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Mr. Alex Salmond (Banff and Buchan): On the subject of confusion, as the Bill has progressed through the Commons, has the Financial Secretary detected any change in economic indicators, for example, the exchange rate and the impact in terms of job losses, the upturn in interest rates and the unemployment figures? Has she detected any change in economic conditions and, if so, what is to be the Government's response?

Dawn Primarolo: What I have detected at this late stage is that the hon. Gentleman has finally participated in our deliberations, having seen no trace of him during the many hours, weeks and months in which we have debated both the Budget and the Bill.

The Bill introduces a number of measures to encourage work and to make work pay. Our reforms of the national insurance system will remove barriers to work that have faced many people in the past and will encourage employment. The new deal will be extended to provide new employment opportunities to the long-term unemployed, partners of the unemployed, the long-term sick, the disabled and disadvantaged communities. The working families tax credit will be a major reform of the tax system--necessary because the labour market has changed almost beyond recognition in the past 20 or 30 years--giving women the opportunity to combine family commitments with paid employment.

Throughout the country, firms are reporting skills shortages. At the same time, there is a huge pool of unused talent and the Government intend to ensure that

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we use that talent. People who want to work will be able to do so; they will be helped to find jobs and to stay in the labour market. We are determined to give them the skills and opportunities that they need, which is something the previous Government failed pitifully to do. The working families tax credit and the reform of the national insurance system, together with our increased investment in education, training and skills, will begin to ensure that we have a labour market that meets the needs of the 21st century. Those measures, taken together, will make it easier for people to get into work, especially families with children; they are about giving people a future and giving them the hope that they want for that future.

Mr. Derek Twigg (Halton): I am pleased to hear what my hon. Friend has said. What does she think would have happened if Labour had not got in? What sort of future would those people have had?

Dawn Primarolo: I am sure that the Opposition can explain for themselves how they would have continued to fail to invest in skills and to preside over chaos in the tax system, particularly in regard to families with children, and how they would not have increased child benefit or ensured that young people have an opportunity to gain skills and jobs through the new deal. As we know, the Opposition opposed this Government's windfall tax.

Alongside all of that reform, the Government are promoting enterprise. We need to promote enterprise alongside labour market reform to create a dynamic business sector, which is an essential part of any economic policy. We have put in place a corporation tax regime to encourage long-term investment. We have the lowest rates ever and we are abolishing advance corporation tax. Business has widely welcomed those changes. We have cut the small business rate of corporation tax to 20 per cent. from next year. Both business corporation tax rates will be held at the new levels or lower for the lifetime of this Parliament--an undertaking that the previous Government never gave, which shows the confidence of this Government in their policy and in our firms.

Dr. Nick Palmer (Broxtowe): Is my hon. Friend aware that during questions to the Chancellor this week, the shadow Chancellor said that he did not realise that the gap between Britain and Europe was widening on corporation tax? He thought that we were getting closer to Europe and becoming less competitive. Does it worry her that we do not have an Opposition who are in command of their portfolio?

Dawn Primarolo: I am sure that the shadow Chancellor will settle into his new position and will get up to speed on the relevant facts with regard to corporation tax.

The Government have also undertaken long-overdue reforms of the capital gains tax system to promote enterprise, reward risk-taking and encourage long-term investment in place of a culture of short-termism and expediency. The Bill introduces tapers, which will reduce CGT on business and non-business assets held over the longer period. The effective rate of capital gains tax will be 10 per cent. for business assets held for 10 years. It is right in principle that everyone should pay a share of tax on their gains.

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Sir Robert Smith : Has the hon. Lady worked out the consequences of the Finance Bill, should the Government fail to control inflation? How much real tax will people pay, if one takes into account the inflation of assets?

Dawn Primarolo: If the hon. Gentleman had been able to hear all the deliberations through the long consideration of the Bill, he would realise that the prudent approach to the economy being taken by my right hon. Friend the Chancellor will deliver stability, investment and the security and sustainable growth that the country badly needs.

The Bill also introduces the new university challenge fund--a public-private partnership to provide £50 million in venture capital to help turn good research into good business, which is badly needed in this country.

There will be a further boost to first-year capital allowances to help fund investment--remaining at 40 per cent., rather than 25 per cent., for a further year. That is another indication of the Government's determination to ensure that businesses can grow and that investment is created.

The Government have also invested in the environment. We are committed to an annual increase in road fuel duties of at least 6 per cent. in real terms, which is slightly more than the previous Government's commitment of 5 per cent. The increase will help us to keep our commitment to greenhouse gas targets, which are crucial in meeting our Kyoto obligations. We will be consulting soon on measures to graduate vehicle excise duty to encourage the use of less environmentally damaging cars. The reduction, under clause 16, of up to £500 in vehicle excise duty for lorries and buses that meet the new low-emission standards and the changes in duties on diesel duties and road fuel gases will help to reduce the impact of transport emissions on local air quality. That is a vastly important measure.

In addition to climate change and local air quality, we are dealing with land use and sustainable waste management. The landfill tax, which was introduced by the previous Government, was an important first step in environmental taxation. The increase in the standard rate from next year should encourage waste producers to reduce their waste and to seek more sustainable ways in which to deal with it.

The Budget was about fairness. We inherited from the previous Government a situation in which one child in three grew up in poverty--this Government are determined to tackle that. We targeted support where it was most needed--on families. From next April, child benefit for the oldest child will increase by £2.50 a week, with an equivalent increase for poorer families through the family premium of income support and jobseeker's allowance--that is the largest ever increase. The new child care tax credit will pay 70 per cent. of the costs of child care--up to £100 a week for one child, and £150 a week for two or more children. To help fund the package to support children, we have reduced the married couple's allowance from 15 per cent. to 10 per cent. from April 1999.

Fairness also means ensuring that people pay their proper share of tax. The Bill contains a number of anti-avoidance measures to close loopholes and to prevent abuse of the system. That is why we ensured that the foreign earnings deduction loophole was closed.

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The Government will continue to ensure fairness in the rates at which people pay their tax and that people pay what they are required to pay.

The Bill reforms inheritance tax to tighten up the rules on public access to inheritance tax-exempt assets. It is right in principle that exempt assets that are supposed to be open to the public are open to the public--that makes the system fairer.

We are encouraging savings as an essential part of our strategy. The Bill introduces the new individual savings accounts, which make it easier for people to save. Extending the savings habit to more people is absolutely essential.

The Bill reinforces our commitment to economic stability and to the promotion of enterprise. It shows our determination to modernise the tax and benefits system to make work pay. It is another step in delivering what we promised less than a year ago--long-term stability, with opportunity for the many, not only the few. The Bill is another milestone in the Labour Government's progress to those objectives, and I commend it to the House.

5.7 pm

Mr. Heathcoat-Amory: The Finance Bill--all two volumes and 400 pages of it--is one long exercise in tax raising, and Conservative Members make no apologies for having voted against its tax-raising measures.

Mr. Andrew Love (Edmonton): The right hon. Gentleman talks about tax-raising measures, but would not the amendments that the Opposition tabled in Committee have imposed another £6 billion to £7 billion in taxes?

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