New Clause 16
'For the purposes of this Part the valuation assumptions in relation to a person and any benefits are
Mr. Tyrie: This is a very interesting but minor clause, which should detain us for about six minutes. As I understand it, it only provides the Treasury with the power to vary the terms under which the product is offered to the customer. It does not, as I was initially concerned when I first read it, enable it fundamentally to alter the shape of a premium bond and the type and range of products that may be made available. I should
(a) if the person has not reached such age (if any) as must have been reached to avoid any reduction in the benefits on account of age, that the person reached that age on the date, and
(b) that the person's right to receive the benefits had not been occasioned by physical or mental impairment.'.[Dawn Primarolo.]
Brought up, read the First and Second time, and added to the Bill.
New Clause 17
'Regulations under section 11 of the National Debt Act 1972 (c.65) (power of Treasury to make regulations as to raising of money under auspices of Director of Savings) may repeal any provision contained in section 54 of, or Schedule 18 to, the Finance Act 1968 (c.44) (terms of issue of premium savings bonds).'.[Ruth Kelly.]
Brought up, and read the First time.
Motion made, and Question proposed, That the clause be now read a Second time.
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like the Minister to confirm that important point. As she will probably know, some people consider even premium bonds to be an unacceptable form of gambling. Indeed, Harold Wilson described them as such.
Now, of course, measures to deregulate gambling have been advancedwe do not know whether the gambling Bill will be introduced. It crossed my mind when I saw this clause that it could be part of a wider set of proposals to enable the Government to engage more directly in the gambling sector. As it happens, I would not in principle be against a widening of the structure of premium bonds, but if that were to be undertaken it would merit serious debate.
As it stands, we accept the measure, although I should like the Minister to confirm the point that I have just made about the limit of its scope. I note the increased importance of premium bonds in Government funding; no doubt that is why the clause has been introduced. The Government will need to raise a good deal more money, as the Red Book has shownperhaps more even than they have set out; if I had to bet, I would do so on that side of the line. The importance of premium bonds has doubled over the past 12 months as a source of funding for the Debt Management Office; I think that I am correct in saying that it has increased from about £4 million to about £8 million. They now account for about 20 per cent. of total national savings activity, or about 7 or 8 per cent. of total funding. What was almost an irrelevant issue not too many years ago, for a Government who were not borrowing much money, is now quite an important one, so any alteration in the terms is presumably targeted at trying to obtain more custom. Certainly, the Government will need to get more custom in.
I should be grateful if the Minister could confirm that I have correctly understood the clause, as the explanatory notes were not terribly clear. I did not have a chance, although I tried, to read the original legislationthe National Debt Act 1972 and the Finance Act 1968to make absolutely sure that the clause will do what I think it is going to do. There is an inherent tension between any form of gambling instrument that is outside Government activity on the one hand, and premium bonds on the other. It was widely held that the creation of a national lottery would be very damaging to premium bonds. As it happens, the statistics are ambiguous on that. Although the rate of increase for premium bond take-up slowed, it certainly did not fall when the lottery was introduced.
I should be grateful if the Minister could dwell on what her longer-term proposals for premium bonds are, as well as confirming my earlier point.
Mr. Stephen Pound (Ealing, North) (Lab): I support what the hon. Gentleman says, as there are concerns across the House on this issue. He quoted the late Sir Harold Wilson, and the late Baroness Thatcher was equally concerned about the issue[Hon. Members: ''She is not late.'']Sorry, the former Member of this House who is now Baroness Thatcher, with whom I
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entirely agreed on this subject. I agreed with her on only one other occasion, and that was with her opinion of the Conservative Cabinet at a particular time.
The hon. Member for Chichester mentioned the lottery, and I am concerned that avaricious eyes are being cast at premium bonds, which are a successful mechanism and are widely supported, going with the grain of the nationthere are none of the problems of aggressive selling or the difficulties associated with the lottery. Like many people, I am concerned that the integrity of premium bonds should remain unchallenged. I look with confidence to the Minister for assurance; perhaps she could underscore the fact this is a cross-party concern.
I apologise for killing the former Prime Minister.
Ruth Kelly: It might be helpful to start by briefly exploring the remit of National Savings and Investments, which is to raise cost-effective financing for the Government. It does so by selling a range of products to savers and investors. In the last financial year, National Savings and Investments contributed £3.4 billion to net financing. The most popular National Savings and Investments product is the premium bond23 million customers have bought premium bonds, investing £24 billion. It is the main contributor to NSI's net financing target.
I hope that I can reassure both my hon. Friend the Member for Ealing, North (Mr. Pound) and the hon. Member for Chichester that the premium bond product remains as provided for by section 11 of the National Debt Act 1972. Premium bonds were created by the Finance Act 1956, which is not affected by the clause that we are debating. I hope that that puts some of their concerns to rest.
National Savings and Investments has embarked on a wide-ranging modernisation programme, and one of its objectives is to re-examine and update premium bonds. The new clause will give it the flexibility that it needs and enable it to carry out the results of its review. I know that my hon. Friend is interested in the factors that it may consider in that review, and I assure him that they are intended to meet customer need better rather than to change fundamentally the nature of premium bonds.
As with all its products, National Savings and Investments wants to review premium bonds in the light of customer feedback. Changes in the retail financial services market have an impact on premium bonds as they do on other products, and it wants to ensure that the product continues to meet customer need. For example, it may want to reconsider the need to give three months' notice of a change in the prize fund rate, which is clearly out of step with today's financial services market, in which customers expect their financial provider to react immediately to changes in base rates.
Another issue for consideration is that National Savings and Investments has a solely paper-based application system. It may wish to consider giving customers greater choice in how they investover the telephone, for example. It may consider whether it needs to publish winning numbers in the London Gazettethere are about a million winning numbers
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each month. It may consider using its website to inform people if they have won a prize. Those seem to be sensible factors to be considered in a review. I hope that I have reassured my hon. Friend and other hon. Members that the proposals are relatively straightforward and will not undermine premium bonds.
Question put and agreed to.
Clause read a Second time, and added to the Bill.
New Clause 18
Partnerships exploiting films
118ZL Partnerships exploiting films
(1) Where (apart from this section) an amount may be given to an individual under section 380 or 381 in respect of a loss (''the loss in question'') sustained by him
(a) in a trade consisting of or including the exploitation of films, and
(b) in an affected year of assessment,
none of that amount may be given otherwise than against income consisting of profits arising from the trade; but this is subject to subsection (4).
(2) An ''affected year of assessment'' means a year of assessment at any time during which the individual carried on the trade in partnership which is also
(a) the year of assessment in which the trade is first carried on by him or any of the next three years of assessment,
(b) a year of assessment in which he did not devote a significant amount of time to the trade, and
(c) a year of assessment at any time during which there existed a relevant agreement guaranteeing him an amount of income.
(3) For the purposes of subsection (2)(c)
(a) ''a relevant agreement'' means
(i) an agreement that was made with a view to the individual's carrying on the trade or in the course of his carrying it on (including any agreement under which he is or may be required to contribute an amount to the trade), or
(ii) an agreement related to an agreement falling within sub-paragraph (i),
(b) an agreement ''guarantees'' the individual an amount of income if the agreement, or any part of it, is designed to secure the receipt by the individual of that amount (or at least that amount) of income, and
(c) it is immaterial when the amount of income would be received under the agreement.
(4) If the loss in question derives to any extent from exempt expenditure, amounts that (apart from this section) may be given under section 380 or 381 in respect of the loss otherwise than against income consisting of profits arising from the trade may be so given to the extent that the total of the amounts so given does not exceed the exempt part of the loss.
(5) The exempt part of the loss is so much of the loss in question as derives from exempt expenditure.
(6) Expenditure is exempt expenditure for the purposes of this section if it is
(a) expenditure incurred before 26 March 2004 in a case where this paragraph applies, or
(b) expenditure that, for the purposes of the computation required by section 111(2), was deducted under section 41 or 42 of the Finance (No. 2) Act 1992, or
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(c) incidental expenditure that, although deductible apart from section 41 or 42 of that Act, was incurred in connection with the production or acquisition of a film in relation to which expenditure was deducted under either of those sections.
(7) Subsection (6)(a) applies where the individual carried on the trade before 26 March 2004.
118ZM Partnerships exploiting films: supplementary
(1) In section 118ZL and this section any reference to a film is to be construed in accordance with paragraph 1 of Schedule 1 to the Films Act 1985.
(2) Section 118ZH (meaning of ''a significant amount of time'' etc) applies for the purposes of section 118ZL as it applies for the purposes of section 118ZE.
(3) For the purposes of section 118ZL(3) agreements are related if they are entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into).
(4) The reference in section 118ZL(6) to the acquisition of a film is a reference to the acquisition of the master negative or any master tape or master disc of the film; and this subsection is to be construed in accordance with section 43(1) and (2)(b) of the Finance (No. 2) Act 1992.
(5) In section 118ZL(6) ''incidental expenditure'' means expenditure on management, administration or obtaining finance.
(6) The part of the loss in question that derives from exempt expenditure shall be determined on such basis as is just and reasonable.
(7) The extent to which any expenditure falls within section 118ZL(6)(c) shall be determined on such basis as is just and reasonable.
(8) In any case where sections 380 and 381 have effect as mentioned in section 118ZD(2) or 118ZI(3) (cases where sections 380 and 381 have effect as if loss carried forward from earlier year sustained in subsequent year), section 118ZL also has effect as mentioned in section 118ZD(2) or (as the case may be) section 118ZI(3).'''.[Dawn Primarolo.]
Brought up, read the First and Second time, and added to the Bill.