Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Mackay of Ardbrecknish: My Lords, my amendment, Amendment No. 154, is grouped with the amendment. As the Minister rightly supposes, the amendment has been on the Marshalled List for some time and has been overtaken by his amendments.

Before I turn to these amendments, perhaps I may say that the Aberdeen Chamber of Commerce sent me a copy of the correspondence. I am sure that it will be pleased that the noble Lord, Lord Hughes of Woodside, has put its view on the record. It is also nice that the noble Lord has contributed. He has the honour of being the first person on the Government Back Benches who has shown any interest in this important Bill throughout the day. If my memory serves me aright, there was only a brief intervention from the noble Lord, Lord Desai, during the first day of Report. I was about to say that the Liberal Democrats have been quite active. Perhaps the noble Lord, Lord Steel, wishes to intervene.

Lord Steel of Aikwood: My Lords, the noble Lord is being a little unfair. He is forgetting the contribution of the noble Lord, Lord Hogg, earlier in the proceedings.

Lord Mackay of Ardbrecknish: My Lords, I cannot remember the contribution of the noble Lord, Lord Hogg. Perhaps it was on the first day of Report--or perhaps in Committee.

Noble Lords: Today!

Lord Mackay of Ardbrecknish: My Lords, it must have been when I was not present and the lawyers were having a go. My welcome to the noble Lord, Lord Hughes, is therefore not as fulsome as it would have been if he had been the first to contribute. I am glad to see that two Back-Bench Labour Members have decided that it is an important issue.

Lord Steel of Aikwood: My Lords, I am tempted to say that if the noble Lord came more often he would not make these mistakes.

Lord Mackay of Ardbrecknish: My Lords, if I came more often I might be tempted to make longer speeches!

I am grateful to the Minister for his undertaking in Committee that he would consider the matter of residence; and for his assurance that he would meet the three groups, which he did. Like them, I am satisfied that the difficulty we all appreciated in the initial definitions of residency have now been dealt with by the Government. I think that it is unlikely that anyone will be caught who is not to all intents and purposes resident in Scotland simply by staying overnight in Scotland for 183 days when a day is defined as just the end of the day. I hope that if that happens the Inland Revenue will be able to use its discretion.

I do not wish to go into the "if"s and "but"s. However, I can foresee that an individual might be caught. I refer to people such as the stewardesses on the

28 Oct 1998 : Column 2059

first flight down from Scotland in the morning who stay overnight in Scotland in order to be on that plane. It is not a plane I take often. They might run up 183 days. No one has come forward with an example of someone who might be in that category and whom we would not want to be caught as a Scottish taxpayer. I am fairly content that 183 days more than meets the objections we put forward at Committee stage.

Again, I am grateful to the Government for listening to the arguments put forward and for responding. I welcome Amendment No. 153A.

Lord Sewel: My Lords, with the leave of the House, perhaps I may respond to the points raised by the noble Lord, Lord Selkirk of Douglas, about the 183 nights. Travellers would have to clock up 183 nights in Scotland. I believe that spending so many nights in Scotland is a clear demonstration of strong affection towards Scotland. I should have thought that such people would be more than happy to be classified to be Scottish taxpayers.

Secondly, I confirm that the Bill has no effect on the tax liabilities of charities. I also confirm that any orders provided for in the Bill will first be the subject of consultation. I hope that the noble Lord is satisfied.

On Question, amendment agreed to.

Lord Sewel moved Amendment No. 153B:

Page 32, line 21, leave out ("elsewhere in the United Kingdom at the beginning or") and insert ("in the United Kingdom at the").

On Question, amendment agreed to.

[Amendments Nos. 154 and 155 not moved.]

Clause 72 [Changes to income tax structure]:

[Amendment No. 156 not moved.]

Clause 73 [Accounting for additional Scottish tax]:

[Amendment No. 157 not moved.]

Clause 74 [Effect of tax reduction for Scottish taxpayers]:

[Amendment No. 158 not moved.]

Clause 75 [Supplemental powers to modify enactments]:

[Amendment No. 159 not moved.]

Lord Mackay of Ardbrecknish moved Amendment No. 159A:

After Clause 75, insert the following new clause--

Income Tax relief

(" .--(1) Income tax relief at the United Kingdom basic rate will continue to be applied to personal pensions and free standing additional voluntary contributions.
(2) Where the Scottish Parliament passes a resolution to vary the basic rate of income tax in Scotland, the different sums in tax relief between the United Kingdom basic rate of tax and the Scottish varied rate of tax will be assessed direct on the individual taxpayer and collected direct from, or paid to, the individual taxpayer by the Board of Inland Revenue.").

The noble Lord said: My Lords, it is late to try to get one's mind around a complicated argument. I do not suppose that the new clause is properly drafted by any manner of means. It is tabled more by way of a probe

28 Oct 1998 : Column 2060

to see where the Government's thinking lies with regard to income tax relief as applied to personal pensions and free-standing additional voluntary contributions.

The pensions industry in Scotland and throughout the United Kingdom is concerned about the impact which the Scottish variable rate might have on its ability to deliver personal pensions and free-standing additional voluntary contributions in an economic way. Currently, tax relief is given in such premiums at the UK basic rate. But, of course, if that were to change because the Scottish parliament introduced a Scottish variable rate, the Scottish basic rate would be different from the basic rate applied to people in England, Wales and Northern Ireland.

To date, the addresses and so forth of policyholders are not of huge importance from year to year. Most regular premiums for such accounts are received directly from bank accounts. A variety of figures has been bandied about as to the cost to the pensions industry of setting up systems to deal with this problem and keep it up to date. The Inland Revenue has made certain suggestions and the pensions industry has estimated costs to the industry of anything from £50 million and £125 million to operate the new system. Of course, that cost must be borne by policyholders. Companies would pass it on. That would be difficult, but it would be doubly difficult for the pension companies to pass that cost on to policyholders in England and Wales, because it has nothing to do with them. Therefore, the whole burden might have to be carried by policyholders in Scotland, which would add significantly to the costs of running their personal pensions or their free-standing additional voluntary schemes.

That is the problem, but there are two possible solutions. The first is to allow the basic rate relief on pensions at the UK level and do not involve SVR. The other is to allow the basic rate on the premiums and allow policyholders to obtain relief for the SVR via their self-assessment forms. It is true to say that not everybody fills in self-assessment forms so that is not much of a solution. However, I put that forward because it was one of the initial suggestions.

We know that the Government are aware of this problem and, indeed, in a letter to the CBI in Scotland, the Chancellor of the Exchequer indicated that. The CBI wrote to the Chancellor on 28th July and received a reply on 1st October which, even by Treasury standards, is a fairly slow response time. In view of the length of the letter and the fact that it did not say very much, it could have been written the day after it was received.

However it said:

    "My officials are actively looking at keeping any additional compliance burden on pension providers to the minimum necessary and I agree that the forum you suggest for exploring these matters is the appropriate one. You will appreciate that any final decision on the way forward must have due regard to the Government's priorities more generally. I cannot, therefore, give you a commitment that the most favoured option of the insurance industry will be accommodated. However, it is right that every viable option is explored".
That is Treasury-speak for saying, "Yes, we think something should be done but we are not sure what it should be". I wonder whether the Government have

28 Oct 1998 : Column 2061

made any further progress. It is on that basis that I put forward this amendment which would opt for one of the solutions in the first part.

I do not believe that the second option is feasible. For those people who do not fill in self-assessment forms, the matter could be dealt with by their income tax returns. However, I believe that my first proposal is better. Income tax relief would be just at the United Kingdom basic rate and the complications of the Scottish variable rate would therefore not come into the matter. It may be rough justice, but it seems to me better than imposing on the pension industry and ultimately on policyholders a considerable additional expense of having to keep a database on where every one of their policyholders is a taxpayer within the United Kingdom. I hope that that explanation is clear and brief, even at this time of night. I beg to move.

12.30 a.m.

Lord Sewel: My Lords, I should say first that the issue which Amendment No. 159A is intended to tackle is one with which I am already fairly familiar. I had a detailed and useful discussion about it when I met representatives of CBI Scotland, the Institute of Chartered Accountants in Scotland and the Law Society of Scotland on 21st October. I can probably do no better, in replying to the noble Lord, than to report to the House the outcome of those discussions.

The representative bodies expressed the concern of pension providers that if they were required to claim different levels of basic rate tax relief in respect of personal pensions and FSAVCs and, for this purpose, had to identify which of their customers were Scottish taxpayers, they would face compliance costs of upwards of £50 million. They argued that those costs would have to be passed on to their customers and that that might lead to some products being removed from the market.

I made it clear in response to those concerns that the Government recognise the potential problem; that we had not reached any final conclusion about the best way of dealing with it; and that we were still very much in the process of consulting the industry about possible ways forward. I made it clear that the Government's aim was to minimise compliance costs wherever possible and that the objective of the current consultation with the industry was to identify a range of possible options and the totality of the cost of each and then to consider further which represented the best way of proceeding.

This is a matter for secondary legislation rather than the Bill, and that is accepted by the professional bodies. It is one among a range of issues on which the Inland Revenue is currently consulting before making appropriate regulations. That seems to be an entirely sensible way to proceed, given the complexity of the issue.

I recognise the various options raised by the noble Lord, Lord Mackay of Ardbrecknish. They are among the range of options being considered. It would seem to me that it is not beyond the wit of man to find a system where the two data sets of Scottish taxpayers and pension holders could start talking together, and then

28 Oct 1998 : Column 2062

something akin to an automatic or passive claim could be made. However, I am not in possession of sufficient detailed knowledge to come to a conclusion on that, but would hope that it would be one of the options that will at least be explored.

As I indicated, we are taking this seriously. We are consulting the practitioners most directly concerned with the issue and are committed to working with them to identify an appropriate solution to the problem. On that basis, I hope the noble Lord has heard enough to enable him to withdraw his amendment.

Next Section Back to Table of Contents Lords Hansard Home Page