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Business Tax Burden

3. Dr. Julian Lewis (New Forest, East): If he will make a statement on the tax burden on businesses. [3323]

The Chief Secretary to the Treasury (Mr. Andrew Smith): Information on receipts from different taxes and changes are included in the relevant issues of the "Financial Statement and Budget Report".

Dr. Lewis: I thank the Chief Secretary for that singularly uninformative reply. Does he accept that the

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Confederation of British Industry has estimated that the tax burden on business has increased by £5 billion a year, and could that be the explanation for the fact that Britain has slipped in the ranking of most competitive countries in the World Economic Forum's league from fourth to ninth position?

Mr. Smith: The truth is that the Government have cut taxes on business, including a cut of 3 percentage points in the large and small companies rate of corporation tax and the introduction of the 10p starting rate, which—as my right hon. Friend the Chancellor has said—will be expanded in the Budget next year to give more help to small businesses. The result is that corporation tax as a share of the gross domestic product has fallen under this Government from the 3.6 per cent. we inherited to 3.4 per cent. last year.

As for the CBI, Digby Jones, its director general, said in response to my right hon. Friend's enterprise statement on 18 June:

David Taylor (North-West Leicestershire): While I accept my right hon. Friend's point about the level of corporate taxes, does he accept that small and medium enterprises face a serious problem in relation to the level of business rates? I received today a letter from a small firm in my constituency that has moved to new premises and provided 150 new jobs. Its space requirements have not quite doubled but its rate bill has quintupled. Can my right hon. Friend work with other Ministers to examine the effect of that tax, which is long overdue for reform?

Mr. Smith: I shall of course examine carefully the points that my hon. Friend makes. There is always more we can do for small firms and we are looking at what that might be, but we have cut their average corporate tax bill by nearly a quarter. We have raised the threshold for mandatory audit, we have introduced the Small Business Service and we are simplifying the VAT regime. We also allow businesses to calculate their tax liability on the same basis that they need to provide figures for their company reports. As a consequence, there are now 170,000 more small businesses than when the Government came into office. We shall look at what we can do to give them more help, but the progress that has been made already should be recognised.

Mr. Nicholas Winterton (Macclesfield): I am sure that the Chief Secretary will appreciate my total commitment over many years to manufacturing industry, but I want to bring to his attention the plight of a textile company in the north-west. It is involved in a very competitive sector of manufacturing, and has spent more than £1 million on reducing the emissions into the environment that result from its manufacturing processes. Under the climate change levy, the firm will have to pay £85,000 a year. Does not the right hon. Gentleman believe that that is extremely unfair? Before he tells me about rebates, I must add that, unfortunately, the company is not eligible for a

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rebate. It will therefore have to accept an additional tax burden of £85,000 a year. How would he explain that to the company?

Mr. Smith: I acknowledge the hon. Gentleman's commitment over many years to manufacturing industry, and the consistency and passion with which he has spoken on the subject under successive Administrations. The answer to his question regarding the firm in the north-west that he described is that we can build success for the future only through investment, by developing skills and by creating a generally low-tax environment for business that recognises the tough global competitive circumstances faced by such firms. No Government can guarantee the success of individual firms or sectors; we can only do our level best to create the best conditions for them to succeed against tough global competition. Opposition Members accept the Kyoto targets, but it is no good them willing the ends with regard to climate change if they are not prepared to grasp the means.

Debt Relief

4. Mr. Michael Connarty (Falkirk, East): What steps he is taking on debt relief in developing countries. [3324]

The Chancellor of the Exchequer (Mr. Gordon Brown): Since Chad was accepted as the 23rd country on 22 May, 23 countries have now entered the debt reduction process, with debt cancellation now totalling $53 billion. Four more countries are expected to achieve debt cancellation in the next few months. Seven countries are prevented from doing so by internal conflicts.

Mr. Connarty: I thank my right hon. Friend for that reply. May I add my personal congratulations to the others that my right hon. Friend has received from his Scottish friends, and from Sarah's personal friends in Scotland?

Does my right hon. Friend think that what he has achieved in debt cancellation is undermined by the fact that many countries are burdened with commercial debts, rather than debts to Governments, with the result that a level playing field does not exist? Is any effort being made to try to stop the repatriation of so much money to commercial companies in the advanced part of the world? That would create a more level playing field in commercial terms for the countries that we, through the Government, are trying to help, and thus make it easier for them to escape indebtedness and poverty.

Mr. Brown: I thank my hon. Friend, and I acknowledge the work done in his area and throughout Britain by the churches and the non-governmental organisations to raise the issue of debt relief. There is an arrangement in the Paris Club for dealing with commercial debt, but most debt owed in Africa is owed to official sources. That is why our decision—which has been followed by most other major countries—to give 100 per cent. debt relief to those countries moving through the debt reduction process is of particular benefit to Africa.

Many of the countries involved wish to be able to borrow money in the future to pay for the infrastructure projects and the work in health and education that they want to undertake. They must be in a position to be able to do so. We do not want to put them in a position that means that they can never borrow again.

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I share my hon. Friend's worries about the speed of the process, and the Government are to put forward new proposals at Genoa. We cannot deal only with the conflict countries; we must ensure that the debt relief being given at the moment is sustainable. That means that we have to look at the particular position of a few more countries. A number of countries are not applying for debt relief. Most of those that do apply will get it either this year or next, subject to the civil wars in those countries coming to an end.

Dr. Jenny Tonge (Richmond Park): I hate to dispel the warm glow in which I am sure the Chancellor is basking this morning, but does he agree that the debate about debt relief has clouded the point that if this country carries on increasing its aid budget in the way that it does at the moment, it will take 50 years to reach the United Nations recommended target of 0.7 per cent? What is he going to do about that, as it is so much more important?

Mr. Brown: First, the percentage is increasing and has increased over the last few years. It is rising to 0.31 per cent. and will then rise to 0.33 per cent and we will look at the matter again in the spending round. In our manifesto, we committed ourselves to substantial increases in international development aid, and we will look at that matter in the spending round decisions next year. I do not accept what the hon. Lady says. We are increasing the amount of aid, both in real terms—by about 50 per cent. over the last few years—and in terms of the percentage of national income.

There are many more things that have to be done. My right hon. Friend the Secretary of State for International Development has not only set up a Department that leads the world, but one that has led the way in untying aid, which I hope that the hon. Lady agrees is important. My right hon. Friend has also called for an end to export credits involving arms and other unproductive expenditure being financed by the Exchequers of Britain and other countries. Equally, she led the way last week in the removal of subsidies for small arms. On all the issues, she and the Government are trying to lead the way.

On the 2015 targets—which I hope that the hon. Lady will also address when she looks at the issues—the global health fund and the initiatives next year on education are our means of moving matters forward so that we can meet those targets. We are increasing resources for overseas aid, and we are doing so sustainably. It is unfortunate that the Liberal Democrats all the time make new spending promises that they know perfectly well they cannot afford.

Mr. Andy Reed (Loughborough): I congratulate my right hon. Friend the Chancellor on his personal commitment to the work that has been done over the last few years, but does he accept that, unfortunately, some of the devil is in the detail? Has he seen the report from Jubilee Plus this week, which shows that, under the heavily indebted poor countries initiative, it is possible that some of the countries may not reach their growth targets, which would cause particular problems for those that try to exit the HIPC initiative over the next few years? Will he use his influence on the G7 and G8 to ensure that the details of the HIPC initiative deliver the poverty reduction that all of us in this House want?

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Mr. Brown: I thank my hon. Friend for taking a long-term interest in the issues and the all-party work that has been done. There are six countries—Burkina Faso, Malawi, Mali, Niger, Rwanda and Tanzania—in respect of which we are now working with the World Bank and the IMF because of the central issue of the sustainability of debt relief. HIPC must offer a sustainable exit from debt, and we will ensure that that takes place. That is why we are prepared to look at all means of doing that, and we will work with the international institutions to secure it.

I do not think that the reports published this week should get away from the central argument. It is only if we co-operate with other countries and work to strengthen the international institutions that we will make progress on the issue. The idea of some—that we could make any difference by abandoning the international institutions and retreating into isolationism or protectionism—is absolutely wrong. I believe that reform of international institutions is the agenda on which all those who believe in social justice should focus their attention.

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