Clause 6

Part of Finance (No. 3) Bill – in a Public Bill Committee at 6:00 pm on 10th May 2011.

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Photo of David Hanson David Hanson Shadow Minister (Treasury) 6:00 pm, 10th May 2011

I hope that we can dispose of this matter relatively quickly, because we have so far had a good debate on corporation tax matters relating to clauses 4 and 5. Clause 6, however, sets the rate for smaller companies with profits below £300,000 at 20% in 2011. Companies with profits between £300,000 and £1.5 million pay at a rate between the main and lower rates, worked out on a sliding scale.

The amendment calls on the Treasury to provide, in effect, a corporate tax road map for smaller companies, because, as we have debated, the corporation tax cuts that are proposed in clauses 4 and 5 are going predominantly to larger, or a least larger profit, companies. The main rate and lower rate are coming closer together as a result. We need clarity from the Minister, therefore, as to the Government’s intentions for the lower rate of corporation tax for smaller companies who have the lower rate of profit. We have had a good debate on these matters, but most of the benefit will go to large companies, rather than small. In benefit terms, for every £1 going to small companies, more than £4 goes to large companies.

We have picked up from representations to the Committee that small businesses across the country want to know what the strategic vision is, what certainty there is on taxation policy, and what the Government’s intentions are over this Parliament. I say that again because the arguments that I have made in previous discussions, including when discussing clauses 4 and 5—relating to the strength of the economy, the levels of unemployment in UK regions, the level of growth and business activity—are particularly important for the level of small business activity, and for small business growth.

With due respect to all our businesses, in my constituency Airbus produces world-class planes, the wings for corporate jets, carries out a range of large-scale manufacturing activity, and will benefit from the corporation tax cuts proposed in earlier clauses, but equally important are the many small businesses that supply materials, goods and services to those bigger businesses. They have a lower rate of profitability and turnover, yet now find themselves getting closer to the corporation tax rate set for larger companies. The measures before us in clauses 4 and 5, and now in clause 6, make those changes to corporation tax. The amendment asks the Minister to discuss with the Committee how he sees the potential growth of small businesses around the country.

We know that the Minister has tried to encourage small businesses to employ people in certain regions through the national insurance holiday proposal that was discussed in depth before Christmas in another Committee. In Treasury questions today it was clear that, as my right hon. Friend the Member for Morley and Outwood (Ed Balls) said, that has not yet taken off to the extent that we wish in terms of creating employment in those sectors. The corporation tax proposals are extremely important in helping small businesses, not just large ones. The amendment is probing, and we could undoubtedly have discussed this in the clause stand part debate. I wanted to place on record that we would welcome the Minister’s comments on where he sees potential over the next four years for corporation tax to help small businesses as well as the larger businesses that we have discussed to date.