Finance Bill

It is a great pleasure to follow my right hon. Friend the Member for Wokingham (Mr. Redwood), who gave a splendid speech. He tried valiantly to remain in order and discuss the subject matter of the Finance Bill, despite frequent interventions tempting him in other directions. Indeed, it was a pity that his speech came to an end just when he was getting into his stride. This has been a curious debate because, in my limited experience in the House, debates on Finance Bills are often closely related to the Budget debate. Finance Bills usually implement the key measures in the Budget but, on this occasion, that is not quite how it has worked, because many of the controversial headline measures in the Budget will be implemented not in this Finance Bill but in future ones. Although the Chancellor joked in his Budget statement that he did not have any intention of performing the roles of Chancellor and Prime Minister simultaneously as Mr. Gladstone did, it appears that to some extent he has done his successor’s job in advance, as he has already written large chunks of the next two Finance Bills. It is clear—and my right hon. Friend the Member for Wokingham alluded to this point—that he will take the role of First Lord of the Treasury extremely seriously. Indeed, I wonder whether the term, ““Chancellor of the Exchequer?, will fall into disuse and, for the next two or three years, the occupant of No. 11 Downing street will be known as the ““Second Lord of the Treasury?. It is customary for the Select Committee on Treasury to produce its report on the Budget on the day on which the Finance Bill receives its Second Reading. As the only member of the Treasury Committee to attend today’s debate, I believe that it is worth drawing the attention of the House to that report, as the hon. Member for Falmouth and Camborne (Julia Goldsworthy) did. There is one part of the report to which I should like to refer—the Chief Secretary referred to it, as did the right hon. Member for Birkenhead (Mr. Field)—as it deals with the evidence that the changes announced in the Budget will result in 5.3 million households being worse off, principally because of what is often referred to as the abolition of the 10 per cent. band but which, perhaps, we should refer to as the doubling of that band to 20 per cent. In evidence to the Committee on the Wednesday, the figure of 5.3 million was more or less confirmed by a Treasury official, who said that it was in the right region. I suspect that the Chancellor did not appreciate that answer a great deal, because the next day that official, Mr. Mark Neale, was due to join him in giving evidence to the Committee but, at very late notice, he was withdrawn. It would appear that that answer, along with one or two others which, at the time, the Committee thought were helpful, were rather too open and transparent. I hope that Mr. Neale is well and has not damaged his career prospects in any way. The Chancellor made two arguments against the 5.3 million figure used by the Institute for Fiscal Studies, the first of which concerned the impact of increases in the minimum wage. Having looked at the figures, I understand that the number of people earning the minimum wage who are likely to be losers under the Budget is, on the basis of a parliamentary answer that I received earlier this week, 171,000 at the absolute maximum. Clearly, that is not a substantial number, given that 5.3 million households will be worse off. The Chancellor’s second argument was that there would be an increase in the take-up of working tax credit. No particular evidence was provided as to why that should be the case, and we will obviously watch that figure very closely to see whether there is evidence of increased take-up. I want to concentrate on the issue at the heart of the Finance Bill: corporate taxation, which has been touched on by right hon. and hon. Members. Government policy in that area is, to some degree, inconsistent and incoherent. First, there is inconsistency in the Government’s approach between mainstream corporation tax and small business corporation tax. There will be a cut in the rate of mainstream corporation tax not this year, but next year, as well as the abolition of certain allowances. It would be churlish to be entirely critical of that, as there are arguments for doing so. Greater simplification is an important objective in our tax system, and I think that I have heard Government spokesmen say that they were doing so partly for simplification reasons. I do not know whether the Government consider that simplification is an important matter in taxation policy. If they do, they have not been successful in achieving it in the past 10 years. None the less, I welcome that change. While the Government have moved in one direction on mainstream companies, they have moved in the other direction with small companies, as the rate has been increased and allowances have been reduced. Before turning to that in greater detail, and although, as I said, I welcome the proposal on mainstream companies in principle, I should like to ask the Financial Secretary a couple of probing questions. Some of the evidence that the Treasury Committee received suggested that some companies will clearly benefit—services will generally benefit—whereas other companies that rely on capital allowances will not be favoured and will in fact suffer, including manufacturers, farmers to some extent and, as was particularly highlighted, property infrastructure providers, who will lose out. It is worth asking one or two questions in that context. First, if we are looking at major infrastructure projects, the Olympics immediately spring to mind. Will companies that have been contracted to develop infrastructure projects in the next few years for the 2012 Olympics lose out as a consequence of the changes to capital allowances? If so, is that something that they must bear or is it possible that contracts will be renegotiated? Indeed, could the financial stability of those companies be put at risk? Certainly, part of the evidence that the Select Committee received suggested that there was a potential problem. Secondly, there are concerns about private finance initiative projects. Lawyers have put it to me that some of the contracts—by no means all of them—entered into for PFI projects contain terms whereby, if capital allowances are changed, the consequence would be borne not by the contractors but by the Government, which may have an impact on the public finances.