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Mr. Jack: The Secretary of State mentioned the policy on business tax allowances for capital investment that the Government have been pursuing. How much net extra investment has resulted from those proposals?
Mr. Byers: If the right hon. Gentleman reads the Red Book, he will see that we have record business investment compared to GDP, although that is not how the right hon. Member for Wells portrayed the situation. The figures are based on 1995 prices, so the comparison is good.
Mr. Harry Barnes (North-East Derbyshire): My right hon. Friend the Chancellor said that, to encourage enterprise, six tax cuts will be targeted on areas that have suffered relative depression, such as coal, textile and steel communities. Presumably, my constituency will be included, as Biwater has closed. Will information be supplied as to which areas will be eligible? Obviously, I have a constituency interest in that. The proposals are distinct from ones to which he referred at a previous Question Time, when he said that tax credit provisions will relate to the best bids for help with economic regeneration. There is sometimes a problem over who has made the best bid, so targeted provision is important, as is knowing whether we are in on it.
Mr. Byers: My hon. Friend makes an important point. The six-point package, which my right hon. Friend the Chancellor mentioned yesterday and which I hope to touch on later, will be available to designated areas and communities. Work on that designation is still going on, but we can expect an announcement in the not-too-distant future as to which areas will qualify for that important package of help with regeneration and job creation in the parts of the country that need it most. The package is part of an active regional industrial policy, which is important to ensuring that our country's economic prosperity is shared round and that we enlarge the winner's circle so that more people can benefit from the success that we are making of the economy.
Extending the R and D tax credit from small companies to larger companies will be an important development resulting from the Chancellor's statement. We want to make sure that we get it right, which is why we want to consult in detail, particularly those industries that will be able to benefit from such a regime.
Since 1997, the number of small businesses has grown by 170,000. That is a response to the tax cuts that we have introduced for the sector. Small company tax has been cut from 23p to 20p and there is a new starting rate of just 10p in the pound. That means an overall cut in the typical small company tax bill of nearly 25 per cent.
We shall continue to improve the environment for smaller firms to create new opportunities for enterprise and to help existing firms to grow, creating new jobs and prosperity. That is why we shall introduce a new regime to simplify VAT for up to 500,000 small businesses, which will include allowing at least 100,000 more businesses to file VAT returns annually instead of quarterly and increasing the VAT threshold in line with inflation, keeping the UK threshold at the highest level in Europe.
We shall also seek views on a new optional flat rate scheme for small firms. It would be simpler to use, with VAT calculated as a percentage of their taxable turnover; and rather than small firms having to wait until they had been registered for a year, they would be allowed to enter the annual accounting regime immediately. That would achieve real practical benefits for small companies.
We are also consulting on a radical new look at the tax treatment of small companies. Those proposals would allow small companies to base their tax calculations on their statutory accounts, which would end the current administrative burden of having to submit to the Inland Revenue a tax calculation in addition to the statutory accounts.
We also intend to improve the enterprise management incentive schemes to make them easier for companies to operate, doubling the limit on the total value of shares that can be offered and removing the limit on the number of employees who can be granted those options.
As the Chancellor announced yesterday, we accept all the recommendations of Paul Myners' review of institutional finance. We shall change the rules on life insurance companies investing in venture capital so as to provide greater incentives for insurance companies to provide equity finance for small and medium-sized enterprises. We shall also make it easier for small companies to raise equity and long-term finance.
We shall create new opportunities for businesses to support the jobs and growth of the future; but at the beginning of the 21st century, we must also invest in our children--the future of our country. We have already introduced a wide range of reforms that benefit women, families and children in particular. There are more women in work than ever before. We have introduced the national minimum wage, benefiting some 1.5 million workers, more than 70 per cent. of whom are women, and helping to reduce the pay gap between men and women to its narrowest ever.
Last year, we introduced new rights for part-time workers, 80 per cent. of whom are women, and ended discrimination on pay, pensions, training and holidays for the 5 million women and 1 million men who work part time. We calculate that the changes have benefited part-time workers by about £555 each. Part-time workers will no longer be treated as second-class citizens under the law. They play a valuable role in a flexible labour market, and they should be treated justly.
In introducing these regulations for part-time workers, I have paid particular attention to the needs of families. I have extended the new rights to include all workers and ensured that some of the most vulnerable groups--such as home workers and agency workers--will now receive full protection.
Full-time workers who start working part time will now be able to compare their new terms and conditions to their previous package. That will help women returning to work part time after maternity leave.
We have also introduced a right to time off work to deal with a family emergency, starting from day one of employment. We have introduced statutory rights to decent minimum standards--all of them opposed by the Conservative party.
In the modern economy we need to harness fully the energy and talents of our work force. In a tight labour market, employers find it increasingly difficult to recruit and retain skilled people. In this changing world, it is vital that we recognise the pressures on working parents and business, and that we look at ways to support businesses and parents in meeting the challenges of family life. That is why last December I published a Green Paper setting out proposals to give more help to new parents and greater support to the businesses employing them. Our proposals were based on the most comprehensive review of work and parents ever undertaken by a Government in Britain. In the light of that review, we set out nearly 50 options to give more support for new parents and for the businesses that employ them.
Following an extensive consultation on these options, a range of measures was announced yesterday that will radically improve the lives of working parents with a new baby. We will increase statutory maternity pay and maternity allowance from its current £60.20 a week to £75 a week next year, and to £100 in the following year. That is as big a rise in the next two years as occurred in the previous 40. We will not only improve the rate of maternity pay, but increase the period during which it is paid, raising it from 18 weeks to 26 weeks. For the first time, parents who adopt will qualify for these benefits: paid adoption leave, for the same period and at the same rate, will be available when a child is first placed with a family. To help working fathers, we will introduce a new right to two weeks' paid paternity leave--at £100 a week--from 2003.
To help employers, we will increase the support that small businesses receive for the administration of maternity pay. We will double the threshold for small-employer relief, to £40,000. That means that about 60 per cent. of all firms paying maternity pay will be able to reclaim their costs in full, plus compensation.
These measures support a range of further steps in the Budget to support families and children. There will be a further increase in the sure start maternity grant, from £300 to £500, for more than 200,000 low-income families. The value of the children's tax credit will be increased from the previously announced £8.50 a week to £10 a week when it is introduced on 1 April this year--making it worth up to £520 a year for around 5 million taxpaying families.
However, we also recognise the additional costs that are incurred during the first 12 months after a child's birth. We will therefore raise the children's tax credit to £20 a week for a year from the birth of the child.
One of the issues raised in our consultation on work and parents was the need for good, affordable child care. The absence of affordable child care remains one of the main barriers to work for parents. Evidence clearly shows that an increase in the current limits for child care support
That is why we intend to increase the limit in the child care tax credit component of the working families tax credit and the disabled persons tax credit. That limit will be raised to £135 a week for the cost of child care for one child, and to £200 a week for the cost of child care for two or more children.
In order to claim the child care tax credit, families must use appropriate child care. However, current child care credit rules do not apply to child care provided in a person's own home. This restriction poses particular problems, especially for parents who work irregular hours. I heard that at first hand when I recently discussed these issues with a group of mothers in Bolton. They described the difficulties very clearly. A nurse working irregular hours set out graphically the problems that she encountered in finding affordable child care. The mothers said that support for child care costs in their own homes would be a significant advance.
That support would also benefit families who have a child with a disability. I am therefore pleased to be able to announce that we will now consider how we can help families who need formal child care in their own homes. One possibility being considered is extending the child care tax credit. That is a practical approach that will make a real difference to many working parents.
The changes in the Budget will benefit business, parents and, above all, children. However, we need to ensure that the changes translate into real benefits that increase prosperity in every part of the country. Now that we have economic stability, we have an opportunity to make a real difference for all our people, wherever they might live, and to make sure that all parts of Britain share in rising prosperity.
There are now more people in work in every region than there were in 1997, and average earnings have increased in every region as well. However, too many areas are still underperforming. Some regions are lagging behind in productivity growth and investment in research and development. Our next steps must be to put in place the measures that will allow all regions to fulfil their potential.
Over the past four years, we have made a start in giving the regions the tools that they need. We established regional development agencies and we are increasing their funding substantially. Tomorrow, my right hon. Friends the Chancellor of the Exchequer and the Deputy Prime Minster will announce new financial flexibilities to enable regional development agencies to fulfil their role in delivering higher productivity and balanced growth in every region.
In addition, we will introduce new fiscal incentives to extend the opportunities for enterprise in rundown areas. In total, we are introducing six new tax cuts targeted at enterprise and growth and worth £1 billion over the next five years.
To render tax free the first stages of buying property and bringing land back into use, stamp duty will be abolished in designated areas. To bring disused properties back into use, we will cut VAT on residential property conversions. There will be accelerated tax relief for cleaning up contaminated land, and to help revitalise our
Moreover, to cut the cost of small-business borrowing, we will introduce a new community investment tax credit. That was recommended by Sir Ronald Cohen and, with a capitalisation of some £40 million, it will ensure that a partnership between Government, financial institutions and the charitable sector makes a real difference to businesses growing in the designated areas.
To cut the costs of start-ups, the Small Business Service will offer one-stop support and up to £2,000 of help for any start-up company drawing up its business plan. That will make it easier than ever in the designated areas to start and sustain a business. With our active industrial and regional policy, the Government are reaching out to all parts of the country to ensure that they can benefit from our economic prosperity.
The stability that we have achieved means that we can now make the reforms that our country needs. Those reforms include increasing enterprise in every region and supporting hard-working families. The Government can do that because we have made our choice. We have chosen stability, not boom and bust; full employment, not mass unemployment; investment in future prosperity, not cuts in essential services; tax cuts that we can afford; and a commitment to strong communities, not a belief that there is no such thing as society.