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Mr. Smith: I shall certainly examine that case. I should point out that, through our national child care strategy, a huge expansion in child care provision is under way, stimulated not least by the provisions of the working families tax credit. However, as I said, I undertake to look at the point the right hon. Gentleman raises.
The improvements I have described and their impact on tackling child poverty and helping working families will be reinforced by further improvements to public services that will be made, thanks to our commitment to average real growth in health spending of more than 6 per cent. a year over the next four years--the longest period of sustained high growth in expenditure in the history of the national health service. The immediate boost of £2 billion for health this year is in part funded by the real increase in tobacco duties set out in clauses 12 to 15.
The Conservatives' decision not to vote for the tobacco tax provides further confirmation that their sums do not add up and that they could not deliver on Labour's pledges on health and education.Our additional boost of £1 billion for education this year is accompanied by the introduction in clause 57 of a new training relief for employees. It will make employers' contributions to education or training undertaken by holders of individual learning accounts exempt from tax and national insurance where they qualify for grant or discount and are available to all employees on similar terms.
Businesses and jobs will benefit from our commitment to enterprise. We have already cut main and small business rates of corporation tax to their lowest-ever levels--the lowest of any major industrialised country. The Bill contains several measures designed further to promote enterprise and help business. Those include the cuts in capital gains tax in clause 37; the research and development tax credits in clauses 67 and 68; the permanent 40 per cent. capital allowances for small and medium-sized enterprises in clause 69, which will help manufacturing businesses in particular; the new all-employee share ownership plan in clause 47; the enterprise management incentives in clause 61, which will help high-risk companies recruit key personnel; and the corporate venturing provisions in clause 62.
Those measures have been widely welcomed by business. Together with the introduction in the Budget of three-year, 100 per cent. capital allowances for investment in information and communications technology equipment and an extra £100 million for the new £1 billion target umbrella fund for regional enterprise growth, they comprise a huge commitment to business success on the part of a Government who believe that enterprise must go hand in hand with fairness.
Mr. Andrew Tyrie (Chichester): The Chief Secretary makes great play of the tax breaks that have been given to business, but will he tell us what the overall burden on business of the changes in business taxation since 1997 has been?
Mr. Smith: We have been helping businesses to invest, expand and create an enterprise culture in this country. Let me quote the Institute of Directors news release commenting on the Budget. It states:
- The Institute of Directors welcomes the pro-enterprise flavour of the Budget, coinciding with the Institute's own recommendations. The cut in capital gains tax on business assets, plus the moves to encourage wider employee shareholding, will be a welcome boost to enterprise. We are delighted to see businesses being encouraged to seize the opportunities offered by e-commerce, where moving quickly will have a big effect on our international competitiveness.
Mr. Smith: As the Government have said on a number of occasions, we fully appreciate the importance of objective 1 status for west Wales and the valleys and the regions within England, which are benefiting from it. The Administration in Wales have stated that the money this year is adequate to get the programme started. I have said many times that the future is properly a matter for the spending review. Anyone who has tangled with these issues will realise that they are of some complexity.
It is a mark of our recognition of the importance of objective 1 status for west Wales, the valleys and Wales as a whole that it is being dealt with in the spending review. Full consideration will be given to how the funds and the public expenditure cover can be provided to ensure that the programme goes ahead. We realise its importance for the regeneration of parts of Wales and for regions in England as well.
Sir Brian Mawhinney (North-West Cambridgeshire): Bearing in mind the Bill's positive aspects for business, will the right hon. Gentleman tell us whether the tax burden on business has increased or decreased since the 1997 general election?
Mr. Smith: I have recently pointed to a string of ways in which tax on business is falling. Moreover, there are measures in the Budget that will encourage business to invest further by extending reliefs, which have been widely welcomed throughout industry, by its representative organisations and by individual firms. We shall take no lectures on business from Opposition Members, who presided over the two deepest recessions since world war two, which resulted in the decimation of business, with hundreds of thousands of firms going bust and 1 million jobs lost in manufacturing industry. That must be contrasted with the stability, sound finances and prospects of business growth that we now have.
I must make progress on the Bill itself. The new optional ring-fenced regime in clause 81 is another measure that will help business.
Mr. Geraint Davies (Croydon, Central): Would my right hon. Friend be interested to know that when tax and borrowing are put together as a share of gross domestic product--in other words, what the Government are spending on behalf of the public--they were 38.2 per cent. in 1996-97, and are due to decrease to 36.4 per cent. in 2000-01? That is a difference of about £17 billion, or an extra 7p on income tax. As Baroness Thatcher has pointed out, at the end of the day all business tax is paid by individuals. Does my right hon. Friend agree that the burden of tax on business and everybody else is decreasing under the Government?
Mr. Smith: I thank my hon. Friend for his helpful intervention. He always makes interesting observations on our proceedings. I welcome them, even when they involve quoting the baroness.
I was referring to clause 81, which will introduce the so-called tonnage tax regime, whereby shipping companies can opt to work out taxable profits on the basis of the tonnage of ships operated. This innovation, which I know a number of my hon. Friends and Opposition Members have called for, and which follows Lord Alexander's inquiry, is part of the Government's commitment to encourage the British shipbuilding industry and will, I am sure, be welcomed.
The Bill modernises the tax treatment of corporate groups and international operations. Clause 96 extends group relief to UK branches of non-resident companies. Clause 100 enables groups to bring together chargeable gains and allowable losses on asset disposals, without having to go through the rigmarole of transferring asset ownership within the group. Clause 103 improves the fairness and the effectiveness of anti-avoidance rules for controlled foreign companies.
I shall say a word about the Budget provisions in clause 102, which limit the use of so-called mixer companies to shelter low-taxed foreign profits from UK tax. It is important to understand that under the old rules, the UK taxpayer is currently underwriting the cost to business of investing in countries that have not reduced their tax to the UK level. In that sense, our changes promote international tax competition. Perhaps even more important, they level the playing field among groups that invest directly from the UK and those that adopt mixing structures.
Taken together, our measures align tax treatment with economic rationality, tackle avoidance, and help sustain the United Kingdom as a competitive base for international operations.
Mr. Oliver Letwin (West Dorset): Is that why the Inland Revenue consulted for a long period on enshrining the previous regime?
Mr. Smith: There has been extensive consultation about the regime from which these changes result. The changes have been widely welcomed--there has been criticism but there has also been a substantial welcome--and they make the United Kingdom a more attractive base for international and multinational operations.
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