New Clause 10 — Review of reform to the annual investment allowance

Part of Bills Presented — Affordable Homes Bill – in the House of Commons at 3:30 pm on 2nd July 2014.

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Photo of David Gauke David Gauke The Exchequer Secretary 3:30 pm, 2nd July 2014

As always, the hon. Gentleman’s questions are interesting and could take me in a number of directions. Let me just say this: it is important that the United Kingdom has a competitive tax system. It is the case that corporation tax will continue to play an important part in our tax system, and it is important that it is properly enforced. Indeed, the UK is leading the way on international reform to ensure that we have an international tax system that takes a contribution from companies. In the end, however, it is always individuals who pay tax—whether it is the shareholder, consumer or employee. All tax is paid by people even if the cheque is written by the company.

Let me return to the measures that we have set out. The Office for Budget Responsibility has said that the measure to extend the AIA is expected to bring forward another £1 billion of business investment in the short and medium term. Although the Government rightly keep all tax policy under review, there is limited merit in conducting an evaluation in the way that the amendment suggests, and there are also a number of obstacles that make it impossible. Her Majesty’s Revenue and Customs will not have the relevant data to conduct such an evaluation for another year, and as Mr Robinson said, it would be extremely difficult to isolate the impact of this change from the other factors influencing business investment, and from subsequent changes, in the ex-post data.

An important point was made by my hon. Friend Gordon Birtwistle, who said that a number of factors are involved in business investment, not least confidence. As my hon. Friend Charlie Elphicke pointed out, the AIA has been set at various levels over this period; identifying a direct link between the level of AIA and business investment is extremely difficult.