The
Chairman: I can fully support what the hon. Gentleman has
said about a stand part
debate.
Mr.
Hands: I am not going to detain the Committee for long
but, I want to reinforce what has been said by my hon. Friends. It
strikes me that the whole process has been deeply flawed. The
consultation has been extremely poor, especially in relation to the
data. Seven months later, we are not really any closer to having any
more robust data.
I have a
question for the Minister. Going back to the Institute for Fiscal
Studies report and the pre-Budget report in October, the IFS outlined
various questions. I want to see whether the Minister has any answers.
What is her current estimate of the number of non-doms? How many have
unremitted foreign income above £62,500 or £80,000? How
much foreign income do the remainder have? How many does she believe
would leave the country if these proposals came into
force? Mr.
Jeremy Browne (Taunton) (LD): I wonder whether the
Minister will draw on the expert analysis provided by the Government
when they estimated how many members would come from new accession EU
countries.
Mr.
Hands: That is a very valid point. I represent a
constituency where the current estimate is that 6 per cent. of the
population is Polish. In the last year we had
7,300 foreign nationals apply for a national insurance number. The
effect that these new regulations might have on the flow of people
could be considerable, particularly in a constituency like
mine. In
October, the IFS said that no one really knows the answers to these
questions. I am assuming that, after seven months, the Minister, when
faced with questions from a body such as the IFS, would be able to
provide some reasonably good
answers.
Jane
Kennedy: There have been 135 Government amendments. I
checked that quickly myself scanning through the amendment paper. I say
to the hon. Member for Fareham—other hon. Members will be
interested in this—that that is not a record. The previous
record for a Finance Bill is more than 200. Guess when that was. It was
in 1995.
Mr.
Bob Blizzard (Waveney) (Lab): Do not give way on
that.
Mr.
Hoban: Perhaps it is a sign of a Government coming to the
end of their life when so many amendments are tabled to Finance
Bills.
Jane
Kennedy: My hon. Friend was right. I should not have given
way.
On the very
specific point about unfettered gifts of foreign assets offshore, HMRC
made its view very clear in a frequently asked question some time ago.
In simple terms, it is only when such gifts were made after 6 April
2008 that they would be taxed. I would like to answer a little more
broadly than I would have done on these specific amendments, Sir
Nicholas. Following the pre-Budget report, we have shared clauses in
draft at the earliest opportunity. We actively looked to respond
quickly to the concerns that were aired within our overall policy aim.
Following the PBR in October, there was relatively muted reaction to
the proposals on residence and domicile, but our response has been
swift to concerns raised once the detailed clauses were put out in
draft.
We have
sought at every opportunity to address those concerns. That has
resulted in several changes to our original proposals, and numerous
improvements and simplifications to the Bill as first drafted. As has
been pointed out on other occasions, when the Government respond to
criticism, it is simply presented as a U-turn. One simply cannot win
when one seeks to address proper concerns that have some basis, and try
to amend the proposals accordingly.
On the IFS
report, we have stated in both the PBR and the Budget that we assumed
there were about 3,000 people who might leave, but our assumption has
now fallen by about 400 as a result of the Budget changes. However, it
is an area in which it is very difficult to make assumptions. We have
not seen any convincing evidence that the numbers leaving the UK might
be higher. As I have said repeatedly, the UK remains an attractive
place to live, work and do
business.
Mr.
Hands: It is certainly helpful to have some estimates of
these numbers—3,000 and the latest estimate 2,400—could
she tell us a little bit about the methodology involved in arriving at
those estimates?
Jane
Kennedy: The fact is that we do not have hard data on many
of these, simply because there has not previously been a need for
people to declare their income offshore. So the hard data that he is
seeking are not immediately available either to us or to other
sources.
Mr.
Hands: The Minister says that we have no hard data, but
figures of 3,000 and 2,400 sound as if they have a certain amount of
precision. Can she at least tell us what factor has been most involved
in downgrading that estimate from 3,000 to
2,400?
Jane
Kennedy: In large part it was the debate we held with
representative bodies about the changes we have made that led to the
clarity we were able to bring to the concerns in the early days.
Although the hon. Gentleman dismissed the letter that Mr David Hartnett
published, it did go a long way to allaying many fears about what the
changes mean to individuals.
Mr.
Hands: I thank the Minister for giving way—she has
been generous—but I do not think that she has come any closer to
saying where the figures of 3,000 or 2,400 have come from. Have they
come from a consulted body, which seems to be her implication? If so,
presumably that body must have said what was driving the change. Is it
the decline in house prices, or is it something
else?
Jane
Kennedy: The hon. Gentleman should not try to put words
into my mouth. I know that he is not trying to do it in a deliberately
mischievous way— [Interruption.] I am being generous here.
But for me to go into detail about the way in which we arrive at these
assumptions would entail a great deal of debate in this Committee. I
suggest that it may be of more value if I look in detail at the
questions he has asked and see what data I can make available to the
Committee. I will write to him and share the letter with the
Committee. I
should like to make a more general point, Sir Nicholas, particularly in
view of your advice on the stand part debate. Hon. Members criticised
the fact that we had made the decisions and the fact that we had plans
to proceed with the detail. The hon. Member for Cities of London and
Westminster said that, on balance, he preferred the Conservative
proposal, but that would have been for the flat rate charge of
£25,000. Once a charge had been paid, no more questions would
have been asked about an individual’s worldwide income. Their
proposal would not have addressed the issue of fairness to which he
rightly
alluded. 2.15
pm There
was without question a great deal of awareness within the House of the
complaints of unfairness, but it is also important to bear in mind that
the Conservative proposal, unlike our proposal, would have charged
people from the day they arrived. The hon. Gentleman referred to Indian
graduates who could come here for a short time and then return to the
Indian sub-continent. We very much want to encourage people of quality
from around the world to come here. We would want them to come and,
having worked here, perhaps to stay longer. That is why we believe that
beyond seven years it is right to invite remittance users to
make a greater contribution.
That brings
me back to the other main difference between the two proposals. The
Conservative proposal would have raised in the region of £3.5
billion from a group of people—roughly 120,000—whereas
the tax take already is around £13 billion. It is around
£500 million now. We were inviting a greater
contribution, but a much more modest one than the Conservatives
proposed. That may be why the hon. Gentleman preferred their proposal.
That is not widely
appreciated. The
current arrangements for the taxation of non-domiciled people in the UK
are very generous. They serve the British economy well. In terms of
attracting the world’s best talent to the UK we have now arrived
at a balance which maintains that. It is important to recall that the
changes that we propose do not affect all non-domiciles. They affect
those who choose to use the highly advantageous remittance basis. I
have responded in a broader way to a debate that has gone slightly wide
of the
amendment.
Mr.
Browne: I think all reasonable people would recognise that
the Conservative party’s proposals were laughably ill-conceived
and put together in a characteristically amateur fashion. I concede
that point to the Minister. What still seems strange is that the
Conservatives succeeded in panicking the Government into coming up with
a corresponding set of proposals which, judging by the number of
amendments, do not seem to have been much better thought-out than the
Conservative
ones.
Jane
Kennedy: I have drawn attention to the comments of the
hon. Member for Twickenham on the matter. I would not have
characterised the proposals put forward by the hon. Member for Fareham
as laughably
ill-conceived.
Mr.
Hands: Because you copied
them.
Jane
Kennedy: We acknowledge that there was some merit in the
idea of a charge, but we did not agree with the way in which it was
proposed to levy it. We have arrived at the right balance. Our
proposals are reasonable and proportionate. They allow the remittance
basis to settle at a point at which it is now sustainable for the very
long-term future, without the shallow and partisan criticism that we
occasionally hear from the Lib Dem
Benches.
Mr.
Hoban: I thank the Minister for her clarification of what
I was seeking to tackle in amendment No. 375. I shall not therefore
push it to a vote. Any lingering ambiguity should have been dealt with
by her very clear statement on pre-April 2008 gains.
In the
Minister’s response to the broader issues, she highlighted the
fundamental difference between the approach of our two parties, and the
reason why the Government are in the mess they are in. When we
consulted on our proposals for a charge on non-doms, we recognised some
of the challenges there would be in trying to unpick the details of
anomalies. It is a complex area. I return to one of the comments that
was made in evidence to the House of Lords Select Committee: the
Government have probably created as many anomalies as they have closed
down.
I do not
know whether I will be sitting on the Finance Bill Committee next year,
but I fear that we may come back to revisit this matter, if not in
terms of primary
legislation, perhaps in the form of guidance or some other way of
getting around the Chancellor’s commitment to avoid reopening
the
topic. The
way in which issues other than the charge were dealt with created the
weight of opposition to some of the measures. The Minister was right:
there was an immediate response to the change announced in
October’s pre-Budget report. When we announced our proposals in
October, there was support for them because they struck the right
balance between fairness and making sure we did not create more
problems than we were trying to resolve. There was support for our
proposals because they seemed proportionate and
reasonable.
The
Government got into trouble because of the broadening of their
proposals when the consultation document came out, and particularly
when the draft legislation came out. That is one of people’s
concerns, and the problems with the proposals and their complexity has
resulted in the process we are going through today to deal with 135
amendments in the space of six hours, or however many hours there are
in today’s two sittings. I do not think it has created much
certainty for
taxpayers.
Mr.
Field: For the record, although the Finance Act 1995 may
have had slightly more amendments, it was not guillotined by the
Government of the day, and therefore there was a chance to discuss in
full detail the various amendments that had been put forward, which has
not been the case with this
Bill.
The
Chairman: Order. I have to correct the hon. Member for
Cities of London and Westminster. The Bill is not guillotined or
programmed. We have to make that clear. That does, however, give me the
opportunity to say that we have—in expectation only, not
according to a programme motion—just over an hour and 35 minutes
to go, although it looks to me as though we will go on
longer.
Mr.
Hoban: Thank you, Sir Nicholas. As you said, Finance Bills
are traditionally not subject to programme motions and guillotines. In
the interest of moving the debate on to the gripping topic of fees, on
which I would like to say a few more words, I shall draw the debate on
this group to a close. I think the Government are reaping the problems
of acting in haste by trying to close down loopholes and anomalies, and
I feel that in some shape or form we will relive these moments with
pleasure, not only on Report, but in subsequent Bills. With that, I beg
to ask leave to withdraw the
amendment. Amendment,
by leave, withdrawn.
Amendment
made: No. 486, in schedule 7, page 164, line 2, at end
insert— ‘809RA Deemed income
or gains not to be regarded as remitted before time when they are
treated as arising or
accruing Where— (a)
income or foreign chargeable gains are treated as arising or accruing,
and (b) by virtue of anything
done in relation to anything regarded as deriving from the income or
chargeable gains, the income or chargeable gains would otherwise be
regarded as remitted to the United Kingdom before the time when they
are treated as arising or
accruing, treat the income or
chargeable gains as remitted to the United Kingdom at that
time.’.—[Jane
Kennedy.]
Jane
Kennedy: I beg to move amendment No. 354, in schedule 7,
page 164, line 12, at end
insert— ‘809SA Consideration
for certain services (1) This
section applies to income or chargeable gains
if— (a) the income or
gains would (but for subsection (2)) be taken to be remitted to the
United Kingdom because conditions A and B in section 809K are
met, (b) condition A in section
809K is met because a service is provided in the United Kingdom
(“the relevant UK service”),
and (c) condition B in section
809K is met because section 809K(3)(a) or (b) applies to the
consideration for the relevant UK service (“the relevant
consideration”). (2) The
income or chargeable gains are to be treated as not remitted to the
United Kingdom if the following conditions are
met. (3) Condition A is that
the relevant UK service relates wholly or mainly to property situated
outside the United Kingdom. (4)
Condition B is that the whole of the relevant consideration is given by
way of one or more payments to one or more bank accounts held outside
the United Kingdom by or on behalf of the person who provides the
relevant UK service. (5)
Sections 275 to 275C of TCGA 1992 (location of assets) apply for the
purposes of subsection (3) as they apply for the purposes of TCGA
1992.’. The
amendment was drafted in consultation with representatives from the UK
financial services industry. It enables the industry to continue to
provide services to non-domiciled individuals. I am assured
that the amendment meets the concerns that the industry has raised. The
hon. Member for Fareham has indicated that he has a number of issues to
raise, so I will allow him to do so and then hope to reply in more
detail.
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