Business and Job Creation

Oral Answers to Questions — Treasury – in the House of Commons at 11:30 am on 11th December 2012.

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Photo of Chris Skidmore Chris Skidmore Conservative, Kingswood

What steps he is taking to encourage private sector job creation.

Photo of Andrew Jones Andrew Jones Conservative, Harrogate and Knaresborough

What steps he is taking to support business creation.

Photo of Richard Graham Richard Graham Conservative, Gloucester

What steps he is taking to encourage private sector job creation.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

Some 1.2 million private sector jobs have been created since the first quarter of 2010. Last year more new businesses were created than in any other year on record. In the autumn statement we took further steps to support job creation and business creation by reducing the corporation tax rate to 21%, extending the small business rate relief scheme to support 500,000 small businesses and increasing by tenfold the annual investment allowance to £250,000.

Photo of John Baron John Baron Conservative, Basildon and Billericay

The Labour Government more than doubled the national debt. This Government have done well to reduce the deficit by 25%, but this still means that we are adding to our debt, albeit at three quarters the pace. Financial repression and quantitative easing will ease the debt somewhat through higher inflation, but may I encourage the Chancellor, despite some positive measures in the autumn statement, to be bolder in encouraging economic growth, including by cutting small business corporation tax, which is the only credible way—

Photo of George Osborne George Osborne The Chancellor of the Exchequer

My hon. Friend is right that the deficit is how much we add to the debt each year. That is why we have to bring the deficit down—it has come down by 25%—but he is also right that we have to have a competitive private sector. We have to have a private sector-led recovery, which is why we have increased the annual investment allowance, for example. He recommends a cut in the small company corporation tax rate.

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Interruption.

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The shadow Chancellor from a sedentary position said, “That’d be a good idea,” but he was going to put the rate up when we came into office. We have cut the rate to 20% and increased the annual investment allowance.

Photo of Chris Skidmore Chris Skidmore Conservative, Kingswood

Does the Chancellor agree that increasing the annual investment allowance from £25,000 to £250,000 will make a huge difference to local small businesses and lead to additional and vital job creation in the private sector?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I think it will help, alongside the reduction in the small company rate. I am pleased that the Federation of Small Businesses said we had listened to the concerns of members, and the chambers of commerce were also supportive. Over the next two years this measure will encourage investment from small and medium-sized businesses, although all businesses that invest will benefit.

Photo of Andrew Jones Andrew Jones Conservative, Harrogate and Knaresborough

As someone who has set up small businesses myself, I think that encouraging small business creation is part of the solution to the country’s economic problems. Does my right hon. Friend agree that it is a sign of the strength of the private sector in this country that we have seen new businesses created in such record numbers and that this has been one of the factors in generating the 1 million-plus private sector jobs created since the election?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

It is welcome that more than 1 million jobs have been created in the private sector. We now have record female employment, which is also welcome, while the number of those on out-of-work benefits has fallen by 190,000, which is something I hope everyone would welcome.

Photo of Pat McFadden Pat McFadden Labour, Wolverhampton South East

May I congratulate the Chancellor on his U-turn on capital allowances for manufacturing industry? When did he realise that his previous stance of dismissing them as complex reliefs was wrong and at total variance with the Government’s stated aim of supporting manufacturing? When did his conversion to supporting these allowances take place, as long called for by Labour Members and the Engineering Employers Federation?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

The first thing I would say is that we reduced the small companies rate—which would have gone up to 22% under the plans put in place by the last Labour Budget—to 20%. We have now introduced a £250,000 annual investment allowance for small and medium-sized businesses for the next two years. The right hon. Gentleman says that the Labour party had been calling for this. It had 13 years to introduce a £250,000 annual investment allowance. There were all those Budgets that the shadow Chancellor wrote and he did not put it in place.

Photo of Barry Sheerman Barry Sheerman Labour, Huddersfield

The Chancellor will know that the all-party parliamentary groups on Yorkshire and North Lincolnshire and on manufacturing welcome the change in attitude towards the capital allowances. However, businesses in Yorkshire are saying that they are looking for some leadership and some light at the end of the tunnel, and they ended up feeling thoroughly depressed after watching the autumn statement. When is the Chancellor going to show more leadership? Let us see some light at the end of the tunnel.

Photo of George Osborne George Osborne The Chancellor of the Exchequer

I have to say that the reaction to the autumn statement from the business organisations of Britain was very positive. It was warmly welcomed because we are maintaining control of the public finances, which is a prerequisite for stability and recovery, and because we are taking steps to cut the corporation tax rate and increase the annual investment allowances. I still do not know whether Labour supports the cut in corporation tax. Its Front Benchers have been sending out confused messages on that over the past couple of days. Perhaps we will hear from the shadow Chancellor when he gets to his feet.

Photo of Rachel Reeves Rachel Reeves Shadow Chief Secretary to the Treasury

The Chancellor knows that business success is key to getting our economy growing, to getting the deficit down and to creating jobs. Will he therefore tell us what was the judgment of the Office for Budget Responsibility on the impact on growth of the measures that he announced in the autumn statement last week?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

The Office for Budget Responsibility said that there was a measurable impact on growth in the short term, and of course we have to pay for this in the long term, so it has taken that into account. I have always said that we want to improve the long-term supply potential of the British economy, and one of the most encouraging signs is that the UK, which was becoming a less and less competitive place to do business, is now back in the world’s top 10 competitive economies.

Photo of Rachel Reeves Rachel Reeves Shadow Chief Secretary to the Treasury

I am not surprised that the Chancellor does not want to answer my question, because the OBR’s assessment is that his measures will add just 0.1% to UK gross domestic product by 2018. That must also be set against the fact that growth has been downgraded this year, next year and every year of this Parliament. Is it not the truth that the Chancellor has no plans for jobs and growth, and that that is why the Government are set to borrow an extra £212 billion during the course of this Parliament, breaking the fiscal rules that he gave to this country?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

When the Labour party was in office, its approach led to the economy shrinking by 6% of GDP. We have set in place plans to ensure that the deficit it left us is dealt with and that our economy is more competitive. I would have thought that the hon. Lady would welcome the fact that we have over 1 million new jobs in the economy and a record rate of small business creation. That is something to celebrate in our economy.

Photo of Nick Gibb Nick Gibb Conservative, Bognor Regis and Littlehampton

May I welcome the Government’s announcement in the autumn statement to put more resources into ensuring that multinationals pay their fair share of tax? That is a key measure to help UK-based business creation. May I also suggest that the Chancellor consider introducing a requirement on multinationals to disclose in advance significant connected party transactions as a way of speeding up transfer pricing inquiries?

Photo of George Osborne George Osborne The Chancellor of the Exchequer

My hon. Friend makes a good point. Obviously, everyone is frustrated when they see multinational companies breaking the tax laws or interpreting them in such a way that they basically avoid paying corporation tax. That situation is not acceptable. We are putting more money into the enforcement of the rules and working with countries such as France and Germany to change the international rules so that we can have a better situation in the future. It would not work if we just acted unilaterally, because these are by definition multinationals. That is why we have to work with other countries.