---

Finance Bill

I do not have a problem with lower business taxes, and I am very supportive of lower corporation tax. I have said so many times that, as part of an overall competitive framework for business, that is a prerequisite for solid economic growth. When we look back over the medium term, we can see that many countries which, when they reduced their business tax burden, in fact experienced a business tax increase year on year as the rates came down. None of those comments will come as a surprise to those on the Conservative Front Bench, as I have made them on many occasions. It is the case, however, as we have discussed before, that concerns arose when business taxes were kept high. Even when allowances and reliefs for investment were extended, there were concerns that that regime failed to support the good businesses that were simply getting on and running their companies, and supported only the companies or firms that invested in particular areas. I shall return to that in a moment. The hon. Member for Fareham (Mr. Hoban) suggested that the proposed tax cuts would fundamentally be paid for by reducing or removing allowances or reliefs, by simplifying the allowance or relief system. Although I agree with the need for a simpler tax allowance and relief system in general, I have a couple of questions about his amendment. What assessment has he made of the value of lost investments—investments that might be cancelled or delayed as a result of the proposals—if those allowances or reliefs have already been budgeted into the costs? Why has he proceeded at this point with the cut, rather than proposing a longer time scale for changes to the tax and allowance regime, which would allow the economy to benefit from the announcement effect, as we have seen elsewhere, whereby businesses come and set up in preparation for lower taxes, while mitigating the risk of investment projects being cancelled or postponed? I am very supportive of a lower corporation tax rate—our aspiration is to reduce it to 20 per cent.—and I am in favour of a simpler tax system, which is a good thing, as it reduces costs and burdens, and is easier for business people, their offices and their staff, to understand. However, I question the timing of the proposal. Why not say that it would take place in future, to benefit from the announcement effect, and why not tie that into a longer lead time for the abolition or simplification of allowances? Importantly, what assessment has the hon. Gentleman made of the risk of investment projects being cancelled? I want to support the proposal, but it would be useful to hear his thinking.