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Furthermore, even if they are to be dealt with in a Private Member’s Bill, another Private Member’s Bill covering this subject is already under consideration in another place—Mr Gordon Prentice’s Disqualification from Parliament (Taxation Status) Bill. It is a rather more all-encompassing Bill in that it covers both Houses of Parliament, which I think I am right in saying would make this Bill superfluous. I am afraid that I fail to understand why the noble Lord, Lord Oakeshott, is aiming his guns exclusively at your Lordships’ House. If changes are needed in this area, surely they are needed every bit as much in another place. I shall return to this issue later when we discuss another amendment tabled to rectify that irregularity.
As regards this group of amendments, which concerns the inclusion or not of domiciliary status, I noticed that at Second Reading the Minister said:
“We would have to think very carefully indeed about an approach which involved deeming another group as UK domiciled”.—[Official Report, 14/3/08; col. 1720.]
I think that my noble friend Lord Selsdon has expanded adequately on concerns in this area.
This whole matter needs considerably more thought. If the issue is genuinely and simply one of taxation status, however defined, surely more than a few Members of your Lordships’ House have worked abroad while being Members and have not paid full UK tax, possibly—dare I suggest it?—even Liberal Democrat Members.
As regards my noble friend’s proposed deletion of the words,
I agree with what my noble friend Lord Strathclyde said when he pointed out at Second Reading that this Bill appears to argue that Members of your Lordships’ House cannot have tax residence in any country other than this one. In fact, it says that they are deemed not to. First, I suspect that it is possible to be resident in more than one country for tax purposes. Indeed, the noble Lord, Lord Oakeshott, acknowledged in his speech introducing his Bill at Second Reading that it is possible to be partly resident here and partly resident overseas. Therefore, if the Bill’s bottom line is to ensure that full UK tax is paid in this country, one problem that I think it will create is that some people will be subject to double taxation. I doubt whether the double taxation treaties all automatically result in the United Kingdom receiving its full share of tax, which definitively would mean that the other country did not receive the tax. Is that what is intended? Perhaps it is none of our business whether tax is paid additionally elsewhere, but I hope that that is not the case, because it seems somewhat unreasonable.
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Secondly, the amendment of my noble friend Lord Astor quite rightly specifically allows residence in another EU member state, a view that appears to be shared by the noble Lord, Lord Goodhart, in his Amendment No. 3 in the next group. The fact that this was not dealt with in the Bill in the first place raises questions, as my noble friend Lord Astor said, about how serious the position of the Lib Dems is on the European Union. My noble friend is absolutely right to probe where the boundaries should be drawn. So far the debate has brought out some important issues which need to be explained.
Earl Ferrers: Perhaps I might make an observation or two. For a few years, I used to decorate the passages of the Home Office. I always shuddered when domiciliary and residential matters were discussed because I found them deeply confusing and I have found them so ever since. I am not sure that I am more suitably enlightened this evening. The noble Lord, Lord Desai, said something quite important. He was a little mocking of the Liberal Democrats, although they are used to that. He said that they do not have the capacity to tax people and that he hoped that they never would. Surely this Bill is about taxing people; it would ensure that certain people are taxed. I always thought that your Lordships’ House was not allowed to discuss matters relevant to taxation because of what happened 100 or so years ago. Therefore, I am surprised that this Bill, which is basically a taxation Bill, should have come to your Lordships’ House. I am also surprised that the Liberal Democrats—as has been pointed out, their serried ranks are full—have three Bills on the reform of the House all at once. That seems slightly obtuse and unnecessary.
I am concerned about the remarks made by the noble Lord, Lord Oakeshott, in his Second Reading speech, to which I listened with interest. My noble friend Lord Selsdon referred to asperity of speech—that you do not say anything unpleasant to another person, particularly without letting him know in advance. I do not know whether the noble Lord let the noble Lord, Lord Laidlaw, know what he was going to say, but the noble Lord, Lord Oakeshott, said:
“What a tragic scene that must have been. You come straight out of a meeting, get into the Rolls-Royce, say ‘PricewaterhouseCoopers, James’ to the chauffeur and then suddenly have a terrible memory loss. Why on earth are you going to see your tax adviser? Obviously, you are feeling pretty ill so you go straight to the airport, get on the private jet and go back to Monte Carlo. Thank goodness the noble Lord’s memory returned a year later and he was able to remember to sell his business for £768 million. The effect of that was to cost the British taxpayer at least £50 million in capital gains tax that he would have had to pay if he had honoured his undertaking”.—[Official Report, 14/3/08; col. 1709.]
All that may have been true, but it is pretty offensive stuff to say about a person who was not here. I wonder whether the noble Lord, Lord Oakeshott, had the courtesy of letting him know. It puts a nasty smell over the noble Lord’s Bill.
The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Hunt of Kings Heath): This has been a fascinating debate. The noble Lord, Lord Oakeshott, is discovering what all us anoraks on
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Earl Ferrers: I think the Minister is confused. It is Thursday today.
Lord Hunt of Kings Heath: It is true that today is Thursday but none the less most of our debates on the Bills introduced by the noble Lord, Lord Steel, and the noble Lord, Lord Avebury, were on a Friday. Indeed, I am very surprised that we are not debating on a Friday the Bill introduced by the noble Lord, Lord Oakeshott. No doubt we can have a debate about that in due course.
Perhaps I may follow the example of the noble Lord, Lord De Mauley, by restating the Government’s position on the Bill. We made it clear at Second Reading that the Government support the principle of no representation without taxation. Therefore, we support the intentions behind the Bill. The Government would never seek to impede progress of a Private Member’s Bill being taken through your Lordships’ House, and we would also hope that any such Bill would be subject to appropriate scrutiny.
I also said at Second Reading that we do not consider the Bill as it stands to be an appropriate vehicle to support. The Government gave a commitment in the Budget this year that the personal tax rules on residence and domiciled status would not be visited at least until the end of the next Parliament. Of course, the substantive question raised by the noble Lord, Lord Oakeshott, is worthy of consideration. As other noble Lords have mentioned, there is another Private Member’s Bill in another place introduced by my honourable friend Mr Gordon Prentice, which in a different way addresses the same questions of membership of Parliament and tax and residency.
I have to point out once again that the principle of dealing with this matter is supported by the Government. We do not think that the Bill of the noble Lord, Lord Oakeshott, is the right way forward, although clearly it is helpful for us to have these debates. If future legislation is introduced, they will undoubtedly be informed by discussions both in your Lordships’ House and in another place. Of course, this has to be seen in the context of wide reform of your Lordships’ House—I hesitate to mention the cross-party working group because many of your Lordships find that a rather disagreeable thought. Clearly we are making progress, and it is hoped that we will publish a White Paper before the Summer Recess. This is a matter that clearly deserves to be considered.
I thank the noble Viscount, Lord Astor, for his extraordinary tour around Europe, although the House is in some doubt about his geographical expertise. His
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The comments of the noble Lord, Lord Selsdon, were very interesting. He will know of the current review by Her Majesty’s Treasury. I have already said that the Government have given a commitment that the personal tax rules will not be revisited in relation to resident domiciled status until at least the end of the next Parliament. I think that that is an appropriate response for the points that he raised.
Earl Ferrers: As this is primarily a Bill to deal with taxation, is it correct that it should be introduced in this House? Should it not have been introduced in another place? Secondly, if it is to do with taxation, should it not be a government Bill?
Lord Lea of Crondall: I have a supplementary question to that posed by the noble Earl. If, as is the policy of the Conservative Party, we moved to a wholly elected House, had salaries and had to consider our taxation arrangements, is it not inconceivable that that might be discussed in this House?
Earl Ferrers: The Minister may like to answer that particularly interesting question, but I wonder whether I can, too. In the disastrous event of the whole of this House being elected, all the circumstances would be totally different. We would discuss all financial matters in this House as well as in the other place and the other House would hate it all.
5.30 pm
Lord Hunt of Kings Heath: I do not agree with the noble Earl, Lord Ferrers, about that, because the February 2007 White Paper that led to the votes was predicated on the primacy of the House of Commons continuing. Without giving away any secrets of the cross-party working group, on which the noble Earl's party is represented by the noble Lord, Lord Strathclyde, the leader of the Conservative Party in this House—he is making, if I may say so, a major contribution to our discussions—a point that unites all members of that group is the maintenance of the primacy of the House of Commons. The work being taken forward is on that basis.
As for whether it is appropriate for the noble Lord’s Bill to have been allowed to be, I can say only that since the House authorities have accepted that it can be debated here, with all my experience of the wisdom of those authorities, I am sure that that is entirely appropriate.
Earl Ferrers: The noble Lord made a very interesting statement. He said that the Government wish to see this House, as well as the other House, elected, but for the primacy of the House of Commons to continue. I quite agree with that, but is he really saying that once this House is elected, those elected people will be second-class citizens compared with Members of the House of Commons?
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Lord Elton: While the noble Lord is considering that, has he not revealed that he is in fact in an undeclared dilemma? He has said that the Government will not oppose the Bill, but equally that the Government are committed to not changing the law on private personal taxation until the end of the next Parliament. It seems to me that he must hold to either one statement or the other, or else be pulled into two pieces.
Lord Hunt of Kings Heath: When we were debating the Criminal Justice and Immigration Bill, the noble Baroness, Lady Miller, suggested that I was between a rock and a hard place. The noble Lord, Lord Elton, clearly thinks that I am again in that rather difficult position. I do not think so, because although we do not think that Mr Gordon Prentice's Bill meets all the points, it deals with the issue in another way that perhaps does not transgress so much the point about taxation changes that I made in relation to this Bill.
On the more general point raised by the noble Earl, Lord Ferrers, the cross-party group is working on the basis of the vote in the other place. There were two votes in favour: for an 80 per cent elected and for a 100 per cent elected House. It is working on that basis, but it is also working on the basis that whatever proposals are in the White Paper, they should be based on the essential foundation of the primacy of the Commons. It is perfectly possible to have an 80 per cent or 100 per cent elected second Chamber that still respects and reflects the primacy of the Commons.
Lord Elton: Did the noble Lord say that the Prentice Bill transgressed the principle of non-interference with personal taxation less than this Bill? Was that an endorsement of that Bill—in other words, have the Government undertaken to diminish their commitment to leaving that form of taxation as it is now until the end of the next Parliament? If not, what exactly did he mean when he said that?
Lord Hunt of Kings Heath: The noble Lord, Lord Elton, invites me to tread in dangerous water. I will try to tread myself out of it as quickly as I can.
Let me repeat: the Government gave a commitment in the Budget that the personal tax rules on resident and domiciled status will not be revisited until at least the end of the next Parliament. My honourable friend Mr Prentice's Bill takes a rather different approach from that of the noble Lord, Lord Oakeshott. That is what I was referring to. The Government have expressed reservations about the drafting of the tax provisions within Mr Prentice's Bill. The noble Lord certainly cannot take my comments on Mr Prentice's Bill as detracting at all from the commitment that the Chancellor made in the Budget. I hope that I have got myself out of the trouble that the noble Lord thought that I was in.
Lord Oakeshott of Seagrove Bay: I am delighted to join the noble Lord, Lord Hunt, in the anoraks’ club. I hope that I can learn from him a light-hearted and good-humoured touch. I agree with the noble Viscount, Lord Astor, when he moved his amendment and hope that we can stay like that all day.
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The noble Earl, Lord Ferrers, referred to quotations I gave in my speech at Second Reading. The quotes I gave regarding the noble Lord, Lord Laidlaw, were direct quotes from the House of Lords Appointments Commission. It is a great shame if we cannot quote from that body in this House. I hope he will accept that the other things he quoted were light-hearted and good-humoured and take them in that spirit.
I thank both Front Benches for their support in principle. To some extent, we have revisited Second Reading. I shall not make another Second Reading speech except to repeat that this is very simple. Some speakers have not quite understood the simplicity of the way in which the Bill aims to deal with the problem. If you sit in the British Parliament, if you sit in this House and vote on laws for the British people, you must pay full British taxes on all your worldwide income and capital gains, like the vast majority of your fellow citizens. That, to me, is entirely clear. My noble friend Lord Goodhart is well able to go into detail about the exact definitions of one sort of domicile or another, but there is no need to. It is a clear principle and I believe that the way in which it is stated in the Bill is clear—you pay tax on that basis whether you are domiciled in the UK or not. That is how you are charged tax.
The noble Viscount, Lord Astor, asked why Europe is not included. There is no problem. Peers can live anywhere they like but they pay tax here on the basis that they are resident here. That is a very simple principle which deals with a good number of the detailed points made.
The noble Lord, Lord Selsdon, raised a number of points. I promised to reply to them and will do so, in so far as they are relevant to the amendments. He asked me whether what I said on Second Reading had been accurately reported in Hansard. The answer is yes, apart from at col. 1721, where I am reported as saying:
“Briefly, I thank the Minister for giving further publicity to the occasional quotes I have been able to get into the newspapers”.—[Official Report, 14/3/08; col. 1721.]
That was a mistake. I wanted to thank the noble Lord, Lord Strathclyde. Apart from that, what I said has been accurately reported. I thank him again for congratulating me on my financial background, but that is not really the point. One does not need to be a financial expert for this Bill. I heard what he said about Switzerland and its attraction. Building Design magazine will tomorrow carry the story that the noble Lord, Lord Foster of Thames Bank, is believed to have moved to Switzerland and is non-resident in this country for tax purposes. We await developments, but I can confirm that if that is the case, the noble Lord would, if the Bill went through, still have to pay full British taxes in this country.
The principle is quite clear and I cannot see that amending the Bill to include people from Europe can be right. Citizens of EU countries are not able to sit in this House. They do not pay tax on the same basis, so I cannot see why one should make those changes.
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Earl Ferrers: The noble Lord said that if the noble Lord, Lord Foster, were resident in this country, he would have to pay tax if the Bill went through. Surely that makes it a taxation Bill.
Lord Oakeshott of Seagrove Bay: No. If the noble Lord were non-resident abroad, it would not change his taxation status. We are just saying that, for Members of this House, it is effectively a self-regulating Bill about how this House works. If he is not happy with that, he is able to take leave of absence. This is not something that is generated for taxation from the Commons. It is about this House taking a decision on what basis its Members should sit here, which is why I believe that this is an entirely appropriate Bill for this House.
The noble Lord, Lord De Mauley, made various points, but it is fair to say that most of them referred to areas that will come up on later amendments. In particular, his points about double taxation come up in a later group and will be dealt with by my noble friend Lord Goodhart.
Apart from Europe, the key point and the key aspect of the amendments tabled by the noble Viscount, Lord Astor, is to make a differentiation between domicile and residence. To me, the principle is the same. The principle, as I enunciated at the beginning, is that Members of this House pay full British taxes on all their worldwide income and capital gains. It does not matter whether you have domicile; it does not matter whether you have residence. The principle is the same. I do not think that the great majority of people in this country know or want to know the difference. They just want to know that we are all paying full British tax. Therefore, I oppose, and we will oppose on these Benches, all these amendments.
Lord Selsdon: Perhaps I may correct the noble Lord. I am afraid that he is wrong on the difference between domiciliary status and residency, with particular reference to many of the Commonwealth countries—Australia, New Zealand and other areas—where there is no double taxation agreement. While it may be said that someone is a Member of this House who was not a British national to begin with and became one later, his domicile may well be his country of origin. Within that, there may be differences between estate duty and capital gains, which do not exist in others.
I do not object at all to the principle that people who are elected to Parliament or who are in Parliament should pay tax. I believe that the same application should be made to all those 103,000 people who are elected representatives and to anyone who holds a government job in the United Kingdom, whatever their nationality and origin. I am not speaking just about Northern Rock, but about many government appointments where people come here from abroad, do not pay tax in the United Kingdom and, therefore, have a much higher net income than their British equivalents.
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