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Helping Local Business and Improving the Skills Base


15th March 2010

Jonathan Djanogly's keynote address to a meeting of regional businesses in Cambridge.

Failure of Government schemes

It is a pleasure to be here today and can I firstly congratulate my colleagues in the European Parliament for organising this conference and for presenting us with a good opportunity to discuss economic issues that will rightly dominate the coming General Election.

Recent economic news heightens fears for a double dip recession. Certainly the weak economy has led to a weak pound – but what was so shocking was that rather than this leading to more demand for exports, we heard that exports in January actually fell and that the trade deficit has broadened. On the back of this sterling fell back below $1.50 and so the spiral of decline continues.

The last year has been a traumatic one for many UK businesses. Investment dried up, production has now fallen 21 months in a row as demand in many sectors froze, and productivity weakened to the extent that hundreds of businesses were forced to close down. Having said that, it needs to be recognised that this region with its economic diversity and resilent small business sector, has fared rather better than most despite government inaction.

If we take the manufacturing sector for instance, an important one for the Eastern region, under Labour since 1997, 10 per cent of manufacturing businesses have closed down and more than 1.5 million manufacturing jobs have been lost.

Yet, business support schemes have been weak. Following the Pre-Budget Report of November 2008, the Government did introduce a number of schemes seeking to support businesses through the recession. While there have been elements of direct lending and equity investment by the Government, these schemes have, for the most part, taken the form of loan guarantees.

But well over a year on from the announcement of these loan guarantee schemes, what is cause for great concern is the lack of progress in this Government’s approach to the challenges facing business. Not least is how businesses across the UK have been and still are experiencing acute shortages of finance and working capital.

What we hear from business is that the Government has designed its multitude of schemes in such a complicated and confusing fashion that third parties (including banks) often did not actually understand how to operate them, or which one to operate! Indeed, it was not always clear on what terms support was being offered to businesses. The Government, in its “Enterprise Finance Guarantee” scheme, likes to quote the “value of loans offered”. This is of course very different from – and should not be confused with – the “value of loans drawn down” by businesses.

Conservative policy for supporting manufacturing

Cutting the deficit is a vital and urgent component of Conservative economic policy – but what happens next to stimulate the economy? This is where Labour and Liberals run out of ideas – Mr. Brown talks of government investment but investment with what, I ask – possibly new taxes, but it is all rather vague. Conservatives believe that the recovery will be business not government led and that our role is to ensure that business must be at the heart of the economy if the UK is to achieve sustainable economic growth. People complain at the size of our services sector but we need to acknowledge that even given its present challenges, the UK still has the sixth largest manufacturing economy in the World. Manfacturing still produces more than half of the UK’s exports and even though its share of the economy has dramatically fallen under Labour, it still constitutes more than 12 per cent of our Gross Domestic Product. With the strong support of a Conservative government, those firms that emerge from the recession will be stronger and leaner for the experience and will be a key factor in UK economic growth going forward.

Only last week Sir James Dyson published his report for David Cameron, recommending policies to enable a Conservative government to generate a major expansion of high tech product development which will create real sustainable growth in the UK economy. This will be very important for the development of business and job creation in the Eastern region where we have a high tec concentration.

A Conservative government will be more vocal at home and abroad in our support for British design, science engineering and invention. We will reinvigorate science teaching in schools, and promote knowledge and collaboration between education and business. We will look to unlock the potential of start-ups by tax measures, encouraging venture capital and encouraging bank lending via a comprehensive loan guarantee scheme. For high tech companies, those that are so important for the local economy here in the East, we will also consider better use of tax credits for R& D.

Yet, the spectre of red tape hangs over British business like a black cloud. Rather than burdening UK business with more cumbersome red tape and complex regulatory schemes, as this Government has done, a Conservative government would instead cut the regulation and red tape that is suffocating our industry and business.

The British Chamber of Commerce has warned that the burden of taxes and regulation on business created under this Government is set to reach £25.6 billion over the next four years. This is unacceptable.

In October of last year we published a paper setting out a Conservative vision for regulation.
This outlined how excessive red tape and the innumerable number of quangos established by this Government has undermined the UK’s economic competitiveness and left business drowning in red tape.

We have proposed that under a Conservative government, Regulatory Impact Assessments will be followed up three to five years after legislative changes to ensure that any new regulation is not having a negative effect on UK business. A new “Star Chamber” cabinet committee would enforce a strict “One In – One Out” policy on regulation providing that any new laws must include cuts in old laws with a target of reducing the net regulatory burden by 5 per cent. Additionally, “sunset clauses” will be applied not only to regulations but also to Regulators, to ensure their necessity is reviewed in the future. Furthermore, during the first term of a Conservative government, all Regulators will be re-assessed and their duties reviewed. And a significant quango cull will be swiftly actioned.

A prime concern of a Conservative government would be to cut back on the overwhelming amount of employment regulation facing employers in UK business. I refer here to the 25 Acts of Parliament and 250 Orders since 1997, all directly increasing employment laws; many as a result of the so called Warwick Agreements with the unions. Of course, the unions are to be funding some 75% of Labour’s election campaign – so don’t expect any reduction in this flow of red-tape if Labour were to stay in power.

A good example of this is Labour’s current attempt to suffocate the temporary worker market with its rushed proposals relating to the Agency Workers Directive. Indeed, if every small business were encouraged to take on a single extra employee, unemployment would disappear. But, such is the red tape and bureaucracy attached to employment laws, albeit with the aim of protecting workers, that, ironically, many UK businesses are telling us that they do not even want to hire people anymore. If we can get on top of this issue overseas business will once again see Britain as a competitive business environment where they wish to invest and create jobs.

A Conservative government would therefore look to roll back much of this redundant and, frankly, counterproductive goldplating of European legislation, with the intention to get businesses employing people again. Ultimately our aim is to repatriate employment law back to the UK, although until that time there will be full engagement with the EU, with the help of our MEP colleagues, to get the best deal for Britain.

As regards specific employment law reform we are reviewing how to deal with vexatious claims to employment tribunals, TUPE and redundancy laws and we will of course look to preserve our Working Time opt out. Our guiding principle here will be flexibility. That will involve cutting red tape for employers. But it will also include looking at ways to maximise using the talent and experience that exists in the UK, rather than avoiding this issue and rushing to make up the gap, once the economy improves, by reopening Britain to further unsustainable levels of unskilled economic migration. That will mean understanding modern flexible working requirements so that we can better utilise sections of our population such as women and retired people. We have significant proposals to move this agenda forward.

Corporate taxation also requires a thorough review. I recognise here that only India has a larger corporate tax code than the UK. A Conservative government would embark on a process of tax simplification to make it significantly easier for businesses to predict, calculate and pay their taxes.

To stimulate growth further, Conservatives aim to cut the rate of Corporation Tax from 28 per cent to 25 per cent and the small companies rate from 22 per cent to 20 per cent so that businesses have a chance to get back on their feet. We also want to reverse Labour’s job destroying increases to National Insurance once it is prudent to do so, although we will immediately abolish NIC for start ups of less than 10 staff to stimulate job creation.

Although we see the driver for job creation being business as opposed to labour’s big government stance, we do also think more should be done by government to encourage a flexible workforce. Given the unacceptably high levels of illiteracy, This starts with Michael Gove’s plans to improve education generally. But Conservatives are also committed to government taking rigorous action to help with the re-skilling of the workforce as part of its “Get Britain Working” plan. “The Work Programme” campaign, our new integrated welfare to work initiative, is based on four programmes.

First, the “Work for Yourself” initiative will provide opportunities for individuals to start their own businesses thus encouraging people into self-employment.

Secondly, the “Work Together” project, will connect people to volunteering opportunities in their area, and will allow people to develop their skills in new areas of business.

Thirdly, Conservatives will establish “Work Clubs”, places for people to receive mentoring, skills training and help in finding local job opportunities.

And, fourthly, the “Young Action for Work” campaign will provide 200,000 additional apprenticeships over two years.

Conclusion

Business has faced a testing period in recent times that has stretched the resources of many companies to breaking point. A Conservative government will offer change and renewal compared to the visionless empty hulk represented by this government. Conservatives will give business the secure macroeconomic lower debt platform, the access to finance, the skilled workforce and the vision it will need to compete with the best on the global stage. Times are hard but the position is not irreversible and I and my colleagues are ready for government and keen to roll up our sleeves and start sorting things out.



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