Business Taxation

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 14th April 1988.

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Photo of Mr Michael Brown Mr Michael Brown , Brigg and Cleethorpes 12:00 am, 14th April 1988

To ask the Chancellor of the Exchequer what responses he has received to his Budget proposals for changes in business taxation.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

To ask the Chancellor of the Exchequer what responses he has received to his Budget proposals for changes in business taxation.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

The proposals that my right hon. Friend announced in his Budget statement have been widely welcomed.

Photo of Mr Michael Brown Mr Michael Brown , Brigg and Cleethorpes

Does my right hon. Friend agree that the responses which may well have come in congratulate the Government on establishing a single rate of inheritance tax? Will not this measure ensure that it will be much easier to pass on family businesses and retain those family businesses in operation for future generations?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

My hon. Friend is right, but that was, of course, just one of the measures in the Budget. It will, as he said, enable family businesses to be passed on to future generations, which is a good thing. The Budget was widely welcomed. The CBI said: This is the Budget we have been waiting for. It will help to maintain the momentum of Britain's economic recovery and should boost business confidence.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

Is it not right that, because of the Budget, we now have one of the lowest rates of business taxation in the Western world? Is that not a major boost to companies wishing to invest here, to companies that are already here, and to the revenue?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

My hon. Friend is right. We have one of the lowest rates of corporation tax in the Western world, and the small business rate of tax is at the lowest level ever. This should be a great magnet, bringing further inward investment into this country, and should be welcomed by everyone.

Photo of Alistair Darling Alistair Darling , Edinburgh Central

Has the Chancellor received representations on the business expansion scheme proposals, to the effect that it is wrong to provide a tax shelter for those who are the richest in society to enable them to set up rented accommodation, often to exploit those at the poorest end of society?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

We have not received representations to that effect. The hon. Gentleman may be interested, and perhaps surprised, to hear that we have had some representations from people protesting because we have narrowed and limited the relief fund of the business expansion scheme. We did that because we wanted to concentrate on start-ups and small businesses. We think that it is well worth while extending the scheme to the private rented sector. We need more rented accommodation.

Photo of Mr Chris Smith Mr Chris Smith , Islington South and Finsbury

Do the Government not recognise that their own commissioned survey of the business expansion scheme has shown that it has relatively minor job creation effects, that it has tended to concentrate on low-risk, asset-based enterprises and not on high risk ventures, that it is largely based in the south-east, and that it has tended to transfer funds from the north to the south? In addition, it is being used as a tax haven rather than as an efficient way of channelling private investment into enterprise and wealth creation. Far from expanding it, should the Government not have changed it radically or even scrapped it?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

The hon. Gentleman seems to be ignoring what I have just said. In many respects, we have narrowed the scheme. It is obvious from his question that he is unaware that we had a survey of the scheme done by Peat, Marwick, Mitchell and Co. which reached very different conclusions from those to which the hon. Gentleman referred. It s precisely because we think that the scheme should not he used to create asset-backed investments at the taxpayer's expense that we have narrowed its application to £½million small businesses. That will deal precisely with the point that the hon. Getleman raised and he should acknowledge that.