HC Deb 18 July 2002 vol 389 cc416-8
10. Mr. Mark Simmonds (Boston and Skegness)

What discussions he has had with the Secretary of State for Trade and Industry regarding manufacturing industry competitiveness. [684071]

The Economic Secretary to the Treasury (John Healey)

My right hon. Friend has regular meetings with the Secretary of State for Trade and Industry on a wide range of issues, and we recognise the vital contribution that UK manufacturing makes to the economy, exports and innovation. That is one reason why the Government are now investing so heavily in innovation, with Monday's announcement of the largest sustained increase in the science budget for a decade, and the announcement in April of the extension of the R&D tax credit to all firms—a measure that will overwhelmingly benefit manufacturing industry.

Mr. Simmonds

I thank the Minister for that answer, but is it not true that since 1997 UK manufacturing industry has had to suffer an explosion of red tape and bureaucracy, as well as an increase in taxation? No fundamental reform of public services was mentioned in the Chancellor's announcement on Monday, yet he was only too happy to throw the public's money around like a drunken sailor. In that context, I would like the Minister to tell us how the Government square the increase in red tape, bureaucracy and taxation on manufacturing industry with pretending to support an entrepreneurial and enterprise economy.

John Healey

I must say to the hon. Gentleman that effective regulation has important economic benefits. If it is properly framed, regulation can correct market failures, create a more level playing field for business, and put in place essential protections such as health and safety at work. This Government have a strong record in cutting red tape. As Minister with responsibility for customs, I can say that we have recently raised the threshold for VAT registration, and we are introducing a new VAT flat-rate scheme and new VAT import reliefs. Those changes were welcomed by the British Chambers of Commerce, which said: We welcome the Chancellor's attempts to try to simplify the VAT system". Moreover, the CBI said: The Chancellor has left business in no doubt that he is committed to encouraging enterprise. The tax improvements, including the red tape burden, are welcome.

Mr. Wayne David (Caerphilly)

Does my hon. Friend agree that small and medium-sized enterprises are becoming increasingly important to the well-being of the economy, and that the measures on late payments that this Government have introduced incrementally are proving of enormous benefit to SMEs?

John Healey

My hon. Friend is precisely correct. It is such simplification measures, plus tax cuts targeted precisely at small businesses, that are bringing such benefits. Of course, all businesses also benefit from the greater economic stability that we have seen since 1997, including low interest rates and inflation rates, sound public finances, and steady growth. That is the best support that Government can give to manufacturers small and large— precisely the support that they did not get in 18 years of Conservative Government.

Mr. Tim Boswell (Daventry)

Have not Treasury Ministers cottoned on to the fact that increased costs on business operate at the margin, and have a completely disproportionate effect on competitiveness and profitability? Does the Minister not concede that further increases in labour market regulation are extremely unlikely to buy off labour market and trade union militancy, which sank the previous Labour Government and has returned to haunt this one?

John Healey

I simply do not recognise the hon. Gentleman's description. On costs for business—particularly small business—I should remind him that, thanks to a series of tax cuts since 1997 that were reinforced in this year's Budget, and to corporation tax reforms, we have the lowest rates in the UK's history. Capital investment for small firms—permanent in the first year—has given a real boost, and research and development investment has been welcomed across the board. The Budget's tax cuts for business across the piece mean that—even after the Budget—12 other European Union countries still have higher tax burdens on business than does the UK.