House of Commons
Tuesday 7 July 2009
The House met at half-past Two o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
Communities and Local Government
The Secretary of State was asked—
Part of Sedgefield has been designated a growth point in south Durham and is attracting a lot of economic investment. What more can the Minister’s Department and Durham county council do to enhance investment in social housing in Sedgefield and other parts of County Durham?
I am aware of the commitment that my hon. Friend’s council in Durham has to helping people through this tough period of recession. I am also aware of its long-term plans to lift the county and its residents. He asked me what more the council could do. I suggest that it look at the announcement that we made last week of £1.5 billion extra in order that we can build this year and next year the homes that people need—affordable homes that people can rent and buy. My hon. Friend and his council will notice that we have increased fourfold the funding and therefore the number of homes that councils can build over this year and next year. In short, it should bid for the money.
The Minister will know that tenants in the social housing sector need to move from one local authority area to another for family or employment reasons. Does not the injunction from the Prime Minister to give priority to local people inhibit tenant mobility?
No—exactly the opposite. As a distinguished former Housing Minister the right hon. Gentleman will recognise that we need new homes and we need to build homes that people can afford to rent. He will also know that there is a perception that the system for allocating council and housing association homes can be unfair, inflexible and can stop people who need to move in order to take up or pursue work from doing so. The Prime Minister announced and I will set out in detail before the end of the month ways in which local authorities can give greater preference according to the priorities and pressures in their area. That might include, for some, supporting those who want to work but who need to move in order to do so.
Will my right hon. Friend confirm that giving more priority to people with local needs is not about race but about trying to help people such as Katie Wilson, in my constituency, who has been on the waiting list for 17 years and simply wants to be housed in the community where she was brought up, where her family and friends are? It is about allowing people to move near grandparents so that they can support the children and allow the parents to go out to work. It is those sorts of issues that are important and they are currently not given sufficient priority in the allocation systems.
I hope that we can move beyond this argument about immigration. I am not proposing to change the rules about who can apply so that foreign migrants do not have a right to go on to council housing lists. I want to give councils greater freedom and greater scope to be able to make judgments about whom to give preference after they have housed those who are in the most serious housing need. The views of my hon. Friend’s council in Sheffield might be very different to the support that councils in Southwark or Somerset might want to give. The principle for this Government is that we should give councils that greater scope to be able to devise and run their lettings list in a way that best meets local housing needs.
I take this opportunity to welcome the Secretary of State to his new post and to congratulate the Housing Minister—although he is a familiar face in the local government Front-Bench team—on his elevation. I would also like to express my sorrow at the deaths of the six adults and children who died at the Sceaux Gardens estate the other day. I am sure that we all want to ensure that such a terrible tragedy cannot be repeated in any of our social housing estates.
It was slightly cringe-worthy to hear the Housing Minister trying to explain this morning why his priority is to tackle a misperception about access to social housing when the fundamental problem, surely, is the lack of social housing. Is not the key way to solve that to get rid of the housing revenue account subsidy system? Given that the Prime Minister trailed such a move in January and that we now have a further consultation on a review, is it not time that the decision was brought forward rather than delayed further?
I am grateful to the hon. Lady for her comments. She might have missed my statement last week, which set out my aim to dismantle the housing revenue account and the announcement that, from last week, councils that build new homes will be able to keep in full all rents and any capital receipts from them. It is a first step in making wholesale reforms, which are long overdue, and a part of removing the barriers to councils’ being able to build, commission building and see the provision of homes in their areas that people need.
I am aware of the consultation document seeking views on options for addressing the impact on local communities of high concentrations of houses in multiple occupation. Local residents in the centre of Ormskirk are affected by homes in multiple occupation, and in particular there is a high concentration of students. May I urge the Minister to take their views into consideration and to bring into reality changes to the legislation, as he sees fit from that consultation?
I am looking at this matter very carefully, and will take into account the views of the residents in Ormskirk that my hon. Friend has reported to the House. I shall also take her views into account, and I am looking to make decisions on this matter pretty shortly.
I also congratulate the Minister for Housing on his promotion, and welcome him and the Minister for Regional Economic Development and Co-ordination to their new roles in the Department. Like the whole House, I am sure, I wish to share in the condolences extended to the bereaved from Camberwell.
I had to replay the Minister’s interview on the “Today” programme this morning twice to understand precisely what the Government’s position on housing now is. Will he confirm that the Government’s plans may change the requirement in primary legislation to give housing priority to the homeless, families with children and the overcrowded?
I am glad that the hon. Lady is following our announcements so closely. To be clear, I have said consistently—and I confirmed it last week, well before today’s “Today” programme—that I am not changing the requirement for local councils to give priority to those in most serious housing need. In other words, I am not touching the reasonable preference categories. What I am looking to do, and I shall publish this at the end of the month, is to set out new statutory guidance that will allow councils more scope to give preference to people in their area who they believe are in most need, or to relieve the pressures that they are under. However, that can work only when placed alongside a serious programme to build more homes. That was what the housing pledge and the Prime Minister’s commitment last week was all about.
But given that waiting lists have soared by 800,000, and the legal requirement to house priority groups, is not the Prime Minister’s pledge of
“local homes for local people”
simply empty rhetoric—a dog whistle to Labour’s disillusioned and abandoned core vote?
No. What would be empty rhetoric would be a professed concern for housing in this country alongside a plan to take £800 million out of the housing budget this year and 10 per cent. in every year after that, because that would mean that we could not build the homes that we need for the future.
Changing Places Toilets
New guidance for British standard BS8300 which was published in March includes for the first time detailed guidance for Changing Places toilets. A review of part M of the building regulations, which covers the access to and use of buildings, will begin this year and will consider the possible inclusion of such toilet facilities.
The Minister may not be aware that one of the first Changing Places toilets was installed in the centre of Milton Keynes. It means that families with disabled children can enjoy a day out just like any other family. When part M of the building regulations is looked at, may I urge him to ensure that it includes a requirement that a Changing Places toilet is put in every newly built major public building?
First, may I thank my hon. Friend and the many hon. Members of all parties who have written to me about Changing Places? I also thank all those hon. Members who attended the recent Mencap reception for everything that they are doing to highlight the importance of providing suitable facilities for disabled people. No one who attended the reception and who saw the film about Lowri and her mother Bethan could fail to be moved about what they and many other disabled people have to experience.
I congratulate my hon. Friend on the impact that she has had at a local level in ensuring that Milton Keynes was one of the first towns in the country to install one of the 85 new facilities that I am pleased to say have been developed. I can give her the assurance that she seeks, and I believe that the 85 facilities that have been developed are a very good start. I encourage all hon. Members to work with their local authorities, as she has, so that more can be provided in future.
East Sussex Waste Plan
The Department has provided approximately £70,000 to East Sussex county council and Brighton and Hove city council through a combination of planning delivery grant and housing and planning delivery grant.
I thank the Minister for that answer, but he might also have mentioned the private finance initiative credits provided previously by the Treasury. Does he share my concern that some of the promises from East Sussex county council, especially about its disliked incinerator, have simply not been carried through? For example, it promised that the incinerator could be accessed by rail, but in reality every deposit will come by road, with a lorry passing through Newhaven every two minutes. What can the Government do to ensure that the county council pays some attention at least to the environmental effect of its actions?
Business Rates Revaluation
As business rates revaluation is a regular exercise every five years, no impact assessment is carried out in preparation. However, an impact assessment of the transitional arrangements for the 2010 business rates revaluation will be published shortly, alongside a consultation document setting out the Government’s proposals for a transitional relief scheme.
I am grateful to the Minister for that answer, and I am sure businesses will be grateful too. In a recent survey that I conducted in Beckenham, 46 per cent. of small businesses said that they needed help already with business rates. Given that the threshold for the supplementary business rate is only £50,000, and the effect that that will have on small businesses, does the Minister agree that a revision of that level should be included, otherwise the Government will be accused of sneakily increasing the burden on small businesses?
In fact, the small business rate relief scheme is extremely effective. Overall, the assistance to businesses has been about £260 million in the past year. That is something that we introduced alongside a range of other measures to assist businesses during these difficult economic times, very often in the teeth of opposition from the Conservative party.
No one in the House can be unaware of the difficulty of imposing additional costs on small businesses, in particular at this time. The other side of that, of course, is that businesses continue to make demands on local services, especially the emergency services—fire and police—and especially where premises may be empty for whatever reason. So whatever else happens in the present exercise, will the Minister ensure that while protecting the interests and the balance sheets of small companies, local authorities are properly compensated for any income forgone as a result of that effort to protect small businesses?
My hon. Friend makes an important point. Some £20 billion in business rates is collected and distributed to local authorities around the country. Given that the business rate increase is based on the retail prices index and that there was a spike from last September, we are introducing the transitional rate relief this year in order to ensure that there is not a big impact on businesses, while maintaining the income to the local authorities.
This year business rate tax rises were so unaffordable that Ministers have had to introduce an emergency rates deferral scheme. Next year’s revaluation could see thousands more struggling businesses hit again, just because of their location. If, in 2005, 700,000 properties saw their rateable values rise by 20 per cent. or more, how many businesses need to lose out in the 2010 revaluation before Ministers decide that their formula does more harm than good? If Ministers are not going to assess that impact, why not?
The hon. Lady made the same point in a recent debate. She still does not seem to understand that the system is based on legislation that was introduced by the previous Administration, and is based on a formula whereby business rates increase by the RPI. There is overall no greater collection of the business rates. It occurs to me that the hon. Lady has never said in any of her contributions what she would do. She knows how the system works, yet she comes up with nothing but empty accusations, and no plans whatever for the future.
I thank the Minister for that answer. He will know that there is next to no local support for the Pennbury town idea, excepting that of the Co-operative Society—a situation that, I suggest, involves some conflict of interest with the Labour Government. He will know also that there is nothing ecological about building on a greenfield site and no demand for housing on that scale, so will he learn the lesson of past new towns—of building huge new towns without any existing infrastructure and of how unpopular they have been—and understand what a disaster the new town would be for the people of Leicestershire?
As I come to make decisions on the matter, I will have the benefit of quite an extensive consultation, of additional assessments that have been undertaken, and of the opportunity that has been given to everyone, including residents in the hon. Gentleman’s constituency and Members, to make their views known. I say to him very clearly that the links that any developer or company may have with any of those eco-town proposals and with any political party are simply not a material consideration in the decision that I take, and will not be.
May I urge the Minister, when he makes an announcement on Pennbury, to reject it firmly? The scheme will have a devastating effect on my constituency and on the city of Leicester in general—on transport infrastructure, in particular, and on regeneration investment in the city. The scheme is based on ludicrously unrealistic projections of traffic and jobs and is, frankly, the wrong scheme in the wrong place.
And the Minister will hear it again when, I hope, he permits me, the hon. Member for Leicester, South (Sir Peter Soulsby), my hon. Friend the Member for Rutland and Melton (Alan Duncan) and the right hon. Member for Leicester, East (Keith Vaz) to see him with an all-party delegation, as we have requested, to provide him with some of the facts of life about the popularity and utility of the scheme. It will be in my constituency and it will impose a town of 40,000 residents in the middle of rural Leicestershire. It is an idiotic scheme, and—Mr. Speaker, I shall be very brief—the sooner this Minister, who is the fourth such Minister to have to deal with the issue, realises that and promises not to make an announcement—
I may be slow sometimes but I get the message. I say to the hon. and learned Gentleman that there has been complete consultation and the decision-taking process is now under way. Just as when planning applications are called in, however, it would not be appropriate for me or any ministerial colleague to meet him or other Members. I reassure him, none the less, that I have an enormous amount of material and a wide range of representations, including from him, to take into account.
Notwithstanding the Minister’s eventual decision on Pennbury, does he recognise that there is an acute shortage of affordable housing in the shire districts and boroughs of Leicestershire? Will he therefore suggest to me how we can encourage the reluctant landlords, which Tory district and borough councils often are, to take advantage of the new announcements that were made last week, rather than to spend their time coercing their tenants into a stock transfer or drumming their fingers waiting for the hon. Member for Welwyn Hatfield (Grant Shapps) to ride over the horizon—
My hon. Friend will realise and, I hope, welcome the series of announcements that I have made so far, building on the excellent work of my right hon. Friend the Member for Derby, South (Margaret Beckett). The further announcements that I plan to make are intended largely to remove the bias in the system against councils being able to build the homes that are needed in their area. So, there are some questions for my hon. Friend to ask of his council, and for every Member to ask of their local council. Why are local councils not building or commissioning the building that is necessary? Why are they not bidding for the funds that the Government are making available? Why are they not making the land available on which those homes could be built? Why are they not giving the planning permission for those homes to be built? And, indeed, why are they not going to make the lettings policies fairer in future?
The Prime Minister launched the eco-town programme in a blaze of publicity in May 2007 and then upped it to 10 eco-towns, but here we are two years later and the Government are still consulting on the matter and still consulting about planning guidance. The small print of last week’s draft legislative programme, however, revealed on page 122 that the towns have now been pushed back to 2020. So, will the Minister—the fourth to have been across the Dispatch Box from me—now just admit that the programme is a shambles, that developers are running scared, that judicial reviews have delayed it, that it will require massive public subsidy when the coffers are bare and that the Government’s own environmental advisory panel said that, at best, only one eco-town was environmentally friendly? Is it not time that this Housing Minister, the ninth since the Government came to power, admitted that the unpopular eco-town programme is a complete shambles and scrapped it?
On the contrary. I ask the hon. Gentleman to be a little patient; I have said to the House that I expect to make an announcement before the recess, and I have not yet finished four weeks in the job. Eco-towns give us the opportunity to meet two needs: first, the need for new homes, including those that people can afford to rent; and secondly, the need to build our homes in future in a way that helps us tackle the threat of climate change. Given that more than a quarter of the total carbon emissions in this country come from homes, that is something that we simply must do.
Regional Spatial Strategies
The Department has had a number of recent representations from Members on the timetable for further reviews of regional spatial strategies. Margaret Beckett—[Interruption.] Sorry.
My right hon. Friend the Member for Derby, South (Margaret Beckett) answered questions in the House on the point on 2 June 2009. In addition, the regional spatial strategy for the south-west has been subject to extensive consultation; there were 35,000 responses on its proposed changes.
I thank the Minister for that response. The vast majority of those 35,000 responses opposed the building of 68,500 houses in Cornwall. Is it not time to scrap the targets and provide the funds to local authorities, which can build the affordable housing in the places where it is most needed?
The hon. Gentleman misses the point about regional spatial strategies, which are absolutely essential in ensuring that the Government meet their target of 240,000 extra homes by 2016. He should support that, given that 161,000 people in his region alone are on the waiting list for homes.
Does the Minister not see the irony? In July 2007, the Prime Minister told the House:
“we will continue robustly to protect the land designated as green belt.”— [Official Report, 11 July 2007; Vol. 462, c. 1449.]
In May this year, the east of England regional plan was struck down by the High Court because, to use the judge’s words, it would
“erode the Green Belt without alternatives being considered”
and because there was a lack of a proper strategic environmental assessment. The south-west regional plan has just been indefinitely withdrawn by the Government after the High Court gave an identical ruling, and judicial reviews have now been launched on the same grounds against the south-east regional plan.
The Minister is new to his post. Would it not be a good idea to take this opportunity to scrap the derailed and discredited regional spatial strategy system, the Prime Minister’s discredited promise, or both?
Seldom have I heard such a lot of rubbish in such a short space of time. The regional spatial strategies are crucial in ensuring that we get the housing outcomes that we want. With respect to the east of England judgment, small procedural elements needed to be readdressed, and the issue has been remitted to the Secretary of State. We will put it right and we will learn the lessons from the east of England and apply them to the south-west. We will move forward.
Since 1997, the green belt has decreased by 0.8 per cent. However, if we take the New Forest national park into account, there has been a 2 per cent. increase since that year.
Council Rental Income
I thank my right hon. Friend for that answer. Does he agree that the changes that he has made would allow Leeds city council to regenerate one of the most deprived housing estates in the north of England—the Beckhill estate in my constituency? Will he agree at some later stage to visit that estate to see it for himself?
I will certainly see whether I can fix a date—although my diary secretary will not be pleased that I am saying this—to visit the estate and accompany my hon. Friend in doing so. I hope that he will give every encouragement to the Tory and Liberal-led Leeds council to bid for the funds to build the new homes that people in Leeds need. I have been encouraged by the fact that it is one of the 20 local authorities that have signalled their intent to bid in the first round for the money that we will make available from the end of July.
Does the Minister not accept that these changes—which, by the way, I warmly welcome, as I believe in meaningful local government with a full range of responsibilities—have come too late to prevent what was then Macclesfield borough council from being forced to transfer its housing stock to a housing trust? Will he ensure that in future housing remains within the democratic domain so that it is democratically accountable and local people can decide where houses are built, instead of leaving it to an unelected, somewhat bureaucratic organisation?
I thought for a moment that we were going to re-run some of the arguments that the hon. Gentleman and I have had about local government reorganisation in Cheshire. The point that he makes is, in different terms, consistent with what I explained to the House earlier—that part of the purpose of the changes that I have announced is to remove the bias in the system that prevents councils, and has done for more than two decades, from building in order to meet the needs in their area. From this point on, councils will be better able, on a fairer basis, to build in the same way that housing associations have been able to do in recent years.
Independent Local Government
As my hon. Friend knows, the statutory independence of local government is set out in various Local Government Acts, and we are committed to the principle of local self-government. I want to ensure that we have the right balance of power and responsibility between central and local government, and I will shortly launch a consultation that will explore those issues. I want, in particular, to explore how democratically elected local authorities can influence all public spending on public services in their area.
In finding the right balance to set local authorities free from what is, in effect, the most heavily centralised state in the democratic nations of the world, will my right hon. Friend take this opportunity perhaps to join Conservative Front Benchers and stop chaining local government, to set it free, and to allow it both the powers and the finance to look after as much of its own affairs as is possible?
I think that my hon. Friend will accept that we have done a great deal to give powers to local authorities: they have had the three-year funding settlement, the amount of ring-fencing has been reduced, and the number of targets has been reduced. As I said earlier, I now want to embark on the next stage by ensuring that local authorities have the powers that mean that when somebody elects a local councillor they are electing someone who can genuinely influence public services in their area. However, it is also important that there are some minimum entitlements to the quality of service. We need to ensure that we balance the rightful, powerful place of local authorities with people’s rights to decent services, wherever they live.
If the right hon. Gentleman is straightforward in this—and I am sure that he is—will he look carefully at the democratic deficit that would occur if there were a reorganisation of local government in Suffolk, which would mean either that the county of Suffolk took away the powers from locally elected people and covered an area stretching from Mildenhall across to my constituency instead of having real local authorities, or a change to an invented local authority with which nobody has any connection at all?
I obviously hear what the right hon. Gentleman says. He knows that I am awaiting the report of the inquiry into that matter, and it would not be appropriate for me to comment, but I assure him that Ministers will give proper consideration to the results of those considerations.
Migration Impacts Fund
I am pleased to say that we received some 330 proposals for funding. My right hon. Friend the Secretary of State will shortly announce the successful projects.
I am delighted that money is being made available—largely, I might say, provided by classes of migrants themselves. Can the Minister indicate not just the advantages accruing to migrants themselves but the general societal advantages of the migration impacts fund?
My right hon. Friend is right to point out that the fund is derived from increases in immigration fees and is intended to alleviate pressures on local services from transitional changes. There are a number of examples of projects we would like to fund that would benefit the whole community. One is tackling rogue landlords, which would have a direct impact on both migrants and other people in the neighbourhood and the community. That is the principle on which we are approaching the funding.
We will not be considering whether or not there will be a council tax revaluation until at least 2010-11.
Conventionally, one thanks a Minister for their answer, but may I say that it was very disappointing, especially for my constituents? They are increasingly puzzled and angry at a local tax system based on a 15-year-old valuation of their homes, which has no contact with current realities, equity or their ability to pay. Does the Minister and the Secretary of State not accept the urgent need for a new, fairer system based on the ability to pay, which would allow local councils to deliver good services at a fair cost?
I suspect that the hon. Gentleman is referring to the local income tax, which Michael Lyons looked at but did not recommend for a whole host of reasons, including the risk of substantial increases for the working population, the cost burden on employers and the particular impact on small businesses. Yet again, that is an example of a Lib Dem policy that, while professing to do one thing, has quite the opposite effect.
In advance of any major revaluation, will my right hon. Friend consider encouraging local authorities that want to offer council tax discounts for householders and businesses that have introduced energy-efficiency measures and microgeneration? In one fell swoop, that would deal more quickly with the problems of climate change than anything else that could be done.
My right hon. Friend the Secretary of State is consulting on powers for local authorities, particularly with regard to low-carbon strategies. A number of local authorities are also innovatively considering, during these difficult economic times, how they can link energy-efficiency measures with stimulating the local economy and employing local people. That is exactly the sort of interventionist approach that we think is correct.
Listing Applications (Planning)
These statistics are not collected. It would be difficult to do so, since planning applications are made to local planning authorities and listing applications are made to English Heritage. Planning permission is not in any case generally required to demolish an unlisted building outside a conservation area.
I thank the Minister for his answer. English Heritage reckons that five properties pending listing have been demolished in the past year. The problem of pre-demolition while listing is being considered is recognised by the Government, who sought to bring in measures for interim protection in their Heritage Protection Bill. That Bill is still on hold. Can they say when they will bring in measures, either as a stand-alone Bill to introduce interim protection, or through the Heritage Protection Bill, which is not controversial and has the majority support of Liberal Democrats and Conservatives?
Given the hon. Gentleman’s background in architecture, he has made himself something of an expert on the matter. I agree that it is important to protect such buildings. He is right that a requirement for interim protection for heritage assets, which are the subject of an application for designation, was included in the Heritage Protection Bill last year, and we will introduce such a requirement when there is a suitable legislative opportunity.
During the recession, we take the view that the Government have a responsibility to maintain the building of homes that people can afford and create some of the jobs that will help the country through it. That is why we announced last week an extra £1.5 billion to support building such homes, more scope for local authorities to manage their allocation policies in future and a bigger role for local government. That means more homes, fairer lets and meeting local needs.
I thank my right hon. Friend for that response and greatly welcome the Government’s continued commitment to investing in social housing. I am sure he realises that Plymouth is no exception to the pressing demand for more social housing. Does he also envisage a role for community land trusts in filling the gap in affordable and social housing?
There may indeed be a role for community land trusts in some areas. For example, in Plymouth, the Devonport new deal for communities is considering developing that sort of arrangement. We believe that community land trusts have an important part to play, and that is the reason for legislating last year in the Housing and Regeneration Act 2008, and for the availability of funding under the national affordable housing programme. We should respond to the consultation shortly.
Will the Minister acknowledge that there is an urgent requirement for more affordable housing in my constituency and many others in the south-east, but that the infrastructure simply does not exist to support it on the planned scale? Will he consider what can be done to increase the share of Government expenditure on infrastructure in the south-east, which currently receives an unfair deal from the Government?
The hon. Gentleman raises a broader question about funding for local councils, but he also gets to the heart of the matter. If he believes that his area needs more homes that people can afford to buy and rent, his council needs to play a part in the building programme that we are setting up—I hope he will urge it to do that and encourage it to bid. I also hope that he will make representations to his Front Benchers so that those budgets will not be cut in future.
To help people who may be threatened with repossession, we have put in place advice and support at every stage of the process—from free debt advice when they first get into trouble, to free legal advice and representation should their case end up in court.
I thank my right hon. Friend for that answer. The claimant count in Halton for May was up 88 per cent. on this time last year; we have almost the worst unemployment rate in the north-west. Is it not therefore essential that when the Government give help to people to remain in their homes, or help with social housing, areas such as mine, which are suffering much more than others, get priority?
We are trying to do two things. First, we want to ensure that there is support for everyone, wherever they are, who may run into problems. Secondly, given the unemployment pressures in my hon. Friend’s constituency, he will welcome our changes to support for mortgage interest, which have doubled the capital limit and shortened the period for which people have to wait for that support. I am sure that he will also welcome the money that has gone through his local authority towards debt advice, as well as help in the courts. At no stage, including when the case comes to court, is a repossession a foregone conclusion.
Local Authority Leaseholders
Information on the individual financial circumstances of the estimated 230,000 local authority leaseholders in England is not available. However, it is estimated that at least 6 per cent. of local authority leaseholders in London have received major works bills for £10,000 or more.
May I emphasise again to my hon. Friend the predicament of many council leaseholders in Westminster, some of whom are about to receive bills for up to £58,000? Let me also stress to him that over the years, the local authority and the Government have been pressing home ownership on tenants, yet in some cases they are now being expected to pay bills the repayment of which will total more than their net earnings. Please may I meet Ministers again to discuss what can be done to assist those people and prevent them from risking losing their homes?
I congratulate my hon. Friend on the fantastic job that she does in speaking up for her constituents on this issue, and on the work that I know she has done on it for a long time. I know how concerned she is about it, and I can tell her that the Department has been keeping it under review. I know, too, that she and other Members wrote to my predecessor to propose a number of measures. I would welcome the opportunity to meet her and other colleagues who have been campaigning on the issue.
I would like to refer to the tragic fire that occurred in Camberwell on Friday afternoon. I am sure that the House will wish to join me in offering sympathy to all those affected and, in particular, condolences to those who have lost loved ones. My hon. Friend the Member for Dewsbury (Mr. Malik), the Minister responsible for fire and rescue, met London fire brigade’s incident commander yesterday afternoon to hear about the fire for himself. I would like to take this opportunity to place on the record our gratitude to the fire and rescue service and to other emergency services for the professionalism and bravery that they showed in responding to that distressing situation.
The House will be aware that the fire is being investigated by both the police and the fire and rescue service, but at this stage it would be wrong to draw premature conclusions. However, the public will want to know that they will be kept fully informed. I have asked Sir Ken Knight, the Government’s chief fire and rescue adviser, to report back to me urgently as conclusions emerge from the investigations and inquiries that are under way.
I am grateful for that answer. Let me turn to a more local issue for my constituency. In Crewe and Nantwich, as across the rest of the country, the quality of public pavements is a continuing problem. The issue came to the fore earlier this week when one of my elderly constituents tripped and fell, breaking her wrist and suffering serious facial injuries, which, sadly, is an increasingly all too frequent occurrence. Does the Secretary of State support my view, and that of the Crewe and Nantwich safer pavements action team, that a difference in level of 25 mm between paving stones is too great and that the threshold for deciding—
This is not a subject that I have yet had the opportunity to look at in detail since I took up my post, but as I recall, the difference in level was originally established by the courts rather than by primary legislation. I have every sympathy for anybody who has suffered in that way, but the need for local authorities to invest in and maintain pavements is important, and it would be harder to do that if the kind of cuts proposed by the hon. Gentleman’s party—£1 billion from my Department alone—were made.
Thank you, Mr. Speaker. [Interruption.] I am impressed at being called after invisibly standing up to catch your eye, although I was standing up to catch your eye earlier. My urgent question is this. The Government have announced extra investment in public housing. Will they ensure that they invest in those local authorities that are ready to dig, such as Slough, where tenants will get houses more quickly than in areas where the local authority will spend a lot of time complaining about infrastructure but not doing anything?
Let me reinforce the point made by my right hon. Friend the Minister for Housing. The challenge and the opportunities are now there for local authorities to show leadership. We are providing the funding and changing the rules, and I certainly want to see the money going to those places with housing needs where the local authority is prepared to step up and meet that challenge.
I believe that the correspondence was dated 26 June. I have not yet looked at it, but I will do. I know that concern has been expressed in the hon. Gentleman’s constituency about this issue. There are perhaps quite a small number of such cases. This is a difficult question, but we do not want to make it harder for people to object in the circumstances he has outlined. However, I will certainly look into the matter and into what the Audit Commission has said, and I will respond in writing to the points he has raised.
Does my right hon. Friend agree that a shortage of social housing is more likely to be the fault of Tory authorities such as Hammersmith and Fulham—last month, it announced plans to demolish 3,500 newly modernised social homes—than of new immigrants to the country, who, according to an Equality and Human Rights Commission report today, occupy only 2 per cent. of council homes?
My hon. Friend is quite right to put the responsibility on local authorities. We shall see whether the local authorities that have in the past talked the talk, but not been prepared to take any action to produce social housing, will now respond to the investment and the challenge that the Government have laid down.
I can tell the House that, despite the fantastic induction that I have received over the past few weeks, I was not aware of that point. I will, however, be very happy to meet the hon. Lady to discuss the matter in more detail if she would like to do so.
I welcome the boost that the Government have given to councils building more council housing, but will the Government look urgently at the Co-operative party’s proposals for mutual home ownership, whereby home investments and pension funds could be used to ensure that those on modest incomes who cannot afford to buy a home can get on to the housing ladder?
I will certainly look at that. In general terms, I am ready to look at and back anybody and any organisation that is prepared and able to get homes under way, so that people who need them have the opportunity to buy or rent them at a level they can afford.
Will one of the Ministers outline to the House how the future jobs fund will work? It is a project that has been put together by the Department for Communities and Local Government and the Department for Work and Pensions. Will the Minister also make it clear to the House that bids from local authorities will be supported only if they include value added—as Stockton’s does—and if the jobs they make available will be permanent?
The future jobs fund is an enormously important initiative by the Government to ensure, in particular, that there are jobs for young people who have been out of work for a long time, and for others in areas of high deprivation. Bids to the future jobs fund are being assessed at the moment, and the criterion that they should involve jobs that will last is clearly part of the process. I should also point out that this initiative is part of the Government’s fiscal stimulus, and that our response to unemployment and the recession is possible only because of the wider measures that the Government are taking.
That is an interesting question coming from someone who advocates a 10 per cent. cut in local government expenditure, which would have cut my Department’s budget by £1 billion this year. There is a responsibility right across local government, as in other areas of government, to achieve the maximum efficiency and the best possible value for money for our citizens. I believe that the targets we have set are achievable, but I have to say that the destruction that the hon. Gentleman would wreak on local government is something we do not want to see.
May I tell the Housing Minister how warmly welcomed his statement was last week on the housing subsidy account? May I also urge him to ensure that any changes he makes will enable excellent four-star councils such as Wigan to build on the 80 council houses it will be placing in the Scholes area of Wigan, so that there are more of them in future?
My right hon. Friend the Secretary of State visited Wigan just 10 days ago. Both he and I are clear that Wigan is a first-rate authority and we are pleased that it wants to take maximum advantage of the new freedoms and the new funding we are ready to make available to help councils build. I hope that my hon. Friend will work with his council to make the most of the opportunities we are now creating.
I have every confidence in how my right hon. Friend the Minister for Housing is handling this issue, and I am not going to comment on the particular proposal. In listening to this debate, however, I regret the lack of imagination so often shown by those who cannot grasp the importance of understanding how we use planning, housing and urban development to ensure that we provide good-quality communities at the highest environmental standards for the future. Too many of the critiques seem to be opposed to the entire idea, rather than to particular individual proposals.
All Members must regret the fact that workers throughout the country are suffering job cuts, pay cuts and short-time working, but does the Secretary of State agree that that should not be used as a reason or excuse to cut the terms and conditions of local government workers?
I want to pay tribute to local government workers for the job they do, as I was also able to do at the Local Government Association conference last week. Local government workers are in discussions with their employers, the local authorities, at the moment. Those discussions have to take place in the light of the three-year financial settlement and the expectations of council tax payers for reasonable settlements. I certainly regard the job that local government workers do as essential, and I believe that the rising public appreciation of local services that we have seen in recent surveys is down to their efforts and their commitment.
I appreciate the Secretary of State’s position, but will a Minister please comment on the fact that my constituents view with great suspicion the fact that Tesco has begun to buy up property in the centre of Kirkby ahead of the determination of a recent planning appeal? If this disastrous scheme were to go ahead, it would be seen by my constituents purely as legalised bribery.
I can understand why my hon. Friend, who represents her constituency so assiduously, wishes to raise this issue, but she will understand, given where things are in the planning process, that no Ministers can respond in public on this matter—but we do hear what she says.
While I welcome the Government’s conversion on the issue of the housing revenue account and their commitment to dismantling the system, it concerns me that there appears to be no mechanism to enable that to be done. Why have the Government not been willing to include a Bill in the draft legislative programme to get rid of the HRA system and extend that arrangement beyond just new houses, as the Minister suggested in his earlier answer would happen?
I hope that the hon. Lady can wait until the end of the month, when I will set out in a detailed consultation document the plans we have and the steps we will take. There will be a timetable for the reforms that we need to introduce in order to do what I set out to do—dismantle the system, but do as much as we can in advance of the legislation that will be required.
Does my right hon. Friend accept that my hon. Friend the Member for West Lancashire (Rosie Cooper) ought to spend more time worrying about the development of her own town centre rather than, as she seems to be doing, preventing £400 million of investment from going into Kirkby?
Points of Order
On a point of order, Mr. Speaker. Today the Ministry of Defence issued a written statement. While I have no doubt that that was perfectly in order, the statement contained the sensational announcement that the Government were making preparations for a strategic defence review. They have resisted calls for such a review for some considerable time. While this may be within the letter of your admonition that the House of Commons should hear major policy announcements first, Mr. Speaker, do you really believe that it is within the spirit of your admonition? Are there any means that you can use to bring a Minister to the House to make an oral statement? Alternatively, will you allow an urgent question on the topic tomorrow?
The first response to the hon. Gentleman is simply stated. It is for Ministers to decide which orderly method of making their announcement they choose to deploy, and, on the hon. Gentleman’s own admission, what the Government have chosen to do is perfectly in order. The second response—which I think may be of interest and encouragement to the hon. Gentleman, who takes a keen interest in these and related matters—is that Defence questions will take place next Monday, and he may find a suitable opportunity to explore the point then.
On a point of order, Mr. Speaker. This morning I received a reply to a letter from Lord Myners, the Financial Services Secretary, dated 2 July. I had written to him on 3 December. To be fair to the Department, an apology from the permanent secretary was attached to the letter, but given that the Department aims to respond within 15 working days and the reply has taken seven months to arrive despite two chases from my office, I really do not think that this is in order. I know that the permanent secretary said that the Department is introducing measures to deal with the problem, but it would be helpful if you could make it clear to Ministers that such delays are simply not acceptable.
I am grateful to the hon. Gentleman. I am glad that he has raised that point of order. He will be aware of the premium that I attach—as, I know, do a huge number of Back Benchers—to timely responses both to written parliamentary questions and, indeed, to letters.
I think it fair to say that the hon. Gentleman has a legitimate grievance. He has suffered a lengthy delay. I hope that that delay is coming to an end, and that such an example of bad practice will not be repeated. The hon. Gentleman will be pleased to know that Treasury Ministers were present to listen to his point of order.
On a point of order, Mr. Speaker. You will recall that on 16 March this year the House resolved
“that the UK Youth Parliament should be allowed for this year alone to hold its 2009 annual meeting in the Chamber of this House.”—[Official Report, 16 March 2009; Vol. 489, c. 742.]
You will also know that the annual meeting of the Youth Parliament takes place between 24 and 27 July at the University of Kent at Canterbury, and that it will not now take place in the House. [Hon. Members: “Hear, hear.”] I am delighted that some of my hon. Friends think that that is good news.
My point of order is this, Mr. Speaker. I understand that there are proposals afoot for a meeting of the Youth Parliament to take place in the Chamber on Friday 30 October. Although that date does not fall in the recess, it is a non-sitting Friday, and a good deal of disruption could potentially be caused. Will it be necessary, Mr. Speaker, for the House to consider a fresh motion before such a course can be taken?
The hon. Gentleman is a very experienced hand and knows very well—he referred to it at the start of his point of order—that the House has made a decision on the question of whether the Youth Parliament should be able to hold a debate here. The hon. Gentleman was present at and a contributor to the debate on that matter in March. I know that he would not seek for one moment to inveigle me into repeating a debate that we held some months ago. As a point of clarification, it might be of interest to the House to know what I understand to be the case; namely that the annual meeting of the UK Youth Parliament is indeed taking place later this month—I believe in the county of Kent—but that that is a quite separate matter from the special occasion of the debate in this House upon which the House agreed earlier this year.
Further to that point of order, Mr. Speaker. I am seeking further clarification. The House resolved that the UK Youth Parliament should be allowed for this year alone to hold its 2009 annual meeting in the Chamber of the House. Surely if it is not going to have its annual meeting in the House, a new resolution will be needed.
I do not think that there is any immediate prospect or likelihood of reversing the decision that the House made. I am quite happy to look both at the text of what was agreed and at the title of the event that is to take place in Kent. I know that the hon. Gentleman has a fastidious concern for correctness in these matters and that is something we can do our best to satisfy. But we cannot and will not rerun old debates. I know that the hon. Gentleman would not want that for one moment.
Parliamentary Commissions of Inquiry
Motion for leave to introduce a Bill (Standing Order No. 23)
I beg to move,
That leave be given to bring in a Bill to make provision for establishing a commission of inquiry subsequent to a resolution of Parliament into matters relating to the conduct of a Minister of the Crown; to make further provision for establishing a commission of inquiry into particular events which have or may have occurred and which have caused, or are capable of causing, public concern; to set out the procedures for setting up such a commission of inquiry, its powers, rights and privileges; to amend the Inquiries Act 2005; and for connected purposes.
The Bill is partly a response to the setting up of the Iraq inquiry and the excellent debate in the Chamber the week before last. It is partly an attempt to look ahead and to prepare the House for any eventuality that we may have to face. But principally it is a Bill to enable Parliament, in at least one respect, to assert its authority, to remove its assumed metaphorical cringe to the Executive and to stand on its own two feet. That is a worthwhile objective in itself.
Mr. Speaker, you will recall the problems that were identified in the debate on the Iraq war inquiry: the very long delay in setting up the inquiry at all, subsequent to the decision of the Prime Minister; the lack of openness that was originally suggested in the way in which the inquiry was to be conducted; and the deficiencies of process, with many hon. Members being worried about the inability to take evidence under oath and the inability of the inquiry to have the power to summon witnesses. There were concerns about the composition of the commission of inquiry—not those who were asked to join, but those who were omitted and the particular areas of expertise that they might have brought—as well as about the terms of reference and about the timetable for report.
Some of those were subsequently dealt with as a result of the debate that we had in the House. The concerns were addressed by a process of retreat on the part of the Prime Minister, communicated by correspondence to the chairman of the inquiry. I am not sure that that was an entirely sensible way of dealing with the matter; nevertheless, it may have produced at least some potential remedies. But the issue is this: when we need an inquiry because of a matter of great public concern, it should be this House that takes the decision, not a member of the Executive and not a Minister. This has been known for a very long time. Lord North is not often quoted as a model for parliamentarians or for Prime Ministers but in 1774 he referred to this House as
“the grand inquest of the nation…our very clear duty as members of this House is to undertake the very difficult, the very painful, the very meritorious task of watching our Ministers, of reprehending them, of blaming and calling them daily to account.”
That is a succinct expression of our duty, and, in extremis, part of the way in which we fulfil it is by setting up a public inquiry, or at least it was; there is a long history of this House having set up commissions of inquiry in earlier years. That was formalised under the Tribunals of Inquiry (Evidence) Act 1921. I do not defend every aspect of that Act; it had problems in procedural terms and parts of it were certainly capable of amelioration, but it nevertheless provided a clear power for the House to set up a commission of inquiry.
That then began to be questioned by the Government when they were looking forward to introducing legislation in this area. The Select Committee on Public Administration, to which I owe a great debt of gratitude in preparing my Bill, looked at this in its first report of 2004-05. It stated that
“in future inquiries into the conduct and actions of government should exercise their authority through the legitimacy of Parliament in the form of a Parliamentary Commission of Inquiry composed of parliamentarians and others, rather than by the exercise of the prerogative power of the Executive.”
Needless to say, the Government did not agree with that view; it will not surprise many Members to learn that they did not feel that it was right for Parliament as a body to be held to be superior to the prerogative powers of the Executive. Therefore, in the dying days of the last Parliament, they brought forward the Inquiries Act 2005, the effect of which was to repeal the 1921 Act and to remove entirely the formal role of Parliament in setting up public inquiries. I think that that was fundamentally wrong-headed, because there are 1,001 reasons why Ministers may not wish there to be a public inquiry into aspects of their conduct or the conduct of others in their control. There are so many reasons for them to delay, obfuscate or misdirect, rather than to have the searching after truth that a properly constituted public inquiry can provide.
We should also remember that public inquiries often look into the actions of public bodies, of which Ministers are hardly disinterested observers; they have a responsibility there, so of course it is often not in their interests to set up a formal inquiry. I believe that were such inquiries to be set up under the authority of Parliament, they would have more legitimacy and the public would have more confidence. The PAC returned to this matter in its ninth report of 2007-08, and recommended the provision of a mechanism for setting up such an inquiry.
That is the format on which my Bill rests. By amending the 2005 Act, it would restore powers in the 1921 Act to Parliament, although not in precisely the same form. It equips an inquiry to do its job effectively, enabling Parliament to confer the powers that an inquiry would need to take evidence under oath, to compel witnesses, to ensure that it has the papers before it, to ensure that its composition is appropriate to the task, and to ensure that wherever possible it takes its evidence in public so that the general public have the confidence that their interests are being properly represented. The parliamentary mechanism for the setting up of an inquiry requires a majority of this House, so it is not open to mischief—people will not be able to set up inquiries on spurious grounds, for instance—because a majority of this House is required, and a majority of this House will normally support the Government of the day unless there is a high level of public anxiety.
I believe that this House has a specific job to do on behalf of the nation. That job is to speak for, and ask questions on behalf of, the public. Sometimes we can do that within this Chamber. Sometimes we can do it in our Select Committees and they are the appropriate way of looking into matters in more depth, but at other times those Committees can find obstacles put in their way, as the Select Committee on Foreign Affairs found when it carried out its own inquiry into the lead-up to the Iraq war. When that is the case, it is sometimes necessary, in order to restore faith in democratic principles within this House and to allow the public to have sight of the truth, to set up a properly constituted commission of inquiry. When we do that, it should be in the hands of this House and this Parliament, not those of that Executive. That is why I believe this Bill is so important and why it has garnered the support of so many hon. and right hon. Members on both sides of the House, and it is why I hope the House will allow it to go forward today, so that we can perhaps make progress, even in the short time left available in this Session of Parliament, towards restoring some faith and credibility in this House.
Question put and agreed to.
That Mr. David Heath, Dr. Tony Wright, Mr. Michael Howard, Sir Menzies Campbell, Mr. Graham Allen, Mr. Iain Duncan Smith, Sir Alan Beith, Angus Robertson, Andrew Mackinlay, Mr. Richard Shepherd, Paul Rowen and Sir Nicholas Winterton present the Bill.
Mr. David Heath accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 16 October, and to be printed (Bill 130).
Finance Bill (Ways and Means)
Transfers of trade to obtain terminal loss relief
That provision may be made in the Finance Bill for disapplying section 393A(2A) of the Income and Corporation Taxes Act 1988. —(Mr. Timms.)
Consideration of Bill, not amended in the Committee, and as amended in the Public Bill Committee
New Clause 8
Transfers of trade to obtain terminal loss relief
‘(1) In section 393A of ICTA (set off of losses against profits of same or earlier accounting period), after subsection (2D) insert—
“(2E) But subsection (2A) above does not apply by reason of a company ceasing to carry on a trade if—
(a) on the company ceasing to carry on the trade, any of the activities of the trade begin to be carried on by a person who is not (or by persons any or all of whom are not) within the charge to corporation tax, and
(b) the company’s ceasing to carry on the trade is part of a scheme or arrangement the main purpose, or one of the main purposes, of which is to secure that subsection (2A) above applies to a loss by reason of the cessation.”
(2) The amendment made by subsection (1) has effect in relation to cessations of a trade on or after 21 May 2009.’. —(Mr. Timms.)
Brought up, and read the First time.
I beg to move, That the clause be read a Second time.
With this it will be convenient to discuss the following: new clause 5—Pre-commencement notification
‘(1) Part 7 of FA 2004 (disclosure of tax avoidance schemes) is amended as follows.
(2) In section 308 (duties of promoter) after subsection (5) insert—
“(5A) A person who is a promoter in relation to a notifiable proposal may seek pre-commencement approval from HMRC as to whether the proposal is in accordance with current legislation.
(5B) HMRC shall respond within a reasonable period of time to any request for pre-commencement approval under subsection (5A).’.’.
Government amendments 41 and 42
Amendment 34, in schedule 17, page 202, line 19, at end insert
‘or part of a transaction of a value exceeding £100 million’.
Amendment 35, page 203, leave out line 10.
The amendments and new clauses in this group all concern tax avoidance. For the tax system to be effective everyone needs to pay their fair share. Tax avoidance damages the ability of the tax system to deliver its objectives, imposes big costs on society and shifts a greater burden of tax on to taxpayers who do comply with the rules. So the Government are committed to continuing to move quickly and effectively to tackle tax avoidance in all its forms.
What I shall do, if I may, Mr. Speaker, is speak to the Government new clause and amendments in this group and seek to catch your eye later to respond to comments made by others when they discuss the other new clause and amendments.
New clause 8 counters an avoidance scheme that has been notified to Her Majesty’s Revenue and Customs. The scheme exploits corporation tax terminal loss relief rules that allow losses arising in a trade in the 12 months prior to cessation to be carried back and set off against profits made in the previous three years. The scheme works by artificially engineering a deemed cessation of trading, which allows the company to access the relief in circumstances not intended by Parliament, and it could be used by a large number of companies and it poses a risk of significant loss of revenue. In order to stop companies exploiting the scheme and, thus, to protect the Exchequer, I made a written ministerial statement on 21 May announcing our intention to introduce this legislation.
The new clause addresses situations in which there has not been, in any real sense, a cessation of the trade, but where it is claimed that the cessation occurs as a result of the trade being transferred to a person outside the scope of corporation tax. The new clause is targeted only at avoidance and applies only where it can be established that the reorganisation concerned is part of a scheme or arrangement, one of the main purposes of which is to access terminal loss relief. In such circumstances, terminal loss relief will not be available to the transferring entity. The new clause provides vital protection to the Exchequer from wholly artificial avoidance schemes and does so in a targeted and proportionate manner. I therefore ask hon. Members to ensure that the new clause stands part of the Bill.
Government amendments 41 and 42 seek to ensure that clause 59, which contains a provision to counter an avoidance scheme that abuses the double taxation relief rules, does not hit any unintended targets. Following representations, Government amendments were tabled in Committee that were intended to ensure that the clause would not have an unintended effect in normal commercial situations. The amendments would have provided that the clause applied only to payments made under the laws of a territory outside the UK. These amendments reflected agreement that HMRC reached with industry legal experts and had the advantage of following existing legal precedent that applies for the purposes of controlled foreign company legislation.
The Government amendments would have covered the overwhelming majority of cases in which refund of foreign tax might arise from commercial contracts. However, after those Government amendments were tabled, further representations were received which showed that they may not go far enough to ensure that the clause does not hit any unintended targets. Although these are unusual circumstances, I said during the course of our debate on this clause in Committee that it is right that we should take account of them and that I would return to this matter with further Government amendments on Report—and I have done so.
During the Committee debate, I made it clear that I accepted the principle of the similar Opposition amendments, but that I wanted to reflect further on the issue to ensure that any amendments were technically correct. The new Government amendments contain one minor adjustment, compared with the Opposition amendments in Committee, in that they refer to a “tax authority” rather than a “taxing authority”. This is because a taxing authority might be seen as the legislative body which imposes the charge to tax, rather than the authority that assesses and collects the tax, and makes any necessary payments or repayments—a small but necessary change. The amendment has also been duplicated to cover the situation where the taxpayer is seeking a deduction for foreign tax, as well as where double tax credit relief is sought.
I hope that my hon. Friend will not feel discouraged from intervening later in the debate.
The amendments will ensure that this clause will not affect normal commercial arrangements, and I ask the House to support them. I will seek to catch your eye later, Mr. Speaker, to respond to points made by others about this group.
I rise to speak in favour of new clause 5. I originally had no intention of tabling such a new clause until we had the debate upstairs on clauses 66 and, more importantly, 67. Both of those clauses rightly seek to outlaw the highly contrived tax avoidance schemes that the Minister described in some detail at the time. That was the right thing to do.
Interestingly, the debate on clause 67 almost completely ignored its content and revolved around the issue of principle of retrospective legislation. In general terms, I oppose retrospective legislation, especially when it comes to the tax code, because it delivers uncertainty, but I do recognise that from time to time it might be necessary. One of the reasons why retrospective legislation is necessary when it comes to clamping down on contrived tax avoidance schemes did not become clear until after the debate in Committee.
Let me explain. The process that is followed in such schemes is that tax avoidance schemes are developed by promoters, they commence operating and only then, post-commencement, are they notified to the HMRC, which can—and sometimes does—outlaw the practices and introduce retrospective changes to the law to facilitate that. In the case of clause 66, the scheme was effectively outlawed within a week or so of the Revenue’s being notified of it. The Government can act very quickly, but not always, and it can take some time—perhaps a year—to introduce the necessary retrospective legislation. That is precisely what happened in the instances that we discussed in Committee.
It struck me as somewhat peculiar that such schemes were not checked by the Revenue in advance of their commencement to allow the commissioners to rule on their legality or otherwise or even to suggest, even if they were legal, that they were likely to be outlawed quickly because they were simply going to be tax avoidance schemes. I was very pleased, when we probed the Minister, to get his reply. I asked whether he could
“confirm that promoters are able to seek confirmation of the schemes in advance”
and the answer was:
“Promoters can seek that clearance as well. They are required to disclose, but they can seek clearance if they wish.”––[Official Report, Finance Public Bill Committee, 16 June 2009; c. 431.]
However, it was not until two days later that the Minister rather graciously corrected what he had said. His letter said:
“In both cases, the correct answer should have been”—
I shall read out both paragraphs for the avoidance of any doubt. They read:
“HMRC offers a clearance service to businesses covering the tax implications of commercial transactions”—
I do think that there should have been more commas in this sentence—
“where there is material uncertainty as to the tax outcome and the issue is of commercial significance to the business. Under the clearance regime HMRC will not give advice, or comment on, tax avoidance schemes.
In addition to the clearance service for business, HMRC offers a written…service to personal tax customers covering completed transactions where the correct tax treatment is in doubt or where guidance is needed on HMRC’s interpretation of recently passed law or its application to a specific proposed transaction, where there is genuine uncertainty. This written advice service does not cover arrangements where tax avoidance is an issue. The scope and terms on which this service is offered is set out in Code of Practice 10.”
That is extremely clear, but the implication of that answer is that the Finance Bill, unamended, would perpetuate the status quo, which is that schemes can be developed, promoted and commenced, people can buy into them or use them and they are then notified to the HMRC, outlawed and made subject to retrospective changes. That all risks uncertainty in the tax code, which none of us wants to see, and a potential loss of revenue yield, I am certain. Most importantly, it risks individuals taking tax or financial planning advice or action, thinking that they are doing the right thing and that they are behaving wholly within the law, and finding that they are then subject to retrospective changes to a law that they had no intention of breaking.
It would be much simpler to allow promoters to clear schemes in advance to ensure that if they were illegal, or likely to be outlawed, they simply would not be promoted. That would give us certainty in the tax code and protect those individuals who think they are doing the right thing and end up being subject to retrospective legislation.
I fully agree with the thrust of the hon. Gentleman’s argument, but he might be aware that the Select Committee on the Treasury received certain information from Barclays bank about its tax avoidance schemes. The schemes that it developed are extremely complex, and it took them to HMRC and got the staff there to look at them and basically approve them, because it did not have the resources and everything else to go through it all, whopped it back to its clients and said, “We put this to HMRC, they think it’s okay and now we have all sorts of ways of trying to alleviate that”—
The hon. Member for South-East Cornwall (Mr. Breed) makes an important point about the complexity of some schemes, but it is the very complexity of the tax code that allows highly complex and contrived schemes to operate. There is an argument for simplifying the tax code as a whole, but today’s debate is not about that. I want to ensure simplicity, help people avoid illegality and protect tax yields. That seems sensible, and I hope that it is uncontentious—unless there is a hidden argument or a problem in the Revenue that the Minister will tell us about in a few minutes.
Most Opposition amendments are moved to claw back powers from HMRC, or to stop officialdom interfering in people’s lives or businesses. Almost uniquely for me, I have moved the new clause because I want to give the tax commissioners more powers and responsibility. It makes absolute sense for them to be able to validate schemes in advance and declare them either legal or illegal. More importantly, even if a scheme is legal, the commissioners should be able to tell its promoters, “Yes, it’s legal today, but I suspect that the Minister will come down on it like a ton of bricks in two weeks’ time, so it’s probably better not to promote it.” That would create certainty in the tax code and protect people looking for tax and financial planning.
I look forward to what the Minister has to say. I want to offer more powers to the Revenue, in the hope that we can get certainty and protect people from the dangers of retrospective legislation.
I want to make one very brief central point, and it relates to what the hon. Member for Dundee, East (Stewart Hosie) has just been saying. My right hon. Friend the Financial Secretary has explained that new clause 8 is necessary to block yet another loophole that would open up yet another lucrative tax avoidance mechanism, and I am absolutely sure that he is right. What is significant is that the Government have found it necessary to table the new clause now, and that is because the latest tax avoidance scam surfaced only after the Finance Bill was published.
Similar scams are being invented all the time, by extremely highly paid City accountants and lawyers. As a result, the Treasury has to scurry around trying to block them up as quickly as they are created.
I do not disagree that it is perfectly within the rights of any Government to have a rigorous anti-avoidance regime along the lines that the right hon. Gentleman clearly supports, but does he accept that, commensurate with that, there also needs to be a full and open clearance process? Such a process would help prevent scams being created, and the need to deploy anti-avoidance measures.
The question is what particular transparent and open system the hon. Gentleman would recommend, but I am in favour of something like what the hon. Member for Dundee, East has proposed. As I shall explain in a moment, we need a general provision of the sort that would avoid the House of Commons continually spending its time trying to block one scam after another. I agree that that is not the most efficient way of dealing with the problem.
I was coming to that. The hon. Gentleman and I have had some conversations on this subject, and I entirely agree with him. My question to the Minister has to do with whether the Government are engaged in a labour of Sisyphus. Why do they not seek to break the cycle of endless tax avoidance scams—because, being clearly designed to get round paying tax, that is what they are—by introducing a general anti-tax avoidance principle into the UK tax system? I can think of two or three previous Treasury Ministers who were very much in favour of that course.
I tabled a proposal along these lines two months ago, and I am glad to see that the hon. Member for Southport (Dr. Pugh) has retabled it as new clause 2. I realise that it has not been selected for debate, presumably because it would increase taxes. Of course, that is exactly what the new clause is designed to do, where appropriate, but under our rules only the Government have that prerogative. But I want to ask my right hon. Friend the Financial Secretary why we continually spend our time scrabbling around in the bulrushes trying to block off every new tributary of tax avoidance, when we could seize the high ground and block this ever-flowing antisocial river altogether at one go. There are good precedents for this—
Does the right hon. Gentleman accept that one of the prices of liberty is eternal vigilance, and that one has to be very careful about trying to claim that people are guilty unless proved innocent? That is precisely the reason that we do what we do. It is extremely dangerous to start off a taxation system on the basis that people must not be allowed to do anything lest they avoid tax.
I do not often disagree with the right hon. Gentleman, but here I take a rather different line. Of course there must be transparency, as the hon. Member for Cities of London and Westminster (Mr. Field) said, and of course we do not hold people guilty until proved innocent. What I am recommending—the hon. Member for Dundee, East said the same—is that there should be a general principle which makes it clear that if the purpose of the device is solely to evade or avoid tax and it has no sensible, practical, obvious economic purpose, it should be ruled out in terms of what the mechanism is designed to do.
I would add that there should be some penalty to discourage such action in future. That is not unfair. It is a way of avoiding an artificial, deliberate and proliferating attempt to avoid tax, which means that the rest of us who are not super-rich and not big corporations have to pay. I do not think that is a very good idea.
I am grateful—it is Report stage. I have been racking my brains, going back a long time. I think my right hon. Friend will find that there is a Court of Appeal case to the effect that he seeks to push for this afternoon. It is a case about artificial transactions from, I believe, 1985, the Ramsay and Cook case, which does much of what my right hon. Friend wants.
My hon. Friend has the advantage over me because I have not looked at that, but I find it difficult to believe that it achieves what I am seeking to achieve. If that is so, I am surprised that such schemes continue to roll on and on.
To conclude the speech, which I am finding difficult, there are good precedents for such a principle—it is not a novel idea—particularly the Australian one and, interestingly, in Jersey, both of which seem to be working perfectly well and have been accepted by all parties in those Parliaments. Will my right hon. Friend the Minister please explain the Government’s thinking and when we might expect such a provision to be brought forward? It is sorely needed when the deficit in the public accounts this year is of the order of £175 billion.
I shall speak to amendments 34 and 35 and broadly in support of new clause 5. I do not doubt the Minister’s or the Treasury’s sincerity and determination in wishing to prevent tax avoidance, I do not doubt the skill and intelligence that they have put to the task and I do not doubt the expertise and knowledge that underlie the Government proposals. I need to be convinced that all this is enough to frustrate a huge, massively rewarded and well financed avoidance industry at the heart of modern commerce.
The right hon. Member for Oldham, West and Royton (Mr. Meacher) outlined the Government’s approach. They seem to advocate general principles and then track and box off avoidance schemes while encouraging notification, but they do not want to introduce a general anti-avoidance law. None the less, the Bill withdraws an important general control—section 765 of the Income and Corporation Taxes Act 1988. Albeit an anachronistic one, it is a general control. Pleasing though it might be to the City, this approach has failed to convince many people far more knowledgeable in this field than I. My amendments seek to toughen up this approach.
My preference, like that of the right hon. Member for Oldham, West and Royton, is for the introduction of a general anti-avoidance provision. It is in new clause 2, an unselected amendment in my name. A general anti-avoidance provision would reduce tax complexity straight off: complex avoidance schemes father complex tax law. The provision works elsewhere in the world, such as in Australia, Canada and all sorts of places; and with proper Revenue and Customs advisory services available to business, it would not need to gum up business.
That is a fair point, but I was going to say that the Treasury at one stage, in the halcyon days of new Labour, began a consultation on the phenomenon of the desirability of a general anti-avoidance rule, or GAAR. Interestingly, it said:
“The United Kingdom is unusual”—
“among developed countries in having neither a statute nor an established legal principle to counter tax avoidance in general. Many other countries in the developed world have found such a rule or principle to be a very useful remedy for countering tax avoidance, although not a universal cure.”
Before the hon. Gentleman moves on, may I just check something? There are concerns that, if we have specific anti-avoidance rules, having an overriding anti-avoidance rule, too, might be a stage too far. If he were to get what he wanted with a general anti-avoidance rule, would he want to see the removal of the specific rules, too?
We need a belt and braces rule—a specific provision that is assisted by a general rule. Again, the Government’s consultation stated:
“A GAAR, applying at first only to the corporate sector,”—
this was 1998 or thereabouts—
“would aim to put a stop to many of the complex avoidance schemes which currently cost the Exchequer large sums. In addition, it would be expected to discourage people from devising contrived avoidance schemes in the future.”
That was the Treasury, not the Opposition or the right hon. Member for Oldham, West and Royton.
Now we have the repeal of the time-served section, section 765 of the 1988 Act, which ensures that when funds leave the country the Treasury is notified of any detriment to it. It is an old rule to do with the flight of sterling and so on, but it does—or did—a good job. We have the replacement of a clearance and pre-disclosure scheme with a light-touch reporting regime, coupled with a series of attempts to outlaw specific dodges and scams.
However, if we read the legislation, we find that only transactions above £100 million will need to be reported, and not even then if they are said to be
“in the ordinary course of trade”—
hence my amendment. If, after six months, there is no report on a £100 million transaction, there will be a ludicrous fine of £300, which I remember made the hon. Member for Northampton, South (Mr. Binley) incandescent in Committee. It is a ludicrous penalty to enforce on a £100 million transaction.
The hon. Gentleman is a man of most moderate temperament, and I should not wish to malign him.
In the game of chess being played out between Treasury officials and City tax lawyers, the Treasury is agreeing to play blindfolded, and there can be only one winner. What is there to stop a transaction being broken down into segments of less than £100 million to avoid reporting requirements—just wrapping up the transaction differently? What stops a firm declaring any transaction to be in “the ordinary course of trade”—a phrase that, incidentally, has created legal problems in countries where a general anti-avoidance provision is in place?
The Liberal Democrat amendments are simple attempts, like new clause 5, to strengthen the Treasury’s arm and powers of intervention—to make exemptions less open to abuse and less user-friendly. The principal argument for user-friendly exemption is the old chestnut, beloved of the CBI, about the anti-competitive dangers of slowing up commerce. At first, I took that argument seriously; I thought it a sound, decent argument. It is the argument against section 765 and the long-standing argument for its withdrawal. Indeed, I thought that it was a serious, solid argument, despite the claims made only four years ago by the then Paymaster General in its favour, saying that it saved
“a great deal of revenue”––[Official Report, Finance Public Bill Committee, 30 June 2005; c. 319.]
However, I had the good fortune recently to speak to a man who actually administers the provision. He told me that it still protects a great deal of revenue, that clearance procedures in the modern Revenue and Customs are very rapid, and that adequate advice is freely and readily available—in hours not days—provided HMRC has the staff to provide it. Understandably, I asked the Government—the Financial Secretary, actually—how many staff at HMRC administered the provisions of anti-tax-avoidance legislation. The answer that I received reads as follows:
“HM Revenue and Customs (HMRC) staff use whatever parts of the tax code are relevant to help people and businesses pay the right amount of tax and, where necessary, to tackle tax avoidance, evasion and fraud.”
“HMRC is unable to provide information regarding the specific number of resources deployed on the separate elements of that work.”—[Official Report, 22 June 2009; Vol. 494, c. 670W.]
The Government simply cannot tell us how many people are involved in counteracting tax avoidance.
In summary, I am not confident about the Government’s approach, the reporting regime, the exemption or the penalties, which border on the pathetic. I am aware of the dilemma that the Government face: business legitimately needs clarity and speed, and the Treasury needs transparency, fairness and accuracy. However, there is an overwhelming case that a general anti-avoidance provision, coupled with revenue efficiency, can cover most of that. Loose reporting, pathetic penalties and a tangle of tax regulations, however, are unlikely to.
My hon. Friend the Member for Cities of London and Westminster (Mr. Field) made an important point: sometimes the complexity of the tax system itself gives rise to opportunities for tax avoidance schemes. When relief is given, tax advisers and planners look to how they can maximise it to reduce their clients’ tax bills. From Finance Bill to Finance Bill, we have seen new loopholes being created and closed down—there have been significant revisions to the legislation on film tax relief in the past 10 years, for example.
There is a momentum within tax law itself that creates the loopholes that can be exploited; the loopholes are then closed, creating more complexity. We need to get that rolling process under control. New clause 8 represents an example of when the relief available on the termination of a business has been used to create a new opportunity for tax planning.
I know that the hon. Gentleman has only just begun, but before he finishes I hope that he will comment on the measures advocated by my right hon. Friend the Member for Oldham, West and Royton (Mr. Meacher), which aim to stop the poison from coming into the system in the first place. What the right hon. Member for Suffolk, Coastal (Mr. Gummer) said almost takes us back to last century’s debates on vaccination—did we want people to stop becoming ill in the first place, or were we to deal with the illness only once they became ill? That example has similarities with the issue of tax avoidance, as distinct from tax evasion.
If I got dragged down that line of argument, Mr. Speaker, I would be trespassing into a new clause that was not selected, so I shall be careful about what I say about that general principle.
New clause 8 responds to a specific anti-avoidance scheme. In Committee, we discussed clause 23, which allowed losses to be relieved and extended the carry-back period for losses. During that debate, the Financial Secretary commented on the generous nature of the terminal loss relief, particularly for businesses that had closed down for reasons of economic viability. The scheme sought artificially to use the losses by trying to transfer a business to an entity outside the scope of corporation tax—for example, a partnership in respect of which an individual had a small share of the profits but the original company was entitled to the majority of the profits. That meant that the company was then able to claim terminal loss relief and carry back trading over possibly three years even though trade had continued. The conditions in the clause prevent the artificial abuse of the availability of that loss relief, and we welcome the step that the Government have taken.
New clause 5, tabled by the hon. Member for Dundee, East (Stewart Hosie), has its origins, as he said, in a debate on new clause 67 that we had in Committee, several of whose members had been lobbied by a company called NT Advisors, which had devised a scheme that was at the core of the provisions in the clause. The new clause has some appeal in proposing a pre-clearance device for such schemes, but I add a note of caution about this sort of mechanism. I understand that tax advisers spend a great deal of money on their clients’ behalf in trying to devise these schemes, which are potentially quite lucrative, as the numbers in clause 67 suggested. Clearly, they do not want to clock up fees with no chance of the scheme being viable, so I can see the attraction for them in having a pre-clearance device, which would save them a great deal of time and money. It would also put the onus on HMRC to act as almost a subcontracted or out-sourced arm of the tax adviser in looking at the fine detail of such schemes to see whether they worked. The advisers themselves should bear the principal responsibility of getting schemes right; otherwise, there is a risk of HMRC being inundated with speculative, half-thought-through schemes under which the advisers are looking to HMRC to tie up the fine detail.
The hon. Gentleman’s argument is absolutely right. However, advisers and promoters are coming up with schemes right now, and there is a real risk of loss of revenue yield and of individuals so engaged finding themselves subject to retrospective legislation. I am trying to work out where the balance should lie between the Revenue saying, “No, you can’t do it—we’re about to outlaw it”, and allowing people to continue to develop these schemes and then finding that they are subject to retrospective legislation.
Indeed, balance is a difficult issue to get to the bottom of. No one in this House likes to see retrospective legislation, and there are rules that constrain its use. In the debate on clause 67, we discussed the Rees rules and the doctrine put forward by my right hon. Friend the Member for Charnwood (Mr. Dorrell) when he was a Treasury Minister; we even referred to some principles established by the previous Paymaster General. However, I am worried that we may end up in a situation where HMRC is used as a clearing house for tax advisers and has the responsibility for checking whether the schemes work. The law should be clear enough for advisers to work out whether schemes are legal, and they should not be subcontracting their work to HMRC. Moreover, people who buy into these schemes will need to think carefully about the advice that they have been given and what happens if it turns out to be wrong. I suspect that in some cases, if the scheme does not quite work according to plan, advisers may make some clawback and try to cover their own backs by avoiding having to repay losses to their clients.
I am a little anxious about where new clause 5 would take us. In other areas, it is right that pre-clearance arrangements are in place and discussions can be had with the Revenue, but that arrangement causes me concern in this context. What would happen if HMRC did not reply within a reasonable period of time? Would it be assumed that the scheme has been passed as fine to be sold to a wider public? I am a little sceptical about the new clause, because I do not think it would have the effect that the hon. Member for Dundee, East desires it to have. It could have the consequence of adding burdens to HMRC by getting it to test out the legal aspects of these schemes and checking their detail, thereby adding costs to the taxpayer when we want HMRC to work on supporting the taxpayer.
On the onerous nature of introducing anti-avoidance procedures, I was not entirely persuaded by the arguments made by the hon. Member for Southport (Dr. Pugh) on amendments 34 and 35. My reading of schedule 17 suggests that it already contains the power to tackle some of the abuses that might arise through the more streamlined nature of the reporting rules, and there is provision for secondary legislation to address certain issues, including about the valuation of a transaction or event. We need to get the balance right between promoting compliance through reporting and ensuring that the rules are right in the first place.
On Government amendments 41 and 42, we are delighted to see that the Government have recognised the wisdom of my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands). In introducing them, the Financial Secretary gave the sense that it was almost to be expected that they would be tabled on Report, and that we should not be surprised to see them on the Order Paper. In Committee, he gave a slightly different interpretation, saying:
“The Opposition amendment is broader in scope but has some technical difficulties. The reference to a taxing authority would be novel in tax law and its effect is not altogether clear.”––[Official Report, Finance Public Bill Committee, 16 June 2009; c. 393.]
Clearly between 16 June and the day when the amendments were tabled, the Government recognised the wisdom of my hon. Friend’s remarks, and I am pleased to see them form part of the Bill.
We have had an interesting discussion about new clause 5, on pre-commencement notification. The hon. Member for Dundee, East (Stewart Hosie) raised the matter in Committee, and I subsequently wrote to him to clarify the position.
HMRC already operates a clearance regime under code of practice 10, to which the hon. Gentleman referred, in cases in which the application of recent legislation to planned transactions is uncertain. As we can all see, when legislation is new there could well be uncertainty about exactly what it means. In that situation, a clearance regime is appropriate so that people can discuss with HMRC whether the transactions described will work in the way that is intended, particularly in the case of larger businesses. Such businesses have access to a clearance system in wider circumstances, following the implementation of Sir David Varney’s recommendations on HMRC’s links with them.
However, as the hon. Gentleman rightly said, HMRC will not entertain requests for clearance if it is obvious that the motive behind the application is to avoid tax. That policy is understood and accepted by the various professional bodies, and it is well established. I suggest to him that there is no good reason to change the policy on a situation in which disclosure will, by definition, involve arrangements that are intended to obtain a tax advantage as a key benefit.
I agree with the hon. Member for Fareham (Mr. Hoban) that the problem is that if such a facility were offered in practice, scheme promoters would take advantage of it by continually devising variations on schemes and making more changes to them until they eventually found one that worked. We would all agree that avoidance is not acceptable behaviour, and that we should not effectively ask HMRC to become complicit in avoidance by offering its promoters such a refinement service, which I fear is what would happen.
I understand the arguments that the Financial Secretary and the hon. Member for Fareham (Mr. Hoban) are making, but is the point not that promoters are already finding schemes that work, and that the Government, the House and the Revenue are having to find and fix retrospectively, rather than saying in advance, “Yes, this may well work, but we’re going to outlaw it, and perhaps it would be better if you didn’t promote it in the first place”?
The problem is that new clause 5 would help the promoters of avoidance. It would give them advice and help them clarify whether their avoidance product would work. I am sure that the hon. Gentleman accepts that HMRC should not provide such help. However, I am not averse to proposals to tighten up the way in which we tackle tax avoidance. As I shall explain shortly, we have done a great deal on that, much of which has been effective. I am certainly not saying that there is nothing further to do—there may well be—but new clause 5 would have an undesirable impact.
How do Ministers satisfy themselves about the tax affairs of the banks that they own on behalf of the taxpayer? How can they be sure that those large losses are entirely justified on trading and other grounds? Are they sure that the banks need not pay any tax in the current situation?
That is a matter for HMRC, but I am sure that the right hon. Gentleman has seen the code of conduct for bank tax, which we published recently for consultation. Undoubtedly, some of the activities of banks in the UK have involved avoidance—in some cases, significant avoidance. Banks are in a strong position to indulge in that sort of behaviour because they can do it for their own part and then advise their clients on similar approaches. I agree with the right hon. Gentleman that it is right to be vigilant about banks’ tax submissions, but if he takes the opportunity to read the code of conduct that we have published for consultation, he will see the steps that we are taking to make progress on that.
Information provided by a promoter is often insufficient to tell HMRC whether the scheme will work. In some cases, the scheme will turn on a novel interpretation of the law and, in the end, that can be tested only in the courts. It is not enough in some circumstances for HMRC to examine the scheme and decide whether it will work. Ultimately, it will require a decision by a court. In other cases, a scheme’s effectiveness will depend on the specific facts to which it is applied. In those circumstances, HMRC could be in a position to say whether the scheme works only when it features in a tax return. Providing the clearance under new clause 5 could therefore prove difficult.
I have much sympathy with new clause 5. However, as constituency Members, many of us are faced with the problem of planning applications, whereby a planning application is made to the local council, it gets turned down, for which reasons are given, but goes back in a month later, after it has been tweaked. There is wave after wave of planning applications until one gets through. At least the local authority can charge for that. Does not new clause 5 run the risk of causing similar problems for HMRC?
My hon. Friend is right. That is precisely the danger to which new clause 5 could give rise, with the difference that building something or progressing with a development is, in principle, good and laudable, whereas avoiding tax is not. There is therefore an even stronger reason not to follow that route.
New clause 5 states that HMRC will have a “reasonable” amount of time to comply with the clearance request. Again, I agree with the hon. Member for Fareham. What constitutes “reasonable” in that context? It can take a considerable time before HMRC is in a position to make such a judgment and it could easily be impossible to do that in a time frame that might be considered reasonable by the taxpayer. I therefore question the usefulness of that sort of clearance to those who are genuinely trying to pay the right amount of tax at the right time, and I strongly argue against adopting the new clause because it would help those whose purpose is purely and clearly to avoid tax. As I said earlier, however, that is not to say that I want to close the door on tightening the disclosure arrangements. Indeed, there may be opportunities for us to do that.
My understanding is that when HMRC is involved in anything like that, as it is on occasion, it does not charge people. However, if new clause 5 were to be accepted, we could see not only wave after wave of applications made, as I said earlier, but tax-avoiding accountancy firms, as it were, apparently getting free accounting advice from HMRC, a point to which the hon. Member for Fareham (Mr. Hoban) adverted earlier.
I share my hon. Friend’s concern about what we might find ourselves getting into. On the other hand, however, I suppose that one could argue that charging for the service might add a further degree of legitimacy to activity whose illegitimacy one would otherwise want to underline throughout. However, we should not be giving that kind of advice at all, so for now we can perhaps leave the question of whether it ought to be charged for.
Let me respond to another point that the hon. Member for Dundee, East made. HMRC receives a significant number of disclosures every year, but only a proportion of those lead to legislative measures. He raised the issue of promoters selling abusive tax-avoidance schemes. As he will know, we have announced that HMRC will take forward discussions to improve the avoidance disclosure regime. There may well be things that we can do, and HMRC is consulting on working with tax agents.
That brings me to the points made in this debate, not least by my right hon. Friend the Member for Oldham, West and Royton (Mr. Meacher), about having a general anti-avoidance rule. Let me say to my right hon. Friend and the House that we want to keep that question under review. It was consulted on in 1998, as was said by the hon. Member for Stockport—
I beg the hon. Gentleman’s pardon—I have made that mistake before.
When we consulted on the idea there were a lot of objections, and they were by no means all from tax avoiders. Those who have pointed out that other countries have such a rule are right in terms of a number of counties, although interestingly, the United States does not have a rule of that kind. Some people have argued that if we introduced a general anti-avoidance rule, we would have to have what is suggested in new clause 5, which stands in the name of the hon. Member for Dundee, East, namely a fairly comprehensive clearance system, which would potentially be costly to provide. Another downside would be the uncertainty that such a rule could generate.
We have, of course, introduced a number of effective targeted anti-avoidance rules, and we will continue to evaluate the benefits of going further and specifically consider the possibility of a general rule. However, I want to underline the fact that, in recent years, we have done a great deal to tackle avoidance. We have a strong strategy and a good track record on tackling tax avoidance in all its forms. We reckon that the steps taken as a direct result of the disclosure regime, which has been in place for five years, are so far responsible for closing £11 billion of avoidance opportunities.
We have led internationally on increasing transparency through the G20 and the growing number of tax information exchange agreements, and I have already mentioned the innovative code of conduct for banks that we published for consultation recently. We have also led on modern legislative approaches, such as the new principles-based legislation, of which there are examples in the Bill, in clauses 48 and 49, which give new opportunities for transparency. Also, through the targeted anti-avoidance rules, we are ensuring that businesses and individuals pay their fair share.
My right hon. Friend mentions the code of conduct that has just been published. Does he really believe that a voluntary code of conduct is going to be adequate to deal with the shark pool that is involved in City tax avoidance? Has he looked at the Australian anti-avoidance principle, which has worked for years? I am not aware that it has any significant disadvantages but, if it has, will he tell us what they are?
My right hon. Friend asks whether I think that a voluntary code of conduct for banks will be effective. Yes, I do. I have spoken to some very hard-headed individuals who have looked at these matters, and they also think that it will be effective. Once a bank has publicly committed to the code, it will have certain obligations. Its auditors, for example, will want to take a view on whether it has correctly implemented the terms to which it has signed up. Part of the code that we have been consulting on involves determining what sanctions would be appropriate if deliberate non-compliance were to be found. We have suggested in the consultation document that if, for example, we identified an individual in a bank who was responsible for deliberate non-compliance, we would make a report to that individual’s professional body. My right hon. Friend ought not to be misled by the proposal for a voluntary code into believing that it will not be effective. Based on the way in which we have drawn it up, I believe that it will be. We are consulting on this at the moment and we want to listen to the views of everyone who is in a position to comment on our proposals.
We are aware of the Australian rule, and we keep a close eye on developments elsewhere around the world. I am not in a position at the Dispatch Box this afternoon to set out a detailed analysis of the effects of the introduction of that rule, but I underline that we want to keep under review the question whether it would be appropriate to go down the road that new clause 2 would lead us.
The Minister has stated a preference for targeted measures, and I understand the strategy that is being followed. However, there comes a point at which, when we look at all the targeted measures, we find that there are certain principles underlying them. Does not that make a case for some sort of cull—a statement of general principle or general anti-avoidance rules?
We had a discussion in Committee about principles-based legislation, and we have some examples of it in clauses 48 and 49 of the Bill. This is novel; these matters have not been legislated for in this way before. I believe that, as a result of adopting and making acceptable this new approach to legislating, some new opportunities might well arise that could shift the argument somewhat on whether a general anti-avoidance rule would be appropriate. As I have said, this matter is something that we want to keep firmly in our sights.
I do not want to leave the House with any sense of complacency about this. The changes that we are debating in the Bill will raise more than £1 billion in tax, through blocking avoidance, and protect revenues of a further £3 billion by 2010-11. We are looking at further ways of extending and improving the disclosure regime, and we are considering the application of the principles-based approach to other matters.
My right hon. Friend made a point about people devising schemes just after publication of the Finance Bill, and he is absolutely right: there will never be a shortage of inventiveness and energy in terms of avoidance. The Government need to be extremely vigilant in response. However, we can do as we did in this case, which was quickly to announce to the House that we were going to close a particular avoidance opportunity. It might take a while to implement the required legislation, but we can implement it with effect from the date of the announcement made in the ministerial statement. We would not have to wait for the legislation in order for the closure to take effect.
Will the Minister say a little about the Ramsay case—I think it is the Ramsay case—to which I have already referred, which relates to a Court of Appeal decision of, I believe, 1985? It deals with artificial economic arrangements developed solely for the purposes of tax avoidance. As I understand it—this is dragging my memory back more than 25 years—such arrangements were banned by the Court of Appeal.
I must say that, as so often, I am very impressed by my hon. Friend’s expertise and memory. Sadly, I am not in a position to present the House with details of that particular case. I certainly think that he is right that decisions like that one have constrained some of the activity that certain companies have wanted to indulge in. Sadly, however, there is still quite a lot of latitude available, which is why we have had to take steps such as those outlined in new clause 8. I will refresh my memory on that particular case; perhaps my hon. Friend and I can discuss it separately.
If we were to go down the road of issuing a general rule or principle, we would have to consider a range of factors: the impact on certainty for people and companies, the issue of whether a clearance system would be needed, the effect on the rest of the tax code and whether we would need to repeal parts of that code. Countries such as Australia that have general anti-avoidance rules often find that they still need some specific rules in addition to support the overall scheme, so we would also need to reflect on that. We would certainly need a full consultation before we opted for such an arrangement. I am nevertheless grateful to those who have raised this important topic—one that we must keep within our sights.
No, I am not saying that. The hon. Gentleman will know from the context of discussions about the asset purchase scheme that that matter has been debated and arrangements have been made for those two banks that are, in fact, rather different.
The hon. Member for Southport (Dr. Pugh) suggested that HMRC was playing blindfolded, but I do not think that that is right. As I have said, the anti-avoidance steps that we have taken have been pretty effective. The 2004 disclosure regime has been successful—it was pretty controversial at the time and was certainly innovative—in protecting more than £11 billion. HMRC anti-avoidance teams use the information provided to combat avoidance schemes every day.
Amendments 34 and 35 would both widen the scope of the new reporting rules introduced in schedule 17, which we debated in Committee. The schedule repeals existing rules and introduces a new post-transaction reporting requirement for corporation tax targeted at transactions posing a significant risk of tax avoidance. This requirement applies to certain transactions involving foreign investments whose value is in excess of £100 million. Targeting the reporting requirement in this way removes the need for businesses to report comparatively low-value transactions that are unlikely to give rise to tax avoidance, so significantly reducing the administrative burden compared with the current Treasury consent rules. As we discussed in Committee, those rules are rather elderly and in some respects not wholly appropriate to how businesses now operate.
Amendment 34 would make any transaction reportable where it is part of a transaction exceeding £100 million. I well understand the concern expressed by the hon. Member for Southport about the possible use of fragmentation of transactions as a means of getting round the new arrangements. I suggest, however, that that problem has already been effectively dealt with by the regulations introduced by schedule 17, drafts of which I supplied to members of the Public Bill Committee. Those regulations provide that, for the purposes of the £100 million threshold, “transaction” is defined broadly and includes a series of transactions entered into in pursuance of the same arrangement. That means that the valuation of a transaction must take into account a linked series of transactions, although they may be strictly separate. I hope that, on that basis, the hon. Gentleman will accept that his amendment—which addresses a perfectly proper concern—is unnecessary.
Amendment 35 would widen the scope of the reporting requirement by removing the exclusion for trading transactions. Trading transactions have been deliberately excluded because the new reporting requirement, like the previous rules, is targeted at changes to the capital structure of multinational groups, which, by their nature, will not generate transactions of the type that the amendment addresses. The reporting requirement is only one tool available to help HMRC to combat tax avoidance. The removal of the exclusion for trading transactions would be very likely to generate a great many unnecessary reports. I hope the hon. Gentleman will accept that the reporting requirement introduced by schedule 17 strikes the right balance between Exchequer protection and administrative burdens on business.
The hon. Gentleman mentioned that, in 2005, my right hon. Friend the Member for Bristol, South (Dawn Primarolo), the former Paymaster General, had said that the Treasury consents regime ought not to be repealed because it protected a great deal of revenue. Removing the need for companies to apply to the Treasury for consent before entering into transactions allows businesses to enter into commercial transactions in a way that they see fit, in line with modern business practice. By targeting the new reporting rules at transactions that pose the highest risk of avoidance, we are ensuring that tax revenue is still sufficiently protected. The de minimis limit reducing the amount of information that is reportable will significantly reduce the administrative burden of complying with the rules.
I think that we have got the balance right, but I am grateful to Members who have raised important issues. I hope that the House will agree to the Government new clause and amendments, and that the other new clause and amendments will not be pressed to a Division.
Question put and agreed to.
New clause 8 accordingly read a Second time, and added to the Bill.
New Clause 1
Implementation of section 1
‘(1) The rates charged by virtue of section 1 shall not have effect until such date as may be appointed by order made by the Treasury.
(2) No such order may be made until the Chancellor of the Exchequer lays before Parliament a statement that, in his opinion, measures have been taken to ensure that no person is worse off by reason of the person’s income not being sufficient to secure that the effect of the abolition of the 10p starting rate has been entirely offset by the reduction of the basic rate, which took effect in the tax year 2008-09.
(3) The power to make an order under subsection (1) shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons.’.—(Mr. Frank Field.)
Brought up, and read the First time.
With this it will be convenient to discuss the following:
Amendment 2, in clause 1, page 1, line 8, at end insert—
‘(3) This section is subject to section [Implementation of section 1].’.
Amendment 37, in clause 3, page 2, line 10, leave out ‘£6,475’ and insert ‘£10,000’.
Amendment 40, in clause 6, page 3, line 7, at end insert—
‘(3A) At the end of section 646(8) of ITTOIA 2005 (adjustments between settlor and trustees etc.), insert—
“(9) A settlor of a settlement in respect of which he is liable to pay income tax under section 624 or 629 is entitled to receive credit for any income tax paid by the trustees of such a settlement in calculating his income tax liability and to be repaid any excess of that credit over that liability.
(10) A settlor who receives a credit under subsection (9) above is to that extent not entitled to recover any tax from the trustees under subsection (1) above.”
(3B) The amendment made by subsection (3A) shall be deemed to have effect from 6 April 2006.’.
I have been in the House for 30 years, and have moved many motions on new clauses and many amendments. I have always taken real pleasure in doing so, but I cannot say that I take much pleasure in moving this new clause, or from the feeling that we are somehow on course for a collision with the Government over the treatment of many people in our society who earn low wages.
Political parties, whatever part of the House they occupy, are broad coalitions, containing people of diverse views, but they also have core values which keep them together. There is clearly a huge divergence of views on the Labour Benches among Members who have been in the House for some time and those who have arrived more recently, and among those who think of themselves as traditional or old Labour, those who think of themselves as new Labour, and those who simply think of themselves as Labour. However, the golden thread that links us is that, when push comes to shove, we are all on the side of the poor.
The Government have taken a number of measures of which Labour Members, and, I hope, those in other parties, can be proud. They have tried to move life chances towards those who generally have least, and, if need be, away from those who find it easiest to make it to the top. Therefore, there was in the beginning puzzlement, which turned to anger, that in the 2007 Budget the Government announced the abolition of the 10p starting rate of tax accompanied by a 2p reduction in the standard rate of tax. Since coming to this House I have been an advocate for cutting taxation and particularly the direct rate of tax, the headline rate with which the people whom I represent are massively concerned. It determines whether they take a job, whether they work longer hours and so on.
I was staggered, as were other hon. Members, that that 2p reduction in the standard rate of tax was largely—although not totally—paid for by the abolition of the 10p starting rate. The cost of the 2p reduction was about £9.5 billion; the extra revenue from abolishing the 10p starting rate was about £8.5 billion. We found ourselves for the first time that I can recall advocating a measure that increased the tax burden on the lower paid and made it easier for people such as me, other Members and millions of people outside the House of Commons. It flew in the face of our understanding of what Labour is about: being on the side of the poor.
It is true that it took a little time for Treasury Ministers to recognise that there was not just an issue here, but that it was something that cut to the quick most of us who have devoted our lives to public service. We were anxious to see measures that would offset, as far as humanly possible, the additional tax burden that we had placed on the people taking home the smallest wage packets. The Government, to their credit, have introduced a number of such measures. They have changed benefit rates and protected those over retirement age who would have lost out by increasing the tax allowances, so that the sums they would lose would be met. I note that others may wish to raise the fact that those who retired before 65 would not receive the same protection as older people, such as me.
Is my right hon. Friend certain about what he is saying about pensioners? I think there is a popular misconception along the lines he is describing. My understanding from pensioner constituents is that a pensioner must have an income of over £22,000 to gain from the measure and that anyone with an income below that amount will be worse off.
They certainly have. I repeat that I hope my hon. Friend the Member for Stoke-on-Trent, Central (Mark Fisher) catches your eye, Mr. Deputy Speaker, to develop his point.
There have been benefit changes on top of tax allowance changes for us pensioners. There have been two welcome and major initiatives in the Budget, presented to us as mitigating the effects of the abolition of the 10p rate.
The first major point is that since the announcement of the abolition of the 10p rate, there have not been specific tax changes relating solely to those who have lost out from the abolition. In the initial statement the new Chancellor announced a £2.7 billion package which increased tax allowances by about £600. That applied to all of us, however. We in this House benefited from that; we benefited from the 2p increase as did those on the 10p rate, and there was also a more recent increase in tax allowances across the board, which we again benefited from, as well as the people who lost the 10p rate. Therefore, the relative tax burden that the abolition of the 10p rate placed on the poorest earners in our country has not been rectified.
My hon. Friend the Member for Hyndburn (Mr. Pope) and I wrote to the Chancellor three months ago to say that that is still a big issue. We did so not simply for our consciences’ sake, as conscience is magnified because by next May or June we will have to face the electorate, and there are quite a lot of low-paid workers out there who might not be writing us letters any longer—they may have given up on that effort—but who still feel aggrieved that we made the move in the first place, and some of whom also know that they remain worse off in money terms compared with 2007 despite the increases in personal tax allowances.
So although I welcome all the moves that the Government have made, I am also puzzled. Labour Members’ grievance with the Government was that, with the new disadvantages we had placed on the poorest earners in our society, there were no specific measures aimed at rectifying this change that we had brought about. This was not an act of nature; we did it. I cannot be the only MP who has received letters from constituents saying, “Please persevere. I understand why the Government are finding billions and billions of pounds to bail out the banks. I accept that it may well be necessary to do that, but we have needs as well.” Their grievance is that although we could find all that money for the banking system, it appears that in this Budget and previous Budgets we have found general changes that benefit all of us but we have not specifically managed to rectify the increase in the tax burden that our Government have brought about for those who earn the lowest wages in our society.
When my hon. Friend the Member for Hyndburn and I first went to see the Chancellor days after he was appointed to that office, he was as courteous as ever and asked, “Well, how would you solve the issue?” This was before the Government found £2.7 billion to make the general increase of £600 in tax allowances. We suggested that the best move would be to increase tax allowances across the board to ensure as far as humanly possible that there were no losers, but that that increase should then be clawed back from all of us who had been the gainers from the 2p rate by increasing national insurance. My hon. Friend and I left that proposal with the Chancellor.
The next part of this saga took place on the morning that the Government announced they would increase tax allowances for all of us. The Chancellor phoned me and said, “There will be a statement this afternoon. I can’t tell you what’s in it, but I hope you will like it”. As I am on the same political side, when I came to the House I wanted to say as much as possible in favour of the measure, but I cannot describe the depth of my despair as I heard the Chancellor saying there was going to be a universal increase but there would be no clawback. It is true that I welcomed that package. Who was I to stand up when the Chancellor had found £2.6 billion and spit on his feast and say this is not what is actually required, especially as I hoped that we might at a later stage get him to tailor that measure to help the lowest paid and claw the necessary sums back off the rest of us, and in so doing help to balance the books?
Was not one of the strange features of the Chancellor’s compensation package that, although it had the advantage of simplicity, the majority of the £2.7 billion was given to taxpayers who had not lost as a result of the doubling of the 10p rate?