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Section 5 of the European Communities (Amendment) Act 1993

Europe needs to tackle its fiscal deficit and put in place the policies that will lead to economic growth. One reason for such uncertainty in the eurozone is that a series of imbalances have built up in different European economies. It is important that we tackle them and set out a very clear course for growth. I shall come later in my remarks to some of the actions that the UK Government have led to ensure that the EU spends more time talking about growth and finding ways in which we can accelerate economic progress in the European economies. Let me mention some of the measures we are taking at home that were set out in the Budget. We are committed to creating the most competitive tax system in the G20. We are cutting the rate of corporation tax to 22% by 2014, which will be the lowest rate in the G7 and the fourth lowest in the G20. [Interruption.] The hon. Member for Nottingham East (Chris Leslie) pre-empts my remarks, because I was about to say that we will remove the ineffective and uncompetitive top rate of tax. I should say to the hon. Gentleman that I talk to businesses that wish to grow and businesses that want to locate here in the UK. They commend the Government for the corporate tax reforms in which we have engaged. In Treasury questions earlier, my right hon. Friend the Chancellor referred to remarks made by the chief executive of GlaxoSmithKline, who responded positively to the tax changes that we introduced. He is not alone—other businesses are moving to the UK as a consequence of our corporate tax arrangements. Clearly, when we are trying to attract international businessmen to work here in the UK, and if we want to retain high-paid, talented business leaders here, the 50p tax rate is an issue. It is an outlying issue in G7 countries and affects location decisions for businesses. Cutting the top rate of tax is therefore the right thing to do. We set out the cost—£100 million—in the Red Book and highlighted measures that would raise five times that amount from the very wealthiest in society. That was a difficult decision, but I believe it was the right one if we want the economy in this country to grow. As was mentioned earlier, one consequence of the higher rate that the previous Government introduced—they did not bother to introduce it in the first 12 years they were in office—was that 20,000 people moved from the UK to Switzerland. That demonstrates the negative impact of a 50p rate. If we want to be competitive, we need a competitive tax regime for both personal and corporate taxes.