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Clause 1 — Main rate of corporation tax for financial year 2011

Part of Finance Bill – in the House of Commons at 8:30 pm on 12th July 2010.

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Photo of David Gauke David Gauke The Exchequer Secretary 8:30 pm, 12th July 2010

As I said a moment ago, the changes to capital allowances will take effect from 2012, and we believe that there is a substantial benefit for the UK economy in reducing the corporation tax rate. Indeed, it is a direction of travel that our predecessors followed when they reduced the rate from 30 to 28%, but we do not think that that went far enough. The point was raised in earlier debates that the UK has lost its competitive advantage in having a relatively low rate of corporation tax, as a number of other countries have cut their corporation tax rates much further than we have over the last 13 years. We believe that the lower rate sends a very clear signal that Britain is open for business and it is a demonstration of the direction of travel in which we are going. Assessment of the impact of Budget measures on investment over the next few years suggests an increase in investment of £13 billion.

The Budget thus provides a set of proposals and a set of reforms to corporation tax that will encourage further investment. As I say, it is a sign that Britain is open for business and a sign to investors and businesses throughout the world that the UK is a good place in which to do business. We believe that the package as a whole is well balanced and that it will aid a private sector recovery, partly funded through reforms to capital allowances and partly through the bank levy, as we debated earlier. Legislation is not required for the changes in capital allowances in this Finance Bill or indeed in next year's, but we have set out a clear sense of direction that has been welcomed by business groups as a whole. We therefore urge the shadow Minister not to press the rather complicated amendment 49. It will not make any difference, because we will legislate to this effect in any event-without the complicated mechanism in the amendment. I urge him to withdraw it.

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