big six accountancy firms; now we have the big four, and the vast majority of the world's largest firms are audited by one of those. It is therefore imperative that their accounting be beyond reproach,
and that investors can trust the accounts presented to the public and to shareholders to be independent. I cannot help but feel that that independence is in danger of being compromised by allowing a firm auditing a client company to provide lucrative consulting and tax advice as well. That is a point for Treasury Ministers to note.It is too much to assume that auditing firms that receive large fees for their consulting work will not be at least a little swayed, and certainly tempted, in their less lucrative auditing roles too. Two possible solutions present themselves. One is to bar auditors from offering non-audit work. That would create a real barrier to conflict of interests, as opposed to the Chinese wall model, which seems to have been ineffective. The fact that the Government intend to require companies to publish full details of the non-audit services that they get from their auditors suggests that the potential for conflict is recognised. I feel that it would be best to remove the possibility altogether.
Another idea would be mandatory rotation of auditors, perhaps every three years. That would encourage independence, as it would reduce the possibility of auditors and clients becoming too close. The knowledge that an auditor's work would be under scrutiny by one of its rivals every few years would surely encourage a higher standard of work, which is needed both for businesses and for the economy as a whole.
Once any changes are put in place, we need to put trust in the new processes. It is true that some businesses have abused our trust, but excessive regulation will only stifle innovation and the necessary degree of risk taking that is part of a successful entrepreneurial culture. I am glad that the Queen's Speech offers us some clear guidelines without excessive regulation.
I shall now touch briefly on other welcome measures on the agenda for the coming Session. I am pleased that provision is to be made for establishing community interest companies to promote social enterprises. These new entities should bring useful and desirable economic and social benefits for the United Kingdom, especially as they will be expected to produce annual reports on their efforts to meet social objectives.
I shall now raise several other issues that are important to my constituency and me. I look forward to supporting the proposals in the pensions Bill, as my constituents have raised the issue of pensions reform with me. I have often lobbied the Chancellor on the subject, and I am sure that many of my constituents will be pleased with the plans for a pension protection fund and a pensions regulator. I also hope that the Government will continue to recognise the importance of small businesses, which are especially important in my constituency, and also vital to the economy.
I wonder whether the Treasury has made any commitment to deal with the domicile rule, which has lost the Treasury many millions of pounds in potential revenue. I am sure that the Chancellor is also aware of the high level of consumer debt, which is potentially damaging to households and families. I hope that the Government will think about ways of discouraging the sometimes murky activities that snare people into a debt trap.
Of course, for all the proposals outlined in the Queen's Speech, the devil will be in the detail. I believe that there is much potential and I hope that the House will come together on many of the issues raised in the debate today. A healthy economy is essential to the UK not for its own sake, but for what it allows us to do. It enables us to continue investing and makes it possible to meet our social obligations to the nation. These proposals should create the healthy conditions and good practices necessary—
Madam Deputy Speaker: Order. The hon. Gentleman's time is up.
5.35 pm
Mr. Jonathan Djanogly (Huntingdon) (Con): Thank you, Madam Deputy Speaker. As "Tail-end Charlie", I shall have to pick on only a few issues. One issue that has not been much mentioned today, but which must be debated, is the massive impact of regulation on businesses, particularly small businesses, in our country. There are 15 new regulations coming into force every day, which, according to the estimate of the British Chambers of Commerce, amounts to a cost hike of £20 billion a year on business. When I asked businesses in my constituency about that, 90 per cent. felt that the burden had increased under the Labour Government.
The evolving picture for British manufacturing is not a pretty one. Productivity growth has halved since Labour came to power. Output was down by 4 per cent. last year—the biggest fall since 1991—and profitability has fallen to its lowest level since 1992 with 300 manufacturing jobs being lost every day. In such a dire position, we need to ask what the Government wanted to achieve. It is certainly not equality, because the divide between rich and poor is growing. Clearly, the Government believed that low interest rates would encourage investment, but while the personal debt mountain has grown to ever-higher levels, corporate investment has fallen in the last quarter to its lowest level for 20 years.
I can only imagine that Europe must figure highly in Labour's grand plan—I have the inevitable feeling that they want to dumb down to the lowest level of the social chapter—and that the Government wish to appease the unions with a European social agenda that will lead to a less competitive and, ultimately, higher unemployment economy, which is more euro-compliant. Once comfortably in the euro, the Government will be able to blame others for setting an interest rate that destroys our own economy.
Having said that, Labour has also encouraged our very own British regulations, such as the climate change levy, the aggregates tax and, most recently, the income tax hike in the form of national insurance, which is itself equivalent to a 3 per cent. rise in corporation tax but is wholly unrelated to such niceties as whether the company concerned makes a penny of profit. Worrying as the red tape and regulations are to business, the growing sentiment that I hear from businesses is that they feel increasingly isolated. While their employees' protections and rights are becoming ever more entrenched, who in the Government is standing up for business interests?
The tide continues to flow in this year's Queen's Speech with a new draft disability discrimination Bill and Employment Relations Bill chipping away time and again at our competitiveness. It is a Government of technocrats and target setters, not innovators and leaders. Whenever there is a problem, they say, "Let's have another Bill", but before we move on to the new Bills, including the proposed Bill to regulate auditors and facilitate the raiding of companies and their directors by the Department of Trade and Industry, what about the comprehensive companies Bill that they have promised for five years—the one that will reduce form filling, ease statutory capital requirements for companies and remove the inherent discrimination that small companies face in our corporate legislation? I ask the Government, in whose in-tray is that now languishing?
I recently met the British Exporters Association, which said that the relevant Minister did not seem much concerned about attending meetings with foreign parties to help companies to win contracts, though that was regularly done by other European Ministers. I return to the question whether it is worth having a Department of Trade and Industry at all. The answer is, probably not, when the Secretary of State prioritises commenting on semi-nude women sitting on cars in motor shows, attacks the ability of British managers rather than supports them, and highlights the question of ageism as a sop to pensioners who are now forced to work due to Labour having smashed their pensions.
My opinion might be different if we had a Government who cut regulation for companies and fought Treasury plans to increase corporate taxes; who stood up for British interests abroad and demanded our fair share of Iraqi contracts; who travelled the world securing inward investment and British foreign infrastructure and export deals, and who sorted out rather than pandered to the unions and their ancient work practices, as we recently saw with the Post Office strikes. Only then might I give a cheer for the Department of Trade and Industry.
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