Economy: Enterprise, Taxation and Manufacturing

Part of the debate – in the House of Lords at 12:27 pm on 22 May 2008.

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Photo of Baroness Buscombe Baroness Buscombe Conservative 12:27, 22 May 2008

My Lords, I, too, thank my noble friend Lord MacLaurin for introducing this important and timely debate on a crucial subject concerning the role of enterprise in the United Kingdom. I declare my interests as chief executive of the Advertising Association and as a non-executive director of Three Valleys Water plc, which is a water company. I will focus my contribution on three areas: regulation, the creative industries and the disproportionate and disruptive power of some non-governmental organisations.

UK businesses are now facing massive economic uncertainty. A decade of Labour Government has meant a major increase in taxation, as well as a raft of new regulations. Let us be honest; regulation is taxation by another name. It is essential that the UK remains the most attractive and competitive location for larger businesses to base their offices. We must never forget that most businesses can just as easily conduct their operations from New York, Hong Kong, Dubai or Mumbai. It is also essential that we continue to resist unnecessary regulation and over-taxation, which would drive business and investors elsewhere.

Sir Martin Sorrell, chief executive of the advertising firm WPP, has warned against the planned tax changes that would see large chunks of multinational companies' overseas profits brought within Britain's tax net. He said:

"If the measures ... are introduced, ratified, confirmed and implemented, we will be taking a very serious look at the advantages and disadvantages [of moving]. I think the proposals will lead to the exodus of a number of multinationals. I have been surprised by the number of our clients and non-clients who are considering this action".

Earlier this week, at the annual CBI dinner, the president of the CBI said:

"What business needs is clarity, certainty and competitiveness—what we have got is more cost, complexity and capriciousness—and we can't go on like this".

Let us take the creative industries as an example. They are collectively a huge and growing contributor to the economy, but I know from my own experience that they are feeling particularly fragile in the current economic climate of uncertainty and high taxation. More needs to be done to give this sector freedom to thrive and there are a number of ready solutions. For example, we should look to exempt the creative industries from changes in legislation such as TUPE and capital gains tax, which damage free and fair competition in the market and undermine entrepreneurialism.

TUPE has been extended to certain professional sectors such as the advertising industry, for which it was never well adapted. It threatens to strip advertising agencies of the flexibility they need for the development of new ideas and concepts for new clients. TUPE particularly hurts the smaller agencies, the small businesses that do not have the legal and personnel resources to manage it. My experience of working in the creative industries is in stark contrast with my experience as a director of a company in a heavily regulated industry. That is simply because there is an enormous difference between working in an inflexible, bureaucratic and heavily regulated environment and working in an industry with clearly defined boundaries of self-regulation.

It is no accident that the creative industries are growing at twice the rate of the rest of the economy when they are not unnecessarily constrained by the heavy hand of regulation and compliance. Advertising regulations deliver fast, free and flexible, albeit strong, consumer protection and, as a bonus, the whole regulatory process is paid for by the industry at no cost to the consumer. We should therefore look to adapting existing self-regulation models to more business sectors, not to additional legislation, to set standards.

I wish to consider another sector constantly undermined by regulation. A survey conducted last year by the University of Reading among industry leaders found that regulation, particularly poorly drafted and non-evidence-based regulation, was perceived to be the biggest single threat to the future competitiveness of the UK food and drink manufacturing sector. Given that food and drink is the largest single manufacturing sector in the UK, with a turnover of £74 billion, and accounts for 14 per cent of the total manufacturing sector, its views must be listened to.

One of the things that struck me in recent years has been the extent to which industry appears to be fixed in the headlights of non-governmental organisations. There seems to be a conventional wisdom that the more industry concedes the better for everybody. In my experience that is entirely wrong. NGOs are insatiable and the more conceded the more damage they do and the ever more they demand. Many NGOs appear simply to want to undermine trust in business and to believe that their rationale is to cause damage. It is disappointing that NGOs lobbying the Government and opposition parties often pursue an agenda of their own, focusing on a single set of issues. They have no duty to refer to the wider picture. In some cases, especially in relation to consumer affairs, consumers can be bombarded with mixed and negative messages without fully comprehending the nature of the source of criticism. The fallout from this in some instances significantly and unjustifiably affects the balance sheet by damaging the reputation of business. Shareholders and consumers lose out.

Given my eight years here in your Lordships' House as a shadow Minister across seven different briefs, I can attest to persistent, powerful and very professional lobbying by NGOs across different sectors. But should that not be largely the function of the taxpayer-funded National Consumer Council? It would be much healthier if NGOs sought to work with industry and government to tackle complex social problems in the round.

The Government's priority should be to build a more enterprising society in which all who have the initiative, skills and drive have the opportunity to start and run a successful business. The Government should create the best environment in the world to start and grow a business and to tackle specific barriers that inhibit successful enterprise. Enterprises do not want government to be a burden on their backs; they want government to be an understanding and supportive friend at their side. The Government should seriously question whether they should intervene at all, not, as they currently do, take it for granted that they must.

At this week's CBI dinner the Chancellor of the Exchequer said of competitiveness:

"We will do nothing to jeopardise that".

I have to say that all those sitting in Grosvenor House listening—more than 1,000 businesspeople—found that statement completely breathtaking. I say in response to the Chancellor and to the Minister, please prove it.