Indeed. It is worth making the point, though, that on paper there is a rigidity about this. I remain concerned that if growth forecasts, downrated sensibly, are not met, there will have to be these necessary adjustments.
I welcome the phased reduction in corporation tax, but question whether it makes sense to pay for it through changes to capital and other investment allowances. The Road Haulage Association has said:
"We are concerned about the reduction of the investment allowance for small firms to £25,000 from £50,000 which will have a detrimental impact on small haulage companies."
That trade body probably speaks for many in its approach to the change to the annual investment allowance.
I am pleased by the way in which the Government have handled the capital gains tax changes, keeping the rate unchanged for basic rate payers to encourage and allow modest investment but increasing the rate for higher taxpayers. Closing the gap removes a perverse incentive to take income that could be taxed as capital rather than through income tax, but keeps a sufficient distance between the rates of income tax and capital gains tax to encourage real investment. That was handled quite well.
I have a question, though, about the rationale for the increase in insurance premium tax. I heard the explanation that it has previously mirrored the VAT rate, but there is no reason why that should still be the case. It will bring in some £2 billion in additional tax over the next five years, and I can only hope that that decision does not come back to haunt this Government in the way that the abolition of advanced corporation tax on pensions came back to haunt the Labour Government. The Conservative party in particular has made a great many criticisms about how that pension change was made and the impact that it had. Indeed, it was a smash-and-grab raid that the Chancellor described as "disastrous" in Accountancy Age last year. I hope that the insurance premium tax increase will not be described in that way in future.
Incidentally, in the same interview, on
However, the real damage in this Finance Bill, as many Members have mentioned, is the determination to put up VAT. That directly contradicts the stated intention of both coalition parties to create a fairer society. Although it may well be the case that in cash terms the wealthiest will pay more VAT, it is clear that the poorest 10% will pay nearly three times higher a percentage of their disposable income than the richest 10%. That is all because of the wrong-headed view, to some extent shared by Labour, that deficit consolidation must be achieved quickly. That is based, I believe, on a flawed assessment of the Canadian model, rather than a credible one perhaps based on the New Zealand model, which certainly worked. The consequence of the VAT changes, at least according to Save the Children, is that the VAT bill for the poorest could rise to more than £31 a week.
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