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Finance Bill

Volume 739: debated on Monday 16 July 2012

Second Reading (and remaining stages)

Moved By

My Lords, as noble Lords are well aware, when this Government came into power they inherited the largest peacetime deficit in our history. We are doing everything possible to get the economy moving and to deal with the enormous debts we inherited. Last week’s Fiscal Sustainability Report by the Office for Budget Responsibility highlighted the importance of the Government’s plans to ensure the long-term sustainability of the public finances. Our consolidation plans build on last year’s public sector pensions deal, which the OBR has identified as instrumental in preventing further increases in public sector net debt over the long term.

This Bill implements further reforms to improve the state of the economy. Despite the challenging economic backdrop, we remain committed to supporting growth. The Bill introduces a number of changes to encourage growth in our economy and help businesses of all sizes. The Government have clearly set out their ambition to have the most competitive tax system in the G20. The competitiveness of our tax system diminished over the last decade, as our competitors cut their corporation tax rates. We have taken action to address this. Clauses 5 and 6 make further cuts to the main rate of corporation tax, to a rate of 23% next year. This will be followed by a further cut in the Finance Bill of 2013. A cut in the main rate of corporation tax benefits businesses right across the country. As the CBI said:

“The additional cut in the headline rate of corporation tax will help make the UK a more attractive place for companies to invest, do business and create jobs”.

The Bill also introduces new controlled foreign companies rules designed to improve the UK’s tax competitiveness. These reforms will ensure that this is done in a way that reflects modern, global business practices, significantly reducing the compliance burdens of business. As my right honourable friend the Chancellor said in his Budget Statement, this reform,

“will stop global firms leaving Britain, as they were, and encourage them to start coming here”.—[Official Report, Commons, 21/3/12; col. 802.]

WPP and other major companies have recently announced that they are considering a return to the UK, or that they will move their tax domicile into the UK.

Alongside these reforms, the Bill also introduces a patent box to encourage innovative activity in the UK, but competitiveness is not only about the corporation tax rate. We had been told that the 50p rate of income tax was damaging to our competitiveness and that it would not raise revenue. Indeed, the HMRC report, published alongside the Budget, sets out that the 50p rate is distortive, is damaging to international competitiveness and is an economically inefficient way of raising revenue. In short, the 50p rate has failed. The analysis by HMRC shows that the yield would be, at best, £1 billion and, at worst, may raise nothing at all. This is because the behavioural response has been substantially larger than expected. The 50p rate has damaged the UK’s competitiveness at the very time we must do all we can to improve it. That is why we will reduce the additional rate to 45p from next year. As the CBI said:

“Reducing the 50p income tax rate will send a clear signal that Britain is open for business”.

We want to make the UK the best place in Europe to start, finance and grow a business. That is why the Bill introduces measures to enable greater investment in our small and medium-sized companies. The increases to thresholds and better targeting of the enterprise investment scheme and venture capital trusts in Clauses 39 and 40 will allow businesses to raise equity more easily. The Bill also establishes the new seed enterprise investment scheme to encourage investment into new, early-stage companies by providing tax relief of 50% to investors.

The Bill also provides for individuals. The increase in the personal allowance in Clause 3 will set the value at £8,105 from 6 April this year and we have announced a further increase of £1,100 next year, the largest ever increase in cash terms. The Government are taking 2 million people out of income tax and providing a tax cut to 24 million people. This is a major step towards our commitment to raising the personal allowance to £10,000 by the end of this Parliament.

The Bill also makes changes to the age-related allowances that support our objective to make the tax system simpler and easier for people to understand, but no pensioners will be worse off in cash terms as a result of these changes and this year our triple lock will see the basic state pension increase by over £275. This is £127 more than the previous Government’s plans.

This Government are responsive to the concerns of working families and businesses about the cost of living and the challenges of running a business. That is why we have deferred the fuel duty rise, so that road users are paying 10p a litre less in taxation than they would be doing had Labour still been in power. As RAC Foundation director Professor Stephen Glaister said:

“This is good news for drivers and good news for the country”.

As noble Lords know, this Government have also had to make difficult decisions so that we can tackle the deficit. This includes withdrawing child benefit from households earning more than £50,000. This is a fair way to make savings. We are also taking steps to ensure that the wealthy pay their fair share. The Budget package ensures that the wealthiest will pay five times more than the cost of reducing the additional rate of income tax. The introduction of a new higher rate of stamp duty land tax at 7% on properties sold for more than £2 million will raise over £1 billion in the next five years. The new stamp duty land tax enveloping entry charge rate of 15% will deter those seeking to put their high-value property into corporate structures to avoid tax. The introduction of the UK-Switzerland agreement will ensure that we address the tax loss from those who put their money into Swiss banks to evade tax, and we are tackling tax avoidance with measures in the Bill raising over £1 billion in total.

We will also raise revenue from those sectors that are better able to pay. The increase in the bank levy in Clause 209 will ensure that that the levy will raise around £10 billion from banks over the course of this Parliament, yield that is helping to ensure that we can reduce the deficit, which in turn ensures the stable, low interest rates that are of such benefit to our economy.

The Government are committed to greater consultation on tax policy changes. Most of the measures in the Bill were announced at Budget 2011 and have been subject to extensive consultation. We published more than 400 pages of draft legislation for comment in December and received more than 450 comments. This consultation has ensured better legislation with fewer changes required.

The Bill sets out changes to improve our competitiveness, encourage investment and support our businesses through the recovery. Of course, we always said that recovery would be choppy. In fact, last year the independent Office for Budget Responsibility revealed that the underlying damage to the economy, and our challenge in repairing it, was much greater that anyone had thought. However, we are doing everything possible to confront Britain’s problems, get the economy moving and deal with the enormous debts we inherited. The Bill builds on the progress that the Government have made to date to help families, help business and support economic growth, and I commend it to the House.

My Lords, because of the way in which legislation progresses through the Commons and through this House, I feel that all of us present tonight have discussed all the issues contained in the Bill on numerous occasions. I have to confess to a small temptation just to say, “Please refer to speeches I made earlier”. It means that I shall be brief and just hit on the few issues that I wish to highlight.

To me, the most important measure in the Bill is the raising of the starting threshold for income tax to £8,105 this year and to more than £9,000 next year. Two million low-income earners will have been taken out of paying income tax altogether by this and previous lifts in the threshold and, as the Minister said, some 24 million middle and low-earning income tax payers will have seen their income tax bills reduced by about £330. This has to be right. It moves us well on the way to a starting threshold of £10,000, as set out in the coalition agreement. As a Liberal Democrat, I see it as a significant move towards a threshold that, in essence, starts above the minimum wage, with the notion that there is a relationship between earnings on the minimum wage and the point at which income tax starts. I believe that that has to be right as a major incentive into work and a major measure to tackle long-term poverty.

Cutting taxes significantly at the bottom end of the earnings spectrum is now pretty much taken for granted as the right thing to do across all the parties. I only have a short memory, but I remember all the debates not long ago when this looked pretty revolutionary. The Labour Party chose not to do it in what were considered to be times of plenty, so the fact that it is now being achieved in times of austerity will, I hope, embed this type of philosophy across all the things that we do, no matter which party we come from, as we look at taxation in the future. This is one of the most progressive tax strategies that Governments have adopted in recent years. It has the character of a permanent change and to me is far more effective than the one-off one-year VAT cut that has sometimes been proposed by Labour—which, interestingly, would help the richest members of our community the most.

The Bill also continues to strengthen support for business. I am particularly pleased with the increased incentives for small businesses, new start-ups and entrepreneurs. However, I ask the Government to look at extending the enhanced capital allowances regime to small businesses more widely than just to those in the enterprise zones. I am a member of the All-Party Parliamentary Group on Rebalancing the British Economy, an excellent group that I recommend to the House. Of all the evidence that the group has heard, I have been most struck by that given by Brompton Bicycles, a firm that sells a conventional product but is successful in large part because its manufacturing processes are at the cutting edge of technology. UK small businesses desperately need to accelerate their adoption of new manufacturing technologies to compete and grow. They may not be high-tech in their products, but to be high-tech in their manufacturing tends to make them much more competitive and effective. Incentives to invest in these new processes for small businesses are crucial and I encourage the Government to put this high on their agenda.

The tax avoidance measures in the Bill are very welcome and, I would say, long overdue. Stamp duty has been a particular concern of mine because avoidance by the wealthy is so unfair to the ordinary house buyer. The Bill clamps down on some schemes that use domestic corporate structures to avoid stamp duty, though, in my reading it has not yet eliminated what I would call the Cayman Islands problem—the number of properties that are now already in Cayman Islands trusts or will be put into them in future, avoiding not just stamp duty but also capital gains and inheritance tax. I hope that the Government will make a move on that very soon because it remains a significant loophole and a real sore to every taxpayer who pays up on stamp duty.

Economic growth overshadows all fiscal and economic debates. I am therefore pleased that the Funding for Lending scheme was launched last week by the Treasury and the Bank of England. However, it strikes me as extraordinary that the Treasury and the Bank of England have had to set up a scheme in such a way that banks can get discounted loans only by actually maintaining or increasing lending. That tells you that that they have responded to just about nothing else. To me, that underscores the argument for banking reform, which, hopefully, will be a major occupation for this House after Christmas.

This is a sensible Bill that has been produced in difficult times and I very much hope that we will see it pass.

My Lords, I spoke in this debate last year to express my concern that, despite numerous statements by the Prime Minister before and since the general election about the importance of recognising marriage in the tax system, nothing has happened. It is a great sadness to me that, one year on, that is still the case.

Let us be very clear: the commitment to recognise marriage was in the Conservative manifesto and made it into the coalition agreement, so it is not a policy that has been dropped because of the coalition. The Liberal Democrats have formally been given the right to abstain and, in embracing the coalition agreement, have consented to this. This should ensure a majority adequate to secure the passage of the measure, given that not only Conservative Members of another place will vote for the proposal. There is therefore no reason why the Government should not action their commitment and every reason why they must.

Of course I understand that the coalition agreement pertains to the period 2010-15, so I am not suggesting that the Government have reneged on their commitment. What I am saying is that, given the importance of this commitment, it is a great shame that it has not been given greater priority. Moreover, because of developments since 2010 and the time that it will take to introduce a transferable allowance, I consider that it is now imperative that the introduction of the allowance be made a top priority for 2013.

UK residents find themselves in a relatively unusual position. Only 20.9% of people living in OECD member states are subject to individual taxation without spousal allowances or credits. Most of these live in just two countries—the United Kingdom and Mexico. Among highly developed large economies, the UK is alone in operating a tax system that ignores spousal obligations.

Given that we fail to recognise marriage in the tax system, it is hardly surprising that many married couples in the UK are treated less well than they would be in other developed countries, on average. When the commitment to recognise marriage in the tax system through a transferable allowance was made in 2010, the latest available figures demonstrated that the tax burden on a one-earner married couple with two children and on average wage was 33% greater than the OECD average. Consequently, UK residents faced a greater disincentive to marriage than did most people living in the developed OECD world.

That is of importance for two reasons. The first is child development. The social science evidence is very clear: marriage provides a much more stable environment for child development than cohabitation, so there is no public policy merit in making it harder for people to marry here than in other developed countries. This is hugely important, because the evidence also shows clearly that children raised in stable two-parent homes do much better on average, according to every relevant benchmark, than children raised in single-parent homes. I do not say this to criticise in any way single parents, who for the most part do an excellent job in what sometimes are extremely difficult circumstances, and I believe that they deserve our full support. Rather, I say it because we need to ensure that public policy does not make it more difficult for couples who want to marry to do so in the UK than in other developed OECD countries. If we do not make this change, “broken Britain” should come as no surprise to us.

The second reason is choice. In approaching choice, I am aware that some people find the idea that fiscal policy has anything to do with marriage ridiculous. They assert that people get married for love and they give the impression that any reference to fiscal consideration in the context of marriage is somehow crass and insensitive. These people, who usually in my experience are very well off, make the basic mistake of confusing two different decisions. As I said in last year’s debate, of course people do not fall in love for fiscal reasons. However, when they fall in love and decide that they want to be together, they face a choice: do they marry or cohabit? It is in making that decision that fiscal considerations are very real, particularly if you are on a low to modest income. Statistics demonstrate that 90% of young people aspire to marry, so why then is the marriage rate at an all-time low and the cohabitation rate at an all-time high? Clearly, people have not stopped falling in love and deciding that they want to be together.

I do not want to suggest for a minute that increasing cohabitation is just, or even primarily, the result of fiscal policy—undoubtedly there are other significant cultural factors—but I suggest that fiscal policy is a contributory factor for the evident disconnect between the aspiration to marry and the level of marriages. The fact is that people in the UK fall in love and decide that they want to be together in a context where the option of marrying is more difficult than it is for most people living in the developed OECD world.

Bringing ourselves into line with international best practice and recognising marriage in the tax system will help to make it no more difficult for those who aspire to marry in the UK to do so than is the case for most OECD residents. Moreover, I contend that the case for recognising marriage in the tax system is even stronger today than it was in 2010. Analysis of the latest OECD figures carried out by CARE and presented in Taxation of Families 2010/11 reveals that a one-earner married couple with two children and an average wage now face a tax burden that is 52% greater than the OECD average, a significant increase on the 33% figure for 2010.

This deeply disturbing deterioration impels us to delay no longer the introduction of the transferable allowance. The Prime Minister, who has talked so much about supporting marriage, cannot allow a situation to develop in which the tax disincentives to marriage increase significantly under his premiership. He must ensure that, at least in terms of fiscal policy, it is no more difficult for couples to marry in the UK than it is across the OECD on average.

Before I conclude, I wish to touch on the extremely important subject of Her Majesty’s Revenue and Customs and the IT changes that will need to be implemented in order for the transferable allowance to be given effect. It has been suggested that it could take a year or more for HMRC to make the necessary changes. In the light of this, there are five key questions for the Minister.

First, has the Treasury asked HMRC to assess how long it will take to make the requisite IT changes to introduce the transferable allowance? Secondly, if the answer to the above question is yes, how long did HMRC estimate and, if the answer is no, will the Minister urgently ask them to make an estimate? Thirdly, has the Treasury instructed HMRC to start making the necessary IT changes to facilitate the introduction of the transferable allowance? Fourthly, if the answer to the third question is no, will he urgently ask HMRC to begin making the necessary IT changes? Fifthly, when do the Government intend to bring forward legislation to formally introduce the transferable allowance?

I look forward to the Minister’s reply. If he does not have all the information to hand today, I would be most grateful if he would write to me and place a copy of the letter in the House of Lords Library.

My Lords, I will say a little about small business and the EIS. The Minister stressed the importance of small businesses in his speech, and I think everybody across all shades of party opinion knows that small business can provide extra employment and boost the economy, and that the proportion of GDP and employment it represents continues to grow.

The EIS has been a considerable success and raised some £12 billion of high-risk equity for small businesses. It was interesting that the French Government sent a delegation over to the UK to look at why the EIS had worked so much better in the UK than the French scheme had in France, even though, on the face of it, the French scheme looked to be more generous. I also make the point that equity is just as important as debt—small businesses cannot, and should not, view bank borrowing as a substitute for equity. As a buffer for survival, equity is absolutely necessary.

At this point, I declare an interest, which is duly in the register, as chairman of the EIS Association, the not-for-profit trade body representing the various professionals involved in promoting and creating EIS offerings. My colleagues from the EIS Association have had an extremely constructive dialogue with HMRC and I pay tribute to the good will and constructive actions of particular individuals in trying to address some of the issues that need addressing, which the Finance Bill does to some extent. I was extremely pleased that the Government listened to the proposals to widen the coverage of the EIS and deal with the follow-on situation of small companies that had survived and grown a bit but needed some more equity capital. It was a pity that the Government were obliged to delay getting EU state aid clearance, as I do not see that these sorts of measures are any of the business of the EU. I am very pleased that the Government did listen and have addressed that.

I am therefore a little disappointed in respect of two big areas in the Finance Bill. The first is the limiting of loss relief to £50,000, or 25% of annual income, which changes the risk-reward nature of EIS investment. In a way, the Government have given with one hand, by widening the parameters, but taken back with the other hand with that measure. Given that small company investment is extremely high-risk, what the loss is going to be with small companies that fail is a material consideration. I know there is some amelioration of that in that losses can be spread over two years for tax purposes, but I feel that this was slightly a political measure and not really thought through in terms of its impact. For all those who invested under EISs in the past on the basis of loss relief, it is also retrospective in that it is being changed after they took the decision to invest based on the then risk/reward parameters.

A minor point is that the list of qualifying investments has been looked at from the negative side but not from the positive side. I cannot see why nursing homes and hotels are not qualifying investments. As the record shows, neither is an area where people make instant profits and both are socially useful. There is a case for reviewing the rules on a positive side.

The second point is perhaps the most material. The EISA has had constructive discussions with the Treasury for some time on measures to stop what I think we and the Government have viewed as abuse of the EIS, where the basic objectives, which we all understand, are being rather used for tax schemes and getting around the rules. Everybody in the industry broadly understands what those abuses are and is pretty constructive about dealing with them. This has led to the new rules in the Finance Bill that create Section 178A of the Income Tax Act 2007. It introduces new disqualifying arrangements which apply to VCTs and the new SEISs as well as EISs. These include test conditions A and B, and if either is met the arrangement is disqualified. I shall read condition A because I get very upset that the drafting of a law in this area can be so entirely opaque:

“Condition A … is that as a result of the money raised by the relevant issue being employed for the purpose of the relevant business activity, the whole or the majority of the amount raised is, in the course of the arrangements, paid to or for the benefit of a party or parties to the arrangements or a person or persons connected with such a party”.

I am afraid it is extremely opaque. I think I know what it is getting at: that where an EIS-qualifying company is to some extent fronting for a larger company that is underwriting its business risk, it is clearly not cricket. I wish that things such as that could be drafted in a way that is a little clearer and more straightforward.

The second condition, condition B, outlaws where a part of business venture, not otherwise qualifying, would qualify. For example, if, say, old people’s homes do not qualify, you separate out a restaurant in the old people’s home which would qualify. Candidly, I cannot particularly see the harm in that if it is employing people and providing a service. It would again be helpful if what the condition means were clear, but I question whether it is of much economic use.

The even bigger issue is that the new arrangements include a process for advanced assurance guidelines by HMRC. This is a form of pre-clearance. In the light of those very opaque conditions A and B, it is almost necessary in order for people to know whether an EIS proposition is okay. It is therefore helpful, but my first point is that it will require HMRC to be adequately resourced to provide and assess these pre-clearances. If not, there will be delays in the funding that small business badly needs.

I believe the initial draft of the Revenue’s guidance notes have, for some reason, been fairly widely circulated, which was not intended. As the notes stand, they are capable of being interpreted in an extremely unhelpful way. Most people know the issues that these guidelines are getting at but, on the face of it, the wording could unintentionally disqualify a range of businesses, especially developing, building, owning and operating solar, wind and other energy projects benefiting from ROCs. Typical characteristics of such investments are: that the majority of the investment comes from one or other EIS fund or VCT; where the business is a start-up; the customer servicing and maintenance function has to be outsourced initially because the business cannot afford to do it itself; and if there are any major engineering or other capital costs, they need to be outsourced to a third party until the business is large enough to be able to afford them. The guidelines include these four characteristics as disqualifying the business for an advanced clearance guideline under something called VCM21035. I cannot believe that it is the Government’s intention to disqualify, in particular, start-ups. It does not mean that these investments are automatically disqualified for EIS relief, but they are disqualified for this new advanced clearance. Of course, the new advanced clearance will, in practice, become an effective prerequisite in that no one is going to invest in an EIS proposition unless it has an advanced clearance under the new arrangements. The guidelines do not say, but could usefully do so, that—notwithstanding the specific guidelines—if the promoters believe the business is not abusive they should explain when they apply for advanced clearance. I think that is particularly relevant to the point I just made about start-up companies in the solar industry.

I also understand that the objectives of most of the fairly extensive clauses in the guidance notes go quite a lot further than what is in the Bill, which I do not think is necessarily intended. The guidance would be much more practical and helpful if it gave illustrations of the things that it seeks to disqualify. As the guidance stands, it would be much more practical for EIS funds to invest in follow-on situations and to avoid start-up seed capital. Again, this is entirely at odds with the objective of the new SEISs.

I hope the guidance notes will be reviewed and refined. At present, they will cause too much uncertainty and lead to a reduction in the flow of EIS funds to perfectly reasonable propositions. The essence of the point is that VCM21035 sets out where HMRC will decline to give advance assurance. At present, as I have just said, this is well beyond the new disqualifying principles within the Act. It also gives HMRC too much discretion to pick and choose whether or not companies get advance clearance. I am sure it is not the Government’s intention to disqualify start-ups from being largely funded by VCTs and EIS funds, nor to disqualify companies which in their early stage need a certain amount of outsourcing.

Finally, another issue that delays the flow of EIS funding is MiFID. Advisers need to be ever more protective if they are to promote EISs to their clients. It is not just a question of their clients signing to say they are a sophisticated investor; the adviser needs to write a paper saying why he considers the client to be a suitable investor for something as high-risk as the EIS. The bottom line is that, other than the most sophisticated advisers, most give up and say, “Well, we’re really not attached to this area. It is too difficult and too risky”. To the extent to which we can have any flexibility under MiFID, it is necessary to make it easier for intermediaries and financial advisers to be able to promote EIS investments.

My Lords, the noble Baroness, Lady Kramer, probably expressed what we are all likely to feel about this debate. We have had in the House a series of economic debates and questions and many opportunities to consider the Budget and its ramifications over quite a considerable period. That may just account for tonight’s fairly limited attendance in consideration of the Finance Bill. Of course, we all recognise the limitations of this House in considering the Bill, but there is no doubt that in the context of the developing economic situation and the Government’s actions over the past few months, it feels as though it has been with us for a very long time indeed. This is not, however, the Bill which the Chancellor introduced. The outstanding feature of this Finance Bill is that it was trailed from the Treasury before the speech was made; the kind of approach which back in 1946 caused a Chancellor to be dismissed for speaking out of turn. These days, of course, trailing things is looked upon as a high political art form, though a great deal of what was trailed then did not turn out to be reality.

We had not been very long into discussions on the Finance Bill before the Government began to exercise a dizzying series of U-turns, whether it was on hot food, static caravans, improvements to listed buildings or charitable donations. All were changes which the Government then dressed up as the result of consultation, when in fact the proposals in the Budget were repudiated by a Chancellor who was fast losing confidence in his own decision taking. The result is that we will have from the Minister a paean of praise to the wisdom of the Government for the way they have handled the economy, with ne’er a mention in his speech of where the resources are meant to come from to fill the gaps which these subsequent concessions have caused in the revenue. We thought many of these original measures were misconceived; the Government have merely spread consternation by their rethinking of the position. The other characteristic of all Treasury Ministers—and the noble Lord, Lord Sassoon, enjoys his part in that role—is that they appear to address everything to deal with the nation in terms of the Finance Bill being concerned with business, taxation and how the country pays its way.

Those are important considerations. They ought to be a substantial part, and inevitably are, of every Budget. But where is the concern about the society that the Bill will impact upon? Where is the concern about social justice? Apart from the phrases about us being “all in this together”, where is the evidence? The Minister indicates that giving a substantial tax concession to millionaires—not mentioning, of course, that the Cabinet consists largely of millionaires—is merely a reflection of the fact that the tax does not raise too much. Of course, there is no consideration at all of the impact upon the nation of a Government asking it to take the deprivations that occur in this Budget: the loss of benefits and the onslaught on vulnerable people in our society. There is no consideration at all that giving a concession to millionaires creates a symbol of a totally unfair approach to government. Is it therefore not surprising that the Government are losing their credibility among the nation, as is clearly evidenced every time the Prime Minister loses control of his arguments at Question Time in the other place?

I understand what the noble Baroness, Lady Kramer, says about taking low-paid people out of income tax. Of course that is to be welcomed. However, she must also recognise that the major priority enjoined by all those who are concerned about the state of British society—and a number of other western societies as well—is that some tackling was necessary during the years when we were in Government of the excessive degree of child poverty, which was a stain upon our society and measure of the unfairnesses which our society metes out. Children, after all, are not responsible for the state they are in, but everybody recognises the crippling disadvantages of being born and trapped in poverty. The Government, of course, are ensuring that that trap becomes even more vicelike in its control through the significant reductions in benefits. We know what that means for children in poverty.

Of course, it may be that some concession was made to lower-paid workers, but it certainly was not made to pensioners. The Government have abandoned their commitment to the age-related allowance for pensioners in line with inflation, and introduced their granny tax.

We have argued that this Budget is so manifestly unfair and inappropriate that the unfairness is being felt throughout society. It is also utterly and totally ineffective. I do not have detailed questions to ask the noble Lord; that is just as well, as I hope that he would be able to restrain his winding-up speech to reasonable limits and he has a great deal to respond to from the noble Lord, Lord Flight—and, indeed, from the noble Lord, Lord Browne of Belmont.

However, I add one caveat to the noble Lord, Lord Browne: we have got to be somewhat judicious in this House when we are commenting on and playing our part in making laws which apply to those who are a generation or two behind us. Their mores are different. That is not to say that we do not recognise that so many value marriage; that is why weddings take place with great panache all the time. I imagine that many noble Lords in this House enjoy, as I do myself, a situation where my marriage is reaching almost 50 years; so I am certainly not going to be against marriage. But I am counselling against giving advice to a generation which has got a different approach to the way in which it expresses its commitments between man and woman. We would all recognise that a decade or so ago expression particularly on the Conservative Benches of this House on issues of equality for homosexuals was totally different from the perspective with which the Conservative Party responds today. I am not so sure about its entire membership in this House but certainly its agreed policy as regards its Members of Parliament. I have slight anxiety about dictating to a younger generation what the incentives should be with regard to their social relationships.

I have one question for the Minister: what is his response to the International Monetary Fund’s announcement today that growth will be 0.6% lower than the Government and the OBR have forecast for this year and will be 0.6% lower next year? The Government are left with the prospect of 0.2% growth this year. What an emergence from a double-dip recession that represents. Even the following year, only 1.6% growth is forecast. Therefore, both years will be manifestly below the average for advanced countries of 1.9% growth.

We are falling further behind in terms of growth and there will be a reduction in our resources. That is why the Government are in such difficulty with regard to their Budget, and why there are such privations on the least well off in our society. Ordinary people are feeling the pinch. There was not a word from the Minister or a single word in this Finance Bill about anything to do with unemployment and scarcely anything to do with employment. One million young people are unemployed. Is the Minister suggesting that they are responsible for that? Have the Government not got some responsibility for tackling those issues? I ask: what in this Bill relates to those issues? There is nothing. After all, if there had been anything, I am sure that the noble Lord would have referred to the issue but, of course, he did not.

We have a Finance Bill which partially reflects the total incompetence of this Government and their dizzying U-turns over the Budget proposals. The Budget is inherently and manifestly unfair, which leads to the nation rejecting and being critical of those who introduced it.

This recession was made in Downing Street. If the Chancellor concentrated rather less on his main bête noir—the Shadow Chancellor, Ed Balls—and a little more on the real economy, we might see a rather better approach to the crisis that this nation is in. It is absolutely clear that part of this is driven by the fundamental beliefs of the Chancellor and those who support him. They are using what is undoubtedly a crisis with regard to public finances to indulge in their commitment to create the smaller state—to reduce welfare and care for those in need. They did it in the 1930s and they are doing it in the second decade of the 21st century. It did not get us out of recession in the 1930s and will not now. The proof is already there. Meanwhile, it is the ordinary citizen of this country who pays the price.

My Lords, as I respond to this debate on the Finance Bill, I thank the dedicated band of noble Lords for contributing to this short and, what was until the last intervention, rather focused debate, before the noble Lord, Lord Davies of Oldham, went off in many different directions. This year’s Finance Bill follows an unprecedented degree of consultation and engagement, and implements many of the changes announced at the Budget. I say to the noble Lord, Lord Davies of Oldham, that there were some 200 measures in the Budget and on three of them, after consultation, we made appropriate changes. Therefore, I think that his characterisation of the Budget-making process, and the changes since, is way off the mark.

First, I will address one or two of the specific points raised before returning to the bigger picture. I start by thanking my noble friend Lady Kramer for pointing out what the noble Lord, Lord Davies of Oldham, seems not to recognise—that we are now engaged in the most progressive tax strategy of any Government in recent years. I completely agree with her. Not only is that the case but it is demonstrably the case. No previous Government have put distributional tables into the Budget document so that it is completely clear where the majority of the pain is falling, which is on those with the broadest shoulders in the top percentiles of the income distribution. I can assure my noble friend that as we carry on the progress on these many issues, we will make sure that we are very alive to loopholes. On stamp duty, for example, there are clearly questions, with possible ways of doing sub-sales avoidance and so on.

My noble friend mentions one offshore financial centre. I think that the agreement with Switzerland, which I referred to in my opening speech, shows that we will work tirelessly to take all appropriate action on that front. The noble Lord, Lord Browne of Belmont, makes a powerful case in relation to marriage. I would not go as far as the noble Lord, Lord Davies of Oldham, in rebutting that case. The coalition agreement commitment remains in place. We keep that commitment, as we do all taxes, under review. The noble Lord would not expect me to say any more this evening, but he has put on the record very clearly his feelings on this matter.

As to the IT systems of HMRC for transferable allowances, again it is an area of questioning that has been raised in another place. There is nothing I can usefully add. We do not tend to give a running commentary on HMRC operational matters. If there is anything more I can do to shed light on the specific questions that the noble Lord, Lord Browne, raises, of course I will write. However, my strong feeling is—as I suspect he realises—that I will not be able to give him anything more on that, but he makes his points very clearly.

My noble friend Lord Flight made some very technical but important points around EIS and VCT schemes in particular. He made the important point that some £12 billion of equity has been raised. These schemes have been extremely successful. As I outlined in my opening speech, we want to expand them. At one point my noble friend characterised them as giving with one hand and taking with the other. We do not see it like that. We have consulted extensively on detailed rules. Many industry groups contributed to the consultation and strongly supported the complete package of changes. However, my noble friend made his point very clearly. We keep these matters under continual review and if there are ways of making the guidance clearer and more helpful, I am sure that his thoughts will be taken on board. I will draw them to the attention of relevant officials. I also take the general point about clearer English, which is something of which we need to be reminded on a regular basis.

The noble Lord, Lord Davies of Oldham, launched a quite extraordinary attack—with which I agreed on a number of matters. My principal point of agreement was with the statement at the end of his speech that this is a recession made in Downing Street. I completely agree. The structural deficit that caused the recession to be as deep and severe as it is came from the overspending in the six years up to the financial crisis of 2008, when the previous Government diverted from the plans they had been left by my right honourable friend the previous Chancellor but three, Kenneth Clarke, who left the nation’s finances in a fine state. If the previous Government had carried on with his plans for a few years more, things would not be in the state that they are.

Would the noble Lord extend the same criticism to all the other advanced countries that face exactly the same issues?

My Lords, we were left with the largest structural deficit in the G20. We have brought it down from more than 11% to 8%, so we are making good progress—but the size of the task was bigger than in any other major economy.

Without rebutting the full litany and charge sheet—noble Lords would not thank me for keeping them much longer tonight—I absolutely rebut suggestions that we are insensitive to the societal and distributional effects of our measures. I explained the transparency with which we set out the effects of the Budget. It is those on the highest incomes who will pay most. The real results of what we are doing are the 800,000 new jobs that the private sector has created in the past two years. It is only by the private sector creating new jobs that we will be able to afford the better public services that the country needs and the lower taxes that we deserve. New jobs, falling unemployment and falling inflation are the things that the Government are concentrating on, and which the Budget continues to underpin.

Finally, the noble Lord, Lord Davies of Oldham, referred to today’s announcement by the IMF that downgraded global growth prospects. He was right to draw attention to it. The IMF forecast minus 0.3% growth for the eurozone this year. It forecast that the Italian economy will contract by 1.9% and the Spanish economy by 1.5%. It forecast that US growth would be only 2%, and it downgraded forecasts for emerging economy growth. It is in the face of those very strong headwinds that we have to carry on with our deficit reduction programme of tight fiscal discipline and loose money. I am very happy to talk about the 1930s. We do not have time to do it in detail, but tight fiscal discipline and loose money is precisely the prescription that caused a significant increase in growth through the 1930s.

In conclusion, this Government have taken difficult decisions to eliminate our structural current deficit over the coming four years and stimulate a private sector recovery. This strategy has been endorsed by the IMF, the OECD, the European Commission, ratings agencies and UK business organisations. We have always said that recovery would be choppy and our plans would necessarily incorporate a degree of flexibility. This Bill further delivers our commitment to improve our competitiveness, encourage investment and support our businesses, large and small. At the same time, it removes hundreds of thousands of individuals from income tax and helps reduce the cost of living for families across the country, and makes these changes in a way that is fairer and more consultative than any Finance Bill before. I commend this Bill to the House.

Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.

My Lords, even though we have concluded all the business on the Order Paper, we expect to receive a message from the Commons tonight. At the moment I cannot offer guidance on a specific time, so I therefore beg to move that the House do adjourn during pleasure until a time to be announced on the annunciator.

Sitting suspended.