Examination of Witnesses (Questions 400-419)
RT HON
ALISTAIR DARLING,
MR DAVE
RAMSDEN, MR
MIKE WILLIAMS,
MR EDWARD
TROUP AND
MR SIMON
GALLAGHER
19 MARCH 2008
Q400 Mr Dunne: Can you confirm that
employees investing in employee share schemes will not be able
to benefit from the new entrepreneur relief?
Mr Williams: In general, most
of them will benefit from the—
Q401 Mr Dunne: Any gain in excess
of the annual amount will not have the benefit of entrepreneur
relief?
Mr Darling: The entrepreneurs'
relief is restricted to officers and people with shareholdings
greater than 5%, exactly as I set out in January.
Q402 Mr Dunne: The answer is no?
Mr Darling: The position is exactly
as I set out in January. I say that for those who follow these
proceedings so that no one is misled.
Q403 Mr Dunne: What estimate have
you made of the number of employee shareholders who will therefore
lose out from the capital gains tax charge being increased effectively
for them?
Mr Darling: I cannot give you
that figure offhand. We can perhaps write to you about that.
Q404 Mr Dunne: An estimate will have
been made, I presume?
Mr Darling: Perhaps it would be
better to write to you. [1]
Q405 Mr Dunne: On vehicle excise duty,
what percentage of vehicles will pay a higher rate following the
Budget proposals?
Mr Troup: In 2009 the majority
of new vehicles will pay the same amount or will pay less, around
70%.
Mr Darling: Some will pay more.
As I said last week, what we are trying to do is to give incentives
to manufacturers to produce cars that are more environmentally
friendly and also to give incentives to people to choose the least
environmentally damaging car. It follows that if you reduce it
at one end there will be an increase at the other. Some of the
claims that appeared last week were grossly misleading in terms
of the percentage of new cars bought. An awful lot of people will
gain from this which I think is a good thing.
Q406 Mr Dunne: It also applies to
all cars manufactured since 2001, so it is not just the new cars;
it is a continuing charge for existing ones.
Mr Darling: The old regime applies
pre-2001.
Mr Troup: For all existing drivers
next year, 53% will be no worse off.
Q407 Mr Dunne: That means 47% will
be worse off.
Mr Troup: 45. There must be some
rounding.
Q408 Mr Brady: There are a couple
of aspects of specific Act changes. First of all, can I ask you
why you decided to defer the 2p increase in road fuel duty for
six months?
Mr Darling: Quite simply because
in the current circumstances when people are facing increased
costs and given the fact that the price of oil is so high at the
moment, I thought it was the right thing to do to defer it until
October.
Q409 Mr Brady: Specifically in your
Budget statement, you said that you did it because you wanted
to support the economy now and help business and families by postponing
that increase until October. If the oil price remains as high
or higher in October and if the inflationary pressures on ordinary
families are as great in October and the general economic uncertainty
is as great, would the option remain open to defer it again?
Mr Darling: What I said was I
was going to defer it until October which means that the increase
will come into effect in October. I gave my reasons for deferring
it until that time. I meant what I said. It has been deferred,
not cancelled.
Q410 Mr Brady: Can I press you on
the rationale for it? What I want to get to is, if the purpose
of it is for environmental reasons, then surely any change in
behaviour will be affected by the cost of fuel, not by the proportion
of it that is tax? Looking forward, if we see continuing increases
in fuel costs as a result of the oil price, would you be looking
as a matter of policy to revisit the levels of taxation?
Mr Darling: You are right that
the policy reason for increasing taxation on fuel, rather in the
same way as the policy reason underlies the changes I made in
relation to road tax, is because we want to encourage people to
be more conscious of the environmental costs of driving. That
is why the road fuel will be going up next year and the year after.
I set out my proposals in the Budget but in relation to both those
changes and indeed the changes to vehicle excise duty and the
VED ones start coming in 2009 with further changes in 2010, which
is consistent with what I was saying earlier. Because we think
it is the right thing to do, it is tightening the stance we take
at that time but in all these things every Chancellor will look
at the impact of what is happening on the economy as a whole and
reach a judgment as to what is right. Those are just that; they
are judgments. My judgment was that for this coming period of
six months we should postpone the increase because I think that
will help businesses and families.
Q411 Mr Brady: Clearly this is a
tax that impacts directly not only on families but also has a
very important impact on the road haulage sector which is dealing
in a very competitive market often with European competitors that
have much lower rates of duty payable on fuel in their own economies.
To what extent do you take account of that difference in duty
rates between the UK and competitor countries?
Mr Darling: I took into account
the impact on business, including hauliers, and as you probably
know I met the FTA and the RHA a short while before the Budget.
I listened to what they had to say. The second point is a more
general point and that is the differential in fuel duties here
as opposed to France and Germany and so on and there of course
you have to take into account other factors such as the costs
of hiring people in France and Germany. There are all sorts of
other taxes that hauliers have to pay and, as you know, there
have been several studies done on this over the last seven or
eight years. They show a mixed picture across Europe frankly,
but the reason I took my decision was to support business in general
rather than in response to the particular points that both those
organisations made to you.
Q412 Mr Brady: Can I turn then to
aviation duty? You were very clear in the Budget, saying that
in order to strengthen the environmental signals through taxation
the new per plane duty will be increased by 10% in the second
full year of operation. That 10% will be an increase in the duty
level based on the previous year. It is not based on an estimate
of increased movements. Given that this is all about the environmental
signal that it sends, what is your policy regarding the future
of this duty once the aviation sector is covered by the EU environmental
trading scheme? Will it be your policy to reduce it again or indeed
to get rid of it altogether?
Mr Darling: You may recall in
the pre-Budget report I said that we wanted to move to a tax not
per passenger but per plane and we are consulting on that at the
moment. That consultation finishes towards the end of April. We
will then make a decision on that. There are a number of issues
that need to be resolved. In relation to aviation coming into
the emissions trading scheme which I have long been in favour
of, although it has not quite got there yet—I think it is
going through the European Parliament—if it does come in
then of course we will take account of that alongside the system
of domestic taxation. My position on aviation is quite clear.
I think it does need to meet its environmental costs. I am not
against it. It is quite important for people in this country as
well as businesses which is why when I published the Aviation
White Paper five years ago now I was very clear that, subject
to environmental concerns and to the consultations we needed to
go through, in general supporting a modest expansion was the right
thing to do. I am very clear about that but I am also very clear
that it does have to meet its environmental obligations.
Q413 Mr Brady: Just to be even clearer,
if and when aviation is covered by the European emissions trading
scheme, I think you have just accepted the case that these duties
should be reduced.
Mr Darling: If we are being absolutely
clear, I did not actually say that.
Q414 Mr Brady: That was why I was
pressing you further.
Mr Darling: I said of course I
would look at what we charge in duty as well as the impact of
the ETS and I made the point that I think it is important that
we support the aviation industry but it is also important that
it meets its environmental costs.
Q415 John Thurso: At paragraph 4.69,
the Red Book states, "The government firmly believes it is
unfair that some individuals can arrange their affairs to gain
a tax advantage by shifting part of their income to another person."
Why is it unfair?
Mr Darling: If you have two people
who are employed, they pay through the PAYE system and they have
no choice about it. It just comes off at whatever rate is applicable.
What is unfair is if you get a husband and wife, the husband is
doing all the work and the wife does not make a contribution to
the business and she can utilise her tax advantage in a way that
just would not be open to anybody else.
Q416 John Thurso: Let us define that.
Mr Darling: We had always understood
that that was what the law was until the Arctic case last
summer. I do not have any problem with husbands and wives who
are partners in a business and they are both working. It seems
to me that it is absolutely right that we should recognise that
through the tax system. Where you have the problem is where one
of them is not doing any work at all.
Q417 John Thurso: Let me get to the
core of my question. I appoint my wife as a non-executive of my
company. How do you value that contribution?
Mr Darling: The answer to that
is you have to see what somebody is actually doing.
Q418 John Thurso: She comes to the
board meeting four times a year and I pay her £5,000.
As a non-executive, is that value?
Mr Darling: This is one of the
things that we need to get right in the consultation that we are
carrying on at the moment. What I think is unfair and the whole
point of having a consultation to look at this is, if you get
one couple who happen to be in the PAYE system—one may be
working and one may not—the working man or woman cannot
transfer money to the spouse.
Q419 John Thurso: The business is
paying them both the rate.
Mr Darling: If they are working—
1 1 Ev 84 Back
| 
