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Rob Marris: The hon. Gentleman referred to HMRC estimates that 21,000 small businesses and perhaps 90,000 self-employed persons could incur learning and familiarisation costs. Those businesses and individuals specialise in accountancy and tax. Is he saying that a reason not to have anti-avoidance legislation is the fact that accountants would have to read a bit more?

Mr. Spring: I always love the hon. Gentleman's interventions as he is defending and promoting the interests and growth of the tax advisory sector—they are magnificent. There is no one who does not get his valued attention, and I hope that he will serve on the Bill's Committee to add to the enjoyment of Ministers.

Does such a form of government by regulation help to explain why our competitiveness has been shrinking, which is a problem that we will increasingly face in years   to come? Does the Chancellor believe that our businesses should be tied up by spending more money not on investment and development, but rather on complying with copious Government regulations?

Of course illegitimate tax avoidance is unacceptable and should be dealt with, but the context in which many Government regulations are promulgated is making Britain a less attractive place to do business. If business investors are intimidated about setting up business here—due to lack of certainty, or a perception that retrospection will become an increasing part of the culture of doing business in this country—we will ultimately be the losers, so the matter must be treated with more sensitivity for the future economic growth and performance of this country.

2.15 pm

The Economic Secretary to the Treasury (Mr. Ivan Lewis): This has undoubtedly been an interesting debate about an important Bill that is absolutely central to the Government's aim of deterring tax and NICs avoidance. Before I address some of the specific points raised during the debate in a little detail, I shall reiterate the Bill's purpose.

The Bill demonstrates our continuing commitment to take action against avoidance. It is key to achieving the Treasury and Government's objectives of fairness and opportunity by ensuring that all pay the correct amount of tax and national insurance. It is an essential element in building a serious and credible deterrent against future avoidance activity, and is needed to secure a total tax and national insurance yield of £200 million in 2004–05 and £500 million a year thereafter. As the income tax disclosure provisions have demonstrated, it   is not possible to anticipate the range and complexity of such extremely contrived arrangements. The
 
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Government intend to close down such activity permanently. The Bill will ensure that the Government can deal with any arrangements that emerge in future that are designed to frustrate their intention that employers and employees should pay the proper amount of national insurance on the rewards of employment.

I now come to specific points raised during the debate. The hon. Member for Cities of London and Westminster (Mr. Field) made a typically reasoned and   fair speech. Indeed, it was based in the real world to a large extent, but when he talked about sitting on this   side of the House and visiting the constituency of my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) one day, it began to reach the realms of fantasy.

The hon. Gentleman seemed to advocate the virtues of a flat tax. I tell him that we will make it absolutely clear to the British people at every opportunity that if the Conservative party were ever to govern this country, it would impose on the people a flat tax that would be both unfair and impractical. The people of this country will make judgments about the nature of such policies when the time comes.

The hon. Gentleman used the phrase "desperate Treasury" and that sentiment was echoed by several Conservative Members. That desperate Treasury has delivered to this country low inflation, low interest rates,   2 million new jobs and the lowest unemployment in living memory. Let us be clear what the business community asks of any Government—that they deliver   stability. If a Government deliver economic stability, businesses will grow and prosper. No Government since the war in this country have delivered such macro-economic stability as ours, so let us stop the nonsense of labelling the Treasury as desperate, or of saying that measures such as the Bill somehow undermine business competitiveness.

The hon. Gentleman talked about bona fide avoidance schemes, although I am sure that he did not mean to do so. There is no such thing as a bona fide avoidance scheme, although his comment colours several contributions made by Conservative Members. Avoiding taxation is not a demonstration of flair and innovation. If we gave people the impression that we will incentivise, reward and encourage flair and innovation in the context of avoiding tax responsibilities, what kind of message would we be sending to the private sector in this country?

Mr. Mark Field: I think that the Economic Secretary will find that the record shows that I referred to bona fide remuneration schemes earlier on.

The hon. Gentleman makes an important point about flair and innovation. I tried to make as balanced a point as possible about that in my speech. Flair and innovation mean not just the flair and innovation of the brightest tax and employment benefit remuneration scheme advisers, who try to find small differences between their schemes and those proposed by the Government so that they can avoid taxes. Flair and innovation have a far more important part to play. My hon. Friend the Member for Ludlow (Mr. Dunne) and
 
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I made it clear that flair and innovation have made this country a great trading nation over many centuries. We play around with those facets at our peril.

Mr. Lewis: I agree entirely with the hon. Gentleman. I shall read out the recent result of a survey. It reads:

"London has been named the best European city in which to locate a business for the 16th year in succession."

That is according to an annual survey.

"The United Kingdom capital has also increased its lead over second place Paris and third place Frankfurt."

That is what the latest European Cities Monitor shows. London came top in five of the 12 categories questioned in the survey, including the quality of staff. Any suggestion that there is any undermining of flair and innovation by the Government's policies, economic or social, is arrant nonsense.

Mr. Field: I will not take any personal credit for London's great name in this regard. There is an important point in relation to flair and innovation, in that we are talking of a global market. We are quite happy with and proud of our record against other European countries, but we are inward looking if we believe that our success against Paris, Hamburg or Munich is enough. There are 23 cities with a population of 2 million or more. Cities are fast growing In China. There are cities growing up from Delhi to Bangalore. There are other such cities in India. We exist in a global market and it shows a paucity of aspiration simply to make reference to our success in competitiveness, flair and innovation by comparison with our European neighbours.

Mr. Lewis: By any international comparison this country is doing well economically. Having said that, we have a long way to go. There are many other countries that would die to have low inflation, low interest rates and the levels of unemployment that this country has, as well as, alongside that, our level of investment in the public good and in public services. There are so many countries that would aspire to achieve the combination of economic stability and economic success alongside social justice, which arguably has been uniquely the success of this Government. That is in the context of the global challenges that lie ahead.

We are not complacent. We recognise that the challenges that will come at us in future from India and China require us to raise our national game even further in skills, innovation, long-term planning and in sensible and active regional policy. We recognise also that there   is a constant need for the Government to be   encouraging the country to be dynamic and to be accelerating the pace of change. It is necessary to recognise the real challenges that come as a consequence of globalisation.

It would be churlish of any Opposition Member to start lecturing the Labour party on economic policy or economic performance. The worst thing that business could face would be a return to boom-and-bust economics. That was the legacy that the Government sought to tackle, and we have done so incredibly successfully.

My hon. Friend the Member for Stoke-on-Trent, South, (Mr. Flello) made an excellent contribution to the debate. He hit the nail on the head when he said that
 
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the issue here is the importance of fairness and equity and the idea that all taxpayers should fulfil their proper responsibilities as equal citizens of this country, wherever they live, whatever their income levels and whatever sector they work in. I agree entirely with my hon. Friend.

I am pleased that the hon. Member for Twickenham (Dr. Cable) said up front that he supports the objectives that are set out in the Bill. He was right to talk about a spectrum of behaviour. However, I challenge the hon. Gentleman on one of his points. He said that this is not a moralistic issue, but entirely a practical one. I believe that people paying proper and fair levels of taxation is a moral issue in terms of the sort of society and economy that we want to be encouraging. The hon. Gentleman is right in saying that we cannot just have a moral approach. I accept that we must be very careful about the practical consequences. However, it is my view that we are dealing with a moral issue.

The hon. Gentleman and others spoke about the retrospective nature of the proposed measures. Probably the best justification for retrospection is for me quickly to remind the House of what has happened year after year. In 1991, we had unit trusts. In 1993, there were gold bullion and tradable commodities. In 1994, there were diamonds and fine wine. In 1995, we had grants of options in third party companies. In 1996, there were own company share awards and options. In 1997, we had trade debt and restricted covenants. In   1998, there were conditional shares. In 1998 there were also readily convertible assets. In 1999, we had the exercise of options. In 2003, there were employee benefit trusts. There were also adjustable options. Also in 2003 there was national insurance contributions alignment to schedule 22 to the Finance Act 2003. In 2004 there was national insurance contributions alignment to sections 86 to 95 of the Finance Act 2004.

All those examples reinforce the need to move in the direction in which the Bill takes us. Anyone considering these matters objectively, while understandably raising some concerns, would have to agree that on balance—the balance of judgment—this is the right thing to do.

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