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Smith, John P.Snape, Peter
Soley, Clive
Steinberg, Gerry
Strang, Gavin
Straw, Jack
Taylor, Mrs Ann (Dewsbury)
Taylor, Matthew (Truro)
Turner, Dennis
Vaz, Keith
Wall, Pat
Wallace, James
Walley, Joan
Wardell, Gareth (Gower)
Welsh, Andrew (Angus E)
Williams, Rt Hon Alan
Williams, Alan W. (Carm'then)
Wilson, Brian
Winnick, David
Worthington, Tony
Wray, Jimmy
Tellers for the Noes :
Mr. Ken Eastham and
Mr. Robert N. Wareing.
Clause 51 ordered to stand part of the Bill.
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10.15 pmMr. Madden : On a point of order, Sir Paul. On 5 May the Minister for Local Government wrote to me and to all other hon. Members, presumably yourself included, saying that he was aware how important it was to make sure that people knew about the community charge--
The First Deputy Chairman of Ways and Means (Sir Paul Dean) : Order. I must stop the hon. Gentleman. We are in Committee on the Finance Bill. I doubt whether the hon. Gentleman is raising a point of order, but even if he is I cannot take it in Committee ; I can take it only when we are sitting as a House.
Mr. Madden : I understand that, Sir Paul. Before you took the Chair this matter was raised under points of order. As the Leader of the House is in his place, I wish to ask when the Government will make a statement advising us what action is being taken to stop these leaflets being put through the letter boxes--
The First Deputy Chairman : Order. That is not a matter for the Committee of the whole House. The hon. Gentleman must seek some other way to raise the matter that concerns him.
Mr. Madden rose--
The First Deputy Chairman : Order. We are in Committee of the whole House and I hope that I have made it clear to the Committee that I cannot deal with such a matter now. I doubt very much whether it is a matter for the Chair anyway, but it is certainly not matter for me as Chairman of the Committee of the whole House.
Mr. Bob Cryer (Bradford, South) : On a point of order, Sir Paul. In view of the circumstances in which the Government have been spending money, would it be possible for you to allow a manuscript amendment to the Bill at this stage in order to remove the Government's authority to spend money on these deceitful leaflets? The Minister has been running rampant doing this- -
The First Deputy Chairman : Order. The hon. Gentleman is very ingenious but in no way could that be made in order on the clauses we are now discussing. We now come to--
Mr. Madden rose --
The First Deputy Chairman : Order. I have tried to make it clear twice to the hon. Gentleman that I cannot conceivably take a point of order on the community charge while we are in Committee of the whole House considering the Finance Bill. I must reiterate that the hon. Gentleman must find another way to raise the matter which concerns him. I cannot take it now.
Mr. Madden rose --
Mr. Dennis Skinner (Bolsover) rose --
The First Deputy Chairman : Order. I am on my feet. We are in Committee on the Finance Bill. The points of order which have been raised are not matters for the Chair and are certainly not in order on the proceedings of the Finance Bill, with which we must now get on. Mr. Alan Beith.
Mr. Skinner : On a point of order, Sir Paul. You are absolutely right on this matter because it is difficult
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chairing meetings for a long time. However, I wonder whether you would be prepared to accept a manuscript amendment in the guise of a new clause to the Finance Bill in order to provide surcharges on those Ministers who have been spending taxpayers' money on these leaflets, just as you would if this were a local authority? Will you accept a manuscript amendment?The First Deputy Chairman : I regret to say that I cannot do that. We must deal with the amendments on the Amendment Paper and we must be fair to those hon. Members who have amendments in their names. Mr. Alan Beith.
Clause 33
Corporation tax : small companies
Mr. Beith : I beg to move amendment No. 14, in page 23, line 5, leave out £150,000' and insert £250,000'.
This concerns a form of relief to small businesses and I am bound to say that it is a much better way of spending taxpayers' money than on tendentious leaflets about the community charge, which I have received since my copy has already come through the door. Moreover, I think that those for whom this amendment is designed as a benefit, small companies, which contribute so largely to the public revenues, will feel very strongly that the funds they contribute through taxation should not be used for propaganda in pursuit of Government policies.
I am sure that in considering my amendment the Minister will feel even more impelled to accept the greater relief I am suggesting, covered as he is with guilt through the activities of the Government in publishing at taxpayers' expense leaflets about the community charge.
Mr. Madden : Does the hon. Gentleman, think, like me, that it is very important that this Committee, as it is concerned with small businesses and the business rate system, should be told what action the Government will take to recover the leaflets which have been put through the letter boxes of many of our constituents?
The First Deputy Chairman : Order. I am sure that the hon. Gentleman will not spoil his amendment by getting out of order.
Mr. Beith : I will certainly do my best to keep within order, Sir Paul, and to avoid your chastening.
It is the sense of many small businesses that this Budget is certainly one of some disappointment. There are many specific measures that small businesses would have liked to see in the Budget in a number of areas. The area in which the Government have taken some action on the lines which we proposed is one on which I will argue that they ought to have gone considerably further.
In our Budget proposals before Budget day we put forward the view that the threshold below which small businesses pay the lower level of corporation tax should be raised to £250,000. The Government agreed to a much smaller increase to a threshold of £150,000 based on a rate fixed in 1982, so it has remained at that level for a long time. There is an argument for making the relief more extensive. However, while the amendment would benefit many small manufacturing firms, it does not cover the whole range of small business including sole traders and very small firms, whose activities fall far below the scope even of the relief I propose.
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The Government recognise that the present rate of corporation tax for small businesses is one on which relief could reasonably be raised. The Government get a great deal of money out of corporation tax. It is one of the most buoyant elements of revenue, and the Government continue quietly collecting that money without much public recognition of the contribution that business makes. The Chancellor is happy to talk about his Budget surplus and what he plans doing with it, but he does not seem so keen to explain how much of that surplus comes from asset sales and how much from corporation tax. One paradox is that corporation tax rates in this country are lower than in competitor countries, but that British companies pay more corporation tax than their European competitors. One can speculate as to why that is so. It could be because of greater compliance, more stringent enforcement, or different systems of relief. The fact remains that British businesses pay heavier amounts of corporation tax than do their Community competitors.One business sector particularly in need of relief is smaller manufacturing companies. Many of them are bearing the heaviest burden of the present high interest and high exchange rates. Some of the largest companies have considerable cash mountains at their disposal and are not the victims of high interest rates. Many gain substantially from them. All those involved in exports are affected by exchange rates, but the combined effect of high interest and high exchange rates bears most heavily on smaller firms. Companies that should now be preparing for 1992 face increasing costs, such as those involved in third party verification of products standards. Nevertheless, they feel a compelling need to improve their export performance. The Chancellor's whole Budget strategy is based on the assumption that there will be a massive improvement in our country's export performance. The major contributors to any such improvement must be smaller manufacturing companies, for whom I argue that a greater level of relief should be provided.
The Government's main argument against reducing corporation tax is that that might add to wage inflation by reducing pressure on employers to control their labour costs. That contention cannot apply to smaller companies, which are not the culprits in fuelling wage inflation. They are not usually the leaders in the pay round, and often are among those that have worked hardest to trim their costs so that they can stay in business.
The threshold at which those smaller companies become eligible for the higher rate of corporation tax should be raised not just to £150, 000 but to £250,000. A related amendment increases the other end of the scale from £750,000 to £1 million, so that it will remain smooth between those two points. That is one way that the Budget can be made more helpful to small firms, and one that Conservative Members should find to their liking. I hope that some hon. and right hon. Members who have stayed on to listen to this short debate will join us in the Lobby tonight and support a higher level of relief for smaller businesses than is proposed in the Budget. I invite them to do so. 10.30 pm
The Paymaster General (Mr. Peter Brooke) : The hon. Member for Berwick-upon-Tweed (Mr. Beith) moved his amendment concisely and briskly. He paid tribute to the interest his party has in small businesses and in that he is
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echoing the interest that the Government have. My hon. Friend the Member for Taunton (Mr. Nicholson) put a shrewd question to my right hon. Friend the Chancellor of the Exchequer on 27 April about tax concessions, which was specifically directed to small businesses since 1979, which was answered by my right hon. Friend the Financial Secretary. It ran to two and a half columns in the Official Report. I have no doubt at all that small business men in Somerset, who read eagerly the questions put down by my hon. Friend the Member for Taunton, responded enthusiastically to that information and that that was in part responsible for Somerset being wrested from the hon. Member's party during the recent county council elections. The hon. Member asked why, with lower rates of corporation tax, we achieved higher yields, and suggested it was either compliance or the quality of the surveillance by the Inland Revenue. The answer of course is the extremely successful and high rates of profitability being earned by British companies during the economic expansion we have enjoyed for the last seven or eight years. He made reference to interest rates, but small companies in particular wish to see a reduction in inflation, to which those interest rates are directed. As to the merits of the hon. Member's amendment, the background to the lower rate of corporation tax, the small companies' rate, is familiar to the Committee. Clause 33 increases the profit limits for the small companies rate and the associated marginal relief to £150, 000 and £750,000 respectively, as the hon. Member said. The Government's changes in recent years have concentrated on bringing the rate of corporation tax down, so increasing the profit limits has not been a high priority and the limits have remained unchanged since 1983. This year we thought it right to increase the limits substantially.The two amendments which the hon. Member has tabled would increase the profit limits even further. In our view, those limits would be too high. Clause 33 already increases both limits by 50 per cent., which is more than enough to take account of inflation over the period since the limits were last raised. Over 20,000 companies will pay less tax as a result of this change. This represents half of those companies which were previously paying corporation tax at a higher rate than the small companies' rate. We think the new limits we have proposed are high enough.
There is another objection to adopting the limits the amendments propose. Under our present proposal the special rate of corporation tax which applies to company profits between £150,000 and £750,000 will remain at 37 per cent., because we are increasing both limits by the same proportion. If the limits were raised, as the hon. Member's amendments propose, to £250,000 and £1 million, the marginal rate would have to be 38er cent. I know that some companies are convinced about the disincentive effect of high marginal rates, and we would be very reluctant to increase the marginal rate even by a small amount.
Finally, I have seen the hon. Member's press release which accompanied this amendment. We are looking forward very much to the hon. Member being on the Committee upstairs, but I hope that he will be able to manage something more substantial in his next press release than he has done tonight.
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Mr. Nicholas Brown : The Minister is quite right to raise the attendance of the hon. Member for Berwick-upon-Tweed (Mr. Beith) at the Finance Committee. The Minister will remember that the hon. Gentleman was a member of the Finance Bill Committee last year and attended only three of the 15 sittings. In fact, his absence from that Committee stage was commented on almost every day of the proceedings.
Mr. Brooke : The hon. Member for Newcastle upon Tyne, East (Mr. Brown) is quite right in his recollection of those events. There passed through my mind as I surveyed the empty seat of the hon. Member last year that remark of Sir Winston Churchill concerning the Margrave of Baden, who was one of the allies of the first Duke, of whom it was said that his military epitaph for all time should be that the two greatest captains of his age thought his absence from the field as an ally well worth 15,000 men.
I urge my hon. and right hon. Friends to resist this amendment.
Mr. Beith : The hon. Member for Newcastle upon Tyne, East (Mr. Brown) and the Paymaster General must be the only two Members in the Committee who did not notice where I went in July last year or how I occupied my time during that month. I am glad to say that my hon. Friend the Member for Orkney and Shetland (Mr. Wallace) discharged an excellent service in that Committee's far smaller number of sittings, during which I fought a certain election.
If that is the only reason that the Government can think of for not allowing a higher level of relief for small business, and the only reason that the Labour party can think of for not supporting it--[ Hon. Members :-- "What about the policy review?"] Indeed, perhaps the matter could be brought into the Labour party's policy review. The dearth of serious argument, however, leads me to believe that my hon. Friends should be given the opportunity to invite those who genuinely support small business to come into the Lobby and vote for the amendment.
Question put, That the amendment be made :--
The Committee divided : Ayes 14, Noes 179.
Division No. 192] [10.35 pm
AYES
Beith, A. J.
Campbell, Menzies (Fife NE)
Carlile, Alex (Mont'g)
Ewing, Mrs Margaret (Moray)
Fearn, Ronald
Hughes, Simon (Southwark)
Jones, Ieuan (Ynys Mo n)
Kennedy, Charles
Kirkwood, Archy
Livsey, Richard
McGrady, Eddie
Michie, Mrs Ray (Arg'l & Bute)
Salmond, Alex
Welsh, Andrew (Angus E)
Tellers for the Ayes :
Mr. James Wallace and
Mr. Matthew Taylor.
NOES
Aitken, Jonathan
Alexander, Richard
Alison, Rt Hon Michael
Amess, David
Amos, Alan
Arbuthnot, James
Arnold, Tom (Hazel Grove)
Batiste, Spencer
Beaumont-Dark, Anthony
Bellingham, Henry
Bennett, Nicholas (Pembroke)
Blackburn, Dr John G.
Blaker, Rt Hon Sir Peter
Boscawen, Hon Robert
Boswell, Tim
Bottomley, Peter
Bottomley, Mrs Virginia
Bowis, John
Braine, Rt Hon Sir Bernard
Brandon-Bravo, Martin
Brazier, Julian
Bright, Graham
Brooke, Rt Hon Peter
Brown, Michael (Brigg & Cl't's)
Buck, Sir Antony
Burns, Simon
Burt, Alistair
Butler, Chris
Butterfill, John
Carlisle, Kenneth (Lincoln)
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