Mr.
Timms: I am saying that my right hon. Friend the
Chancellor will make assessments of the right rates of tax in each
Budget. The hon. Gentleman no doubt envisages my right hon. Friend
making that assessment again in 2017, and he is probably right about
that. The Chancellor will make the assessment at the
time. I
want to respond to a couple of points made by other hon. Members in the
debate before I conclude. The hon. Member for Henley was concerned that
the VAT impacts were not accounted for, but they are, in the normal
way. The economic forecast reflects the 50p rate—the
rate was input into the Treasury model; the economic forecast was the
output of that and VAT receipts were then computed in the normal
way. The
hon. Member for Cities of London and Westminster made the point, which
others have made, about how diversion into capital gains could be more
attractive. Differentials between tax on capital and income are not new
in the UK tax system. In the 1970s we had a substantial gap and it has
been a familiar feature of the UK tax system, which is why the statute
book contains a significant amount of anti-avoidance legislation.
Indeed, clause 49 has further provisions, so that can be dealt with as
well.
Mr.
Stuart: Will the Minister give
way?
Mr.
Timms: No, I shall now conclude. By way of summary, the
Government have thought carefully about how the further money required
for the consolidation should be raised. It is right that those who are
in the best position to do so should be asked to make a contribution,
which is what clause 6
achieves.
Mr.
Gauke: On a point of order, Sir
Nicholas.
The
Chairman: I shall take it, but I cannot think what the
point of order is. I shall listen and judge
accordingly.
Mr.
Gauke: It is the convention that income tax rates are set
on an annual basis for the year ahead. Despite the Minister being
pressed, we have had no justification for the necessity of the clause
or what its legislative effect is. Sir Nicholas, can you advise me
whether the clause would therefore appear to be fairly harmless and to
have no impact, and could therefore be enacted next year? Is it
appropriate that such a clause is included in the Bill, when it does
not appear to have any legislative
effect?
The
Chairman: The answer to the final part of the question, in
my opinion, is yes. It appears to me, and I have taken a little advice,
that the clause deals with setting a framework for a higher rate of
tax. The level of that tax can be set in a future Budget. I hope that
that deals with the hon. Gentleman’s point of order. I
understand his point and clearly there is some confusion. The clause,
in my estimation and on the advice that I have taken, is the setting of
a top rate of tax, without specifying that top rate of tax, which could
come in future
legislation. Question
put and agreed
to. Clause
6 ordered to stand part of the Bill.
Schedule
2Income
tax
rates Question
proposed, That the schedule be the Second schedule to the
Bill.
The
Chairman: I am permitting a debate on the schedule,
although the broad idea and the content were discussed in the last
debate and on the Floor of the House. However, the hon. Member for
Hammersmith and Fulham wishes to deal with some technicalities and this
is the right
opportunity. 10.15
am
Mr.
Hands: Some important technical issues arise from the way
in which schedule 2 amends the Income Tax Act 2007. They stem from the
decision to add the definition of the higher rate limit or the new
additional rate of tax to section 10 of the Act, rather than to section
20. Section 20 defines the starting rate and basic rate limits, which
are not defined under section 10. I think that the Government are
amending the wrong section of the 2007
Act. For
example, paragraph 9 of schedule 2 alters the definition of the
“basic rate limit” under schedule 4 to the 2007 Act so
that it now refers to section 10, even though the limit remains
specified under section 20, not section 10. Paragraph 4 of the schedule
tries to amend subsection (6) of section 10 of the 2007 Act
when—to judge from a copy of the 2007 Act that I printed from
the website of the Office of Public Sector Information—there is
no subsection (6) of section 10. I should be grateful for clarification
from the Government. In my copy of the Act, the section ends at
subsection (5) not subsection (6), so I am confused about precisely
what is being
amended. Paragraph
6 of schedule 2 adds the higher rate limit to the scope of section 414,
but leaves the parenthesis referring to section 20 alone rather than
including section 10, where it seems to be more appropriate. In other
words, if schedule 2, which will amend the 2007 Act, is to have
validity, it should refer to both sections 20 and 10. Those are
important points, and it is necessary to have this slightly separate
debate so that such matters do not get lost in the overall political
discussion about the 50p tax rate. For the sake of tidiness, the
Minister might want to consider specifying all the limits under one
section because, at the moment, it seems that the parliamentary
draftsman had a little change of heart and left a few loose ends in the
important provision that amends the 2007
Act.
Mr.
Timms: The hon. Gentleman has raised an interesting and
thoughtful point. I reassure him that the drafting is technically
right. Section 20 of the 2007 Act was repealed by the Finance Act 2008,
which was passed after the 2007 legislation to which he
referred.
Mr.
Hands: I was hoping that the Minister would answer my
question about subsection (6). It does not appear to be in the Act, yet
it is being amended by the schedule. How can that take
place?
Mr.
Timms: As I said, I reassure the hon. Gentleman that the
drafting is technically right. I would be happy to drop him a line on
that specific point and, indeed, copy my response to each member of the
Committee.
Mr.
Hands: On a point of order, Sir Nicholas. Excuse my lack
of familiarity with the situation—I do not come from a legal
background—but surely we cannot just accept an undertaking that
the drafting is correct when we are referring to a subsection that does
not exist. Perhaps we could adjourn so that the Government can come
back with a correct explanation of the whereabouts of the relevant
subsection (6) in the 2007 Act that the schedule is supposed
to be
amending.
Mr.
Timms: I will attempt to help the hon. Gentleman a little
further. I am at a slight disadvantage because I do not have the same
piece of paper in front of me that he has in front of him. I think that
he was describing the 2007 legislation that he had copied
off the internet. The whole of section 20 of that Act was repealed by
the Finance Act
2008.
Mr.
Hands: The Minister says that section 20 was repealed, but
the relevant subsection (6) is part of section 10, not section 20. Is
the right hon. Gentleman saying that section 10 has been repealed? If
it really has been repealed, whatever happened to subsection (6) of the
section that was
repealed?
Mr.
Timms: I have difficulty as the hon. Gentleman is
referring to the 2007 Act, which does not reflect the amendments made
under last year’s Finance Act. If he had in front of him a
version of the legislation, together with all of the amendments made
under last year’s Finance Act, he would see that the drafting
was indeed technically
correct.
Mr.
Hands: I hope that the Minister is right, but I took the
copy of the Act from the OPSI website. Perhaps as a result of this
discussion he might ensure that that website is updated immediately, if
he is right about the amendments to the Income Tax Act 2007 resulting
from last year’s Finance Act. Obviously a number of us are
looking at something that is out of date.
Mr.
Bone: I sit on the Joint Committee on Statutory
Instruments. Only yesterday we reviewed regulations relating in part to
this Bill. There were potential errors that needed correction, so the
Minister should be careful when saying that all the drafting is correct
on
this.
Mr.
Hands: I thank my hon. Friend for that intervention. We
are now awaiting an answer from the Minister and also an undertaking
that the OPSI website will be updated with due
speed.
The
Chairman: Order. I do not know whether the Minister wishes
to reply, but I have just had whispered in my ear, “It’s
a website thing.” May I suggest that the Minister seeks to
clarify that and perhaps then we can move
on?
Mr.
Timms: If the hon. Gentleman looks at last year’s
Finance Act on the same website and takes account of the changes that
made to the draft that he has in front of him, he will get the answer
to his questions.
The
Chairman: I repeat that there appears to be some
clarification on a website. No doubt what has occurred here will be
noted and, if the Opposition are not satisfied, there will be later
stages of this Bill when the matter can be raised
again. Question
put and agreed
to. Schedule
2 accordingly agreed
to.
The
Chairman: Clause 9, which is on value added tax—the
title is “Extension of reduced standard rate and anti-avoidance
provision”—was agreed to in the Committee of the whole
House on Tuesday 12 May, as reported in columns 743 to 774 of
Hansard. We will not be having a rerun of the stand part debate
in this Committee. Schedule 3 contains detailed provision on a
supplementary charge on supplies spanning the date of the VAT change
and minor amendments about orders changing the standard rate of
VAT.
Schedule
3VAT:
supplementary charge and orders changing
rate
Mr.
Gauke: I beg to move amendment 5, in
schedule 3, page 75, line 7, at
end insert— ‘(10) Paragraphs
2(3) and (4) shall not apply where the supplier can demonstrate that
the terms of its contract does not permit additional VAT to be charged
(i.e. if the contract provides otherwise for the purposes of paragraph
21(2) of this Schedule) and that at the time the contract was entered
into the supplier had no intention or knowledge that it would become
connected with the person to whom the supply is
made.’.
The
Chairman: With this it will be
convenient to discuss the following: amendment 6, in schedule 3,
page 77, line 8, after ‘persons)’, insert
‘save for section
839(5)(b)’. Amendment
7, in
schedule 3, page 77, line 19, at
end insert— ‘(c) may only
apply to supplies made after the date of such order or where supplies
have been contracted to be made prior to such order and the contract
allows for additional consideration to be
paid’.
Mr.
Gauke: It is a pleasure to be called by you,
Sir Nicholas, to serve under your chairmanship, and to move
our debate on from the perils of the interweb
thingy. As
you said, Sir Nicholas, clause 9, which relates to the temporary VAT
reduction, was debated in the Committee of the whole House. We
discussed when we should return to a rate of 17.5 per cent. I have no
intention, as you have already guided us, Sir Nicholas, to run over the
discussions that we had about the effectiveness or otherwise of the
reduction, nor about whether 1 January is the appropriate date to
return to 17.5 per cent, as we had a full and interesting discussion
about that subject on the Floor of the House.
Schedule 3
contains a number of detailed provisions required by the structure
created and the Government’s policy of reducing VAT and then
returning it to a higher level over time. I look forward to debating
the details this afternoon, Sir
Nicholas. 10.25
am The
Chairman adjourned the Committee without Question put (Standing Order
No.
88). Adjourned
till this day at One
o’clock.
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