HC Deb 15 December 1994 vol 251 cc1056-9
4. Mr. Miller

To ask the Chancellor of the Exchequer what estimates he has made of the effect of his Budget on investment levels in the United Kingdom economy.

9. Dr. Lynne Jones

To ask the Chancellor of the Exchequer what impact his Budget will have on investment levels in the United Kingdom economy.

11. Mr. Mandelson

To ask the Chancellor of the Exchequer what effect his Budget will have on investment levels in the United Kingdom economy.

The Financial Secretary to the Treasury (Sir George Young)

The Budget reinforces our strategy of ensuring sound public finances and low inflation, providing a good climate for investment. We expect investment to grow strongly in the coming year, with whole economy investment increasing by 5¾ per cent. and business investment at nearly 11 per cent.

Mr. Miller

That strategy has resulted in Britain coming 22nd out of 24 countries in an OECD survey of investment as a function of gross domestic product, and it has resulted in a steady decline in manufacturing investment in plant and equipment since 1990. Will not that strategy continue to undermine Britain's manufacturing base?

Sir George Young

I do not see how the hon. Gentleman can claim that 11 per cent. growth in business investment next year is in any way disadvantageous. What would damage investment in this country are the Labour party's proposals to help itself to substantial sums of money from industries which were nationalised—money that it would find only by cutting investment and infrastructure and thus creating unemployment. We will listen to no lectures about investment from the hon. Gentleman.

Dr. Jones

The Minister talks about business investment, but surely he is aware that even the most optimistic forecasts do not predict that it will reach the level it was before the recession. Therefore, he will not be surprised to learn that at a recent meeting with the West Midlands Engineering Employers Federation I was told that, apart from a little help that will be provided to tiny businesses, the Chancellor's Budget will do absolutely nothing to secure the long-term sustained growth in business investment that is necessary if we are to reach the investment levels of our competitors to which my hon. Friend the Member for Ellesmere Port and Neston (Mr. Miller) referred.

After 15 years of Tory Government, is the Minister not ashamed of that record? According to an answer from the Minister of State to my hon. Friend the Member for Great Grimsby (Mr. Mitchell)—[Interruption.]

Madam Speaker

Order. This is a total abuse of Question Time. Both questions and answers have been extremely long, and it is totally unfair on those hon. Members who have questions listed further down the Order Paper and who can reasonably expect to be called. I want brisk questions and answers.

Sir George Young

The hon. Lady is not correct. A recent Confederation of British Industry survey, published in October, showed that the balance of firms planning to spend more on plant and machinery is at its highest level since April 1989.

Mr. Mandelson

Will the Minister congratulate those in the north-east—notably those in my constituency of Hartlepool and those in the Northern Development Company—who have worked so hard to secure the recently announced investment by Samsung Electronics in Teeside? Does that not demonstrate a very powerful case for a close partnership between the private and public sectors, as well as the importance of effective regional policies and Government incentives for investment? Will the Minister therefore repudiate the Employment Secretary's demand that such essential industrial assistance be cut?

Sir George Young

Of course I pay tribute to those who have won the orders. One reason why the north-east has done so well is that the Government have consistently supported that area through development corporations, city challenge and enterprise zones, and our policies are now paying off.

Mr. Renton

I congratulate the Financial Secretary on what he has told us. What budgetary measures does he think need to be introduced in order to maintain—let alone increase—investment levels if serious suggestions were made by serious people that Britain should leave the European Union?

Sir George Young

My right hon. Friend is right. Many investors, particularly international companies, want to invest in a country that is at the heart of Europe, and that is a key part of our selling strategy. A healthy economy, sustainable recovery, low inflation and rising profitability are what matter, and we now have them.

Mr. Jenkin

Why does Britain have the most punitive rate of capital gains tax in the entire developed world? Would not it boost investment if we were to reduce or even abolish CGT? Japan has no CGT, and it works perfectly well.

Sir George Young

There will be opportunities as the Finance Bill goes through Committee to develop at length the subject of CGT. It is worth recording that 99 per cent. of taxpayers do not pay CGT, so one must put the problem in perspective.

Mr. Quentin Davies

Is not the 11 per cent. projected increase in business investment exceptionally high? Although the Labour party—for obvious reasons—does not want to acknowledge that fact, is it not irrefutable evidence of the confidence that the Government's policies have engendered in the economy?

Sir George Young

My hon. Friend is right. In the past few days, a decision has been taken by London Underground about the Northern line, and the go-ahead has been given to the Croydon tramlink and the midlands metro. Investment decisions are now being taken, jobs are being created and we are making progress in modernising the infrastructure.

Mr. Darling

On Tuesday, the Chancellor said that the timing of interest rate rises depended on, among other things, political events. Who will decide the timing of interest rate changes as we approach the general election—the Governor, acting in the interests of the economy, or the Chancellor, acting in the interests of the Tory party?

Sir George Young

The hon. Gentleman knows precisely what the regime is. Decisions are taken at the monthly meetings, and the Governor has flexibility on the timing.

Mr. John Marshall

Will my right hon. Friend comment on the levels of investment by British Telecom, the gas industry and the water industry? Does he believe that the rise in their investment is due to the fact that they are now in the private sector and are not nationalised industries?

Sir George Young

My hon. Friend is quite right. It is exactly those successful investment programmes that the Opposition seek to damage with their proposal for a windfall tax, which I hope has now been abandoned.