Surplus Target and Corporation Tax

Debate between George Osborne and Kit Malthouse

Monday 4th July 2016 Commons Chamber

[Mr Osborne]

When it comes to annoying our European partners, I do not think this is going to be the thing that tips the balance after the last couple of weeks. Ireland is a member of the EU and has a 12.5% corporation tax rate. When it comes to investment in the north and the midlands, I am very much open to what further steps we can take. I do not pretend that we have done everything possible; I think there is more we are going to have to do, and all of us collectively—particularly those who represent constituencies in the north and the midlands—need to focus on what we can do to make sure that people feel more enfranchised and connected with this country’s economic success.

[Kit Malthouse (North West Hampshire) (Con)]

The Brexit vote was always going to require a Treasury response so I am pleased the Chancellor has produced one, but, rather than concentrate on the profit and loss, I wonder if he would care to look more at the balance sheet and consider measures to lift or relieve some of the constraints on the operational liquidity of capital in the economy. Our capital base is fundamental to our growth, and taxes and regulations on the operation of capital are significant constraints. So will the Chancellor look at investment allowances, tax breaks on starting new businesses and capital gains tax, in the hope that we can maintain a nice liquid market for capital investment in the UK?

[Mr Osborne]

My hon. Friend is right to say that, while taxes on business profits are important, capital taxes are also vital to stimulating investment. That is why in the Budget we reduced capital gains tax—and, with hindsight, that is an even more sensible move than I thought it was at the time. I am always ready to consider further investment allowances, and we have very successful allowances such as the enterprise investment scheme. Of course, the balance has always got to be between simplification and simplicity of the tax system and new allowances, and sometimes people call on me in the same breath to do both things—not my hon. Friend, because he is very clear in his thinking. We have got those allowances, but reducing headline rates is generally the better approach.

UK Economy

Debate between George Osborne and Kit Malthouse

Wednesday 29th June 2016 Commons Chamber

[Mr Osborne]

The stability of our financial institutions is there for people to see. It has been assured by our regulators. If the hon. Gentleman is saying that the market is making new assessments about the future earnings of banks, yes, that is so, and it is quite striking that it is banks that face the UK economy that have seen the sharp falls in their share prices, not banks that face the European and international economy. We have to be realistic: markets—free markets—are going to make those kinds of adjustments. We have seen those—the shadow Chancellor noted them—but it is striking that there has been the largest one-day fall against the dollar on record for our pound sterling. Equity markets, particularly the FTSE 250—which largely comprises companies that, again, face the UK domestic market—fell by 14%, and they are now 9% below their level. The particular sectors that have been affected are British retail banking, house building and short-haul airlines, some of which have seen their share price fall by more than 40%.

[Kit Malthouse]

Notwithstanding what the Chancellor of the Exchequer has said, will he acknowledge the benefits of a weaker exchange rate? For a country that is running a large trade deficit, having a significantly weaker exchange rate will make a large difference, particularly to exporters, and it means that we are more likely now to avoid deflation in the economy, which not a few months ago people were forecasting was likely to hit us.

[Mr Osborne]

I agree with my hon. Friend that a free-floating currency is a shock-absorber that we have the benefit of. We do not have a fixed exchange rate, and of course we are not part of a single currency, so the currency can take some of the strain, and that is reflected in the currency market.

The only thing I would caution my hon. Friend on is this: in 2008 we saw a sharp fall in sterling, and that was sustained, but it did not lead to the boost in exports that people expected at that point. That was partly because other markets, including European markets, were depressed, but, as we came to discover, it was also the case that integrated supply chains these days are more international. For example, car exporters might benefit from the fall in the currency in terms of the price they sell their cars for, but they will have imported parts and will have seen import prices go up. Unfortunately retailers are also warning us that prices in supermarkets, for example, may well now rise because of the fall in the currency, but we will wait and see.

Of course the other challenge we face is from the credit rating agencies—not that everything they say is gospel. Unfortunately, we lost our triple-A rating with Standard & Poor’s and were downgraded two notches a few days ago.

Oral Answers to Questions

Debate between George Osborne and Kit Malthouse

Tuesday 1st March 2016 Commons Chamber

[Mr Osborne]

Our intention is to use the principles of the Barnett formula to make sure that the devolved Administrations, not only in Scotland, but in Northern Ireland, do get the resources they need. Of course we would urge them then to spend those resources on training, but that is ultimately a matter for them and the people to whom they are accountable.

[Kit Malthouse (North West Hampshire) (Con)]

Given the importance of family investment in start-up businesses, particularly science and technology businesses, where a leap of faith is often required, will the Chancellor, in the Budget, consider lifting the restrictions on family investment under the enterprise investment scheme and the seed enterprise investment scheme, so that mum and dad can invest alongside everybody else on the same terms?

[Mr Osborne]

I am happy to take that as a Budget representation. I am sure my hon. Friend will understand that if he turns up on Budget day, he will see my response to it. The SEIS and EIS have been enormously successful. We have to make sure that the rules are tight enough so that they are supporting the kind of entrepreneurial activity we want, rather than being used as a vehicle for tax avoidance. I think we have got the balance right so far, but I am aware of good, positive proposals that people have put forward to improve it.