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Small Manufacturing Business

Oral Answers to Questions — Treasury – in the House of Commons at 2:30 pm on 16th March 2010.

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Photo of Barry Sheerman Barry Sheerman Chair, Children, Schools and Families Committee 2:30 pm, 16th March 2010

Whether he plans to amend the fiscal environment for small manufacturing businesses to facilitate their growth.

Photo of Stephen Timms Stephen Timms Parliamentary Under-Secretary (Department for Business, Innovation and Skills) (Digital Britain) (also HM Treasury), Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills)

The annual investment allowance of £50,000 is particularly helpful for small manufacturing businesses. The business payment support service allows firms with cash-flow difficulties to spread tax payments over a period. My right hon. Friend the Chancellor will set out our plans in his Budget statement next week.

Photo of Barry Sheerman Barry Sheerman Chair, Children, Schools and Families Committee

Is my right hon. Friend aware that many businesses, such as manufacturing businesses in Yorkshire and especially Huddersfield, very much value the range of incentives that they have, particularly the research and development tax credits? Does he also understand that they are very worried? One business man said that he could not sleep at night because of thoughts of a naive new Chancellor sweeping all this away.

Photo of Stephen Timms Stephen Timms Parliamentary Under-Secretary (Department for Business, Innovation and Skills) (Digital Britain) (also HM Treasury), Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills)

My hon. Friend is absolutely right. There is a great deal of concern among manufacturers about the Conservative party's proposals. I agree with the Engineering Employers Federation, which has described the proposals as a disaster for manufacturers. The Institute for Fiscal Studies said that the proposals

"would help companies that make large profits with little investment, at the expense of businesses that are investing heavily in the UK".

What we should be doing is supporting investment.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

The Financial Secretary told Mr. Sheerman that he would have to wait for further announcements in the Budget, but why does he have to wait until then when the Chief Secretary is merrily going around ahead of the Budget telling the world there will be no tax increases? Is the purdah rule now selectively applied, or is the Chief Secretary just gaffe-prone?

Photo of Stephen Timms Stephen Timms Parliamentary Under-Secretary (Department for Business, Innovation and Skills) (Digital Britain) (also HM Treasury), Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills)

As my right hon. Friend the Chief Secretary has made clear, tax announcements are made at the time of the Budget. Like my right hon. Friend, however, I am very interested in what the shadow Business Secretary has been saying this morning, apparently committing the Conservative party to a 3 per cent. deficit by 2014.

Photo of John Bercow John Bercow Chair, Members Estimate Committee, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Speaker of the House of Commons

Order. The Minister is being very cheeky-anybody would think an election is on the way. The Minister does not need to preoccupy himself with the policies of the Opposition, and I know that in a moment he will want to return to the policies of the Government.

Photo of John McFall John McFall Chair, Treasury Committee

In recent evidence to the Treasury Committee, Lord Turner told us that

"the tax deductibility of interest is creating a bias in the tax system".

That bias is towards debt, rather than equity. For the sake of all manufacturing industry, is it not time that we had a real debate on this issue, so that we correct the tax system in favour of people who are involved in manufacturing and creating jobs in the country?

Photo of Stephen Timms Stephen Timms Parliamentary Under-Secretary (Department for Business, Innovation and Skills) (Digital Britain) (also HM Treasury), Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills)

My right hon. Friend is right. We will need to reflect on this, but I think that he will agree that it would be a mistake to make changes now that undermine the incentive to invest in manufacturing. That is what the Conservative party is proposing, however.