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Castle Hill Hospital, Cottingham

Mr. Hinchliffe : To ask the Secretary of State for Health from where the proposed finishing kitchen at Castle Hill hospital, Cottingham, will receive its supplies of prepared food.

Mr. Freeman [holding answer 20 July 1989] : This is a local matter and not for me. We have no doubt however that the district health authority will seek to use the most cost effective and efficient source of supply available. The hon. Member may wish to contact the chairman of the East Yorkshire health authority for such information as may be available at this time.

Cyclotron Machines

Mr. Fearn : To ask the Secretary of State for Health (1) if, before making funds available for the purchase of a cyclotron machine for St. Thomas's hospital, he took into account evidence of the use and success rate of cyclotron machines in other European Economic Community countries ;

(2) what evidence he had about existing cyclotron machines' performances in the United Kingdom before providing funds of the purchase of the cyclotron for St. Thomas's hospital.

Mr. Freeman [holding answer 20 July 1989] : I refer the hon. Member to my reply to him on 17 February 1989 at column 419.

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Inland Revenue (Relocation)

Mr. Brandon-Bravo : To ask the Chancellor of the Exchequer when he expects to announce a decision on the proposal to relocate over 2,000 Inland Revenue head office posts to Nottingham; and whether there are any plans to relocate the remaining pay-as-you-earn tax work currently carried on in tax offices in the London area.

Mr. Norman Lamont : Following an internal review of its London headquarters accommodation, the Board of Inland Revenue published on 21 April this year a working party report which recommended that, in view of the continuing problems which faced the Department on its accommodation and staffing in the London area, over 2,000 posts in headquarters and other specialist officers should be relocated from south-east England.

After full consultations with the appropriate Civil Service unions, with senior management and with staff, the board has concluded, with my agreement, that some 2,100 posts should be relocated. The great majority of these posts will move to Nottingham provided that a suitable site for a new office development can be obtained on satisfactory terms. As well as headquarters staff, it is envisaged that the capital taxes office, the superannuation funds office and the office of the inspector of foreign dividends will be included in the move to Nottingham. Depending on progress, it is hoped that the main relocation of work to Nottingham will take place from 1992. As for the PAYE tax work, my hon. Friend will be aware that the majority of this work in the London area was transferred to offices in other parts of the country in the 1960s and 1970s. It has now been decided to move the PAYE work of some further 400 clerical and executive staff in late 1989 to Cardiff, Bootle, Edinburgh, Glasgow and Livingston, and the Department is looking at the possibility of moving the work of a further 1,200 or so PAYE posts, including all of the remaining London posts, away from the London area in the period from mid-1990 to mid- 1992.

While work is being moved the Department will try to ensure that any inconvenience to the public is kept to a minimum. For the longer term, in order to maintain a service for those who need to make a personal visit to discuss their tax affairs, the existing network of local inquiry offices in the London area will be strengthened and enlarged where necessary.

The moves will secure a good and cost-effective service for the taxpayer. Better recruitment prospects outside the south-east will result in a more experienced and stable work force.

Life Assurance

Mr. Austin Mitchell : To ask the Chancellor of the Exchequer in what respects investment-linked life assurance policies are taxed differently from endowment-linked mortgage policies ; and what would be the saving to the revenue from treating the latter on the same basis as authorised unit trusts.

Mr. Norman Lamont : For the life office, in no respects. For the policy holder, no distinction is drawn between investment-linked policies, as such, and endowment

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policies associated with mortgages. For any sort of policy, the tax treatment will depend on the terms of the policy (in particular, whether it is a "qualifying" policy) ; the circumstances in which policy benefits are paid out ; and the overall tax position of the policy holder. Most endowment policies associated with mortgages are not investment-linked and therefore cannot be treated on the same basis as unit trusts : no estimate can accordingly be made of the revenue effect of doing so.

Mr. Austin Mitchell : To ask the Chancellor of the Exchequer what is his estimate for 1989-90 of the figures quoted in paragraphs 6.9 and 5.16 of the recent consultation paper on the taxation of life assurance.

Mr. Norman Lamont : There is no paragraph 5.16 in the consultative document to which the hon. Member refers. Information required to update the estimates to 1989-90 in paragraph 6.9 is not available.

Mr. Austin Mitchell : To ask the Chancellor of the Exchequer what is the aggregate value of single premium life assurance policies ; what is his estimate of the amount of tax collected per £1,000 of single premium over the life of a single premium life assurance policy in terms of constant prices ; and what is his estimate of the gain to the revenue per £1,000 of premium from a tax regime meeting the criteria set out in paragraph 3.3 of the consultative document on the taxation of life assurance issued by the Inland Revenue in June.

Mr. Norman Lamont : No estimate is available for the total value of single premium policies. None can be made for the lifetime tax yield per £1,000 of premiums paid on such policies whether under the current tax regime or under any alternative regime. This would vary widely depending on the future performance of each policy, on future tax rates, on the overall tax position of the life offices and policy holders concerned, and on the length of time for which each policy holder chose to retain his policy.

Mr. Austin Mitchell : To ask the Chancellor of the Exchequer what is the estimated revenue yield in the current financial year from fully implementing each of the options listed in paragraph 7.9 of the recent consultation paper on the taxation of life assurance ; and if he will publish in the Official Report the charge falling on the policy holders and shareholders in the case of investment-linked and other life assurance, distinguishing where appropriate between qualifying and non-qualifying policies, current charges, exit charges and capital gains.

Mr. Norman Lamont : The options to which the hon. Member refers set out in broad outline possible alternative approaches to the reform of life assurance. The extra yield, if any, to be expected from implementation of these options would depend on the precise measures assumed to be adopted. My right hon. Friend the Chancellor of the Exchequer announced in the Budget the Governments' proposals for implementation along the lines of "Option C" in the consultative document : estimates of the initial effect of these proposals on tax yield, and indications of their possible long-run effects, were published in the "Financial Statement and Budget Report" (HC 235).

Mr. Austin Mitchell : To ask the Chancellor of the Exchequer what is the estimated revenue yield in the

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current financial year from taxing pension schemes on the basis of the first and last of the principles set out in paragraph 7.3 of the recent consultation paper of the taxation of life assurance.

Mr. Norman Lamont : The first principle in paragraph 7.3 of the consultative document "The Taxation of Life Assurance" is that income earned for policy holders should be taxed as it arises and that capital gains should be taxed, at the latest, as they are reflected in benefits paid out. To apply this principle to funded occupational pension schemes would require that tax relief on the investment income of the funds should be withdrawn. It would be for decision whether pensioners would be allowed a tax credit to set against the tax due on the pensions paid to them to reflect the tax which had been borne by the fund on its investment income. The net revenue cost or yield would depend upon the precise proposal, on the nature of any transitional provisions and on the behavioural responses of investors and institutions. Any estimate of revenue would almost certainly involve disproportionate cost.

The last principle is that tax effectively borne by policy holders and that actually reaching the Exchequer should as far as possible be in line. For occupational pension schemes, this already applies.

Mr. Austin Mitchell : To ask the Chancellor of the Exchequer what is the estimated share and estimated value of the pension and annuity business referred to in paragraph 6.23 of the recent consultation paper on the taxation of life assurance ; and what is the amount of the disparity referred to in paragraph 6.25.

Mr. Norman Lamont : On the basis of a sample of companies for 1986, pension and general annuity business liabilities at the end of that year amounted to about half of total life assurance liabilities, amounting to some £110 billion, of offices authorised to do life assurance business in the United Kingdom.

The disparity referred to in paragraph 6.25 of the consultative document "The Taxation of Life Assurance" will be eliminated once relevant measures in the current Finance Bill come into full force from 1 January 1990.


Mr. Austin Mitchell : To ask the Chancellor of the Exchequer whether he will publish in the Official Report a table showing for the various forms of institutional saving the estimated gain to the revenue in the current financial year from disallowing commission etc. as an expense.

Mr. Norman Lamont : Information on which to base a reliable estimate is not available centrally.


Mr. Sillars : To ask the Chancellor of the Exchequer if he will list his engagements when he expects to make a major speech on the economy.

Mr. Major : My right hon. Friend will be speaking on a number of occasions over the next few months, including the IMF/IBRD meetings in Washington (26-28 September), the Conservative party conference (10-13 October) and at the Mansion house (19 October).

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Charitable Donations

Mr. Simon Coombs : To ask the Chancellor of the Exchequer on what basis Customs and Excise assess liability for value added tax on the whole of a donation by a commercial company towards an advertisement by a charitable organisation, rather than on the value of that part of the advertisement which might be deemed to be promoting the company.

Mr. Lilley : There is no VAT liability on unconditional gifts of money, but where payments are conditional on a charitable organisation supplying clearly identifiable benefits in return, for example, advertising or publicity, such supplies are liable to VAT, and have to be accounted for at the standard rate by any charitable organisation whose taxable turnover exceeds the registration limits.

TSB Scotland

Mr. Sillars : To ask the Chancellor of the Exchequer if he will publish the text of the letter of assurance about the future of TSB Scotland which he received from the then chairman of the TSB Group at the time of privatisation.

Mr. Lilley : The letter written when the Trustee Savings Bank Act 1985 was under consideration was published in Hansard on 4 July 1985 at cols. 261-63.

Mr. Sillars : To ask the Chancellor of the Exchequer if he will institute an inquiry into the TSB before its proposed restructuring takes place, with a view to ensuring that pledges of autonomy for its Scottish operations, which were given at the time of flotation, are fulfilled.

Mr. Lilley : The future structure of the TSB is a matter for the TSB. I note that the TSB has recently confirmed that the assurances made at the time of its flotation will be honoured.

Interest Rates (Mortgages)

Mr. Wilson : To ask the Chancellor of the Exchequer how many letters he has received from members of the public on the level of interest rates or their impact on the cost of mortgages.

Mr. Lilley : My right hon. Friend has received a number of letters on this subject.

Official Report" (Sales)

Mr. Cran : To ask the Chancellor of the Exchequer what was the average daily sale of daily parts of the Official Report in 1988 and in each of the preceding nine years.

Mr. Lilley : The estimated average number of copies sold per issue for each year since 1980 is given in the table. I regret that figures for 1979 are no longer available.

                       |House of Commons Daily|House of Lords Daily                         


1980                   |6,169                 |3,855                                        

1981                   |5,812                 |3,688                                        

1982                   |5,391                 |3,295                                        

1983                   |5,221                 |3,234                                        

1984                   |5,005                 |3,290                                        

1985                   |4,925                 |3,038                                        

1986                   |4,713                 |3,030                                        

1987                   |4,638                 |2,930                                        

1988                   |4,535                 |2,669                                        


Mr. Parry : To ask the Chancellor of the Exchequer what is the current level of inflation.

Mr. Lilley : The all items RPI inflation rate in the year to June 1989 was 8.3 per cent. the same as in May. A better indication of underlying inflation is given by the increase in the RPI excluding mortgage interest payments ; it rose 5.9 per cent. in the year to June 1989, down slightly from the 6 per cent. figure in May.

Small Businesses

Mr. David Shaw : To ask the Chancellor of the Exchequer if he will make a statement on the achievements of his Department and his policies in helping small businesses over the last 12 months compared with the previous 12 months ; and if he will publish the performance indicators by which his Department monitors those achievements and the statistical results of such monitoring.

Mr. Major : The Government's economic policies are designed to maintain a vigorous economy in which business and enterprise can flourish. Over the last 12 months we have continued our commitment to this goal. Among the specific measures helpful to small businesses introduced in the last Budget were :

for the small companies' lower corporation tax rate of 25 per cent. profit limit raised by 50 per cent. to £150,000 and the limit for receiving transitional relief raised to £750,000 ;

simplification of pensions rules and substantial increases in personal pension contribution limits ;

improved tax reliefs designed to encourage employee participation in PRP and employee share schemes (including ESOPS) ;

abolition of close company apportionment rules ;

introduction of the receipts basis of schedule E (a simpler system for the assessment of earnings).

extended relief for pre-trading expenditure ;

VAT registration threshold raised broadly in line with inflation ; CGT gifts relief retained for business assets.

We are continually looking at ways of reducing the burdens on small businesses. In addition to the continuous review of forms, explanatory notices and leaflets with the aim of providing guidance which can be easily understood, the following changes have been achieved in the last 12 months :

The completion of the computerisation of PAYE and extension throughout the country of computerisation of the tax affairs of the self-employed.

From 1 July 1989 the scope of the Community carnet was extended. Development work has taken place for the introduction on 1 August 1989 of two fast lane systems which will speed up the clearance of certain EC imports.

Development work is proceeding on a new computerised system for the handling of import export freight which will speed up the clearance of goods.

We have also carried out thorough examinations of :

The VAT cash accounting scheme ;

Default surcharge ;

VAT bad debt relief ;

Export data capture ;

VAT second hand schemes ; and

PAYE communications between employers and the Inland Revenue

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The results of these reviews are under consideration

Debt Repayment

Mr. Dalyell : To ask the Chancellor of the Exchequer if he will make a statement on the exchanges between his officials and Sir Kit McMahon and the team of Midland bankers who visited Brazil in February to consider debt repayment problems.

Mr. Peter Lilley [holding answer 17 July 1989] : It has been internationally agreed that it is not for the Government to intervene in negotiations between commercial banks and debtor countries, and the United Kingdom fully supports this policy. Accordingly there have been no discussions on Brazil's debts to commercial banks between my officials and Sir Kit McMahon or other members of the Midland bank team which visited Brazil.

EC (Tax Relief)

Mr. Lester : To ask the Chancellor of the Exchequer if he will publish figures of the information he has for wage and salary earners in each of the member states of the European Community showing (a) which allow income tax relief against social security contributions, (b) which allow income tax relief against specified travel to work costs, (c) which have a non-specific earned income tax relief and (d) which allow income tax relief for work-related child care costs.

Mr. Norman Lamont [holding answer 19 July 1989] : According to our latest available information, these reliefs are allowed in the EC member states as follows :

(a) In all member states, except the United Kindom and Ireland, social security contributions are generally an allowable deduction in the computation of taxable income from employment.

(b) In Luxembourg and Netherlands specified travel to work costs are allowed as a deduction in the computation of taxable income from employment. Certain other countries, eg. Belgium, Denmark, France and Federal Republic of Germany grant a flat-rate expense deduction for employment income, which is intended to cover, inter alia, the cost of travel to work.

(c) A general deduction in the computation of taxable income from employment, at varying percentages or flat-rates, is allowed in Belgium, Denmark, France, Federal Republic of Germany, Greece, Luxembourg, Netherlands and Spain. A flat-rate credit against tax due is allowed in Italy.

(d) Certain reliefs in the form of deductions in the computation of taxable income from employment, with varying provisions regarding, for example, the marital status of the taxpayer and the age of the relevant children, and usually up to a specified maximum deduction, are allowed in Belgium, France, Federal Republic of Germany, Greece, Luxembourg and Netherlands.

Family Deeds of Covenant

Mr. Wallace : To ask the Chancellor of the Exchequer (1) if he will reproduce in the Official Report the text of the Inland Revenue press release sent out following the 1988 Budget regarding the date by which notification of family deeds of covenant executed before 15 March 1988 had to be intimated to the Inland Revenue ; and to which newspapers and periodicals this press release was sent ;

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(2) what information he has regarding the newspapers and periodicals in which there was publication of a reference to the Inland Revenue press release issued after the 1988 Budget and relating to the 30 June deadline by which intimation had to be made to the Inland Revenue of family deeds of covenant executed before 15 March 1988.

Mr. Norman Lamont [holding answer 20 July 1989] : The text of the Inland Revenue press release issued on 15 March 1988 was as follows :

"The Chancellor proposes in his Budget to abolish tax relief for payments made by individuals under non-charitable Deeds of Covenant made on or after today. Recipients will be exempt from tax on the payments. This will greatly simplify the existing system. The change will apply to covenants made to students by their parents, as well as to other covenants. Parental contributions to student grants will, however, be reduced for new students. Full details will be published by the Department of Education and Science tomorrow.


1. Non-charitable covenants made by individuals on or after 15 March 1988 will have no effect for tax purposes. This means that : payers should not deduct tax from covenanted payments and will not get tax relief on them, and

recipients will not pay tax on them or be able to claim repayment. 2. The present rules will continue to apply to

all covenants in favour of charities ;

other covenants made by individuals before 15 March 1988 provided they are received by the tax office by 30 June 1988.

Deduction of tax

3. The effect of the reduction in the basic rate of income tax on charitable covenants, and on other covenants made before today, is set out in a separate Press Release.

Notes for editors--

Present tax position

1. A deed of covenant is a way of legally transferring income from one person to another. It can be effective for tax purposes under present law if it is capable of running for more than 6 years (or more than 3 years if it is in favour of a charity).

2. On making each payment under the covenant the payer deducts basic rate tax and so gets basic rate relief. If the recipient is not liable to tax he can claim the tax deducted from the payment back from the Inland Revenue.

Effect of the Budget proposals

3. The payer will not be entitled to deduct tax from payments made under a new covenant (unless it is to a charity). If he covenants to pay £100, that is the amount he will pay and the recipient will receive. The Inland Revenue will not be involved. A separate Treasury Press Release explains the background to the proposals. Details will be available from tax offices shortly.


4. Student covenants made on or after 15 March 1988 will be treated in the same way as other new covenants. But since the payments will no longer be taxable, students will have the whole of their personal tax allowances to set against other income, such as vacation earnings. Furthermore, for new students there will be a new and more generous scale for assessing parental contributions to their maintenance grants.

A word of warning

5. A Deed of Covenant is a legal document and it is not permissible to put a date on it earlier than the date it is executed. This will result in refusal of any tax refund. It can also result in prosecution by the Inland Revenue for attempted fraud.

Other transfers of income

6. Covenants which transfer income from one person to another are "annual payments". The proposals will also apply to other "annual payments" which transfer income in a similar way from an individual to someone else ; but they will not apply to interest payments or to payments made for commercial reasons in connection with the payer's business.

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Copies of the press release were sent to all national newspapers, over 200 other periodicals and local newspapers, and over 3,000 individuals and organisations which receive copies of Inland Revenue press releases on subscription. A leaflet was also available from local tax offices shortly after 15 March 1988.

There were many articles in the press about various aspects of the 1988 Budget measures, including the changes in the tax treatment of non- charitable covenants. Comprehensive information about press reports is not available, but the particular point about the 30 June 1988 deadline which the hon. Member has in mind was specifically mentioned in a number of publications, including the Financial Times, The Daily Telegraph, Which?, Taxation and the New Law Journal. The point was also covered in the BBC radio programme "Money Box".

Freelance Journalists

Mr. Madden : To ask the Chancellor of the Exchequer what representations he has received about Inland Revenue procedures over taxing the earnings of freelance journalists.

Mr. Norman Lamont [holding answer 20 July 1989] : None in recent months.

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