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Session 2008 - 09 Publications on the internet General Committee Debates Finance Bill |
Finance Bill |
The Committee consisted of the following Members:Liam Laurence Smyth,
Committee Clerk † attended
the Committee Public Bill CommitteeThursday 21 May 2009(Afternoon)[Mr. Peter Atkinson in the Chair]Finance Bill(Except clauses 7, 8, 9, 11, 14, 16, 20 and 92)Schedule 3VAT:
supplementary charge and orders changing
rate Amendment
moved (this day): 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.’.—(Mr.
Gauke.) 1
pm
The
Chairman: I remind the Committee that with this
we are taking 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.
David Gauke (South-West Hertfordshire) (Con): It is a
pleasure to welcome you back to the Chair, Mr. Atkinson. As
I am sure you would expect, Sir Nicholas Winterton kept us
in order this morning in his inimitable way, but we are delighted to
see you back.
As I stated
this morning, and as Sir Nicholas pointed out, we debated clause 9,
which deals with the temporary cut in VAT from 17.5 per cent. to 15 per
cent., on the Floor of the House, and I have no intention of running
through all those arguments again. I will merely add that those of us
who were concerned about the state of the public finances take no
reassurance from this morning’s news that public sector net
borrowing has increased substantially for April and is at record
levels, and that the ratings agency Standard and Poor’s has
revised its outlook for the UK to negative, due to borrowing concerns.
The agency has said that Britain’s triple A rating for its
Government bonds was at risk if the next Government did not produce a
credible plan to put Government debt on a “secure downward
trajectory”. Our concerns about a discretionary fiscal stimulus
appear to be further vindicated.
The
Financial Secretary to the Treasury (Mr. Stephen
Timms): The hon. Gentleman will know that Standard and
Poor’s has reaffirmed the triple A rating for the UK, but has he
also seen that, since the publication of the Standard and Poor’s
view, both Moody’s and Fitch Ratings have also reaffirmed their
view of a stable outlook for their triple A rating? Standard and
Poor’s is on its own on
that.
Mr.
Gauke: I am grateful for that intervention; none the less,
the announcement from Standard and Poor’s this morning is a
timely warning that the public finances are in a perilous state and
that the current level of borrowing is clearly unsustainable. I know
that you do not want me to dwell on whether the VAT cut was wise,
Mr. Atkinson, so I will turn to schedule
3. Given
the changes in VAT and the fact that it will return to 17.5 per cent.
on 1 January, we accept that the Government’s concern about
potential forestalling and their desire to prevent the advancing of the
time of supply on standard rated supplies are legitimate. Consequently,
and given where we are, we have no objections to the measures in
schedule 3, as they are perfectly reasonable.
However, the
Law Society has brought a couple of concerns to our attention, and it
might help the Committee if I outline them. We have sought to bring the
Committee’s attention to those concerns by tabling amendments 5,
6 and 7. If the anti-forestalling provisions in schedule 3 are to
apply, certain conditions that need to be fulfilled, which are set out
in paragraph 2. The first condition is
that “the
supplier and the person to whom the supply is made are
connected”. The
second condition is that the relevant considerations come to more than
£100,000. The third condition is that
“a prepayment in
respect of the supply is financed by the supplier or a person connected
with the
supplier” I
am simplifying the matter a little, but that probably serves the
purposes of the Committee. The Law Society’s concern relates to
condition A. It says that the test of connection, already wide, has
been extended by a recent case, Kellock Brown. Indeed, the society has
raised the possibility that some banks in partial public ownership and
indeed, the state may be connected for the purposes of the test. I will
be grateful if the Minister can respond to that
point. There
may be a danger of condition A applying more broadly than is intended.
Our amendments are intended to solve the potential problem of the
provision applying where the supplier had no intention or knowledge
that they would become connected to the person to whom the supply is
made—people may find themselves caught up in the provisions when
that was not the intention. We tabled amendments 5 and 6 to highlight
that issue and obtain the Government’s
response. Our
second concern relates to paragraph 10 of the schedule. Our first point
is that we are back in the era of Henry VIII clauses, in that it will
be possible to amend primary legislation by order. That is something
about which, traditionally, the House as a whole has always been
concerned. Those of us who served on the Committee on the Banking Bill
will remember similar concerns being expressed, and the Economic
Secretary and I debated Henry VIII clauses at some length. There is
recognition of the potential problem with parliamentary scrutiny arising
from any Henry VIII clause. In the case of the Banking Bill, the
Minister set out his reasons for why there might be a need to amend
legislation to deal with particular cases—indeed, if I recall
correctly, that section of the Banking Act 2009 is now being used quite
extensively in relation to the rescue of Dunfermline building society.
The use of Henry VIII clauses is, none the less, a concern that hon.
Members on both sides of that Public Bill Committee raised, and I raise
it again
here. The
second element of concern about paragraph 10 is that there is nothing
in the paragraph that would prevent the Treasury from making an order
that is, to some extent, retrospective—nothing that would
prevent an order from applying to a supply that occurred before the
date of the order. That concern was also raised by the Law
Society, which we attempt to address in amendment 7, which
provides that any order made under paragraph 10 should apply only to
supplies made after the date of the order, or where there is a
contractual provision enabling it to be varied subsequently. We think
that that answers the concern. It may well be that the Government would
not, in any circumstances, use the order in a retrospective manner, and
we would welcome an assurance to that effect. Otherwise, I would be
grateful if the Minister outlined the circumstances in which the
Government would make an order that was not in compliance with
amendment 7. That would be helpful to the
Committee. Subject
to those technical points, we have no particular objections to schedule
3, for the reasons that I outlined earlier. However, we think that we
have expressed legitimate concerns that we hope the Minister will be
able to answer, perhaps by accepting the
amendments. Mr.
Jeremy Browne (Taunton) (LD): I shall not speak at length,
Mr. Atkinson, because the points that I had wished to make
were either made in detail in the main Chamber of the House, or made a
few moments ago by the hon. Member for South-West
Hertfordshire.
My party also
did not approve of the temporary VAT cut. We did approve of a fiscal
stimulus, but we thought that the money could be better spent than on a
reduction in sales tax. That reduction is worth approximately
£1 billion a month, depending on what people choose
to buy. That is a substantial amount of money, which, as I have said,
we felt could have been spent more constructively. Having said that, we
are where we are. The Government have implemented that policy of a
reduction in sales tax and it seems reasonable to us that the
anti-forestalling measures outlined in schedule 3 be put into effect to
ensure that people pay the tax that they are expected to
pay.
The
Conservative amendments strike me as reasonable, but I would be
interested to hear the Minister’s response to them. He may feel
that there are practical difficulties and that the amendments are too
loosely defined in their scope. If that is the case, they may not be
appropriate. I look forward to hearing what the Minister has to say on
those amendments, but my party supports the schedule as a
whole. John
Howell (Henley) (Con): I only have a couple of questions
for the Minister. My hon. Friend the Member for South-West
Hertfordshire mentioned the concerns
of the Law Society. I would like to mention the concerns of the
Institute of Chartered Accountants in England and Wales.
Some of the
institute’s concerns overlap with those of the Law Society, such
as the wide definition of “connected persons”. However,
the ICAEW raised another question that is valid to ask here. What is
the basis of the assumptions underlying the schedule about the
potential scale of abuse? The ICAEW makes a very good point that,
without that type of evidence, the nine pages of anti-avoidance
legislation that are before us seem a disproportionate response to what
is only a 2.5 per cent.
adjustment.
I am grateful
to all the hon. Members who have spoken today to express general
support for the measures in the schedule. As we have discussed, the
reason for the temporary reduction in VAT was to deliver a fiscal
stimulus to the economy in a timely, targeted and temporary way, and
that stimulus is working. The hon. Member for South-West Hertfordshire
drew attention to some economic news this morning. He may also have
noticed the Office for National Statistics’ retail sales figures
published this morning showing continuing—indeed, I would say
remarkable—strength. Retail sales volume is up 2.6 per cent. on
the year. In very stark contrast to what happened to retail sales
figures in the last recession, over the past six months retail sales
volume has grown by almost 2 per cent. In the last half of 1991, which
is a comparable period to now, that figure fell by 2 per cent. So that
4 per cent. difference in retail sales volume over a six-month period
is the difference.
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