§ 11. Mr. David Ruffley (Bury St. Edmunds)If he will make a statement on the abolition of the ACT dividend tax credit as it relates to pensioner incomes. [124956]
§ The Minister of State, Department of Social Security (Mr. Jeff Rooker)The abolition of advance corporation tax was part of a package of measures to encourage companies to invest in their long-term future. Removing the tax credit removed the encouragement for companies to pay dividends instead of retaining profits to finance future expansion. That is in the interests of all investors, both individuals and pension schemes, and will help to promote a thriving economy, which will benefit all pensioners' incomes.
§ Mr. RuffleyThe Minister should be aware that there are some 300,000 pensioners whose incomes are so low that they do not pay tax but who are modest shareholders. They now face the loss of about £75 a year as a result of the Government's abolition of dividend tax credit. Why did the Government impose this sneaky, unjust and unfair stealth tax on some of our poorest pensioners?
§ Mr. RookerTo be honest, it is not possible to disaggregate the exact effect of a package of measures designed to improve economic performance. From the hon. Gentleman's experience as an economic consultant to the Conservative party, he knows that it is much better for businesses to base their decisions on the operation of the business, not on the vagaries of the tax system. Making the change made a substantial difference. The average return on pension fund investments in 1998 was 16 per cent; in 1999, it was 21 per cent. Part of the package was that corporation tax went down from 33 to 30 per cent. Pensions are a lifetime investment—the hon. Gentleman understands that—and they need a strong and healthy economy. That is what we are creating.