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Corporation Tax

Volume 627: debated on Tuesday 18 July 2017

5. What assessment he has made of how to balance the needs of (a) business and (b) the Exchequer in setting the corporation tax rate. (900550)

This Government believe in a tax regime that is fair and competitive. Since 2010, we have reduced the headline corporation tax rate from 28% to 19%, allowing companies, big and small, to invest in expanding their business, boost wages, create jobs and lower prices. Onshore corporation tax receipts have also increased by over 50% despite the rate being lowered.

Does the Minister agree that if we raise corporation tax, it is normally passed on by business to customers, and that if we lower it, we hope that prices will come down?

My hon. Friend is entirely right. It is important to remember that the burden of corporation tax does not just fall on shareholders. If we were to follow Labour’s policy of increasing corporation tax, we would see less investment, lower growth, lower productivity and, as the Institute for Fiscal Studies has said, lower wages and indeed higher prices.

Earlier, the Chancellor acknowledged that productivity is the key to economic growth and eliminating our public sector deficit. When manufacturing businesses invest, they often lose any benefits of corporation tax reduction because of higher business rates. That acts as a disincentive to invest and increase output and productivity. Why does he not cut business rates instead?

This Government have done a great deal in terms of providing business rate reliefs, which were announced in previous Budgets and are, I think, well known to the House. There will be more to come on that in the Finance Bill.

Will the Minister tell the House by how much the corporation tax take has gone up since the corporation tax rate was cut?

This is an important point. As the corporation tax rate has decreased to 19%—it will go down further to 17%—we have seen a 50% increase in the take, which is an amount in the order of £18 billion.

Most economists prioritise building business confidence and improving infrastructure and skills over cutting corporate tax rates. Is the Minister aware that lowering corporate tax rates now presents the appearance of Britain trying to undercut countries with which we need to agree a decent Brexit deal—at a time when businesses are not confident in the Government’s leadership, but are instead “aghast” and “confused” at their approach to Brexit?

We have seen a huge increase in employment in this country to a record level, and a record drop in unemployment to the lowest level since the mid-1970s. A lot of that has been driven by business. If the hon. Lady is seriously suggesting that the recipe for increasing the confidence of business is putting up its corporation tax to 26%, she has, I am afraid, missed the point.