Confusion At PM's Question Time

Listeners to the weekly Prime Minister's Questions Time on Wednesday (April 5) would have been confused as the two protagonists spoke at cross purposes about the effect of IR35 on small businesses and the effect of NI on share options on larger concerns.

Listeners to the weekly Prime Minister's Questions Time on Wednesday (April 5) would have been confused as the two protagonists spoke at cross purposes about the effect of IR35 on small businesses and the effect of NI on share options on larger concerns.

With both leaders confusing tax avoidance with tax evasion, Tory leader William Hague opened the batting by raising the recent report that Cisco was considering pulling back its investment in the UK.

He said: "This week, the UK managing director of Cisco, one of the world's largest companies, said that 'the UK is a great place for us. But, if tax remains the same we will have to look seriously at where we develop our products and where we have our European support operations.

"Does the Prime Minister understand why one of the world's largest companies is saying that and will he explain the reasons to the House?

The Prime Minister replied: "It is precisely because of the concerns that have been raised that we have a consultation paper with three options. We shall discuss the issue with those concerned. If firms such as Cisco have legitimate concerns, of course we have to deal with them, but we also have to deal with tax avoidance. If the right hon. Gentleman is saying that we should not attempt to deal with that, perhaps he will get up and say so."

Mr. Hague countered: "Of course we should deal with tax avoidance. We should deal with tax avoidance, but that is not what one of the world's largest companies is talking about. It is talking about the extension of national insurance contributions--another stealth tax introduced by the Chancellor--on which there has been no consultation paper. The Prime Minister poses for pictures with computers but, when one of the world's largest computer companies threatens to pull the plug on UK investment, he does not know what it is talking about. That is not a good sign.

Mr Hague then moved on with a thinly veiled reference to IR35 "According to a report published yesterday, 50,000 IT consultants are either emigrating or thinking of emigrating, or they are not returning to the UK from overseas assignments--if only we could be so lucky with the Deputy Prime Minister. Does the Prime Minister understand why thousands of IT companies are taking their business abroad? Will he explain that to the House? "

Tony Blair replied: "The right hon. Gentleman is talking absolute nonsense. Of course there is a paper about the share options, as it is important that we ensure that there is no tax avoidance. We will listen to legitimate concerns and act on them, but it would be wholly wrong to allow tax avoidance to take place on the back of any of those practices.

"As for British business, the economy has never been stronger. We have 800,000 new jobs, growth is up, and for the first time in 30 years we have come through a slowdown without a recession. Inflation is down, and for the first time in decades we have got rid of Tory boom and bust."

Mr. Hague continued his attack on high-technology stealth taxes: "So either the Prime Minister is unaware of what is happening in the high-technology sector, or he does not care about it. The British Chambers of Commerce said yesterday that the Government seems to be unaware that its actions are working against creating a better climate for business.

"Those words are borne out by the Prime Minister's remarks in the past few minutes. While the Secretary of State for Trade and Industry is waving goodbye to the old economy, is not the Chancellor--with stealth taxes and regulations--slamming the door on the new economy?"

The Prime Minister did not address the issue of people moving overseas directly. He said: "I was thinking that there is at least one economic migrant who has come back to this country instead of staying abroad. They are not all leaving--some are coming back. What the Leader of the Opposition is saying really is nonsense. Of course it is important for us to ensure a good climate for business. That is why we have reformed capital gains tax and reduced corporation tax, but we must also ensure that tax avoidance does not take place. We have a balance to strike, and we are trying to strike it in the right way. "