Shadow Chancellor George Osborne has promised tax breaks for new businesses and a simpler tax system to end the need for elaborate avoidance schemes.
Mr Osborne and David Willetts, the Shadow Higher Education Secretary, were speaking to business leaders and students at Birmingham Metropolitan College.
This is some of what they said:
George Osborne
Government has to face the fact that the economy is in a weak state. Britain is now pretty well the last major economy in the world still in recession. How do we get credit moving again, businesses are still struggling with credit? There’s a chronic lack of confidence, lack of foreign investment in the UK. We have to be honest about these problems and talk openly about how we address them.
The banking system is a source of enormous frustration to everyone. We have provided a trillion pounds of grants, support and liquidity and the banking system remains incredibly fragile. A bank like RBS has a balance sheet bigger than Britain’s GDP. Dealing with the system remains a massive challenge. We have to have a better regulated system which requires change, putting that famous supporter of Aston Villa, the Governor of the Bank of England (Mervyn King), in charge of regulation.
Britain needs successful financial services but we have got to protect the taxpayer when things go wrong. It can’t be ‘heads they win, tails we lose'.
The second problem is the budget deficit. It is around £175 billion this year. It represents a quarter of all public spending. One in every £4 spent by the Government has to be borrowed from the rest of the world.
One of the reasons we are still in recession is there is a lack of sense on how to deal with this problem. We are like a family that’s spending too much. Just as you have these agonising meetings when you sit down with your husband or wife and go through the things you are going to cut back on, we as a country are going to have that conversation.
We need to get the country working again. We need to send a very clear signal that this country is open again. Unemployment in Birmingham is now over 12 per cent and over 30 per cent in some parts.
It’s also about trying to encourage businesses. A new business will not pay tax on the first ten people it employs.
We have an unbalanced economy and we are paying the price for that imbalance. Too much of the growth is in London and the South. We need a more regionally balanced economy. That means supporting manufacturing, transport infrastructure.
On Global Warming:
The overwhelming body of scientific evidence suggests it is happening but even if you do not believe it is happening, that it is man-made and that it will have bad consequences for the world, you would surely accept we have to protect our energy security.
Oil and gas come from some of the most politically unstable places in the world Britain should be trying to improve its energy efficiency, find other sources of energy, should be making use of its resources. We would be doing these things also to try and save costs and a time when all business and the Government are struggling. There’s a massive market out there for Britain in new energy technology. Green energy technology is where a lot of the investment in the world is going now.
Poverty
Between 10 and 20 per cent of the people in this country, in good times and in bad, have been entirely left behind. Five and a half million people are on permanent out-of-work benefit. There has been a huge focus of our policy-making on how you help them. There are people in our country who pay 96 per cent tax – very low-income people because for every £1 they earn they have 96 pence taken away in benefit withdrawal. There are now 900,000 people in more entrenched poverty than there were ten years ago.
Tax avoidance
I would like a good HMRC that’s effective in spotting tax avoidance and dealing with it. We need a system with fewer exemptions and reliefs and is, broadly-speaking, simple and has lower rates, that’s very neutral and doesn’t present opportunities for tax avoidance. Governments have to be aware of the consequences. They make Capital Gains Tax 18 per cent and personal income tax 50 per cent but if you can present income as a capital gain there are problems. There are thousands of people working out how to transfer from the 50 per cent rate to the 18 per cent rate. Complexity leads to avoidance. I think the answer is a simpler system and lower tax rates and that’s the best weapon in tax avoidance.
Business rates review
Told of a newsagent whose bill is due to rise from £8,000 to £18,000 a year, Mr Osborne said: It’s not doing what we were told it would and as potentially increasing substantially the tax on small businesses. The first thing we will do is try and get the Government to change its approach.
David Willetts
Pledged 10,000 extra university places next year plus more money for apprenticeships.
We think they help ensure that, as we emerge from this terrible recession, we have a better-qualified workforce, more opportunities for young people and a better balanced economy.
What we are talking about isn’t just skills for the next year, you are talking about infrastructure for the next generation. We haven’t been investing enough in the capital we need for a modern, efficient economy. We completely understand that, as part of a better performing British economy, we have to have the infrastructure they have in France and Germany and even in America.
Asked about the cancellation of a building scheme at the college, he said: If we are smart we can make these projects go ahead. Colleges are very restricted in the deals they can do with external lenders who provide them with the finance. By giving colleges greater freedom to do deals with local businesses. What really matters is that you get an opportunity for training and education which is as good as the competition are getting in India and China. You are entitled to the same standard if not better.
On student fees, he said: There is frustration as they have not seen what the fees have done to improve their education experience. The only justification for changing fees for students is if it improves the experience of students. That’s what the money is supposed to go for, to make it worthwhile being a student.