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Mr. Flight: My right hon. Friend has made an important point, which is that the definition as a tax relief in the provision makes it somewhat inflexible to the changing needs of medical priorities. His point is that even the priorities of today do not appear to be adequately covered.

In the Red Book, the Government state that they expect the provision to cost nothing in 2003-04, £10 million in 2004-05 and £20 million thereafter, so they do not think that there will be a particularly material effect. Our discussions with the industry lead us to suggest that if we are serious about trying to be effective, targeted grants would be more helpful. We have added 14 pages of complex fiscal legislation to something that, when we consider the expected cost, looks too much to us like tokenism rather than a serious attempt to help. In our judgment, the route taken is not necessarily the most effective.

Mr. Boateng: The right hon. Member for Fylde (Mr. Jack) has characteristically made a serious and significant point, but it is not the point that the hon. Member for Arundel and South Downs raised. The

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right hon. Gentleman is not complaining about the inflexibility of the measure, but rightly probes what it might offer to meet the wider health challenges that he outlines. The WHO has been intimately involved in the development of the proposal. Representatives of that body sit with those of the industry and of the developing world on a committee chaired by my right hon. Friend the Secretary of State for International Development, and it fully supports the measure.

The points made by the right hon. Gentleman were right. The WHO recognises 21 groups of infectious diseases, of which the three biggest killers in the developing world are TB, malaria and HIV/AIDS. That is why we have focused on them--they account for about 6 million deaths a year.

The hon. Gentleman made a point about grants. The focused relief has to be seen as part of a wider package of measures to alleviate the burden of disease in the developing world. As part of those measures, we have pledged $200 million to the global fund established to provide developing countries with the resources to purchase drugs and medicines for AIDS, TB and malaria, among other problems.

Extension of the relief to other diseases at the moment might dilute the incentive for companies to concentrate additional resources on research and development into the key diseases. We could not extend it to research into all the infectious diseases that afflict poorer people in the developing countries without substantially reducing the 50 per cent. rate at which the relief is given.

The right hon. Gentleman was right to point out the scope within the legislation to extend the powers by regulation. That is because the HIV virus mutates rapidly in response to changing conditions, as right hon. and hon. Members on both sides of the Committee will know. Therefore, we have included a provision to allow us to add further strains to the list of those eligible for research relief as new forms of the virus develop and are identified by medical science.

The wider question of whether there might be scope for such relief in relation to animal diseases that pose a threat to public health globally or to the economy in the developing world is interesting. Using relief in that way will doubtless be monitored carefully to see what scope it has for use in other areas of public and development policy—subject always to there being a market failure, because that is what it is designed to address. The right hon. Gentleman makes an interesting point, and it is worthy of consideration.

I have spent quite some time with the industry both in Committee and bilaterally discussing the question of grants, but I have not heard the call being made for extensive grants in the terms described by the right hon. Gentleman, not least because the industry recognises the substantial contribution that we are making to the global fund. The industry also recognises that grants and development aid have to be directed to creating the infrastructure through which those goods might be marketed and distributed in the developing world. Without that, all of this would be a waste of space.

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I hope that the Committee will feel able to give the clause, and its schedules, a fair wind.

Question put and agreed to.

Clause 53 ordered to stand part of the Bill.

Schedule 13

Tax relief for expenditure on vaccine research etc

Mr. Flight: I beg to move amendment No. 5, in page 207, leave out lines 18 to 20 and insert—

    '(1) This Schedule applies to expenditure incurred on or after 1st April 2002.'.

The Chairman: With this it will be convenient to discuss amendment No. 6, in page 209, line 38, leave out from 'after' to end of line 39 and insert '1st April 2002'.

Mr. Flight: These are simple amendments. We see no reason, nor has one been advised to us, why the provision should not take effect straight away but should be left in the ether to be implemented at some unspecified time. The amendments would therefore ensure that the start date is the beginning of the present tax year.

Mr. Boateng: I can give the hon. Gentleman the assurance that he seeks. There is no danger whatever of the provisions being left in the ether, as he so picturesquely describes it. I assure the Committee that we intend the measure to be implemented as soon as we have the necessary state aid approvals. It is necessary to get state aid approval, but we have every confidence that the Commission will give it. However, as it may affect competition in trade between European Union member states, it is necessary to obtain such approval. We propose bringing the provisions into effect on a date appointed by the Treasury, which we expect will be soon after receiving approval.

The measure is intended, as we have indicated, as an incentive to industry to commit new resources to discovering vaccines and medicines for the prevention and treatment of those diseases. They know that it is coming. They are doing work in that area and know that we are seeking Commission approval. There is no uncertainty or doubt as to our intentions. I hope, with that assurance, that the hon. Gentleman will not press the amendment to a Division.

Mr. Flight: I thank the Minister for that response. May I cheekily ask, in what I trust will be the unlikely event of the proposals being ruled out of order by the European Union on competition grounds, that the Government consider the alternative of specific grants being made to specific companies on the ground that it would be purely humanitarian expenditure?

Mr. Boateng: The measures are as likely to be refused by the Commission as the hon. Gentleman is to disappear into the ether. We can be absolutely sure that both of them will be around for a considerable time. I hope—with my assurance of his fate as well as

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the fate of the measures—that the hon. Gentleman will not feel the need for me to give him such an undertaking.

No one can doubt the commitment of the House and the Government to the cause of development aid and global health. I have every confidence that the Commission will give the necessary approvals as the measures are consistent with Community objectives. Therefore, the scenario that the hon. Gentleman paints, in which it is necessary to fill the gap with grants, will not occur.

Mr. Flight: I thank the Minister for his reply and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 13 agreed to.

Schedule 14 agreed to.

Clause 54

Gifts of medical supplies and equipment

Question proposed, That the clause stand part of the Bill.

The Chairman: With this, it will be convenient to take new clause 2—Gifts of medical supplies and equipment (No. 2)—

    '.—(1) Where on or after 1st April 2002 any person (''the donor'') makes a gift of relevant goods from trading stock for a relevant purpose then:

    (a) no amount shall be required to be brought into account as a trading receipt or gain in consequence of the making or receiving of the gift; and

    (b) the costs of making and delivering the gift shall be deducted as an expense of the trade of the donor in computing the profits of that trade.

    (2) Where the donor or any person connected with him receives any benefit in money or money's worth attributable to the making of that gift, then for the accounting period in which the benefit is received the donor shall be deemed to be in receipt of income chargeable to tax under Case VI of Schedule D on an amount equal to the higher of—

    (a) any relief claimed pursuant to subsection (1), and

    (b) the amount of the benefit in question.

    (3) The Secretary of State may by order prescribe relevant purposes and relevant goods to have effect for the purposes of this section, either generally or in respect of a given time or situation. Section 839 of the Taxes Act 1988 (connected persons) applies for the purposes of subsection (2).'.

Mr. Flight: The clause offers tax incentives to companies for gifts made from trading stock of medical supplies or equipment for human use and humanitarian purposes. There are two incentives: first, the value of the gift is not included in the company's tax computations, so the company will get a full tax deduction for the cost of acquiring the stock without having to show any corresponding income. Secondly, any costs of transportation, delivery or distribution incurred by the company will also be tax deductible. If the company or a person connected to the company receives a benefit from the gift, the company is taxed on the value of that benefit. The Treasury has given

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power to determine which supplies and equipment the incentives do not apply to. The tax reliefs apply to gifts made on or after the beginning of the tax year.

We have three objections, which is why we introduced the new clause. First, the incentives would apply to companies alone, not to unincorporated businesses. Although there may not be many such unincorporated businesses, why should they not be covered in the event that they have something to contribute?

Secondly, War on Want has raised concerns that the measures could be used for drug dumping—making gifts of drugs that may be good products but are not especially useful in over-supply.

Thirdly, the measures apply to medical supplies or equipment given for humanitarian purposes, but there is no definition as to what constitutes medical supplies or equipment or, indeed, humanitarian purposes. Under corporation tax self-assessment, companies are required to assess their tax liabilities to the best of their knowledge. Would it not be helpful, therefore, to provide guidance as to what will constitute qualifying gifts? As drafted, the clause provides help only for humanitarian purposes and does not give incentives for gifts of supplies and equipment that may help emergency recovery in event of disasters.

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