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British Businesses Hurting (Queen's Speech)


18th November 2002

British business is hurting" Jonathan Djanogly tells MPs

Mr Jonathan Djanogly: British business is hurting; of that there can be no doubt. The Chancellor spoke earlier of failing unemployment, but I found that to be grossly complacent. Thousands of jobs are going by the day in the City of London, in manufacturing, where 400,000 jobs have been lost since 1997, in the high-tech and communications sectors, which have had the stuffing knocked out of them - only last week 3,500 jobs went at Cable and Wireless - and in agriculture-related business, which are in desperate straits.

My hon. Friend the Member for North-East Bedfordshire (Alistair Birt) gave a good picture of the situation in the eastern region, which is also my region. Some 41 per cent of companies are showing falling output, and there are declining new orders, reduced staff numbers and reduced capital expenditure. All those issues present a very serious picture that goes somewhat against the complacency shown by the Chancellor. How the situation changes in the public sector, where there are increasing head counts across the board. Not only are there more employees, but requests for wage increases of up to 40 per cent are being made at a time when people in the private sector are worrying about whether they will have a salary at all.

Business is now starting to see what Labour is all about. It now realises that 80 per cent of the £4.5 billion of taxes raised this year is coming from business. As more people in the private sector lose their jobs and start to see public sector salary hikes without improvements in public services, they will see how their companies - and therefore, indirectly, themselves - are having to pay for Labour's tax and spend policies. At the same time, companies are now also realising that they have had to pay 87 per cent of all the tax hikes made since 1997 - some £29 billion, according to the CBI. That is apart from the fact that they are reeling fro so many regulations.

We have a Government who are increasingly obsessed with micromanagement and intervention to equalise regulations to the lowest common denominator with our European neighbours. The result is that we are fast losing our competitive advantage in an increasingly world economy. We have fallen from ninth to 19th on the world competitiveness scoreboard and our share of world exports is falling, together with poor rates of productivity that are rapidly falling behind those of America, France and Germany.

Burying our heads in the sand and ignoring the impact of the global economy and possible deflation, with the introduction of endless new regulations, may keep the unions happy, but, as the 950 employees of Black and Decker who lost their jobs in the Prime Minister's constituency know, it is destroying our ability to compete. Where are those jobs now? They are in the Czech Republic, because we can simply no longer compete in terms of labour costs and taxes.

Rather than face up to the problem, what are the Government doing at the moment? They are delaying the inevitable by restricting the movement of goods and people from our eastern European partners. In short, we try to make them less efficient to hide our own deficiencies. Yes, the economic slowdown is global, but the less flexible our markets become, the less we can adapt to international pressure. While the Chancellor equivocates over the euro, we are losing sight of the big picture.

I do not feel that the Government are advising people on the real implications of technology; of course, cheap travel and communicatons are the core components of globalisation. The fact is that the service sector is now every bit as much at risk as the manufacturing sector. Clerical jobs can be carried out at a massively lower cost in the east than in this country, which is why banks and other institutions are now transferring their operations abroad. One can set up a call centre in India and employ bright university graduates who speak perfect English at one fifth of the cost of employees in this country. Indeed, I was delighted to see that the Department of Trade and Industry has significantly increased its staff numbers in China, not least because, at this rate, that is where most of our services sector and manufacturing could be located in five years' time.

If we are to survive as a serious business player and encourage more investment, we must act now to cut taxes on business and start excluding companies from regulations - especially smaller growing firms. As the Federation of Small Businesses has rightly pointed out, such firms incur a much larger proportionate negative impact from such regulations than larger companies.

The lack of engineering-based apprenticeships and the shortage of skilled staff is also of enormous concern. Employers in my constituency continuously mention that to me, and much more needs to be done. Two weeks ago, I visited a university to be told that it is cutting its engineering courses because of lack of demand and increasing its psychology courses. I think that that says it all.

Finally, I was disappointed not to see the long-awaited companies Bill in the Queen's Speech. British company law is in urgent need of reform - and after three years of consultation on this largely unconentious issue, business wants the Bill and we should get on with it.



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