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Finance Bill

Volume 565: debated on Tuesday 2 July 2013

[2nd Allocated Day]

Further consideration of Bill, as amended in the Public Bill Committee

New Clause 7

Restrictions on interim payments in proceedings relating to taxation matters

‘(1) This section applies to an application for an interim remedy (however described), made in any court proceedings relating to a taxation matter, if the application is founded (wholly or in part) on a point of law which has yet to be finally determined in the proceedings.

(2) Any power of a court to grant an interim remedy (however described) requiring the Commissioners for Her Majesty’s Revenue and Customs, or an officer of Revenue and Customs, to pay any sum to any claimant (however described) in the proceedings is restricted as follows.

(3) The court may grant the interim remedy only if it is shown to the satisfaction of the court—

(a) that, taking account of all sources of funding (including borrowing) reasonably likely to be available to fund the proceedings, the payment of the sum is necessary to enable the proceedings to continue, or

(b) that the circumstances of the claimant are exceptional and such that the granting of the remedy is necessary in the interests of justice.

(4) The powers restricted by this section include (for example)—

(a) powers under rule 25 of the Civil Procedure Rules 1998 (S.I. 1998/3132);

(b) powers under Part II of Rule 29 of the Rules of the Court of Judicature (Northern Ireland) (Revision) 1980 (S.R. 1980 No.346).

(5) This section applies in relation to proceedings whenever commenced, but only in relation to applications made in those proceedings on or after 26 June 2013.

(6) This section applies on and after 26 June 2013.

(7) Subsection (8) applies where, on or after 26 June 2013 but before the passing of this Act, an interim remedy was granted by a court using a power which, because of subsection (6), is to be taken to have been restricted by this section.

(8) Unless it is shown to the satisfaction of the court that paragraph (a) or (b) of subsection (3) applied at the time the interim remedy was granted, the court must, on an application made to it under this subsection—

(a) revoke or modify the interim remedy so as to secure compliance with this section, and

(b) if the Commissioners have, or an officer of Revenue and Customs has, paid any sum as originally required by the interim remedy, order the repayment of the sum or any part of the sum as appropriate (with interest from the date of payment).

(9) For the purposes of this section, proceedings on appeal are to be treated as part of the original proceedings from which the appeal lies.

(10) In this section “taxation matter” means anything, other than national insurance contributions, the collection and management of which is the responsibility of the Commissioners for Her Majesty’s Revenue and Customs (or was the responsibility of the Commissioners of Inland Revenue or Commissioners of Customs and Excise).’.—(Mr Gauke.)

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

New clause 7 makes changes to the procedure for the granting of interim payments in common law court claims relating to taxation matters. Its effect will be to limit the circumstances in which interim payments may be granted in the rare tax cases originating in a common law claim as opposed to appeal through the tax tribunal. The new clause will bring the treatment of tax cases under the two routes into closer alignment. It will simplify the process and lessen administrative burdens for the Revenue and for claimants.

I should like to set out some of the background to this change. It corrects a difference in treatment with respect to the granting of interim remedies on tax disputes that arise depending on whether the claim is appealed to the tax tribunal or originates before the High Court, or the Court of Session if in Scotland. Generally speaking, appeals against a decision by Her Majesty’s Revenue and Customs on a tax matter are appealed to the tax tribunal. This system is provided for in statutory tax legislation and is the standard route of appeal for a taxpayer who disagrees with a decision by HMRC.

There is no procedure for the granting of interim payments under this system. Instead, tax is paid or repaid as appropriate when a decision is made on the case. This is a sensible arrangement. The interim award procedure was not designed to be a remedy in a tax dispute. Its common application is to victims who have suffered serious injury to their health but the long-term prognosis leaves it unclear how much they should receive. An interim payment allows them to have enough money to make adaptation to their homes and to pay for care. Clearly, the complex adjudication of a tax dispute is a very different circumstance unsuited to the application of anticipatory payments in advance of final judgment. It is therefore right that the normal practice in tax disputes is not to grant an interim payment.

However, difficulty arises where a tax claim originates in common law. In such circumstances, it would currently fall outside the scope of the tribunal system and would therefore be appealed instead to the High Court. Here claimants may obtain interim payment before the matter is finally settled. Such payments may then need to be returned to the Revenue as the direction of jurisprudence changes at different stages of litigation. This back-and-forth process is administratively burdensome on both parties and adds to the cost of the litigation. Furthermore, it exposes the Revenue to a risk of non-recovery in the event that the taxpayer becomes insolvent after obtaining an interim payment that it is later required to hand back.

Let me set out a little more detail on the new clause. The measure will operate by limiting the power of a court to grant an interim payment to a claimant whose application for such payment is founded, at least in part, on a point of law which has yet to be finally determined. The court will, however, still be able to grant an interim payment to whatever extent is necessary to fund the ongoing litigation, as well as in some other defined circumstances where there is a strong case for granting such award. The measure relates only to those rare tax cases that fall outside the scope of the tribunal system. It is a procedural matter, not a change in tax policy.

The Minister said that such cases are rare. How many are there each year, and how quickly will they be dealt with under the system proposed in new clause 7 as compared with now?

How quickly a particular case will be dealt with depends on the length of time it takes to be resolved. The right hon. Gentleman will know from his considerable experience as a Treasury Minister that some of these cases can take a number of years. It is worth pointing out that, by and large, large corporates tend to be involved in this type of litigation. The length of time it will take for a case to be resolved is ultimately unaffected by these changes. Their only significance is that there will not be interim payments in these rare cases.

The right hon. Gentleman asked how many cases there are per year. I cannot give him the number straight away, but it is very low. In the vast majority of cases, disputes are taken through the tax tribunal. As I say, this is about making common law cases consistent with tax tribunal cases. It is difficult to give the precise number of cases per year, but we are talking about low numbers.

I thank the Minister for responding to my right hon. Friend’s useful question. Will he clarify why the Government are proposing this change as a new clause to the Finance Bill? What has come to light between the initial drafting of the Bill and this stage in the proceedings, which is clearly very late given that the Bill is due to receive its Third Reading today?

We have introduced it at this point because recent jurisprudence has crystallised our view in this regard. As I say, we want consistency between common law cases and tax tribunal cases. A degree of volatility has been created in terms of tax revenues that none of us should welcome. In short, the answer to the hon. Lady’s question is that the reason is recent jurisprudence.

Let me give the right hon. Gentleman a little more detail in response to his question about rare cases. HMRC is aware of fewer than 10 strands of litigation where tax issues are being handled through the High Court. That is not to say that they would necessarily all involve interim payments, but I hope that that gives some sense of the scale of the issue. As I say, it is a procedural matter.

It is helpful of the Minister to give the House an indication of the scale in terms of the number of cases. Can he also indicate the scale in terms of the amount of tax at stake in such cases?

The first point to make is that this does not ultimately change the amount of tax at stake, because a litigant will either win or not win. If a litigant who ultimately wins has not had access to an interim payment as a consequence of this measure, that does not change what they will ultimately receive. Some of these cases involve large sums of money, sometimes many millions of pounds. In some cases, interim payments have been very significant. However, I stress that this does not ultimately change how much money will end up in the pocket of the litigant. It is a question of timing and ensuring that we have some consistency.

Turning to why we are doing this now, it follows recent jurisprudence of the Court relating to the application of the interim awards procedure. This jurisprudence has crystallised our view that the interim payment procedure is not suitable for complex tax disputes. There is also an element of risk management in this. HMRC is routinely involved in litigation where the tax at stake may be for very high sums of money. The granting of payments on an interim basis before a final decision has been reached contributes to the volatility of tax revenues. By limiting the application of the interim payment procedure in common law court claims relating to taxation matters, and bringing the system into better alignment with what is standard practice in the tax tribunal, the new clause will cut down on complex work associated with calculating claims on a contingent basis before matters relating to liability and quantum have been resolved by the judiciary.

The information being provided by the Minister is very helpful. The impact note states that the change will have no Exchequer impact, but that Her Majesty’s Revenue and Customs will benefit from reduced administrative costs and burdens. Is the Minister able to put a sum on that economic benefit to the Treasury?

That is a fair question and there will be a benefit to HMRC, but it is difficult to put a sum on it. I do not want to overstate the argument—we are not talking about an administrative saving of many millions of pounds—but clearly these cases are difficult to deal with. They involve the additional complexity involved in large-scale litigation matters that are taken through the courts. There is a saving, but I do not want to overstate it. The hon. Lady raises a perfectly fair question, but it is difficult to provide a precise number.

At a time when there is considerable pressure on resources, it is difficult to justify the considerable additional work that the interim payment procedure creates for the Revenue by adding stages to the litigation process. We have, therefore, taken the decision to legislate now in order to achieve better alignment between the treatment of different tax cases at the earliest opportunity. The Government believe that this will help bring an end to misalignment whereby the availability of interim payments in the context of tax differs depending on whether claims are brought in the court system or the tribunal system.

I thank the Minister for his comprehensive account of new clause 7 and for responding to our queries. As he has said, the Government want to introduce a number of new clauses and amendments to the Bill. Could you clarify, Mr Deputy Speaker, whether we are dealing with just new clause 7 at this stage, or are we taking any other amendments?

Thank you, Mr Deputy Speaker; I appreciate that clarification.

New clause 7 makes changes to the procedure for the granting of interim payments in common law claims relating to taxation matters so that the treatment of tax cases commenced under common law court claims and tax tribunals will be more closely aligned in future. We support this simplification process, and the Minister’s response to our probing questions during his generous explanation of the new clause has clarified the issue.


Question put and agreed to.

New clause 7 read a Second time, and added to the Bill.

Clause 175

Election to be treated as domiciled in the United Kingdom

I beg to move amendment 1, page 105, leave out lines 4 to 13 and insert—

‘(3) Condition A is that, at any time on or after 6 April 2013 and during the period of 7 years ending with the date on which the election is made, the person had a spouse or civil partner who was domiciled in the United Kingdom.

(4) Condition B is that a person (“the deceased”) dies and, at any time on or after 6 April 2013 and within the period of 7 years ending with the date of death, the deceased was—

(a) domiciled in the United Kingdom, and

(b) the spouse or civil partner of the person who would, by virtue of the election, be treated as domiciled in the United Kingdom.’.

These Government amendments make important changes to the UK’s inheritance tax rules.

Amendments 1 to 7 will bring in greater flexibility and provide more individuals with the option to elect to be treated as UK domiciled for the purposes of inheritance tax. They demonstrate the Government’s willingness to listen to the views of external interested parties and act where there is a principled case for change.

Amendments 35 to 51 are being made as a result of comments by interested parties. They clarify the technical interpretation of the legislation and change the commencement provisions with respect to certain liabilities.

Let me turn first to amendments 1 to 7 to clause 175. The clause reforms the inheritance tax treatment of transfers between UK-domiciled individuals and their non-UK-domiciled spouses or civil partners. The changes allow individuals who are not domiciled in the United Kingdom but who have a UK-domiciled spouse or civil partner to elect to be treated as domiciled in the UK for the purposes of inheritance tax.

The amendments are being made following comments from two key interested parties—the Chartered Institute of Taxation and the London Society of Chartered Accountants—about how the Finance Bill as drafted amends the inheritance tax treatment of spouses and civil partners not domiciled in the UK. Their further representations since the publication of the Bill in March have helped us understand the concerns raised in more detail. Considering the points raised has taken time, but the amendments will resolve these issues.

The clause as drafted stipulates that a person must be non-UK-domiciled and married at the time they make an election. Consequently, a person who has recently become UK domiciled would not be able to make a retrospective election that would cover a period when he or she had been non-domiciled. Effectively, they are trapped if they are not aware of the possible IHT consequences at the point just before they become UK domiciled—for example, if they decide to remain in the UK indefinitely after having children here. This might be especially harsh in situations where the original UK-domiciled spouse dies suddenly having made potentially exempt transfers to the surviving spouse.

Similarly, the Bill as drafted requires a person to remain married to, or in a civil partnership with, the UK-domiciled spouse or civil partner throughout the “relevant period” preceding the election, which can be up to seven years. Therefore, in circumstances where the marriage or civil partnership has been dissolved and the person is a non-domiciled individual, they are prevented from making an election retrospectively and hence prevented from gaining access to spousal relief for the period when they were married in return for their overseas assets being brought into IHT. That was not the intention of the policy.

Amendments 1 to 7 remove the condition that a person must be non-UK-domiciled at the time of making an election. They also remove the requirement that the person making the election is married or in a civil partnership with the UK-domiciled individual throughout the relevant period. The amended clause stipulates instead that they were married or in civil partnership at any time during the relevant period.

As a result of these amendments, individuals who are domiciled in the UK but who were previously domiciled elsewhere will be able to make a retrospective election. Similarly, the amendments will also enable individuals previously married or in a civil partnership to make a retrospective election following divorce or dissolution. This will ensure that changes in domicile or marriage status do not restrict the ability of individuals to elect to be within the UK inheritance tax system.

Amendment 1 simply removes a sub-paragraph that is no longer required as a consequence of amendments 2 to 6, while amendment 7 provides clarity that the provision for revoking an election applies only to the person who made the election and not to that person’s personal representatives.

Let me now turn to amendments 35 to 51 to schedule 34. Clause 174 and schedule 34 reform the inheritance tax treatment of outstanding liabilities. They introduce new conditions and restrictions on when a liability can be deducted from the value of an estate.

The current rules allow almost all outstanding liabilities at death to reduce the value of an estate, irrespective of how the borrowed moneys have been used, or whether the loan is repaid following the death. That creates opportunities for avoidance and can lead to decisions and arrangements being made purely for tax reasons. A range of contrived arrangements and avoidance schemes on the market seek to exploit the current rules. The number of those is expected to grow as other avoidance routes are closed off.

There is an inconsistency in how the current rules treat liabilities that are used to acquire assets that qualify for relief, but that are secured against different types of assets. That creates an advantageous tax position and distorts decision making by encouraging individuals to secure business loans against their personal property where there may be no need to do so. The Government believe that the tax system should neither encourage nor penalise the choice of one form of security over another.

Clause 174 and schedule 34 address those opportunities for avoidance and inconsistency in three ways. First, deductions will be disallowed where the loan has been used to acquire excluded property—that is, property which is excluded from the charge to inheritance tax. Secondly, where the loan has been used to acquire relievable property—that is, property which qualifies for a relief—the relief will be allowed against the net value of the property after deducting the loan. Thirdly, the loan will generally be allowable as a deduction only if it has been repaid from assets in the estate.

The Government are making those changes to improve the integrity and fairness of the inheritance tax system, close avoidance opportunities and remove the inconsistency in the treatment of loans.

Following the publication of the Finance Bill in March, Her Majesty’s Revenue and Customs has received comments from representative bodies, practitioners and individuals that have highlighted sections of the legislation that could be clarified. Interested parties have also expressed concern that the new provisions will apply retrospectively where individuals have secured business loans on their non-business property for commercial reasons, rather than for avoidance purposes, before the changes were announced. Those individuals would face a higher IHT bill if they died before the debt was repaid.

Amendments 35 to 49 clarify the interpretation of the legislation to ensure that it works as intended, and address some of the technical issues identified in feedback. If a loan has been used to acquire excluded property, which later becomes chargeable to IHT, amendment 37 will allow the deduction for the liability. Conversely, if chargeable property subsequently becomes excluded property, the amendment will deny the deduction.

Where a loan has been used to acquire relievable property and that property is given away before death, amendments 41 and 42 will ensure that the liability is not deducted again against other types of property if it has already been taken into account. Amendment 45 will widen the meaning of “estate” to allow the liability to be repaid from property that is usually treated as being outside a person’s estate for IHT purposes, such as foreign property that is owned by an individual who is not domiciled in the UK. Where a loan has not been repaid and the deduction is disallowed, amendment 47 will make it clear that the liability will not reduce the amount that would be eligible for the inheritance tax exemption for transfers between spouses or civil partners.

The Government recognise that some lenders may require security in the form of personal assets and that individuals who have secured existing loans against their personal property to finance business investment may not be able to restructure the loan or unwind the arrangements. Amendments 50 and 51 will therefore amend the commencement date so that the new rules dealing with liabilities incurred to acquire relievable property will apply only to new loans taken out on or after 6 April 2013. That will mean that someone who took out a business loan in the past secured against their other assets will not be affected by the new provisions.

The commencement date for the other provisions in schedule 34 will remain unchanged as the date of Royal Assent. Those provisions will apply to other liabilities, irrespective of when they were incurred.

The Minister is again providing a thorough explanation of the Government amendments. He may recall that the Chartered Institute of Taxation expressed concerns that clause 174 and schedule 34 were “profoundly anti-business” and did “not recognise economic realities”. Will the Minister provide reassurance that the Government are confident that those concerns are addressed by today’s amendments?

We have sought to address many of the concerns that have been raised. It is perhaps worth outlining the policy objective of limiting the deduction for liabilities. It removes a tax advantage that certain schemes and arrangements seek to achieve. It removes an anomaly in the current rules that may distort business financing decisions. The measures will ensure that the value of an estate that is subject to IHT reflects the normal economic consequences of incurring a liability. They support our policies on anti-avoidance and fairness.

We have demonstrably listened to the concerns that have been raised. We are seeking not to prevent or deter individuals from starting a business or investing in an existing business, but to close down an avoidance opportunity. The change will not prevent a business from securing a loan against non-business assets or disrupt business activity. It will only remove the anomaly that can provide a tax advantage for restructuring debts in one way over another.

The amendments will improve the inheritance tax rules. They will bring greater flexibility and provide more individuals with the option to elect to be treated as UK domiciled for the purposes of inheritance tax. They will ensure that the new provisions in clause 174 and schedule 34 reduce potential tax losses and reduce the role of inheritance tax in business financing decisions, while minimising the impact on legitimate arrangements.

Amendments 1 to 7 will make technical changes to clause 175, which introduces provisions by which an individual who is or has been married to or who is or has been in a civil partnership with someone who is domiciled in the UK can elect to be treated as UK domiciled for inheritance tax purposes. The Minister has set out in detail the reasons for the changes and the expected impact.

I have one additional question. The impact note that was published with the amendments states that there will be a negligible impact in this year, but that in future years there is expected to be a £5 million negative impact on the Exchequer. Will the Minister clarify how and why that negative impact will be realised?

Amendments 35 to 51 will alter schedule 34 and clause 174 on the treatment of liabilities for inheritance tax purposes. Understandably, the Minister focused on those proposals for the majority of his remarks, because they have been the subject of significant concern from a number of quarters. As he explained, the clause was drafted in response to avoidance schemes and arrangements that sought to exploit the inheritance tax rules that allow for a deduction for liabilities owed by the deceased against the value of an estate, regardless of whether the debt is paid after death.

HMRC has outlined some of those arrangements. Some involve contrived debts that are subsequently not repaid, so there is no real reduction in the value of the estate. Others involve loans that are used to acquire assets that are not chargeable to inheritance tax or which qualify for a relief so that the value of the estate is doubly reduced. The policy intention of the measure is to remove the tax advantage that such schemes and arrangements seek to achieve through the exploitation of that loophole. Obviously, that is an aim that the Opposition support.

The impact assessment shows a net positive return to the Exchequer of £5 million in 2013-14, rising to £20 million in 2014-15, then falling and remaining steady at £15 million after 2017-18. It is obvious why the impact will be lower in 2013-14, but it would be helpful if the Minister would clarify why the return is expected to peak at £20 million and peter down to £15 million on an ongoing basis. Presumably, individuals who are aware of the changes will, as executors, adjust their tax planning behaviour, but it would be interesting to understand why we expect that increase in 2014-15, and why the return will continue at £15 million on an ongoing basis. Is that return expected to continue indefinitely in terms of tax protected by the Exchequer?

A number of concerns about this measure were raised in Committee, and also expressed by several external organisations that the Minister mentioned. Most notably, there is concern that the new rules are too broad and may unintentionally catch genuine existing arrangements, rather than solely avoidance behaviour. It is welcome that amendments 35 to 51 seek to focus the new rules more tightly, and clarify the legislation where appropriate to minimise the impact on those with innocent arrangements. Despite the amendments, there are still a number of concerns about clause 174 and schedule 34. I have already asked the Minister whether he is confident that those concerns have been addressed, because even despite the amendments, concerns continued to be raised. It would be helpful if the Minister would provide comfort to the House, members of the public and tax professionals who are concerned about the clause.

The key concern expressed by the Chartered Institute of Taxation relates to debts that are not discharged from the estate of a deceased person. New provisions in clause 174 appear to mean that if a debt has not been discharged directly out of an estate, it will not be deductible for inheritance tax purposes. For example, if the deceased’s estate contains a house subject to a mortgage, the mortgage debt might be repaid from the proceeds of an insurance policy, payable directly to the beneficiary. Although a spouse or civil partner would not be subject to inheritance tax under such circumstances, a cohabitee or orphan child would be. Alternatively, if there is no insurance to pay off the mortgage, the beneficiary might take on the mortgage debt. In either case, as liability will not have been discharged directly out of the estate, which is a requirement of the new provision, it appears that it will not therefore be deductable.

I understand that HMRC intends to deal with such scenarios in its guidance, but it would be helpful for the Minister to clarify the position in his response. The Chartered Institute of Taxation previously expressed concerns that the measures are “profoundly anti-business” and do “not recognise economic realities”. Indeed, it went so far as to state

“we can hardly think of a more counter-productive measure than to deny relief for lending related to business.”

I am sure the Government will want to respond to that strong concern, given current economic conditions and their stated desire to stimulate economic growth. I am sure it is not their intention to enact measures that could be counter-intuitive to that desire.

The Government’s amendments mean that new rules on liabilities incurred to acquire a relievable property will apply to loans taken out or varied on or after 6 April 2013. That is important because of the retroactive nature of schedule 34, which has been criticised given the significant implications for business loans taken out many years ago and secured against a person’s house.

The Chartered Institute of Taxation continues to be concerned that the amendments do not provide adequate protection for small businesses. If a business loan was taken out many years ago but is varied after 6 April 2013, the transitional protection offered by the amendments falls away. That could trap small business owners into existing loans, or hinder anyone whose loan comes to an end, where the bank wants to alter the terms, or if the individual wants to refinance. Ultimately, the Chartered Institute of Taxation fears that that could result in people facing an unenviable choice between selling the family home and selling their business if the business owner dies. I would be grateful to hear the Minister’s comments on those concerns.

To return briefly to my comments on amendments 1 to 7, the impact assessment states that the proposed changes could impact on small businesses. There has been no consultation with small firms or any other groups, so perhaps the Minister will confirm that both sets of changes will not have the detrimental impact on small businesses and business lending that many tax professionals are concerned about.

I will try to address the hon. Lady’s points. First, on inheritance tax and non-domiciled spouses, she correctly mentioned the costs of the policy, which are largely due to an increase in the lifetime limit set out in the Budget documents. Clause 176 increases that limit from £55,000 to £325,000—it has not been increased since 1982, and we wanted to address that to be fair to non-domiciled spouses. That is the reason for the cost.

The yield from measures in clause 134 and schedule 34 comes from two main types of avoidance scheme that will be closed by these provisions. The main impact on one will be relatively short-lived. The hon. Lady is right to point out that we expect tax agents providing tax avoidance schemes to move on to new schemes in other parts of the tax code, and that will have a behavioural impact. That explains the peak in one year—2014-15—and the £15 million yield for subsequent years.

The hon. Lady mentioned the impact on business and I refer her to my earlier remarks—as you will have noted, Mr Deputy Speaker, I covered quite a lot of ground in a fairly lengthy speech. Estates will continue to get a deduction for loans or liabilities, provided they are not used to acquire assets that are not chargeable to inheritance tax and are repaid after death, unless there are genuine commercial reasons for non-repayment. Business and investment decisions are made on a range of factors, including tax. One of the Government’s key principles for good taxation is that the tax system should be efficient. It should neither favour nor penalise one form of lending or security over another. The new provisions will ensure that this is the case.

The hon. Lady referred to a point raised by the Chartered Institute of Taxation that debts not discharged directly out of the estate will not be IHT deductable. The definition of “out of estate” will be extended by amendment 45 to include indirect assets not normally included in the estate, such as excluded property. Otherwise, no deduction will be due, but this reflects the economic consequence of incurring a liability and repaying it. It would disadvantage the Exchequer to provide for relief where debts are not repaid and do not reduce the inheritance tax being passed on.

On whether that will harm business, and whether the amendments deal with concerns that have been raised, it is worth pointing out that independent research published in the SME Finance Monitor suggests that the majority of business overdrafts and loans are unsecured. Where security is provided, it is typically in the form of a charge on business property, such as commercial mortgages. That is supported by a review of recent IHT returns. Most estates with such liabilities will therefore be unaffected by the changes.

On consultation, the provisions are designed primarily to tackle avoidance schemes, such as those involving debts between connected parties. As is normal practice for such measures, there was no consultation and draft legislation was not published in advance. To do so would have exposed the avoidance schemes to greater publicity, potentially encouraging more schemes to be set up. Following the publication of the Finance Bill, the Government, as expected, received comments from interested parties and are responding to the many concerns raised by tabling amendments on Report to clarify and improve the Bill.

I appreciate the Minister’s point, but I question the reference to how the majority of small businesses manage to secure funding. Small businesses in particular are struggling to obtain funding from banks.

Order. We are wandering away from the amendment, and I know the hon. Lady just wanted to make a point on the amendment.

My point relates specifically to the amendment, Mr Deputy Speaker. Many businesses that manage to obtain funding are often required to provide their home as security. If this provision has a detrimental impact on small businesses and puts family homes in jeopardy, will the Government keep it under review?

I can appreciate why the hon. Lady raises that point, but recent evidence from inheritance tax returns suggests that the majority of business overdrafts and loans continue to be unsecured. There may well have been changes to the balance between secured and unsecured business overdrafts and loans in recent years, but it remains the case that the majority are unsecured. Where security is provided, it is typically in the form of a charge on a business property. I understand why she raises the point, but the evidence suggests that this will not cause the concern that she anticipates. All measures are kept under review and this will be no exception, but we believe that we have got the balance right. This will address a distortion and an avoidance opportunity. I therefore hope that these proposals, as refined by the amendments, will become part of the Bill.

Amendment 1 agreed to.

Amendments made: 2, page 105, leave out lines 39 to 43.

Amendment 3, page 106, line 4, leave out ‘spouse or civil partner’s’ and insert ‘deceased’s’.

Amendment 4, page 106, line 7, leave out from first ‘date’ to end of line 19 and insert—

‘if, on the date—

(a) in the case of a lifetime election—

(i) the person making the election was married to, or in a civil partnership with, the spouse or civil partner, and

(ii) the spouse or civil partner was domiciled in the United Kingdom, or

(b) in the case of a death election—

(i) the person who is, by virtue of the election, to be treated as domiciled in the United Kingdom was married to, or in a civil partnership with, the deceased, and

(ii) the deceased was domiciled in the United Kingdom.’.

Amendment 5, page 106, line 21, leave out ‘spouse or civil partner’ and insert ‘deceased’.

Amendment 6, page 106, line 27, leave out ‘or (4)(b)’.

Amendment 7, page 106, line 41, leave out ‘a lifetime or death election’ and insert

‘an election under section 267ZA(1)’.—(Mr Gauke.)

Schedule 2

Tax advantaged employee share schemes

I beg to move amendment 8, page 144, line 34, at end insert—

“(10A) For the purposes of subsection (10) it does not matter if the general offer is made to different shareholders by different means.’.

Clause 14 and schedule 2 provide a wide-ranging simplification of the four tax advantaged employee share schemes, following recommendations by the Office of Tax Simplification. The Government are introducing amendments 8 to 16 to provide further clarity on the rules that apply where company events involving “general offers” take place. When clause 14 was discussed in Committee, we highlighted some of the improvements that we are making to simplify the tax advantaged employee share schemes, and I shall provide hon. Members with some background on the specific provisions relating to these amendments.

Current legislation allows employees affected by certain company events, such as takeovers, to exchange their original scheme shares or options for shares or options in the acquiring company. The schedule also creates new rights for participants to realise scheme shares or exercise options without tax liability in the event of a cash takeover of their company.

Earlier this year, a tax tribunal hearing a particular case published a decision on what constitutes a “general offer” for the whole of the ordinary share capital of a company. Following this decision, and a number of requests from taxpayers and advisers, the Government consider it desirable to clarify the scope of what constitutes a “general offer” for the purposes of the provisions. The amendments clarify the position across all four tax advantaged employee share schemes, and confirm the rules as they have been consistently applied by HMRC. Our aim is to remove any uncertainty for advisers and taxpayers, consistent with the general simplification theme of the changes. The amendments, alongside the changes that already form part of the Bill, demonstrate the Government’s commitment to simplifying and clarifying the tax rules where possible.

These are technical amendments tabled in response to concerns about the operation of the share incentive plans in section 498 and schedule 2 to the Income Tax (Earnings and Pensions) Act 2003. The amendments will clarify save-as-you-earn option schemes. We support the clarification of the rules that apply when general offers take place.

Amendment 8 agreed to.

Amendments made: 9, page 144, line 45, after ‘“(7)’, insert—

‘For the purposes of sub-paragraph (5) it does not matter if the general offer is made to different shareholders by different means.

(8) ’.

Amendment 10, page 146, line 20, at end insert—

“(3DA) In subsection (3D)(a) the reference to the issued ordinary share capital of the relevant company does not include any capital already held by the person making the offer or a person connected with that person and in subsection (3D)(b) the reference to the shares in the relevant company does not include any shares already held by the person making the offer or a person connected with that person.

(3DB) For the purposes of subsection (3D)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.’.

Amendment 11, page 147, line 16, at end insert—

‘(1A) After sub-paragraph (3) insert—

(3A) In sub-paragraph (3)(a) the reference to the issued ordinary share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (3)(b) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

(3B) For the purposes of sub-paragraph (3)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.”

(1B) A SAYE option scheme approved before the day on which this Act is passed which contains provision under paragraph 37(1) of Schedule 3 to ITEPA 2003 by reference to paragraph 37(2) has effect with any modifications needed to reflect the amendment made by sub-paragraph (1A).’.

Amendment 12, page 147, line 37, leave out sub-paragraph (1) and insert—

‘(1) In Part 7 of Schedule 3 (exercise of share options) paragraph 38 (exchange of options on company reorganisation) is amended as follows.

(1A) In sub-paragraph (2)(c)—

(a) after “982” insert “or 983 to 985”, and

(b) after “shareholder” insert “etc”.

(1B) After sub-paragraph (2) insert—

“(2A) In sub-paragraph (2)(a)(i) the reference to the issued ordinary share capital of the scheme company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the scheme company does not include any shares already held by the person making the offer or a person connected with that person.

(2B) For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.”’

Amendment 13, page 149, line 34, at end insert—

“(2HA) In subsection (2H)(a) the reference to the issued ordinary share capital of the relevant company does not include any capital already held by the person making the offer or a person connected with that person and in subsection (2H)(b) the reference to the shares in the relevant company does not include any shares already held by the person making the offer or a person connected with that person.

(2HB) For the purposes of subsection (2H)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.’.

Amendment 14, page 150, line 31, at end insert—

“(3A) In sub-paragraph (3)(a) the reference to the issued ordinary share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (3)(b) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

(3B) For the purposes of sub-paragraph (3)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.’.

Amendment 15, page 151, line 6, leave out sub-paragraph (1) and insert—

‘(1) In Part 6 of Schedule 4 (exercise of share options) paragraph 26 (exchange of options on company reorganisation) is amended as follows.

(1A) In sub-paragraph (2)(c)—

(a) after “982” insert “or 983 to 985”, and

(b) after “shareholder” insert “etc”.

(1B) After sub-paragraph (2) insert—

“(2A) In sub-paragraph (2)(a)(i) the reference to the issued ordinary share capital of the scheme company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the scheme company does not include any shares already held by the person making the offer or a person connected with that person.

(2B) For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.”’.

Amendment 16, page 151, line 13, at end insert—

‘Enterprise management incentives

30A (1) In Part 6 of Schedule 5 (company reorganisations) in paragraph 39 (introduction) after sub-paragraph (3) insert—

“(4) In sub-paragraph (2)(a)(i) the reference to the issued share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

(5) For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.”

(2) The amendment made by this paragraph comes into force on such day as the Treasury may by order appoint.’.—(Mr Gauke.)

Schedule 9

Qualifying Insurance Policies

With this it will be convenient to discuss the following:

Government amendments 18 to 29.

Amendment 52, page 213, line 2, at end insert—

‘(aa) the policy has an annual premium of £3,600 or less.’.

Amendment 53, page 213, line 2, at end insert—

‘(ab) the policy is subject to capital gains tax.’.

Amendments 17 to 29 make a number of technical changes to schedule 9 and clause 25 to ensure that the qualifying insurance policy regime works as intended. Let me set out some brief background to these changes. The qualifying policy regime was introduced in 1968 to preserve pre-existing tax treatment for traditional moderate value, long-term, regular premium savings policies that contain a significant element of life insurance.

No upper limit was set for the investment premiums that could be paid into a QP, which allowed individuals to obtain unlimited relief from higher rates of income tax. In the 2012 Budget, the Government announced a restriction to the tax relief available for QPs. Clause 25 and schedule 9 introduce an annual premium limit of £3,600 on qualifying life insurance policies. This restriction limits the amount of premiums payable into QPs for an individual to no more than £3,600 in any 12-month period, with effect from 6 April 2013.

This measure supports the Government’s objective of promoting fairness in the tax system by ensuring that tax reliefs for QPs are correctly targeted. Consultation since the Bill was introduced has continued and identified the need for Government amendments to clause 25 to deal with points of detail in 13 areas. None of these represents a change of policy; as I have said, they are technical adjustments to ensure that the rules operate effectively and as intended. The amendments have been discussed with industry representatives and have benefited from the comments received.

Let me briefly explain the amendments in slightly more detail. The purpose of the changes is to provide flexibility to deal with potential future exclusions from the non-assignment rule and potential future exclusions from the circumstances under which beneficiaries must make statements, to extend the period by which an individual must first make a statement and to clarify what information an insurer must provide and obtain from a policy beneficiary and what an insurer must provide to HMRC. In addition, a number of amendments make minor corrections or consequential changes to the more material changes that I have described.

If I may, Mr Deputy Speaker, I will speak to amendments 52 and 53, standing in the name of my hon. Friend the Member for West Worcestershire (Harriett Baldwin), at the end of the debate.

I rise to speak to amendments 52 and 53, standing in my name and the names of my hon. Friends the Members for City of Chester (Stephen Mosley) and for Finchley and Golders Green (Mike Freer).

I tabled these amendments to schedule 9 after being alerted recently to the consequences of the proposed changes to the life insurance qualifying policy regime for a small business in Malvern in my constituency, which is a market maker in traded endowment policies. The business provides a price at which it will both buy and sell an endowment policy, which creates welcome liquidity in these financial instruments. The firm has been recognised for its work with a Queen’s export award for industry.

The Association of Policy Market Makers estimates that the traded endowment policy market involves about 7,000 policies a year, out of the 20 million policies outstanding, and has a value estimated at approximately £150 million. The reasons why someone might want to sell an endowment policy vary. The most significant reason —accounting for 20%—is poor investment performance, although someone might be selling their house or trying to get some equity release. People sell endowment policies when they want to reduce their mortgage or improve their home—perhaps at retirement or when they lose their jobs, are bereaved or are getting divorced. Someone might want to buy a second-hand endowment policy to get a better rate of return than cash without a stock market risk. Endowment policies are also popular products with people with lump sums—such as victims of accidents who receive large payouts—because they have capital protection at maturity and tend to be priced to beat inflation.

The market is in natural decline, as endowment policies are no longer very popular and the existing 20 million policies have a finite end date. Nevertheless, there are thought to be seven such small businesses in the UK, employing about 200 people, including in the constituencies of my hon. Friends the Members for City of Chester and for Finchley and Golders Green. These firms worry that they will be put out of business by the change of tax treatment for these policies contained in schedule 9.

I completely understand, support and appreciate the Chancellor’s desire to restrict tax relief for higher-rate taxpayers to £3,600 a year for all new policies that are issued. What I am raising is the impact on existing qualifying policies, which have hitherto been subject to capital gains tax after they change hands. However, the tax treatment might now become so unattractive that the secondary market will dry up. I fear that the Chancellor and the Exchequer will lose out on the potential capital gains tax created by future transfers of such policies. The potential capital gains from the industry as a whole are estimated at £750 million, depending on how much changes hands and the rate of capital gains tax at the time. That is a not inconsiderable sum of money.

In setting the £3,600 annual limit for new policies, the Treasury needs at the same time to limit the number of qualifying second-hand endowment policies that any one individual can buy. My amendments simply seek to set the same annual premium limit for existing policies as that for new policies under this legislation. That would create a fair and level playing field between new policies, which are being restricted, and any outstanding existing policies that might change hands. I know that the Minister would not want to close down small financial services businesses because of this change in the tax treatment of policies issued many years ago. I think that we can all agree that that would be excessive and retrospective.

I hope that by considering my amendments the Government will find a way to restrict the tax relief on new policies in the future—while still allowing the secondary market in existing qualifying policies to continue—and continue to allow those capital gains tax revenues for the Exchequer. I appreciate that we are talking about a small, specialised secondary market—I was not aware that it existed until 10 days ago. I also appreciate that the industry was not able to feed into the consultation at the end of the year—it was not alerted to the potential change—but it has now fed into the process, via the business in my constituency. I hope that by giving serious consideration to my amendments—and, I hope, accepting them—the Government will allow the industry and the endowment policy market to die of natural causes in due course, as the policies mature, rather than killing it off suddenly with the Bill.

Allow me now to turn to amendments 52 and 53, in the name of my hon. Friend the Member for West Worcestershire (Harriett Baldwin). I recognise that she speaks from experience and in support of concerns raised by her constituents. I have listened very carefully to those points, and I welcome the opportunity to debate this issue. In providing some additional background to the annual premium limit, I hope that she will be reassured by the safeguards that we have introduced—and the reasons for introducing them—and will consider not pressing her amendments. Amendments 52 and 53 ask that the Government exclude assignments that make a policy non-qualifying where either the policy has an annual premium of £3,600 or less, or the policy is subject to capital gains tax.

Let me respond to some of the points raised by my hon. Friend. She commented that seven small businesses selling second-hand endowment policies could close as a result of the change to the tax treatment of qualifying policies. We recognise that these policies are likely to sell for less on the market where the purchaser is an individual who is a higher or additional rate taxpayer, due to the income tax charge when the policy matures. Let me reassure her that there is currently no bar to the sale of non-qualifying policies on the market and that research from the industry shows that non-qualifying policies are currently sold in the market. We envisage that this market might actually increase as a result of fewer QPs being available for sale.

Let me reassure the House that any adverse impact of the tax changes will be limited to those purchasers who are higher or additional rate taxpayers. Where a second-hand endowment policy is bought by a corporate investor or a basic rate taxpayer, there will be no impact on the tax position of the buyer when the policy matures. As a result, the loss of QP status will not make these policies any less attractive for those investors.

My hon. Friend made a point about capital gains. Previously, the purchaser of a traded endowment policy would have been liable to tax under the capital gains tax regime. That tax treatment was based on the maturity proceeds, less what the purchaser paid to acquire and maintain the policy. Capital gains tax treatment was more favourable, in that no additional tax would be payable unless the gains exceeded the annual exempt amount. In practice, it is likely that higher or additional rate taxpayers structured their affairs so as to ensure that little or no capital gains tax would be payable by using their full annual exempt allowance for a tax year. For 2013-14, that amount is £10,900. There is an additional safeguard for basic rate taxpayers who fall into the higher tax bracket as a result of the policy maturing. If that happens, the individual will get top-slicing relief, which reduces any additional tax payable. The relief is not available if the taxpayer is already a higher or additional rate taxpayer when the policy matures.

My hon. Friend has stated that her amendments would set the same annual premium limit for traded endowment policies as that set for new policies and existing policies. The annual premium limit of £3,600 applies to each individual rather than to a single policy. The effect of amendment 52 would be to exclude a policy from the limit if it had an annual premium payable of £3,600 or less. Purchasers of traded endowment policies will already have an annual premium limit of £3,600 applying to their own policies. As a result of that amendment, they would also be able to acquire as many traded endowment policies as they could afford, so long as each of those policies had premiums payable under the threshold. That would put an individual who had taken out a qualifying policy from the outset at a disadvantage to an individual who later acquired a policy. Amendment 52 would not result in a level and fair playing field. Rather, it would inadvertently create an unfair advantage for purchasers of these traded endowment policies.

My hon. Friend understandably referred to the restrictions on assignments for consideration, which are an essential part of the policy. The aim of our measure is to help to promote fairness in the tax system by limiting the tax relief available to higher rate and additional rate taxpayers. Without this restriction, individuals in a financial position to purchase traded endowment policies would be able to acquire qualifying policies without limit, while everyone else would be subject to the £3,600 annual premium limit. That would put an individual who had taken out a qualifying policy from the outset at a disadvantage to an individual who later acquired a policy, which would be unfair and inconsistent.

My hon. Friend considers that there is an element of retrospection about applying the annual premium limit to any QPs existing before 6 April 2013. Let me reassure her that there is no element of retrospection. The sale of a traded endowment policy on or after 6 April 2013 is treated no differently from an individual varying an existing policy after that date either to change the term or to vary the annual premiums payable. In all those cases, an individual will have made a conscious decision with regard to an existing product in full knowledge of the tax consequences resulting from that decision. The Government’s position is therefore that it would be unfair, inconsistent and disproportionate to allow all pre-6 April 2013 policies to remain qualifying following assignment to maintain the secondary traded endowment market.

The Government have listened to my hon. Friend’s concerns, however. As a result of the representations made, we would like to remind her that amendment 19 proposes giving HMRC a power to deal, in regulations, with any additional circumstances for which exclusion may be appropriate. I will ask officials to meet my hon. Friend’s constituents and to work with the industry to ensure that the annual premium limit remains proportionate as it beds in. I want to reassure her that if the evidence shows that the impact of the annual premium limit would prematurely bring to an end the traded endowment market, as she fears, the Government would consider using their power in amendment 19 to address the matter in a proportionate way, following discussions with interested parties. I hope that that provides her with a degree of reassurance that the Government are listening, and I respectfully ask her not to press her amendments to a vote.

These important technical changes enjoy the broad support of the life insurance industry. They will provide a more effective and more proportionate regime for the operation of the annual premium limit on QPs, and help to ensure that tax reliefs for QPs are appropriately given. I therefore commend Government amendments 17 to 29 to the House.

Amendment 17 agreed to.

Amendments made: 18, page 206, line 32, after ‘(g)’, insert ‘or (4A)’.

Amendment 19, page 213, line 25, at end insert—

“(4A) The Commissioners for Her Majesty’s Revenue and Customs may by regulations provide that sub-paragraph (2) does not apply if prescribed conditions are met in relation to the assignment.

“Prescribed” means prescribed by the regulations.

(4B) Regulations under sub-paragraph (4A) may—

(a) make different provision for different cases or circumstances, and

(b) contain incidental, supplementary, consequential, transitional, transitory or saving provision.’.

Amendment 20, page 213, line 27, after ‘(3)’, insert ‘or (4A)’.

Amendment 21, page 213, line 48, after ‘(g)’, insert ‘or (4A)’.

Amendment 22, page 214, line 33, at end insert—

“(6A) The Commissioners for Her Majesty’s Revenue and Customs may by regulations provide that an individual is not required to comply with sub-paragraph (2) if prescribed conditions are met.

“Prescribed” means prescribed by the regulations.

(6B) Accordingly, if by virtue of regulations under sub-paragraph (6A) an individual is not required to comply with sub-paragraph (2), sub-paragraph (3) does not apply because that individual does not comply with sub-paragraph (2).’.

Amendment 23, page 214, line 42, leave out ‘Finance Act 2013 is passed’ and insert—

‘first regulations under paragraph (c) below come into force’.

Amendment 24, page 215, line 12, at end insert—

“(8A) Sub-paragraph (8B) applies in relation to a policy if the obligations under the policy of its issuer are at any time the obligations of another person (“the transferee”) to whom there has been a transfer of the whole or any part of a business previously carried on by the issuer.

(8B) In relation to that time, in sub-paragraph (2) the reference to the issuer of the policy is to be read as a reference to the transferee.’.

Amendment 25, page 215, line 13, after ‘sub-paragraph’ insert ‘(6A) or’.

Amendment 26, page 221, line 38, leave out from ‘regulations’ to end of line 9 on page 222 and insert ‘—

(a) requiring relevant persons—

(i) to provide prescribed information to persons who apply for the issue of qualifying policies or who are, or may be, required to make statements under paragraph B3(2) of Schedule 15;

(ii) to provide to an officer of Revenue and Customs prescribed information about qualifying policies which have been issued by them or in relation to which they are or have been a relevant transferee;

(b) making such provision (not falling within paragraph (a)) as the Commissioners think fit for securing that an officer of Revenue and Customs is able—

(i) to ascertain whether there has been or is likely to be any contravention of the requirements of the regulations or of paragraph B3(2) of Schedule 15;

(ii) to verify any information provided to an officer of Revenue and Customs as required by the regulations.’.

Amendment 27, page 222, line 10, leave out ‘(2)’ and insert ‘(1)(b)’.

Amendment 28, page 222, leave out lines 20 and 21.

Amendment 29, page 222, leave out lines 29 and 30 and insert—

‘“relevant person” means a person—

(a) who issues, or has issued, qualifying policies, or

(b) who is, or has been, a relevant transferee in relation to qualifying policies.

(6) For the purposes of this section a person (“X”) is at any time a “relevant transferee” in relation to a qualifying policy if the obligations under the policy of its issuer are at that time the obligations of X as a result of there having been a transfer to X of the whole or any part of a business previously carried on by the issuer.”’.—(Sajid Javid.)

Schedule 34

Treatment of liabilities for inheritance tax purposes

Amendments made: 35, page 424, line 36, leave out ‘subsection (2) or (3)’ and insert ‘subsections (2) to (3A)’.

Amendment 36, page 424, line 38, leave out ‘excluded property’ and insert ‘property mentioned in subsection (1)’.

Amendment 37, page 425, leave out lines 11 to 14 and insert—

‘(3) The liability may be taken into account up to an amount equal to the value of such of the property mentioned in subsection (1) as—

(a) has not been disposed of, and

(b) is no longer excluded property.

(3A) To the extent that any remaining liability is greater than the value of such of the property mentioned in subsection (1) as—

(a) has not been disposed of, and

(b) is still excluded property,

it may be taken into account, but only so far as the remaining liability is not greater than that value for any of the reasons mentioned in subsection (3D).

(3B) Subsection (3C) applies where—

(a) a liability or any part of a liability is attributable to financing (directly or indirectly)—

(i) the acquisition of property that was not excluded property, or

(ii) the maintenance, or an enhancement, of the value of such property, and

(b) the property or part of the property—

(i) has not been disposed of, and

(ii) has become excluded property.

(3C) The liability or (as the case may be) the part may only be taken into account to the extent that it exceeds the value of the property, or the part of the property, that has become excluded property, but only so far as it does not exceed that value for any of the reasons mentioned in subsection (3D).

(3D) The reasons are—’.

Amendment 38, page 425, line 19, leave out ‘excluded’.

Amendment 39, page 425, line 20, leave out ‘subsection (3)(a)’ and insert ‘this section’.

Amendment 40, page 425, line 23, at end insert—

‘“remaining liability” means the liability mentioned in subsection (1) so far as subsections (2) and (3) do not permit it to be taken into account;’.

Amendment 41, page 426, leave out lines 12 to 19.

Amendment 42, page 426, line 37, at end insert—

‘(7A) Subject to subsection (7B), to the extent that a liability is, in accordance with this section, taken to reduce value in determining the value transferred by a chargeable transfer, that liability is not then to be taken into account in determining the value transferred by any subsequent transfer of value by the same transferor.

(7B) Subsection (7A) does not prevent a liability from being taken into account by reason only that the liability has previously been taken into account in determining the amount on which tax is chargeable under section 64.

(7C) For the purposes of subsections (1) to (4) and (7A), references to a transfer of value or chargeable transfer include references to an occasion on which tax is chargeable under Chapter 3 of Part 3 (apart from section 79) and—

(a) references to the value transferred by a transfer of value or chargeable transfer include references to the amount on which tax is then chargeable, and

(b) references to the transferor include references to the trustees of the settlement concerned.’.

Amendment 43, page 426, line 45, after ‘162A(1)’, insert ‘or (3B)’.

Amendment 44, page 427, line 13, after ‘162A(1)’, insert ‘or (3B)’.

Amendment 45, page 427, line 22, after ‘estate’, insert—

‘or from excluded property owned by the person immediately before death’.

Amendment 46, page 427, leave out lines 32 to 34 and insert—

‘(b) securing a tax advantage is not the main purpose, or one of the main purposes, of leaving the liability or part undischarged, and’.

Amendment 47, page 427, line 42, at end insert—

‘( ) Where, by virtue of this section, a liability is not taken into account in determining the value of a person’s estate immediately before death, the liability is also not to be taken into account in determining the extent to which the estate of any spouse or civil partner of the person is increased for the purposes of section 18.’.

Amendment 48, page 427, line 43, leave out from ‘(2)(b)’ to end of line 46.

Amendment 49, page 428, line 9, after ‘162A(1)’, insert ‘or (3B)’.

Amendment 50, page 428, line 19, leave out ‘The’ and insert—

‘(1) Subject to sub-paragraph (2), the’.

Amendment 51, page 428, line 21, at end insert—

‘(2) Section 162B of IHTA 1984 (inserted by paragraph 3) only has effect in relation to liabilities incurred on or after 6 April 2013.

(3) For the purposes of sub-paragraph (2), where a liability is incurred under an agreement—

(a) if the agreement was varied so that the liability could be incurred under it, the liability is to be treated as having been incurred on the date of the variation, and

(b) in any other case, the liability is to be treated as having been incurred on the date the agreement was made.’. —(Sajid Javid.)

New Clause 10

Impact of the Spending Round 2013 on tax revenue

‘The Chancellor shall publish, within six months of Royal Assent, a review of the impact on revenue from rates and measures in this Act, resulting from the Spending Round 2013. He shall place a copy of the Review in the House of Commons Library.’.—(Catherine McKinnell.)

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

The Opposition’s new clause 10 challenges the Chancellor to publish, within six months of Royal Assent, a review of the impact of last week’s spending review announcements on tax receipts. Should the Government agree to undertake such a review, as we hope they will, we suspect that its conclusions would be pretty short, given the Chancellor’s comprehensive failure to deliver the economic boost that this country so desperately needs. It was a dead duck of a spending review, and it was even more disappointing, given the context in which it was made. The Chancellor did not want to come to the House to announce a spending review last week, but he was forced to announce a further £11.5 billion of spending cuts in 2015-6. Why? Because his economic plan has utterly and categorically failed.

Is the hon. Lady suggesting that the Government should be borrowing even more billions of pounds than is already the case, or that they should make further cuts? If it is the latter, she should not be surprised if she gets some support from the Government side of the House.

I am pleased to hear the hon. Gentleman suggesting that those on the Government Benches are considering supporting our proposal. I wonder whether he has realised that his Government are borrowing £245 billion more than they planned, because they have failed. Their economic plan has failed—it has failed on living standards, on growth and on getting the deficit down. The Chancellor promised in 2010 that by 2015 he would have balanced the books, yet he is borrowing £245 billion more than he planned—and those books will not get balanced in the time frame that he promised.

I support new clause 10 because it is really important to see whether the measures in the spending review will increase tax receipts. My hon. Friend is highlighting the failure over the last three years to get the economy growing and the impact of that on tax receipts. That explains the reality of the further and deeper cuts that the Chancellor promised us we would not have to face.

I thank my hon. Friend for that interjection, which gets to the crux of the matter. The Chancellor had to come here last week to announce further spending cuts in 2015-16, planning for future failure, because he is failing to deal with the economic reality that we face today. Ultimately, we are tabling this new clause because we hope that the Government will take stock of the situation in which they are leaving households up and down this country. The price of the failure of the Chancellor’s economic plan is not being paid by those at the top. We debated at great length yesterday the fact that the top-earning taxpayers are getting a tax cut from this Government, while it is ordinary families that rely on public services that are paying the price for this economic failure throughout the country.

Despite the pain being meted out to those who are least able to bear it, the coalition’s self-defeating economic policies have resulted in the Government failing their own economic tests. They are borrowing more than they planned and they are not going to balance the books by 2015. Rather than spending his time planning how to boost jobs and growth now, the Chancellor is planning for failure in 2015. He should be laser-focused on injecting a stimulus into the economy to secure jobs and growth now, so that we no longer need to plan for failure and for further cuts in 2015. It is common sense.

My reading of the new clause is that the review would have to be placed in the House of Commons Library within six months. Is it my hon. Friend’s intention to urge the Government to look at infrastructure spending in the review and, specifically, to include the figures on the impact of cutting capital investment again, year on year, in the spending review and what that does for our economy?

Indeed, it is very much the hope that the Government will shine this laser focus on measures to boost spending and boost jobs and growth now in order to stimulate the economy, get people into work and get the welfare bill down. We know that that bill is rising as a result of the failure of the Government’s economic plan. They should focus on infrastructure spending, which is not just what we say, but what the IMF says, too.

How does the hon. Lady think she could work out the true implications and effect of the spending review in only three months? Why did she choose three months rather than six months, nine months or one year?

That is an interesting question because the new clause suggests that the review should be published “within six months”, so I wonder whether the hon. Gentleman has simply misread our new clause. We feel that there is no time to lose, but that six months is a reasonable period to give the Government time to consider the likely impact of the spending round in 2013 on tax receipts. Ultimately, if we are to balance the books and get borrowing down, we are going to have to increase our tax receipts into the Exchequer.

Does the hon. Lady recognise that one of the biggest effects of the spending review will be on local government expenditure, which of course has to be dealt with in the following May—falling outside the six-month period? Some of the greater impact of the spending review will be felt after she has asked the Government to produce the report.

I am pleased that we have the hon. Gentleman’s support in principle for the fact that the Government need to take stock of the impact of these spending decisions and his acknowledgement of the devastating impact of the cuts to local authority projects, which we have rehearsed many times here, particularly in areas such as the one I represent. We will not see the impact straight away; we will see it in six months, 12 months, 18 months or two years’ time. The Government have imposed cuts without allowing the economy time to grow, create jobs and consolidate the debt in a responsible way, so we will face the consequences of this economic approach for many years to come. I am pleased, as I say, that the hon. Member for Southport (John Pugh) recognises that.

My hon. Friend has mentioned local government cuts. According to my reading of the spending review, capital spending in the budget of the Department for Communities and Local Government is to be cut by 35.6%. Could the review take account of that, although it will be some time before we are aware of its full impact on the economy?

The purpose of the proposed review is to encourage the Government to become laser-focused on the impact of their spending review. My hon. Friend is certainly laser-focused—not just on the impact of the cuts on local authority budgets, but on their impact on jobs and economic growth up and down the country.

Common sense tells us—well, it tells everyone but the Government, it would appear—that boosting growth and living standards this year and next would bring in tax revenues and reduce the scale of the cuts that will be needed in 2015, but nothing in the spending review will boost the economy over the next two years. It seems incredibly complacent and counter-intuitive to come to the House and simply plan for the consequences of economic failure in 2015. We believe that the Chancellor should have used his spending review to concede that he has got it wrong and has failed to secure growth. He should be proposing genuine investment in infrastructure this year.

My hon. Friend is, again, making a powerful speech. Is it not the case that 1% growth since 2010 would have generated an additional £335 billion in the economy? As a result of this incompetent economic policy, however, the Government are having to come back and ask for more.

My hon. Friend has made a very good point. I should be interested to hear the Minister’s response to the figures that she has given, and to what she has said about the lost opportunities for growth. Those opportunities, moreover, have not just been lost over the last three years; the Government are planning on the basis of a further two years of lost economic growth, which simply defies common sense. According to the International Monetary Fund, they should be investing in infrastructure this year to boost economic growth and the housing market, and to encourage job creation and increased tax receipts. The Government seem to be ignoring not only what we are saying, but what the IMF is saying.

The hon. Lady has referred several times to the impact of Government policy on jobs. Does she not recognise and welcome the fact that under the present Government there are more people in work than at any other time in our history? We have created more than 1 million private sector jobs—three for every job lost in the public sector.

I acknowledge what the hon. Gentleman has said, but I do not think that it can be linked to the economic reality—the reality of what households and people are experiencing. Many people are in insecure work, many are on zero-hour contracts, and many are self-employed. People all over the country feel that their living standards are being squeezed to such an extent that they cannot afford to pay for what they need by the end of the week.

The fact is that the employment rate is lower now than it was in 2008. Absolute numbers mean nothing. The rate is lower now than it was before the recession.

Order. The debate is, to put it politely, starting to go a little wide of the new clause. Perhaps we could focus—in a laser fashion!—on new clause 10.

Thank you, Madam Deputy Speaker, but I think that my hon. Friend has made an important point. What we needed to hear from the Chancellor last week was a plan for economic growth that would boost tax receipts and increase the number of jobs. Ultimately, that is how we can balance the books and reduce the deficit: by getting people into work and reducing their dependence on welfare.

My hon. Friend made a powerful point: the Government should not be so complacent about the unemployment situation in this country, and in particular the long-term unemployment situation.

On a point of clarification, if the hon. Lady’s party was in government, would it be cutting VAT?

Well, I am pleased that the Minister is engaging with the need to review his own Government’s spending plans so they can take stock of precisely how those plans are working to resolve the unemployment situation and the lack of economic growth in this country. If the Minister could provide some reassurance that his Government are focused on reducing the debt, that would be very helpful.

My hon. Friend was speaking about the spending review’s failure in respect of living standards, and that is crucial. Real wages are set to fall by 2.4% over this Parliament, meaning people will be worse off at the end of the Parliament than they were when this Government came to office. That is the real story: it is a spiral of lower wages, lower living standards and lower tax receipts, and then ultimately more debt, more borrowing and a higher benefits bill. Does my hon. Friend agree that that is the spiral we are in?

Yes. My hon. Friend makes a powerful point, and it highlights the complacency of this Government. They feel it is a case of “job done” as some jobs have been created in the private sector, but ultimately the reality families are facing is that they cannot afford to pay for heating and buy food and what they need for their children and their families because living standards are being so desperately squeezed.

I just want to give the hon. Lady another opportunity to answer the simple question I asked. The position of her party has for some time now been to favour a cut in VAT. We do not support that approach, but does she support it? Does the Labour party still believe that, at this precise moment, VAT should be cut to 17.5%?

The Government clearly do not support that approach because one of the first things they did when they came to power was increase VAT and the costs for ordinary families up and down the country. We have said all along that we would not have taken those decisions. We would not have chosen to give a tax cut to those on the highest incomes. We would not have slapped a 2.5% charge on poor families who are struggling to make ends meet. We have made that very clear, but the Government have ignored that call. We think the Government should be taking action now to try to stimulate the economy and put some money back into very hard-pressed families’ hands.

My hon. Friend is stating the case for this new clause very clearly. Does she agree that the increase in VAT took a lot of individuals’ spending power out of the economy and also took out a lot of confidence, and that that is what has led to the decline in growth?

Yes, it was a huge blow for families across the country to see costs spiral overnight. This Government seem incredibly complacent about the impact their spending decisions have had, not only on families but on economic growth. We need to look at the facts. The Chancellor promised growth of 6% in 2010. He also promised that he had asked the country for all he would ask for and would not come back for more, but there he was last week, planning for more cuts in 2015 and completely failing to recognise both that his economic plan has resulted in 1% growth, not the 6% he promised, and that his increase in VAT was very much a part of the reason for that.

May I press the hon. Lady for a third time on the question my hon. Friend the Minister has been asking? At this moment in time, given where we are with VAT at 20%, would she advocate, as her party has in the past, that it now be reduced to 17.5%? Also, is her party still in favour of the five-point plan for growth, of which the VAT reduction is but one part?

It is very strange that Government Members, who are in power and making the spending decisions that are having such an impact on families, are solely obsessed with what Labour would be doing. We are in opposition. The hon. Gentleman can speak to his Minister and implore him to make the necessary changes that will bring economic growth back to this country. That is what the Government need to be focused on. The Chancellor is so obsessed with his own economic failure—a failure to recognise that his plan has completely failed—that the Government simply obsess about and focus on what we would be doing, but we are not in government.

I came in to support my hon. Friend in pushing for new clause 10, which focuses on the impact of the spending review on the economy and, in particular, on tax revenue, so I am a little surprised at the nature of the debate. However, would she envisage the review examining the implications of the tax cut for millionaires on the economy over the past few years? Would it examine the impact of giving the richest people in our country a tax cut, as that is an actual policy?

To be fair, and to stay laser-focused on the new clause, I should say that we hope and envisage that the Government’s review would look at the impact of the spending review they announced last week. We heard more promises of action from the Government last week, but we did not hear about action that will take place next week, next month or even next year. We heard the Government pledging action on infrastructure investment in two years’ time.

That would be bad enough even if the Government had a proud record, or indeed any record at all, on delivering on the infrastructure projects they announced three years ago. As we have heard a few times—it bears repeating because the figures are so shocking—just seven out of 571 so-called “priority” projects identified by the Government in 2011 in their national infrastructure plan have actually been completed; 80% of the projects announced have not even got off the ground. Despite all the hype, if we delve into the figures, we find that the Government are cutting investment in infrastructure in real terms by 1.7% by 2015. Instead of an urgent boost to jobs and growth, which this country is crying out for, by bringing forward long-term investment in infrastructure, as advocated not only by us but by the International Monetary Fund, all we got was a series of empty promises for two years’ time—and some for beyond that—from a Government who lack all credibility on this issue.

My hon. Friend rightly talks about how few of the Government’s priority infrastructure projects have begun. Does she hope the review would also examine progress on the Government’s priority school building programme? I understand that there are 261 projects, and I wonder whether she has had time to consider how much progress has been made on them.

That is another absolute failure in terms of the promises made by this Government that are simply not delivered. I hope that the Government will agree to undertake the review we are calling for today and that the House will, by voting with us, acknowledge that the economic plan the Government have so far pursued is failing and that they need to examine what last week’s spending review will deliver. I hope that there will be a recognition that they promised to rebuild, again as part of a “priority” programme, 261 schools and only one project has begun. It is devastating, not just for the children who need those new schools, but for the communities that need those jobs and the small businesses that need to supply the construction industry, which, as we know, has been brought to its knees by this Government’s failure to invest in infrastructure. Instead of investing in affordable homes, improving transport links and repairing Britain’s broken roads, which would give the country the short, medium and long-term returns that we are looking for, the Government are cutting capital spending in 2015. Announcing infrastructure projects for two years’ time will not create a single job today.

My hon. Friend is making a crucial point about the impact on jobs. I had hoped that the spending review would consider jobs in the construction sector, where 84,000 jobs have been lost since the Tory Government came to power—that is, between the second quarter of 2010 and the first quarter of 2013. That is a shocking figure: 84,000 jobs have been lost when we should have seen 84,000 jobs created in the construction sector.

My hon. Friend makes his point very powerfully. It is a fact that a number of jobs have been lost in the construction industry that should have been created if the Government were taking not just our advice but that of the IMF and investing in infrastructure projects now. If they did so, tax receipts would improve this year and next year and we would not have to plan for failure in 2015, which is what the Chancellor came here to do last week.

My hon. Friend is right when she talks about the implications of the Government’s failure to invest in house building and construction in this country on the revenue from rates. Does she think that the review placed in the Library ought to consider the implications of the lack of receipts from house building in the Government’s vaunted programmes, such as the community infrastructure levy and so on, as well as of the business rates raised from firms in the construction industry? Is scepticism not one reason behind this request for a review? Four major housing announcements have been made in the past three years, and there have been 300 announcements, four launches and no action, and the lowest house building in 2012 for 70 years, so is there not some scepticism behind it?

My hon. Friend tempts me to suggest a less than honourable motive for our tabling the new clause. I appreciate that there may be some scepticism about the Government’s commitment to investing in infrastructure and growth and that last week’s announcement was simply about planning for more cuts to public services rather than a genuine attempt to try to look for opportunities for growth. It must be said, however, that the spending review, which plans more cuts in 2015 and was accompanied by an infrastructure announcement on Thursday that was mostly reheated—I think my hon. Friend the Member for Nottingham East (Chris Leslie) described it as a “microwave statement” as its announcements had been reheated so many times—failed to impress anybody.

Liberal Democrat Members in particular should be concerned by statements from the Deputy Prime Minister. He has commented that

“the gap between intention, announcement and delivery is quite significant”.

He puts that rather mildly, and I would hope that by supporting our new clause the Government could take stock of the impact mot just of the 2013 spending round they announced last week but of the delay in delivering any of the projects that have already been announced, as well as the delay pursuant to the announcements that have been made for 2015. This is an important opportunity for the Government to take stock and consider why their economic plan has so catastrophically failed. That would mean that rather than planning for failure in 2015, they could take the steps necessary now to bring forward infrastructure investment and put into play the infrastructure investment that has already been announced so that we can start to create jobs and opportunities for communities up and down the country that are suffering from stagnation in the economy.

The hon. Lady has made the link between infrastructure and its impact on the construction industry and jobs. Does she therefore welcome the recent survey by the ManpowerGroup of more than 2,000 companies in the construction sector, which concluded that we have the best outlook for construction job creation for five years?

I would welcome any signs of positivity in economic growth from any sector of our economy, especially the construction industry, which has suffered catastrophically from the cuts and stagnation in the economy over the past three years. I would indeed welcome that small piece of good news. It is a step in the right direction, but our amendment calls on the Government to take stock and do more.

I think construction is an incredibly important part of the economy, so I think it is right that the hon. Member for Central Devon (Mel Stride) suggests that the review six months after the spending review would look at construction. I hope it would explore the figures that I have seen, suggesting that the volume of new construction orders fell by 10% between quarter 4 of 2012 and quarter 1 of 2013. Construction is going in the wrong direction at the moment, and we need to know from the review whether the measures in the spending review will actually make that worse.

My hon. Friend makes an important point. Ultimately, it is about what we hear in our communities when talking to businesses about confidence—the confidence to invest, the confidence to take seriously the Government’s commitment to investing in infrastructure and growth. The reality on the ground is deeply worrying. Members of the public will be concerned about the complacent tone that the Government adopt towards the economic situation. The Government are apparently ignoring the fact that they promised 6% growth and delivered only 1%, that they promised 576 infrastructure projects and have delivered only seven, that they promised 261 rebuilt schools and have only put spades in the ground in one. Members of the public will be worried to hear how complacent this Government seem to be. That is why we tabled the new clause—to give the Government the opportunity not just to make the announcement and walk away, hoping that nobody will notice that they are doing nothing about economic stagnation, but to spend some time reflecting on what these announcements will mean in real terms in respect of expected tax receipts.

There is one key Government Department that is capable of increasing tax receipts to the Exchequer, and that is Her Majesty’s Revenue and Customs. Indeed, without the receipts that HMRC collects, there would be no funding to invest in public services. HMRC’s capacity and resources are therefore absolutely critical, and it is widely accepted that it can make a pretty impressive return on investment. Last year, senior HMRC officials brought in £16.7 billion over and above what was returned voluntarily by businesses and individuals.

I am very pleased to hear my hon. Friend highlight the important role that HMRC plays in our economy. Whatever the review shows about the implications of the spending review, one of the key aspects is HMRC’s effectiveness in bringing in tax revenue. Will my hon. Friend therefore urge the Government, in this review, which I hope they will support, to look at the implications of underpayment of wages to people, particularly minimum wage avoidance issues? HMRC recently sent a team to my constituency, and found that £100,000 was owing to local workers. There are huge implications for receipts at HMRC.

My hon. Friend raises a very important point. I have tabled several parliamentary questions to the Minister on that subject, and I look forward to his response outlining what action the Government are taking, alongside HMRC, to ensure that it not only collects tax throughout the country but ensures that employers abide by the national minimum wage legislation to ensure that employees do not fall short despite the fact that they are working. It is imperative that HMRC has the Government’s support and also has the correct resources to ensure that workers are not exploited in the way that my hon. Friend suggests is prevalent in his part of the country and which I have no doubt is a phenomenon that impacts on hard-working people countrywide.

Despite the headlines suggesting that everybody is avoiding tax, we are generally a tax-compliant nation—I believe the current figure is approximately 93%. Of course, it is the 7% for which HMRC needs extra support and resources to get the returns. The Association of Revenue and Customs estimates that a senior tax official earning £50,000 a year can expect to generate additional yield of at least £1.5 million a year—a return 30 times greater than the cost of their salary. That is a good investment, I think most would agree.

When the Chancellor announced a further £11.5 billion of cuts to public expenditure, what did that mean for HMRC, a department already faced with a net reduction in funding of £2 billion over this Parliament and the loss of an additional 10,000 staff? Well, the right hon. Gentleman announced that HMRC’s target for additional revenues raised, including from tax avoidance and evasion, would be increased to £24.5 billion in 2015-16—£1 billion more than the 2014-15 target and £10 billion more than the 2010-11 target. According to the spending round report, HMRC will be required to contribute

“to deficit reduction through the collection of an additional £95 million in tax credit debt on an innovative payment by results funding basis.”

However, under the funding settlement announced by the Chancellor last week, at the same time as it is required to bring in those additional revenues, HMRC must cut its costs by a further 5% in 2015-16, on top of the significant efficiency savings and cuts it has already been expected to make. Can the Minister confirm, for the benefit of the House and as part of the review for which we are calling, precisely how much funding will have been cut from HMRC between the coalition coming to power in 2010 and the end of financial year 2015-16? A clear picture of the figures would be useful. Also, will he confirm the total number of HMRC posts that are expected to have been lost during that period?

My hon. Friend’s question to the Government is incredibly important and I hope we hear an answer. Does she share my concern that some of the measures in the spending review will have serious implications for tax collection unless HMRC has sufficient resources? For example, the director of the Institute for Fiscal Studies said of the shares for rights policy that it has “all the hallmarks” of another tax-avoidance opportunity, and Lord Forsyth, the former Conservative Employment Minister, said it

“has all the trappings of something that was thought up by someone in the bath”.—[Official Report, House of Lords, 20 March 2013; Vol. 744, c. 614.]

HMRC will have to be very alive to these issues of tax avoidance.

My hon. Friend makes an important point. The Bill Committee debated at some length the fact that the Government like to talk the talk on tax avoidance, but have created another tax-avoidance opportunity in the hare-brained shares for rights scheme. I think we all agree with Lord Forsyth.

The hon. Lady talks about the importance of clamping down on tax avoidance, and the hon. Member for Corby (Andy Sawford) talks about tax avoidance in the context of share transactions. Does she, as I do, condemn the £1.65 million donation to her party by John Mills using precisely that type of scheme—a share donation—as means to “tax efficiently” avoid tax?

The hon. Gentleman seems to be expressing some consternation about his Chancellor’s new shares for rights scheme. I am not sure I heard him express the same concerns when this House debated and voted on that scheme. He knows that any donations made to the Labour party are made within all the rules on donations, and any tax due on those donations will be paid. I think he can rest assured that that is in hand.

Returning to the point made by my hon. Friend the Member for Corby (Andy Sawford), it is vital that when additional tax avoidance opportunities are created, HMRC has the resources to deal with them, and that it does not take its eye off other aspects of its activity, such as enforcing national minimum wage legislation and general customer service. We know that the National Audit Office report on HMRC’s customer service performance, which was published in December last year, contained some worrying figures on HMRC’s ability to handle customers.

We hope that the review that we are calling on the Government to undertake will look at HMRC’s ability to recover tax receipts and ensure that its customers, many of whom are not customers by choice, get the support they need in order to pay their tax—not just individuals, who are often dealing with tax credits and find that they need support from HMRC, but small businesses that need support in order to pay the right tax. It is not right that individuals and small businesses in particular, but large businesses too, are left struggling to pay the tax that they wish to pay HMRC voluntarily. The Government should be aware that there is a limit to the extent to which HMRC can do more with less, as they are asking of it in the spending review.

Given the hon. Lady’s response to my previous intervention, I wanted to clarify the issue of John Mills and his donation to the Labour party. Does she accept that his donation is a case of tax avoidance—yes or no? [Interruption.]

Order. Mr Sawford, I do not need your help in chairing the debate in the Chamber today. I have done enough Finance Bills to know what is in order and what is not in order. The question that has been put is about tax receipts, excluding the reference to individuals, and that is in order.

It is open to the Government to support our proposed review of spending round 2013 and the impact that that may have on tax receipts. If the hon. Member for Central Devon (Mel Stride) wants to support our motion today and the Government in undertaking such a review, it is open to him to do so. We have not specified exactly what should be included in that review and it is open to the Government to look at whatever avoidance opportunities they consider relevant to ensuring that we protect future tax receipts.

I know from written answers that I have received from HMRC recently that staff numbers were projected to fall from 88,875 in March 2009 to 58,464 by March 2014. Will the Minister provide an update on those figures, and in particular what HMRC’s headcount is expected to be by March 2016, following last week’s spending review and the additional resource reduction flowing from it? It is concerning that despite much-publicised announcements about increased investment in tax avoidance and evasion activity, the number of HMRC staff working in enforcement and compliance was expected to fall from 34,762 in March 2009 to 26,905 in March 2014.

I assume that given the Government’s much-stated commitment to getting tough in this area, the predicted fall in staff numbers is no longer going to happen and that we will see a rise in the number of HMRC staff dedicated to enforcement and compliance work. It would be helpful if the Minister could confirm that for the House and tell us how many HMRC staff will be working in this area between this year and 2015-16.

In conclusion, the Government had the opportunity last week to boost tax receipts by announcing measures that would provide the short and medium-term boost our economy needs while providing a long-term return for the country, yet despite the catastrophic failure of their economic plan to date, the Chancellor came to the House and announced that he would continue ploughing the same infertile furrow he has been on since 2010. He just cannot bring himself to admit that it has gone badly wrong. We believe that conducting the review set out in new clause 10 might just help the Government to take stock and note the error of their ways to date. I therefore urge all Members to support the new clause, not only for the sake of their constituents, but for that of our country’s finances.

I will try to say something positive about new clause 10. It is quite laudable, in a way, because it would link spending to taxation and get us to engage in retrospective analysis, and frankly we do not do enough of that in this place. We talk about policy a great deal, but the long-term effects are often hidden from us. It can be quite counter-intuitive. We had an interesting debate yesterday on the 50% tax rate, the Laffer curve and the effect that such a rate might or might not have. There are plenty of other examples where the effect of taxation needs to be adequately scrutinised. In Committee we debated what tax avoidance measures would do to people’s behaviour, what petrol taxation would do to people’s behaviour and to the revenue we get, what landfill tax would do to councils’ behaviour, and what the video games industry would make of the various changes that will affect it.

My problem with what the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) is saying is that I think Parliament should do what she is suggesting. It seems to me that Parliament does not have enough good, accessible data and that we make no real effort to examine the whole business of tax revenue yields in any systematic, thorough, regular or routine way. When it comes to spending, there is a very similar picture. There is no real scrutiny of spending in this place. The scrutiny we do is not even as good as that which might be found in a local council. We have the big events, such as the announcement of the spending review, but there is no detailed examination of expenditure.

If Members do not believe me, they should come along to estimates day tomorrow and see the examination of estimates that is imposed in this place. The last time we had an estimates day, I was actually ruled out of order by the Deputy Speaker—not you, Madam Deputy Speaker—for talking about the estimates, which was thought improper.

We do not examine the non-controversial, everyday departmental expenditure that goes on from year to year and the errors that occur in it. The Public Accounts Committee does a very good job of looking at the controversial stuff, but there is no rigorous, effective or ongoing examination of expenditure. We do not do enough of that and we do not know enough about what tax policy actually does, how Departments spend and what the profile of a Department is on a day-to-day, month-to-month and year-to-year basis.

Arguably, somebody in the basement of the Treasury knows the spending profile of Departments, but they would probably be unable to give the hon. Lady the answer she wants in three months, and probably not in six months. I think she has to recognise that she is making a hard ask and, in my view, probably a futile one, because if we do not do any real scrutiny of taxation in this place—we scrutinise policy, but certainly not outcomes—beyond headline figures and big grandstanding days such as the announcement of the spending review, then what we are essentially doing with the Government finance is firefighting.

What takes place in this place is not effective financial scrutiny. We do not look at the boring, pedestrian, routine and important spending, which is massive. The new clause asks the Treasury to mark its own work, and I am sure that it would be perfectly happy in some contexts to do so, but what we really need is to get Parliament to do the work and to give us an answer that would satisfy us, including the hon. Lady.

It is a pleasure to follow the hon. Member for Southport (John Pugh), who began by underscoring how important it is to have retrospective analysis, which is exactly what the new clause asks for. It is difficult to see how it can be argued against. It says:

“The Chancellor shall publish, within six months of Royal Assent, a review of the impact on revenue from rates and measures in this Act, resulting from the Spending Round 2013.”

That would assist good governance and assist the people out there whom we come here to represent. Indeed, so far the arguments have been supportive, although there has been useful interrogation of the issues as the debate has progressed, which everybody has welcomed.

The economy expands and responds positively to acts by the Exchequer or the behaviour of individuals, the Government or business. At the time of the 2010 election, our economy was not in great health but was steadily moving in a positive direction. There was growth and good stimulus in the economy through, in particular, the strong infrastructure spending that was driving it forward. The then Government were, properly, using their resources to drive forward spending, confidence and movement in the right direction. This Government came into office in a state almost of panic and switched off the tap of infrastructure spending. The figures now show that infrastructure spending is much less than it would have been if the plans that were in place and were helping to drive the economy forward had been continued.

That has had an impact on business confidence. We have already highlighted the crucial importance of construction as a driver of the economic health of the nation. Construction businesses have been having a torrid time over the past few years. Sadly, a serious number of subcontractors have gone out of business. Local construction companies tell me that the difficulty they are having in getting sufficient credit from their builders merchants to do the jobs which are now beginning to emerge in the economy presents another structural problem. The root cause of that is the fact that so much Government infrastructure spending was taken out of the economy in 2010, 2011 and 2012.

Many businesses have struggled and lacked confidence. Some do have reserves, but they are wisely holding on to them for a rainy day. They are not spending and making the investments in the future direction of their businesses that they might otherwise have done because they do not have the confidence to do so. The Government are not spending, businesses are not spending, and, equally, individuals are lacking confidence and not spending. When we debated VAT earlier, the Minister posed an interesting question, and rightly so. However, the reality is that putting up VAT when his Government did had an immediate hit on individuals’ spending confidence which has helped to create this downward spiral.

The new clause would ensure that there are marks in the ground to show where the Government must come back to the House to account for the impact of their policies. When the Chancellor set out his policies in his emergency Budget, which has led us to the sorry pass we are in today, he was confident that we would be in a completely different place. If he had implemented the provision in new clause 10 at that time, that would have assisted him in rethinking his policies. It would also have assisted the British people in not having to suffer the consequences of those policies for so long, because he would have reappraised the situation.

The new clause is needed to help every Member carry out one of our fundamental duties on behalf of our constituents, namely taking action to improve the nation’s economic performance and to build the confidence of businesses and individuals.

Every Budget begins with the Chancellor giving a résumé of the implications of his policies. I cannot remember that ever being greeted with wholesale acclamation from all parties. What the hon. Gentleman is asking for is more of the same, is it not?

The hon. Gentleman makes a good point. Chancellors sometimes glance back at the effect of their Budgets with rose-tinted glasses instead of seeing the real effects of their economic policies, including the decisions made in 2010, 2011 and 2012.

I congratulate the Government on moving their rhetoric to the right place: suddenly, words such as “growth” and “investment” are as prominent in their lexicon as they always should have been. However, as my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) has pointed out, their promise on infrastructure spending is to spend tomorrow—most of it in 2014, 2015, 2016 and even 2017—rather than now. It is spending decisions taken now that will have an impact on the lives of people today, rather than waiting and hoping for things that may happen at a future date.

Boosting growth and living standards this year and next year would bring in more tax revenues and reduce the scale of the cuts needed in 2015. Taking action now to boost economic growth—by, for example, bringing infrastructure plans forward so that they happen now rather than tomorrow—would make a real difference. That is why the new clause would be helpful: it would test the impact of the spending round on tax receipts and, as my hon. Friend has said, do so in time to make any necessary adjustments to improve not only the economy, but people’s lives and living standards.

The figures revealed by the Government last week showed another cut of 1.7%—or nearly £1 billion—to capital investment in 2015-16. One would not have thought that to be the case on hearing the announcement, but having looked at the plans I know that that is what they reveal. Capital spending is down by 1.7% in education, by 2.3% in defence and by 17.6% in the Home Office. In the Department for Communities and Local Government, including housing, it is down by a massive, staggering 35.6%, and by 57.6% in the Department for Culture, Media and Sport. Those are large figures and we need to know whether their impact on the economy’s behaviour will be beneficial or, as I fear, not.

The coalition has more or less mirrored the capital spending plans of the former Labour Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), so is the hon. Gentleman saying that he was wrong in his allocation of capital spending?

If we move away from the rhetoric and look at the facts, we will see that in their first three years this Government have spent £5.6 billion less in capital investment compared with the plans they inherited from Labour. That amounts to a £5.6 billion cut to spending that would have taken place had this Government continued with the plans they inherited from the previous Government. What has happened illustrates the importance to the health of the economy of continuity in large infrastructure projects. It is difficult to get that right between the parties, but we must recognise that there are plans for infrastructure spending so that the tap cannot be turned off easily, as the Government did with the Building Schools for the Future programme. If that programme had been carried forward, it would have assisted economic development, as well as continuing to revolutionise the learning environment of children up and down the land.

In the three months to April 2013, output in the construction industry was 4.7% lower than in the same period a year earlier. Construction output is down by 11.2% since the 2010 spending review. Construction—that energetic sector that drives the economy—continues to struggle. That is why we need to check, three months down the line, the effect on the economy of the decisions that are being made today to ensure that we are moving in the right direction.

The volume of new construction orders fell by 10% between quarter 4 of 2012 and quarter 1 of 2013. That is a massive dip. The number of new orders for infrastructure fell by 49.8% over the same period—the largest fall since 1987. The value of public sector infrastructure orders fell by £2 billion between quarter 4 of 2012 and quarter 1 of 2013. Those are significant contractions of demand in the economy.

That clearly has an impact on jobs. At the end of the day, jobs are what transform people’s lives. There is unanimity about that across the Chamber. The construction sector has lost 84,000 jobs since the Government came to power. That has an impact on the well-being and quality of life of individuals, as well as on the economy and the livelihoods of people beyond the construction industry.

There is much more that I could say, but I will return to the essence of this simple, helpful, concise new clause. I can see no argument for the Government not accepting it. It would help us all if they accepted it gracefully so that we can move forward together in harmony.

It is always a pleasure to follow my hon. Friend the Member for Scunthorpe (Nic Dakin). I agree with him totally and will speak in support of new clause 10.

The points made by the Institute for Fiscal Studies last week when the comprehensive spending review was published support what we are trying to do with the new clause:

“The documentation and explanation accompanying yesterday’s spending review announcements was woeful”.

It went on to say:

“Publishing such a small amount of information with little explanation is not an exercise in open government.”

That warning says it all. It reflects the Government’s total incompetence on the economy.

Last week’s spending review was further evidence that the Government’s economic policies are failing. They were warned by my right hon. Friend the Member for Morley and Outwood (Ed Balls) that cutting too far and too fast would smother growth, and that is just what has happened. The Chancellor promised that he would deal with the deficit by 2015. That will not happen. He promised that his emergency Budget and his first comprehensive spending review in 2010 would deal with the nation’s finances and put the country on the road to recovery. Again, that has not happened.

It is interesting to hear the hon. Lady refer to the right hon. Member for Morley and Outwood (Ed Balls). She is critical of our Government’s policy, but does she support increasing the debt? She criticises not bringing down the deficit faster, but if she followed her right hon. Friend’s policy, I am afraid the deficit would be going up, as would the debt.

I am afraid I totally disagree with the hon. Gentleman, but I thank him for his intervention. Perhaps I could mention that his right hon. Friend the Chancellor said:

“We have already asked the British people for what’s needed.”

He promised that he would not come back asking for more, yet last week we were here again. I hate to draw parallels with Oliver Twist, but it is a little like him coming back for more. In three years, the Chancellor has managed to hollow out the economy. He has not sorted out the City, and he is passing it off as everybody else’s fault, rather than his own.

There is a thing called “chutzpah”. Is the hon. Lady saying that her party bears no responsibility whatsoever for the enormous debt legacy and deficit the country was left with? The Government are making progress. More men and women are in work than ever before and the deficit is down by a third. Yes, the debt is not going down as fast as possible—

Order. Mr Newmark, this is not an opportunity for you to make a speech; it was an intervention on new clause 10, and we would like it to be relevant.

On the hon. Gentleman’s final point, there is more to come in my speech: “And there’s more”, I promise—I never did a good impersonation of Frank Carson. On employment, however, the hon. Gentleman is wrong. Employment is lower than in 2008 and I will come on to that—those are official statistics, so he cannot refute them. At the end of 2010, our economy was growing, yet we have been bumbling along the bottom for three years. We had a double-dip recession and barely escaped a triple-dip recession. Growth has been downgraded at every turn.

No, I will not give way now, as I want to carry on with my argument. There may be an opportunity later.

Amazingly, just a few months after the Chancellor delivered his autumn statement, he had to halve his estimates for growth this year. We will be borrowing £245 billion more than planned since 2010, and as we have heard, the deficit will not be eradicated as the Government promised in 2010. In spite of being told how important austerity was for economic confidence and low interest rates, the triple A rating has been downgraded by not one but two credit rating agencies. The Government tried to blame everybody except themselves and said that austerity was the only way, only to receive an embarrassing rebuke from the chairman of the Office for Budget Responsibility who said that public spending cuts wiped 1.4% off growth last year. The International Monetary Fund followed suit shortly afterwards.

Should anyone wish to know how we relate to the rest of the world, we come 18th in the G20, due to our appalling economic performance. Even after the IMF revised its multiplier, the Chancellor remains steadfast. I could go on—[Interruption.] I am tempted. Our rate of inflation is way above the Bank of England’s 2% target. Employment is lower now than in 2008 and one in 10 people are underemployed. Whatever economic indicator we use, the Government are failing. By all accounts, the public are now starting to see that. Earnings are falling in real terms by 2%, and a recent poll showed that four out of five people feel that austerity is not working. As we have heard, the Chancellor is resolute and sticking fast. The Chancellor and the Prime Minister have also tried to pass this off as everybody else’s fault, but we need to examine the arguments put forward to explain why we are in this mess.

The previous Labour Government have been blamed, but that ignores the fact that this was a global financial crisis. We should remember that at the time the Chancellor and the Prime Minister failed to suggest that our financial institutions required more regulation. The Chancellor has tried to suggest that it is a public spending issue, but public spending as a percentage of GDP was 36.5% in 2007, compared to 42.5% in 1997. In other words, the Labour Government did repair the roof when the sun was shining. We brought down the deficit when we were in power, and it is outrageous to suggest anything else. After injecting funds into our banks, public spending rose to 60% of GDP, but the City’s debt was 245% of GDP. For this Government to pass the crisis off as a sovereign debt problem is absolutely outrageous. This was a problem in our financial institutions that they said nothing about when they were in opposition. They are still failing to grapple with this major issue. They have not managed to improve it.

The Government are trying to distract attention away from our financial institutions and blame what they refer to as shirkers and scroungers. Their attack on the social security budget is outrageous. We must not forget that 43% of social security is paid to older people through old age pensions. This attack is on our pensioners, and that is disgraceful. Growth of just 1% a year since 2010 would have generated £335 billion more. If growth had been 2% a year, that figure would have been £551 billion. Many economists have said that the lack of growth as a result of the failure of economic policy may not be recoverable.

On the areas taking the biggest hits in the spending review—I have just alluded to the Department for Work and Pensions—we must not forget local government. What will the cuts hit? They will hit our social care budget—the budget for the most vulnerable in our society. That is outrageous. Although the NHS budget has been protected, the Institute for Fiscal Studies predicts that job losses are likely to continue. We have already seen 300,000 people lose their jobs in the public sector. It is estimated that another 300,000 will lose their jobs in the next two years. The indirect effect of cuts to work and pensions, local government and the NHS will be to hit our pensioners and increase the number of children growing up in poverty, which will affect the rest of their lives, to more than 1.1 million. We are also seeing, for the first time in decades, life expectancy coming down in certain areas. I could go on, but I will finish there.

New clause 10 asks for a review of the impact on tax revenues of the measures set out in the 2013 spending review. I note that the Labour party again seems to be interested in discussing matters that are not in the Bill as such. Rather than discussing the Bill, Labour Members want to discuss the spending review—although given how the spending review went for the Opposition, they might have done better to spend last week debating the Finance Bill.

Let me explain briefly why new clause 10 is unnecessary. The House will be aware that in 2010 this Government created the Office for Budget Responsibility in order to ensure that the impact of Government policies is independently scrutinised. The OBR routinely publishes economic and fiscal outlooks, which provide a transparent and independent assessment of the impact of Government policy on the public finances, including receipts, and the economy. The impact of the policies announced in the 2013 spending round will be reflected in the OBR’s autumn forecast, which will be published alongside the autumn statement, so there is no need for a parallel review, which is what new clause 10 would involve.

We have had an interesting debate about the measures in the spending review. At times I have been somewhat confused about the Opposition’s position. I had understood that they accepted the spending review envelope, although it certainly did not sound like it from what the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) said. She described local government spending cuts as “devastating”, so we assume that she opposes that measure. She was not quite clear about where further cuts would be made to compensate for that, but no doubt she will enlighten us in future.

We also heard the Opposition make the argument that we should take steps to boost growth now, rather than focusing on 2015-16. That was not an endorsement of changes such as planning deregulation, which can help growth, or a more competitive tax system. Indeed, we have tried to work out exactly what Labour believes in this area, but it was not clear. We have consistently heard about a five-point plan from the Opposition, including a cut in VAT, which was the flagship of that plan. On three occasions the hon. Lady was asked whether Labour still favoured a temporary cut in VAT under the current circumstances; on three occasions that question was evaded. I will happily give her the opportunity to intervene now if she wants to provide an answer. Do the Opposition believe in cutting VAT now? [Interruption.] She is not going to answer that question. I think we have seen the abandonment of the five-point plan—

One of the frustrations for my constituents is hearing the Government give highly political answers when they are being held to account. New clause 10 is important because it seeks to look at the impact of the measures in this spending round. The Minister says it is unnecessary, but if he looks at the contrast between the OBR forecast at the time of the 2010 spending review and real growth in the economy, he will see that it was wide of the mark and that our economy has been flatlining for the last three years. That is why we need to know the real implications.

If the hon. Gentleman accepts the OBR numbers, he really ought to accept the OBR analysis of why what he describes has not happened.

However, let me not go into that. Rather, let me turn to what appears to be the panacea coming from the Opposition, which is to say that we should borrow more in order to invest in capital infrastructure. It ignores the fact that the Darling plan—Labour’s plan to address the deficit partially—involved substantial cuts in capital spending. It also ignores the comments made by the right hon. Member for Edinburgh South West (Mr Darling) about some of the challenges of using infrastructure for pump-priming purposes. The argument also ignores the fact that we will be spending more on capital infrastructure as a proportion of GDP in this decade, a period of austerity, than in the previous decade, when the Government were throwing money around. It also ignores the measures that we have set out for delivering the biggest programme of road investment since the 1970s, for updating our rail networks, for securing our energy infrastructure, for investing more in science and innovation, for building new homes and schools, for establishing the single local growth fund, for expanding digital coverage and for investing in our flood defences.

I was hoping to leave the Minister time to respond to some of the serious concerns that we have raised, but this complete fantasy-land account of the Government’s record on infrastructure investment has prompted me to jump to my feet. Will he confirm that his Government are investing less in infrastructure than was proposed under the Darling plan? They are investing 1.7% less in real terms over the course of this Parliament, and again in 2015-16. They are also borrowing more.

It is clear that the balance of our plan has focused much more on current spending, as compared with capital spending, than did the plans that we inherited.

I want to turn to the issue of HMRC, which the hon. Lady rightly raised. I can assure her that, as a consequence of the measures we are taking, HMRC’s yield is going up compared with what we inherited. By 2015-16, yield will have increased by approximately 70%, which represents a staggering increase in the performance of HMRC under this Government. Yes, staff numbers are falling but, when it comes to enforcement and compliance, staff numbers will be higher in 2015-16 than they were under the previous Government. We should not always focus on inputs; we should focus on outputs. The record on outputs is very good. If the hon. Lady wants to focus on inputs, however, she should be aware that the record of the previous Government involved the number of staff working in enforcement and compliance falling by 10,000. Under this Government, that number will be increasing.

I have run out of time, but I believe that the spending review is evidence of a Government who are prepared to take the difficult decisions that we need, and a Government who have economic credibility. The contrast with Labour could not be greater.

Question put, That the clause be read a Second time.

Clause 38

Real estate investment trusts: UK REITs which invest in other UK REITs

I beg to move amendment 57, page 15, line 16, at end insert—

‘(2) Notwithstanding the provisions of paragraph 13 of Schedule 18, that Schedule shall come into force after the Chancellor has conducted, and placed in the House of Commons Library, a review of the operation of the interaction of REITs with the Housing Market. The Review shall consider—

(a) tax measures in place to support house building; and

(b) what steps HM Government have taken to support house building.’.

I am tempted to start by saying that I am sure this is the part of this afternoon’s proceedings that everyone has been waiting for, and that there is much excitement about the prospect of talking about real estate investment trusts, and that many Members will want to contribute on this very important issue.

Amendment 57 is another amendment that I have regularly described as very mild-mannered. It proposes that the Government must ensure that the impact of their policy is examined and reported on, and that all Members are subsequently able to access information on its impact from the House of Commons Library. In this amendment, we are asking for that information to be examined and made available before schedule 18 is implemented.

The amendment also asks that the Government conduct a review of the interaction of real estate investment trusts with the housing market and that the Government consider in particular measures that are in place to support house building and what measures they have taken to support house building. I suspect that the Minister may well say this is not necessary because everything is always kept under review so far as the Government are concerned, but he will be aware—because he has heard me say this before both in Committee and on the Floor of the House—that I think Governments always tend to say things are under review, but there is a great difference between something that sits on a shelf that may be dusted down and had a look at if someone asks a parliamentary question or writes to a Minister, and something that is a proactive review, whereby policy is examined and modelling work is done and different facts and figures are placed in the House of Commons Library so that we can all benefit from that information. That is really why we have tabled this amendment now. I keep making this plea to the Minister to take up, at least once, the opportunity to look more favourably on such reviews.

In last year’s Finance Bill Committee and once again this year, we have had important discussions about real estate investment trusts, or REITS. For hon. Members who have not followed the Committee musings over the two years or had the opportunity to read in Hansard the record of the excellent contribution from my hon. Friend the Member for Nottingham East (Chris Leslie), who said just a few words about REITs during those deliberations, I shall outline briefly what this is about and why our amendment is so important.

REITs are securities that sell like a share on stock exchanges and invest in real estate directly, either through properties or mortgages. As of September 2012, 34 nations had REIT-like regimes in place. REITs are tax-advantaged vehicles set up to encourage investment in the property sector. I will, of course, be developing that theme, and people may wish to consider my comments in the light of the need for the review. REITs are exempt from corporation tax on profits and gains arising from their property rental business as long as profits are distributed. In that way, taxation of income from property is moved from the corporate level to the investor level. REITs have been given tax advantages to encourage diverse investment in the property sector, where fellow investors can have a different tax status.

We seek to amend a simple, one-line clause introducing schedule 18, which of course contains considerable detail. I am sure the Minister will speak to the Government amendments in some detail in due course, but these provisions would allow UK REIT income derived from investing in other UK REITs to be treated as income of its tax-exempt property rental business. Until now, REITs have predominantly invested in commercial properties—for example, office and retail properties. We had lengthy discussions about that when debating a previous financial Bill. According to Treasury consultation documents published in April 2012, there are more than 20 UK REITs, with a market capitalisation of more than £20 billion, so this is obviously an important issue.

As I said, the Committee discussed in detail why it is important to reform the REIT regime. We did not oppose clause 38 in Committee and we are not seeking to do so now; we are simply seeking this review and reporting back. My hon. Friend the Member for Nottingham East recognised that REITs are important investment vehicles that have changed the investment scene relating to property and those financial instruments. He spoke about that in Committee, also acknowledging that the Government appeared to be proposing relatively sensible pieces of housekeeping on the cash flow and investment profiles of the REITs. He further acknowledged the argument that REITs could make better returns on such cash if they were allowed to invest short term in other REITs. That was seen as promoting greater liquidity in the property market and potentially attracting additional investment income, particularly into the built environment. However, at that time my hon. Friend also raised a number of specific points with the Minister. For example, he asked what the policy’s effect would be on revenues to the Exchequer. He probed further the broader impact on tax treatments and also sought to discover whether HMRC had done any modelling on how the arrangement might affect yields.

My hon. Friend was interested in what the REIT vehicles are investing in and in how they are linked to commercial property arrangements and the circumstances in which residential property REITs exist. In Committee, he also sought further information from the Minister on the impact of REIT arrangements on the residential property market and its prices, given that there has been some concern in various quarters about the Government perhaps looking more at the demand side of the housing market equation than at the supply side.

I shall say a little more about the housing market later, but in Committee my hon. Friend specifically pressed the Minister on whether the Treasury had analysed the general impact of REITs on property prices in the residential sector and whether there was any overlap between the Help to Buy arrangements and investment in REITs.

The Committee also heard during that debate that although the Government originally consulted on the idea of using REITs as a vehicle to support social housing investment, they decided not to take that forward. There was no REIT vehicle arrangement to help with what the Opposition believe to be the priority—that is, of course, dealing with the need for social housing and affordable housing. I shall say something further about that in due course.

To be fair to the Minister, he advised the Committee that only 15 written responses to the Government’s consultation were received and that there was consensus that amending the tax treatment of REITs would generate positive benefits for the industry and his Government’s wider objectives, as he saw them.

In response to the questions from my hon. Friend, the Minister referred to the tax information and impact note that, as he pointed out, states that

“the provision will have a negligible impact on the Exchequer”.

He went on to explain:

“It removes a barrier that has prevented REITs from investing in REITs, which has generally not happened because it has been an inefficient structure. As a result, the cost of the change to the Exchequer will be negligible.”

That is all fair and proper, but his response to the question on the impact on house prices was perhaps less definitive. At that stage, the Minister suggested that the Government could not

“yet assess the impact on house prices as there are not yet any substantial residential REITs on the market, so the answer is that they have not had an impact on house prices.” ––[Official Report, Finance Public Bill Committee, 4 June 2013; c. 318-19.]

Although I can see the logic in that argument—it comes from a factual perspective—my hon. Friend was probing a question on which I invite the Minister to say more today. Has the Minister considered whether he would use some of the extensive resources at his disposal to do some further modelling work, not just to consider what is happening now but to make projections for the future? That would give us some idea of the advantages and disadvantages of the proposal, particularly as regards the impact on house prices, and would allow us to identify the concerns and, if any were identified, to see how they could be mitigated. That was what my hon. Friend was seeking and is part of the reason why we have tabled the amendment once again.

The Minister, in Committee, responded to questions by my hon. Friend the Member for Nottingham East on issues relating to the wider policy and REITs and the Help to Buy scheme. At that stage, the Minister drew a clear distinction between what he saw as the policy on REITs and the policy on Help to Buy. He stated:

“There is nothing to prevent REITs from investing in residential property”.

He did acknowledge that

“currently returns are not high enough to attract investors.”

At that stage he also advised the Committee:

“Responses to the consultation suggest that the need for further changes to the REIT regime to support social housing…was seen as not particularly pressing.”

It would be helpful if the Minister would say a bit more about that, because he also said in Committee:

“For some stakeholders, the changes to the REITs regime in the Finance Act 2012 were already sufficient to enable them to set up a social housing REIT.”

I would be interested to hear what discussions have taken place, and how the Minister intends to work with the sector to see whether it is feasible, and whether it is advantageous, to try to set up something in that regard, because other interested parties currently not considering establishing a social housing REIT were concerned that housing at social rents alone would be unable to generate sufficient returns to attract investors. I hope the Minister will say something more on that. For those parties, further additional changes to the REIT regime, such as the removal of the listing requirement, would be unlikely to make any difference to the thinking. The thrust of the Minister’s argument was:

“Essentially, we did not believe that the various ideas that we looked at to encourage social housing REITs would be effective”.[Official Report, Finance Public Bill Committee, 4 June 2013; c. 318.]

In Committee, we heard the Minister acknowledge that dealing with REITs was a relatively small part of the much bigger picture of the housing market. That is absolutely correct, and he was right to say that. I have laid out several areas where it is important to look further at some of those issues for the future and to do some of that work and report back to the House in due course. Our amendment provides the vehicle to do that.

The Minister was absolutely correct to acknowledge that the REIT regime was a relatively small part of that much bigger picture, so let me spend a few minutes looking at that bigger picture. This also relates to the part of our amendment that would provide for further work to be done on the tax implications of different regimes, and on what the Government are seeking to do to support house building and create further housing opportunities for those who need them. It is therefore relevant to our amendment.

I do not think it is overstating the case to say that we face the biggest housing crisis in a generation. The Opposition recognise the seriousness of the issue. We know how crucial house building is to economic recovery. Whether it is a young family seeking an affordable home in which to bring up their children, or whether it is those at a different stage in life, seeking to downsize or to change their accommodation as their needs develop, it is of course important that a range of housing options is available, and at a cost that people can afford at that stage in their life. That is key.

For the three years that I have been in this place, Opposition Members have consistently called for action on housing, especially affordable housing. I praise my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) for his conviction and clarity on housing policy, and his understanding of the impact of what is happening in the real world on those who are trying to get on the housing ladder, or trying to obtain their first tenancy in a social housing situation.

Yesterday I quoted some comments by both the Prime Minister and the Chancellor on taxation, and there were some groans and some cheers. If the House will allow me, I shall continue that pattern for a moment and quote once again, but this time from the Prime Minister and the Deputy Prime Minister, who are all in it together, of course.

In the foreword to the Government’s housing strategy, they wrote:

“The housing market is one of the biggest victims of the credit crunch: lenders won’t lend, so builders can’t build and buyers can’t buy.”

They continued:

“it is right for government to step in and take bold action to unblock the market.”

We do not disagree, because of course the Government must act and deliver bold action, but in practice, yet again, the rhetoric does not match up with the reality. In housing, as in so many other things, this Government have promised much but delivered very little on the ground. Housing investment is well short of what Labour was proposing; house building has fallen; rents are rising; home ownership is becoming harder to achieve; and homelessness has risen. The Government’s record offers little hope to hard-working families who are trying to do the right thing and aspire to better things, but who are held back by the combination of the squeeze on their incomes and the lack of suitable affordable housing that is available to them.

One of the reasons I came into politics is that way back in 1979, when I was a student, I spent some time living in London and working for a project for homeless people. I recall all the improvements made in subsequent years during Labour’s period in office to enable homeless people and those who were living on the streets to obtain accommodation and support to get back on their feet. I never thought I would see in my lifetime some of the things that are happening now to people who have lost or are at risk of losing their home. Although I am straying somewhat from the amendment, let me say that I am worried about the impact the Government’s policy on the bedroom tax is having on many decent people.

The amendment, which would ensure that the Government review and produce further work on the housing market and taxation, is important. Perhaps we should not be surprised by the Government’s poor record on housing. We heard in the previous debate about their warm words but weak action on infrastructure. My hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) pointed out that just seven of the 576 projects in the 2011 infrastructure plan have been completed, and that five of those were started under Labour; and that despite their warm words, the Government are cutting capital infrastructure spending by 1.7% from 2014-15 to 2015-16. She also gave a stark reminder that of the 261 new school building projects the Government have said will be delivered, only one has started.

We have had hollow promises to kick-start the economy, hollow promises to get growth going, and hollow promises to balance the books in this Parliament. When the British people, right across the country, look at this Government’s record, they understand that this Government have failed to deliver, time and again.

Does the hon. Lady accept that there are some success stories? In my constituency, for example, the Government are giving almost £2 million for a purpose-built homeless shelter, which will serve a large part of Hertfordshire, and we have provided the funds to build the first council houses in Stevenage in 30 years. As for infrastructure, my local hospital redevelopment is part of a £150 million hospital rebuilding scheme, and a section of the A1M is being widened. It is not all as bad as the hon. Lady makes out.

I appreciate what the hon. Gentleman says, and I am sure his constituents will appreciate the fact that he has raised the matter in the Chamber today. The people who make use of that homeless shelter no doubt welcome the fact that it is there for them but, with respect, that does not get away from the wider need to ensure that we have good quality, affordable housing right across the country. Although his constituents may be benefiting at present, sadly I see in the places that I visit and right across the country that there are areas where that level of investment is not happening. People are finding their living standards squeezed and they are finding it extremely difficult not only to balance their own household budgets, but to plan for the future.

The hon. Gentleman’s intervention leads me neatly on to the subject of house building, although I suspect that that is not what he intended to do. None the less, it gives me the opportunity to move seamlessly into that part of my speech. The Government have had four major housing launches in three years and they have made more than 300 announcements on housing. Some areas would have welcomed 300 houses, never mind 300 announcements. We know, notwithstanding the hon. Gentleman’s comments, that house building is at its lowest level since the 1920s, and research by the House of Commons Library confirms that no peacetime Government since the 1920s have presided over fewer housing completions than this Government have in the past two years. So for all the launches and all the statements, are things going to get any better on this Government’s watch? That is a question that the Minister has to answer.

Is my hon. Friend aware that of even that paltry number of housing finishes, the Labour Government were responsible for many of them? For example, the Strata Homes development in Retford in my constituency was started under the Labour Government only because of a capital grant given to get it going, and given as a present to this lousy coalition.

I could not have put it better myself. My hon. Friend speaks with great passion and I know that he always seeks to do the best for his area, but he makes important points that the Government would do well to take into account.

Is the situation going to get better? From what we know already, it is getting worse rather than better. Housing starts fell by 11% in 2012 to below 100,000. The construction sector has been hit particularly hard by the Government’s policies, which are hurting rather than helping. An estimated 80,000 construction workers are out of work and there has been an estimated 8.2% fall in construction output, despite recent signs of the beginning of change. Even in respect of home ownership, which one imagines this Government of all Governments would advocate, there are 136,000 fewer home owners than when the Government came to power. Home ownership has fallen from 67.4% to 65.3%. Crucially, on affordable homes, the official figures from the Homes and Communities Agency show that the number of affordable housing starts collapsed in 2011-12 by 68%.

I referred earlier to my own experiences when I worked on a homelessness project while I was a student in London back in 1979, which was one of the reasons that I got involved in politics in the first place. It is appalling that homelessness and rough sleeping are up by a third since the election. The Government must take responsibility for some of these awful situations.

The number of families with children and pregnant women being housed in bed-and-breakfast accommodation for six weeks or more has risen by more than 800% since the coalition Government came to power. A staggering 125 councils have had to house families in B and Bs for six weeks or more. [Interruption.] My hon. Friend the Member for Bassetlaw (John Mann) is right: it is a waste of taxpayers’ money. It is not only a waste of money, which is important, but a human tragedy for the families living in those conditions. I ask hon. Members to pause for a moment and reflect on how they would cope if life events meant they had to live like that. What if they were uprooted from somewhere they had been staying and had to pack up their belongings? What if they found themselves, perhaps with children, having to live for an extended period in one room in bed-and-breakfast accommodation, with nowhere to keep their belongings, nowhere to call home, and nowhere to do all the things that we take for granted with our own families?

Let us take a closer look at the Government’s so-called bold action plan. If the Housing Minister’s claims are to be believed, the new homes bonus will deliver an additional 400,000 properties by incentivising growth in planning permissions for new housing and the output of new homes, but the figures show that fewer homes are being delivered, not more. In reality, their flagship scheme has delivered a reduction in both permissions and outputs since 2010. In 2010, residential planning permissions totalled 135,000, but they were down to 115,000 in 2011, to just 95,000 in the first nine months of 2012, and in 2012 they fell by 11% to below 100,000.

A National Audit Office report stated that the Government’s assumptions about the new homes bonus were “unreliable”, “unrealistic” and

“contained a substantial arithmetical error”.

The report found little evidence that the new homes bonus is increasing house building or approvals for housing and that it is rewarding behaviour that would have happened anyway. It also found that the Government are not even monitoring the impact of the £1.3 billion of taxpayers’ money, which is another reason why it is important that we have the review.

Does my hon. Friend also accept that the heat map for the new homes bonus is completely unfair, because it affects the ability of local authorities to spend on other projects such as house renovations, rather than new build? It is a Treasury policy that is not working.

My hon. Friend makes an important point. New build is of course important, but so too is bringing existing dwellings up to modern standards and ensuring that families have decent accommodation. That is a useful point to which I hope the Minister can respond.

Given that the National Audit Office report was so damning, by no stretch of the imagination could the new homes bonus be called a success. If we couple that with the rest of the record I have described, we might even call it unforgiveable.

Then there is the Help to Buy scheme, which the Treasury Committee dubbed a “work in progress”. It took us some time to get any real answers from the Minister when we probed how the scheme would work in practice. The Opposition desperately want to help first-time buyers, but the Government are making the crisis worse. As I have said, affordable house building is down. Indeed, many commentators, including those the Government might well have assumed would be on their side, are concerned that the scheme is pricing people out of the market. The Government need to take action on the supply side by building more affordable homes, just as the International Monetary Fund has been arguing. I wonder whether the Minister agreed with the IMF when it said:

“There is a risk that, in the absence of an adequate supply response, the result would ultimately be mostly house price increases that would work against the aim of boosting access to housing.”

Let us take a look at how well the affordable rent programme has worked. Labour invested £8.4 billion in the three years from 2008 to 2011, while the Tories will invest just £4.5 billion in the four years from 2011 to 2015. The Government have cut the budget for new affordable homes by 60%. No doubt they will try to argue that they are getting more for less and that this is all about lean Government, but that is not borne out in reality. Affordable housing starts have collapsed—not stalled, not flatlined, but collapsed. The Government like to claim that they are going to deliver 170,000 affordable homes by 2015, but the NAO report confirms that despite the relentless spin, over 70,000 of those were commissioned by the previous Labour Government.

If it is about getting more for less, the result will be to push up rents, so these so-called affordable homes will not be affordable. That, in turn, will push up the cost of housing benefit, which will undermine many of the other claims the Government are making on reducing the housing benefit bill.

My hon. Friend makes an important point. She spent a long period working on housing issues in Scotland and taking forward a number of very positive policies in her previous life at Edinburgh city council, so I always listen carefully to what she has to say, and I hope that the Minister does the same. We have to ensure that policies have no unintended consequences. That is why, in this very mild-mannered amendment, we are suggesting a review to look more broadly at the impact of these policies as regards taxation and the Government’s record on housing, to produce information, and to put it in the House of Commons Library so that we can all be aware of it in looking to the future.

This Government appear to care more about spin than substance. Even with a record that shows they have failed on issue after issue, there is more, because their failure to deliver also extends to the NewBuy scheme. So far, 12 months in, the scheme has delivered fewer than 2.5% of the promised 100,000 mortgages. At this rate, they will not meet their target until 2058. In September last year, the Government announced £10 billion-worth of housing guarantees that were due to open for bids in April 2013. However, as the Financial Times reported recently, the plans are in disarray because no financial group has come forward to run the scheme.

On right to buy, the Government extended the discounts, promising one-for-one replacement. Notwithstanding the rhetoric, the reality is that since the extension of right to buy, 3,495 homes have been sold but just 384 homes have started to be built or have been acquired as replacement stock.

My hon. Friend raises an important point. People were promised that there would be one-for-one replacement in social housing. The fact that it was not like-for-like replacement was another folly in the Government’s policy. It should be put on the record that it is not one for one but one for nine, and that is a tragedy.

My hon. Friend puts his point powerfully on the record. His phrase, one for nine, will perhaps hit home more vividly than my expressing it as 3,495 homes sold but just 384 starting to be built. It is also right to say that those houses that are being built should meet the needs of people who are seeking either to get their first home or to move.

I do not want to spend too much time on the bedroom tax, but it is sad that the Government constantly say that people are living in homes that are far too big for their needs. I know from my own area and the work I did before coming to this place that many people who live in such housing are rooted in their local community. They do not want to move to another town, village or even another street. If homes of a decent standard that met their needs were available in their area, perhaps they would be prepared to move in order to free up some of the larger family houses.

Does my hon. Friend agree that if we built environmentally friendly, small, local authority bungalows with a little bit of garden, like we used to, many people would queue up to move into them? If only the Government would get their act together and provide the funding to build them.

My hon. Friend makes another very good point. I know of areas where elderly people would welcome such an opportunity. Indeed, I know of some elderly people who have been persuaded, because they felt it was the right thing to do, to move into good-quality housing where everything is on the flat and they have a small garden, a common area and locally provided services. It is also important that such housing is environmentally friendly and has affordable heating and rent.

Elderly accommodation is a chronic problem in my constituency and other areas. Does my hon. Friend know whether the Government, as part of their housing strategy, have undertaken any assessment that has identified the need for accommodation for the elderly?

I cannot answer for the Government, but I would have thought that any Government reflecting on the needs of citizens throughout the country—particularly given the number of elderly people in our communities and the fact that people are living longer—would want to undertake a proper and thorough assessment of future needs and that its projections would be translated into a comprehensive housing plan for the future. If such a plan is in place, I am sure the Minister will enlighten us on it before the end of this debate.

This is about people’s homes, but Government Members seem to think that it is about the number of bedrooms and do not really understand the emotional link that people have to the home that they may have been born and brought up in, that they may have raised their family in, or that they may be set to retire in in their later years. Surely any compassionate society should take that into consideration. We should also take every possible step to ensure that people do not become homeless; we must not let that become another scandal.

I will finish soon because others wish to speak on this important issue. Ministers promised last summer that the Government were on course to smash their ambition to release enough land for 102,000 homes, but they have now conceded that they are only a third of the way towards that target. I will not give into the temptation to go back over every Government failure, but they have missed target after target. After all the warm words, hot air and relaunches, it is clear that this Government are making the housing crisis worse, not better.

People who are out in the cold looking for their first home, looking to move, or looking for somewhere to live out their later years in comfort without having to worry whether it is affordable might look back at Labour’s record. There were 2 million more homes under Labour and we built 500,000 affordable homes. A million more families were able to buy their own homes, housing standards improved and homelessness fell by 70%.

My hon. Friend the Member for Birmingham, Erdington (Jack Dromey), who might want to comment on the work that he has been doing, is right to call for investment in house building to tackle the housing crisis, bring down the benefits bill—we have not dwelt on that in this debate, but it would feature in a review if the Government accepted the amendment—and put a roof over the heads of the families and individuals who need a home. It would also create thousands of jobs and apprenticeships, and rebuild Britain as we need it for the future.

This is another mild-mannered amendment. I do not see what objections the Minister could have to conducting a review. It would answer a number of the questions that were posed in Committee.

My hon. Friend has made some valuable points in what is an excellent speech. Does she agree that the Government and certainly the Treasury ought to consider in the review what impact a VAT cut would have on the construction industry and on the renovation and refurbishment of properties? That should be part of the review because half the country is being left behind.

Thank you for that guidance, Mr Deputy Speaker. I had feared that the Exchequer Secretary would jump up and ask a supplementary question about the Opposition’s position on cutting VAT.

I suspect that the hon. Gentleman wants to stray into the territory where Mr Deputy Speaker has suggested we do not go. Suffice it to say that my hon. Friend the Member for Hyndburn (Graham Jones) makes yet another suggestion that the Minister would do well to consider as part of the wider review. I look forward to hearing his response.

My hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson), in her powerful speech, pointed to the biggest housing crisis in a generation that is gripping our country. House building is down to the lowest level since the 1920s. Homelessness is up by 30% since the general election, after it fell by 70% under the Labour Government. We have a mortgage market in which millions struggle to get mortgages and a private rented sector with 8.6 million tenants, or 1.1 million families. There are many good landlords, but many bad ones too. There are chronic problems of security, stability, affordability and quality. One in three homes in the private rented sector does not meet the decent homes standard.

Like my hon. Friend, my interest in housing goes back a long way. When I was a lay trade union activist, I was also secretary of the Tenants and Residents Federation. I was a founding member of the Housing Action campaign. For older Members of the House who remember the occupation of Centre Point, I was proud to be one of those who organised what was an effective demonstration against office block speculation, against the background of rapidly rising homelessness and bad housing. I never thought that we would be back here 30 years later debating a crisis worse than that one.

There was an office block speculator called Harry Hyams. Those were the days when people could build office blocks and not pay rent on them, and they would appreciate two or three times in value every year. That happened against the background of a chronic housing crisis. We rightly protested against that and the incoming Labour Government rightly changed the law for—

Order. We are trying to deal with an amendment. Going down memory lane is all very well, Centre Point is very interesting and Mr Mann will always have a response, but I know that Members are desperate to get back to the amendment.

You are right, of course, Mr Deputy Speaker.

We are here to stand up for the people we represent, and we all see the impact of the housing crisis in our constituencies. I see the impact in the shortage of homes being built in Erdington—56 certified by the National House-Building Council in 2012—and the building worker, one of 79,000, who lost his job, a big man who burst into tears on his front doorstep in Marsh lane and said, “I’ve lost my job three times; I am desperate to provide for my family. I simply can’t cope any longer.” I also see the impact on the homeless families who come to my surgery—on one occasion, they had just been evicted—desperate for a decent home, and the young people in the Orchard project run by the YMCA in my constituency, where numbers of young homeless people double every year.

Is the hon. Gentleman aware that homelessness today is at its lowest for the past 30 years? It has been lower in only three of the past 27 years. It has been bad, but homelessness today is the lowest it has been for 27 out of 30 years.

I prefer to rely on statistics from the hon. Gentleman’s Government: homelessness has risen by 30% since the general election.

A teacher and a firefighter in their 20s came up to me on Erdington high street and poured their hearts out about how they are desperate to buy their own home but simply cannot get a mortgage. Evidence from Shelter has shown that typically, couples in their 20s will have to save for 11, 12, 13 or 15 years to afford a deposit. Extraordinary statistics show that the number of people between 25 and 34 who own their own home has fallen from 2 million to 1.3 million, and census figures showed that for the first time since the 1950s home ownership has fallen in our country.

I have seen the problems in the private rented sector in my constituency, such as the lady in Streetly road who had to be rescued by the council’s private tenancy team from a premises for which she was being charged a fortune in rent, but which was deeply dangerous because of faulty electrical wiring.

My hon. Friend makes a powerful point. One sad thing that I reflect on is that a lot of property in the private rented sector is in grossly bad condition, yet the rent is paid by the taxpayer through housing benefit. I do not for the life of me see why we do not have better regulation of the private rented sector when a vast amount of public money goes into that market through housing benefit.

My hon. Friend is right. We call it protection for good tenants and landlords alike; the Government call it red tape and have rejected every move since 2010 to regulate the private rented sector more effectively. No Government have done enough in our lifetime, but my hon. Friend the Member for Kilmarnock and Loudoun was right: I will compare favourably anytime the record of our Government to the current Government.

I hate to throw facts at the hon. Gentleman, but 421,000 social homes were lost under the previous Labour Government. This Government are building 170,000 homes by 2015. This Government’s record is far better than that of the past 13 years under the previous Government.

Let me spell out the facts: 2 million new homes; 1 million more mortgage holders; half a million more affordable homes; and 1.6 million social homes brought up to a decent homes standard after our Government inherited a £19 billion backlog in housing repairs. In the 1980s, the hon. Gentleman’s Government stood back and allowed a tidal wave of mortgage repossessions. In 2008, we took action to keep people in their homes and, through the kick-start programme, sustained the building industry against collapse and got Britain building again. I will compare that record favourably anytime to the miserable track record of failure of the hon. Gentleman’s Government.

Does my hon. Friend share my perplexity about the figure for the amount of homes lost that Government Members have come up with in recent debates on housing? If social homes are lost, they are lost through the right to buy. The Government have decided to increase the size of discounts and further encourage the right to buy, so they will probably lose more social homes than they build. We cannot compare net figures with gross figures.

Indeed, when the former Housing Minister, the right hon. Member for Welwyn Hatfield (Grant Shapps)—a man who gives hubris a bad name—launched the new enhanced right-to-buy campaign, he said that there would be one-for-one replacement. One for nine is what is happening. In addition, as freedom of information requests have just shown, Labour councils are building council homes at twice the rate of Conservative and Liberal Democrat councils.

Another explanation for the loss of units under the previous Government is that, because they were investing in upgrading homes through the decent homes standard, some homes, particularly in high-rise blocks, were too expensive on a unit cost basis to improve. It was costly, but they had to be demolished. We lost units because we were trying to improve the overall stock.

My hon. Friend is right: tough decisions had to be made. All of us in our constituencies have seen the benefits of that decision to invest in the decent homes programme: it has transformed the lives of millions of tenants.

Why have the Government made these mistakes? They started with the catastrophic error of judgment of cutting £4 billion in affordable housing investment in 2010, which led to a 68% collapse in affordable house building. What we have had subsequently are a succession of false dawns: four “get Britain building” launches, 300 separate initiatives and thousands of press statements. I once said of the former Housing Minister that if we had a home for every press statement that he issued we would not have a housing crisis.

My hon. Friend the Member for Kilmarnock and Loudoun looked at the track record: NewBuy was to produce 100,000 homes, but thus far there have been 2,500. When the Minister comes to respond on NewBuy, he might care to refer to the recent Help to Buy announcement, when the Prime Minister ruled out, from the Dispatch Box, any question of its being used to buy second homes. I tabled a written question:

“To Mr Chancellor of the Exchequer…with which organisations or companies (a) he and (b) other Ministers in his Department have met to discuss the mechanism that will be put in place to stop people using the Help to Buy Mortgage Guarantee Scheme to purchase a second home.”

In answer, I was told that

“Treasury Ministers have met with a number of companies in the mortgage industry to discuss a wide number of issues, such as the Help to Buy mortgage guarantee scheme, including through the Home Finance Forum.”—[Official Report, 1 July 2013; Vol. 565, c. 408W.]

Has a mechanism been agreed?

My hon. Friend makes a valid point regarding going from First Buy to homebuy to Help to Buy. When the Government talk about affordable housing, is there any explanation of why the upper limit in the previous schemes of £280,000 was increased to £600,000 in the current scheme? How does that qualify as affordable housing, and how does it help people who are struggling? That is surely redirecting money at people who could afford a more modest property.

Those of us on the Opposition Benches stand for homes for all; the Government stand for homes for the better-off.

Another example of hype was what the £10 billion guarantee scheme would deliver, including in investment in the private rented sector. However, the Government have failed to get anyone to run the scheme for them. Another example—there are endless examples—is self-build. The former Housing Minister said in opposition that the Conservatives would oversee a housing “revolution” led by self-build. He said they would have an action plan in government to double self-build homes. He introduced that action plan in 2010. He then tried to conceal whether it had worked, but ultimately the Information Commissioner forced his hand. We now know that self-build has fallen under this Government, not increased.

Is my hon. Friend as disturbed as I am by the Government’s failure to deliver on their promise to exempt self-build from the community infrastructure levy and the affordable housing levy, despite repeatedly saying in this Chamber that they would do so?

We have been strong supporters of self-build. The Government have promised a great deal on self-build, but done pitifully little. The figures speak for themselves: a decline in self-build under a Conservative-led Government, compared with what happened under a Labour Government.

The simple reality is that we have seen catastrophic mistakes, a succession of false dawns and, to be frank, downright cheek—the point has already been made that sometimes the Government have claimed the figure is 170,000, when 70,000 of those homes were commissioned by a Labour Government. The comprehensive spending review last week was a missed opportunity. There are indications of a moderate uptake in house building; what we needed was a major investment programme—I will say more about that in a moment. It was a missed opportunity at the worst possible time, and we now run the risk of seeing five wasted years for housing under this Government.

Let me make some brief points about the announcement made last week. It represents a cut in investment in affordable house building, instead of the necessary ambition of approach. I would simply contrast two figures. In the final comprehensive spending review under a Labour Government, £8.4 billion was committed for the three-year period from 2008 to 2011. For the three-year period from 2015 to 2018, this Government propose to invest but £3.3 billion—less than half of what Labour proposed to invest in affordable house building.

In addition, we are seeing an approach on the part of the Government that will mean the slow death of social housing—the mistakes made in 2010, with the cuts in investment; the progressive reigning back of councils’ ability to use section 106 to insist on affordable and social housing; and, now, the Housing Minister talking about the need to convert to the affordable rent model, which is unaffordable for many people and will push up housing benefit bills. We also see the Government once again restating their determination finally to crack the problem of bringing public land to market. We have heard it all before. They have promised a great deal and delivered pitifully little.

It is little wonder that the National Housing Federation was critical of the statement, despite the Government saying that the role of housing associations would be central. The federation attacked it as representing a cut in investment. It is also little wonder that the Chartered Institute of Housing said that the statement lacked the necessary ambition. Just when the country needed a sense of urgency and ambition, the Government let the country down. That is why our amendment argues for a serious approach, designed to get Britain building. First, we have to tackle the biggest housing crisis in a generation. There should be decent homes for all, to rent or buy, at prices people can afford. Secondly, history tells us that there has never been a recovery from a depression, such as that in the 1930s, from a war or from any recession since the war without a major public and private housing programme.

That is why the shadow Chancellor has said that the Government should heed the advice of the International Monetary Fund. Were they to invest that £10 billion in a house building programme, 400,000 homes would be built, and 600,000 jobs and 100,000 apprenticeships would be created. The Government need to invest now, rather than looking beyond 2015. They need to build now, in order to get people back into work now and to bring the cost of failure and the housing benefit bill down. It cannot be right that 95p in every £1 spent on housing investment goes on housing benefit. We need to get that money shifted into bricks. Such investment would ultimately bring down borrowing as well.

My hon. Friend is making a powerful speech. I have to criticise the Government for the fact that if every one of their announcements on this matter had been a house, we probably would not have a housing crisis now. They have talked an awful lot about house building but, brick upon brick, it is not happening in very many places in this country.

I agree absolutely with my hon. Friend. As I said earlier, if we had a house for every press statement issued by the Government, we would not have a housing crisis.

The hon. Gentleman is making some powerful points, and I entirely agree with him on the need for a house building programme. Would not the advantage of such a programme be that there would be a ready revenue stream in the form of rental repayments?

The hon. Gentleman is absolutely right. All the benefits that I have referred to, plus others, would result from such a programme. If we were to invest in retrofitting as well as in new build, we could tackle some of the chronic problems that are costing the national health service £2.5 billion a year. We could also tackle the problem of a whole generation of young people being held back at school because their overcrowded homes impact on their ability to do their homework. That impacts on their exam results, which in turn impact on their lifelong earnings potential. If the Government were to invest in housing as we would do, they could also reflect the demands of an ageing population. They would be able to help people of all tenures to downsize, rather than using the obscene weapon of the bedroom tax, which has no place in a civilised society.

My hon. Friend has made a powerful point. The Government’s policy is totally focused on an under-supply of housing, but he makes the valid point that the Treasury should be looking at the other part of the problem, which is the over-supply of housing and its consequences. The Treasury needs to take this matter on board. In constituencies such as mine, people suffer chronic ill health as a result of poor housing.

My hon. Friend makes a good point. This is not just about new build, where appropriate; it is also about retrofitting, about regeneration and about bringing empty homes back into use. It is also about recognising that the housing market and the problems associated with housing should not simply be seen through the prism of London and the south-east. Housing markets vary considerably nationwide.

I have listened very carefully and I understand the logic of what the hon. Gentleman has said. My only worry and concern is where we are going to get the money to invest in housing—investment in housing is a good thing. The hon. Gentleman suggested that we would get the money back, but we will not get it back quickly.

What is happening for certain is that the country is paying the price of failure, with £245 billion more being borrowed because of it. Ultimately, it comes down to this: it is a choice between paying for the costs of failure and investing for success. All the evidence shows in transmission times that investing in house building is the quickest way to get a sluggish economy moving. It would build badly needed homes for people to rent or buy; it would put building workers back to work; it would create apprenticeships and hope for the nearly 1 million young people out of work; it would progressively bring down the cost of housing benefit; and, ultimately, reduce borrowing rather than increase it. That is the choice that the Government and the country now face: do we invest public money for failure or invest it to build for success?

My hon. Friend is making a very powerful speech. Is it not the case that the £25 billion that goes into housing benefit supports rentier capitalism and not entrepreneurial capitalism? Would not that money be better invested in bricks and mortar? One of the solutions that the left and the Labour party have for this problem is to bring in rent controls. Does my hon. Friend agree that rent controls would help to bring down the housing benefit budget?

I would make two points in response. First, the single biggest factor that would make a difference is, of course, significantly increasing supply. What is so wrong about the Government’s approach is that it has been too much focused on demand and not sufficiently focused on supply. On the issue of demand, we have heard criticisms from the IMF, the Treasury Select Committee and others about the impact of Help to Buy on pushing up house prices, without necessarily seeing a significant increase in supply.

Secondly, we definitely need to look at a very different type of private rented sector for the future, where quality standards will be raised and where there will be longer-term tenancies and flexibility for those who wish it and security for those who need it. Index-linked rents, for example, could see people having predictable and more affordable rents. If we look at existing evidence of such longer-term tenancies with the indexation of rents, we find that tenants pay significantly less and landlords have a reliable income stream, so it works for good landlords and tenants alike. The time has come for a very different private rented sector in the future. Sometimes we refer to “the continental model” of security, affordability and higher quality, where people enjoy a higher status in a sector of choice—not what we have at the moment.

Millions of people will have waited for last week’s comprehensive spending review with hope, but their hopes have been dashed. What we had was hyperbole from the Chief Secretary to the Treasury. I have to say that I sat gobsmacked at his contribution. When it comes to writing the history of hyperbole, he will deserve a chapter of his own, as we have heard it all before. The simple reality is that this Government’s housing policies, like their economic policies, have failed and will continue to fail. Whether it be “First Buy”, “NewBuy” or “Help to Buy”, the British people know from experience that getting a decent home at a price they can afford and getting Britain building once again will ultimately mean sending this message to this Government at the next general election—“goodbye”.

Let me begin by drawing attention to my interests as declared in the Register of Members’ Financial Interests.

I am very pleased to follow my hon. Friend the Member for Birmingham, Erdington (Jack Dromey), who made a powerful and persuasive speech about the importance of expanded investment in housing, and my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson), who presented a masterful overview of the whole range of housing expenditure.

The state of the housing market in Britain today can only cause alarm, for a variety of reasons. Output is far below the level that would enable it to meet the current need, and that is bad for people who are themselves in need. It is bad for people who want to buy their homes but find it impossible to do so at prices that they can afford; it is bad for people who are looking for social housing, because the waiting lists are overstretched and the supply is inadequate; and it is desperately bad for people who risk homelessness. The number of homeless people has, alarmingly, been rising in the last three years, after, it must be said, a period during which there was enormous success in driving down the level of homelessness.

The state of the market is also bad for people in private rented housing, which, curiously, is one of the few success stories of recent housing history. The amount of private rented housing has increased, but unfortunately it has increased on the back of very steep rent increases. That has created a huge problem for people who simply cannot afford to pay such rents without the help of housing benefit, and it has created a real problem for the Government. All the Government’s rhetoric is about reducing housing benefit, but the policy that is being promoted by both the Treasury and the Department for Communities and Local Government is leading to increased calls for it. Increased dependence on private renting and higher rents in the social housing sector, both of which are explicit policies of the DCLG, inevitably drive increased demand for housing benefit. The Government have got themselves into an extraordinary mess. One arm of Government is talking about cutting housing benefit, while the other is deliberately fuelling demand for it.

Does my right hon. Friend agree that the Treasury does not seem to be taking account of evidence which shows that the cost of private renting housing, per unit, is roughly twice the cost of social housing? At that rate, the more reliance there is on the private rented sector, the higher the housing benefit will be.

I entirely agree. As my hon. Friend the Member for Birmingham, Erdington pointed out, it is important to support the private rented sector, but it must be helped to do the job it does best, which is providing for people whose incomes are higher than the incomes of those who have traditionally depended on social housing.

The Government have created a problem for themselves by trying to use the private rented sector, with high rents, as a substitute for social housing, with lower rents. That is inevitably a recipe for more dependence on housing benefit. It traps people who are dependent on benefit, which is bad for them, and it increases the bill for housing benefit. What we need are policies that encourage both the growth of a private rented sector for people who can afford to pay a market rent for their housing and will not be dependent on benefit, and, in parallel, the revival of a social housing sector that meets the needs of those who require housing at sub-market rents.

Sometimes the issue of private rents is presented as though it involved people living in mansions, but many of those high private rents are actually charged in former council properties. Ironically, two tenants living next door to each other may both be receiving housing benefit, but the rents involved may be very different. People who are not living in mansions are simply having to pay high rents.

My hon. Friend has made a fair point about the fact that the rise in rent levels means that many people are paying above the odds for accommodation that is not particularly good. However, that is a product of shortage. We need an increased supply of good-quality private rented housing which commands a market rent. There will be people who are perfectly happy to pay that rent, and to benefit from good-quality accommodation as a result.

As my hon. Friend the Member for Birmingham, Erdington said, we need to bear down on exploitative landlords who are letting substandard properties and charging above the odds for them. We also need to ensure that councils and housing associations provide an adequate supply of alternative housing for people who genuinely cannot afford to pay a market rent, and who would otherwise be left either dependent on housing benefit or homeless.

My right hon. Friend is making some very powerful points. The private rented housing market is very diverse, but in areas such as mine in Gateshead in the north-east of England, where we have a substantial private rented sector, unfortunately much of the property in that sector is housing of last resort and people are having to pay inflated rents for it—rents that are much higher than they would have to pay for much higher-quality socially rented housing in the neighbourhood.

My hon. Friend makes a very good point that again illustrates just how dire the consequences of current policies are for people in need of housing.

If the current housing policy and current housing market are bad news for people in housing need, they are also bad for the economy. As my hon. Friend the Member for Birmingham, Erdington rightly emphasised, there would be huge economic benefits from an expanded house building programme. Not only would we see an increase in employment and demand for materials, most of which are sourced within the UK, but there would be huge impacts on the supply chain.

I agree with what my right hon. Friend is saying. Does he agree that there would be a particular impact on young people? There are more than 1 million young people in this country who are desperately in need of a job. Many young people in Wigan were employed in the construction industry and on apprenticeships before this Government came to power, so they would experience a very positive effect from the changes he is describing.

I entirely agree. I happen to be the president of Youthbuild UK, which is one of the bodies that has been campaigning specifically for more effective opportunities for young people, in particular disadvantaged youngsters, to get the training and skills necessary to secure employment in the construction industry. I wholly endorse what my hon. Friend says.

There are benefits in terms of the economy. There are benefits in terms of employment. There are wider supply chain benefits. I am thinking in particular of all the industries that provide the materials, furniture, furnishings and equipment that go into houses when they are built. When people move into a house, they need carpets, furniture and various fittings, and all of that additional demand will be good for the UK economy. There is therefore a real multiplier effect from an expanded house building programme.

It is not just about new homes. As has been said, it is also about retrofitting existing homes that are in poor condition. Here the Government have got themselves into another mess, but not through lack of a good idea. The idea behind the green deal is a sound one: that we try to put in place a mechanism that enables people to borrow the money required to fund improvements in the energy efficiency of their home and they can then pay for that out of the savings they make through reduced bills because the home demands less energy. That is in principle a very good idea. The problem is that the scheme the Government have managed to come up with after quite a long gestation period has proved so complex, opaque and financially disadvantageous that it is at present struggling to get any takers.

I admire the ambition displayed by the Minister responsible for the scheme in trying to get it off the ground. He has put a huge amount of effort into trying to promote it, but as it is currently constituted it is simply not attracting the interest of the British public, and without doing that it will not fly, so we will have a continuation of the problems of energy inefficient homes that are bad for the environment because they pour out unnecessary carbon emissions. That will be bad for the fuel poor who end up paying more for fuel than they need to, and it will be bad for the construction industry because all those potential jobs in retrofitting existing homes will not be taken up.

Does my right hon. Friend agree that it is an indictment of the Government’s shambolic housing policy that they rejected the idea that private landlords should in the near future be forced to implement the green deal and energy efficiency measures in properties? The Government have put that backstop date back to 2018, which allows private landlords still to have houses that do not meet the lowest of energy ratings for many years.

I am grateful to my hon. Friend for highlighting that, because it is a cause of real concern that the energy efficiency programmes that were in place have come to an end, and as a result of the introduction of the new ones—the green deal and the energy company obligation programme—the level of activity on energy efficiency retrofitting has plummeted.

I talked to a housing association, active in my constituency, that has done a magnificent retrofit of about 1,000 properties in Charlton. That has hugely improved the comfort of its tenants, who can now keep warm at much less cost. It has improved the appearance of the estate and has won plaudits from everyone, and it was done with a work force who included a number of young unemployed people from the area, who were trained specifically to be able to take up the advantages of employment as part of the scheme. It was an admirable scheme. When I was congratulating the housing association on it, the one and only disappointment came when it told me “Well of course this was funded under the old community energy saving programme—CESP—which made it possible and has now ended. We would probably not be able to do this again if we were starting from scratch today.” That is an obvious problem.

My right hon. Friend is talking about the ending of schemes. Does he agree that this is not just about renovating properties where people are living, but about the large number of empty properties in boroughs such as mine which are crying out to be renovated? They are in places where people want to live, where communities can be recovered in the way he just described, but nobody is living there now. Does he agree that the Government need to revisit the issue of funding for empty properties?

The thrust of my whole speech is about the importance of the Government finding more effective measures to stimulate investment in housing in all sectors. That includes bringing empty properties into use, improving the existing substandard housing stock and building new homes that are needed to increase the supply. The case is overwhelming, but, sadly, as the figures cited in this debate so far have shown, the Government are failing to meet the needs. I am not going to go into that in detail, because it has already been covered.

I wish to draw attention to the new homes bonus. It an extraordinary scheme, and our Front-Bench spokesperson made some pertinent remarks about it. It was launched by the Government as, supposedly, the panacea for the problem of opposition among some local communities to new house building in their area. The theory was that if a financial incentive was given to councils and to communities for agreeing to build new homes, we would get a different attitude—we would have enthusiasm for new house building rather than hostility. And so the new homes bonus was launched.

The new homes bonus is a very expensive scheme. As the National Audit Office report demonstrates, it is costing £668 million in the current year, but that is due to rise to £905 million next year, to £1.1 billion in 2015 and on beyond that, because it is a cumulative bonus that is paid for a six-year period. I have given only the individual one-year costs. When we add in the cumulative costs derived from previous years’ awards, we find that by 2018-19—that is six years ahead, so at the end of the six-year period—on current trends, expenditure on the scheme would be £7.5 billion. It is a very, very expensive use of public money, which is mostly taken from local authorities. The Government talk about it as though it is a Government scheme, but they are putting in only £250 million a year, with the rest coming as a top-slice from local government funding.

My right hon. Friend is making a strong argument about the new homes bonus, which is top-sliced from local authorities and given back to those who build. On other policies, such as empty homes and retrofitting, local authorities that have had their income reduced substantially, and are in low-demand areas such as mine and unable to build new homes, encounter a perverse incentive, whereby a slew of issues, such as empty homes and dealing with the private rented sector, cannot be dealt with. The money is simply given to authorities that are cash rich and are building more homes, and it is not really in their interests to build any more because they have got enough money.

My hon. Friend makes a very good point. The NAO made an absolutely damning comment—I am astonished that the Government have not looked at this one sentence and said that they clearly need to reconsider the scheme. It is, quite simply:

“We found no association between individual local authorities’ planning application approval rates and their numbers of homes qualifying for the Bonus.”

There we have it: the NAO can find no correlation between the granting of planning consent and the awarding of the bonus, yet that is what it is supposed to do—it is supposed to incentivise councils to improve their performance in granting planning consent. No wonder the Government are embarrassed.

Rather than doing what they ought to by carrying out a thorough and quick review of the scheme and winding it up if it is proved to be as ineffective as the NAO indicates, the Government have done another extraordinary thing and announced in the spending review last week that they will take £400 million of new homes bonus money and transfer it to local enterprise partnerships. It is not their own money—only £250 million is Government money, and the other £150 million would otherwise have been paid to local government. It will now go to the LEPs. Whatever happened to localism? I thought the Government’s mantra when they came into office was that they would allow more decisions to be taken locally. This decision muddies the waters and it will be even more confusing to work out where the money goes.

As my hon. Friend the Member for Hyndburn (Graham Jones) pointed out, there is already gross inequality between different parts of the country, many of which are contributing to the new homes bonus and getting nothing out of it while others, which have done nothing to improve their housing performance because they already have a high demand for housing and because it is already been built in those areas, benefit from the scheme. It is a most extraordinary scheme and it will be made even more opaque and confusing. Clearly, such a scheme has no prospect of achieving the incentive effect it was supposed to achieve.

My right hon. Friend has put his finger on it. There is not an economic rationale for the policy, but a political one. Essentially, it is a stealth redistribution from poor areas to wealthier ones with a more active, buoyant and successful housing market.

My right hon. Friend, as always, is very acute and he realises that this is a political move. The change is being introduced with no analysis and no evidence base—it is a political move that will have significant redistributional consequences in favour of some areas at the expense of others, paying no regard whatever to the principles of localism that the Government used to proclaim.

May I tempt my right hon. Friend to reflect on one other aspect of the subject he just touched on? If his figures are right—I am sure they are—by 2017-18 this will cost £7.5 billion in total. That cannot be described as a top-slice from local government as it represents almost a third of the total local government expenditure in England. The proposal will fundamentally destabilise the whole system of local government funding within five to six years.

My right hon. Friend makes a valid point, and it is a further argument for the serious and thorough evidence-based review of the subject that the Government ought to be undertaking. It is shameful that they are continuing to tinker with this failed scheme at a time when there is such an urgent need for the limited funds that are available to be used to best effect to stimulate investment in housing and to have the beneficial economic effects that my hon. Friends and I have been talking about.

The amendment specifically calls for a review of the operation of REITs and their interaction with the housing market. That is important because the scale of investment necessary to secure the level of house building and home improvement we need will require a combination of public and private investment. We must therefore have measures that encourage more private investment in both private and social rented housing. Institutional investment in private renting has been a bit of a holy grail for many years for people who saw it as a way of ensuring an improved private rented sector driven by responsible investors who would be keen to see high standards of investment and management.

I am grateful to my right hon. Friend for giving way once again. Will he congratulate my local Labour authority, Hyndburn borough council, which has private institutional investors? The council has got a pension company to invest in private lets to the tune of £14 million and is using that capital to regenerate and provide affordable housing for rent for people who need it. Does he not agree that there should be more such schemes in the UK? That flagship programme has appeared on many television programmes and I am proud to say that a Labour authority is doing it.

My hon. Friend makes a valid point and highlights the fact that throughout the country, there are a series of partnership agreements between the public and private sectors which are successfully helping to attract increased investment to meet social needs. That is what we need to encourage. I very much welcome amendment 57 because it calls for precisely that: it calls for a review of the REITs programme and how it interacts with the housing market. The thinking behind it is entirely about how we can ensure more effective blending of public and private finance to meet housing needs.

I have gone on quite long enough, so I will let others contribute. I conclude by saying that current policies are not working. We have a stagnant housing market, which is showing very limited signs of recovery. We have massive unmet needs., and we have huge economic problems which should be addressed by an expanded house building programme. I hope the Government will change course.

It is a pleasure to return this debate to the amendments to clause 38 and schedule 18 to the Finance Bill before us. Before I discuss Opposition amendment 57, I shall say a few words about amendments 30 to 34, which are designed to ensure that clause 38 and schedule 18 work as intended. The clause and the schedule make improvements to the REITs regime. This year’s Finance Bill improves the REITs regime by allowing a UK REIT to treat income from another UK REIT as income of its tax-exempt property rental business. Therefore these amendments do not affect the policy, but rather ensure that it works as intended. The change would generate positive benefits for the REIT industry, and also meets the Government’s wider objectives.

Let me provide some background. During the technical consultation in February, stakeholders told us that the changes as drafted might not work quite as intended. HMRC has consulted further with interested parties, and we agree that minor changes are necessary to achieve the desired policy aims. The problem, as presented by interested parties, concerned the balance of business test, which requires that at least 75% of the REIT’s profits must come from a property business. Interested parties were concerned that in certain circumstances, a REIT that invests in another REIT might fail that test even though the lower-tier REIT derives all of its income from a property business. Consideration of the issue has revealed that minor amendments are required both to the new and the pre-existing legislation. These amendments together will ensure that the Bill’s changes correctly implement the intended policy, which is that profits of a property rental business comprising the new type of tax-exempt income do not include amounts attributable to capital allowances and other tax adjustments.

Turning to Opposition amendment 57, we have had a very broad debate this afternoon. Indeed, it has felt more like an Opposition day debate on housing than a debate on the clause and the schedule. The amendment proposes that the schedule shall come into force after the Chancellor has conducted a review of the interaction of REITs with the housing market, and I hope to address the issue of REITS and the housing market in my remarks.

I hoped the Minister would understand that the nature of the debate reflected Opposition Members’ genuine concerns about the Government’s record on housing. But specifically on REITs, when he responds to the arguments in favour of the review, will he be able to say something more about the future of REITs and social housing?

The hon. Lady can rest assured that I will address that very point, if not necessarily every point made in the wide-ranging debate.

The proposal set out in amendment 57 is that

“The Review shall consider…tax measures in place to support house building; and…what steps HM Government have taken to support house building”

but the Government’s view is that there is no need to postpone the changes to the REIT regime, as the proposed review would add little value at this time. There is something of a routine here of the hon. Lady requesting a review and me turning it down, and she asks so nicely that I feel almost pained in doing so, but the reason we believe in this case that a review would add very little is that there are not yet any REITs with substantial housing assets on the market, so it is too early to assess any interaction of REITs with the housing market. We do not accept the amendment and I urge her not to press it to a vote.

The new changes to the REIT regime are an example of tax measures to support house building. As REITs represent the supply side of the property market, any improvements to the REIT regime are expected to have a positive impact on the market.

The hon. Lady made a couple of points on how the REIT regime works: the first, which I believe we touched on in Committee, was whether the regime could support people who want to own their own home. It is worth pointing out that residential REITs can provide accommodation only in the private rented sector, so they are not designed, nor could they be used, for the purpose of home ownership.

The second point, on which the hon. Lady intervened, was on the relationship with social housing and what role REITS could play in that sector. There was full consultation in summer 2012 involving a number of one-to-one and group meetings with interested parties in the social housing sector. The reality is that yields on, for example, affordable rents do not appear to be high enough to attract investors into that sector, but I assure her that discussions are ongoing with non-social housing entities and other interested parties to explore the possibility of residential REITs. If a workable residential model can be found, it might be possible to use it to further a move into social housing, and we certainly would not rule that out. At the moment there appears to be no interest in using REITs for those purposes, but we are entirely pragmatic about that.

We believe that REITs have a valuable role to play and we do not want to delay the implementation of the schedule while we conduct a review from which there is little to be gained. For those reasons, I urge the hon. Lady to withdraw the amendment.

We discussed wider housing policy, but I do not intend to be drawn into a lengthy, general debate on housing. I just point out that we announced £5.4 billion of additional support for housing in the last Budget, building on the £11 billion this Government have already committed to investment in housing over the spending review period. Last week’s spending round announcement confirmed a total of £5.1 billion-worth of investment to support housing in England from 2015-16 to 2017-18; £3.3 billion of that new funding is for affordable housing over those years and will support the delivery of 165,000 new affordable homes in England over the next three years. I can also point out some of the recent housing numbers. Housing building starts in England rose by 4% in Q1 2013, seasonally adjusted. Housing starts are 15% higher than in the same quarter last year. Starts are now 62% above the 2009 trough.

No, I want to give the hon. Lady a moment or two at the end of the debate to respond to the points that I make.

The amendments before us, alongside the changes that already form part of the Bill, show the Government’s continued support for REITs and the UK property sector. I believe the Government amendments will be welcomed by interested parties. The delay that would result from Opposition amendment 57 would be unfortunate and I urge the hon. Lady to withdraw it.

I find myself in the same slightly pained position that the Minister described. He said no so nicely, as he normally does, that I hesitate to come back with extremely critical comments. I am disappointed once again that he has not heeded our arguments, especially the argument for a review and a look at how the wider tax regime deals with housing issues.

As I said earlier, we did not seek in Committee to strike clause 38 or the schedule from the Bill, but we considered it opportune for the Government to consider a wider review. The Minister said that our debate had gone wider than real estate investment trusts. That is true, and it is because the Opposition are so concerned about the Government’s lamentable record on housing. I was disappointed that the Minister did not see fit to deal with some of the issues that were raised, particularly the criticisms arising from the work of the Treasury Committee on the Help to Buy scheme and National Audit Office report on the new homes bonus. I noticed also that the Minister was not tempted to respond to the concerns expressed by my hon. Friends about forward planning, housing strategy, how that would be funded, especially for people who require care and support, and accommodation suited to the elderly.

I am disappointed that once again the Government have come up with warm words, as I mentioned during the debate. Although the Minister said very nicely that he would not have a review, that is exactly the same mantra as we have heard from the Government all the way through the Bill. On every occasion when we simply wanted the Government to scrutinise their policies and report back to the House, they have refused to do so. For that reason, I unfortunately cannot accommodate the Minister’s request to withdraw the amendment. I can see that he is terribly disappointed but not surprised. I therefore intend to press the amendment to a Division.

Question put, That the amendment be made.

More than four and a half hours having elapsed since the commencement of proceedings on consideration, the proceedings were interrupted (Programme Order, 1 July).

The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

Schedule 18

Real estate investment trusts: UK REITs which invest in other UK REITs

Amendments made: 30, page 310, line 36, at end insert—

‘(1A) After subsection (4) insert—

“(4A) In the case of a group, for the purposes of subsections (1) and (2) a distribution falling within section 549A(5) or (7) received by a member of the group is to be treated as profits of a property rental business in accordance with section 549A(1) notwithstanding section 549A(4A).

(4B) In the case of a company, for the purposes of subsections (1) and (3) a distribution falling within section 549A(5) or (7) received by the company is to be treated as profits of a property rental business in accordance with section 549A(1) notwithstanding section 549A(4A).”’.

Amendment 31, page 311, line 9, leave out paragraphs 5 and 6 and insert—

‘5 (1) Section 548 (distributions: liability to tax) is amended as follows.

(2) In subsection (5) after “2009)” insert “so far as the distribution is a distribution of exempt profits”.

(3) In subsection (6) after “2005)” insert “so far as the distribution is a distribution of exempt profits”.

(4) After subsection (8) insert—

(9) This section does not apply in relation to a distribution falling within section 549A(5) or (7) so far as the distribution is a distribution of exempt profits.

(10) For the purposes of this Chapter a distribution is a “distribution of exempt profits” so far as the distribution falls within section 550(2)(a), (aa), (c) or (d).

(11) In applying section 550 for the purposes of subsection (10) in relation to a distribution made by the principal company of a post-cessation group or by a post-cessation company—

(a) subsection (1)(a) is to be read as referring to the principal company of the post-cessation group, or (as the case may be)

(b) subsection (1)(b) is to be read as referring to the post-cessation company.”

6 (1) Section 549 (distributions: supplementary) is amended as follows.

(2) In subsections (2) and (2A) after “shareholder” insert “so far as they are distributions of exempt profits”.

(3) After subsection (3) insert—

“(3A) “Relevant distribution” does not include a distribution falling within section 549A(5) or (7) so far as the distribution is a distribution of exempt profits.”

(4) In subsection (4) after the first “shareholder” insert “(so far as they are distributions of exempt profits)”.’.

Amendment 32, page 311, line 31, at end insert—

“(4A) Subsection (1) applies in relation to a distribution only so far as the distribution is a distribution of exempt profits.

This is subject to section 531(4A) and (4B).”’.

Amendment 33, page 312, line 39, leave out ‘4’ and insert ‘4(2) to (4)’.

Amendment 34, page 312, line 41, leave out sub-paragraph (2) and insert—

‘(2) Subject to what follows, the amendments made by paragraphs 5 to 7 above have effect in relation to distributions received on or after the day on which this Act is passed.

(3) A distribution received by a member of a group UK REIT does not fall within section 549A(5) or (7) of CTA 2010 if it is received in an accounting period of the principal company of the group beginning before the day on which this Act is passed.

(4) A distribution received by a company UK REIT does not fall within section 549A(5) or (7) of CTA 2010 if it is received in an accountin