(Except clauses 11, 18, 40, 43, 44 and 69 and schedule 8) - Clause 24 - Deduction cases
Finance Bill
3:15 pm
Philip Hammond (Shadow Chief Secretary To the Treasury, Treasury; Runnymede and Weybridge, Conservative)
My hon. Friend is exactly right. Whatever Government Committee members might think, we do not make such points for the good of our health. Although the Paymaster General may think that she has dealt with all the issues raised and although her officials may tell her that those concerns and fears have been dealt with, the message that we are still getting from the outside world—from specialist advisers and from industry—is that there are still real concerns about this legislation.
Beyond that, there is still a perception in the US that the UK has now taken a distinctive turn. It has moved in a direction that international investors find uncomfortable and, as I have said, there is a cumulative impact on the international—particularly the US—perception of the investment climate in the UK. I share my hon. Friend's concern that the Government need to think hard about such matters.
We know that there is a need for revenue and that the Government have targeted a certain amount to be raised by such measures. However, have they carried out a real analysis of what the reaction of the corporate sector of the international investment sector will be? Surely the Government do not think that everything will remain the same and that the only thing that will happen is that UK corporate tax receipts will increase by £200 million and all corporations will act precisely as they have done in the past. That is not the real world.
In practice, international investors will adjust their models to deal with the position that they fear in the UK. Multinational corporations may look again at where they locate their European headquarter operations or at the base from which they undertake their outward investment. Over time, there will be an adjustment in the behaviour of the sector that takes full account of what the Government are doing. That is the nature of an internationally competitive business environment and, whether the Paymaster General likes it or not, part of that internationally competitive business environment is the tax environment. She might prefer all businesses and investors to consider pre-tax returns as the basis of their investment, but they do not—and they will not in the future. There will be a second-order consequence.
Perhaps it will not matter to the Paymaster General or her boss, but experts in the field genuinely believe that the end result of such a decision three , four or five years down the line will be that any revenue gain to the UK Exchequer in the short term will be offset by the negative effect on UK growth from the declining attractiveness of the UK as an investment destination. I still believe that the best solution would be for the Government to withdraw chapter 4, go out to consultation, think again about it, make sure that it is redrafted to reflect only those narrow purposes that the Government say that they have in mind and reintroduce it at a later stage.
I seek your guidance, Mr. Cook. Would it terminate the debate if I sought to ask leave to withdraw amendment No. 58, and give the Paymaster General no opportunity to reply?