Oral Answers to Questions

Stewart Hosie Excerpts

Tuesday 16th November 2010 Commons Chamber

[Mr Hoban]

My hon. Friend makes an important point. We need to ensure that savers have the information that they need to enable them to shop around and find the best possible deal. ISA providers have already agreed to disclose interest rates on their statements, and the Financial Services Authority is consulting on extending that duty to other savings accounts.

[Stewart Hosie (Dundee East) (SNP)]

The Minister will be aware that the savings ratio is forecast to fall in every single year until 2015. Does this not make the decision to abolish the child trust fund—a savings plan with a 74% voluntary take-up rate—all the more short-sighted?

[Mr Hoban]

The problem with the child trust fund is that there was no evidence to demonstrate that it increased savings across the economy. We are faced with a difficult decision: we need to find savings to tackle the budget deficit that we inherited, and we believe that the best thing to do is to give help to families now rather than locking that money away until the children are 18.

Finance (No.2) Bill

Stewart Hosie Excerpts

Monday 8th November 2010 Commons Chamber

[Mr Hanson]

Indeed, and TIGA—my hon. Friend says “tiger”; I say “teega”, but we both mean the same thing—has estimated that we can make savings to the Treasury by investing in a tax relief up front and keeping jobs in this country. That is the crucial point.

[Stewart Hosie (Dundee East) (SNP)]

rose—

[Mr Hanson]

I know that the industry is important to Scotland, so following my hon. Friend the Member for Dundee West, I give way to the hon. Member for Dundee East (Stewart Hosie).

[Stewart Hosie]

The right hon. Gentleman was right to mention the Chancellor’s argument that the proposed tax break was poorly targeted, but he will be aware of the evidence given to the Scottish Affairs Committee by Edward Troup of the Revenue. He said:

“I am not sure I would say it was poorly targeted. It was targeted at the video games industry…it was perfectly designable if we had continued with it”,

and so on and so forth. Does not that experience from the coal face, from inside the Revenue, directly contradict the argument that the Government used to do away with the plan?

[Mr Hanson]

The hon. Gentleman has effectively read out the next section of my speech. I have indeed examined what was said in the Scottish Affairs Committee. The Under-Secretary said at the same meeting on 20 October:

“It may be that we can revisit a video games tax break in the future.”

Was he speaking for the Department of Culture, Media and Sport or for the Treasury? I presume that the Chancellor was speaking for the Treasury in ruling out the idea, but three months later his Minister in the DCMS said that we should consider it in future.

I do not necessarily wish to press the new clause to a Division, but I have tabled it so that the Exchequer Secretary can clarify whether, in the next 12 months or two years, he can meet the objectives that my hon. Friends the Members for Dundee West, for West Bromwich East and for Liverpool, Wavertree, and the hon. Member for Dundee East, have championed so strongly.

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[Mr Field]

They are the spiritual home of so many things, as I am sure the Opposition Whip would agree.

I have spoken on many occasions to leading lights in the video games industry, and they outlined many of the concerns that have been expressed by the hon. Members for Dundee West (Jim McGovern), for Dundee East (Stewart Hosie) and for West Bromwich East (Mr Watson). There is a risk that a significant amount of business is leaving these shores because of a perception, and indeed the reality, that there is unfair tax and regulatory competition from further afield.

One of my concerns, which I expressed before the election to leading lights in the video games industry, is that trying to emulate the film tax credit is not necessarily the right route down which to go. Back-Bench and Front-Bench veterans of Finance Bills going back a decade or more—you are one, Madam Deputy Speaker, from your time as a Minister, as am I from my time in opposition—will know of the concern that the film tax credit has had to be updated almost annually, because of the clear abuses and unintended consequences resulting from it. There was a sense that although the film business in this country benefited from it, there was a significant through-flow of cash that was not in the interests of either the Exchequer or the high-quality products of which our film industry has been rightly proud in decades gone by.

[Stewart Hosie]

Notwithstanding the hon. Gentleman’s points about the film tax credit, I am sure that he will understand the business model around which the video games industry operates. A large amount of cash is spent in the development of games, but revenue drops off in the run-up to a new hardware offering or console being developed. The difficulties that the sector faces are exacerbated by the regular new hardware offerings. Does that not make a stronger case for some sort of assistance?

[Mr Field]

I accept that. There is also little doubt that we have some tremendously high-quality people working in this business. I must say, in parenthesis, that one difficulty is that hitherto we have had to import far too many such people from beyond these shores. I know that our university media studies industry is much discredited, but those media studies courses that are linked to the video games industry in particular often ensure that we get some of the brightest and best of the home-grown talent in our universities entering the industry.

I take on board the concerns of the right hon. Member for Delyn (Mr Hanson), given that the issue before us has been in the ether for years. I would prefer not to rush into anything, although I hope that my hon. Friend the Minister will take on board the deep concerns expressed today so that we can come back, perhaps during next year’s Finance Bill, with a workable model based on the proposals before us.

I would like to put in a word not just for the video games industry, unique though its interests are in the minds of those who run and work in those businesses, but for the animation industry. It is a related industry within the media sphere, and faces many of the problems expressed by the hon. Member for Dundee East and businesses in the industry. The animation industry is deeply concerned that it is losing some of its brightest talent, and feels that—this is felt not just in the animation sector—it is facing unfair competition not only from the Canadian and French models, but from Ireland and, dare I say it, Scotland. It feels that it is losing out to a large degree. I would therefore like to see a clause that brings the video games industry, the animation industry and all these other industries under a single protocol. Such a protocol could operate well and effectively, so I hope that the Treasury will consider one in next year’s Finance Bill.

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[Mr Gauke]

The circumstances facing us in the run-up to the June Budget were such that we wanted to introduce a more fundamental reform of corporation tax. In that Budget on 22 June, we announced a reduction in the main corporation tax rate from 28% to 24% over the next four years. In doing that, we wanted to show a sense of direction, to ensure that Britain was open for business, and that we were providing lower rates. Our approach is to have a broader base but lower rates rather than targeted intervention, unless there is clear evidence that intervention is the right approach.

[Stewart Hosie]

The Minister is being generous. He is paraphrasing the Green Book, which says that the Government will

“prioritise spending which supports private sector growth and investment”.

Various forms of those words have been used since his party and the Liberal Democrats took office. Surely tax breaks that would cost perhaps £195 million and would deliver £415 million in tax receipts are precisely the sort of investment in precisely the sort of industry that would meet the Government’s objectives.

[Mr Gauke]

We have heard the figures quoted by TIGA, but we do not accept the validity of that analysis because we feel that some of the assumptions underpinning those estimates are erroneous. The research commissioned by the industry implicitly assumes that the investment incentivised by the subsidy is entirely additional to the UK economy. In reality, it is likely that the relief will displace investment from elsewhere in the economy, so the net impact on total UK investment could be limited. For example, it is possible that such a tax subsidy would divert investment from more productive sectors to the detriment of the productivity of the UK economy as a whole.

If Opposition Members are making the case that lower taxes always result in growth in the economy, I would listen with great interest and it would—my right hon. Friend the Member for Wokingham (Mr Redwood) made this point—be an interesting conversion to supply-side economics. I do believe, however, that the strongest economic case can be made for lower tax rates as a whole, across a broader base, as opposed to targeting some sectors, unless there is a strong case that there is some kind of market failure. We have not yet heard such a case being expressed in a way that we find persuasive, and that is why we decided not to proceed with video games tax relief.

That is not to say that we do not wish to support British businesses—far from it; we do. It is vital that we have a strong private sector to drive the recovery, but we must support that growth in the right way. In the emergency Budget, the Government announced a major package of reforms to the business tax regime with the aim of creating the most competitive corporate tax system in the G20.

[Mr Gauke]

The TIGA analysis makes the assumption that everything achieved as a consequence of the relief would be additional to the economy. It does not appear to recognise that there would also be displacement, and that highly skilled graduates would not remain unemployed if they did not find work in the video games industry. We are therefore sceptical about the TIGA analysis. My hon. Friend makes his point well, however, and the nature and profile of the video games business clearly have some significance for his constituency, but we are as yet unconvinced of the necessity for the tax relief that was proposed by the previous Government, and that is proposed in the new clause.

The Government’s focus must be on providing a strong business environment for sectors across the board, including video games. Our reforms will reduce rates of corporation tax by four percentage points over the next four years, which means that the UK will continue to have the lowest main rate in the G7. This will improve our relative position significantly, compared with that of our competitors, after the years in which we have fallen behind. This will benefit companies across the economy, including those in the video games industry.

[Stewart Hosie]

My party welcomes the reduction in corporation tax; we believe that it is a good thing. However, some of the businesses that are creating video games are not big enough to pay corporation tax. Many of them are dependent on the annual allowances, but some of those have now gone, and one has been halved. So although I welcome the reduced corporation tax, the overall package will not necessarily help the start-up studios and small studios as they develop their games.

[Mr Gauke]

We have also reduced the small profits rate of corporation tax from 21% to 20%, when it was set to go up to 22%, and we have effectively reversed the jobs tax—the increase in national insurance contributions that would have hurt start-ups. We are also offering start-ups, including those in the hon. Gentleman’s constituency, a national insurance contributions holiday for the first 10 employees, so there were plenty of positive policies for start-ups announced at the time of the Budget. Indeed, given the state of the public finances, it was a very pro-business, pro-growth Budget in the way that it set up proposals for lower taxes.

On tax simplification, the Office of Tax Simplification earlier today announced the list of reliefs and exemptions within the tax system. When its work began in the summer, the general expectation was that there would be about 400 reliefs and exemptions; the total reached is 1,042 such reliefs and exemptions. Many play an important role within our tax system—I do not wish to decry that—but we have to think carefully about introducing new areas of complexity and new reliefs and exemptions, unless there is a strong case for doing so. Members have already made the case for video games, but the Government remain unconvinced.

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“We’d expect most domestically-orientated banks, for example Lloyds, to be better off after four years than they were pre-budget”.

[Stewart Hosie]

This is interesting. I have seen many of these quotes before, and I am certainly minded to support the new clause, if the hon. Gentleman pushes it to a vote. An examination of the level of tax on banking is sensible, but I would like to know what the Labour party proposes for the level of taxation, given that every billion out of the banks is about £10 million to £15 million less to lend in the real economy. I am curious, therefore, to find out how punitive the Labour party would be.

[Chris Leslie]

I accept the hon. Gentleman’s point. We have to be prudent in how we address these questions, and I hope to come to some of the matters he raises as we explore corporation tax and so on. If he bears with me, I will—hopefully—elaborate.

UBS analysts said that they expected Lloyds and HSBC to benefit by 2012 because of the cut in corporation tax bills, which in their case was larger than the hit they expected to be sustained through the banking levy. It seems, therefore, that the banking levy is playing quite a small part, perhaps a walk-on character—

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[Chris Leslie]

The TUC says that the effective rate of corporation tax for the banks will fall from 25% in 2000 to below 20% this year, which means that, in reality, they are already paying a rate that is below the headline rate that small firms pay. Those findings are certainly eye-catching. All I am saying in new clause 3 is that they merit further review and consideration, which would be a reasonable step to take. Indeed, those findings suggest that we could even be heading towards a regressive corporation tax system in the UK. Small businesses should be paying less in corporation tax than the banks, but the evidence suggests that that might not be the case.

The third wheeze that the banks might benefit from, in their navigation of the corporation tax system, is known as deferred tax, which can be defined as the tax liability that might be payable at some point in the future because of transactions that have already taken place, albeit where there is no certainty about when it will have to be paid. Deferring the payment of tax is not something that ordinary taxpayers can indulge in with great ease, yet it appears that the banks are playing that game on a gargantuan scale, according to the findings of Richard Murphy, the director of Tax Research LLP. He suggests in his recent report that the banks’ deferral of tax reserves are absolutely phenomenal. He calculates that a sum totalling nearly £19 billion, which is nearly half what this country spends on capital projects annually, might not be paid by the banks in corporation tax as a result. He describes that as

“an extraordinary double subsidy going on for these banks.”

Not only were the banks underpinned by the taxpayer in 2008—they are still underpinned in the form of the guarantees offered by the Treasury—but they may receive another fillip, he argues, from that deferred corporation tax gain.

[Stewart Hosie]

Unless my memory is playing tricks on me, at least one of the nationalised banks used those unused or deferred tax assets to pay for the asset protection scheme, which was set up—rightly—by the Labour Government in the previous Parliament. Without those unused tax assets or that deferred tax, the asset protection scheme would not have been possible, thereby imposing an even bigger burden on the banks, so I am not quite sure where the hon. Gentleman is going with this.

[Chris Leslie]

I am not making any particular proposals at this point; I am simply saying in new clause 3 that we should review the level of tax that banks are paying. There may be perfectly good and justified reasons for it, but we are talking about enormous sums of money. If, as some allege, the banks are playing a canny game, with sums of money that might have prevented many of the swingeing cuts that we are seeing to public services, it is incumbent on us, on behalf of our constituents, to ask those questions. If we are indeed “all in it together”, as we are constantly told, we should ensure that the banks pay their fair share and do not leave the rest of us picking up all the bills.

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[Stewart Hosie]

On that point, I entirely agree with the Minister. A fundamental part of this is the new capital requirements under Basel III—some 7% higher for at-risk banks. Does she not agree, however, that a review of bank taxation, along with the Bank commission and the new Basel III regulations, would be sensible to ensure that we have the balance in the round between taxation and capitalisation, risk and regulation, and supervision both at the UK level and with respect to this rather complicated European structure?

[Justine Greening]

The hon. Gentleman is right that the bank levy itself needs to be viewed in the context of overall policy. He is right that it is not just about the bank levy; we have to look at it in the light of the broader changes around regulatory reform and the work of the Independent Commission on Banking. I will shortly come on to explain what that means for new clause 3.

We know that we have to tackle the regulatory failures of the past. We also know that it is right that banks make a contribution in respect of the risks they pose to the UK economy, but there is no benefit in taking action that would simply drive banks abroad. As the hon. Member for Islwyn (Chris Evans) pointed out, hundreds of thousands of jobs across the UK depend on Britain being competitive in this industry. For the financial services sector as a whole, as of June 2009, it had 1 million employees. The jobs are not just in London and the south-east, as there are nearly 100,000 people employed within the financial services industry in the north-west, while there are between 69,000 and 70,000 people employed by that industry in the east of England and about 90,000 in Scotland. Although there have been serious failures in the past, we also have to remember that many of the jobs that are part of this overall sector do not bring in high incomes, as the hon. Gentleman pointed out.

Comprehensive Spending Review

Stewart Hosie Excerpts

Thursday 28th October 2010 Commons Chamber

[Danny Alexander]

I will press on, and give way in a moment.

Thanks to Labour’s profligacy, there really was no money left. The country knew it, our business leaders knew it, and, as we discovered, the Labour Chief Secretary knew it too. By May, the alarm bells were ringing—the danger was real. Whether one wants an expansive social policy, a smaller state, or more or less public spending, it must be underpinned by proper control of the public finances. If that control is lost, the policies that have been built, whatever they are, will inevitably crumble.

[Stewart Hosie (Dundee East) (SNP)]

The Chief Secretary said that to be taken seriously one needs to have a credible and detailed plan. He then went on to say that the Government have laid out their plans in detail, so perhaps he can give us some of that detail. Which Revenue offices will shut? Where will the Department for Work and Pensions closures be? Among the 35,000 Ministry of Defence civilians, where will the jobs be lost? Will he give us the detail in the same way as when the spending plans in the 2004 and 2007 CSRs were announced?

[Danny Alexander]

There is a great deal of detail in the spending review document, as the hon. Gentleman knows because he has had a chance to study it, and of course Departments will set out more detail in due course. He would have a bit more credibility on the subject of controlling the public finances if his colleagues in the European Parliament had not just voted for the 6% rise in the European Union budgets.

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[Stewart Hosie (Dundee East) (SNP)]

The one thing that I would say about the CSR is that—no matter how many times the Chancellor said it during his statement, no matter how many times the Chief Secretary said it today and no matter how loudly the hon. Member for Central Devon (Mel Stride) said it a moment ago—it was not fair. The cuts—£81 billion a year by 2014-15—and the tax rises were not unavoidable.

Every decision taken by the coalition was a political one, but it was the failure to understand the consequences of the decisions that astonished me. Nowhere was that more so than in the defence elements of the CSR and the strategic defence and security review that went along with it. The decision to cancel the Nimrod programme puts a huge threat over RAF Kinloss and a huge question mark over RAF Lossiemouth,

[Greg Hands (Chelsea and Fulham) (Con)]

What would happen under Scottish independence?

[Stewart Hosie]

The Parliamentary Private Secretary is chuntering away about Scottish independence. It is interesting, is it not? He normally wants to deprecate countries such as Ireland and Iceland, but they still sit above the UK in the world prosperity league. I shall give him a copy of The Scotsman to look at later, before he decides on another ill-judged sedentary intervention.

The bottom line is that those defence cuts threaten to add to the 10,000 military job losses under Labour and to the £5.6 billion military underspend in Scotland under Labour. Far more importantly, they would represent a 25% reduction in the entire military footprint in Scotland. If the cuts go ahead, they will represent a 25% hollowing out of the entire economy of Moray. When Conservative Ministers say that we are all in it together, it strikes me that that is not absolutely true and that it is not absolutely fair.

The CSR was not just about the Scottish block but about other UK spending decisions, yet somehow Scotland was portrayed as doing better than most UK Departments. That is nothing but spin. The House of Commons Library makes it clear that the Department of Health, the Department for International Development, the Department of Energy and Climate Change, the Department for Work and Pensions, the Ministry of Defence, the Cabinet Office, the Treasury, the Law Officers, the Northern Ireland Office, the Department for Culture, Media and Sport, the Foreign and Commonwealth Office, Her Majesty’s Revenue and Customs and the Wales Office all did better. A little more substance and a little less spin would not go amiss.

That is important because the cuts represent £1.3 billion in cash terms next year and, above all expectations, there will be an £800 million cut in capital expenditure. That directly threatens 12,000 Scottish jobs. It is dreadfully disappointing—the cuts were announced on the same day as the Scottish quarter 2 GDP figures, which showed Scottish growth up at 1.3%, above the 1.2% for the UK, and confirmed the decision to have direct capital investment to protect jobs during the recession. That makes it all the more ludicrous that the Government would seek cuts of such magnitude before recovery is secure.

[Rehman Chishti]

Did the hon. Gentleman respond to the Government’s spending challenge with his own ideas about where the savings should be made, with £44 billion as a starting point?

[Stewart Hosie]

What I did, possibly before the hon. Gentleman was a Member of the House, was to table amendments to previous legislation to set out a much more sensible framework for a proper programme of fiscal consolidation, based on the successful New Zealand model, rather than the flawed Canadian model that his party and the Liberal party are now following.

One of the things that I find extraordinary, which the Chief Secretary could not explain earlier, was the lack of detail in the Government’s plans. The Department for Transport is expected, among other things, to reduce its administrative costs by one third—£100 million a year. The Department for Business, Innovation and Skills is expected, among other things, to reduce its administrative costs by £400 million. In the Home Office, the UK Border Agency is expected to cut its support function costs by £500 million.

I am not necessarily saying that that cannot be done: what I am asking is how. Which offices will close, how many jobs will be lost, how many staff will be sacked, and where are they located? Of the 42,000 job losses in the military—the 25,000 civilian and the 17,000 uniformed —which ones are those, in which units, where are they currently based, and when will they go? Why would not or could not the Chief Secretary give us that information today? It gives the impression that the Government are making it up as they go along.

I am aware that time is short and I know that many other Members want to speak, so I have a specific question for Treasury Ministers. Page 50 of the comprehensive spending review makes it clear that

“interest rates on Public Works Loan Board (PWLB) loans have been increased to 1 per cent above UK government gilts.”

It goes on to add, unsurprisingly:

“The amount of self-financed capital expenditure is forecast to fall by 17 per cent over the four years.”

This will bring in to the Government, according to the table on page 12, £1.3 billion. That will be about £120 million from Scotland.

Will the Minister please confirm that there will be a requirement in Scotland for another £120 million of cuts, and £1.3 billion of cuts throughout the whole of the UK, in order to find the money to pay the extra £1.3 billion in interest charges because of the increase on Public Works Loan Board loans? I would be grateful for confirmation of that today.

Comprehensive Spending Review

Stewart Hosie Excerpts

Wednesday 20th October 2010 Commons Chamber

[Mr Osborne]

But it was the stated policy of the previous Government to increase social rents over time to approach the level of market rents—[Interruption.] That was the policy of the previous Government. As I have said, we have tried to do this in a way that protects existing social tenants. It will help to build more social housing, and in the end the Opposition have to ask themselves why they failed so miserably on building social housing.

[Stewart Hosie (Dundee East) (SNP)]

The Chancellor has announced 500,000 job losses and cuts of £81 billion—that is just the cuts, not the tax increases—while giving no detail of how that will be achieved. This will cause huge anxiety among those in the public sector and those who depend on their services, and in the private sector firms that are dependent on public sector contracts. I believe that this is reckless: it cuts too fast and too deep. I have one question today: how can the Chancellor possibly imagine that, after his statement, a real-terms, direct cut to the Scottish block of around £4 billion can do anything other than weaken the ability of Scotland to recover in these difficult economic times?

[Mr Osborne]

First, we have preserved the Barnett funding arrangements. Secondly, the decisions that we have taken on the national health service and schools budgets in England will help the funding settlement for Scotland. What we are seeking to do, north and south of the border, is to put the United Kingdom’s economy on a strong and sustainable footing so that there can be growth in Scotland and in the rest of the country. My final observation is that people are pretty clear, in the House and in Scotland, that if Scotland had been independent over the past three years, given the scale of the banking crisis, it would now look like Iceland.

Finance (No. 2) Bill

Stewart Hosie Excerpts

Monday 11th October 2010 Commons Chamber

[Ms Eagle]

The hon. Gentleman was not in the House at the time, but the reduction in VAT was part of the fiscal stimulus that kept the economy afloat during the most dangerous parts of the credit crunch. The growth figures for the early part of this year show that that fiscal stimulus package was working.

[Stewart Hosie (Dundee East) (SNP)]

The hon. Lady talks about the fiscal stimulus package working. It did work, of course, and I backed fiscal stimulus. Does she not now regret that the previous Government was one of only two in the G20 fully to withdraw the fiscal stimulus package in 2010?

[Ms Eagle]

The hon. Gentleman is arguing that we should do the opposite of what the Government decided to do in June. I hope that, in due course, we will see him in the Lobby with us.

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[Ms Eagle]

That is our starting point as we move forward to judge what the Government will announce in a few days’ time. The issue here is the scale and speed of the deficit reduction, and how that impacts on our approach to being able to see some kind of economic recovery sustained, given what is happening in the rest of the world. The worry that we have always had about the Budget judgment implicit in the June announcements and soon to be reinforced in the forthcoming spending review is that the medicine being fed to the patient runs a higher risk of killing it off. We do not want the deficit reductions to be too soon and too deep to sustain a recovery. The Irish example demonstrates the risks of focusing on getting the deficit down at too high a cost to the growth potential of the economy. The Government have a particular view on those judgments, but we disagree with them on the necessity for speed and the ferociousness of the deficit reductions. We are not saying that deficit reductions will not be necessary. The Chancellor used to mention the Irish example all the time as the Irish Government made their extremely deep and fast cuts, but lately he appears to have stopped referring to it at all. I wonder why.

The Government are gambling on their outdated and dogmatic view that if only the state would get out of the way, the private sector would spontaneously move to fill the gap and quickly create the 2.5 million extra jobs that the Office for Budget Responsibility has calculated would have to be created to get the deficit down as forecast. Thus our economy is meant to perform better in job creation terms than it has ever done before, even in much more benign economic circumstances than those we face.

We have just lived through the most dramatic example of the limits of that market fundamentalism that any of us are likely to see in our lifetime. It was not the private sector that rescued the world financial system from meltdown in the credit crunch; it was the co-ordinated action of Governments. Governments have a crucial role to play in fostering economic growth and helping to encourage the emergence of a better, more balanced economy, yet the Bill does nothing to restore the support for industry that the Government have already cut. It does nothing to reverse the £3.6 billion tax hike that will hit our manufacturers in order to pay for the corporation tax cuts announced in the June Budget, £1 billion of which will go straight back to the banks.

Abolishing allowances and reliefs effectively hits businesses with a tax hike when they invest. It benefits investment-light industries such as financial services over investment-heavy industries or new sectors looking to grow. That change penalises companies that need to make sustained investment to establish themselves and grow. It is a strange way for the Government to signal that they wish to see a rebalanced economy and the creation of new industry. Little wonder, then, that the plans have been described as “a disaster” by the senior economist at the Engineering Employers Federation and that the Institute for Fiscal Studies has said:

“Cutting investment allowances to fund a cut in the mainstream corporation tax rate would help companies which make large profits with little investment, at the expense of businesses that are investing heavily in the UK but making only marginal returns.”

There is no sign of a serious growth strategy.

[Stewart Hosie]

Will the hon. Lady give way?

[Ms Eagle]

I have given way to the hon. Gentleman before, but I shall do so once more.

[Stewart Hosie]

I agree with much of what the hon. Lady has said. Would it not carry more weight, however, if her Labour Government had not abolished, for example, industrial buildings allowance and agricultural buildings allowance—the very sort of allowances that she described that would help investment now. Would not her argument carry more strength if her Government had not butchered those important allowances only a few years ago?

[Ms Eagle]

I remember the detailed discussions that we had on that issue in previous Finance Bill debates. The hon. Gentleman has probably been in more of them than I have. The issue is not the abolition of allowances that are 40-odd years old and increasingly do not recognise the changed shape of UK industry. It is about abolishing allowances completely to fund a cut in mainstream corporation tax, with the result that the incentives for investment are taken away at the point of investment.

One of the measures that the Bill ought to have contained but does not is the creation of a tax relief for the video games industry. We all know in the House that in the UK we have a particular expertise in creating video games, which was beginning to create high-value jobs in the UK in what has become a multi-billion-pound industry. We also know that our brightest software engineers are being tempted abroad by generous and possibly illegal tax breaks, and that we risk the decimation of our UK base if we do not respond. That is why, while we were in government, we developed the video games tax credit, which was to operate along the same lines as the film tax relief. In opposition, just before the election, the Conservative party supported that. On 13 April 2010 the hon. Member for Wantage (Mr Vaizey), now the Under-Secretary of State for Culture, Olympics, Media and Sport, said:

“We are committed to a tax break along the lines of the video games tax credit. We have been calling for tax breaks for the video game industry for the last three years.”

Like so many other things said during the general election campaign, that pledge was abandoned immediately after it. We will want to explore the issue further in Committee.

Before the Minister uses the standard Treasury line about how the video industry can always make use of the research and development tax credits that are available more generally, he might care to put all our minds at rest and deal with the nasty rumours swirling around that the entire R and D tax credit may be at risk in the cuts to come. Perhaps the Economic Secretary will reassure us on that point.

Another notable omission from today’s Bill is any reference to increasing the resources which will allow HMRC to build on its already excellent work to tackle the tax gap. Obviously, as was said earlier, the more that tax due is collected, the more effectively the deficit can be tackled and the less pain our society will be forced to endure during the adjustment ahead. During the conference season the Deputy Prime Minister made much of the need to close the gap between the taxes that are due and those that are actually collected. He made grand and welcome pronouncements that it is “ethically wrong” to avoid paying our taxes. He was followed by the present Chief Secretary to the Treasury who announced, interestingly, that he regarded both tax avoidance and tax evasion as “morally indefensible” in times like these.

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[Mark Simmonds]

I am grateful for that intervention. The hon. Gentleman will not be surprised to hear that I do not share his analysis. In fact, the parallels are interesting. I would argue that in the early 1980s Geoffrey Howe and Margaret Thatcher were clearing up the mess that they inherited from the previous Labour Administration, just as the Chancellor of the Exchequer and Liberal Democrat colleagues in the coalition are tidying up the mess that we inherited from the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) and Tony Blair, his predecessor.

[Stewart Hosie]

The hon. Gentleman is giving an interesting analysis, which I do not share at all. He spoke about monetary loosening and monetary expansion. We have had a zero bound in interest rates and 99% of the £200 billion of quantitative easing has gone to buy Government debt—it has gone right through the tube, without hitting the sides of the real economy. Where does he think the monetary easing and expansion will come from to give the cash needed by businesses that want to invest? It is not coming from QE.

[Mark Simmonds]

The hon. Gentleman is right, in a way. I hope that interest rates will remain low for a considerable time to give businesses confidence to borrow money, when they need to, to invest; we could be having a whole argument about the banking sector and structure as well. When interest rates start to tick up again, I hope that the quantitative easing position will start to unwind and the Bank of England will start to sell some of the QE back into the market, which will then create confidence. Personally, I am very nervous about future quantitative easing; we have probably done just about enough. If interest rates stay low as a loose monetary policy, I am reasonably confident that we will have steady growth, for reasons that I have just explained.

From where will the potential dangers come? I do not think that we are assured a return to good times expeditiously. There are risks and problems, particularly in the global economic context—especially given the need to balance the UK economy away from consumer expenditure and the financial sector. I am afraid that recent news from around the world has not necessarily been encouraging. US economic growth is slowing, Chinese manufacturing is cooling and problems in Japan may spread to other Asian economies. Furthermore, there is the dangerous US-China currency stand-off, which could lead to protectionist policies. I very much hope that those will not be put in place.

If we are to have a strong export-led-growth UK model, we will require a strong eurozone. Although the eurozone grew strongly in the second quarter of this year, it remains highly dependent on German growth. We will have to monitor extremely carefully the impact that fiscal tightening has in the eurozone and its particular relevance to UK exports, although I very much hope that that will be assisted by a weakening and a sterling depreciation. Given what they inherited, the Government’s macro-economic policy is absolutely right.

I want to focus on a particular aspect of the Finance Bill. It relates to the aside, made by the Exchequer Secretary in his opening remarks, about real estate investment trusts, which are covered by clause 10 and schedule 4 of the Bill. I support the changes that are set out, but I have a couple of specific questions, which the Minister could answer in her winding-up speech or about which she could write to me, with a copy of the letter being put into the House of Commons Library.

At the moment, dividends through real estate investment trusts, which are tax-friendly vehicles for the ownership of property, particularly commercial property, have to be paid in cash. The Bill will allow them to be paid in stock as well. What will the tax status of those dividends paid in stock be? Will income tax or capital gains tax apply? Clearly, capital gains is paid only when a gain is realised or made. What would happen if the stock deteriorated rather than increased in value? In the Bill there seems to be some provision for a market value. I am not sure how that will work in practice and over what time scale that market value will be assessed.

Real estate investment trusts, which the previous Government brought in, are an excellent vehicle for the ownership of commercial real estate in particular. The HMRC REIT unit has a very good reputation and is extremely helpful to those involved in the industry. However, there are issues that should be in the Bill but are not. The Treasury needs to consider them to improve real estate investment trusts.

The trusts should be the worldwide answer to property investment, in which all our pension funds invest. They are very significant to the future well-being of most of the UK’s population. We need to make the reforms to strengthen further the position of the UK as a place for these important capital markets. The current tax structure of REITs should have put an end to the offshore floating of companies and funds, but that has not happened. It is very complex to bring back onshore a fund that is already listed elsewhere. The Treasury needs to consider ways of simplifying the procedure, therefore reducing the costs and making such a move more efficient and effective.

The Treasury also needs to look at the transition period, which is currently 12 months. It needs to be three years. Some 75% of the money raised inside a real estate investment trust has to be spent within 12 months, and that needs to be looked at and extended. At the moment, to avoid losing their status, investment trusts are having to invest in incorrect assets that are not necessarily going to produce the returns that the people involved believe they should be getting for themselves or their shareholders, whether individuals or pension funds. That issue needs to be looked at carefully.

I am also extremely nervous about the income cover rule. I will not bother boring the House with that at the moment, although officials will know what I am talking about. Currently, it is 10%, but I would argue that it needs to be the same as the takeover percentage, which is about 29.9%.

I want to make one final point about real estate investment trusts. Currently, they can be listed only on recognised exchanges. That does not include the alternative investment market, or the AIM. Many smaller REITs want to float on the AIM so that they can generate income and funds and grow their business. At the moment, they have to be listed both on the AIM and an exchange offshore. That adds costs and bureaucracy and it is utterly unnecessary. I should like the Treasury to make dual listing a thing of the past and make it much easier for entrepreneurial REITs and new REITs.

[Mark Simmonds]

I am grateful for the intervention of my hon. Friend, who is absolutely right. If he has an interest in these matters, he will also be aware that one of the outstanding main problems of UK commercial and investment banks is their level of debt against commercial property, which has fallen in value since the heights of the market back in 2006-07. The banks are finding it difficult to unravel some of those positions. The real estate investment trust structure may enable them to find a way through some of those problems.

[Stewart Hosie]

I very much welcome what the hon. Gentleman is saying about REITs. Some of his Front-Bench colleagues will remember that the same pleas were made to the then Labour Government when REITs were first introduced. All power to the hon. Gentleman’s elbow in persuading his Front Benchers to do what he suggests. Would there not be an advantage in getting small private companies, or even groups of housing associations, to benefit from REITs in respect of social for-profit housing as well?

[Mark Simmonds]

I agree with the hon. Gentleman. That is not a new idea. Many years ago I was chairman of the housing committee on Wandsworth borough council. He may be surprised to hear that at that time—back in 1993-94—I proposed to the then Treasury Minister exactly what he has just suggested about housing associations. It was about creating the ability for them to raise capital, reinvest in the stock and so on. He is absolutely on the right lines. I hope that one day he and I can work together on trying to develop our thoughts on this matter.

The Government’s macro-economic policy is absolutely right. We must control public expenditure, and that control must be permanent, not temporary in order just to get us through this crisis. Then we must ensure that UK taxpayers’ money is being spent to the maximum benefit of those who are using public services. I support the Bill.

--- Later in debate ---

[Nic Dakin]

The ending of universal child benefit is a cut against children and families, and I do not think it is the right thing to do. It would seem that children and families are to pay the price of the global economic crisis caused by the failure of financial businesses and markets around the world. That hardly seems fair to me. To answer the hon. Gentleman’s question, I would rather leave child benefit in place and not give £6.4 billion back to businesses, through changes in their taxes, much of which will go back to the banks that got us into this mess in the first place.

This Bill represents a real opportunity to put in place the infrastructure spending that is a crucial prerequisite for economic growth. Sadly, it appears to be a missed opportunity. We have seen excellent planned investment, such as Building Schools for the Future, the playbuilder programme and so on, scrapped. Ministers then appear surprised when construction companies have to lay people off.

[Stewart Hosie]

I am listening intently to the hon. Gentleman’s speech, but just in case my memory is skewed, can he confirm that Labour’s plans were to halve capital expenditure as well, and that many of the cuts in capital investment that he is bemoaning are precisely the same as those that would have happened under his Government?

[Nic Dakin]

My hon. Friend the Member for Nottingham East (Chris Leslie) will no doubt pick up that point later from the Front Bench, as he is more knowledgeable about the overall position than I am.

There is a relationship between the private sector and the public sector. Properly managed, they support each other. As my hon. Friend the Member for Bassetlaw pointed out so skilfully, if we take all the spending out of the economy, there will be nothing to buy, and therefore the businesses that sell things will go into a spiral of decline. That is the difficulty that we are on the cusp of at the moment.

--- Later in debate ---

[Stewart Hosie (Dundee East) (SNP)]

It is a pleasure to follow the hon. Member for Northampton South (Mr Binley), and particularly to comment on his pleas on behalf of small business. In Scotland, we have 302,000 businesses, and 285,000 employ fewer than 50 people. They do not issue commercial paper or corporate bonds. They do not do rights issues. They are not listed on markets or exchanges in the main. Ninety-nine per cent. of them are owned in Scotland. They are almost exclusively solely dependent on the retail high street banks for their credit lines and working capital, so the more the Minister and her team can do to ensure that affordable lending goes up, and that we do not get the conversion of mortgages to loans, which puts the houses of small business directors on the line should a business fold, the better. Those businesses are hurting. Given that they provide the vast majority of employment in Scotland, we need to ensure that that powerhouse, the SME sector, drives forward with all the capital that it needs. However, that is not what I wanted to speak about today. It was, however, a fantastic opportunity to get it in again.

It would be normal on Second Reading of a Finance Bill to refer to the Budget which it follows, although this is the second Finance Bill following the emergency Budget debate on 22 June. It was the debate that followed that and the debate on the Finance Bill on 6 July that gave us the opportunity properly to debate the Government's whole approach to dealing with the economy, although listening to many of the earlier speeches, I am not sure whether I have gone back three months and we are having the first Second Reading debate. Those were the opportunities, along with the debate on VAT on 13 July, to point out that this Government plan an additional £40 billion of fiscal tightening—over and above the £57 billion of cuts and tax rises planned by Labour—to remind the House that the ratio of cuts to tax increases has gone from 2:1 to 4:1 and to remind it also of the damage that would cause. The debate on the VAT rise, which, as Shelter explained to us helpfully in advance, will lead to the poorest families in the country paying £31 every week in VAT, was the opportunity to make the case against that rise.

This Finance (No. 2) Bill—the third in the calendar year—is different. It contains what the Minister described on 15 September as minor and technical measures, but that does not mean that we should not give it our full consideration, in particular those clauses and schedules which tax practitioners have raised real concerns about. I am grateful, as was the shadow Chief Secretary, to the Institute of Chartered Accountants for its response to the Government consultation. I will draw on that heavily and do something quite unusual in a Second Reading debate: refer in detail to clauses in the Bill. I hope we will get some technical answers when the Minister sums up.

The Institute of Chartered Accountants asks, in respect of part 3, clause 25 and schedule 9, paragraph 7, which inserts new paragraphs 2A and 2B into schedule 53 of the Finance Act 2009, whether, where a company has a profit in an earlier period and a loss or non-trading deficit on loan relationships in a later period that is carried back, interest on the earlier period profits will continue to accrue if in the absence of a claim late paid corporation tax would have been due, up to nine months after the end of the later period. I would welcome formal confirmation that that mirrors the existing rules. The institute adds that those rules perpetuate the existing differences between the interest rules where losses are carried back and offset against profits of an earlier period. Under existing rules, where losses are carried back against profits and where additional corporation tax would be due, interest will run from nine months after the end of the first accounting period. However, in cases where losses are carried back resulting in a repayment of corporation tax, repayment interest will only run from nine months after the end of the later period. I would have expected that, in a genuinely harmonised regime, late paid interest and interest on overpaid tax would ideally run from the same date. Therefore, will the Minister explain the Government's thinking on those proposals?

The institute also believes that paragraph 10, inserting new part Al into schedule 54 of the Finance Act 2009 on repayment interest, would deliver the opposite provisions to what is proposed in new paragraphs 2A and 2B in schedule 9. Again, please confirm that the new rules mirror the existing rules. The same question applies to franked investments in paragraph 11 of schedule 9. Do the new rules mirror the existing provisions?

Paragraph 12 inserts new schedule 54A into the 2009 Act and makes two further changes to the general rules that were introduced in 2009. This relates to new paragraphs 1 and 2. As I understand this, subject to certain conditions, HMRC can recover as late payment interest amounts of repayment interest that have been paid, but which ought not to have been paid. However, this provision does not apply in cases where the whole or part was a result of HMRC error. Therefore, can the Minister please confirm that it is intended that these new paragraphs will have the same effect as those currently set out in section 826(8A) to (8C) of the Income and Corporation Taxes Act 1988? I know that these are technical questions but they are important. If we get this wrong, there will be all sorts of chaos within business. Some of the other clauses that I will come to pose even more dangers. Can the Minister also confirm that the latter provisions will be repealed when these new rules come into force?

New paragraphs 3 and 4 of new schedule 54A suggest that where there is an underpayment of corporation tax for one accounting period and an overpayment of corporation tax for another accounting period, neither late payment interest nor repayment interest will arise during a common period. The Institute of Chartered Accountants understands that this provision is intended to give statutory effect to HMRC's existing practice, but I would welcome confirmation of that.

A number of other questions are raised about particular provisions in those schedules and I would welcome the Minister’s assurance that, if there have been errors in drafting, oversight or inconsistencies as a result of what is in this Bill, the Government will table the appropriate amendments in Committee.

I turn now to clause 7, entitled “Settlor to return excess repayment to trustees etc”. Is there not a problem with that because of the change to make trusts pay income tax at 50%? Should the aim of the tax regime for trusts not be to maintain equality between income and gains of trusts and non-trusts? Does not taxing trusts at a 50% rate when the majority of settlors pay tax at other rates cut across that objective?

I understand that the scope of the clause is limited to repayments in respect of trust income deemed to be that of the settlor rather than reductions in the settlor's liability. Therefore, for the avoidance of doubt, can the Minister confirm that the settlor need not repay anything to the trustees where the settlor has miscellaneous income losses of his own brought forward which he has to use against the trust income?

There is also a general concern about the costs and administration burden on trustees, settlors and the Revenue in relation to implementing some of the measures in the Bill owing to the large number of tax repayments that now have to be made for small, or indeed very small, amounts, and the need for all settlors to be added into self-assessment. I would welcome the Minister’s comments on that. People with no or modest savings or dividend income are in the self-assessment regime, which is complicated and worrying for some people. Even for modest savers, the regime can cost £100 or so for an accountant to prepare a tax return.

Clause 5, “Venture capital schemes”, and paragraphs 1(4) and 2(8) of schedule 2, introduce a “financial health requirement” that prevents tax relief for investment in a firm that is “in difficulty”. The explanatory notes make it clear that the issuing company is in difficulty if it is reasonable to assume that it would be regarded as a firm in difficulty for the purposes of the Community guidelines on state aid for rescuing and restructuring firms in difficulty. However, the guidelines would appear no longer to have any effect. Paragraph 109 of directive 2004/C244/02 states:

“The Commission will apply these Guidelines with effect from 10 October 2004 until 9 October 2009.”

That implies that the guidelines have now lapsed. Will the Minister clarify whether the guidelines are still effective? Even assuming that they are, it is unclear how they will affect companies raising money under enterprise investment scheme or venture capital trust legislation, because paragraph 9 of the directive guidelines states that

“for the purposes of these Guidelines, the Commission regards a firm as being in difficulty where it is unable, whether through its own resources or with the funds it is able to obtain from its owner/shareholders or creditors, to stem losses which, without outside intervention by the public authorities, will almost certainly condemn it to going out of business”.

The implication is that for as long as the company can raise funds from its existing shareholders or creditors, but presumably not from new, external investors—that is not explicit—it does not fall within the definition of a firm “in difficulty”. I would be grateful if the Minister could confirm whether that interpretation is correct.

Paragraphs 10 and 11 of the directive guidelines clarify particular circumstances in which a firm would be regarded as being in financial difficulty, but they appear to be subsidiary to the primary condition—if a company can raise funding from existing shareholders, those paragraphs simply do not come into play. I would like the Minister to confirm whether that interpretation is correct.

The matter gets more complicated, because paragraph 12 of the guidelines states:

“For the purposes of these Guidelines, a newly created firm is not eligible for rescue or restructuring aid even if its initial financial position is insecure. This is the case, for instance, where a new firm emerges from the liquidation of a previous firm or merely takes over such firm’s assets. A firm will in principle be considered as newly created for the first three years following the start of operations in the relevant field of activity. Only after that period will it become eligible for rescue or restructuring aid”.

I understand that in effect, a newly created company would not be regarded as a firm falling foul of the firm-in-difficulty provisions for three years after the commencement of operations. Even if it were, I would welcome clarity on how the measure would apply in a group context. Does the three-year rule apply to a new holding company, operating subsidiary or indeed to the entire group?

On the point in time when the financial health requirement is viewed, proposed new section 108B(1) to the Income Tax Act 2007 states:

“The issuing company must meet the financial health requirement at the beginning of period B”,

which means the period beginning with the date of the issue of the shares. However, it is unclear how the Revenue will approach that in practice. The logical interpretation is that the issue should be considered only when the application for formal EIS approval is made using form EIS 1. It would create considerable difficulties for companies and their advisers if the Revenue could use the benefit of hindsight and withdraw EIS relief retrospectively, after a formal approval is given and certificates issued. It would also ultimately undermine the company’s ability to attract that EIS investment, as there is likely to be considerable uncertainty on whether that relief would be available at all.

There is also a question over the meaning of “permanent establishment” in paragraphs 1(5) and 2(12) of schedule 2. Proposed new section 191A(7) to the 2007 Act states:

“A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it carries on business there through an agent of independent status (including a broker or general commission agent) acting in the ordinary course of the agent’s business.”

The implication is that if a company employee makes sales in the UK on behalf of the company, the company would have a permanent establishment in the UK. However, there appears to be no requirement for that employee to be resident in the UK, and that a visitor carrying on business on behalf of the company would qualify. Will the Minister confirm whether that interpretation is correct?

There are other issues in relation to that proposal. Proposed new section 191A(2)(b) to the 2007 Act states that

“an agent acting on behalf of the company has and habitually exercises there authority to enter into contracts on behalf of the company.”

It has been suggested that for clarity, the definition should follow that already established in the Finance Act 2003, which is that

“an agent acting on behalf of the company has and habitually exercises there authority to do business on behalf of the company.”

I realise that there could be difficulties in respect of groups with a holding company, because the Bill requires the issuing company—the holding company—rather than the subsidiary company that has the trading operation to which VCT or EIS funds will be supplied, to have a “permanent establishment”.

[Charlie Elphicke]

My understanding is that that provision is fairly well understood: “to do business” is a wider phrase than “to enter into contracts”. The “contracts” provision follows the OECD model of tax conventions on “permanent establishment” in a given jurisdiction, and it therefore tracks better the language of international tax law.

[Stewart Hosie]

I understand perfectly well that “to do business” is a better phrase than “to enter into contracts”, but I want the Minister to confirm the nature of the commissioned agent or an employee of the business. They might be based overseas while carrying out business here, and I should like absolute clarity and certainty on that rather than on the wider point on the difference between the phrases “to do business” and “to enter into contracts”. I am with the hon. Gentleman on that.

I am asking that question because as the Minister knows, in many groups, the holding company is a pure holding company, and undertakes no activity other than holding shares in its subsidiaries. My point is that such a company is unlikely to constitute a business as defined in the Bill. Consequently, to require a company to have a “permanent establishment” through which business is carried on or, if the proposed definition is maintained, a

“permanent establishment…to enter into contracts”,

could be seen as running counter to commercial reality. I would welcome further clarification on how such arrangements would be treated for those purposes.

I am dreadfully sorry, Mr Deputy Speaker, that I did not engage in a classic Second Reading debate or address more widely issues that are not in the Bill, but I thought it important for someone actually to ask some specific technical questions to probe the Government on it, rather than indulging in the kind of debate that I am sure we will have on clause stand part later in the Bill’s progress.

[Several hon. Members]

rose—

Amendment of the Law

Stewart Hosie Excerpts

Wednesday 15th September 2010 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

Let me go back over the last three Finance Bills that have become Acts. In 2009, we had 127 clauses and 61 schedules—the normal Finance Bill that we have all spent many pleasurable months Upstairs considering. The first Finance Act of 2010 had 70 clauses and 20 schedules, and then we had the very brief Finance (No. 2) Act 2010, which had 11 clauses and five schedules. The Minister tells us today that there is a requirement for a third Finance Bill this year to cover 18 areas—he described them as minor technical measures. It might well be that they are measures that are time-limited to some extent and must be considered. However, my difficulty is that there will be two full years between 2009 and 2011 before we get a full Finance Bill. That Bill is important in terms of scrutiny because it consolidates and brings together all the tax and duty measures in a single Bill and gives Parliament the opportunity to consider in the round the comprehensive impact of all these measures together rather than doing so piecemeal, which is what is being done here, notwithstanding the technical reasons behind that.

I have no particular problem with the measures that are to be debated—I think that some of them will be sensible—but I am looking for some confirmation before I make a final determination on this measure that when we get to 2011 there will again be a full, comprehensive Finance Bill so that we can see all the tax, duty and other financial measures in a single Bill for proper detailed consideration Upstairs over the months it normally takes. I hope that the Minister can give us some assurance that once we have got past this limited No. 3 Finance Bill, future Finance Bills will not be delivered in this way and will once again be full and comprehensive.

PAYE Contributions

Stewart Hosie Excerpts

Wednesday 8th September 2010 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the reported errors made by Her Majesty’s Revenue and Customs that appear to have led to millions of people underpaying or overpaying billions of pounds of pay-as-you-earn contributions.

[Mr Speaker]

Order. I should be grateful if hon. and right hon. Members who are leaving the Chamber would do so quickly and quietly so that the Minister, Mr. David Gauke, can respond to the urgent question.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

I am grateful for the opportunity to make a statement to the House about the action that HMRC is taking to rectify overpayments and underpayments in the PAYE system.

The PAYE reconciliation process occurs every year to reflect the changes in people’s earnings and employment status that happen over the course of a tax year. In previous years, HMRC employed a system of manually joining up separate pieces of information through PAYE. Each case of potential overpayment or underpayment had to be reviewed individually before reconciliation could be finalised. That was inefficient and clerically intensive work, and it resulted in a backlog of open cases. HMRC now employs a new computer system that matches records automatically to ensure that the correct amount of tax is paid.

The coalition Government have already started to look at how to reform PAYE further and make it more efficient. As part of the Government’s strategy to create the most competitive tax system in the G20, we are consulting on options to improve PAYE. The PAYE system was introduced at a time when people had one job—perhaps the same job for their whole career—and one source of income in retirement. However, that world has now gone and it is common for people to have earnings from multiple sources. That is well known, but it is something that the previous Government failed to address.

No reconciliation process was undertaken last year, so this year HMRC had to complete the reconciliation for two years instead of one. The preliminary assessment of this year’s reconciliation was first brought to my attention earlier in the summer, and while the majority of PAYE records are correct, we are acting promptly to put right the situation that we inherited, which has contributed to the number of individuals required to make payments and the size of payments owed. About 4.3 million taxpayers will receive repayments between now and Christmas, while 1.4 million will be sent letters specifying how any underpayment has been calculated and how such payments can be reviewed.

To begin the process of reconciliation, HMRC has sent out the first set of taxpayer notifications to individuals throughout the UK. Those individuals who have overpaid will receive a full refund. Those who have underpaid will make additional payments through the PAYE system, provided that the payment due is less than £2,000. If the payment due is more than £2,000, HMRC will contact the individual to discuss the issue. All payments will begin next year and no immediate one-off payment will be required. HMRC will review the responses to the first set of notifications and make any changes needed to operational plans before going ahead with the rest. Staggering the process between now and Christmas will help to ensure that HMRC can deal with all queries efficiently.

The Exchequer is owed a total of approximately £2 billion. The fact that we were left with the worst deficit in peacetime history means that we simply cannot afford to write off all the underpayments. To ensure that the tax system is fair for everyone and that everyone pays their fair share, we are taking action to recoup the funds as painlessly as possible. In cases of genuine hardship, HMRC will allow payments to be spread across a period of three years. As was already the case, it will not pursue cases when the amount owed is less than £300—that is an increase from the previous threshold of £50—which applies to 40% of all underpayments. Of course, in specific circumstances, HMRC will consider writing off underpayments where it can be shown that HMRC was provided with all the information necessary—although I have to tell the House, from historical experience, that that is unlikely to apply to many cases. We do not want to build up people’s hopes unrealistically.

This Government understand that there is an urgent need to reform our PAYE system. In opposition and from day one in government, we have sought ways to improve it. The system is outdated, inefficient and burdensome to the Exchequer and taxpayer alike. We need PAYE to reflect the employment issues that the 21st century presents, and that will be a focus of reforms that we take forward as part of our wider strategy for reform.

[Stewart Hosie]

I thank the Minister for his technical explanation of the problem. I say at the outset that, given the scale of the problem—6 million people owing or owed perhaps £6 billion—it is disappointing that a Minister was brought here to make that statement and that the Government did not volunteer one earlier.

May I ask for more clarity? Is the number of people affected around the 6 million previously reported, and does the Minister discount the figure of 23 million reported in some of the press today? Is he confident that the previously reported figure for mispayments of £3.8 billion are correct, and does he give any credence to reports in the press today of an additional £3 billion of mispayment error? In short, I am trying to understand the full extent of the problem.

Can the Minister tell the House when those due to receive payments from the Revenue will get them? He confirmed the procedure for the Revenue requesting payment from those who have underpaid, and I am pleased that the offset is now £300, but can he give a cast-iron guarantee that those whose circumstances have changed dramatically—perhaps they have lost their job—will not be hounded for modest payments that they can no longer afford to make?

What action is the Minister taking to ensure that taxpayers are not now the target of fraudsters and scams? To get to the bottom of the matter, although he explained how the problem occurred, can he explain how long such errors have been occurring and when Ministers first knew about them? How could a system so flawed have been allowed to operate as it did? He spoke a lot about PAYE and his intention to reform it, but the public, employers and employees have a right to trust and believe that the PAYE system is reliable and works. What guarantees can he give us today that, after work is done on PAYE, it will be trusted and people’s family and household incomes and budgets will not be shredded, as they may be in the coming year, with demands for back tax because of miscalculations by the Revenue?

[Mr Gauke]

First, let I say that I am perfectly happy to answer these questions and I am genuinely grateful for the opportunity to do so.

The hon. Gentleman asked about the backlog of cases. That matter has been well known—I believe that he and I have debated it in the past, and a National Audit Office report published on 30 June gave the most recent update on the position. There is nothing new in the backlog that has emerged in recent weeks. There is a problem and we and HMRC are seeking to deal with it, but it is a problem that has existed for many years and we are critical of the previous Administration for the lack of progress in resolving it. A specific concern that has featured very recently is that it has emerged that, in the last two tax years, 4.3 million people have overpaid tax and 1.4 million have underpaid. Our aim is to send cheques to all those who have overpaid over the course of the rest of the year—in dramatic contrast with previous delays in addressing overpayments.

The hon. Gentleman is right to raise the question of changed circumstances, and it is absolutely right that HMRC considers hardship cases. That is why we have announced today that HMRC will show flexibility in some cases to spread payment over three years. As I said, we are not seeking to pursue the matter mindlessly, without taking account of individual circumstances, especially of those owing large amounts.

The hon. Gentleman also rightly raises the subject of fraudsters, and I am grateful to have the opportunity to reiterate that HMRC will not send e-mails to members of the public; communication will be in writing. Of course, people should be cautious.

How long has this problem persisted? The fundamental problem with PAYE, in the sense of there being too many open cases, and underpayments and overpayments, is a long-standing issue. In part it has to be recognised that, inherently in the PAYE system, there will sometimes be underpayments, because not all the information will be available in-year. For example, all the information about benefits in kind, company cars and so on, will not necessarily be available to HMRC or to employers. That will come to light at the end of the year, and then there will be a need for reconciliation, but that problem has always existed.

The hon. Gentleman specifically asked how long Ministers have been aware of the problem. This Minister has been aware of a problem with PAYE since day one, and that is one reason why we made proposals for reform when in opposition.

The hon. Gentleman asked also about future reform. It is important that there is trust in the PAYE system, and it is right to say that in 85% of cases PAYE is correct in-year, but there are still problems, and we are consulting on proposals so that information is more up-to-date—if you like, so that it is real-time information. That means that HMRC will be able to respond to changed conditions much more quickly, and that we will have a system that is fit for the 21st century, in which people move around, change jobs and have multiple sources of income. We think that that is the direction in which we need to move.

Office of Tax Simplification

Stewart Hosie Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Gauke]

My hon. Friend makes a good point. The greater the complexity, the greater the opportunities for avoiding tax, and a simpler tax system closes down some of those opportunities. The relationship between avoidance and complexity is itself complex, because avoidance leads to more complexity. As a Government, we take tackling tax avoidance very seriously.

[Stewart Hosie (Dundee East) (SNP)]

The old tax law rewrite project only managed, in more than a decade, to bring about the Capital Allowances Act 2001, four income tax measures, the Corporation Tax Act 2009, the Corporation Tax Act 2010 and the Taxation (International and Other Provisions) Act 2010. As the Minister expects a report on each of this new body’s inquiries, with an analysis of its reform options and recommendations, all of which might take some time, may I ask him, if he does nothing else, to urge the new Office of Tax Simplification to work rather more swiftly than the old tax law rewrite project was able to?

[Mr Gauke]

The hon. Gentleman rightly makes the point that tax law is a complicated matter, and such matters are not addressed easily and simply, but we believe that we have appointed the right individuals, and that there is engagement by the tax professions. We believe that the tax law rewrite project had many commendable features, but it was very restricted. It focused merely on wording, and we want an independent body to consider policy recommendations to see how we can improve our tax system.

Finance Bill

Stewart Hosie Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Gauke]

The further forward the projections go, the less reliable the information and evidence on existing measures, not to mention the fact that, of course, there will be a number of Budgets between now and then and further policy announcements will be made during that period. Therefore, those projections are unlikely to be particularly accurate or helpful to the House.

[Stewart Hosie (Dundee East) (SNP)]

The Minister has been telling us about a number of measures that will mitigate the VAT rise, such as changes to the tax system and tax credits, but none of those things is in the Bill. He has not mentioned some of the other cuts not yet announced but promised that are not in the Budget either, not least the huge savings intended to be made in the welfare system. Would he care to give a more rounded picture and tell us what the impact on those who are at the very bottom and wholly dependent on benefits will be when those cuts kick in?

[Mr Gauke]

This Government have provided greater distributional analysis than any Government have done before. Clearly, in very difficult times, when it is necessary to raise substantial sums and to reduce the deficit very dramatically, we have managed to do so in a way that has spread the pain. It is not the Government’s desire from any great sense of pleasure to be taking tough measures, but that is unavoidable—we cannot ignore it or hide from it—and, yes, there will be pain, but there is no alternative.

Our long-term objective remains to increase the personal allowance to £10,000, as set out in the coalition agreement, and we have made progress in the Bill and the Budget. We are increasing the personal allowance on income tax and taking almost 1 million people—the lowest earning income tax payers—out of income tax altogether. That will also benefit 23 million people who work in Britain by up to £170 a year.

The second matter that the Bill stands for is freedom—freedom for the private sector to grow, unconstrained by uncompetitive tax rates. The Bill will take the first step towards that by cutting the corporation tax rate to 27%, and it will be cut every year until it reaches 24%—the lowest rate of any major western economy, one of the lowest rates in the G7 and the lowest rate that this country has ever known.

Hon. Members were concerned that cutting the main rate would mean that banks did not pay their fair share. Many sectors, including manufacturing, will benefit from the reduction in corporation tax, but we have made it clear that the reforms outlined in the Budget will ensure a greater contribution from the banking sector—one that far outweighs any benefit that they receive from lower corporation tax rates. The banking levy announced in the Budget is a surgical approach reflective of economic risk and intended to encourage banks to move to less risky funding profiles. Banks will pay at least £2 billion more in tax as a consequence of those proposals.

The hon. Member for Nottingham East (Chris Leslie), who has contributed a great deal to the debates on the Bill, was particularly concerned that the banks will be let off for risky behaviour. That is not the case, but I hope he will accept that a targeted approach is the best way forward. Tax competitiveness is good for employers and society as a whole, and the bank levy allows us to be competitive, while ensuring appropriate tax treatment for those activities that pose the greatest risk.

--- Later in debate ---

[Mr Byrne]

Let us come to that point directly. If we want to understand the difference between our parties, we need only compare the recession that we have been through in the past two years with the one presided over by the Conservative party. Unemployment in this recession is half what it was during the recession of the 1990s. Furthermore, repossessions are 40% lower and company insolvencies are running at about a third of the rate reached in the 1990s recession. We Labour Members believe that it is right to act to protect people’s jobs and homes and the firms that they work in.

[Stewart Hosie]

Much as I like the shadow Chief Secretary and much as he is doing a sterling job in attacking this new nasty Con-Dem Government, a wee bit of revisionism is going on here. The UK did not lead the way. The fiscal stimulus packages in the United States, France, Japan and even Germany predated the United Kingdom’s. If there were a bit more reality in this, there would be a lot more credibility to the attacks that the right hon. Gentleman is trying to level at the new Government.

[Mr Byrne]

It would be churlish of the hon. Gentleman not to acknowledge the role that the Labour Government played in bringing the G20 to London and agreeing a £1.1 trillion package of support, as well as the measures on international banking reform. All that ensured that whereas fairly low levels of growth in world trade and world economic improvement were projected last year, we are now looking at a significantly better picture. Surely he will acknowledge that.

[Stewart Hosie]

I supported fiscal stimulus; I still support fiscal stimulus when it is necessary. The question is not what may or may not have been spun at a G20 meeting, but why the Labour Government left the UK as one of only two G20 countries without a fiscal stimulus package in 2010. I welcome banking regulation, but given that Northern Rock began to collapse in the late summer of 2007, why will the real new banking regulation that we need still not be in place until the autumn of 2012?

[Mr Byrne]

I do not know what figures the hon. Gentleman is looking at, but in the March Budget the fiscal stimulus provided by automatic stabilisers was about 4.4% of GDP. The idea that a fiscal stimulus was not sustained into 2010 is fantasy.

Finance Bill

Stewart Hosie Excerpts

Thursday 15th July 2010 Commons Chamber

[Mr Chope]

Absolutely. I make no apology for declaring my own view, which is that if it could be afforded, it would be sensible to give tax relief on insurance premiums where we think those premiums are for the public good and will result in reducing the burden on the state and the taxpayer. I would like at least to bring in incentives in the form of tax relief, let alone eliminate the insurance premium tax. As I said earlier, I do not think that the latter is affordable in the present crisis. That is why I tabled this very modest proposal in the hope that it will get the Government thinking about alternative means of raising money from insurance policies.

[Stewart Hosie (Dundee East) (SNP)]

I rise to speak to amendment 15 in my name and that of my friends. At face value, the increase in insurance premium tax in the Budget did not cause a huge stir, but as its consequences began to be felt, many representations were made by consumers and the industry. On balance, it is wise that we should have a report on the likely consequences of this tax rise on individuals, families, consumers and the sector. A number of concerns and predictions have been voiced. Eric Galbraith, the chief executive of the British Insurance Brokers Association, said that its research

“demonstrated that businesses and consumers were reducing insurance cover as a result of the recession”

and that

“we are concerned that increases to insurance premiums as a result of IPT could lead to even further underinsurance or even a lack of insurance protection. The last thing people need in a financial crisis is a higher insurance bill”.

That makes sense, given that taxes elsewhere, not least VAT, are going up. The insurance industry is worried that increased premiums may tempt people completely to stop insuring their homes, holidays or travel. Already, according to research by moneysupermarket.com, only one in five travellers always cover every trip they take here or abroad.

One consequence of underinsurance or non-insurance is that the number of illegal uninsured drivers is on the rise. According to the Motor Insurers Bureau, they already push up the average car premium for everybody else by £30 a year. If more people are underinsured or have no insurance at all, the premiums of those who pay the minimum third-party insurance will be pushed up even further. That is another burden that people really cannot do with in the middle of this recession, when times are tough. As the right hon. Member for East Yorkshire (Mr Knight) has made clear, in certain parts of the country, where the car is a necessity and people are honest, such premiums will be paid again and again. There will be a lot of hits to the honest insurer as a result of non-insurance elsewhere.

The Association of British Insurers has responded to the Budget by saying:

“Raising IPT is a direct tax increase for the vast majority of people who sensibly protect themselves and their families with insurance. This is regrettable and could have serious unintended consequences if it puts off consumers from protecting their homes, cars, holidays and everyday living.”

On uninsured trips, apparently some 2.9 million trips are made each year without adequate cover. Peter Hayman, the director of P J Hayman, expects that number to rise as more people opt to economise and use “free” cover as the cost of IPT increases. Perry Wilson, the founder of Insure and Go, has said:

“Our research suggests that the UK travel insurance industry receives over half a million claims for medical problems a year and nearly 400 000 for lost or stolen baggage. This tax rise will only act as a deterrent to those who sensibly want to insure themselves against these risks”.

Of course, the cost of not having insurance in certain circumstances can be extraordinarily expensive.

[David Rutley (Macclesfield) (Con)]

The hon. Gentleman makes an important point about underinsurance, as have other Members. Does he agree that this should not be just about the potential increase in IPT, but should also be about what we can do in terms of product design? Surely the onus should be on insurers to come up with products that help people, particularly younger drivers, to avoid this challenge. For example, they should look at opportunities for pay-as-you-go insurance and other possibilities. The argument is not just about IPT, but is about other product-related challenges and what can be put forward to mitigate the problems of underinsurance.

[Stewart Hosie]

I am a great supporter of innovative product design, marketing and pricing strategies, and I hope that all those things happen, but we are debating an amendment to the Finance Bill in which the Government are putting up IPT. I shall not strain the limits allowed by the Chair, but shall stick to the amendment and what is in the Bill, while supporting any innovation that the insurance sector, which is massively important in Scotland, might bring forward.

There is a deterrent effect on those who wish sensibly to insure themselves against many risks, and that effect will be enhanced as the cost of insurance rises. There are also specific consequences for individuals. Some 1.2 million people—about one in 20 motorists—regularly drive uninsured, and honest motorists pay the £30 premium I have mentioned, which is likely to go up. If someone is caught driving without insurance, the police are entitled to remove their vehicle from the road and charge them for the cost of transporting, storing or scrapping it. However, some cars may be worth less than the cost of insurance and there will be a burden on the public purse as a result of that removal, storage and scrapping of vehicles if people choose simply to abandon them.

People might also cut corners and opt for the “free” travel insurance offered by credit card companies, which might leave some travellers without the necessary levels of cover and might be costly in the long term. I do not intend to take up much of the Committee’s time on this issue, as this is a probing amendment, but this issue is more serious than I had initially imagined. I look forward to hearing the Minister’s comments on that last point in particular, because if people decide not to pay insurance premiums and instead settle for the “free” cover offered by their credit cards, they might be underinsured in certain circumstances. Also, business might be driven from the traditional, successful, good insurance companies, and I am conscious of what the net loss of jobs, revenue and profitability in that sector might be. So, putting up IPT will have consequences for the sector, for individuals and for jobs. All these points need to be answered properly and considerable comfort needs to be given that we are not going to turn into a nation that says, “We can’t afford insurance; we’ll do without it and let other people pick up the tab.” I shall listen very carefully to the Minister’s reply.

[Mr Redwood]

My hon. Friend the Member for Christchurch (Mr Chope) has highlighted the two very important and different issues of health insurance and motor insurance. Let me start with motor insurance, which is a legal obligation that is imposed on everyone who wishes to own and drive a car.

Like my hon. Friend, and, I suspect, everyone else in the House, I think it quite right that there should be that obligation. It reminds people that driving a car is a serious business and that they could do considerable damage to others or themselves if they do it badly. It also means that, were someone to drive badly or to be involved in an accident that was not their fault, there would be redress and injured third parties who might need substantial compensation would not be left without it. For all those reasons, we think that car insurance is a very good idea and we accept that it should be a legal obligation.

The coalition Government think that one way of raising more revenue is to increase the tax on that compulsory purchase, but quite a lot of people in the House think it would be better to raise more revenue from the existing level of insurance tax on motor insurance by getting more people to be insured. We are rightly very concerned that, because of the way in which the insurance market works, a significant number of people, particularly younger people, may not be taking out any insurance or may not be taking out proper insurance for their circumstances, and that that places other people at risk and could mean losses that those young people could not afford to pay if they had an accident. That clearly means a loss of revenue for the Exchequer, because those people are not making their contribution by paying their share of insurance tax. We would like the Minister to consider whether better enforcement of the insurance rules could help with his task of filling the coffers and narrowing the deficit. That might be a better route than increasing the tax.

I am sure that the Minister will remind us that we are talking about a 1% increase and that it is quite a modest sum of money. We have been reminded a few times that young people with certain kinds of vehicles, or some young people with any kind of vehicle, can be required to pay a four-figure sum each year for their motor insurance, so we could be talking about £10 or more. The additional increase would not be welcome, because most young people find such sums of money quite large in the first place, and a further 1% would not be helpful.

--- Later in debate ---

Treatment of persons at age 75

[Stewart Hosie]

I beg to move amendment 16, page 3, line 12, leave out ‘22 June 2010’ and insert ‘a date set by the Secretary of State by regulation.’.

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

With this it will be convenient to discuss amendment 17, in schedule 3, page 19, line 38, leave out ‘22 June 2010’ and insert ‘a date set by the Secretary of State by regulation.’.

Clause stand part.

Schedule 3 stand part.

[Stewart Hosie]

I do not intend to delay the Committee. By and large, I am very supportive of clause 6. The two-year extension for people reaching the age of 75 in order to allow them to buy an annuity when it is most effective for them is a good thing to do. The clause seems to be pretty well drafted and the description of it is extremely good. I am pleased about the protection in paragraph 8(2) of schedule 3, which provides that if a member dies before a year has passed since their 75th birthday, and at the date of death there are still funds held for the purposes of the arrangement that have not been designated as available to pay an unsecured pension, not paid as a lump sum, and not applied towards the provision of a scheme pension or a dependent’s scheme pension, those funds are treated as though they had been designated as available for the payment of an unsecured pension and will then be taxed on death at a rate of only 35%. That makes sense.

However, I am aware, through a constituent of my hon. Friend the Member for Angus (Mr Weir), that there are a small number of individuals who have already reached 75, or will hit 75 before 22 June, and who did not buy an annuity because it was not worth it or not effective. I want to describe the position of that person and then see what help the Minister might be able to provide, or hear her explanation of how the clause might assist.

As the rates for annuities were very low, this gentleman did not take up one on reaching 75 in 2007. Instead, he chose a scheme pension that allowed him, subject to pension regulation supervision—a specialist firm did that for him—to continue to manage his pension fund for a period of 10 years and take the actuarially calculated levels of income from it. That was very sensible and prudent. However, the downside is that on his death, if any of that fund is left, it will be subject to inheritance tax at a rate of 80% before it passes to a family member of his choice.

[Mr Mike Weir (Angus) (SNP)]

Indeed it was a constituent of mine who brought the matter to our attention. Does my hon. Friend think that a way round might have been for the clause to allow anyone to take the extra two years if they were to reach age 75 or were already in that position? I cannot imagine that the numbers affected would be huge, but it would have got round this particular problem.

--- Later in debate ---

[Stewart Hosie]

It may have got round the problem. That is one of the questions that I shall put to the Minister.

If the 80% IHT rate is correct, as I believe it is, the situation seems dreadfully unfair, although I recognise that it occurs because of the tax benefits of the pension saving over a person’s lifetime. Of course, people cannot benefit from the same tax twice; I appreciate that. However, I suspect that of the people over 75 who had the means to purchase an annuity but did not, very few would want to do so now. We may be talking about some very wealthy people who would always manage their own pension anyway. I welcome the protection for those who hit the age of 75 on 22 June or thereafter, but people aged between 75 and 77 will feel extremely hard done by if they just miss that cut-off date. There are also those who were already 75 a year or two before and chose not to buy an annuity but are managing their pension provision.

This is a matter of natural justice and fairness. I imagine that the numbers of people who are in this position and would want to buy an annuity are very small, so I am looking to see what protection there might be in the Bill. We may reach a situation whereby there is simply a cut-off, so that even if someone reached the age of 75 on 21 June 2010 and found it not worth buying an annuity, they would no longer be able to take advantage of the two-year gap, which would be a sensible thing to do.

I hope that the Minister can give us some comfort as regards the small number of people, all of whom are beyond the age of 75, who will pay 80% IHT on any remaining funds at the time of their death, compared with those who, within the provisions of the clause, will pay only 35% if they die at that time. I would like an assurance that the Bill and the clause will help that small number of people too.

--- Later in debate ---

[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.

[Ms Angela Eagle]

I beg to move amendment 61, page 3, line 12, at end add—

‘(2) Schedule 3 shall not have effect unless the Chancellor of the Exchequer has laid before the House of Commons a report on the implications of the abolition of compulsory annuitisation of pensions, including—

(a) the revenue implications of abolition; and

(b) a distributional analysis showing who would benefit from abolition.’.

The amendment would mean that the age at which compulsory annuitisation is required could not rise, as the Government announced in the Budget, from the current 75 to 77 until the Chancellor lays before the House a report setting out the implications of abolishing the compulsory annuitisation of pensions savings. That would include the revenue implications and a distributional analysis of who would benefit from the abolition, in the interests of transparency. It is important to explore in more detail the Government’s precise thinking and intentions.

Before I do that, I shall comment on the sudden appearance this morning of a written ministerial statement, to which the Economic Secretary referred, on the matter. It appeared without the courtesy of any warning before our debate on the subject.

I spent some time on the Treasury website trying to avoid the increasingly odious comments on the “spending challenge website”, which continues to publish offensive and outrageous suggestions for savings, such as sterilising the poor, reopening the workhouses and the forced repatriation of immigrants. It appears to be completely unmoderated by the Treasury, and I hope that the Economic Secretary will convey my strong view that something should be done about that thing on the Treasury website.

What I could not find on the Treasury website, right up to the point when I came into the Chamber for today’s debate, was a copy of the consultation document that the written ministerial statement said would be there. I have a copy of the complete list of Treasury consultation documents that was on the website at around 12.30 pm. It featured the bank levy consultation, but not the consultation alluded to in the written statement. I therefore had to go the Library and have it printed so that I had the chance to look at it before I dashed into the Chamber, but the Minister has been waving it about. Will it be the usual behaviour of those on the Treasury Bench to give Members of the House so little time to look at a 53-page document? There was no advance warning, and the document was unavailable on the Treasury website, even though the written ministerial statement said it would be there. The Minister should get her Department to do a lot better than it has done today. That the document was unavailable anywhere other than via a photocopying machine in the Library at the last minute is a discourtesy to the House.

When I had a look at the consultation as I sat on the Front Bench while other debates were going on, the first thing I noticed was that the consultation will be a mere eight weeks long. It starts today and will end on 10 September, which is four weeks shorter than is recommended as good practice in the code on consultation, the second criterion of which states:

“Consultations should normally last for at least 12 weeks with consideration given to longer timescales where feasible and sensible”.

The consultation is an eight-week, rushed consultation that includes the entirety of the August holiday, when many of the people who have expertise on this matter will be sunning themselves in very much nicer climes than most of us could probably afford to visit, before they come back to pronounce. That is a very peculiar way to consult on such an important matter.