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My Lords, I must start by drawing attention to my entry in the register of interests, as I provide advisory services to a business, and to my role as the Prime Minister’s trade envoy to Uganda and Rwanda. I also thank my noble friend Lady Neville-Rolfe for introducing this debate. Many years ago, I made my maiden speech in a debate about the economy and the need to be more business-friendly. We have come a long way from where we were, but there is still more that we can and should do.
We should start by putting Britain’s economic performance in context. For three years, Britain has become synonymous with one word and one event: Brexit. Our departure has played out like a soap opera that the whole world has watched with increasing despair. Almost every day, news bulletins have been filled with Brexit updates, to the exclusion of almost every other event. This has resulted in one of the most important national stories flying under the radar: that the British economy continues to outperform all expectation.
At a time of considerable global uncertainty, with a potential US-China trade war, many leading economies slowing and protectionism rearing its ugly head again, Britain has continued to grow above expectation. The UK economy grew by 0.3% in the three months leading up to May. The economy has now grown by more than 17% since 2010.
Nowhere is this underreported miracle more obvious than in the UK labour market. At 3.9%, unemployment is down to the lowest level the UK has seen since the 1970s, with a record high of 32.7 million people in employment—up by nearly half a million in the past year and by 3.67 million since 2010. This has worked across the board, with a record high number of women in employment, 1 million more disabled people in work since 2013 and nearly half a million fewer young people out of work.
This is a great triumph for this Government, who reformed the welfare system and created a friendly environment for businesses when taking office in 2010. What is striking is that 80% of the 3 million or so new jobs are full-time and wages are rising at a higher rate.
Investment in the UK is also booming. Recent OECD figures revealed that Britain was the most popular country in Europe for foreign direct investment, with almost double the amount invested in Germany. Ernst & Young recently revealed that Britain was now the world’s most attractive economy for mergers and acquisitions, with £305 billion-worth of transactions in 2018.
The Government can also be proud of their decisions on tax and spending matters. Government borrowing is now down to its lowest level in 17 years and is currently at about £24.7 billion. That is a long way down from the £150 billion it reached in 2010. In part, borrowing is coming down because tax receipts are going up. Last year saw a record amount paid by individuals to the Exchequer, with nearly £623 billion paid in personal taxes—up £29 billion on the year before. This proves that good, old-fashioned Conservative policies work: being business-friendly and keeping taxes low has helped to power our economy.
Yet major areas still cry out for reform. Our planning system remains a significant barrier to businesses looking to invest and grow. Britain also has a considerable problem with productivity. An often-stated statistic is that it takes French and German workers four days to produce what Brits do in five. We need more investment in new machinery to improve productivity; too often, firms are totally reliant on cheap labour to do the work, rather than investing in technology, which is expensive in the beginning but more than pays for itself in the long run.
My noble friend Lady Neville-Rolfe mentioned infrastructure, which includes road, rail and, perhaps most important of all, our aviation capacity. I can think of no other leading country in the world that would take so long to build one extra runway in its capital city; we are decades behind where we need to be when it comes to our airports. When I compare us to Asian and African economies, I am embarrassed by how slowly Heathrow’s additional runway is going. Flights are our bridge to other countries. If we are to be an outward-looking nation post Brexit, speeding that up would help.
Of course, our economy faces many other challenges, including the time it takes to do CRB checks or open a bank account, which can be as long as six weeks. Then, there is the problem of VAT registration, despite the fact that the UK is ranked about ninth for ease of doing business. We need to improve in all these areas to encourage inward investment.
I want to focus on the tax system for a moment. We should be looking to make our tax system as appealing and competitive as possible, particularly for small businesses. Britain is one of the only countries in the world where companies have to pay a tax to employ people. I understand the logic behind employees paying tax, but an employer having to pay national insurance contributions to employ them is too much. There is also a strong argument for scrapping corporation tax and replacing it with a 1% tax on turnover, with the first £250,000 exempt. This would be a massive boost to small businesses and would make Britain one of the most competitive places in the world to do business. It would also help to solve the conundrum that the Treasury faces of how to capture large organisations such as Amazon and Google that have a high turnover in the UK but pay very little tax. What those companies do is not illegal, but it is unfair to many of their competitors; this would help to level the playing field.