Clause 35
Finance Bill
12:30 pm
Mark Field (Cities of London and Westminster, Conservative)
I echo the words of my hon. Friend in introducing the subject. I ask the Minister for an indication of the Treasury’s broader thinking. No one can dispute that it is quite acceptable at times to utilise the tax system to incentivise or disincentivise certain behaviours. However, my concern is that the worldwide debt cap that has been put in place in the whole regime, rather short-sightedly, simply reacts to the specific economic problems of today, instead of looking at the long-term future.
We have a Finance Bill every year and I suppose that it is quite legitimate for any Government on a short-term basis to put such a regime in place to deal with the problems of the day, which can then be done away with in a year or two’s time, but the proposed regime obviously adds an extra layer of complexity, not least because the worldwide debt cap applies to global companies—companies with significant interests here in the UK, but which also have operations overseas. Given that it is a worldwide debt cap, I would be interested to have some indication from the Treasury as to precisely what negotiations have taken place with other countries and whether the measure is part and parcel of a concerted international process.
I worry that the measure may have been put in place because of the present problems. I accept that the genesis may not lie in September 2008, but may be found a little bit before that. That raises the obvious question that my hon. Friend mentioned in relation to the private equity industry. In many ways, we have seen a skewing of the tax system over the past decade or so: extremely low tax rates have made the putting of debt on to the balance sheet a much more attractive proposition. We are moving away from that now, and the Minister will rightly point out that, in the present climate, he wants to disincentivise having a hell of a lot of debt on the balance sheet. That may be an academic point, because I suspect that many private equity providers will not be able to get that much debt on their balance sheet, even if they want to. Many private equity players have problems, but because of the lack of liquidity they are trying to raise relatively small sums of money for debt-for-equity swaps. That is probably a more desirable way to run those businesses in the longer term.
Above all, I am keen to know what the Treasury’s broad thinking is. Is this a short-term measure given our specific problems at the moment, or is it part of a longer-term regime to incentivise longer-term behaviours in relation to debt?