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My Lords, it is an honour to be answering this Question from the Dispatch Box. British business is competitive. It creates jobs, it produces the goods and services on which we depend, and it pays tax that funds public services. Those services in turn support business, and paying for them fully generates fiscal stability. Those services and that discipline in turn underpin business competitiveness. It seems to me that, through the system, we should be thanking businesses for the huge burden they bear and for the amount they generate for our economy and society.
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My Lords, I welcome the Minister to his new position. I thank him for his Answer, but I am a little surprised by his optimism. Since the changes to capital gains tax and higher employment costs, 6,000 business owners and company directors have left the country, some 13,000 stores and 700 pubs have closed, and 7,000 hotels, restaurants and cafés have entered insolvency. The warnings are coming from everywhere: the Institute of Directors, the CBI, the IEA, the British Retail Consortium, the hospitality sector and major retailers all point to the burden of higher taxes. We cannot tax our way to growth. Does the Minister not agree that to get growth, we need more entrepreneurs and risk-takers, not policies that drive them abroad?
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I absolutely do think that we should be backing business. I hope there is some assurance in the first speech that the Chancellor of the Exchequer made when he said that he was just as concerned about the cost of doing business as he was about the cost of living. This Government have done lots of things to generate competitiveness. One is fiscal credibility. Another is the trade deals. A third would be the industrial policy. Perhaps we are beginning to see in the things that businesspeople are saying that although there is some bad news—there is always some bad news—there is also good news. For example, earlier this year 46% of members of the British Chambers of Commerce expected to grow this year, relative to 35% last year. I could quote many business organisations and individuals who are essentially saying that Britain is on the up and a great place to invest.
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My Lords, I speak as the chair of the International Chamber of Commerce UK. This country has been a magnet for inward investment over the years, yet over the last decade the number of foreign direct investment projects is at its lowest level for many years. I congratulate the Minister on his appointment, but will he acknowledge that a reason for this is the highest level of taxes that we have had in 80 years? That is eroding our competitiveness, our attractiveness as an investment destination and, most importantly, growth. Ireland next door reduced its corporation tax to half ours at 12.5%, has grown rapidly and is a magnet for inward investment.
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We would all like tax to be as low as possible and investment to be as great as possible. Britain is the number two destination for external investment, according to the PwC CEO survey; the United States is number one. Huge investment is taking place in this country—£360 billion in the areas that have been identified for our industrial policy. The chief executive of Lloyds Bank said it is a “phenomenal” place to invest. Although one needs to be careful about the enthusiasm of entrepreneurs from Silicon Valley, Jensen Huang of Nvidia said it is
“a great place to invest … You’re the envy of the world”.
Of course we want to have more investment, but equally we are seeing that growth is coming—in the last six months, the highest in the G7—and last year productivity was the best for 10 years if you take out the effect of the pandemic.
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My Lords, I welcome the noble Lord, Lord Pitt-Watson, to his post. He has already allowed me and my colleagues to badger him, and we will continue to do so. When the Government increased employers’ NICs and reduced the threshold, it gave protection to the tiniest small enterprises. But surveys now estimate that more than 40% of small and medium-sized enterprises have been significantly negatively impacted. Have the Government tracked the growth lost from the impact on this critical sector, particularly in the most disadvantaged regions of the country?
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The noble Baroness is correct that 900,000 small businesses are protected from this. There are also protections for hiring people under 21 and apprentices under 25. But there is not a specific study of this, and the reason is because we view this as a system. People pay their tax and therefore we are able to do education, transport and all those other services. Would we want that tax to be lower? Absolutely, but we will do it in a way that balances the books and maintains the fiscal discipline to which this Government are committed.
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My Lords, is it not the case that these tax increases are required only because the last Government left us with a £22 billion deficit and hollowed out public services with their policies over many years? Is it not about time they apologise rather than criticise?
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I thank the noble Lord for that question. I have been trying to stay in the spirit of our new Prime Minister and to reach the greatest cross-party consensus that we can on this. What the Chancellor and the Prime Minister have said about being really careful about business costs, and making sure that business stays competitive, takes us some way in that direction. But every businessperson will tell you that you need to balance the books, and the comment from my Benches suggested that perhaps, three years ago, that was not taking place.
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My Lords, I also very much welcome the Minister to his new role, and I thank the noble Lord, Lord Livermore, for his contribution in one of the more difficult Front-Bench jobs, as the Minister is discovering. I will focus on growth, which was the top priority when Labour was elected with a huge majority. Yet many of the measures introduced—higher taxes and an assault on business—have probably reduced growth and competitiveness. So what is the new Andy Burnham Government’s growth target, and when do they expect to achieve it?
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One swallow does not make a summer, but the UK’s growth was number one among G7 countries in the first half of this year and the previous year had record productivity. Dismissing that and saying that growth is not taking place misses the evidence that we are beginning to see. What do we intend to do on this? We intend to follow the policies that have been working: the industrial policy, the planning reforms, the new sources of finance, being sensible about government accounting so that capital is not discouraged, fiscal credibility and good trade deals.
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My Lords, I congratulate my good and noble friend on his appointment to this job, which is a wonderful thing for the country as well as for him. On growth, does he agree that, while the amount of tax is obviously important, so too is the effectiveness with which the tax is spent? Will he bring this perspective to his dealings with Treasury officials?
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Of course that is absolutely right: the money coming through the Treasury needs to be spent as well as it possibly can be. The delivery of public services, particularly in support of activities that are so critical for business—our universities, for example—is a central part of doing our job properly.