Kamlesh Kumar Patel, Esquire, OBE, having been created Baron Patel of Bradford, of Bradford in the County of West Yorkshire, for lifeWas, in his robes, introduced between the Baroness Massey of Darwen and the Lord Adebowale.
Lord McKenzie of Luton: My Lords, inheritance tax is currently paid on around 6 per cent of estates on death. The Government have announced increases in the tax-free threshold to £325,000 by the end of the Parliament. Moreover, despite rising house prices across the country, evidence shows that in every region, including London, the majority of properties are below the inheritance tax threshold.
Baroness Miller of Hendon: My Lords, does the Minister acknowledge that the yearly increase inthe inheritance tax threshold is lagging far behind the spiralling value of many homes in London and, indeed, elsewhere? Does he also acknowledge that that creates enormous difficulty? He mentioned the figure of 6 per cent. I know of many cases of families who have worked very hard for their family home who are having to sell it because they do not have other resources adequate to meet the tax, or else they have to pay it in lump sums as they go, again causing great hardship to family life.
Lord McKenzie of Luton: My Lords, I believe that the noble Baronesss assertion is potentially misleading: it depends over which period the comparison is made. For example, between 1986 and today, the average increase in house prices has been £155,000, while
10 July 2006 : Column 470
Lord Howarth of Newport: My Lords, while one must have some sympathy with the concerns articulated by the noble Baroness, Lady Miller, is it not the case that, were investment in owner-occupied homesalready free of capital gains taxto be further privileged by being exempted from inheritance tax significantly up the scale, the effect would be to fuel house-price inflation and divert more capital from investment in industry and other productive assets that are in the interests of everyone?
Lord McKenzie of Luton: Yes, my Lords, I agree. If you picked out any particular asset to give it a privileged treatment for inheritance tax purposes, it would have the impact of distorting the market, as my noble friend suggests.
Lord Newby: My Lords, does the Minister accept that we are in a highly unsatisfactory situation in which the very rich can avoid inheritance tax altogether by careful planning, whereas the merely affluent are increasingly being caught by it? Would the Government consider including lifetime gifts in the taxable sum so that the threshold could be raised, the rate of tax cut and avoidance made much more difficult?
Lord McKenzie of Luton: My Lords, it is important that avoidance is tackled throughout our tax arrangementsthe Government have been diligent in doing that. As to potentially exempt transfers, we have tabled no proposals to change the rules. Obviously the tax system is a matter for the Chancellor at the time of the Budget. I understand that the issue is getting some attention from the Liberal Democrats, and I can understand why they are, I think, some £20 billion short on their tax plans.
Lord McKenzie of Luton: My Lords, I am not sure that the noble Baroness has interpreted correctly what I might have said or was seeking to say. It is important that we have rules for taxing capital that passes on death or by way of giftit is a matter that successive Governments over 100 years or more have addressedand it is appropriate that the system is fair. As it is, there is a range of reliefs available under inheritance tax, one of which has just been referred to. There is the spouse exemption, business property relief, agricultural property relief and othersa generally generous set of reliefs is available. Only some 6 per cent of estates pay inheritance taxabout 37,000 estates each year. That has been a broadly stable statistic over a number of years.
Lord Campbell-Savours: My Lords, does not the very existence of inherited wealth grossly distort the property market by artificially inflating prices and denying those who do not receive inherited money equal access to the property market with those who do? I say that as someone who, on principle, rejects and refuses to receive any inherited wealth whatever.
Lord McKenzie of Luton: My Lords, it is right that there should be arrangements to bring inherited wealth within the tax net. That seems to be entirely appropriate, and it is what inheritance tax does. Of course, irrespective of the inheritance tax system, household wealth has increased under this Government by something like 60 per cent in real terms since 1997.
Lord Redesdale: My Lords, what plans do the Government have for trust funds that have been set up to pay inheritance tax? There is some concern that they would be eligible for capital gains tax. Considering that those trust funds are set up for the sole purpose of making sure that the Chancellor receives the money for inheritance tax, would that not be rather unfair?
Lord McKenzie of Luton: My Lords, the noble Lord might be referring to the current changes in the Finance Bill. The thrust of those changes is to make sure that interest in possession trusts and accumulation and maintenance trusts in particular are not exploited, as they have been in the past, for tax avoidance purposes. Apart from the more targeted exceptions in the legislation, the thrust of those arrangements is to align the system with the mainstream system for trusts, which is what discretionary trusts attract.
Lord Roberts of Conwy: My Lords, what is the Governments estimate of the increase to that 6 per cent, or 37,000 estates, as a result of the recent increases in house prices? A considerable increase must be anticipated.
Lord McKenzie of Luton: My Lords, that depends on a number of factors. I stress again that part of the problem with the current debate is that people assume that current house prices immediately fall into the tax net. That is quite apart from the fact that there is a threshold below which tax is not paidtax is paid only above the threshold. It depends on what people do over their lifetime with their assetsyou have to take the long-term view. Historically, about 6 per cent of estates have fallen into the inheritance tax net. With regard to the extent to which capital taxes are featured in our system, it has been below 0.3 per cent of GDP over something like 30 years, or 1 per centor slightly lessof total tax take over 30 years.
The Secretary of State for Constitutional Affairs and Lord Chancellor (Lord Falconer of Thoroton): My Lords, the review of the Rice case by Her Majestys Chief Inspector of Probation has shown that the Human Rights Act may be being misapplied by the probation and parole systems by giving insufficient importance to the states primary responsibility to provide public protection. Some court judgments have led to public debate about the workings of the Act. We are reviewing, overall, the working of the Act and will do whatever is necessary to ensure that the Human Rights Act works as it is supposed to, but we will not repeal the Act, and we will not leave or act inconsistently with the convention.
Lord Tebbit: My Lords, in a Written Answer given to the noble Lord, Lord Lester, on 5 July, we were told that the Prime Minister had asked the Home Secretary to consider whether legislation was needed to require our judges to be as compliant with the wishes of government as those on the Continent. Is that an implied criticism of our judges or of judges on the Continent?
Lord Falconer of Thoroton: My Lords, I am not sure that the wording of that Answer was precisely as the noble Lord saidI will need to check it. No, it is not a criticism of the judges; they do that which the law requires them to do. If that gives rise to concern, the right way to deal with it is to change the law, but that must be done in accordance with the terms of the convention, which we as a country substantially wrote and signed up to 50 years ago.
Lord Lloyd of Berwick: My Lords, does the noble and learned Lord agree that the meaning of the European Convention on Human Rights is a question for the judges and, ultimately, for Strasbourg, and not for Her Majestys Ministers?
Lord Falconer of Thoroton: My Lords, I do. That is what is meant by the independence of the judiciary. Problems with the enforcement of the convention very often arise, as I indicated in my Answer, because of misunderstandings and misapplications of the Act, as in the tragic case of Naomi Bryant, who was murdered by somebody who should not have been released. The Chief Inspector of Probation said that he might have been released because of misapplications and misunderstandings of the Act.
Lord Goodhart: My Lords, do the Government accept that human rights legislation is most important not when it is popular but when it is unpopular? Do they also accept that, given the extent to which the
10 July 2006 : Column 473
Lord Falconer of Thoroton: My Lords, I agree strongly with the last point made by the noble Lord: the Human Rights Act does not inhibit any rational and robust approach to crime and terrorism. Indeed, having a clear set of rules makes it possible to take robust measures because, with a clear set of parameters, you know where you stand, and tough measures can be taken because there are clear safeguards.
Lord Tomlinson: My Lords, my noble and learned friend agreed with the noble and learned Lord, Lord Lloyd of Berwick, about the importance of the European Court of Human Rights in Strasbourg. Will he therefore undertake to look at the report produced by the noble and learned Lord, Lord Woolf, which drew attention to the serious underfunding of that court, and reflect on it to see what action Her Majesty's Government need to take to ensure that it is properly financed?
Lord Falconer of Thoroton: My Lords, my noble friend makes an important point. I have read the report of the noble and learned Lord, Lord Woolf, and the other people engaged in work with him. There are unacceptable delays in the European Court. There are too many cases, and they often come from countries that are quite new signatories to the Council of Europe treaty and the convention. The European Court must decide how it deals with that problem, and we will provide any assistance that it asks for.
Baroness Wilcox: My Lords, if, as the Prime Minister rightly said, the balance between the criminal and the victim has gone wrong in the past eight years, is that not good cause to review the part played in that by the Human Rights Act?
Lord Falconer of Thoroton: My Lords, the Prime Minister was referring to things such as the inability before the 2003 Act to have indeterminate sentences to provide proper public protection in many cases or the inability to look into people's bank accounts for evidence of money laundering, for example. We also need to ensure that what happened in the Rice case, as described by the Chief Inspector of Probation, does not happen again. I am glad that the noble Baroness could take time off from hugging a hoodie to come and ask that question today.
Will my noble and learned friend help me and advise the House on whether it would be possible for some of my former colleagues in the House of Commons to go to the European Court in Strasbourg if some future Government were to try to remove
10 July 2006 : Column 474
Lord Stoddart of Swindon: My Lords, I have two questions for him. First, how often, if at all, is the European convention reviewed? Secondly, can I ask him about activities, particularly by the police, that may bring the convention into disrepute? I am thinking of the man on a tin roof who was bombarding everyoneand peoples propertywith stones. To see that he had his human rights, the police, far from helping to bring him down, sent up not only food but cigarettes to him. That really brings things into disrepute.
Lord Falconer of Thoroton: My Lords, I am still noble and learned. When my noble friend the Leader of the House said that the independents should ask a question, she plainly meant the noble Lord, Lord Tebbit, not the unindependent anti-European party. The convention is never reviewed, although its workings are reviewed, and it is disgraceful that the noble Lord, Lord Stoddart of Swindon, presses on with that canard about the Human Rights Act requiring the man on the roof to be given cigarettes and food. It did notit had nothing to do with it.
What is their response to the report by the Audit Commission, Public sports and recreation services, that school sports facilities are not being used to full effect to provide community sports and recreation facilities which are fit for purpose.
Lord Davies of Oldham: My Lords, the Government welcome the report, which, while highlighting some legitimate challenges, recognises that education facilities
10 July 2006 : Column 475
Lord Addington: My Lords, I thank the Minister for that Answer. I turn his attention to another part of the report, which states that successful strategic management between sports and recreation services and health and education sectors is not common. As the noble Lord, Lord Warner, assured us on Thursday that the Department of Health was taking a lead in this, can the Minister tell us exactly what guidance has been given to the Department for Education and Skills by the Department of Health to tackle obesity and other problems, with regard to recreational activities, and what weight that guidance has?
Lord Davies of Oldham: My Lords, the noble Lord will recognise that the DCMS and the Department for Education and Skills are on course to hit an ambitious target of providing enhanced sports facilities and increased provision for sport in school by 2010. The noble Lord will know, as he has presented this case frequently to the House, that the best way to tackle ill health among children and to prevent obesity is to ensure that young people get the opportunities to enjoy sport and exercise.
Baroness Billingham: My Lords, the Audit Commission rightly draws our attention to the potential of state schools to provide leisure and recreation facilities for all of us. However, given the fact that independent schools frequently have outstanding sporting facilitiesvery level playing fields, in most casesand are in receipt of charitable status, which gives them significant financial benefit, what are the Government doing to open up those facilities for everybody, so that everyone can benefit from them and not just the privileged few?
Lord Davies of Oldham: My Lords, my noble friend will be well aware that the Government are concerned to develop school sports partnerships that guarantee that young people get the benefit of private resources dedicated to the enhancement and provision of sport, whether that involves private clubs or, in some cases, private schools. The progress on the latter may not be as rapid as we would wish, but some progress is being made, and we intend to encourage private independent schools to make their contribution to local school partnerships.
|Next Section||Back to Table of Contents||Lords Hansard Home Page|