asked Her Majesty’s Government:
What steps they are taking to encourage international companies to move their headquarters to the United Kingdom and to discourage other companies from leaving.
My Lords, UK Trade & Investment works closely with the regional development agencies and the devolved Administrations to put together attractive propositions for international companies looking to bring their headquarters to the UK. It has a strong record of success in doing so. In 2005-06, the UK attracted 151 such projects, compared to 30 for France and 19 for the Netherlands. The figure of 151 compares with 108 last year and two in 1998-99.
My Lords, I thank my noble friend for that Answer. Is he aware that my Question stems from an article by the noble Lord, Lord Rees-Mogg, which was as usual excellent and well researched, whether one agrees with what he says or not? He indicated that we might be losing international companies to the Republic of Ireland because of the higher rates of tax in this country. In fact, I was so surprised by the article that I sought further information, as my noble friend is aware, and found that over the past 10 years only four international companies had partially moved their headquarters to the Republic of Ireland. While only two international companies moved in in the first year, by 2004-05 the number had risen to 108. Those figures were so surprising and so good that I could not understand them. Will my noble friend consider carrying out some research to show whether those figures are accurate and whether we really are doing everything possible to ensure that international companies both come here and stay here?
My Lords, subject to the obvious restrictions on the figures in the sense that they are from UKTI and relate to the projects that it knows about—they are not internationally published figures—I can assure my noble friend that they are accurate. They indicate that, certainly on the question of company headquarters, this country is doing extremely well, with many companies obviously coming to London—interestingly, from all parts of the world. Last year, about 52 companies came from the United States, 28 from India, 14 from Japan and 10 from Australia. We are performing well. However, we must be clear that there are cases where we have lost manufacturing plants to the Republic of Ireland because it has offered large financial incentives. I still think that it is the right policy that we do not try to match those incentives but stick to making this country attractive economically for companies to come to.
My Lords, can the Minister confirm that what the noble Lord, Lord Rees-Mogg, wrote in his article is right? The corporation tax now being levied in the Republic of Ireland is 12.5 per cent; here it is 30 per cent. Can he also confirm that under this Chancellor our comparative competitive advantage because of a low burden of tax has been greatly eroded, so that we have slipped down the league tables? The Minister must be aware, as I am aware from evidence that we have received at the Tax Reform Commission, of the complaints being made by companies through the big four accountants that the aggressive attitude of the Inland Revenue is forcing people to look to countries such as Ireland and the Netherlands, which now offer a far friendlier business environment, as used to be the case here before this Government came to office.
My Lords, one needs to look at the whole package of conditions offered by a country, not at just one tax rate in the entire tax regime. What the figures clearly show is that a lot of companies from other countries looking at us from the outside think that we are the best country to come to. That is a pretty fair judgment.
My Lords, does not the Minister accept that one of the results of the free market in takeovers in the United Kingdom is increased evidence of the transfer of headquarters overseas following a foreign takeover? No doubt he will agree that the free market in takeovers in the City of London is a major advantage for it in its role as the leading financial centre in the world, but is he satisfied that there is a level playing field in foreign takeovers, particularly with our European partners and with state-owned and state-subsidised purchasers, of which two obvious examples are what is happening to our ports and with Gazprom and Centrica?
My Lords, I do not think that anyone would pretend that there is a level playing field in takeovers, but what should be realised is that, although you can impose restrictions that in the short term may give your country advantages, we now see more and more that American companies will not locate plant or headquarters in other European countries because of such restrictions and the lack of flexibility. That is why they come to this country; they think that it is a more benign environment.
My Lords, has the Minister looked at the possibility of raising in the European Union the question of unfair tax competition? That is particularly relevant with regard to corporation tax. The rate in the Republic of Ireland has been mentioned: it is12.5 per cent. It used to be 10 per cent, and it rose by 2.5 per cent partly because of pressure from Europe. Would it not be sensible for the Government to pursue those avenues to try to ensure a reduction in the level of unfair tax competition?
My Lords, discussions on unfair tax competition can very much lead to an argument on the harmonisation of tax rates. We are not at all keen to get into the question of the harmonisation of tax rates, a matter that, we think, should remain within the country. Countries need to look at the total package that they offer—and it is a question of the total package. A country can have a very good rate for one form of tax, but it is the total tax rate and overall conditions that really matter.