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Business Promotion

2. Mr. Tim Boswell (Daventry): What recent steps he has taken to promote business activity in the UK. [11327]

3. Adam Price (East Carmarthen and Dinefwr): What additional steps he plans to take to increase output in the manufacturing sector. [11328]

The Chief Secretary to the Treasury (Mr. Andrew Smith): The Government are committed to creating and maintaining the right climate for businesses to flourish, to invest and to grow. Of course, no country can insulate itself from world economic events, but the UK is now much better placed than in the past to weather the global situation. The Government will continue to steer a course of stability with low inflation, sound public finances and measures for investment, skills and research and development, which are so crucial for manufacturing industry in particular.

Mr. Boswell: In the light of that reply, will the Chief Secretary tell the House whether he is concerned that last year the Government collectively introduced a record 3,865 new regulations? Does the right hon. Gentleman agree with the director general of the Confederation of British Industry, who was reported in the press on Tuesday, when he stated:

For the sake of businesses large and small who are worried about their cost structure and their competitiveness, will the right hon. Gentleman tell the House when it will all stop?

Mr. Smith: Of course it is important that we cut and minimise the regulatory burden on business. That is why we raised the threshold on statutory audit for small businesses, which benefited more than 100,000 small businesses. It is why, as we announced in the Budget, we are consulting on aligning the tax treatment of firms with the accounts that they prepare for statutory purposes, thereby cutting the paper trail. We are simplifying VAT administration, including raising the threshold for the flat-rate scheme and the qualification for annual accounting.

The greatest burdens that we have taken off business are the 10 per cent. level of inflation, the 15 per cent. interest rates for more than a year and the ballooning national debt, which Conservative Members imposed on British business when they were in government.

Adam Price: The Chief Secretary will know that there have been a further 70,000 job losses in UK manufacturing over the summer period alone. Will he not recognise that the most important factor in the problems of manufacturing over the past five years has been the persistent overvaluation of the pound? Will the Government not use the policy tool at their disposal to bring about a more competitive exchange rate by intervening in currency markets? That is called sterilised

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intervention, which sounds a little painful, but it is a good deal less painful than what is currently happening to manufacturing communities.

Mr. Smith: Most painful for manufacturing industry in Wales and for business throughout Britain would be a return to the instability that we have seen in the past. What we do for business is maintain conditions of economic stability, low interest rates and low inflation while introducing measures to stimulate investment. We have already cut corporate taxes on large and small businesses. We have introduced the research and development tax credit to help small businesses, and we are consulting on extending that measure to larger businesses. That is something that would be greatly welcomed by manufacturing industry in Wales and elsewhere. We have also cut the capital gains tax regime to stimulate more investment.

Even in the current difficult circumstances, which manufacturing of course faces, manufacturing investment for the second quarter of this year compared with the same quarter last year was increasing. The Government stand behind manufacturing industry with policies for economic stability, investment and skills to improve competitiveness. At the end of the day, it is competitiveness that ensures the future of business and the jobs that depend on it, along with measures such as the new deal. The hon. Gentleman might have congratulated us on the contribution that the new deal has made to cutting unemployment in Wales.

Kali Mountford (Colne Valley): I ask my right hon. Friend not to take any lessons from the Conservative party, whose policies of instability and lack of investment cost millions of manufacturing jobs.

Does my right hon. Friend agree that the manufacturing sector is moving at different paces even within itself, and that those companies that do well are investing? What does he intend to do to ensure that those that are not investing are incentivised so that the plant and machinery of the previous century is not the basis of the UK's economic future?

Mr. Smith: I have already referred to the improvements that we have made in the capital gains tax regime to bring forward extra investment. I have referred also to the research and development tax credit, which is stimulating new investment in small businesses. As my hon. Friend will be aware, we have also set up the regional development agencies, and we are establishing regional development venture capital funds to bring new investment forward. With the establishment of the manufacturing advisory service and the setting up of manufacturing centres of excellence in every region, including my hon. Friend's, there will be liaison with the businesses that she is concerned about. There is evident proof that the Government are committed to manufacturing and securing investment for the future, and to delivering on those commitments.

Mrs. Louise Ellman (Liverpool, Riverside): What action is my right hon. Friend considering in relation to the future of the electronics industry, with particular reference to the future of the Marconi site in Liverpool?

Mr. Smith: As I have said, we have already introduced a research and development tax credit. We are consulting

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on the extension of that measure to larger firms. That has been warmly applauded by business. I refer my hon. Friend to the initiatives that we are taking, through the regional development agencies, to ensure that where there are special regional areas of strength, such as the one that she has identified, we build on the research that takes place at a very high level in our academic and other research institutions so that "discovered in Britain" is translated into "manufactured in Britain".

Mr. Michael Howard (Folkestone and Hythe): The Chief Secretary is right to emphasise the importance of stability. Does he agree that a stable legislative framework is important for business activity?

Was the Chancellor, the Chief Secretary or anyone else in the Treasury aware that the Secretary of State for Transport, Local Government and the Regions was to threaten the rail regulator with emergency legislation to prevent him exercising his existing powers?

Mr. Smith: My right hon. Friend the Secretary of State has made his position clear on a number of occasions. His statement on Monday was followed by the statement of my right hon. Friend the Prime Minister yesterday during Prime Minister's questions. I have nothing to add to what has been said.

Mr. Howard: Is it not the case that Treasury officials were present at all the meetings of the Secretary of State? Is it not the case also that the Chancellor and the Treasury were well aware of what was going on? Is not the only reason for the Chief Secretary's prevarication this morning the fact that he knows and the Chancellor knows that what the right hon. Gentleman did was absolutely utterly indefensible?

Mr. Smith: If the right hon. and learned Gentleman thinks that giving Railtrack a blank cheque was the right thing to do, he does not have the support or the confidence of the people of this country. As I have said, these are questions properly for my right hon. Friend the Secretary of State for Transport, Local Government and the Regions. [Interruption.] He has answered them on the basis of the decision that he took—[Interruption.]

Mr. Speaker: Order. Let the Chief Secretary answer the question.

New Deal (Long-term Unemployed)

4. Gillian Merron (Lincoln): What plans he has to extend the new deal to assist long-term unemployed people to find work. [11329]

The Chancellor of the Exchequer (Mr. Gordon Brown): Since spring 1997, long-term unemployment has been cut by two thirds.

From April 2001, as part of our continuous improvement in it, we have intensified the new deal for the long-term unemployed with our employment action teams and with the extension of employment zones.

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Further help for the unemployed will be part of the discussion that will arise from the pre-Budget report, which I can tell the House will be on 27 November.

Gillian Merron: May I draw my right hon. Friend's attention to the experience of my local employment service, which has used the new deal to help about 2,400 people into work in Lincoln, but whose experience tells it that to assist small numbers of long-term unemployed people, or perhaps even those who have never worked, it is more expensive to provide training and support? I call on my right hon. Friend to take account of that in the pre-Budget report to ensure that we have the new deal funded and catering properly for those who are the hardest to help into work.

Mr. Brown: I am grateful to my hon. Friend. What has been done in her constituency and other constituencies can indeed be extended so that we can help those young people or adults who, for some reason or other, have fallen through the net and remain long-term unemployed. I am obviously in discussions with the Secretary of State for Work and Pensions; we are trying to look at measures for areas where there are real problems that have still to be dealt with. It is time to consider the way in which we can extend the new deal and match what we do for people in long-term unemployment with what we are doing with Ambition IT, Ambition Finance and Ambition Construction; those initiatives meet the needs of employers by helping long-term unemployed people obtain the skills needed for the jobs that are available.

Mr. Michael Jack (Fylde): The Chancellor may be aware that yesterday at 1 o'clock in my Fylde constituency, Snackhouse savoury snacks manufacturing business went out of business with the loss of 400 jobs. While we have had excellent support already from the Employment Service and the North West development agency, may I seek his assurance that, in spite of what his right hon. Friend has just said, he will re-examine, before 27 November, the costs that companies such as Snackhouse have had to bear as a result of new business costs such as the climate change levy, new employment legislation and domestic rises in local taxes? Companies such as Snackhouse needed help; so will their successors. Will the Chancellor assure me that he will look again at costs for business?

Mr. Brown: Of course I sympathise with the right hon. Gentleman and his constituents who have lost their jobs. These have been difficult times for many businesses, particularly in the manufacturing sector. When there are substantial redundancies, he should know that rapid response teams are brought in by the Department for Work and Pensions, and the relevant regional development agency, as he rightly mentioned, puts itself at the service of the company and employees looking for jobs.

The way to deal with the problems that are faced is to run the correct monetary and fiscal policy. It should be noted that, this morning, the Bank of England announced that it is cutting interest rates by a further 0.5 percentage points; it is adopting a pre-emptive policy. Seven interest rate cuts have now been announced this year. The Bank of England adopted a pre-emptive approach in 1998 when there was a slowdown in the economy; it is doing exactly the same now. I believe that the cut will be warmly

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welcomed throughout the country. As for individual measures, we have cut corporation tax and small business corporation tax; we have cut capital gains tax from 40p to 10p for business assets for more than two years. We are introducing the necessary taxation measures; for small businesses, we are removing the responsibility for audit, and allowing them to submit one set of accounts to the Inland Revenue, not two. We are also introducing a package of deregulatory measures that will simplify VAT for the smallest businesses in the country. In all those areas, despite what the right hon. Gentleman said, we have been cutting taxes for business.

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