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Lord Inglewood: My Lords, we are aware of the scale of the destruction and the terrorism that has been taking place in south-east Turkey. That is at the core of our anxieties about human rights abuse that is taking place in Turkey. We are anxious to put pressure on the Turkish Government, in particular to encourage those who are in favour of internal constitutional reforms in Turkey, which will bring about the kind of changes which we all desire to see. But as part of that process, we are most anxious to ensure that we do not push matters so far that those who hold those opinions lose their positions of power.

Baroness Elles: My Lords, is my noble friend aware of the report on the 1,600 missing persons from Cyprus who were taken by the Turkish military authorities? In the discussions on human rights and the relationship between the EU and Turkey, will my right honourable friend raise that matter in order to secure a definite answer from the Turkish Government about the fate of those missing persons?

Lord Inglewood: My Lords, I am sure that my right honourable friend the Secretary of State is aware of those matters, but I shall have to write to the noble Baroness with a precise answer to her question.

Lord Kennet: My Lords, is there not another obstacle to Turkey joining the ranks of, as it were, normal nations which is even more powerful than any that has yet been mentioned; that is, the continued occupation of Northern Cyprus against UN security resolution after resolution and against the opinion of the whole world? That is an occupation which is not recognised by any country.

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Should not the rectification of that injustice figure high on any list which is put to the Turkish Government by the Secretary of State?

Lord Inglewood: My Lords, I assure the noble Lord, Lord Kennet, that that matter is high on the Government's agenda. We are working hard to support the United Nations Secretary General's efforts to bring about a solution to the Cyprus problem. That is one of the matters which will, we hope, be raised today with the Turkish Foreign Minister.

Lord Ennals: My Lords, what are the circumstances in which the Secretary of State is seeing the Turkish Foreign Minister? Secondly, will he be applying his time and arguments specifically to the Kurds and the circumstances in which they are denied both the right to speak and use their own language? That restriction would be absolutely intolerable for a Welshman in the United Kingdom.

Lord Inglewood: My Lords, my right honourable friend the Secretary of State is meeting the Turkish Foreign Minister today, together with representatives from the French, Italian and German Governments. They are discussing Turkey's relationship with the West. With regard to the use of the Kurdish language, Turkey's position is contrary to the UN Convention on the Rights of the Child. While the Turkish Government have not subscribed to that convention we urge them to do so. In turn, that would mean that the matters about which the noble Lord, Lord Ennals, complains should come to an end.

Baroness Blackstone: My Lords, will the Minister tell the House what position the Government take on the Turkish Government's recent request for a substantial loan from the Council of Europe to build so-called collective villages for Kurdish refugees whose homes have been destroyed deliberately by the Turkish Army? In the circumstances, would it not be right to reject that cynical request? Will the Minister tell the House whether his right honourable friend the Secretary of State will be discussing that with the Turkish Foreign Minister today?

Lord Inglewood: My Lords, the request to which the noble Baroness refers has been made relatively recently to the social fund of the Council of Europe. I expect that my right honourable friend will be asking his Turkish counterpart for background information about that proposal so that he can decide on its merits.

Finance Bill: Schedule 17

3.17 p.m.

Lord Eatwell asked Her Majesty's Government:

    Whether they will reconsider Schedule 17 to the Finance Bill, given that the new proposals contained in that schedule to levy taxation on the non-existent income on interest-free loans will have a considerable impact on the many charities which benefit from such loans.

The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Henley): My Lords, as drafted at present that provision could impose a tax

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liability on a person who lends money to a charitable trust. I can announce, however, that my right honourable friends will be bringing forward an amendment at Committee stage in another place to take loans to charities outside the new charge.

Lord Eatwell: My Lords, I am most grateful for the Minister's reply. I am glad that he has responded to the pressure which the Labour Party brought to bear in relation to the matter. Will he confirm also that Schedule 17, as currently drafted, would result in a parent who offers an interest-free loan to his children to purchase a house being taxed on the non-existent income? Is that part of the schedule also to be reconsidered?

Lord Henley: My Lords, I can confirm that we are making the change announced. It was not as a result of pressure from the noble Lord or from the party opposite. I notice that he had about four attempts to get his Question right with the final draft of the Question appearing on the Order Paper only this morning. The noble Lord is wrong on the point he made. This applies only to loans to trusts and does not apply to a loan that someone makes to another individual, whether interest free or not.

Lord Eatwell: My Lords, I attempted to help the noble Lord by ensuring that he received counsel's briefing before the Question was tabled. I should have thought that he would have understood it and would therefore discover that Section 660C does indeed apply to loans between persons, such as loans from parents to children.

Lord Henley: My Lords, I am grateful for the advice I received from counsel, Mr. Robert Venables. I have read and studied it, as have legal advisers in the Treasury. I have the most enormous respect for such an eminent lawyer, but on that point he is wrong, as is the noble Lord.

Lord Boyd-Carpenter: My Lords, I wish the noble Lord, Lord Eatwell, many happy returns of the day. Perhaps I may say to my noble friend that he should be congratulated on the extremely sensible answer that he has given, which reflects great credit on the Government's financial administration.

Lord Henley: My Lords, I am grateful to my noble friend for those comments. I shall certainly pass them on to my right honourable friends in the Treasury. I echo also the kind remarks my noble friend made as regards the noble Lord, Lord Eatwell.

Lord Bruce of Donington: My Lords, is the Minister aware that it hardly lies in his or the Government's mouth to criticise corrections to Questions that are tabled in the interests of the House as a whole? Would it not be better if the Government paid far closer attention to the accuracy of their replies and the information contained in them?

Lord Henley: My Lords, even Homer nods, as they say. The important thing is that we have got it right, or we intend to get it right by means of an amendment. Just as we got it wrong in making the

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error in advance, I was pointing out to the House that the noble Lord, Lord Eatwell, took three attempts to get his Question right.

Lord Peston: My Lords, will the Minister clarify his Answer? It is most important. Did the noble Lord actually say that if any noble Lord—or, indeed, anyone else—lent a sum of money to one of his children at zero interest, no tax would be payable? Can the Minister confirm in simple terms that the answer to the question is: no tax will be payable?

Lord Henley: My Lords, no tax would be payable on notional interest in such a case. Schedule 17 deals with the case of loans, interest free or at a lower rate of interest than the commercial rate, to a trust and not to an individual.

Lord Dubs: My Lords, while we welcome the fact that charities are to be exempt, can the Minister indicate whether the increased tax that is intended in the schedule to the Finance Bill would apply to interest free loans made to organisations which are not charitable?

Lord Henley: My Lords, the measure is not designed to increase tax. Our original thought was that it would probably have more or less no effect whatever; in fact, it might raise a certain amount of tax. It is merely to implement the proposals of the Chancellor of the Exchequer to simplify the income tax benefit to settlor rules. For tax purposes, those rules treat the income of trusts and other settlements as the settlors in certain circumstances.

Lord Barnett: My Lords, would the Minister care to check the answer he gave to my noble friend Lord Peston? If the sum of money loaned was a substantial one, would it still not be liable to tax of any kind?

Lord Henley: My Lords, I am trying to make clear the fact that the notional interest would not be taxed under the provisions about which we are talking. They purely relate to transfers to trusts; they do not relate to transfers to individuals.

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