My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved accordingly, and, on Question, Motion agreed to.
House in Committee accordingly.
[The DEPUTY CHAIRMAN OF COMMITTEES (Lord Geddes) in the Chair.]
Clause 1 [Taxation status of members of the House of Lords]:
moved Amendment No. 1:
1: Clause 1, page 1, line 3, leave out “and domiciled”
The noble Viscount said: I shall speak also to the other amendments in my name. I was unable to be here at Second Reading but I have read carefully in Hansard what was said. I shall say at the outset that I do not think that the Bill should go very far. I do not think that it should leave this House. The Bill that is being promoted in another place is a more satisfactory answer to the issue and the whole thing should be wound up in the debate when we consider how this House is reformed in future. I do not think that we can just pick one thing.
The noble Lord’s Bill brings up some interesting issues that are worth exploring. I find it extraordinary that a party that is so keen on Europe and everything European and which has not put down a single amendment to the Bill on the Lisbon treaty wants to prevent anybody who sits in this House from living perhaps part of the time in France or Italy, or wherever it may be in the European Union, and then attending this House. If we take the fact of the European Community as it is, one should be able to do that. I see no reason why, in theory, one should not do that.
We can stand for the European Parliament and we do not have to live in this country to do that. I remember that the noble Lord, Lord Steel, stood for the European Parliament in a seat just outside Rome—
It was the whole of central Italy.
No doubt he had an extremely interesting time canvassing the various hostelries around the whole of central Italy. I am sure that he had an overwhelming vote, but I seem to remember that he was just pipped to the post by a local. However, he did not have to establish residence or domicile in Italy at that stage.
The Bill also excludes anyone who lives in the Channel Islands or the Isle of Man, as I do not think for tax purposes that they count as being resident or domiciled in the United Kingdom, although there seems to be no reason why, if you live there, you should not be able to serve in this House. Many people have done so in the past. If you take this theory even further, we must ask what about civil servants? Are they going to be asked to be resident and domiciled in this country before they accept the Government’s money? What about all those who sit on government quangos and accept the Crown’s payment for doing so? It seems that we go down a dangerous route.
I am all for people paying their taxes in this country. I have no interests to declare. I think I have always been domiciled here; that I have always been resident here; and that I have always paid far too much tax here. I do not think that I have ever been to Luxembourg, or wherever it is—if I have, I have certainly never noticed it—and I do not have a bank account there. It seems to me that there is also a philosophical difference and, indeed, a legal difference between residency and being domiciled. You can be resident in this country without being domiciled. There are Members of this House who are not—
I thank the noble Viscount for giving way. He mentioned Luxembourg, which is obviously not the same place as Liechtenstein. Before we continue the debate, would it be useful to have a map of Europe so that we can see where all these places are?
The noble Lord is probably better at his European geography than I am, whether it is Luxembourg or Liechtenstein. No doubt he will be able to tell us all about it if he so wishes.
There is a definite legal difference between being resident and domiciled. There are Members of this House who were born in another country, who have arrived here and are resident. They do not necessarily know whether they are domiciled here because you have to have lived here for a certain number of years before you are officially domiciled. They may be paying full tax while they are here, but it does not mean to say that anybody has actually formally told them whether or not they are domiciled. I am not a tax lawyer, but I am not sure that works as part of the noble Lord’s Bill. The noble Lord is much better trained in the world of finance than I and will be able to tell us how these interesting issues work. However, it seems extraordinary that a party that is so keen on Europe is not going to allow anybody in this House to live in Europe and to come here. I beg to move.
I hope that I may be forgiven for intervening but I am pleased with the gentle light-hearted way with which this has begun. In the Recess, having worked in these areas for many years, I found myself being approached by a number of non-nationals who had growing concern about the situation in the United Kingdom. It is sufficiently serious to ask for certain reassurances. The problem arises probably in press comment, but it was said that this particular Bill was going to be fast-tracked though the House of Lords. I believe I was told that that was because it was a statement from the Liberal Democrat party. That, for people who understand the British system, is no problem, because they know that the legislation has to go to the House of Commons; but there are those who do not and think that Bills end up in the House of Lords and then receive Royal Assent. That is quite worrying.
Your Lordships may not think this is important, but as we go on and as the matter develops, I will try to demonstrate to your Lordships that since the Bill was introduced there has been what one may call a series of material adverse changes in attitude to politicians and to law in this country, which could have a major detrimental effect on the economy. Therefore, I begin by asking a few questions of the noble Lord, Lord Oakeshott, and others, to which the noble Lord can well reply. He has solid financial background and has always been open in everything that he has done.
The first question is: is everything accurate and true that he is reported in Hansard as having said? I found two spelling mistakes, but people have been taking this apart. That is the first question. I have a series of questions; they are not unfriendly.
I am having some difficulty following the relevance of some of these points to the amendments under discussion. I am happy to answer at the end, but I am not going to pop up and down like a jack-in-the-box. I will listen to the noble Lord making his speech and then reply.
First, I would like to remind the noble Lord of certain procedures in this House that have not necessarily been followed. I do not put this down to his youth or to his lack of time here, but over 45 years I have found certain things. I once had a word with him outside the Chamber to ask whether some of the things said were correct. I would like to refer to the codes of conduct applicable to Members of Parliament. It indicates that Members intending to refer in debate to another Member should inform that Member in advance. Members may not accuse other Members of deliberate misrepresentation or lying, use abusive or insulting language likely to create disorder, or criticise the conduct of individual Peers other than on a substantive Motion to that effect. That has been the case for a long time. If we are all in the Chamber and I am talking about the noble Lord, Lord Oakeshott, and others, there is normally no problem. However, when the conversation happens outside and gets repeated in the Chamber—and Hansard today is much more widely read than people may believe—it is pulled apart. Further than that, the BBC Parliament channel and others can reproduce, often with selective editing, extracts from all proceedings. I found to my horror—not horror, that would be the wrong word—that when I spoke in the slavery debate, it was repeated eight times in seven days, right the way around the world. I suggest that that may have been part of the promotion of the party opposite. The first thing one wants to do is to take any heat out this debate.
The second question to the noble Lord, Lord Oakeshott, relates to the impact of the Bill and who it is intended to impact upon. I could go on for quite a long time with these questions, and the noble Lord would prefer that. I would like to ask whether he or the Liberal Democrat party has made an assessment of how many people may be impacted upon by the terms and conditions in the Bill; that is, Members of your Lordships’ House. Perhaps I could ask that, sit down and then jump up again.
I do not know if I can assist the noble Lord. The normal rule in Committee allows interventions, but it might be better if the noble Lord puts his points, other noble Lords speak, I then give a government view and the noble Lord, Lord Oakeshott, winds up. Would that be acceptable to the Committee? It seems to me that that is the way we should go.
The Bill, relating only to the House of Lords, raises an issue that I think should have been raised in a general purpose debate and then discussed within the House and the usual channels. It should not be presented in this way, as an attempt to drive through Parliament a Bill that impacts upon a particular group of people. After what was said, not recently, by the Conservative Party in an article attacking the noble Lord, Lord Sainsbury, who was a very good Minister and did a lot of good for this country, and what was said by others who, in the attempt to deal with cash for peerages, sought to knock each other and Members in this House, which is not normal practice and never has been, my concern is that within the international community in London, where I have worked, on and off, all my life, there is now a groundswell of nervousness and anxiety. It was started by Mr Cameron when he made a political speech saying they would tax foreigners in order to pay for a lack of Treasury revenue. That was followed up by the Prime Minister and the Liberal Democrat party which has asked for harmonisation of taxation throughout Europe.
The worry here—I cannot nod my head—for me is the impact upon the economy. Without wishing to bang on, but I shall bang on for a bit, I want to take noble Lords back to the basis of the economy which historically, when I was involved in the trade world, was based upon balance of payments surpluses, mainly in manufactures. For years we had surpluses in manufacturers because we were a manufacturing industry. Then at the time when I was on the Audit Committee with the noble Lord, Lord Ezra, and others in this House, we looked for some years at what would happen to the economy when oil ran out. I have to say that we were not predicting $100 a barrel or anything like that, but it was said that that was the time when the United Kingdom should reinvest heavily in other activities and industries. There were investments. There were high-tech investments. There was a silicon valley, where 50 per cent of all the computers in Europe were made, in Scotland, near Glasgow. There was also the silicon road down to Bath where high technology came and service industries began to spring up. But gradually the manufacturing base was eroded almost completely. Even some of the more brilliant developments, such as the Dyson machines, were made outside the United Kingdom. So the balance of payments in our economy ceased to be based on manufactures. It was therefore based on services.
In the days when I was on the committee for trade in invisible exports, services were deemed to be financial services such as insurance, banking, accountancy and consultancy activities, but there was also a range of other smaller manufacturing and service industries. Gradually, other than at the high level, many of these services have been exported, for example, telephone answering systems, to India. So what is the basis of the economy? It is not based just on the City of London. At the high-tech level, particularly in medical research and health, we are very advanced in the engineering but we are not very good at the application. The noble Lord, Lord Desai, and I have discussed these matters for many years.
I am worried that the statements that have been made about taxation are causing concern among members of the international community living in London and the United Kingdom within a free market economy. I may be wrong but this area is a large part of my life. I have been president of the Anglo-Swiss Society for many years. Its members always agree that taxation is a trade weapon. We have used it as such in the United Kingdom in giving tax allowances to people who built ships and people who imported things and then reused them. We started business capital leasing in a big way and even double-dip leasing. We led the field in airlines not owning their own airplanes.
I note that we are now in Committee. I recall the Standing Order that says that long speeches tend to weary the House. The noble Lord is in his 15th minute. For the last five minutes I have not managed to understand the relevance of his remarks to the Bill, which is about the domiciled status of Members of this House. He is giving us a very interesting tour of the recent history of the British economy but it has no relevance to the amendment we are discussing. I suggest that the noble Lord is close to being out of order.
I said that I would sit down and raise points on different issues.
I recognise a filibuster when I hear one.
That is very good as the noble Lord has always proposed harmonisation of taxation. As I say, I may be wrong, and I shall be pleased if I am proved to be wrong. However, at the moment, there is confusion about domiciled residence and ordinary residence. The Bill uses the word “domiciled”. Obviously, if you are born and brought up in the United Kingdom, you are domiciled in the United Kingdom, and will be for ever and a day. The noble Lord will correct me if I wrong.
That is not the case. I was born and brought up in the United Kingdom but from my birth until 1966 I was domiciled in the USA.
I am concerned about domicile, and so are other people. I assume that in some cases, in order to be domiciled, particularly in Scotland, you have to have a grave.
I am sorry. I missed the last word.
You have to have a lair certificate.
When I was born my father was, and continued to be for the whole of his life, domiciled in the USA. I acquired domicile of origin of the USA because the rule then was, and still is, that a child acquires the domicile of its father at the date of birth. I ceased to be domiciled in 1966 when the—
The noble Lord should address the Committee as a whole and not the Back Benches.
I am grateful to the noble Earl for that intervention but it may be convenient if I point myself in the direction of the noble Lord, Lord Selsdon, who raised this point. It was only when it became clear to me by 1966 that I was going to make my life permanently in the United Kingdom that I recognised that I had acquired, and should be treated as having acquired, a domicile in the United Kingdom.
That relates to the noble Lord himself, and I am not necessarily talking entirely about British subjects. My concern here, which is probably not real but perceived, is that there is a groundswell of opinion that all foreigners working in London will have to be domiciled there and pay tax on their worldwide income. That is a real fear. It would be helpful if the Liberal party could perhaps give the assurance that that will never be the intention. Domicile is not necessarily a matter of fact. Certainly for non-British nationals that is not the case, and it depends on your marital status and where you come from.
As President Sarkozy said the other day, London is the sixth or seventh city of France. There may be 750,000 French subjects in this country paying tax on their British income but not necessarily paying tax on their mortgages in France or other benefits. That has always been the case with the international community. Therefore, the employees have no objection to paying tax in this country and I do not think that any member of the international community objects to the principle of having a tax levy placed on him. Historically, it was a fairly simple matter. I speak from some practical experience. If you worked in this country and you were a foreigner, you had to show that you had an income of £25,000 a year and you paid tax on that. That was in the early days. When I was in the banking world and we employed people, that was the case, but you did not pay capital tax on other issues. Equally, if you were a British subject working abroad, you were allowed to have 25 per cent of your income paid tax free.
The clear thing about taxation is that it should be transparent. My worry is that this Bill as presented to the external world may cause concern, because it might lead to a perfectly reasonable statement that this should apply to the House of Commons and possibly to those in elected Assemblies in the United Kingdom, who number in general 106,203—local authority is another level. The principle is there. The difference is that, other than a few of us in your Lordships’ House, no one is elected. The other difference is that no one here receives a salary in this field. My wish is that the Bill could be changed somewhat. I will speak later to the amendments suggesting that certain people should be excluded.
Within that framework, we come to the existing 734 Members of your Lordships’ House. I would willingly read out all the writs of summons and provide everything, because in this world I have probably more information on your Lordships’ House than anyone else. I did the original report for the Labour Party and I have had this stuff for over 45 years. I feel quite concerned that, even in the 1999 Act, people ignored the Commonwealth. There are 1.8 billion members of the British Commonwealth, which represents 30 per cent of the population and 20 per cent of the land area of the world. The assumption here is that no member of the Commonwealth may become a Member of the House of Lords unless he becomes domiciled in the United Kingdom and leaves his country behind.
Equally, within that framework, one must accept that one of the main revenue streams of the poorer countries, particularly in the Caribbean, is financial services. Those may not appeal and hold no interest to the Members in the Liberal party, who are assembled in serried ranks as though they must have a Whip on for something that is really not that important. That makes it look even worse; if it is presented to the outside world that the whole Liberal party believes that doms, or non-doms, or whatever, should be taxed, that is a worry.
I can produce representations that have been made to me. At the moment, the money flowing out of London is very significant indeed, and other people are competing for it. The noble Lord, Lord Desai, may pull me apart, but I see that there is added value in the movement of that money and that, whatever money comes in, some remains and some goes out, and it is not purely in the City of London. We are now the second largest international investor in the world.
My life has been in trade and I have dealt with many of the more difficult countries in the world—the second biggest being Algeria. Some of that trade is in oil. I want some reassurance from all Benches that it is not their intention to pursue further the taxation of people who are working in the United Kingdom as though they were domiciled here. Yes, they can be ordinary residents. Some people may be resident to an extent in several countries, or they may move.
I often represent groups of pensioners internationally. Anyone in your Lordships’ House can represent whom they like. I represent the 19 million people who did not vote at the last election. I also represent many of the groups abroad in areas where I worked—roughly 12 million people.
Perhaps I should remind my noble friend that in this House we can represent only ourselves.
Then why do noble Lords declare that they have interests? If you declare an interest because you have a public job, are you representing something—as, for example, in the post offices debate today? I am not being flippant—
We are all having a laugh as well, but some of these issues are serious. The problem will not necessarily go away. The dangers here, frankly, are the politicians, of which I am not one; I never have been one and probably never will be. With this Bill in place, all three parties are effectively saying that they do not want people from the international community to be here unless they are domiciled and pay full tax on capital gains and on everything else. I can give noble Lords a list of where these people are, because part of my life has been in this field. Some are good and others are bad. But, in general, Switzerland, which is attracting large amounts of money again, does not have anonymous bank accounts and it negotiates and deals with people, who then set themselves up.
It would probably be better to debate the entire taxation system of international people, but I would like, in this case, the noble Lord, Lord Oakeshott, clearly to define what a domicile is, in terms of a foreign national who is living and working in this country. That may relate not only to a foreign national but to his wife of another nationality. Noble Lords will remember the poll tax; the Government are proposing a poll tax in another form. It is a tax on the individual. I know that it is difficult for me to make myself entirely clear—
I thought that that would get a laugh.
It is not relevant.
I think that noble Lords will find that it is relevant. Could I please again have a definition of “domicile”? The definition is that domicile can be applied to a person in both countries: the host country and the country of his nationality. If you are German or French, you cannot necessarily change your domicile, as the noble Lord, Lord Goodhart, has done. “Domicile” is the word that worries me. Residency is not an issue, although initially domicile was linked to residency. The amendment would remove the word “domiciled”. I am suggesting that we either remove the word “domiciled” or explain it in a way that is acceptable to the international community in London.
I always thought that this was a simple Bill. The Liberal party, as yet, does not have the power to impose taxation on anyone; long may it remain so. The amendments that have been proposed by the noble Viscount need some discussion. The purpose of the Bill is not to exclude foreigners—money-earning bankers and everyone else. It is about the tax status of Members of your Lordships’ House. The simple argument for the Bill is that, if you are going to be a Member of this House, you should be a fully taxpaying person. That is an easy concept.
When I first inquired about the nature of domicile, I was told the story about the grave. I said that I happened to believe in cremation and, therefore, I did not know what I would do. Should I buy a little pot for my ashes? Is that enough to be domiciled? I think that the point is very simple. People take non-domiciled status to escape taxation in this country and we would like them to come clean and be honest if they want to join your Lordships’ House. If they do not want to do that, they can go and cheat as much as they like. It has nothing to do with me; it is to do with the tax officers. The principle is: if you want representation, you had better pay taxation.
I did not think that I had heard my noble friend aright when he said that you had to have a grave in order to be domiciled. I did not think that you had a grave until you were dead, so perhaps the noble Lord, Lord Desai, who subscribes to this theory, could explain what it means.
I should have said that you had to have a plot reserved in your name in a graveyard and that you had to give evidence of that. I went into this when I had no money from which to escape the tax. I found out that even then it was not worth my while buying a little urn for my ashes for the future.
Perhaps I may help the noble Lord.
Just on the question concerning graves. There is a lair certificate, which is issued to you in Scotland when you reach the age of 50. You receive it in a letter from the Writers to Her Majesty’s Signet, and it is also proof of being domiciled.
I should say at the outset that, echoing the words of my noble friend Lord Strathclyde at Second Reading, we have no particular difficulty with the broad principle behind the Bill, which in a nutshell is that there should be no representation without taxation. However, the debate that has already taken place has demonstrated some of the complexities and has started to explain why, as my noble friend Lord Strathclyde said at Second Reading, such matters would more appropriately be dealt with in a government Bill.
Furthermore, even if they are to be dealt with in a Private Member’s Bill, another Private Member’s Bill covering this subject is already under consideration in another place—Mr Gordon Prentice’s Disqualification from Parliament (Taxation Status) Bill. It is a rather more all-encompassing Bill in that it covers both Houses of Parliament, which I think I am right in saying would make this Bill superfluous. I am afraid that I fail to understand why the noble Lord, Lord Oakeshott, is aiming his guns exclusively at your Lordships’ House. If changes are needed in this area, surely they are needed every bit as much in another place. I shall return to this issue later when we discuss another amendment tabled to rectify that irregularity.
As regards this group of amendments, which concerns the inclusion or not of domiciliary status, I noticed that at Second Reading the Minister said:
“We would have to think very carefully indeed about an approach which involved deeming another group as UK domiciled”.—[Official Report, 14/3/08; col. 1720.]
I think that my noble friend Lord Selsdon has expanded adequately on concerns in this area.
This whole matter needs considerably more thought. If the issue is genuinely and simply one of taxation status, however defined, surely more than a few Members of your Lordships’ House have worked abroad while being Members and have not paid full UK tax, possibly—dare I suggest it?—even Liberal Democrat Members.
As regards my noble friend’s proposed deletion of the words,
“and in no other country for taxation purposes”,
I agree with what my noble friend Lord Strathclyde said when he pointed out at Second Reading that this Bill appears to argue that Members of your Lordships’ House cannot have tax residence in any country other than this one. In fact, it says that they are deemed not to. First, I suspect that it is possible to be resident in more than one country for tax purposes. Indeed, the noble Lord, Lord Oakeshott, acknowledged in his speech introducing his Bill at Second Reading that it is possible to be partly resident here and partly resident overseas. Therefore, if the Bill’s bottom line is to ensure that full UK tax is paid in this country, one problem that I think it will create is that some people will be subject to double taxation. I doubt whether the double taxation treaties all automatically result in the United Kingdom receiving its full share of tax, which definitively would mean that the other country did not receive the tax. Is that what is intended? Perhaps it is none of our business whether tax is paid additionally elsewhere, but I hope that that is not the case, because it seems somewhat unreasonable.
Secondly, the amendment of my noble friend Lord Astor quite rightly specifically allows residence in another EU member state, a view that appears to be shared by the noble Lord, Lord Goodhart, in his Amendment No. 3 in the next group. The fact that this was not dealt with in the Bill in the first place raises questions, as my noble friend Lord Astor said, about how serious the position of the Lib Dems is on the European Union. My noble friend is absolutely right to probe where the boundaries should be drawn. So far the debate has brought out some important issues which need to be explained.
Perhaps I might make an observation or two. For a few years, I used to decorate the passages of the Home Office. I always shuddered when domiciliary and residential matters were discussed because I found them deeply confusing and I have found them so ever since. I am not sure that I am more suitably enlightened this evening. The noble Lord, Lord Desai, said something quite important. He was a little mocking of the Liberal Democrats, although they are used to that. He said that they do not have the capacity to tax people and that he hoped that they never would. Surely this Bill is about taxing people; it would ensure that certain people are taxed. I always thought that your Lordships’ House was not allowed to discuss matters relevant to taxation because of what happened 100 or so years ago. Therefore, I am surprised that this Bill, which is basically a taxation Bill, should have come to your Lordships’ House. I am also surprised that the Liberal Democrats—as has been pointed out, their serried ranks are full—have three Bills on the reform of the House all at once. That seems slightly obtuse and unnecessary.
I am concerned about the remarks made by the noble Lord, Lord Oakeshott, in his Second Reading speech, to which I listened with interest. My noble friend Lord Selsdon referred to asperity of speech—that you do not say anything unpleasant to another person, particularly without letting him know in advance. I do not know whether the noble Lord let the noble Lord, Lord Laidlaw, know what he was going to say, but the noble Lord, Lord Oakeshott, said:
“What a tragic scene that must have been. You come straight out of a meeting, get into the Rolls-Royce, say ‘PricewaterhouseCoopers, James’ to the chauffeur and then suddenly have a terrible memory loss. Why on earth are you going to see your tax adviser? Obviously, you are feeling pretty ill so you go straight to the airport, get on the private jet and go back to Monte Carlo. Thank goodness the noble Lord’s memory returned a year later and he was able to remember to sell his business for £768 million. The effect of that was to cost the British taxpayer at least £50 million in capital gains tax that he would have had to pay if he had honoured his undertaking”.—[Official Report, 14/3/08; col. 1709.]
All that may have been true, but it is pretty offensive stuff to say about a person who was not here. I wonder whether the noble Lord, Lord Oakeshott, had the courtesy of letting him know. It puts a nasty smell over the noble Lord’s Bill.
This has been a fascinating debate. The noble Lord, Lord Oakeshott, is discovering what all us anoraks on House of Lords matters discover: that every matter concerning your Lordships’ House is always subject to extensive scrutiny and debate. The noble Earl, Lord Ferrers, whom I admire greatly, was very unfair when he criticised the Liberal Democrat Party for the three Private Members’ Bills currently before the House. There are those of us who like nothing other than debating matters concerning reform of your Lordships’ House, particularly on Fridays. Long may that continue.
I think the Minister is confused. It is Thursday today.
It is true that today is Thursday but none the less most of our debates on the Bills introduced by the noble Lord, Lord Steel, and the noble Lord, Lord Avebury, were on a Friday. Indeed, I am very surprised that we are not debating on a Friday the Bill introduced by the noble Lord, Lord Oakeshott. No doubt we can have a debate about that in due course.
Perhaps I may follow the example of the noble Lord, Lord De Mauley, by restating the Government’s position on the Bill. We made it clear at Second Reading that the Government support the principle of no representation without taxation. Therefore, we support the intentions behind the Bill. The Government would never seek to impede progress of a Private Member’s Bill being taken through your Lordships’ House, and we would also hope that any such Bill would be subject to appropriate scrutiny.
I also said at Second Reading that we do not consider the Bill as it stands to be an appropriate vehicle to support. The Government gave a commitment in the Budget this year that the personal tax rules on residence and domiciled status would not be visited at least until the end of the next Parliament. Of course, the substantive question raised by the noble Lord, Lord Oakeshott, is worthy of consideration. As other noble Lords have mentioned, there is another Private Member’s Bill in another place introduced by my honourable friend Mr Gordon Prentice, which in a different way addresses the same questions of membership of Parliament and tax and residency.
I have to point out once again that the principle of dealing with this matter is supported by the Government. We do not think that the Bill of the noble Lord, Lord Oakeshott, is the right way forward, although clearly it is helpful for us to have these debates. If future legislation is introduced, they will undoubtedly be informed by discussions both in your Lordships’ House and in another place. Of course, this has to be seen in the context of wide reform of your Lordships’ House—I hesitate to mention the cross-party working group because many of your Lordships find that a rather disagreeable thought. Clearly we are making progress, and it is hoped that we will publish a White Paper before the Summer Recess. This is a matter that clearly deserves to be considered.
I thank the noble Viscount, Lord Astor, for his extraordinary tour around Europe, although the House is in some doubt about his geographical expertise. His Liechtensteins and Luxembourgs seemed to cause some confusion to all noble Lords. None the less, his amendment departs from the principle that the Government enunciated at Second Reading, and we would find it difficult to support the Bill as it stands.
The comments of the noble Lord, Lord Selsdon, were very interesting. He will know of the current review by Her Majesty’s Treasury. I have already said that the Government have given a commitment that the personal tax rules will not be revisited in relation to resident domiciled status until at least the end of the next Parliament. I think that that is an appropriate response for the points that he raised.
As this is primarily a Bill to deal with taxation, is it correct that it should be introduced in this House? Should it not have been introduced in another place? Secondly, if it is to do with taxation, should it not be a government Bill?
I have a supplementary question to that posed by the noble Earl. If, as is the policy of the Conservative Party, we moved to a wholly elected House, had salaries and had to consider our taxation arrangements, is it not inconceivable that that might be discussed in this House?
The Minister may like to answer that particularly interesting question, but I wonder whether I can, too. In the disastrous event of the whole of this House being elected, all the circumstances would be totally different. We would discuss all financial matters in this House as well as in the other place and the other House would hate it all.
I do not agree with the noble Earl, Lord Ferrers, about that, because the February 2007 White Paper that led to the votes was predicated on the primacy of the House of Commons continuing. Without giving away any secrets of the cross-party working group, on which the noble Earl's party is represented by the noble Lord, Lord Strathclyde, the leader of the Conservative Party in this House—he is making, if I may say so, a major contribution to our discussions—a point that unites all members of that group is the maintenance of the primacy of the House of Commons. The work being taken forward is on that basis.
As for whether it is appropriate for the noble Lord’s Bill to have been allowed to be, I can say only that since the House authorities have accepted that it can be debated here, with all my experience of the wisdom of those authorities, I am sure that that is entirely appropriate.
The noble Lord made a very interesting statement. He said that the Government wish to see this House, as well as the other House, elected, but for the primacy of the House of Commons to continue. I quite agree with that, but is he really saying that once this House is elected, those elected people will be second-class citizens compared with Members of the House of Commons?
While the noble Lord is considering that, has he not revealed that he is in fact in an undeclared dilemma? He has said that the Government will not oppose the Bill, but equally that the Government are committed to not changing the law on private personal taxation until the end of the next Parliament. It seems to me that he must hold to either one statement or the other, or else be pulled into two pieces.
When we were debating the Criminal Justice and Immigration Bill, the noble Baroness, Lady Miller, suggested that I was between a rock and a hard place. The noble Lord, Lord Elton, clearly thinks that I am again in that rather difficult position. I do not think so, because although we do not think that Mr Gordon Prentice's Bill meets all the points, it deals with the issue in another way that perhaps does not transgress so much the point about taxation changes that I made in relation to this Bill.
On the more general point raised by the noble Earl, Lord Ferrers, the cross-party group is working on the basis of the vote in the other place. There were two votes in favour: for an 80 per cent elected and for a 100 per cent elected House. It is working on that basis, but it is also working on the basis that whatever proposals are in the White Paper, they should be based on the essential foundation of the primacy of the Commons. It is perfectly possible to have an 80 per cent or 100 per cent elected second Chamber that still respects and reflects the primacy of the Commons.
Did the noble Lord say that the Prentice Bill transgressed the principle of non-interference with personal taxation less than this Bill? Was that an endorsement of that Bill—in other words, have the Government undertaken to diminish their commitment to leaving that form of taxation as it is now until the end of the next Parliament? If not, what exactly did he mean when he said that?
The noble Lord, Lord Elton, invites me to tread in dangerous water. I will try to tread myself out of it as quickly as I can.
Let me repeat: the Government gave a commitment in the Budget that the personal tax rules on resident and domiciled status will not be revisited until at least the end of the next Parliament. My honourable friend Mr Prentice's Bill takes a rather different approach from that of the noble Lord, Lord Oakeshott. That is what I was referring to. The Government have expressed reservations about the drafting of the tax provisions within Mr Prentice's Bill. The noble Lord certainly cannot take my comments on Mr Prentice's Bill as detracting at all from the commitment that the Chancellor made in the Budget. I hope that I have got myself out of the trouble that the noble Lord thought that I was in.
I am delighted to join the noble Lord, Lord Hunt, in the anoraks’ club. I hope that I can learn from him a light-hearted and good-humoured touch. I agree with the noble Viscount, Lord Astor, when he moved his amendment and hope that we can stay like that all day.
The noble Earl, Lord Ferrers, referred to quotations I gave in my speech at Second Reading. The quotes I gave regarding the noble Lord, Lord Laidlaw, were direct quotes from the House of Lords Appointments Commission. It is a great shame if we cannot quote from that body in this House. I hope he will accept that the other things he quoted were light-hearted and good-humoured and take them in that spirit.
I thank both Front Benches for their support in principle. To some extent, we have revisited Second Reading. I shall not make another Second Reading speech except to repeat that this is very simple. Some speakers have not quite understood the simplicity of the way in which the Bill aims to deal with the problem. If you sit in the British Parliament, if you sit in this House and vote on laws for the British people, you must pay full British taxes on all your worldwide income and capital gains, like the vast majority of your fellow citizens. That, to me, is entirely clear. My noble friend Lord Goodhart is well able to go into detail about the exact definitions of one sort of domicile or another, but there is no need to. It is a clear principle and I believe that the way in which it is stated in the Bill is clear—you pay tax on that basis whether you are domiciled in the UK or not. That is how you are charged tax.
The noble Viscount, Lord Astor, asked why Europe is not included. There is no problem. Peers can live anywhere they like but they pay tax here on the basis that they are resident here. That is a very simple principle which deals with a good number of the detailed points made.
The noble Lord, Lord Selsdon, raised a number of points. I promised to reply to them and will do so, in so far as they are relevant to the amendments. He asked me whether what I said on Second Reading had been accurately reported in Hansard. The answer is yes, apart from at col. 1721, where I am reported as saying:
“Briefly, I thank the Minister for giving further publicity to the occasional quotes I have been able to get into the newspapers”.—[Official Report, 14/3/08; col. 1721.]
That was a mistake. I wanted to thank the noble Lord, Lord Strathclyde. Apart from that, what I said has been accurately reported. I thank him again for congratulating me on my financial background, but that is not really the point. One does not need to be a financial expert for this Bill. I heard what he said about Switzerland and its attraction. Building Design magazine will tomorrow carry the story that the noble Lord, Lord Foster of Thames Bank, is believed to have moved to Switzerland and is non-resident in this country for tax purposes. We await developments, but I can confirm that if that is the case, the noble Lord would, if the Bill went through, still have to pay full British taxes in this country.
The principle is quite clear and I cannot see that amending the Bill to include people from Europe can be right. Citizens of EU countries are not able to sit in this House. They do not pay tax on the same basis, so I cannot see why one should make those changes.
The noble Lord said that if the noble Lord, Lord Foster, were resident in this country, he would have to pay tax if the Bill went through. Surely that makes it a taxation Bill.
No. If the noble Lord were non-resident abroad, it would not change his taxation status. We are just saying that, for Members of this House, it is effectively a self-regulating Bill about how this House works. If he is not happy with that, he is able to take leave of absence. This is not something that is generated for taxation from the Commons. It is about this House taking a decision on what basis its Members should sit here, which is why I believe that this is an entirely appropriate Bill for this House.
The noble Lord, Lord De Mauley, made various points, but it is fair to say that most of them referred to areas that will come up on later amendments. In particular, his points about double taxation come up in a later group and will be dealt with by my noble friend Lord Goodhart.
Apart from Europe, the key point and the key aspect of the amendments tabled by the noble Viscount, Lord Astor, is to make a differentiation between domicile and residence. To me, the principle is the same. The principle, as I enunciated at the beginning, is that Members of this House pay full British taxes on all their worldwide income and capital gains. It does not matter whether you have domicile; it does not matter whether you have residence. The principle is the same. I do not think that the great majority of people in this country know or want to know the difference. They just want to know that we are all paying full British tax. Therefore, I oppose, and we will oppose on these Benches, all these amendments.
Perhaps I may correct the noble Lord. I am afraid that he is wrong on the difference between domiciliary status and residency, with particular reference to many of the Commonwealth countries—Australia, New Zealand and other areas—where there is no double taxation agreement. While it may be said that someone is a Member of this House who was not a British national to begin with and became one later, his domicile may well be his country of origin. Within that, there may be differences between estate duty and capital gains, which do not exist in others.
I do not object at all to the principle that people who are elected to Parliament or who are in Parliament should pay tax. I believe that the same application should be made to all those 103,000 people who are elected representatives and to anyone who holds a government job in the United Kingdom, whatever their nationality and origin. I am not speaking just about Northern Rock, but about many government appointments where people come here from abroad, do not pay tax in the United Kingdom and, therefore, have a much higher net income than their British equivalents.
If you ask, as I have done, many headhunters about the situation for people who want to come to work in the United Kingdom, they say that, because it is not clear, people are turning down jobs. The noble Lord, Lord Hunt, has said exactly what I had hoped that he would say. The Government will stick to their last and there will be no changes in the tax law in this respect until after the next Government or Parliament.
We should not forget people who go on to contracts—often they may have a five-year or a three-year contract. What I am talking about might be described at one level or another as arbitrage. Sometimes people will be paid in one currency and not in another. Is there a capital gains tax when the euro, if you are paid in it, comes at a higher level? These are serious issues and the accountancy profession is really looking forward to this. As noble Lords know, the charge for matters on this by the senior partner is £1,000 an hour to lay on hands; £500 an hour for the next one; and the girl in the striped skirt—who is really switched on and does the work—is paid a lesser amount.
The accountancy bills for this are horrendous. There is an uncertainty which the Government may be able to clear at a later date. I believe that the noble Lord is saying, “Yes, let the Liberals go ahead and have their fun. It will not become law and we will be dealing with things at a later date”. I still believe that all this should have gone through a committee of both Houses, but I appreciate the determination shown by the noble Lord, Lord Oakeshott.
I thank the noble Lord for that; he has helped to clarify a point. If the point that he has been making were to apply to 103,000 elected bodies and so on, this would be a taxation Bill. But it is not. That is why it applies to this House. We are talking about this House only and what we do in this House. I did not say that there is no difference objectively between domicile, residence or anything else in general. If it was a general taxation Bill, of course I would accept that. I am saying that there is no difference as far as the effect of this Bill is concerned, because people are just going to pay full British taxes. That is the point. It is not relevant to this Bill, but it would be to a general taxation Bill.
On the question of whether there can be a change following what was said in the Budget, the noble Lord, Lord Hunt, said that the Government have said that they would not revisit it, but the small print of the Budget document states that the regime will not be substantially changed over the next two Parliaments in so far as it affects non-domiciles. The idea that passing this Bill and affecting perhaps a handful of non-domiciled Peers is a substantial change just does not stand up. I am sure that if it is a rule of the House, I do not see why it should be overtaken by that statement.
The noble Lord says that this is not a taxation Bill, and in so far as it merely addresses the status of Members of this House, he is clearly right. But when it affects the way in which a group of individuals is taxed differently from all other individuals, surely it becomes a hybrid Bill. I leave that question in the air because it will have to be answered before Report. The simpler question, in which the noble Lord invites those who are not expert to take part, is the effect of the amendments on domiciliation and the desirability thereof. That is because the philosophy behind the Bill is that people who contribute here but live and are taxed elsewhere take away more than they bring in. But we have a number of Members of this House—we are not supposed to name individuals—who live on other continents such as America and Asia, but come here occasionally and contribute a great deal. Losing them would be a great loss to us. Has the noble Lord considered the effects in both directions on the composition of the House and the quality of the contribution of Members.
That is a very fair point and I welcome the contribution of all these people, wherever they live. All I ask is that they contribute full British taxes at the same time.
At the same time as they contribute to foreign taxes?
Does the noble Lord agree that this Bill is not about the taxation of people, but about whether they want to resign if they do not want to pay full taxation? It is not a taxation Bill, but a resignation Bill.
I am grateful to all noble Lords who have spoken to my rather modest amendment, and particularly to my noble friend Lord Selsdon, who gave us a tour de force on the issues raised which I am sure will be read by the international accountancy profession for years to come. He made some extremely important points.
The noble Lord, Lord Wallace of Saltaire, accused my noble friend of filibuster. All I can say to the noble Lord is: do not tempt us because we might take you up on that challenge.
The noble Lord, Lord Desai, rightly pointed out that the Liberal Party has not had any power to impose taxation for a long time and it is unlikely that it will. Of course it has the advantage that it is unlikely ever to be in Government in the future, so its Members are given an enormous freedom that the rest of us do not have. But the noble Lord made one point about domiciliation that concerned me, and that is where you are going to be buried. I think he said that when you are over 50, you must have a plot or a place to be buried. That suddenly reminded me that I am over 50 and I have absolutely no idea whether I have a plot or place to go to, and I suppose that I had better do something about it.
That is the case in Scotland.
Scotland might be one of the places where I end up, and so I had better do something.
I interrupt my noble friend for a moment to suggest that he directs his efforts to making sure that he has a place in the next world, not in this one.
Of course I will take my noble friend’s advice and do the best I can.
Don’t leave it too late.
I will follow the example my noble friend sets for all in this House.
My noble friend Lord De Mauley put clearly the policy of the Conservative Party on this, which I agree with, and the noble Lord, Lord Hunt, put the Government’s view, which was extremely helpful. The noble Lord raised one issue and I wonder whether he can expand on it. Are these issues being debated or discussed by the cross-party group? Not being a member of the group, I do not know what it is discussing, but it would be interesting to know whether these issues come under the remit of that group.
It is tempting for me to go through the matters we are debating in the cross-party group, but I do not wish to anticipate the White Paper when it is published. I would have thought that this question would fall to be considered as part of a comprehensive programme of reform of your Lordships’ House.
I am grateful to the Minister for that response.
If the Bill went through and became an Act, would it be legal under EU law? I do not know the answer to that question under the various human rights Acts that we have passed. My noble friend Lord Ferrers and I took the National Lottery Bill through this House and there was a great debate after it was passed about whether Ministers should buy a lottery ticket. It was decided that we should all buy a lottery ticket to encourage other people to buy them. If we won £10 we would keep it, and if we won the jackpot we were offered the opportunity to give the money to charity. I remember saying to the Permanent Secretary at the time that if I happened to win the jackpot I would have to consider my place in Her Majesty’s Government very carefully. That was the only assurance I could give. However, I wonder whether that would be enforceable under the various human rights laws if one moved abroad.
The noble Lord, Lord Oakeshott, gave a partial reply to my amendment which showed that there is a flaw in the Bill. He said quite clearly that he had no objection to any noble Lord who sat in this House living part of the time or some of the time—whatever the words were—in, for example, France, and attending the House provided he paid full English tax. I agree with the noble Lord that that is a question of residency but not of domicile. If, for example, the noble Lord, Lord Oakeshott, moved and spent half the year in France, or whatever period it was, attended the House and still paid full English tax, he might also have acquired domicile status in France as well, which under this Bill that would mean that he would not be able to sit in the House because he might be domiciled in two places. That is a flaw in the Bill.
The noble Viscount has still not quite grasped how the Bill works. It is not objectively whether you acquire domicile or residence in France; that does not matter. It is simply whether you are paying full British taxes on the basis that you are fully resident and domiciled in this country. It is not a test of fact; it is a basis of how you are actually charged. It is as simple as that.
Perhaps I can remind the noble Lord that this is not true and that each country has a different requirement where after so many days you are deemed to be resident. But you cannot impose because if there is not a double taxation agreement, there can be double taxation. Perhaps the noble Lord could brush up on his residency and domicile facility. I will give him a paper on it.
The noble Lord, Lord Oakeshott, has contradicted something he said earlier. He is saying that you should pay full English tax—and I do not disagree with that—but the Bill refers to ordinarily resident and domiciled. He cannot have it both ways, which is what he is attempting to do. He is trying to produce some facts on which tax will be paid—which is fair enough—but in a way that does not quite work. I am afraid that that is the case and his arguments just do not hold water.
I would normally be tempted to ask the opinion of the House but I see that there is a mass of noble Lords on the Benches on my right and so, being the conciliatory person that I am, I shall read with great care what the noble Lord, Lord Oakeshott, said and I shall ask various experts on residency and domiciles to check that I am right. However, I know that he is not right. So, with those words of warning, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 2 not moved.]
moved Amendment No. 3:
3: Clause 1, page 1, line 4, at end insert—
“(1A) Subsection (1) shall not apply to a Member of the House of Lords who is domiciled in the United Kingdom but is employed outside the United Kingdom by the Crown or by an international organisation of which the United Kingdom is a member.”
The noble Lord said: I have tabled Amendment No. 3 at the suggestion of my noble friend Lord Oakeshott. Amendment No. 5 is purely consequential and I shall not speak to it further. During his opening speech at Second Reading my noble friend pointed out that there were some cases where Members of your Lordships’ House had been employed outside the United Kingdom as British or international public servants. He mentioned two specific cases. I have not asked their permission to give their names, but I doubt that they will object: one is my noble friend Lord Ashdown and the other is the noble Lord, Lord Robertson of Port Ellen, in his role as Secretary-General of NATO. I might add that I think the late Lord Cockfield had already become a Member of the House by the time he was appointed to be a Commissioner of the European Community, as it then was, in Brussels. No doubt there may be similar cases in future.
We therefore think it would be appropriate to exclude from the operation of the Bill Members of your Lordships’ House who are in the service of the Crown—for example, as diplomats or as members of the Armed Forces—although in fact people in those categories are mostly treated as residents anyway. We wish to extend that to employment with the international organisations of which the United Kingdom is a member. Those include, obviously, organisations such as the United Nations, NATO, the European Union, the World Bank, the International Monetary Fund, the World Trade Organisation, the Council of Europe—and one could go on for some time further. Persons working for organisations of that kind are performing a public service on behalf of a body of which the United Kingdom is a member.
We see no justification for excluding people in this category and giving the exemption only to those in the service of the Crown, as is proposed by Amendment No. 4, which is also in this group. We believe the exemption should extend only to those who retain domicile in the United Kingdom. An existing domicile is retained unless an individual decides to live permanently in another jurisdiction; it cannot be changed merely by taking up residence there. An appointment to work for an international organisation in another country is entirely consistent with the retention of the United Kingdom domicile.
In our view, however, the exemption does not and should not apply to people who are employed outside the United Kingdom in the private sector or are employed by foreign Governments. I am not for a moment suggesting that there is anything improper about taking up employment abroad; of course not. But, increasingly, people are appointed to your Lordships’ House to do a job here. That appointment is for life, and I believe that it involves an implicit commitment by Members to make themselves available to participate in the work of your Lordships’ House so long as they are capable of doing so. If such Members choose to take residence abroad, we believe they should be prepared either to surrender their right to participate in the business of your Lordships’ House or, if they wish to retain the right so that they can return to active membership later, to continue to meet the tax liabilities that they would undergo if they were residents of the United Kingdom.
Depending on the terms of the double tax treaty with the county of actual residence and the tax law in that country, that might involve paying tax in both countries. There are ways of dealing with that to involve the exercise of double taxation. The simplest, perhaps, is one that is used in relation to countries with which we have no double tax agreement; that is, to allow the tax paid in the country of actual residence as a donation from income for the purposes of United Kingdom tax. That, though, is plainly a matter for a future Finance Bill and not appropriate for this Bill.
I have considered whether it would be possible to extend the exemption to people who are employed abroad by a charity. That looks attractive at first sight—for instance, one might think, “Why should someone who is employed overseas by Oxfam not be exempted from this?”—but it would be difficult to monitor the rules if the exemption were extended that far, and it offers an opportunity for too many loopholes.
The exemption would not apply to Clause 1(6), which requires an appointee to your Lordships' House to be ordinarily resident and domiciled in the UK at the time of their appointment. If someone who would be suitable for appointment to your Lordships' House is employed for the time being outside the United Kingdom, that appointment can and should be deferred until that person’s return to residence in the United Kingdom. The problem therefore arises only where someone who is already a Member of your Lordships' House is offered a non-resident job by an international organisation.
Amendment No. 3 would allow Members of your Lordships' House to take up posts of public service involving residence abroad without having either to pay double tax or to surrender permanently all rights to participate in the business of your Lordships' House. Restriction to employment by international organisations of which the United Kingdom is a member will prevent abuse and ensure that the service in question has links to the United Kingdom. The amendment is obviously not fundamental to the Bill, but it is useful. It should, and I hope will, be adopted without disagreement. I beg to move.
moved, as an amendment to Amendment No. 3, Amendment No. 4:
4: Clause 1, line 4, leave out from “Crown” to end of line 5
The noble Lord said: While the first part of the amendment proposed by the noble Lord, Lord Goodhart, is understandable, the second part will make the Bill very difficult to administer. I can understand that a Member of the House of Lords employed by the Crown should be excused from the provisions of the Bill. I am sure that it is right and proper that those working for their country should not inadvertently get caught up in this legislation. But does the noble Lord realise what a Member of this House,
“employed … by an international organisation of which the United Kingdom is a member”
means? If he does, I suspect that he is on his own.
On 27 February, Dr Howells, the Minister of State for the Foreign and Commonwealth Office, said:
“Comprehensive lists of both the international organisations of which the UK is a member, and bilateral treaties under which the UK has obligations, are not centrally held, and to draw up such lists would incur disproportionate costs”.—[Official Report, Commons, 27/2/06; col. 304W.]
In other words, no one has a clue how many international organisations the United Kingdom is a member of.
If a Member of this House is sufficiently adept to organise their tax affairs in such a way as to avoid UK taxation on some or all of their income, I cannot believe that that individual would not be able to find employment, however nominal it might be, within one of the innumerable international organisations of which the United Kingdom is a member. From a purely practical point of view, the proposed exemption by virtue of being a member of an international organisation as described in the Bill creates a very grey area.
There is, of course, another aspect. If a noble Lord is employed by an international organisation, then however honest and conscientious they may be, there must inevitably be a degree of responsibility to his or her paymaster. While I have the utmost faith in the ability of Members of this House to behave completely honourably, I am not certain that there should be a special position in Parliament as is proposed. This leads one to ask, as my noble friend Lord Selsdon suggested, to whom the Bill is designed to apply. Could it catch Members of this House who are giving valuable service and whose presence adds to the Chamber? If a noble Lord has so arranged his tax affairs to his best advantage—something entirely within the law—should this House then deprive itself of the contribution that that noble Lord makes, as my noble friend Lord Elton said? The Exchequer would not gain, but this House could lose. Of course, such a noble Lord could rearrange his affairs to fall outside the scope of the Bill, but there must be a high risk that he or she would be reluctant to pay to join the work that we do in this House, leaving us all the poorer. In fact, it makes one wonder whether there is any benefit at all to be gained from this Bill, however attractive it may appear at first sight. I beg to move.
I want to ask the noble Lords, Lord Goodhart and Lord Howard, a very simple question about these amendments. As far as I understand these matters of taxation, which is not very much, would what the noble Lord, Lord Goodhart, wants to achieve be met by the Member concerned having a temporary leave of absence while he is employed in such positions? If that were allowed, we would not need to make any further changes to the noble Lord’s Bill.
I shall reply to the noble Lord, Lord Desai, on that. To provide in this Bill for a temporary leave of absence would require further amendment to the Bill, so it is not an answer to the problem.
If I may just use my 45 years here to comment on this, I have held 21 years of government appointments in one form or another, all unpaid. In the days when we received no remuneration at all, I had to explain to my colleagues why I was sloping off to the House of Lords early for a gin and tonic. It is extraordinarily difficult to balance that. I have worked in or with many countries—how many I cannot say—and have been paying tax on and off and have sometimes got tax relief.
If an individual wished to take a paid job, it would not matter who he was paid by or whether it was public or private but, if he was unable to attend the House of Lords, he would have the right to take temporary leave of absence. That is what he should do—and he is not surrendering very much. The incidences may not be great but when I was 25 it was quite significant. I was way down in the age group here.
We also have to think that withering on the vine takes place. There is another two years to go and already well over 60 per cent of your Lordships' House are pensioners in one form or another. Most of them will not necessarily take full-paid jobs—but I do not see why there should be any exceptions at all to this rule. The right should be there that if someone decides that he wishes to take an international appointment, whether paid by the private or the public sector, or even if he were self-employed and working on an individual project somewhere or other, he should be able to say to the House that he is taking leave of absence. That could be revoked at any time, when he returns. Why should the House not allow someone to come back and speak on a particular topic of a debate? If he was working for the Antarctic survey, for example, he might come back to speak on a global warming debate. That did actually happen at one time. I do not see why the amendment is necessary at all, but that is a personal view.
The noble Lord, Lord Oakeshott, stated with a certain pride that one year he paid a six-figure tax Bill, or something quite big. If he is as good as that he might well get a heavily paid job from one of the American banks or Dubai or anywhere else. We would hate to lose him, even for a short time.
This amendment, like the Bill, does not really work. It does not work for a number of reasons. As the noble Lord, Lord Goodhart, said to start with, it does not include anybody who went abroad to work for a charity. I find that extraordinary. In a previous amendment my noble friend Lord Ferrers suggested that I should do more so that I should have a better afterlife. He was very keen on that. If I took him seriously and headed off to some remote corner of the world for six months or whatever period to work for a charity, and if this Bill were passed, I might find myself excluded from this House when I came back. That is a flaw in the Bill. It shows that it is incredibly difficult to tinker with taxation, and it shows what a difficult time Chancellors of the Exchequer have.
I also find it extraordinary that the noble Lord, Lord Goodhart, should just dismiss the suggestion of the noble Lord, Lord Desai, about a temporary leave of absence. It seemed an enormously sensible proposal. I do not understand why he is so against that. Maybe the noble Lord, Lord Oakeshott, will be able to give us better reasons why he should be against it.
My noble friend Lord Howard of Rising made a very important point. We do not know how many such organisations there are. We do not even know the definition of “member”. What is the definition of member? What is a membership? Is it an honorary membership, a signed-up membership or a signatory? If some Minister somewhere signs something saying “Save the Walrus in Patagonia”, does that mean that that international organisation will be recognised and count for these purposes? Who knows? I think the lawyers would have enormous fun with the idea of “an international organisation of which the United Kingdom is a member”. I am surprised that the noble Lord, Lord Goodhart, who is such a distinguished member of the legal profession, would come forward with an amendment with such a gaping loophole in it. Perhaps it suggests that even his party and the mover of the Bill do not expect it to go very far.
The fact that the noble Lord, Lord Goodhart, has had to propose an amendment to a Bill put forward by someone on his own Benches—indeed, he said that his noble friend had asked him to put it down—raises a question about how much thought went into the Bill in the first place. That seems particularly unacceptable in a week when this House has sat until midnight more than once to consider issues of fundamental importance on a government Bill, showing how scarce and valuable the House’s time is. It would have been better to have got it right the first time.
I think I understand where the noble Lord, Lord Goodhart, is coming from, but Amendments Nos. 3 and 5, which would allow those working in an official capacity to retain membership of your Lordships’ House—
My Lords, I understand what the noble Lord said, but as he himself said, the House has met several times this week and we have had various government amendments; in other words, they thought a little better as the thing went on. If my noble friend Lord Oakeshott, in consultation with my noble friend Lord Goodhart, believes that this amendment is right, I do not see that the situation is any different.
I am most grateful to the noble Lord for his intervention. I will try to explain why I think these amendments need further thought. I was saying that I think that I understand where the noble Lord, Lord Goodhart, is coming from, but Amendments Nos. 3 and 5 would allow those working in an official capacity to retain membership of your Lordships’ House. Therefore, they introduce a glaring incidence of double standards. If accepted, it would on the one hand be permissible for those expecting to retake their seats in your Lordships’ House to go off abroad and earn substantial remuneration simply on the grounds that they are employed in some loosely defined way by the Crown or by an international organisation, of which the United Kingdom is a member, while on the other hand it would not be acceptable for other Members of your Lordships’ House to go off to work unashamedly and perfectly legally in the private sector overseas to earn valuable foreign currency to the UK’s benefit and then return and retake their seats.
What also needs to be answered is whether, in order to retain their status as Members of your Lordships’ House, Peers employed outside the United Kingdom by the Crown or by an international organisation, of which the United Kingdom is a member, would be required while resident abroad to pay United Kingdom tax, or at least to remit to Her Majesty’s Revenue and Customs the amount by which UK tax on their earnings would have exceeded the foreign tax they paid while they were so working had they been UK-resident. The amendment of the noble Lord, Lord Goodhart, does not appear so to provide. I think I understand his explanation why it does not but his noble friend’s Bill would therefore result in other Members of your Lordships’ House being exposed to double taxation, so it smacks of double standards, as I say.
My noble friend Lord Howard of Rising makes a very valid point with his Amendment No. 4; namely, that even if the rest of it is acceptable, the wording of the original Amendment No. 3 is far too wide. The United Kingdom is a member of many international organisations. The noble Lord, Lord Oakeshott, himself said at Second Reading that,
“we need to be careful to define the type of international public bodies which would qualify; otherwise, we could leave gaping loopholes”.—[Official Report, 14/3/08; col. 1710.]
We look forward to his proposal and perhaps that of his noble friend Lord Goodhart on how to deal with these problems.
I do not disagree with the noble Lord’s analysis but I thought that he was being a little unfair to the Liberal Democrat Party because surely the whole point of the Committee stage is to allow for amendments to be made in the light of discussion. To be fair, the noble Lord’s amendment came about because of discussion at Second Reading.
However, the Government have reservations about the way in which the noble Lord, Lord Goodhart, has approached his amendment. I reflect comments made by other noble Lords. No doubt, he is agonising over whether to press it to a vote. If he decides not to do so and to consider the comments that have been made, it seems to me that is a vindication of the way your Lordships work.
It seems to me that no one disagrees with the principle of providing an exemption to noble Lords working abroad for international organisations such as NATO and the United Nations on the basis that the Bill is drafted. It is clearly in this country’s interest that distinguished Members of Parliament and people from other reaches of life take part in international organisations. That must be in the interests of the United Kingdom. I am sure we acknowledge the splendid work carried out by noble Lords from all parties and the Cross Benches who have held very high office in international organisations. Clearly, they have made a huge contribution to those organisations and make highly relevant contributions to our debates in the light of their international experience. It would be a great loss if that were not allowed to happen in future.
The problem with the amendment’s drafting has already been mentioned. The United Kingdom is a member of many international organisations. The noble Lord, Lord Howard, suggested that we are not aware of how many but to try to discover that would be a futile and costly exercise. I remember answering a Question on international treaties and being asked how many this country had signed. Over the years we have signed hundreds, if not thousands, and I suspect that the same applies with regard to international organisations although I can confirm that we are not a member of the Patagonian Society of Walrus Lovers.
How does the Minister know if he does not have a list?
I have it on very good authority.
This is a problem that will have to be faced up to. The noble Lord, Lord Goodhart, himself referred to international voluntary organisations such as Oxfam or Save the Children Fund and illustrated some of the difficulties involved. None the less, I am sure we would consider that Members of your Lordships' House who were involved in such organisations could make a contribution on coming back from international postings. Clearly, in thinking through how this should be taken forward, great care needs to be taken in framing any exemptions of the kind suggested, to avoid any possible unintended consequences. That is one of the problems that we face.
The noble Lord, Lord Howard, suggested that only Crown servants serving abroad should be exempt from the provisions of the Bill. I have taken advice on this, and my understanding is that earnings from that type of employment remain taxable in the UK and that, in certain circumstances, legislation provides for HMRC to exempt such earnings in case of individuals who are resident abroad, for example, where an individual is being employed locally on a low rate of remuneration. That might, for instance, include a local national who is employed to provide clerical support for a British consulate. That is unlikely to include any of your Lordships if they are working for the Crown abroad.
My understanding is that the majority of Crown servants pay UK tax on their earnings and would be most unlikely inadvertently to fall foul of the provisions in the Bill. If noble Lords are interested, I will be happy to provide further information on this matter. Both noble Lords have raised very interesting points, which need to be considered by the noble Lord, Lord Oakeshott. The fact is that it is a rather complicated area that needs great consideration.
Perhaps I may very quickly take up a moment of our scarce and valuable time, as I heard the noble Lord, Lord De Mauley, say. The noble Lord asked me why we have brought forward one amendment to this Bill. It was as a result of a meeting that I had with the noble Lord, Lord Strathclyde, three days before Second Reading, when he raised this point. Therefore, we are trying to deal with the points that have been made, and if we cannot do that in the context of what are very clear principles, things have come to a pretty pass.
I was just going to be helpful. For many years, I had responsibility for relationships with international organisations, when I was in the Midland Bank Group. We were bankers to many of them; I probably have a list somewhere. It was amazing how many there were. My only unfortunate incident was when I was briefly sued by the Flat Earth Society, which was complaining that we made an acquisition in America, and it was trying to stop it and settle out of court.
There are many organisations, not least in the Middle East, and in many cultural parts of the world, which are quite active and genuine, which have bank accounts and which employ British subjects in one way or another. There can often be people who may be seconded by the Peace Corps in the United States or by voluntary organisations here. We do not want to stop the younger groups wanting to come into the House of Lords—
Does the noble Lord think that the solution is to have a prescribed list? Normally, it is the role of opposition amendments to suggest lists, which Governments always resist, because by listing some organisations you exclude others. That is a well-known principle, which noble Lords opposite no doubt argued from this side of the Chamber when they were in government. It may be that in this case—I should be interested in the comments of the noble Lord, Lord Goodhart—a prescribed list, amendable by affirmative order, might be an appropriate way to go forward.
Let us not have more legislation, for goodness sake.
The noble Earl, Lord Ferrers, was a member of the Government for 18 years. I wonder how many pieces of legislation he took through your Lordships’ House.
Stacks; and on the whole, they got through. But rather like the noble Lord, Lord Oakeshott, we actually listened to people and amended Bills. I cannot think what that has to do with this Bill this afternoon.
I think the next stage in the procedure is for me to reply on the amendment tabled by the noble Lord, Lord Howard of Rising, but not to deal at this point with the general structure of my Amendment No. 3.
The issue that causes particular problems is the allegedly very large and wholly uncertain number of international organisations. I do not accept that as being the case. The concept of international organisations is well recognised in international law. I seem to remember from my student days that this goes back to the International Postal Commission set up by an international agreement in the 1860s. This issue is very different from that of treaties. I quite understand why the Government do not know how many treaties, particularly bilateral treaties, are still in force, because they become sometimes more relevant and sometimes less relevant as time passes. But if there is an international organisation in existence, it can hardly escape being identified.
I wonder whether the problem is the definition of an international organisation. In a sense, the noble Lord has in his mind the kind of international organisations to which the amendment would apply. Is not the problem in the way that he has drafted the amendment that many organisations could be classified in that way? That is why I wonder whether he has given consideration to a list, as I have suggested.
I very much welcome the Minister’s suggestion and I may come to that later, but not at this stage. Such a body does not just have to be an international organisation; it must be an organisation of which states are members, and of which the United Kingdom is one of those states. I quite imagine the response to a Written Question to which the noble Lord, Lord Howard, referred. I can see that it might take a bit of money to go through the files of the FCO to find out how many international organisations there were of which the country was a member, but I cannot imagine for a moment that there is any difficulty in achieving that. It may take a bit of time and money, but that is all.
As it is 6.30 pm and we are here for half an hour, it might be useful to put the thought that the amendment is not predicated on the fact that we can draw up a definitive list of international organisations. If someone out of the handful of people to whom this might apply filled in a form at the time, would that not cover the issue?
Perhaps the best way of putting the position, rather than spending more time on this, is that I am certainly prepared to reconsider this issue. The Minister’s suggestion has been very helpful. In that case, provided that the noble Lord, Lord Howard, is prepared to withdraw his amendment to my amendment, I am prepared to ask the leave of the House to withdraw Amendment No. 3.
Before the noble Lord does that, I note that he says that he would consider what the Minister said and that his advice was very helpful. Would the noble Lord say which advice was helpful, because the noble Lord, Lord Hunt, said it had always been the Government’s attitude to say, “No, we do not want lists”, but then said that it would be a good idea to have a list? One has seen government views change quickly and radically, but not as quickly as that. Which does the noble Lord, Lord Goodhart, support—having a list or not having a list?
The noble Earl would expect me to say—indeed, I shall say—that what I thought was interesting was the proposal that there should be a list and a power to add to it by order. That seems reasonable.
When noble Lords propose lists, it is normal for the Government to point out the risk. Is it definitive and inflexible? Also, by listing certain things, you exclude others. But I thought that in this case a list might be a way of dealing with this problem, particularly if it was amendable by order, so that there could be flexibility. I do not think that there is any contradiction. Clearly, lists appear in legislation, but I was just making the point that in general Governments are a little wary of them.
I was trying to make the point that it was absolutely correct for the noble Lord to be wary of them. It is undesirable to make lists and it is even more undesirable to make lists which can be amended by order. We would end up with a whole lot of new bureaucracy. The noble Lord would be much better to stick to his original advice not to have lists.
Perhaps I may ask the noble Lord, Lord Goodhart, a question that he has not yet touched on. I asked him about membership. He said that there is a definition of “international organisation” which is recognised by law, but I wonder whether there is such a clear definition of what it is to be a member of an organisation. There can be various shades of being a member. Does it mean being a signatory? Is there an agreement? I am sure that he will correct me if I am wrong but I do not believe that there is such a clear definition of a member of an organisation as there is for an international organisation.
I do not want to go into too much detail now but I think that there is a fairly clear and well established precedent for what constitutes an organisation of this kind. It is not just an agreement between two, or perhaps more than two, countries to do something together; it is an agreement that involves setting up an organisation which has membership, the members being, or including, states—in this case, the United Kingdom being one of those states.
Having listened to this debate, which I find fascinating, perhaps I may ask the noble Lord whether there is a difference in legal terms between being a member of an organisation for which the UK has ratified the agreement and being a member of an organisation for which the UK has not ratified the agreement. Does that affect the position?
I am sorry; I missed the noble Earl’s last sentence.
Does that affect the position?
I am afraid that I do not follow the noble Earl. I must have missed something a little earlier than that. I do not think that the question of what involves an international organisation of which individual states are members is particularly difficult.
I thank noble Lords for their many comments but I remain completely unconvinced. I do not think that it is any good to say that it is easy to get a list when a Minister of the Government has said that it is actually very difficult, if not virtually impossible. This cannot have been looked at very seriously if we are not even sure what a member of an organisation should be, and on those grounds I should like to test the opinion of the House.
24 April 2008
Amendment No. 3 is therefore not amended.
I do not intend to press Amendment No. 3 this evening partly because I have been informed by one of my noble friends that a committee of your Lordships’ House is in the process of drawing up a list of international organisations of which the United Kingdom is a member.
In those circumstances, further revision of Amendment No. 3 to take this factor into account is likely to be desirable. I add my thanks to the Minister for his suggestion. This would be an appropriate moment to beg leave to withdraw the amendment.
The noble Lord said that he would address the point raised by the Minister about charities and NGOs, which he has not done, and which is related to his amendment.
We will further consider that between now and Report. As I made clear, I had considered and taken a specific view on it. We will see if there is a practical way of bringing that into account in the Bill on Report.
The noble Lord said that he knew what was happening and that he therefore did not want to include his amendment in the Bill. If not, why did he vote against the amendment to the amendment?
Because I totally disagree with the amendment to my amendment. It was not my choice that it should be voted on; that was the choice of the noble Lord, Lord Howard of Rising. We were certainly not going to either support it or abstain. I propose to sit down very quickly before anyone else intervenes. I beg leave to withdraw the amendment.
Amendment No. 3, by leave, withdrawn.
[Amendment No. 5 not moved.]
I beg to move that the House do now resume.
Moved accordingly and, on Question, Motion agreed to.
House adjourned at 6.47 pm.