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Land Settlement Tenants (Compensation)

7. Mr. Laurence Robertson (Tewkesbury): What plans he has to meet the chairman of the Inland Revenue and hon. Members to discuss tax issues relating to compensation given to former land settlement tenants. [101771]

The Paymaster General (Dawn Primarolo): There are no plans for such a meeting. Representations have been made querying the raising of tax charges by the Inland Revenue in respect of an out-of-court compensation paid by the Ministry of Agriculture, Fisheries and Food, in the early 1990s, to a number of former tenants of the Land Settlement Association, but it has been made clear that Ministers do not intervene in individual cases. The Inland Revenue's independence from Treasury Ministers in handling individuals' tax affairs must be scrupulously observed. When disputes continue between taxpayers and the Revenue, it is for the appeal commissioners and the courts to determine how the law is to be applied.

Mr. Robertson: I thank the Minister for that reply. At some stage, however, Ministers have been involved in the matter. Although the Minister quite rightly said that the award was made by MAFF in the early 1990s, the then Minister said in a letter to the chairman of the Inland Revenue that

I really do think that the Minister should get involved in resolving what is clearly a gross inequity.

Dawn Primarolo: The rules applying to the Land Settlement Association are the same as those applying to all other taxpayers; an exception would be possible only if a specific amendment were in a Finance Bill or if an extra-statutory concession were publicly announced. Such an exception may be authorised only by a Treasury Minister, and Treasury Ministers in the previous Government made no such authorisation. Ministers in the previous Government did not put in place the rules that the hon. Gentleman claims that they should have. Consequently, normal taxpayer rules apply.

Mr. Howard Flight (Arundel and South Downs): The House will be aware--as I am sure that you are in the west midlands, Madam Speaker--that many land settlement tenants have retired or are farmers. The Government have hardly been helpful to those two categories of people--indeed, one might argue that those people have been victimised. By refusing to support the intent of the previous Government, are not the current Government imposing yet another stealth tax on two

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categories of people whom they have already hit hard? Secondly, will the Minister not admit, as the Chancellor has already admitted, that the overall burden of taxation has gone up from 35.3 per cent. of gross national product in the tax year 1996-97 to more than 37 per cent. this year, and that that is a marked rise in taxation?

Dawn Primarolo: The hon. Gentleman fails to understand how the tax system works. It was not the intent of the previous Government to make such an arrangement. Had it been their intent, they would either have tabled a specific amendment to a Finance Bill--they did not; the issue was settled in the early 1990s--or put in place an extra-statutory concession to give influence to that compensation. The hon. Gentleman is asking us to breach the principle and require Ministers to get involved in individual taxpayers' affairs. Relations in the tax system are clear. An appeal must go to the appeal commissioners and then to the courts. That is the position over which the previous Government presided and it would be foolish to require Ministers to intervene in individual matters now. Some individuals have settled. Others continue to argue hardship. The proper way forward is for them to appeal to the appeal commissioners and then, if they are not satisfied, to the courts.

Mr. Phil Woolas (Oldham, East and Saddleworth): In the light of the questions that she has been asked today, which does my hon. Friend think is falling faster--the tax burden or the reputation of the right hon. Member for Horsham (Mr. Maude)?

Madam Speaker: Order. That was rather a wasted question.

Sir Nicholas Lyell (North-East Bedfordshire): Will the Minister reconsider what she has just said about the former tenants of the Land Settlement Association? We are talking about people who endured pain, suffering and hardship for years. Compensation for that is not taxable. Will she recognise that such poor people have no money to go to the special commissioners or through the Court of Appeal? Before they are driven down that route, there should be a meeting with the head of the Inland Revenue. The Minister should kindly read the question that she is answering, which refers not just to Ministers, but to the head of the Inland Revenue. Such a meeting would enable Members on both sides of the House who represent those poor people to help them find a fair way through their harsh and unfair situation and solve the problem before they are driven to court, adding to the burdens of those whose suffering we should be sympathising with rather than increasing.

Dawn Primarolo: I am surprised by the right hon. and learned Gentleman's heavy criticism of the actions of his colleagues when they were in power, because they decided not to make specific arrangements. As he knows, compensation for personal hardship is not liable to income tax. Compensation for loss of trading profits is taxable as a trading income. That was established when the compensation was paid by the previous Government, whose Treasury Ministers failed to make any legal provision of the type for which they are now arguing, to change the calculation of tax on compensation. They now

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ask for a Treasury Minister to intervene in individual tax affairs. That should not and cannot happen. The appeal system is clear in legislation.

Exchange Rate

11. Dr. Vincent Cable (Twickenham): What his definition is of a competitive sterling exchange rate; and if the United Kingdom currently meets that definition. [101775]

The Financial Secretary to the Treasury (Mr. Stephen Timms): The Government do not have a target exchange rate for sterling. By pursuing policies for sound public finances, sustained growth and low inflation, the Government are creating the environment for achieving and maintaining a stable and competitive exchange rate over the medium term.

Dr. Cable: How do the Government reconcile their commitment to a stable and competitive exchange rate with the Organisation for Economic Co-operation and Development data which came to the House of Commons Library yesterday, which show that the price competitiveness of British industry, and exporters generally, has declined by 6 per cent. this year; 12 per cent. since the Government came to office; and 30 per cent. since the beginning of 1996? Is the objective simply not attainable, and would it not be more honest for the Government to acknowledge that they are not even proceeding in the right direction?

Mr. Timms: We have achieved a remarkable new stability in the economy since the election. The imperative now is to lock that in for the long term, and to build on it to deliver full employment for Britain in the new millennium. I recognise that there are real concerns, particularly for manufacturers selling their goods in Europe, but short-term fixes are not the answer. The pick-up in world growth is improving UK export performance. The latest three-month on three-month data show that goods export volumes, excluding oil and erratics, are up strongly by 8 per cent. to September. Services exports remain close to record high levels, and manufacturing output is up. In reality, the news on exports is encouraging.

Mr. Alan W. Williams (East Carmarthen and Dinefwr): The totally unexpected fall in the value of the euro in the past year has driven the pound up to record levels. The European Union, as a trading bloc, has a massive balance of payments surplus, inflation is barely 1 per cent. and unemployment is at 10 per cent. What pressure are the Government putting on our European partners to expand their economies so that the euro recovers and the pound can then fall in value?

Mr. Timms: That is a matter for them, but I entirely recognise that there are firms--particularly those selling goods in Europe--which are facing real difficulties. However, there is no quick fix here. The consensus among independent forecasters is that exports of goods and

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services will grow by 4 per cent. next year. Exporters are performing well, and CBI data on export orders show clear improvements on a year ago.

Mr. Eric Forth (Bromley and Chislehurst): Does the Minister accept the vital role that has been played by variable exchange rates in recent economic history? Does he recognise that most of the successful economies of the past few decades have succeeded because of the fact that they were benefiting from their currencies' variable exchange rate? Does he further accept that a variable exchange rate is a vital mechanism to recognise changing relationships between trading economies, and that, were that variable relationship not to be available, other things would have to vary domestically--not least inflation and unemployment?

Mr. Timms: Medium and long-term exchange rate stability is desirable, and requires the approach that we are taking--sound macro-economic policies for sustained growth and low inflation. We will not repeat the mistakes of the past with short-term fixes, which would take us back to Tory boom and bust. We are taking the right decisions for the long term to build for a future of full employment.

Mr. John Swinney (North Tayside): Apart from telling them that there are no short-term fixes, does the Minister have any other advice for exporters who are wrestling with a competitive disadvantage of 20 or 30 per cent. in relation to previous years? Is it not the case that the improvement in manufactured exports has come about only because it is an improvement on pretty awful figures--figures which declined because of the impact of sterling over the past two to three years?

Mr. Timms: The hon. Gentleman is right--things are improving. However, I repeat that I recognise the difficulties that some exporters are facing. The Government attach great importance to the promotion of exports. That is why we established British Trade International in May, giving Britain a sharper edge in export markets. We want to work with exporters to maximise their success in overseas export markets.

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