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The Committee having divided: Ayes 193, Noes 296.
Division No. 152]
[4.54 pm



AYES


Afriyie, Adam
Alexander, Danny
Ancram, rh Mr. Michael
Arbuthnot, rh Mr. James
Atkinson, Mr. Peter
Bacon, Mr. Richard
Baldry, Tony
Barker, Gregory
Barrett, John
Beith, rh Mr. Alan
Benyon, Mr. Richard
Beresford, Sir Paul
Binley, Mr. Brian
Blunt, Mr. Crispin
Bone, Mr. Peter
Boswell, Mr. Tim
Bottomley, Peter
Brady, Mr. Graham
Brazier, Mr. Julian
Breed, Mr. Colin
Brokenshire, James
Brooke, Annette
Browne, Mr. Jeremy
Browning, Angela
Burns, Mr. Simon
Burrowes, Mr. David
Burt, Lorely
Butterfill, Sir John
Cable, Dr. Vincent
Cameron, rh Mr. David
Campbell, rh Sir Menzies
Carmichael, Mr. Alistair
Carswell, Mr. Douglas
Cash, Mr. William
Chope, Mr. Christopher
Clappison, Mr. James
Clark, Greg
Clarke, rh Mr. Kenneth
Crabb, Mr. Stephen
Davies, Mr. Dai
Davies, David T.C. (Monmouth)
Davis, rh David (Haltemprice and Howden)
Dorrell, rh Mr. Stephen
Dorries, Mrs. Nadine
Duncan, Alan
Duncan Smith, rh Mr. Iain
Dunne, Mr. Philip
Ellwood, Mr. Tobias
Evans, Mr. Nigel
Fallon, Mr. Michael
Farron, Tim
Featherstone, Lynne
Field, Mr. Mark
Foster, Mr. Don
Fox, Dr. Liam
Francois, Mr. Mark
Fraser, Christopher
Gale, Mr. Roger
Gauke, Mr. David
George, Andrew
Gidley, Sandra
Gillan, Mrs. Cheryl
Goldsworthy, Julia
Goodman, Mr. Paul
Goodwill, Mr. Robert
Gove, Michael
Gray, Mr. James
Grayling, Chris
Green, Damian
Greening, Justine
Gummer, rh Mr. John
Hammond, Mr. Philip
Hammond, Stephen
Hancock, Mr. Mike
Hands, Mr. Greg
Harper, Mr. Mark
Harris, Dr. Evan
Harvey, Nick
Hayes, Mr. John
Heathcoat-Amory, rh Mr. David
Hemming, John
Hendry, Charles
Hoban, Mr. Mark
Hollobone, Mr. Philip
Holloway, Mr. Adam
Holmes, Paul
Horam, Mr. John
Hosie, Stewart
Howard, rh Mr. Michael
Howarth, David
Howarth, Mr. Gerald
Hughes, Simon
Huhne, Chris
Hunt, Mr. Jeremy
Jack, rh Mr. Michael
Jackson, Mr. Stewart
Jenkin, Mr. Bernard
Kawczynski, Daniel
Kennedy, rh Mr. Charles
Key, Robert
Kramer, Susan
Laing, Mrs. Eleanor
Lamb, Norman
Lancaster, Mr. Mark
Lansley, Mr. Andrew
Laws, Mr. David
Leech, Mr. John
Leigh, Mr. Edward
Letwin, rh Mr. Oliver
Lewis, Dr. Julian
Liddell-Grainger, Mr. Ian
Lilley, rh Mr. Peter
Loughton, Tim
Luff, Peter
Maclean, rh David
MacNeil, Mr. Angus
Main, Anne
Maples, Mr. John
May, rh Mrs. Theresa
McIntosh, Miss Anne
McLoughlin, rh Mr. Patrick
Miller, Mrs. Maria
Milton, Anne
Mitchell, Mr. Andrew
Moore, Mr. Michael
Mulholland, Greg
Mundell, David
Murrison, Dr. Andrew
Öpik, Lembit
Osborne, Mr. George
Ottaway, Richard
Paice, Mr. James
Penning, Mike
Penrose, John
Prisk, Mr. Mark

Pugh, Dr. John
Randall, Mr. John
Redwood, rh Mr. John
Reid, Mr. Alan
Rennie, Willie
Rifkind, rh Sir Malcolm
Robathan, Mr. Andrew
Robertson, Angus
Robertson, Hugh
Robertson, Mr. Laurence
Rogerson, Dan
Rosindell, Andrew
Ruffley, Mr. David
Russell, Bob
Sanders, Mr. Adrian
Scott, Mr. Lee
Shepherd, Mr. Richard
Simmonds, Mark
Simpson, Mr. Keith
Smith, Sir Robert
Spicer, Sir Michael
Spink, Bob
Spring, Mr. Richard
Stanley, rh Sir John
Steen, Mr. Anthony
Stuart, Mr. Graham
Swinson, Jo
Swire, Mr. Hugo
Syms, Mr. Robert
Tapsell, Sir Peter
Taylor, Mr. Ian
Taylor, Dr. Richard
Turner, Mr. Andrew
Tyrie, Mr. Andrew
Vaizey, Mr. Edward
Vara, Mr. Shailesh
Viggers, Peter
Walker, Mr. Charles
Wallace, Mr. Ben
Watkinson, Angela
Webb, Steve
Weir, Mr. Mike
Whittingdale, Mr. John
Widdecombe, rh Miss Ann
Wiggin, Bill
Williams, Hywel
Williams, Mark
Williams, Mr. Roger
Williams, Stephen
Willis, Mr. Phil
Wilson, Mr. Rob
Wilson, Sammy
Winterton, Ann
Winterton, Sir Nicholas
Wishart, Pete
Wright, Jeremy
Young, rh Sir George
Younger-Ross, Richard
Tellers for the Ayes:

Mr. David Evennett and
Mr. Brooks Newmark
NOES


Ainger, Nick
Ainsworth, rh Mr. Bob
Allen, Mr. Graham
Anderson, Janet
Armstrong, rh Hilary
Atkins, Charlotte
Bailey, Mr. Adrian
Baird, Vera
Balls, rh Ed
Banks, Gordon
Barlow, Ms Celia
Barron, rh Mr. Kevin
Battle, rh John
Bayley, Hugh
Beckett, rh Margaret
Begg, Miss Anne
Bell, Sir Stuart
Benton, Mr. Joe
Berry, Roger
Betts, Mr. Clive
Blackman, Liz
Blackman-Woods, Dr. Roberta
Blears, rh Hazel
Blizzard, Mr. Bob
Blunkett, rh Mr. David
Borrow, Mr. David S.
Bradshaw, Mr. Ben
Brennan, Kevin
Brown, Lyn
Brown, rh Mr. Nicholas
Brown, Mr. Russell
Browne, rh Des
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burgon, Colin
Burnham, rh Andy
Butler, Ms Dawn
Byers, rh Mr. Stephen
Byrne, Mr. Liam
Caborn, rh Mr. Richard
Cairns, David
Campbell, Mr. Alan
Caton, Mr. Martin
Cawsey, Mr. Ian
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Clark, Ms Katy
Clark, Paul
Clarke, rh Mr. Charles
Clarke, rh Mr. Tom
Clelland, Mr. David
Clwyd, rh Ann
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Connarty, Michael
Cooper, Rosie
Cooper, rh Yvette
Corbyn, Jeremy
Cousins, Jim
Cruddas, Jon
Cryer, Mrs. Ann
Cummings, John
Cunningham, Mr. Jim
Cunningham, Tony
Curtis-Thomas, Mrs. Claire
Darling, rh Mr. Alistair
David, Mr. Wayne
Davidson, Mr. Ian
Dean, Mrs. Janet
Denham, rh Mr. John
Devine, Mr. Jim
Dhanda, Mr. Parmjit
Dismore, Mr. Andrew

Dobson, rh Frank
Donohoe, Mr. Brian H.
Doran, Mr. Frank
Dowd, Jim
Drew, Mr. David
Eagle, Angela
Eagle, Maria
Efford, Clive
Ellman, Mrs. Louise
Ennis, Jeff
Etherington, Bill
Field, rh Mr. Frank
Fisher, Mark
Fitzpatrick, Jim
Flello, Mr. Robert
Flint, rh Caroline
Follett, Barbara
Foster, Mr. Michael (Worcester)
Foster, Michael Jabez (Hastings and Rye)
Francis, Dr. Hywel
Gapes, Mike
Gardiner, Barry
George, rh Mr. Bruce
Gibson, Dr. Ian
Gilroy, Linda
Godsiff, Mr. Roger
Goggins, Paul
Goodman, Helen
Griffith, Nia
Griffiths, Nigel
Grogan, Mr. John
Gwynne, Andrew
Hall, Mr. Mike
Hall, Patrick
Hamilton, Mr. David
Hanson, rh Mr. David
Harman, rh Ms Harriet
Harris, Mr. Tom
Havard, Mr. Dai
Healey, John
Henderson, Mr. Doug
Hendrick, Mr. Mark
Heppell, Mr. John
Hesford, Stephen
Hewitt, rh Ms Patricia
Heyes, David
Hill, rh Keith
Hillier, Meg
Hodge, rh Margaret
Hodgson, Mrs. Sharon
Hoey, Kate
Hood, Mr. Jim
Hoon, rh Mr. Geoffrey
Hope, Phil
Hopkins, Kelvin
Howarth, rh Mr. George
Howells, Dr. Kim
Hoyle, Mr. Lindsay
Hughes, rh Beverley
Humble, Mrs. Joan
Iddon, Dr. Brian
Illsley, Mr. Eric
Ingram, rh Mr. Adam
Irranca-Davies, Huw
James, Mrs. Siân C.
Jenkins, Mr. Brian
Johnson, rh Alan
Johnson, Ms Diana R.
Jones, Helen
Jones, Mr. Kevan
Jowell, rh Tessa
Joyce, Mr. Eric
Kaufman, rh Sir Gerald
Keeble, Ms Sally
Keeley, Barbara
Keen, Ann
Kelly, rh Ruth
Kemp, Mr. Fraser
Kennedy, rh Jane
Khan, Mr. Sadiq
Kidney, Mr. David
Kilfoyle, Mr. Peter
Knight, Jim
Kumar, Dr. Ashok
Ladyman, Dr. Stephen
Lammy, Mr. David
Laxton, Mr. Bob
Lazarowicz, Mark
Lepper, David
Levitt, Tom
Lewis, Mr. Ivan
Linton, Martin
Lloyd, Tony
Love, Mr. Andrew
Lucas, Ian
Mackinlay, Andrew
MacShane, rh Mr. Denis
Mactaggart, Fiona
Malik, Mr. Shahid
Mann, John
Marris, Rob
Marsden, Mr. Gordon
Martlew, Mr. Eric
McAvoy, rh Mr. Thomas
McCabe, Steve
McCarthy, Kerry
McCarthy-Fry, Sarah
McDonagh, Siobhain
McDonnell, John
McFadden, Mr. Pat
McFall, rh John
McGovern, Mr. Jim
McGuire, Mrs. Anne
McKechin, Ann
McKenna, Rosemary
Meacher, rh Mr. Michael
Meale, Mr. Alan
Merron, Gillian
Michael, rh Alun
Milburn, rh Mr. Alan
Miliband, rh Edward
Miller, Andrew
Moffatt, Laura
Mole, Chris
Moon, Mrs. Madeleine
Moran, Margaret
Morden, Jessica
Morgan, Julie
Morley, rh Mr. Elliot
Mountford, Kali
Mudie, Mr. George
Mullin, Mr. Chris
Munn, Meg
Murphy, Mr. Denis
Murphy, Mr. Jim
Murphy, rh Mr. Paul
Naysmith, Dr. Doug
Norris, Dan
O'Brien, Mr. Mike
O'Hara, Mr. Edward
Olner, Mr. Bill
Osborne, Sandra

Owen, Albert
Palmer, Dr. Nick
Pearson, Ian
Plaskitt, Mr. James
Pope, Mr. Greg
Pound, Stephen
Prentice, Bridget
Prentice, Mr. Gordon
Prescott, rh Mr. John
Primarolo, rh Dawn
Prosser, Gwyn
Purchase, Mr. Ken
Purnell, rh James
Rammell, Bill
Reed, Mr. Andy
Reed, Mr. Jamie
Riordan, Mrs. Linda
Robertson, John
Robinson, Mr. Geoffrey
Rooney, Mr. Terry
Ruddock, Joan
Russell, Christine
Ryan, rh Joan
Salter, Martin
Sarwar, Mr. Mohammad
Seabeck, Alison
Sharma, Mr. Virendra
Shaw, Jonathan
Sheerman, Mr. Barry
Simon, Mr. Siôn
Skinner, Mr. Dennis
Slaughter, Mr. Andy
Smith, rh Mr. Andrew
Smith, Ms Angela C. (Sheffield, Hillsborough)
Smith, Angela E. (Basildon)
Smith, Geraldine
Smith, rh Jacqui
Snelgrove, Anne
Soulsby, Sir Peter
Southworth, Helen
Spellar, rh Mr. John
Starkey, Dr. Phyllis
Stewart, Ian
Strang, rh Dr. Gavin
Straw, rh Mr. Jack
Stringer, Graham
Stuart, Ms Gisela
Sutcliffe, Mr. Gerry
Taylor, Ms Dari
Taylor, David
Thomas, Mr. Gareth
Timms, rh Mr. Stephen
Tipping, Paddy
Todd, Mr. Mark
Touhig, rh Mr. Don
Trickett, Jon
Truswell, Mr. Paul
Turner, Dr. Desmond
Turner, Mr. Neil
Twigg, Derek
Vaz, rh Keith
Vis, Dr. Rudi
Walley, Joan
Waltho, Lynda
Watson, Mr. Tom
Whitehead, Dr. Alan
Wicks, Malcolm
Williams, rh Mr. Alan
Wills, Mr. Michael
Wilson, Phil
Winnick, Mr. David
Winterton, rh Ms Rosie
Woodward, rh Mr. Shaun
Woolas, Mr. Phil
Wright, Mr. Anthony
Wright, David
Wright, Mr. Iain
Wyatt, Derek
Tellers for the Noes:

Mr. Frank Roy and
Mr. Dave Watts
Question accordingly negatived.
28 Apr 2008 : Column 43

28 Apr 2008 : Column 44

28 Apr 2008 : Column 45

28 Apr 2008 : Column 46

Clause 5 ordered to stand part of the Bill.

Clause 6


Rate etc

Stewart Hosie: I beg to move amendment No. 8, page 3, line 20, leave out from ‘(1)’ to end of line 21 and add

(4) No order may be made under subsection (3) until—

(a) the Treasury has compiled and laid before the House of Commons a report containing an assessment of the impact of changes to the rate of capital gains tax on—

(i) businesses seeking investment,

(ii) investors who normally pay tax via capital gains tax, and

(iii) the availability and cost of houses to buy and rent; and

(b) the report has been approved by a resolution of the House of Commons.’.


28 Apr 2008 : Column 47

The amendment seeks to have the Treasury justify the changes it intends to make to the capital gains tax system and to have them approved by the House of Commons before any implementation. There are a number of reasons for that, which I will explain later, but the assessment that we seek from the Treasury will consist of three parts.

First and most important, what would the impact be on businesses seeking investment? For us, that is the most crucial area. As they stand, the Government’s proposals will only damage business investment. For example, if someone who invests in a business and pays capital gains tax seeks the same cash return after tax under the changes, that will leave less profit in the pot for, say, a proprietor investor or a manager investor, who may no longer take the risk and seek that capital. If, on the other hand, the investor receives the gross amount and pays the additional tax under the new system, they may consider the risk not to be worth taking and decide to take their money elsewhere, perhaps out of the country.

Secondly, the Treasury should report on investors who normally pay tax via capital gains tax, not least because it would appear from all the reports that I have read and all the people to whom I have spoken that the changes to the rules have had the consequence, unintended or otherwise, of encouraging real investors to sell up and take their money out of businesses to avoid falling into the new tax regime. That has been evidenced by a flurry of recent newspaper reports, of which I shall give one or two examples.

In article entitled “How Darling’s ill-thought CGT fix has only made things worse”—not exactly a snappy title, but one that sums it up—the Sunday Herald said:

The article continued:

The Fair Investment website put the matter similarly:

The article, of 8 April, went on to quote KPMG tax partner David Kilshaw saying to The Times that this has been

as investors rushed to sell up before the new laws came into effect.

5.15 pm

It is not only newspaper commentators and financial advice websites that have been discussing the issue—practitioners have also been talking about it. I am grateful to the Institute of Chartered Accountants in
28 Apr 2008 : Column 48
England and Wales for its comments on this matter. It says that these highly controversial changes were announced

It also said that the announcements showed a lack of appreciation of the potential damage that they could

I agree entirely with its assessment of capital gains tax reform in the 2008 Budget that

the impact before implementation. That is fundamentally what I seek to do with amendment No. 8: have the Treasury provide all the detailed assessments that will be required for people to understand the consequences.

Mr. Mark Field (Cities of London and Westminster) (Con): Is there not a problem with that, in principle at least? If more time is given, that will allow the distortions that the hon. Gentleman mentioned earlier to happen, such as small business people wanting to sell when a radical change is proposed. How would his amendment get around that problem?

Stewart Hosie: I was just about to make that point. The hon. Gentleman is probably right, on balance, in relation to the previous debate on corporation tax, to say that changing things now might create distortion and uncertainty. However, this measure was proposed in the pre-Budget report and there was a flurry of panic, mainly in the Government ranks. The Government then changed things to introduce the £1 million lifetime entrepreneurs’ allowance, but there was still a lack of clarity—I know that from speaking to accountants close to the end of the financial year—so I am not convinced at all, in this case, that a small additional delay until we get clarity from the Government would deliver the instability that the hon. Gentleman describes.

The third area that the Treasury should report on is the housing market, particularly in areas of Wales, Scotland and elsewhere where there is pressure on house prices, a lack of affordable first-time accommodation, particularly for those on modest wages, and a shortage of affordable private lets. The paradox of the CGT changes is that not only are they damaging investment in business and possibly driving investors to take their money elsewhere, but they have made speculation in the private housing market more attractive. That is bizarre at a time when there was already huge pressure—particularly in high-pressure areas and remote, rural areas—and a shortage of housing combined with low wages. That is a catastrophic thing for the Government to do.

Again on the impact on business, tax is going up, as are costs such as fuel, energy and the transport of raw materials. Traditional funding routes have either dried up because of the credit squeeze or are very expensive, and the stock exchange and the alternative investment market are either inappropriate or too expensive for the kinds of businesses that seek private investment at the lower level. This is the wrong time to make changes to CGT that risk, even potentially, driving out investors from business. Let me give an example.


28 Apr 2008 : Column 49

Historically, to get a stock market listing a company needed to be a £100 million-plus company, but the truth is that the figure was much bigger than that. Entry-level costs were £750,000, and so were fundraising costs; advisory costs were £250,000; and commission was 2 to 5 per cent. of the money to be raised. Even on AIM, entry level was about £300,000 and so was fundraising, commission was 2.5 per cent. and advisory costs were about £50,000. That was for companies looking to raise £2 million to £20 million. With traditional bank funding drying up and with other routes being beyond the means of most small companies, private investors were filling an important gap. If there is a risk—I believe the risk is real and serious—that the capital gains tax changes will force private investors with capital to take their money elsewhere, the change needs to be reviewed and revised. I was happy not to press my earlier amendment No. 7 on corporation tax, but although I will wait to hear what the Minister has to say and see whether she provides me with any comfort, if she fails to do so I am likely to press amendment No. 8 to the vote.

Mr. Philip Hammond (Runnymede and Weybridge) (Con): Most of the debate on the Bill so far has focused, quite understandably, on clause 3, which doubles the 10p rate of income tax. The Prime Minister is, of course, personally responsible for the changes in clause 3—and, indeed, clause 5, which we have just debated, as both were announced in the 2007 Budget.

Clause 6 is, by contrast, something of a home-grown own goal for the Chancellor, at least if we believe that he is the author of the 2007 pre-Budget report. Although the doubling of the 10p rate has delivered the short-term political damage, the fiasco of the pre-Budget report and the capital gains tax changes will have a lasting and negative effect on business sentiment. The manner of the introduction of such far-reaching changes to business asset capital taxation in the pre-Budget report—with no consultation, no forewarning and little thought—was damaging enough in itself, but the signal that Labour was willing to sacrifice the interests of business to short-term political advantage was more damaging still. The substance of the proposal, at a time when the economy is slowing and public concern about jobs and prosperity is growing, sends a hugely negative message to British business and to Britain’s entrepreneurs.

Mr. Mark Field: Does my hon. Friend agree that, given the City of London’s position as an international financial centre, the sense of indecision and dithering and the impression created that the Government are, as my hon. Friend rightly points out, seeking to make political capital out of the situation rather than having regard to the long or even medium-term economic welfare of the country is likely to be extremely damaging, not just for our domestic businesses but internationally?


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