Business Investment

8. What fiscal steps his Department is taking to help increase the level of business investment.

At the autumn statement in 2023, the Chancellor set out ambitious growth packages designed to boost business investment, including making full expensing permanent and a tax cut to companies of over £10 billion a year to ensure we have one of the most generous capital allowances in the world. With further growth-enhancing measures set out in spring Budget 2024, the Office for Budget Responsibility estimates that Government policy announced at the past three fiscal events is expected to increase the size of the economy by 0.7% by 2028-29.

Like my hon. Friend the Member for St Ives (Derek Thomas), I was delighted to see the increase in the VAT threshold from £85,000 to £90,000 in the Budget. That will help small businesses invest for the future, such as the Two Doves café and gift shop in Overton, which is popular with people from both Clwyd South and North Shropshire. However, given the vital importance to small businesses, will my hon. Friend prioritise increasing the VAT threshold again in the next fiscal intervention?

My hon. Friend comes to this House with significant business experience, so when he talks, we certainly listen, and I am delighted to hear that he was pleased with the VAT threshold increase. I can tell him that, in addition to what I said to my hon. Friend the Member for St Ives (Derek Thomas) about the £90,000 threshold, this level is higher than that of any EU member state and is the joint highest in the OECD. Many of his businesses will be among the 28,000 that will benefit from the increase, so we have no plans at this stage to change it.

But the actual record of this Government over the past 14 years is abysmal. It is a fact that business investment has been consistently among the lowest in both the OECD and the G7, and now the Office for Budget Responsibility is forecasting a further 5% fall this year. Why?

Announcements in each of our last three fiscal events have enhanced our business investment environment for international investors: we have the second highest foreign direct investment stock in the world; we have some of the best universities in the world, which are attracting businesses; we have announced full expensing, which is a £10 billion-a-year tax cut; we have the lowest corporation tax in the G7; and we are reforming our energy grid, bringing investment into our net zero ambitions. We are reforming our systems, reducing our taxes, and encouraging investment.