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Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): Not long ago the Prime Minister as leader of the Labour party chose to abolish a different clause IV. Now through clause 4 of the Finance Bill the Government are imposing a burden on the whisky industry that I am not convinced will tackle the problem that they seek to address. Can the Chief Secretary clarify how he means to help operators who have small production lines and therefore cannot necessarily predict whether their bottles will need stamps for the internal market or no stamps for export? That will impose added burdens and costs not just on the cash flow through the acquisition of stamps, but on the production line. The measure will be a burden on all operators, but for the small operators especially, the stamp could be a particular difficulty in the management of their business.
Mr. Boateng: My hon. Friend the Economic Secretary has spent some time, as have civil servants in Customs and Excise, in discussion with the industry about the particular concerns of small distilleries, and progress has been made in that respect. There will be help with their additional costs, and those discussions continue in order to make sure that they are given every assistance that is reasonable and practical.
The evasion of duty on spirits is a matter of widespread concern, not least to the industry, because of the way in which illicit trade undermines the brands. The Roques report went into that in some detail. I recall from my own time as Financial Secretary the detailed discussions and measures that we undertook together with the industry to tackle the problem, but it is clear that it continues to escalate. That is why the measure is a proportionate and reasonable response.
Mr. Richard Bacon (South Norfolk) (Con): The Chief Secretary is right that the illicit trade is of concern to the legitimate industry. Does he recognise that it is also of concern to taxpayers that, as was pointed out in the Roques report, the actions of Customs and Excisewhich, I accept, have improved sincecontributed dramatically to the losses to the taxpayer? Some £800 million of revenue was lost, £341 million to London City Bond alone.
No, I certainly will not. I have been given sufficient forewarning by the intervention of the hon. Member for South Norfolk (Mr. Bacon) not to give way to the hon. Member who sits on the Opposition Front Bench. The point made by the hon. Member for South Norfolk was entirely different from the one that I was making and was recognised in the Roques report. It was a one-off and, as he fairly said, there has been considerable improvement since in the performance of Customs and Excise.
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Through tax stamps we are dealing with a significant fraud that not only deprives the Exchequer of revenue, but creates unfair competition for honest businesses and serves as a conduit of resource for organised crime. The industry, through the joint alcohol and tobacco consultation group, worked hard and constructively to develop a response to the problem, but we know that the anti-fraud impact of that package fell significantly short, and if it continued, would still fall significantly short of that estimated to result from tax stamps. It is right, therefore, that we should protect the revenue as we propose, but offsetting measures will reduce substantially the impact of compliance costs.
Mr. Prisk: I appreciate that the situation is awkward for the Chief Secretary, because he is on record previously as being strongly opposed to such a measure, but this is a day for U-turns by those on the Government Benches. May I ask the right hon. Gentleman a simple question? Given that the Government expect to get only £160 million back from the measures, what is the logic for spending £280 million, which is the experts' best estimate of the cost of the scheme? It cannot make sense.
Mr. Boateng: Those figures are not accurate. The hon. Gentleman knows very well why it has been necessary to take the measures. The work of the National Audit Office, the investigation carried out by the Select Committee and the work of Customs and Excise all indicate a loss that needs to be addressed. We must be clear about this. Yes, it is right that there should be a fund to assist with capital investment. It is right, as the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) said, that we should take particular note of the position of small firms. That is why my hon. Friend the Economic Secretary has targeted the assistance at smaller firms in particular, in order to mitigate their upfront costs. Customs is having further discussions with the trade on design, terms and coverage. It is right that we address this mischief. I hope that in Committee, we will be able to build some sort of consensus around the need to tackle a serious fraud.
Together with these and other measures to safeguard fairness in the tax system, the Budget makes a real contribution, ensuring that everyone pays their way and that as little as possible is wasted through avoidance and fraud. It is important to tackle such behaviour and to ensure that taxpayers' money is safeguarded and spent efficiently.
Of course, fairness extends across the generations. The Government recognise that we have an obligation to future generations to pursue sustainable economic growth that delivers our economic, social and environmental objectives, and to meet our domestic and global responsibilities in that regard. Environmental action of the sort enshrined in the Budget and the Bill that puts it into effect is not incompatible with productive business. It is to the advantage of businesses to adapt and invest now in new practices, and so stay ahead of the global trend.
We have already made considerable progress with the environmental agenda through the introduction of measures such as the climate change levy, the United Kingdom emissions trading scheme, the aggregates levy, and support via the Carbon Trust and through enhanced capital allowances for energy and water-saving
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technology. These measures are not designed primarily to raise revenue, but to incentivise environmentally responsible behaviour by business.
In the Bill we will introduce new eligibility criteria for climate change agreements, which will increase the number of businesses that can participate in the scheme, boosting both the environmental impact and business competitiveness. Given business success in delivering on climate change objectives, and taking account of business competitiveness, we will freeze the rates of the climate change levy. There has been a real partnership between industry and Government in this respect and considerable progress has been made. We are keen to encourage households as well as businesses to tackle energy efficiency, and we have introduced a package of measures that includes incentives for the private rented sector to invest in energy efficiency.
The Finance Bill advances some of the key steps to ensure that the country has the means to meet the challenges of the future, but it is important for individuals to be able to do that too. That need drives our pension simplification measures, which are the most radical changes to the taxation of pensions for a generation. Simplifying the taxation of pensions is the cornerstone of making pensions easy for everyone to understand, thus enabling everyone to prepare for the future.
The eight different tax regimes for pensions were built on top of each other, leaving us with a maze of regulations through which the citizen and consumer must make their way, and often driving arbitrary distinctions between employees. We are sweeping away that complex system and replacing it with a single regime with an easily understood lifetime allowance for tax-privileged pension saving and a tax-free lump sum of up to 25 per cent. for all.
Annual limits on savings that vary according to an individual's age, the date on which they joined a scheme or the type of the scheme will end. As decision making becomes easier for savers, so administration will become simpler for employers and providers, which will reduce costs in the long run. Simplification matters if people are to save as flexibly as they now work. When we have simplified the system, it will be possible to draw a pension and carry on working for the same employer, perhaps for fewer hours a week. By creating a simple system that enables people to plan and save for their retirements, the Bill renews and affirms the Government's role in the UK pensions partnership.
Mr. Andrew Mitchell (Sutton Coldfield) (Con): I agree with the Chief Secretary about the merits of simplification, which is one good aspect among the litany of bad aspects of the Government's pension changes. If he is trying to encourage savings, however, will he explain why he is reducing the amount that people can save through individual savings accounts and making other disadvantageous changes for ISA holders? Next year, why does he not increase the figure from £7,000 to, for example, £10,000 or even £15,000 per year, instead of reducing the capital figure allowed to £5,000?
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