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No. 47, in page 239, line 42, at end insert--
`.--(1) The amendments made by paragraph 16 above have effect in relation to accounting periods ending on or after 1st January 1994. (2) In the first accounting period of a company ending on or after 1st January 1994 in which the subsection (3) figure for any category of business exceeds the subsection (2) figure, the subsection (2) figure shall be treated as increased by an amount not exceeding the amount or aggregate amount of any subsection (2) excesses in relation to that category of business for accounting periods beginning on or after 1st January 1990 and ending before 1st January 1994, but not so as to produce a subsection (2) excess for that period.
For this purpose the subsection (2) excess for an accounting period beginning on or after 1st January 1990 and ending before 1st January 1994 shall be determined without regard to the fact that in any other such accounting period the subsection (3) figure exceeded the subsection (2) figure.
Expressions used in this sub-paragraph have the same meaning as in section 432F of the Taxes Act 1988.
(3) Where a transfer mentioned in section 444A of the Taxes Act 1988 took place at the end of an accounting period of the transferor beginning on or after 1st January 1990 and ending before 1st January 1994, section 444A(3A) shall have effect in relation to the transfer as if it read--
"(3A) Any subsection (2) excess (within the meaning of section 432F(2)) of the transferor for an accounting period
Column 1598beginning on or after 1st January 1990 and ending before 1st January 1994 which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available to increase the subsection (2) figure (within the meaning of section 432F(1)) of the transferor in the first accounting period ending on or after 1st January 1994 in which the subsection (3) figure exceeded the subsection (2) figure--
(a) shall, instead, be treated as a subsection (2) excess of the transferee, and
(b) shall be taken into account to increase the subsection (2) figure of the transferee in its first accounting period ending on or after 1st January 1994 in which the subsection (3) figure exceeds the subsection (2) figure, but not so as to produce a subsection (2) excess for that period,
in relation to the revenue account of the transferee dealing with or including the business transferred.
For this purpose the subsection (2) excess for an accounting period beginning on or after 1st January 1990 and ending before 1st January 1994 shall be determined without regard to the fact that in any other such accounting period the subsection (3) figure exceeded the subsection (2) figure.".'.
No. 40, in page 240, line 12, leave out sub-paragraphs (2) to (4) and insert--
`(2) Where the policy or contract for any life assurance business was made before 1st November 1994, the amendments made by this Schedule (and the repeals consequential on those amendments) shall not have effect for determining whether the business is overseas life assurance business.
(3) Where the policy or contract for any life assurance business effected by a company resident in the United Kingdom at or through a branch or agency outside the United Kingdom was made before 29th November 1994, subsections (5) to (9) of section 431D of the Taxes Act 1988 shall not have effect for determining whether the business is overseas life assurance business.'.-- [Sir George Young.]
Amendments made: No. 78, in page 246, line 41, leave out `70' and insert `35'.
No. 79, in page 247, line 37, leave out `70' and insert `35'.-- [Sir George Young.]
Amendment made: No. 72, in page 267, leave out lines 18 to 20 and insert--
`8.--(1) The requirement of this paragraph is that the value of the relevant assets--
(a) did not exceed £10 million immediately before the issue of the relevant holding; and
(b) did not exceed £11 million immediately afterwards.
(2) Subject to sub-paragraph (3) below, the reference in sub-paragraph (1) above to the value of the relevant assets is a reference--
(a) in relation to a time when the relevant company did not have any qualifying subsidiaries, to the value of the gross assets of that company at that time; and
(b) in relation to any other time, to the aggregate value at that time of the gross assets of all the companies in the relevant company's group.
(3) For the purposes of this paragraph assets of any member of the relevant company's group that consist in rights against, or in shares in or securities of, another member of the group shall be disregarded.
(4) In this paragraph references, in relation to any time, to the relevant company's group are references to the relevant company and its qualifying subsidiaries at that time.'.-- [Sir George Young.]
Amendments made: No. 73, in page 283, line 27, leave out from `is' to end of line 30 and insert
`remitted to the United Kingdom in circumstances such that, if the settlor were actually entitled to that income when remitted, he would be chargeable to income tax by reason of his residence in the United Kingdom, it shall be treated for the purposes of this Chapter as arising under the settlement in the year in which it is remitted.'. No. 74, in page 284, line 13, leave out from beginning to `insert' and insert--
`.--(1) Section 677 of the Taxes Act 1988 is amended as follows. (2) In subsection (2)(b) after "the amount of" insert "that income taken into account under that subsection in relation to".
(3) After subsection (2)(f)'.
No. 75, in page 284, line 16, at end insert--
`( ) In subsection (9) after "one of the events specified in section 673(3)" insert "or, in the case of a sum paid on or after 6th April 1995, in one of the events specified in section 660A(4) or on the death under the age of 25 of any such person as is mentioned in section 660A(5)".'.
No. 76, in page 284, line 16, at end insert--
`. In section 678 of the Taxes Act 1988, omit subsection (7).'.-- [Sir George Young.]
Amendment made: No. 60, in page 290, line 48, leave out from `above' to end of line 50 and insert
`("the deemed single interest") were an interest of--
(i) except in a case to which sub-paragraph (ii) below applies, the person in respect of whose interest or previous interest the payment is made;
(ii) in a case where the person entitled to receive the payment is any other person who has or has had an interest which is deemed to be comprised in the deemed single interest, that other person; and'.-- [Sir George Young.]
Amendments made: No. 56, in page 343, column 3, leave out lines 20 to 24.
No. 53, in page 343, line 53, column 3, leave out `paragraphs 1(9) and' and insert `paragraph'.
No. 77, in page 345, line 23, column 3 at end insert--
---------------------------------------------------------------------------- | |`Section 678(7).'.
No. 15, in page 346, line 11, at end insert--
`(8A) Stock lending--
Chapter Short title Extent of repeal
1988 c. 1.
The Income and Corporation Taxes Act 1988.
In section 129(1), the words "has contracted to sell securities, and to enable him to fulfil the contract, he".'.
Column 1600No. 20, in page 349, line 34, column 3, leave out from beginning to end of line 35 and insert--
No. 21, in page 349, line 36, leave out from beginning to end of line 41.-- [Sir George Young.]
Order for Third Reading read.
The Bill consolidates the Budget strategy of my right hon. and learned Friend the Chancellor of the Exchequer, which is to sustain and strengthen Britain's growing economic recovery. That is now moving ahead powerfully across a broad and virtuous front of low inflation, high exports, rising investment, falling unemployment and solid growth.
That picture is confirmed by last week's publication by the Central Statistical Office of the national accounts, which showed that Britain's national output rose by about 4 per cent. in 1994 as a whole--the highest rate for six years. Britain's is now the fastest growing major economy in Europe, and is forecast to remain so. That growth has been led by exports, which increased in 1994 by 14 per cent. by volume and by 9 per cent. by value. Those are record-breaking achievements, and they will be helped to power ahead by several clauses in the Bill, which give exporting companies easier access to new sources of capital.
Our exporters are already doing spectacularly well not only in Europe but in the growing markets of the wider world. For example, last year our exports to Brazil increased by 27 per cent., to Singapore by 28 per cent., to South Korea by 28 per cent., to eastern Europe by 21 per cent. and to Malaysia by 35 per cent. The Confederation of British Industry survey published in March shows that the orders in British industry's export order books are at their highest point since records began.
Behind those excellent export figures lie many other success stories. Exports, of course, consist of visibles and invisibles. Invisibles have been consistently strong for many years, and they are now becoming stronger. They will be strengthened further by new clause 12, which was moved by my hon. Friend the Minister of State yesterday and which will establish a gilt repo market, and by schedule 8, which will make it easier for British insurers to do business in Europe and across the world.
As for visible exports, the success story that I can report to the House is the revitalisation of Britain's manufacturing industry exports. Britain is on its way back to being one of the successful workshops of the world, and manufacturing industry is playing a starring role in the recovery.
Output rose by more than 4 per cent. in 1994--the fastest rate of growth since 1989. Manufacturing investment is up by more than 8 per cent. and manufacturing productivity by 4.5 per cent. Manufacturing industry employment increased by 40,000 in the past three months--the best increase for more than 15 years--and unit wage costs in manufacturing industry fell last year, thus making our industry increasingly competitive in the world marketplace.
Column 1601The clear message from business surveys and forecasters is that with the help of the measures in the Bill the strong performance by our manufacturing industry is expected to continue, just as we expect the surge in inward investment by overseas investors to continue. Many inward investors will be encouraged to come here by clause 35, which again sets Britain's rate of corporation tax as the lowest main CT rate in Europe.
I know that the Opposition rather like to make dismissive and pessimistic noises about inward investment. For example, on 9 May last year the deputy leader of the Labour party was rash enough to say:
"After 15 years of this deregulation I don't see much inward investment flooding in".
As we know, the right hon. Gentleman's memory is a little defective sometimes. If he had to enlist the assistance of the constabulary to recognise his own Jaguar car, no wonder he finds it hard to recognise the great car factories that are springing up in Wales, Sunderland, Scotland and in the midlands as a result of inward investment. Perhaps the most appropriate response to that characteristically lugubrious forecast by Labour's deputy leader 11 months ago, would be the refrain from the old folk song, "Oh, no John, no John, no John, no."
The facts of inward investment are so positive and so good for Britain that what we should all be saying enthusiastically is, "Oh, yes Toyota, yes Nissan, yes Samsung, yes Ford Motor Company, yes we welcome you here." As about 635,000 jobs have resulted from inward investment, clearly one of the driving forces behind the welcome expansion of Britain's industrial base has been the simple fact that foreign investors are giving a huge vote of confidence to Britain's economy.
That is a remarkable contrast to the Opposition's vote of no confidence in the Bill that does so much to strengthen Britain's economy. It is a pretty sad reflection on the Labour party that it still takes the old neanderthal socialist view that a profit should be without honour in our own country.
Talking of prophets, I am sorry that the Opposition's in-house Cassandra, the hon. Member for Dunfermline, East (Mr. Brown) cannot be with us today. I understand that he is in Scotland--no doubt striving to stir up gloom and despondency there over the 18 per cent. annual productivity growth north of the border between 1990 and 1995, the 14.6 per cent. surge in Scottish manufacturing exports in 1993, and the 100 inward investment projects a year--two per week--currently coming into Scotland. I wonder whether he is even managing to sound gloomy about the BSkyB inward investment project that is creating up to 1,000 full-time equivalent new jobs in his constituency. Conservatives will not let the doomwatcher from Dunfermline forget the most incompetent forecast of this Parliament, which he made on 17 March 1993:
"I make one Budget forecast--that, after the Budget, unemployment will rise this month, next month and for months afterwards."--[ Official Report , 17 March 1993; Vol. 221, c. 289.]
Column 1602What actually happened is that ever since the hon. Gentleman made his false prophecy unemployment fell--that month, next month and month after month for two years. Not since the Labour Government appointed a Minister for drought--
Mr. Robert Sheldon (Ashton-under-Lyne) rose --
Ashton-under-Lyne (Mr. Sheldon) will remember that time. Not since the Labour Government appointed a Minister for drought has a Front Bencher's forecast been proved so resoundingly wrong.
Mr. Sheldon: Surely the biggest forecast of all was the 2.95 deutschmark, which failed miserably. The signal mark of the Government is that they failed to keep us in the exchange rate mechanism; the results of that failure of policy are around us now.
Mr. Aitken: I am finding it difficult to follow the point that the right hon. Member for Ashton-under-Lyne is making. Interest rates are not the subject of forecasts; we are not wise enough--or wild enough--to do any such thing. Certainly, compared with the forecast made by the hon. Member for Dunfermline, East, we have made no mistakes at all.
Unemployment has fallen by 600,000 since that prediction was made, and it is still falling steadily at a rate of 1,000 a day. So the employment news, like the export news, the manufacturing industry news, the low inflation news and the economic growth news, is all good news. The good headlines about what is really happening in the economy will be helped considerably by the small print in the Bill and by the accompanying measures announced by the Chancellor in his Budget.
Work incentives, savings incentives and investment incentives are key ingredients of the Bill. The Government have recognised the cardinal importance of low rates of income tax to preserve work incentives, and the Bill takes a significant step towards our long-term aim, reaffirmed by the Prime Minister in his excellent speech in Birmingham on Saturday--a basic rate of income tax of 20p in the pound. Clause 33 widens the 20p band to £3,200--twice the increase necessary for indexation. That means that one in five of all taxpayers will now pay tax only at the lowest rate of 20p. Just as employees are being encouraged by incentives to take on work, employers are being encouraged to offer work to new employees. From the day after tomorrow--6 April--employer national insurance contributions will be cut by 0.6 per cent. for employees earning less than £205 a week.
The Bill is doing its best to get more people back to work, by means of the incentives that I have mentioned, but we have not neglected those who are too old to work. The Bill increases the income limit for the age-related personal tax allowance by £430--well above the inflation indexation rate. In a full year, the measure hands back £200 million to nearly 3 million pensioners.
This is a Finance Bill for savers. It extends the very popular tax-exempt special savings accounts--TESSAs--by allowing those who have built up a nest egg in a TESSA to reinvest all or part of the capital that they have accumulated in a new TESSA up to a limit of £9,000 as
Column 1603soon as their account matures. It also widens the scope of personal equity plans, the enterprise investment scheme and the venture capital trust scheme to enhance the availability of finance and investment for industry, which is an important objective for the Government. The Bill's measures that achieve that should be widely welcomed by all those who understand how a modern economy works. The Government have grave doubts about whether the Opposition understand how a modern economy works. In our debates, their main preoccupation has not been with Britain's soaring exports, falling unemployment or increasing investment and economic growth. They seem to have an incorrigible aversion to mentioning the good news that is strengthening Britain as a successful world trading nation. That good news includes the fact that we had a £2 billion current account surplus in the second half of last year.
Instead, the Opposition showed an obsession with tax loopholes, share option schemes and executive pay. The Bill has done a great deal to combat tax evasion but the great divide between the Government and the Opposition on the rewards for hard work and enterprise can be simply stated: we are against the abuses of commercial success, but the Opposition are against the rewards of commercial success.
Good rewards are the lifeblood of an enterprise and export-led culture. It is a sign of success when many good businesses, some good business leaders and many good employees get well rewarded as a result of their successful efforts. Such people do not deserve to be described as "fat cats" by Opposition Members. They are simply hard-working people who have earned their rewards because they have contributed to successful businesses.
We are determined to ensure that all Britain's wage and salary earners keep as much of their earnings as possible in their own pockets, and have to pay income tax only at a rate that is as low as we can fairly and prudently keep it. As my right hon. and learned Friend the Chancellor made clear in his speech at the weekend, the time when we can start cutting taxes again is coming closer. When we talk about cutting taxes as soon as it is prudent to do so, let us never forget that sound public finances are a precondition for low taxation, and that sound public finances are what the Government are steadily delivering as we put the world recession behind us. Although we had to make some unpopular tax increases and painful expenditure cuts, we are forecast to halve the nation's overdraft, or public sector borrowing requirement, between 1993-94 and this year. We plan to eliminate the PSBR and balance the budget by the end of the decade. Such good housekeeping is central to the Finance Bill and to the Budget, but it seems to be terra incognita to Opposition Front Benchers. All they seem to know about good housekeeping is the magazine of that name.
Whenever we try to pin down the Opposition about serious good housekeeping issues, they perform their unconvincing imitation of the three notorious monkeys--see no policy, speak no policy, have no policy. By contrast to those three monkeys, a central thrust of the Government's policy is that we continue to maintain a constant downward pressure on public expenditure. That is why the Chancellor's Budget contained the
Column 1604announcement that we were cutting £29.5 billion off the planned public expenditure totals during the next three years. The Bill continues that process.
I commend to the House the new clauses so ably moved yesterday by my hon. Friend the Minister of State in relation to the introduction of an open market in the sale and repurchase of Government securities. That sounds a technical subject, but the results are far from technical. As my hon. Friend explained, the arrangements introduced by the new clauses should result in significant savings for the taxpayer on the £20 billion debt interest bill.
The Opposition do not have any serious proposals for controlling or reducing public expenditure. If one probes behind the Front-Bench monkeys' posture of see no policy, speak no policy, have no policy, one discovers pork barrel after pork barrel of ill-concealed public expenditure increases. For example, Opposition Front Benchers kept quiet about their policies on pensions when we debated clauses 56 to 59, which relate to pensions. It was with surprise that one picked up The Observer on 12 March to read the headline
"Pensions for anyone of 60 says Labour".
The story went on:
"Under plans to be unveiled by the Labour party this week . . . the proposals would mean that people could get a pension five years earlier than under government plans for a retirement age of 65". The article reported that the shadow Social Security Secretary had persuaded Labour's Treasury team that his new policy would be cost-neutral. I hope that we can now be told the truth by the hon. Member for Oxford, East (Mr. Smith), and that he will unveil his miraculous cost-neutral policy that offers to pay pensions five years ahead of schedule. One estimate is that such a policy might cost the taxpayer £13 billion. We would all like to hear how it could possibly be cost-neutral, and the hon. Gentleman could also explain why he did not unveil that miraculous new policy during debates on the Bill. I think we should be told.
That is not the only explanation that we want. Veiled in the semantic obscurity of bland buzz words that are almost
incomprehensible in their cost implications to the man on the Clapham omnibus, one will hear time and time again--especially in the speeches of the hon. Member for Dunfermline, East--expensive new Labour mantras such as "greater use of capital receipts", which is worth some £6 billion, "new regional assemblies and development agencies", "the introduction of a defence conversion agency", "a growth strategy for Europe"-- [Hon. Members:-- "Hear, Hear.] Opposition Members are cheering, but they should wait until they hear the price tags. Reference is also made to "increased investment in economics and social fabric" and "an emergency employment programme to get people back to work", not to mention the notorious "post neo-classical endogenous growth theory".
What the artful dodgers on the Opposition Front Bench must face up to is that those high-falutin' plans add up to a number of public spending promises, and promises have prices. The real price that will have to be paid for such departures from the foundations of sound public finances on which this Bill is built is higher taxation. The Opposition Front Benchers do not dare admit it, but the cat has been let out of the bag by the Labour party's most influential eminence rouge on its Back Benches, the former deputy leader and shadow Chancellor, the right hon. Member for Birmingham,
Column 1605Sparkbrook (Mr. Hattersley). His words in one of his many columns--this time in The Guardian on 13 March--will live in political infamy as they are quoted up and down the country in the coming months. He said:
"Labour now has a clear choice. It can either be the Party of higher taxation and proud of it, or the Party of higher taxes which it is ashamed to describe, afraid to admit and incapable of calculating with any accuracy. It cannot be the low taxation Party." Amen to that. The candid right hon. Gentleman has poured egg over the faces of the Opposition's Front-Bench team.
The Opposition like higher taxation, and they are proud of it. They will inevitably have to increase the PSBR to the point where the initials stand for plunder, spend, borrow and raid. They now want to oppose the policies in the Bill and the Budget which are underpinning sound public finances, improving exports, encouraging investment, reducing unemployment, creating the best growth record in Europe and offering the British people higher real disposable incomes. We are on the right track, and the Bill will keep us there. I commend it to the House.
Mr. Andrew Smith: Unlike the Chief Secretary to the Treasury, I shall talk mainly about the Finance Bill. First, let me dismiss what comprised 90 per cent. of his speech. I should have thought that the right hon. Gentleman would be the first person not to take too much notice of what he reads in the newspapers, whether it be our plans or on other matters.
The right hon. Gentleman made claims about the state of the economy and the achievements of our exporters, but if he believes that the Labour party will let this Government, after all they have done, walk off with the credit for the hard graft of our exporters, workers and managers, he is a bit too arrogant and complacent and he does not understand the British people. They know the mess that the Government's failures have got this country into. They know about the huge and irresponsible borrowing that the Government have stacked up, and they know that the Government broke every promise they made before the election.
We hear talk from Conservative Back Benchers and from the chairman of the Conservative party, which the Chancellor is frantically trying to damp down, about tax cuts being on the way. That comes a bit rich from a Government who have not yet finished driving through all 20 of their tax increases since the election, which have added £812 extra in tax burden, year-on-year, to a typical family. All that, when living standards fell last year and are falling this year. That extra tax burden, which is in breach of every promise that the Chief Secretary and his hon. Friends made at the last general election, is what people will remember. I think that that takes care of 90 per cent. of the right hon. Gentleman's speech, and now to the Finance Bill.
The first thing to report is that this is a very different Bill from the one that confronted us on 17 January on Second Reading. The fact that it is so different is a great tribute to the work of my hon. Friends, the arguments that they mounted and the campaign that they undertook. Labour, assisted on occasion by some Conservative Members and rather less often by the Liberal Democrats, has forced substantial changes on the Government.
Column 1606We started with the Government's momentous defeat on value added tax on fuel on the Floor of the House--we did not hear much about that from the Chief Secretary. In Committee, they were also defeated on the tax simplification proposal of the hon. Member for Beaconsfield (Mr. Smith). I understand that that was the first time in the memory of the Clerks that a new clause tabled by anyone other than the Government had been added to a Finance Bill.
Labour has mounted effective pressure in the country on the matters covered by the Bill, which forced the Government to back down, for example, on the extension of tax privileges for executive share options to part-time directors, when even Ministers had to recognise that what they were advocating was indefensible. There is a string of other changes, from vehicle excise duty to the level of pools betting duty, where the Government have been made to change their position, whether by the force of votes or public opinion, or the force of argument.
It is worth running through the changes that make this such a significantly different Bill: the Government's defeat on VAT on fuel on the Floor of the House, when we held it at 8 per cent; the forced withdrawal of the Government proposal to extend tax breaks on executive share options to part -time directors; the prevention, or at least the damage limitation exercise as my hon. Friend the Member for Western Isles (Mr. Macdonald) described it, of the imposition of vehicle excise duty on carriers on the Scottish islands and the Scilly Isles; the fact that we stopped the Tories increasing vehicle excise duty on farm vehicles, which was set to increase to a maximum of £5,000; the fact that we forced a cut in proposed vehicle excise duty on recovery vehicles, from the Government's proposed maximum of £5,000 to £750; the fact that, earlier today, we secured concessions on the tax treatment of capital borrowing from the Government for housing associations and universities; the fact that we defeated the Government in Committee, with the help of the hon. Member for Beaconsfield, to secure examination of the simplification of the tax system; the fact that we successfully proposed taxation changes to assist settlements for accident and injury victims; the concessions that we won for disabled drivers of company cars; the exemption from duty for non-prize amusement machines; and the 5 per cent. reduction of pools betting duty, to 32 per cent. It is a formidable list.
Mr. Aitken: The hon. Gentleman is using the royal "we" so wildly that I feel I must be listening to the film, "The Madness of King George". Not one Labour amendment was carried and so the idea that all that was due to Labour's influence is rubbish. My hon. Friends and I rightly listened carefully to representations from industry and others, but the notion that Labour should get one ounce of credit shows that power has gone to the hon. Gentleman's head.