Corporate Taxation (Hansard, 12 February 1998)

§ 13. Mr. Jenkin
When he expects the review of corporate taxation to be concluded. [27213]

§ Mr. Darling
The Inland Revenue has recently consulted business on proposed changes to the corporate taxation regime. That consultation period ended on 30 January. Any further announcements are, of course, a matter for my right hon. Friend.

§ Mr. Jenkin
Where is the Confederation of British Industry at fault in its analysis that the Government's announced corporation tax changes will amount to a £22 billion increase in tax in this Parliament?

§ Mr. Darling
The changes that we have made to the corporation tax regime will greatly help industry. The tax system will no longer be the determining factor as to whether profits are retained or distributed—that is properly a matter for managers. The tax changes have allowed us to reduce the rate of corporation tax, as has been said many times this afternoon, in order to ensure that we have one of the lowest rates of corporation tax of any of our major competitors.

§ Mr. Sheerman
Will my right hon. Friend ensure that any such review takes seriously the suggestions that Labour Members often make that corporations should be given certain incentives to invest in universities and university research that creates jobs? Is he aware that the Dearing report recommended that an extra £500 million—much of it coming from the corporate sector—be invested in universities? We have not seen much of that money yet.

§ Mr. Darling
My hon. Friend is correct: we want industry not just to invest in its own development but to co-operate with educational institutions. I am aware that the Dearing committee expressed a similar hope. I think that my hon. Friend will agree that the reduced level of corporation tax, together with the other steps that we are taking to encourage business, will prompt businesses not just to co-operate with educational institutions but to make the necessary investment that will benefit individual businesses as well as the wider economy.

§ Mr. Lilley
Should not the Chancellor have completed his review of corporation tax before he announced his ill-thought-out changes, which impose a hefty burden on pension funds and companies? Would he not then have avoided stumbling from announcing the abolition of tax credits in July—without realising that that would involve abolishing foreign income dividends—to abolishing advance corporation tax in the autumn, which then required him to introduce a new system of quarterly payments in his autumn statement, which he will now have to revise in his March Budget because of the 549 criticisms from the CBI? Will he confirm to the House that unless he does so, despite the change in the corporation tax rate, the changes so far announced will increase the burden on business by £22 billion?

§ Mr. Darling
As regards the consultation exercise, most of the responses have been very positive. I should have thought that the right hon. Gentleman would welcome that. I repeat that the changes we have made to the corporation tax regime will be to the long-term benefit of companies in this country and the economy. I think that most people recognise that.