| Previous Section | Index | Home Page |
Construction Industry Scheme
12. Mr. Brian Cotter (Weston-super-Mare): If he will make a statement on the likely impact of the introduction of the construction industry scheme. [79456]
The Paymaster General (Dawn Primarolo): The new construction industry scheme, which commences on 1 August this year, will significantly reduce the opportunity for tax evasion in the building trade. This will be achieved by restricting gross payment certificates to subcontractors who have met their tax obligations on time and have a turnover above the threshold we have set in regulations; and by requiring other subcontractors to register with the Inland Revenue.
Mr. Cotter: I thank the Minister for that answer. May I point out that the scheme will exclude 200,000
subcontractors from receiving gross payments? We are told that this is to combat £50 million of tax evasion. However, the figure calculated of tax liability for 714 tax certificate holders is just £1,800 per head. That means that £50 million of tax evasion is being drawn from only 27,000 certificate holders. Is it reasonable that 170,000 honest contractors should suffer being sidelined by contractors and subjected to cash flow problems in order to reach this small minority? May I suggest that there could be a fairer, more efficient way of avoiding this tax evasion than the scheme proposed?
Dawn Primarolo: I know that the hon. Gentleman has received many representations in his constituency and he has written to me a number of times on this matter, but I should point out some facts to him. The legislation to deal with this abuse in the construction industry, which has the support of the industry, the trade unions and associations, was first introduced to Parliament in 1995 with all-party support. It was further dealt with in legislation in 1996, again with all-party support. The issue is the evasion of tax in this area and was recognised by the industry, the trade unions, the Government and employment tribunals as a result of some hearings. The Government must take action. Instead of worrying about, and undermining, such action, the hon. Gentleman should be supporting the Government in dealing with a very difficult area. He should not break the all-party support that his party has helped to maintain until now.
Mr. Ian Bruce (South Dorset): Will the proposed schemes announced in the Budget for other contractors follow the path of the construction industry scheme? The suggestion that such a scheme will be introduced for information technology contractors, for example, is causing a great deal of worry among all sorts of self-employed people and those who form single-member limited companies. Exactly what is the Treasury up to?
Dawn Primarolo: The hon. Gentleman is confusing a number of items. The clauses in the construction industry scheme which his party initiated, with our support, and which will continue, are designed specifically to deal with the problem of labour-only subcontractors--who used to be called the lump--in the building industry. The turnover threshold that we have introduced is set at a very fair level--lower, I might say, than the one his Government were going to set.
Shipping (Fiscal Regime)
13. Mr. Barry Gardiner (Brent, North): What remit he has given to Lord Alexander's investigation of the fiscal regime for British shipping. [79457]
The Paymaster General (Dawn Primarolo): Lord Alexander has agreed to conduct an independent inquiry into the case for, and design of, a lower rate ring-fenced tonnage-based tax and additional enhanced training incentives for the shipping industry, taking account of the Government's objectives for shipping and the national and international competitiveness issues involved. The inquiry is to conclude as soon as is practicable.
Mr. Gardiner: I am grateful to my hon. Friend for that reply. What assessment have the Government made of the
possible revenue implications for the Exchequer of a tonnage-based tax such as that in which the Dutch Government are engaged, which has resulted in a 37 per cent. increase in Dutch-flag ships, a 23 per cent. increase in employment in their shipping industry and a 19 per cent. increase in their gross domestic product? Will she confirm that the assessments will be made available to Lord Alexander, so that he can set them alongside the success of the Dutch scheme?
Dawn Primarolo: Those are precisely the issues that Lord Alexander will be considering in studying tonnage- based tax regimes in other European Union member states and, indeed, elsewhere. He will be supported by the Treasury in ensuring that the figures are detailed and correct, and will be making his recommendations on precisely such information.
Single Currency
14. Mr. Geraint Davies (Croydon, Central): What recent representations he has received from business on the single currency. [79458]
The Economic Secretary to the Treasury (Ms Patricia Hewitt): My right hon. Friend the Chancellor receives many representations from business on the single currency.
Mr. Davies: Does my hon. Friend accept that support for the euro among larger international trading companies is much greater--as it is in the City--than among smaller companies, partly because larger companies see the natural trade benefits if we join and the prospective loss of investment if we never join the euro? What action is being taken to inform and advise small and medium companies on the benefits of the single market and the single currency--particularly those that link their supplies to international companies, which obviously have much greater interest in trading in euros?
Ms Hewitt: I thank my hon. Friend for that question. Our priority for small and medium companies is to help them to adjust and to take advantage of the opportunities that were created by the introduction of the euro earlier this year. Some 750,000 small and medium firms in our country already have trading links with Europe. That is nearly half our small and medium firms. All of them could be affected by the euro, regardless of whether we finally decide to join economic and monetary union. We have been ensuring that they are aware of the euro and its implications, and have been helping them to adjust to that new reality.
Mr. Nigel Evans (Ribble Valley): Does the Minister accept that many small to medium enterprises are operating at the margin? They are already reeling from new rulings and regulations from the European Union adopted by the Government, such as the 48-hour directive. Will she explain to the small to medium enterprises that, if we go into a single currency, interest rate policy will be directed from elsewhere and they will have to pay higher interest charges just for the benefit of other parts of the EU?
Ms Hewitt: My right hon. Friend made it clear in his statement to the House in October 1997 that the overriding test for whether Britain should join the single currency would be whether it would be good for our economy and our businesses, for jobs, for investment and for the City. Of course that includes small businesses, but, at this stage, I hope that the hon. Gentleman agrees that the priority is to ensure that small and medium businesses in this country, half of which already have trading links with companies in other parts of the EU, are given all the help that they need to trade with suppliers and customers who use the euro. We are helping small businesses to adjust to the euro. We are also helping them by introducing the lowest rate of corporation tax for small businesses ever in this country.
Mr. Jim Cousins (Newcastle upon Tyne, Central): Does the Minister accept that, since the euro was introduced, it has been managed by the European Central bank to achieve a falling exchange rate against the Anglo-Saxon currencies? That has now been compounded by an interest rate cut in Europe, placing our trading exporters in industries and services in a more difficult position. Can my hon. Friend assure us that she is making representations to the European Central bank to try to prevent competition over exchange rates?
Ms Hewitt: I would observe that 80 per cent. of the rise in sterling's value came under the Conservative Government. We have made the tough decisions necessary to end the cycle of boom and bust, bring inflation down and get the public finances under control after we inherited from the previous Government a public sector debt of £26 billion. We have created the conditions for economic stability that, in turn, can underpin a stable and competitive exchange rate.
Mr. Edward Davey (Kingston and Surbiton): Does the Minister agree that many pro-euro businesses have concerns about the rate at which the pound will join the euro? Will she acknowledge that it is important that the level of the pound be reduced, because it is not competitive? Will she promote a public debate in the country and among our European partners on the sustainable long-term rate for the pound, so that we can join the euro at that rate?
Ms Hewitt: As I have just said, of course we want a stable and competitive exchange rate. The way to achieve that is to put in place the conditions for economic stability. That is what we have done by giving independence to the Bank of England and by ensuring that inflation falls and stays low. We now have the lowest long-term interest rates for 40 years, the lowest mortgage rates for 33 years, and the lowest rates of corporation tax ever. Those are the conditions for economic stability that, in turn, will underpin a competitive and stable exchange rate.
| Next Section
| Index | Home Page |