Clause 76 - Taper relief: assets qualifying as business assets
Finance Bill
10:00 am
Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
I remind the Committee of the policy background of the arrangements in the clause. Two principles govern access to the more generous business assets rate of capital gains tax taper relief. The first is to encourage desirable investment by compensating for risk in, for example, unlisted trading companies. The second is to encourage employees to align their interests, so to speak, with those of the company for which they work, through share ownership.
As the hon. Gentleman explained, the purpose of amendments Nos. 34 and 35 is to backdate to 6 April 1998 the benefits of the new definitions of business assets that were included in the Finance Act 2000 and, in particular, the benefits in clause 76. There are several reasons why I do not wish to do that: it would produce no increase in productivity or benefit to the economy; it relates to past behaviour; and it would be expensive, with substantial deadweight costs.
The changes that the Government made last year provided real and positive encouragement to entrepreneurial investment and greater employee share ownership. Our aim is to provide the right conditions to boost productive business activity. The amendment would not achieve that. It provides no encouragement for the future, but seeks instead to reward past activity. Therefore, the hon. Gentleman will not be surprised that I am not attracted to it.
The amendments would be extremely expensive. I am sure that the hon. Gentleman would agree that a cost of some £300 million during the next three years for activity that has already occurred would not be considered a good investment, by any stretch of the imagination. In my view, that expenditure would be wholly wrong. I understand the hon. Gentleman's argument, but the Government are not attracted to it.
In addition, the amendment would require us to revisit closed tax assessments and would direct money away from the new enterprise economy, rather than providing incentives for growth. Those are real problems. I think that the hon. Gentleman agrees with our changes, but wishes that we had made them last year, so that the benefit would have accrued over that time. I am sure, however, that he appreciates that it would not be—dare I use the word?—prudent to use £300 million to reward what has already happened. Therefore, if the hon. Gentleman presses the amendment to a vote, I ask the Committee to reject it.