Mr. Forth: What comment does the hon. Gentleman have about those modest-income people who took advice to go into self-invested personal pensions and who have now had their fingers badly burned as a result of the Chancellor letting them down?
The right hon. Gentleman referred to people of modest means. I suspect that his definition of modest means is slightly different from mine. It is right,
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however, to discuss SIPPs in this context. The Government listened to the considerable representations made on SIPPs and changed their approach in the pre-Budget report. That might appear to be a contradiction to some Members, but I do not think that it is. To me, the underlying theme is that if one has modest meansI would say that they were considerable means in terms of what is dealt with in this Bill, and in terms of SIPPs and second homesgetting involved in such tax avoidance measures is dodgy until the law is passed.
In the statement that my right hon. Friend the Paymaster General made on 2 December 2004, she included a statement of intent that she and the Treasury team wished to be put into United Kingdom legislation. That was not government by fiat. If it were, we would not be here, because we would not have a Bill in front of us. My right hon. Friend would have introduced the changes by fiat from 2 December 2004. I would have objected strongly. From what I know of her, there is no way that she would ever wish to govern by fiat. The matter would rightly come before the House, as it has done today. To suggest that this is government by fiat, which brings in all the arguments about the Magna Carta, takes us off track.
I echo what the right hon. Member for East Yorkshire said about amendment No. 6. Were it to be passed, it would make things worse in terms of what the right hon. Member for Bromley and Chislehurst (Mr. Forth), as I understand his view, appears to want to happen. On amendment No. 16, tabled by the hon. Member for Christchurch, either he and other Members who keep using the word "principle" have a principle on retrospectivity or they do not. We cannot have half a principle going back to 11 October this year, but not going back to 2 December 2004. Either one can envisage that retrospectivity, as I do, going back to a ministerial statement that is yet to be enacted but will be enacted if the Bill is passed, or one cannot. What he said about a convention in relation to Finance Bills seems to undermine his position. Either he has a principle or he does not.
Mr. Chope: Surely the principle is knowing what the situation is. On 11 October, the Bill was published and anybody could see its content. When the Paymaster General made her statement on 2 December last year, however, the situation was opaque in the extreme.
Rob Marris: That is a helpful intervention, because my right hon. Friend the Paymaster General and I differ from the hon. Gentleman on whether the written ministerial statement of 2 December 2004 was opaque. I do not think that it was, and my right hon. Friend has made it very clear to the House that she does not think that it was. I accept that the accountancy body to which the hon. Gentleman has twice referred said that it was not quite clear, but I do not think that it was opaque. I think that it said, "Watch out if you're trying to get involved in some strange tax avoidance scheme. We have clamped down on them in the past and we are going to clamp down in the future." My right hon. Friend put out a kind of caveat-avoider warning on 2 December 2004.
The hon. Member for Christchurch made a point about his amendment No. 19 and the Henry VIII clause. The amendment proposes the removal of new section
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4C(3), which the hon. Gentleman said was retrospective. When I intervened on the right hon. Member for Bromley and Chislehurst earlier, I quoted subsection (3)(a) to demonstrate that it was not retrospective. I realise that the hon. Gentleman has worries about retrospectivity, but he seems to be interpreting the phrase in brackets in subsection (3)(a) differently from me. There is retrospectivity in the Bill, but I do not think there is any in subsection (3).
Mr. Chope: The hon. Gentleman is a distinguished lawyer, but surely if his interpretation were correct, the subsection would read "modifying any provision of any enactment passed after the commencement day", without the restriction to
Rob Marris: The hon. Gentleman and I differ, in that I do not agree that it is retrospective, but I understand his interpretation and I hope that my right hon. Friend the Paymaster General will clarify the wording.
I take the hon. Gentleman's point about economic well-being, but I think he rather over-egged his case. He referred to a projected Government deficit of £151 billion over the next five years, and contrasted it with the sum of £95 million. With due respect, he inadvertently did not present a true picture. The £95 million is the projected increase in tax revenue for 200405 as a result of the Bill. According to the regulatory impact assessment, thereafter it will be £240 million a year. In round terms, if the £240 million continued for the whole five years, the total would be more than £1 billion. I appreciate that £1 billion is about two thirds of 1 per cent. of £151 billion, but the comparison is not quite as extreme as the hon. Gentleman suggested.
Amendment No. 5 proposes the removal of new section 4B(4) in clause 1. Will my right hon. Friend explain what the subsection means? As I said earlier, I think that if it were removed, the effect would not be what the right hon. Member for Bromley and Chislehurst wants, but I may have misunderstood. If I may use the word employed by the hon. Member for Christchurch, the subsection is slightly "opaque". I hope that my right hon. Friend will explain it, and why she wants it to remainas I imagine she does.
The amendments deal mainly with the retrospective nature of the Bill, a topic that was considered both on Second Reading and in Committee. It is right for it to receive full and proper attention on Report as well, given the importance of retrospection in the context of tax. As has been pointed out a couple of times, when our party were in government, retrospection was used on occasion to tackle tax avoidance, but that should not create a precedent. It
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should not mean that measures containing an element of retrospection should go unchallenged. I welcome the amendments in that context, as they urge the Treasury to justify certain parts of the Bill.
I share the uncertainty of the hon. Member for Wolverhampton, South-West (Rob Marris) about the precise meaning of the wording. I suspect that it boils down to the fact that the Bill follows anti-avoidance measures enacted in respect of other taxes. As I have said, one problem is that NICs and other taxes are dealt with by different Acts, so changes need to be enacted separately. It still has some retrospective provisions and I want to make some general comments about retrospection in response to amendment No. 16, proposed by my hon. Friend the Member for Christchurch (Mr. Chope).
I join other hon. Members in chiding my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) on amendment No. 6. I fear that it creates a position whereby, if the rest of the Bill goes through unamended, the removal of the specific provision would enable retrospection right back to the initial introduction of national insurance contributions.
Amendment No. 16 brings out one of the key issues relating to retrospection. It is designed to put back into the Bill a particular date from which retrospection can start11 October 2005. My hon. Friend the Member for Christchurch and other hon. Members have already referred to the surprise of those who follow these matters closely outside this place about the Bill's relation to the Paymaster General's statement of 2 December 2004. We had a brief exchange on that matter earlier. In tax representation document 53/05, the Institute of Chartered Accountants said:
In the same paragraph of the representation, the Institute of Chartered Accountants expresses, albeit somewhat less eloquently, the sentiments of my hon. Friend the Member for Braintree (Mr. Newmark) in speaking about Adam Smith. It cites passages from the European case "Stichting Goed Wonen". Paragraph 32 states:
"Although in general the principle of legal certainty precludes a Community measure from taking effect from a point in time before its publication, it may exceptionally be otherwise where the purpose to be achieved so demands and where the legitimate expectations of those concerned are duly respected".
I suspect that the Institute of Chartered Accountants was surprised on reading paragraph 33 and felt that its legitimate expectations had not been respected. The principles of paragraph 32, it probably thought, should applythat people should have legitimate expectations and be able to rely on legal certainty.
People have asked how that differs from the Rees rules that were set out in the Finance Act 1978, to which my hon. Friend the Member for Christchurch referred. It reminds me of further comments from the accountancy profession. I do not want to go into all the Rees rules again, but I would draw attention to the first of the four:
It is the generalised nature of the Paymaster General's statement of 2 December 2004, that leads people to ask whether the first Rees rule principle has been met. The Paymaster General was explicit in saying earlier that it had been met, but others feel that it has not. That poses the question of how people should have reacted to that statement. Is it perhaps more appropriate to start the period of retrospection from 11 October 2005, when the Bill was published, and to thereby present clearly to advisers, professionals and others interested in tax matters the nature of the Government's concerns? That is the issue that we have been debating through this group of amendments and it is important to the principle of retrospection. People are looking for clarity and certainty, which the Paymaster General's statement of December 2004 perhaps did not possess in the eyes of some. I would welcome her comments on that and on other aspects of retrospection.
Through amendment No. 18, my right hon. Friend the Member for East Yorkshire (Mr. Knight) seeks to amend just one line in clause 1, but leaves untouched other payments that are themselves linked to national insurance contributions. If his amendment is accepted, another one should be tabled and accepted to bring all contributions and payments into line with each other, instead of singling out statutory payments.
Given that there is another group of amendments that we want to discuss later, I will conclude my remarks and look to the Paymaster General to be much clearer about the issue of retrospection and how it fits in with the Rees rules set out in the Finance Act 1978.