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Chris Huhne: I, too, shall attempt to be brief, as time is marching on and we discussed the issue in the Standing Committee at considerable length. I have three points. The first is that the measure is not being proposed by the Treasury to deal with tax avoidance. There is no pressing reason why the Government should include it in this Finance Bill, rather than allowing the consultation process to continue and introducing a more substantive measure in the Finance Bill next year. The matter has been under discussion for a long time, and the fact that the Treasury proposes an explicitly time-limited measure lets the cat out of the bag and reveals the rather half-baked nature of the basis on which the Government intend to proceed.
My second point is that the regulations are tax-raising measures that should properly be the preserve of Parliament and positively agreed by the House. For that reason, I commend the amendment. Thirdly, the proposals are arbitrary and discriminatory and have changed dramatically from those that were first aired in the draft regulations published at the end of 2004. They would have had an impact throughout the life insurance industry, whereas under the current proposals the focus would be on only a small number of companies for a similar amount of revenue. Those companies are thus entitled to expect some independent restraint on the freedom of civil servants—albeit under the direction of Ministers, who are no doubt already on the case—to push through measures that could have a significant impact on their commercial position.
For reasons relating to the technical taxation aspects of the substantive measure and the principle that the matter should be discussed in the House, I hope that the amendment will be supported. I look forward to the Minister's response.
Mr. Ivan Lewis:
First, I shall respond to some of the specific points made by hon. Members. The hon. Member for Cities of London and Westminster (Mr. Field) again expressed concern about double charging and again I reassure him, on the record, that we believe that no double charge is possible and that regulations
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will deal with the issue. If people can demonstrate that there is a risk of double charging we will ensure that the regulations reflect whatever is necessary to prevent it. I hope that that reassures the hon. Gentleman.
The hon. Member for Eastleigh (Chris Huhne) implied that, somehow, the position that we have arrived at in the Bill was a bolt out of the blue—an unexpected, entirely different proposal from the one that emanated in the past. I refer him to a High Court judgment about a transfer of business that involved AXA Sun Life. It is interesting to note what the judge said:
of the assumptions about the tax that it would pay in future
"was on the basis alleged but contends that it is highly likely that in the future the Inland Revenue will seek to close what they regard as a loophole in the taxation of insurance funds and that accordingly tax rates will rise . . . The FSA says that they do not regard AXA's tax assumptions as unreasonable."
That judge made those comments in the year 2000, so our proposal can hardly be described as a bolt out of the blue or something that has come as a tremendous shock to the industry.
6.30 pm
I respond to what the hon. Member for Cities of London and Westminster said about the sector's claim that our description of the consultation and negotiations with them was inaccurate by saying that we specifically attached a sunset clause to the substantive measure because of the representations and concerns that have been articulated by the industry and the sector. Either they accept the inevitability that such changes will be made, or they continue almost to play for time, to engage in consultation that is not real. We have responded sensitively and directly to their requests that we attach a sunset clause to the measure because of the concerns that the industry has expressed on a number of occasions.
As hon. Members know, we had a lengthy debate in Committee on Opposition amendments to remove the regulation-making power altogether. Having withdrawn those amendments, they now seem to be coming from a different angle to try to achieve the same objective: making the regulations follow the affirmative procedure. Obviously, we are not unsympathetic to the points made by some Opposition spokespeople. Where the Bill, or the first Finance Bill introduced in March, enacts a major reform under secondary legislation, that may be done by regulation under the affirmative procedure in some circumstances.
For example, the affirmative procedure is used for the rewriting of the rules for authorised investment funds in the Bill—the subject of amendment No. 2, which we have just debated—and the securitisation companies in the Finance Act 2005. However, the legislative framework established by the powers in both those cases is permanent. In both cases—the legislation for authorised investment funds and securitisation companies—the affirmative power has been limited to the first use of the power when the new structure is established.
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Schedule 9 is different as it involves a temporary use of powers, limited by the sunset clause that the industry sought. On Second Reading, the hon. Member for Eastleigh said:
"At present, there is a simple approval of new regulations by the House when they are first introduced; thereafter, revisions are subject only to the negative resolution procedure. There is no trigger point at which a general assessment of the operation of delegated powers can be undertaken, but it seems to us that there should be."—[Official Report, 7 June 2005; Vol. 434, c. 1153.]
I assume that what he meant by a "trigger point" is a sunset clause. I take him to be saying that a sunset clause is an alternative to an affirmative procedure. That is exactly the position that the Government have adopted in the legislation.
I appreciate that the power in schedule 9 to make regulations is capable of being used to make radical changes, even if only for 2005. If that were done, there ought to be an opportunity to debate those changes, but hon. Members who served on the Committee will know that I circulated a letter that contained details of the proposed regulations and that the regulations will affect only a limited number of cases in precisely the way I that described. They ensure that income from assets that are wholly excess to policyholder requirements is taxed at the appropriate rate and that, as I have said, there are mechanisms to ensure that no double counting takes place.
It has been claimed that there has been no scrutiny of the regulations. I resent the suggestion from the industry that there has not been ongoing and serious consultation. The consultation will continue. With a sunset clause, as hon. Members will know, any replacement legislation will be primary legislation that gets full scrutiny, and I made that absolutely clear in Committee. I place that on the record again now. When the sunset clause expires, it will be replaced by primary legislation in the next Finance Bill, setting out a permanent framework for apportionment rules, which will be fully debated in the usual way.
Even if I were minded to accept an amendment—which I am not—along the lines proposed, neither amendment No. 5 nor amendment No. 6 would do. They go too far. They also cover very straightforward and simple changes that are a direct consequence of minor technical changes to the Financial Services Authority rules. I am sure that that was not the prime objective of the amendments, because that would establish a precedent that would not be practical or applicable in terms of minor changes to FSA rules.
I believe that we should put in place a sunset clause. By doing it in the way that we are proposing, there remains the possibility that the Opposition can seek a debate; they still have that opportunity through parliamentary procedures. On that basis, I urge the hon. Member for Cities of London and Westminster to consider seriously withdrawing the amendment, or I will be obliged to ask my hon. Friends to oppose it.
Mr. Mark Field:
I am glad that we have had a concise debate and a precise response from the Minister on this issue. He is quite right when he identifies that the Government have gone some way, through the sunset clause, to keeping the insurance industry happy. One of the main reasons for the sunset clause was the fact that this was rushed legislation.
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I am glad that the Minister has also been able to demonstrate that if anyone in the insurance industry is able to show that a double charge would take place and that they would lose out on the grounds that we have set out, there will at least be an opportunity to reassess the situation.On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
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