Tax Relief (Hansard, 6 April 1989)

§ 7. Mr. Morgan
To ask the Chancellor of the Exchequer if he will estimate the cost to the Exchequer of tax relief in relation to (a) enterprise zones, (b) business expansion schemes and (c) personal equity plans.

§ Mr. Norman Lamont
The estimated costs of the business expansion scheme and personal equity plans are £100 million and £15 million respectively in 1988–89. The latest year for which estimates of the cost of the relief relating to enterprise zones are available is 1985–86, when the cost was about £60 million.

§ Mr. Morgan
Does the Minister agree that what the Chancellor has done in making personal equity plans tax deductible to cover privatisation in the coming year is to admit that the privatisation of electricity and water cannot take place without creating a tax loophole? Will he tell us, therefore, what the cost of privatising electricity and water will be to the taxpayer, as the Government have again thought up a wonderfully socially progressive idea for getting the non-shareholding classes to subsidise the shareholding classes?

§ Mr. Lamont
The hon. Gentleman seems terrified that the privatisation of water or electricity might be a success and, therefore, more difficult for the Labour party to reverse. The hon. Gentleman is exaggerating wildly. The purpose of the changes to personal equity plans that my right hon. Friend made in his Budget is to encourage wider share ownership. The point relating to new issues was one detail and the cost of that is extremely modest.

§ Mr. Neil Hamilton
Does my right hon. Friend agree that the best form of tax relief is straight reductions in tax rates? As Opposition Members seem to have grasped that fact and, in their increasingly desperate scramble for office, are making their party more voter-friendly by following the lead that we have been giving for the past 10 years, can my right hon. Friend tease out of the right hon. and learned Member for Monklands, East (Mr. Smith) the bands at which the lower rates of tax that the Opposition propose would be payable?

§ Mr. Lamont
My hon. Friend is absolutely right. The Leader of the Opposition made a tantalising speech earlier this week when he attempted to explain the tax policies of the Labour party. However, as my hon. Friend has identified, he left out the absolutely crucial point and most of us are wondering where the beef was in that speech.

§ Mr. Chris Smith
Does the Financial Secretary accept that the business expansion scheme, especially now, when it is so overwhelmingly employed for the purposes of private rented property, has long ceased to be a genuine source of new equity for enterprise, and has become simply a principal means of tax avoidance for higher rate taxpayers? Is that not another example of what we have seen so often under this Government? For the great majority of taxpayers it is pay-as-you-earn, but for the privileged few it is pay-if-you-like.

§ Mr. Lamont
I do not agree with the hon. Gentleman. The changes that we made to the business expansion scheme last year targeted it much more on small companies and, with the changes that have taken place in the equity and venture capital markets, I believe that that was the right change to make. The second change that we made was to target the business expansion scheme on the revival of the private rented sector. I am not at all embarrassed by the fact that £300 million to £400 million seems to have been invested in private rented accommodation because that is absolutely excellent.