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which gave not just the BES tax relief but, in addition, extra slices of tax relief to top rate taxpayers, should not be rewarded ; it should be penalised retrospectively.Let us remind ourselves of the exact nature of the abuse that we are debating. We are talking about a top rate taxpayer who can make a payment of interest over five years of £30,000, can get tax relief in return for that payment of interest of £28,000, making a total payment of only £2,000 in return for an investment worth £40,000. We are therefore referring to somebody who, by that means, makes a profit at the end of the day--tax-free, with no capital gains tax to be paid--of £24,000.
That is only a modest estimate of the increased value of the company's assets. A situation in which an individual can literally make money out of this country's taxpayers must be considered intolerable and be dealt with as severely as possible. That is why, in those special circumstances, we ask the Committee to close that tax loophole retrospectively. Unless the Financial Secretary is prepared to accept our amendment, I shall urge my right hon. and hon. Friends to vote in favour of it.
Mr. Norman Lamont : As the hon. Member for Islington, South and Finsbury (Mr. Smith) observed, the Committee's debate has been very wide- ranging. In fact, the hon. Gentleman's comment is something of an understatement. It emerged from the debate that a number of Opposition Members have some kind things to say about the business expansion scheme. They include the hon. Members for Pontypridd (Dr. Howells), for Burnley (Mr. Pike) and for Workington (Mr. Campbell-Savours) and, to some extent, the hon. Member for Cardiff, West (Mr. Morgan). They all had words of praise for certain aspects of the scheme.
A number of Opposition Members wanted more detail about the scheme's effects, though at the beginning of the debate I outlined the information at my disposal about the direction of the scheme, about the proportion of it devoted to small businesses having a turnover of less than £500,000, and about assured tenancies--and I gave a general report on the scheme's progress.
The hon. Member for Cardiff, West made an interesting speech in which he compared some people with sharks but then withdrew that remark because he rather likes sharks. I was then dismayed that he made a comparison with vultures because I rather like vultures. [Hon. Members :-- "Oh!"] I spent most of my summer in Crete watching them, and I hope to return to see more of them. I would have preferred the hon. Gentleman to stick to his original metaphor. The hon. Member for Cardiff, West drew a useful and valid distinction between seed capital and venture capital. He will recall that the business expansion scheme began as a start-up incentive, but the development of the venture capital market since 1983, when we extended the scheme to larger companies, enables us again to place the emphasis on smaller companies having a turnover of less than £500,000, which is more in line with the hon. Gentleman's thoughts in respect of seed capital.
The hon. Gentleman gave several reasons why he feels that the scheme is concentrated in south-east England, and disagreed with my views on that aspect. I was impressed by some of the hon. Gentleman's arguments, but I emphasise that it was never intended or marketed as an instrument of
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regional or employment policy. It was always specifically designed as a national economic tool to encourage enterprise.Mr. Morgan : Our complaint is that the scheme has become an instrument of reverse regional policy.
Mr. Lamont : There is always a tendency for any tax allowance scheme to be taken up in areas where economic activity is at its highest. As the hon. Gentleman said, sometimes take-up occurs where there is more capital available. I agree that it would be better to have a spread of financial services throughout the country, but I feel certain that the scheme has brought benefits to many regions. The hon. Member for Workington referred to a matter that he raised last year concerning connected persons. I have seen no evidence to support the claim that he makes, but I shall look further into the matter and may write to him.
The hon. Gentleman said that he cites the Johnson Fry advertisement in every speech that he makes, and I hope that he is receiving a commission from that company for doing so, because he seems to be an active salesman for its services. He referred to the tax loopholes that Johnson Fry advertises. When he makes speeches quoting that advertisement, I am sure that he mentions also that it was perfectly possible for higher rate taxpayers to avoid paying any tax under a Labour Government. By using universally available 100 per cent. capital allowances, a higher rate taxpayer could easily avoid paying any tax under Labour, because similar schemes were being marketed at that time.
Mr. John Smith (Monklands, East) : Those schemes related only to capital allowances.
Mr. Lamont : The right hon. and learned Gentleman makes the point that the schemes related to capital allowances. One hundred per cent. capital allowances were used in conjunction with leasing agreements by higher rate taxpayers to avoid paying tax. That happened frequently under a Labour Government and was a direct response to the very high marginal rates that they imposed.
The debate touched also on assured tenancies and on the Housing Act 1988. The hon. Member for Leeds, West (Mr. Battle) gave several examples of bad landlords, but seemed to argue against any privately rented accommodation, which is where I part company with him. Assured tenancies are subject to general law, which the Housing Act 1988 strengthens both in respect of harassment and illegal eviction, which has led to some recent convictions.
The hon. Member for Berwick-upon-Tweed (Mr. Beith) mentioned the possibility of a rent review provision being used to drive out a tenant. Even at this early stage, I think that the problem mentioned by the hon. Gentleman is unlikely to arise, for there is no evidence to suggest otherwise. However, we shall keep an eye on that aspect. The Opposition amendment would simply build on clause 44, which will end a tax loophole that has been exploited to excess. The only difference between us is that the Opposition contend that that loophole should be closed retrospectively, but no argument has been advanced to justify that contention. The Government are blocking the loophole because it is now thought to be excessive, but there is no doubt that those who have already exploited it did so perfectly legally, and it would be wholly wrong for Parliament to legislate on it retrospectively. Nothing said
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by the Opposition justifies such a draconian measure, and I urge my right hon. and hon. Friends to reject the amendment.Question put, That the amendment be made :
The Committee divided : Ayes 161, Noes 237.
Division No. 193] [6.58 pm
AYES
Abbott, Ms Diane
Adams, Allen (Paisley N)
Allen, Graham
Anderson, Donald
Archer, Rt Hon Peter
Armstrong, Hilary
Ashley, Rt Hon Jack
Ashton, Joe
Banks, Tony (Newham NW)
Barnes, Harry (Derbyshire NE)
Barnes, Mrs Rosie (Greenwich)
Barron, Kevin
Battle, John
Beckett, Margaret
Bell, Stuart
Benn, Rt Hon Tony
Blair, Tony
Blunkett, David
Boyes, Roland
Brown, Gordon (D'mline E)
Brown, Nicholas (Newcastle E)
Buchan, Norman
Buckley, George J.
Campbell, Ron (Blyth Valley)
Campbell-Savours, D. N.
Cartwright, John
Clark, Dr David (S Shields)
Clarke, Tom (Monklands W)
Clay, Bob
Clelland, David
Clwyd, Mrs Ann
Cohen, Harry
Cook, Robin (Livingston)
Corbett, Robin
Corbyn, Jeremy
Cousins, Jim
Cryer, Bob
Cunliffe, Lawrence
Darling, Alistair
Davies, Rt Hon Denzil (Llanelli)
Davies, Ron (Caerphilly)
Davis, Terry (B'ham Hodge H'l)
Dixon, Don
Douglas, Dick
Duffy, A. E. P.
Eastham, Ken
Evans, John (St Helens N)
Ewing, Mrs Margaret (Moray)
Fatchett, Derek
Field, Frank (Birkenhead)
Fisher, Mark
Flannery, Martin
Flynn, Paul
Foot, Rt Hon Michael
Foster, Derek
Foulkes, George
Fraser, John
Fyfe, Maria
Garrett, John (Norwich South)
Godman, Dr Norman A.
Gordon, Mildred
Graham, Thomas
Grant, Bernie (Tottenham)
Griffiths, Win (Bridgend)
Grocott, Bruce
Haynes, Frank
Healey, Rt Hon Denis
Henderson, Doug
Hinchliffe, David
Holland, Stuart
Home Robertson, John
Hood, Jimmy
Howarth, George (Knowsley N)
Howells, Dr. Kim (Pontypridd)
Hughes, John (Coventry NE)
Hughes, Robert (Aberdeen N)
Hughes, Roy (Newport E)
Hughes, Sean (Knowsley S)
Illsley, Eric
Ingram, Adam
Janner, Greville
Jones, Barry (Alyn & Deeside)
Jones, Ieuan (Ynys Mo n)
Jones, Martyn (Clwyd S W)
Kaufman, Rt Hon Gerald
Kinnock, Rt Hon Neil
Lamond, James
Leadbitter, Ted
Leighton, Ron
Lestor, Joan (Eccles)
Lewis, Terry
Lloyd, Tony (Stretford)
Lofthouse, Geoffrey
Loyden, Eddie
McAllion, John
McAvoy, Thomas
McFall, John
McKelvey, William
Madden, Max
Mahon, Mrs Alice
Marek, Dr John
Marshall, Jim (Leicester S)
Meacher, Michael
Meale, Alan
Michael, Alun
Michie, Bill (Sheffield Heeley)
Mitchell, Austin (G't Grimsby)
Moonie, Dr Lewis
Morgan, Rhodri
Morris, Rt Hon A. (W'shawe)
Morris, Rt Hon J. (Aberavon)
Mowlam, Marjorie
Mullin, Chris
Murphy, Paul
Nellist, Dave
Oakes, Rt Hon Gordon
O'Neill, Martin
Orme, Rt Hon Stanley
Pike, Peter L.
Powell, Ray (Ogmore)
Quin, Ms Joyce
Radice, Giles
Randall, Stuart
Redmond, Martin
Rees, Rt Hon Merlyn
Reid, Dr John
Richardson, Jo
Roberts, Allan (Bootle)
Robertson, George
Rogers, Allan
Rooker, Jeff
Ross, Ernie (Dundee W)
Rowlands, Ted
Sedgemore, Brian
Shore, Rt Hon Peter
Short, Clare
Skinner, Dennis
Smith, Andrew (Oxford E)
Smith, C. (Isl'ton & F'bury)
Smith, Rt Hon J. (Monk'ds E)
Smith, John P.
Snape, Peter
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