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Chris Bryant : I intend to speak briefly because I want to make only two points.

First, although the hon. Member for Chipping Barnet (Mrs. Villiers) sounded reasonable, she exaggerated the need for any changes to the Government's proposals. Indeed, the hon. Member for Ludlow (Mr. Dunne), who perhaps owns property that far exceeds the expectations of any of my constituents, gave the game away when he said that half of all properties in Britain will soon—in a matter of a few years—go over the threshold. Not a single property in the Rhondda sells at £300,000. The idea that 50 per cent. of estates in the next few years will reach £325,000 is extraordinary. The hon. Gentleman's mathematics need to be better because between 94 and 96 per cent. of estates do not reach that threshold today and will not do so with the increases in the threshold that the Bill proposes.

Mr. Dunne: Clearly, I am not familiar with property values in the Rhondda, but I know those in my
 
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constituency of Ludlow, where the average property value exceeds £200,000. I understand that the average property value in the south-east of England exceeds £300,000.

Chris Bryant: The hon. Gentleman can speak for his constituency, but I dare to suggest that if he considers the whole country, his statement that 50 per cent. of estates will be valued at more than £325,000 in the next few years is a gross exaggeration.

When the hon. Member for Chipping Barnet gave her list of teachers, fire officers and others, she appeared to suggest that all of them—every teacher in the country—will suddenly have to put together a new will and a new trust. She clearly has not met teachers in my constituency, or in the majority of constituencies, who will not get anywhere near the £325,000 figure. Consequently, her comments constitute scaremongering, which is an inappropriate approach to the Bill.

Secondly, the reason for my opposition to new clause    1 and my wholehearted support for the Government's proposals is that there are two alternative directions of travel in which we can move on inheritance tax. One is to undermine inheritance tax—not necessarily by pledging to abolish it, but by suggesting that one disagrees with it and would like to abolish it even if one does not have the gumption to say so. On the other hand—I may be about to step into old-fashioned shoes—some of us believe in inheritance tax for the simple reason that the greatest source of inequality and inequity in British society is inherited wealth. If we do nothing, especially when the wealthiest in our society are doing extremely well, to undermine the progress towards greater inequality, we undermine the fabric of the society in which I want and choose to live.

The hon. Lady was wrong to table new clause 1. We need to do what the Government propose and try to ensure that there are not many different ways of exempting oneself from inheritance tax and that there are not ways that are especially available to the wealthiest in society, who can afford expensive consultants on tax and other matters.

John Thurso (Caithness, Sutherland and Easter Ross) (LD): Will the hon. Gentleman give way?

Chris Bryant: Of course I give way to the hon. Gentleman, whose honour itself is inherited.

John Thurso: The hon. Gentleman is too kind. I quite understand the logic of his argument, but will he tell me whether he would like the Government to remove all exemptions to inheritance tax and to apply it to everyone across the board with no exceptions?

Chris Bryant: No. This is another area in which the hon. Member for Chipping Barnet exaggerated earlier. She seemed to suggest that spouses and civil partners were suddenly going to face a new problem in relation to inheritance tax. I do not believe that to be true; it is an exaggeration. However, the Paymaster General might want to clarify the one genuine point that the hon. Lady raised when she described the situation of someone who remarries and wants to ensure that some of their property goes to the children of their first marriage, and
 
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that the second wife is happy with that arrangement, as is often the case. Perhaps the Paymaster General could clarify precisely how that will still be possible.

To return to the question that the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) asked me, of course there should be exemptions, and the most important are those for spouses and civil partners.

Mr. John Redwood (Wokingham) (Con): Is the hon. Gentleman saying that prospects under Labour are so poor in his part of the world that no one there will ever reach the inheritance tax threshold?

Chris Bryant: No. The right hon. Gentleman misunderstands the economy of south Wales, just as he did when he was Secretary of State for Wales. I must point out to him that there are more people in paid employment with good prospects today because of the national minimum wage, which he opposed. However, if I continue in that vein, Sir Alan, you will tell me that I am straying somewhat from new clause 1, and I did promise to draw my remarks to a close fairly swiftly.

Inheritance tax is about paying a fair share, and the proposal by the hon. Member for Chipping Barnet tries to undermine the concept of a fair share. We are right to oppose new clause 1.

Julia Goldsworthy (Falmouth and Camborne) (LD): As we have heard, there is a divergence of opinion on what the Bill means. The Red Book suggests that only £15 million would be raised by the changes to inheritance tax and trusts, and that the new regulations would affect only a small number of people. However, the evidence given to the Treasury Committee by John Whiting suggested that the changes would affect a lot of everyday arrangements and a huge number of individuals. The Times suggested that they would affect 100,000 families, and the Society of Trust and Estate Practitioners went further, estimating that at least 1 million wills would be affected. The society also estimated that the average cost of rewriting a will was £250. If we multiply that by 1 million, we see that the cost to individuals of rewriting their wills would stand at £250 million, while the benefit to the Treasury of the changes would be £15 million. It is easy to see the disparity between the number of people likely to be affected and the amount of money raised.

Skandia estimated that up to 4.5 million life insurance policies could be affected by the changes, because so many families have life insurance policies written into trusts. Given that the nil rate band does not stay in line with inflation, more and more families will be drawn into the lower end of the system. Therefore, it is not only those who presently fall into the inheritance tax band who will be going back to their solicitors to change their life insurance policies. This will also affect people who are unsure at what point in the future their estate might fall into the inheritance tax band.

Ann Coffey : Will the hon. Lady tell us at what level her party proposes to set inheritance tax?

Julia Goldsworthy: I am very pleased to tell the hon. Lady that we will shortly be announcing a fundamental
 
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review of the taxation system, in which all will be revealed. That review will look into making the taxation system fairer and more progressive.

Dawn Primarolo: When the hon. Lady announces the outcome of that review, will it contain the principle that the rules apply to everyone and that no one is allowed to get round them? If so, how would her party enforce them?

Julia Goldsworthy: As I said, the system will be fairer and simpler. The hon. Members for Rhondda (Chris Bryant) and for Chipping Barnet (Mrs. Villiers) do, in fact, agree on something. Fundamentally, the issue raised by new clause 1 is that of spouse exemption and whether that is changed by the Bill. There is a real lack of clarity, and all the new clauses and the amendments to them are intended to make the situation clearer. Even if the Paymaster General argues that it is already clear, members of the public and professionals have a different interpretation of what the regulations mean.

I can see the good intentions of new clause 1, but its argument is slightly circular—that anything exempt under the new Act will continue to be exempt—and does not make sense. The amendment tabled by the hon. Member for South-West Hertfordshire (Mr. Gauke) improves his Front-Bench team's phrasing and overcomes that tautology. New clause 2, tabled by Liberal Democrat Members, extends that and calls for a further period of time to have elapsed so that the implications of the legislation can be made absolutely clear, not least for individuals who have died since the Budget either intestate or with their will written into trust. At the moment, the cases of those individuals are subject to considerable uncertainty. I am glad that the hon. Member for Rhondda approves of amendment (b), which, for the avoidance of any doubt whatever, makes it clear that civil partners will also fall under the spousal exemption.

New clause 2 seeks a delay in the implementation of the Act until its impact is fully assessed and understood. Debate in the House and outside shows continuing disagreement about the extent of that impact. Making it explicit that a full consultation will take place would be appreciated, as that did not happen before the proposals in the Bill were put forward. I understand that a partial regulatory impact assessment has been undertaken, but the new clause would ensure that there would be a full regulatory impact. Is the Paymaster General prepared to publish that partial regulatory impact assessment before the relevant clauses are considered in Committee? Will she also provide longer-term projections of the revenue that she estimates the measures will gather? The Red Book gives only a limited time scale and shows that, according to the Government's estimates, the amount of money will be small. Clearly, the professionals think that the opposite might be the case. All the measures in new clause 2 would help to inform the public and make clear what the impact and the revenue implications for the Treasury will be.

As I said, new clause 3 echoes the theme of the amendment tabled by the hon. Member for South-West Hertfordshire and extends it. As well as making it absolutely clear that there will be no retrospection for applied transfers of value written into trust made prior
 
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to 22 March, it makes provision for people who have died intestate with dependants since 22 March. Currently, their estates are in limbo, and it is not clear how the new regime will apply to them. Fundamentally, it preserves the existing rules of exemption for two years until the new system and its implications are fully established. It also sorts out what happens in relation to people who die in the intervening period.

Surely the fundamental anomaly is that, under the existing regulations, someone can still make a lifetime gift free of inheritance tax if they do not die within seven years. That has not been redressed by the Bill. The changes proposed by the Bill impact on people who are not cash-rich, cannot make cash gifts in kind and thereby avoid inheritance tax, and have houses that have increased greatly in value in the many years that they have lived in them. In my constituency, for example, average house prices are increasing so rapidly, and the gap between house prices and incomes is so great, that more and more households are falling into inheritance tax.

Can the Paymaster General be explicit about what mischief has been done that the Government are trying to overcome, and about their assessment of the impact of any avoidance under the existing trust regime? Will the Government respond to the Treasury Committee's request that they should provide detailed information about how they arrived at their estimate that the new rules on the tax treatment of certain trusts will affect only a "minority of a minority" of the 100,000 discretionary trusts? Will they do that before clause 57 and schedule 20 are considered in Committee?

If, as the Government claim, existing spouse exemptions and other reliefs from inheritance tax will continue to apply when a trust is set up in the case of an individual with dependants dying intestate, can they explain why the professionals beg to differ? Can they specify where that is explicit in the Bill, and can they clearly demonstrate why the new clauses and the amendments to new clause 1 are not necessary? Along with the professionals and many members of the public, I would welcome more clarity, certainty and evidence-based policy-making in this regard.

4.15 pm

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