---

Finance Bill

It is a pleasure to follow the hon. Member for Dumfries and Galloway (Mr. Brown), who always speaks with care on behalf of his constituents. I am sure that many of them would listen to his concern about fuel prices, which is shared by many Members. I was disappointed earlier at the words of the Chief Secretary to the Treasury. Given that she represents a Yorkshire constituency, I would have thought that she would have known a little more about how to judge a wicket. It seems to me that she was on a particularly sticky wicket today, and I expected her to respond accordingly. However, my judgment of her words was that she thought that the wicket would take a bit of spin, and I found that disappointing. I want to talk about what is missing from the Finance Bill and what should be put in on Report. I want to concentrate on three issues: the rising costs of regulation faced by business generally; the increasing tax burden borne by small and medium-sized enterprises, particularly small ones; and the personal debt faced by many of the poorest in our community, for whom the cutting of the 10p tax rate will cause considerable hardship. I have spoken about regulation on a number of occasions and the issue is well rehearsed among many other Members. It is almost a truism now to say that the cost of regulation is hitting business hard. Much of that regulation is increased tax regulation, with which the Bill is particularly concerned. The Chancellor's inability—or unwillingness; call it what you will—to simplify that tax burden for business generally is a sizeable omission. I do not need to repeat that the British Chambers of Commerce recognises that the cost of regulation under this Government has now risen to £66 billion—a massive burden for business, given the global challenge that is emanating from Brazil, India and China. In addition, the statutory instrument statistics of 2007 made it clear that 14 new regulations were enacted by the Government every working day. Many of them impact on business. Finally, the Federation of Small Businesses said that, on average, small businesses spend seven hours a week on red tape and paperwork. Those are tremendous burdens on a business economy to which we are looking to provide the real challenge on which our children and grandchildren will rely for their well-being in 20, 30 and 40 years' time. This House does not often think in terms of such lengths of time, but it behoves us to do so. Otherwise, we shall find our decline down the table of well-being continuing and accelerating. I find that a fearful prospect. I do not need to talk too much about the need for tax changes because the Treasury Committee report on the 2008 Budget made that plea on a number of occasions. I could read them out, but I do not think that you, Mr. Deputy Speaker, would want me to do so, given that time is limited. However, the Treasury Committee grabbed on to the fact that we need to simplify our tax system and get burdens off the backs of businesses, particularly small ones. The National Audit Office looked at small businesses in 2006. I have not seen any changes as a result of that audit, although the Government should have taken notice and created change. That is a fine example of how the Government, in my humble opinion, are going wrong. The National Audit Office said that the monitoring regulations for small schemes were not well developed and that there was no assessment of the impact of Small Business Service expertise on the development of regulation. Indeed, the Government went on to argue that they would cut the number of small business support schemes from the estimated 3,000 in existence at that time to 100. Way back in March last year, I asked the Treasury how many schemes had been cut, how many had been consolidated and how many were in existence then as a result of the reduction. Secondly, I asked what assessment had been made of the effectiveness of the schemes, but I am afraid that I got no answer. I tabled a written question on the issue on 3 April this year, which means that I was due an answer this morning. Sadly, I did not receive an answer to the important question of how many schemes have been reduced, how many are now in existence and the Government's assessment of their effectiveness. My guess is that I will not receive an answer, although I hope that the Minister will give me it tonight. Unless the Government effectively assess what they do, they cannot do anything effectively; the premise is simple. My concern about the Bill is that nothing in it tells me that the Government are properly assessing. I shall talk more about that in a little while. I move on to taxation. I can say from my own experience that the business sector is not getting the message that the Government are business friendly. In fact, it is becoming increasingly concerned about the Government's attitude when it comes to real measures rather than words. There has been a capital gains tax increase from 10 per cent. to 18 per cent.—an 80 per cent. increase. I welcome entrepreneurial relief, but many entrepreneurs are still being put off from starting, developing and growing businesses. We need to recognise the impact of such increased taxation on small businesses particularly. What assessment has been made of that increase and what effect do the Minister and the Government generally feel that the increase will have on small business start-ups and on the businesses that might leave these shores as a result of increased taxation? Capital gains tax plays a particular role in that respect. It is estimated that the Exchequer will yield from increased capital gains tax £250 million in 2008-09, £300 million in 2009-10 and £500 million in 2010-11. However, it does not seem to assess what the cost impact will be in real terms. If it does, I will be happy for the Minister to prove me wrong later, but I bet that I do not get a proper answer. An example of the impact of Government thinking on small businesses is that of income shifting. Many small businesses run by husband and wife teams will recognise the value of consultation undertaken by the Government after due pressure and will be equally pleased that this measure has been put off until 2009, but there is fear about the bureaucracy that will be enacted at that time. Anybody who has been involved in a small business and knows about the impact of such bureaucracy will understand that fear. It will mean all sorts of double accounting for husband and wife teams. My main concern, however, is that the Government seem to believe that every small business is out to twist the taxman. That is the impression that they give. One need only read what the Chancellor said in his Budget speech to recognise that that was the underlying theme of this move. The truth of the matter is that most people in small businesses are, frankly, too damn busy—I apologise if that is unparliamentary language, Madam Deputy Speaker—earning a living and creating and developing their businesses to have the time to think about dishonesty with the taxman. In fact, they are quite fearful of the taxman and want to be honest because they do not want him on their backs. I do not understand why the Government think that small businesses are out to cheat them. Again on assessment, it would be nice to know what is the economic advantage to the Treasury. Has that figure been worked out? Are we putting a massive burden on small business generally for very little return to the Treasury simply because this Government do not trust business? If so, business knows the answer and will know how to act. Let me conclude by talking about the impact of personal debt, particularly among the very poorest in our society. I quote from a document that states:"““The Bank of England has estimated that around half the people who describe debt as being a ““serious burden”” are from a low income group…People living in housing provided by local authorities or housing associations are more than twice as likely to have been in debt than the average person…Debt and a number of other serious social problems are interdependent on each other both in terms of cause and effect…Those out of work are more likely to have experienced serious personal debt problems…Those who left school early, or came from single parent families, or whose parents were unemployed are more likely to have been in debt.””" There is a massive debt problem for people at that level; I do not want to talk about loan-sharking today, but that has an impact. It is all about weekly cash flow, and the problem is that the Government's proposals will affect that. There lies the hidden problem that they have not understood. I wonder whether they have assessed the impact of that weekly necessity to repay debt and how that relates to the abolition of the 10p tax rate. If so, perhaps the Minister will tell me what it is. That is a serious matter that has not been considered and needs to be. The Budget, as represented in this Finance Bill, has not helped many sectors of the community. It has created massive concern for home owners, as indeed has the Prime Minister—the previous Chancellor over a period of years. It has brought despair to would-be first-time buyers, because there was no help for them. It has turned off entrepreneurs and depressed business managers. It has made the poor poorer. Sadly, all this is from a Minister who has bailed out bankers who have caused their own problems, and caused problems for this country, by not only allowing increased personal debt but by acting in the most irresponsible manner imaginable. There are parameters to controlling any sector of business, and by golly there is an immediate need to look at the finance sector.