Speech by the Financial Secretary to the Treasury.
As an accountant myself, I know just how important our profession is to the wider economy.
That throughout the ages companies, businesses, and entrepreneurs alike have all relied on the services we provide.
And that we’ve come a long way in the 7,000 years since the days of crude Mesopotamian bookkeeping… but the basic principles and benefits remain.
As accountants, we’re well placed to see when things are going wrong, what needs to be improved, and how businesses should react to changing circumstances.
The APA is an excellent example of this.
Numerous businesses and successive Governments have benefited from your expertise.
And in Sir Michael Snyder you have one of the most respected members of the profession and someone who is committed to its continued success.
But this evening I’d like to discuss something that - while related to our profession - is equally relevant to business both here in the City and beyond.
The UK’s strategy for enhancing its attractiveness as a venue for international business
Throughout history the UK has been a hub for global business, trade and investment.
From the 18th century, as the first nation in the world to industrialise, we cemented our position as one of the leading economies of the world.
With a trade network that extended all the way from North America and the West Indies, to South Asia and Africa, we became the engine that helped drive future globalisation.
In those days our merchant fleet traded goods such as bullion, textiles and tea - a staple of every British household.
And since this time, international business has evolved at an incredible pace. Now the world is truly a global marketplace; and the UK needs to set out its stall.
I strongly believe that the City of London will always be an international centre for financial services, and that the UK will remain an excellent place to do business. Not because I take London’s strengths for granted but because we in this Government will do as much as it can to strengthen not weaken London.
Much of our success today is owed to our long history of openness to foreign firms and investment and to our excellent professional services including accounting.
The UK has always been at the heart of international trade and finance, and our openness is a real asset to our economy - and one we’re keen maintain.
As the Prime Minister has said:
it is absolutely vital for our economy that we attract the maximum amount of inward investment, and that we do everything we can to demonstrate that the British economy is open for business, open for trade, and open for investment.
So I’d like to take this opportunity to talk you through the measures we, the Government, are taking to show that Britain is very much open for business.
How we aim to preserve the strengths that have made us a global centre for commerce.
Amend the regulatory and legal frameworks that govern our economy
And reform our tax policy - with the ambition of creating the most competitive corporate tax system in the G20.
The UK as a place to do business
I’m sure you all recognise the many factors that make the UK an excellent place to do business.
Our time zone acts as a bridge between the US and Asia. Our native language is global in its reach.
But also our other strengths.
Strengths that have developed over the many hundreds of years that the UK has been a global centre for commerce. Three, in particular, that this Government will look to preserve:
- The flexibility of our labour market.
- Our highly skilled workforce, and world-class educational institutions.
- And our position as the gateway to Europe - the largest single market in the world.
It is these factors that have helped make the UK one of the most open and internationally successful locations for trade and investment in the world:
More companies choose to locate their European headquarters in the UK than anywhere else
One in four jobs in the UK is linked to business abroad.
And our global financial service centre attracts more overseas business to the UK than any other nation.
A strong financial sector is vital to the well-being of our economy as a whole.
Through business lending, investment, trade finance, insurance and world class professional services- our financial sector is the glue that holds UK plc together.
Not just in London, but across the whole country, as many areas outside of the capital have developed their own financial specialties, such as Edinburgh’s internationally recognised expertise in asset management.
Leeds combined strength in professional services and finance.
And many other regional centres - such as Bournemouth and Birmingham - who are home to the back office functions that sustain international business.
These local clusters are supporting growth and investment across the UK, and the global economy.
Regulation and legal frameworks
But if events across the world have taught us anything, it is that we should not take the strength and stability of our financial sector for granted.
That is why the Government is taking forward a new programme of regulatory and legislative reform, to reinforce the UK’s attractiveness as a place to do business.
It is true that we already have one of the most business friendly legal systems of any nation.
The UK is well-known for its sophisticated commercial law; upholding of contractual agreements; and protection of its investors.
Yet while we start from a strong position, there remains a need to improve the legislative and regulatory frameworks that underwrite our economy.
Reliable, fair and consistent regulation is important to maintaining the attractiveness of London, and the UK as a whole.
The financial crisis has shown us that when regulation and market discipline fails, the economy suffers.
I believe that a strong regulatory framework will provide the necessary conditions for a flourishing financial sector - one with high standards of supervision and corporate governance.
Our plans to overhaul the broken tripartite system which failed to identify - or deal with - excessive risk-taking are well underway. Two weeks ago we published further details on our intention to establish a new system of more specialised and focused financial services regulators.
We are moving responsibility for macro prudential regulation to the Bank of England, and creating a dedicated micro prudential regulator, the Prudential Regulatory Authority.
It is also our ambition to create a focused conduct regulator, the Financial Conduct Authority, to protect consumers, and the integrity of our markets.
These will employ judgement; not indiscriminate box ticking.
A robust regulatory framework will enhance the competitiveness of our economy - providing certainty for banks and confidence for consumers.
It will make the UK more - not less - attractive for investors. And a strong City supports a strong economy - the two are mutually reinforcing.
But let me stress the need for balance and proportion. Over- regulation, whether in financial services or business more generally will stifle innovation and growth. We need to get the balance right.
We’re determined to avoid a situation where an ever-growing burden of red-tape undermines the attractiveness of the UK economy.
The Government is fully engaged in the EU and international debates on regulation.
We will continue argue against ill thought out and poorly evidenced measures that damage competiveness, but also reserve the right to impose higher standards in the UK, if that is what’s necessary to maintain stability.
A world class financial centre would expect nothing less.
Our reforms will help ensure that the UK remains a place where people choose to do business, and want to locate.
Our four-year fiscal plan will cut the deficit without increasing taxes on business.
We reversed the most damaging part of the planned jobs tax.
From this April it will be cheaper to employ people on low and middle incomes, which in turn will save jobs and support the recovery.
Small businesses will see their tax rates cut.
And from April, you will see the first of four annual reductions in the main rate of corporation tax. That will bring corporation tax to 24%, its lowest ever rate, the lowest in the G7.
Interestingly, the corporate tax plan announced by President Obama in his State of the Union speech is based on the same principles - a simpler system with a broader base and lower rates.
But we are not stopping there - our corporate tax roadmap has set out the direction of travel so that you can plan ahead with more certainty.
In the coming Budget we will reform Britain’s outdated and complex rules for Controlled Foreign Companies.
We have seen a steady stream of companies that have left the UK in recent years.
This Government is not content to sit by and watch our competitiveness leech away and our corporate tax base undermined.
And to encourage high-tech businesses to invest in the UK and create high-value jobs, we will introduce from 2013 a lower 10% corporate tax rate on profits from newly commercialised patents.
Our patent box will mean that Britain’s tax regime for intellectual property will be among the lowest in the western world.
Our goal is the most competitive business tax regime of any major western economy.
And we are also conscious of the impact of personal tax rates on our ability to compete.
That’s why the personal tax allowance is increasing by one thousand pounds from April.
And it’s why we have said very clearly that I regard the 50p tax rate as a temporary feature of the tax system.
Also important is addressing the costs of complying with the UK’s tax legislation.
So we are making every effort to simplify taxation in Britain - to eradicate the unnecessary complexities that came with the system we inherited.
We want the system to be one of fewer surprises, where the business world is fully engaged at each stage of the tax making process; and will have ample opportunity to help shape future policy.
We want a regime which boosts our competitiveness, not one that drags us down.
Tax and regulation are just two factors that encourage investment in the UK, and make us an attractive place for firms to locate.
When taken in isolation, these factors mean nothing without:
- an efficient and stable legal framework.
- high standards of transparency and corporate governance.
- a deep and highly skilled pool of talent.
and a cluster of professional and associated businesses.
The very things that set the UK apart as a global centre for business, and world leader in the field of international finance.
And the Coalition Government’s policies shall build on this platform. We will work with - rather than against - those who wish to contribute to our economy.
We welcome the fact that companies from across the globe are increasingly interested in the UK, and see us an ideal base from which to achieve their international ambitions.
As the UK has a long history of international trade and investment; and this Government is committed to its future.