Dawn
Primarolo: I am sure that any Member of this House
occupying my role in Government would take the clear view that the
restoration of accounts to their original owners or heirs stems from a
very dark episode in global history. As all Committee members who have
spoken acknowledge, it was considered only right and proper to make
provision in the clause for the exemption.
I am
grateful for hon. Members’ comments. Rarely is a clause in any
Finance Bill so welcomed. The words “morally right” are
not often attached to considerations of taxation, but they could apply
anywhere. They might apply to other points, but they definitely apply
to the clause’s objectives. I commend it to the
Committee. Question
put and agreed to.
Clause 64 ordered to stand
part of the Bill.
Clause
65London
Organising
Committee Question
proposed, That the clause stand part ofthe
Bill.
John
Healey: Clauses 65 to 68 deal with the status of
activities relating to the Olympics. As part of London’s bid for
the 2012 Olympic Games and Paralympics, the Government gave an
undertaking to introduce the necessary legislation to exempt the London
Organising Committee of the Olympic Games from corporation tax. Clauses
67 and 68 would do the same for the International Olympic Committee and
for non-UK resident competitors and support staff. That is a recent
innovation by the IOC, and all bid cities were required to give such
tax undertakings.
Clause 65
and the supplementary provisions in its sister clause 66 will provide
the exemptions required for the London organising committee as well as
powers to enable that exemption, where appropriate, to be extended or
restricted as the committee’s plans and arrangements for
delivering the Olympics in 2012 become
clear. That is an
essential part of a major event, not just for London, but the country,
and to which I think that we are all looking forward. The exemptions
are important also so that the committee can deliver the best ever
Olympics, and do so in
London. Mrs.
Theresa Villiers (Chipping Barnet) (Con): I welcome you,
Mr. O’Hara, to the Chair. I shall speak briefly to clause 65,
and not trouble the Committee by referring to the clauses linked to it.
I shall take this opportunity also to put on the record my
congratulations to the London bid team for its remarkable achievement
in bidding successfully for the 2012 games. Given, as we have heard,
that the provisions in the clauses were a requirement for the bid to
have been made, there is no question but that the Government should
honour the undertakings made in it.
Will the Financial Secretary
tell us whether the clauses are expected to cost a significant amount?
One would not necessarily expect the London organising committee or the
IOC to raise significant revenue, but it would be useful to hear any
information that he might have on
that. Will
the Minister comment also on the points raised by the Institute of
Chartered Accountants about whether the model for the exemption could
be useful for charities as well? A number of complications with
charities in general might make the model inapplicable, but I thought
that it was a constructive idea from the institute, and I would welcome
his thoughts on the
matter. I
realise that it is not strictly related to the clause, but may I urge
the Treasury to keep a watchful eye on the overall cost of the
Olympics? I have raised that point with the Financial Secretary on the
Floor of the House; it is of particular concern to my constituents in
Chipping Barnet, who are London council tax payers who will pick up the
bill for cost overruns, along with the
lottery. The
budget for the London organising committee has increased already from
£1.46 billion, envisaged last year when the London Olympics Bill
went through the House, to around £2 billion, as confirmed by
the Minister for Sport in Westminster Hall last week. He indicated that
the increase was due to inflation, presumably over the
period until the games in 2012. However, that increase would put
inflation at 33 per cent. over that 6-year
period. Furthermore,
the heightened security needed following events on 7 July must surely
have an impact on the overall cost of the games and could presumably
drive it up further. I believe that the funding package on security is
about £220 million, which was set before the 7 July attacks. The
Government have said plainly that they will not meet the cost of
overruns and that those must be shared by the lottery and London
council tax payers. However, the Minister must be aware that if the
games go badly over budget, there will be pressure on the Government to
step in. For the sake of London council tax payers and to guard against
future demands on the Exchequer, I urge the Government to do all that
they can to ensure that the highest standards of procurement are
applied to Olympic projects so as to avoid the cost overruns that have
dogged many previous
games. If Olympic
construction projects are late, we cannot just shift events to Cardiff,
as we can the FA cup. I hope that we can learn lessons from Wembley and
public procurement disasters such as the Scottish Parliament. I am told
that the residents of Montreal are still paying for the games that it
held over 30 years ago. Sydney’s budget was £1 billion,
but its games ended up costing £2.8 billion, I believe. The
Athens Olympics overran massively, with costs spiralling from £1
billion to £5 billion, much of which was due to security
considerations, which of course will be more significant in London. I
appeal to the Ministers here, as representatives of the Treasury and
guardians of the public purse, to ensure that that sort of overrun does
not happen in 2012.
Ms
Barlow: I welcome my right hon. Friend’s assertion
that the Olympics will have a major effect on the whole country.
However, I seek clarification of paragraph 13 of the explanatory note
to the clause, which states that
“The International
Olympic Committee included a requirement in the bid process for the
2012 Olympic Games and Paralympic Games that tax in the host country
should not have a significant impact on the Games. As a result of the
successful London bid the Government is committed to providing certain
tax exemptions, including: LOCOG would be exempt from corporation tax;
Withholding tax would not be levied on royalties, and other annual
payments made to
LOCOG.” With regard to
the regulations for LOCOG, competitors and staff, the receipt of tax
relief gives the organisers a responsibility to ensure that these are
not just London Olympics, but games for the whole of the United
Kingdom. The Olympic
games will be held not only in London but in other parts of the
country, as will training camps—the city of Brighton and Hove,
of which my constituency is part, is hoping to play host to some teams.
We need to ensure that the games are embraced by all the people of the
United Kingdom, so these clauses must not be thought of as enabling the
Government to provide subsidies for the capital from those who live
outside London. Will
my hon. Friend clarify that the tax relief that is rightly to be given
to those concerned with the Olympics, and which was part of the London
bid, will apply also to providers situated outside London, such as
sports venues in my area?
John
Healey: My hon. Friend the Member for Hove (Ms Barlow)
makes some important points about the role of the Olympics and their
potential benefit not just for London but for the whole country. The
body is, of course, the London organising committee but, as she rightly
says, the games are for the whole UK and they must—and I hope
will—be embraced by the whole UK. I wish Brighton and Hove all
the best in its bid to host some of the teams that will be competing in
the Olympics and Paralympics. Rotherham in South Yorkshire is hoping to
do the same— [Interruption.]—and
Bristol, too, the Paymaster General informs me. Clearly, there is a lot
of interest across the UK in the prospect of the Olympics. The
associated activities will reach well beyond the Greater London area,
and the organising committee is well aware of that.
On the comments of the hon.
Member for Chipping Barnet (Mrs. Villiers), it is difficult to estimate
the tax cost in terms of potential revenue forgone. Secondly, the
potential yield has not been factored in to the forecasts because if we
had not won the bid for the games, there would be no potential tax
yield from Olympic-associated activities. Without the exemptions that
we are considering, the bid would not have been successful; they were a
requirement of the bid application. On the more general costs, the hon.
Lady is right. I can assure her that the Treasury will keep a close eye
both on the general costs that concern her and on the standards of
procurement throughout the run-up to 2012. I have no doubt that the
Opposition will help with the scrutiny of the costs and the standards
of procurement, as will the National Audit Office and Parliament as a
whole. There are two
points about provision for charities. First, LOCOG is not a charity, so
it does not benefit from the wide range of tax exemptions available to
charities. Secondly, we need to appreciate the unique nature of the
Olympic event. That is why we are putting in place unique tax
arrangements. It is a once-in-a-lifetime opportunity for a country such
as ours to host the games. To that extent, our provisions for the
Olympics cannot be generalised to other events, nor are they
appropriate for charities generally. I hope that on that basis, the
Committee will allow the clause to stand part of the Bill.
Question put and agreed
to. Clause 65
ordered to stand part of the Bill.
Clause 66 and 67 ordered to
stand part of the
Bill.
Clause
68Competitors
and
staff Question
proposed, That the clause stand part ofthe
Bill.
11.45
am Mr.
Colin Breed (South-East Cornwall) (LD): In the explanatory
notes on the background to the clause, paragraph 9 states
that “athletes not
resident in the UK will not pay income tax on any income arising from
their performance at the
Games”. Does
that include sponsorship, advertising, media appearances—in
fact, all the income that is sometimes somewhat more than that arising
from their performance in the games? Sometimes income is more to do
with their performance in television adverts and such
like.
John
Healey: I can broadly confirm the
supposition that the hon. Member for South-East Cornwall (Mr.
Breed) makes. The current tax system for non-UK resident performers
includes income earned in the UK from a range of activities. In the
case of a sports star, for example, it may include the winnings in a
tournament and media earnings from associated appearances. The
provision is designed for the specific purpose of making a special
time-limited exemption on such earnings for individual competitors,
performers and support staff directly related to the delivery of the
Olympics. That is the basis of the proposal, and I stress its
time-limited nature.
Mr.
Breed: Will the Financial Secretary explain the time
limit? Is it the three weeks in which the Olympic games take place, or
is it a longer period, including that prior to the games when
performers are training in this country?
John
Healey: No, it will be a longer period than that. The IOC
suggested in the host-city contract that we consider a period of 120
days leading up to the opening ceremony, and an additional 60 days
after the closing ceremony. We will work through the detail. The clause
contains the power to make such requirements in regulation, which is
obviously more appropriate than making them in the Bill. Nevertheless,
that is the period we are considering: several weeks around the Olympic
games and the Paralympic games proper.
Helen
Goodman (Bishop Auckland) (Lab): I understand what the
Financial Secretary says about what is going on, but he has not
explained why we are providing that massive tax
exemption.
John
Healey: Perhaps my hon. Friend the Member for Bishop
Auckland (Helen Goodman) missed it, but when we started talking about
this group of clauses at the outset, I explained that as an innovation,
the IOC required of any bid city its preparedness to make tax
arrangements to ensure that the successful city’s delivery of
the Olympics was not affected by tax. Therefore, clauses 65 to 67
include a range of organisations—not only the London Organising
Committee but the International Olympic Committee—and clause 68
covers the competitors and support staff.
The short
answer is that the IOC wanted and required the provision as part of the
bid. We gave an undertaking to create it as part of the successful
London bid, and clause 68 will honour that undertaking.
Question put and agreed
to. Clause 68
ordered to stand part of the
Bill. Clause
69Restriction
on a company’s allowable
losses
Mr.
Goodman: I beg to move amendment No. 103, in page 54, line
10 [Vol I], at end
insert— ‘(2D) Arrangements
where the tax advantage arises due to the creation or utilisation of an
allowable loss shall not be treated as arrangements for the purposes of
Part VII of the Finance Act
2004.
(2E) Where an allowable loss accrues to a company in
circumstances that are not disqualifying circumstances, then for the
purposes of the Tax Acts it should be assumed that the Promoter and the
company did not wish that the element of the arrangements that secured
a tax advantage not to be disclosed to any other promoter or Her
Majesty's Revenue and
Customs.”'.
The
Chairman: With this it will be convenient to discuss
amendment No. 104, in page 54, line 4 [Vol I], after
‘enforceable)', insert ‘but
arrangements shall not include any election undersection 24,
161 or 171A and shall not apply to either the whole or part of the loss
to the extent that the allowable loss corresponds to an equivalent
economic loss suffered by the
company'.
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