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UK: International Competitiveness

Volume 719: debated on Wednesday 23 June 2010

Question

Asked By

To ask Her Majesty’s Government what steps they intend to take to protect and strengthen the United Kingdom’s international competitiveness.

My Lords, we are committed to maintaining and improving our international competitiveness by restoring macroeconomic stability, helping provide infrastructure, science and research and better linking higher and further education into the economy. We will ensure that regulation is proportionate and will work towards having the most competitive corporate tax regime in the G20.

I thank the Minister for her reply and welcome the Government’s recognition that reducing the deficit depends fundamentally on continued economic growth. In yesterday’s Budget, the independent Office for Budgetary Responsibility determined the revenue maximising rate for capital gains tax. Given that the top rate of income tax of 50 per cent is a deterrent to attracting talented individuals and investment to the UK, will the Minister support asking the OBR to investigate what top rate of income tax would maximise Exchequer returns?

The Office for Budgetary Responsibility was established to form independent judgments on the overall shape of government finances, not to provide policy advice on different taxes. Beyond a technocratic assessment of the methodology and central assumptions of measures, including tax, the OBR has no remit on tax policy.

Will the noble Baroness explain to the House how reducing capital allowances, imposing a levy on the banks, increasing VAT and shrinking domestic economic demand at a time when demand in some of our most important export areas—notably the eurozone—is contracting, will assist the international competitiveness of UK firms?

I am afraid that noble Lords have heard this answer before and will hear it again. We are where we are. Given the fiscal plans that this Government inherited, I am afraid that we would put the recovery at risk if we did it any other way. Threatening higher tax and interest rates would affect not just the Government but families and businesses. The noble Lord could have answered that question himself a few months ago.

Does my noble friend accept that one of the reasons why productivity has fallen in this country is the enormous amounts of taxpayers’ money that have been thrown at public services which have not been reformed? Following the Budget, the opposite is now true. As funds for government departments fall, productivity will go up and may even match the rises in productivity in the private sector.

My Lords, can the Minister give an assurance that the Government will do their utmost to provide high-speed broadband in rural areas in order not to blunt the competitiveness of key development and employment in that part of our nation?

Yes. Legislation for this is on the way. Noble Lords must already know that we are keen and concerned to ensure that the regions are kept as up to date as everywhere else. We do not want this to be London-centric or eastern-centric; we want to make absolutely sure that rural areas, such as where I live, have as soon as possible all the infrastructure that they need.

My Lords, if we are to be internationally competitive, surely we should support industries such as the nuclear energy sector, which has great potential in the UK and for exports. Why on earth have the Government withdrawn the loan to Sheffield Forgemasters? That is a disastrous decision.

What we as a Government want to do is make the conditions right whereby all parts of industry can grow.

My Lords, there is time for both noble Lords. Perhaps we should have the noble Lord, Lord Cotter, first, and then the noble Lord, Lord Jones.

My Lords, the Government are rightly committed to reducing bureaucracy to help competitiveness. Will the Minister look at the hurdles faced by small businesses when they try to borrow? They include new charges and fees along the line, audits, facility fees, reviews, management fees and so it goes on. These are clearly blocks in the way of the ability to borrow. Will the Minister also consider the high rate at which businesses frequently have to borrow through the banks?

The enterprise finance guarantee scheme has been extended and there will be a Green Paper soon in which we will be looking at all these issues.

My Lords, our international competitiveness depends on producing a value-added, innovative economy. That calls for skilled people. Will the Minister explain how, after 11 years of full-time, compulsory and free education—which is something that 5 billion people on this planet do not have—half the young people who will take a GCSE this month will not get grade C or above in English and maths, and will therefore be unemployable?

The noble Lord will of course be delighted that we are bringing forward the Academies Bill and he will no doubt be supporting it. We want to ensure that British higher and further education are better linked into our economy. Our priorities include an increasing emphasis on adult education, stripping out some of the bureaucracy around further education, and putting an end to the outdated distinction between blue-collar apprenticeships and further education on the one hand and university education on the other. BIS has already redeployed £200 million from Train to Gain to fund 50,000 extra apprenticeships and an additional £50 million towards capital spending on colleges.

My Lords, does the noble Baroness recall the estimates made by the EU enterprise and industry commissioner, Mr Gunter Verheugen, that EU overregulation was costing us some 6.4 per cent of GDP per annum—around £84 billion today? Why do Her Majesty’s Government insist on staying on the “Titanic” when the iceberg of international competition is staring us in the face?

The noble Lord will be very pleased to know that we have already said that we will look seriously at the gold plating that we have been doing to European Union regulations. I am sure that he will support us in that.