| Previous Section | Index | Home Page |
8.15 pm
Mr. Webb: Surely we are dealing here with priorities. Who will have the prior claim on the assets of a firm that has gone bankrupt? The hon. Gentleman seems to be saying that firms that are about to go bankrupt should be able to salt away what little money is left in years of retrospective pension contributions, rather than the creditors, who may themselves be small businesses on the brink of bankruptcy, having a prior claim.
Mr. Davies: No; I am saying that if people are given an opportunity to make tax-sheltered contributions to a pension scheme, which we have always had in this country--or, at least, have had for so long that we cannot remember when we did not--they will do so as far as they can. Let us suppose that they are told that they need not do that every year on a regular basis: that they can still make full contributions up to the Revenue limits, and can smooth those contributions over time. If they find that at certain junctures they do not have the necessary cashflow to make the requisite contributions, they can do so later out of greater earnings.
Otherwise, self-employed people might be liable for a fixed charge on their cashflow. They would say to themselves every year, "If I want to receive the benefit, I must take the money out now and put it in my pension scheme. I cannot leave it in the company; if I do, I shall have lost the chance of tax relief for ever." People would bring forward their pension contributions, and businesses would be deprived of cashflow, at times when it would be more logical to defer such contributions, in the interests of the health of business and thus in the interests of creditors.
I do not know whether that will be one of the Government's excuses. I have racked my brains wondering how such a stupid proposal could be presented, and racked my brains again wondering why the Government are doing so in a way that I have already described as insulting to the House of Commons. It breaches what I would like to think of as elementary good faith between Government and Opposition in Committee. I like to think that, in Committee, the Government do not have in their back pocket, and will not subsequently produce, a proposal that negates everything implied in the clauses that are being dealt with.
Surely, if we are to create a sensible balance, we must first ensure that no distinctions are made between different sorts of pension schemes in relation to tax and insolvency rules. The same rules should operate for everyone. As we agreed in Committee, the original Bill removed the anomaly created by the Landau case.
Secondly, we must make a clear distinction between approved and unapproved schemes. Where the Revenue has determined that a level of pension contribution is reasonable, by definition it must be reasonable; otherwise, Parliament made a mistake in authorising the rules in the first place.
Thirdly--this is in clause 12 of the Bill, as passed in Committee--we should exercise more scepticism in relation to unapproved schemes, which may well provide opportunities for excessive amounts to be salted away. In those instances, there should be a provision for clawback, where necessary. Fourthly, we should ensure that there is a clear formula for determining the extent to which the clawback can take place, or the criteria by which the excess can be defined. Clause 12 says, basically, that a man may keep what is necessary for his own upkeep and that of his family; beyond that, the court may look to any excess contributions. That criterion, however, is missing from the new clause, which is open-ended.
One of the many unfortunate consequences of accepting the new clause--which I hope the House will not do tonight--would be the creation of considerable uncertainty in an area in which I thought we were moving towards greater clarity.
Mr. Webb:
As I have said, I did not have the privilege of serving on the Committee that considered the Bill, so I apologise in advance for not having followed the detailed discussion on clauses 11 and 12 in the original Bill. However, my understanding is that those clauses provided for pension funds to be more secure in the event of bankruptcy, which seems, obviously, a step in the right direction. What appears to be represented in new clauses 11 and 12 is a recognition that that provision could be abused by excessive sheltering within pension funds immediately in anticipation of bankruptcy.
It seems that a balance has to be struck between providing the protection that we would want for someone's pension assets when that person becomes bankrupt, and allowing that to become abused, so a lot hinges on the definition of "excess contributions". I may not have been paying full attention, but the Minister said that he was going to indicate what the criteria for excess contributions to be used by the courts were going to be. I did not emerge with a clear understanding of what those were.
The hon. Member for Grantham and Stamford (Mr. Davies) queried whether contributions up to Inland Revenue limits, for example, could ever be regarded as excessive, either for a given year, or retrospectively. I should be grateful if the Minister would deal with that specific point. Indeed, the hon. Member for Surrey Heath (Mr. Hawkins) asked precisely that question and, I believe, wants to develop that point.
I have some sympathy with the hon. Member for Grantham and Stamford with regard to the process by which we have arrived at new clauses 11 and 12. It is unacceptable that the Minister has been forced into a position of saying. "We did not have time to do the Scottish bits." That is not an acceptable way in which to put legislation before the Houses of Parliament. To be frank, it is worrying that we find ourselves in this situation in the first place.
The new clauses that we are about to discuss relate to another last-minute Government attempt to close a tax loophole. My concern with all measures introduced in
haste is that they are not good legislation. Fast legislation is seldom good legislation, particularly in complex sectors such as pensions, taxation and insolvency.
Therefore, I seek some reassurance from the Minister. I should be interested to know the parentage of the new clauses. How long have they been thought about? Where did they come from, essentially? Did the Government publish clause 11 and 12, receive representations from the people whose job it is to get round such clauses that they could get round, and realise that they needed to plug the loophole? How do they manage to find people whose job it is to get round such clauses who are willing to tell them that they have found a loophole, so that the Government can close it?
I am intrigued to know the process by which we arrived at the new clauses. I hope that the Minister will be up-front with us, as he was in admitting that the Government had not got round to writing the Scottish bits. I hope that he will tell us how we came to have what is a sticking-plaster clause, which was put on so late in the process.
On balance, we are reassured by the Minister's comment that, each year, only a handful of cases would fall foul of the new clause. Again, it will be interesting to know the basis of his belief that it will be a minority sport. He asserted that that was his estimate, but did not provide us with any basis for believing that.
Mr. Quentin Davies:
On experience, I think that the hon. Gentleman is wrong and is rash to rely on the assurances that he has just quoted. On the contrary, the open-endedness of new clause 11 could result in an enormous amount of litigation and avoidable gratuitous legal costs.
Mr. Webb:
I am grateful to the hon. Gentleman. I seek robust assurances from the Minister, which he will be held to, no doubt, by the electorate, among others, that vast swathes of legislation and litigation will not arise from the new clause.
We understand the principle that the Minister clearly and simply expressed, but we have reservations about the definition of "excess", about whether contributions up to the limit would ever be regarded as excessive, and about whether the measure blows a hole in the protection that is being put around pension funds. In particular, Liberal Democrats are keen to know where the new clause comes from, and why the Government had not thought of it in advance; I presume that the matter was not raised in Committee.
Therefore, I hope that the Minister can assure the House that the measure is carefully thought through, not rushed, and does not blow a hole in the principle that my hon. Friends have already accepted.
Mr. Forsythe:
I seek a little clarification from the Minister following what he said about including Northern Ireland in the Bill.
The Bill refers specifically to Northern Ireland in a number of places. In clause 78(4), paragraphs (a) to (j) refer to Northern Ireland. In clause 78(5), paragraphs (a) to (d) do so. At the end of the Bill, where we have items that are to be deleted, a part refers to it.
| Next Section
| Index | Home Page |