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Finance Bill

I am not taking a position on where we should be in the league tables. I am saying that other countries are looking at how they can use their headline rate of corporation tax as a tool, to use the words from Canada, to""improve productivity, employment and prosperity in an uncertain world"." I am not suggesting that a target should be set for the UK's headline rate of corporation tax; I am just pointing out to the Committee that it is an important tool that countries use to attract and retain businesses. We must be mindful of that when thinking about overall tax policy in the UK. I believe that there is a consensus on this issue. The Prime Minister said last year at the Institute of Directors conference:""Our aim is to reduce corporation tax even further when we can afford to do so...and we're looking at how we're going to do it."" I shall come to how we can pay for that in a second, but I shall wait until the hon. Member for Taunton returns to his place so that he can hear that bit of fiscal prudence. The Financial Secretary might remark that the Government have taken some measures to reform the taxation of foreign profits. I acknowledge that, although it has not been an entirely straightforward process and the Government have had a couple of consultations to attempt to get the right structure in place. The sense from industry is that that is now broadly in place, but no one should say, "The job is done, we have dealt with this issue, let's move on to something else." The listed publishing group Informa moved its tax domicile from London to Switzerland not long after the Budget, once it knew broadly what the shape of the taxation of foreign profits would be. We therefore cannot afford to rest on our laurels in any way, and that is why I tabled the amendment. Given the Government's dire fiscal position, I appreciate that the room for manoeuvre is limited. When borrowing this year is £175 billion and next year's forecast is for £173 billion, there is not much money left in the kitty to cut the burden of taxes. That is why the package we propose today is cost-neutral. We have long made it clear that our reforms to the headline rate of corporation tax, reducing it from 28 per cent. to 25 per cent., will be funded by simplifying reliefs and allowances. [Interruption.] Right on time, the hon. Member for Taunton returns. We will bring the rate of capital allowances more closely into line with the accounting measure for depreciation, which is meant to reflect the deterioration in value of assets over their life. That is how we will fund the package of reforms. We set out that position clearly when we announced the policy, and we will continue to use that approach of funding changes in the headline rate of corporation tax by simplifying the tax system and trying to align the accounting and tax definitions of profit more closely.