Mr.
Gauke: The Minister makes the point that people who lose
out because of, to use a phrase he has used a number of times this
morning, fiscal consolidation, will feel aggrieved. But does he not
agree that they will feel particularly aggrieved if a tax rise is
contrary to an express commitment in a
manifesto?
Mr.
Timms: In a period in which we are seeing an utterly
unprecedented crisis in the world economy, I think that people are
looking to the Government to take the right decisions and safeguard the
economy, families and businesses. The situation that we are in at the
moment is unprecedented and requires very bold measures on the part of
the Government. We have put bold measures in place and this is one of
them. People will recognise that that is the right thing to
do.
Question
put and agreed to.
Clause
4 accordingly ordered to stand part of the
Bill.
Clause
5Abolition
of personal reliefs for
non-residents
The
Chairman: Clause 5 is a one-line clause that introduces
schedule 1. Both clause and schedule relate to the abolition of
personal reliefs for non-residents. It might be more convenient for the
Committee to have a general debate as if those two things were being
considered together under clause 5, as long as that does not cause any
problems.
Question
proposed, That the clause stand part of the
Bill.
Mr.
Timms: As you said, Mr. Atkinson, clause 5
introduces schedule 1. It achieves a more consistent treatment in the
provision of personal allowances and reliefs from income tax for all
non-UK residents and non-European economic area citizens, thereby
ensuring that the legislation complies with the Human Rights Act
1998.
The clause
removes entitlement to personal allowances and reliefs from those who
currently enjoy them solely on the grounds of Commonwealth citizenship.
I am confident that the large majority of non-resident Commonwealth
citizens who currently claim UK personal allowances and reliefs will
still be entitled to do so through other provisions. Those will include
double taxation agreements that allow non-resident, non-EEA citizens to
claim UK personal allowances and reliefs. Among other things, the
agreements provide for Commonwealth citizens who have become or served
as members of the British armed forces, to get that
entitlement.
The opening
paragraph of schedule 1 removes most of the personal allowances and
reliefs in question. Those include personal allowances, married couples
allowance, blind person’s allowance and life assurance premiums.
Having mentioned blind person’s allowances, I should point out
that it is unlikely that anyone would be affected by that change, as
the current rules for eligibility for that allowance are already
predicated on a person living in the UK.
Paragraphs 2
and 3 provide for a number of consequential amendments in relation to
life assurance premiums and limits on relief for those premiums. That
has the effect of removing entitlement from non-resident individuals
who currently claim them solely by virtue of being Commonwealth
citizens. The remaining paragraphs make the consequential changes
necessary to ensure consistency through all the relevant tax
legislation on this matter.
The result of
the changes taken together is that non-UK-resident Commonwealth
citizens will no longer qualify for personal allowances and reliefs by
reference to their citizenship status alone. It does not affect their
entitlement to personal allowances and reliefs under other qualifying
conditions or double taxation agreements. The amendments in the
schedule will take effect in the tax year 2010-11 and subsequent tax
years. I commend the clause and schedule to the
Committee.
Mr.
Hands: I thank the Minister for his explanation of what at
first does not appear to be a particularly controversial provision.
However, there is a lot of controversy embedded in this, and there are
a large number of people to whom this country owes something of an
obligation who are likely to be affected. I would be grateful to hear
what estimate the Minister has of the number of persons likely to be
affected.
As the
Minister said, this will principally affect 14 different
Commonwealth countries with which the UK does not currently have a dual
taxation treaty. I understand those 14 countries to be the Bahamas,
Cameroon, the Cook Islands, Dominica, the Maldives, Mozambique, Nauru,
Niue—a country of which I have not heard, for which I must
apologise to the citizens of Niue—Saint Lucia, Saint Vincent and
the Grenadines, Samoa, Tanzania, Tonga and
Vanuatu.
The
Lord Commissioner of Her Majesty's Treasury (Mr. Bob
Blizzard): The hon. Gentleman obviously had no
constituents affected by the phone scams of a few years
ago—constituents were getting huge bills from BT, running up to
hundreds of pounds, for mysterious phone calls made to Nauru.
Unfortunately, BT never recompensed those
people.
Mr.
Hands: I thank the hon. Gentleman for his telling and
knowledgeable intervention. He is right—I had a constituency
case of someone running up such bills on a phone line to Vanuatu,
rather than
Nauru. Some
of the 14 countries involved are pretty mainstream, larger countries,
such as Tanzania, Cameroon and the Bahamas. A certain number of
residents of those countries will have previously worked in the UK,
which I shall come on to in due course, but I would suggest a fair few
of my constituents would be among them—some of the
Minister’s constituents may also be affected. It is worth
pointing out that the countries that we talked about cover a pretty
vast range of likely income areas, ranging from the Bahamas—I am
not for one moment suggesting that the Bahamas is entirely full of
wealthy people seeking to avoid tax, but on a per capita basis it is
doing rather well—to Tanzania and Cameroon, which are very much
developing
countries. I
want to raise a few of the points made by the Low Incomes Tax Reform
Group in reference to clause 5. The group is concerned that people who
have served the United Kingdom in the past, returned to their home
countries and become pensioners will suddenly find themselves liable to
UK taxation perhaps for the first time since they were in the UK. It
goes on to mention the Ministry of Defence, recruiting for the
military, and the NHS, for
nurses: “Non-resident
individuals will no longer qualify for reliefs and allowances including
the basic and age-related personal allowances, married couples’
allowance, blind person’s allowance and relief for life
assurance solely by virtue of being a Commonwealth citizen. These
allowances are particularly relevant for pensioners.”
For the
Government to introduce a penalising measure seems slightly bizarre.
For example, many from the SS Windrush generation, came over
and served in this country in public service in the 1950s and
’60s, and will have now returned to islands such as St. Lucia,
St. Vincent and the Grenadines. I would be grateful to know
whether the Minister has considered that and whether he has had any
discussions with either of the Governments involved or, for example,
with any of the SS Windrush support groups that are still around in
this country. Going back to the
LITRG: “It
does seem perverse that a supposed action in the name of Human Rights
brings a range of low income pensioners in some of the poorest
countries of the world into the ' UK tax net ‘out of the
blue’.” I
have a few questions for the Minister. Most obviously, why is he
introducing the set of measures now? What specific proposals does he
have to negotiate double taxation treaties with the 14 countries that
are not covered but which are affected? What discussions has he had
with the Governments of the 14 countries? What are his feelings about
creating two classes of Commonwealth citizen? Our relations with the
Commonwealth are important, but the measure will suddenly create two
different classes of Commonwealth citizens. How many people in each of
the 14 countries will be affected and what study has he done of the
type of people who will be affected? Is the reason why he changed the
rules really that the old rules were not compliant with the Human
Rights Act, which was what was implied in the guidance notes? Finally,
how much will all those measures actually raise? The Minister needs to
be ready to answer a large number of questions for the benefit of the
Committee. 1
pm The
Chairman adjourned the Committee without Question put (Standing Order
No.
88). Adjourned
till this day at half-past Four
o’clock.
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