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Those are important new steps, but we need to go further. We need a new discipline across Whitehall, one that forces Departments to prioritise individual regulations within an overall budget and one that makes more transparent the true cost and impact of regulation on businesses. We will now consult on how we can best introduce a new system of regulatory budgets across Whitehall. Those budgets would set out the cost to business of new regulation that can be
introduced within a given period and the Government will operate for the first time within an overall ceiling on new regulations.
That proposal is radical and innovative, and we will be the first country in the world to implement such an ambitious system. It will fundamentally change the creation, development and implementation of regulation in the United Kingdom and it has already been welcomed by the CBI and the Institute of Directors as a measure that could make a real and lasting difference to businesses.
Mr. Redwood: I welcome the intent behind this measure and it is a very good idea. Can the Secretary of State give us any indication of the early Budget runs in terms of relief to business in total cost?
Mr. Hutton: I shall not put a figure on that today, because it would be silly to try to do so. What we will do over the next few weeks is set out the methodology that we will deploy, and the figures will have to be put in the public domain and we will consult on them. However, it is important to recognise that the significant challenges that we face as a country include climate change, which must be dealt with sensibly and proportionately. For example, it would not make sense for us to say that we can make progress on climate change only if we scrap all the health and safety laws, or opt out of the social chapter—as the right hon. Gentleman would probably propose. We have to strike a balance, but it is important that the Government have decided that we should have regulatory budgets, and this is not a consultation on whether but on how. I hope that those budgets will come into effect in the financial year starting April 2009. All Departments and relevant regulators will be covered, and the new system will give a powerful boost to our aim of making the UK the best place in the world to do business.
Let us compare that credible action with the Opposition’s incoherence on regulation. The Leader of the Opposition has a track record of proposing significant new regulation when he wants to appear family-friendly. I am sure that that has not escaped the attention of the right hon. Member for Wokingham (Mr. Redwood). When the hon. Member for Rutland and Melton talks tough to businesses, he proposes a one in, two out policy for all new regulations. Perhaps today he will tell the House which two regulations he will scrap in order to introduce the new right for fathers of newborn children to take time off at the same time as mothers. Which two regulations would go to make way for the mandatory pay audits for businesses that the Leader of the Opposition has also proposed?
I am sure that the right hon. Member for Wokingham would be able to give the hon. Member for Rutland and Melton some tips on the right way forward. It might be helpful to read out what the right hon. Gentleman has already said about the UK’s framework of employment regulation, which is, I think, his starter for 10:
“we should seek opt outs from the areas of regulation that we think are most damaging...This would include all employment and social regulation.”
One thing is certain: a party that tells each audience what it wants to hear will ultimately not find favour with any audience at all. Those least impressed will be
British businesses looking for a clear direction from their Government to steer the UK through uncertain times in the world economy.
We want to ensure that every entrepreneur and business in the UK can access the finance that they need for business creation and growth. We will work to remove any remaining barriers in one of the world’s most dynamic and flexible finance markets. [Interruption.] The hon. Member for Runnymede and Weybridge (Mr. Hammond) is chuntering away. I suspect that he will have the opportunity to make his own speech. We always look forward to his contributions. He has mentioned the small companies rate of corporation tax—
Mr. Philip Hammond (Runnymede and Weybridge) (Con): No, capital gains tax.
Mr. Hutton: Well, I will also come to the small companies rate of corporation tax, because the hon. Gentleman has mentioned that, too.
We have made significant changes on capital gains tax in response to what business has said to us. The hon. Gentleman would be hard pushed—he is a decent and fair man—to find any example from the G7 or from any of the developed nations of relief for entrepreneurs as generous as the 10 per cent. entrepreneurs relief announced by my right hon. Friend the Chancellor for the first £1 million of lifetime gains from business. That is a significant improvement to the current provisions on retirement relief, on which I am sure the hon. Gentleman is an expert, and will address many of the concerns that have been raised.
The hon. Gentleman will know that the small companies rate of corporation tax is part of a range of measures that have to be taken to deal with the serious issue of tax-motivated incorporation. Even with those changes to the small companies rate it is important for us all to remind ourselves of one rather important fact that has escaped all the chanting of Opposition Front Benchers. Even with the phased increases, the small companies rate of corporation tax will still be lower than it was at any time when the Conservative party was in office.
We want to ensure that every entrepreneur and business in the UK can access the finance that they need for business creation and growth. We will work to remove any remaining barriers in one of the world’s most dynamic and flexible finance markets. With the support of small firms loan guarantee lenders, new measures include £60 million to the small firms loan guarantee scheme and the extension of the scheme to small and medium-sized businesses that are more than five years old. We are also providing an extra £30 million through enterprise capital funds to stimulate the provision of mezzanine finance alongside the launch of the third round of those funds on 1 April.
The public services industry is also an increasingly dynamic part of our economy. We want to increase the opportunity available for small and medium-sized enterprises to work and innovate in the sector, too. Anne Glover of Amadeus will lead a review of the barriers to SMEs winning the greater share of public contracts and consider the practicality of a 30 per cent. SME target for Government procurement. We will amend
the public sector procurement clause to enable organisations that use factoring and invoice discounting to compete for this business.
We have, I believe, listened to businesses and responded to their needs. I believe that the Budget will help the UK economy to continue to grow at a time of turmoil in international finance markets.
Tony Baldry (Banbury) (Con): The Secretary of State has just announced yet another review. Can he tell the House how many reviews his Department is undertaking at the present moment?
Mr. Hutton: The Department is not undertaking very many reviews. We are looking at a number of important issues, and many people have asked us to instigate the sort of review and investigation that I have described. We are prepared to look again at some of the issues involved.
One thing that I have learned in government—and I am glad to say that few Opposition Members have had the chance to do so—is that it is often a good thing to ask people from outside Government to take a fresh look at policies. That approach has proven beneficial for both the Government and business.
Mr. Jim Cunningham (Coventry, South) (Lab): My right hon. Friend will be aware that representatives of small business, including a delegation from Coventry, lobbied Parliament last week. The review should look at the process by which bids are submitted for contracts with local authorities that are worth less than £10,000. For small businesses employing two or three people, the ability to tender for those contracts is vital.
Mr. Hutton: I am grateful to my hon. Friend, and glad to get one supportive intervention.
Mr. Philip Hammond: I seek clarification on a point of detail. The Secretary of State mentioned that the prohibition on invoice factoring would be abolished. It is one of the features of his enterprise White Paper, but I have here a letter from his colleague the Exchequer Secretary, dated 13 January 2008. In it, she assures me that the standard terms and conditions used by Government Departments
“do not prohibit the assignment of a debt between suppliers and third parties”.
Is she wrong, or is this a non-announcement?
Mr. Hutton: I am sure that there is a perfectly sensible explanation and that, given a bit of time, I will be able to respond appropriately to the hon. Gentleman. For now, however, the right answer must be that the approach taken by that Treasury Minister was obviously correct.
The Budget will genuinely help to release the talents of more of our people. It will harness the untapped potential and rising aspirations in our society to create businesses, jobs and wealth for our country’s future. It should help remove the financial, regulatory and personal barriers that still hold too many of our businesses and citizens back from achieving their ambitions and success. It is a Budget that will help boost enterprise and innovation throughout the economy. It will build on the strong and stable
framework of the past decade to enable this country to tackle the challenges of the decade ahead effectively, and to seize the opportunities that it presents.
4.22 pm
Alan Duncan (Rutland and Melton) (Con): The House has listened to the Secretary of State for well over half an hour, but I am not sure that we have learned very much. What we are debating today is less a Budget than a Government confession of all the accumulated consequences of their misbehaviour in the past.
I call the Prime Minister’s first Budget a “confession” because hidden away in the back of the Red Book is all the evidence of his wasted decade as Chancellor. We had 10 years of profligacy that are now costing families in higher bills every year; 10 years of incompetent management at the heart of Government that are now to cost business £1.7 billion extra over the next three years; and 10 years of the right hon. Gentleman bragging and boasting about how much he was spending, with no appreciation of the consequences.
The Chancellor did his best to talk us into submission last week, but the rhetoric has unravelled and exposed us to some very uncomfortable home truths. For all that the Prime Minister used to bang on about prudence, the cruel truth is that prudence has turned out to be not such a pretty lass.
The UK has the largest budget deficit in western Europe, and there has been a massive rise in Government borrowing. We have a consumer economy fuelled by unrestrained and certainly unprecedented levels of domestic debt, so it is no wonder that the Chancellor has been forced to downgrade his growth forecasts.
But what is the Government’s response? Is it to do nothing, and to be the very definition of soporific but sensible stability? If only it was: instead, the Government’s instinct is to raise taxes and spend even more, and to hit the wealth creators and entrepreneurs who are the very people who can expand our economy and help wean us off our addiction to borrowing.
In case Labour Members have forgotten, I can tell them that the wasted decade was built on the strongest economic foundations, and that it was sustained by 15 years of global growth. We have had high levels of liquidity in the market and low prices—until recently—of crude oil, with optimism remaining stable. We had all that, even despite the Asian crisis in the late 1990s, the bursting of the dotcom bubble or the tremors of 11 September.
Ultimately, all economics is cyclical. Long periods of economic growth invariably end some time and a downturn follows. No matter how successful a country’s, or company’s, economic management may be, the good times always have a turning point. Nobody has yet managed to abolish the business cycle. It is the most enduring economic phenomenon. Its existence is the one thing for which we cannot blame the Government, but their refusal to admit that one day the cycle would turn is something for which they are utterly culpable.
The surest sign that problems are looming and that the dreaded turning point is just around the corner is when bankers, institutions and countries convince themselves that they have entered a new period of history in which economic gravity can somehow be
defied. As the Chancellor and the Prime Minister have both said to anyone who would listen, the disintegration of sub-prime debt did indeed light the fuse that led to the explosion of Northern Rock and the fireworks that we are witnessing in today’s markets. Institutions are indeed partly to blame for allowing their judgment on the quality of lending to become polluted. For some, the music has stopped and market liquidity has evaporated.
Much of this has indeed been caused by an irresponsible United States Government deficit, but the reason that the UK Government are now undeniably culpable is that they did not use that decade to prepare for the years that would inevitably follow. Especially with globalisation’s pressure on competitiveness, the Prime Minister should have recalibrated the economy so as to reinforce it for more difficult times later. He did the opposite.
At the end of the right hon. Gentleman’s decade as Chancellor, we should have had lower taxes, less borrowing, better funded pensions and higher savings. Instead, all those variables have been moving in the wrong direction. Taxes are right up to their limits, debt—public and personal—is right up against the buffers, savings have evaporated and pensions have been raided to destruction by the Chancellor’s unforgivable economic vandalism. He has squandered a decade of economic prosperity. He has disguised growing structural problems and deferred decisions that could easily have been taken when things were going well. He used the decade to support his political ambitions over and above the long-term interests of the country. Now, thanks to him, the economy has no slack to cope with a downturn. It is unduly reliant on the City, and housing transaction costs are likely to prove an exaggerated downward force on the housing market. He has not even managed the public finances sufficient to support inflation-based increases in public sector pay.
The Prime Minister while Chancellor should have recalibrated the British economy not just to withstand the pressures of a cyclical downturn but also to equip it to contend with the new forces of global competition from the likes of India and China. While talking of doing so, in practice he did not. In other words, thanks to the Prime Minister, the condition of the economy is ill equipped to cope with the problems posed by events in world financial markets and it contains elements that are likely to exacerbate the problems.
United Kingdom conditions are not prepared for the turn in the cycle. We have nothing set aside for a rainy day, so the pain people will face stands to be greater than it would otherwise have been. We can perhaps, therefore, rustle up a little dose of sympathy for the poor hapless creatures who have to follow in the wake of this bludgeoning Prime Minister. There is the poor, poor Chancellor who has had to succeed the Prime Minister’s decade as Chancellor. He is like a poor malnourished orphan equipped with a bucket and shovel following a cart horse with bad digestion. Then we have the Secretary of State for the Department for Business, Enterprise and Regulatory Reform, whose words about our current Prime Minister were famously read into the record.
Mr. Bellingham: What did he say?
Alan Duncan: It would be inappropriate for me to repeat the words. I will steer my hon. Friend to the comment to which I am referring later. Some of the people who most wish that the Prime Minister would change his ways are people in business—people working in the thick of the economy. Those same people were left battered and bruised by the Government’s election gambits in the pre-Budget report last autumn. Business confidence in the Government has eroded very fast since then.
Last week’s Budget should have been an offering that restored the trust that the Government have lost, but it turned out to be more of a fig leaf to disguise the defectiveness of the British economy. It is no surprise that 92 per cent. of business leaders do not think that the Budget will restore consumer confidence. Some 65 per cent. say that it will be bad for their business, while an astonishing 73 per cent. believe that the Budget will actually contribute to the economic downturn in the UK—and no wonder, considering that the Government will take £1.7 billion in extra revenue from business over the next three years. That is in addition to the disastrous capital gains tax hike announced last August, and the small companies tax rise that was announced in last year’s Budget but is coming into effect now. For small businesses in particular, it is a disturbing trend at the very moment when their pockets are feeling the pinch.
It is clear that the Secretary of State, who has been an eloquent, albeit lone, voice for business in Whitehall over the past year, may have won some important concessions, but in other ways he has not been that successful. The dreadful changes to capital gains tax—Lord Jones’s words, not mine—remain pretty much the same. Income shifting has merely been deferred, with the pain being stored up for next year, not removed altogether. The same goes for fuel duty, with a sting in the tail being included for 2011. Small businesses will still be hit by the rise in their corporation tax. Recent data from one business organisation indicate that on average small companies spend £8,700 and 50 hours annually just on complying with basic tax regulations.
The enterprise White Paper, on which it is important to focus today, had some welcome news. I am glad that the Government have finally come round to our proposal that a percentage of state contracts be offered to small and medium-sized enterprises. I hope that they will go further than merely reviewing it, as the Chancellor said he would. The proposal was of course first announced by my right hon. Friend the Member for Witney (Mr. Cameron), the Conservative party leader, back in October 2006, so it has taken a little longer for the Government to copy the idea than it took them to “borrow” our inheritance tax proposals, but it represents progress none the less.
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