Finance (No. 3) Bill

I am grateful to my hon. Friend, because he brings me to the subject of the small profits rate of corporation tax. That is not specifically addressed by the clause, but the previous Government intended to increase the small companies rate, as it used to be called, from 21% to 22%. In the previous Budget, this Government announced that we would not increase it to 22%, but reduce it to 20%. That policy, along with our policy on employers' national insurance contributions, was warmly welcomed by the FSB. That demonstrates the Government's commitment, at a difficult time for the public finances, to ensuring that we have the strong, private sector growth that the economy so badly needs. Let me briefly set out why reducing corporation tax rates is important. A competitive rate helps to sell the UK as a place to do business, and encourages businesses to invest and thrive here, which is vital if our economy is to grow. My right hon. Friend the Chancellor has had to take some difficult decisions since the election, and clearly, because of the size of the deficit we inherited, we cannot rely on unsustainable public sector spending to carry the economy. We need to rebalance the economy and to remember the value of enterprise. Growth in the public sector feeds the deficit, but growth in the private sector feeds the recovery that the country needs. Budget 2011 delivers a fiscally neutral package of measures, and the Government remain on course to deliver our fiscal consolidation plans. The costs of policy decisions announced in the Budget are broadly offset in each year by measures that raise revenue, but within that fiscally neutral envelope, Budget 2011 includes action to support private sector recovery and to improve the long-term sustainability of the public finances. The Government published our plan for growth, which is the first phase of the growth review, which involves action across the economy. The further 1% reduction in the main corporation tax rate will help us to achieve the ambition of growing the private sector, regaining even more of the competitive advantage that we have lost in recent years. However, that is only one part of the Government's strategy to remove barriers to growth. In his speech much earlier today, the right hon. Member for Delyn (Mr Hanson) argued that corporation tax rates are not everything, and he is right, but the Government have set out in our plan for growth policies that aim to put the UK on the path to sustainable, long-term economic growth. It is worth quoting John Cridland, the director-general of the CBI, who said:"““This Budget will help businesses grow and create jobs. The Chancellor has made clear the UK is open for business…The extra 1p cut in corporation tax will help firms increase investment.””"