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Taxation (Small Businesses)
4. Mr. Bellingham: To ask the Chancellor of the Exchequer what plans he has for alleviating taxation on small businesses. [33408]
The Financial Secretary to the Treasury (Mr. Michael Jack): The last Budget included plans to reduce further the tax burdens on small business.
Mr. Bellingham: Will my hon. Friend join me in welcoming the fact that our corporation tax is among the lowest in the world and in welcoming the Government's recent announcement about reducing rates on small businesses in rural areas? Does he agree that small businesses do not want extra bureaucracy and extra regulation--particularly that which would flow from adopting the social chapter and other social legislation from Europe? [Interruption.] Does that not illustrate the fact that the Labour party cannot be trusted when it comes to small businesses?
Mr. Jack: My hon. Friend takes entirely the right line. The noises from the Opposition Benches show that Opposition Members completely distrust private enterprise and lack any understanding of it. Indeed, most of them have had no experience of operating in it.
Mr. Hain: Given the fact that the VAT registration threshold has not been raised in line with inflation, is the Minister happy that another 14,000 businesses have been forced into the VAT net?
Mr. Jack: Many small businesses are pleased that we have increased the threshold for VAT. That has relieved them of unnecessary bureaucracy and has expanded their opportunities to be competitive in the marketplace.
Value Added Tax
5. Mr. Harry Greenway: To ask the Chancellor of the Exchequer what is his latest estimate for VAT income for (a) the current financial year and (b) each of the previous two financial years; and if he will make a statement. [33409]
Mr. Heathcoat-Amory: VAT receipts for 1994-95 and 1995-96 were £41.8 billion and £43.1 billion respectively. The latest published forecast for 1996-97 is £47.9 billion.
Mr. Greenway: I welcome the rising trend announced by my right hon. Friend. Does it not compare favourably with the dismal stories put about by the dismal Johnnies in the Labour and Liberal parties--stories about declining economic activity and falling VAT receipts? Do not the figures reflect a more buoyant economy and augur well for a more cheerful future when tax cuts may in due course be made for everyone?
Mr. Heathcoat-Amory: My hon. Friend is right. The strong and buoyant figures for consumer expenditure are feeding through into higher VAT receipts. When my right hon. and learned Friend comes back from Lyon, he will no doubt read about my hon. Friend's enthusiasm for tax cuts.
Rev. Martin Smyth: Although I welcome the increase in VAT takings and realise that money talks, will the Minister undertake to review VAT on specialist equipment for the blind-deaf, so that they can play a fuller part in a society in which they are so often isolated?
Mr. Heathcoat-Amory: I am sure that the hon. Gentleman knows that equipment specially adapted for disabled people is zero rated--but we keep these matters under review and his comments will have been noted.
Sir Sydney Chapman: Although I am glad that VAT receipts are rising, will my right hon. Friend confirm that they are still a relatively small proportion of total tax receipts? Is he aware that in Social Democrat Sweden the VAT rate is 22 per cent., and it is on everything?
Mr. Heathcoat-Amory: My hon. Friend is entirely right about that. Not only do the Swedes have a much higher standard rate but they do not have our zero rates, so their tax system is a great deal more regressive than the United Kingdom's.
Ms Primarolo: Will the Minister confirm that he is considering introducing a statutory limit of six years on the refund of VAT campaigns? Will he confirm that he is doing so to prevent a haemorrhage of public funds and repayments, to close the gap on avoidance schemes which is opening up and to try to shore up the weak public finances that are undermining the Government's ability to do anything positive in the public sector?
Mr. Heathcoat-Amory: In answer to the original question by my hon. Friend the Member for Ealing, North (Mr. Greenway), I announced that VAT receipts over the past few months have been extremely buoyant. For April and May, they are 12 and 15 per cent. higher, respectively, than a year ago. So I do not understand how the hon. Lady can refer to a haemorrhaging of national finances. If she is saying that the Opposition are against stopping
loopholes and avoidance schemes, that too is a most interesting announcement by an Opposition Front Bencher.Interest Rates
6. Mr. Pawsey: To ask the Chancellor of the Exchequer if he will make a statement on his policy for interest rates. [33410]
Mr. Waldegrave: Interest rates are set to achieve the inflation target of 2½ per cent. or less.
Mr. Pawsey: I thank my right hon. Friend for that reply. Does he agree that low interest rates and low inflation are the prerequisites for any successful economy? Will he further agree that both conditions are currently in place, which is probably why the British economy is outperforming our principal competitors in Europe? Would he care to say what would happen to the economy if the policies of the Opposition, especially the social chapter, were implemented?
Mr. Waldegrave: To quote Aneurin Bevan, we do not need to look in the crystal ball, we can read the book in relation to the Opposition's policies. When they were running the economy, they achieved 27 per cent. inflation. When the Organisation for Economic Co-operation and Development reported on Britain in 1979, among its many criticisms of our economy was the fact that inflation was rising to 11 per cent. again. In its report this year, it says that the
- "United Kingdom has . . . become a more flexible and less inflation prone economy."
Mr. Sheldon: I welcome the reduction in interest rates and offer my congratulations to the Chancellor on his relationship with the Governor of the Bank of England, which is a pretty suitable one at present; but will he bear it in mind that the amount of research and development has declined during the past few months, a serious aspect, and that plant and machinery expenditure needs to be much higher? To deal with the shortcomings of the Government's economic policy, particular attention must be given to some form of capital allowances for plant and machinery in particular.
Mr. Waldegrave: One of the most satisfactory features of the last period--indeed, since 1979--has been the increase in the efficiency of capital investment, which is increasing faster in Britain than in other countries. It is also very satisfactory that in the last recession Britain did not cut its investment or its research and development as much as in previous recessions. Those are both good signs for the long-term health of the economy.
Mr. Hawkins: Does my right hon. Friend agree that it is a great triumph for Conservative policy that interest rates are now at a historic 30-year low? Will my right hon. Friend contrast that with the position in Germany, where industrialists are making it clear that they now realise that Germany's commitment to the social chapter is costing it hundreds of thousands of jobs? The leader of
the Labour party, in his recent visit to Germany's BDI, the convention of German industry, made it clear that he was still committed to the social chapter. His views are the views of failed old Germany's social democratic socialism.
Mr. Waldegrave: It was indeed a comic scene when the Leader of the Opposition, having gone to Germany to tell the German Chancellor that he would sign up to everything in Europe, then had to listen to a speech by Mr. Heinkel--during which, I believe, he made his excuses and left--in which Mr. Heinkel paid warm tributes to the British economy. It would have been better if the Leader of the Opposition had stayed and listened.
Mr. Andrew Smith: Does not interest rate policy depend critically on sound public finances? As the Chancellor has admitted that there was a mistake in his Budget calculation of tax revenues, as this year's borrowing races ahead of the Government's forecast, and as the right hon. Member for Wokingham (Mr. Redwood) warns in an article in Public Finance tomorrow that the Government have borrowed an extra £100,000 million during the past three years, is it not high time that the Chief Secretary quantified the mistake that was made in the Budget forecast, came clean with the House and started to tell us the true state of the public finances, and accepted the case that Labour has put forward for an independent audit of the books before the Budget in November?
Mr. Waldegrave: It will do the hon. Gentleman a great deal of good to learn economics from my right hon. Friend the Member for Wokingham. I am glad that he is reading his articles with attention. They are a very different kind of economics from those that he used to believe in. It will do him good to read my right hon. Friend's speeches. If the hon. Gentleman wants to look at public finances, he should first explain why, under the Labour Government--the only thing by which we can judge him--in every year on average, public borrowing was higher than it has been under the Conservative Government.
Mr. Olner: My hon. Friend the Member for Oxford, East (Mr. Smith) was at school then.
Mr. Waldegrave: The hon. Gentleman was indeed at school, learning the wrong economics which I am now glad to find that he is correcting by reading my right hon. Friend's speeches.
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