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29 Apr 2008 : Column 175
4 pm

If we believe that this discrimination between the treatment of politicians and that of everyone else is indefensible—and having now studied it, I think it is—why on earth are we extending it? Surely two wrongs do not make a right. If we are uncomfortable with the current regime, should we really seek to extend it to include the Mayor of London? Perhaps there is a specific reason for defining the tax treatment for MPs in statute, and then a specific reason for extending such treatment to an outgoing Mayor of London. If so, I look forward to hearing the Minister’s explanation of the thinking behind that logic.

The third question is a matter of the timing—hence amendment No. 17 to change the commencement date of this provision from April 2008 to April 2009. I have assumed that the measure before us is not technically hybrid, but there is something uncomfortable—this is not specific to the current, about-to-be former, Mayor of London, but a more general point—about dealing with public legislation that specifically benefits a defined individual or small group of individuals. It means that the merits of the measure inevitably cannot be considered in isolation from the debate about the merits or demerits of the individual or individuals concerned or the manner and circumstances of that individual’s going. I thus ask the Minister whether we should put this change clearly beyond any hint that it could benefit any specific individual currently at risk of receiving a termination payment.

The fourth question is whether there should be a rethink about what is or is not tax-free on termination. I understand that the Liberal Democrats have tabled a broader amendment that looks at the tax treatment of termination payments more generally, rather than just how to deal with Members of Parliament or Mayors of London, so the House will have an opportunity to reflect in further detail when that amendment is debated. It raises the interesting issue of the Government’s general view on this area of taxation of income.

I look forward to hearing the Minister’s explanation of the thinking behind this clause, particularly of why the Government are proposing to extend the statutory tax relief. I look forward to hearing clarification of whether the Government have any plans to extend it further to any other parts of local government, clarification of the Government’s view on the tax treatment of MPs’ resettlement grant payments, and perhaps clarification of the wider issue of the taxation of termination payments.

Rob Marris (Wolverhampton, South-West) (Lab): Perhaps the hon. Gentleman will tell us whether he believes the Greater London authority is more akin to a devolved Assembly, such as those in Scotland, Wales and Northern Ireland, or more akin to a council?

Mr. Hammond: That is a fair comment. It has many of the characteristics of one of the devolved Assemblies, but not all of them. It would also be fair to ask whether elected executive mayors, taking on a full-time role in managing a big city, could reasonably argue that they should be treated in the same way as the Mayor of London is apparently to be treated. That is why I put the question to the Minister. She is a Treasury Minister, so I assume that her instinct will be to resist all pleas for tax-preferential treatment. As I have said, however,
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pressure is being put on the Government by organisations representing other elected members, and I would be interested to hear the Government’s take on this issue.

As I have made my points reasonably, I should also like to hear whether the Minister agrees that there is a problem when such a provision, which is perhaps intended to have a general and continuing effect, clearly becomes entwined with the fate and fortunes of an individual. We in this Chamber cannot in honesty claim to be able to debate a termination payment for the Mayor of London and its tax treatment without considering the individual who is most likely to benefit from that provision. However, that is a bad way for us to make legislation.

An important issue is at stake. If the current Mayor benefits from this provision, it may well be, as one tax expert was reported as saying, the best £30,000 of public money ever spent, but it is none the less important that we understand the underlying reason for doing this and have some clarification, so that we address any lingering suspicion that the Government might merely be seeking to offer a golden parachute to an old political crony as he comes to the end of his political career.

Mr. Jeremy Browne (Taunton) (LD): I shall speak for a far shorter time than I did when you allowed me to continue for longer yesterday evening, Sir Alan.

I think it is rather touching that we in this House believe that our debates that take place a few days before elections will shift large numbers of votes. I am sure that that is why this particular aspect of the Bill has been brought to the fore in the Chamber this afternoon. I fear, however, that our conversation is not being as closely watched by people across the capital city as we might wish. I share the distaste expressed from the Conservative Front Bench for some of the more extravagant spending priorities that the current Mayor of London has indulged in during his period in office, although I do not share the Conservatives’ enthusiasm for their candidate, who has failed to put forward a persuasive case for his election.

Let me, however, return to the topic of severance payments. We think it is reasonable for there to be a package in place for a person who has served a period as an elected politician in this country—that rule also applies to Members of this House. There is a lack of clarity, however, on the wider point of the taxation of severance payments, where a distinction is made between the treatment when that is a one-off redundancy payment that does not attract tax below the £30,000 level, and the contractual payments when there is a tax liability.

A concern has been expressed to my colleagues and me that Her Majesty’s Revenue and Customs does not always act within the spirit of the rules. This is meant to be a one-off payment that softens the burden of redundancy, allowing people to make some provisions for seeking alternative employment and to pay the bills during that transition period. However, it is said that HMRC looks at it as an opportunity to raise revenue—and just at the point when people often require a bit of breathing space to get their financial affairs and working lives back on track. That is a rather aggressive way of trying to raise what is a fairly small amount of money.

Mr. Philip Hammond: May I draw the hon. Gentleman on the specific point? Does he think it generally a good idea to have statutory provisions that exempt politicians
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from the hazards facing the rest of the population? He makes a good argument about the challenges facing an individual who is in receipt of a payment and needs to defend it against HMRC, but should politicians, be they Members of Parliament or Mayors of London, be exempted by statute from having to go through that process?

Mr. Browne: The general principle that I would adopt is that politicians should not seek to apply to themselves rules that do not apply to the population as a whole. I add the small caveat that every job and type of occupation has different requirements and contains different contractual elements, and that the circumstances in which politicians find themselves redundant are different, in some ways, from those that sometimes face other people. I appreciate that lots of people in other walks of life can also make such a claim, but people across the country will recognise that it is helpful not to have the Revenue breathing down their neck just when they are trying to get themselves back on their feet again—some people will be in that situation.

Obviously there must be a point where such people are eligible to attract tax, and this situation should not be used as a device to try to circumvent the normal taxation rules. That is why our amendment No. 15 seeks to ask the Treasury to re-examine whether the rules can be more evenly and fairly applied, and to provide that HMRC falls within a tighter set of restrictions than those under which it appears to feel it operates at present.

Rob Marris: I notice that the debate on this amendment is so riveting that not a single London Member is in the Chamber, although the hon. Member for Putney (Justine Greening), who is a Front-Bench spokesperson for the Opposition, was present until recently. I have a simple question for the Minister on amendment No. 15: will she tell us what the budgets are for the Welsh Assembly, the Scottish Parliament, the Northern Ireland Assembly and the Greater London authority?

Mr. John Redwood (Wokingham) (Con): I do not wish to use this opportunity to refer to the present Mayor and to try to exert last-minute influence over an election in which many of our colleagues are probably participating on the streets as we speak. I wish to raise the issue of principle. We face a public expenditure crisis in this country; the Government have overspent, and they are borrowing too much, taxing too much and spending too much money on purposes with which the public do not agree. The proposal before us today is another small example; it is an extension of payment in tax relief to former Mayors should they lose office, one way or another. It legislates not only for one Mayor or one particular payment, but for all future Mayors of London.

I do see the mayoralty of London as a mayoralty; it is the mayoralty of by far and away the biggest city in the United Kingdom. However, the Mayor of London is only one of many mayors of London, because there is a mayor of the City of London and a mayor of the city of Westminster, and there are many borough mayors. Most important local government in London is still carried
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out by the boroughs, rather than by the rather grand Mayor that was created more recently. It is difficult to see how one can sustain the argument that if it is fair to have severance payment for the grand Mayor of London, no severance payment is offered to the mayors of the individual cities in London, who are, in many ways, responsible for bigger budgets and more important services: they are responsible for education and social services, unlike the overall Mayor of London. As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) has said from the Front Bench, it would be difficult to say that the mayor of Manchester or the mayor of Birmingham should not be given something similar.

I have a challenge for the Government: why do they think that, in the middle of this crisis of over-taxing, overspending and over-borrowing, this is a worthy clause on which to spend more public money? Why do they think that they can hold the line at saying yes to the Mayor of London, but no to the other mayors in London and to the mayors of other great UK cities? They will find it extremely difficult to hold that line.

Let us examine the question of justice and the contrast with the arrangements for Members of Parliament. We live in world in which people often come into the House of Commons at a much earlier age than they would expect to become an elected mayor, and they might be a Member of Parliament for 20 or 30 years. If they suddenly and abruptly lose their seat—perhaps in circumstances outwith the control of individual Back Benchers, because of the performance of their party or Government—one can see how that could prove a dreadful disruption to their lives. They may not be especially well known or have alternative skills, because they have put everything into their life as politicians. That is why that rule, which is unpopular with the public, was introduced, and people stood for election knowing that it was the rule.

4.15 pm

It is very different with the Mayor of London. Again, I do not wish to personalise the debate, but I point out that anyone who stood last time round knew that that was not the rule. Why is it fair to change the rules after the election? If such a rule were thought necessary, it should have been introduced at the time that the mayoralty was established and before we had any idea of who would be the first or subsequent Mayor of London.

The other difference is that the mayoralty of London has turned into a celebrity activity, certainly as conducted by the first Mayor. We have already heard from the current Mayor that were he to lose, he thinks that he could have a good life appearing on chat shows and writing articles. I do not think that anyone who has an exciting enough personality to become Mayor of London would be short of a penny or two, should the electorate terminate their contract. They would become famous—

Mr. Jeremy Browne: Is not the right hon. Gentleman focusing too narrowly on the Labour and Conservative candidates, who I acknowledge are driven entirely by a love of being on television and the celebrity culture, and overlooking the Liberal Democrat candidate, who has a powerful and persuasive record of reducing crime and tackling the serious threat of criminal behaviour in our capital city?

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Mr. Redwood: I do not think that we need to have such petty political debate when I am trying to discuss the principles of the matter. However, if I may be slightly partisan for a minute, I would say that in the totally unreal world in which there could be a Liberal Democrat Mayor—that is not what the polls and the public are saying—he too would become a celebrity and would, in due course, be in exactly the same position as the existing Mayor. Should the electorate tire of such a Mayor, he would be able to command good fees on the speaking circuit.

Given that the length of time that someone is Mayor is likely to be rather different from the length of time for which people may have the privilege of being a Member of Parliament, and because an ex-Mayor would be far better known and have more earning power when the job leaves them or they leave the job, I do not think that the same case can be made as is made even for Members of Parliament. The proposal also has to be set in the context that any payment to any politician is questionable and unpopular. We should not extend such privileges, but seek to cut them back.

The Financial Secretary to the Treasury (Jane Kennedy): When my officials drew to my attention the fact that this Finance Bill would have to contain these measures, I knew that it was not the best time for us to consider them. I know also with absolute certainty that were I in the position of the hon. Member for Runnymede and Weybridge (Mr. Hammond)—I hope that that will not happen for many years—I would not have been able to resist tabling an amendment for discussion on the Floor of the House today.

The hon. Gentleman has taken the opportunity to make one or two light-hearted comments about the contest that is taking place elsewhere, but he has also asked some genuine questions, as have other hon. Members. It is worth noting that this issue was debated in the GLA and, interestingly, Conservative GLA members supported it. The proposal will also benefit some Conservative GLA members who are standing down soon.

The power to establish and administer a severance scheme for the GLA arrived only following Royal Assent to the Greater London Authority Act 2007, in October last year. That is why we have had to include the provisions in this Bill, rather than in the Finance Bill last year.

Rob Marris: Has my right hon. Friend had any indication of whether the hon. Member for Henley (Mr. Johnson), who already moonlights as a journalist and is proposing to moonlight in a third job, supports the amendment tabled by his Front Benchers?

Jane Kennedy: No, I have not had any such indication. I genuinely believe that we should avoid personalising debates too much, even when they are as light-hearted as this. Perhaps it is more proper for me as a Minister not to respond in too much detail to points on personality; it is for colleagues to make their points in their own way.

The Greater London authority severance pay scheme is similar to those for MPs and Members of the devolved Assemblies. For the sake of consistency and fairness, it is right that the same tax treatment should apply to all those schemes. Severance payments are taxable only to
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the extent that they exceed £30,000 when they are made to MPs and Members of the devolved Assemblies. It is right that the same rule should apply to payments to the London Mayor and London assembly members in the event that they cease to hold office at the time of elections.

It is not the case that every member of the London assembly, the Welsh Assembly, the Scottish Parliament or this Parliament works in another capacity. My hon. Friend the Member for Wolverhampton, South-West (Rob Marris) pointed out that some work as journalists. Others work as lawyers. That is not necessarily something to be decried. That fact adds to the quality of debate that we have in this place and enables Members to bring with them wider experience and skills that enrich our ability to debate subjects in Parliament. There is no prohibition on people having such work, but not everybody is in that situation.

It is worth noting that many members of all the public authorities that I just mentioned are full-time assembly members. It is assumed that they will commit a large part of their working time to the job that they do. Most Members of the House these days regard themselves as full-time Members of Parliament and that is why the House has made these arrangements for Members. Although the right hon. Member for Wokingham (Mr. Redwood) said that he did not believe that the Mayor of London should receive the benefits of such schemes, I believe that it is better if we step back from the subject, treat it coolly and calmly and take the personalities out of it so that we look at the broad fairness of the proposal that we are considering.

The hon. Member for Runnymede and Weybridge made me do a double-take. He mentioned the severance scheme—it is a slight diversion, Sir Alan, but he asked me a question. He should look at the review of Members’ allowances that was brought forward in March. He is right; it is proposed that the severance scheme would no longer be payable to Members who chose to retire. However, a number of concerns have been expressed and the matter is subject to further consultation. I am sure that the comments that he has made today and any further comments that he might want to make to the review would be welcome.

Mr. Philip Hammond: I am grateful to the Financial Secretary, as she has genuinely given me a piece of information—that is probably a first in this Committee. I had not looked at that review. She tells me that it is proposed that Members of Parliament who retire voluntarily would cease to be eligible for these payments, but my understanding of the GLA arrangement is that members who retired voluntarily as well as those who lost their places as a result of an election would be eligible for the termination payments. That would put the GLA arrangements out of line with those being proposed for Parliament.

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