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Dawn Primarolo: The Bill does not allow for a 12-month delay—it says that statutory instruments must come into force within 12 months, which is quite different.

Mr. Hoban: The secondary legislation may be delayed for up to 12 months, although it does not have to be delayed for that period. I am grateful for the Paymaster General's clarification that it may be delayed for up to 12 months.

The Bill also allows statutory instruments to come into effect 12 months before they are laid. I know that that issue was raised in Standing Committee by my hon. Friends, so I am grateful for the Paymaster General's reassurance, first, that such statutory instruments will be subject to the affirmative resolution procedure and, secondly, that she will work to ensure that all the regulations relating to the closure of schemes both for PAYE and national insurance will be published at the same time. I am sure that those who take an interest in such matters will welcome that assurance, because it will make scrutiny far easier.
 
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Retrospection has concerned us during many debates on the Bill. There is a concern that it may become widespread and institutionalised, and its use raises several issues. We must ensure that such measures do not become institutionalised, so that the quality, credibility and predictability of our tax system is not undermined.

5.22 pm

Dr. Cable : There are important elements of consensus and agreement on the Bill, but there are also some elements of disagreement, and the Paymaster General has obviously found it difficult to get her head around the fact that we take that nuanced view.

On consensus, I shall repeat the point that I made on Second Reading, which the Paymaster General has already quoted—the Government should take reasonable steps to stop people creating complex tax avoidance schemes, in this case in relation to national insurance, which is obviously right because of general revenue concerns. We supported increased national insurance contributions to fund the health service, and we do not resile from that. The measure is also obviously right given the general principle of fairness—most of us pay our dues, and it must be right for the Treasury and the Inland Revenue to act against those who do not.

The problem, which Liberal Democrat and Conservative Members have expressed, concerns the general principle of retrospective legislation. Again, that principle is not absolute, because, as the Minister has said, retrospective action has been taken in the past on tax matters—it is part of history. As the European Court of Justice has stated—I have quoted it today, and I quoted it on Second Reading—there are certain cases in which it is proper to apply retrospective measures, so we are not dealing absolute moral principles.

However, we need to take account of the concerns that have been expressed. The Institute of Chartered Accountants is not in the business of promoting the interests of fat cats but of preserving the basic principles of tax law and maintaining its fundamental integrity. It has raised serious worries about this aspect of the Bill, and it is only proper that we should echo those. I would summarise the problem by saying that there are, of course, certain circumstances in which retrospective action is necessary in the tax world, but there need to be checks and balances. One of the useful amendments that was tabled was designed to achieve that, which is why we supported it.

I have looked back at the comments by my hon. Friend the Member for Eastleigh (Chris Huhne) to which the Minister took exception. I find it difficult to see why. He was merely reiterating what I had said on Second Reading—that there are worries about the principle of retrospective action. He pressed the Minister on several occasions to give an estimate of the tax revenue that would be involved. Clearly, we need to talk about real numbers. If vast amounts of revenue are involved one takes a slightly different view of a major legal principle being challenged than one would take if it was to secure very small amounts of revenue. My hon. Friend repeatedly asked what amount was involved, and we ended up with a scale that ranged from £250 million down to nought. No estimate was
 
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produced. He therefore rightly voted for sceptical amendments criticising the application of retrospective legislation in this case.

Rob Marris: The hon. Gentleman says that the hon. Member for Eastleigh (Chris Huhne) pressed for some figures but did not get any. There are figures in the regulatory impact assessment and in the explanatory notes. I appreciate that the hon. Gentleman and his hon. Friend may not find those figures credible—that is an intellectual possibility—but his suggestion that we were given no figures surprises me.

Dr. Cable: I have merely read through the transcript of the Committee—I was not there at the time, unfortunately. There was a simple and in no sense politically loaded request for clarification of the revenue position in light of the fact that the proposals covered part of a tax year. It may well be that the answers that we were seeking were in the regulatory impact assessment and did not need any explanation or clarification from the Minister, but the exchange that I read was unsatisfactory, and that is what led to my hon. Friend speaking and voting as he did.

My final point concerns a basic element of tax policy. We keep getting pieces of legislation that are designed to plug loopholes, and it is sometimes necessary to ask why so much avoidance takes place. Some of it must be due to the extreme and growing complexity of tax legislation. One of the most interesting contributions in the Committee was made by the right hon. Member for Birkenhead (Mr. Field), who forcefully made the point that he was discussing a Bill designed to plug a tax loophole that was in large part generated by the vast ramifications of the complexity of tax law that the Government are creating. He makes an entirely valid point. We should stress that the more complex tax legislation becomes, the greater the incentives and opportunities for tax avoidance, and the more legislation is required to deal with it.

I reiterate my first and major point that the principle of preventing people from creating complex tax avoidance measures to avoid paying national insurance must surely be right. It is only regrettable that we have not had the necessary safeguards on the retrospective application of the legislation.

5.29 pm

Mr. Newmark: As the Paymaster General knows, I have been involved in the process from the beginning and I have been impressed with her deft way of not answering questions. Several remain unanswered and I should like her to deal with them.
 
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First, does she believe that making a written statement in December 2004 was sufficient to make the proposals clear and plain to those who might be affected by them? Was her statement intended to create a precedent for other retrospective legislation?

Secondly, will the Paymaster General give full details of just two out of the 100 schemes that she told us on Second Reading were so offensive that they should be stopped retrospectively?

I acknowledge that retrospective tax legislation is not   a new concept but it has previously required specific   primary legislation to avoid being ultra vires. Clause 1 will allow the Treasury to pass subordinate regulations if and when needed. Does not that sound the death knell of legal certainty for tax planning purposes? Does the Paymaster General believe that the benefits of the measure outweigh the potential costs?

Has any assessment been made of the potentially harmful consequences that the Bill might have for international businesses' decisions about whether to establish themselves in this country given what might be interpreted as an increase in the Government's use of retrospective taxation?

The Bill should address the cause of the disease in the tax symptom, not the symptom itself. The disease is the complexity of taxation and the lack of clear response to legitimate tax planning. There is a continuum between legitimate tax planning that we all undertake and the notion that a few people are behaving illegally or illegitimately to escape their fair share of the burden of taxation. The Bill does nothing to tackle the undoubted uncertainty about the frontier of legitimate activity. The measure will compound rather than resolve the uncertainty.

Question put and agreed to.

Bill accordingly read the Third time, and passed.

CIVIL PARTNERSHIP

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

That the draft Civil Partnership Act 2004 (International Immunities and Privileges, Companies and Adoption) Order 2005, which was laid before this House on 30th November, be approved.—[Kevin Brennan.]

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