House of Commons
Tuesday 12 May 2009
The House met at half-past Two o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
Mental Health Services (Sutton)
Mental health services receive funding from primary care trusts according to the priorities and needs of the local population. Sutton and Merton PCT and the Government organisation Working for Wellness will invest £2.4 million over three years in improving access to psychological therapies. In 2010-11 Sutton and Merton PCT expects to spend £53.6 million on mental health services, which represents 9.1 per cent. of its allocated budget.
The Minister may be aware of debates in the House on the future of Henderson hospital and that a consultation entitled “Shaping the future: Supporting people with complex personality disorder” is under way. Can he reassure me that the model of a therapeutic community with a residential component will be given reasonable consideration in plans for dealing with personality disorder, and will he receive from those dealing with Henderson hospital an update on the future of that service?
As the hon. Gentleman knows, Henderson hospital is temporarily closed because of falling demand and lack of clinical viability, but, as he says, that is subject to a consultation due to end on 27 July, to which organisations and individuals can of course make representations. The matter is obviously one for local decision making, but he has today drawn the House’s attention to the services that he wants to be provided in future and I shall ensure that his representations are fed into that local consultation.
Maternity/Paediatric Services (Greater Manchester)
Service reconfiguration is a matter for the local NHS. The North West strategic health authority reports that the “making it better” reconfiguration of children and maternity services across Greater Manchester will see four new state-of-the-art hospitals open this summer in central Manchester, at a cost of £500 million. There will also be expanded facilities in north Manchester, Bolton, Oldham and south Manchester. Services will be transferred in stages to ensure a smooth and efficient transition for patients and staff.
The hon. Gentleman may not know, but over the next three years the NHS in Greater Manchester plans to invest more than £100 million in new buildings to improve facilities for women, children and babies, including new maternity units at North Manchester general, Royal Bolton, Royal Oldham, St. Mary’s and Wythenshawe hospitals. In-patient children’s and maternity services will be provided in eight new centres of excellence across Greater Manchester and the number of neonatal units will increase from two to three. The review was driven by clinicians, in particular the desire of doctors, nurses and midwives to improve safety. I commend them for the work they are doing.
The consultation on the reconfiguration of children’s services and the associated discussions has lasted for more than a quarter of a century. Obviously not everyone is satisfied with the outcome, but now that decisions have been made, it is important that the schedules set are kept to. Will my hon. Friend assure me that that will happen and that the decisions made will not be changed?
The local NHS bodies in Greater Manchester are responsible for implementing the reconfiguration. It has taken some time, but the results are now there for all to see in both the hospitals that are opening now and the plans for the future. These are exciting times for the Greater Manchester NHS, and all MPs on both sides of the House representing constituencies in the area will see their constituents benefit from the changes. I understand my hon. Friend’s desire to ensure that the changes are delivered on budget and on time. I shall make sure that the local NHS bodies in Greater Manchester are aware of the strength of his feelings on the matter.
The Minister may recall that when the proposals to shut obstetric units were made in January 2006, the consultation document said:
“The birth rate nationally is falling”.
That was not true when it was written, and since then, in the space of two years, the number of births in Greater Manchester has increased by 7 per cent. When facts change, so can conclusions. Will Ministers therefore reconsider the plans to remove obstetric services from Fairfield hospital in Bury and the Rochdale infirmary, the effect of which will be that, each year, well over 5,000 mothers living north of the M62 will be without local access to full obstetric care?
I always enjoy it when Opposition Members question the investment and reform being made under a Labour Government. I remember that during the 18 years of Conservative rule, hospital services in Greater Manchester were pretty much abandoned. A great deal of thought and planning went into deciding the size of the new maternity units. Account has been taken of the number of births, ongoing changes to maternity practice and projected birth rates. Taking all factors into account, all the new maternity units will have the flexibility for additional capacity, should it be needed. That will allow the NHS in Greater Manchester to give women choice over where they wish to have their babies, which they would not have had under the Conservative party.
Out-of-Hours Primary Care
The independent regulator, the Healthcare Commission, recently reviewed urgent and emergency care in England. Solihull was given a rating of three—five being the highest and one the lowest—with out-of-hours services contributing to 25 per cent. of that score. The review found that, nationally, out-of-hours services had improved significantly since 2005. Where the local NHS has concerns about the performance of its out-of-hours providers, it must take urgent and robust action to address them.
Following the death of Mr. David Gray at the hands of Dr. Daniel Ubani, is it not the case that the Minister cannot give me an assurance for my constituents in Solihull, or indeed for constituents anywhere else, because there is no mechanism for assuring the quality and consistency of out-of-hours service? Do not patients need some guarantee on what basic level of assistance they are likely to receive?
The hon. Lady is wrong; the quality of out-of-hours services is monitored and assured in a number of ways: first, primary care trusts have clear legal responsibilities to provide safe, high-quality out-of-hours services; and, secondly, strategic health authorities act as performance managers. The regulators, as she will be aware, are now investigating the provider that ran the services that led to the tragic death of David Gray. I would like to update the House. East of England strategic health authority informed me this morning that it had discovered new issues of concern about Take Care Now—the provider of the services in the case in question—and its performance that predate the Dr. Ubani case. The SHA is now reviewing, with the PCTs concerned, its previous decision to continue to use TCN services, pending the outcome of the Care Quality Commission investigation.
Both the National Audit Office and the Public Accounts Committee have, for some time, pointed to significant flaws in the private provision of out-of-hours general practitioner care. As the hon. Member for Solihull (Lorely Burt) said, there have been fatal shortcomings in outsourcing an essential aspect of primary care. Does the Minister agree that more and more PCTs across the country should follow the example of Leicestershire County and Rutland primary care trust, and bring outsourced out-of-hours provision back in-house? Failing that, should not the performance of organisations be tracked much more closely by the Department of Health, so that our constituents are not left to the mercies of cowboy clinicians?
Decisions such as that taken by my hon. Friend’s PCT are for local primary care trusts. I have to challenge him on his interpretation of the National Audit Office findings and the Healthcare Commission’s findings. The NAO report did not find any evidence of risk to patient safety in out-of-hours services, and it showed that eight out of 10 patients were satisfied. As I have said, the Healthcare Commission report found significant improvements in performance since 2005. Neither of the reports found that there was variable performance between private and non-private providers.
The vetting procedures referred to by the Minister must be hopelessly inadequate to allow a cosmetic surgeon from Europe who did not even know the correct dose of diamorphine to work in this country. He has admitted killing the patient with a dose 10 times too great. Whatever vetting procedures we have are inadequate, and I ask the Minister to take steps to improve them, particularly in relation to doctors coming from the European Community.
As a doctor himself, the hon. Gentleman will know that this country has among the highest levels of vetting of professionals of any country in the world. Employers have a legal duty to ensure that all doctors whom they appoint are fit to practise, and all doctors, including locums, must be on an official performers list, and must be registered with the independent regulatory body, the General Medical Council. He is right: we are talking about an absolutely terrible case, for which the doctor has been tried in his absence. As a result, as I informed the House, the SHA, with local primary care trusts, is reviewing the contract given to the company concerned. There are clear legal obligations on PCTs and strategic health authorities to ensure that their out-of-hours services are safe. Something went terribly wrong in the case that we are discussing, and he is right that it is important that both the local and national NHS learns the lessons as a result of it.
But is it not elementary that the best out-of-hours services are provided by doctors who know their patients and their records? Should we not have a concerted campaign to try to ensure that, wherever practicable, out-of-hours services are conducted by family practitioners who normally look after those patients?
The hon. Gentleman makes a very good point. The vast majority of out-of-hours services up and down the country are still provided by local GPs, whether working in co-operatives or social enterprises, or for private organisations that are contracted or commissioned by the primary care trust. The difference between the system now and the previous system is that they are not compelled to do so. The problem with the previous system was that GPs often felt overtired: mistakes were made and the service was patchy and dangerous in many places. The Conservative idea of going back to the bad old days of forcing all GPs to provide out-of-hours-services would be an absolute disaster.
Following the question from the hon. Member for Wyre Forest (Dr. Taylor), Medical News Today reports that
“some…EU-qualified doctors acquired their rights to practise without any specific training in general practice.”
However, they could end up—and have ended up—working in our out-of-hours services. While it is not possible to prevent such doctors from practising in this country, it is possible to stop them being employed in NHS out-of-hours services. Is it not time that the Minister ended that practice and made it an absolute requirement on out-of-hours providers that they cannot employ anyone without the training required for British-trained GPs, as well as for those GPs who come from outside the EU.
Without repeating what I have said about the legal duties of the commissioners of the service and employers to verify whether someone is fit to practise, and about the role of the GMC, I am sure that all those organisations, including the GMC, will be very interested in the article that the hon. Gentleman has just produced.
May I press the Minister a little further? I do not wish to repeat what has already been said, but it is quite clear that the Government mismanaged the negotiations on the 2004 GP contract resulting, whatever the Minister says, in an out-of-hours service that is at best fragmented and inconsistent. As we have heard, the tragic death of David Gray in Cambridgeshire starkly highlighted the inconsistencies and variations in primary care trusts’ registration of locums, as well as the lack of co-ordinated quality in patient safety standards. That needs to be addressed urgently. Does the Minister agree that that demonstrates that GPs are closest to their patients and the communities they serve, and are therefore in a significantly better position to commission out-of-hours care on their patients’ behalf, without necessarily having to provide it themselves?
It is only since 2004 that we have had a framework that is supposed to deliver a uniform service across the country. People behave and talk as if there was some golden age in which there was a wonderful out-of-hours service, but it did not exist. Some parts of the country did not have a service at all; in other parts, the service was dangerous or patchy. Doctors resented being forced to do that work, and we had massive recruitment problems, particularly for women doctors. Doctors were often overtired, and there were serious accidents. We now have a system in place with a legal responsibility on the commissioners at local level—the PCTs—to deliver a quality service for their population. They are overseen by the regional level of the NHS and by the independent regulator, who did not exist before. We therefore believe that we have the right systems in place—it is the implementation of those systems that we need to ensure is right, and as the independent Healthcare Commission itself says, the quality of out-of-hours services has improved significantly since 2005.
We have been preparing for a flu pandemic for the past five years. On 22 November 2007, I made a statement to the House introducing the national framework for responding to an influenza pandemic. That document, jointly published by the Department of Health and the Cabinet Office civil contingencies secretariat, is the cross-Government strategy for dealing with an influenza pandemic. The planning process is supported by exercises carried out by the Health Protection Agency. The framework is guiding our response to the current H1N1 outbreak, and the World Health Organisation has recognised Britain as one of the best-prepared countries in the world.
I am grateful to the Secretary of State for that reply. We are all glad that the spread of the flu seems to have slowed, at least for the moment; we are particularly glad that, rather puzzlingly, there have been no fatalities outside Mexico. I do not know why that should be, but there it is.
Perhaps there have been one or two; I have been corrected by my hon. Friend on the Front Bench.
Does the Secretary of State agree that if an awful pandemic were to occur, an important tool in dealing with it would be the national flu helpline? Will he explain why the Government have announced that the helpline will not be operative until the end of this year?
First, I should correct the hon. Gentleman. There have been three deaths in the USA, one in Canada and one in Costa Rica. However, it is true that the majority of deaths have been in Mexico. I am pleased to say that we will have a debate on this issue on Thursday. When we discussed it last Thursday, the issue of the flu line came up. I say again that we agreed the contract with British Telecom last December. It will be ready in October, after the most thorough testing. No country in the world has such a sophisticated system. Its purpose is to enable people who are symptomatic to go home and stay there, ring a number or go on the internet, go through an algorithm, get a code and send someone else to collect their antivirals. In that way, people will not walk around spreading the disease further.
No country in the world has such a system. We have the opportunity to introduce it in October, but, as I said to the House last week, there was no way we were going to introduce it without the most thorough testing. The last thing we need in the middle of a pandemic is the breakdown of an IT system—and we have a certain amount of history on that.
Is my right hon. Friend aware that there have been two cases of swine flu in my county, one of them in my constituency? One of the issues is how people can best protect themselves and know where the outbreaks are without anybody’s confidentiality being breached and without an excessive sense of panic being created. Can my right hon. Friend say how he would balance those issues, so that people know enough to protect themselves without there being undue concern about the number of cases and where they are?
That has been working well. The Health Protection Agency has been doing the contact tracing—tracing those who have been in close contact with people who are symptomatic. When we publish the information about new cases, the agency makes sure that the families and close relatives have been advised first, so that the information is known to them first, and then we do the contact tracing.
Generally, it is no secret when there has been an outbreak. One of our worries has been the problems that children have been having. Text messages have been sent and there has been bullying around the idea that people from the school concerned have some kind of plague. That has caused the Health Protection Agency not to name publicly the schools involved. I guess that, locally, the schools will become known pretty quickly, not least because they generally close for seven days. But people are trying to be sensitive about the information and to ensure that the policy of containment works and that people support it. Incidentally, all our evidence from the public—most recently this morning—is that between 75 and 80 per cent. of them think that what I have described is the right way to deal with the outbreak.
Castle View school on Canvey Island in my constituency is now closed following five outbreaks of swine influenza. I congratulate the Government on their strategy and in particular on their building up of Tamiflu stocks. Will the Secretary of State estimate how long it will take for a specific H1N1 vaccine to become available? What research is being done on that right now? Will he confirm how long schools that are closed must remain closed, so that our constituents can start to plan again?
I hope to be able to say more about the vaccine in the debate on Thursday. British scientists at the Health Protection Agency in Colindale have identified the strain—the so-called isolate. They have passed that to Potters Bar, where the National Institute for Biological Standards and Control will now do the work of producing a vaccine. That work has been completed, and the next stage is what I hope to be able to tell Parliament about on Thursday. Efforts are going on in this country and abroad to ensure that we get a vaccine developed as quickly as possible. Of course, it would take at least five to six months to manufacture and produce it. However, we hope that having taken the first step, whereby we have identified the isolate, the next stage—to get the vaccine from that—is very close.
Accepting that if swine flu does take place, the elderly will be particularly vulnerable, will my right hon. Friend not only acknowledge that fact but explain to the House what systems are in place locally within the community to ensure that an early warning system is available and that medical help is immediate?
The elderly are obviously a prime concern, particularly if they are living on their own and need someone else to get their antivirals for them. At the moment, the evidence from Mexico—the HPA has just finished a week there and has brought back lots of detailed information—is that the people who are dying are aged between 25 and 50. My hon. Friend raises an important point. We must try to produce the vaccine that the hon. Member for Castle Point (Bob Spink) spoke about without interfering with the production of seasonal flu vaccines, which are to a great extent used by the elderly, but also by people with chronic conditions. We are aware of the issues with the elderly. We are considering who would be the priorities for a vaccine once it starts coming through; the elderly may or may not be in that category once we know more about this disease.
Choose and Book System
Spending on the development, delivery and maintenance of the choose and book IT system to March 2009 was £134 million. As at 31 March 2008, which is the latest date for which an estimate of the overall local and central expenditure on the NHS IT programme was made, the National Audit Office estimated that a total of some £3.55 billion had been spent on the programme.
I am grateful to the Minister for that reply. I speak to a lot of GPs, as I am sure all Members do, and the impression that I get from them is that patients prefer their GPs’ advice. GPs know their patients rather better than do software systems, which often override patient preferences anyway. In view of that, and given that the system has had a long time to bed in, is the Minister content that it is giving real value for money?
I am slightly puzzled by the hon. Gentleman’s question. There is no contradiction between using choose and book and giving patients choice; in fact, choose and book is a vital component in helping GPs to ensure that their patients are given choice. If, as he says, there are GPs in Cornwall who are not offering their patients that choice, I find that as unacceptable as he does. If there is a problem with the choose and book system whereby slots are not becoming available, which may be what he wants me to address, that is an issue that the local primary care trust needs to address. The latest figures for Cornwall that I have show that it is one of the highest performers in the country on choose and book, with up to 80 per cent. of GP referrals being made through that system. It therefore sounds to me as though both choose and book and the choice system are working pretty well in Cornwall.
My hon. Friend is right to introduce technology into the national health service, particularly in these formats. However, given that according to the National Audit Office the figures are running at £3.5 billion, has he analysed the benefit that is derived from such schemes compared with the cost of investing in other parts of the NHS? There is a great feeling that IT is overtaking many other aspects of clinical care, and that many local needs could otherwise be met through those funds. Is he convinced of the value for money of this funding?
There is no doubt that an initiative such as choose and book is cheaper and easier to use and helps to enable the choice system or other elements of the national IT programme such as picture archiving, which is incredibly important and successful around the country. No one can have any doubt that these initiatives have not only improved the quality of patient care but are saving the NHS a lot of money. At this stage of the national programme’s development, it is difficult to quantify the total benefit in terms of economics and patient gain, but every day patients and clinicians are benefiting from the advantages that the computer system provides to them. There are still many challenges ahead—I do not duck those at all—but countries all over the world are considering this, including Barack Obama’s America, where people are looking to introduce a similar sort of national computer system into the American health care system as the one we have here.
More than three years ago, Tony Blair promised that patient choice would be a key driver of reform, but in February this year the Minister had to admit that the choose and book system was being used by as few as 12 per cent. of GPs in some primary care trusts and that a mere three PCTs had, only recently, hit the Government’s downgraded target of 90 per cent. usage, which was meant to be reached two years ago. Given that doctors are finding that the system is slow to use and crashes frequently, will the Minister tell the House the average percentage of GP referrals that are now being made through choose and book, and whether he thinks that this is yet another example of his failure to deliver?
The Public Interest Disclosure Act 1998 gives clear legal safeguards to NHS staff who disclose protected information in the public interest. The penalties for those who punish staff for using that law are severe. The Department has made it clear that every NHS trust should have local policies and procedures in place to comply with the Act. The NHS constitution handbook, published on 21 January 2009, sets out how staff should have
“protection from detriment in employment and the right not to be unfairly dismissed for ‘whistleblowing’ or reporting wrongdoing in the workplace.”
I thank my right hon. Friend for that answer, but some weeks ago, he was asked why we do not have enough whistleblowers. In my experience in Coventry, we have had one or two whistleblowers who were on the receiving end of disciplinary action. How can we encourage whistleblowers if that sort of thing happens?
That is unacceptable, and it certainly is not the view of Public Concern at Work, the independent charity that, to a large degree, drove the introduction of the Public Interest Disclosure Act back in the late ’90s. It states that
“the culture is changing and people up and down the NHS are much more aware today that they may have to account for their actions…Recent initiatives mean that many, if not most, NHS Trusts are committed to promoting responsible whistleblowing as an essential aspect of good clinical governance. Whistleblowing in today’s NHS need not end in tears.”
That is supplemented by a survey of nurses, to which 87 per cent. responded that they would blow the whistle, so to speak, even if they suffered reprisals. The good news is that nurses say that the culture is improving year on year, and 77 per cent. say that the culture for raising concerns in their work is better than it was three years ago.
I am afraid that the Secretary of State completely misunderstands the position. The fact is that there are whistleblowers, but they are terrified to come forward. I have my own evidence of that, which I was hoping to raise when he gave an oral statement on Stafford hospital, which he has declined to do. The reality is that devices are being employed by certain hospitals and hospital authorities to bypass the 1998 Act, which is good in intention.
I strongly dispute the idea that Public Concern at Work or the Royal College of Nursing takes the view that the Secretary of State describes. He grossly misunderstands the nature of the exercise. It is very serious, and people are being terrified into not making statements. At Stafford hospital and others in the region, from which people have contacted me, the situation is very serious and needs to be dealt with. He is thoroughly complacent.
We have talked before about the mystery at Stafford being the absence of any whistleblower. There was an absence of whistleblowers when the general secretary of the RCN visited Stafford, when the Leader of the Opposition visited Stafford and said to the press afterwards what a great hospital it was, and through all the different procedures.
The hon. Gentleman accuses me of complacency, but give us the evidence and we will deal with things. The law on whistleblowing, which the Opposition voted against at the time, is very clear. There is a very clear protection. I have quoted the charity that has been responsible for pushing the matter—those were not my words but the charity’s. We also have the evidence of a very wide survey of nursing staff. Against all that, the hon. Gentleman says that we are complacent. We have introduced the legislation and the constitution that bolsters it, and we have made it absolutely clear that the law protects people in that situation. I do not accept that nurses, and least of all consultants or doctors—I have yet to meet a shy consultant—would not come forward on such a serious issue because they were somehow terrified, despite the protection of the law. I am sorry, but I do not accept it.
I must say to my right hon. Friend that the culture is changing more quickly in some parts of the NHS than in others.
To be constructive, will my right hon. Friend confirm that the Department has a contract with Public Concern at Work to provide free, confidential legal advice to NHS staff about whistleblowing? Will he consider perhaps making more effort to promote and publicise access to that service?
I will confirm that. I was the junior Minister who introduced the Act and we do have such an agreement with Public Concern at Work.
However, my hon. Friend was with me at Stafford hospital when we sat with all the representatives of the unions and the royal colleges—no manager in sight. We said that we were a bit puzzled about why no one blew the whistle, but there was no answer to that. No one told us that it was because people were terrified of raising points. I have no doubt that there were serious problems at Stafford hospital or that the staff were not listened to the many times they made representations, but my hon. Friend will agree that there is a total absence of evidence to show that someone was prepared to blow the whistle, but was disinclined to do so because they did not feel that they had the protection of the law.
The Secretary of State acknowledged in the House on 18 March with reference to the Healthcare Commission’s report on Mid Staffordshire NHS Foundation Trust:
“The Healthcare Commission has said that clinicians and staff gave up registering complaints at the hospital because they felt that they were wasting their time”.
He also acknowledged that the absence of whistleblowers was
“one of the great mysteries of Stafford”.—[Official Report, 18 March 2009; Vol. 489, c. 922.]
He should not be surprised. I cannot help feeling that we are living in parallel universes. A recent RCN poll of 5,000 nurses said that two thirds of nurses had raised concerns about care—
Order. Front Benchers have the privilege of getting in on the questions they choose, but that is not an opportunity to make a statement. Back Benchers must be considered, so perhaps the Secretary of State will try to answer what the hon. Lady has already said.
I do not think that there are any party political differences on the matter—we all want the issues at Stafford to be resolved. The hon. Member for Stone (Mr. Cash) has pushed the matter vociferously, as has my hon. Friend the Member for Stafford (Mr. Kidney). We want a solution.
I am also struck by the reluctance of the public in Stafford to be involved in Stafford hospital. We have talked about the staff—it is a foundation trust, so the staff have an important involvement in it—but there is also a problem with the public coming forward and getting involved—
It is hard to assess the risk posed by swine flu as the clinical picture remains unclear. There are some indications that the virus may cause only mild symptoms, and that, in some cases, people have recovered without antivirals. However, an overall prognosis for the impact of the virus is still difficult to determine at present and it is still too early for confident predictions about the possible severity of the flu in the United Kingdom.
I am grateful to my right hon. Friend for that reply. I read with great interest the brochure that the Department circulated, and it is helpful. However, I am sure that my right hon. Friend agrees that there is some difficulty with the substantial overlap between the symptoms of normal flu and those of swine flu. What would she recommend that my constituents do if they seem to have a severe case of what may well be normal flu? Should they go to their GP, ring a helpline or wait and see?
What I would say to my hon. Friend and, in particular, to anybody who has been following the media coverage is that either there has to be contact with somebody who has travelled to Mexico or the person affected has to have travelled to Mexico. They should then phone for advice, from either their GP, NHS Direct or the flu service line.
Earlier the Secretary of State said that the isolate had been identified and he spoke about the work of Potters Bar on the vaccine. What international co-operation has there been between the Department and other countries, or are we at risk of seeing vaccines being almost completed in countries around the world, yet without any proper understanding between them?
I can assure the hon. Gentleman that we are co-operating with our European neighbours, the World Health Organisation and the United States. That information is shared, because the isolation of the virus in the UK, for instance, is the isolation of the virus that happens to be in the UK, and it is compared with the isolates of the virus in, for instance, the United States. There is international co-operation to ensure that the development of a vaccine, if that is possible, is shared equally on a world basis.
The right hon. Lady will know that, through its modelling, which has been published in the journal Science, the Imperial College team has said, albeit with great uncertainty at this stage, that the information points to a pandemic, potentially at the lowest end of the scenarios that we have discussed for a number of years in the contingency plan. That would imply something in the order of one quarter more of the population being affected, with perhaps four in 100 people affected being hospitalised and perhaps four in 1,000 people affected dying. Given that, will the right hon. Lady confirm that we need to continue the counter-measures against the virus, in order to seek to contain it, and, in particular, that we will maintain post-exposure prophylaxis until such time as the virus is spread in the community and that we will pursue household prophylaxis thereafter?
I am grateful to the hon. Gentleman, because I know that he and my right hon. Friend the Secretary of State have been able to speak about the issue a number of times. I would like to confirm to him what the Secretary of State has already said about containment before—and if—the flu moves to sustained person-to-person transmission across communities. I absolutely confirm to the hon. Gentleman, particularly given that the World Health Organisation is at phase 5, that we will continue that planning until we have a much better understanding of the virus. We would then be able to share the details of that planning with him, including what steps should be taken after that. It is crucial that we continue to share that information.
Elderly Care Beds
Primary care trusts work with local authority partners to commission high-quality care services from appropriate providers to meet local patient needs, with a clear focus on improving health outcomes for the population, including older people. It is the responsibility of each provider—be it the hospital, the residential facility or another provider—to determine the level of service provision, such as bed numbers, to meet expected demand and to provide high-quality care.
I put it to the Minister that it is entirely wrong that primary care trusts that are not clinically qualified should deprive dying patients of beds. I hope that he will remove them from the picture and allow a decision to be taken by clinically qualified practitioners.
I understand the importance of the issue to the hon. Lady, but it is vital that we have an appropriate process for commissioning high-quality services locally. It is the responsibility of primary care trusts to undertake that function and, in the case of the care of elderly people, to do so, through beds in hospitals, beds in residential care and so on, in partnership with their local authorities. It is their responsibility to ensure that we have high-quality services from those appropriate providers. It is also a responsibility—this is subject to inspections and so on by the Care Quality Commission—to ensure that the relevant provider provides that high-quality care in a way that meets elderly people’s needs.
In the 24 months ending September 2008, 66,250 people saw an NHS dentist on the Isle of Wight. The equivalent figure for England was 27.1 million. We have increased dental funding to more than £2 billion and made it a national priority in the NHS operating framework that primary care trusts commission services to ensure access for anyone who seeks help in finding an NHS dentist. The NHS is planning that all PCTs will deliver this by March 2011.
I thank the right hon. Lady very much. There was an improvement in the availability of dentists on the island until the NHS abolished registration. We now have figures that show the number of treatments, rather than the number of individual patients getting treatment. Will she explain why the figures are now taking this form, rather than the old form?
On the Isle of Wight, the number of people getting access to, and treatment from, NHS dentists increased from 26.2 per cent. to 38.1 per cent. between March 2006 and September 2008. In fact, that is the biggest percentage increase in the country. The Isle of Wight is doing precisely as the Government have advised. It is looking at local need, commissioning the appropriate services and delivering that access. I understand that the hon. Gentleman would like that process to move faster, but the ring-fenced investment and the plans are in place, and the powers are in place for the PCTs. He has seen a marked improvement in his constituency.
I am sure that my right hon. Friend shares my concern about the continued inequalities in relation to cardiovascular disease. Will he provide me with an update on what is being done to tackle inequalities not only in the prevalence of the disease but in access to care?
My hon. Friend is absolutely right about the importance of this matter. The inequalities relating to cardiovascular disease have narrowed substantially over the past eight years, and we are well on track for a 40 per cent. reduction in the inequalities gap by 2010. The most important measure—among a range that I have too little time to set out—is the introduction of a vascular health check for everyone between the ages of 40 and 74 on a call-and-recall basis every three years. That programme commenced last month and it will be one of the most important contributors to tackling this disease and to focusing the NHS much more on prevention than on diagnosis and cure.
My right hon. Friend the Secretary of State and I have met Lord Archer to discuss his report, and the Government intend to respond to his findings before the House adjourns for the spring bank holiday recess. The question of a debate is a bit beyond my remit, Mr. Speaker, but I am sure that you heard what the hon. Gentleman said.
As my hon. Friend will know, the Department of Health’s long-held policy is not to fund in cases such as these. However, she has raised details about which the whole House will be concerned and on which it will want to see progress. The Secretary of State has offered to have a meeting with officials and the national advisory council of the Thalidomide Trust to pursue these matters, and I agreed during an Adjournment debate on 31 March to meet the all-party group on thalidomide. My hon. Friend the Member for Gower (Mr. Caton), who chairs the group, is going to write to me with details of the points that he wishes to raise with the Department on behalf of the group. That offers us a way of taking this matter forward.
I will happily look into the case that the hon. Gentleman raises. He will know that foundation trusts come under the remit of Monitor rather than the direct remit of the Department of Health. I would also point out the finances not only of his local hospital but of the NHS in general are in much better shape than they were even just three or four years ago.
May I congratulate my right hon. Friend on the abolition of NHS prescription charges for cancer patients? Will he tell us when the review of long-term conditions that are currently not exempt from such charges will be completed?
My right hon. Friend is right to say that we took the decision on cancer prescriptions as the first step towards looking at other long-term conditions. The first thing we have to do is to define long-term conditions—some very easily slot into that definition and there is no mystery, but there are some cases around the edges that we need to be absolutely sure about. That is why we asked Professor Ian Gilmore to carry out this report. I understand that his work will be completed in the summer.
I can confirm that. It is the type of project that we want to succeed because it is the type of project that the local NHS feels is absolutely essential. As far as I am aware, nothing has changed from the position that obtained when we met in my office a few months ago.
I am grateful to my hon. Friend for writing to me, following the last Health questions. I wrote to him earlier today about this. The local health trust says that giving this contract—[Interruption.] Postmen can deliver very quickly. The gloriously named Sunlight Laundry, which will take over this project, can do everything being done at the moment but at a lower price. I am sure that it does not want its dirty linen to be washed in public, so what I have done in my letter to my hon. Friend is to offer a meeting with the Under-Secretary of State for Health, my hon. Friend the Member for Brentford and Isleworth (Ann Keen). I hope that it can take place shortly.
What we have done since the allocations last December—it was a two-year allocation of 5.5 per cent. each year and included the ability to draw down £800 million of surplus—is to say that there is a message here. It comes from the chief executive of the NHS as well, and it is that the NHS has to prepare for a time when we will not have such spectacular increases in growth. We brought the level of investment up to within touching distance of the European average. Now that we are there, at around 9 per cent., it is inconceivable—irrespective, incidentally, of the economic situation—that such large increases will continue. The message from the chief executive of the NHS and from me is that we need to think in a five-year time frame, including not just the next two years, but the three years to follow.
We cannot say at this stage what the expenditure will be in the NHS, but we can say that it will continue to be our absolute priority. As the Prime Minister told the Royal College of Nursing yesterday, we hope very much to ensure that there are real-terms increases over the coming years, although they may not be at the same level as in the past.
My hon. Friend has raised a very important point, which will concern all Members, about the drugs that are apparently being made available, particularly those containing benzylpiperazine. The Medicines and Healthcare products Regulatory Agency is pursuing the matter, and is trying to establish whether the drugs need to be defined as medicines when they are sold either on the internet or over the counter. In addition, the Advisory Council on the Misuse of Drugs is considering the whole issue and, in particular, whether certain products should now be banned. When we receive its recommendations, I shall be more than happy to inform my hon. Friend of them, because the present position is resulting in deadly drugs being available when they should not be.
The Minister of State will know from our recent Adjournment debate how important it is for thousands of my constituents to be guaranteed access to GPs registered in England so that they, residents of England, can be treated under the rules of the English NHS rather than those of the Welsh health service. Is he able to update me following his recent visit to my constituency and his meeting with the chief executive of my local primary care trust?
I am well aware of the issue, because the hon. Gentleman has raised it with me on a number of occasions. I am not sure that anyone could say with any confidence that thousands of people may be in this position, but there is no doubt that a number of them may be. Having discussed the matter with the chief executive of NHS Gloucestershire during my visit to the hon. Gentleman’s constituency last week, I can inform him that the primary care trust will seek to resolve the case that he raised with it, involving a particular couple. It also intends to survey all Gloucestershire residents registered with GPs in Wales to establish how many of them might wish to register with GPs in England, with a view to providing more GPs in the part of the hon. Gentleman’s constituency where a problem exists.
Why are NHS children-only dental contracts still operating with private dentists? Is that not an unacceptable legacy of practice in the past, when parents were persuaded to take up private treatment on the basis that their children would continue to receive NHS treatment?
My hon. Friend is a member of the Select Committee on Health, which produced a very good report on dentistry, and that is one of the points that it raised. I have asked Professor Jimmy Steele to examine all the issues, including registration and children’s services, and to report back very quickly. I hope that at the same time we can produce a response to the Committee’s report, because I think that it made an important contribution to the debate about the future of dentistry.
One in five people in the United Kingdom suffers from hay fever, especially at this time of year, and one in three people will develop an allergy at some point in their lives. What are the Government doing to raise awareness among GPs of immunotherapy as a treatment that can tackle causes, not just symptoms, and bring lasting relief to many allergy sufferers?
I thank my right hon. Friend for his visit to Chorley hospital, but may I draw his attention to an issue that affects the whole of Lancashire and, indeed, the whole country? I refer to the funding of mental health services. We all know that mental health care is a poor relation. What can my right hon. Friend do to help pensioners who suffer from mental illness? Can he secure extra funds and support, and ensure that provision is seamless between social services, primary care trusts and hospitals themselves?
I very much enjoyed my visit to my hon. Friend’s constituency; I saw some very good things going on there. On mental health, last year’s OECD report said that Britain is in the lead on mental health services—in the lead on the number of psychiatrists and psychiatric nurses per head of population, and in the lead in having the lowest suicide rates since records began. We want to do more, however. The roll-out of psychological therapies is crucial to people of all age groups, but especially pensioners, and 3,600 psychological therapists are being trained up in what Lord Layard describes as the biggest single improvement to mental health since the NHS began.
In the interests of value for money in the NHS, may I ask Ministers to look into the prescription of what are known as “specials” by GPs? A local pharmacist has written to me giving an example of a product consisting of 50 g of Betnovate cream, which costs £2.86, and 450 g of E45, costing £5.39; the total cost of the mixed cream was £347.88. Clearly, there is money being wasted here; will Ministers please look into this?
Points of Order
On a point of order, Mr. Speaker. It is stated on page 370 of the 22nd edition of “Erskine May” that
“parliamentary government requires the majority to abide by a decision regularly come to, however unexpected”,
and page 368 says:
“Technically…the rescinding of a vote is a new question, the form being to read the resolution of the House and to move that it be rescinded”.
On 3 July 2008, amendment (f), which I proposed, was agreed unanimously and without dissent by the House. It removed the ability of Members of the House to designate separate homes as main homes for capital gains tax purposes as opposed to main homes for expenses. It would appear that the House of Commons Commission has not applied that resolution, but, under the House of Commons (Administration) Act 1978, the Commission does not have the power in any way to overturn a decision of the House. I seek your guidance, Mr. Speaker, on when this resolution will be applied, or whether in fact it is being applied but that has not been stated.
I thank the hon. Member for giving me notice of his point of order. I understand his concern. This matter has been considered by the Members Estimate Committee and will, no doubt, again be considered by the Committee. I will ensure that he gets a proper response.
May I also say to the hon. Gentleman that I am not saying that we did not fully understand the amendment, but if he can come to the Clerk of the House and give us an explanation of his interpretation of it, that will help the Members Estimate Committee. I hope that that is all right with the hon. Gentleman, and that he is prepared to do that.
On a point of order, Mr. Speaker. In Health questions just now, I referred to Stafford hospital. In the light of what the Leader of the House said in reply to a question that I put on 30 April, I and other Members thought we could expect an oral statement—not merely a written statement—from the Secretary of State regarding the Stafford hospital situation, given the reports. In fact, I think it is true to say that the Secretary of State has certainly, during the course of the last 10 days, indicated to me that he thought he would be doing so. On Thursday last week, however, I received a letter from the Leader of the House and, without going into the detail, it says:
that is the written statement—
“represents the Government’s response”.
In other words, we are not getting an oral statement. I have to say that in the light of questions relating to whistleblowing and my own and others’ determination to have a public inquiry under the Inquiries Act 2005, which would protect whistleblowers, we need to have a proper statement from the Secretary of State on these reports. Mr. Speaker, will you please protect the House and ensure that the Secretary of State comes to the House and gives an oral statement?
The hon. Gentleman will know that I am not in a position to bring the Secretary of State before the House, except when an urgent question is granted. What I would say, however, is that the hon. Gentleman’s deep concern has been heard. It has been heard by the Health Ministers on the Treasury Bench. There is also nothing to stop the hon. Gentleman applying for an Adjournment debate, which would mean that a Health Minister—I am not sure whether it would be the Secretary of State—would certainly come before the House.
On a point of order, Mr. Speaker. At column 548 in yesterday’s Hansard, you explained all the reasons why the Metropolitan police have been called in over the alleged stealing of a disc, which was probably sold to The Daily Telegraph. I have absolutely no disagreement with all the reasons that you gave, but, on reflection, I wonder whether it would be right for you to apologise to my hon. Friend the Member for Vauxhall (Kate Hoey). When she raised a point of order, you referred to her “public utterances” and “pearls of wisdom”. [Interruption.] May I put it to you, sir, that a Member of Parliament should be able to raise a point of order without there being such personal comments, which some of us at least—not all of us, apparently—consider inappropriate. Should not the Speaker always refrain from personal comments?
Further to the point of order raised by my hon. Friend the Member for Bassetlaw (John Mann), Mr. Speaker. Whatever the outcome of the discussions he has with the House of Commons Commission, is it your belief that any such change on the question of the nomination of homes could not be retrospective and therefore would not apply to any of the information currently in the public domain?
Surface Water and Highway Drainage Charges (Exemption) Bill
Motion for leave to introduce a Bill (Standing Order No. 23)
Mr. Mike Hall (Weaver Vale) (Lab): I beg to move,
That leave be given to bring in a Bill to require water companies to exempt from surface water and highway drainage charges places of worship, non-profit making sports clubs, scout groups and guide associations; and for connected purposes.
In short, the need for this Bill has been created by the water regulator, Ofwat, when it called on water companies to alter the way in which they charged for surface area and highway drainage, and by the very short-sighted actions of United Utilities, when it implemented changes to the way in which it charged non-household customers for surface water drainage—incidentally, those changes were approved by Ofwat.
On 30 September 2003, Ofwat announced the outcome of its review into how water companies charged for surface water drainage. It concluded that the fairest way to charge for surface water drainage was by charging non-household customers on the basis of the size of their estate—that is called site area charging. However, Ofwat failed to implement its own guidance in those matters and did not carry out a regulatory impact assessment on the change of policy. Astonishingly, it did no work on the impact that surface area charging would have on community voluntary groups.
What Ofwat did instead was to warn water companies that a change to surface area charging may have a negative impact on sensitive properties such as schools, hospitals and places of worship. In general, Ofwat warned water companies that they would need to take into account the scale and speed of any changes to see whether they were reasonable and acceptable to customers. United Utilities took Ofwat’s advice and brought in surface area charging, but it did not take into account the scale and speed of the changes, the impact that that would have on its customers and whether that was reasonable or acceptable.
In defence of the change, United Utilities stated that it had been required by Ofwat to bring in surface area charging. It went on to claim that the changes would be revenue neutral. On that point, United Utilities has not been able to produce figures that substantiate that claim.
It was not long before churches, community sports clubs and scout groups contacted me about media reports and contacts from their parent organisations warning that they would be required by United Utilities to pay massive increases for surface area and highway drainage. Before the change to surface area charging was introduced, such organisations had been granted significant discounts on their water bills because of their status. Their bills were based on the rateable value of their property, which was either zero or heavily discounted.
I took up these cases with United Utilities. Sadly, in several cases, it emerged that United Utilities had not been billing the organisations for water rates at all, and it then decided to issue them with water bills based on surface area charging. The bills were also backdated for seven years. That was a particularly insensitive approach by United Utilities.
I will give two examples of just how much the water bills are going up. The 1st Halton scout group in my constituency saw its water bill go up from £37.80 to £198, which equals a massive 424 per cent. increase. St. Mark’s church and the Bethesda church in the Hallwood ecumenical parish in Runcorn are billed jointly. In 2007-08, they did not pay any water rates. In 2008-09, their surface area charge went up to £181.76. That is set to rise to approximately £2,000 by 2010-11. That is a massive increase that the Hallwood ecumenical parish will not be able to afford.
For places of worship, community sports clubs, scout groups and guide associations, every extra £1 they spend on surface water drainage is £1 less that they have to spend on the valuable services they provide for their parishioners, communities and members. In the area covered by United Utilities, there are more than 2,000 faith buildings and 600 not-for-profit sports clubs. There are also 900 scout groups in the United Utilities area which are going from strength to strength. Over a three-year period, those groups will face an increase in bills of up to around £2,000 per annum. If those increases are implemented, for many groups it will mean bankruptcy.
There has been considerable criticism of the way in which the surface area charging scheme has been implemented for places of worship, community sports clubs, scouts and guides. That criticism has come from both sides of this House, and we have seen concerted effort from hon. Members, especially through the all-party scout group, to try to change the policy. Interestingly, Ofwat has now started to criticise United Utilities’ approach.
On 21 January, Ofwat issued a statement saying that United Utilities had poorly implemented the new system of surface water charges. In particular, it had failed to communicate the fairness and environmental benefits of the new system and failed to take into account the impact on the 2,000 faith buildings and 600 not-for-profit sports clubs in its area. Ofwat went on to announce that United Utilities had agreed to a one-year moratorium during which surface area charges would be frozen at 2008-09 levels for faith buildings, community sports clubs, scout groups and guide associations.
At face value, that was a much welcomed measure. However, I am very concerned that this one-year moratorium will only delay the implementation of surface area charging and will not result in a charging policy that is both acceptable and fair to those groups. The reason I am concerned is that Ofwat has made it clear that United Utilities should use the one-year moratorium to work with customers to communicate the need for the new charges and offer advice on how they can implement environmental improvements which will help them to reduce costs significantly.
Ofwat has also said that United Utilities will use the moratorium to create a new time frame for the implementation of the surface area charging scheme by spreading the remaining charge over a longer period of time to allow time for customers to take measures that will offset future costs and also benefit the environment. On that basis, at the beginning of the financial year 2010-11, places of worship, community sports clubs, scout groups and guide associations will still be faced with substantially larger bills for surface area drainage. Simply altering the implementation date is not good enough. Those organisations want to see a scheme that places them back where they were prior to the change.
Ofwat has made it clear that certain water companies have been able to bring in changes to charges that have been beneficial to the communities they serve, and it cites Severn Trent Water. Severn Trent has an exemption for community and voluntary groups from surface area charging. It is very popular with those groups, for understandable reasons, and that is why there have been no complaints to Ofwat about the charges under Severn Trent. Unfortunately, Ofwat has instructed Severn Trent that the exemption cannot continue and that it must re-visit the scheme and remove any subsidies.
Ofwat has made it clear to water companies that it will not approve any tariffs for surface area charging that involve cross-subsidies, are based on rateable values or involve exemptions. Ofwat has also instructed all water companies that their tariffs for surface area charging have to be approved by November this year. Conversely, Ofwat has not said what types of charges other than surface area charging will be acceptable. Unless something is done now, places of worship, non-profit making sports clubs, scout groups and guide associations will still be faced with the bills, which will have been delayed for only 12 months.
United Utilities and other water companies have fallen foul of the same directives from Ofwat. We have here a classic case of unintended consequences of the actions of the regulator, and only the regulator can break the deadlock and put things right. United Utilities and other water companies say that they do not have the legal scope to bring in a scheme for surface area charging that will benefit places of worship, community sports clubs and guides and scouts.
The Bill sends a very strong message to Ofwat that it must act now to break the deadlock, and must start to be part of the solution and stop being part of the problem. If action is not taken now, it will have a massive impact, with massive water bills closing down places of worship, community sports clubs, scout groups and guide associations across the county. The purpose of this Bill is to provide certainty that such a scheme is possible by bringing forward legislation that exempts places of worship, community sports clubs and guides and scouts from having to pay surface area drainage charges. I commend my Bill to the House.
Question put and agreed to.
That Mr. Mike Hall, Andrew Miller, Helen Southworth, Derek Twigg, Mr. George Howarth, Ian Stewart, Mr. Greg Pope, Mr. Neil Turner, Janet Anderson, Dr. Brian Iddon, Tom Levitt and David Heyes present the Bill.
Mr. Mike Hall accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 16 October and to be printed (Bill 94).
(Clauses 7, 8, 9, 11, 14, 16, 20 and 92)
Considered in Committee
[Sir Alan Haselhurst in the Chair]
I call Mr. Stephen Timms to move the order of consideration motion.
That the Order in which proceedings in the Committee of the whole House on the Finance Bill are taken shall be: Clauses 7, 8, 9, 11, 92, 14, 16 and 20.—(Mr. Timms.)
I beg to move amendment 1, page 3, line 16, leave out ‘28%’ and insert ‘25%’.
After that rather shaky start, Sir Alan, I am sure that the rest of our Committee proceedings will move more smoothly.
Clause 7 sets the main rate of corporation tax at 28 per cent., but the amendment—which I also tabled in Committee to last year’s Finance Bill—would reduce that to 25 per cent. We have tabled amendment 1 for the same reasons that applied last year. We believe that the headline rate of corporation tax is uncompetitive, and that it impacts on the UK’s attractiveness as a place to do business. If we are to look forward to how the economy will develop once the recession is over, we need to think about making sure that we are as competitive as possible when compared with other nations.
Some may argue that now is not the time to think about reducing the headline rate of corporation tax and that we should focus first on the current economic and fiscal crisis, but I do not believe that we can afford to ignore the UK’s competitive position at this time. I shall set out in more detail why I think the amendment is important and necessary and why I believe the Committee should support it.
Five years ago, Britain had the fourth lowest corporation tax rate in the EU. Now, even after the reduction in the headline rate from 30p to 28p in the 2007 Budget, we have the 19th lowest rate. The average in the OECD is 22.5 per cent., so Britain’s rate is some 5.5 per cent. higher than that. We need to address that. Without a change, we are likely to find ourselves slipping further down the OECD table and putting ourselves at a competitive disadvantage to other members of the OECD, the G20 and the EU.
We can take it for granted that everyone wants to reduce taxes when they can, and no doubt we will come on to how much the proposal would cost and how the Opposition intend to pay for it. On the point of comparison, however, does the hon. Gentleman agree that our present 28 per cent. rate is distinctly lower than the various forms of corporation tax in France or Germany, taken together? They are our principal competitors, so there is not a great deal to be gained from the comparisons that the hon. Gentleman makes.
The hon. Gentleman has long experience of business, both in the UK and overseas. He will understand the importance of remaining competitive and of always being vigilant about what other nations are doing. Tax has become an increasingly important issue when it comes to the location of businesses and, given that both capital and labour are very mobile now, we need to pay attention to it. It is not good enough to say, “Okay, France and Germany have higher rates than we do.” We need to look at the broad perspective, because there are other countries that are happy to compete for inward investment and people to join their work forces.
But we have also slipped down the table: our rate used to be the fourth lowest, and now it is the 19th lowest. We can pick and choose our comparisons, but the reality is that we have moved down the league table. That is what we need to reflect on. I would not want always to benchmark myself against the performance of the French and German economies. The Prime Minister has always boasted about how we have performed better than other countries, but I do not think that that is a very fruitful route to go down.
Is it not potentially misleading to concentrate solely on the rate of corporation tax? We have to include comparators such as incentives, concessions, allowances and the regulatory frameworks in other nations. The headline rate of corporation tax may or may not be a significant factor in decisions to invest or relocate.
The hon. Gentleman makes an important point. I do not argue that my proposal is a magic bullet—that all our problems would be dealt with overnight by reducing the headline rate from 28 to 25 per cent. Within the confines of the debate, I hope to touch on that briefly later in my speech. He is right: there are other factors that businesses bear in mind when thinking about the location of their business. They include the predictability and certainty of the tax system, which again are perceived to be weaknesses in the UK tax regime. Our tax system is not seen to be as predictable and as certain is it could be. In attracting businesses to the UK and keeping in the UK those that are already here, I am the first to accept that the amendment is not a magic bullet.
Is my hon. Friend, like me, concerned to see Shell, for example, deciding to locate its headquarters and taxable operations in Holland rather than here, because the Dutch have a lower tax rate? Does he think that the Irish rate is extremely attractive to many businesses thinking about an English-speaking location? Is he worried by the flight of much of our insurance industry out of this country for tax reasons?
My right hon. Friend makes some important points. I shall discuss later some of the companies that have relocated from the UK to overseas jurisdictions because of tax regimes and rates. A number of Lloyd’s-based insurers have moved to Bermuda, in part for regulatory reasons, but in part because of the rate of corporation tax in Bermuda. Canada is setting a clear policy goal of having the most competitive rate within the G7, because the Canadians recognise how easy it is to move from one jurisdiction to another, particularly among English-speaking countries, and how important tax is—perhaps following the Irish example, where a very low corporation tax rate was set to attract businesses into the country.
People regard such tax policies as a way to gain competitive advantage and we need to bear that in mind. When I first spoke on a Budget from the Dispatch Box, in 2006, when the right hon. Member for Normanton (Ed Balls) was Economic Secretary, the Government dismissed this issue as though it did not matter. I thought that that was a disappointing, short-sighted view of the importance of tax to attracting businesses to the UK. The present Financial Secretary is much more aware of these matters and I expect us to discuss some of the reforms to the taxation of foreign profits later. The Government have been slow on the uptake, however, which has damaged our competitiveness.
I thought that the right hon. Gentleman wished to intervene earlier. Does he wish to do so now?
But Canada has stated a clear ambition in that respect, and our competitors are to be found outside the G7 as well. The very fact that we have had to expand to the G20 demonstrates the importance of other nations as competitors to the UK.
Let me give a few examples of countries with lower tax rates than ours. My right hon. Friend the Member for Wokingham (Mr. Redwood) referred to the Netherlands, where the corporate income tax rate is 25.5 per cent. Norway and Sweden are in line with us, but Canada—a member of the G7—has a rate of 19.5 per cent.; our position in the G7 is therefore under threat from Canada. Within the EU, the Czech Republic, one of the new accession states, has a rate of 21 per cent., and Portugal, Greece, Denmark and Austria all have a rate of 25 per cent. Although the rate in Germany is a central Government rate, clearly there are federal rates, too. The headline rate in Germany is 15.83 per cent. There are a range of views. We can pick and choose, but the general picture is that we have moved backwards, not ahead, in the league tables; that is the point that we want to make.
Surely the point is that when we make a judgment we have to take the most meaningful comparators. We could include whatever country we liked from across the world, if we took what the hon. Gentleman says literally and took it to its logical yet absurd conclusion. Surely it is therefore right to consider the members of the G7, which are our real competitors in such areas. Perhaps focusing on that at this point of time, when we are at a crossroads, is not the most relevant thing to do. He has to see the matter in that context.
I think that this argument about the G7 is a bit sterile and a bit stale. It says that the G7 economies are the only ones that we should care about, yet we held the G20 summit in London just last month because we recognised that the global economy is changing. Countries that were previously of relatively little economic importance to the world are becoming increasingly important to the shape of the global economy. We cannot rest on our laurels by assuming that the G7 will always remain in pole position; we cannot take that view. If that was the view that the hon. Gentleman took when he was in government, I am disappointed and surprised at him.
I agree that the G7 argument is spurious. Workers in my constituency have recently lost their jobs to Hungary and China. We will never compete with those countries on wage costs, but does the hon. Gentleman not agree that a reduction in corporation tax simply helps to create a competitive package? It would at least make it a tough decision, and not an easy choice, for boards of directors to move their businesses elsewhere.
The hon. Gentleman makes an important point about his experience of jobs in his constituency moving to China and Hungary. There may be situations in which we cannot compete with such economies, but we should make sure that we have the best possible competitive environment—an environment that will encourage businesses to invest in the UK, and ensure that businesses based in the UK see our tax system as a reason for being here.
The right hon. Member for Wokingham (Mr. Redwood) drew a comparison with Ireland. During my time on the Treasury Committee, its Conservative members frequently made comparisons with Ireland; they said that its tax rates and deregulation were important pull factors for companies that chose to locate there, or that it was always a threat that they would locate there. Given the economic situation in Ireland—businesses are closing down and leaving that country—is it really a valid comparison? Is that really the model that we should look to? Does that point not shore up what my colleagues on the Labour Benches have been saying—that we should be making a comparison with members of the G7 and our real competitors, such as France and Germany, instead?
Labour Members say, “The Irish economy has collapsed, so we should throw out the idea that low tax rates and a proportionate regulatory environment are means by which to achieve economic growth.” I know that that is a seductive argument, but part of the problem for the Irish economy, as I understand it, is that because of the euro there were low interest rates when the economy was booming. There was an asset price bubble in Ireland, which has burst, as it burst in the UK. Some of Ireland’s problems flow from that, rather than from the fact that it has a low corporation tax rate or a particular regulatory environment.
We have to be careful to understand correctly the causes of success in Ireland, and the cause of its current economic problems. I would argue that its problems have to do with the macro economy, and the way in which the euro does not necessarily meet the needs of every economy in the eurozone—a point that my right hon. and hon. Friends would very much recognise. I suspect that even the Government recognise that point from time to time; that is probably why we are not in the euro. The convergence criteria have yet to be met, even if they are still being measured over in the Treasury.
I am not sure that it is the main cause, which is the asset price bubble that built up because credit was cheap, thus enabling people to borrow, pushing up prices in the housing market. That is exactly what has happened in the UK. We have a solution in macro-prudential regulation and in giving the Bank of England greater control over the amount of debt in the economy, which will tackle issues relevant to the asset price bubble at a time when inflation rates are lower. The hon. Lady may be right to identify the lack of macro-prudential regulation as a weakness in the Irish economy, but it is a weakness, too, in our economy, which is why reform is needed.
I am grateful to the hon. Gentleman for his usual generosity in giving way.
These are difficult issues, but from looking at the figures in the Red Book, I would imagine that the Treasury has taken corporate relocation into account, so if the amendment were accepted, tax revenues in the United Kingdom would drop by £3.7 billion, as a rough estimate. Why is the hon. Gentleman not pursuing the logic of his position in going for the OECD average of 22.5 per cent. corporation tax which, again on those figures, would cut corporation tax revenues in the UK by £6.8 billion? Where is the money coming from?
I am grateful to the hon. Gentleman for raising the issue of costs, and I shall tackle it within the narrow confines of our debate. I think that that was his first contribution to the Committee of the whole House, but he has featured in previous Finance Bill Committees, bringing his detailed knowledge of explanatory notes to the fore. I hope that he will be tempted by the usual channels to serve on the Public Bill Committee again, because we missed him last year. It would be nice to see him again this year, taking part in debate on probably the last substantive Finance Bill before the general election.
It is important that we have a competitive rate of corporation tax. One of the great strengths of the UK is that we have an open economy, which is the basis on which the City of London, the global financial centre, has grown. There has been a free flow of capital and people into London, which has made it a successful centre. The fact that businesses are prepared to move to this country means that—
I share the hon. Gentleman’s enthusiasm for the notion that the hon. Member for Wolverhampton, South-West (Rob Marris) should serve on the Public Bill Committee, but I would be interested to hear him develop his response to the intervention. Even if we were minded to support the amendment, there would be cost implications, so given that we have a budget deficit of £175 billion, is the hon. Gentleman confident that that cost gap can be bridged, and does he anticipate that the extra industry of the type that the right hon. Member for Wokingham (Mr. Redwood) often describes in these debates will be sufficient to generate the extra revenue to make up the shortfall identified by the hon. Member for Wolverhampton, South-West?
I had forgotten that we had the voice of fiscal conservatism to the left of our Benches.
I will, as I said earlier, return to the issue of costs. However, I have not yet addressed the issue of whether we are dependent on an increase in tax revenue flowing from a reduction in corporation tax to fill the gap. We have not factored that into our costings—that would be a windfall to accounts. My right hon. Friend the Member for Wokingham is a great proponent of the Laffer curve, but I am a bit more cautious than him about its impact and banking those gains, as it were, at this point. I would rather have a cost-neutral package of reform—and I will explain how we will fill the gap in a minute—than presume that we would get an instant flow of tax revenues. As the fiscal environment improves, I hope that that means that more companies will want to come to the UK, which will strengthen the flow of tax revenues to the Exchequer. Goodness knows, we need it at the moment.
I thank my hon. Friend for his generosity in giving way. Clearly, our financial problems are spread over more than one year, so a lower rate sends a signal. One would hope to keep companies in the UK, or encourage them to relocate to the UK, so that they would pay tax over three or four years. One year, if the figures are out, will not make much difference, but it will make a difference if a company is here for three or four years.
Indeed. A big part of the issue is sending a clear signal about what a tax regime’s direction of travel should be. One of the criticisms that people could make of the Government is that, at times, there has been a lack of clarity about that direction of travel. I shall touch on that in my remarks on clause 8.
I am grateful to the hon. Gentleman for giving way once more, and I am sorry for interrupting his flow. He said that the additional location or additional output of businesses were not factored into his financial calculations, so he has still not answered the hon. Member for Wolverhampton, South-West (Rob Marris), who made two points. The first was that, in his estimate, the cost would be £6 billion and he asked where the Conservative party would find that money; the second was to ask why the hon. Member for Fareham (Mr. Hoban) did not follow the logic of his own argument and reduce the rate to 22.5 per cent. I am thinking particularly of the first point: if there is not going to be extra industry and growth to bridge the gap, how does the hon. Gentleman propose to finance it?
I am just getting going on the amendment. I have said to both the hon. Member for Wolverhampton, South-West (Rob Marris) and the hon. Member for Taunton (Mr. Browne) that I will come to that point. I am not using a debating or rhetorical device to avoid answering the questions, but I want to deal with the issue in sequence. I ask them both to be patient; the day is still young.
Indeed—we literally have all night. Let me continue to make the case for why it is important for us to deal with the issue.
As I was saying, our economy is an open one. Businesses choose to locate here; we have few barriers to prevent them from doing that, and few that prevent them from moving offshore. Because we are so open, we cannot tax businesses on the basis that they have no choice but to stay here. The evidence has shown that businesses move. During the period covering the last Finance Bill, when we debated the same issue, companies such as United Business Media, Shire, Kraft, Experian and Google had moved outside the UK. To pick up on the point made by my right hon. Friend the Member for Wokingham, since then, Beazley, a Lloyd’s of London insurer; WPP, the advertising giant; Regus, which provides office services; Henderson, a major fund manager; and Charter, an engineering company have all done the same. The fact that they constitute a broad spectrum of businesses from a wide range of industries is telling.
We have had warnings. Richard Lambert, the director general of the CBI, said:
“In today’s world of global markets, companies have many more choices to make about where to invest their capital and their talent than they did in the past. Business tax is one of the most important considerations that firms have to take into account, and it is easily measured…business leaders believe the UK’s corporate tax regime is more burdensome than it was five years ago, and that this is making the UK less attractive as an international business location.
The worry is that on current trends our position relative to other developed economies will deteriorate further over the next two or three years.”
Mr. Lambert made that statement in 2006. Time moved on, but the CBI returned to the same point last year in its publication “UK business tax: a compelling case for change”, which concluded:
“Comparatively high tax rates, increasing complexity and a lack of certainty are all contributing to declining tax competitiveness.”
The report called for a more strategic approach to corporation tax. So the voices making the point are not only those of Conservative Members; people in industry are also making it. Richard Lambert touched on the point raised by the hon. Member for North-West Leicestershire (David Taylor): the issue is not only the rate but other aspects of the tax regime. I remind Members of what Mr. Lambert said:
“increasing complexity and a lack of certainty are all contributing to declining tax competitiveness.”
This theme has emerged elsewhere—it does not just come from the CBI. Last year, the City of London corporation published a report, “The Impact of Taxation on Financial Services Business Location Decisions”, which discussed how “sticky” London is with regard to business staying put in spite of the tax regime, not because of it. It compared the UK’s corporate tax regime with those of other financial jurisdictions, and found that the UK had among the worst scores in two categories: “Certainty of Interpretation” and “Attitude and Approach”.
There is a growing consensus that says, yes, rates are important, but it is not just about rates. In a report commissioned by the Mayor of London—
It is very clear who the Mayor of London is. [Interruption.] If I meant the lord mayor, I would refer to the lord mayor of the City of London. [Interruption.] I am not sure that the previous Mayor would have been that interested in the tax regime, whereas I think that Boris Johnson is a bit more interested in the competitive position of London compared with other jurisdictions.
The executives interviewed for that report concluded that the UK’s reputation for predictable, competitive and constructively applied taxation is in decline, and the call was for a strategic policy on corporation tax.
When a detailed analysis was done in 2006, it was found that the de facto corporation tax rate for larger companies in the UK was not 30 per cent., the official rate at the time, but 22.5 per cent. because of the activities of avoidance vehicles and companies. Is the hon. Gentleman reassured by their ingenuity? If this is such a crushing burden on British industry, why do the majority of FTSE 100 companies pay no tax, or nugatory amounts, and did so even before the recession reduced their profit base?
The hon. Gentleman had an Adjournment debate on this issue last week when we were debating the Second Reading of the Finance Bill; I am sorry that I could not listen to his remarks. There is an issue about the tax take and what a tax gap is. One comment made about research by the TUC is that it does not take into account some of structural reliefs that are in place in the UK tax system. It is important that companies pay the tax they are due to pay and do so promptly and fairly. However, we live in a complex global economy. Several of the companies listed in the FTSE 100 are not necessarily UK trading companies, so they will be subject to a different tax regime. It is a difficult comparison to make. Just as the hon. Member for Coventry, North-West (Mr. Robinson) picked holes in my analysis of where we are in relation to the OECD, some would pick holes in an analysis of the tax gap. It is not as clear-cut as people would suggest.
I am interested in what the hon. Gentleman is saying about complexity and differences in the tax system. Before he moves on to Canada, will he expand on why he chose not to extend his proposed cut to ring-fenced profits and to apply it only to non-ring-fenced profits? I declare an interest as a shareholder in Shell, and an interest in North sea investments through my constituency and my membership of the offshore oil and gas industry all-party group.
The hon. Gentleman makes an important point. When I thought about the amendment’s impact, I considered whether it should deal with changing the ring-fenced profits rate as well, but I was conscious that that might take me into a new field of argument about oil taxation, which my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands) will deal with in Committee. There is a complex set of interactions for us to discuss carefully, but I wanted a narrowly framed amendment to avoid detaining the Committee for too long.
I turn to Canada, which the hon. Member for Wolverhampton, South-West mentions quite often. He prayed it in aid in relation to VAT in last week’s debate on the Bill. I do not know whether he has seen Canada’s aspiration for corporation tax rates, which was highlighted in the report produced by Bob Wigley for Boris Johnson. It stated that Canada’s mission statement on tax was that:
“To improve productivity, employment and prosperity in an uncertain world, a bold, new tax reduction initiative will reduce the general federal corporate income tax rate to 15 per cent. by 2012 from its current rate of 22.1 per cent. The general corporate income tax rate will decline by 7.12 percentage points between 2007 and 2012—giving Canada the lowest overall tax rate on new business investment in the Group of Seven (G7) by 2011 and the lowest statutory tax rate in the G7 by 2012.”
That is a very clear statement of intent from the Canadian Government about the direction of travel, and I am sure that people thinking about the relocation of businesses will take it into account.
Indeed, and that is why I carefully quoted the report, pointing out that the quotation related to the general federal rate. The report flags up the scale of the reduction—7 percentage points—in the federal rate of tax. The Canadian Government believe that that will provide the lowest overall rate of tax on new business investment in the G7, which is a clear statement of direction. In thinking about how economies move out of recession and plan for the future, countries that can afford such tax changes will think very carefully about making them.
I am not taking a position on where we should be in the league tables. I am saying that other countries are looking at how they can use their headline rate of corporation tax as a tool, to use the words from Canada, to
“improve productivity, employment and prosperity in an uncertain world”.
I am not suggesting that a target should be set for the UK’s headline rate of corporation tax; I am just pointing out to the Committee that it is an important tool that countries use to attract and retain businesses. We must be mindful of that when thinking about overall tax policy in the UK.
I believe that there is a consensus on this issue. The Prime Minister said last year at the Institute of Directors conference:
“Our aim is to reduce corporation tax even further when we can afford to do so...and we’re looking at how we’re going to do it.”
I shall come to how we can pay for that in a second, but I shall wait until the hon. Member for Taunton returns to his place so that he can hear that bit of fiscal prudence.
The Financial Secretary might remark that the Government have taken some measures to reform the taxation of foreign profits. I acknowledge that, although it has not been an entirely straightforward process and the Government have had a couple of consultations to attempt to get the right structure in place. The sense from industry is that that is now broadly in place, but no one should say, “The job is done, we have dealt with this issue, let’s move on to something else.” The listed publishing group Informa moved its tax domicile from London to Switzerland not long after the Budget, once it knew broadly what the shape of the taxation of foreign profits would be. We therefore cannot afford to rest on our laurels in any way, and that is why I tabled the amendment.
Given the Government’s dire fiscal position, I appreciate that the room for manoeuvre is limited. When borrowing this year is £175 billion and next year’s forecast is for £173 billion, there is not much money left in the kitty to cut the burden of taxes. That is why the package we propose today is cost-neutral. We have long made it clear that our reforms to the headline rate of corporation tax, reducing it from 28 per cent. to 25 per cent., will be funded by simplifying reliefs and allowances. [Interruption.] Right on time, the hon. Member for Taunton returns. We will bring the rate of capital allowances more closely into line with the accounting measure for depreciation, which is meant to reflect the deterioration in value of assets over their life. That is how we will fund the package of reforms. We set out that position clearly when we announced the policy, and we will continue to use that approach of funding changes in the headline rate of corporation tax by simplifying the tax system and trying to align the accounting and tax definitions of profit more closely.
I am rather bemused by the hon. Gentleman’s explanation of the cost-neutrality, which makes it sound as though the amendment were mere window-dressing. It will not remove any tax burden on UK-based businesses if, taken as a whole, the package is cost-neutral, with counter-balancing increases from the business sector. It sounds like grandstanding and window-dressing.
I thank the hon. Gentleman for his generosity in giving way. On the projections for corporation tax this year—I do not say he accepts those figures—the amendment would cost the Exchequer £3.7 billion. If he proposes a cost-neutral package, the £3.7 billion will be raised from businesses through other mechanisms—for example, changes in allowances. How would the amendment, as part of such an overall package, have any effect on whether a company decided to relocate to Switzerland? A company would examine the total tax burden, including allowances, not simply the headline rate of corporation tax.
I do not agree and I shall explain why. The hon. Gentleman argues that there is a clear relationship between businesses that pay corporation tax and those that benefit from capital allowances. He claims that they are alike in their profile, but I do not think that that is the case. The headline rate sends a powerful signal to business about the advantages of locating in the UK. Perhaps some businesses are not interested in capital allowances; that depends on the nature of the business—on whether it is service-oriented or invests more in capital equipment. There is a mixture of incentives, and there will be some winners and losers. However, it is important to send a signal about the direction of travel. There is no money available for tax cuts, so a funded package is the sensible way to send the right signal to business about the importance to us of the UK tax system’s remaining competitive.
The debate is interesting. As the hon. Gentleman said, we often had it in the Treasury, and the headline rate seems attractive. However, as my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) said, the tax burden remains the same. Will the hon. Gentleman bear in mind the massive impact of £3.7 billion a year on capital allowances? It cannot simply be dismissed as a compensating factor. The problem with much of British industry, particularly the manufacturing sector, is the UK’s persistent tendency to under-invest in capital. Increasingly, we say that we will have cheaper and more flexible labour and we chase that market down, but it does not get us anywhere. Let us consider what the Germans have done. Germany is the biggest exporter in the world. Its manufacturing sector is strong because of its continuing capital investment in its industry. By how much would the £3.7 billion a year reduce capital allowances? Has the hon. Gentleman taken that into account? Can he give us that figure?
According to some examples, the general plant and machinery capital allowance will be about 12.5 per cent., and the long-life plant and machinery capital allowance will be about 6 per cent., bringing them more closely into line with the accounting rates of depreciation.
Bringing those allowances into line with depreciation is no good at all. That means we will barely be investing at the replacement level, which was one of the big problems with the old General Electric Company. Tight though Lord Weinstock’s controls were, investment often ran at less than the depreciation rate. Manufacturing is a bit more in the spotlight now—rightly so, I think, and not just because I represent a manufacturing constituency in Coventry, in the west midlands—and it is regaining importance, given the imbalance that the collapse in the financial sector has caused, which we need to remove. However, having a target to drive capital investment down to the level of depreciation is a suicidal policy.
I am grateful to the hon. Gentleman for his rather lengthy intervention, because it enabled me to find a quotation. I will not hold a competition with hon. Members afterwards to see whether they know who the author was; rather, I will tell them. The quotation says:
“Promote investment and growth—by…reducing tax-driven distortions on commercial activity, ensuring that business decisions are based on commercial rather than tax considerations; stimulating higher levels of foreign and domestic investment through a lower CT rate on a broader tax base”.
That is a good summary of our policy. What particularly pleases me about that quotation is that it is from the Treasury, from a document entitled “Business tax reform: capital allowance changes”, a technical note from December 2007. Clearly, the debate has moved on since the hon. Gentleman was sat around the table watching TV with the former Chancellor—wherever he watched TV.
That is why I said what I said earlier, when I teased Government Members about there being a consensus on the issue. The Treasury recognises the power of the argument. Indeed, the hon. Member for North-West Leicestershire (David Taylor), who is a great campaigner against the tax gap, will be very concerned about distortions in the tax system that led to particular types of behaviour. I just think that the hon. Member for Coventry, North-West should be a little more careful not to state the Government’s case too boldly.
Is there not a slight paradox, given the argument being made? Only last year, there were significant changes to plant and machinery allowances and a massive reduction in industrial buildings allowances, which was commented on at the time. I am pretty sure that the arguments made by the Government on that occasion were rather different from those that we have heard this afternoon.
Indeed. I am pleased that the hon. Gentleman, who is a fellow veteran of previous Finance Bill Committee proceedings, has reminded me of that. We have had debates in Committee about reformed capital allowances before. The Financial Secretary and I had a debate about the abolition of the industrial buildings and agricultural buildings allowances. [Interruption.] The Minister says from a sedentary position, “You were against it.” We argued that the issue should be explored in more detail—so that the competitive impact could be considered—and that the Government had rushed into things without proper thought.
There are issues on both sides of the argument, although I take on board the important comment that the hon. Member for Coventry, North-West made about manufacturing. I know from my experience of visiting manufacturing companies in my constituency that compete at the top end, producing high value-added items that compete with the best—that is, if they are not the best in the world themselves—that there is a mixture of plant in those operations. There are some very old, faithful bits of kit in those factories, as well as some very new, modern equipment. It has been pointed out that the life of some of the more modern pieces is quite short, in relation to their contribution to the top end of manufacturing, and that they might therefore require a shorter depreciation period and a steeper write-off. We need to think about that.
I do not wish to stray too far from the subject, Sir Alan, but one issue that has emerged from the economic crisis is the need to broaden the base of British business, and manufacturing is important in that regard. We must be mindful of that. We are not blind to the concerns expressed by the hon. Member for Coventry, North-West, but we do not want to see distortion in the tax system.
Distortion in the tax system is one thing, and we have had the arguments about neutrality. I am sorry that I was not at the previous meetings of the Committee. May I just plead that we do not build into Conservative thinking the idea that the Treasury or the Department for Business, Enterprise and Regulatory Reform have ever had the policy—which the hon. Gentleman is now adopting—of reducing capital allowances down to the bare minimum of depreciation? That cannot be a proper theoretical or practical position to take up.
This is about trying to reduce distortions in the tax system to ensure that decisions are not being driven by tax considerations. The rate of the capital allowance is a cash flow issue. Over the life of an asset, a business will get full relief on that asset, assuming that it uses it until it is scrapped. It is a question of timing as to when that relief arises. I am sure that, at a later stage in Committee, we shall have a debate about the 40 per cent. first-year allowance being introduced in the Bill. Perhaps such a measure is right in a crisis, but for the purposes of the long-term reform and simplification of corporation tax, we need to look at reducing the distortions in the system.
In so doing, we should consider reducing the headline rate of corporation tax. That would send a clear message to businesses, which are fed up with the complexity and distortions in the tax system. A lot of the tax planning that takes place is a consequence of the distortions that are built in to encourage particular types of behaviour. A less complex, more straightforward system would yield benefits to the economy as a whole and make it more attractive to inward investment. Companies’ compliance costs would also be reduced, and my old employer, PricewaterhouseCoopers, might not get quite the same revenue flow from tax planning as it had in the past. That might be a price worth paying, however.
I have spoken for rather longer than I hoped to, but the Committee will be pleased to know that I have almost completed my remarks on this subject. It is important for Britain’s competitive position in the global economy that we have a corporation tax regime that is fit for purpose. Part of that can be achieved through tackling complexity, improving predictability and certainty, and having a proper consultation process in place. A fundamental part of the package, however, is to reduce the headline rate of corporation tax.
The amendment is part of a package that would ensure that the measure was cost-neutral. Regrettably, I cannot table amendments that would increase the tax take, so I cannot propose the flipside to this package, which would change capital allowances. However, we have set out a clear package of measures to reform corporation tax, in order to improve the competitiveness of the UK economy. As we look beyond the recession, we need to ensure that we are competitive not only with the G7 but with other global economies, so as to make the best of the advantages that we have, to broaden the base of the economy and to bring wealth and prosperity back to the UK.
Having been lucky enough to catch your eye, Sir Alan, I wish briefly to revert to the question of effectively reducing the capital allowances, which would come into effect in year one. Given the recession and its likely progression, immediate cash-benefit to companies is the very thing we need at the moment. Despite the seeming good news today, I think we all know that we are still in a precarious position and should not take anything for granted. The real need is for cash flows to companies now, so reducing capital allowances at this point in time would hit the very thing we need for the future, which is investment. The timing is particularly perverse.
Apart from the wrong timing, we would be hitting the very area where we are already weakest, and the hon. Member for Fareham (Mr. Hoban), who led for the Opposition, should realise that. We already have a relatively low depreciation charge, which arises directly from the fact that our manufacturing sector is weak compared to our main competitors in exports and world markets—India and China, for example, are taking the lead on many consumer goods. Where we have to compete, we already have a low depreciation charge arising from our relative under-investment over the years, so driving it down still further would hit the very sector that most of our policies should be directed at improving.
If they are loss-making, they are not going to benefit from a reduction in corporation tax. That is the whole point. They are losing money in part because of under-investment but mainly because of the world situation. The right hon. Gentleman has, surprisingly, made precisely my point for me. In the short term, those companies will not benefit from any reduction in corporation tax, so we should be trying to get them what they need by securing money for them from the various schemes that have been announced. Of course, I am the first to acknowledge, in front of the Secretary of State for Business, Enterprise and Regulatory Reform, that we have been slow to get those schemes off the ground. The Conservative party offers no help, however, by suggesting that we have £50 billion in our pockets and that it be should doled out to anybody who wants it. That is not serious.
I put it to the hon. Member for Fareham that what he proposes is wrong. I accept that getting the headline rate down is important, and the first thing we did in government, if the hon. Gentleman remembers, was to introduce a whole range of tax changes, including moving to a new system of corporation tax and other measures. Of course, we reduced the headline rate of corporation tax—it was the first thing we did in our first Budget. I do not underestimate the importance of that, but it is important that we send the right signal and timing is so important. It is no good sending a signal at the wrong time. No one is coming here to invest at the moment. However well we are doing in other respects, the important thing is to get money to the worst-hit sector at the moment, which is manufacturing.
I highlight the manufacturing sector, because, despite the dire forecasts of the City of London—the right hon. Member for Wokingham (Mr. Redwood) knows far more about that than I will ever know; indeed, he has probably forgotten far more than I will ever know, and probably to his own benefit—comparatively speaking, the City has not been so badly hit. Not yet, at any rate, so the losses are occurring where they always occur—in my own area, that of my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) and that of my right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform—[Interruption.] Yes, in the area of my hon. Friend the Member for Walsall, North (Mr. Winnick), too.
In sum, now is the wrong time and this is the wrong target. The Conservatives should reconsider and put off their proposal. In fact, I know that their proposal to reduce capital gains is not remotely serious—it is a talking-point, and quite a good one in a way. However, I believe, Sir Alan, that now is not the time and what is offered is directed at the wrong target. The amendment should not be pressed and we should not accept it.
I am a director of two companies, as declared in the Register of Members’ Interests, but I wish to make some general remarks about the tax system.
My hon. Friend the Member for Fareham (Mr. Hoban) has been quite right to say that a lower headline rate of tax could be very important in attracting more business to this country. I think he could have added that it will also affect the judgments of quite a lot of multinational businesses that already have some representation in Britain but have options over where they could carry out their various activities.
Quite rightly, it is not legal for a company to fiddle its transfer prices by suppressing profit in a high-tax regime in order to allow the transfer of that profit to a low-tax regime by artificial means. Under this and previous Governments, the Treasury has rightly adopted methods of preventing or stopping that practice. It is, however, an entirely legitimate business strategy for a multinational with factories, service areas and operational centres around the world to decide where, at any given time, it is best to allocate particular types of business. Obviously, if a multinational has footloose business of a high-technology, high-value-added, high-growth kind which will produce a high margin and plenty of profit, it will look very carefully at the effective and, especially, the headline tax rates around the world. All other things being equal, it may then decide to put more of its high-value, high-profit business into the parts of the world that offer the most competitive headline rates.
I am sure that, in their saner moments, Treasury Ministers agree that that is the case. They know that it happens and that it is a real possibility now, which is one of the additional reasons why I think my hon. Friend the Member for Fareham is right to press them again on whether they are certain that 28 per cent. is a sufficiently competitive rate at a time when the whole world is hungry for jobs and for higher-technology and high-value-added business, and when there is not enough business to go round and there are not enough jobs to go round.
It is true that our debate takes place against the background of a sharp devaluation of the pound. Such a devaluation has many drawbacks. It makes us all poorer, and it pushes up inflation—although it has one important advantage in that it makes our industrial and service activity much more competitive in the short term from a British base, which I trust will limit the damage in Britain compared with that in some of our competitor economies. However, we need to think beyond the one-off impact of the devaluation. We need to think beyond the present trough of the recession. We cannot be sure how long it will take, but there will be recovery, and we need to ask ourselves that fundamental question: is 28 per cent. a sufficiently competitive rate at the present time?
The hon. Member for Coventry, North-West (Mr. Robinson) rightly pointed out that the present Government had continued the previous Government’s policy of cutting the headline rate. That was very sensible, but I think that they got stuck. I do not think that they realised how rapidly the rest of the world had moved on. In the opening exchanges today, my hon. Friend the Member for Fareham was asked if he recognised that all that we needed was one of the more competitive rates in the G7, and that if we had it we would be all right. Of course we will not be all right. The world has been completely transformed. The Prime Minister accepted that in hosting and chairing the G20. The serious competitive threat to keeping manufacturing in Britain or attracting it to Britain today comes primarily from China and India. It is a serious option for most multinational companies to switch production from the United Kingdom or Germany to China or India. Most multinational companies already have several factories in those countries, as well as having manufacturing capability in Britain, Germany, the United States or some combination of all three.
The proposal that we are discussing goes to the heart of that issue. Why are we talking about the headline rate? We are doing so because it is the headline rate that people usually use in their simulations, models and forecasts when considering where to put their future investment. They also look at the underlying trend of policy. If, as in Canada, it is clearly a commitment to make the current rate the maximum and to say that in future it will be reduced, that will be a fairly influential factor when it comes to the judgment on the back of the numbers. If people see a Government who face a monumental deficit and who seem to think that it is only possible to secure more tax revenue by raising tax rates—itself a very dubious argument, in my view—they may well say to themselves that the Government could not be bothered to cut the rate below 28 per cent. although they knew that 28 per cent. was no longer particularly competitive, and that in a year’s time they, or some other Government, might be forced to put the rate up. That is not a good background against which to make an investment judgment.
I urge Treasury Ministers to think again. I urge them to understand that our prime competitors have much lower tax rates than we have, as well as having lower remuneration and other competitive advantages. I urge them to understand that the big investment players in manufacturing in this world already have capacity around the world, and the ability to switch. I also urge them to understand that we are talking about not just where the new factory goes, but where the work is allocated around the different factories of the world, and that if we allow our country to be perceived as more hostile to business—less competitive in tax and regulatory terms—we will start to be on the wrong end of business judgments. The people in the American, Japanese or Chinese multinational will start to say, “Well, we’ll leave the old, low value-added, less profitable business in Britain because of the tax rate,” and that means that Britain will lose jobs rather than create them, and that, in the end, the British plant will be the one most likely to face the closure notice because—surprise, surprise—it has the worst business and then it has the worst figures. The people in the multinationals will forget that that particular country has less good factory results because, for tax reasons, they chose to locate a less profitable business in it. Therefore, if countries are not careful, they can find that they are on a very slippery slope indeed.
In today’s exchanges, we have already heard Labour Members voicing scepticism about whether the setting of a 10 per cent. rate in Ireland was the reason so much business was attracted there. I can assure Labour Members that, from conversations I have had on account of my work on the policy review and for other purposes, it is clear that the low headline rate of corporation tax has probably been the number one attraction to footloose international businesses in choosing to go to the Republic of Ireland. They did not go there for the European Union grants; most of those were paid to agriculture, which was not a particularly successful sector. They did not go there to join the euro either, because they have to deal in a multi-currency world and what matters to them is the rate into the dollar, the renminbi and the rupee, so the euro is not that important. What mattered to them was that they assumed that they would run profitable businesses—and for quite a lot of years, many of them did—and it makes a huge difference to their forecast cash flows on an investment if they are keeping 90 per cent. of them rather than only 70 or 72 per cent. of them with the rest going to the Government. The Financial Secretary is a clever man, and he knows the power of compound arithmetic. The compound effects of taxing at 10 per cent. are so much more benign than the compound effects of taxing at 28 per cent.
I do have one, friendly, disagreement with my Conservative Front-Bench colleagues in that I believe that the Laffer curve works—they are sitting up and taking notice, Sir Alan. I am trying to make our lives easier, because I believe that this is one of those rare cases where we can have our cake and eat it. I believe that if a country is brave enough to set a lower tax rate, as the Irish were in spades, it can attract a huge extra amount of business, because world business is very footloose and very sensitive to the individual tax rates on offer. The Irish moved from being a lot poorer than the United Kingdom to being a lot richer. At the same time, they moved from spending less per head to being able to spend a lot more on public services because the low rates brought in so much more revenue. Such low rates can therefore have an extremely benign effect, but there is also the reverse effect: if a country allows itself to become too uncompetitive on the headline rate, it discovers that even putting it up does not solve its revenue problem, but can actually make the revenue problem worse.
Fortunately, so far, although we have had a run of companies leaving the country, such departures have been paced out and the Government have managed to suppress a lot of bad commentary on that, but I suggest to them that they should not push their luck any further. My hon. Friend the Member for Fareham produced a partial list of those companies that have gone. There are others as well, and in certain sectors, such as insurance, it is becoming a rush to get to the exit on time. The situation could be the same for some of the higher charging investment management companies, one of which my hon. Friend mentioned. This is a serious problem for the United Kingdom. To those on the Labour Benches who say, “Well, we don’t want to keep those sorts of businesses if they’re that sensitive to the tax rate and do not want to pay their fair due”, I say that that is a very short-sighted view. Businesses are, on the whole, motivated by profit and money as well as by wishing to serve the public, but they know they have to serve the public well to generate the revenues—that is the deal—and if we are too cavalier in our approach to taxing them, we do not just lose the tax revenue they were paying in terms of corporation tax, but we lose the tax revenue they were paying in terms of the tax on their employees, the national insurance and the VAT on the money their employees would have spent in the shops. We lose a great deal of tax revenue if we become too cavalier about where businesses are to be located.
The case is very straightforward: cutting the rate from 28 per cent. to 25 per cent. would send a very strong signal to our international competitors and, more importantly, to international manufacturing investors that this country is serious about remaining tax competitive. I hope that my Front-Bench colleagues agree that a change to 25 per cent. is the minimum that we need to do and that it is not the final resting place. I would be much happier with a rate of 20 per cent., because that would make a huge statement, would catapult us back to being a place that people talked about as a desirable location for investment and would definitely illustrate the Laffer curve—one might say that one would be “Laffing” all the way to the bank if one was to do that, because so much more business would be attracted and so much more revenue would be coming in.
As a result of these straitened times, my hon. Friend the Member for Fareham says that we should be absolutely sure and pay for this proposal out of removing allowances. That is my second-best option—I would rather just cut the rate—but it makes more sense than doing nothing, because it does take the trick on the headline rate and I do not believe it does the damage that the hon. Member for Coventry, North-West, who is no longer in his place, seemed to suggest. Past corporation tax reforms have cut allowances and cut rates, and they have been helpful and benign; they have usually resulted in more flows of business as long as they establish a competitive international rate that we can work with and of which we can be proud.
I do not think that those on the Treasury Bench are communicating a strong enough sense of the danger to our economy that the current situation represents. Perhaps they are resting on the laurels of the devaluation and perhaps they do not understand how tough the situation is, particularly in the manufacturing heartlands. They are not energetic enough in making the case within government that if we are serious about rebuilding our manufacturing, we need to put in place a package of measures, and this considerably lower corporation tax headline rate would be an important first step.
I would like this country to export more and make more, as that is part of the necessary process for recovery. A lower corporation tax rate would help to do that. I do not despise financial services. I would like us to grow and improve our financial services offering in Britain and keep London as a very important financial centre. That, too, is very dependent on a very competitive corporation tax regime. The Financial Secretary knows that I am not happy with the huge sums tipped into banks, which have grossly distorted the economy’s adjustment process and have delayed the necessary adjustment in those banks. I wanted to keep them going at a much lower cost.
Of course I did not want the banks to go bankrupt, but it is a disgrace that so much money has been absorbed in them. If we had not wasted all that money in the banks, even the Financial Secretary could have afforded my 20p in the pound proposal for corporation tax, given his view that it does not generate the extra revenue that I believe it does. That option would have been a much better competitive package for Britain than losing billions in RBS and delaying the time when RBS sorts itself out and actually generates some money for British taxpayers and for the Treasury, instead of taking away all the money that we need in order to offer a more competitive package. I hope that the Treasury will also go away and think about squeezing some money out of the banks to make the rest of British business profitable, rather than squeezing the rest of British business to try to buttress the banks.
If one looks at table C6 on page 231 of the Red Book, one sees that the projected receipts from corporation tax for the financial year 2009-10 are £34.7 billion. The amendment would cut corporation tax by three 28ths—from 28 to 25 per cent. In round terms, three 28ths of the projected revenues of £34.7 billion is £3.7 billion. If one were to cut our corporation tax rate to the OECD average, which the hon. Member for Fareham helpfully informed us is 22.5 per cent., that would be a five and a half 28ths cut in £34.7 billion, which would be a £6.8 billion cut.
That is not before us tonight. I suspect, from what the hon. Member for Fareham (Mr. Hoban) said—although he did not say so directly—that he would not pursue the logic of his position and seek to put the UK at the average rate of the OECD, but cut only from 28 to 25 per cent. That was because he wanted a revenue-neutral package, and that the counter-balancing measures that he outlined to make up for that loss—which I calculated at £3.7 billion, although I appreciate that he does not accept that figure—would come to £3.7 billion. His countervailing measures did not come to £6.8 billion and therefore he could not go the whole hog to cut corporation tax to 22. 5 per cent. When I hear the phrase “revenue neutral”, it has the same effect as the words “efficiency savings” and my scepticism meter starts twitching markedly—
I am not saying that it cannot happen: I simply said that my scepticism meter starts twitching. Following the probing and then the speech by my hon. Friend the Member for Coventry, North-West (Mr. Robinson), and the measures that the hon. Member for Fareham said that he was not allowed to table tonight, it appears that the countervailing measures to achieve the other half of this package—to make up for the lost revenues in corporation tax, were that cut to be enacted—are precisely the sort of measures that would hit manufacturing.
Parenthetically, I would say to the hon. Member for Fareham that my understanding of the procedure of the House is that he could have tabled his amendments, so that we could have seen them, but the Chairman of Ways and Means would not have selected them—[Interruption.] Well, there is chuckling from Conservative Members, but it would have been useful to see the countervailing measures proposed. Instead, they were outlined by the hon. Gentleman, and from what I understand, they would hit manufacturing. The right hon. Member for Wokingham (Mr. Redwood) talks about footloose manufacturing companies, but his Front-Bench colleagues favour a tax regime for business that would hit manufacturing. It would be the loser under the countervailing measures and other parts of British business would gain. As a Member of Parliament in the west midlands—my hon. Friend the Economic Secretary is in his place, and my hon. Friends the Members for Walsall, North (Mr. Winnick) and for Coventry, North-West were here earlier—the current plight of manufacturing is a considerable concern, without changing the tax regime in a way that would make things worse.
I understand the aspiration towards lower corporation tax, but the hon. Gentleman has to be careful about pushing the Canadian model too far. There are many jurisdictions in Canada, and those subject to federal taxation are federally incorporated and make up a tiny minority of companies, engaged in activities such as telecommunications and transport that, under the Canadian constitution from 1982 and the British North America Act 1867, are the federal preserve. Almost all business in Canada is the provincial preserve, and the huge trade barriers between provinces are an issue that bedevils that country. I understand that the hon. Gentleman aspires to that model, and it does raise some money at the federal level, but he should not push it too far.
I do not accept the concept of distortion—although I am not sure that that is the argument that has been made—because people change their behaviour. There is no natural way for people to behave that is somehow then distorted, because to say that is to buy in to the whole nonsense about perfect competition, which never exists, even on eBay. We have taxation measures to encourage certain forms of behaviour, and some of those behaviours are related to commercial matters, including for example, the lack of VAT on newspapers and books, and the company car taxation regime. So, corporation tax as part of a package of taxation measures will have an effect on behaviour and one must be very careful about that so as not to drive business out. I reject any suggestion that we have perfect competition and that we should not intervene at all.
We should have a capital allowance regime that encourages manufacturing and capital investment, as my hon. Friend the Member for Coventry, North-West said. I remember that a few years ago, when we had a 100 per cent. first year writing down allowance for investment in computers, that measure found favour on both sides of the House, although some might have said that it was a distortion. I favour capital allowances that help manufacturing and I urge Labour Members to reject the amendment tonight.
The hon. Gentleman is characteristically honest, but does he not recognise that decisions are taken to reduce allowances because they have perhaps distorted behaviour or outlived themselves and changes need to be made? We need to get people to act in a way that is consistent with their economic and commercial drivers rather than simply distorting behaviour for a short-term objective.
I will not be tempted too far down that line, Sir Alan. However, I think that there is a role for writing down allowances and tax and capital allowances to encourage certain behaviour in the economy, even though it might be seen by some—and perhaps by the hon. Gentleman—as a distortion. That is why I think that the computer writing down allowance should have continued for a bit longer, until we had even more computers in the economy. That allowance was very helpful. I urge my hon. Friends to reject the amendment, because it is part of an overall package that would hit manufacturing and would be bad for British industry and bad for jobs in the west midlands.
The measure proposed by those on the Conservative Front Bench is actually rather simple and modest. One would think from the attempt to draw dividing lines, as is fashionable in politics at the moment, and from the length of the speech made by the hon. Member for Fareham (Mr. Hoban) that a huge point of principle was being proposed that distinguished the Conservative party from the Government. If the sentiments expressed by the right hon. Member for Wokingham (Mr. Redwood) had been the substance of the amendment, that would have been true. He made a serious ideological point that distinguished between what he thought was the best way forward for the British economy and the Government’s proposed way forward for the British economy. The distinction made by the amendment is not nearly as substantial and as impressive.
The right hon. Member for Wokingham said that there was great value in cutting headline rates. I think there is some truth in that, although it is not always as straightforward as he might think, as shown by the Prime Minister’s experience in his last Budget as Chancellor of the Exchequer. He cut the headline basic rate of income tax to 20p, thinking that that would be extremely popular and would incentivise a lot of people on low to middle incomes to do more work. It appeared not to have that effect when people realised that it was revenue-neutral and that some would be disadvantaged as they would have to pay additional taxes to make up the shortfall arising from the money that was lost by cutting the headline rate. Cutting headline rates is not always as popular as politicians and legislators might think.
I was also interested in the point made by the right hon. Member for Wokingham about the Laffer curve, although he appeared to suggest that the Laffer curve’s principal benefit is attracting investment from other countries into the jurisdiction where that applies. I would have been more interested if he had gone on to advance the view that it would generate more money from companies within the existing area of jurisdiction. He appeared to dwell less on that point, although I suspect that that is also his view.
By way of contrast, the amendment attempts to create an impression that, at this time of recession, the Conservative party would like to give British companies preferable tax treatment. However, having heard the explanation from the hon. Member for Fareham, one understands that that is not the case and that the proposal is revenue-neutral with regard to the total tax take. For that reason, his speech could have lasted two minutes rather 50—he could simply have said, “This amendment seeks to redistribute but not reduce the tax burden on British businesses.” Given that our budget deficit will be £175 billion this year and £173 billion next year, and that we do not have huge amounts of surplus revenue sloshing around to use to reduce taxes, I and my party are minded to support the amendment precisely because of its modesty.
Three principles are worth observing—[Interruption.] I hear mutterings from off stage, but my point is that, although the ideas of the right hon. Member for Wokingham are more interesting and ideologically adventurous, they would create a real distinction—something that the Conservative party wants only to give an impression of doing. In a way, there is nothing very interesting about the amendment.
I will in a moment. We are considering not how much business is taxed, but whether the burden on different aspects of business should be redistributed in a way that renders the total tax take more reasonable. By and large, I think there is scope for collecting the same amount of tax revenue in a more simple way, and I shall set out my three principles for doing so. Before I do, however, I shall give way to the right hon. Gentleman.
That would have been funnier if the timing had been better. As it was, it was a typical Back-Bench attempt to be conservatively amusing.
The Conservative party believes it is here to argue the case for British business. That is reasonable, but it is trying to create the impression that it wants to cut the tax burden on British business. In reality, though, it does not want to do anything of the sort, and that is why I said that the amendment could have been dealt with rather more quickly. Had the Opposition proposed from the Front Bench the measures articulated by the right hon. Member for Wokingham, that would have been worth debating all of today and tomorrow because it would have represented a massive change in economic and tax policy. However, that is not what the Conservatives are trying to do: they are trying to give that impression, but they are not really trying to achieve that.
Even so, for the reasons that I am about to outline, I think the amendment is probably a step in the right direction. The first principle that I think ought to govern these matters is stability. Stability is beneficial: the Government have kept the rate unchanged, and that is a reasonable step in the right direction. It would help if they gave an indication of how long the rate will be kept at that level. I realise that future Finance Bills and general elections make it harder for them to give a firm commitment, but it would be helpful if business could have a feel for where corporation tax rates are going.
The second principle is simplicity, and it is in that regard that I think the amendment is most worthy of support. Removing lots of rates and reliefs and concentrating on a lower headline rate makes the system easier to understand for companies. It is harder for people to dodge tax, and complying with tax obligations is less of an administrative burden.
The third principle is transparency. I caution Conservative Members against creating the impression that they wish to cut business taxes when the reality is that they want nothing of the sort. They are in harmony with the Labour Government in thinking that the overall tax burden on business is exactly right, but this modest amendment at least advances the cause of simplicity and, on that basis, I see no reason to oppose it.
I declare an interest as the chairman of an SME that employs about 140 people and that pays well below the corporate tax rate affected by the present discussion, although we hope that, one day, we will get there. We do, however, service a number of companies that are in the relevant tax bracket, and therein lies my interest, because supply chains are a vital component of the whole structure.
I shall talk about how people think about tax as much as about how accountants evaluate tax. Business men tend in the main to be more creative than accountants and they tend to dwell less on detail. It is that degree of creativity that makes the amendment interesting and it is why I commend it so strongly. What the amendment proposes would create a feeling of the worth of being involved and of using money to gain more money and to grow on behalf of the nation, as well as on behalf of the people we employ. It reflects an attitude of mind —one that is often not understood by Government Members.
Many in business get the impression that Labour Members think that business men are there to make profit and that that undertaking is in some way dubious—or even, some of the worst sort of that thinking suggests, crooked. In fact, many business men are there to create, to build and to grow, and that very objective is the driving force that creates jobs in this country. Therein lies the importance of the amendment: it would encourage creativity, which in turn encourages jobs. That is a vital part of the process in which we need to be engaged right now if we are take advantage of the green shoots that will appear, as my right hon. Friend the Member for Wokingham (Mr. Redwood) and my hon. Friend the Member for Fareham (Mr. Hoban) have said. When those green shoots appear, we need to be in a position to exploit them to the advantage of our nation. High taxation in any form does not help us to do that.
Another point touched on by my right hon. Friend is the need to attract to this country businesses and big companies from other nations. I am amazed by the arguments advanced by some Government Members, who seem to think that our real opponents are Germany and France—that those countries should be our comparators and that, as long as we are lined up relatively sensibly with them, the world is okay. Let me tell Ministers that the world is changing dramatically and the G7 may not always be in pole position. In fact, I believe that the present elements of the G7 will not be in pole position for very much longer, because I perceive a massive, dynamic change in the world, which the present recession will only enhance. The Government need to understand that, but I see no understanding among them of that trend.
Let me explain part of the reason I think that. I have just returned from a Department for Business, Enterprise and Regulatory Reform trip to the United Arab Emirates and Saudi Arabia, and I went to Dubai. Some might say that Dubai is having a pretty bad time, and indeed it is, because it is not a major oil-producing part of the world, but it is a hub for a massive region. People there said to me time and again, “We used to look to the west; we now look to the east.” Business man after business man in Saudi Arabia and the Emirates told me that. Of course, many of them were not nationals of those countries. They were European business men who decided to settle their businesses in that part of the world because of the potential that it provided. That is what we are competing against. It is against that background that this debate is so important. It is about ensuring the recharging of Britain’s natural entrepreneurial spirit. That creativity is vital, and lower tax rates inspire that creativity. I beg the Government to recognise the connection in the amendment, even at this late stage.
I was rather surprised at the hon. Member for Coventry, North-West (Mr. Robinson), whom I admire enormously. He is one of the few members of the Labour party with real business experience. I was particularly surprised that, although he recognised that we created the lowest corporate rates of taxation in the G7, he did not seem to think that that was too important. That was a very confusing argument. I recognise the points made about the overall tax basis, but he did not see the creative, imaginative elements of the proposal, as I would expect a business man to do. That surprised me in a business man of his stature.
Drawing on his business experience, does my hon. Friend find, as I do, that business people in big companies will go to enormous lengths—within the law, we trust—to try to avoid paying higher taxes? That is important when they do business across the world.
Of course my right hon. Friend is correct. Many of the greatest business supporters of the current Government were the proponents of such exercises. The hon. Member for Coventry, North-West—I repeat that I hold him in great esteem—said that the argument was about timing. That was the essence of why he did not want to support a cut to 25 per cent. at this moment. I would argue that it is precisely because of the timing that we need to make the change. I was one of those people who saw, from ’79 onwards, a great rebirth of entrepreneurial spirit in this nation. I saw what that did for people like me, who wanted to go out and be their own boss, to build and create, and to drive forward the jobs that were so successfully created in the next years.
At the time, one of the major motivations for me, and for many other people like me, was the fact that the Government wanted to get off the back of business, free business up, and encourage business to build. Therein lies the import of the cut to 25 per cent. Like my right hon. Friend the Member for Wokingham, I want further cuts as time progresses, but timing is vital if we are to grab the green shoots that will surely appear. That is why it is important that we make the change now, and that we tell people we want to support business and entrepreneurism. We want to grow jobs and businesses and we want to attract businesses so that my children and grandchildren do not see that movement to the east as the end of their hopes and aspirations.
I do not have a problem with lower business taxes, and I am very supportive of lower corporation tax. I have said so many times that, as part of an overall competitive framework for business, that is a prerequisite for solid economic growth. When we look back over the medium term, we can see that many countries that, when they reduced their business tax burden, in fact experienced a business tax increase year on year as the rates came down.
None of those comments will come as a surprise to those on the Conservative Front Bench, as I have made them on many occasions. It is the case, however, as we have discussed before, that concerns arose when business taxes were kept high. Even when allowances and reliefs for investment were extended, there were concerns that that regime failed to support the good businesses that were simply getting on and running their companies, and supported only the companies or firms that invested in particular areas. I shall return to that in a moment.
The hon. Member for Fareham (Mr. Hoban) suggested that the proposed tax cuts would fundamentally be paid for by reducing or removing allowances or reliefs, by simplifying the allowance or relief system. Although I agree with the need for a simpler tax allowance and relief system in general, I have a couple of questions about his amendment. What assessment has he made of the value of lost investments—investments that might be cancelled or delayed as a result of the proposals—if those allowances or reliefs have already been budgeted into the costs? Why has he proceeded at this point with the cut, rather than proposing a longer time scale for changes to the tax and allowance regime, which would allow the economy to benefit from the announcement effect, as we have seen elsewhere, whereby businesses come and set up in preparation for lower taxes, while mitigating the risk of investment projects being cancelled or postponed?
I am very supportive of a lower corporation tax rate—our aspiration is to reduce it to 20 per cent.—and I am in favour of a simpler tax system, which is a good thing, as it reduces costs and burdens, and is easier for business people, their offices and their staff, to understand. However, I question the timing of the proposal. Why not say that it would take place in future, to benefit from the announcement effect, and why not tie that into a longer lead time for the abolition or simplification of allowances? Importantly, what assessment has the hon. Gentleman made of the risk of investment projects being cancelled? I want to support the proposal, but it would be useful to hear his thinking.