§ 3. Richard Ottaway (Croydon, South) (Con)What discussions he has had with representatives of small businesses regarding proposed changes to the taxation of small incorporated businesses. [1584691]
§ The Paymaster General (Dawn Primarolo)The Government will announce in the Budget their proposals for taxing owner-managed businesses. It would not be right to consult on proposals of this nature in the period immediately prior to the Budget.
§ Richard OttawayThe Minister will be aware that since 1999 taxation policy for small businesses has been skewed in such a way that it is much more attractive for small businesses to incorporate than to remain unincorporated. She will be aware that in the past financial year the number of new incorporations went up by 43 per cent. Was that an intended consequence? If so, why has she hinted that she will reverse the policy?
§ Dawn PrimaroloThe hon. Gentleman knows full well that the Government policy on incorporation and unincorporated companies is to introduce a series of measures that help both, for example the 40 per cent. first-year capital allowances. He will also know that the Government's policy is to ensure that incentives are focused on encouraging companies to retain profits in order to reinvest in themselves to help them grow. It is right that the Government should consider that principle now and ensure that the policies in place are delivering reinvestment in companies that are growing, providing jobs and increasing productivity and affluence.
§ Roger Casale (Wimbledon) (Lab)May I tell my right hon. Friend that many small businesses in my constituency have incorporated, encouraged by the prospect of stable economic growth, the ability to access research and development tax credits and the zero rate of tax on £10,000 profits? She has said that she keeps these matters under review. Will she make sure that any further changes are introduced fairly and build on the good consultation with the Federation of Small Businesses and the British Chambers of Commerce that this Government have established, in stark contrast to the deaf ears of the Tory party when it was in office?
§ Dawn PrimaroloMy hon. Friend is right that the stable economic environment is necessary. The stability produced by this Government has ensured that regardless of companies' incorporation or otherwise, we have more companies', they are growing and they are contributing to the British economy. That stability has in part been secured by consideration of tax issues in detailed discussions with all the organisations involved, including the Federation of Small Businesses, with which we are in regular contact.
Mr. David Batley (Bury St. Edmunds) (Con)In 2002 the Chancellor told us that the small tax incentive for small incorporated businesses would cost not more than £265 million in the current financial year. Now independent experts tell us that it will cost the Exchequer at least four times that. As a result the right hon. Lady tells us that she is contemplating a U-turn—a change which will mean higher taxes on hard-pressed small business men and women. Will the right hon. Lady confirm that that proves that when it comes to tax, new Labour's figures simply do not add up?
§ Dawn PrimaroloAs usual, the hon. Gentleman bases his assertions on figures that he cannot substantiate. As he well knows, the growth in jobs and in small businesses and the benefits to his constituency in seeing reductions in unemployment—down by 48 per cent. —are all part of the Government's strategy of ensuring we deliver economic stability, in which all companies, small, large, incorporated and unincorporated, can grow.
§ Brian Cotter (Weston-super-Mare) (LD)Does the Minister not realise that highlighting that possible change causes an enormous amount of concern to small businesses? There has been such excessive tinkering with the taxation system that instead of stability, which is what the Government said they wanted, we have instability; we are creating jobs for accountants rather than in small businesses.
§ Dawn PrimaroloWe shall only have to wait until later today for an abject lesson in changing policies; my recollection is that the hon. Gentleman has supported every measure the Government have introduced to help small businesses, whether incorporated or unincorporated, because he realises the value of helping companies to grow, to reinvest in their business and create the jobs that we all need in our constituencies—including his.
§ Mr. Howard Flight (Arundel and South Downs) (Con)During the Standing Committee on the Finance Act 2002, I questioned the wisdom of the Government giving large tax increases to small businesses to incorporate and, indeed, the wisdom of favouring one legal structure over another. The Paymaster General responded very pithily to my question, in confirmation of that intent—the Chancellor might bother to listen to this—and told me that small business would not look a gift horse in the mouth.
In the light of IR591, 117 MPs signed early-day motion 501, asking the Chancellor to explain what has gone wrong with Government policy and what are now their intentions. The fact is that the Government deliberately— [Interruption.]
§ Mr. SpeakerOrder. May I remind the hon. Gentleman that we are still only on Question 3? We must move on, but the Paymaster General can answer.
§ Dawn PrimaroloI am sorry to say that, as always, the hon. Member for Arundel and South Downs (Mr. Flight) is confused. The Government did not introduce tax increases; we introduced reductions in tax to help small businesses to grow so that they could contribute to economic stability and to the growth and development of our economy. As a measure of the hon. Gentleman's confusion, at that time he was forecasting a crash.