§ 2. Mr. Jacques Arnold
To ask the Chancellor of the Exchequer how many tax breaks are eliminated or reduced by the Finance (No. 2) Bill 1988.
§ The Financial Secretary to the Treasury (Mr. Norman Lamont)
The main tax breaks eliminated or reduced by this year's Finance Bill are the forestry tax shelter, the tax relief for non-charitable convenants and for home improvement loans, and the under-taxation of company car scales.
§ Mr. Arnold
Does my right hon. Friend accept that the elimination of these loopholes, which were inherited from the Labour Government, is extremely welcome and constitutes the reverse side of the coin of the tax cuts in the recent Budget? They are particularly welcome as they will reduce the load on tax lawyers and tax accountants, who can then put their brilliant minds to work that is productive to the economy. In taking these steps further, will my right hon. Friend learn from experience in the United States in this regard?
§ Mr. Lamont
It is not often appreciated that in many respects we have gone further than the United States, which retains some—and more—of the reliefs that we have. If one adds to the list business entertainment, life assurance premium relief and the alterations that we have made to align capital gains tax and income tax, the revenues raised by these changes in 1989–90 will be more than £800 million. We do not hear much about that from the Opposition.
§ Mr. Nigel Griffiths
When the Prime Minister was wagging her finger at the Chancellor, as was reported to him by his hon. Friends, was it because of differences about the exchange rate, because of a difference of opinion over interest rates, or just because she was telling him to let the pound rise, no matter what the expense to British industry?
§ Mr. Lamont
Those are highly interesting questions, but, alas, they have nothing to do with the question on the Order Paper. All that I shall say to the hon. Gentleman is that I was there and he was not.
§ Mr. Boswell
Does my right Friend agree that one of the best consequences of lower tax rates is a reduction in the premium on the avoidance of tax? In that contest, will he promise to consider a speedy end to the close company provisions, which now seem wholly redundant?
§ Mr. Lamont
I shall consider my hon. Friend's latter point; and, of course, his first point is entirely right. The dramatic reductions in rates that we have made substantially reduce the incentive for people to waste a lot of time trying to find a way round and through the tax system—something that they did enormously when we had punitive taxation rates under the previous Labour Government.
§ Mr. Gordon Brown
But will the Financial Secretary confirm that for every tax loophole that was closed in the Budget another was opened by the Chancellor? Will he also confirm that whereas somebody earning less than £60 a week will be paying 25p in the pound in tax, which is completely unavoidable, the man earning £1 million, by using all the tax loopholes that the Chancellor has made available to him, can end up with a tax liability of absolutely nil? How does he defend that?
§ Mr. Lamont
The first point that I would make is that if the hon. Gentleman thinks that under the Labour Government there were not ways in which someone's tax bill could be reduced to nil, he does not know what was happening. Secondly, we have deliberately retained some reliefs in the tax system, such as the business expansion scheme and the enterprise zones, because we think that they serve a socially useful purpose. I do not know why the hon. Gentleman is so opposed to enterprise zones. The other day he said that some rich men are now finding the 452 charms of Middlesbrough irresistible. That shows that the tax relief on enterprise zones is doing some good. It has doubled employment in the enterprise zones.