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House of Lords

Wednesday, 20 May 2009.

3 pm

Prayers—read earlier at the Judicial Sitting by the Lord Bishop of Ely.

Railways: Network Rail


Asked By Earl Attlee

The Minister of State, Department for Transport (Lord Adonis): My Lords, Network Rail is a private sector company limited by guarantee. Changes to Network Rail’s corporate governance are matters for its board and members and the independent Office of Rail Regulation, not for Ministers.

Earl Attlee: My Lords, I thank the Minister for that reply. Given the widespread concern regarding Network Rail’s corporate governance and, most importantly, its operational effectiveness, why has his department not exercised its right as a special member to appoint a director to the Network Rail board?

Lord Adonis: My Lords, it is not corporate governance that is the point at issue, we believe, but how Network Rail’s executives go about the business of improving the efficiency of its operations. The ORR’s recent determination gives Network Rail very significant incentives to improve its efficiency by 21 per cent over the next five years. We believe that the managers of Network Rail need to concentrate relentlessly on improving efficiency, and it is a matter for Network Rail itself whether it believes that changes in corporate governance will help to that end.

Lord Faulkner of Worcester: My Lords, while accepting what my noble friend said in his first Answer—that the governance of Network Rail is not a matter for Her Majesty’s Government—no doubt he will express some pleasure at the decision of its chief executive to forgo the bonus last year, which presumably was in response to some gentle pressure which he applied to himself. Is my noble friend aware that this is very welcome indeed?

Lord Adonis: My Lords, the decision was taken by the chief executive of Network Rail entirely on his own account. However, I have always subscribed to the wise words of Ralph Waldo Emerson that the reward for a job well done is to have done it.

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Taxation: Interest Rates


3.03 pm

Asked By Lord Dubs

The Financial Services Secretary to the Treasury (Lord Myners): My Lords, for most taxes interest on late payment is charged at a higher rate than the interest applied to repayments of overpaid tax. This is in line with the practice in most other tax authorities and, of course, in business. HMRC has been consulting on a new interest regime, and during consultation it was generally accepted that differential rates were appropriate. Following the consultation, the Government announced at the Budget that they would continue with the policy of using differential rates.

Lord Dubs: My Lords, I am grateful to my noble friend for that Answer, but I am not sure that I have quite understood it. Will my noble friend confirm that the position is that if any of us as taxpayers owes money, we are charged 2.5 per cent interest, but if the tax authorities owe us money, it is 0 per cent? Why?

Lord Myners: My Lords, I endeavour to answer that by reference to the principles on recompense that we apply, which are based on fairness and simplicity. I point out that it is generally the practice of banks to pay a slightly lower rate of interest to those who owe the bank money or replace deposits and to charge a slightly higher rate to those who have borrowed as a positive incentive. Having a single rate for interest charges would make it extremely difficult to choose a rate that did not have the perverse incentive effect of either encouraging people not to pay their tax or, alternatively, to use HMRC as if it were a deposit-taking bank.

Lord Newby: My Lords, does the Minister accept that for most people who are owed tax, the most important thing is how quickly they get their money back, not the rate of interest on it, particularly since interest rates are very low in any event? Can the Government give an assurance that just as they are making sure at this time that they pay their suppliers quickly, HMRC repays tax quickly as well?

Lord Myners: My Lords, I agree entirely with the noble Lord, Lord Newby. It is an issue of the availability of funds rather than the cost of funds which is often critical, particularly to smaller companies, and HMRC is committed to making prompt repayment of overpayment when it becomes aware of such a situation. It endeavours to do this within a 30-day period of becoming so aware. It generally achieves that target with a high degree of success, except at times of peak operating periods such as the end of the tax year.

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Baroness Gardner of Parkes: My Lords—

Lord Thomas of Gresford: My Lords—

Baroness Gardner of Parkes: My Lords, is the Minister aware that this can be very annoying for the taxpayer? I found myself in receipt of a £13,000 payment from the Inland Revenue when I knew that I owed it money; it did not owe me money. Having notified it of this, it said that I would have to pay interest on the money. It took six letters or more, each time referred to a higher level, to have the matter reviewed. In the end, it said that it would not charge me any interest on the money. There was every reason to have just stuck to the £13,000; it was so difficult to give it back. What must that have cost the public in administration? What does the Minister think? Could money not be saved there?

Lord Myners: My Lords, I am sure the noble Baroness was extremely clear and forthright in her representations to HMRC. I imagine that mistakes occur. Taxes are extremely complicated, particularly where people have multiple sources of income, and therefore at times overpayments or overcredits will take place. HMRC is committed to rectifying such mistakes as swiftly as possible, but I am sure there are particularly complex cases where it will take a little longer. I am delighted to hear that the noble Baroness in the end achieved the outcome that she believed was right. I hope that we made good use of the funds while we held them.

Baroness Howarth of Breckland: My Lords—

Lord Thomas of Gresford: My Lords, I apologise to the noble Baroness for rising to ask a question before her, but the 30 days repayment has really struck home. I was informed at the beginning of March that I would receive a repayment of tax. Two months went by, and I asked why I had not received it; HMRC said it was not sure about my address. For 39 years I have lived at and paid tax from that address. When I asked for the cheque, HMRC said, “Well, it will take 10 days for you to get your cheque”. Is there a strategy to delay repayment of tax?

Lord Myners: My Lords, I feel I am going to be drifting into answering individual tax queries on behalf of noble Lords. Rest assured, there is no strategy other than to ensure that people pay the right amount of tax at the right time; if they overpay, that they receive that overpayment as promptly as possible; and, in a more normal interest rate environment—that is, not one characterised by 0.5 per cent base rates—there would be some compensation. In the event that the individual does not pay a sufficient amount, they will be pursued to do so and will be charged for late payment. That seems to me to be an equitable and fair approach. How the Inland Revenue was able to contact the noble Lord to tell him that he was owed money but not able to contact him to get the money to him baffles me at the moment. I am sure the noble Lord will tell me outside the Chamber if he feels that I should have more information.

Baroness Howarth of Breckland: My Lords, I will ask the Minister a general question. In most of the authorities and government departments in which I have worked, statistics have been kept of the number

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of complaints and the number of outstanding amounts that needed to be repaid and the amount of interest, at whatever rate it was. Does the tax office have these kinds of statistics and, if so, can they be published?

Lord Myners: My Lords, HMRC sets performance objectives in these areas and monitors progress against those objectives. That has quite an important influence on the allocation of resource if it is falling short of its targets.

Lord Howard of Rising: My Lords, the Minister referred to tax being very complicated. Who was responsible for the tax advice manuals going from one volume to almost an entire library in the past 10 years?

Lord Myners: My Lords, the complexity of tax reflects the increased complexity of life in the economy.

Lord Kilclooney: My Lords, since the underpayment of tax, particularly capital gains tax, is more topical these days than the overpayment of tax, what interest will people who have underpaid their capital gains tax be required to pay?

Lord Myners: My Lords, I believe that the rate of interest chargeable is 2.5 per cent per annum.

Lord Geddes: My Lords, given the Minister’s remarks about tax being somewhat complicated, is he therefore denying the HMRC advertisement that says that,

“Tax doesn’t have to be taxing”?

Lord Myners: My Lords, that is just an interesting play on words that no doubt came from an inspired copywriter and was designed to encourage people that, as far as basic tax for the ordinary working person is concerned, it is a fairly simple exercise that should not be intimidating or daunting. The literature and websites that are available are designed to facilitate understanding in order that people can make their full and proper contribution, as I am sure they would wish to do.

Lord Dubs: My Lords, does my noble friend have among his papers information about the sum of money that is charged to taxpayers on the 2.5 per cent basis and how much is owed the other way?

Lord Myners: My Lords, that is an interesting question. I thought I had those data, but apparently I do not. From recollection—I have found it. Interest charged on direct taxes in the year to October 2007 was £957.8 million, a not insignificant amount. Interest charged on late payment of VAT in respect of 2007-08 was just under £100 million.



3.12 pm

Asked By Lord Hylton

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The Minister of State, Foreign and Commonwealth Office (Lord Malloch-Brown): My Lords, the UK sees Turkey’s European Union accession process as the most effective catalyst for change. Through this process, working closely with our EU partners, we encourage the expansion of cultural and minority rights and reform in the criminal justice system. We encourage NATO partners who are not in the EU to support reform. The FCO also provides support for criminal justice reform including training, and funds projects that support anti-discrimination and minority rights.

Lord Hylton: My Lords, I thank the Minister for his reply. Does he agree that internal dialogue in Turkey between its several different traditions is necessary if the Kurdish, Armenia and Cyprus questions are ever to be resolved? Are these not the keys to Turkey’s EU application?

Lord Malloch-Brown: My Lords, I confirm that resolving relations with Cyprus and Armenia is an important obligation on EU candidates, in this case Turkey, because it is a requirement of good neighbourly relations. We have encouraged Turkey to resolve these issues through both internal and external dialogue.

Lord Anderson of Swansea: My Lords, the Turkish Government are the first to acknowledge that there are deficiencies, but does the Minister agree that the direction of travel is right and that in many ways Turkey is a model for other Islamic states? How does he assess the recent joint declaration made by Chancellor Merkel and President Sarkozy that Turkey can only hope to enjoy a privileged position with the EU and will be barred from membership? Is that likely to affect the current negotiations that have been promised to Turkey since the 1960s? What is the UK Government’s position in respect of the declaration and its implications?

Lord Malloch-Brown: My Lords, as far as the UK Government are concerned, EU policy remains unchanged: there is an accession process for Turkey under way. The UK strongly supports it, and strongly supports Turkey’s eventual membership of the EU.

Lord Wallace of Saltaire: My Lords, President Gul’s positive recent statement about greater integration of Kurds as a minority into Turkish political life has been roundly attacked by both the main opposition parties and appears not to be supported by substantial elements within the armed services. In those circumstances, I hope Her Majesty's Government are giving every support they can to the constitutional authorities in Turkey to continue the dialogue. I also hope that British political parties which may have closer links to the opposition parties than to the AKP are trying to get across the same message.

Lord Malloch-Brown: My Lords, we have noticed some loss of momentum in reform in Turkey both on other accession issues such as economic reform and on issues relating to the Kurdish areas. The recent decline in the ruling party’s vote in the local elections in that area of the country may have served as something of a disappointment to it. However, I completely agree with the noble Lord’s point. We must give them every

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encouragement to stick to the difficult road they are going down and to continue to try to bring this group fully into the political mainstream through the reforms that they have under way.

Lord Maginnis of Drumglass:My Lords, although I understand the answer that the Minister has given, may I suggest that it is our duty to remember that Turkey has been our ally for 90 years, including during the Cold War period? It is a massive country with massive problems but everybody, including this Government, seems willing to put its interests on the back burner. Is it not time that we moved its interests forward in terms of membership of the European Union?

Lord Malloch-Brown: My Lords, I completely agree with the noble Lord’s fundamental analysis. Turkey is an extraordinary country with an extraordinary history, and, in our view, it has an extraordinary future within Europe. It is enormously important that we continue pressing for that. However, as an earlier question suggested, unfortunately, our enthusiasm for Turkey’s membership of the European Union is not universally shared by all other member states. We need to fight back against that.

Lord Howell of Guildford: My Lords, while we welcome social advance in Turkey and its eventual membership of the European Union—where it will become by far the biggest member when it finally arrives—Turkey is today at the epicentre of world events and Middle East events and, indeed, of all links between Islam and the western world. Will the Minister ensure that in supporting Turkey’s efforts in every way, we are less inclined to lecture and more inclined to encourage and support? Sometimes the lectures sound a little high-handed, particularly when we have enough troubles of our own here at home.

Lord Malloch-Brown: My Lords, I certainly endorse the noble Lord’s view that lecturing is not the most appropriate form of foreign policy. The rebuke, if it is that, is well taken, because we need in general to be careful about asserting these points in a lecturing way. However, I hope that the relationship with Turkey is well situated within a European Commission review process across the so-called 35 chapters and the Copenhagen principles and so on, where there is continual review of progress and yearly reporting on it, and that this technical discussion avoids anyone getting up into the pulpit and offering the kind of lecturing that the noble Lord rightly wants to avoid.

Lord Corbett of Castle Vale: My Lords, will the Minister confirm that since the election of Mr Christofias as the President of the Republic of Cyprus and Mr Mehmet Talat as the leader of the Turkish Cypriot community, Turkey is playing a much more positive role in trying to assist that settlement process, not only because of the pressures around the application to join the European Union but because it is now recognised on both sides of this long-standing dispute that the time has come to settle it, and there are two leaders in place in both communities who are determined to do their best to achieve that very end?

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Lord Malloch-Brown: My Lords, we are very pleased about the fact that there are now two leaders who very much want to arrive at a negotiated settlement to this dispute. We believe that the Government of Turkey have played a constructive role in this. There is still further to go in the negotiations than we would have wished, and the early honeymoon has turned into a long, hard slog in trying to make progress on the negotiations.

Lord Kilclooney: My Lords, on the issue of Cyprus, Turkey and Greece, can the Minister confirm that the Presidents of Greek Cyprus and Greece are totally opposed to a policy of enosis?

Lord Malloch-Brown: My Lords, the British Government’s view on that is well known. We feel very strongly that the two communities have to find a way in which to live together in full respect for each other and for each other’s rights.

The Lord Bishop of Chester: My Lords, would the Minister agree that absolute religious freedom, including the freedom to convert from one religion to another, is a core human right and must be fully accepted by any member country of the European Union?

Lord Malloch-Brown: My Lords, I certainly would. There are issues on which Turkey still needs to make progress, including issues about the Turkish penal code. For example, there has been a dispute recently about movements to Islamise the state, which have been resisted, with regard to headdresses and such like. Those issues are highly sensitive in Turkey, but we believe that the Government understand the nature of pluralistic religious freedoms and are trying to find a way through that cultural thicket.

Lord Dykes: My Lords, would the Minister not further agree that Turkey needs also to reassure western Europe and the United Kingdom that it will proceed much more rapidly with the economic modernisation necessary east of Ankara, where, apart from tourism, there is a very low rate of income, GNP and output? That needs to be put right to reassure the other EU member states that have serious hesitations about its membership.

Lord Malloch-Brown: My Lords, as I said in answer to an earlier question, I think that the noble Lord is quite right. We are disappointed about how the momentum of economic reform has slowed down. We are using every means that we can to encourage the Government of Turkey once more to put their foot on the pedal and accelerate those reforms, despite the fact that it is now a difficult economic time to be doing that in any country.

The Earl of Listowel: My Lords, can the Minister say what progress is being made in improving the treatment and experience of children and young people in the criminal justice and penal system in Turkey—or will he write to me?

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