Finance Bill

The hon. Lady makes a mistake. She assumes that investment is about the purchase of physical assets that qualify for capital allowances. However, people can invest in their businesses and get them to grow in different ways by recruiting more members of staff and developing the skills of their work force. Investment is not simply about buying machinery. Investment means that companies can grow in a range of ways, not necessarily through the acquisition of physical assets. That is the problem with the Government’s approach to the Budget. The Chancellor appears to be interested in only a narrow group of companies. He is happy to reward businesses that buy physical assets, but penalises small companies generally through increasing the small companies tax rate. The Budget’s failure is penalising businesses that invest in people rather than machinery, equipment and plant. The hon. Lady should consider the small businesses in her constituency, especially those that do not invest in plant and machinery but want to take a risk by employing new members of staff. They will be hit most hard by the Budget—they will pay the higher rate of small companies taxation but will not receive in return the increase in capital allowances, which, when averaged out across all small businesses, amounts to about £60 per company. That is not much of an incentive, even if the hon. Lady’s argument held water. That is why the post-Budget survey undertaken by Populus for the British Chambers of Commerce showed that only 17 per cent. of businesses thought that this year’s Budget would improve their competitiveness. That is the reality of the business reaction to the Budget on the ground. The theory that the Chancellor has put forward in the Budget, and which hon. and right hon. Labour Members have put forward, too, does not hold water. Businesses can expand in ways other than investing in fixed capital and assets. Indeed, the Chancellor is penalising those businesses that do not invest in fixed capital and assets, by increasing the small companies rate of taxation.