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My Lords, I too congratulate my noble friend Lady Neville-Rolfe on securing this debate. As President Ronald Reagan once said, you cannot be for big government, big taxes and big bureaucracy and still be for the little guy. It is exactly because we on this side of the House are for the little guy that our approach to business growth and tax is what it is.
As your Lordships discussed recently in an employment debate that I had the honour to lead, we know that the current low levels of tax are effective. Since 2010 our economy has grown by 18% and there are 1.2 million more businesses, with unemployment down by over 1 million in the same period. In fact, the UK unemployment rate is, at 3.8%, at its lowest since October 1974. We have 32.7 million people aged over 16 in employment, which again is a record since records began in 1971. As there are more people in work today than ever before and unemployment is at a record low, this means fewer workless households. Worklessness is the number one cause of poverty. No, it is not austerity or Brexit; it is households where there are no earners. That is what jobs do for households and why these numbers, as a direct result of the economic policies of this Government, should give us cheer.
We know that every Labour Government have left office with worse employment figures than they inherited from their Conservative predecessor; one has to ask why. Other than perhaps simple competence, one answer must be the levels of taxation. Let us look closely at some impacts of taxation. Our starting point should be that this is not the Government’s money, so it is not a question of tax giveaways; it is the people’s money. When a Government taxes they should tread extremely carefully; if we damage job creation, the bill comes right back to us through the benefits system.
This Government have been trending in the low-tax direction for some time now and the job statistics back this up. Labour has gone on record as wanting to increase taxation, not least by withdrawing what it calls loopholes and which everyone else sees as highly successful incentives to encourage new businesses to start and entrepreneurs to succeed. One jests but, to take a good example, entrepreneur’s relief has been specifically targeted by Labour. The latest HMRC figures show that it had 40,000 claimants last year, costing some £2.4 billion. I say “costing”, but that is to completely misunderstand the purpose and nature of this and other reliefs. Labour and others will claim that it is simply to benefit the rich, but it is of course available only to entrepreneurs such as me and the noble Lord, Lord Haskel.
To fully declare my interests, I started a business employing one person with my own money; eventually, when we had 45 employees, I took advantage of that relief. Like other entrepreneurs, I would like to do that again some day as I am prepared to take that risk, but not if my capital gain would be taxed at the same level as the salary I could otherwise obtain. Take that relief away and entrepreneurs like me will choose to start businesses in other jurisdictions more favourable to entrepreneurs.
Likewise, as we have heard, starting up businesses is central to our long-term success. The current EIS and SEIS schemes are excellent but too restrictive. Those restrictions come mainly from the EU, which regards these schemes as state aid. Can my noble friend the Minister assure the House that once we are out of the EU, he and his colleagues will look at these restrictions to streamline them, as this will lead to a dramatic uptick in new businesses?
As tax rates have been kept to modest rates, the total tax take has gone up from just over £400 billion in 2010 to £623 billion last year, so the economy flourishes in such circumstances.
I shall pick up the point of my noble friend Lady Neville-Rolfe about the high street, which we all know has been hard hit. Retail has changed beyond recognition. Many online platforms, such as Amazon, eBay and, more recently, Alibaba have facilitated an avalanche of low-cost, often dangerous, non-compliant imports and, more concerningly for us, wide abuse of the VAT system. Welcome measures have been adopted to date, but they do not go far enough. Despite the powers given to HMRC to take action, there are platforms such as Amazon where Chinese sellers with no VAT number sell products. Earlier this week, I was given the details of a Chinese company with no VAT number, despite HMRC saying that is not possible. This company was reported to Amazon in early June, yet is still openly trading with no VAT number. There are many others I could cite, so the current measures are not working.
This is obviously why the US, Australia, India and some European countries are now imposing the duty of collecting VAT on those platforms, correctly labelling them facilitators. Every month, a US state introduces a new marketplace facilitator tax, and the tax take goes up because Amazon and eBay are in the best place to collect that tax. This approach should be adopted in the UK if UK online retailers, let alone the high street, are to survive the huge and rapid changes in the retail landscape that would otherwise lead to massive job losses. Only the introduction of new, specific, targeted legislation will create an environment in which this new retail model allows the high street to survive.
But this criticism pales in comparison to that which I level at some commentators and some members of the party opposite, whose entire approach to taxation would do nothing to encourage either business growth or job creation. It would achieve the reverse. As we know, the shadow Chancellor described corporations as the real enemy. “Corporation” is a convenient pejorative; he is really describing employers and job creators. It is now Labour Party policy to raise corporation tax by seven percentage points. Economic commentators reckon that will cost 160,000 jobs. I ask: if these taxes hurt the little guy—and they will—whose side is Labour really on? The Opposition are fond of saying that they are for the many and not the few but, as far as I can see, unless they are referring to the many government quangos they want to start, the beneficiaries of these disastrous policies would not be UK jobs.
Frankly, I find some of the ideas emanating from the left petrifying. In the recent book People Get Ready! Preparing for a Corbyn Government, Christine Berry and Joe Guinan, who are well known to be close to Mr McDonnell, advocate capital controls, the nationalisation of private pensions and the banks, and the replacement of the Governor of the Bank of England and his senior staff, together with some Permanent Secretaries, with people more sympathetic to the current Labour leader’s views. There is a real risk that the Labour Party will be run by those who do not believe in a capitalist system. They believe that businesses and the economy should be run purely to maximise jobs, and that the return on capital should not be the determiner of the investment.
Fortunately, all Members of this House, I hope, know that this will lead to fewer jobs, more poverty, less tax revenue and poor infrastructure. Thankfully, this Government have remembered another of President Reagan’s mantras,
“whenever we lower the tax rates, our entire nation is better off”.
This is truly a policy for the many and not the few, and one to which I am glad the Government continue to subscribe.