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Mr. Burnett: The right hon. Lady said that about £110 million a year was lost. How long has that been going on, and how have the Government quantified the loss?
Dawn Primarolo: I am not sure that I can answer the question as to how long. The issue is when tax avoidance schemes become apparent to tax inspectors, as opposed to when they start operating. That is not always immediately clear. I shall check, and if there is a more suitable answer, I shall make sure that it is passed to the hon. Gentleman. With reference to the £110 million loss, I said that in the past year or so we have seen a growth in this area, but we have been aware of the inconsistencies for some time and we have been moving to correct them. As the hon. Gentleman well knows from his substantial experience, it is a complex area and one should not legislate in haste. We have tried not to do that.
Norman Lamb: Will the Paymaster General respond specifically to the concerns about the complexity of the provisions, so soon after the tax rewrite Bill was considered in this place? It seems extraordinary that the language used is not consistent and that, after a good initiative from the Government, we are now moving in the wrong direction.
Dawn Primarolo: The Bill is in the tax law rewrite style. That is why the measure has been taken out in its entirety and put back in. The total number of pages incorporating the necessary changes to deal with avoidance has increased the Bill by 10 pages—if that figure is wrong, I shall correct it in writing to the hon. Gentleman: that is, 10 pages to protect £110 million and produce fairness.
The hon. Gentleman is right: I am utterly committed to the tax law rewrite project and as a Minister I have given it a great deal of support. Its job is to rewrite existing provisions, not to take decisions about the
policy or make improvements. Imperfect as that is, I considered it inappropriate to hold up the tax law rewrite project in order to get the provision in place. This area and another area of the Bill closely follow the tax law rewrite style. We can all agree that that is the way forward.On changes to the taxation of convertible shares, the existing rules do not operate fairly to ensure that the right amount of value is taxed when the employee unlocks access to it. We have received representations about this unfairness. The new rules are fairer, taking into account the security acquired and the right to convert at a later date, and treating each of those separately to calculate the tax charged. There are examples where that is of considerable importance.
There was a question—I do not remember who from—about interaction with enterprise SMEs. We are not attacking genuine share schemes that give employees a real stake. It is the Government's policy to make sure that we do not do that. We are attacking the exploitation of rules by those who do not use the rules properly. Small companies that want to improve their productivity through employee initiatives can benefit from tax and national insurance advantages by using Inland Revenue tax-advantaged arrangements, particularly the enterprise management scheme. The hon. Member for Huntingdon raised that with regard to its interaction with other areas of the tax system, and stressed that we should ensure that there were no adverse effects that would damage provisions elsewhere in the system. I agree. We will discuss the impact of the new rules, particularly in the context of venture capital, with the British Venture Capital Association. We will be mindful across the piece to ensure that there is no inadvertent knock-on effect.
4.30 pm
The hon. Member for Huntingdon also asked whether there would be guidance. The answer is yes. We want to ensure that the current guidance is updated. In particular, we want to work with the industry to ensure that it is appropriate. It is one thing to write guidance, but another to ensure that it is acceptable and usable by the industry.
We are studying carefully the representations made by such august bodies as the Law Society. So far, none of them suggests that the fundamental concept and approach of the changes is flawed. Many proposals appear—I am sure that this is unintentional—to weaken the anti-avoidance effects and not deal with the structures involved.
I realise that I may have spoken for longer than I should, but I hope I have made it clear why the Government consider absolutely inappropriate an amendment that seeks to delay implementation. That is why I ask my hon. Friends to oppose it, as it is foolish to give, in such a spectacular way, a road map on how not to pay tax. I hope that I have dealt with many of the points that have been made, although I appreciate that I have not mentioned all of them.
In recommending the clause to the Committee, I look forward to the discussions in the Standing Committee, which I am sure will be interesting and detailed and will enable us to deal with many more issues so as to put people's minds at rest.
Mr. Flight: I thank the Paymaster General for her response. In particular, I thank her for some of the corrections that she mentioned, including those about the date and the question of representation and retrospection. I am also glad to note that the Government are now studying the submissions of the Law Society. I trust that they are also considering representations made by the Institute of Chartered Accountants and other professional bodies.
The clause, as it is currently drafted, smacks of legislation made in haste. As it stands, there is potential for a number of unintended consequences. In particular, as my hon. Friend the Member for Huntingdon (Mr. Djanogly) pointed out, the issue of private equity and venture capital is crucial. Unfortunately, development in that area is already stalling pretty seriously in this country.
I do not accept that there has been no scope for consultation on such a major issue. Indeed, the Paymaster General is effectively accepting a degree of consultation with the Law Society. The Government have been seeking to close down avoidance and that seems a clear and straightforward objective. The concern is that, because they have not consulted professionals about where they want to go and the unintended consequences that they want to avoid, we have ended up with legislation that is exceedingly complicated for lawyers, let alone those who have to obey it.
We therefore feel that our amendment is appropriate. As the Paymaster General said, there will be a full debate in Standing Committee and many of the issues will be discussed. However, we are not yet in a society that is so totalitarian that it is right suddenly to introduce such massive and complex legislation with very modest flagging up in the Budget or previously. Furthermore, the new rules are not only about anti-avoidance. We therefore intend to press the amendment to a Division.
Question put, That the amendment be made:—
The Committee divided: Ayes 172, Noes 289.
AYES
Ainsworth, Peter (E Surrey)
Allan, Richard
Amess, David
Atkinson, David (Bour'mth E)
Atkinson, Peter (Hexham)
Bacon, Richard
Baldry, Tony
Barker, Gregory
Baron, John (Billericay)
Barrett, John
Beggs, Roy (E Antrim)
Bellingham, Henry
Bercow, John
Beresford, Sir Paul
Blunt, Crispin
Bottomley, rh Virginia (SW Surrey)
Brady, Graham
Brake, Tom (Carshalton)
Brazier, Julian
Breed, Colin
Brooke, Mrs Annette L.
Browning, Mrs Angela
Burnett, John
Burns, Simon
Burstow, Paul
Burt, Alistair
Butterfill, John
Cable, Dr. Vincent
Cameron, David
Campbell, rh Menzies (NE Fife)
Carmichael, Alistair
Cash, William
Chapman, Sir Sydney (Chipping Barnet)
Chope, Christopher
Clappison, James
Clarke, rh Kenneth (Rushcliffe)
Clifton-Brown, Geoffrey
Collins, Tim
Conway, Derek
Cotter, Brian
Cran, James (Beverley)
Curry, rh David
Davey, Edward (Kingston)
Davis, rh David (Haltemprice & Howden)
Djanogly, Jonathan
Dodds, Nigel
Doughty, Sue
Duncan, Alan (Rutland)
Duncan, Peter (Galloway)
Duncan Smith, rh Iain
Fabricant, Michael
Field, Mark (Cities of London & Westminster)
Flight, Howard
Flook, Adrian
Forth, rh Eric
Foster, Don (Bath)
Garnier, Edward
George, Andrew (St. Ives)
Gibb, Nick (Bognor Regis)
Gidley, Sandra
Gillan, Mrs Cheryl
Gray, James (N Wilts)
Grayling, Chris
Green, Damian (Ashford)
Green, Matthew (Ludlow)
Greenway, John
Grieve, Dominic
Gummer, rh John
Hague, rh William
Hammond, Philip
Hancock, Mike
Harris, Dr. Evan (Oxford W & Abingdon)
Harvey, Nick
Hawkins, Nick
Hayes, John (S Holland)
Heald, Oliver
Heath, David
Hendry, Charles
Hermon, Lady
Hoban, Mark (Fareham)
Hogg, rh Douglas
Horam, John (Orpington)
Howarth, Gerald (Aldershot)
Hunter, Andrew
Jack, rh Michael
Johnson, Boris (Henley)
Kennedy, rh Charles (Ross Skye & Inverness)
Key, Robert (Salisbury)
Kirkbride, Miss Julie
Lait, Mrs Jacqui
Lamb, Norman
Lansley, Andrew
Laws, David (Yeovil)
Leigh, Edward
Letwin, rh Oliver
Lewis, Dr. Julian (New Forest E)
Liddell-Grainger, Ian
Lidington, David
Lilley, rh Peter
Loughton, Tim
McIntosh, Miss Anne
Mackay, rh Andrew
Maclean, rh David
McLoughlin, Patrick
Malins, Humfrey
May, Mrs Theresa
Mercer, Patrick
Mitchell, Andrew (Sutton Coldfield)
Moore, Michael
Moss, Malcolm
Murrison, Dr. Andrew
Norman, Archie
Oaten, Mark (Winchester)
O'Brien, Stephen (Eddisbury)
Öpik, Lembit
Osborne, George (Tatton)
Ottaway, Richard
Paice, James
Paterson, Owen
Pickles, Eric
Prisk, Mark (Hertford)
Pugh, Dr. John
Redwood, rh John
Reid, Alan (Argyll & Bute)
Rendel, David
Robathan, Andrew
Robertson, Laurence (Tewk'b'ry)
Robinson, Peter (Belfast E)
Rosindell, Andrew
Russell, Bob (Colchester)
Sanders, Adrian
Sayeed, Jonathan
Selous, Andrew
Shephard, rh Mrs Gillian
Shepherd, Richard
Simmonds, Mark
Simpson, Keith (M-Norfolk)
Smith, Sir Robert (W Ab'd'ns & Kincardine)
Smyth, Rev. Martin (Belfast S)
Soames, Nicholas
Spelman, Mrs Caroline
Spicer, Sir Michael
Spink, Bob (Castle Point)
Spring, Richard
Steen, Anthony
Streeter, Gary
Stunell, Andrew
Swayne, Desmond
Swire, Hugo (E Devon)
Syms, Robert
Tapsell, Sir Peter
Taylor, Ian (Esher)
Taylor, John (Solihull)
Taylor, Matthew (Truro)
Taylor, Dr. Richard (Wyre F)
Taylor, Sir Teddy
Thurso, John
Trend, Michael
Turner, Andrew (Isle of Wight)
Tyler, Paul (N Cornwall)
Tyrie, Andrew
Viggers, Peter
Waterson, Nigel
Watkinson, Angela
Whittingdale, John
Wiggin, Bill
Wilkinson, John
Willetts, David
Winterton, Ann (Congleton)
Yeo, Tim (S Suffolk)
Young, rh Sir George
Younger-Ross, Richard
Tellers for the Ayes:
Mr. David Wilshire and
Mr. Mark Francois
NOES
Abbott, Ms Diane
Adams, Irene (Paisley N)
Ainger, Nick
Ainsworth, Bob (Cov'try NE)
Alexander, Douglas
Allen, Graham
Anderson, Janet (Rossendale & Darwen)
Armstrong, rh Ms Hilary
Atkins, Charlotte
Austin, John
Bailey, Adrian
Baird, Vera
Barnes, Harry
Barron, rh Kevin
Battle, John
Bayley, Hugh
Beard, Nigel
Beckett, rh Margaret
Benn, Hilary
Benton, Joe (Bootle)
Betts, Clive
Blackman, Liz
Blizzard, Bob
Boateng, rh Paul
Borrow, David
Bradley, rh Keith (Withington)
Bradley, Peter (The Wrekin)
Bradshaw, Ben
Brennan, Kevin
Brown, rh Gordon (Dunfermline E)
Brown, Russell (Dumfries)
Browne, Desmond
Bryant, Chris
Burgon, Colin
Burnham, Andy
Byers, rh Stephen
Cairns, David
Campbell, Alan (Tynemouth)
Campbell, Ronnie (Blyth V)
Caplin, Ivor
Casale, Roger
Challen, Colin
Chapman, Ben (Wirral S)
Chaytor, David
Clark, Mrs Helen (Peterborough)
Clark, Dr. Lynda (Edinburgh Pentlands)
Clarke, rh Charles (Norwich S)
Clarke, rh Tom (Coatbridge & Chryston)
Clarke, Tony (Northampton S)
Clelland, David
Clwyd, Ann (Cynon V)
Coaker, Vernon
Coffey, Ms Ann
Coleman, Iain
Colman, Tony
Cooper, Yvette
Corbyn, Jeremy
Corston, Jean
Cousins, Jim
Cox, Tom (Tooting)
Crausby, David
Cruddas, Jon
Cryer, Ann (Keighley)
Cryer, John (Hornchurch)
Cummings, John
Cunningham, Tony (Workington)
Curtis-Thomas, Mrs Claire
Darling, rh Alistair
Davey, Valerie (Bristol W)
David, Wayne
Davidson, Ian
Davies, rh Denzil (Llanelli)
Davies, Geraint (Croydon C)
Davis, rh Terry (B'ham Hodge H)
Dawson, Hilton
Dean, Mrs Janet
Denham, rh John
Dhanda, Parmjit
Dobson, rh Frank
Doran, Frank
Dowd, Jim (Lewisham W)
Drew, David (Stroud)
Eagle, Angela (Wallasey)
Eagle, Maria (L'pool Garston)
Efford, Clive
Ennis, Jeff (Barnsley E)
Etherington, Bill
Ewing, Annabelle
Farrelly, Paul
Fisher, Mark
Fitzpatrick, Jim
Flint, Caroline
Flynn, Paul (Newport W)
Follett, Barbara
Foster, rh Derek
Foster, Michael (Worcester)
Foulkes, rh George
Francis, Dr. Hywel
Gardiner, Barry
Gerrard, Neil
Gibson, Dr. Ian
Gilroy, Linda
Griffiths, Jane (Reading E)
Griffiths, Nigel (Edinburgh S)
Griffiths, Win (Bridgend)
Grogan, John
Hall, Mike (Weaver Vale)
Hall, Patrick (Bedford)
Hamilton, David (Midlothian)
Hamilton, Fabian (Leeds NE)
Hanson, David
Harris, Tom (Glasgow Cathcart)
Havard, Dai (Merthyr Tydfil & Rhymney)
Healey, John
Henderson, Doug (Newcastle N)
Henderson, Ivan (Harwich)
Hendrick, Mark
Hepburn, Stephen
Heppell, John
Hesford, Stephen
Hewitt, rh Ms Patricia
Heyes, David
Hill, Keith (Streatham)
Hinchliffe, David
Hodge, Margaret
Hoey, Kate (Vauxhall)
Hood, Jimmy (Clydesdale)
Hoon, rh Geoffrey
Hope, Phil (Corby)
Howarth, George (Knowsley N & Sefton E)
Howells, Dr. Kim
Hughes, Beverley (Stretford & Urmston)
Hughes, Kevin (Doncaster N)
Hurst, Alan (Braintree)
Irranca-Davies, Huw
Jackson, Glenda (Hampstead & Highgate)
Jackson, Helen (Hillsborough)
Jamieson, David
Jenkins, Brian
Jones, Jon Owen (Cardiff C)
Jowell, rh Tessa
Joyce, Eric (Falkirk W)
Kaufman, rh Gerald
Keen, Alan (Feltham)
Keen, Ann (Brentford)
Kemp, Fraser
Khabra, Piara S.
Kidney, David
Kilfoyle, Peter
King, Andy (Rugby)
King, Ms Oona (Bethnal Green & Bow)
Knight, Jim (S Dorset)
Ladyman, Dr. Stephen
Lammy, David
Laxton, Bob (Derby N)
Lazarowicz, Mark
Lepper, David
Leslie, Christopher
Levitt, Tom (High Peak)
Lewis, Ivan (Bury S)
Liddell, rh Mrs Helen
Linton, Martin
Lloyd, Tony (Manchester C)
Love, Andrew
Lucas, Ian (Wrexham)
Luke, Iain (Dundee E)
Lyons, John (Strathkelvin)
McAvoy, Thomas
McCabe, Stephen
McCartney, rh Ian
McDonagh, Siobhain
MacDonald, Calum
MacDougall, John
McFall, John
McGuire, Mrs Anne
McIsaac, Shona
McKechin, Ann
McKenna, Rosemary
Mactaggart, Fiona
McWalter, Tony
Mahon, Mrs Alice
Mallaber, Judy
Mann, John (Bassetlaw)
Marsden, Gordon (Blackpool S)
Marshall, Jim (Leicester S)
Marshall-Andrews, Robert
Martlew, Eric
Meale, Alan (Mansfield)
Merron, Gillian
Michael, rh Alun
Milburn, rh Alan
Miliband, David
Miller, Andrew
Mitchell, Austin (Gt Grimsby)
Moffatt, Laura
Mole, Chris
Moonie, Dr. Lewis
Morley, Elliot
Mullin, Chris
Murphy, Denis (Wansbeck)
Naysmith, Dr. Doug
O'Brien, Bill (Normanton)
O'Hara, Edward
Olner, Bill
Organ, Diana
Owen, Albert
Palmer, Dr. Nick
Picking, Anne
Pickthall, Colin
Plaskitt, James
Pollard, Kerry
Pond, Chris (Gravesham)
Pound, Stephen
Prentice, Ms Bridget (Lewisham E)
Prentice, Gordon (Pendle)
Prescott, rh John
Price, Adam (E Carmarthen & Dinefwr)
Primarolo, rh Dawn
Prosser, Gwyn
Purnell, James
Rapson, Syd (Portsmouth N)
Raynsford, rh Nick
Reed, Andy (Loughborough)
Reid, rh Dr. John (Hamilton N & Bellshill)
Robertson, Angus (Moray)
Robertson, John (Glasgow Anniesland)
Robinson, Geoffrey (Coventry NW)
Roche, Mrs Barbara
Ross, Ernie (Dundee W)
Roy, Frank (Motherwell)
Ruane, Chris
Ruddock, Joan
Russell, Ms Christine (City of Chester)
Ryan, Joan (Enfield N)
Salmond, Alex
Salter, Martin
Sarwar, Mohammad
Savidge, Malcolm
Sawford, Phil
Shaw, Jonathan
Sheridan, Jim
Shipley, Ms Debra
Simon, Siôn (B'ham Erdington)
Singh, Marsha
Smith, rh Andrew (Oxford E)
Smith, rh Chris (Islington S & Finsbury)
Smith, John (Glamorgan)
Smith, Llew (Blaenau Gwent)
Soley, Clive
Southworth, Helen
Spellar, rh John
Squire, Rachel
Starkey, Dr. Phyllis
Stinchcombe, Paul
Sutcliffe, Gerry
Tami, Mark (Alyn)
Taylor, Dari (Stockton S)
Taylor, David (NW Leics)
Thomas, Gareth (Clwyd W)
Thomas, Gareth (Harrow W)
Thomas, Simon (Ceredigion)
Tipping, Paddy
Todd, Mark (S Derbyshire)
Touhig, Don (Islwyn)
Trickett, Jon
Truswell, Paul
Turner, Dr. Desmond (Brighton Kemptown)
Turner, Neil (Wigan)
Twigg, Derek (Halton)
Tynan, Bill (Hamilton S)
Vis, Dr. Rudi
Ward, Claire
Wareing, Robert N.
Watts, David
Weir, Michael
White, Brian
Whitehead, Dr. Alan
Williams, rh Alan (Swansea W)
Wills, Michael
Winnick, David
Wishart, Pete
Wood, Mike (Batley)
Woodward, Shaun
Woolas, Phil
Worthington, Tony
Wright, Anthony D. (Gt Yarmouth)
Wright, David (Telford)
Wright, Tony (Cannock)
Wyatt, Derek
Tellers for the Noes:
Dan Norris and
Mr. Jim Murphy
Question accordingly negatived.
Clause 139 ordered to stand part of the Bill.
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