The Parliamentary Under-Secretary of State for the Cabinet Office (Mr. Jim Murphy): I have today laid before Parliament the Government Car and Despatch Agency annual report and accounts 200405, copies of which are available in both Libraries of the House.
The Paymaster General (Dawn Primarolo): The Government propose to bring forward legislation in the next available Finance Bill to exempt from tax certain payments made in relation to bank accounts of holocaust victims, as described below.
The HM Revenue and Customs extra-statutory concession, A100, introduced on 8 May 2000, provides a tax exemption for compensation payments made by UK banks under their scheme called "Restore UK". The scheme is designed to identify and compensate claimants to dormant accounts opened by holocaust victims and frozen during World War II under the Trading with the Enemy Act.
Since the introduction of the extra-statutory concession it has come to light that comparable payments may be made to holocaust victims or their heirs in respect of moneys held by the banks of other countries. For example, claims may be made by victims or targets of Nazi persecution or their heirs through the Claims Resolution Tribunal (CRT) for Dormant Accounts in Switzerland in respect of moneys deposited in Swiss banks in the period before and during the Second World War. The CRT was established as a consequence of the Holocaust Victims Assets Litigation in America.
The CRT awards made to the holocaust victims or their heirs and any comparable payments made by the banks of other countries are outside the scope of ESC A100, because it is available only for payments made under the "Restore UK" scheme run by UK banks.
Following discussions between the Association of Jewish Refugees and HMRC, the Government propose to bring forward legislation in the next available Finance Bill. The legislation will exempt from income tax and capital gains tax payments made to holocaust victims or their heirs when they are broadly comparable to the awards made under the "Restore UK" scheme run by UK banks. This will include any amount designed to cover interest and inflation by increasing the account balance to make it a fairer reflection of the amount
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originally deposited. The exemption will be available whenever the award or payment was made, so long as the criteria set out in the legislation are met.
The proposal is that there will be a provision in the legislation so that anyone who has included a qualifying payment in their self assessment tax return and paid tax will be able to reclaim the tax, even if the normal time limit for amending the assessment has passed.
The proposed legislation will also clarify the effect of the exemption for inheritance tax (IHT) purposes. Present-day recipients of these payments often derive their claim through intervening potential claimants who are now dead. The existing extra-statutory concession aims to ensure that the IHT affairs of these predecessors need not be re-opened because an account has been rediscovered. The Government propose that, when the accounts of holocaust victims or their heirs are rediscovered and compensation payments are made in respect of them, legislation in the Finance Bill will include an exemption from death duties for intervening potential claimants who died before the respective award scheme was opened for claims.
At the same time as bringing forward legislation to provide a tax exemption for compensation payments that are broadly comparable to the "Restore UK" scheme, the Government propose to take the opportunity to put on a statutory footing the exemption currently available under ESC A100 for payments made by UK banks. So that too will be included in the proposed legislation.
UK building societies may participate in the "Restore UK" scheme and ESC A100 applies to any compensation payments made by them to holocaust victims or their heirs. The proposed exemption will include payments by the building societies of other countries.
More information about the proposed tax exemption and guidance for anyone who thinks they may be able to claim back tax already paid on an exempt award is in the news release published by HM Revenue and Customs today at www.hmrc.gov.uk/individuals/holocaust.htm/
The Chief Secretary to the Treasury (Mr. Des Browne): In June 1997, the incoming Government launched a comprehensive spending review (CSR). The CSR was the most fundamental and in-depth examination of Government spending and priorities ever attempted. Moving beyond the short-termism engendered by the old annual planning cycle and building on the platform of stability provided by the new fiscal code, the CSR set long-term aims and objectives for each Department and put in place a public expenditure and performance management framework within which these long-term ambitions could be achieved.
The CSR set the Government's priorities for the long-term: sustainable growth and employment; fairness and opportunity; efficient and modern public services. To support this longer-term approach to public spending, the CSR introduced a series of key reforms to modernise the public expenditure framework including firm three-year departmental spending plans, separate current and
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capital budgets, and outcome-focused public service agreements to support delivery and improve departmental accountability.
The CSR allocated significant additional resources, backed by reform, to the Government's key priority areas, with over 50 per cent. of the increase in departmental expenditure limits and local authority spending being allocated to education and health. In the ten years to 200708, subsequent Reviews in 2000, 2002 and 2004 have built on the objectives, reforms and priorities first established in the CSR.
The framework for managing public expenditure established by the CSR has also proved robust. Three year spending plans have been set and delivered in successive spending reviews. The separate management of current and capital spending has allowed public sector net investment to rise from 0.8 per cent. of GDP in 199697 to 2.2 per cent. by 200708.
Over the last decade the Government have shown how one can deliver a strong economy and sound public finances at the same time as sustained and substantial growth in investment in public services. Looking forward, there are new challenges Britain will need to address in order to lock in these benefits for the decade to come, including:
These changes will have fundamental and far-reaching implications for public services and will require innovative policy responses, coordination of activity across departmental boundaries and sustained investment in key areas. While reaffirming the Government's commitment to their key objectives and building on the long-term framework the Government have put in place, it is right that the Government should periodically re-examine their public spending allocations in fundamental ways.
With the start of the next spending review period coming a decade after the first, the Government propose to launch a second comprehensive spending examining what the investments and reforms initiated to date have delivered and what further steps must be taken to ensure that Britain is fully equipped to meet the challenges of the decade ahead. This review will:
A report will be made on these public spending challenges in 2006. The Government will report on the next three-year spending review covering 200809, 200910 and 201011 in 2007 and will hold departmental allocations to the agreed figure already announced for 200708.
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