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Mr. Letwin: Because we are not long past the date of first accounting. We are dealing with the problem today, and today is April the something or other--the ninth. We are eight days past the accounting period. The problem is that nearly all the companies with which we are dealing--sole traders--will have been dealing on a three-month basis. If they have a month's or six weeks' worth of VAT output zero and a large amount of VAT input and put in a claim, in the near future we shall hear complaints that they have not received an input refund, believe me.

Mr. Donohoe: Can the hon. Gentleman tell us just how many examples he has been given? He said earlier that he had been given examples; now he is saying the opposite.

Mr. Letwin: What I said was that the Paymaster General stood in danger of being given each example.

Mr. Donohoe: How many?

Mr. Letwin: None--because we have come to the end of the three months. [Interruption.] Oh dear; I hope that we can raise the intellectual level of the debate. We are dealing with a problem that will have begun to occur in the last eight days. We have been dealing with a foot and mouth crisis that has been worsening over the past six to eight weeks. People will have made their three-month returns. I guarantee to the Paymaster General that if no steps are taken, we shall see a flood of complaints about late repayment.

It should, incidentally, be no problem for the Paymaster General to agree to our proposed amendment if it is really true that, as she and her colleagues seem to be claiming, there is no delay. Why not make the arrangement automatic? If there is no problem, let us solve it--that is, let us ensure that there cannot be a problem.

The second difficulty arises on the Inland Revenue side--the income tax side. There are two particular problems in this connection. The first concerns those with tied accommodation: we think especially of tenant farmers. There is an oddity in that the Inland Revenue treats the second house owned by such a tied- accommodation dweller as a principal residence for the purpose of not levying capital gains tax. That is a long-established principle in law. Unfortunately, when the working families tax credit was melded into income tax and when--I take it--people's arrangements were moved from the Department of Social Security to the Inland Revenue following the legislation, that principle was not applied. People in tied accommodation who need the working families tax credit now cannot receive it, because they have a second house that is not treated as a principal

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dwelling for that purpose. A simple amendment will suffice, and we will table one. I hope that we can reach agreement on it, because it is urgently necessary.

Dawn Primarolo: Is the hon. Gentleman saying that second accommodation that generates income takes people beyond the WFTC limits?

Mr. Letwin: It may or may not be generating income; the capital sum alone would take people beyond those limits. A wealth test, rather than an income test, is causing the problem. Where there is sufficient income, we are much less worried. The problem arises when there is not sufficient income, and people who would otherwise qualify for the WFTC are excluded by the wealth test.

The second problem on that front involves farmers, hoteliers and other sole traders who, in July, will make corporate income tax payments that they will not eventually be due to pay. There will be an adjustment in due course, but it will be of little benefit to someone who becomes bankrupt and cannot reclaim the money because he or she is not in business. We need a scheme--again, we shall table an amendment on which I hope we can reach agreement--to allow automatically for an early provisional claim. It is the wording of the relevant Act--the Taxes Act 1988--that is causing the problem, and we hope that our amendment will solve it. That too is urgently necessary.

Finally--I appreciate that the House will be longing for me to finish--[Hon. Members: "No, no."] Kind though that is, I am sure that my hon. Friends are, in fact, longing for me to finish, and I shall.

Let me end by saying that there is another absence from the Bill, less immediately important than others but structurally more important. We need--in this Bill, or in the next Finance Bill or the one after that--to see the vast changes in tax structure, and the great tax reductions, that Conservative Members have advocated. We need to see, from 2003, a removal of tax from savings and dividends for basic and starting-rate taxpayers; we need to see a significant increase in the limits on approved share options for small and medium-sized enterprises; we need to see a considerable rise in pensioners' age-related allowances; we need to see the introduction of transferable allowances for married couples, the exemption of widowed parents' allowances from tax, and the increasing of a much- restructured child tax credit by £200 for children under five.

Those are measures for which we have been calling. They are measures that need to be installed in a Finance Bill. What better opportunity could there be than that provided by a Bill as empty as this--and, we hope, subsequently to be denuded of the ludicrous aggregates tax?

Mr. John Bercow (Buckingham): Does my hon. Friend recall that, according to the last Labour party manifesto, how and what Governments tax send clear signals about the economic activities that they wish to encourage or discourage, and the values that they seek to entrench in society? Can my hon. Friend tell me, on the basis of that commitment by the Labour party, why it has chosen in government to punish families, savers and motorists?

Mr. Letwin: I can only assume, using my hon. Friend's impeccable logic, that those are the activities that the

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Government wish to discourage; but, as that would be to discourage nearly everything that goes on in the United Kingdom, I am driven to the conclusion that it is by mistake that the Government are taxing them. We hope to save them from that mistake, in part by introducing measures that will relieve some of the people described by my hon. Friend, and in particular will give people a major new set of incentives to save and provide for themselves over their lifetimes. That is another urgent necessity if we are to avoid a society that depends increasingly on the very means-tested benefits that the Chancellor of the Exchequer has misguidedly extended so far.

Mr. Oliver Heald (North-East Hertfordshire): Does my hon. Friend share my concern that the savings ratio has plummeted under this Government? Does he agree that the removal of the taxes to which he has referred would give a much-needed boost to the savings sector? What are his views on the steady decline that we have seen, and what are the likely consequences?

Mr. Letwin: My hon. Friend is, of course, right. He need not consult my views, however: paltry as they are, they do not bear comparison with the grand majesty of the Treasury's own views. The Treasury has said--perhaps the Chancellor failed to read the Red Book at this point, and allowed the Treasury to speak for itself--that if the savings ratio remains as low as it is at present, it is a very worrying sign for the economy. So it is: but we are not concerned just with the savings ratio in any given year.

As my hon. Friend knows, what we are concerned with is the long-term culture of saving, or the long-term absence of a culture of saving. That has the most profound effects. It is not something that affects only the availability of domestic capital. I was interested to see that the Chief Secretary failed completely to answer a question about gross fixed domestic capital formation. Either he does not have any idea what the trend is or, as I suspect is more likely, he has an idea but does not want to tell us.

That is not the only way in which the savings culture, or an absence of it, has an effect. Much more profoundly, it has an effect on the relationship of the individual with the state and with society at large. If an individual is given insufficient incentives to save as he goes through life, it is inevitable that at some stage, if his income is low, he will be cast on to state benefits. In many instances, that is degrading for the individual. Much more important, it creates a dependency that institutionalises a huge fiscal problem.

As benefits extend to almost 50 per cent. of the population, and as we go through the cycles that Ministers so grandly think that they have abolished, we shall increasingly see fiscal accounts being shot to hell by increased expenditure on means-tested benefits. That is to no one's benefit. It seems nice to the individual who is receiving the benefit but it does not seem nice when the individual is paying tax to support the benefit, or engaging in the borrowing that will lead to the tax to support the benefit.

There is a serious problem, and the Government or the Treasury are aware of that. What are the Government doing to cure it? The answer is nothing. What are the

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Opposition proposing to cure it? The answer is much. That is why we shall advance the tax measures that I have described.

The Bill contains almost nothing except one nasty and classic example of a stealth tax, which we shall oppose. The Bill fails to contain the very things that it needs to contain, such as urgent measures to deal with foot and mouth, long-term strategic measures to deal with the failures of our tax system and a remedy to the problems that arose in the course of the previous Finance Bill. One could not produce a Finance Bill that does less or does it worse than this one.

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