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Mr. Hoban: It manifestly is not the thrust of my argument. I would like a level playing field for businesses, be they incorporated or unincorporated. They should not be forced to choose one legal form or another simply to benefit from tax breaks. The Government have shown a lack of understanding of how business operates and how people run their personal affairs.
We have also seen the benefits of consultation, and the way in which certain aspects of the Bill have been discussed with representative bodies has been very valuable and has cut down the amount of time that we needed to spend discussing them in Committee. It is interesting to note, however, that the area of greatest disagreement has been the one on which there has been no consultationoil taxation. The Government need to learn the lesson that consultation makes for a better Finance Billone that gains the acceptance of the community for which it is trying to create a suitable tax regime. The oil industry has been in uproar because the Government failed to consult it.
This is a long and complex Finance Bill. My right hon. Friend the Member for Fylde (Mr. Jack) was rightwe need simpler tax legislation to reduce the burden of compliance on business and its advisers and to make it far easier for people throughout the country to understand their own tax affairs, without recourse to expensive legal and tax advice.
Mr. Mark Field (Cities of London and Westminster): As with many Finance Bills, I suspect that this one will be remembered as being good for lawyers and tax accountants. They, perhaps alone, will admire the increasing complexity introduced by a somewhat meddlesome Treasury team.
My hon. Friend the Member for Arundel and South Downs (Mr. Flight) spoke skilfully about many matters throughout our proceedings. As he said, we find the oil and gas provisions and the straitjacket imposed on the Channel Islands and other Crown dependencies especially objectionable, and that is why we will vote against Third Reading.
Even the Government's own advisers now highlight the fact that the Chancellor's growth projections are likely to prove grossly optimistic. Projections made only a matter of weeks ago now look hopelessly out of date. We are expecting to have growth of 2.25 per cent. in the current year, rising to 3.25 to 3.5 per cent. in the next financial year. On that basis alone, we have had vast acceleration in public expenditure. A Government who promised the end of boom and bust have placed their foot firmly on the spending pedal at just the wrong time in the business cycle.
Spending on health is rising, not just for the next five years as shown in the Budget, but presumably at similar rates for the period beyond 200607. It seems that it will largely be business that continues to be milked. Many of us have spoken in past years about the Government's redistributive agenda, which may have seemed out of keeping with a generally fairly successful economy, but we had an interesting discussion on property and capital taxes in what seemed a fairly innocent debate on clause 115 and, as my hon. Friend the Member for Epsom and Ewell (Chris Grayling) said, it seems that the Government regard London and the south-east as fair game for a higher burden of tax, be it inheritance tax, a vast increase in stamp duty or a whole array of other corporation and income taxes; yet there is little evidence of the investment in the public sector to which the Paymaster General refers as being focused on that area.
As the Member of Parliament for Cities of London and Westminster, I have been the first to give credit where credit is due. To a large extent, in their first five years the Labour Government have been able to be true to their watchword of stability in the economy. They have gained many plaudits for that from the business community, of which I was a member before 7 June last year. Many business people admired what the Government had done, especially when we take into account the fears that existed before May 1997. Howeverthere is always a "however" on the Opposition Benchesalthough the Treasury has played the hand that it inherited in 1997 skilfully, it is fair to say that it was a very good hand. That fact has, perhaps, not been recognised as readily as Opposition Members hoped.
In keeping with the comments of my right hon. Friend the Member for Wokingham (Mr. Redwood), I am concerned about the sense of denial and complacency in much of what the Treasuryand the Government as a wholesay about the future of the economy. For the good of the economy and the country, I hope that I am wrong, but I suspect that when we gather next year to consider another Budget and another Finance BillI fear that the wish of the hon. Member for Kingston and Surbiton (Mr. Davey) for a biannual Finance Bill will not come true for some years to comethe economic climate will be very different. By then, we will see the damage to business of much of the meddling to which we have referred.
I wish Treasury Ministers the very best, because it is in the interests of this country that we have a strong economynot least in respect of the investment in the public and private sectors that we all want to see. However, difficult times lie ahead. We have put prudence to one side, and the foot is firmly on the public expenditure pedal at what is probably entirely the wrong time.
I shall be interested to hear what the Financial Secretary has to say. I thank her and her ministerial colleagues for providing a constructive basis for our discussions in Committee, on Report and on Third Reading. However, I shall join my hon. Friendsnotably my hon. Friend the Member for Arundel and South Downsin voting against granting the Bill a Third Reading, because some serious problems lie ahead.
Ruth Kelly: I welcome this opportunity to bring the debate on Third Reading of the Finance Bill to a close. This, too, was my first Finance Bill, and I have enjoyed it very much. I want to begin by thanking my hon. Friends and other hon. Members, the special interest groups and others who took a great interest in the Standing Committee's proceedings. Their close attention to detail and their unflagging enthusiasm have done much to smooth the Bill's passage. We certainly heard some interesting speechesfrom both sides of the Housetoday and in Committee.
Government is all about choices, and the Finance Bill is no exception. We have chosen in favour of economic growth and prosperity; in favour of enterprise and innovation; in favour of a sustainable future. Liberal Democrats and the hon. Member for Arundel and South Downs (Mr. Flight) have accused the Government of being Panglossianof putting too rosy a glow on our economic success. I am the first to admit that there is great uncertainty about the world economic outlook, but the fact is that the macro-economic framework that we have put in place is the right one.
On coming to power in 1997, we gave the Bank of England independence, and an independent Monetary Policy Committee is delivering pro-growth low inflation. It has the right symmetrical inflation target to deliver the dual objectives of growth and low inflation. We also have a tough fiscal framework. Over the next five years, net debt will rise no higher than 31 per cent., according to the figures in the Red Book. We now have the most open and transparent fiscal framework that I know of in any of the major G8 countries. The evidence of the success of that framework is clear. Long-term interest rates are at their lowest level for 40 years. We have had the longest period of sustained low inflation since the 1960s. Employment has risen by 1.5 million since 1997, and in the past year we have enjoyed the strongest growth of any of the seven largest industrialised economies
The hon. Member for Kingston and Surbiton (Mr. Davey) highlighted the prospects for manufacturing. Of course, I acknowledge that world trade growth was near zero in 2001down from 12 per cent. in 2000. It was inevitable that UK manufacturing would be hit when world trade growth collapsed, and that the internationally exposed sectors of the UK would be affected. Manufacturing output fell in all industrialised nations, but by less in the UK than in our major competitors. For example, manufacturing output in Japan fell by 13.75 per cent. last yearmore than twice the fall in this country.
The first signs of tentative recovery in the manufacturing sector are appearing. The Red Book forecasts that output will gradually pick up in the second half of the year. The answer is not artificially to massage down the exchange rate, as the Liberal Democrats proposed. That has been tried in the past, and it does not work. It leads only to higher inflation, and boom and bust.
Ruth Kelly: It is clear that stock markets across the industrialised world have fallen, or does the right hon. Gentleman believe that the UK stock market has been especially badly affected? The causes have been the uncertainty of the world economic climate and the vulnerability of corporate profitability which, as the hon. Member for Arundel and South Downs pointed out, has resulted from the recent Enron and WorldCom events.
I turn now to some of the issues raised in the debate. The hon. Member for Arundel and South Downs claimed that the Budget was somehow bad for business. It is not; it is good for business. It promotes enterprise, growth and productivity.
The Government have introduced measures to extend the research and development tax credit to all companies. The Budget cuts the small companies rate of tax by 1p and, by means of a 10p cut, reduces the starting rate to zero. We have introduced measures to reduce the administrative burden of VAT for small companies, and to improve their cash flow. We have also introduced the community investment tax credit. The Budget will increase enterprise and promote entrepreneurship in the UK economy.
The other major point raised in the debate concerns the North sea oil regime. It is right in principle to tax a scarce resource produced under Government licence. Every oil-exporting country has a special tax regime for that purpose. The Government are clear about our principlesto raise a fair share of revenue for the country, and to promote investment.
That is what we have done with the 10 per cent. supplementary charge on oil, and with the 100 per cent. capital allowance. The reform is right in principle, and we now have a stable oil taxation regime for the future.
I know that the right hon. Member for Fylde (Mr. Jack) has a great interest in simplification. He has demonstrated a long-standing interest in the tax rewrite project, and I was privileged to serve on the consultative committee before I became a Minister. However, he suggested that the Bill has not been scrutinised thoroughly. In fact, the Government have involved just those representative bodies that the right hon. Gentleman suggested in the extensive consultation that has been carried out on the measures.