Question proposed, That the clause stand part of the Bill.
The clause reduces the rate of corporation tax for 1987 to 27 per cent. for companies whose profits do not exceed £100,000.Since 1979 we have regularly declared the need to encourage activity in the small firms sector. We have not just paid lip service to this, we have progressively introduced a number of measures to help small businesses. Clause 22 is one of a number of measures in this year's Finance Bill that are aimed at small businesses. It reduces the rate of corporation tax on the profits of small companies from 29 to 27 per cent. This is the latest in a series of cuts. Since we have been in office, the small companies rate of corporation tax has been cut by 15 percentage points from 42 per cent. That is a drop of over one third. This is now the fifth year in succession that we have been able to keep the rate of tax for the small company in line with the basic rate of income tax, which is also the marginal tax rate for the vast majority of unincorporated businesses. That is an important reason for aligning the two. We believe that the reductions provide the right kind of climate for business to thrive, but that is not all that we have done for small companies. For example, we have introduced innovative schemes to help companies to raise capital for expansion — for instance, the business expansion scheme, and many of the changes that we have made on the venture capital scene. I hope that the change, and the clause, will be acceptable to the House.
This is a truly excellent change, and I feel that it should not pass without comment. Nothing can be more profitable than for us to assist the smaller companies. On the whole, the growth rate of such companies bears comparison with, and in many cases exceeds, that of larger companies. To that extent, we are investing in the right place.I welcome the clause. It is a first-class innovation.
Question put and agreed to.
Clause 22 ordered to stand part of the Bill.
To report progress and ask leave to sit again.— [Mr. Neubert.]
Committee report progress; to sit again tomorrow.