Chris Seeks Restoration Of Lower Corporation Tax
Gareth Davies The Exchequer Secretary
We now move on to debate clauses 12, 13 and 19. Before I delve into the detail of the clauses, however, let me first briefly set out how they fit into this Finance Bill.
The Government remain focused on taking long-term decisions to strengthen the economy by driving productivity, increasing the number of people in high-wage, high-skilled jobs, and boosting investment. The Government are also ensuring that the tax system is as competitive as we can make it under very difficult economic circumstances. We have some of the most generous investment incentives among major economies, including full permanent expensing, which the OBR has forecast will generate almost £3 billion of additional business investment each year, or £14 billion over the next five years. It has forecast that that additional investment will increase GDP by 0.1% by the end of the forecast. In addition to full expensing, we have an internationally competitive corporation tax rate—the lowest headline rate in the G7—which this Bill legislates to maintain.
I will now turn to clauses 12, 13 and 19 in more detail. Clauses 12 and 13 set the charge for corporation tax from April 2025. This includes both the main rate and the small profits rate, as well as the thresholds at which those rates apply. The charge for corporation tax must be set every year. It is important to legislate annually in advance, as this provides certainty to large and very large companies that pay tax in advance on the basis of their estimated tax liabilities. These clauses maintain the current main rate of 25% and the small profits rate of 19%, as introduced in April 2023. Tax certainty is of great importance to businesses—I think that is something we can all agree on—and clauses 12 and 13 ensure that they will continue to benefit from stable and predictable tax rules. By maintaining the current rates, the Government have struck the right balance between remaining competitive and raising vital revenue.
Clause 19 makes changes to ensure that the energy profits levy will no longer apply if oil and gas prices return to historically normal levels for a sustained period of time. It does so by introducing legislation to give effect to the energy security investment mechanism, or ESIM. The EPL was introduced in 2022, at a time of near-record high oil and gas prices, but it is right that should those prices return to historically normal levels, the additional tax would cease to apply. The detail of how the ESIM operates was set out in the technical note published alongside the 2023 autumn statement; this Bill simply puts that detail on a legislative footing and provides for secondary legislation to legislate for the administrative details of how that check is made.
Current oil and gas prices are higher than normal, and OBR projections indicate that high prices will persist over the next five years. The ESIM is a mechanism that switches off the EPL if, for a period of six months, the average prices of both oil and gas fall below set thresholds. Those thresholds are currently $74.21 per barrel for oil and 50p per therm for gas, and are based on a 20-year historical average to the end of 2022—before higher energy prices began—and are adjusted each April based on the annual change in the preceding December’s consumer prices index. By providing certainty on the conditions under which the levy will be disapplied, the Government are supporting investor confidence in the sector and helping to protect domestic energy supply, the economy, and of course jobs.
Clauses 12 and 13 provide certainty to businesses by maintaining the current rates of corporation tax, and clause 19 has been welcomed by the oil and gas operators and their investors, with the ESIM providing the sector with certainty to support future investment in the UK—in jobs and in our energy security—while also ensuring fairness to taxpayers. I therefore commend these clauses to the Committee.
Nigel Evans Deputy Speaker (Second Deputy Chairman of Ways and Means), Chair, Restoration and Renewal Programme Board Committee, Chair, Restoration and Renewal Programme Board Committee
James Murray Shadow Financial Secretary (Treasury)
Thank you, Mr Evans, for the opportunity to speak on behalf of the Opposition to new clauses 2 and 3, which are in my name and that of my hon. Friend Tulip Siddiq.
Earlier this afternoon, we pressed the Government on the impact of tax rises, particularly stealth tax rises, on families and pensioners. Of course, it is not only taxpayers and their families who are struggling to make ends meet under the Conservatives. Businesses in Britain are struggling too, and when I meet those from businesses across all sectors, of all sizes and in different parts of the country, they are clear that they want a Government who support them to succeed and grow. What the people I speak to from businesses want from Government, first and foremost and above all else, is stability, predictability and a plan for growth. Stability is greatly prized by businesses, which want to make decisions about investment and growth, which are critical to creating jobs and making people across Britain better off.
That stability is nowhere to be seen under the Conservatives, who have been governing, in a fairly loose sense of the word, through chaos and U-turns. That needs to change if Britain is to reach its potential, and it will change if we win the next general election. If we do, Labour will bring the stability that businesses need to plan ahead. One of the key ways that we have pledged to offer businesses the stability and predictability that they need is through our plan for a road map for business taxation. As the shadow Chancellor has set out, Labour would publish this road map in our first six months in office to give businesses the stability, predictability and long-term plan that is so important to making investment decisions.
We have already pledged that our road map will include our commitment to capping corporation tax at 25%, and with that in mind, we have tabled new clause 2. It sets out our commitment, if we win the next general election, to bring certainty back for businesses by capping the rate of corporation tax at 25% for the whole of the next Parliament. We would take action if tax changes in other advanced economies threatened to undermine UK competitiveness, but we believe that the current rate of 25%, the lowest in the G7, strikes the right balance between what our public finances need and keeping our corporation tax competitive in the global economy.
I hope Treasury Ministers accept our new clause, or if not, perhaps they would like to take this opportunity to follow our lead and also commit to a 25% cap on corporation tax for the whole of the next Parliament if they win the next general election. This is an opportunity for Ministers to show that they understand the importance of stability and certainty. If the Minister would like to intervene to match our commitment to capping corporation tax, I would be happy to give way. No? Why not? Maybe his boss does not agree. Let us not forget that two years ago, the current Chancellor went from advocating a four-point cut in corporation tax to advocating a six-point rise within just a few months. No wonder the Conservatives struggle to make any commitments on tax certainty now.
The truth is that the Conservatives have become unable to offer the stability and predictability that businesses need to invest. That stability is crucial to encouraging private sector investment and getting our economy growing. Our pledge on capping corporation tax and publishing a business taxation road map sits alongside our wider approach to offering stability, not least through our iron-clad fiscal rules, our new fiscal lock, and our respect for independent economic institutions. I know from our conversations with so many businesses that there is huge potential for private sector investment in Britain, and I know how vital a stable Government are for that to be realised, because businesses want and need a Government who will offer them a partner in growth. They need a Government who will offer stability, provide strategic public investment and reform the way our country works, in order to bring down the barriers to growth. That is how Government should be working with businesses to help them grow, create jobs and make people across Britain better off.
Alongside clauses 12 and 13 on corporation tax, this group focuses on clause 19, which introduces a new energy security investment mechanism in relation to the energy profits levy or windfall tax. As I set out on Second Reading, we fully support the mechanism. We very much welcome the signal it sends, which will help with investor confidence in the UK’s offshore energy sector. As we have set out, if we win the next general election, Labour will make the windfall tax stronger, in order to raise more revenue to support our country’s energy transition. However, as we have also set out, we want to give as much certainty as possible to the companies affected. That is why our new clause 3 sets out our commitment that if we win the next election, the energy profits levy will end no later than the end of the next Parliament. We made that commitment when we announced our plans, and it is now in the new clause before us. We recognise that, by its very nature, the windfall tax is a one-off levy in response to extraordinary profits, so it is right to be clear about when it will come to an end.
Let me be clear that our reason for wanting to extend and strengthen the windfall tax is to raise revenue that we need to support our country’s transition to clean energy. This critical transition will create jobs in the industries of the future, bring down bills for households and businesses, and give us energy security and independence. Our plan is to make this transition by 2030, and we need to work hand in hand with the private sector to make that ambitious aim a reality. Many of the firms paying the windfall tax are the same ones that are and will be investing in the clean energy industries of the future. Many of those firms’ employees will work in the clean energy industries of the future, too. We are committed to working closely with all those businesses and employees affected, including through Great British Energy, which will be our new national energy champion, based in Scotland, and through our new national wealth fund to manage this important transition together.
As I have set out, if Labour wins the next general election, we will form a new Government who can once again be a reliable and effective partner to businesses, to help them grow. We will offer stability with our corporation tax cap, our road map for business taxation, and our commitment to unbreakable fiscal rules. That stability will help businesses considering investment decisions, as will our strategic public investment, part funded by the windfall tax, which will help crowd in private sector funding. We will make sure that investment can achieve its potential by reforming the way that our country works. From planning to pensions and grid connections, we will remove barriers that stand in the way of economic growth. That is how we will get the economy growing after 14 years of economic failure from the Conservatives.
As I said earlier this afternoon, if the UK economy had grown under the Conservatives at the rate of the OECD average, it would now be £140 billion larger, providing an additional £50 billion in tax revenues to invest in our public services. Instead, the legacy of the Conservatives’ time in office is one of low growth, working people worse off and taxes rising while public services decline. Ahead of the general election, people will ask themselves whether they and their family feel better off than they did 14 years ago. They will ask themselves whether our hospitals, our schools or our police work better. Frankly, they will ask whether anything in Britain works better than it did when the Conservatives came into office 14 years ago. The choice at the general election will be between five more years of chaos with the Conservatives, or stability with a changed Labour party, and our long-term plan to make working people better off. The Conservatives may try to claim that Britain’s economy has turned a corner, but the truth is that the British people want to turn the page. It is time for a general election.
Christopher Chope Conservative, Christchurch 4:00, 8 May 2024
It is a pleasure to follow the hon. Gentleman. I wish to speak briefly on clause 12 stand part and the new clause to which he has just spoken.
Clause 12 is a simple clause. The title is “Charge and main rate for financial year 2025”, and it states:
“Corporation tax is charged for the financial year 2025…The main rate of corporation tax for that year is 25%.”
Just over four years ago, I was re-elected to this House on a Conservative party manifesto that said that we would keep corporation tax at 19% and would not increase it. As James Murray just reminded us, the Chancellor of the Exchequer thought that 19% was far too high, and he had a radical proposal to reduce it to 15%. At the time, I did not buy into that leadership bid of his, but it is clear now that it was an extraordinary gesture, completely at odds with what he must believe, because I presume that he supports clause 12, which sets corporation tax for the following year at 25%. That is far too high. I voted against the increase originally, and if clause 12 stand part was pressed to a Division today, I would certainly vote against it.
It was with some incredulity that I listened to the hon. Member for Ealing North. His new clause 2 talks about reviewing the impact of section 12. The incoherent subsection (1) says:
“The Chancellor must, within three months of this Act being passed, conduct a review of the impact of section 12 of this Act.”
Obviously, section 12 will not come into effect until the 2025 financial year, while the Bill will be on the statute book within a couple of months. What would be the point of conducting, within three months of that date, a review into something that will not come about until next year? If the new clause mentioned reviewing the impact of the current high levels of corporation tax, I would be with him. [Interruption.] He is shouting at me from a sedentary position. I will happily give way to him, so that he can make his point. Let us have a debate. If he does not want to engage in debate, so be it.
All I am doing is reading out the terms of the hon. Gentleman’s new clause 2. If he wishes to resile from that, let him say so. I am sure that, even at this late stage, Mr Evans, you would accept him withdrawing the new clause because its terms do not bear out what he is telling us.
James Murray Shadow Financial Secretary (Treasury)
The hon. Gentleman invites me to respond. The key point of the new clause, as I am sure he realises, is to make it clear that Labour would cap corporation tax at 25% for the whole of the next Parliament. Does he agree with that?
Christopher Chope Conservative, Christchurch
No, I do not, because that would be capping corporation tax at far too high a level. I would like to see it reduced, ideally back to 19%, as soon as possible. I certainly would not support any notion that we should stick with a 25% rate for the duration of the next Parliament.
That intervention was interesting. If that is the purpose of the hon. Gentleman’s new clause, I think we can say that it is rather opaque, because it does not say, for example, “Between 2025 and 2030, corporation tax shall be set at the rate of 25%”. It says that there should be
“a review of the impact of section 12 of this Act.”
What would the review look at? One thing would be how the 25% rate of corporation tax provided for by section 12 had affected
“investment decisions taken by businesses”.
Surely we know—I think he said so in his remarks—that having corporation tax set at 25% adversely affects businesses making investment decisions, including decisions on whether to increase their investments, or whether to invest in the United Kingdom for the first time. It is because such adverse investment decisions have been taken by businesses that, as he accepts, we have low growth, coupled with rising taxes and a stagnant economy.
It surprises me that more of my colleagues do not wish to engage in this debate. I very much support those Government Members who believe that the Chancellor of the Exchequer’s main objective should be to grow our economy, rather than stifle it through high taxes and more regulation, which seems to be what is happening.
In a sense, the hon. Gentleman has answered his own question—high rates of corporation tax adversely affect investment decisions taken by businesses—so why do we need a review to establish that? How can he both want a review because he does not know the answer to that question, and be so confident about its results that he can announce today that corporation tax will be at 25% for the next five years? It seems a pointless exercise. One is left with the feeling that the main parties have very similar policies on many aspects of taxation.
Drew Hendry Shadow SNP Spokesperson (Economy)
That is what I have been saying.
Christopher Chope Conservative, Christchurch
Both parties support very high levels of tax. They are not as high as Drew Hendry would like them to be, but who knows? If there is a Labour Government, then where Scotland leads on taxation, I am sure that the rest of the United Kingdom will follow. When he responds, I would like the Minister to take up the challenge from the hon. Member for Ealing North and tell us whether he supports 25% for the next four or five years. I would like him to say, “No, 25% is far too high. Perhaps we have to put up with 25% for 2025, but thereafter, if re-elected, we the Conservatives will reduce corporation tax steadily back to 19%, or even to 15%, as the Chancellor of the Exchequer aspires to do.”
Drew Hendry Shadow SNP Spokesperson (Economy) 4:15, 8 May 2024
I agree with the hon. Gentleman’s contention that there is no real difference between the Tories’ proposals and those of the Labour party—a point I have made many times. Does he agree that progressive taxation in Scotland has seen the majority of taxpayers pay less, and those who have a bit more pay more? More higher-rate taxpayers have moved to Scotland during that time, which has protected some of the services. That is not on offer on either side of this House.
Christopher Chope Conservative, Christchurch
The hon. Gentleman misunder-stands the dynamic effects of taxation. I was privileged to be in this House when the then Chancellor of the Exchequer, the late Lord Lawson of Blaby, announced the dramatic reduction in the top rate of tax to 40p in the pound. As a consequence of that reduction, the overall tax yield went up. The burden on individuals was reduced, thereby causing them to work harder to retain their energies for what was happening in our economy, rather than taking their talents overseas. The hon. Gentleman talks about wanting a progressive tax rate in Scotland, but that leads to people becoming collectively poorer. We can see from recent statistics that the Scottish economy is stumbling and failing, because of the misguided policies of the Scottish National party.
That is a bit off the point of whether we support keeping corporation tax at 25%. I certainly do not, and I hope we get confirmation that the Government have aspirations to reduce corporation tax. When my hon. Friend the Minister opened the debate, he said that we need to be stable and predictable. He praised our system of complicated allowances against corporation tax. I would support more tax simplification. If we keep the basic rate down and reduce the allowances, that makes taxation simpler and reduces the need for extra people in His Majesty’s Revenue and Customs to deal with all that. It probably undermines the burgeoning accountancy profession, but that is not necessarily a bad thing.
Whatever happened to tax simplification? A specific committee was set up to deal with tax simplification and measures used to be brought before this House. That has all been abandoned in favour of evermore complex tax arrangements. Far from being stable and predictable, they are unstable and unpredictable because no one knows how those extra complications will be avoided or exploited by those affected. Hon. Members can tell that I am not a happy bunny on this issue, because we are not committed to reducing corporation tax in the long term. We do not seem to recognise the adverse impact that it has on our productive economy and our ability as a nation to grow that economy and thereby provide the extra revenue we need for public services.
I also despair that there are so few of my own colleagues who wish to reinforce the point and get the message out to our constituents and to businesses in our constituencies. That message is “Stick with us, because we find the current levels of corporation tax intolerable. We introduced them because of extraneous circumstances over which we say we had too little control, but do not worry: as soon as those extraneous circumstances are removed from the equation, we will revert to being a low corporation tax party.” Let us have an announcement to that effect today. In the meantime, however, let me say that if clause 12 is put to the vote, I shall vote against it, and I shall certainly vote against new clause 2 for the reasons I have given.
Drew Hendry Shadow SNP Spokesperson (Economy)
rose—
Nigel Evans Deputy Speaker (Second Deputy Chairman of Ways and Means), Chair, Restoration and Renewal Programme Board Committee, Chair, Restoration and Renewal Programme Board Committee
Order. Given that we are not really pressed for time today, unless Mr Hendry intends to speak for up to four hours—
Drew Hendry Shadow SNP Spokesperson (Economy)
I do not intend to do so.
Nigel Evans Deputy Speaker (Second Deputy Chairman of Ways and Means), Chair, Restoration and Renewal Programme Board Committee, Chair, Restoration and Renewal Programme Board Committee
Yes, I can see that.
As both candidates are present, I will now announce the results of the ballot held today for the election of the Chair of the Public Administration and Constitutional Affairs Committee: 290 votes were cast, two of which were invalid, and Dame Jackie Doyle-Price was elected with 161 votes. She will take up her post immediately. I congratulate her on her election. The results of the count will be made available as soon as possible in the Vote Office and will be published on the internet.
We now come to the four-hour speech from Drew Hendry.
Drew Hendry Shadow SNP Spokesperson (Economy)
Thank you, Mr Evans. I will do my best to accommodate your request, as usual.
I am grateful for the opportunity to speak to clauses 12 and 13. The fact is that these clauses maintain the status quo on corporate taxation while failing to support sectors in dire need, such as our hospitality industry, which has seen more than 500 closures in the past year alone. The SNP has repeatedly called for measures such as VAT relief for that sector to alleviate the pressures, but the UK Government have consistently ignored our calls, thus demonstrating a clear disregard for the economic challenges facing Scotland.
Where is the support for our town centres and high streets? Enterprise initiatives such as “VAT-free streets” could help to breathe new life into our vital centres. The SNP has called for urgent help, but again Westminster just shrugs its shoulders and ignores its responsibilities for the damage caused through its calamitous but—as we have seen, and it is worth repeating—unanimous devotion to a disastrous Brexit, to waste and to mismanagement.
The proposed energy security investment mechanism, adjusting the parameters for windfall taxes on the basis of oil and gas prices, represents a missed opportunity to genuinely bolster our energy security and accelerate our transition to net zero. Rather than leveraging these revenues to mitigate energy costs for households who, as I said in our previous debate, are struggling under the current punishing cost of living crisis, or to invest in sustainable growth—and probably the only industrial strategy available to us is investment in renewable energy—this mechanism is poised to jeopardise up to 100,000 jobs and hinder our environmental goals.
Moreover—and there is no hiding place—the Labour party’s screeching U-turn on the £26 billion a year required to stimulate the industrial green transition, which its members know their own advisers have said is the minimum required, and on its proposal to intensify the windfall tax to fund nuclear projects in England is entirely unacceptable, meaning the utilisation of Scotland’s resources for projects that contravene our national interests.
We will support Labour’s new clause 3, because at the very least it will show the opportunity that has been wasted, and the squandering of Scotland’s natural resources, in a clearer light. However, the Bill underscores a critical disconnect between the needs of the Scottish people and the actions of this Government, and indeed this place of Westminster. It is a Bill that perpetuates inequality, neglects economic innovation and leaves our most vulnerable citizens to bear the brunt of its failures.
Having debated these clauses today, let us be mindful of the stark reality: only a Government attuned to the aspirations and challenges of Scotland can genuinely deliver the change we urgently need. That Government should have all the powers to make the changes needed to represent the values of the Scottish people. That needs to be the Government of an independent Scotland that seeks to regain our equal seat at the centre of the European Union.
Gareth Davies The Exchequer Secretary
I was waiting for a four-hour speech and it never came—that was four minutes, but what a four minutes!
Let me thank hon. Members for their contributions to today’s debate. I will respond to some of the points that have been raised at the end of my remarks, but before doing so let me directly address some of the new clauses that have been tabled.
New clause 2 seeks the publication of a review into how the rate of corporation tax set by the Bill, as set out in clause 12, affects business investment and certainty, including what the effect would be of capping it at its current level over the next Parliament. I agree that it is important to regularly review and evaluate policy, and the Government keep all tax policy under review. The Office for Budget Responsibility produces regular forecasts, including of projected corporation tax receipts and business investment. These forecasts are based on the rates and thresholds that currently apply, and which clause 12 maintains from April 2025 to provide advance certainty to businesses. The latest of the forecasts already looks as far ahead as 2028-29 on the basis of the corporation tax rate, which currently stands at 25%, so no further action is required from the Government.
Sarah Olney Liberal Democrat Spokesperson (Business, Energy and Industrial Strategy), Liberal Democrat Spokesperson (Treasury)
The Bill maintains the small profits rate of corporation tax at 19%, but does the Minister not agree that this is a drop in the ocean compared with spiralling costs in energy, staffing, borrowing and a host of other areas? The Chancellor could have used the opportunity to give small businesses a boost by reforming business rates, or by helping them with their energy bills through a proper windfall tax. Does the Minister support new clause 7, tabled by the Liberal Democrats, which would ensure that the Government must lay before the House a review of the impact of the small profits rate to look at whether it really helps small businesses to manage their costs.
Gareth Davies The Exchequer Secretary
I will give the hon. Lady the courtesy of addressing new clause 7 in due course. She is right to highlight that the new rate for small businesses will keep around 70% of businesses in the country at 19% when those that are most profitable move to 25%, but look at the entire package of support for small businesses. It shows that the Government are supportive of our high streets and small business entrepreneurs across the country, whether that is through the increase in VAT thresholds, the 75% rate relief for retail, hospitality and leisure businesses, or all the support that we provided during the covid pandemic and throughout the energy shock, including the energy bill relief scheme and the energy bills support scheme. I put it to her that we are behind our small businesses. We regard them as the engine of our growth, and we will continue to do everything we can to support them. I will come on to new clause 7 in a moment, if I may.
New clause 3 would require a review of the possible impacts of the energy security investment mechanism on energy profits levy revenues, and on investment decisions in the oil and gas sector. It would require this assessment to be made on the basis of the end date of the EPL falling before the end of the next Parliament.
The Government have already published the tax information and impact note, which sets out the anticipated impact of the energy security investment mechanism—the ESIM. This indicates clearly that the mechanism will give operators and lenders to the oil and gas industry confidence in the fiscal regime while the EPL remains over the next Parliament. Based on the OBR’s current price projections, the ESIM is not predicted to trigger before the end of the EPL in March 2029, and is therefore expected to have no impact on EPL revenues. In addition, should there be interest in calculating forgone revenue if the EPL were to end in a particular year, the OBR has published projected EPL revenues over the forecast period, and the impact of the EPL ending early can be calculated from this publicly available information that is there for all to see.
Regarding the assessment of the investment decisions within the oil and gas sector, the Government have been clear that they want oil and gas companies to reinvest their profits here in the United Kingdom, and by legislating for the ESIM we are giving these companies and their investors the confidence that if prices fall, the EPL will cease. This allows the sector to continue investing in the economy, in jobs and in UK energy security while ensuring fairness to the taxpayer, as I said earlier. Indeed, when the ESIM was first introduced, the Offshore Energies UK trade body agreed that the ESIM was a step in the right direction to support confidence and investment in the sector. However, it should be noted that there are of course commercial decisions to be made, and it is not possible for the Government to make an assessment of the impacts of the ESIM on the decisions of commercial organisations.
New clause 7 seeks the laying of a report before this House within three months, assessing the impact of clause 13 on how small and medium enterprises manage their costs. The introduction of the small profits rate last year kept the rate of corporation tax at 19% for companies with profits of less than £50,000, and the availability of marginal relief means that companies with profits between £50,000 and £250,000 pay below the main rate of 25%. This ensures that companies have greater post-tax profits to reinvest, to distribute and to retain to cover future costs and any shocks in the economy. Clause 13 simply maintains this approach from April 2025 onwards, providing advance certainty to taxpayers.
More broadly, it should be noted that our corporation tax rules are based on the fundamental principle of taxing profits net of costs. HMRC already releases its corporation tax statistics publication annually, which breaks down data on corporation tax liabilities by the size of company. Once tax returns covering the period since the small profits rate was introduced come in, this will be reflected in the data, but I am afraid that that will not happen within the next three months.
My hon. Friend Sir Christopher Chope made a typically colourful speech. He made some very valid points, with which many in the Committee will agree. We all want tax to come down. As I said to Sarah Olney, we have included a provision and a rate to ensure that 70% of businesses—the smallest, least profitable businesses—maintain a rate of 19%. We had to increase the rate in the face of an incredibly challenging environment on the back of covid and the war in Ukraine, when the Government stepped in with significant support for businesses, families and individuals across the country. I can tell my hon. Friend that the extension to 25% will raise £85 billion, which will help to reduce our debt over the long term.
We have introduced full permanent expensing, as my hon. Friend mentioned, and I think it is fair to say that he was sceptical of that. However, it was called for directly and clearly by the CBI, Make UK and a number of businesses that want to reinvest their profits into other endeavours and into plant and machinery. I put it to him that we should be looking at the effective rate of taxation for a business, not just the headline rate, but that our headline rate for the largest, most profitable businesses is, at 25%, still the lowest in the G7, which is the most comparable mix of countries to look at.
Of course we want to see tax simplification in all our fiscal statements, which is why we decided to abolish multiple dwellings relief in our last fiscal event. It is also why the Chancellor has set out his long-term ambition to abolish national insurance contributions, which would simplify our tax system substantially.
This is all in the context of a country that remains one of the most competitive in the world, but it is not just about taxation; it is about planning, our rule of law and our amazing educational institutions. That is why Tata recently invested in a 40 GW gigafactory in Somerset, it is why Ørsted has decided to build the world’s biggest offshore wind farm in this country, and it is why AstraZeneca has decided to invest £450 million in a new R&D centre.
Investors look at a range of factors. It is not just about taxation; it is also about regulation. It is remarkable that the shadow Minister did not mention the Labour deputy leader’s obsession with introducing 70 new regulations on business, which would hinder business investment. It is the certainty of a Labour Government’s introduction of regulation that will hinder business investment, not anything that this Government have done in office. Looking at our achievements when it comes to business investment, the facts remain clear.
Christopher Chope Conservative, Christchurch 4:30, 8 May 2024
Looking ahead to the next Parliament, and hoping that there will be a Conservative Government, can my hon. Friend say to all those in the business community who are watching eagerly that a 25% headline rate of corporation tax is too high, and that we want to lower it?
Gareth Davies The Exchequer Secretary
We agree. We want taxes to come down, but we are not going to announce tax decisions from this Dispatch Box outside fiscal events. It is clear for all to see that this Conservative Government believe in lower taxes. We have reduced national insurance contributions for 29 million people by some 30% in just the last six months, and the record is very clear on that.
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