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Finance Bill

May 8, 2002

Finance Bill

I, too, would like to speak briefly on this point. I am sorry that the hon. Member for Wimbledon (Roger Casale) feels that the Opposition’s support for this measure is somewhat tepid. In principle, we are comfortable with the measure, which is a positive step forward. The small business sector, in which I operated prior to joining the House, has not been terribly well served by this Government. It is not fair to say that there is a monopoly of good will towards the small business sector on either side of the political divide. It is fair to say, however, that, in essence, these changes, although welcome, represent only a small part of the burden faced by many small business people.

VAT is one matter on which I have spoken previously in the House – I always felt that I was one of the worst paid pro bono for my tax-collecting skills when I dealt with VAT in my business – and it is an important fund raiser for the Government. There are great concerns, however, about the amount of time that must be spent by any small business man on the various other payroll taxes, which are not affected by the measure.

Much as I understand the Government wishing to make much of this measure, it is very small. As has been pointed out in various interventions, there will no doubt still be a great burden on many small business men in terms of having to deal with receipts for Inland Revenue purposes, if not necessarily for Customs and Excise. I would be interested, however, to receive guidance from the Financial Secretary on his comments to the effect that the whole process would be revenue neutral. Will he tell us which businesses are likely to suffer under the new provision?

Mr. Boateng: I am very grateful to my hon. Friend the Member for Wimbledon (Roger Casale) for stressing the importance that the Government attach to consultation with industry, business and the relevant affected sectors. I first recall meeting him many years ago, when I was an Opposition Front-Bench spokesperson on Treasury affairs. If he was not then a parliamentary candidate, he was at least very active in Wimbledon, and he was noted, at a time when it was not as commonplace as it is now, as someone who always bothered to reach out to small businesses in his constituency and to learn and listen to their concerns. I have no doubt that that contributed to his subsequent success in 1997 and to his re-election last year. That is a lesson that the Labour party has learned, and that we sometimes had to learn the hard way in the years of opposition.

We have been engaged in a process of consultation in order to arrive at these rates. In response to the points made by the hon. Members for Fareham (Mr. Hoban) and for Cities of London and Westminster (Mr. Field), the rates are based on information from previous VAT returns submitted by all traders who would be eligible to join the scheme. The rates have been calculated on the basis of producing a broadly revenue-neutral outcome across each sector. We consulted on all these rates, talked to the sectors concerned, and, in some cases, responded to the consultation by reducing the rates proposed for an individual sector. For example, we now have two rates for construction services, instead of one. That was a result of listening to the industry and its concerns to ensure that we got it right and that we met its needs.

For reasons that hon. Members on both sides of the House have outlined, it would have been a nonsense to set a single flat rate for all small businesses. Either it would have been set so low that there would be a substantial loss of revenue, or so high that the sector would simply not opt to participate. We want businesses to have a real choice. The rate for a particular business will therefore depend on what trade sector it is in, but, clearly, there will be only one rate for each business. If a business is engaged in two or more sectors with different rates, the flat rate to be applied will be that for the main business sector based on turnover generated. The businesses and trade associations that we consulted felt
that that was the best solution to this problem. I think that we have got it right, and we are determined to make sure that it is helpful to small businesses.
As my hon. Friend the Member for Wimbledon said, the measure should be seen as part of a wider Government commitment to support small businesses and to promote an entrepreneurial culture. No doubt there is still more to be done, and we are determined to do all that is necessary to ensure that we have a culture that promotes the creation of jobs, that helps bridge the productivity gap, and that recognises the vital role that the entrepreneurial spirit plays in creating a sound and dynamic economy.

I hope that, as a result of this debate, the enthusiasm that – as my hon. Friend pointed out – Conservative Members have so ably repressed will re-emerge. One does not often associate the hon. Member for Buckingham (Mr. Bercow) with repression in any sense of the word; his enthusiasms are normally plain for all to see. It is unusual for his enthusiasm to be as successfully repressed as it has been on this occasion. However, in the many hours that lie before us in Committee, we will no doubt draw out that enthusiasm. My hon. Friends the Paymaster General and the Economic Secretary cannot wait to have a go at drawing out – "repressions" may be going too far – the enthusiasms of the hon. Member for Buckingham. With that, I commend the clause to the Committee.