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Mr. Burnett: This is one of the few occasions where the Government have changed their mind on a Treasury Bill. I pay tribute to the Minister for listening to, and understanding, the points that have been made. Both the changes to which he has agreed are important.
The Bill is a relieving measure and it is helpful. It caps liabilities at 7 November 2000. As I said earlier, other amendments could have been made in fairness to taxpayers. For example, the Government should have given taxpayers a choice whether to pay on 7 November or on the date on which the option was exercised. That would have been simpler, just as certain, and fair. Now, an individual will, for example, have to pay national insurance contributions on the value of an option on 7 November last of £100,000. The option might decrease significantly in value, and when he or she exercises the option in years to come, the value might be only £10,000, so the individual will be considerably worse off.
The amendments that have been agreed to are welcome. First, the period in which notice is given and contributions have to be made is extended from 60 days to 92. Secondly, there is the amendment that applies where the amount of special contribution is nil because on 7 November either the option was under water or the shares were not readily convertible assets. In those circumstances, notice would be deemed to have been given within the prescribed period. Those are helpful amendments.
We discussed the significant amendments that the Government introduced yesterday, and the Minister has confirmed that he will circulate the draft clauses and probably the entire Bill. I welcome that. I believe he said that he would circulate them to the various professional bodies and perhaps to some taxpayers who call for representation so that they have the opportunity to make submissions and produce amendments to clarify and improve the Bill.
Having had those assurances from the Minister, and realising that the Bill is a relieving measure, we welcome the Bill and the amendments to which the Minister has acquiesced. We shall not, therefore, oppose it.
Mr. Andrew Tyrie (Chichester): I confess that I did not understand all the points that my hon. Friend the Member for Arundel and South Downs (Mr. Flight) made when he was dealing with the Government's amendments to clause 3. I doubt whether anyone else in the House did. I certainly do not think that the Minister did. The only person who fully grasped them was my hon. Friend. That reflects a serious problem that we have encountered today in trying to make legislation of this sort on the Floor of the House.
It is certain that we shall be passing a flawed Bill to the other place, where we hope that it will be put right. It seems that the programme motion will prevent virtually any discussion, if the Government so choose, of any changes made in the other place, even if they are substantive. Effectively, that which is to become law will have received virtually no scrutiny in this place. That is not a good way to produce legislation.
There are two ways of answering that question. First, was it worth it from the Inland Revenue's perspective and how much NIC liability has been created? The Minister gave me the figures for this relieving measure, but following my earlier intervention it was clear that he had no understanding of how much money was being brought in as a whole as a result of the underlying measure, which the Government are attempting to improve by means of the Bill. How much avoidance activity will be discouraged by putting the Bill on the statute book? The yield may be low, but firms may have written fewer options than they would otherwise have done.
The second big issue in addressing whether it was right to treat options as remuneration is the effect that that has had on the whole economy. My hon. Friend the Member for Arundel and South Downs referred to that in his excellent speech. Treating options as remuneration significantly affects economic behaviour. Share options may be extremely efficient as incentives to better business performance. That approach will have been discouraged by anti-avoidance measures.
An assessment of the entire economy would also take into account the compliance burden, the administrative burden and the legal and accounting costs involved in introducing the measure. There has been far too little analysis of those whole-economy effects and a great reluctance to put numbers on them, in terms not only of the Bill and underlying legislation but of a range of measures that the Government have taken since 1997.
The Government are trying to mitigate the whole-economy damage that some of their measures have caused by creating the new approved scheme. The EMI scheme and the company share option plans that the Government introduced push in that direction. They have heavily targeted the information technology sector with some of their measures. I am not convinced that it is right to create a distortive incentive to target a particular sector. The argument runs that that incentive is needed because shares in the IT sector are more volatile. So what? Volatility should be treated as a business cost and the Government should not rejig the tax system to take account of it.
I said that I do not like the way in which the Government have gone about the matter. By implication, I am criticising the way in which the previous Government tried to treat the awkward relationship between tax and national insurance contributions. Of course, that is the origin of the Bill. Let me briefly go through a few possible alternative approaches. The first would be to continue muddling through, which, clearly, the Government are trying to do now. One could continue to try to police the line between tax and national insurance; one could try to limit tax avoidance, but strike
Mr. Deputy Speaker (Mr. Michael Lord): Before the hon. Gentleman answers, let me say that his remarks are becoming rather wide-ranging. Third Reading is limited to the contents of the Bill, and his remarks should be limited to those contents.
Mr. Tyrie: I entirely accept your ruling, Mr. Deputy Speaker. We know that the Bill that we are now considering will not end up on the statute book because it is flawed as drafted; there will be further consultation and it will be fundamentally re-examined in the House of Lords. It is therefore helpful to flag up markers for the other place when it comes to examine the Bill.
Mr. Tyrie: A crucial aspect of that content is the great emphasis on the need to collect revenue, however small the amount being chased. Looking at the Bill, one sees that there is almost a light-headedness about putting on the statute book huge quantities of highly complicated legislation. I defy anybody to read the amendments and honestly say that they can work out what they mean. As I said, nobody has made the effort to work out the whole-economy effect of such measures.
Other approaches need to be adopted alongside the approach that the Government have decided to take. One is to treat share options like all shares and tax the capital gain, as was suggested by Mr. Mike Lynch, chief executive of the software group Autonomy. He said:
I shall not linger for more than two sentences on the point about the contributory principle made by the hon. Member for Torridge and West Devon (Mr. Burnett). I disagree with the view that national insurance contributions and income tax should be integrated, and believe that the contributory principle should stay. The recent report of the Select Committee on Social Security agreed with that, and that is probably where we shall remain. If so, we are thrown back to the first option that I listed--muddling through. If we do muddle through, I urge the Government, as I said a moment ago, not to chase ever smaller sums of revenue with ever more regulation. Is it really worth trying to collect national insurance on unapproved share options?
That is the key underlying question, which I hope the other place will have in mind when they examine the Bill. When it does so, I hope that it will weigh the whole- economy cost against the diminishing return to the Inland Revenue.