Finance Bill

My Lords, I beg to move that this Bill be now read a second time. I am pleased to open the debate on the Finance Bill and, in particular, to address the key issues raised by the report of the Economic Affairs Committee on the Finance Bill 2007. As in previous years, this debate is the Government’s platform for responding to the report of the Finance Bill sub-committee on certain provisions of the Bill. The Bill delivers real change, giving the UK a stronger and more competitive economy, and helping to shape a better and simpler tax system. The Bill sets out the first steps in a major package of reforms to the business tax system. This is, of course, an area identified by the Economic Affairs Committee as one where tax simplification should reduce costs and help promote economic growth. I intend to set out briefly why this is a simplifying package, and why it will promote growth by enhancing international competitiveness, encouraging investment and promoting innovation. The 2007 Budget announced a cut in the main rate of corporation tax, to bring the cost of capital down and to make the United Kingdom more attractive to investors. We have simplified and modernised the capital allowance systems, to reduce administrative burdens and tax distortions, and to promote more efficient investment. There are a number of aspects to this. In terms of simplification, from 2008 expenditure on most plant and machinery will be handled in one of only two pools: 10 per cent and 20 per cent. We will phase out the industrial buildings allowances and agricultural buildings allowances. They had their place in helping the country to rebuild after 1945, but they seem somewhat anachronistic in this day and age and they have a distorting effect. For small companies the rate of corporation tax will increase, but I remind the House that this is a small profit rate of corporation tax, with a quarter of large tax-paying companies paying tax at the small companies rate. Of the 4.2 million small businesses, more than three-quarters are not incorporated and are therefore not affected by this change. I give way to the noble Lord.