Finance Bill

David Rutley Excerpts

Tuesday 28th June 2016 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

I specifically want to talk about clause 43 in relation to vaccine breakthrough. I have issues with a couple of the Government’s proposals. First, it has been made clear that this measure costs the Government very little. In terms of foreign projections, the removal of the relief does not increase the Treasury’s take by a vast amount.

The explanatory notes on this were incredibly helpful and I really appreciated them, but they seem to be missing a few things. First, they say that only 10 firms claimed the relief, but they do not make it clear how many firms research and develop vaccines. After my slightly rudimentary research, I could find only about 10 firms that research and develop vaccines, which means that all of them claim the relief. Therefore, if I am correct, the uptake is quite high. That could be why companies are choosing to research and develop vaccines. I would appreciate it if the Minister confirmed how many companies research and develop these things. If he does not have that information today, perhaps he could write to me with any details he has on that.

The explanatory notes mention the Ross Fund. I appreciate that the fund is a good thing and that it is good that the Government are financially supporting the development of vaccines, but it seems to me that the fund does not necessarily cover everything that the vaccine relief previously covered. The Ross Fund covers the following: antimicrobial resistance, which is a really important thing to be funding in this day and age; diseases with epidemic potential, which, given what happened with Ebola, is a really important area to be funding; and neglected tropical diseases, which is a fabulous area for the Government to support. It is really important to be putting money into the various areas of research that have previously been neglected.

From the research that I have, it seems that vaccine research relief covers HIV/AIDS, whereas the Ross Fund does not. I would really appreciate it if the Government told whether HIV/AIDS research now falls through a gap, because it is an area that we need to continue to research and for which we do not currently have any vaccine or cure. I do not want it to get lost because companies are no longer able to claim aid or funding for such research.

I will not speak at too much length, as my concerns are around clause 43 and the fact that, although helpful, the explanatory notes left me with quite a few questions.

[David Rutley (Macclesfield) (Con)]

I want to add my support to clause 42, notwithstanding the important points made by my hon. Friend the Member for Amber Valley (Nigel Mills), who set out the need for further thinking, perhaps, in the light of the Brexit vote. I was on a different side of the debate from him—only marginally—because I thought that there were concerns about economic risk, but there are certainly opportunities ahead, as well.

We need to ensure that we are ready to explore and realise those opportunities and the Government are absolutely committed to doing that. I hope that the Opposition are as well. It seems that the hon. Member for Wolverhampton South West (Rob Marris) is indicating that. We are up for that. As a result, I am perplexed about why clause 42 is not being supported by the Opposition. Such measures were vital when the proposals were first set out, and it is now even more important to put out a clear signal that we are open for business, that we understand business, that we want business to continue to come to the UK and that we want our exporters to thrive and flourish.

The corporation tax level is an important signal and an important driver in that regard. It is noticeable that the Federation of Small Businesses stated at the time of the announcement that it saw clause 42 as an important statement of intent that will provide a boost for affected firms. Small businesses are of course the backbone of our economy, but it is clear that the clause is an important signal for bigger businesses, too. It helps to illustrate and underline that Britain is open for business.

Given the decision made by the public, which I fully respect, it will be very important that we maintain the flow and increase the levels of foreign direct investment. I thought we were exposed in that area for a period of time, and I think that that exposure is still real, but we are currently the biggest destination in Europe for foreign direct investment. We have seen the biggest increase in FDI in projects in the north-west and I want to work with the Government and whichever party is around to ensure that we continue to see that flow. I want to ensure that the success we see in the country continues and that the northern powerhouse can fulfil its full potential. Key initiatives such as the life sciences corridor in Cheshire will require clear signals to businesses in the UK and abroad that we are open and want to move further forward, which is why I will support clause 42 when we vote, as I understand we will.

[Sammy Wilson]

I want to show our support for clause 42. In fact, I think it would be a bit strange for someone from Northern Ireland to take a different stance, especially given the fact that the Northern Ireland Government have put the reduction and devolution of corporation tax at the centre of their policy for attracting investment into Northern Ireland over the next 10 to 15 years.

There are two things. First, we must ask ourselves whether we believe that a reduction in taxation on businesses acts as an incentive. As I listened to the Opposition spokesman’s opposition to this measure, it raised a query in my mind: is the reduction of other business taxes regarded as acceptable and indeed desirable by the Labour party as a means of incentivising and helping small business? For the Opposition, it seems as though the reduction in business rates, which are a form of taxation, is desirable because it helps small businesses, but that the reduction of corporation tax seems to have no effect, or the opposite effect. If we are going to have some consistency, we must ask ourselves whether the principle of reducing taxes on businesses and their profits, and the impact that that has on the amount of money they retain for investment, is an effective means of stimulating business. If it is true of one form of tax, it is true of another. That is one of the reasons why I believe that the reduction in corporation tax is an important decision.

Secondly, during my former role as a Member of the Northern Ireland Assembly and as a Minister there, one of the things that came up consistently when we spoke to investors was corporation tax. We had an especially big problem, because we were living next door to a country—we have a land border with it—that had emphasised the reduction in corporation tax. Time and again, though not exclusively—there is no point in over-egging this pudding—investors mentioned the level of corporation tax: 12.5% in the Irish Republic and 22% then in Northern Ireland. When companies looked at the headline level of taxation, they viewed the Irish Republic as a much more desirable place to invest. Of course they looked at other things—the skills base, the availability of office and factory space, the infrastructure and so on—but corporation tax was an important factor.

[Sammy Wilson]

It is not the position of the Democratic Unionist party either, because there are other ways in which companies can be held responsible for their infrastructure requirements. For example, one of the forms of taxation that the Government have introduced recently is the apprenticeship levy, where companies will be held responsible. They need trained workers, and they have to make a contribution from their profits to train those workers. There are ways to target the contribution that we require companies to make. I am not saying that companies should not pay for the infrastructure from which they benefit, but we must address one of the issues that they raise when they are considering whether we are a competitive place to invest.

[David Rutley]

The hon. Gentleman is making characteristically important points. Although there has been a nod to what has gone on in the US, it is important to look at what is happening in the UK. As we have seen a reduction in corporation tax, we have seen a strong performance in foreign direct investment. Let us look at what has happened here, which has helped to move the situation further forward—and no doubt it has done so in Northern Ireland as well as the mainland.

[Sammy Wilson]

The hon. Gentleman is quite right: if we look at the record of companies in the United Kingdom as corporation tax has decreased, we see that we have experienced increasing foreign direct investment. Indeed, since the Northern Ireland Government announced that corporation tax will be reduced in, we hope, a year and a half’s time, there has been an upsurge of interest in the number of companies that wish to consider Northern Ireland as an investment proposition. We are already the second most successful region in the United Kingdom for foreign direct investment—I suppose that this bears out the Opposition spokesman’s point—because we have emphasised the other selling points that are available to us at present, but corporation tax is the additional one that will make things easier for us.

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I do not accept the hon. Lady’s criticism that this is somehow just a tax cut for the wealthy. These changes will encourage wider public involvement in investment opportunities and help companies to expand and create jobs. By retaining the 18% and 28% rates for residential property, the Government are encouraging investment in shares, rather than property, thus giving the British economy a boost at a time of global uncertainty. At 20%, the CGT rate paid by higher rate taxpayers is still two percentage points higher than under the last Labour Government. For residential property and carried interest, the rate is 10 percentage points higher.

[David Rutley]

I am sorry that my hon. Friend is in so much pain when he stands up.

I am surprised by some of the things said in this debate. We all recognise the importance of enterprise and of encouraging further enterprise, particularly in the northern powerhouse, as the hon. Member for Salford and Eccles (Rebecca Long Bailey) recognised. We can achieve the aim of encouraging enterprise by using exactly the mechanism that my hon. Friend talks about. Does he agree that that is why the bodies he mentions have made this proposal? It will make a material difference to our enterprising spirit and economic growth.

[Mr Gauke]

My hon. Friend makes an excellent point. We must create wealth in this country to be a successful economy. We need to have an entrepreneurial and dynamic economy. He made this point earlier in the context of corporation tax, but similar arguments can be made in the context of CGT as well.

On the criticism that entrepreneurs relief is badly targeted, I argue that, of course, as with all tax reliefs, it is entirely appropriate that the Government keep it under review to ensure that it is well targeted and not open to abuse, but we believe that it is right to incentivise individuals to set up and expand their businesses. Entrepreneurs relief plays an important part in our pro-growth agenda. It is a highly popular and widely used relief, which supports about 40,000 entrepreneurs a year, according to our latest data. We do not believe that this support should be withdrawn. The latest published cost of entrepreneurs relief is £3 billion, but that is a static figure; the true cost will be different, due to potential changes in the disposals and behavioural change. That behavioural change is very important. On when the data for 2014-15 will be released, these statistics are published annually, and the new release is due in October 2016.

On rates going up and down, let me point out that the 28% higher rate of CGT was introduced in 2010, by the coalition Government, and this is the first change since then. The Government have published the “Business tax road map”, setting out plans for business taxes over the entire Parliament and providing some certainty and stability to businesses.

On the argument that employee shareholder status should be withdrawn, we believe that ESS provides vital flexibility for early-stage firms and that it is right that employee shareholders receive tax benefits on shares awarded in exchange for relinquishing certain employment rights. The purpose of the lifetime limit is to ensure that small firms can offer attractive tax benefits to employees, while ensuring that the benefits are proportionate and fair.

I hope that, with those remarks, I can seek to dissuade the Labour party from voting against the reductions in CGT and the SNP from pressing its amendment to a vote, but if I have been unsuccessful in persuading them not to do so, I urge my right hon. and hon. Friends not to support such measures.

Question put, That the clause stand part of the Bill.