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Finance Bill

Thank you for your indulgence, Sir Michael. I thank my hon. Friend the Member for Windsor (Adam Afriyie), who took the words out of my mouth. I shall, however, come on to the point that he was making in a moment. As I was pointing out, our proposal would calculate the threshold with reference to sterling. I noted the amusement on the face of the Economic Secretary when mention of the word ““euros”” brought one of my colleagues to his feet. Many more would have done so, had they been here to play a part in our debate. [Interruption.] That is right—where are they all when one needs them? Doubtless, the proposal would appeal as a matter of principle to some of my hon. Friends who are not here today. I stress, however, that there is no Eurosceptic agenda, although the events of the past week may mean that we are all Eurosceptics now. We all recognise that in the relatively calm currency waters of the past three or four years there have been periods of turbulence that would create unacceptable uncertainty for the most susceptible businesses. That is very much the point that my hon. Friend was making. I accept that all thresholds are to some extent arbitrary, but at least if currency risk is eliminated from the equation, a company can expand at a controlled rate from year to year and thereby qualify or stand outside the provisions. It is important to remember that small and medium-sized enterprises are often the very businesses that have least exposure to the foreign currency market, so they might find the idea of couching their definition in euros least relevant. Furthermore, such companies are least able to afford uncertainty and are without the internal back-up that would be needed to monitor the currency markets and act accordingly if they were getting near the thresholds. I hope that the Financial Secretary will be able to give us some guidance about why euros are being used, especially at a time when this country has little prospect of joining the single European currency, which may not have been the case when the initial definition was put in place. Amendments Nos. 24, 25, 28 and 29 seek simply to promote commercial certainty. The Government’s current rules for the relevant accounting period mean that a business may discover that it is not an SME after the relevant period has come to an end. Surely, that cannot be a sensible way to proceed. I accept that we are talking not about an enormous mass of businesses, but about a small number of companies that are getting near the threshold. Inevitably, there are always concerns about thresholds. In relation to certainty, surely it is better to adopt our proposal to refer to the previous accounting period rather than the current one. Let me give as an example a company that is not only worried about the vagaries of the currency market, but potentially reluctant to acquire new business that might take it above the threshold unknowingly in the last few months of its financial year. We always have to keep an eye on the collateral impact of any such proposals. In conclusion, three factors are at stake. First, there is the question whether the base is in euros or sterling. Secondly, on the notion of a current year valuation, we propose returning to levels in the near past, for certainty’s sake. Finally, we query whether an SME is an appropriate part of the entire criterion. I hope that we can have a sensible discussion on these matters. I know that we will discuss another set of amendments that propose to do something slightly different at a later stage, but I hope that the Financial Secretary will give us at least some guidance about re-adopting a provision in the Finance Act 1996, which is now nine years old.