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5. Mr. Philip Hammond (Runnymede and Weybridge) (Con): What steps she is taking to reduce unintended incentives to financial services companies to relocate call centres outside the European Union. 
The Secretary of State for Trade and Industry (Ms Patricia Hewitt): Financial services companies take into account cost, quality, customer reaction and many other factors when making decisions about whether or not to off-shore their call centres. We will continue to ensure that the UK is an attractive place to do business, in this and other sectors.
Mr. Hammond : The Secretary of State will be aware of the concern about the exodus of call centre jobs overseas. I know that she is looking carefully at ways of making the UK an attractive place for the call centre industry, but there is no point in her trying to support the sector if her colleagues in Government introduce further disincentives for centres to remain in the United Kingdom.
The Secretary of State will be aware that not only are labour costs lower outside the European Union, but financial services companies outsourcing their call centres outside the EU are not subject to a 17.5 per cent. VAT charge, which would not be recoverable. Is she also aware that Customs and Excise now proposes to tighten the grouping rules, so that for many financial services companies outsourced call centre work in the UK will be subject to an immediate additional 17.5 per cent. cost, leading inevitably to a further exodus abroad? Will she please undertake to talk to the Chancellor of the Exchequer and try to achieve some joined-up government?
Ms Hewitt: The British Bankers Association has said that tax is not a major factor in decisions on outsourcing, and I am a little surprised to hear the hon. Gentleman criticise Customs and Excise for tightening arrangements to prevent tax avoidance.
The current VAT rulesagreed by the Conservative party in 1992do not create a level playing field, which is why my right hon. Friend the Paymaster General is currently negotiating to ensure that in future VAT on services will be charged wherever those services are consumed. That is the answer to the problem, which in any event is a very minor factor, if a factor at all, in decisions to off-shore.
The important point is that when workers are displaced in Britain they should be able to look for support to a Government who are investing in innovation, business creation and skills. They would receive no such support from the Conservatives, whose shadow Chancellor has now committed himself and his party to cutting all public spending in those vital areas.
Mr. Barry Sheerman (Huddersfield) (Lab/Co-op): Does my right hon. Friend agree that although call centre work is not the most high tech and innovative, it provides a good, steady income for many of our constituents? Would she talk to her opposite number in the Department for Transport about the fact that the rail industry, which is heavily subsidised, is talking about taking its call centre for railway timetables abroad? It seems strange to subsidise a timetable service that is taken away to somewhere like India.
Ms Hewitt: My hon. Friend makes an important point, but I should stress that we are seeing an increase of call centre employment in Britain. BT, which was criticised for investing in three call centres in India, has invested in 31 call centres here in Britain. Other companies have come back to Britain after having tried call centre operations in India. Each company should consider for itself what the balance of advantage is and how it can deliver the best quality services to its customers.
None of us should make the mistakeI know that my hon. Friend is not doing soof thinking that one more job in India is one fewer in Britain. It is not. As the call centre industry in India grows, so it will grow in this country, as we have larger markets for our exports and more effective partnerships between companies here and those abroad.
Mr. Quentin Davies (Grantham and Stamford) (Con): Is not the Secretary of State extraordinarily complacent and misinformed about this issue? How can she argue that 17.5 per cent. is an insignificant cost handicap for a company that is contemplating an investment? She cannot have had any experience of investment appraisal if she says something like that. We all know that the Government are wasting a lot of money on a burgeoning bureaucracy, so are desperate to get money out of the public by any means, fair or foul. What they are doing is crazy. They will not make any more money. All that will happen will be that employment will be exported outside the European Union and these call centres will be established elsewhere, so the Government will not get the 17.5 per cent. anyway.
Ms Hewitt: The hon. Gentleman is talking nonsense. I have already said that we are seeking to change the VAT rules to provide a level playing field for VAT, so that wherever services are delivered, they will be taxed on the same basis, whether they are provided by a UK-based company in-house, outsourced or offshored. The hon. Gentleman ignores the fact that, as the British Bankers Association has said, this is not a major factor in decisions. I refer him to the decisions of the Alliance and Leicester, the Royal Bank of Scotland and many other companies, which have said that they will stay in Britain so as to get the quality of customer service that they want. They are reinforced in their decision by knowing that, as every independent survey shows, the Government have created one of the best environments for business and investment in the developed world.
David Cairns (Greenock and Inverclyde) (Lab): I welcome my right hon. Friend's commitment to the UK call centre industry, especially in financial services, as the mortgage centre of the Royal Bank of Scotland is in my constituency. An issue that is worrying me is the level of basic skills training that people need in these jobs, which are not as basic as people think. The RBS has told me that when it advertisesit recently advertised in Greenock for 150 new jobssome of the people who turned up did not have the basic skills that my right hon. Friend and I would take for granted, such as the ability to hold a telephone conversation for 20 minutes. When framing our training and skills programmes, will she ensure that she does not end too far up the chain, as basic skills are needed to keep these jobs in the United Kingdom?
Ms Hewitt: My hon. Friend makes a very important point. I recently had the pleasure of visiting one of the RBS's call centre operations. It is essential that we get investment not only in basic skills, but in the higher level skills that will ensure that we remain competitive in call centre operations and in many other sectors. We are working with the Call Centre Association, employers and unions to achieve that. That is why it is important that the Government go on investing in education, adult skills and lifelong learning. The Conservative party has already made it clear that it would cut that investment.
The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths): We have taken a number of measures to cut form filling and red tape. I mentioned just now the introduction of the flat-rate VAT scheme to cut paperwork and burdens for up to 700,000 small and medium-sized enterprises. We are raising the audit requirement to save 219,000 businesses up to £275 million a year. Let me now add another measure. We have abolished automatic fines for late payment of VAT. In the financial year 1996, the Government took £99 million from small businesses in such fines. I shall be happy to give the House more examples of then and now.
Sir Nicholas Winterton : There are many small business enterprises in Macclesfield, generating many thousands of jobs. Despite what the Minister has just said, how does he respond to the fact that, according to the Library, there were 3,990 new regulations in 2003 alone, as HMSO confirms on its website? In the six full calendar years of the Minister's Government, new regulations total 23,322, 53 per cent. up on the number under the last Conservative Government. What will he do to reduce regulations in a meaningful way?
Mr. Griffiths: The vast majority of those regulations do not affect the hon. Gentleman's constituents. About 40 per cent. of the regulations that I looked at regard road closures and the like, which are necessary. We must strip those out of the statistics that the hon. Gentleman gave and focus on regulations that do burden business. I have given some examples of regulations that we have tackled, but I am far from complacent on this matter.
I would also refer to independent studies. The most recent from the World Bank, "Doing Business in 2004"a survey of 130 countriesranked Britain in the top 10 countries with the fewest regulations. The Organisation for Economic Co-operation and Development has found that Britain has almost the lowest administration costs of any EU country, as well as fewer regulations for entrepreneurs than any other EU country, and Government policies have contributed greatly to this.
Mr. Martin Salter (Reading, West) (Lab): Does my hon. Friend accept that some reality must be injected into the argument that regulation on small business is necessarily bad? For example, there was the conduct of the gangmasters whose callous disregard for human life led to the death of the Chinese cocklers in Morecambe bay, something the hon. Member for Congleton (Ann Winterton) seemed to think was funny
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): The Government said in their White Paper that they felt that the new companies law would reduce the burden on small business by making it much clearer how company law operated by bringing it together in one Billa Bill that creates a minimum standard for small business. However, we have not yet seen that Bill; it has still not appeared. Can the Minister give small business some hope that the Government intend to produce it, and say when they will do so?
Mr. Griffiths: If the hon. Gentleman looks at the latest surveys from the Forum of Private Business or the Federation of Small Businesses about the concerns of their members, he will see that that concern does not rank among them. Therefore, other matters are receiving priority. The measure to which the hon. Gentleman refers is important and will be brought forward at the appropriate time.
Nigel Griffiths: About 50 per cent. of the 147 regulations are directly focused on business and are being tackled. The regulatory reform action plan contains not 147 measures but more than 650, which contrasts with the problems that so many businesses faced a decade ago. One of the successes of the way in which we have tackled red tape and the burdens on business is the current record number of people working in Britain. That too contrasts with the burden of regulation and other factors that brought about not record numbers of jobs, but record bankruptcies in the 1980s and 1990s.
Mr. O'Brien: It is no good relying on the figure of 650, because only 250 of those measures have been tackled to date, and few of thoseabout 25 per cent.relate to tax or regulation. So the hon. Gentleman's answer will receive a massive raspberry from the UK's vital small businesses, not least because they are at the sharp end of this Government's relentless addiction to heaping on business regulatory burden upon regulatory burden at the rate of 15 regulations every working day, the cost of which hits small businesses disproportionately hard.
Let us consider another regulatory threat to our small businesses. Will the Minister state here and now that preserving the UK's opt-out from the EU working time directive is a red line issue, not another white flag issue, for this Government? And will he tell us whether he will be disciplining all his Labour MEP colleagues who just two weeks ago voted to remove that very same opt-out?
Nigel Griffiths: The measures that this Government have taken have achieved the successes in business that even the hon. Gentleman, I notice, does not rebut. But then, he cannot really do so, because the Leader of the Opposition said on 22 June: