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Lord Hunt of Kings Heath: My Lords, we clearly wish to have to the fore all elements of good advice that can be made available, so of course we welcome input from RADAR and all the other organisations that noble Lords have suggested. This project has not yet started but it will run for two and a half years, and the aim is to see what impact it has. If it is seen to have a positive impact, it can be rolled out in other parts of

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the country. Clearly, we want to learn from all organisations that can give effective advice in this project.

Lord Glentoran: My Lords, I am a landowner in Northern Ireland. Looking at the four organisations that have been appointed to carry out this initiative, I find it difficult to see them working successfully towards the result for which we would all hope. The RSPB, Natural England and the other groups in this field are not really natural bedfellows. What is the Minister’s view on that?

Lord Hunt of Kings Heath: My Lords, that is all the more reason for bringing them together. We need to ensure that there is proper ownership and that many of the inevitable tensions, to which the noble Lord has alluded, are dealt with effectively. The four organisations are all supported by the National Farmers’ Union, Plantlife International, the Game & Wildlife Conservation Trust, the Ministry of Defence and the National Trust, so we are not short of advisers and supporters on this initiative.

Banking: Tax Avoidance


2.58 pm

Asked By Lord Higgins

The Financial Services Secretary to the Treasury (Lord Myners): My Lords, since 1997, the Government and HM Revenue and Customs have moved quickly and effectively to tackle tax avoidance in all its forms. Avoidance is not illegal; it aims to reduce tax in ways that may go beyond the spirit but not the letter of the law. The Chancellor has announced a code of practice on taxation for the banking sector so that banks will comply with not just the letter but the spirit of the law.

Lord Higgins: My Lords, I thank the Minister for that reply. Does he agree that it is crucial to maintain the distinction between tax evasion, which is illegal, and tax avoidance, which is not? If it is the Government’s view that some tax avoidance schemes are objectionable, does he agree that the right course of action is for them to legislate to make them illegal? Introducing a non-statutory code of practice, as the Chancellor of the Exchequer is now suggesting, blurs the crucial distinction between evasion and avoidance and puts company directors, trustees and others in a vulnerable position in the light of the fact that they may not be fulfilling their duties.

Lord Myners: My Lords, I agree with the noble Lord that there is a clear distinction between tax evasion and tax avoidance. The authorities pursue with rigour and vigour any examples of tax evasion. Since 2004, we have introduced a system whereby those who are contemplating creative tax strategies or the marketing of those strategies are encouraged to pre-discuss those with HMRC. We have found considerable willingness on behalf of the financial services community to do that. As a consequence, we

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have stopped tax avoidance strategies that otherwise would have cost the Revenue approximately £11 billion. That is at the heart of ensuring that we respect the spirit of the intent of law and Parliament while recognising that a creative accounting and financial services industry will always explore ways in which it can push against the boundary. The new code, which we are in the course of discussing with banks, appears to be well received by them. They are finding it a good basis on which they can be guided on their future tax planning and tax marketing.

Lord Barnett: My Lords, I declare a past interest in advising clients, although not banks, on the avoidance of tax—I would have lost most of them if I had not advised them of how best to avoid tax. We know the difference between avoidance and evasion: it is the thickness of a prison wall. But on the question of avoidance, although I welcome the potential international agreement at the G20 on opening-up tax havens and getting rid of the secrecy, does my noble friend accept that that is not the whole answer? At the end of the day, will there not have to be legislation to deal with the whole question of major tax avoidance, whether by banks or anyone else?

Lord Myners: My Lords, I thank my noble friend for his questions, which are always well informed. The simple fact is that no single jurisdiction can itself stamp out tax avoidance because there is, as the Prime Minister would say, a race to the bottom in terms of moving business to other jurisdictions through double-dip arrangements and transfer pricing. There needs to be international co-ordination. Over recent months, through the work of the OECD and in the G20 Finance Ministers and central bank governors’ meeting 10 days ago, we have seen a real enthusiasm to get to grips with this issue. There is already evidence in steps that have been announced by jurisdictions as different as Hong Kong, Singapore, Liechtenstein and Andorra to break down some of the previous tax avoidance structures, which were creating such a problem for developed nations.

Lord Baker of Dorking: My Lords, will the Minister assuage the anxiety of many Peers that when it comes to the business of drawing up legislation on tax avoidance and tax havens there are sufficient senior civil servants who are aware of the cover-ups and duplicity in setting up tax havens in faraway islands and inviting the British taxpayer to invest in them? Will he ensure that there is knowledge not only in the Civil Service but in the Government of the tricks, ruses and deceits in this business, the purpose of which is to defraud the British Treasury?

Lord Myners: My Lords, the noble Lord, Lord Baker, will know that if it is a question of defrauding, that is tax evasion. I have already commented on that. This morning I met the permanent secretary for tax of HMRC, who assured me that he was confident he had the resources in terms of numbers, skills and attitude to combat the increasingly creative tax avoidance strategies that are being brought forward by professional firms and banking institutions.

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Lord Maclennan of Rogart: My Lords, will the noble Lord indicate whether he believes that the European Union will speak with one voice on this subject in the forthcoming G20 talks?

Lord Myners: My Lords, I think there is considerable reason to believe that there is more unanimity on this issue than there ever has been before.

Baroness Noakes: My Lords, the Minister is something of an expert in tax avoidance strategies, or so we read in the newspapers. Can he help the House and explain the difference between strategies designed to avoid or minimise tax for banks and those, say, for reinsurance companies or fund management companies?

Lord Myners: I did not see that question coming, my Lords. I believe that the noble Baroness, Lady Noakes, refers to press reports about my involvement in establishing a reinsurance business in 2002. This business was based in Bermuda, although its principal operating company was in the UK. I am no longer involved with the company, but I am pleased to say that it is capitalised on the New York Stock Exchange at more than $2 billion, it employs 550 people, of whom 350 are in the UK, and since inception it has paid $360 million in tax, the majority of which has been paid in the UK at an effective tax rate of 24 per cent compared with UK tax rates of 28 per cent, which I do not think can really be described as tax avoidance.

Lord Sheldon: My Lords, how is my noble friend going to deal with the millions of pounds that have been received from United States investments that have been granted tax relief on the basis that United States tax has already been paid? In the United States, interest payments already have tax relief and there has been double relief that needs to be dealt with. What is he going to do about that?

Lord Myners: My Lords, my noble friend raises a fascinating question about a very complex issue. As I have only one minute to answer, I do not think I can do justice to it. However, the UK was the first major jurisdiction to introduce double-dip taxation legislation, which is designed to frustrate people claiming tax credits in two separate locations for the same liability. We are working with other authorities to tighten up control in this area. I suggest to my noble friend that we can seize the opportunity provided by the UK’s chairing of the G20 meeting next week to take a major step forward in pushing towards a more effective, equitable and fair system of domestic and international taxation.

Arrangement of Business


3.07 pm

Lord Bassam of Brighton: My Lords, with the leave of the House, at a convenient point after 3.30 pm, my noble friend Lord West of Spithead will repeat the Statement on the United Kingdom’s strategy for countering international terrorism.

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Postal Services Bill [HL]

Committee (1st Day)

3.07 pm

Clauses 1 and 2 agreed.

Amendment 1

Moved by Lord Hunt of Wirral

1: After Clause 2, insert the following new Clause—

“Post Office company review

(1) Within one year of an order being made under section 2, a post office company must review the services a post office may provide to the public under arrangements with a government department.

(2) The Secretary of State must lay the review, and the government response to it, before both Houses of Parliament as soon as reasonably possible.”

Lord Hunt of Wirral: First, I declare my interests as set out in the register and, in particular, as a partner in the national commercial law firm Beachcroft LLP. At the outset, I make it clear that the Conservative Party supports this legislation in principle. However, I have to add that Ministers are now guilty of the most negligent, costly and culpable late delivery of all time. By failing to act until now, this Government have condemned the Royal Mail to 10 years of unnecessary uncertainty and inevitable decline. The loss of potential revenue and the consequent damage to staff morale has been little short of catastrophic, particularly for the pension fund and the status of the company, despite Royal Mail’s best efforts. Furthermore, as we now scrutinise this Bill line by line, I fear that its shortcomings will become all too evident. We have endured the injury of 12 years of inaction followed by the added insult of a cobbled together rush job of a Bill, so we are going to do our utmost to make this legislation work.

The first group of amendments to be discussed in Committee, and which I have tabled, relate rather unusually to an issue that should be addressed in the Bill but is not; I refer, of course, to the post office network, which at Second Reading was the problem that dared not speak its name. There have been two swingeing rounds of post office closures in recent years, and under this Labour Government some 40 per cent of post offices and sub-post offices have now been closed. Perhaps Ministers truly believe that such enormous cuts to such an integral component part of our society were necessary, but it is utterly irresponsible of any Government not to consider seriously how to prevent any future closures, or even how to allow for the reopening of many of these businesses.

We on these Benches were deeply sceptical of the business case that Ministers made for these closures, and of their contention that they made a real effort to find an alternative way forward. There are enormous numbers of references, particularly in the other place, to post office closures, so the Minister, Pat McFadden, has had every opportunity to come forward with some alternative strategy. Ministers’ strategy in responding to the many debates on post office closures has been to

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say that this is not a matter for them; it is up to the Post Office. On 13 March last year, Pat McFadden said:

“For the future, the Post Office must keep developing new products and new reasons for customers to go through the door”.—[Official Report, Commons, 13/3/08; col. 512.]

This was against the background of what he described as a “difficult closure process”.

If any noble Lords decide to search Hansard for references to the Post Office, I ask them to sit back and just let them all come, because there have been so many debates about closures. Ministers have said so many times, as Pat McFadden did on 20 June last year, that,

and that,

“There are new areas of work for the Post Office”,—[Official Report, Commons, 20/6/08; col. 1270.]

as though it was all the Post Office’s fault.

In all the debates that I have read through, there seemed to be no clear or genuine understanding of the importance of post offices in many communities not only in rural areas but in some of the poorest areas of our towns and cities. The post office is usually the heartbeat of any parade of local shops and usually the centre of any rural community. If it goes under, particularly in a parade of shops, the shops inevitably follow.

I see from the Marshalled List that my concerns are shared by many around the Committee, so I welcome this opportunity to raise this issue.

Lord O'Neill of Clackmannan: Before the noble Lord goes any further, will he tell us how many post offices closed between 1979 and 1997, and perhaps even more significantly between 1992 and 1997 when he was a Cabinet Minister in the other place?

3.15 pm

Lord Hunt of Wirral: There is so much wrong with that question. First, let us look forward and not back. But in looking back, let us see where 40 per cent of the closures occurred. The noble Lord may want to play general election games—I suppose there has to be an election in the next 12 months—but let us now work out and hear his ideas on how to ensure that these closures no longer take place. I certainly will give some examples to the noble Lord, and to other noble Lords, about how we can at least do something constructive in this Bill.

As I was about to say, Amendment 14 in my name, seeks to explore what the relationship between Royal Mail Group Limited and Post Office Limited will look like after part privatisation. We also have an amendment from the Benches to my right on the board of directors and, to be debated much later in these proceedings, on the question of an investment fund. I look forward very much to those debates. I hope that we will get some idea of the Government’s thinking in this area.

My amendments in this group focus in a slightly different direction. We on these Benches strongly believe that this Bill should have come many years ago. We also feel that the Bill was produced in a rather unhelpful rush. These views—I recall the Secretary of State said this at Second Reading—are not mutually inconsistent.

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Proper analysis of the problems and proper consultation on the possible solutions, and proper pre-legislative scrutiny, should all have their place in the process of producing a Bill, particularly one as contentious as this. I hope that my amendments will encourage the Government to start the process as soon as possible, before it is too late.

Amendment 1 states:

“Within one year of an order being made under section 2, a post office company must review the services a post office may provide to the public under arrangements with a government department”.

The Secretary of State must lay the review and the Government response before both Houses of Parliament as soon as reasonably possible. Amendment 2 would insert a new clause relating to the Post Office company report. That is because the Government have on every occasion when closure has been discussed said, “It is not for Parliament to have a view about this closure or that”. I hope that these two amendments will ensure that that does not happen any more.

Amendment 2 embodies an attempt to ensure that a proper analysis is undertaken of why post offices around the country are closing, not only putting people out of jobs, but also causing many villages and areas to lose a vital centre of their community. Amendment 1 seeks to ensure proper consideration of what more could be done to support post offices. I recall that the noble Lord, Lord Whitty, said at Second Reading that government departments should look at what services they could deliver through the post office network. He is right. We were extremely pleased that outside campaigners, and MPs and noble Lords from all sides, were able to persuade the Minister to reaward the Post Office card account to the Post Office. However, I felt and I still feel that the handling of these matters by the Government was a disgrace. Such a destabilising retendering process should never have been forced on the Post Office network. Cancelling it midway smacked of panic—and pretty expensive panic too.

There are a number of other services we feel the Post Office could provide. Our amendment would seek to ensure that the establishment of a post bank, in particular, to take one example, is properly explored. I look forward to hearing what the Secretary of State has to say about that. I think we all were very impressed indeed with the documentation launched about the post bank. The documentation, Post Bank at the people’s Post Office, makes thecase for a postbank, and the comment was made, quite rightly, that the Post Office network is a unique national resource. Communities, businesses and individuals all depend on it. That raises the idea that as well as the universal service obligation, we should have a universal banking obligation. I look forward to hearing from the Secretary of State what he is going to do about all this, because there have been hints in the press about how other services could be provided. We want to know what is going on and what could be included. Not only do we want the idea of the post bank to be explored, but also its feasibility based on evidential grounds.

The noble Lord, Lord Razzall, quite rightly raised the issue of private mail expansion in this area and many others that could be looked at, such as the

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provision of expert advice on pension entitlements or tax returns. None of this must be rushed into. I participated in many of the debates on the setting up of the Financial Services Authority, and as noble Lords know, financial services are very heavily regulated. It would therefore be helpful if the Secretary of State could give us an idea of exactly what he has in mind. The drafting also discloses that we are providing for reviews to be undertaken by Post Office Limited. I would prefer to see a more independent review, particularly on the consideration of future services, but that is another matter.

The Hooper review caused a great deal of contention, although we have had some helpful evidence from the Communication Workers Union that reflects the extent to which it agrees with certain parts of it. However, in his excellent report, Richard Hooper has finally made it impossible for the Government to sweep all these structural problems under the carpet. Post offices would also benefit from an equally rigorous analysis. In looking forward to the Secretary of State’s response, I beg to move.

Lord O'Neill of Clackmannan: I oppose this amendment. I feel that the absence of the noble Lord, Lord Hunt, from the other place over the past 12 years means that he has probably gone to sleep on the issue of the Post Office and that in a number of respects he does not know what has happened to our post offices. In 1997, the incoming Labour Government inherited the Horizon project, which was set up to provide benefit recipients with swipe cards for collecting their benefits. The instructions given by either the Civil Service or Ministers—ultimately it is a ministerial responsibility—were so incoherent that the problems encountered by the system providers were of such an order that it took the best part of a decade to fully computerise Post Office services in the United Kingdom. That is the first thing that we have to recognise.

During that period, a number of people decided that it would be better to get their benefits through the bank than from the Post Office. Certainly, if they went to a post office, they could not take advantage of automatic teller machines because the Post Office, with the acquiescence of the then Conservative Government, had refused to allow individual postmasters to have ATMs on their premises, as they would be regarded as competition with the state run Post Office as adumbrated by the Conservatives.

Let us get the facts correct. A number of people who already get their works pensions through the bank find it equally convenient to get their state pension through the same source so that they can take their money out of the one account. They can also make standing order and direct debit arrangements, which are so convenient for elderly people who cannot get out so easily.

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