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Finance Bill

My hon. Friend articulates the case passionately, and many Members from all parts of the House look at the challenges to the bingo industry and pubs in the same way: a vital piece of the community's infrastructure is in jeopardy, and that will change for ever the nature of the towns, villages and communities in which we live. Clauses 23 and 24, I am pleased to say, introduce a welcome if limited carry-back of losses for an extra year—restricted to £50,000—and the accelerated first-year capital allowances for one year only. Those measures are welcome, but because of the lack of available credit, many small and medium-sized enterprises will be unable to take advantage of the incentive to invest, even if they see market conditions improving—something that yesterday's CBI figures suggest is still a way off. I say to the Chief Secretary to the Treasury that fiscal incentives are fine, but the plight of many, if not most, of those companies is rooted in the credit squeeze, and until they and their customers can secure access to normal lines of credit on normal terms, we will not see a recovery. It is true that quantitative easing is forcing money into the system, but a massive public debt issuance and the continued solvency crisis in the financial sector ensure that very little of that easing is getting past the Government and the banks and out there to the SMEs in the real economy that so desperately need it. Clause 27 makes some minor changes in respect of venture capital trusts. The Government will be aware of calls for a more radical approach, expanding the scope of such trusts to allow them to invest in a wider range of companies and in the secondary market, and helping to provide the liquidity that is currently absent. Despite the rhetoric, the Government have not resolved the crisis in credit markets, and they have failed to get normal bank lending to SMEs flowing again, as banks unsurprisingly focus on rebuilding their balance sheets over supporting their customers. However, here is a suggestion from industry to improve access to a source of equity capital for SMEs, especially those listed on the alternative investment market, and to deepen the market in such equity capital by including secondary market activity in the scope of VCTs. I raise the issue because the European Union recently—I think it was only last Wednesday—approved venture capital trusts for state aid purposes, and the Government's position to date on VCTs may have been partly driven by an uncertainty about whether any different approach would be permitted under state aid rules. I therefore hope that the Financial Secretary can this evening clarify whether the Government are able to consider going further to support SMEs in that way. I welcome, too, clauses 34 and 35 and the schedules that they introduce, finally delivering the foreign profits exemption regime and the associated cap on interest deductibility that has been promised or threatened—depending on which way one looks at it—for some time. We believe that the measure will broadly help British-based international businesses in the recovery; it is just a shame that the context for that positive mood on corporate tax is a Bill that contains a raft of measures on other areas of the tax regime which is bound to make Britain less attractive and thus dilute that positive impact. Business is generally satisfied with the proposals in clauses 34 and 35. The CBI has, none the less, laid down a marker whereby it thinks that further details could usefully be discussed before the interest cap regime comes into force, but the delay to its enforcement allows for that possibility. There is a lesson that we should learn from the package, because the initial proposal was vigorously opposed by business, which considered it to be damaging to Britain's international competitiveness, but the end result has been broadly welcomed. That is an example of how proper consultation and debate between business and Government can deliver what this country needs both to make its tax regime competitive and effective and to allow us to maintain our prosperity in a globalising market economy. The Financial Secretary should take an important lesson from that example. In future, Government should tell business well in advance—at least at the pre-Budget report preceding a Finance Bill—the outcome that they require of a measure. However, the Government should not be prescriptive about how the measure is delivered; they should sit down with business to establish the best, least damaging and most competitiveness-enhancing—if I can say that—way of achieving their objective. Clause 71 introduces schedule 35, which provides for a new tax on the pension contributions of higher earners. It effectively removes the principle of pension contributions being made from pre-tax income. The A-day regime for pensions, which has been referred to in the context of the Opposition amendment, was introduced only in 2006. What was meant to be a long-term regime for long-term saving is being significantly tinkered with, and the signal is being sent out that the settlement is not the enduring fixed landscape that it was billed to be back in 2004, when it was first mooted. The measure introduces more complexity and uncertainty; long-term commitments are being overturned for short-term gain. I have already acknowledged the Government's concern that the 50 per cent. rate of tax makes pension tax relief an obvious route for legal avoidance; that is why they have sought to limit the availability of tax relief to the highest earners. But why on earth did they not do that in the simple and obvious way—albeit one that would also have breached the A-day commitments—of changing the maximum contribution limits under the A-day regime? How can it be fair or reasonable that, under the regime proposed by the Chief Secretary to the Treasury, someone earning £150,000 can get 40 per cent. relief on a £100,000 pension contribution—that is, £40,000 of relief from the Exchequer—but someone earning £200,000, and contributing only £20,000 to a pension fund, is limited to 20 per cent. relief? That perverse outcome risks sending a signal of instability and unreliability throughout the pension regime. It risks a disengagement of top earners from company pension schemes that also benefit tens or hundreds of thousands of lower-paid workers. I am not convinced that disengaging top executives from pension schemes that benefit the many is the best way to protect those schemes. Many savers will see the measure as the thin end of a wedge, reinforcing Labour's attack on pensions which began in 1997 with the £5 billion-a-year tax raid on pension funds. That has undermined what the right hon. Member for Birkenhead (Mr. Field) has described as a pensions system that was once the envy of Europe, but is now arguably one of the least good on the continent.