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Finance Bill

First, I want to say something to the hon. Member for Taunton (Mr. Browne), who, to use the words of the Minister, has his L-plates on. Thinking back to the hon. Gentleman's reference to an obituary of Humphrey Lyttelton, I should say that tax is rather like the game Mornington Crescent: the rules are there if we look carefully, and they will become discernible apparently. I take issue with the introduction and conclusion of the Minister's speech; they were written without the arguments for the amendments having been heard. It was clear from what I said that our proposed cut in the small companies rate of corporation tax would be funded through the scrapping of the annual investment allowance. We have made that clear, not only today but in debates earlier this year and around the time of the Budget. We believe fundamentally that by restructuring the current allowances and reliefs we can make savings that would pay for reductions in the main and small companies rate of corporation tax. We are proposing a funded tax cut. On several occasions, the Minister came back to the point that the Government's measure was to tackle what she claimed was an unfairness in the tax system which encouraged incorporation. Yet at the same time, as the Minister said in response to an intervention of mine, the Government have not done the work to understand whether last year's scrapping of the 0 per cent. rate was sufficient to discourage tax motivated incorporation. She further undermined her arguments by highlighting that larger businesses would also be affected by the tax increase. She referred to the proportions of larger and medium-sized companies that also paid the small companies rate of corporation tax. If we look at the rate of incorporation for companies in the past six years, yes, we see that there has been a 50 per cent. increase in the number of companies incorporating with only one employee. Companies with between one and nine employees are running at about 37 or 38 per cent. in that regard, and for those with more than 10 employees, the figure is just under 20 per cent. We are seeing significant increases in the incorporation of companies of all sizes. Given the long tail of owner-managed businesses, with no employees, that I see in my constituency, perhaps it is not surprising that a large number of them incorporate. The Government's measure is meant to deal with the issue of fairness, but it imposes an additional tax burden on small companies at a time when they do not need it—they are struggling with higher costs and economic uncertainty. I will press amendment No. 1 to a Division because of the problems that face small companies. They want a Government who are on their side and are not working against them. By increasing the small companies rate of tax from 19 to 23 per cent., the Government are damaging those businesses when they need help and support. Conservative Members and, I believe, other Opposition Members recognise the importance of supporting small companies. I hope that those Opposition Members will back us in the Division Lobby. Question put, That the amendment be made:— The Committee proceeded to a Division.