Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 7:37 pm on 9th April 2001.

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Photo of Michael Jack Michael Jack Conservative, Fylde 7:37 pm, 9th April 2001

My hon. Friend makes the point. This is not the time or the place to have the broad argument about the way in which new taxes are introduced or about the type of Bill that we need, but such issues should have been addressed. If the Chancellor were trying to carve out a reputation for himself as a reformer, he and the Government would get to grips with the complexity of the tax system. Comments about simplification—particularly from the Chartered Institute of Taxation—abound on the site of accountingweb.co.uk and those arguments are well known to the Financial Secretary and the Paymaster General. I do not need to repeat them, but it is sad that the Bill fails to deal with such issues.

I am glad that the Bill introduces changes that deal with employee share ownership and the enterprise management investment scheme. I welcome them and the fact that the Chancellor has seen fit to put right some of his over-indulgence in the tax take on items such as fuel. We sometimes forget that we are talking about the people's money and the use to which a Government put it. Whether the tax take is set at the right level is a matter for the debates on the Budget and the Finance Bill. Conservative Members have illustrated the rising tax burden under this Administration and we have suggested ways in which we can deal with that problem.

Other right hon. and hon. Members have referred to the national crisis that has resulted from foot and mouth disease. It has implications for the farming economy, the rural economy and food industries. A call has been made for proposals to try to tackle the economic consequences of this dreadful disease, and I wish to suggest several measures that the Bill could introduce. For example, one clause deals with the enterprise investment scheme and new clauses could touch on the venture capital trust scheme, which is the other issue that I wish to mention.

The enterprise investment scheme and the venture capital trust scheme are financial vehicles that aim to encourage investment in sectors of higher than normal risk. They do so by providing the investor with income tax relief at 20 per cent. on the amount invested. They deal with capital gains made under the investment and also allow for the losses incurred to be deployed in other areas of financial activity.

There is a problem, however. The qualifying conditions of those two financial schemes and the corporate venturing scheme—which is the third strand of help for rural Britain—prevent them from being used to help land-based industries. They expressly rule out agriculture and horticulture as qualifying trades. I can understand that when the schemes were originally devised, there may have been extremely good reasons for those conditions, particularly in the light of the old business expansion scheme. There was also the worry about investing in land when the existing inheritance tax proposals were already fairly generous in respect of people buying farms as a means of securing capital wealth for future generations in their families.

We now face a national emergency, and, if we want to encourage more new investment of a slightly riskier nature, I ask the Paymaster General to consider amending the qualifying provisions to allow either of the two schemes to be used for the benefit of agriculture, the food industry, tourism and rural Britain. If the Treasury is concerned about the extent of the impact of removing the qualifying conditions, it is possible to draft the Bill so that the beneficial amendments that I have suggested are restricted to the areas affected by foot and mouth.

What enterprises would benefit from the changes? Farmers could use the rural development plan and work together to establish new cattle-breeding enterprises to overcome the strictures of foot and mouth, for which they might seek outside capital. The enterprise investment scheme and the venture capital trust scheme could open up the flows of capital that they need. Farm-based food businesses, tourism and other rural industries could also be encouraged, perhaps by taking advantage of the farm business tenancy arrangements that enable tenant farmers to create new business on their enterprises. Tenant farmers will be hardest hit by foot and mouth. They have no asset base to fall back on and would benefit from my proposals.

Corporate venturing is designed in a similar mode to the enterprise investment scheme. It enables people from the world of corporate business to invest so that they gain a tax advantage in the financial vehicles that I have outlined. The food industry and supermarkets have a role if they truly want to invest in and sustain Britain's rural economy. By amending the qualifying conditions in the corporate venturing scheme, the Treasury could induce a new flow of money to be made available to those two schemes to act as vital seedcorn capital.

I make those suggestions because of way in which the state aid rules limit the amount of public finance that can be used to help the process of recovery in Britain's rural economy. I hope that I have illustrated, in a simple and straightforward way, that three existing tax vehicles could be modified to help the rural economy at a vital time.

The hon. Member for Kingston and Surbiton (Mr. Davey) referred to roll-over losses. If a farmer makes losses for six consecutive years, there is a presumption that the farm is not being run on a commercial basis and further losses cannot be used by the farmer to offset against other income. Given the problems that farming faced before foot and mouth and those that it will face in the recovery period when we get on top of the disease, we should consider those arrangements. Bearing in mind the rarefied circumstances of the disease, trading in those tax losses might also be considered as a way to help the enterprises derive other revenue, or at least to enable the losses to be used against other ventures in which farmers might become involved if they use any of those three schemes. We need a more creative approach to the tax mechanisms.

I asked the Chief Secretary about the film industry partly because I wanted an economic justification for additional help, but also because it inspired the way in which I thought about the issue. The film industry, which has not had the problems of foot and mouth, is receiving extra help because it is a creative industry, just as the Government have maintained the extra-statutory concession that enables theatre "angels" to move losses from one west end venture to another. The same creativity must be used if the tax system is to assist our rural economies.

I was intrigued to discover that we are to give VAT relief on children's car seats as part of the Government's package to help families. I sought a justification for that, but could find nothing in the press release REV/C&E 3. It merely says that the VAT will be reduced from 17.5 to 5 per cent. I wanted further information and tabled a question to the Department of the Environment, Transport and the Regions, asking the Secretary of State how many child road deaths had been caused by defective child car seats in the past three years. I did that because the Red Book justifies the relevant clause by saying: Around 6,000 children under eight years old are killed or injured each year on Britain's roads. I thought that defective car seats might be responsible, but the Red Book gives a further piece of advice. It says: It is vital that child car seats are correctly fitted and used to help protect children from harm when travelling by car. That is true, but hardly borne out by the facts issued by the Department of the Environment, Transport and the Regions.

In clause 94, proposed new paragraph 7(2) of schedule A1 states; The following are 'children's car seats'", and the definition includes the combination of a safety seat and a related wheeled framework", so the measure is a way to reduce the cost of children's buggies. Every manufacturer of buggies will add a few straps and claim that they are a new car safety seat. I alight on this aspect of the Bill because I can find no justification for it. Indeed, it falls into the same category as further help for the film industry, which the Chief Secretary could not justify.

I am mystified. What is the Government's strategy on VAT? We recently learned of the extra losses in revenue from VAT, but the Government are cutting it further. When the local Blind Society recently asked me why VAT could not be reduced on aids for the visually impaired, I was left struggling for an answer. Children's car seats—cheap buggies—can have a totally unjustified reduction in VAT, but the aid that makes life bearable for the visually impaired has to bear its full weight. We are owed an answer to that.

Clause 81 deals with life assurance. As the Financial Secretary courteously dealt with my question on that last year, will he this year see whether it is possible to make the capital gains tax changes in life assurance policies so that the holders of those financial assets will have the same benefits that have been visited on those who hold assets outside them? It is high time that the corporate rate was brought up to date.

I mentioned the climate change levy, which is dealt with in clause 103, in the context of the horticulture industry. I note with interest that although clause 100 relates to the landfill tax, it fails to make a corresponding reduction in national insurance charges.

I think we all feel a bit odd about the Bill because we were not expecting to be here debating it. We thought that we would be out on the streets arguing about its content, where there would be more raw meat for us to get our teeth into. However, we are discussing it and have to take note of the missed opportunities. Bearing it in mind that foot and mouth is the nation's main problem, I hope that by our making positive suggestions, the Bill might be modified so that it can benefit rural Britain.