Debate on the Address

My Lords, I thought it might be useful for your Lordships to hear in this debate from someone who is still actively involved with small and medium-sized businesses. First, however, I congratulate the noble Lord, Lord Bilimoria, on an extremely good speech from a real entrepreneur. I declare an interest as a director of a plc whose base is in the Channel Islands—I will come back to that later—and as chairman of a private company manufacturing in Scotland. In passing, I might say that I am delighted no longer to have to declare an interest as chairman of a bank’s pension fund. When I was chairman of that fund, as a result of the removal of ACT, I had to change our defined benefit scheme to what our employees considered a much less attractive defined contribution scheme. Like that job, that is history; however, that subject may well come to haunt the Chancellor in years to come. I am not a member of the CBI although what I say may very well chime with some of the things said today at its conference. My purpose in speaking today is to question the assertion that the Government have been really friendly to business as has been alleged by some, including the Minister—in other words, that business has never had it so good. I do not believe that the running of business has become easier and less bureaucratic under this Government, and while certain actions have been extremely welcome—I instance the changes to business property relief which have safeguarded ownership of some private companies—the general thrust has not been business-friendly. I said that I was a director of a plc registered and operating in the Channel Islands, with business interests in mainland Europe. Why the Channel Islands? Simply, the tax regime is business friendly and likely to become more so. By contrast, what about the position of plcs in Northern Ireland? The open border to the Republic means 30 per cent corporation tax in the north playing 12.5 per cent corporation tax in the Republic. I am not surprised that a cross-party agreement exists in Belfast for harmonisation or special treatment from the Chancellor to exempt companies in Northern Ireland from corporation tax on the first 60 per cent of profits. However, you can imagine what sort of reaction this would bring in our small company in Scotland, and in a Scottish election year. Does the Minister have any news on this subject? The Chancellor inherited a business tax situation which was very competitive in the developed world. I fear that that is no longer the case. Between 10 and 20 years ago, the main UK corporation tax rate was among the most competitive in the world. That is no longer the case because other countries have reduced rates while the UK has kept the rate more or less constant. As the Minister said, corporation tax has to be considered in a global context. We cannot hope to compete in a global economy by setting corporation tax in a vacuum. I fear that we have to do something and I hope that the Chancellor may just do that. What should we do? We quite simply have to cut the main rate of corporation tax and simplify the system. It is easy for the Chancellor to say that he is a friend of business; it is quite another thing to prove it. The difficulty may lie in the fact that he has come to rely on that tax for an increasing part of his tax take. Twenty years ago, companies paid £10.7 billion or 19 per cent, of the direct tax bill. Now, this is estimated to be £41.3 billion or 22 per cent of direct taxes. I hope that as the Chancellor approaches what may be his last Budget, he will bequeath to his successor in that last Budget something that is good for business. He should remember that in a recent survey, 59 per cent of small businesses described forms and other paperwork they have to complete as too complicated. Some 23 per cent acknowledged that there were tax reliefs which they could have claimed but did not because of the complexity of the system. Increased burdens of regulations add enormously to the load of a slim-lined business team, which is particularly so in small businesses such as the one in which I am involved where we have a very small team. Fire and health and safety regulations are all very worthy, but they get evermore burdensome. Any help that can be given by the Government would be welcome, particularly to small businesses. A lower corporation tax rate would allow big business to stay here and be content with a simple tax regime, which used to be the case in Britain. I am very anxious that as plcs become more dependent on the global situation and, thus, very mobile, we do not become internationally less competitive. I applaud the Department of Trade and Industry showing that there is a rise in the number of 16 to 24 year-olds thinking of starting a business. Please do not let that seed-corn be snuffed out or stifled by unnecessary and onerous imposition on these budding entrepreneurs. Perhaps I may finish by citing the noble Lord, Lord Bilimoria, who said that, to succeed, this country has to punch above its weight. What a true saying that is.