Finance Bill

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Roger Casale: One reason why the hon. Member for Kingston and Surbiton is so frightened by the modelling from the Institute for Fiscal Studies, which raises the spectre of a £1.2 billion price tag on the measure, is because it would use up most, if not all, of the extra penny that the Liberal Democrats want to put on income tax. Back in the real world, we should think not only about what we are going to spend money on, but how we are going to raise it in the first place.

The Chairman: Order. Interventions must be both relevant and brief.

Dawn Primarolo: My hon. Friend made his point directly. The hon. Member for Kingston and Surbiton asked whether it would be justified to spend the money on something else. The Government have made the choice that the money should be spent to encourage the growth of smaller businesses and entrepreneurial activity. We note the estimates by the Institute for Fiscal Studies and also that they have been wrong in other estimates. We have checked our figures, and the costs in the Red Book are obviously the ones that we stand by. However, unless the hon. Member for Cities of London and Westminster does not want investment in the growth of companies, wealth and income for sustainable investment in public service over a long period--I do not believe that that is what Conservative Members are saying--the underlying issue is whether the Government have struck the right balance between incentives to incorporate and to remain unincorporated. If hon. Members are saying that we are perilously close to not striking that balance, we are not convinced. We are convinced that the balance is right, but we do not have a closed mind on that. Surely small businesses will not look a gift horse in the mouth. We want to create growth and economic activity, and to sustain entrepreneurial activity. That must be good for the British economy.

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Mr. Field: In view of the Paymaster General's profound statements about encouraging growth and targeting measures at entrepreneurs, will she tell us at what level of profits she wants businesses to incorporate. Presumptions have been made in the Red Book and we would be interested to have a broad view of the matter.

Dawn Primarolo: When I was in opposition, I heard Treasury Ministers say many times that it is unwise to go on the record with advice to businesses about decisions concerning their future. We set the rules to encourage growth and to ensure that the best choices are available, but the choices remain theirs.

Mr. Davey: I hope that the Paymaster General realises that I made my comments in a balanced way when I asked the Government about their view. I seek an assurance that, if the provision is exploited in the way described by the IFS--that is, in a way that does not add to economic growth, but encourages a change in status to exploit the tax incentive--will the Government take action to stem the loss of tax revenue?

Dawn Primarolo: I did not say that the hon. Gentleman was unbalanced and I am not implying that--yet. I responded to him in a balanced way. If he is raising another point, he knows me well enough to know that the Government continue to cast an eagle eye on the way in which the tax system is used. We shall discuss later in the Bill measures to deal with unintended ways in which the tax system is being used and for which taxpayers should not sustain the cost. If the hon. Gentleman is asking me to be as vigilant in the future as I have been in the past, I can give him that undertaking.

Mr. Davey: I am grateful for the Minister's helpful reply. I hope that she is right--

Dawn Primarolo: I hope that I am right.

Mr. Davey: I am glad that the Paymaster General is so keen to ensure that the measure is not exploited. She should understand the effect that it would have if, in a year's time the IFS turns out to be even half-right and the Government decided to take action, because accountants would have spent a great deal of valuable time persuading companies to incorporate. If the Government then change, those companies would be free to try to unincorporate, but that would be an extra deadweight cost.

While the Paymaster General is right to assure the Committee that she will be vigilant, she must be careful when she makes what the right hon. Member for Fylde called ''tinkering changes'' that she is not creating accountants' activity that serves no good, economic purpose.

Question put and agreed to.

Clause 32 ordered to stand part of the Bill.

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Clause 33

Employer-subsidised public transport business services

Question proposed, That the clause stand part of the Bill.

4.15 pm

Mr. Flight: I seek clarification from the Government about whether, under the provision for season tickets, there is an intent to permit travel on trains, trams or park and ride. If not, what is the logic of limiting the clause to public bus services, when I assume that the general objective is to get people out of their cars and on to public transport?

Dr. John Pugh (Southport): I hesitate to make any kind of contribution in such august company as this. I am on a learning curve, but I have a relatively simple contribution to make.

Labour Members are very much in favour of a taxation scheme that modifies behaviour, and one that modifies behaviour and encourages environment-friendly behaviour is doubly welcome. However, and I do not make the accusation directly, the clause could smack of tokenism.

Statistics show—I have the advantage of being on the Select Committee on Transport, Local Government and the Regions—that there is no increase in the use of buses across the country except in London, with a marginal increase outside London. The projected increase in the Government's 10-year transport plan is small, so the growth in the bus network will be fairly minimal. I dare say that the change in taxation law will make some difference, although I do not think any Ministers pretend that it will make a massive difference. When one adds to that the future fall in the cost of motoring, an eloquent plea can be made for the exemption to be widened to take in all kinds of travel plans.

Why are trains not included in the clause? In the area where I live, most people who commute do so by train or through an integrated ticketing system that involves trains and buses. Why are coaches not included and, particularly, why not park and ride? That is essentially a bus scheme, which makes an enormous difference in many town centres. To incorporate it into the Bill would be an example of joined-up government. How would the Paymaster General respond to that suggestion?

Mr. Hoban: I am sorry to amplify the point made by my hon. Friend the Member for Arundel and South Downs and also risk the Economic Secretary to the Treasury calling out ''Focus!'' during my remarks.

The important aspect of the clause is its narrowness in referring only to subsidised bus services. Fareham will become the starting point of the South Hampshire rapid transit system, which is funded by Government money. At a time when the Government are trying to invest in other forms of transport to improve the road network and the public transport network in many

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parts of the country, it seems odd that the tax incentive in the clause is limited to buses. Therefore, I encourage the Government to think again whether the clause could be extended to light railway systems to try to bring about some of the environmental benefits that we all want in densely populated parts of the country.

Mr. Jack: I want to follow the contributions that have been made and put an anomaly to the Minister. A worker at BAE Systems in my constituency, who lived in Fleetwood, could take the Blackpool tramway to its terminus on the Fylde border and then transfer to a stopping bus. The odd situation would arise that the journey from Fleetwood to the edge of St. Anne's would not benefit from the provisions of clause 33, whereas the journey from St. Anne's to Warton, where he might go to work, would.

The Government are reviewing several applications for public funding for the development of tramway systems or tramway and integrated light rail systems. If the measure's objective is to encourage the use of public transport—I notice that its emphasis is on local stopping services—it seems odd that travellers on local stopping tram services, which in many cases in Blackpool run on parallel routes to buses, get no help while bus travellers do. It would be interesting to hear from the Financial Secretary the reason for that apparent inconsistency and whether it is the intention of the policy.

Roger Casale: I take the point that the right hon. Gentleman made about trams. A tram link serves my constituency, connecting Merton and Croydon, and many business people use it. However, we have to start somewhere, and although this is a small measure, it is a very sensible one. I believe that it will encourage people to use public transport more and it is to be applauded. London suffers greatly from excessive congestion, which is a huge problem in my Wimbledon constituency, and the measure will help.

I want to take issue with, or perhaps add to, the points made by the hon. Member for Southport (Dr. Pugh). The aim of the measure is not simply to change people's behaviour. Obviously, it gives people an extra incentive to use local transport if they will not be taxed for it, but we should not forget the measure's importance to business. Businesses recognise the significant costs to themselves of congestion in major cities such as London and the health costs attached to the pollution that congestion generates. Businesses have made many representations to the Government asking them to work through the tax system to encourage people to use public transport more. We must look to businesses to publicise the benefit to their employees, making them aware that they will not be taxed if they travel on local stopping services. Businesses should encourage employees to take up the benefit.

In a similar vein, perhaps we can look in a future Finance Bill at ways of using the tax system to encourage the use of school buses or other public transport by people travelling to school. It is people taking their children to school, especially between 8

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and 9 am, that leads to most congestion in my constituency, creating a lot of trouble for people trying to get to work.

The measure is welcome and I hope that we shall build on it in future Finance Bills. It is about changing people's behaviour, but also about business, the Government and the community working together to reduce congestion in our cities for the benefit of everyone.

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