Finance Bill

Debate between Jon Trickett and Chris Leslie

Monday 12th July 2010 Commons Chamber

[Chris Leslie]

I am very disturbed that the Chancellor’s measures are coming at a time when our manufacturing industries are potentially just finding their feet and beginning to think about turning the corner out of the recession. Taking away some of those crucial allowances will not only affect those niche companies, which will, in turn, be the producers of the tool manufacturing equipment and the entrepreneurs whose work is so necessary and has perhaps been funded and supported by those allowances, but will, in a general context, potentially reduce the competitiveness of that particular sector of the economy.

It is a more general matter of debate whether some sectors of the economy benefit more than others from the corporation tax change. As I have said in previous debates, I am not sure whether my constituents would feel that the oil companies, the utilities and the banking sector should also have the gains from this corporation tax reduction. As I said in our debate some time ago, I am not convinced that now is the time to be giving away a £400 million windfall to the banking sector in this corporation tax cut.

[Jon Trickett (Hemsworth) (Lab)]

I am listening carefully to my hon. Friend’s argument. Has not the largest single factor in this recession been, in effect, a private sector investment strike? I am talking about the fact that £6 out of every £10 of the fall in gross domestic product is attributable to a single factor, which is that the private sector some time ago decided not to invest. There are all sorts of reasons why that should be, one of which is the failure of the banks to provide the capitalisation to allow those companies to invest—that touches precisely on the point that he was just making. Given that level of inactivity in investment, are we not facing both an increasingly inefficient private sector and, as has been said, the cuts in the allowances, which will make things worse?

[Chris Leslie]

Indeed that is the case. I know that my hon. Friend has done a great deal of work on some of the analysis of these points. There are arguments to be made for reducing corporation tax to boost competitiveness, but clearly that is a way of encouraging profit-taking and, in turn, the removal of money from companies in the form of dividends. That, of course, benefits us all in some ways, because we are all members of pension funds and so on. However, if it is indeed the Government’s particular choice at this point in time, as we are coming out of a recession, to try to encourage companies to focus on their long-term profitability, might it not be a better strategy, in some respects, to retain some of those capital allowances to ensure that we can fix our banks such that they are able to supply much-needed credit to small companies, in particular, and to the wider industries across the board?