Finance (No. 3) Bill

I could speculate on those points for my hon. Friend, but the Minister might be in a better position to comment on them. I will give my hon. Friend one thought, however. Perhaps the Chancellor realised that unemployment is rising because of the squeeze on public spending over the year; that growth is slowing because people feel uncertain in their jobs and businesses are not willing to invest; and that the level, depth and speed of public spending cuts over the next two years will lead to growing unemployment—not just in the public sector, but in the private sector, as people in private businesses depend on public investment. For those reasons, I suggest, the Chancellor has had to make additional changes to do what I believe is the right thing: to try to stimulate private sector growth. If last-minute thought has been given to the impact of corporation tax changes and if full assessments have not been made of the impact of VAT on public spending cuts, we need to be aware that capital allowance reductions are coming into effect in April next year. The amendment simply says:"““The Chancellor shall publish, by 31 October 2012, an assessment of the impact of the changes to capital allowances on the UK economy.””" I find it difficult to think of anybody who would object to that. I am sure that the Treasury would make such an assessment as a matter of course in any case. Any good business—and the Treasury is a good business—would look at its outputs, outcomes and impacts and reflect on how they will affect the customer base, which in this case is manufacturing industry. I have real concerns about the decision to reduce the rate of writing-down allowances for new and unrelieved expenditure, as I believe it could impact adversely on smaller businesses and on businesses that are more likely to invest, such as manufacturers. I say this because the Government regularly claim that small businesses are the key to future growth in the economy. Who depends on a capital allowance more—a very large or a smaller business? The argument I put to the Minister is that small businesses would be more affected. Nobody disagrees with the fact that the UK should have a competitive tax regime, and the corporation tax cut should help with that in principle. The Government are paying for it by the measures in clauses 10, 11 and 12—slashing investment allowances by £2.6 billion. The package will penalise companies that invest, particularly manufacturing companies, in order to offer tax cuts that will disproportionately benefit the banks and the financial sector. At a time when the Government claim they are rebalancing the economy by trying to encourage manufacturing, this package could—I say could—do the reverse. The Institute for Fiscal Studies has said:"““The largest beneficiaries from the package of measures””—" including corporation tax and capital allowances—"““will be high-profit, low investment firms””," such as financial services, while the cuts to allowances under clauses 10, 11 and 12 will"““have the largest impact on those firms with capital-intensive operations””," such as manufacturers. That is a direct quote—from page 229, for the Minister's reference—from the IFS Green Budget 2011. The IFS also agrees:"““The losers would be firms that invested heavily but made little profit—notably in the manufacturing and transport sectors but also some capital-intensive service-sector firms. The winners will be less capital-intensive but more profitable firms, historically typified by the financial sector.””" I do not know whether it will pan out like that in real life, but my point is that if it does, clauses 4 and 10 together will mean giving a corporation tax cut that benefits the financial services sector most and a capital allowance cut that damages the private sector of small and medium-sized manufacturing industries most. That cannot be a good recipe for growth in the economy.