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How are British companies supposed to compete when they have already been hit with £43 billion of new business taxes? Taxation is now the key factor for four
25 May 2005 : Column 713
out of five companies in determining their international investment locations. Let us look at what is happening in the rest of western Europe, let alone the rest of the world. Germany is cutting its corporation tax, and France, Denmark, Sweden and Italyhardly bastions of neo-liberalismhave all cut their tax-GDP ratios in recent years. In Britain, however, Labour has increased taxes and will increase them further, whatever the Chancellor promised in the election.
Andrew Miller: The hon. Gentleman and I have constituencies in the same county, and he knows that Cheshire has some important businesses with strong connections to Germany. He has twice mentioned Germany in his speech. Does he really believe that the German economy is on a sounder footing than the economy here, given that Opel workers have taken a pay freeze until 2010 because of the problems and massive cuts that they have faced?
Mr. Osborne: The point is that we are heading in the same direction as Germany if we continue to raise taxes and regulation. The Chancellor always compares our record with that of the countries of western Europe. He never compares our record with the other developed countries of the worldthe English-speaking economiesin comparison with which we are performing much worse. My point is that while we are heading towards higher taxes, those in the rest of the world, including Germany, are reducing their taxes.
Mr. Gerald Howarth (Aldershot) (Con): Is my hon. Friend aware that in my constituency of Aldershot, about three years ago, a German company invested a substantial amount of money in a new facility, and chose to do so in the United Kingdom? The managing director of that company told me about six months ago that if it had to make that decision again today, it would locate not in the United Kingdom but in Germany.
At a time when the rest of the developed world are reducing taxes and burdens to compete with the emerging giants of India and China, this country is going in the wrong direction. That is the competitive challenge.
There is a public services challenge, too. The Chancellor admitted last week that low skills are what he called the "Achilles heel" of our economy. One fifth
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of job vacancies are unfilled because of a shortage of skills, yet colleges are warning this week that 200,000 places on adult education and training courses could be cut from September. Does the hon. Member for Wrexham (Ian Lucas) support that cut?
Ian Lucas: I do not support that. I invite the hon. Gentleman to take a short drive down the M56 from his constituency to Wrexham in north Wales, and to meet the managing directors of Sharp UK from Japan, and Ipsen Biopharm from France, both of which, in the past year, have decided to place their confidence and future in my constituency, reducing unemployment there to less than 2 per cent., compared with 20 per cent. when the Conservative party was in power. Is it not about time he started listening to business? He is welcome to come to Wrexham any time to meet strong British manufacturing companies.
Mr. Osborne: I would be delighted to come to Wrexham, but I point out to the hon. Gentleman that foreign direct investment in this country has fallen from £20 billion a year in 1997 to £12 billion now. That is the general picture affecting the country.
Mr. Osborne: The Deputy Prime Minister says that at least they are still investing, but the amount has almost halved under his Government, and I do not see how he can be proud of that. If we want to stay ahead in the world we need to keep adding value to stay at the cutting edge as technology moves on. We need the best educated and best trained people in the world. The British people have the ability to do that, but they are being let down by this Government. According to Organisation for Economic Co-operation and Development figures, the UK education system under Labour has fallen from fourth to 11th place in the world for science, 7th to 11th place for reading, and eighth to 18th for maths.
No one doubts that the Chancellor is spending a great deal of money. On his current plans, he will have increased the share of the nation's income spent by the state by 5 per cent. He has always confused inputs with outputs, however. He should talk to the Minister for Pensionsformerly the Financial Secretarywho said:
That was the moment when he could have brought about a transformation of our public serviceshe had the money and the majority; now both are running out. He only has himself to blame. Who in Government has opposed every minor reform that a succession of beleaguered Health and Education Secretaries have tried to push through? It has been the Chancellor of the Exchequer, the road block to reform in this Government.
The challenge of the next five years is to build modern, reformed and diverse public services. We understand that. Even the Prime Minister, in his twilight years in
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Downing street, is coming to understand that. The insurmountable obstacle to meeting that challenge, however, is sitting in front of us on the Treasury Bench. That is the public services challenge.
Then we have a pensions challenge. We welcome the new Secretary of State for Work and Pensions to his place. He has the task of sorting out the mess that the Chancellor of the Exchequer has created. It is a refreshing start that he makes no attempt to defend the £5 billion tax on pensionsthe single most damaging thing that this Chancellor has done in office. We will also be interested to hear what the Secretary of State for Work and Pensions has to say about the Chancellor's means-tested pension credit. Adair Turner said at the weekend:
There was a time when the Chancellor would have agreed. Back in 1988, the Chancellor stood at this Dispatch Box in opposition, and condemned means-testing of pensioner benefits as the most serious Government assault so far mounted on the basic principles of Britain's welfare state. Yet what has he done in office? He has extended the means test to half of all pensioners. The previous Secretary of State for Work and Pensions called the pension credit a medium-term solution, before it turned out that he was just a short-term solution. What is the Chancellor's solution?
Then there is the issue of compulsory pension saving. We welcome the new hon. Member for Normanton (Ed Balls) to this place. At last he emerges from the shadows, and we have both the Chancellor and his "mini-me" in the House. During the recent campaign, the hon. Member for Normanton said at a Labour party press conferencehe remembers it wellthat another election would have to take place before any compulsory saving was imposed. The new Secretary of State for Work and Pensions overruled him, however, saying the new hon. Member for Normanton was speaking only
I suppose that he, too, was speaking as a parliamentary candidate and not as a spokesman. Would the Chancellor or the Secretary of State for Work and Pensions like to confirm their views on the matter? Could there be legislation on compulsion in this Parliament? I will take an intervention from either of them, or both of themI think that they are sorting out the position as we speak.
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