Finance Bill

Nigel Evans Excerpts

Thursday 15th July 2010 Commons Chamber

[Mr Christopher Chope (Christchurch) (Con)]

I beg to move amendment 18, page 2, line 23, leave out ‘“6 per cent”’ and insert ‘“5 per cent in the case of personal health insurance, and 6 per cent in any other case”’.

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

With this it will be convenient to discuss the following: amendment 19, page 2, line 23, leave out ‘“6 per cent”’ and insert ‘“5 per cent in the case of motor insurance, and 6 per cent in any other case”’.

Amendment 15, page 2, line 26, at end add ‘, subject to a report having been laid by the Secretary of State containing an assessment of the consequences of the changes in subsection (1) on consumers and the insurance industry.’.

Amendment 48, page 2, line 32, leave out subsection (4).

[Mr Chope]

The amendments aim to tease out from the coalition Government and, in particular, the Exchequer Secretary, who is responding to this debate, what the Government’s attitude is towards people who do the right thing and try to relieve the burden on the public sector and the national taxpayer. Although it would be wrong to suggest that the inspiration for the amendments came from the Secretary of State for Transport, he was on to an important principle recently when he said that if a pensioner has a bus pass but can afford to pay their fare, they should not use the pass but pay the fare themselves and thereby relieve the local taxpayer of the costs consequent upon the use of that subsidised bus pass. It is a subsidy of general application—it goes to people irrespective of their means and ability to pay.

We know that quite a lot of people choose to buy medical and personal health care in the private sector without burdening the state and the taxpayer. If those people choose to do that through personal health insurance, this Budget will increase the financial penalty on them. In other words, it will be a disincentive to people taking responsibility for their own personal health care through personal health insurance. Many years ago, it was the policy of the then Conservative Government that those who subscribed to personal health care insurance should have their subscriptions tax deductible. That was based on the worthy principle that, if we did that, we would encourage more people to take responsibility for their own health care. We have moved a long way from that now.

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[Claire Perry (Devizes) (Con)]

In trying to square the circle of how we can raise taxes when there is no money, it is interesting to note that we have not committed to Labour’s rise in fuel tax, which was going to add a further £425 million—[Interruption.] If you read the small print in Labour’s last Budget, you will see that there was a plan to raise an additional £425 million—

[The First Deputy Chairman]

Order. We are not referring to taxes that are not proposed in the Bill. We are talking specifically about the amendments to the Bill.

[Mr Redwood]

How wise you are, Mr Evans.

I was making the point that the Minister, in responding to this debate on the insurance premium tax, might assuage some of our grief if he were to say that the Government had looked at the total package of taxes on the motorist and that they were aware that this was yet another example of the piling high of taxes on the motorist. Although this individual tax increase will not be large for many motorists—it will be more penal for young drivers and high-risk drivers—it is none the less an additional burden. Even if the Minister cannot accept the amendment, I hope that he will look at other ways of dealing with the problem of fair motoring taxes.

Every time something like this happens to motorists—this time, it is the insurance tax levy—they say, “We are being sandbagged again. Where are those better roads? Where is that safer junction? Where is the wish to spend money on improving the flows on the roads so that we can travel in a more fuel-efficient, green manner of which the Environment Secretary would approve?” There never seems to be the money to do that. We know that this bit of taxation on the motorist, like most others, primarily goes not to making better roads but to a wide range of other purposes; it gets lost in the general coffers.

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[Several hon. Members]

rose—

[The First Deputy Chairman]

Order. It may be of interest to the Committee to know that I shall not be allowing a debate on clause stand part separately from the debate currently taking place.

[Mr Bone]

Thank you, Mr Evans. I am very grateful to have been called. It is a great pleasure to serve under your chairmanship for the first time since you have been elevated to your new role. I refer Members to my entry in the Register of Members’ Financial Interests.

The right hon. Member for Birmingham, Hodge Hill (Mr Byrne) made an interesting and measured speech, which I hope my hon. Friend the Exchequer Secretary will respond to in due course. I could not agree more with the right hon. Gentleman’s last point. We should not be increasing insurance premium tax to anything like European levels. That is one thing we do not need to learn from Europe.

I support the two amendments tabled by my hon. Friend the Member for Christchurch (Mr Chope) and I warmly support the comments made by my right hon. Friend the Member for Wokingham (Mr Redwood). My remarks about relief on motor insurance will be brief. The arguments have been made powerfully and I entirely support them. The amendment about health insurance concerns me the most.

The coalition Government have three areas of protected spending, where public spending is guaranteed to rise: the health service, overseas aid and the European Union. I want to deal with the relationship of the proposals to the health budget. Each year, £100 billion is spent on the NHS and the Government rightly recognise that spending will have to increase. There is no way round it. Demand on the health service will grow and grow, so there will have to be a real-terms increase. Even allowing for that, however, there will not be enough money to do everything in the health service.

One of my constituents is suffering from cancer and needs cancer drugs. She has to sell her house to pay for those drugs. If she had been insured, that would not have been the case. I am convinced that that lady uses the NHS most of the time, so she has not chosen to opt out by insuring herself against everything, but there will always be aspects of health provision that the NHS cannot cover because of their cost. That will mean that people have to pay extra, as this lady is doing for her cancer drugs. If we are to encourage people to insure themselves against such risk, we need to send the right signal.

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[Chris Leslie]

Happily.

[The First Deputy Chairman]

Order. Just before that happens, can we please restrict ourselves to the Bill and the amendments to it?

[Geraint Davies]

I shall bear that in mind. My hon. Friend will know that I had a previous responsibility for adapting Wales to climate change in terms of flood defences, and he will be interested to know that there are literally—

[The First Deputy Chairman]

Order. That is much wider than what we are discussing today.

[Chris Leslie]

Those who require insurance, on which the amendments would seek a report from the Treasury in order to reveal the impact not just on the Exchequer, but on individuals, will also be concerned about their contents insurance and buildings insurance, which are often where the cost of picking up reparations after flooding occur. It would be wrong of me not to pay tribute to my hon. Friend for his work before he entered Parliament.

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[Chris Leslie]

That is a reasonable point, but I should not want to stray beyond the terms of the amendment, suffice it to say that the hon. Gentleman asks a reasonable question, because if we agree to the amendments we might be forgoing revenue to the Exchequer. My view, which he may have heard before but I am happy to share with him, is that the banks should not gain £400 million cash-back from the corporation tax reduction that they will enjoy.

[The First Deputy Chairman]

Order.

[Chris Leslie]

Mr Evans, I felt an obligation to help the hon. Gentleman and hoped that, with that short interjection, you would indulge me.

To return to my general point, insurance is not only a public good, but a necessity for many of our constituents. Our constituents also often make the choice to take out insurance. Although I would not say that all insurance policies are good value for money and although we want to see more competition, I feel uncomfortable about the constant ratcheting up of the costs to our constituents of compulsory insurance, particularly motor insurance.

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[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.

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[Bill Esterson]

The right hon. Gentleman mentioned the record of the last Labour Government on pensions, but what about the record of the previous Conservative Government when it came to the mis-selling of pensions? I trust he would accept that that was a serious problem.

[The First Deputy Chairman]

Order. That is much wider than the amendment.

[Mr Redwood]

I would love to deal with that point, but I shall take your advice, Mr Evans. The real sin was the tax and regulatory raid on pensions under the last Government, which led to the wholesale closures of final salary schemes, and as a result of which most people starting out in work today have no access to a final salary work-based scheme in the way that their parents’ generation did. That is a great tragedy. However, this provision is a small move in the right direction, so I hope that the House will warmly welcome it. Well done to the Minister.

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[Stephen Timms (East Ham) (Lab)]

Schedule 4 provides for the exemption from income tax of expenses paid or reimbursed to MPs, following the introduction under the Parliamentary Standards Act 2009 of the popular new scheme for paying the expenses of MPs administered by the Independent Parliamentary Standards Authority. I understand that that will broadly have the effect of maintaining—[Interruption.]

[The First Deputy Chairman]

Order. Far too many conversations are taking place in the Chamber. Will those who are leaving please do so quietly?

[Stephen Timms]

I appreciate that the arrangements will broadly have the effect of maintaining the tax treatment that applied to similar expenses paid under the previous arrangements. Tax treatment of MPs’ expenses used to be dealt with by specific legislation or long-standing extra-statutory concessions. As hon. Members will know, a long-term project has been undertaken following the judgment in the Wilkinson case of 2006 to place all the statutory concessions on a proper legislative basis. Can the Minister confirm that the previous concession, which I think is numbered A.54—Members of Parliament: accommodation, allowances and expenses—has, with this legislation, been withdrawn, and whether any of the other extra-statutory concessions outstanding are affected by the Bill?

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[Stephen Timms]

Clause 8 and schedule 5 amend the corporation tax rules on loan relationships and derivative contracts that apply to amounts not fully recognised for accounting purposes. This is a good example of the way in which the obligations that the previous Government introduced in 2004 on the disclosure of tax avoidance schemes are bearing fruit by revealing forms of avoidance that represent loopholes that need to be closed, which is what the clause does. The intention behind the clause was announced by the previous Government at the time of the March Budget. The provision is tightly targeted. I am not aware of any adverse reaction, and I certainly support the clause, but will the Exchequer Secretary give us his assessment of how much tax avoidance will be prevented by blocking the loophole?

I was pleased that the coalition agreement included the commitment:

“We will make every effort to tackle tax avoidance”.

Clauses 8 and 9 are the first concrete signs of that commitment being delivered. However, will the Exchequer Secretary tell us a little more about how those efforts will be pursued and what is meant in the coalition agreement by the commitment to

“detailed development of Liberal Democrat proposals”?

If I understand correctly, Liberal Democrat proposals in this area include: changing the taxation of benefits in kind; increasing the proportion of HMRC time spent on income tax evasion; a new general anti-avoidance provision for corporation tax, with companies paying a commercial rate for HMRC pre-clearance—I imagine that that is being subsumed in the wider discussion about a general anti-avoidance rule; and legislating to establish the beneficial ownership of property that is sold to prevent the avoidance of stamp duty land tax. Will the Exchequer Secretary confirm what the coalition agreement meant? Are all those initiatives—

[The First Deputy Chairman]

Order. I think that the right hon. Gentleman is going much wider than the provision before us. Will he confine his remarks to what is contained in clause 8?

[Stephen Timms]

Of course I will, Mr Evans.

I accept that there will always be areas in which there is legitimate uncertainty among business and their representatives about how the law applies. However, I am pleased that clause 8 and schedule 5 are being brought forward to block one more unwanted loophole.