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Mr. Bone: I declare an interest as a chartered account, although I have not practised in public for many years. I am surprised that the Bill contains no reference to chartered accountants or the accountancy profession. Will my right hon. Friend give me some guidance on that?
Mr. Knight: My hon. Friend makes an interesting point. I would like to know whether the Minister thinks that proposed new section 132A(6) to the Social Security Administration Act 1992 would cover accountants. The provision includes a reference to "legal professional privilege", but having never practised as an accountant, I do not know whether accountants would fall under that definition or be covered by the Bill.
There is an overwhelming case for allowing anyone who gives confidential advice to ensure that that advice and the papers associated with it remain confidential,
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even if that person is not legally qualified. Some years ago I employed a young girl called Jane Oakes. She wanted to be a solicitor, but during her employment with me and while she was taking her studies, she was not legally qualified. However, she was an expert on certain areas of law. Information such as that which she obtained when advising a client on her area of expertise, even though she was not legally qualified at the time, should be protected under the Bill and the general provisions on client-lawyer confidentiality.
Legal privilege can provide a defence for a professional legal adviser to a charge of failing to report suspicions of money laundering, but that applies only if the information is received in privileged circumstances and is not communicated to the lawyer with the intention of furthering a criminal purpose. However—this might answer the point made by my hon. Friend the Member for Wellingborough (Mr. Bone)—there is no specific provision in money laundering legislation or the Bill to provide the same protection to accountants. I do not think that accountants generally have the same protection as lawyers when they give advice, although a legally qualified person who advises his employer can claim the defence.
I understand that, so far as money laundering is concerned, at the time the initial guidance was issued, discussions were under way between Ministers and interested parties about how legal privilege could be interpreted. Will the Minister, when she speaks on Third Reading, tell us whether she has had any discussions on the scope of privilege? It is a crucial point for many of us who will have to decide, during the Third Reading debate, whether we want to support the Bill or divide the House.
It being Five o'clock, Mr. Deputy Speaker, pursuant to Order [27 October], brought proceedings on consideration of the Bill to a conclusion.
Bill reported, without amendment.
Order for Third Reading read.—[Queen's Consent, on behalf of the Crown, signified.]
5 pm
Dawn Primarolo: I beg to move, That the Bill be now read the Third time.
We have reached the final stage of the House's deliberations on the Bill and I would like to reiterate to the House the purpose of the Bill. It demonstrates the Government's continuing commitment to take action against tax and national insurance avoidance on rewards of employment and to close down avoidance in that area for good. The Bill 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 that the House has already decided. It is an essential element in building a serious and credible deterrent against future avoidance activity and it is needed to secure total tax and national insurance yields of £200 million in 2004–05 and £500 million per annum thereafter.
As the income tax disclosure provisions have demonstrated, it is not possible to anticipate the range and complexity of the extremely contrived avoidance arrangements that the Bill seeks to address. The powers in the Bill will enable the Government to deal effectively
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with any tax and national insurance avoidance arrangements that emerge in future that are designed to frustrate its intention that employers and employees should pay the proper amount of national insurance on the rewards of employment.
I thank Members who participated in debate on the Floor of the House and in Committee. The debate has entailed a thorough scrutiny of the purpose and details of the Bill, although at times, in some contributions, its objectives got a little lost. That scrutiny included details that are to be set out in regulations.
The hon. Member for Twickenham (Dr. Cable) said on Second Reading that
"in terms of general principles, I broadly endorse what the Government are trying to achieve through the Bill. My colleagues and I voted for higher national insurance contributions to fund the health service, so it follows that we want such revenue to be realised".—[Official Report, 27 October 2005; Vol. 438, c. 483.]
Unfortunately, that does not follow at all because in Standing Committee the hon. Gentleman's colleague, the hon. Member for Eastleigh (Chris Huhne), voted with Opposition Members on an amendment that would have removed the deterrent effect of the Bill. He accused the Government, and said:
a principle that the hon. Member for Twickenham agreed with. He continued:
"The amount of tax revenue at issue should be very great to justify our doing that violence."—[Official Report, Standing Committee D, 15 November 2005; c. 9.]
I do not agree with the choice of words of the hon. Member for Eastleigh, and I am not sure what the Liberal Democrats now count as a substantial amount of revenue, but I think that £200 million, rising to £500 million, comes into that category. The arguments put forward have been supported by the hon. Member for Twickenham, and it would be good if he ensured some consistency from his party.
Over many years, we have seen a minority of employers—it is only a minority, but they happen to be very wealthy—using highly sophisticated tax advice to sidestep the intention of anti-avoidance legislation passed by this House, ranging from 1998 up to the Finance Act 2005. Despite legislation effective from the date of announcement, they have managed to continue to avoid paying the amount of tax and national insurance that is properly due. They do so because new contrived schemes can be devised quickly and used when legislation closing existing schemes is announced. With that approach, the revenue remains very much at risk, even in the short term unfortunately, because employers still have scope to adopt another scheme and get away with avoidance.
The Government's intention is to shut down such activity permanently. To do so, we have to undermine fundamentally the incentives for employers repeatedly to seek out new contrived schemes contrary to the intention of Parliament. The Bill is intended to deter future avoidance by providing a power to backdate a national insurance liability to 2 December 2004 if necessary. With such backdating, there is little point in employers and their advisers looking for a new loophole
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because the national insurance will still become due. The Government hope that we will not need to legislate because employers will finally get the message.
Any amendment that had the effect of removing our ability to make regulations imposing a backdated national insurance charge to a date before the announcement would remove the deterrent effect of the Bill and put all the revenue captured by those arrangements at risk. We have discussed that repeatedly, on Second Reading, in Committee and today, and I have repeatedly reassured Members that there are numerous examples of contrived schemes that the Government have had to deal with since 1997 and that the previous Government also had to tackle. They include contrived schemes involving employee benefit trusts, soft currency loans, such as those denominated in Turkish lira, adjustable options and special purpose vehicles. That will continue unless the Government take action.
The power to make regulations altering liability is restricted to reflecting, as far as possible, employment remuneration measures in tax legislation—normally Finance Acts—that have been backdated. The provisions would already have been discussed during a Finance Bill, before national insurance triggers action, and would be only to reflect anti-avoidance measures. Where such regulations are made, the House will already have had the chance to consider any relevant human rights issues on backdated tax legislation during the passage of the relevant Finance Bill or other legislation.
In addition, the Government will publish the draft national insurance regulations a minimum of 12 weeks before they are made, so that employers and their representatives have every opportunity to comment on the content of any proposed national insurance charge. Where possible, backdated draft regulations will be published no later than when the corresponding tax provisions are discussed in the Standing Committee of the Finance Bill. Both will be available at the same time, so that Members can see how they fit together. Furthermore, to ensure that there is adequate parliamentary scrutiny when regulations are made that create a backdated national insurance liability, such regulations will be subject to the affirmative resolution procedure.
I am pleased to be able to conclude that the Bill has had thorough scrutiny in the House. I have listened carefully to the constructive contributions from Members of all the parties involved in the discussions and I thank them for their participation.
I commend the Bill to the House.
5.9 pm
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