| Previous Section | Index | Home Page |
Mr. Milburn: I shall ensure that the hon. member's comments and those made by my hon. Friend the Member for Greenock and Inverclyde (Dr. Godman) are passed to Lord Alexander, who has now begun his inquiry and will report in due course. The approach that we are taking is prudent and disciplined. We are locking in stability by keeping the public finances under control. Over the next five years, there will be a current budget surplus of some £34 million. This Government's approach will allow us to meet our tough fiscal rules while at the same time providing a £6 billion boost to the economy at just the point in the cycle at which it is most needed.
The Government are steering a course for stability in what is an uncertain and troubled global economy, but stability is a means, not an end. It is the essential precondition for economic prosperity and progress. In the Finance Bill, we build on that platform of stability to improve the productivity performance of the economy for the long term. For too long, Britain has faced a competitiveness gap with our competitors. There is now a 40 per cent. performance gap between the UK and the United States of America and a 20 per cent. gap between us and France and Germany. This Finance Bill will help tackle that productivity problem. It does so by taking forward measures to improve investment, to strengthen the links between business and education and to improve the tax position of growing firms.
Clause 69, for example, extends capital allowances to help bridge the investment gap that has opened up between Britain and our competitors. Too many British firms find themselves outgunned by higher levels of investment in plant and machinery among their overseas competitors. In the most recent international business cycle, for every £100 per worker invested in the UK, the US and Germany invested £140, and France invested almost £150.
We have listened carefully to representations from business organisations and have decided to continue enhanced first-year capital allowances to help small and medium-sized firms to grow and to invest. Similarly, clause 53 provides tax relief for companies seconding staff to schools, colleges and universities. It is part of our wider effort to bridge the gap between business and education.
We believe that education and business working together in partnership have a vital role in helping to prepare young people for the world of work. During our pre-Budget consultation with businesses, we found enthusiastic support from firms of all shapes and sizes for a measure that will help business shape the future work
force that it will need. It is another small, but significant, step towards making Britain a modern, high-skill, high- learning and high-earning economy, whose success will be due to the investment that we make in the quality of our work force.
Mr. Ian Bruce (South Dorset):
Will the Minister give way?
Mr. Milburn:
No. I have given way several times and I must press on.
Success will rely also on giving businesses the right incentives to invest. Clauses 24 to 26 reform the corporation tax system to give Britain the lowest rates of company taxes in our history. Indeed, those clauses give Britain the lowest company tax rate of any major European country and the lowest rate of any major industrialised nation in the world. Moreover, these new rates--of 30p, 20p and 10p--will not apply just for one year. They, or lower rates still, will apply for the rest of this Parliament. They are evidence of this Government's determination to make Britain the best place for business investment.
The new 10p rate of corporation tax for small companies in particular halves their tax rate and will benefit almost 270,000 growing firms. Two in three companies that pay tax will benefit. Those fundamental changes will leave more money in the hands of those who are best placed to create wealth and to create jobs.
These enterprise initiatives are complemented by the other measures announced in the Budget. They include a new research and development tax credit for firms with the brightest ideas and the best potential, new rewards for the best entrepreneurs and new incentives for the best investors. There will also be a new Small Business Service, to provide help for those firms that will be the biggest source of new job opportunities in the future.
The Bill builds on the platform of stability that the Government are creating by helping to develop an economy that is based on enterprise and knowledge. However, it also recognises that our country cannot have an enterprise economy without also developing a fair society. The one sustains the other. We cannot have a successful economy without a fair society, in which the talents of all our people are deployed to the full: nor can we have a fair society without a successful economy in which wealth creation provides the surest foundation for job creation.
The Bill takes forward measures to modernise and make fairer the whole tax system. Taxes are being cut for low and middle-income families. More than that: according to the independent Institute for Fiscal Studies, people in every decile group--from bottom to top--will gain from the measures. These are tax cuts for the many, not just for the few. The average household will be £380 a year better off, and the tax burden on the average family will fall to below 20 per cent. for the first time in more than 20 years. However, these are not just tax cuts. They are tax reforms, too. They are tax cuts for a purpose: to reward work, enterprise and families. In our previous two Budgets, we developed new measures to help people move from welfare to work. Now we are taking that fundamental reform a stage further by ensuring that work pays. For years, successive Governments have taken too much tax from those who work hard but are by no means
wealthy. For years, successive Governments of both persuasions connived in the situation where the working poor, facing marginal tax rates sometimes in excess of 100 per cent., were penalised simply for trying to move off benefit.
The Finance Bill, with the Government's other measures, such as the minimum wage and the working families tax credit--both opposed by the Conservatives--begin to end the perverse incentives that encourage benefit dependency. Instead, it aims to encourage independence by allowing working families to keep more of their income rather than paying it out in taxes. We do so in the recognition that work is the best way out of poverty and that, for too many people, financial uncertainty has acted as a real barrier to work for far too long.
Clause 20 introduces the lowest starting rate of income tax the country has seen for 35 years. The new 10p rate on the first £1,500 of income will halve the tax rate for almost 2 million people, most of them low-paid. Our reforms to national insurance will lift almost 1 million people out of paying contributions at all. From next April, every basic rate and top-rate taxpayer will benefit from our 1p reduction in income tax. On any count, those are major reforms to the tax system.
Mr. Bercow:
Will the right hon. Gentleman give way?
Mr. Milburn:
I have given way to the hon. Gentleman already; I am counting.
Our reforms will make working families better off and, in contrast to the practice of the Conservative party in power, the tax cuts honour our promises at the general election.
Mr. Malcolm Bruce (Gordon):
I assure the Chief Secretary that I am listening carefully to what he says and agree with his broad thrust. Does he accept that he could have done more to increase the personal allowance so that people at the bottom end pay tax at a lower level: not at 25 per cent. but at 50 per cent. of the average wage, as was the case at the end of the war? Why should people on the minimum wage still be paying tax not only now, but for the foreseeable future under this Government?
Mr. Milburn:
I hear that from the Liberal Democrats consistently. We carefully compared their policy of increasing the allowances with our policy of introducing the 10p rate. In terms of benefit to the low-paid and the worst-off, there is no comparison at all. The biggest gains go to the lowest-paid as a consequence of the introduction of the 10p rate. The hon. Gentleman may argue about it, but that is the situation.
I say to the Conservative party that, by introducing the 10p rate, we have honoured the pledges that we gave at the general election. We said that we would not increase the top or basic rates of income tax. We have honoured that pledge. We said that we would not extend VAT to food, children's clothes, books, newspapers, and public transport fares. We have honoured that pledge, too. We said that we would cut VAT on fuel and we have done so. We also said that we would introduce the 10p rate. We have now done that too, and millions of families will see the benefit in their pay packets from next month.
We said that we would do something else as well. We said that we would give more support to families. The record rises in child benefit are a reminder that it is Labour that increases support for families with children and the Conservative party that freezes it. It is Labour that will pay up to an extra £416 a year into the pay packets of families with children. The new children's tax credit in clause 27 provides most help to those who need it most, when they need it most: families when they are bringing up children. We have been able to do that by abolishing the married couples allowance and related allowances and focusing their help where it is most needed.
Our reforms to child support have been widely welcomed as a decisive step to tackling the disgrace of child poverty in Britain. I remind the House that the Child Poverty Action Group, for example, said the day after the Budget:
Almost the only organisation that opposes the new children's tax credit is the Conservative party, despite what the Leader of the Opposition said in his freedom and the family speech just last year. Then he said:
"The Chancellor has proved today that he supports the family and is genuine in his commitment to end child poverty".
The National Council for One Parent Families said:
"This is a clear-thinking, modernising Budget which will help direct help where it is most needed: to families with children, especially those in poverty."
In total, 700,000 children will be taken out of poverty by the measures that we are taking.
"If we were going to phase out the married couples allowance we should have replaced it at the same time with a new allowance, better targeted on families who really need the help."
We have delivered precisely what the right hon. Gentleman was calling for, but of course that was then; that was a year ago. The Tories are now singing a different tune. Now they oppose the abolition of the married couples allowance, despite the fact that they repeatedly cut it when they were in office, more than halving its value for some people. They had a Chancellor of the Exchequer who described the allowance as an anomaly. They allowed the MCA to be available to people whether they were married or not, separated or not, or had children or not. It is as if collective amnesia has taken hold of the entire Conservative party.
| Next Section
| Index | Home Page |