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Finance (No. 2) Bill

The hon. Gentleman is absolutely correct. I was engaged in banking at that time, and it was one of the most difficult periods for any bank to support small businesses—let alone large ones—because of the huge effect of high interest rates. This was not only because of the amount of interest that the businesses were paying to the banks, but because of the effect that that had on underlying security. We therefore had the double whammy of a decrease in security and an increase in borrowing. That was the main contributor to the way in which the economy died. I agree that stability in the economy and stability in the ability to plan are essential. Whatever we now have in this regime, the loss of the zero rate will certainly increase the tax bill of many small businesses. If that is countered by the increase in the first year’s capital allowances, that will make a difference to the growth of those businesses, but they need to be able to rely on that. When they make an investment in plant, machinery or business premises, they need to be able to guarantee that the tax regime will be stable and predictable for the next three to five years. While the Government’s motives were correct, the way in which they implemented the measures have perhaps been found not to be. The change in the VAT regime will also be helpful to many small businesses. Increasing the threshold will help their cash flows. If we really want small businesses to be the engine room of the economy, we must provide a stable tax regime and appropriate planning, as well as more clarification on research and development grants. We must also ensure that not so many businesses fail. Banks play an important part in helping businesses to get over the inevitable difficulties that they face. I regret that far too many banks do not provide adequate support over the longer term, and we see far too many businesses failing. We want to see businesses being set up, and continuing. That requires support and planning not only from the Government but from other bodies. I want to consider the use of the term ““fair and appropriate””. I do not know what a fair and appropriate contribution to tax is for a business, but it will certainly change over a business’s lifetime. Many businesses will find it easier to sustain a fair and appropriate contribution once they have strength and stability. If we try to tax them too early in their lives or submit them to too high a burden of regulation, they will fail and we will get no revenue from them. We need an appropriate tax regime that recognises the difficulties faced by a small business at different stages of its cycle. That would be fair and appropriate, but I am not certain that this particular small business tax regime will achieve it. However, that is what we must aim for, otherwise we will not get a fair and appropriate tax contribution from businesses. There would be far too many businesses starting and failing.