§ The Chief Secretary to the Treasury (Mr. Leon Brittan)
I beg to move amendment No. 51, in page 9, line 4, leave out 'two-hundredths' and insert 'seventy-fifths'.
§ The Chairman of Ways and Means (Mr. Bernard Weatherill)
With this it will be convenient to take Government amendment No. 52.
§ Mr. Brittan
Amendment No. 51 changes from seven two-hundredths to seven seventy-fifths the fraction for determining marginal relief for small companies. Amendment No. 52 deletes subsections (2) and (3) of clause 15 so as to leave the profits limits for the purposes of small companies' relief at the level fixed by the Finance Act 1982 — £90,000 and £225,000 instead of the £100,000 and £500,000 as originally proposed in subsections (2) and (3) of the clause.
The amendments are needed because the Opposition would not agree to the increases we proposed in the Finance Bill in the profits limits for the purposes of relief for small companies. With the need to dispatch the Finance Bill as quickly as possible, and without the consent of the Opposition, it has not been possible to proceed with the proposal in its original form. Accordingly, amendment No. 51 fixes a new fraction for the purposes of calculating marginal relief.
Amendment No. 52 drops the proposal to increase the profits limits for the relief to £100,000 and £500,000. As a result, last year's profits limits of £90,000 and £250,000 remain in force. This means that companies with profits between £90,000 and £500,000 will be paying more tax as a result of the Opposition's intransigence than under our original Finance Bill proposal. Because the profits limits have not been increased, the marginal rate on profits between £90,000 and £225,000 will go up from 60 per cent. to 61⅓ per cent. rather than go down to 55° per cent. under our proposals. In other words, what the Opposition require is a substantial disincentive to companies contemplating expansion.
Accordingly, I can now say that when the present Government are re-elected it is our intention to restore as soon as possible the increased profits limits of £100,000 and £500,000 which we proposed in the Finance Bill. This will help small and medium-sized companies with profits 792 all the way up to £500,000. They will understand, and the country will know, who has sought to deny them that relief and who will be restoring it.
The reduction in the rate of tax for small companies from 40 per cent. to 38 per cent. is of course unaffected by the amendments, as the Opposition have not objected to that, but as a result of the Opposition's attitude it will for the time being apply only to companies with profits up to £90,000 and not up to £100,000.
§ Mr. Robert Sheldon (Ashton-under-Lyne)
Amendment No. 51 is the first of the new amendments that have been tabled in manuscript form and we are grateful to you, Mr. Weatherill, for accepting them.
I maintain and the Committee should maintain that this is not the best way to proceed with the Committee stage of the Finance Bill. The normal way to proceed, and the way in which we would expect to proceed, would be in Committee Room 10 where the proper scrutiny of these meausures, line by line and clause by clause, would have been possible. The worst way to proceed would have been Government by decree, which was the alternative proposed. The second way to proceed would have been Government by acceptance. The best way of all, and the way in which we would normally carry out these procedures, would have been Government by examination, argument and debate. It is an arrogant assumption that the Government are almost entitled to get their measures through just because they proposed them. What we must take into account is that we have had to endure four Budgets which have damaged our industrial and commercial life. We were not able by any means to propose our alternative but we felt able in some way to limit some of the damage of the Bill. That is the basis on which we proposed the amendments that we are debating today.
We accept the lower rate of 38 per cent. corporation tax for smaller companies. That was never in dispute and we welcomed and agreed with it. We thought that it would provide a small but valuable impetus to the role and activities of the small firm, but we saw no reason why this advantage, which in normal circumstances we might even have been willing to see increased, should be extended to companies with profits of £500,000 a year. If there is to be a direction of resources or a reduction of taxation it should be genuinely directed to the smaller companies, particularly in the formation and in the initial activities of the undertaking.
The small change that we propose in clause 15 will be an improvement. I note that it is the Chief Secretary's intention, if he is lucky enough to be returned to office, which I think unlikely, to bring about changes in July. We will be introducing, we hope, an autumn Budget in which we will attempt to remedy many of the wrongs carried out by the Government and bring about an even greater improvement in the matters under debate in clause 15.
We will have an enjoyable, active and busy time correcting the errors made over a long period.
§ Amendment agreed to.
§ Amendment made: No. 52, in page 9, leave out lines 5 to 16.—[Mr. Brittan]
§ Clause 15, as amended, ordered to stand part of the Bill.