Investment (Hansard, 19 March 2003)

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)
My Lords, in 2002 business investment as a proportion of GDP was 12.1 per cent, which is the lowest percentage on a constant price basis since 1996, but higher than the previous six years. The Government will continue to maintain a stable macro-economic environment and a range of micro-economic measures to encourage firms to invest for the long term.

§ Lord Roberts of Conwy
My Lords, bearing in the mind the sharpness of the fall last year and the continuing weakness of investment intentions, does not that augur badly for future profitability, productivity, competitiveness and growth? Is it not time the Chancellor listened to the CBI and the British Chambers of Commerce and reduced business taxation before his revenue falls further?

§ Lord Sainsbury of Turville
My Lords, it is right that falls in investment are bad news for the future profitability of business. We are acutely aware of that. But the reasons for the fall—a combination of the slow-down in the world economy and economic uncertainty—are well known. We have already made major changes to corporate taxation but, in the short term, they will not affect the level of investment.

§ Lord Northbrook
My Lords, does the Minister agree with the conclusions of the CBI and the British Chambers of Commerce in their pre-Budget submissions that the Chancellor has damaged the profits, productivity and investment plans of UK companies through the imposition of £47 billion of extra taxation between 1997 and 2005 and the burden of extra regulation and red tape? If not, why not?

§ Lord Sainsbury of Turville
My Lords, it makes no sense to attribute the sharp decline in business investment in 2002 to factors that the Opposition and, to a certain extent, the CBI have said have been present throughout the life of this Government. The fall in investment in 2002 is clearly related to the situation in the world economy and to economic uncertainty. investment peaked in the fourth quarter of 2000. Therefore, unless there are factors of which I am 234 unaware, clearly what we are now seeing is attributable to the world slow-down in economic growth. which is equally hitting the investment plans of other countries.

§ Lord Newby
My Lords, the Minister says that the slow-down is commonplace across the world, but will know that since the end of 2000 overall investment in the UK has fallen faster than in America, Japan, France, Germany and Italy. Therefore there must be at least an element of something that this Government are doing that is unique to the United Kingdom. Will the Minister pass on to his colleagues in the Treasury the plea from business that there should be no business tax increases in the forthcoming Budget? Unlike in previous Budgets, far from making business taxation vastly more complicated the Chancellor might usefully seek to introduce a major measure of corporate tax simplification in the Budget this year.

§ Lord Sainsbury of Turville
My Lords, it is always wrong to start from mistaken assumptions. In 2001, corporate investment in the US fell by 5.2 per cent. and in Germany by 4.5 per cent. In the UK it increased by 0.9 per cent. In 2002 we saw another fall of 5.7 per cent in the US. I agree that there was a substantial fall in the UK of 10 per cent, but if you take the two years together it is not at all clear that British investment is worse.

§ Lord Higgins
My Lords, the Government sought to justify the Chancellor's £5 billion a year raid on pension funds by changing ACT on the grounds that it would improve investment. Is that still the Government's view now that companies, instead of investing, have to use the moneys to top up their pension funds?

§ Lord Sainsbury of Turville
My Lords, as the noble Lord will remember, the abolition of dividend tax credits was part of a wider package of corporate tax reforms, which included rate cuts. It is wholly inaccurate to look at one measure in isolation. The Government have reduced corporation tax. The net effect of the reforms since 1997 has been to reduce the corporate tax bill. The Government have cut the main rate of corporation tax by 3 percentage points to its lowest level in UK corporate history.