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At present, shares that can be given and which qualify for relief are limited to shares traded on a recognised stock exchange. That leaves out a significant category of potential donor--the entrepreneur who has built a business, such as a dot.com company, up to the point at which he is about to sell a significant part of it. Technically, such a company would remain unquoted on an exchange.
Although I recognise that the Inland Revenue would not want to get involved in the administrative burden of valuing small parcels of shares, and indeed charities would not want to receive them, I believe that the relief could be improved if it were to include this category of donor. I ask my hon. Friend the Economic Secretary to consider extending the definition of the shares or securities that can qualify for relief to include those that are able to be traded or realised. An existing definition is used for the purposes of pay-as-you-earn.
In practical terms, donors are most likely to consider using the relief when they know what their income tax bill is, as that represents the limit of the gift for which they can obtain the tax deduction. That happens at the self-assessment deadline of 31 January each year in respect of the income to the previous 5 April. I believe that donors would increase their gifts if they were able to obtain relief against their income of the previous tax year. Under the present rules, a donor who wants to make a gift has to anticipate his income for the current tax year to 5 April. That inevitably prompts individuals, or most certainly their advisers, to adopt a cautious estimate in order not to give more than is available for relief. A carry-back facility would encourage larger gifts.
A number of individuals realise significant capital gains in a particular year, and again entrepreneurs spring to mind. For such individuals, the amount they may be willing to give to a charity could be a proportion of their capital gains rather than of their somewhat smaller income. Again, by allowing the relief to be given where necessary as a deduction against capital gains in addition to income, it would encourage certain donors to give considerably more when they feel able to afford it.
Experience passed on from America, where there is a similar tax relief, is that a large proportion of the funds going to charities comes from a small number of donors who give significant amounts. Any measure that encourages those individuals to raise the level of their generosity is likely to help the new relief that the Chancellor has introduced succeed even more. I commend it for my hon. Friend's consideration.
I shall address the general point that has been raised in the debate on these two amendments. The point that we have made in Committee and that I reiterate now is that we designed the relief to ensure that it is applied to investments that are readily realisable and easy to value. I have made that point many times, and I know that it will be familiar to the hon. Member for Arundel and South Downs (Mr. Flight). That will allow a charity to make an unfettered decision on whether to add the gift to its investment portfolio, or to realise the gift immediately and use the proceeds for charitable purposes.
Amendment No. 133 would extend the range of qualifying investments that a donor can give to charity and get relief on to include all assets as defined in the Taxation of Chargeable Gains Act 1992, to which amendment No. 132 makes a consequential change.
I do not think that the amendment achieves the hon. Gentleman's intention. It would mean that certain investments, such as gilts, which qualify for relief under the provision as drafted, would no longer do so as they are not chargeable to capital gains tax. He may not be aware of that.
In addition, certain other assets, such as cars, would not qualify for relief, as they are not defined as assets for the purposes of capital gains tax. Many assets would come within that wider definition that would not be as easy to value or as readily realisable. There are no markets for some assets, so charities would be constrained in realising the value of the assets and using them for charitable purposes. That goes back to the basic principles that I mentioned earlier.
Clause 43 will introduce an exciting new relief for charities and their donors. We would like to see how that works in practice. There is already a very generous relief for works of art. There are additional significant reliefs from capital gains tax, inheritance tax and stamp duty for gifts of assets to charity. There are also already extremely generous reliefs from capital gains tax and inheritance tax for gifts and sales of pre-eminent works of art and heritage assets to museums and galleries. We have a tax relief for businesses that make donations to charities of trading stock and items of equipment that are used in business.
The assets that qualify for the new relief were carefully chosen to fulfil the criteria that I have already set out, so I hope that the hon. Gentleman will allow the full effect of the new changes to be seen in practice and will withdraw the amendment.
Mr. Flight: I will not press the amendment to a vote at this time of night, but I exhort the Government to step back and take the point that property in particular is an absolute natural for donation to higher education institutions. On the whole issue of unquoted investments, here we are in an age in which the Government want to encourage venture capital--the age of the internet and so forth--and if the issue is not addressed quickly, charities will lose out on a particular economic phase. It is by no means certain that venture capital investments will turn into licit investments suitable for relief. If the Government
The petitioners therefore request that the House of Commons calls upon the Government to ensure that all final year medical students are eligible to apply for the full financial support that they so urgently need.
Mr. Tony Lloyd (Manchester, Central): This debate is essentially about fairness and about whether, in an area in which tens of millions of pounds are being invested, and in which we hope that many people will have their quality of life greatly improved, we can avoid a situation whereby the 45 or 50 households left in the Lower Beswick compulsory purchase order area will lose out very badly, and whether we can allow them to be cushioned against the worst excesses of the decline in the area.
Let me say a little about east Manchester. It was badly hit by unemployment from the early 1980s onwards; the destruction of the traditional heavy engineering industries, for instance, caused massive damage, while in the background were all the usual patterns of rising crime.
The community to which I refer is traditionally tight-knit; historically, people have been proud to say that they come from it. Sadly, however, we saw the breakdown of that community spirit, and an increase in vandalism and anti-social behaviour that people had not experienced before.
I first became closely involved at the time of the boundary changes, when the boundaries of my constituency were changed. I was shocked by the state of the whole east Manchester area. The Government recognised its plight, and awarded it one of the earliest new deal for the community programmes. Tens of millions of pounds will go to east Manchester, which is good for the area as a whole. The problem for the area that I am talking about is that it was among the hardest hit of the east Manchester sub-communities. It contains, perhaps, only 250 houses, but people living there probably suffered all the problems that hit east Manchester generally, with a vengeance.
Lower Beswick certainly experienced all the problems of property surplus. Houses there began to be left empty, and to be boarded up. It also experienced an increase in the number of unscrupulous speculative landlords--landlords who moved in and tried to purchase property at low prices in the hope of making a quick return from cheap and easy lets, or landlords who saw a rather longer-term opportunity for speculative capital gain.
One housing association, Northern Counties, behaved atrociously. Irresponsibly, it bought numerous properties, and when it could not let them, mothballed the area rather than trying to market them, allowing the blight of empty properties to affect the immediate area in a way that almost guaranteed the long-term destruction of Lower Beswick.
Neither the housing association nor the private landlords were prepared to do anything about the quality of the tenants whom they took in. There was no control by either social or private landlords. There were many anti-social tenants who, although they often stayed for only a short time, in that short time managed to wreak enormous damage. The short-term damage caused massive cumulative long-term damage. I well remember the slum clearances that took place in Manchester in the early 1960s, but I have never seen anything like what we saw in Lower Beswick.
People in that small community do not tend to moan. They tend to get on with life, and have put up with a great deal over many years. In this case, however, I have no doubt that the stress of simply living in the area was enormous. Those who are left suffer from ill health, much of it directly caused by intolerable living conditions. Those who could leave--perhaps they had short-term tenancies--simply got up and went, which in itself exacerbated the problem. The good people--those who had invested in the area, who wanted to make a life for themselves, to be part of the community and to build that community--are, sadly, those who have been stranded by the changes that have taken place in Lower Beswick, and it is they who now bear that heavy load. As I have said, of the 250 houses in the area perhaps no more than 40 or 50 are still occupied.
The announcement of the new deal was a cause for great rejoicing. I was delighted that the Government had recognised the needs of east Manchester, and also felt that I had achieved a lot: I had had my own role to play in the new deal, although many others had contributed. However, the problem is that once the new deal was declared, the existing problems of Lower Beswick became intolerable. It was obvious at that point that Lower Beswick would have to be taken out, to allow the regeneration of the greater area. The greater good of the many was pitted against the immediate and longer-term needs of a limited number of people.
It was a prerequisite for the improvement of the new deal area that Lower Beswick had to come down. I think that the people in Lower Beswick themselves accepted that demolition was almost inevitable by the time the new deal was declared, but that had an immediate impact on property prices. They had already suffered a loss from the high mark of the early to mid-1990s. At that time, in about 1993-94, small two-bedroom terraced houses in the area were being sold for £28,000 or £30,000.
I accept that that is not a lot compared with the elevated prices in London, but the people of that area are not on the elevated incomes of London, so those property prices fitted the income and needs of the people of that community. However, once the CPO was declared, property prices--in so far as property could even be sold--dropped to literally a few thousand pounds each. In some cases, property could not be sold.
The choices that people then faced in Lower Beswick were invidious. They could walk away. They could leave the key in the door and walk out--but in doing so, they left behind not only their own way of life and home, but in many cases, debt to building societies or banks. For those who were lucky enough to have paid off their mortgages, it was impossible to raise another mortgage when they had walked away from a property that had become valueless.
The building societies and banks deserve no credit in the story. With one or two exceptions, they have taken an extremely hard line. They have simply told my constituents that where building society debt exists, it is up to the individual to redeem that, and that before he could be even considered for any further loan, he would have to pay off existing and outstanding debt--even though that debt is not the fault of those who find themselves in that position. Of course, for many people
The compensation scheme available under CPOs is inadequate. The Government recognised that some months ago in the Department's White Paper. There was a reference to the need to look again at the compensation scheme. I think that there is to be a consultation specifically on the question of compensation under such CPOs, but change in the future will not help my constituents, who face the problem here and now. However, compensation is certainly inadequate, as the Government recognise.
The money distributed under CPOs is trivial. It is designed to allow people to refit carpets or whatever; the amounts are modest for people who are losing tens of thousands of pounds. The relocation grant suffers from two major disadvantages. One is the whole concept of what market value means for a relocation grant. The second is that the grants are means-tested. For those who are desperately poor, it is possible to have compensation that may not be adequate, but at least goes some way towards adequacy. For those on very low incomes, the taper and cut-off under the means test is so sharp that they are told that they qualify for virtually nothing.
Again, we can well imagine the plight of the elderly and of those on low incomes who face walking away from their homes with debt, or with no possibility of repurchase. As things stand, some will carry that debt for many years. The stress and ill health that I have talked about have been made massively worse by that situation.
Today, one of my constituents was telling me that since the whole saga began, her long-term condition has been made worse and that she has had to give up work. Ironically, under the compensation scheme, she is better off having given up work. There is something wrong with a scheme in which my constituents become better off by suffering stress and ill health.
There are ways in which the Government and public agencies could help. Two of my colleagues--local councillors Neil Swanwick and John Smith--have worked hard with local residents to determine whether they can relocate somewhere within the broad east Manchester area, in the hope that with the modest compensation they will be given, they will be able to buy into an area with depressed property prices and benefit as that area is regenerated and property prices increase. That is a hope and an aspiration, and it requires an act of faith by local people. Nevertheless, many people are considering taking that step. I applaud the work being done by those two councillors.
As I said, there is also a problem with lenders. I ask my hon. Friend very seriously to examine the lenders' role and to determine what pressure the Government can bring to bear in addressing the negative equity issue. Building societies that have been prepared to lend on the basis of absolute security, although they know better than would-be purchasers that an area is dicey or may be declining, are not operating within the spirit of honesty and probity.
I think that those building societies need to be brought up very sharply and asked to account for their actions. They should also be asked to put together an adequate rescue programme that would allow people to move out,
As I have also said, there is a real problem with determining market value. Current market values in the area are based on the depressed values of an area that was being run down, potentially to demolition. However, the market value of properties only streets away is a very different story. Today I was quoted some property values in areas adjoining the CPO area. Although the quotations may not mean much to the House, they will mean a lot to my constituents. Viaduct street adjoins the CPO area and is separated from it only by a railway line. However, I am told that properties there are being valued at £35,000. In Blackrock street--which is only two or three streets away from the CPO area and has almost identical houses--houses are being valued at between £19,000 and £27,000. Market value, therefore, is a subjective matter. I believe that there is an onus on the public sector at least to consider charitably the meaning of market value.
We should try to ensure that any compensation package misses out speculative landlords--those who became part of the problem by buying in the hope of making a quick buck. They really do not deserve any consideration in extraordinary compensation schemes. It would go down badly if compensation were wasted on those who have not done anything to prop up the area, but have done much to undermine it. I hope that my hon. Friend will take that point on board.
If the area is cleared, as I am told it will be, it will cost in the region of £1 million to £2 million to buy everyone out and make the area fit for redevelopment. According to quite modest estimates, there will be an immediate capital gain and the land will be worth between £5 million and £10 million. If that is true, the rest of us stand to gain a great deal on that desirable capital increase.
It is not beyond our wit to devise a scheme whereby a limited number of people--those who stuck with the area and tried to keep it decent when others simply left--should be able to tap into the capital increase in the value of the land that has resulted from their removal. I hope that my hon. Friend the Minister will take that idea on board.