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9.42 pm
The Paymaster General (Dawn Primarolo): I thank my right hon. Friend the Member for Llanelli (Mr. Davies) and my hon. Friends the Members for South Ribble (Mr. Borrow), for Cunninghame, South (Mr. Donohoe), for Coventry, South (Mr. Cunningham), for Barnsley, Central (Mr. Illsley) and for Selby (Mr. Grogan) for their contributions. I particularly congratulate my hon. Friend the Member for Selby on his excellent gain on Saturday. I understand why he can speak so eloquently about the reform of betting tax.
I also thank the hon. Members for West Dorset (Mr. Letwin), for Kingston and Surbiton (Mr. Davey), for Esher and Walton (Mr. Taylor), and for North Dorset (Mr. Walter), the right hon. Member for Fylde (Mr. Jack), the hon. Member for Guildford (Mr. St. Aubyn) and, finally, the hon. Member for Arundel and South Downs (Mr. Flight), who described the hon. Member for Kingston and Surbiton as a man of the 1980s. If I remember correctly, the hon. Member for Kingston and Surbiton would have been about 15 years of age at the beginning of the 1980s. I know that Liberal Democrats mature quickly, as they must because of the short tenure of their position in the House, but I do not believe that they mature that quickly.
The debate has been good humoured. We were entertained particularly by the closing remarks of the hon. Member for Arundel and South Downs. In the short time left to me, I shall answer the various points that have been made. Several hon. Members raised issues connected with foot and mouth disease and suggested measures that could be taken. I shall deal with those remarks towards the end of my speech.
The hon. Member for West Dorset commented on double taxation relief. I remind him that the changes announced when the pre-Budget report was published will enable companies to obtain relief for tax suffered of up to 45 per cent. in lower-tier subsidiaries. That and other changes will ensure that many companies do not need to restructure to obtain the relief. Of those that decide to restructure to optimise their tax position, many will be able to do so without a foreign tax cost. The hon. Gentleman will no doubt be aware that one of the reasons for multinationals' use of offshore holding companies is precisely to avoid tax on capital gains in respect of the sale of subsidiaries. He should be aware that companies that are setting up activities overseas for the first time will now be able to do so without the complications and costs that are involved in using an offshore holding company.
We hear a lot from the Opposition about unnecessary burdens and complexities. Under the previous Tory Government, however, the UK company investing abroad was forced to use an offshore holding company or be disadvantaged by the tax system. The new system ensures direct investment that is not penalised. I am sure that we will return to that matter in Committee.
The hon. Member for West Dorset expressed regret that the Government have not introduced a relief in the form of deferral or exemption. I am sure that British business deeply regrets the fact that the previous Government did nothing about that throughout their 18 years in office. The matter is currently subject to detailed consultation. I recall that the previous Government were not especially keen to consult people on business tax issues, but this is an important issue. Anyone with the best interests of British business at heart will want to ensure that the reform serves the competitive position of the UK for some years to come. Business has shown a strong desire to engage in discussions on the matter, and the Government have said that we plan to be committed to introducing legislation in the Finance Act 2002.
My hon. Friend the Member for South Ribble answered eloquently the points that were made by the hon. Member for Kingston and Surbiton. He is to be congratulated on
the 13 business breakfasts that he has attended and on telling the House about all the matters that were debated during them. He is also to be congratulated on having visited 20 schools in his constituency since Christmas. Clearly, he can testify to the fact that the money is coming through in terms of investment and buildings. He also made a special plea about the research and development tax credit on vaccine development. I paid close attention to his points about consultation.The hon. Member for Escher and Walton--[Hon. Members: "Esher."] I am sorry, it is catching; I am sure that Front-Bench Members will continue to prompt me. The hon. Gentleman expressed regret that this was the least controversial Finance Bill, and went on to say that it was therefore of no benefit. Presumably, the Bill is not controversial because the Opposition agree with many of the measures that it contains. It is rather odd to hold the view that Finance Bills are good only if they can cause huge rows across the Floor of the House, instead of concentrating on whether they benefit our communities.
For instance, the hon. Gentleman did not comment on the children's tax credit or its extension in 2002 in respect of the baby tax credit. Neither did he refer to the extension of the working families tax credit, the reduction on duty for ultra-low sulphur diesel and petrol, the green technology challenge fund, changes in vehicle excise duty, the package of VAT measures to help small and medium-sized companies or the VAT reduction for museums and galleries. All those issues are relevant and important to the people who watch the proceedings of this House.
No Conservative Member who suggested that this was not a good Finance Bill pointed out that the Government were tackling climate change and improving air quality, or that they had put together a package to regenerate our towns and cities and to protect the countryside. Nor did any Conservative Member mention the VAT reforms in respect of housing for which the empty homes campaign had lobbied so long and hard. All those moves will immediately benefit the community, but Conservative Members say that the Bill is not relevant and does not matter. That just shows how out of touch they are with the priorities of people outside and what those people want to be changed.
The right hon. Member for Fylde made a number of comments about foot and mouth, to which I shall return; but for some reason he specifically alighted on the subject of VAT on children's car seats. Perhaps I can help him a little. In 1999, more than 1,000 children were killed or seriously injured while travelling by car. If children are to be protected, it is vital that they sit in children's safety seats that are appropriate to their age, weight and height, meet the latest safety standards and are correctly fitted each time they are used. Some parents currently use second-hand car seats that may or may not meet the latest safety standards. We therefore considered it right to cut VAT on brand-new, better-quality car seats by some £15. I am sure that that has given the right hon. Gentleman more of an answer than he received in response to his parliamentary questions, but if he wants more detail I shall be happy to give it to him.
The hon. Member for West Dorset referred specifically to tobacco receipts. The fall in revenue receipts in 1999-2000 was due primarily to changes in the timing of
the Budget and changes in duty rates. The revenue receipts for 2000-01 have exceeded the Revenue's forecast.There are a few points that need to be made again. The vast majority of cigarettes that are smuggled are smuggled from beyond the European Union: they come from places where there is no duty on such products. The Government have clearly stated that they will not allow criminals to dictate either our tax or our health policies--of which tax is the prime mover.
The hon. Member for Arundel and South Downs spoke of harmonising duty rates. I remind him that harmonisation with French duty rates would cost £1.5 billion. A man who describes a reduction of £8 billion or £16 billion in public expenditure as necessitating merely a pruning, rather than a cutting, of public services needs to be more careful about making such sweeping statements.
The Government's strategy of using £209 million over three years to clamp down on smuggling is having results. In the first nine months of this year, 2.1 billion cigarettes did not reach the United Kingdom, or were prevented from being circulated in the United Kingdom, and 6,700 vehicles were seized from people trying to smuggle products into this country. Smuggling of tobacco products is a terrible scourge of our community: it undermines legitimate trade, increases criminality--as was pointed out by my hon. Friend the Member for Barnsley, Central--and denies the Exchequer the money to which it is entitled. It also undermines our health policy. The Government's tactics are the right way to deal with smuggling.
Mr. St. Aubyn: Will the Paymaster General give way?
Dawn Primarolo: My time has been shortened because the hon. Member for Arundel and South Downs spoke for longer than had been agreed. I will say what I want to say about foot and mouth disease, and I will return to the hon. Gentleman if there is time.
The hon. Member for West Dorset asserted that Customs and Excise was not paying back input VAT quickly enough and that that was causing problems. When he was pressed, he said that problems might be caused in future. The tax authorities are required to repay within 30 days, and the arrangements that the Government have put in place will ensure that the return is made as quickly as possible. If he has examples of cases where that is not occurring, he must surely bring them to the attention of the authorities.
The hon. Gentleman referred also to the working families tax credit and those who are in tied accommodation and have a second home, and the capital value of the second home counting towards the capital that is held as a family, which meant that they were not entitled to the tax credit. The situation is slightly more complex than that for people who are in tied accommodation. However, there are ways in which the situation can be dealt with. A great deal of information is being given to communities that are suffering from the economic effects of foot and mouth, whether in tourism, the food industry or farming. The latest information about people's rights to receive benefits comes from the Benefits Agency. I understand that the leaflet is about to go on to the internet. It is being circulated to the communities to which I have referred.
The right hon. Member for Fylde asked a series of questions about our enterprise investment schemes, venture capital schemes and venture capital trusts. In particular, he asked that further consideration be given to the qualifying conditions. He was generous in saying that he did not expect a response immediately from me this evening, and I am grateful for that. I will consider carefully what he said. I think that he acknowledged that the Government were not in a position to give blanket exemptions in major parts of the tax system.
The right hon. Gentleman mentioned roll-over relief for agriculture. The Government extended it to six years in December 2000. Again, I will pay careful attention to his arguments. Where help already exists within the tax system or through sensitive application of the system, we can help communities. I am sure that all hon. Members would expect us to do so. As part of that, the Treasury, Customs and Excise and the Inland Revenue have been working hard to identify ways in which the Government can offer practical help to businesses in rural areas that are being damaged by the outbreak of foot and mouth. They will continue carefully to examine all the suggestions that are coming forward.
We want rural businesses to survive, and to survive the outbreak. They need to continue to generate jobs and prosperity for our communities. However, the Government have done a great deal, including many things for the non-farming business community in rural areas: there are powers to grant hardship rate relief, the introduction of a small firms' loan guarantee scheme, and the work that the Inland Revenue and Customs and Excise can do to give as much help as they can to local communities. An emergency helpline operates seven days a week from 7 am to 12 pm. The very companies that the hon. Member for West Dorset said could be anticipating problems should be contacting that helpline before problems occur, not afterwards. In those ways, we shall be able to ensure that we are giving the maximum help that we can to the communities that are affected.
The Bill contains support for families and for pensioners. It sets out clearly a choice for Britain's future. The Government are building on a platform of economic stability as a foundation for future prosperity. We have made the choice to build on that stability. We have chosen to invest more in our public services, not less. We have made sensible tax cuts for hard-working families. There will not be under-investment and cuts in public services, which are the undeniable consequences of the Conservative party's policies.
The Finance Bill is a measure for families and children, and it will tackle poverty and unemployment among our poorest communities. It is a Bill for companies; it will help Britain's businesses grow and secure a long-term rise in prosperity for all. I commend it to the House.
Question put, That the Bill be now read a Second time:--
The House divided: Ayes 319, Noes 175.
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