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"clearly stated commitment to manufacturing, and to streamlining, rather than abolishing, capital allowances, does actually lead me to believe that the proposed rate cut will send a positive message about investing in Britain."
It is important to address one of the concerns that has grown up under this Government. We have become increasingly uncompetitive in this area, so we intend to reduce the mainstream corporation tax rate from 28 to 25 per cent. and the small profits rate from 22 to 20 per cent. We believe that that will be a step in the right direction; indeed, we have ambitions to reduce the rate further, and have engaged some of the country's leading tax experts. They continue to provide advice to the Government and Her Majesty's Revenue and Customs, but we have asked them to develop proposals to reform our corporation tax regime to ensure that we have the
best corporate tax environment in the G20. We should look beyond the G7; we should look at standards in the G20 as a whole, to enable us to bring our corporation tax rate down further. This Finance Bill could have been an opportunity to start some of those reforms and move towards a lower corporation tax rate, but it is an opportunity that has been spurned. However, we hope to have an opportunity in the months ahead to ensure that the UK once again has one of the most competitive corporation tax rates in the developed world.
The Financial Secretary to the Treasury (Mr. Stephen Timms): I was rather hoping that the hon. Member for Macclesfield (Sir Nicholas Winterton) might intervene in this debate on behalf of manufacturing and challenge those on his Front Bench, because the Engineering Employers Federation, on behalf of UK manufacturing, has described the proposal that the hon. Member for South-West Hertfordshire (Mr. Gauke) has just outlined to us-albeit perhaps not in as much detail as it would have been interesting to hear from him-as a "disaster". And so it would be, because the investment allowances that support manufacturing are crucial. It would be quite wrong to abolish them.
Mr. Gauke: The Minister mentioned the EEF. Let me point out to him that the EEF has welcomed the discussions we have had with it about its proposals for a short-life asset regime. It has said that manufacturers will be encouraged to hear of our engagement in the matter, so the situation is not quite as the Minister portrays it.
Mr. Timms: I am pleased that the hon. Gentleman has been talking to the Engineering Employers Federation, although he should have talked to it a bit earlier and perhaps avoided the warranted criticism that his proposals have received.
At 28 per cent., the UK's corporation tax rate is at its lowest level ever. As the hon. Gentleman recognised, it remains the lowest in the G7. In our view it is important that we should retain the competitive position that that relatively low rate of corporation tax gives us. I welcome the fact that the Opposition are supporting-or not opposing-clause 2, and I commend it to the Committee.
Mr. Mark Hoban (Fareham) (Con):
I do not want to detain the Committee for too long on clause 6, as we have already expressed our pleasure at its inclusion in the Bill. It copies an idea that my hon. Friend the
Member for Tatton (Mr. Osborne) announced in October 2007, although the difference is that the proposal in clause 6 is limited to two years. However, I would like to ask the Government about two points of detail that have been raised with us.
First, as happens in many cases now, a first-time buyer might be helped out with the cost of a purchase by a parent or relative. That person might not have owned a home previously, but the provision applies if, as proposed new section 57AA(1)(d) of the Finance Act 2003 says,
"the purchaser, or (if more than one) each of the purchasers, is a first-time buyer who intends to occupy the residential property as the purchaser's only or main residence".
"has not previously been a purchaser in relation to a relevant acquisition of a major interest in land".
My understanding is that someone over 18 living at home would, even if they were not the purchaser, be deemed for legal reasons to have a major interest in land, and that their consent might be required if the home were being remortgaged. How is that situation dealt with in proposed new subsection (2)(a)?
Mr. Timms: In answer to the hon. Gentleman's first question, the issue would be whether the person who had previously owned the property owned a stake in the property being acquired as a result of the arrangement that the hon. Gentleman has described. If the answer was no, and those whose names were on the deeds were first-time buyers, they would be eligible. If someone else who was not eligible had a share in the equity of the property, the concession would not apply.
I did not entirely understand the hon. Gentleman's second question. I am not quite sure what he was asking about the relief. He appeared to be describing a situation in which an additional person in the property had not previously owned a property, and I do not think that the relief would be affected by that.
Mr. Hoban: The Minister has clarified my first point about the situation in which a gift has been made to help someone to purchase a property: the relief could still be granted for that purchase when a gift had been made by, say, a relative to enable someone to purchase a house. My second point related to whether someone who was over 18 and, say, living in their parents' home would be deemed to have a major interest in that property. Would the provision in proposed new subsection (2)(a) prevent them from taking advantage of the relief when they subsequently bought a home of their own?
Mr. Timms: I think I can reassure the hon. Gentleman on that. If someone who had been living in their parents' home and who had not previously owned a property or contributed to buying one subsequently left their parents' home and bought a property for the first time, they would be eligible for this relief.
Mr. Timms: Clause 9 increases alcohol duty rates charged on beer, wine and spirits by 2 per cent. above inflation, and on cider by 10 per cent. above inflation, with effect from 29 March. Together with VAT, these increases are equivalent to 2p on a pint of beer, 5p on a litre of cider, 10p on a bottle of wine and 36p on a bottle of spirits. As the Exchequer Secretary to the Treasury and I have explained, in order to ensure the swift passage of the Bill through the wash-up, I have tabled amendments 1, 2 and 3 to this clause. The amendments will reduce the rates of duty on cider from 30 June this year to a level consistent with a 2 per cent. above-inflation increase, in line with the increases for other alcoholic drinks.
The amendments will cost the Exchequer up to £15 million a year, and will undermine our intention of bringing the rates of cider duty more into line with those for other alcoholic drinks. We will therefore legislate to confirm the originally planned increases in a second Finance Bill, just after the election.
Sir Nicholas Winterton (Macclesfield) (Con): I clearly declare an interest: I am a long-time supporter of the Campaign for Real Ale, and I was the chairman of CAMRA (Real Ale) Investments, a little company that CAMRA formed. Why, despite all the evidence that pubs are closing and brewers are finding it increasingly difficult to survive, are the Government further increasing the tax on beer, a traditional British drink that is already highly taxed? In doing so, they are phasing out pubs which is where responsible drinking takes place. I hope that those on my own Front Bench will hear my request that, in the next Budget, the new Government will not continue to increase the tax on beer, which is used as a milch cow to raise funds.
Mr. Timms: I am delighted that we have been joined on the Front Bench by my right hon. Friend the Minister for Housing, who has a particular interest in the well-being and future of pubs and has done some very helpful work on that subject.
I would take the hon. Member for Macclesfield (Sir Nicholas Winterton) back to his earlier intervention when he drew attention to the need to address the deficit. We are committed to halving it over four years and this is an important step towards achieving that. I am pleased that he has been able to make a further
valedictory intervention and, along with everyone else, I want to wish him well for the future and express my appreciation for his contribution to the House over many years. Given that he has already made a point about the importance of addressing the deficit, I am sure he will recognise the importance of this measure, and I am pleased that his Front-Bench team has agreed not to resist this proposal.
Lembit Öpik (Montgomeryshire) (LD): The Minister will no doubt be aware that the cause of the closure of many pubs is not necessarily taxation, but the behaviour of the pubcos. One thing that his Government could do to reassure the pubs-
Mr. Greg Hands (Hammersmith and Fulham) (Con): You will recall, Sir Alan, that at this stage of the Finance Bill last year, I spoke for one hour and 17 minutes on an amendment dealing with alcohol taxation. I am afraid that I do not have the same amount of time available this evening. However, the Government's changes to alcohol rates deserve some scrutiny.
We are delighted to see the Government forced to climb down on their massive across-the-board tax raid on cider drinkers, but it is clear that, without Conservative intervention, this would never have happened. It is equally clear that only the election of a Conservative Government will ensure that the tax on cider comes back down again. The Financial Secretary has already been quoted in the press as saying:
"No policy will change as a result of the negotiations."
This is because, as he has laid out this evening, he intends to introduce a second Finance Bill after the election to ram the increase through against the protests from everyone-from the ordinary cider drinker to The Wurzels.
Mr. Paul Keetch (Hereford) (LD): May I put on record the fact that it was the Liberal Democrats who established the cider caucus in this Parliament and that it is the Liberal Democrats who have been campaigning to ensure that tax on cider is not increased? The hon. Gentleman should not take this as only a Conservative victory; he should take it as a Conservative and Liberal Democrat victory.
Mr. Hands: I am afraid to say that the hon. Gentleman was not there for the negotiations. I am going to mention the Liberal Democrat position on cider in recent years, because I am afraid that it has not been beneficial to the argument the hon. Gentleman is making this evening.
"Here in the West Country cider is close to our hearts and if we, through our music and association with cider, helped bring this campaign to a ciderhead, then I think we all deserve a pint".
If they can wait until after 30 June, I can tell them that that pint will be rather cheaper, thanks to Conservative pressure yesterday evening. Similarly, the National Association of Cider Makers has rightly said that the increase
"has the potential to undermine what businesses both large and small have done and the great contribution they are making to the rural economy and communities they are part of."
On a number of occasions, I have met the NACM and some of the many small craft cider makers it represents. Their businesses are threatened by the Government's actions. In the west country and beyond, they know how punitive a 10 per cent. duty increase will be.
Finally, let me say something about the Liberal Democrats' position. It is a pity that the hon. Member for Taunton (Mr. Browne), their spokesman on Treasury matters, is not present to witness the Government's climbdown on cider duties. The hon. Member for Twickenham (Dr. Cable) is not here either, but it was the hon. Member for Taunton who mentioned, during the debate on last year's Finance Bill, that he had tabled an amendment that would have frozen duty on spirits but left duties on cider unchanged. Attempting to justify the move, he said:
"Cider is not as widely drunk in my constituency as it once was".-[ Official Report, 12 May 2009; Vol. 492, c. 778.]
That suggests to me that he is no great defender of the cider industry, although he is the Member of Parliament for Taunton. He subsequently tabled a further amendment to the Finance Bill which would have reduced taxes on beer but not, ultimately, those on cider. As we saw last year, the Liberal Democrats cannot claim to be friends of the cider industry.
The Opposition disagree with the whole basis of the Government's approach. Rather than imposing a blanket increase on all types and strengths of cider, we would direct tax increases at the problem, which is caused by high-strength, mass-produced cider. We believe in taxing those 3-litre supermarket bottles of problem cider rather than taxing ordinary, responsible drinkers.
Our approach is not specific to cider, however. We would apply the same approach to all alcohol duties. For example, we would also target super-strength beer. We believe in targeting problem drinks, not all drinkers. Meanwhile, the Government continue to make alcohol duties a blunter instrument than is necessary. Responsible drinkers are being punished, pubs continue to struggle, and the minority who cause trouble go unchecked.
Today we have won a significant victory for common sense on cider, but it is a forced victory. The Government's message to cider drinkers could not be clearer. They have given way temporarily, but are pledged to reverse this amendment if Labour is returned to power. Their message is simply this: if you want a 10 per cent. increase in cider tax, vote Labour. If you want your tax reduced-
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