This Government are determined to ensure that all individuals pay the proper amount of tax on their employment income, other non-employment income and capital gains. Despite the Government's focus on tackling tax avoidance schemes, there are a minority who continue to seek ways to avoid paying an appropriate share of tax, which is unfair on the majority of taxpayers and can undermine funding of public services.

The Government have continued to see evidence of schemes that use partnerships to generate losses that can be offset by individuals against other income or capital gains using sideways loss relief. HMRC's compliance activity in this area and the disclosures that have been received, following the extension of disclosure rules to cover loss creation schemes from 1 August 2006, have highlighted that this type of avoidance activity is still widespread. Despite the introduction of extensive anti-avoidance legislation in this area, scheme providers are continuing to devise and operate more contrived schemes.

Prompt and decisive action is required to ensure that all taxpayers pay their fair share of tax. The Government are therefore announcing with effect from today two changes to the rules for sideways loss relief.

Currently, the amount of a partnership's trading losses for a tax year for which a non-active partner can claim sideways loss relief is restricted broadly to the amount of capital that the partner has contributed to the partnership. The Government propose to introduce new legislation to exclude certain capital contributions from this amount. The capital contributions to be excluded will be those paid by non-active partners on or after 2 March 2007 where the main purpose, or one of the main purposes, for contributing the capital to the partnership is for the partner to obtain a reduction in tax liability by means of sideways loss relief.

The Government also propose to introduce an annual limit of £25,000 on the amount of trading losses for a tax year for which an individual who is a non-active partner in a partnership can claim sideways loss reliefs. The new limit will apply to trading losses sustained as a non-active partner on or after 2 March 2007.

Legislation will be included in this year's Finance Bill. A technical note with full details of this measure will be issued on HMRC's website today.

The 2007 Report of the Armed Forces Pay Review Body has now been published.  I wish to express my thanks to the Chairman and members of the Review Body for their Report.  I am pleased to confirm that the AFPRB’s recommendations are to be accepted in full, with implementation effective from 1 April 2007. 

In line with the AFPRB recommendations, the basic military salary for officers and all other ranks will increase by 3.3 per cent.  In addition, a restructuring of Pay Range 1 will see those on the lowest pay level, some 13,000 servicemen and women, receive a total pay increase of 9.2 per cent.  A further 6,000 service personnel on the next lowest level will receive 6.2 per cent. 

The rates of Specialist Pay (including Flying Pay, Submarine Pay, Diving Pay and Hydrographic Pay) will also increase by 3.3 per cent. 

The Government have also accepted the AFPRB’s recommendation to introduce additional targeted Financial Retention Incentives for Royal Marine and Infantry Other Ranks, and an extension to the Aircrew Financial Retention Incentive, in order to meet specific challenges in retaining our experienced people. 

Also, the AFPRB have confirmed their support for the introduction of the tax-free Operational Allowance, which I announced to the House on 10 October 2006, Official Report, column 175, and has so far been paid to around 31,000 servicemen and women who have served in Iraq, Afghanistan and the Balkans; and the removal of the 100 day initial qualifying period for the Longer Separation Allowance. Together these measures demonstrate this Government’s commitment to provide special recognition for those serving their country on operations.

Copies of the Armed Forces Pay Review Body Report are available in the Vote Office and the Library of the House.

The General Affairs and External Relations Council (GAERC) will be held on 5 March in Brussels. My right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs (Mrs. Margaret Beckett) and I will represent the UK.

The agenda items are as follows:

General Affairs

Preparation of the European Council on 8-9 March

The Council will discuss the draft agenda for the Spring European Council on 8-9 March including climate and energy security, Better Regulation and the Lisbon Agenda. The Spring European Council will be an opportunity for the EU to show global leadership in tackling climate change.

External Relations

World Trade Organisation/Doha Development Agenda

If this remains on the agenda, the Commission will update the Council on the WTO Round.

Sudan

The Council will discuss support for the African Union Peacekeeping Mission in Darfur (AMIS). The Presidency is leading an initiative to secure further EU funds for the African Union, both bilaterally and through the Commission. We will be indicating our support for this initiative and will join the Presidency in encouraging member states who have not yet committed significant funds to do so.

We also expect the Council to adopt Conclusions calling on the Sudanese Government to give explicit consent to the UN Heavy Support Package for the peacekeeping force condemning Sudanese non-cooperation with the UN Human Rights Council and reiterating the need for an inclusive political process under the African Union-UN initiative.

Uzbekistan

We expect the Council to discuss the human rights situation in Uzbekistan ahead of the review in May of the EU measures imposed after the Andizhan killings.

Middle East Peace Process

We expect the Council to focus on the EU's response to the formation of a Palestinian National Unity Government (NUG). The Commission is likely to brief partners on proposals for an International Mechanism for Support to the Palestinian people. We support the Commission's efforts.

Western Balkans

The main focus of discussion is likely to be Bosnia. We expect the Council to adopt Conclusions welcoming the outcome of this week's Peace Implementation Council, which is likely to extend the Office of the High Representative in Bosnia and the Bonn Powers.

Iran

The Council is expected to adopt Conclusion deploring Iran's non-compliance with United Nations Security Council Resolution 1737, underlining the Security Council's intention to adopt further measures and reiterating EU support for a negotiated solution. We will also brief partners on the E3+3 senior officials' meeting in London on 26 February.

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We shall lay before Parliament regulations to increase National Health Service charges in England from 1 April 2007. There will be a cash increase in the prescription charge of 20p from £6.65 to £6.85 for each quantity of a drug or appliance dispensed.

The cost of prescription prepayment certificates will rise to £35.85 for a four-month certificate and £98.70 for an annual certificate. These offer savings for those needing more than five items in four months or 14 in one year.

Prescription charges are expected to raise some £425 million for the NHS in 2007-08.

Charges for elastic stockings and tights, wigs and fabric supports supplied through the Hospital Service will be increased similarly.

For courses of dental treatment begun on or after 1 April 2007 the charge for Band 1 will be £15.90, Band 2 will be £43.60, and Band 3 will be £194.00.

All these increases are below the current level of inflation.

In order to continue to provide help with the cost of spectacles or contact lenses to children, people on low income and individuals with complex sight problems, optical voucher values will rise by an average of 2.7 per cent.

NHS charges and optical voucher values in Scotland, Wales and Northern Ireland are a matter for the Devolved Administrations.

Details of the revised prescription, dental charges and optical voucher values have been placed in the Library.

In due course, we shall lay regulations to make 12 month pre-payment certificates (PPC) available from July 2007 via direct debit instalments and replace the four-month PPC with a three-month PPC at a fee of £26.85.

I am responding on behalf of my right hon. Friend the Prime Minister to the Twenty-second Report of the Review Body for Nursing and Other Health Professions (NOHPRB), Cm 7029, and the Thirty-sixth Report of the Review Body on Doctors' and Dentists' Remuneration (DDRB), Cm 7025, which were laid before Parliament yesterday. The reports have been placed in the Library and copies are available for hon. Members from the Vote Office. I am grateful to the chairs and members of the Review Bodies for their hard work.

The NOHPRB has recommended an increase in the agenda for change pay rates of 2.5 per cent from 1 April 2007. The NOHPRB has also recommended that the minimum and maximum high cost area supplements should be increased by 2.5 per cent.

The DDRB has recommended that the basic rate of pay for junior doctors should be increased by £650 (equivalent to about £1,000 when the banding multiplier is applied) and of all other hospital doctors by £1,000. The DDRB has also recommended that the top and bottom of the salary range for salaried general medical practitioners should be increased by £1,000. In addition they have recommended a zero increase in GP pay and an increase of 3.0 per cent. in the gross earnings base for general dental practitioners. The DDRB calculate that their recommendations will increase the NHS medical and dental pay bill per head by just under 2.0 per cent.

The review bodies pay recommendations are being accepted. However, to ensure consistency with the Government's inflation target, and in line with other parts of the public sector, the awards will be staged. All awards which represent an increase up to and including 1.5 per cent. will be paid in full from 1 April. But all awards which represent an increase above 1.5 per cent. will be paid in two stages, with 1.5 per cent from 1 April and the balance from 1 November. The Government recognise that the staff affected will be disappointed that their award is not being paid in full from 1 April. But we believe that this approach is fair for staff, consistent with the Government's inflation target and affordable for the NHS.

The sixth report of the independent Prison Service Pay Review Body (PSPRB) on the pay of Governing governors and other operational managers, prison officers and related support grades in England and Wales in 2007 has been published today and copies placed in the Library. I would like to thank the Chair and members of the PSPRB for their hard work in producing their recommendations.

The PSPRB has recommended a restructuring of the prison officer pay scale to a new seven-point scale and a restructuring of the pay ranges for Governing governors and other operational managers within a new 21-point spine, from 1 April 2007. The PSPRB has also recommended for those staff not affected by the restructuring (Principal and Senior prison officers, prison officers on the second long service incremental point and unified support grades) an increase in basic pay of 2.5 per cent. The recommendations will lead to a 2.8 per cent. growth in overall paybill to £888 million (excluding oncosts).

Whilst I have decided that the PSPRB's recommendations will be implemented in full, the Government have announced that all Pay Review Body awards—including Doctors, Dentists, Nurses and Judges, as well as prison officers—will be staged so as to be consistent with the Government's wider economic objectives to secure economic stability and steady growth.

The key Pay Review Body recommendations are:

(1) A restructuring of the prison officer pay scale to a new seven-point scale;

(2) A restructuring of the pay ranges for operational managers within a new 21-point spine;

(3) Required Hours Addition for operational managers to be uprated by 2.5 per cent;

(4) The Operation Tornado emergency response payment to prison officers to be uprated to £18 per hour;

(5) On Call allowances and dirty protest payment uprated by 2.5 per cent.

(6) A 2.5 per cent. increase to the basic pay rates of Principal and Senior prison officers, prison officers on the existing Second Long Service incremental pay point and unified support grades;

(7) All other allowances and ex-gratia payments to remain at their current levels.

Recommendations (1) to (5) will be implemented from 1 April. Recommendations (1) and (2) will benefit those below the top pay scale by up to 10 per cent. Recommendation (6) will be paid in two stages; 1.5 per cent. will be paid from 1 April 2007 (in line with other Pay Review Bodies), with the balance to 2.5 per cent. paid from 1 November 2007. The cost of the award will be met from within the delegated budget allocation for the Prison Service.

The Government remain committed to the independent Pay Review Body process. They do not take decisions to stage recommendations lightly. This year's decisions do not provide any indication of future responses.

Further to my statements to the House on Wednesday 10 and Tuesday 16 January 2007, I have placed in the Library of the House today the report of the Home Office internal Inquiry into the handling of notifications, by other European countries, of criminal convictions for UK citizens. The report reinforces the importance of the Home Office's reform programme, which I announced last July, and which is already addressing the issues raised in the report.

The fifth report of the Prison Service Pay Review Body (PSPRB) on the pay of governor and officer grades in the Northern Ireland Prison Service was published yesterday.

My right hon. Friend the Secretary of State for Northern Ireland has accepted the recommendations which are in two parts. The basic increase will be implemented from 1 April 2007 and the efficiency award will be implemented following confirmation from the PSPRB that the efficiency element of the package has been delivered. The cost of the award will be met from within the existing budget allocation for the Service.

Copies of the report have been placed in the Libraries of both Houses.

Further to the statement made by my right hon. Friend the Chancellor of the Exchequer, at Treasury Questions, on the Government's response to the reports of the pay review bodies, the 29th Report of the Review Body on Senior Salaries was published yesterday. This makes recommendations about the pay of the senior civil service (SCS), senior military personnel and the judiciary. Copies were laid in the Vote Office and the Library of the House. I am grateful to the Chairman and members of the Review Body for their work.

Senior Civil Service

The Review Body's main recommendations for senior civil servants' pay are:

1. Changes to SCS pay ranges as follows:

2. The bonus pot for the SCS to be increased by 1.1 percentage points to 7.6 per cent. of the paybill and for the minimum bonus to remain at £3,000; and

3. The Permanent Secretaries' new range to be £139,740 to £273,250.

The Review Body broadly endorses the Government's strategy for senior reward but places a slightly greater emphasis on bonus awards rather than base pay awards, with a recommendation of a headline award of 1.4 per cent.

In line with the approach taken across all pay review body groups, the Government have decided to accept the recommended headline award of 1.4 per cent., which is less than the Government proposed in evidence. The recommendation for bonus awards is also being accepted, but payment will be delayed until 1 November 2007.

Senior Military Personnel

The Review Body's main recommendation for the senior military is an increase of 2 per cent. in the incremental pay scales for senior military officers. In line with the approach taken across all pay review body groups, the Government have decided to accept the recommendation, as this is in line with what the Government proposed in evidence.

Judiciary

The Review Body's main recommendation for the judiciary is an increase averaging 2.4 per cent. for judicial salaries.

In line with the approach taken across all pay review body groups, the Government have decided to accept the recommended headline award of 2.4 per cent. but are staging this to ensure affordability within existing spending limits and consistency with continuing control of public finances. All office holders will receive 1.5 per cent. with effect from 1 April 2007, and the balance of the recommended amount will be paid with effect from 1 November 2007.

Members of Parliament and Ministers

The Review Body's recommendations on SCS Pay mean that Ministers' and MP’s pay, which is linked to the average increase in the midpoint of SCS pay, will increase by 0.66 per cent. The Review Body is also currently conducting a triennial review of MPs' and Ministers' pay which is due to report in summer 2007.

The cost of the awards for the SCS, senior military personnel, the judiciary and Ministers will be met from within existing Departmental Expenditure Limits.

The Employment, Social Policy, Health and Consumer Affairs Council was held on 22 February in Brussels. There were no health or consumer affairs issues. I represented the UK.

The first items were the preparation for the Spring European Council and the Tripartite Social Summit through the endorsement of a set of key messages to the European Council.

Ministers endorsed the key messages from EPSCO to the Spring European Council. There were calls for new EU minimum social standards but they did not receive much of an echo as there was more interest in the strengthening of the social dimension of the Lisbon process. Nine member states, led by France, said the joint letter they had signed last week supported the presidency’s goal of strengthening social Europe. I endorsed the broad focus of the key messages, and stated that there was a lot the UK could support in last week’s letter, e.g. the idea of social Europe supporting working people and citizens more widely in particular the most disadvantaged; the need to uphold European values of cohesion, solidarity and social justice; and the emphasis on lifelong learning, equal opportunities and poverty. However, it was important also to emphasise flexible labour market and the dismantling of barriers to mobility. I added that the means by which we promoted these objectives were important as the existing body of directives already provided the basis for fair and decent minimum standards, and we were not persuaded of the case for further new minimum social standards. We should focus instead on delivering Lisbon and our individual National Reform Programmes. The presidency concluded that the European social dimension needed common objectives, notably on combating poverty, especially child poverty and social exclusion. Migration could be covered too, even though it had not been mentioned in this meeting.

The Tripartite Social Summit on the eve of the Spring Council would discuss the Commission's strategy for 2008 and better regulations.

The Council adopted a resolution on the contribution of older people to economic and social development in the context of demographic change in Europe. It debated the process of open co-ordination on demography and the presidency's idea of a European Family Alliance. I emphasised the primacy of the Lisbon goals and process, and the vital importance of increasing labour supply. After a table round of very similar interventions, the presidency concluded that all delegations supported its approach. There was no need for a new process. The Lisbon Strategy and the existing Open Coordination would suffice.

Work under the Family Alliance and the High Level Group on Demography could be accommodated within them, and that the Commission's Annual Progress Reports would assess progress.

Under other business, the Council noted the annual Work Programmes of the Employment Committee and the Social Protection Committee for 2007, and the Commission reminded members of its recent communication on the “New Community strategy on health and safety at work 2007-2012”, which will be raised again in May.