§ 9. Mrs. Angela KnightTo ask the Chancellor of the Exchequer what the current level of corporation tax is in Britain and in other industrialised countries; and if he will make a statement.
§ The Financial Secretary to the Treasury (Mr. Stephen Dorrell)The main rate of corporation tax for 1993 is 33 per cent. That is the lowest main rate in any EC or G7 country.
§ Mrs. KnightDoes my hon. Friend agree that the low rate of business tax, coupled with a massive increase in manufacturing productivity since 1979, is a key reason why Britain has become the most popular of the European countries for inward investment? Does he also agree that that inward investment is creating jobs in the United Kingdom?
§ Mr. DorrellMy hon. Friend is precisely right. The figures show that the United Kingdom attracted one third of all inward investment into the European Community in 1991. That is a vote of confidence from the internationally mobile business community. It is also an expression of what Mr. Delors called our policy of turning Britain into a paradise for Japanese investment.
§ Mr. MacdonaldCorporation tax is, obviously, one of a number of taxes. Will the Minister confirm that the share of national wealth paid to the Government in overall taxation is now higher than it was in 1979? Does the Minister agree that, after 14 years of a Government committed to reducing taxation as a proportion of national wealth, that is an abject failure on the Government's own terms?
§ Mr. DorrellThe hon. Gentleman's question is yet another illustration of the total failure of the Labour party to understand how a tax system impinges on the wealth-creation process. What matters is the marginal rate at which tax is collected on wealth creation.
The difference beween the Labour party and our party on corporation tax is that, under the Labour party, 52 per cent. of every marginal £1 of profit that was earned in a corporation was paid to the Government. That has fallen 1103 to 33 per cent. under the present Government. That is the incentive to wealth creation which has attracted international investment to this country.
§ Mr. JenkinI congratulate my hon. Friend on the Government's determination that this country should be allowed to set our own rate of corporation tax without interference from the EC, because it is so vital to our competitiveness. Will he undertake to maintain that right, come what may?
§ Mr. DorrellThat is indeed the Government's position. It was endorsed during the British presidency of the European Community when the subject was under discussion last year. It was not a controversial view among any of the member states of the Community.
§ Mr. DarlingThe Chancellor has said that he may have to increase taxes in the autumn to meet the growing public sector borrowing requirement deficit. How much of that deficit do the Government estimate is structural, and how much cyclical?
§ Mr. DorrellThe Chancellor has said that he will make his Budget judgments and announce his conclusions in November, and I am certainly not going to pre-empt those conclusions.