Clause 19 - Profits arising from the exploitation of patents etc

Finance Bill – in a Public Bill Committee am 10:45 am ar 12 Mehefin 2012.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education) 10:45, 12 Mehefin 2012

I beg to move amendment 24, in clause 19, page 11, line 36, at end add—

‘(2) The Chancellor of the Exchequer shall review the impact of this provision on businesses and shall consider where there are other opportunities to introduce targeted support for business. A copy of the report shall be placed in the House of Commons Library.’.

Photo of Peter Bone Peter Bone Ceidwadwyr, Wellingborough

With this it will be convenient to discuss the following:

Clause stand part.

That schedule 2 be the Second schedule to the Bill.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education)

Before the recess, we thought that the dust had settled on this year’s Budget, and that we would be debating the intricacies of the changes being made by this Finance Bill. However, over the recess we learned of not one, or two, but three U-turns, and a 90° turn that has been described recently as a clarification. This has left the public in quite a spin. Now that there has been a welcome reversal of the pasty tax, the caravan tax and the charities tax, as well as clarification on the skip tax, we wait in hope of an announcement of the removal of the granny tax and, most of all, a reversal of the tax cut of £40,000 for 14,000 millionaires.

One measure in this Budget that is certainly welcome, and which we hope will not be followed by any U-turn, is covered by the clause and our amendment. Indeed, it is an idea that was introduced by the Labour Government, which is why, viewed in the light of the chaos and confusion created by the Chancellor’s Budget, his attempts at attributing GlaxoSmithKline’s decision to build its first UK factory in 40 years to his shambles of a Budget seemed at the time, and certainly seems now, rather ludicrous.

Let me remind hon. Members of the Chancellor’s comments on the BBC’s “Breakfast” programme the morning after the Budget announcement:

“You have GlaxoSmithKline, one of the world's biggest companies, one of the great British success stories, saying the Budget has changed their view of Britain as a place to invest. They’re going to create 1,000 jobs here. Now, surely my responsibility as the country’s Chancellor is to get the economy moving, to get jobs created, and when big companies say that about Britain, people should sit up and notice that we are changing the British economy for the better.”

I do not think that leading the country into a double dip recession was quite what the Chancellor had in mind when he made those comments. Clearly the news that GlaxoSmithKline was to build its first new UK factory in 40 years and in doing so create 1,000 much needed jobs is warmly welcomed, but it was Labour’s proposal that gave GlaxoSmithKline the confidence to invest and create these jobs. In 2009, following the Labour Government’s pre-Budget report, its chief executive officer welcomed the idea of the patent box, saying:

“The patent box is exactly the sort of active, long-term and creative support that we need from the Government to ensure that the UK remains an attractive place for highly skilled sectors such as pharmaceuticals. For GSK, assuming the new regime will apply to patents currently under development it will have the immediate impact of making the UK a priority area for future investments”.

A year later, GlaxoSmithKline confirmed that the successful implementation of the patent box would ensure that the UK was the location for its next biopharmaceutical manufacturing plant. In our 2009 Budget, the Labour Government set in motion the idea of the patent box as a way of encouraging innovative activity. The industrial activism clearly worked, and I would welcome the Minister’s estimate of the number of jobs, in addition to those announced by GlaxoSmithKline, that he thinks could be attributable to Labour’s patent box. That is the first part of our amendment.

The amendment goes on to urge the Chancellor and the Government to look at how they can support business in a more targeted way. From my reading of this year’s Budget, there were just two measures along the lines of targeted support for businesses. The first—the patent box—was the previous Labour Government’s idea, as was the second: tax relief for the video games industry to be legislated for in 2013. While hugely supportive of the announcement, the video games industry must also be scratching its head at how quickly the Chancellor turns.

In the Chancellor’s first Budget, he announced the scrapping of Labour’s plans for a tax relief for the video games industry. Developers had previously heralded those plans as inspired. In our last Budget before we left office, we set out plans to introduce the relief, but the Chancellor scrapped them in 2010, saying that that tax break was poorly targeted. If we fast-forward to the March Budget this year, the Chancellor re-announced Labour’s policy of two years ago, claiming it as an effective way to support the video games industry.

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury) 11:00, 12 Mehefin 2012

Does my hon. Friend find it all the more astonishing that the Scottish Affairs Committee undertook an inquiry into the issue and made recommendations to the Government? They did not take up those recommendations at the time, only to U-turn later.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education)

Indeed, that is shocking, and I shall describe some of the reaction from the industry when the initial proposal was scrapped. The research was ignored—it was dismissed, as it was clearly not considered relevant—yet there was a U-turn not two months later, but two years later. That U-turn is welcome all the same, but it prompts the question whether the Chancellor did his homework in the first place, in listening to experts in the field who know what the industry now needs to encourage investment.

Photo of Sheila Gilmore Sheila Gilmore Llafur, Edinburgh East

It is a pleasure to serve under your chairmanship, Mr Bone.

Has my hon. Friend considered whether and to what degree the Government have assessed the damage done to the industry, which is so important to places such as Dundee in Scotland, by the decision not to give it the relief over that period? Obviously, we are pleased that the relief will now be given.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education)

My hon. Friend makes an important point. I was about to put that question to the Minister. Two issues should be considered. First, how many investors or potential developers, having had the good news that they would receive support and a tax relief on investment and then having been told that such a relief was poorly targeted and would be scrapped, have failed to go ahead with their projected plans? Do the Government have any indication of the numbers involved?

Secondly, there is the broader issue of business confidence—of confidence in this Chancellor and this Government, in promises made that are then broken and in policies made that are then reversed. To what extent can the fact that business is sitting on investment at the moment and not investing, as a result of which we  are in a double-dip recession, be attributed to the uncertainty created by our very own Treasury? That prompts this question: what are the Government doing proactively to propose ideas that will inspire confidence in industry?

Will such promises be delivered? The second part of the amendment would require the Chancellor to consider

“other opportunities to introduce targeted support for business.”

He would also have to place a copy of his report in the House of Commons Library. The business community is crying out for not only stability, but investment. Rapid U-turns and shifts in policies are creating uncertainty and, I have no doubt, are stalling the investment that this economy so desperately needs.

The Government should not underestimate the uncertainty that such flip-flopping can cause. On hearing the news last year that the Government would not go ahead with the tax-relief plans, The Independent Games Developers Association, the trade association representing the video games industry, called the Chancellor’s announcement a “betrayal”. The director general of the Entertainment and Leisure Software Publishers Association said,

“It’s a terrible blow. Our industry will be rightly puzzled as to how tax breaks can be lauded before an election, only to be seen as ‘poorly targeted’ and scrapped just six weeks later.”

I would be grateful if the Minister could estimate the number of developers who lost out as a result of that decision. Is there a way to estimate how much investment was lost in the period of uncertainty between the announcement that scrapped the incentive and the recent announcement that it is likely to be re-introduced next year?

Will the Minister confirm whether there are other areas where the Government are considering introducing targeted support for businesses? The message from businesses is that they are struggling—they are struggling to borrow from the banks; they are struggling to get investment from the £754 billion currently being sat on by businesses. The Committee has heard how the forecasts for growth and business investment have been slashed by the Office for Budget Responsibility; they are down from an 8.9% growth forecast in 2011 to the most recent and far more sombre forecast of 0.7% growth. It remains to be seen whether that forecast is also not over-stating reality, given the double-dip recession that the Government led us into.

The Government must take steps and the purpose of the amendment is to assist them in that. They need to instil confidence and provide incentives for businesses to start investing. Labour’s patent box is a welcome measure in the Budget, but the Government can do much more to look for opportunities for a more targeted approach. Knowing that the Government are behind an industry or technology can reduce uncertainty and promote confidence and, most of all, investment. The amendment hopes to change the tide of events currently pursued by the country. I urge hon. Members to support it.

Photo of Nigel Mills Nigel Mills Ceidwadwyr, Amber Valley

It is a pleasure to serve under your chairmanship, Mr Bone. I rise to speak not on the amendment but on the clause stand part debate on this welcome measure; it is testimony to exactly how Government should respond to lobbying. There was clearly a lot of concern in the pharmaceutical  industry, mainly that there were many disincentives against holding intellectual property in the UK. We saw tax being lost as new drugs ended up being owned off-shore.

We have ended up with a wide-ranging relief that applies not only to the pharmaceutical industry but to every industry that uses or registers patents. That is the right way to respond, rather than focusing on one particular industry where we see a problem. It may have been more charitable to refer to this as the “patent capsule”, as a tribute to the industry that generated it. We have here a sensible and welcome proposal that I happily accept was originally talked about under the Labour Government, but has been brought forward and funded by the current Government. We want to see this come into operation and work.

I have a few questions on the detail. Why do we not have some detail? What sounds like a simple idea to let companies with profits from patents be taxed on that income at 10% has turned into about 40 pages of legislation and 80 pages of guidance. I suspect that is due to a fear that businesses will try to refresh every old patent or try to get every pound of income they possibly can into this net to reduce their corporation tax. We have had to go through a series of legislative steps to determine how we calculate IP profit, what expenses have to be there and what avoidance arrangements there are.

There are a few things that merit clarification. Perhaps the Minister could first help me with how exactly we apportion income. Say I am selling a car. I suspect that the patent on most bits of a car expired a long time ago, but if I have a patent on a new braking system and I can sell the car for £20,000 and make a whacking profit, does the fact that I have a patent on a small part of the thing I am selling mean that all the profit I get is in this lower tax rate? Alternatively, must I apportion the fact that most of the car’s technology is no longer covered by patent—at least not one that I hold—and is only the relatively small premium I can get from that new braking component covered? I assume that the second case would apply, but I could not quite work out how, through all the apportionments in the Bill, I would get to that if I owned all the IP for the car completely.

My second area of concern is the anti-avoidance rules at paragraph 357F in the schedule. Paragraph 6.1.2 of the guidance published by the Treasury effectively lists a whole load of situations where the anti-avoidance rules would not be applied. Most of them are perfectly sensible, but I am a little concerned that we are already issuing guidance that says that there are some situations that we do not mean to be caught by the legislation and which the Revenue can take away by guidance—particularly, for example, transferring qualifying IP into the UK.

We clearly want people to bring qualifying IP into the UK so we get the tax benefits from it. That is, I suspect, part of the idea of this scheme. Yet as the anti-avoidance provisions are drafted, that would not be allowed and people would not be allowed to get the 10% tax rate if they did that. The Revenue is having to clarify and take that out in guidance.

It would probably have been better to have had some of those things listed in the Bill rather than in guidance. Most of the things there are relatively sensible. Companies would not expect to make an election to trip them into the anti-avoidance legislation; I should be a little surprised  if that was an interpretation. The drafting of the anti-avoidance clause at paragraph 357FB(1)(c) catches people if their main purpose in being party to a scheme is

“to obtain the chance of securing a relevant tax advantage.”

We are lowering that threshold; it used to refer to being party to a scheme to secure the advantage, not to have a go at securing it. Presumably if people do not secure it, they do not need to be in the anti-avoidance section—they have already been caught.

Finally, a lot of the industries we are trying to encourage as part of generating growth probably do not get to register patents for the valuable IP they produce. I clearly accept that we would not want to incentivise trademarks or marketing intangibles. But it is clear from the shadow Minister’s comments that there are important growth industries that are producing complicated pieces of computer software in code. As I understand it, it is not possible to have a patent on software or code under UK laws, but in the US and some other places it is possible to patent code.

Those businesses will not be eligible for the relief and that might be one of the reasons why we have to go for a targeted thing separately. Once the legislation is working effectively, are the Government prepared to consider whether there are other types of IP we should bring in to encourage that activity and get those valuable assets in the UK that we so desperately need to grow our economy and also to protect our taxpayers?

Photo of John Pugh John Pugh Democratiaid Rhyddfrydol, Southport

The Labour party’s amendment as a demand is quite legitimate, and we should find out what exactly the Government intend to do through the measures they are adopting. I generally support a review of measures, particularly measures like tax exemption for things like video games: I just think that the Government are not necessarily the appropriate body half the time to do it.

I should like to refer briefly to the case raised by the hon. Member for Newcastle upon Tyne North. The video games industry was a very interesting debate at the time. There were Adjournment debates on it. As I understand it, the case was not overwhelmingly made that should the relief end, all businesses would go off to Canada or wherever simply because there was insufficient evidence. I had a personal interest in it because I was surprised by the number of small video games designers in my constituency and scattered throughout the Merseyside area.

There was a general presumption against exemptions for particular industries simply because it adds to tax complexity. A general case can be made for trying to avoid exemptions wherever possible. That seemed to be the line that the Treasury was pursuing; it simply did not see the need. One gets into analogous discussions where people argue that tax exemptions must be given to wealth creators. Other people—usually on the Labour side—say that such exemptions are completely unnecessary because the effect that the Government fear, namely that the wealth creators will decamp, will not transpire. Similar debates take place about the pharmaceutical industry.

Such things cannot be known a priori; they can be known only from data and evidence. The Government have had the data on the video games industry, the  evidence is there and they have responded as we would expect them to. That is evidence-led policy. When the Government initiated the change, it was not possible to say in advance whether it would have the effect that it did, but now that the Government have the evidence and have responded appropriately, we have to welcome the outcome.

Photo of David Gauke David Gauke The Exchequer Secretary 11:15, 12 Mehefin 2012

It is a pleasure to serve under your chairmanship once again, Mr Bone. Clause 19 introduces the patent box. The patent box will apply a reduced 10% rate of corporation tax to profits from patents and related types of intellectual property. The patent box will help to maintain the UK’s position as a world leader in patented technologies and encourage companies to locate high-value jobs associated with patents here.

Encouraging businesses to develop and use their patents will play a key part in supporting a strong and growing private sector. Clause 19 and schedule 2 could benefit up to 5,000 of our most innovative companies. They will benefit a wide range of sectors, particularly high-tech industries such as life sciences, manufacturing, electronics and defence. They are equally applicable to the smallest and to the largest companies.

The patent box will benefit active, innovative businesses that hold or exclusively license patents. Companies must have developed the patent themselves or be actively managing it in order to be eligible for the patent box. Companies can benefit however they choose to use the patents in their business. The technology can be licensed, included in patented products, or used in internal processes or to provide services.

Companies will be able to apply the 10% patent box rate to profits that are attributable to patents, but not to profits that are attributable to routine activities or to commercial brands. For many companies, the rules allow a largely formulaic approach to simplify the potentially difficult task of determining patent profits. This should improve certainty and minimise administrative burdens. My hon. Friend the Member for Amber Valley asked what would happen in the case of a car, an element of which related to a patent. All turnover from the car would be included, but a routine profit element would be excluded—10% on certain costs—as would a marketing return profit. Not all the profit on such a car would be included, therefore, but there would be an amount to reward the technological innovation and intellectual property in the patent.

The patent box will be phased in over five years from 1 April 2013, with the full benefits available from April 2017. It is expected to cost £350 million in the first year, rising to £960 million in steady state.

I will also outline for the Committee future changes. To qualify, the patent must have been granted by the UK or European patent office. Schedule 2 includes a power to include patents granted by the patent offices of other EEA countries. A statutory instrument will be introduced before April 2013 under the negative procedure to include patents from EU countries with similar patentability criteria and patent examination processes to the UK. A draft has been provided to the House.

Powers are also included to permit the Treasury to make consequential changes as a result of changes in EU or national law relating to patents and other qualifying rights; to adjust the definitions for the types of expenses  used to calculate the excluded routine profits of the company; and to update references to international standards for calculating tax profits. The powers will be used to keep the regime up to date and to provide additional clarity if required. We will also keep the regime under review to ensure that it is benefiting business in the way intended, and we will take appropriate action if aggressive attempts are made to exploit it for tax avoidance.

Amendment 24 proposes that the Government publish a review of the impact of the patent box on business and of opportunities to introduce other targeted support for business. As I have discussed in relation to clauses 5 and 6 on corporation tax rates, the Government continue to prioritise reforms to the corporation tax system as part of their action to repair the UK’s model of economic growth. It is because the private sector is critical to the economic recovery and tackling the deficit that the UK must demonstrate that it is open for business.

The Government have taken action to improve the UK’s tax competitiveness in a number of areas. This action includes reductions in the main rate of corporation tax, which will benefit all companies; reform of the controlled foreign companies regime; and introducing an above-the-line research and development tax credit, which will support further R and D investment in the UK by improving the visibility and certainty of the credit. The patent box is also a key part of that commitment.

In November 2010, the Government published the corporate tax road map, which set out a five-year plan for the Government’s approach to reform of the corporate tax system. The proposals were subject to open and transparent consultation with business. The Government have helped to provide stability by delivering the reforms to the timetable first set out 18 months ago in the road map. It is the Government’s view that, in general, a low corporation tax rate with fewer reliefs and allowances will provide the best incentive for business investment, with the fewest distortions. The corporate tax road map has given certainty to business that the tax system will be stable, and therefore the Government are not intending to make any further significant changes at this time. Producing another report on introducing further targeted reliefs is therefore unnecessary.

The Government also routinely publish detailed information on the corporation tax system: HMRC publishes detailed statistics on corporation tax receipts; the OBR publishes information on the corporation tax forecast in its economic and fiscal outlook; and, at Budget, HMRC publishes detailed information on proposed changes, in particular tax information and impact notes and the policy costings document.

HMRC’s existing arrangements will ensure that the impact of the patent box is effectively monitored. This will include capturing data on the level of uptake of the regime and the benefits that the regime delivers to business. However, full information covering the impact of the regime will not be available for several years. The immediate impact is clear from the reactions of business to the introduction of the regime.

I am delighted that already the introduction of the patent box has resulted in £500 million of investment by GSK, including a new manufacturing plant in Cumbria and generating about a thousand new jobs. GSK’s  announcement of its intention to invest was first made in November 2010 in response to the corporation tax road map, not in 2009 when the previous Government announced the patent box. It was, after all, contingent on the successful design of the regime: something that we have been able to deliver.

Photo of John Pugh John Pugh Democratiaid Rhyddfrydol, Southport

The Minister mentioned that the regime will be monitored. Will information be publicly available as a result of the monitoring process?

Photo of David Gauke David Gauke The Exchequer Secretary

The information that we obtain through monitoring the regime can be made available through the usual means. We will be happy to share information with hon. Members who are able to obtain information through parliamentary questions and so on. We will certainly give consideration as to how that information can be best shared. I appreciate my hon. Friend’s interest in this area. I welcome the chance to discuss the issues raised in the amendment. I do not think there is a case for the Government to produce a further separate report on these subjects.

The hon. Member for Newcastle upon Tyne North remarked that the previous Government made an announcement in the run-up to the 2010 general election, and therefore the previous Government should take all the credit for the announcement that GSK, for example, is investing in Cumbria. I am struck by how often we hear arguments that, notwithstanding the desperate state of the public finances that we inherited and the unbalanced economy, the previous Government can accept no blame for the existing difficult economic conditions. I am interested, however, that in the context of the patent box—a policy announcement that was some distance away from having a developed, implementable regime—the previous Government take the credit.

During the process, significant changes have been made to the original proposal to ensure that the regime is competitive and cost-effective. The Government have conducted extensive consultation on the patent box, and there has been very positive engagement with business and representative bodies on all aspects of the policy design. The final provisions have been warmly welcomed. I am pleased that Opposition Members support the patent box’s introduction and that they agree that it will encourage innovative businesses to invest in the UK. It is, however, stretching it a little for the previous Government to take all the credit for the proposals.

In terms of the impact, figures from the Institute for Fiscal Studies show that the patent box will lead to more than double the number of patents being held in the UK. The specific design of the patent box has been developed with considerable input from businesses during the consultation to ensure that the final regime is practical and competitive, and we hope that it will be warmly welcomed.

My hon. Friend the Member for Amber Valley asked whether the provisions should be extended to other forms of intellectual property. A broader box would be very expensive. Most companies hold some kind of intangible assets, and cutting the main rate of corporation tax has been our general focus. Given the state of the public finances, decisions must be made about where the impact can be most useful. Copyright, for example, is automatic on all written material and no inventive  step is required. It is therefore difficult to use copyright as a market innovation in the same way as patents. We must bear in mind that this area is competitive and that capital is mobile, so it is important that the UK is as competitive as possible.

The hon. Member for Newcastle upon Tyne North made a point about the tax reliefs announced for the creative industries, including video games. The Budget stated that three creative sector reliefs will be introduced in 2013, and those measures are designed to incentivise investment. Generally, as I have said, the Government have adopted the corporation tax system with a lower rate and a broader base, but in respect of the reliefs, evidence has been provided showing that market failures exist. Internationally, there has been a move towards introducing such reliefs, as it is a very competitive area. Although it may be the case that the previous Government announced the introduction of a relief for video games, when we arrived in government in 2010, little work had been done or evidence collated to support such a relief. That work has now been undertaken, which is why the decision has been made for targeted reliefs to be introduced for three creative sectors—high-end television, animation and video games.

I am glad that the patent box has widespread support. It will encourage innovative business to invest in the UK and locate high-value jobs and activity here, as well as enhancing the competitiveness of the UK tax system for high-tech companies. I am delighted that the clause is part of the Bill.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education) 11:30, 12 Mehefin 2012

Once again, the Minister’s comments are deeply concerning, in terms of the complacency with which this Government seem to view this country’s economic situation. Moreover, we are in a double-dip recession, the economy is not growing, and serious action needs to be taken to try to stimulate growth.

I accept the Minister’s warm welcome and praise for the patent box initiative. I also welcome the probing questions that the hon. Member for Amber Valley asked about the technicalities, and the implications of the patent box for businesses, in order to ensure that, before the Bill is passed, the Government iron out any issues. Our amendment focuses on the impact of the provision, which the Minister said will be available, in due course, on an ongoing basis. My hon. Friends and I accept that, but he seems to dismiss the requirement to consider

“other opportunities to introduce targeted support for business.”

Our point is that the Government have introduced the ideas and suggestions advanced by the previous Labour Government, but have so far come up with very few suggestions on how to stimulate growth in the economy.

Photo of David Gauke David Gauke The Exchequer Secretary

Will the hon. Lady clarify her position? She will be aware that the main rate of corporation tax has fallen from 28%, which was what we inherited, to 22%, which helps all businesses that pay the main rate of corporation tax. Is she saying that she would prefer us not to have done that? Would she prefer us to provide more targeted reliefs to help specific sectors, rather than make a general reduction in corporation tax?

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education)

I have two comments to make. First, we have not seen that reduction yet; it will be made over several years, and its impact has yet to be felt. We are in a double-dip recession. Those are the economic facts. Secondly, we have discussed at length Opposition concerns that this Government and Chancellor seem to approach the economy as a one-club golfer: corporation tax cuts is all that they seem to have to offer to business. There could be much more innovative and ingenious approaches. Particularly in this economic climate, the Government should address themselves to finding ways to get investment into the economy and to the businesses that need it, and to get growth into our economy.

Photo of David Gauke David Gauke The Exchequer Secretary

The hon. Lady will be aware that the patent box is effectively a corporation tax cut. Is she saying that some corporation tax cuts are good and some are not good?

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education)

The Minister is twisting my words somewhat. He is trying to confuse a very straightforward discussion about the cut in the headline rate of corporation tax being all that this Government are offering, and this cut in corporation tax—the patent box—and potential tax reliefs for video games. Other than that cut, very little is on offer to give businesses the confidence that this Government are behind them, are backing their industry and are going for growth.

Photo of Ian Mearns Ian Mearns Llafur, Gateshead

Over the weekend, I had a significant discussion with people at a company in my constituency who are expert in producing marine and yacht paint and protective coatings, including fire retardants. They have a major onsite research and development arm in my constituency. One of their major problems is that once they have produced and patented a product, they do not receive assistance from the Government to get it into the European market, where there are restrictions. They have not received any such help from the British Government, which is needed because the European testing authorities take up to five months to clear British products for sale in the European market.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education)

My hon. Friend raises an important example of the point I am making. The Government believe that, if they get out of the way and cut taxes, industry will spring up from below, businesses will thrive, we will have growth and the economy will move forward.

Photo of John Mann John Mann Llafur, Bassetlaw

I encourage my hon. Friend to stick to her guns. The Opposition Front-Bench team are calling for lower taxation and more support for businesses, not least in light of the evidence recently supplied by the OECD that British industry, because of the banks’ interest rate hikes, is now paying the highest effective interest rate in the 27 member states of the European Union.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education)

I thank my hon. Friend for that sobering statistic. The point is that it is not enough for the Government simply to stand aside and get out of the way. The clause introduces the patent box, which is a prime example of where the Government can make a real difference. By the same token, our amendment calls  on the Government to consider other opportunities for targeting support at businesses and specific industries. I am shocked, and I can hear from the murmurings behind me that Opposition Members are also shocked, that the Government seem reluctant to invest time in doing so.

Photo of Aidan Burley Aidan Burley Ceidwadwyr, Cannock Chase

The hon. Lady says that the Government need to think of ways to support business other than through tax cuts. The previous Committee I sat on in this room increased from one year to two years the amount of time that an employee has to work for an organisation before he or she can make an unfair dismissal claim against that employer. Businesses, especially small businesses, had been crying out for that move to make it easier to hire and fire people. Does she support that move?

Photo of Peter Bone Peter Bone Ceidwadwyr, Wellingborough

Order. We are straying a little wide of the mark. We need to come back to the clause and the amendment.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education)

Thank you for calling the Committee to order, Mr Bone. I would briefly say that it is not sufficient for the Government to get out of the way, and the point raised by the hon. Member for Cannock Chase is another example of that.

Photo of Peter Bone Peter Bone Ceidwadwyr, Wellingborough

Order. Actually, the shadow Minister is not going to say a brief word about that measure; she is going to come back to the clause.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Education)

Thank you, Mr Bone.

The Government could introduce many other more innovative measures, and I will cite just one that is in Labour’s five-point plan for growth. There should be a one-year national insurance break for every small firm that takes on extra workers. I would have thought the Government would support such an initiative; I know that businesses do. Rather than making it easier to sack workers, the amendment would make it easier for businesses to hire workers, which would get our economy moving. That is why I urge hon. Members to support our amendment.

Question put, That the amendment be made.

The Committee divided: Ayes 13, Noes 17.

Rhif adran 10 Decision Time — Clause 19 - Profits arising from the exploitation of patents etc

Ie: 13 MPs

Na: 17 MPs

Ie: A-Z fesul cyfenw

Na: A-Z fesul cyfenw

Question accordingly negatived.

Clause 19 ordered to stand part of the Bill.

Schedule 2 agreed to.