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Mr. Boateng: Not at all. I have crossed swords with the hon. Member for Buckingham (Mr. Bercow) for many years, since he was in short trousersalthough that was, of course, quite recently. No discourtesy is intended. I hope that all hon. Members who represent seaside constituencies will accept the Treasury's invitation to attend a seminar on the issues that affect such constituencies.
Mr. Michael Weir (Angus): As someone who also represents a seaside constituency, I am pleased to hear the Minister's comments. This is the second Budget in a row in which the Government have changed corporation tax and trumpeted that as a help for small businesses, but does he recognise that many small businesses, which are the backbone of economies in constituencies such as mine, are self-employed
Mr. Boateng: That is not a fair or accurate analysis. Allowances are available to the self-employed in partnerships, and those are of assistance. The package of reforms to improve small business access to finance, the consultation on the scope for introducing small business investment companies in the UK, the improvement to the research and development tax credits and the package of deregulatory reform for small businesses have all benefited small businesses. Although there is no room for complacency, small businesses have probably been helped more than anything by low interest rates and the stability that has resulted from the policies adopted by my right hon. Friend the Chancellor. All that would be put at stake were some of the wilder fantasies of the nationalists given their head. However, the signs from recent elections are that that will not happen.
Kali Mountford (Colne Valley): At a conference in west Yorkshire on Friday attended by representatives of the regional development agency and employers' confederations, employers made it clear that, although stability is key to their development, and notwithstanding the low interest rates, they still encounter the problem of unco-operative banks, especially when it comes to small businesses. I direct my right hon. Friend to the Select Committee report that highlighted that banking problem. Will he look again at what can be done to make it easier for small businesses to access finance?
Mr. Boateng: I well remember that report and my hon. Friend's contribution to it as a Committee member. I am sure that her contribution is missed by her colleagues on the Committee, as it is by everyone. As a result of the Committee's work and a robust dialogue between business and the Treasury, the good news is that the banks are increasingly aware of their responsibilities to small business and of the opportunities for good business that arise from meeting their needs. That is why we have introduced a package of reforms to increase and improve access to finance for small business, and why the work of the Phoenix fund, the role of venture capital in this area and the consultation on the scope for introducing small business investment companies is important.
For business, it is not just about delivering, as we have done, the monetary and fiscal frameworks that have kept the economy stable and growing in the good times, and indeed in difficult times. Reforms to the competition authorities, corporation tax, investment, innovation and skills are the prior conditions for the creation of a dynamic, enterprising and productive Britain.
International comparisons show that we have a low-tax environment that is friendly to entrepreneurshipthe UN's trade and development commission ranked the UK second in the world in attracting inward investment in a report published only last September. The Organisation for Economic Co-operation and Development has said that the UK is the best place to start out and succeed in business, and its latest figures show that our corporate income taxes plus employer social security contributions as a percentage of gross domestic product in 2000 were the third lowest in the EU, lower than those of France, Germany and Italy. That is a record that the right hon. Gentleman should give us credit for, and I hope that he will now do so.
Mr. Jack: I am always delighted when the Government follow the trend set by the previous Conservative Government in lowering marginal tax rates both at the personal and business levelit is nice that a good idea has been recognised. However, in the context of the Government's continuing consultation on reforms to corporation tax, will the Chief Secretary explain to the House what benefit will accrue to British business from the abolition of tax relief for allowances under the present arrangements for corporation tax and its replacement with allowances against the rate at which assets depreciate?
Mr. Boateng: The right hon. Gentleman knows that the Government have a continuing programme of reform and rationalisation of corporation tax, which has enabled us to reduce the burden of taxation on companies and is widely welcomed. One is always concerned about anything that increases complexity, but I have not heard it being seriously suggested that on balance we have not got it right and that our record does not compare favourably with the stewardship of corporate taxation when he was Financial Secretary. He is not one to blow his own trumpetwell, not muchbut he should give us some credit for the reforms that we have introduced in this field. No doubt, during the consideration of the Bill in CommitteeI hope that he will again grace us with his presence this year, as that Committee would not be the same without himwe will have an opportunity to explore these matters in a little more depth.
We are not complacent. We are working to make the process easier still, and have identified more than 500 regulations introduced by previous Governments for reform or abolition. Our changes have already helped small businesses to employ almost 400,000 more people than they did in 1997, which tells us something about whether the Government are getting it right in relation to small businesses. I would argue that we are, and that the Opposition did not.
This Budget and Finance Bill mark the next stage of reform to give greater flexibility in capital markets, product markets, housing and planning, and the labour market. Clause 136 provides support for people who regularly work at home under flexible working arrangements. Employers will be able to meet some or all of the incidental household costs incurred by employees who work at home without giving rise to a tax charge. The Bill provides necessary recognition of
Mr. Bercow: Perhaps I may be permitted briefly to return to the subject of macro-economics. Given the interdependence of fiscal and monetary policy and the favourable intra-European comparisons that the right hon. Gentleman made a few moments ago, what assessment has he made as Chief Secretary to the Treasury of the merits or demerits of the proposed changes to the voting procedures of the European Central Bank?
Mr. Boateng: I am interested in the subject, but it would be quite untrue to say that I have made an assessment of it. One watches the development of the European Central Bank with interest, as all hon. Members would expect. I celebrate the fact that it was this Government who had the good sense to make the Bank of England independent, which the Opposition opposed and would never have had the guts to do. One would hope that at least one of them would have the good grace to stand up and congratulate us on the steps that we have taken.
Mr. Boateng: No, the hon. Gentleman has much too much form for us to believe that he is about to stand up to congratulate us on allowing our central bank the independence that was its due and that has so benefited the economy.
Clauses 132 to 134 freeze corporation tax rates. At 30 per cent., the main rate is lower than in any other major industrialised country, and the 0 per cent. starting rate means that 150,000 companies pay no corporation tax whatever.
Clauses 158 to 161 contain a package of measures to simplify the capital gains tax system, including an extension of business assets taper relief to improve access to let property for unincorporated traders. I hope
Clauses 138 to 140 simplify employee share schemes to make them easier for companies to administer, give employees in such schemes more flexibility, remove anomalies and provide a statutory corporation tax deduction for contributions to those schemes.
Following feedback from businesses, the Finance Bill improves the way in which the research and development tax credit works, allowing more businesses, particularly small and medium-sized enterprises, and more types of expenditure to qualify, and helping to take us toward the American spend on research and development of around 2.8 per cent. of GDP. Any comparison between ourselves and the United States in the area of productivitywe still have a way to go to catch up with its successrecognises the need for us to address the issue of spend on research and development, and we shall continue to consult.