Finance Bill

I strongly agree with the approach adopted by the hon. Member for Fareham (Mr. Hoban), and with his conclusions. He set out the arguments pretty comprehensively, and I do not think I need add to them in great detail. It is true that, as has just been said, the Budget’s overall approach to business is neutral. It has probably been favourable to large companies and less favourable to small companies, for reasons that have already been given and particularly because of the impact of clause 3. However, what we say as Opposition spokesmen is less important than the way in which businesses themselves experience and perceive the changes. A fairly large survey conducted by the British Chambers of Commerce, which represents both large and small companies, concluded that 70 per cent. of United Kingdom businesses believed that the proposals would damage them, mainly because of the impact on small companies. Let me deal with the two major arguments that have been advanced in defence of clause 3. The first, advanced by the hon. Member for Bishop Auckland (Helen Goodman), is the tax avoidance argument—the argument that large numbers of small entrepreneurs are constantly calculating, on the basis of the tax rate, the respective merits of taking their profits as salaries or as dividends. That may or may not be a valid point: we do not know. One of my questions to the Government is how much research they have actually done. There have been two major changes of policy, and I think it legitimate to ask how well the Government are informed by research and survey about how companies in this position behave. The Economic Secretary asked the hon. Member for Fareham (Mr. Hoban) whether he was going to change the policy. The hon. Gentleman gave a perfectly sensible answer, although I think he could have added to it. He said, ““We would change the policy if we knew what was happening in terms of behaviour.”” The Government are rushing into tax changes without presenting any evidence about the way in which companies behave. In evidence to the Select Committee, the CBI said:"““A claimed rationale for this decision was to reduce the differential between incorporated and unincorporated businesses. But in this case it is not clear why the corporation tax rate will end up above the personal income tax rate rather than being aligned with it.””" If the purpose is to stop arbitrage at the boundary, why are the rates not being aligned? There may well be an answer to the CBI’s question. If so, perhaps the Minister can explain what it is.