SOUTH BASILDON and East Thurrock MP, Stephen Metcalfe rose on the floor of the House of Commons to recommend the budget.
Mr Metcalfe said: “I am pleased to have an opportunity to contribute to this most important debate. Before I start, I put on record my appreciation to my right hon. Friend the Chancellor for his statement yesterday, for putting growth at the heart of the Budget, for unashamedly backing business, and for rewarding hard-working families. Those are the areas I want to focus on, but first I want to talk a little about the cut from 50% to 45% in the top rate of tax.
I have to say that I did not campaign for the cut and I was surprised to see it in the Budget, although that does not mean I do not welcome it. As a Conservative, I believe that all taxes should be as low as possible so that everyone can keep as much of their money as possible and spend it how they wish. But I recognise that at a time of national austerity, when public sector workers are experiencing a pay freeze and then very modest pay increases, and ordinary families are struggling with high fuel and energy prices, giving what appears to be a tax cut for the wealthiest in society seems to make no sense. Our hearts say this cannot be right, but if we use our heads, look at the hard facts and stop listening to the class war rhetoric of the Opposition, it begins to make a little more sense.
The 50% tax rate left Britain isolated as the country with the highest income tax rate in the G20—higher than our competitors such as the United States and countries in Europe. It made Britain a less attractive place for wealth and job creators to set up and do business. It encouraged the wealthiest in society to be more creative about where in the world they paid their tax. It saw £16 billion of income deliberately shifted into a previous tax year, meaning that the total take from the 50% rate was only around £l billion. It did not raise the levels of income expected and it made Britain less competitive.
The higher tax rate made Britain less competitive, and if we are less competitive, it means less growth, fewer jobs, reduced prospects for economic recovery and fewer tax cuts for the rest of us. Despite the perception, therefore, that this cut benefits the wealthiest, I believe that it benefits us all. Having a top rate of 50% rather than 45% raises only £100 million in direct tax, whereas the other Budget measures introduced yesterday raise five times that amount—£500 million.
We should not listen to Labour on this matter. Its aim is to reignite the class war and divide Britain along the lines of envy for its own political gain.
“I want to say to the people of South Basildon and East Thurrock, “Ask yourself this simple question: what is in the best interests of you and your family? If you answer economic growth, better job prospects, low interest rates or lower taxes, welcome this change, because it goes some way to delivering those aims.” On its own, however, it is only a small step. To achieve real growth, we need more, and I am pleased that we are getting more. The Chancellor both confirmed existing growth measures and announced new ones. As a member of the Science and Technology Committee, I am pleased that the science budget is receiving continued support. Investment in science and technology is vital if we are to emerge from financial austerity. New technologies, deployed for our own economic gain, can provide both jobs and growth. I therefore welcome the maintenance of the £4.6 billion science budget. I believe—I think the Chancellor does too—that science and technology form the basis of our future competitiveness.
Investment in sectors that Britain excels in is also vital. Investments such as in the Francis Crick Institute at St Pancras, the establishment of a UK centre for aerodynamics, which will encourage innovation in the aircraft industry and help design and commercialise new ideas for decades to come, and the £100 million of support, alongside the private sector, for investment in major new university research facilities are important parts of that support.
Also important are the changes to research and development tax credits to encourage businesses to invest in innovation and technology. We also need to improve links with small businesses and the research base to assist in the commercialisation of research and, I hope, capture the value that can come from that. These will be the key drivers of economic growth, and the Government should continue to strive to create the best possible operating environment in which this can take place to encourage greater investment and international interest. We want the international research community to see the UK as the best place to invest in science and technology. I am therefore pleased that the Science and
Technology Committee will be looking at how we can bridge the valley of death—the chasm between concept and commercialisation.
This goes wider than just science-based businesses, however. We want all businesses to see the UK as the best place to set up and do business, and I welcome the measures that the Chancellor has taken to ensure that this becomes a reality. The reductions in corporation tax, the introduction of corporation tax relief for video games, animation and high-end television, and the investment in broadband provision and infrastructure are all welcome additions to the growth programme.
Obviously, any rise in cost base will have an impact, but we are working hard to reduce that to the absolute minimum, and we are putting in place a framework around which businesses can grow that will mitigate the 5.6% rise.
We all welcome the investment in infrastructure, which will be a driver for growth, although I add the caveat that I and my constituents remain wholly unconvinced that an airport in the Thames estuary is the right solution to maintaining our hub status. I would therefore encourage the Government to listen to my hon. Friend Lorely Burt, who made a very good bid for that increased capacity in Birmingham.
I also want to put in a plea for small and medium-sized enterprises. In 2009, they accounted for 49% of private sector turnover. SMEs are vital to the economy. Cutting corporation tax, abolishing Labour’s job tax and offering support through the national loan guarantee scheme are all welcome, I am sure. However, if SMEs are to operate at their full potential, regulation, red tape and bureaucracy must be cut. They have been strangling the economy for too long. I am therefore encouraged to see measures that will allow greater freedoms for businesses in this area. My right hon. Friend the Chancellor’s announcement yesterday that he plans to reduce the number of UK SMEs required to undertake an audit and to reduce the burden of financial accounting for UK businesses has to be welcome. I hope that the consultation on a new cash basis for calculating tax, which the Federation of Small Businesses has welcomed, will benefit many small and micro-businesses, allowing them to concentrate on growing their businesses, rather than spending time, money and effort fulfilling requirements that were designed for much larger businesses.
Finally, in the short time I have left, I want to talk about jobs. Businesses are vital for growth, but they are equally vital for tackling unemployment. I am delighted to see that unemployment is beginning to stabilise.
Dealing with unemployment, through the building business and enterprise loans, will allow jobseekers to start their own businesses and unleash a new generation of entrepreneurs. However, we should not forget that our existing small and medium-sized enterprises have the potential to deliver sustained employment. We should redouble our efforts to create confidence for businesses to take on staff. I therefore reiterate my call to make it easier for firms to hire staff in the knowledge that employment regulation will support them if things do not work out.
As we emerge from the deepest recession in living memory, I applaud the government’s commitment to addressing an over-leveraged economy, an unsustainable budget deficit and a broken model of growth, inherited from the previous Administration. Our plan of fiscal responsibility has allowed the UK to surge ahead of the curve. We have become a safe haven in the sovereign debt storm. As a result, we have been able to deliver record low interest rates for families, businesses and taxpayers, yet still remove millions of people from paying any tax at all, by increasing the tax threshold. Although we are not immune from events taking place on our own doorstep, we can—as this Government are demonstrating—steer this country out of a financial quagmire and deliver growth, employment and a future brighter than any alternative the Opposition may offer.