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Rob Marris (Wolverhampton, South-West): I welcome the fact that the hon. Member for Arundel and South Downs (Mr. Flight) has at last put forward an amendment that might—I stress the word "might"—have a beneficial effect on many of my constituents, because the issue affects many of them. I shall be interested to hear what the Financial Secretary to the Treasury says about it.
Mr. Flight: I thank the hon. Gentleman for his kind comments. May I make the point that a healthy and strong British economy is of enormous benefit not just to all of his constituents but to every other individual? There are many issues that may appear to be macro rather than micro ones, but they are all about the efficient working and prosperity of our economy.
Rob Marris: Those are interesting words from the hon. Gentleman, as I am not sure that they will be a sequitur to what I am about to say. I sat through most of the debate
on the Finance Bill yesterday, the last four new clauses put forward by the hon. Gentleman—new clause 10 on attribution of gains to members of non-resident companies; new clause 11 on capital allowances for expensive cars; new clause 12 on investment companies and trading companies; and new clause 13 on stamp duty exemption on disposal of substantial shareholding—appeared to deal with taxation issues for the very rich, which do not affect many of my constituents. When I put that to the hon. Gentleman last night, he said:
- "These clauses have been proposed by the non-political and unbiased Chartered Institute of Taxation".—[Official Report, 3 July 2002; Vol. 388, c. 357.]
Madam Deputy Speaker (Sylvia Heal): Order. Perhaps the hon. Gentleman could now move on to discuss new clause 23.
Rob Marris: May I briefly finish my point, Madam Deputy Speaker? The new clause moved by the hon. Member for Kingston and Surbiton was entitled "Simpler Tax Assessment for Low-income Pensioners", and it was also suggested by the Chartered Institute of Taxation. Was this new clause suggested by the institute or does the hon. Member for Arundel and South Downs take up the institute's proposals only when they deal with the very rich?
Mr. Flight: That is a pretty poor line of attack. I do not think that my track record illustrates what the hon. Gentleman is seeking to imply. This new clause covers a matter that has been discussed widely within the Revenue and other bodies. It has nothing to do with the Chartered Institute of Taxation.
Rob Marris: I am grateful for that clarification. Perhaps we can now move on to debate this important subject.
The Financial Secretary to the Treasury (Ruth Kelly): I am pleased that the hon. Member for Arundel and South Downs (Mr. Flight) recognises the important contribution that ISAs make to our savings strategy. I recognise his long-standing interest in these issues, and I know that he takes a keen interest in the workings of the ISA market. He has outlined the reasons for the new clauses, which would affect ISAs and TESSA-only ISAs. From what he said, I gather that its essence would be to allow tax-privileged cash savings to be converted into stocks and shares ISAs through what would essentially be a one-way valve. It would not then be possible to convert the equity investments back into cash.
The hon. Gentleman mentioned current market conditions and the encouragement to cash investors to diversify their savings into equities. As he recognised, there are difficulties with the drafting of the new clause. It is a little unclear what it is precisely intended to achieve. However, I have listened with interest to his proposals. As ISAs are such an important part of our savings strategy and have already extended the opportunity to save to new
groups of people—particularly those on lower incomes, women and previous non-savers—we consider the rules governing ISAs extremely carefully and keep them constantly under review.We would have to consider the issues and implications relating to the new clause. However, I assure the hon. Gentleman that we are prepared to consider, in principle, his proposals along with other changes to the ISA regime, which may become possible when the review of the polarisation regime concludes following the Financial Services Authority's recent consultation paper. We take these issues seriously and we want to encourage savings. ISAs form a major plank of our savings policy, so we will keep the issues under review.
Mr. Flight: I thank the Financial Secretary for her comments. Do not take too long, however, because many citizens in the constituency of the hon. Member for Wolverhampton, South-West (Rob Marris) might think, as and when markets recover, that it was a pity that they were totally locked into cash savings. I am glad that the Government are interested in pursuing the idea in principle. I made it clear that it was a probing new clause, so I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.
New Clause 24
Simplifying married couples allowances
'(1) Section 257A of the Taxes Act 1988 shall be amended as follows—
(2) In subsection (2) the amount specified for the year 2002–03 shall be £5,535.
(3) Omit subsections (3) and (4).
(4) In subsection (6), after the words "entitled to relief under this section", leave out from "this section shall have effect" to the end of the subsection, and insert—
"he shall be entitled to the relief under this section as if he had been married throughout the year of assessment.".'.—[Mr. Edward Davey.]
Brought up, and read the First time.
Mr. Edward Davey (Kingston and Surbiton): I beg to move, That the clause be read a Second time.
The hon. Member for Wolverhampton, South-West (Rob Marris) may be pleased to learn that the new clause results from another suggestion made by the Chartered Institute of Taxation. It was not suggested by the institute's Low Incomes Tax Reform Group, which was the genesis of the two new clauses that I moved last night, but by the institute's campaign for simpler taxation. This evolving campaign has a manifesto for tax simplification, and this new clause derives from the proposals for personal tax quick wins. It does not really distinguish between the wealthy and the not-so-wealthy, because both groups would potentially gain. One change in new clause 24 would lead to a gain of the princely sum of £7 per annum for pensioners aged between 65 and 74. That is not a huge amount, although £7 is arguably worth more to someone on a low income than to those on a higher income.
1.45 pm
The institute is keen on the changes in new clause 24 because it wants to simplify the tax system in simple
ways—for example, by reducing the number of boxes on the self-assessment form that drops through so many letter boxes every year, by reducing the number of civil servants who have to wade through the forms and by saving time in the private sector. Every year, we need to consider how we can simplify the tax system, and new clause 24 contains two simple proposals for advancing that agenda.Both proposals relate to the married couples allowance, which was recently restricted to 10 per cent. and has now been restricted to pensioners and those who were born before a certain year. That strengthens the case for reform, because the allowance is effectively withering on the vine. While it remains with us, it makes sense to make its administration as simple as possible. At the moment, different rates for the married couples allowance apply to different ages of pensioner. Someone aged between 64 and 75 in the fiscal year 2002–03 has a married couples allowance of £5,465, which is £70 lower than the rate for pensioners aged 75 or above, who receive an allowance of £5,535.
New clause 24 seeks to equalise the allowance at the higher rate. That is not a very generous change, because it would be worth only £7 a year, but it would mean that the coding that pensioners receive would not need to be changed. Savings would also be made in the production of the self-assessment form. The CIT suggested that it would remove at least one box from the form. Coupled with other simplifications that the institute suggests, 22 boxes and one whole page could be removed from the tax form and guide. This proposal is a small step towards meeting that objective.
The second proposal is perhaps more interesting. At the moment, if a pensioner who is eligible for married couples allowance marries, he or she can receive only a proportion of the allowance in the year of the marriage. That necessitates a complicated calculation that requires five boxes on the form and half a page in the tax guide to explain. That is a waste of time. It is an unnecessary calculation, because there cannot be that many pensioners who marry aged 66 or above.
The amount that the Exchequer would lose by the proposed change would be tiny. The new child's tax credit will not have an in-year restriction, so the change would bring the remaining age-related married couples allowance in line with the Government's legislation elsewhere and would be a slight bonus for pensioners getting married. It could not be described as giving a huge tax incentive to pensioners to rush out and wed, but it would remove complications and give them a little extra to spend on their honeymoon. I hope the Paymaster General will take the new clause in the spirit in which it is intended, so that we simplify the tax system for elderly people.
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