CORPORATION TAX—OTHER RATES AND FRACTIONS

HC Deb 17 July 1974 vol 877 cc473-513

4.35 p.m.

Mr. David Mitchell (Basingstoke)

I beg to move Amendment No. 101, in page 6, line 28, leave out from '1973' to 'and' in line 29 and insert: 'and subsequent years shall be three fourths of the Corporation tax rate '.

Mr. Deputy Speaker (Mr. George Thomas)

With this we are to take Amendment No. 103, in page 6, line 29, leave out '42' and insert '40'.

Mr. Mitchell

The amendment is designed to help all those small businesses which pay corporation tax. It proposes that the small business rate for corporation tax should be set at three-quarters of the standard rate for large companies. Its effect this year would be that, instead of increasing corporation tax for small businesses by 2 per cent. from 40 per cent. to 42 per cent., it would reduce it by 1 per cent. from 40 per cent. to 39 per cent.

As happened yesterday, we have given to the Government a certain sense of choice. They will see that, very helpfully, Amendment No. 103 is designed simply to retain the small business corporation tax rate at 40 per cent.

This matter is of considerable importance, for 93 per cent. of companies are small businesses. I declare my interest, along with many others and, I hope, my understanding of some of the problems which face small companies.

I ask the House to consider two principal points. There is, first, the special contribution to the national economy which comes from the smaller businesses and the vast potential there is for increasing it if only we give them the sinews—the working capital—and the incentive with which to do it. There are, secondly, the very acute financial problems which affect the small business sector at present.

My colleagues and I want to see the release of the dynamism, vigour and productive potential of the small business sector. It is more inventive than larger firms. Research shows that 80 per cent. of inventions come from small businesses or people acting on their own. It is better at innovation, because change is disproportionately expensive for a large organisation. It makes better use of national resources entrusted to it than does any other sector of the economy.

I will forbear from calling the frown of concern to the face of the Chief Secretary by mentioning the return on investment in the nationalised sector. That would be a rather unpleasant subject to intrude into the discussion. For the 300 largest companies in the country, the return pre-tax and not accounting for inflation is 14.6 per cent., whereas a search from Samuels and Smythe has shown that the average yield of smaller companies is 18.6 per cent. Thus, there is a substantially better use of national resources in the case of these companies.

Smaller business have a special rôle in the economy because they provide so much of the competition which I regard as the most effective price cutter ever invented by anybody in economics or politics.

These companies are the seed corn from which the bigger companies of the future will grow. Therefore, I do not think that there will be any disagreement across the Floor of the House about the first of my principal points.

I turn now to consider what is preventing small businesses from developing their full potential and making their full contribution to the national economy. It is the acute cash flow problem which faces them. There are three main reasons why it is so acute at present. The first is inflation. I do not blame the Government for inflation, for it has been growing for a considerable time.

But the reality is that because of inflation, to do the same volume of business substantially higher working capital is required, and it is fair to say that the rate of inflation is accelerating at the present time and that is accelerating, in direct proportion, the amount of working capital required by these businesses. Secondly, there is growth. Because companies are doing a bigger volume of business—something which the Government very much desire and which the country needs—even more working capital is required. At the time when this working capital is required we find that price and profit margins are restricted, so that the producer cannot get from the market the additional working capital he needs. As the Bolton Committee showed, this sector of the community relies for its working capital on plough back and retention of profits. Therefore, if we are to help these companies and they cannot increase their prices, help must be given by reducing taxation.

The judgment of the Chancellor of the Exchequer in his Budget was to increase the tax on this group of companies by 2 per cent. at the precise time when they are so acutely short of working capital. This amendment suggests that, far from increasing taxation, we should be encouraging investment and production and should therefore be reducing taxation so as to ensure that sufficient working capital is available in these companies.

As to the cost, I estimate—and I believe the Chief Secretary will agree with me—that to reduce corporation tax from 40 to 39 per cent., which is what is, in effect, proposed here, would cost about £7 million.

The Chief Secretary to the Treasury (Mr. Joel Barnett)

indicated dissent.

Mr. Mitchell

If the hon. Gentleman does not agree I shall be very interested to hear his explanation. I believe that I can prove the figure I have given to the House. Certainly, where we would seek to make this reduction the Government would seek to increase the tax.

There is, however, one other perhaps worse aspect. The Government have increased the tax on large companies from 50 to 52 per cent., which is an increase of 4 per cent. in their corporation tax liability. But for small companies, which have greater need, the proportionate increase is greater. Instead of putting it up by 4 per cent. the increase for the smaller business is 5 per cent.—a point which the House should take into account.

I must express my astonishment that the Minister responsible for small businesses in the Department of Industry is not here for this discussion. Moreover, he did not even come into the Chamber to sit on the Front Bench to listen to our discussion on the subject of small businesses last night. Perhaps one of the hon. Members sitting on the Government Front Bench would like to show his interest in small businesses by finding the Minister responsible for small businesses and bringing him into the Chamber. He is not sick. He is able to vote. He has not been nodded through the Lobby. Is there any reason why he should not come here to hear what we have to say? Perhaps he might even wish to go so far as to make a contribution to the debate. He might like to tell us his views about this. So many of the deputations which have waited upon him have been told, "Of course, I am a small business man at heart. I am entirely with you in all you seek to do, but those dreadful civil servants prevent me from doing what I would like to do." The hon. Gentleman who has responsibility in political terms for decision making should be sitting here taking his medicine or giving us the benefit of his advice this afternoon.

Sir John Hall (Wycombe)

Would not my hon. Friend agree that to ask that the Minister concerned should be here is carrying masochism too far?

4.45 p.m.

Mr. Mitchell

Yes. I should like to say a word about Budget arithmetic since I know that this causes the Chief Secretary some concern. We on this side of the House have saved the Government some £10 million of expenditure which would have been spent on retrospective payments to trade unions. I feel that that £10 million would be much better spent on the productive potential of the smaller business sector of the economy.

If I may put this in the national context for a moment, the Government fear a slow down in the economy. We have been told that next week the Chancellor of the Exchequer will come to this House to announce certain reflationary measures. One of the reasons why those measures have become necessary is the increase in corporation tax on the business sector, preventing it from producing at the pace at which it should and would have produced. Therefore, we are helping the Government. But there is another reason of which I hope the Chief Secretary to the Treasury is aware—that very small businesses today are holding back from investment projects because they are very worried about the proposed wealth tax which the Government have announced they are to introduce. The Government have left us in a state of total uncertainty as to how this will affect companies and those who invest in businesses.

If we are to have a capital levy of this kind, surely the Chief Secretary is aware that any business man facing a decision on whether he should extend his borrowing or seek to tie up money by investing it in new plant and equipment will say to himself, "I had better not do it because I do not know how much I shall have to contribute to the capital levy the Government have promised in the autumn Budget". Unfortunately, that is an added reason for the economy beginning to run down at the present time. The national interest demands that there should be a boost to production. With respect to some of my hon. Friends who may take another view, I would stress a boost to production rather than to consumption. for that should be the basis of any measures which the Government may take at the present time.

I say to the Government, give small businesses the incentives. Give them the wherewithal to do it and they will succeed in producing the increased wealth that this country so desperately needs.

Mr. William Clark (Croydon, South)

I wish to support my hon. Friend the Member for Basingstoke (Mr. Mitchell). I believe that it would be agreed in all parts of the House that at every possible opportunity he champions the cause of the small business man. I cannot understand the Labour Government. They do not seem to be living up to their philosophy. Here we are talking about small business men. It is sometimes said, I believe quite wrongly, that the Conservative Party is the party for industry and the rest of big business and so on. Here the Conservative Opposition—and I am delighted that we should have the support of the Liberals—are championing the cause of the small business man.

It is true that the Government are to be congratulated in that they have given a small measure of relief to small businesses. At the Committee stage we were delighted that on the instigation of an Opposition amendment the Government saw the wisdom of increasing the limit of liability for capital gains for small businesses, so that on retirement the amount was increased from £10,000 to £20,000. For that we were most grateful. All we are asking here is for some relief. some assistance for the small business.

I do not want to rehearse my hon. Friend's arguments. I know that the Chief Secretary, with his professional expertise and experience, knows it to be a fact that small businesses are facing a cash flow problem. Apart from the fears that my hon. Friend has raised about this so-called wealth tax or gift tax, call it what one will, the companies are suffering cash flow problems, and one thing which must always be remembered when comparing big businesses with small businesses is that whenever there is a credit squeeze the impact always falls more heavily on the small business. With a bank squeeze big companies can, by and large, ride out the trouble, but small companies cannot.

We now come to the question of corporation tax on small businesses. As my hon. Friend the Member for Basingstoke (Mr. Mitchell) pointed out, the proportionate increase for big businesses is smaller than for small businesses. On that ground alone the Chief Secretary should think again and do his arithmetic afresh, and I know that he is a very good mathematician. My amendment is a little more modest than that of my hon. Friend the Member for Basingstoke. It would cost the Revenue less than would my hon. Friend's amendment. In Committee an amendment to lower the rate of corporation tax to 40 per cent. from 42 per cent.—which, alas, we lost by one vote, but which situation we might remedy in a few moments—would have cost the Revenue, we were told, £9 million. I would have thought that was a small enough sum in view of what it would mean for this vital section of industry. With its working proprietors, this section is, by and large, more efficient than the large company sector with all its management and corporate structure.

Sir Harmar Nicholls (Peterborough)

When my hon. Friend spoke of bringing down the rate of corporation tax to 40 per cent. he should bear in mind that it is not yet 42 per cent. Surely it is a matter of asking the Government not to increase it. My hon. Friend should not use words which give the impression that the Government are giving something back. The amendment in the name of my hon. Friend the Member for Basingstoke (Mr. Mitchell) would reduce the figure to 39 per cent., which we estimate would cost £7 million.

Mr. Clark

I accept what my hon. Friend says. If we want to compromise, however, let us leave it at 40 per cent.

There is an anomaly in the way in which corporation tax affects small organisations. Housing associations, building societies and provident societies are subject to a rate of 40 per cent. Alas, the trustee savings banks, which again concerns the small man, do not pay corporation tax at the lower rate.

I understand that you did not select Amendment No. 103, Mr. Deputy Speaker, because it was out of order, and in view of that you would no doubt prefer me not to refer to it. Nevertheless, I should be most grateful for a categorical assurance, similar to the one given yesterday about building societies and pension funds, that in the next Finance Bill provision will be made to include trustee savings banks. That would need an amendment to Section 96 of the 1972 Act.

Sir Raymond Gower (Barry)

I understood the Chair to indicate that we were taking Amendment No. 103 with an earlier one. My hon. Friend says it is out of order.

Mr. Deputy Speaker

We already have one amendment before the House, and with it we are discussing another. The hon. Member for Croydon, South (Mr. Clark) ruled his amendment out of order, I did not.

Mr. Clark

I beg your pardon, Mr. Deputy Speaker. I had intended to say Amendment No. 102, which was not selected. This is, if you like, another personal statement that I have inadvertently misled the House.

Small businesses are suffering a cash flow problem. We need not go into the arguments about the three-day week and whether it was right or wrong, but these businesses suffered as a result of it and they are also suffering from inflation. A further problem for them will be accelerated or advance corporation tax. Many close companies are forced to declare a dividend. That was perfectly all right under the imputation system when there was freedom of dividend payments, but with dividend limitation the imputation system will hit small companies very hard. That, coupled with 50 per cent. advance corporation tax, serves only to aggravate their cash flow problem.

I appeal to the Chief Secretary to accept the cheaper of the two amendments which, as my hon. Friend the Member for Peterborough (Sir H. Nicholls) pointed out, involves not reducing corporation tax but leaving it at its present level. The amendment in the name of my hon. Friend the Member for Basingstoke would mean a reduction. The Chief Secretary must realise that the small business is the backbone of the country and we must do all we can to foster it and see that it is not penalised by taxation or in any other way.

Mr. John Pardoe (Cornwall, North)

Yesterday in the course of our discussions on small businesses we extended the lower rate of corporation tax to more such companies by redefining the term "small company". In the Budget the Chancellor proposed to raise corporation tax from 50 per cent. to 52 per cent. for large companies and from 40 per cent. to 42 per cent. for small companies. In Committee the Government claimed that they were maintaining the differential at 10 per cent., and by one sort of mathematics they are, but by another they are not. There is a 4 per cent. increase, as the Chief Secretary admitted, for large companies, but a 5 per cent. increase for small companies.

The question today is whether we should reduce the rate for small companies, whether that is a suitable priority and whether it is essential. I hope that the Chief Secretary will give some indication of the cost. In Committee, he said that the cost of the amendment on the old base was £9 million compared with £45 million which was the total relief for small companies. Of course, yesterday's amendment, which will cost £15 million, widens the base and so already there is now total relief for small companies of about £60 million even without the amendment we are now discussing. I want to know what the amendment would add to the total cost.

My inclination at this stage is to say that small companies this year do not deserve two bites of the cherry when one might well suffice. I accept immediately all the arguments about company liquidity, particularly of small companies, and the problems they face. I do not intend to make a detailed analysis of company liquidity now because that issue will arise on the next amendment. However, we have already done something fairly substantial for small companies in widening the definition.

Mr. David Mitchell

What was done yesterday does not affect the broad range of small businesses, which are suffering from a shortage of working capital. Yesterday's amendment will affect only the small number of firms which will now be added to the group of "small businesses", and if the hon. Member wishes to help all small businesses my amendment is, if anything, of greater importance.

Mr. Pardoe

I did not take part in the debate yesterday although I was present throughout. I did not hear then any such remarks that the amendment was not wholly helpful. Yesterday the whole case was that it was essential that we made the amendment which would be a splendid thing for small companies. Now I understand the Conservatives to say that what we did yesterday was not significant.

I think that it was very significant, and that it was a substantial help to a larger section of small companies than would otherwise have been helped.

There is already a differential. It is only a question of whether we think that the extension of the differential should be a high priority for us today. I regard the advance corporation tax as far more important. Of course, it costs far more money as well. I am by no means convinced at this stage that small companies are entitled this year, with all the other claims that face us, to two bites of the cherry.

5.0 p.m.

Mr. R. J. Maxwell-Hyslop (Tiverton)

As my hon. Friend the Member for Basingstoke (Mr. Mitchell) has pointed out, in a time of inflation a business needs an increasing amount of working capital merely to sustain the same volume of business. Additional working capital can be obtained in one of two ways. If it is obtained by borrowing, interest charges must go on to the price of the merchandise and so be paid by the consumer. The second way is to put up the price paid by the consumer, so that the cash flow from sales generates the increase in working capital needed purely to sustain the same volume of business at increasing unit costs.

If there is an increase in corporation tax which results in a reduction in the cash in hand of a business, large or small, this increases still further the amount of extra capital that must be raised either by borrowing or by increasing prices. It is, therefore, the purchaser of the goods or services of that business who ends up by paying the increased corporation tax. It is a fallacy to believe that the proprietors or shareholders of the small business concerned pay. Under inflationary conditions, that is not so.

Amendment No. 101 tends towards reducing the acceleration in general price levels, which I understand is entirely compatible with the policy of both Front Benches. Set against the very small loss in revenue to the Exchequer, if the amendment is passed, is the unchallengeable fact that it will make a definite, if small, contribution to stabilising the cost of living and sustaining the quantum of employment.

The financial stresses on small businesses, not only from inflation in general but from inflation in taxation in particular, including inflation of rates and water charges, are burdens which can become unendurable. When the burdens on a small business become unendurable, either it goes out of business, with the loss of employment that that brings to the community, or it sells out to a larger competitor. When that happens to a large business, it is known as a take over. It is just the same in the case of a small business. If the Labour Party claims to be opposed to take overs, it must be opposed to measures which bring about the economic conditions in which take overs are unavoidable.

On the summation of those grounds, each of which is individually valid, I hope that the Treasury Bench will welcome the amendment. Whether it does or does not, I hope that the House will pass the amendment.

Mr. Deputy Speaker (Mr. George Thomas)

Sir Robert Redmond. I am sorry. I call Mr. Redmond.

Mr. Robert Redmond (Bolton, West)

After that, Mr. Deputy Speaker, I think that you would not wish me to repeat the arguments I used on new Clause 14 last night, although many of them are equally relevant.

I must take this early opportunity to express sympathy with the Chief Secretary to the Treasury. We know that he has sympathy with small firms and understands their problems. He had to do some special pleading last night, working to a brief in which he did not honestly believe. It is a pity that he does not run a seminar for the Lobby fodder that should be sitting behind him, because his hon. Friends might learn something.

The most important thing to do in relation to the amendment is to refute the charges made by the Chancellor of the Exchequer last night, when he accused the Opposition of being irresponsible. What is happening is that those who are interested in the welfare of small businesses are furthering their interest. What heaven-sent right has the Chancellor to say that we are adding to his borrowing requirement? Why is it so sacred and pure for the Government to be able to take, and try to control, the money earned by industry and leave industry to borrow from the banks? I do not see how those two things add up.

Anyone would think that the Government were able to look after the money better than the man whose future depended on it and, judging by what the Chancellor said last night, that if we reduce corporation tax we are ensuring that the directors and proprietors of small businesses go off on a great binge and spend the money quickly.

I have been in the House for four years, but before that I was in small firms in industry and in various forms of public life for as long as I can remember. I have served in many organisations connected with local government and in other public bodies. I have never yet met that paragon of virtue who can spend other people's money more efficiently than he can spend his own. Certainly, the present Chancellor, who has said that he never saves any money himself, is not that paragon. The people running their private businesses are much nearer to being paragons than the Chancellor or probably any member of the present Government.

Mr. John Cope (Gloucestershire, South)

We have agreed in previous debates on the general advantages to the economy of small businesses. I think that even the Chief Secretary has agreed with us. Those advantages include their flexibility and responsiveness to consumer demand and their better labour relations. They are better to work for and deal with.

We have also agreed that one of the disadvantages of the imputation system of corporation tax is that the system is more difficult for small businesses, which do not as a rule distribute much of their profits. It is the clauses dealing with the small business rate that are the way in which the House and Governments—the previous Government in particular, but also this Government by implication, is not attempting to alter the system—deal with the problem.

No doubt, we shall hear again from the Chief Secretary the argument that the amendment will benefit 94 per cent. of companies, as a result of our amendment last night. But it is not that 94 per cent. that is the relevant figure, because it equates large companies such as ICI with the smallest companies and gives one unit to each in calculating the percentage. The interesting thing is what proportion of corporation tax is collected from companies paying the small companies rate. I do not know what that proportion is, but I would be surprised if it amounts to as much as 20 per cent. of the amount of corporation tax collected.

No doubt we shall also be told that this proposal will not benefit small businesses but businesses with small profits. This is an argument which the Chief Secretary has used previously and that is presumably why he is not listening now—

Mr. David Mitchell

Not only is the Minister not listening to my hon. Friend's question, but the Whip who went out to fetch the Minister responsible for small businesses has returned empty-handed.

Mr. Cope

How nice to have one's speeches rewarded in the way in which my hon. Friend has just been rewarded by the arrival of the Minister.

Of course the amendment benefits all businesses with small profits, but that is not an argument against it. Would the Chief Secretary prefer to help small businesses with large profits? If so, a different amendment would be necessary. Perhaps he wants to clobber large businesses with small profits. Perhaps that is what lies behind his objection to the amendment. If that is his intention, all he will do is succeed in driving those businesses to perhaps even smaller profits and perhaps into the hands of the Secretary of State for Industry.

No doubt the Chief Secretary will also argue that the proposal helps small investment companies and others of the kind which he probably regards as less desirable than small trading companies. Of course, if small investment companies and the like have profits within the bracket, they will be helped. But that is not a criticism of the amendment. It may be a criticism of the system under which we help small companies, but it is not a criticism of the amendment, which modifies that system.

In the amendment—I am talking about the amendment moved by my hon. Friend the Member for Basingstoke—we have argued not only that the rate should be brought down but that it should be put on a regular basis, that is, it should be three-fourths of the main rate of corporation tax. It is important that it should he expressed as a proportion in this way, not merely as a rate. We have seen this year that when it is expressed as a rate the Government and the Chief Secretary can come to the House and propose a 5 per cent. increase in the bill for corporation tax for small companies, but only a 4 per cent. increase for large companies. It is the amount of corporation tax which they have to pay which matters to the small companies, not the fact that there is still a 10 per cent. difference in the rates paid by large and small companies.

I also suspect that we shall hear much from the Chief Secretary about the cost of the amendment and its effect on demand. I am not sure how quick the effect on demand would be, but the amendment puts money into an important part of the industrial sector. I am not sure what the cost of the amendment will be. We altered arrangements last night and that must have an effect on the cost of the amendment, but I suppose that the cost arising from last night's alteration and the proposal we are now discussing might amount to £35 million, which I do not think would be out of the way.

It is less than one-fifth of the amount by which the Treasury got the estimate of corporation tax yield wrong last year. I am not sure how accurate the Treasury sums are this year, but the Treasury's figures will surely not come down to the sort of costs involved in the amendment. The cost is also, incidentally, less than 5 per cent. of the amount by which corporation tax will increase this year, even if the Bill proposed no changes to the rates. The total corporation tax yield would still increase by 20 times the amount dealt with in the amendment, which is also rather less than the amount which the Minister of Agriculture was dispensing from the Dispatch Box earlier this afternoon. I would not like it to be thought that I am against what the Minister of Agriculture announced earlier this afternoon, but this is not the moment to comment on it. I merely draw the attention of the House to the comparison of the two sums, the cost of what we are proposing and the total which the Minister of Agriculture is to dispense—

5.15 p.m.

Mr. Peter Rost (Derbyshire, South-East)

With regard to the question of the cost to the Revenue, does not my hon. Friend agree that there is a viable argument which suggests that it would not cost the Treasury anything, except in the first year, simply because if small companies are allowed to retain more of their profits they will grow more quickly and fiscal drag will enable the Revenue to collect much greater taxation in future years?

Mr. Cope

My hon. Friend is absolutely right with regard to the future, but we are concerned with this immediate year. It is precisely the dynamism of small companies which would lead to the effect to which my hon. Friend refers. We hope to give encouragement to small companies by means of the amendment.

Mr. Geoffrey Finsberg (Hampstead)

I lend support to the amendment. I am sorry that my distinguished constituent, the hon. Member for Cornwall, North (Mr. Pardoe)—who is one of many distinguished constituents whom I represent—took a rather disquieting view of the situation. I would have thought that if he genuinely believes in small businesses and believes that if they are allowed to flourish they will become the big businesses which will provide more revenue for the Treasury, he would welcome more wholeheartedly the excellent amendment moved by my hon. Friend the Member for Basingstoke (Mr. Mitchell).

The remarks of my hon. Friend the Member for Croydon, South (Mr. Clark) were of particular interest. I greatly hope that the Chief Secretary will have another look at the grossly unfair treatment accorded to trustee savings banks in this country. Had he been pleased to concede the same rate to them as to building societies the cost would have been £750,000 a year, which is not particularly great. I understand that I do not have to bypass the point I have made, but it should be a passing reference—

Mr. Deputy Speaker (Mr. George Thomas)

I suggest that it has now passed.

Mr. Finsberg

I had assumed that.

We are doing the right thing in trying to stress once again to right hon. and hon. Gentlemen on the Treasury Bench that they must look at this matter in a much more flexible manner. It is difficult to know what goes on behind the exterior of the Chief Secretary. He nods most sagely and wisely and is of most pleasant appearance, but he must inwardly hate the briefs he has to put over. The greatest pleasure to back benchers yesterday was in watching the faces of the officials as their advice was rejected over and over again by the House. They will have to get used to that happening on many more occasions, and I believe that this will be one of those occasions.

The proposal to dilute the savage attack which would otherwise be made on small businesses by the Government's proposals on corporation tax ought to be supported. I do not mind which of the two amendments is accepted. The Chief Secretary is looking so benign that he may be about to tell us that he will accept one of them. It is difficult to tell, but we live in hope.

The Chief Secretary will be doing a great service to the small businesses and, strangely enough, although he does not appreciate it, he might begin to claw back some of the electoral advantage which was thrown away by his party yesterday if only he would see that the small businesses provide secure employment in conditions that are usually of the best. I appeal to him to take a more constructive approach to these amendments.

Sir Harmar Nicholls

I do not think it is irrelevant to remind the House that the Prime Minister boasted, when he formed his Government, that he had put people of experience on the Treasury Bench. He said that they had had experience in the previous Labour administration. I hope, in view of that experience, that they will carry on with the old conventions. While the Under-Secretary of State for Industry who is responsible for small businesses is with us now, his absence during the whole of the debate yesterday and most of today's debate is to be deplored.

I remember the time when the Department would not allow a junior Minister to remain in the Department when something was being discussed in the House which was likely to impinge upon his responsibilities. Perhaps the Department has gone soft, too. I hope that that old convention, which I believe is a sound one, will be upheld and that Ministers will come here so that they may know at first hand what is going on.

The hon. Member for Cornwall, North (Mr. Pardoe) had me worried. He has been so sound on this subject until now. While he did not make a contribution yesterday he was listening intently and when it came to the vote he showed that he had been listening to some good purpose. What we are seeking to do today is not separate from the decision made yesterday. It is an obvious follow on. What we did yesterday was to include more people in the bracket by raising the figures. What we are trying to do now is to face up to the problems of those in the small bracket who were affected before yesterday's amendments were made. They are a real problem. Just because we included more people who are likely to benefit it does not mean that we have removed the problems of those in that bracket.

I do not like talking in theoretical terms. Most of my experience on these matters is practical. I want to pass on a situation which typifies these problems. I know of a man who had a main concern with 25 subsidiaries. At the end of the year, after having tried to run all these things—developing a heart condition in the process—he decided that what he had to pay by way of tax left him in such a position that the net returns were intolerable.

He divested himself of 24 of the subsidiaries and left himself with one main branch. He got rid of his responsibilities. He took away all the advantages of employment which he was creating through the bigger organisation. He found that when he had taken account of the taxation position he was as well off with the one branch as when he had had the larger business.

It is a sad thing when we remove encouragement and incentive for people to expand and develop. It is bad for the consumer and it is bad for the efficiency of industry. The Chief Secretary is aware from his professional experience of the fact that the margin of incentive left to the small business man just does not justify the risks, the worry and the trouble he has to take to keep going.

It is because we would like to give that extra bit of encouragement that we have introduced this amendment. I recognise the strength of the argument in favour of leaving the rate at 40 per cent. However I believe that the demands being made are such that we have to give positive encouragement.

My hon. Friend the Member for Gloucestershire, South (Mr. Cope) suggested that the cost of the amendment would be about £35 million. I saw that the Chief Secretary nodded at that. I have not come to that figure and I would be interested to hear the official figures. Perhaps I can tell the Chief Secretary how I arrive at my figures, because if I am wrong I want to be told why. The amendments carried yesterday cost £15 million. The figure of £15 million has to be taken from £35 million, which would bring us down to £20 million. I believe that the Government would be left with £20 million, which we suggest would be based upon a 2½ per cent. excess which he expects to get as a result of this Bill. I think he will find that if he takes that figure and if he bases it on the present 40 per cent., the actual cost of what we are asking him to do would be £9 million to £10 million, or less. That brings it into the range of possibilities.

It would be consistent with the decision taken by the House yesterday. The hon. Gentleman ought not to disregard what Parliament seems to want. The vote yesterday, with a 25 majority, showed that Parliament, with all its objectivity and impartiality, wanted this. This was not a Conservative Opposition pushing a doctrinaire point of view. It is true that it is part of the Conservative platform. We believe that the small business man must be maintained for the good of the nation. However, we had the support of the Liberal Party and the various offshoots of the nationalist parties who certainly cannot be adjudged members of the Tory Party.

This was an objective and impartial decision, and since that indication has been given, the hon. Gentleman would be following parliamentary democracy by listening with even more sympathy to us today. It is also consistent with the claims and the boasts which the Treasury Bench has made. My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) was right to underline the point of interest which took the argument outside the narrow realms of the effect upon the individual small business.

What the Government are claiming is that they have helped the consuming public by giving food subsidies to hold down prices. The only effect of increasing this tax by 2½ per cent. would be to put up the prices of these goods to some extent. For the Government to boast on the one hand that they are trying to keep prices stable by giving subsidies and then to push through increased taxes which would have exactly the opposite effect is a complete contradiction which I do not believe the hon. Gentleman as an accountant, an actuary, would like to have upon his conscience or upon his record. [Interruption.] He may have to go back to his private office after next October. The chances are that he will.

He must return with a reputation unsullied by the sort of contradictions coming forward now. The small businesses have established their claim. Parliament showed yesterday that it accepted that claim. A reduction of 1 per cent. in this rate is the sort of contribution that would help these businesses, the nation, and, I think, the hon. Gentleman.

5.30 p.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

I was interested in the point made by my hon. Friend the Member for Peterborough (Sir Harmar Nicholls). The same point was made by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), namely that a rise in corporation tax was likely to result in a rise in the prices of products made by any given company. I do not believe that to be so, but there is a large area of doubt about it. The effect of the rise in corporation tax will be to take away more of the profits. Prices will not rise, because they are controlled by market forces, and there are few areas where prices can be forced up against the market. If my hon. Friends are right, a rise in corporation tax is a rise in prices which is a reduction of the amount of money in the hands of the public. It must be that an increase in corporation tax will take money out of circulation. That will mean a reduction in the money supply. Therefore, the amendment is inflationary and not deflationary and it would contribute towards the mini-Budget if we were to pass it.

I did not intervene yesterday but I watched the Opposition's mini-Budget unfolding. I loyally supported my right hon. and hon. Friends in the Lobby. I wondered today, I having spent a few hundred million pounds yesterday—

Mr. David Howell (Guildford)

Did you?

Mr. Ridley

We did. Today I heard the Minister of Agriculture, Fisheries and Food spend another £3 million.

Mr. Howell

I think that my hon. Friend has said that a few hundred million pounds were spent yesterday. I hope that he is not swallowing some of the wildly inflated figures which were handed out from the Dispatch Box at a rather late hour last night. I hope that he will study the figures which were discussed yesterday which according to my calculations amount to about £54 million.

Mr. Ridley

As my hon. Friend rightly says, £54 million. In addition there will be the impact of a far greater sum relating to rentals and VAT.

It worries me that we should now be spending all this extra money. I wonder what the Chancellor will have to do in his mini-Budget on Tuesday. Is it proposed that he should increase taxes so as to take away the extra money which we are spending?

Mr. David Mitchell

When my hon. Friend refers to the extra money that we are spending, does he ally that with certain monies remaining in the hands of the business community to fructify and to be invested in plant and equipment and with the profits which it has generated?

Mr. Ridley

There is no doubt that it is expenditure. We are talking about the revenues of the Exchequer. If we pass this amendment and similar amendments we shall reduce those revenues and, therefore, contribute towards an increase in the rate of inflation at some further stage. The excessive expenditure of the Government is already causing our inflation rate to become intolerable. The very problems which have been mentioned as being at the base of the problems facing small businesses—for example, accelerating inflation and liquidity difficulties—will under these conditions be exacerbated if we contribute to increasing the rate of inflation.

Sir Harmar Nicholls

I have a lot of sympathy with the general view that I know my hon. Friend is trying to put forward. We are in an inflationary situation which could bring the country to disaster. It could do so very soon. I do not believe that any mini-Budget or anything that aggravates that situation to any great extent would be acceptable to the House or the country. I hope that my hon. Friend is not arguing that the situation is perfect and that there are no narrow areas in which relief would have the opposite effect to the general argument that he is putting forward. I tried to give a practical example to the House. I referred to a man who ran a company with 25 branches and who, because of excessive taxation, cut down his branches. He would be replaced by 24 new organisations which would not be run as efficiently or cheaply and which would add to the inflationary position much more than if the man to whom I referred were encouraged to carry on from his one central organisation. Many of my hon. Friends agree with the general argument that my hon. Friend is putting forward, but he must not suggest that everything is perfect. There are certain areas of the business community which could be helped constructively by the proposals that we are putting forward.

Mr. Ridley

I intend to support my right hon. and hon. Friends in the Lobby. I do not wish to cause them any apprehension. I am merely asking the Chief Secretary a question. I am asking him how he will raise revenue to cover the concessions which we are asking of him. I am asking him what his right hon. Friend will do next Tuesday in that regard. It is clearly right that these amendments should be made with the will of the House, but we must have regard to the overall balance of the Chancellor's Budget. It is incumbent upon those of us who put forward areas for relief to indicate where they would like to see increases made to match the reductions which they are proposing.

I come to the merits of this particular relief. I think that we must justify the figure of three-quarters which appears in Amendment No. 101. In a way, that is made easier for me by the action of the House last night in extending the limit from £15,000 to £25,000 for qualifying companies. Within the bracket of £15,000 to £25,000 there will be some companies in desperate need of investment funds for growth. Within the original bracket from £0 to £15,000 there will be fewer companies in that position because so many of them are shops and small businesses which are not contemplating expansion and for which capital is not necessarily the main problem. That seems to be the justification for having a lower rate for small businesses. As they do not have access to the market it must be that they can invest in the future only out of retained profits. If that is so, we should be directing ourselves to companies which do not have access to the market.

Is it not rather rough justice to take a figure out of the air, such as three-quarters or 40 per cent. as against 52 per cent., and to say that that figure applied to a range of companies which make profits of less than £25,000 will be the rate of corporation tax? That seems to be an arbitrary decision, supporter as I am, and as I think every hon. Member knows, of small businesses and of giving such businesses special help.

I put my second question to the Chief Secretary. When the Treasury prepares its suggestions for next year's Budget—I do not now refer to the mini-Budget—will regard be had to the tax relief which is to be made available to increase the funds available from investment for those companies which cannot easily or properly obtain funds from the public or from other sources? It seems that we should think much more in terms of going up to the size of a company which might be able to go public and of gearing relief to a greater degree to the amount of investment that is made. The justification for two static companies, one inside the bracket and one outside, one of which will pay only three-quarters of the tax that the other will pay, will be hard to sustain. On the other hand, I am sure that it is right that we should take special measures for this part of the corporate sector.

What increases in taxation will the Chancellor propose next Tuesday to cover the worthwhile amendments which my hon. Friends have been making? Secondly, will the Treasury do some deep thinking for next year's Budget about what should be the proper form of assistance to small companies through the taxation system, bearing in mind the need to increase their resources available for investment?

Sir Raymond Gower (Barry)

I think that my hon. Friend the Member for Basingstoke (Mr. Mitchell) and my hon. Friend the Member for Croydon, South (Mr. Clark) presented their appeal to the Government in moderate and fair terms. I believe that they did so most impressively.

Mr. David Mitchell

Hear, hear.

Mr. Clark

Hear, hear.

Sir Raymond Gower

I am glad to hear my hon. Friends agree with me. I think that the hon. Member for Cornwall, North (Mr. Pardoe), who has now returned to the Chamber, was perhaps unwittingly making a slight error when he suggested that the concession which was obtained yesterday in some way made it unnecessary to have this concession today.

The concession which was made yesterday benefits some companies which were formerly in another band, but it does not benefit the large number of small businesses which are already classified as such. For them this concession is needed.

Mr. Pardoe

I ask the hon. Gentleman to withdraw his remark that I had just returned to the Chamber. During the whole course of the debate I have not been absent from it.

Sir R. Gower

I am sorry. The hon. Gentleman must have left his seat for a moment.

My hon. Friends have not over-stated the case for the amendment. They may perhaps have under-stated it. For many small companies it is not a question of lack of confidence in the future but of profound anxiety about the future. My anxiety arises from the fact that all Governments and too many financial commentators tend to judge our economy by the results which the big companies—the standard bearers—achieve. If the results of ICI and other large companies are good, everyone seems to think that the country is doing well. All Governments and far too many commentators in the journals and the Press are guilty of this practice.

In Napoleonic times we were characterised as a nation of small shopkeepers. Perhaps today we should be characterised as a nation of small manufacturers. It is not so much the well-established small company that is at risk but the small company that has just commenced business and is making its first halting attempt to establish itself. How baffling must be the prospect for a small company which seeks to establish itself today. Practically all overheads have increased in cost astronomically—rentals, industrial rates, lighting, heating, postal charges, telephone charges. The financing of running costs, purchases, stocks and work in progress is enormously expensive for a small company. If a small firm which is just starting borrows money from a banker or from any other source the interest rate is prohibitive.

In addition, the Government are proposing a sledgehammer blow of a substantial increase in tax. There is a tendency to underestimate the profound anxiety felt in the board rooms of small companies, in small family firms and in firms which are run by individuals. Against that background I appeal to the Government through the Chief Secretary not to regard the amendment as a concession which might be made next year rather than this year. It is a concession which must be made now. What are at risk are not the great standard bearers but the small companies from which some day we hope the future standard bearers will emerge. The prospect of the ICIs of tomorrow ever emerging from the small companies of today seems to be remote.

The country faces new and difficult economic problems of a kind which our fathers and forefathers did not have to contemplate. I admit that all Governments, as well as international circumstances, have contributed to those difficulties. By making the concession the Government will show that they are not judging the health of our economy purely from the results achieved by large organisations but that they are sensitive to the small companies which in the long term will perhaps contribute more to our economy than will the larger companies which receive so much attention.

5.45 p.m.

Mr. Joel Barnett

This is the fourth debate we have had on the important subject of small companies. I note with interest that the Conservative Party believes in small companies and I am pleased to hear that. I am surprised, if the Conservatives are so interested in small companies, that they should have introduced the corporation tax system which did small companies so much harm.

Sir Harmar Nicholls

They made a mistake.

Mr. Barnett

I am delighted to hear the hon. Gentleman admit the mistake. We have had no such admission from the Opposition Front Bench.

The concession which was made yesterday to extend the relief not to small companies but to companies with small profits will cost £15 million. That concession means that the cost of accepting this amendment is considerably more. I hesitate to argue about the arithmetic of the hon. Member for Peterborough (Sir H. Nicholls), who has great knowledge of this subject, but I am advised that, because of the extension of the relief to more companies, the cost of Amendment No. 101 is £20 million. The cost of the typically modest Amendment No. 103 laid by the hon. Member for Croydon, South (Mr. Clark) is slightly less at £15 million.

Sir Harmar Nicholls

If the cost of Amendment No. 103 were calculated on the present rate of 40 per cent., it would cost nothing. If it were calculated on the rate I ask for, according to the figures which the hon. Gentleman has given it would cost £5 million.

Mr. Barnett

The hon. Gentleman must be aware that the amendment is to this year's Finance Bill and not to last year's. This year's Finance Bill has in it a rate of 42 per cent. I hope that the hon. Gentleman will accept my figures.

It is unnecessary for me to go over again the arguments for helping small companies wherever we can. I noted the remarks of several hon. Members, particularly the hon. Member for Basingstoke (Mr. Mitchell). The Opposition apparently have a great desire for maximum intervention in the affairs of small companies. They wanted my hon. Friend the Under-Secretary of State for Industry who is responsible for small businesses to be here, presumably because they want him to be active in intervention. He was not here this afternoon because he was at a conference with Mr. de Laszlo at the offices of the Small Businesses Association. I am sure the hon. Gentleman will understand that one reason for discussing these matters is to get the maximum intervention by Government, which I am happy to see Conservative Members are keen to have. My hon. Friend came here immediately after having those discussions with the Small Businesses Association. I shall be happy to give way to allow the hon. Member for Basingstoke (Mr. Mitchell) to apologise.

Mr. David Mitchell

I am glad to know that that was the reason the Minister was not in the Chamber at the time, and perhaps he was similarly occupied last night. Perhaps the hon. Gentleman could say that he was able to satisfy the Small Businesses Association, because the Chief Secretary does not appear to be doing so.

Mr. Barnett

I have been so busy in the last one-and-a-half hours listening to the debate and to every word uttered that I have not had time to consult with my hon. Friend. I am sure if I had attempted to do so it would have been taken amiss. It would have been thought that I had stopped listening to the fascinating speeches we have heard in this debate.

Let us get clear at the outset that we are not talking about small businesses, but about companies with small profits. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley), in his typically fair way, pointed out that we should direct our attention to those small companies which cannot go to the market. He was referring to the close company, as it was called under the former system of corporation tax—a system which the Conservatives voted out. That was the type of company which would have benefited.

I was asked by the hon. Member for Gloucestershire, South (Mr. Cope) whether I would rather help small companies with large profits. The answer is, yes, I would. However, these amendments would help companies right across the board—not only small companies, but large companies, quoted companies—and often very inefficient companies. This is the wrong way to go about helping small companies, if that is what the hon. Gentleman had in mind.

Mr. Cope

Is not this an argument against the system covered by these provisions? In other words, it is not an argument against the amendment, but against the system.

Mr. Barnett

It is the system which makes it impossible to direct attention to the type of company which the hon. Member for Cirencester and Tewkesbury had in mind.

Mr. Ian Lloyd (Havant and Waterloo)

Would the Chief Secretary assist by defining what he means by "small"? Does he mean small in terms of numbers employed, or capitalisation, or what? Surely he admits that there is a considerable correlation between profits and capitalisation and profit and other factors. Although the hon. Gentleman described as an exception the fact that the large company may make small profits, the statistical distribution across the 800,000 or so companies shows that that is not the case.

Mr. Barnett

Following the provision carried by the hon. Gentleman and his colleagues, small companies are defined as companies with profits of less than £25,000 with the reliefs tapering off on profits of up to £40,000. We are now talking about giving further relief to that type of company. If the amendments are carried, we should be directing attention not only to the excellent type of small close company, which is very important as a trading company, but to the inefficient quoted companies, property companies, investment companies, and so on. I do not think that is what Conservative Members have in mind. Therefore, these amendments do not achieve their objective.

My experience is that it is not the level of taxation that stops the small company being efficient. There are many other reasons, but it is certainly not that factor. I do not want to widen the subject to the question whether an increase in taxation means an increase in prices. The hon. Member for Cirencester and Tewkesbury had a fascinating argument with his hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop). I think that the matter can also be argued the other way. The real question should be directed to the Opposition Front Bench since we understand that they are deciding how much reflation there should be in the economy.

The hon. Member for Cornwall, North (Mr. Pardoe) appeared to argue that we had done enough for now for the new type of company. One Conservative contributor to the debate thought the hon. Member for Cornwall, North was in error. Perhaps the hon. Member for Cornwall, North was keeping his votes in balance. He voted yesterday with the Opposition and now feels that he has to balance it a little the other way. He may be in danger of looking too much like his coalition partners, and that is the reason for his present stance.

Mr. Pardoe

The Chief Secretary is not conducting the debate at a worthy level. There is no question of trying to balance the votes at all. Out of the £30 million for which the amendments are asking, £15 million has already been given to small companies. The Chief Secretary by indulging in fatuous remarks will not lure me into the Opposition Lobby.

Mr. Barnett

I am not trying to lure the hon. Gentleman anywhere. I was trying to help the House to understand the hon. Gentleman's motives.

The hon. Member for Cirencester and Tewkesbury began by arguing that the effect of the amendments was bad because it expanded the money supply. He was a little upset at what his Conservative colleagues did yesterday. He even managed to upset his hon. Friend the Member for Guildford (Mr. Howell). He apparently thought that they made a mess of things yesterday by increasing the money supply too greatly. Then, to our astonishment, he decided that he could still vote for the amendment. I cannot understand why he should wish to do so.

6.0 p.m.

Mr. Ridley

Will the hon. Gentleman answer my question? Will he propose increased taxation next week such as I believe to be necessary not only to deal with the excessive money supply which already exists but to deal also with the increase which will result from our work yesterday and today?

Mr. Barnett

I noted the hon. Gentleman's question, but I am not ready to open my next Budget yet.

The real argument, as I have said in each of these four debates, is first that a proposal of this kind does not help small companies alone. It helps many others. What is more, this House has decided already to help this type of company to the extent of £15 million as a result of its decision yesterday. It has extended the relief for the lower rate of tax to a number of other companies, and 1 do not think that it would be right now to reduce their tax further. The Opposition should think carefully before deciding to put another £20 million into the money supply by supporting Amendment No. 101.

Mr. J. Bruce-Gardyne (South Angus)

The hon. Gentleman knows that this is a spurious argument. Under the rules of order. it is not open to the Opposition to suggest points at which the Government could increase their revenues. That is for the Government to do. If Parliament in its wisdom decides to diminish the Government's revenues, it is entirely open to the Government to counterbalance that by reductions in public expenditure or by increases in user charges, which only the Government can propose.

Mr. Barnett

It would have been a little more honest of the Opposition, when they are increasing the money supply and reducing taxation in the way that they are, to have made a passing reference to what they would suggest should be done to compensate for it. We have not heard a word about that from the Opposition. This is a very important point, and I am fascinated to know whether the hon. Member for Guildford (Mr. Howell) will now tell us how he would suggest—

Hon. Members

That is for the Government to do.

Mr. Barnett

The increase in the money supply is the responsibility of the Opposition. I am sorry that they are so sensitive about this. Government supporters did not vote for the amendments yesterday. The Opposition did, and they must suffer the consequences of their actions.

If the hon. Member for Guildford tells us precisely what he would do to balance the evil to the economy, which he and his right hon. and hon. Friends did yesterday, we shall listen most carefully. If he tells us, I am sure that my right hon. and hon. Friends will be delighted. It will help us to add to our manifesto. So far, we have not had that. All that we have had so far is dishonest votes to reduce taxation.

Mr. Rost

Does not the hon. Gentleman accept that what Parliament has done by its votes yesterday and what it proposed in this amendment will result in a reduction in the money supply? By depriving the Executive of additional revenue, we have forced a discipline upon the Government to reduce their expenditure.

Mr. Barnett

If the hon. Gentleman believes that, he will believe anything. That is the most disingenuous argument that I have ever heard.

I have made it clear already that what the Opposition are proposing in these two amendments, first, will not help close companies in the way that they intend and, second, is a wholly false way to spend more money. The hon. Member for Cornwall, North talked about priorities. If the Opposition had £20 million of tax relief to give, would they give it in this way? That is the question that this House has to decide. The Government could find many ways in which we might want to spend £20 million. But in this Finance Bill, this is not the way. I ask my right hon. and hon. Friends to resist the amendments.

Mr. David Howell

It will have come as no surprise to the House once again that we have received a quite hopeless reply from the Chief Secretary. We had a feeble and light-weight reply yesterday, and we have had the same today.

We are dealing here with a very large number of companies. We are dealing not only with close companies, of which the hon. Gentleman said there were 350,000, but with other companies as well which may come within the profit margins with which we are concerned.

I think that the hon. Member for Cornwall, North (Mr. Pardoe) is a little confused about what happened yesterday. By raising the limits to £25,000 graded to £40,000, we benefited those companies earning above £15,000 of profit. We brought them into a situation where they got a benefit. Yesterday, we were not touching the 180,000 to 200,000 companies with profits below £15,000. The amendment today is concerned with that vast number of companies which were not benefited in yesterday's amendments. I do not know whether the hon. Member for Cornwall, North is happy about that, but it is clear that the Chief Secretary has got into a muddle about it.

At one point, the Chief Secretary said that we did not want to give further relief to these companies. But yesterday we did not give relief to companies earning below £15,000. At another point, the hon. Gentleman said that we had given enough help to companies of this type. He ignores the 180,000 to 200,000 with profits below £15,000 which were not touched by yesterday's amendment.

Mr. Joel Barnett

Is the hon. Gentleman suggesting that these amendments would give no relief to those companies assisted yesterday by new Clause 14?

Mr. Howell

Of course not, but there is a vast category of quoted companies—on the Chief Secretary's own admission, 180,000 to 200,000 of them—which were not helped yesterday because their profits are below £15,000 and which would be helped by today's amendment.

It is quite incorrect to suggest that there is a matter of further relief to those companies. They were given no relief yesterday. It is also incorrect to suggest that more help is to be given to companies of this type. They were not helped yesterday.

Mr. Pardoe

The hon. Member for Guildford (Mr. Howell) has put the record straight. None of us is in any doubt now. If he had to choose between yesterday's amendment and today's, for which one would he go?

Mr. Howell

I am about to answer that question, though I shall not answer it directly. I shall say how we approach this matter.

I have said enough already to indicate that I see these amendments not as a matter of choice but as complementary, because today's amendment is helping the 180,000 to 200,000 companies with profits below £15,000 which were not helped by yesterday's amendment.

Whether we talk about Amendment No. 103 or Amendment No. 101, the figures are modest. There are other ways of helping the collapse in confidence and the desperate cash and liquidity situation of small companies. We discussed this yesterday. One way would involve the Chief Secretary keeping his colleagues in the Department of Trade quiet. That would be a cheaper way. If that is not possible, we must look for ways in which we can in some degree benefit those tens of thousands of companies which are not affected by yesterday's amendment. This amendment does that.

My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) referred to the effect on the money supply. Others of my hon. Friends made the fair point that if expenditure is increased or the revenue is reduced it is up to the Government to find other ways of making it up. The Chief Secretary challenged that point. That argument could go on ad infinitum.

We have proposed a number of modest amendments which have been accepted. The total expenditure involved is well within the responsible levels which any Opposition ought to be entitled to put forward, is well within the tolerances of any Budget judgment, and is far away from the wild figures about which the Chancellor was trumpeting when he came to the House last night and spoke at the Dispatch Box.

We make no apology for putting forward sensible and constructive amendments. The Chief Secretary ought to apologise, if apologies are to be made, for giving a misleading answer by indicating that companies earning below £15,000 profit were helped yesterday. They were not. They will be helped today by this additional complementary amendment.

I advise my right hon. and hon. Friends to pursue Amendment No. 103 which, according to the Chief Secretary, will cost a further £15 million. That would be the sensible way to carry forward a sensible policy at this time.

Yet again the Chief Secretary and his right hon. and hon. Friends seem to be completely out of touch with the mood of growing concern and crisis in the boardrooms of small and not-so-small companies throughout the land. They seem to be out of touch with all the difficulties and the growing sense of crisis within these companies of trying to find cash and liquidity for future investments. The hon. Gentleman is unaware of the situation. We are not. I strongly advise my right hon. and hon. Friends to press Amendment No. 103. I believe that present circumstances make it right that we should do so.

Mr. John Loveridge (Upminster)

I am sorry in some ways to join the debate at a rather awkward moment, but the Chief Secretary said that it was not the levels of taxation that stopped small companies being efficient. I am not so sure. If the Government keep stepping up taxation, they can step it up to such a degree that they can close every business in the land. There must be some point at which businesses are taxed out of existence.

No one has claimed what the Chief Secretary denied. It is not efficiency that is at stake but the capacity of these businesses to expand for the good of the national economy.

It is a great pleasure for me to support my hon. Friend the Member for Basingstoke (Mr. Mitchell) who so ably set out why the amendment should commend itself to the House. It is sad to feel that back benchers on the Government side have not had enough interest to join in the debate, although a large proportion of workers are employed in small businesses.

Mr. David Weitzman (Hackney, North and Stoke Newington)

We on the back benches are no partners to the Opposition's irresponsibility.

Mr. Loveridge

The first intervention from a Government back bencher speaks only of irresponsibility. There is no word of argument within it. It means nothing. [Interruption.] I ask hon. Gentlemen to make their judgment at the end when they have heard what I have to say.

Mr. John Tomlinson (Meriden)

Get back to your painting.

Mr. Loveridge

I am glad that someone likes my paintings. I thank the hon. Gentleman for that compliment.

There are three good reasons for supporting the amendment. The first is that it would add to the simplicity of taxation, to the certainty of it for the future and to the understanding of those who are taxed. The second is the unfairness of the Chancellor's proposals which are discriminatory against the smaller firms. The third reason is the importance of retained earnings to the smaller business, especially to the business that needs liquidity for expansion.

I should declare an interest. I am the head of a small or medium-sized business. It is, however, run as a partnership and, therefore, there is no direct effect on me from the amendment.

6.15 p.m.

On the first aspect of simplicity and clarity, the amendment calls for a fixed rate of three-quarters of the full rate in future. Oh, how we long for some certainty—[Interruption.] Hon. Gentlemen may laugh, but many people weep. We long for some certainty from this Government over matters of taxation. We are tired of being told what is to come in a future Budget which will be antedated to a past Budget. No wonder accountants and solicitors feel unable adequately to advise clients who are faced with threats of being squeezed until the pips squeak. What kind of Government works by threat?

A letter that I received recently from the head of a large business contained these words: I and several other members of the senior management of the company spend more than a third of our time in meeting the demands of unnecessary Government interference. Small companies do not have so many senior managers to spare. Often more than one-third of the time of those who run small businesses may be taken in trying to meet the effects of unnecessary Government interference! For that reason, the simpler, clear, definitive rate of three-quarters for the future would be better.

Secondly, I spoke of unfairness. Last year the ratio of the burden on the smaller company compared to the larger was 40 per cent. to 50 per cent. This year it is 42 per cent. compared to 52 per cent. Therefore, the increases in corporation tax affect the larger company by 4 per cent. and the smaller company by 5 per cent. extra. Why bash the small firm more than the large firm?

The third aspect is perhaps the most important—namely, the financial effect of the amendment which would reduce the present tax by 1 per cent., or 3 per cent. below what is proposed by the Government.

Firms need liquidity increases to expand and to invest. They are already hit in their cash flows, because they have to renew their stocks at higher prices than they paid for their stocks last year. They have to meet the burden of exceptionally high interest rates on borrowed money. They have tight lines of credit from larger companies, themselves pressed for cash due to the impact of threshold agreements. They also have to meet advance payments of taxation, on a substantial scale in many cases.

Expanding businesses, which get paid for their goods after the delivery of those goods, or by progress payments after work done, need growing capital funds if they are not to be at risk of over-trading, and thus a threat to those with whom they do business.

Bank loans are nominally repayable on demand, even though they may be extended. Long-term money is not usually available on reasonable terms to the smaller or medium-sized businesses. They cannot go to the stock market because they are too small. Therefore, as soon as these smaller firms start to expand, they run into liquidity problems. It is an inevitable pattern. The amendment would play a small but significant part in helping them to meet these cash flow problems.

I hope the Government will be able to meet at least part of what has been proposed by my hon. Friend. They can accept the second amendment. That would show a gesture of good will.

The smaller firms have friendly relations and amicable co-operation with their workforces. They are recognised worldwide for their innovations. They represent the hope for the future, the "seed corn" as they have been described. That is indeed a good and true phrase, however much those on the Opposition benches may laugh at it. For all these reasons, I ask the Government to accept the amendment.

Mr. David Mitchell

On a point of order, Mr. Speaker. With Amendment No. 101 we have been discussing Amendment No. 103. If I withdraw Amendment No. 101, would it meet your approval for a vote to be taken on Amendment No. 103?

Mr. Speaker

I would allow Amendment No. 103 to be moved formally and then voted on.

Mr. David Mitchell

On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 103, in page 6, line 29, leave out '42' and insert '40'.—[Mr. William Clark.]

Question put, That the Amendment be made:—

The House divided: Ayes 283, Noes 292.

Division No. 87.]	AYES	[6.22 p.m.
Adley, Robert	Burden, F. A.	Dunlop, John
Aitken, Jonathan	Carlisle, Mark	Durant, Tony
Alison, Michael (Barkston Ash)	Carr, Rt. Hn. Robert	Dykes, Hugh
Allason, James (Hemel Hempstead)	Carson, John	Eden, Rt. Hn. Sir John
Amery, Rt. Hn. Julian	Chalker, Mrs. Lynda	Edwards, Nicholas (Pembroke)
Ancram, M.	Channon, Paul	Elliott, Sir William
Archer, Jeffrey	Chataway, Rt. Hn. Christopher	Emery, Peter
Atkins, Rt. Hn. Humphrey (Spelthorne)	Churchill, W. S.	Ewing, Mrs. Winifred (Moray & Nairn)
Awdry, Daniel	Clark, A. K. M. (Plymouth, Sutton)	Eyre, Reginald
Baker, Kenneth	Clark, William (Croydon, S.)	Fairgrieve, Russell
Balniel, Rt. Hn. Lord	Clarke, Kenneth (Rushcliffe)	Farr, John
Banks, Robert	Clegg, Walter	Fell, Anthony
Bell, Ronald	Cockcroft, John	Fenner, Mrs. Peggy
Bennett, Sir Frederic (Torbay)	Cooke, Robert (Bristol, W.)	Fidler, Michael
Bennett, Dr. Reginald (Fareham)	Cope, John	Finsberg, Geoffrey
Biggs-Davison, John	Cordle, John	Fisher, Sir Nigel
Blaker, Peter	Cormack, Patrick	Fletcher, Alexander (Edinburgh, N.)
Body, Richard	Corrie, John	Fletcher-Cooke, Charles
Boscawen, Hon. Robert	Costain, A. P.	Fookes, Miss Janet
Bowden, Andrew (Brighton, Kemptown)	Craig, Rt Hon W. (Belfast E)	Fowler, Norman (Sutton C'field)
Boyson, Dr. Rhodes (Brent, N.)	Critchley, Julian	Fox, Marcus
Braine, Sir Bernard	Crouch, David	Fraser, Rt. Hn. Hugh (St'fford & Stone)
Bray, Ronald	Davies, Rt. John (Knutsford)	Fry, Peter
Brittan, Leon	d'Avigdor-Goldsmid, Maj.-Gen.James	Galbraith, Hn. T. G. D.
Brocklebank-Fowler, Christopher	Dean, Paul (Somerset, N.)	Gardiner, George (Reigate & Banstead)
Brown, Sir Edward (Bath)	Deedes, Rt. Hn. W. F.	Gardner, Edward (S. Fylde)
Bruce-Gardyne, J.	Dixon, Piers	Gibson-Watt, Rt. Hn. David
Bryan, Sir Paul	Dodds-Parker, Sir Douglas	Gilmour, Rt. Hn. Ian(Ch'sh' & Amsh'm)
Buchanan-Smith, Alick	Dodsworth, Geoffrey	Gilmour, Sir John (Fife, E.)
Buck, Antony	Douglas-Home, Rt. Hn. Sir Alec	Glyn, Dr. Alan
Budgen, Nick	Drayson, Burnaby	Goodhart, Philip
Bulmer, Esmond	du Cann, Rt. Hn. Edward	Goodhew, Victor
Goodlad, A.	McAdden, Sir Stephen	Roberts, Michael (Cardiff, N.-W.)
Gorst, John	MacArthur, Ian	Roberts, Wyn (Conway)
Gow, Ian (Eastbourne)	MacCormack, Iain	Rodgers, Sir John (Sevenoaks)
Gower, Sir Raymond (Barry)	McCrindle, R. A.	Rossi, Hugh (Hornsey)
Gray, Hamish	McCusker, H.	Rost, Peter (Derbyshire, S.-E.)
Grieve, Percy	Macfarlane, Neil	Royle, Sir Anthony
Griffiths, Eldon (Bury St. Edmunds)	MacGregor, John	Sainsbury, Timothy
Grist, Ian	McLaren, Martin	Scott-Hopkins, James
Grylls, Michael	Macmillan, Rt. Hn. M. (Farnham)	Shaw, Giles (Pudsey)
Gurden, Harold	McNair-Wilson, Michael (Newbury)	Shaw, Michael (Scarborough)
Hall, Sir John	McNair-Wilson, Patrick (New Forest)	Shelton, Willam (L'mb'th, Streath'm)
Hall-Davies, A. G. F.	Madel, David	Shersby, Michael
Hamilton, Michael (Salisbury)	Marshall, Michael (Arundel)	Silvester, Fred
Hampson, Dr. Keith	Marten, Neil	Sims, Roger
Harrison, Col. Sir Harwood (Eye)	Mather, Carol	Sinclair, Sir George
Harvie Anderson, Rt. Hn. Miss	Maude, Angus	Skeet, T. H. H.
Hastings, Stephen	Maudling, Rt. Hn. Reginald	Smith, Dudley (W'wick & L'm'ngton)
Havers, Sir Michael	Mawby, Ray	Spence, John
Hawkins, Paul	Maxwell-Hyslop, R. J.	Spicer, Michael (Worcestershire, S.)
Hayhoe, Barney	Mayhew, Patrick(Royal T'bridge Wells)	Sproat, Iain
Heath, Rt. Hn. Edward	Meyer, Sir Anthony	Stainton, Keith
Henderson, Douglas (Ab'rd'nsh're, E)	Miller, Hal (B'grove & R'ditch)	Stanbrook, Ivor
Henderson, J.S.B. (Dunbartonshire, E.)	Mills, Peter	Stanley, John
Heseltine, Michael	Miscampbell, Norman	Steen, Anthony (L'pool, Wavertree)
Higgins, Terence	Mitchell, David (Basingstoke)	Stewart, Donald (Western Isles)
Hill, James A.	Moate, Roger	Stewart, Ian (Hitchin)
Holland, Philip	Molyneaux, James	Stodart, Rt. Hn. A. (Edinburgh, W.)
Hordern, Peter	Money, Ernie	Stokes, John
Howe, Rt. Hn. Sir Geoffrey (Surry, E.)	Monro, Hector	Stradling Thomas, John
Howell, David (Guildford)	Moore, J. E. M. (Croydon, C.)	Tapsell, Peter
Howell, Ralph (Norfolk, North)	Morgan-Giles, Rear-Adm.	Taylor, Edward M. (Glgow, C'cart)
Hunt, John	Morris, Michael (Northampton, S.)	Taylor, Robert (Croydon, N.W.)
Hurd, Douglas	Morrison, Charles (Devizes)	Tebbit, Norman
Hutchison, Michael Clark	Morrison, Peter (City of Chester)	Temple-Morris, Peter
Iremonger, T. L.	Mudd, David	Thatcher, Rt. Hn. Margaret
Irvine, Bryant Godman (Rye)	Neave, Airey	Thomas, Rt. Hn. P. (B'net, H'dn S.)
James, David	Neubert, Michael	Townsend, C. D.
Jenkin, Rt. Hn. P. (R'dge W'std & W'fd)	Newton, Tony (Braintree)	Trotter, Neville
Jessel, Toby	Nicholls, Sir Harmar	Tugendhat, Christopher
Johnson Smith, G. (E. Grinstead)	Normanton, Tom	Vaughan, Dr. Gerard
Jones, Arthur (Daventry)	Nott, John	Viggers, Peter
Jopling, Michael	Onslow, Cranley	Waddington, David
Joseph, Rt. Hn. Sir Keith	Orr, Capt. L. P. S.	Wakeham, John
Kaberry, Sir Donald	Osborn, John	Walder, David (Clitheroe)
Kellett-Bowman, Mrs. Elaine	Page, Rt. Hn. Graham (Crosby)	Walker-Smith, Rt. Hn. Sir Derek
Kershaw, Anthony	Page, John (Harrow, W.)	Wall, Patrick
Kimball, Marcus	Parkinson, Cecil (Hertfordshire, S.)	Walters, Dennis
King, Evelyn (Dorset, S.)	Pattie, Geoffrey	Warren, Kenneth
King, Tom (Bridgwater)	Peyton, Rt. Hn. John	Watt, Hamish
Kirk, Peter	Pink, R. Bonner	Weatherill, Bernard
Kitson, Sir Timothy	Price, David (Eastleigh)	Wells, John
Knox, David	Prior, Rt. Hn. James	West, Rt. Hn. Harry
Lamont, Norman	Raison, Timothy	Wiggin, Jerry
Lane, David	Rathbone, Tim	Wigley, Dafydd (Caernarvon)
Langford-Holt, Sir John	Rawlinson, Rt. Hn. Sir Peter	Wilson, Gordon (Dundee, E.)
Latham, Michael (Melton)	Redmond, Robert	Winterton, Nicholas
Lawrence, Ivan	Rees, Peter (Dover & Deal)	Wood, Rt. Hn. Richard
Lawson, Nigel (Blaby)	Rees-Davies, W R.	Worsley, Sir Marcus
Le Marchant, Spencer	Reid, George	Young, Sir George (Ealing, Acton)
Lester, Jim (Beeston)	Rhys Williams, Sir Brandon
Lewis, Kenneth (Rtland & Stmford)	Ridley, Hn. Nicholas	TELLERS FOR THE AYES:
Lloyd, Ian (Havant & Waterloo)	Ridsdale, Julian	Mr. W. Benyon and
Loveridge, John	Rifkind, Malcolm	Mr. Adam Butler.
Luce, Richard	Rippon, Rt. Hn. Geoffrey
NOES
Abse, Leo	Blenkinsop, Arthur	Carter, Ray
Allaun, Frank	Boardman, H.	Carter-Jones, Lewis
Archer, Peter	Booth, Albert	Castle, Rt. Hn. Barbara
Armstrong, Ernest	Boothroyd, Miss Betty	Clemitson, Ivor
Ashley, Jack	Bottomley, Rt. Hon. Arthur	Cocks, Michael
Ashtor, Joe	Boyden, James (Bishop Auckland)	Cohen, Stanley
Atkins, Ronald	Bradley, Tom	Coleman, Donald
Atkinson, Norman	Broughton, Sir Alfred	Colquhoun, Mrs. M. H.
Bagier, Gordon, A. T.	Brown, Bob (Newcastle upon Tyne, W.)	Conlan, Bernard
Barnett, Joel (Heywood & Royton)	Brown, Hugh D. (Glasgow, Provan)	Cook, Robert F. (Edinburgh, C.)
Bates, Alf	Brown, Ronald (H'kney, S. & Sh'ditch)	Cox, Thomas
Baxter, William	Buchan, Norman	Craigen, J. M. (G'gow, Maryhill)
Beith, A. J.	Butler, Mrs. Joyce(H'gey, WoodGreen)	Cronin, John
Benn, Rt. Hn. Anthony Wedgwood	Callaghan, Jim (M'dd'ton & Pr'wch)	Crosland, Rt. Hn. Anthony
Bennett, Andrew F. (Stockport, N.)	Campbell, Ian	Cryer, G. R.
Bidwell, Sydney	Cant, R. B.	Cunningham, G.(Isl'ngt'n, S & F'ab'ry)
Bishop, E. S.	Carmichael, Neil	Cunningham, Dr. John A. (Whiteh 'v' n)

Dalyell, Tam	Janner, Greville	Rees, Rt. Hn. Merlyn (Leeds, S.)
Davidson, Arthur	Jay, Rt. Hn. Douglas	Richardson, Miss Jo
Davies, Bryan (Enfield, N.)	Jeger, Mrs. Lena	Roberts, Albert (Normanton)
Davies, Denzil (Llanelli)	Jenkins, Rt. Hn. Roy (B'ham, St'fd)	Roberts, Gwilym (Cannock)
Davies, Ifor (Gower)	Johnson, James (K'ston upon Hull, W)	Robertson, John (Paisley)
Davis, Clinton (Hackney, C.)	Johnson, Walter (Derby, S.)	Roderick, Caerwyn E.
Deakins, Eric	Johnston, Russell (Inverness)	Rodgers, George (Chorley)
Dean, Joseph (Leeds, W.)	Jones, Barry (Flint, E.)	Rodgers, William (Teesside, St'ckton)
de Freitas, Rt. Hn. Sir Geoffrey	Jones, Dan (Burnley)	Rooker, J. W.
Delargy, Hugh	Jones, Gwynoro (Carmarthen)	Roper, John
Dell, Rt. Hn. Edmund	Jones, Alec (Rhondda)	Ross, Stephen (Isle of Wight)
Dempsey, James	Judd, Frank	Ross, Rt. Hn. William (Kilmarnock)
Doig, Peter	Kaufman, Gerald	Rowlands, Edward
Dormand, J. D.	Kelley, Richard	Sandelson, Neville
Douglas-Mann, Bruce	Kerr, Russell	Sedgemore, Bryan
Duffy, A. E. P.	Kilroy-Silk, Robert	Selby, Harry
Dunn, James A.	Kinnock, Neil	Shaw, Arnold (Redbridge, Ilford, S.)
Dunnett, Jack	Lambie, David	Sheldon, Robert (Ashton-under-Lyne)
Dunwoody, Mrs. Gwyneth	Lamborn, Harry	Shore, Rt. Hn. Peter(S'pney & P'plar)
Eadie, Alex	Lamond, James	Short, Rt. Hn. E. (N'ctle-u-Tyne)
Edelman, Maurice	Lawson, George (Motherwell & Wlshaw)	Short, Mrs. Renée (W'hamp'n, N.E.)
Edge, Geoff	Leadbitter, Ted	Silkin, Rt. Hn. S.C.(S'hwark, Dulwich)
Edwards, Robert (W'hampton, S.E.)	Lee, John	Sillars, James
Ellis, John (Brigg & Scunthorpe)	Lastor, Miss Joan (Eton & Slough)	Silverman, Julius
Ellis, Tom (Wrexham)	Lewis, Arthur (Newham, N.)	Skinner, Dennis
English, Michael	Lewis, Ron (Carlisle)	Small, William
Ennals, David	Lipton, Marcus	Smith, Cyril (Rochdale)
Evans, Fred (Caerphilly)	Loughlin, Charles	Smith, John (Lanarkshire, N.)
Evans, Ioan (Aberdare)	Loyden, Eddie	Snape, Peter
Evans, John (Newton)	Lyons, Edward (Bradford, W.)	Spearing, Nigel
Ewing, Harry (St'ling, Fkirk & G'm'th)	Mabon, Dr. J. Dickson	Spriggs, Leslie
Faulds, Andrew	McCartney, Hugh	Stallard, A. W.
Fernyhough, Rt. Hn. E.	McElhone, Frank	Steel, David
Fitch, Alan (Wigan)	MacFarquhar, Roderick	Stewart, Rt. Hn. M. (H'eth, Fulh'm)
Fitt, Gerard (Belfast, W.)	McGuire, Michael	Stoddart, David (Swindon)
Flannery, Martin	Mackenzie, Gregor	Stonehouse, Rt. Hn. John
Fletcher, Raymond (Ilkeston)	Maclennan, Robert	Stott, Roger
Fletcher, Ted (Darlington)	McMillan, Tom (Glasgow, C.)	Strang, Gavin
Foot, Rt. Hn. Michael	McNamara, Kevin	Strauss, Rt. Hn. G. R.
Ford, Ben	Madden, M. O. F.	Summerskill, Hn. Dr. Shirley
Forrester, John	Mahon, Simon	Swain, Thomas
Fowler, Gerry (The Wrekin)	Mallalieu, J. P. W.	Taverne, Dick
Fraser, John (Lambeth, Norwood)	Marks, Kenneth	Thomas, Jeffrey (Abertillery)
Freeson, Reginald	Marquand, David	Thorne, Stan (Preston, S.)
Freud, Clement	Marshall, Dr. Edmund (Goole)	Thorpe, Rt. Hn. Jeremy
Galpern, Sir Myer	Mason, Rt. Hn. Roy	Tierney, Sydney
Garrett, John (Norwich, S.)	Mayhew, Christopher (G'wh, W'wch, E)	Tinn, James
Garrett, W. E. (Wallsend)	Meacher, Michael	Tomlinson, John
George, Bruce	Mellish, Rt. Hn. Robert	Tomney, Frank
Gilbert, Dr. John	Mendelson, John	Torney, Tom
Ginsburg, David	Mikardo, Ian	Tuck, Raphael
Golding, John	Millan, Bruce	Tyler, Paul
Gourlay, Harry	Miller, Dr. M. S. (E. Kilbride)	Urwin, T. W.
Graham, Ted	Milne, Edward	Wainwright, Edwin (Dearne Valley)
Grant, George (Morpeth)	Mitchell, R. C. (S'hampton. Itchen)	Wainwright, Richard (Colne Valley)
Grant, John (Islington, C.)	Molloy, William	Walden, Brian (B'm'ham, Ladywood)
Griffiths, Eddie (Sheffield, Brightside)	Moonman, Eric	Walker, Harold (Doncaster)
Grimond, Rt. Hn. J.	Morris, Alfred (Wythenshawe)	Walker, Terry (Kingswood)
Hamilton, James (Bothwell)	Morris, Charles R. (Openshaw)	Weitzman, David
Hamilton, William (Fife, C.)	Moyle, Roland	Wellbeloved, James
Hamling, William	Murray, Ronald King	White, James (Glasgow, Pollok)
Hardy, Peter	Newens, Stanley (Harlow)	Whitehead, Phillip
Harrison, Walter (Wakefield)	Oakes, Gordon	Whitlock, William
Hart, Rt. Hn. Judith	Ogden, Eric	Willey, Rt. Hn. Frederick
Hattersley, Roy	O'Halloran, Michael	Williams, Alan (Swansea, W.)
Hatton, Frank	O'Malley, Brian	Williams, Alan Lee (Hvrng, Hchurch)
Healey, Rt. Hn. Denis	Orbach, Maurice	Williams, Rt. Hn. Shirley (H'f'd & St'ge)
Heffer, Eric S.	Ovenden, John	Williams, W. T. (Warrington)
Hooley, Frank	Owen, Dr. David	Wilson, Alexander (Hamilton)
Hooson, Emlyn	Padley, Walter	Wilson, Rt. Hn. Harold (Huyton)
Horam, John	Palmer, Arthur	Wilson, William (Coventry, S.E.)
Howell, Denis (B'ham, Small Heath)	Pardoe, John	Winstanley, Dr. Michael
Howells, Geraint (Cardigan)	Park, George (Coventry, N.E.)	Wise, Mrs. Audrey
Huckfield, Leslie	Parker, John (Dagenham)	Woodall, Alec
Hughes, Rt. Hn. Cledwyn (Anglesey)	Parry, Robert	Woof, Robert
Hughes, Mark (Durham)	Pendry, Tom	Wrigglesworth, Ian
Hughes, Robert (Aberdeen, North)	Perry, Ernest G.	Young, David (Bolton, E.)
Hughes, Roy (Newport)	Phipps, Dr. Colin
Hunter, Adam	Prescott, John	TELLERS FOR THE NOES:
Irvine, Rt. Hn. Sir A. (L'p'I, EdgeHI)	Price, Christopher (Lewisham, W.)	Mr. Joseph Harper and
Irving, Rt. Hn. Sydney (Dartford)	Price, William (Rugby)	Mr. Laurie Pavitt.
Jackson, Colin	Radice, Giles

Question accordingly negatived.

Mr. Joel Barnett

I beg to move, as a manuscript amendment, in page 6, line 31, leave out three-twentieths' and insert 'one-sixth'.

This might be an appropriate moment to move this amendment, which arises out of a point relating to new Clause 14. Before it was carried by the House, I mentioned that the new clause was technically defective and would have created a problem with tapering fractions. The fraction of three-twentieths needs amendment because it provides for the small companies relief to be tapered off in a straight line as profits mount from the lower figure to the higher ceiling figure. The fraction is a product of the difference between the small companies rate and the ordinary rate and of the difference between the lower figure and the higher figure for small companies relief. If it were left at three-twentieths, in spite of the changes made yesterday, the tapering would be distorted.

Mr. David Howell

We are grateful to the Chief Secretary for adding technical perfection to our humble endeavours.

Amendment agreed to.