Speech

Speech by The Financial Secretary to the Treasury, Mark Hoban MP at City Week

Speech by the Financial Secretary to the Treasury.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Mark Hoban

The UK’s strategy for enhancing its attractiveness as a venue for international business

Thank you.

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 -  from the bankers from Lombardy who came to London in the 15th Century, to the more recent arrivals of banks, private equity and asset management from the US, Asia and Africa.

The UK has always been at the heart of international finance, and our openness is a real asset to our economy - and one we’re keen maintain.

As the Prime Minister said at a recent UKTI Business Summit:

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.

And, as it is the start of City Week, it seems right to talk about the important role financial services play in our economy.

Not only because of its individual contribution, but also because a strong financial sector is vital to the well-being of our economy as a whole.

Through business lending, investment, trade finance and insurance - 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 centers - 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.

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.

Before the summer, we set out our plans to overhaul the broken tripartite system which failed to identify - or deal with - excessive risk-taking.

We are moving responsibility for macro prudential regulation to the Bank of England, and creating a dedicated micro prudential regulator.

It is also our ambition to create a focussed conduct regulator, to protect consumers, and the integrity of our markets.

We 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 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 argue against ill thought out 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.

Tax reform

Our reforms will help ensure that the UK remains a place where people choose to do business, and want to locate. 

But in recent years our tax system has not supported this ambition. 

So when we came to power we announced our aim to create the most competitive corporate tax system in the G20:

  • By improving the international competitiveness of our tax rates.
  • Simplifying taxation and eliminating unnecessary complexities. 
  • And ensuring greater stability across the tax system - giving businesses the confidence to invest in the future.

In our first 100 days in power, we have already taken steps towards meeting these objectives.

First, we announced our plan to cut corporation tax to 27 per cent next year, with a reduction of one per cent in each of the following three years.

With four annual reductions in the rate of Corporation Tax, this will take it down to just 24 per cent.

The lowest rate of any major Western economy; one of the most competitive rates in the G20; and the lowest rate this country has ever seen.

Once fully implemented, this package of reforms will reduce the Corporate Tax burden on businesses by more than £2bn.

Yet while our recent announcements on corporation tax have focussed on lowering rates, we also recognise that we cannot create the most competitive corporate tax system in the G20 by reducing rates in isolation.

The UK needs a more territorial approach to taxation, and a system that properly reflects the modern, global, business environment.

We have already made initial announcements on our plans to change the rules for taxing foreign branch profits, and reform of the Controlled Foreign Company rules.

We want to make CFC rules easier to operate, to enhance the attractiveness of the UK economy.

Equally 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.

That is why we have set up the independent Office of Tax Simplification. 

And why we want to create a more stable tax environment.

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.

Conclusion

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, who can benefit from a having a world-class financial services sector on their doorstep.

The very things that set the UK apart as a global centre for business, and world leader in the field of international finance.

Not just in London, but across the UK’s many cities who give our financial services’ footprint its depth and diversity.

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.

Thank you.

Published 20 September 2010