16:28 - divided: - Ayes: 196 / Noes: 310 - Question accordingly negatived.
16:42 - The Committee divided: - Ayes: 310 / Noes: 198 - Question accordingly agreed to.
17:29 - The Committee divided: - Ayes: 187 / Noes: 313 - Question accordingly negatived.
Chris Leslie
I hear what my hon. Friend says, but I am reluctant to extend compulsion in that regard. We should certainly encourage people to take out travel insurance and inform them of what might befall them should they not do so—they could be stranded abroad or find themselves without adequate medical or health cover, for example. I do not know whether hon. Members always remember to fill in their E111 forms when they travel to other countries in the European Union, but our constituents often do not. They can find themselves in significant jeopardy. In those circumstances, travel insurance is very useful.
Many people are employed in the insurance industry, and if there are disincentives against our constituents’ taking out decent, high-quality policies there will be an impact on the insurance sector and the financial services sector more widely. The financial services sector, including insurance, is one of the great industries of our country. It has been subject to a lot of criticism, and we can talk about that on another occasion, but it is important that we should not take steps that harm the products that we consume in this country and sell worldwide.
I conclude by reiterating to the Treasury the importance of assessing the impact of the insurance premium tax increase on our constituents and the Revenue. We do not know from the Red Book how the £455 million annual yield precisely breaks down between pensioners, young people and beyond. My right hon. Friend the shadow Chief Secretary says that the impact on pensioners will be significant and I take his word for that. That issue is a great worry. These are serious matters and I hope that the Treasury and other hon. Members will hear some of the points shared across both sides of the Chamber today.
The Exchequer Secretary to the Treasury (Mr David Gauke)
We have had a wide-ranging debate on clause 4 and the amendments tabled to it; I am sure, Mr Evans, that you want to hear its conclusion. I was grateful to hear the contribution made by my hon. Friend the Member for Wellingborough (Mr Bone), who highlighted the freedom given to Government Back Benchers in Committee debates. I hope that my remarks will persuade my hon. Friends not to make full use of that latitude. We shall see.
The amendments are concerned with the general impact of the rise in the standard rate of insurance premium tax, particularly in respect of its impact on personal health insurance and the motor industry. I will come to those issues in detail in due course. Before I do so, I propose to set before the Committee the reasons behind the course that we have chosen.
Reducing the deficit and ensuring economic recovery are the most urgent issues facing the UK and they are the Government’s top priority. In the words of the shadow Business Secretary, it is no good wishing the deficit away; it is only by acting quickly to tackle the deficit and restore confidence in the public finances that we will achieve economic growth. That has meant that we have had to take many tough decisions to ensure that everybody makes a fair contribution. Part of that contribution will come from increases to the standard and higher rates of IPT.
Clause 4 legislates for that by increasing the standard rate of IPT from 5% to 6% and the higher rate of IPT from 17.5% to 20%, both with effect from 4 January 2011. IPT is, of course, a tax on insurers, not on their customers; 80% of all the insurance sold in the UK is exempt from IPT. All long-term insurance, such as life insurance and pensions, is exempt from IPT. My hon. Friend the Member for Christchurch (Mr Chope) mentioned Conservative party policy on long-term insurance. If he is a little patient, I am sure that my right hon. and hon. Friends at the Department of Health will say more on the subject. I just underline the point that IPT is not levied on long-term insurance.
Mr Gauke
What I can say is that given how IPT is currently structured and where it is levied, it does not apply to long-term insurance; the conclusion to be drawn about something that falls within the definition of long-term insurance is fairly logical.
However, in respect of the types of insurance that are affected, insurers have the right to respond to the tax as they see fit. They are not obliged to pass on IPT through higher premiums. [Interruption.] We recognise that many insurers will pass it on to their customers through higher premiums, but I will not be dragged into the detail of the amendment tabled by the hon. Member for Nottingham East (Chris Leslie).
The question was asked whether further regulation should be imposed on insurers, making them display prominently how much is being paid in IPT. Unlike VAT, IPT is a tax on insurance, so there is no obligation to pass it on or to recover it for businesses. We do not think that that would be appropriate. Insurers are, of course, perfectly free to display the IPT rate on documentation, and many do so. Requiring them to do so, however, would be burdensome and unnecessary.
Mr Gauke
I am not denying that we expect the increase to be passed on predominantly to consumers; we expect that the bulk of it will be. The analysis of VAT, another indirect tax, shows that two thirds tends to be passed on straight away and that much of the rest is passed on over the following 12 months. However, it is not always possible to predict and it partly depends on the level of competition.
Gordon Banks
I just want to make a simple point. The Minister is saying that he expects consumers to pay twice—once through increased premiums and once through increased IPT. Does he find that acceptable?
Mr Gauke
That is not what I am saying. I am saying that the increase in insurance premium tax, which is payable by insurers, is likely to be passed on to consumers. We are not denying that; in simple terms, we need the money.
Even if the increases to the standard and higher rates of IPT are passed on in full, the impacts will be very modest, costing households less than 20p a week on average and businesses an average of less than 0.01% of annual turnover, even for smaller businesses.
Mr Kevan Jones
I am not sure whether the hon. Gentleman has renewed his car insurance or household policy recently, but he will find that most insurance policies make it clear exactly how much tax is paid, so I do not think it is the case that they will withhold the increase and not pass it on to the consumer.
Mr Gauke
I am grateful to the hon. Gentleman for underlining an earlier point that I made—that it is not necessary to introduce regulation in this area. As I say, we anticipate that it will be passed on, but it is not mandatory. I am not denying that position.
Despite these modest impacts, the IPT rate increases will contribute more than £450 million a year to reducing the deficit. As I said, such decisions have been forced on us by the economic circumstances that the UK finds itself in, and they have not been taken lightly. We are confident, however, that this modest rise in IPT, which leaves the main rate of the tax significantly lower than that of many of our European competitors, is a means of raising much-needed revenue that will not have a significant impact on households, businesses or the insurance industry.
Mr Byrne
The Minister is making an argument about choices that are made in order to increase revenue, but I think the Committee is struggling to understand the reason for the increase in the standard rate of IPT. Other choices were available. Why have increases in cider duty been withdrawn, for example, while new taxes are being introduced on insurance?
Mr Gauke
The central point is that the country is in a very difficult position as regards the public finances. I hope that the shadow Chief Secretary is grateful for the fact that I have got this far through a speech without once referring to his letter. With another intervention, I may be tempted to do so. We have made a series of judgments. If he thinks that cider duty is the way to reduce the deficit, I suggest that he is somewhat mistaken.
Amendment 18 would exempt personal health insurance from the increase in the standard rate of IPT, and amendment 19 would do the same in relation to motor insurance. In effect, that would mean creating a new reduced rate of IPT that applied only to private medical insurance and motor insurance. Of course, the Government recognise the value of these types of insurance and, indeed, of insurance more generally.
I assure my hon. Friend the Member for Christchurch that we do not disapprove of people taking out private medical insurance—that is not something we wish to prohibit, either in law or by imposing enormous costs on it. In health policy, our focus is of course on improving the national health service, and we have this week set out important proposals on improving the quality of the health service and reducing expenditure on bureaucracy. We are also, as a Government, protecting the NHS from spending cuts, which is not, as I understand it, a policy endorsed by Labour. The purpose behind this tax increase is clearly to raise more revenue—it is not an attempt to try to dissuade people from taking out private health insurance.
Thomas Docherty
The Minister claims that the Government are protecting the NHS. Is he aware that all the health boards in Scotland have written to their employees to inform them that following the cuts that his Government are making, the NHS in Scotland will have significant job losses?
Mr Gauke
Of course health care in Scotland is a devolved matter, and you will not want me to digress on that, Mr Hoyle, but the fact is that health care spending will go up in real terms under this Government. That is not, as I understand it, a policy that is supported by the official Opposition.
Mr Chope
My hon. Friend framed his policy in rather negative terms by saying that the Government did not disapprove of health insurance and did not want to prohibit or deter it. Can he be a bit more positive and say that it is their policy to try to encourage people to take responsibility for their own insurance, on similar lines to the Secretary of State for Transport saying that he wishes people to take responsibility for paying their own bus fares, despite their having bus passes, if they can afford so to do?
Mr Gauke
As a Government—I am sure that this is a principle that my hon. Friend would support—we believe in giving people choice, and that is what we will do. We have set out our policies in that context, and I am merely underlining this Government’s commitment to the national health service.
The combined effect of the amendments tabled by my hon. Friend the Member for Christchurch would be to slow down fiscal consolidation. Through the Budget and this particular measure, the Government are trying to get our deficit under control, and slowing it down would not be an appropriate step.
Chris Leslie
Specifically in terms of the contribution to fiscal consolidation, how much of the yield from the increase in IPT will come from the motorist via car insurance?
Mr Gauke
If I may, I will provide a little more information breaking down the numbers in a moment or so, and we shall see whether that is specific enough for the hon. Gentleman.
Exempting motor insurance from the IPT rise would reduce revenue by £160 million a year, and exempting medical insurance would reduce it by a further £40 million. Taken together, those figures total £200 million—nearly £1 billion over the lifetime of the Parliament. That would leave us with quite a shortfall, and a couple of options. First, we could raise £1 billion from elsewhere. We have to be open about the fact that the purpose of the IPT rise is to raise revenue, and if we were to look to raise the outstanding £1 billion through IPT, that would mean increasing very considerably the rate of tax on the remaining classes of insurance. For reasons that I will set out, we do not think that that is the right way to go. The second option is to leave ourselves with £1 billion outstanding, which would leave us further away from plugging the deficit, with all the risks that that entails. We are certain that that is not the right way to go.
It has always been a principle of IPT that the tax applies to a relatively broad base of general insurance, with few exceptions. That broad base allows us to keep the standard rate of the tax low by international standards. Even at the new rate of 6%, the UK’s standard rate of IPT is far lower than in, say, Germany, where it is 18% for property and 19% for motor insurance, or France, where it is 9% for property and 18% for motor insurance. Narrowing the base of the tax through specific exemptions of the type that my hon. Friend the Member for Christchurch suggests would put that low rate at risk.
To respond to the perfectly fair question of the shadow Chief Secretary, the fact that we have announced the increase should not be taken as a signal that we intend to harmonise tax levels with those elsewhere. To quote what the shadow Chancellor used to say, we always keep taxes under review and it would be daft to rule things out, but this increase should not be taken as a signal of an ongoing programme of further increases.
We do not take any pleasure in introducing this tax rise, even though the reasons for it are clear. However, by keeping a broad base of tax within general insurance, we are able to raise revenue so as to cut the deficit, while keeping the increases at a level that will not have any significant impact on the number of people buying insurance.
Thomas Docherty
Has the Treasury done any work to enable it to hazard a guess as to how many people will not now take out motor or health insurance as a result of the rise?
Mr Gauke
We do not believe the rise will have a noticeable effect on the number of people taking out insurance, but I know that hon. Members are concerned about the impact of the IPT rises on households. I have already set out the average impact on households. Specifically in the case of the insurance covered by amendments 18 and 19, the IPT rate increase will add only about £6 a year to the average motor insurance premium, and for those who buy private medical insurance the rise will cost less than £10 a year on average. Consequently, it is difficult to make the case that the increase will prove much of a deterrent to people taking out motor insurance or private medical insurance. Consumers are well used to insurance premiums fluctuating, and the modest effects of the rise will not act as any significant deterrent.
Mark Hendrick (Preston) (Lab/Co-op)
The Exchequer Secretary says that the rise will not be a deterrent, but it will certainly provide an incentive to people who pass the tax on to the consumer to increase charges over and above the amount in question and then blame the Government for it, as we have seen with so many other taxes.
Mr Gauke
Let us see what happens. I am not sure that the evidence necessarily supports that concern, but I am sure that if it happens the hon. Gentleman will come back to the House to highlight it. Many within the insurance industry have themselves acknowledged that the rises are very modest and will not have a significant impact on households or on the take-up of insurance.
Amendment 15 would make the IPT rise announced in Budget contingent on the publication of an assessment of the effect of the rate rise on consumers and the insurance industry. We believe it is unnecessary. I have set out fairly comprehensively in this debate the expected impact on households and businesses—in broad terms, that impact will be minimal.
I should also point out to hon. Members the considerable amount of information on the impact of the Budget that we have already put in the public domain. In particular, for the first time the Government have set out their analysis of the distributional impact on households of the Budget measures, including the IPT rate changes, in annex A of the Red Book. Separately, other organisations such as the Association of British Insurers have given estimates of the impact of the rise on households, which are very much in line with our own estimates. Naturally, the industry and consumers do not like the rises, and we do not like having to introduce them, but the industry accepts that they are going to happen and is preparing accordingly.
Finally, I wish to address amendment 48 which, as the shadow Chief Secretary said, is a probing amendment aimed at exploring the reasons for the rise and its impacts. He asked a specific question about the balance between the standard and higher rates. For 2010-11—Members should remember that the rate increases will occur in January 2011—the revenue raised will be £110 million from the standard rate and £5 million from the higher rate. For the following years, the higher rate will raise £25 million each year, with the balance made up from the standard rate, which in most years raises £450 million.
The shadow Chief Secretary also asked about the reason for the increase in the higher rate from 17.5% to 20%. As he correctly surmised, it is to do with value shifting and the fact that travel insurance is often sold with other products on which VAT is payable. A discrepancy between the IPT on travel insurance and other rates may create dangers of value shifting, and that is the reason for the proposal.
Mr Gauke
As I said earlier, the cost of my hon. Friend’s amendment to exempt motor insurance from the IPT rise would reduce revenue by £160 million a year, and exempting medical insurance would decrease revenue by a further £40 million a year. I hope that that is helpful.
The increase is necessary. It is an attempt to bring our deficit under control. We need to make some tough decisions, and that is one.
Mr Chope
I shall not get involved in that debate now, because I want to keep the focus on the narrow issues in my amendments. I am disappointed that the Minister did not respond to my concern—echoed by the hon. Member for Nottingham East (Chris Leslie) and others—about the regressive nature of the insurance premium tax, especially on the motoring public. One suggestion I made was that instead of having a standard tax on insurance premiums, we could have an individual transaction tax so that every motorist would pay the same tax for his annual insurance premium.
Mr Gauke
My hon. Friend is right to return to this point, and I apologise for not responding to it in my earlier remarks. If we took that approach on a revenue-neutral basis, we would end up essentially with the same transaction tax level on a big and small car—whether a Bentley or a Skoda, we would have the same transaction tax. Is that what he is advocating? That itself would be regressive.
Mr Chope
I was not thinking about Bentleys versus Skodas; I was thinking about the student living in Liverpool trying to run a vehicle that is perhaps 10 or 15 years old and finding it hard to make ends meet, and about the person who might have several Bentleys in the garage covered under some collective insurance. I am concerned about those living in high-risk areas or who are in high-risk groups—because they are young drivers, for example—whose insurance premiums are significantly higher than those of, for example, the person whom my right hon. Friend the Member for East Yorkshire (Mr Knight) mentioned who is in their mid-50s and happens to own a Bentley. I do not think that, prima facie, that is fair. I was throwing out a challenge to my hon. Friend the Exchequer Secretary to see whether an individual transaction tax that is not related to the size of the premium might produce a fairer result. It seems as though it might not, but perhaps we can correspond on that so that we can take the matter forward.
We have covered a lot of ground in this debate, and I have already expressed my disappointment. The question now arises of whether we should seek to divide the Committee on the proposals. I live in hope—perhaps I am naive—that in due course we will get a better and more positive response from the coalition to questions of responsibility and encouraging people to do the right thing, and that it will send out those positive measures. To seek a Division would probably be counter-productive because, apart from anything else, I would have to pick one, rather than both, of my amendments, which would mean picking on one particular type of insurance premium tax as against another. I am not sure that that is necessarily in accordance with the will of the Committee, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Ms Eagle
I certainly understand that anger, and I suspect that there will be even more anger if the Government do not address the unfair way in which the distribution of the pension tax relief has developed, especially since the simplification from A-day in 2006. We tried to address the problem by targeting the people at the very top who had benefited the most from the relief in particular.
We received representations from stakeholders who called for a simpler system, and it would be wrong of me to try to claim that the system for which we legislated was simple—it was clearly complex. However, when dealing with people on very high earnings who use complex financial arrangements, we often find that that complexity must be matched to ensure that a fair amount of tax is taken from them. In tax and benefit law, as the Economic Secretary will know—she probably struggles with this every day—there is always a trade-off between simplification and fairness, as well as yield. We took the view that despite the complexities of the system that we were introducing, it was right to target very high earners in particular. I state the distributional analysis again: the top 300,000 people receive 25% of £18.9 billion. No right-thinking person in this country with any kind of understanding of what the term “fairness” means would want us to tolerate that kind of distribution.
Simplification is always a popular cry, but there are trade-offs, and it causes different problems if we create a simpler system. We did consider other options, but the trade-offs are inescapable. We want to explore in debate today how the Government are working their way through the trade-offs, so that we can try to assess whether the solution that the Government have hinted at, but have not put before us, is fair, or whether its outcome is less fair than the outcome of the system that we decided on.
The Economic Secretary to the Treasury (Justine Greening)
I can see that the hon. Lady and other Opposition Members are following a particular train of inquiry, and that is perfectly right—it is the purpose of this debate. I just draw her attention to the fact that the clause gives the Government the power to repeal the previous measures if we can find a better alternative. If we cannot, I assure her that we will leave what is in place. However, does she agree with the Institute for Fiscal Studies, which described the measures that the previous Government proposed as unfair?
Ms Eagle
It is up to the entire electorate to decide what is fair or unfair. I have set out some of the reasons why we approached what is a difficult problem in the way that we did, but I certainly welcome the Minister’s comment that if the Government cannot find a different way of doing things, they will leave the current structure in place. I was wondering about the reference in the clause to December this year. I suspected that that might be what we would call a backstop position. It is important that the hon. Lady has put her point on the record. Taking what she says at face value, I assume that the Government will do some work in the next period. I do not know whether a measure will be in the Finance Bill, or how quickly that work will be done, but certainly there is not very much time for a completely new system to be brought in.
Justine Greening
The hon. Lady is very kind. Given that she raises the issue, perhaps it would be helpful for the rest of the debate if I set matters out. On the timelines, she is right; we clearly need to make progress quickly. The aim is to publish draft clauses in the autumn, and to legislate in the Finance Bill 2011.
Ms Eagle
I certainly appreciate the information that the Minister has put before us, and it helps us to get on with the debate. I suppose it means that she and her officials will have time for at least a little bit of a holiday this August. Under our plans, the yield begins to come in during the next financial year. I was under the impression that she would have had to ensure that she legislated for an entirely new system in the September 2010 Finance Bill. She now tells us that potential measures for an alternative system will be forced into next year’s Finance Bill, which means that an extra £0.2 billion of revenue that was scored for the next financial year will have to be raised. I assume that she will take account of that.
Geraint Davies
My hon. Friend is right. The status quo proposal of getting the £3.6 billion from the top 2% was based on standing back and considering whether there should be greater tax relief for those who are already the richest. The answer was no. At difficult times, those with the broadest shoulders should bear the greatest burden, but now, the burden is being taken from them and placed on much weaker consumers. That will undermine the attractiveness of pension schemes among larger numbers in middle income groups.
In essence, the proposal is to reduce the tax allowance from £255,000 a year to some £30,000 to £45,000. That creates an enormous difference in how many and which people are captured, and generates great anxiety in the industry—the providers that it represents and consumers whom it serves.
Justine Greening
May I confirm that I have understood what the hon. Gentleman prefers? Would he rather have tax relief at 20% for people who can afford to pay up to £250,000 into a pension fund in one year?
Geraint Davies
The Economic Secretary knows that the distributional impact of the proposals is, as I have said, to spread the £3.6 billion burden from the top 2% to 10%. It is as simple as that. She knows that that is the case, and there is no way that she can wriggle out of that political and economic fact. Before the election, there was a promise that million pound estates would avoid inheritance tax—the top 5,000 households. At the last moment, the Chancellor stepped back and said, “Oh no, at such difficult times, we won’t give billions of pounds to the top few thousand households. Don’t worry. Vote Tory.” However, their secret plan was to have a word behind the scenes with their rich mates, telling them, “Don’t worry, we’ll reverse the Labour party’s old plan to make sure that the top 2% pay most.”
Thomas Docherty
I shall be relatively brief. It is perhaps worth noting that since my hon. Friend the Member for North Durham (Mr Jones) first commented on the lack of interest from those on the Government Benches, there has been a flurry of—I suspect—BlackBerry messages going out, so that we are now being treated to no fewer than five Conservative Back Benchers. They have joined us for the afternoon, yet not a single Liberal Democrat has arrived in the Chamber.
It would be wrong of me to suggest that the Liberal Democrats are simply uninterested in the Budget, so could it be that the Chancellor, having been thwarted in his plans for a millionaire’s inheritance tax break, came up with a new wheeze after the coalition deal? How could he help his friends in the City? Unsurprisingly, the Chancellor’s new wheeze is to reverse the previous Government’s policy of trying to find a more equitable approach to pensions. That, I suggest, is the reason why our Liberal Democrat colleagues have not been advised of the importance of this debate. For if they saw the skilful manoeuvre that the Economic Secretary is trying to perform on the Committee today, they would surely rush to the Chamber to show their outrage at this terrible scheme.
It is a slightly unusual situation when a Minister as artful and articulate as the Economic Secretary tells us this afternoon that the current system is terrible—that it does not work; that it is unfair and unclear—yet has not been able to articulate what would replace it. It strikes me, as a perhaps naive and innocent new Member, that the starting point for any Government—particularly a Government who are so terribly keen to reduce regulation and bureaucracy—should be as follows: rather than introducing legislation that has no purpose except to give them some wriggle room, the Government would have been better off spending their time coming up with an alternative proposal for the Committee to examine, instead of giving the Minister the opportunity to spend her summer and that of her civil servants coming up with a new scheme.
To conclude, although I look forward to the Minister’s reply, I suspect that we will hear no detail whatever about what the Government plan to replace the current system with, and that in six months’ time she will not have been able to find a suitable replacement.
Justine Greening
May I start by saying what a pleasure it is to serve under your chairmanship, Mr Amess?
We have had a wide-ranging debate today and I will do my best to answer a number of the issues that Opposition Members have raised. However, it would perhaps be best for me first to set out the background to this debate, as the shadow Minister did. This issue was first looked at by the previous Government, and we have returned to it as a new Government. The coalition Government inherited from their predecessor the largest budget deficit of any economy in Europe, with the single exception of Ireland. One pound in every four that we spend is borrowed. The gap stands at £149 billion for this financial year alone.
The previous Government had planned to raise extra revenue through the restriction of pensions relief for higher-rate earners. As we have heard, that approach was due to raise £4 billion to £5 billion a year by 2014-15. Given the appalling state of the public finances that we have been left as a new Government, it is something that we cannot ignore.
On Second Reading, my right hon. Friend the Chief Secretary set out our commitment to fairness. This is a progressive Budget that ensures that every part of society makes a contribution to deficit reduction, while protecting the most vulnerable, especially children in poverty and pensioners. The Budget has a number of measures to support pensioners, not least the triple lock guaranteeing an annual increase in the state pension in line with earnings, prices or a 2.5% increase, whichever is the higher.
Justine Greening
Let me make some progress.
That will benefit 11 million pensioners across the country. Through clause 6, which we will debate next, the Budget will enable individuals to make more flexible use of their pension savings.
Returning to clause 5, the Government have considered pension tax relief issues and believe that reform is a necessary part of their commitment to tackling the fiscal deficit. It is worth citing the views of Robert Chote, who heads up the Institute for Fiscal Studies, following the Budget. He spoke about this measure on 23 June:
“Perhaps the most welcome change was the decision to rethink the last Government’s complex, unfair and inefficient plans to limit pension contributions relief for high earners.”
That was what he thought about it.
Justine Greening
Many people on the minimum wage will not view it as progressive for someone who can afford to pay upwards of £100,000 a year into a pension fund to be given a 20% marginal rate tax break. In fact, that was not the only problem. Having listened to the concerns of the pensions industry and employers, this Government have real reservations about the approach towards pensions tax relief that was adopted in the Finance Act 2010. We believe it could have unwelcome consequences for pension saving, bring significant complexity into the tax system and damage UK business and competitiveness. The director general of the CBI said of the previous Government’s measure, brought forward in the Finance Act 2010:
“This will have serious consequences—it will make it much harder for UK business to attract and retain global talent… In every way, it’s a bad move.”
In addition, a number of features of the approach adopted in the Finance Act 2010 were unfair. For example, it included a very complicated income test, which made it difficult for individuals and advisers to understand. It also made it difficult for individuals to plan, as they would not know their final income until the end of the tax year so they would not know until then whether or by how much they would be affected. The income test also created many perverse incentives, avoidance opportunities and anomalies. For example, different charges could arise, depending on whether an individual or their employer made the pension contributions.
Under the approach in the Finance Act 2010, individuals on the highest incomes, who are able to put in very large pension contributions—upwards of £100,000 to £200,000 in one year—would have continued to get pensions tax relief, as they would still have been able to get relief at the basic rate rather than the higher rate. That is worth up to £51,000 a year. Given our concern for fairness, we believe—
Justine Greening
We are proposing a different approach, which would address that very measure. The decision for the hon. Gentleman to take tonight is on whether people who are able to pay £100,000 to £200,000 a year into their pension fund should be able to get tax relief at the basic rate. That is the question for him to answer.
Ms Angela Eagle
There are hints in the Red Book about the annual allowance taking the strain, so will the Minister tell us whether that is the only approach that is going to be looked at, or is she considering a range of different approaches? She is comparing a system that was legislated for and consulted on with a replacement about which the House has no real information. As I say, there is a hint in the Red Book, but nothing else. Will she help us focus on the comparison by doing us the courtesy of telling us what her Government are going to develop as an alternative?
Justine Greening
I was just about to come to that. One thing that we know right now about the existing plans is that if they came in from April 2011, they would curtail, but still give, basic rate tax relief to people who can afford to pay hundreds of thousands of pounds into a pension every year. Our alternative approach looks principally at significantly reducing the annual allowance to curtail that effect. We think that the annual tax relief available will potentially be restricted to less than half that available under the previous Government’s plan, significantly curtailing the ability of the super-rich to benefit from pensions tax relief. That alternative approach is supported by the pensions industry, including the National Association of Pension Funds, as well as employers and their representatives, including the CBI. The Government are keen to continue to engage with the pensions industry, employers and other interested parties to specify the level of the annual allowance, and other relevant design features.
Let me leave no uncertainty about our fiscal objectives. The Government are clear that a reduced annual allowance approach would have to raise no less revenue than the existing plans to restrict pensions tax relief in order to enable us to meet our commitment to deficit reduction. That is why we are not repealing the existing regime at this point, while we are finding a better way of achieving our objectives.
The hon. Member for Wallasey (Ms Eagle) asked for more detail. Our provisional analysis suggests that the appropriate level for the annual allowance could be in the region of £30,000 to £45,000 in order to deliver the necessary yield to the Treasury. However, the level required would be influenced by a number of policy design features in the revised regime. Once those have been decided, we can repeal the measures in the previous Government’s Finance Act 2010. Clause 5 therefore gives the Treasury a power to make an order repealing section 23 and schedule 2 in that Act.
Those measures, which are known as the high income excess relief charge, restrict pensions tax relief to the basic rate for high-income individuals, with effect from 6 April 2011. Let us be clear, however, that they still give basic rate tax relief to high-income individuals. The Government want to consult on a new approach. We want to discuss how best to design an alternative approach to make sure that it can operate fairly and effectively. The power to repeal is time-limited, because we recognise the need to resolve the design of the restriction of pensions tax relief as quickly as possible. We have already begun discussions with groups, which will continue through the summer.
Amendment 60 proposes that we should publish a report outlining the new arrangements and details of the yield implications and distributional impacts. I have some sympathy with the thrust of the amendment, but it will ultimately be unnecessary, because there will clearly be a chance for people to look over the draft legislation, and we will not repeal the high income excess relief charge until details of the alternative regime have been finalised and set out in public.
Ms Angela Eagle
I thank the Minister for giving way on this important point. Will she undertake to provide a distributional analysis so that we can compare directly the effects of the system that she wants to repeal, with the system that the Government finally settle on if she can find an alternative? That is the essence of the amendment, so her answer to this question is quite important.
Justine Greening
A whole range of analyses and impact statements will come out with the legislation. I suspect that, as my hon. Friend the Member for Chelsea and Fulham (Greg Hands) behind me is saying, any work that is done would give an answer that Opposition Members would not like, because it would show that we are no longer going to give basic rate tax relief to people who can afford to pay hundreds of thousands of pounds into a pension pot every year.
Let me address some of the issues that have been raised. I have set out the time frame within which we want to progress towards a better alternative to the current system. We all agree that, for pensions tax relief to remain affordable, we have to limit high levels of tax-privileged pensions saving, but we think that there is a better way of doing it than the one set out by the previous Government. We believe it is important to reduce the annual allowance to prevent people from saving £255,000 a year tax free.
The hon. Member for Wallasey mentioned instances of people suddenly being able to pay a large amount into a pension fund on a one-off basis. She was right to raise that matter, and we shall be looking at options for protecting basic rate taxpayers and supporting any hard cases caused by such one-off spikes in pension accruals. She also asked about the lifetime allowance being changed. We have not ruled that out, but it is obviously a key mechanism that sits alongside the annual allowance. We shall therefore have to look at it in the context of where we end up going with the annual allowance limit. I should say that all this is subject to being able to work with key stakeholders to get something that we believe we can rely on. That is why the provisions will give us the power to repeal that measure, if we can find a better way.
I particularly want to respond to the argument from Labour Members that our proposals would somehow give a tax break to the most well-off people in the country. Let us have a look at some of the figures involved. Of course, the minute I say that, I lose the relevant bit of paper. Ah, here it is. Under the terms of the Finance Act 2010, someone who is contributing £283,000 to their pension fund on an annual basis would have had a tax charge, net of pension relief, of £85,000. Someone making the same contribution to their pension pot under a potential annual allowance level of £35,000 would have a tax charge, net of relief, of £124,000. The reason for that is that they would get 20% tax relief on the income that they would otherwise have paid a much higher rate of tax on. That is why they would pay just under £40,000 a year more under our proposed scheme than they would have done under the previous Government’s arrangements.
I wonder whether those Labour MPs who are so concerned about the impact of tax policy on the better-off people in this country will go through the Lobby today and vote for a measure that means that people who can afford to pay £283,000 a year into their pension pot will pay £40,000 less tax than they would previously have done. I do not know what Labour Members think “good” looks like in relation to taxing better-off people, but I guess I will find out when we have a Division on this amendment shortly.
Chris Leslie
The hon. Lady is talking to us as though we were schoolchildren, but she will not publish her proposals. Will she now agree to place in the Library a copy of the table that she has in front of her straight away, or this evening, so that we can all share in this secret plan?
Justine Greening
I would have thought that the hon. Gentleman was so intelligent that he could do the maths himself. The calculation is pretty straightforward. It is a bit like doing a tax calculation where someone has an allowance and then a rate, and they apply it to the excess of the allowance that they are paying in extra.
Matthew Hancock (West Suffolk) (Con)
Does my hon. Friend remember a distributional table ever being placed in a Budget under the Labour Government?
Justine Greening
I have no recollection of that, but I will not take up more of the time of the Committee. The last figures that I set out probably spoke louder—
Chris Leslie
On a point of order, Mr Amess. Is it in order for the Minister to withhold information to which she has clearly referred in the debate from the rest of the Members engaging in the discussion?
Justine Greening
It seems that I’m damned if I give information and damned if I don’t. I was asked to provide some facts, and I made sure that I gave some facts and figures. Now that I have provided some to the Committee, apparently that is a bad thing to do too. I think the problem is that the figures I have just provided are not ones that Opposition Members want to confront. They are about to go through the Lobby and vote on people who can afford to put a couple of hundred thousand pounds into their pension pot paying more tax net of pension relief than less.
Thomas Docherty
I am grateful to the Minister for helping us to understand how much the Chancellor can afford to put into his pension fund. How can we confront figures that we do not get to see?
Justine Greening
I was asked for some figures and what the impact would be on the very richest. We can probably find in Hansard tomorrow that I have just provided the Committee with that information. That is probably the way in which debates are meant to work. Ministers have questions put to them and if they can answer them in some detail, they do. That is what I have done. I have set out in some detail why we are pursuing the clause. I hope that everyone realises that it is sensible and a pragmatic way to address the industry’s concerns. The industry faced a £1 billion bill for implementing excessively complicated and unfair tax changes on pensions tax relief. We hope that we can reach a conclusion with the industry and all stakeholders, but the key issue is to address the fiscal deficit, so any solution will have to bring in no less money than the mechanism intended by the previous Government.
Ms Angela Eagle
We have had a long discussion, so I will be brief. I appreciate the information, such as it was, that the Minister was able to put before us about the shape of the alternative scheme. It is a bit like shadow boxing when one tries to compare a scheme that has already been legislated for with one that has been only hinted at in the Red Book. That has been the problem with this debate.
I was candid about the issues and trade-offs that we had to go through to come up with the structure for which we legislated in the Finance Act 2010. I hope that the Minister and her colleagues will be as candid as they try to develop this other method. She said that she was sympathetic, but she is still resisting the amendment to put a report before the House that will contain distributional analyses and much more information about this alternative system. That is a great pity. We shall divide the Committee on that amendment as the Minister has not given us an undertaking to provide that information. I also want a separate vote on clause 5.
Question put, That the amendment be made.
Justine Greening
I am grateful to the hon. Member for Dundee East (Stewart Hosie) for his questions, and it is probably wise if I take this opportunity to set out to the Committee the background of clause 6 and address the issues that he raised. I am sure that he will be interested in the consultation document that has been launched today on a number of them.
The Chancellor announced in the Budget that the Government would end the effective requirement to purchase an annuity by age 75 with effect from April 2011. The reason why we want to do that is that it will provide greater flexibility and choice for the individuals affected. In considering the hon. Gentleman’s amendments, it is important for the Committee to understand why we are making that change and how we are going about it.
A consultation on the detail of the changes was launched earlier today by my hon. Friend the Financial Secretary, and our intention is to introduce any changes from April 2011. As set out in the consultation document, the Government will be guided by the following principles in implementing the changes: first, that the purpose of tax-relieved pension savings is to provide an income in retirement; secondly, that any changes to the pension tax rules should not incur Exchequer cost or create any opportunities for tax avoidance; thirdly, that individuals should have the flexibility to decide when and how best to turn their pension savings into a retirement income, provided that they have sufficient income to avoid exhausting their savings prematurely and falling back on the state; fourthly, that pension benefits taken during an individual’s lifetime should be taxed at income tax rates, with the tax-free pension commencement lump sum continuing to be available; and fifthly, that on death, as the hon. Gentleman mentioned, the pension savings that have been accumulated with tax relief should be taxed at an appropriate rate to recover past relief provided, unless they are used to provide a pension for a dependant. Those principles will ensure that the new rules offer maximum flexibility to pension savers, while avoiding undue complexity or incurring a cost to the Exchequer.
The proposals set out in the consultation document will create additional flexibility for anyone saving into a defined contribution pension. That new flexibility means that individuals will be able to decide for themselves whether and when to purchase an annuity. It will also allow them to leave their pension fund invested in an income draw-down arrangement beyond the age of 75, and to take benefits from their pension fund later than that age if they wish. In addition, individuals who can demonstrate that they have secured a minimum income will be free to draw down unlimited lump sums. The changes will also allow the pensions and annuities industry to consider more innovative products, giving consumers greater choice.
While the new rules are being finalised, it is important that individuals who are about to turn 75, and who have not yet made a decision about what to do with their pension savings, are not disadvantaged in the meantime. The changes set out in schedule 3 are the minimum necessary to enable those reaching 75 on or after Budget day to defer the decision on what to do with their pension savings.
The Bill achieves that by providing for the pension tax rules that previously applied to draw-down arrangements only up to age 75 to continue to apply up to an individual’s 77th birthday. That means that the higher inheritance tax charges that apply specifically to pension scheme members aged 75 or over will not apply to individuals who are about to turn 75, and who have not yet made a decision on what to do with their pension. They will not now have to make a decision until they reach 77, and in the meantime we will have worked through the consultation process. Clause 6 and schedule 3 will therefore ensure that they need make no decision until after new rules are finalised next year. To do otherwise would be unfair and confusing, and changing the rules retrospectively would add unnecessary complexity.
Mr Weir
I understand the Economic Secretary’s point and I am closely following her argument. Does she accept that many people did not get annuities in the past two or three years because the economic position meant that it was simply not a good time to buy them? Those people are effectively being penalised. Would it not be fair, as I suggested in an earlier intervention, to say that everyone had two years from now, while the consultation goes ahead and changes are being made, to consider their position? Perhaps some people will wish to continue as they are, but at least they would have the option, which is rightly being given to people who are approaching 75.
Justine Greening
I thank the hon. Gentleman for that intervention. I will set out our overall approach to the issue that he raised. In every individual case, there are specifics. I was not aware of the case of the individual whom he mentioned, and I would be happy to give him a more specific answer if he gives me details. However, in principle, he raises a difficult issue. It is doubtless hard for people who reached their 75th birthday before we got to Budget day when we announced the proposed changes. We had pressed the previous Government to take action earlier, but it was left to us, on coming into government, to start to take the steps that we all agree are important. We do not agree with making retrospective legislation, except in the most egregious cases. As he said, the provision affects only a few hundred people.
The inheritance tax charge of 80% would apply to estates over the inheritance tax threshold of £360,000 a year. On the face of it, I cannot give much comfort to the constituent of the hon. Member for Angus (Mr Weir). We are trying to improve the position of those who reached 75 on or after Budget day, but I have set out the basic principles, and the details of the constituent’s case may or may not fit them. If the hon. Gentleman provides the exact details, I will give him a more exact answer. I hope that I have provided some background and that we can find a way forward to clarify and resolve the specific issue.
Stewart Hosie
I thank the Economic Secretary for her response. Clearly, the way forward for people reaching 75 is sensible. The two-year deferral until the consultation is complete is right. It recognises the problem and ensures that no one else falls through the cracks between now and the end of the consultation. I am slightly disappointed that no hope was offered that the consultation could allow a slightly retrospective element to those very few people who have become 75 in the past few years, did not take an annuity and are managing their own funds. I will not press the amendment, but I will have another think about it before we reach Report next week, when I may revert to it. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr Redwood
I would love to deal with that point, but I shall take your advice, Mr Evans. The real sin was the tax and regulatory raid on pensions under the last Government, which led to the wholesale closures of final salary schemes, and as a result of which most people starting out in work today have no access to a final salary work-based scheme in the way that their parents’ generation did. That is a great tragedy. However, this provision is a small move in the right direction, so I hope that the House will warmly welcome it. Well done to the Minister.
Justine Greening
I thank my right hon. Friend for his kind words. This provision is a step forward. As he said, it might be a small one, but it is an important one that will open up a flexibility that many whom we want to encourage to start saving for a pension will value, which is why it is important that we take the time to make an early start on this matter.
I want to respond to a couple of the shadow Minister’s points, including the one about the consultation document not being published in good time. This clause allows us to engage in a consultation. It was not necessary to launch the consultation today, but as it was it was launched at 12.30 pm, and by the time we got to the clause it was 5 o’clock—several hours after the document became available—which has meant that we have had a more informed debate today.
Justine Greening
We are getting into the same sort of argument that we had in the previous debate, where if we had put the consultation document up and had not had a sentence on an earlier webpage saying that it was there, we would have been accused of hiding it away. I am afraid that we have to do one before the other, and clearly in this case we decided to put out the statement that the consultation was going up on the website, and then we put it there, which is where it has been since 12.30 pm.
Whatever the bluster from the Opposition Benches, it cannot mask the fact that we are taking a positive step forward on pensions today. We have launched what I think will be a landmark consultation. Clause 6 and schedule 3 will give us the time to get that consultation right over the summer and then bring forward legislation in the forthcoming Finance Bill to ensure that people have more flexibility in dealing with their pensions, because ultimately it is their money, which they have put aside for their retirement. We want them to be able to deal with the pot that they have built up in a way that suits them, rather than in a way that suits the country.
Interestingly, we had a brief discussion about the fact that 75 has been the statutory age for some time. It was first agreed in 1976, which is ironic, given the obviously parallels between Britain then and now, with the Labour Government then having to be bailed out by the International Monetary Fund and going on to leave a desolated economy. We are ensuring that we have sustainable finances in our country over the coming years, so hopefully we will reach a different end point from that of that Labour Government.
I very much welcome the fact that the shadow Minister nevertheless supports the consultation going ahead, and I can assure her that we are going to get on with it. We believe that eight weeks is plenty of time to get a response, given that the issue is one that people have been pressing Governments past—and now present—to address. We are a new Government, so we are getting on with adopting a new and improved approach to annuities and pensions, as we can see from today’s debate. I therefore very much hope that the hon. Lady will withdraw her amendment, so that the clause and the consultation can improve the legislation, creating more flexibility in pension law for the people who so badly need it.
Ms Eagle
I am not really that satisfied with the answers that the hon. Lady has given, as she will not be surprised to hear, after that brief reprise of the 1970s. My information is that the Finance Act 1921 introduced compulsory annuitisation and that the current age of 75 was introduced in 1956, which was a Conservative time, not a Labour time.
Regardless of the Minister’s point scoring, however, it is important that we take an appropriate amount of time to see how any changes to the annuitisation regime might work in practice. The Opposition have no objection to the idea of having a higher age. However, there is some scepticism about the practicality of having a minimum retirement income and how it might be worked out, although that is part of the consultation, which no doubt we will now all be struggling with over August. It is a shame that the information was not available in a more timely fashion, so that we could have done more preparation for this debate. Because the amendment seeks more information and because the Government seem to be rushing ahead so precipitously, we would like to press the amendment to a vote.
Question put, That the amendment be made.
Stephen Timms
I know that the hon. Gentleman is a chartered tax specialist, as was acknowledged at a reception last night, so I defer to his understanding of these matters.
The Bill is different from the IPSA scheme on a couple of points. The IPSA rules say that when Members are required to be at the House of Commons after 11 pm, non-London areas MPs who claim the London area living payment may claim for the cost of an overnight stay in a hotel, subject to an upper limit. Any MP, including London MPs like me and the Minister, may claim for the cost of an overnight stay in a hotel if it would not be reasonable to return to any residence, where they are required to be at the House of Commons because the House is sitting beyond 1 am. I do not understand the different tax treatment of those two situations. Under new section 292, liability for income tax is avoided only if the House sits beyond 1 am. That is fine for London MPs like me. If I made a claim for a hotel stay under the IPSA rules, the new section would exempt me from income tax on that payment. However, it seems a bit unfair to non-London MPs, in that the IPSA scheme allows them to claim for the cost of an overnight stay if the House sits after 11 pm, but the new section gives them an income tax liability on that claim unless the House sits after 1 am. I wonder why the rules have been drawn up in that way.
A second area where I am puzzled relates to travel expenses for children. I have no children, so I hasten to say that this has nothing to do with my personal arrangements. The IPSA scheme provides for travel and subsistence expenses in respect of travel for dependent children aged under 16, limited to 30 single journeys per child between the Member’s London area residence and the constituency residence in each year. The new section would exempt from income tax the cost of journeys by spouses or partners but not—as far as I can see—the cost of journeys by children. Why is tax payable on those expenses but not on the others?
Justine Greening
I shall briefly talk about what we seek to achieve with clause 7 and schedule 4, and then try to answer the specific issues raised by the right hon. Gentleman.
Clause 7 introduces schedule 4, which provides for the income tax treatment of certain expenses paid or reimbursed to Members of Parliament under the new MP expenses scheme introduced and administered by the Independent Parliamentary Standards Authority. For the main part, the changes introduced by the provisions are necessary to reflect the fact that expenses are no longer paid under a resolution of the House but instead are paid by IPSA under the authority of the Parliamentary Standards Act 2009.
As we are all aware, expenses paid to Members have come under close scrutiny over the past year, not just by the media and the public, but also by IPSA. In developing its new scheme, IPSA has taken account of the requirement of MPs to perform their duties both in their constituencies and in Westminster. It has decided that the expenses covered by the exemptions introduced by the schedule are necessary for the performance of an MP’s parliamentary functions.
The key provisions will broadly maintain the long-standing statutory exemptions for overnight accommodation and EU travel expenses that were introduced in recognition of the particular role of MPs. The provisions will codify elements of concessionary tax treatments that, because MPs are required to carry out their duties both in their constituencies and in the House, have applied for many years to certain UK travel expenses paid to MPs. Additionally, they will reflect IPSA’s decision to continue to reimburse some UK travel for MPs’ spouses and partners, albeit in more restricted circumstances. The schedule therefore puts the previous concessionary treatment on a statutory footing to allow those payments to continue to be made without tax being due. Finally, the provisions reflect IPSA’s decision to deal with payments for evening meals separately from general expenditure connected to overnight accommodation, and the schedule now introduces a specific exemption for the costs of meals reimbursed under IPSA’s scheme. Again, that maintains the previous tax treatment.
The right hon. Gentleman raised two issues—about late-night sittings and accommodation. He is right: there is indeed a difference. The IPSA and tax treatment is different for sittings that end after 1 am and for sittings that end between 11 pm and 1 am. For sittings that run after 11 o’clock, there is tax exemption for expenses incurred for overnight accommodation, because that is deemed by IPSA a necessary expense incurred in the MP role.
Non-London MPs who decide to take the London allowance—the London expense regime—are able to charge overnight accommodation if the House sits after 11 pm, as the right hon. Gentleman pointed out. However, that charge is not tax-exempt; it is deemed subject to normal tax treatment for any employee. A normal employee would not be able to claim a tax exemption if they chose to stay in a hotel because they had been working late. The rules for the House sitting past 1 o’clock are agreed with IPSA as necessary for the fulfilment of the MP role, so are tax-exempt. Before that, although MPs from outside the London area can get reimbursement for overnight costs, they are not tax-exempt. I hope that I have clarified the situation, even though some people might not agree that the tax treatment set out in the clause and schedule 4 is fair.
Children’s travel was not tax exempt under the previous scheme, and clause 7 and schedule 4 merely maintain the same tax treatment of children. However, the right hon. Gentleman was right to point out that the tax exemption for spouses will continue, albeit with some more restrictive conditions. Again, I hope that I have clarified the position.
As IPSA continues to develop its expenses regime over the coming months and perhaps years, we will obviously have to keep an eye on any changes and ensure that we determine whether we need to reflect them in tax law.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
Schedule 4 agreed to.
Clause 8
Amounts not fully recognised for accounting purposes
Question proposed, That the clause stand part of the Bill.
Stephen Timms
Clause 8 and schedule 5 amend the corporation tax rules on loan relationships and derivative contracts that apply to amounts not fully recognised for accounting purposes. This is a good example of the way in which the obligations that the previous Government introduced in 2004 on the disclosure of tax avoidance schemes are bearing fruit by revealing forms of avoidance that represent loopholes that need to be closed, which is what the clause does. The intention behind the clause was announced by the previous Government at the time of the March Budget. The provision is tightly targeted. I am not aware of any adverse reaction, and I certainly support the clause, but will the Exchequer Secretary give us his assessment of how much tax avoidance will be prevented by blocking the loophole?
I was pleased that the coalition agreement included the commitment:
“We will make every effort to tackle tax avoidance”.
Clauses 8 and 9 are the first concrete signs of that commitment being delivered. However, will the Exchequer Secretary tell us a little more about how those efforts will be pursued and what is meant in the coalition agreement by the commitment to
“detailed development of Liberal Democrat proposals”?
If I understand correctly, Liberal Democrat proposals in this area include: changing the taxation of benefits in kind; increasing the proportion of HMRC time spent on income tax evasion; a new general anti-avoidance provision for corporation tax, with companies paying a commercial rate for HMRC pre-clearance—I imagine that that is being subsumed in the wider discussion about a general anti-avoidance rule; and legislating to establish the beneficial ownership of property that is sold to prevent the avoidance of stamp duty land tax. Will the Exchequer Secretary confirm what the coalition agreement meant? Are all those initiatives—
Mr Gauke
I thank the shadow Minister for his words of support. It would be somewhat surprising if he did not support the measure, as I am sure that he would have introduced it had he been in our position.
Clause 8 relates to corporation tax avoidance involving de-recognition. The corporation tax rules on financial instruments broadly follow the treatment of profits and losses recognised in accounts drawn up under generally accepted accounting practice. That applies to most financial instruments, including loans and derivatives. However, in certain cases where the terms of an asset and a liability are closely related, accounting practice may mean that neither the income nor the expenses arising on them are included in the accounts. For example, a company may have issued preference shares on which the dividends payable equal the interest received. As the company is economically flat in such cases, accounting practice allows it to de-recognise both the income and expenses. However, for tax purposes, that gives rise to a mismatch. The income is taxable, while the dividends are not deductible.
Unfortunately, avoidance schemes have continually sought to exploit the practice of de-recognising income. In 2006, legislation was introduced to block such avoidance by overriding the de-recognition for tax purposes. It required that where certain conditions are met, taxable profits are to be computed as if there had been no de-recognition in the accounts. It was necessary to amend the original legislation in 2007 and 2009 to block new schemes. Previous action has protected something like between £100 million and £150 million. To answer the shadow Minister’s question, it is anticipated that the measures in the Bill will protect £150 million per annum.
It is worth making the point that in addition to blocking the latest schemes, the Government intend to remove the opportunity for new abuse. We will amend the anti-avoidance rule in question so that it works in a more wide-ranging manner. Such a rule will make it unnecessary repeatedly to block similar versions of what is essentially the same scheme, and will allow us to address the matter more completely. HMRC will issue a technical note on the subject shortly, with a view to us making the amendments in the Finance Bill 2011. Any such changes would be effective from a date to be announced in the autumn, following consultation on the details of the proposals.
I note your earlier guidance, Mr Evans, and I will not go into detail on the points that the shadow Minister made, but we continue to look at the issue, and the Government take anti-avoidance measures very seriously.
Question put and agreed to.
Clause 8 accordingly ordered to stand part of the Bill.
Schedule 5 agreed to.
Clauses 9 to 11 ordered to stand part of the Bill.
The Deputy Speaker resumed the Chair.
Bill reported, without amendment.
Bill to be read the Third time tomorrow.