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Mr. Michael Fabricant (Lichfield): Like my hon. Friend the Member for Arundel and South Downs (Mr. Flight), I also wonder why this new clause has been introduced on Report. The explanatory note produced by the Treasury says that this is merely a technical provision. Unlike my hon. Friend, who believes that it has been introduced by the treasurers for some Machiavellian reason, I suspect that it was tabled at this late stage of the Bill merely due to incompetence.
What will be the market test for this borrowing from one Government Department to another, or from one series of funds to another, rather than on the open market? The Minister said that it was obviously cheaper to borrow internally. I accept that, but will a nominal interest rate be set? If such a rate is set, who will charge it against whom? Will it be entirely within the Treasury, or will a particular Department benefit from the loan funds overnight?
When the moneys are chargeable, will we see a transfer of funds? And--this may interest the House more--how much does the Paymaster General think will be loaned overnight, as an aggregate sum, over a year? Are we talking about millions, or about billions?
Mr. Nick St. Aubyn (Guildford):
I am listening carefully to my hon. Friend's speech, but, apart fromthe Minister's Parliamentary Private Secretary, no Government Back Bencher is present to listen to this important debate.
Mr. Fabricant:
I find that extraordinary. We may be speaking about billions or, for all I know, trillions of pounds. The Paymaster General gave no indication of the amount that we are discussing. Let us not forget that this is not Government money; it is our money. It is their money--taxpayers' money. We need to know how the taxpayer will be affected. Will he or she benefit from the interest rates that are being set, or will he or she suffer a disadvantage because the money is not sought from outside sources?
It is not good enough to try to slip a measure through late in the evening when Labour Members--all 300-plus of them--are wining and dining in the fleshpots of London. We are talking about taxpayers, money. Thank God we have an Opposition who are at least opposing these proposals.
Ms Hewitt:
I rather regret the fact that I do not have the chance to wine and dine, whether in the fleshpots or simply in the Members' canteen.
We engaged in a full and interesting debate on this subject in Committee. Clause 125 completes the separation between monetary policy and cash management--debt management operations--that we undertook when we gave the Bank of England operational independence in regard to monetary policy. The new clause is simply and genuinely a technical consequence of the main provision that we introduced in the Bill. It follows from the assumption of cash management by the Debt Management Office, a Treasury agency that already handles debt management.
As the hon. Member for Arundel and South Downs (Mr. Flight) said, at present the Government's daily need for cash to balance the books is met through the Bank of England, and through the ways and means overdraft facility with the Bank's issue department. However, once we start managing the cash separately and allowing the Debt Management Office to manage it on behalf of the Government, it would be inefficient to allow money to sit in separate accounts--those belonging to the Revenue departments--if it could be made available to meet a deficit on the National Loans Fund, when the alternative to using that spare cash would be borrowing by the DMO from the markets.
Let me reassure the hon. Gentleman and his colleagues that this has nothing whatever to do with our possible entry into the single currency in years to come. We have simply completed the separation of monetary policy and debt management operations, in order to avoid any conflict of interests--or perceived conflict of interests--between the two. In particular, as I explained in
Committee, the separation will assure the markets that debt management decisions are not influenced by inside information on interest rate decisions.
Mr. Fabricant:
Will the Minister answer the specific questions that I asked her? I see that her official has passed her a note, so perhaps she will be able to do so. First, what amounts are we talking about on aggregate--millions, billions, trillions or what? Secondly, if she is in effect market-testing between internal transfers within the Treasury and borrowing on the open market, what interest rates will be set and what criteria will she use to set them?
Ms Hewitt:
I was just coming to that. All in good time.
There will be no interest rate charges, because money is simply being lent from one Government account to another. It would be no more appropriate to charge interest on the loans than it would be if I were transferring money from one account to another in my own name. As for the amounts that might be lent, we estimate that the maximum that Customs and Excise might lend would typically be about £700 million. We do not expect to be able to meet the loans from the Inland Revenue to the National Loans Fund, although the new clause gives the power for that to be done.
As I say, this is simply a technical provision that will further improve the Government's housekeeping arrangements and, by reducing any possible need for the DMO to raise money on the open market, will save the taxpayer modest amounts of interest that would otherwise have been paid.
Question put and agreed to.
Clause read a Second time, and added to the Bill.
'.--(1) For subsection (2) of section 71 of the Taxation of Chargeable Gains Act 1992 (allowable losses of trustees treated as transferred to a person becoming absolutely entitled to settled property) there shall be substituted the following subsections--
"(2) Where, in any case in which a person ('the beneficiary') becomes absolutely entitled to any settled property as against the trustee, an allowable loss would (apart from this subsection) have accrued to the trustee on the deemed disposal under subsection (1) above of an asset comprised in that property--
(a) that loss shall be treated, to the extent only that it cannot be deducted from pre-entitlement gains of the trustee, as an allowable loss accruing to the beneficiary (instead of to the trustee); but
(b) any allowable loss treated as accruing to the beneficiary under this subsection shall be deductible under this Act from chargeable gains accruing to the beneficiary to the extent only that it can be deducted from gains accruing to the beneficiary on the disposal by him of--
(i) the asset on the deemed disposal of which the loss accrued; or
(ii) where that asset is an estate, interest or right in or over land, that asset or any asset deriving from that asset.
(2A) In subsection (2) above 'pre-entitlement gain', in relation to an allowable loss accruing to a trustee on the deemed disposal of any asset comprised in any settled property, means a chargeable gain accruing to that trustee on--
(a) a disposal which, on the occasion on which the beneficiary becomes absolutely entitled as against the trustee to that property, is deemed under subsection (1) above to have taken place; or
(b) any other disposal taking place before that occasion but in the same year of assessment.
(2B) For the purposes of subsection (2)(b)(ii) above an asset ('the relevant asset') derives from another if, in a case where--
(a) assets have merged,
(b) an asset has divided or otherwise changed its nature, or
(c) different rights or interests in or over any asset have been created or extinguished at different times,
the value of the relevant asset is wholly or partly derived (through one or more successive events falling within paragraphs (a) to (c) above but not otherwise) from the other asset.
(2C) The rules set out in subsection (2D) below shall apply (notwithstanding any other rules contained in this Act or in section 113(2) of the Finance Act 1995 (order of deduction))--
(a) for determining for the purposes of this section whether an allowable loss accruing to the trustee, or treated as accruing to the beneficiary, can be deducted from particular chargeable gains for any year of assessment; and
(b) for the making of deductions of allowable losses from chargeable gains in cases where it has been determined that such an allowable loss can be deducted from particular chargeable gains.
(2D) Those rules are as follows--
(a) allowable losses accruing to the trustee on a deemed disposal under subsection (1) above shall be deducted before any deduction is made in respect of any other allowable losses accruing to the trustee in that year;
(b) allowable losses treated as accruing to the beneficiary under this section, so far as they cannot be deducted in a year of assessment as mentioned in subsection (2)(b) above, may be carried forward from year to year until they can be so deducted; and
(c) allowable losses treated as accruing to the beneficiary for any year of assessment under this section, and allowable losses carried forward to any year of assessment under paragraph (b) above--
(i) shall be deducted before any deduction is made in respect of any allowable losses accruing to the beneficiary in that year otherwise than by virtue of this section; and
(ii) in the case of losses carried forward to any year, shall be deductible as if they were losses actually accruing in that year."
(2) This section applies in relation to any occasion on or after 16th June 1999 on which a person becomes absolutely entitled to settled property as against the trustee.'.--[Dawn Primarolo.]
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