---

Column 906

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

---

Column 907

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

---

Column 908

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

---