John Healey (Financial Secretary, HM Treasury; Wentworth, Labour)

I will attempt to be brief on this clause, too. The Labour Government are committed to maintaining a modern, fair and competitive corporation tax system. That is becoming more important in what is increasingly a more flexible and competitive global trading environment. Since 1997, we have therefore attempted in part to promote enterprise by reducing the headline rate of corporation tax from 33 per cent. to 30 per cent., the lowest United Kingdom corporation tax rate since its introduction. Alongside that, we have introduced several more targeted measures, including relief for research and development costs, which we shall debate under future clauses.

The clause will enable corporation tax to be charged for the financial year 2007-08. It sets the main rate for that year at 30 per cent., which is no change from the current rate. I commend the clause to the Committee.

Julia Goldsworthy (Shadow Chief Secretary To the Treasury, Treasury; Falmouth & Camborne, Liberal Democrat)

The Financial Secretary talked about competitiveness. Although corporation tax rates have fallen in recent years and have remained unchanged since 1999, they have been falling in other developed countries. I should therefore be interested to know what investigation his Department has carried out into whether the United Kingdom looks set to remain an attractive place for investment compared with other countries. I want also want to know his future projections for revenues from the tax since, in 2004-05, the UK revenues from corporation tax, excluding North sea oil, represented 2.6 per cent. of the total tax take. Including North sea oil revenues, the figure is 3.3 per cent., which is very high for countries in the Organisation for Economic Co-operation and Development. I shall be interested to know what future implications he thinks that that will have for competitiveness. Are the taxes are being relied on more heavily because of the commitment not to increase income taxes?

John Healey (Financial Secretary, HM Treasury; Wentworth, Labour)

The hon. Lady is right to say that maintaining a competitive economy and tax system is a continuing challenge. She asked me about corporation tax projections, which are set out as normal in the pre-Budget report and the Budget. It makes no sense to strip out the corporation tax returns and projections from a particular sector of the economy as she tried to do. I remind her that the World Economic Forum’s most recent global competitiveness report ranked the UK as the most competitive of all the major European countries.