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Mr. Michael Fallon (Sevenoaks) (Con): Will the right hon. Lady confirm that we are to add 159 pages to the 203 pages of legislation that we passed only two months ago? Might there not be a better way of supporting business than passing one page of tax legislation for every day of the year?
I know that, as a distinguished member of the Treasury Committeeno doubt he is
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keen to be reappointedthe hon. Gentleman follows these matters closely. So he knows that the full Budget and the full Finance Bill were announced before the general election and that all the Budget resolutions were passed by the Housenot one was opposed. In that Budget, the balance was struck between facilitating business and removing unnecessary regulation and acting on behalf of taxpayers who comply with their responsibilities. Our aim is to make sure that avoidancewith which a substantial part of the Bill before us dealsis prevented and that tax due is paid.
Kelvin Hopkins (Luton, North) (Lab): I agree that we have a strong economy, especially compared with those of the eurozone. Does my right hon. Friend agree that the main reason for that is that we have sustained good consumer demand by implementing appropriate fiscal and monetary policies, which would not be permitted inside the eurozone? Will she commit herself to continuing those strong policies to keep our economy going as it is?
Dawn Primarolo: My right hon. Friend the Chancellor will be delighted to hear that my hon. Friend supports his fiscal rules and stewardship of the economy, which does not surprise me given the success that these policies have produced in constituencies such as his and mine in achieving a massive reduction in unemployment.
John Bercow (Buckingham) (Con): Working on the principle that one ought to be grateful for small mercies, perhaps my hon. Friend the Member for Sevenoaks (Mr. Fallon) ought to be relieved that, this year, the Finance Bill does not amount to the 488 pages represented by a previous Finance Bill that the Chancellor introduced. Will the Paymaster General tell me whether the principle of reform of the regulatory process, on which the Chancellor has rightly spoken recently, has in any way informed the construction of this Bill?
Dawn Primarolo: I know that the hon. Gentleman follows these matters closely. Perhaps he will allow me to continue making my speech, so that I can illustrate which parts of the Bill he will be ecstatic about on the basis that they will reduce regulation and make changes within the tax system to assist the processes that businesses enable. He will be able to identify a number of clauses that will do that. If he has the time to sit on the Finance Bill Committee, I am sure that we will all benefit further from his incisive analysis of the matters before us.
Let me now turn to some of the individual components of the Bill. I shall begin with VAT avoidance. I know that hon. Members will agree that, for a tax system to be effective, everyone must pay their fair share of taxes and receive the reliefs to which they are entitled. We are fully committed to combating all forms of tax avoidance, including VAT avoidance. Indeed, we have introduced a compliance strategy specifically to target the VAT gap, which has been discussed in the House before.
There are concrete measures in the Bill that will help to combat VAT avoidance. They include legislation in clause 1 that will enable Her Majesty's Revenue and
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Customs to combat avoidance schemes that abuse UK customs warehousing rules. Clause 3 will extend the provisions dealing with "unjust enrichment" so that no business will unfairly benefit from charging too much VAT. The disclosure rules introduced in the 2004 Budget, which were debated in the House, require promoters and users of certain avoidance schemes and arrangements to provide information to the revenue Departments. Much of that information has been translated into this Finance Bill to close down active avoidance schemes. So, following the announcement made in the 2005 Budget, clause 6 and schedule 1 will extend the disclosure rules to encompass two new listed VAT schemes and a new hallmark.
Secondly, on gift aid, recent events have demonstrated the generosity of the British people in donating in times of need, and the use of gift aid by charities and donors has grown considerably. For example, £586 million of tax was repaid to charities on gift aid donations in 200304. That is why we have included clause 11, which will amend existing gift aid legislation in relation to admissions. The hon. Member for Buckingham (John Bercow) might wish to take note of that proposal, which will assist business and make the rules simpler. The measure will clarify the circumstances in which gift aid will apply when free admission is given in return for a donation. Crucially, this amendment will uphold the core principle of gift aid in generating new and additional giving, and it will broaden the types of charities that can benefit.
Thirdly, on scientific research organisations, the Government are committed to enabling Britain to achieve its full potential. However, as global restructuring continues, advanced industrial nations are moving away from low-skill, low-tech products and processes, and focusing closely on technology, science, research and development.
Britain will continue to enjoy its competitive edge only if we develop world leadership in the most technologically intensive and science-based industries and services. In last summer's spending review, the Chancellor set out our 10-year plan for science. That includes a new and stretching target to increase UK investment in both private and public sector research and development from 1.9 per cent. of national income to 2.5 per cent. in 10 years' time. Clauses 13 to 15 present measures to help foster the wider benefits that scientific research organisations can provide to our economy and business. They will update the exemptions for scientific research organisations, enabling them to widen their activities and undertake a broader range of research and development.
Fourthlyand turning to financial measuresI am sure that the House will be happy to join me in recognising the vital role played by the City and the financial sector across Britain in driving forward our economy. Professionally managed, well communicated and diverse financial services support our economic growth and are key to our continued prosperity. That is why we have been keen to tackle issues from improved financial inclusion to the workings of the investment chain. As part of the package of reforms of the tax system for authorised investment funds, this Finance Bill includes powers to rationalise the legislation that applies to those funds. Clause 16 specifies a reduced rate of corporation tax of 20 per cent. that will apply to open-
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ended investment companies, ensuring that they are subject to the same treatment as authorised unit trusts. In addition, clauses 17 to 19 introduce powers to change regulations and are designed to facilitate a more flexible approach to investment strategies.
Andrew George (St. Ives) (LD): Has the Minister had the opportunity to reflect on Government proposals to extend self-invested personal pensions to residential properties from April next year? Is she aware of the tidal wave of interest in moving money in that direction and of the impact that that will have on tax avoidance and the availability of affordable housing in constituencies such as mine, which already have high levels of second and holiday homes?
Dawn Primarolo: I am certainly aware of the press speculation pointing to the sort of trends that the hon. Gentleman identifies, but the pension schemes that use property as part of a pension fund are very tightly controlled. Only 50 per cent. of the current value of the pension fund can be raised as a loan to fund a property purchase. The property becomes an asset of the pension fund, and there is a requirement to put all rental income into the pension fund and to lock it away. Any currently owned property that is placed in the pension fund is subject to the normal constraints. On maturity, when the pension fund needs to be drawn on, that property is deemed part of the pension fund and not the individual's. Therefore, much of the press speculation is based on a misunderstanding of how the clauses work. If the hon. Gentleman serves on the Committee, I am sure that by probing the clauses he will be able to assure himself and the House that that is so. However, I am following carefully the speculation and ensuring wherever I can that it is speculation and not the actual result of the proposals.
Adam Price (Carmarthen, East and Dinefwr) (PC): Has the Treasury come up with its own estimate of the tax revenue that will be forgone as a result of these new measures? Standard Life has suggested something in the order of £4 billion. Can we take it from the Paymaster General's remarks that the Government have no plans to introduce any amendments on this matter during the later stages of the Bill?
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