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Chris Huhne (Eastleigh) (LD): First, may I apologise to the Chair for being late for these proceedings and for not being able to resume exactly where I left off when the hon. Member for Normanton (Ed Balls) was kind enough to—
Mr. Philip Hammond (Runnymede and Weybridge) (Con): On a point of order, Mr. Cook. Is it in order for the hon. Member for Eastleigh to show the discourtesy that he has shown to the Committee by ending one sitting in mid-sentence, not arriving to continue it at the beginning of the following sitting and then seeking to resume a speech on an amendment that has now been lost?
The Chairman: The amendment has not been put yet. As I understand it—I was not in the Chair at the time—the hon. Member for Eastleigh was stopped by the Committee deciding to end its proceedings at that point. The Committee went away, and the situation is unfortunate. We do not know the reason for his arriving late, but he arrived after the similar amendment was moved by a member of the Opposition. I do not see anything that transgresses ''Erskine May'' or any other Standing Order of the House. We are debating amendment No. 105 and not amendment No. 104. I remind the Committee that the question on amendment No. 104 has never been proposed.
9.30 am
Chris Huhne: On a point of order, Mr. Cook. Again, I apologise for being late. May I ask your advice? I should be pleased to continue my remarks on amendment No. 105, as its effect is exactly the same as that of amendment No. 104. Will you advise me on whether that would be appropriate? Would you prefer me to do otherwise?
The Chairman: The Chair's preference has nothing to do with it. It will be eminently sensible for you to
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continue doing what I thought you were going to do anyway. Let us get on.
Chris Huhne: Mr. Cook, your common sense is extraordinary. Thank you very much.
The Chairman: My common sense is renowned.
Chris Huhne: Who could possibly disagree?
To sum up the remarks that I was making on Tuesday evening, I should say that this is a temporary grab for revenue by the Treasury from one sector of financial services—life insurers—and that it is self-evidently no more than opportunistic. It will be interesting to hear Ministers' justifications, given the changes in the tax base that they have introduced in the draft regulations over a short period.
There is no evidence of any avoidance that could have sparked such a sortie into one particular part of the corporate undergrowth. As I have said, the basis of the charge has changed fundamentally. The HMRC has recognised that it is only temporary by binding itself with a sunset clause and a commitment to a new substantive basis for sorting out the potential tax base—namely, those assets held by life insurers that are surplus to what is needed to meet their commitments to their policyholders. The new basis of the charge will take about £35 million from a handful of companies and will stop others from reaching sensible commercial judgments, approved by a court scheme, to apportion assets between policyholders and shareholders, because that would crystallise a large tax charge.
Moreover, as the hon. Member for Cities of London and Westminster (Mr. Field) has just pointed out in another context, such matters are to be determined by Treasury orders, rather than by primary legislation. In our view, that is a very poor basis for such a fundamental tax change.
At the close of proceedings on Tuesday, the hon. Member for Normanton intervened and asked me a number of questions. I hope, Mr. Cook, that you will allow me to make some response to those, as his intervention was not ruled out of order. As I understand it—like the hon. Member for Normanton, I am a newly elected Member, so please correct me if I am wrong, Mr. Cook—we in the Opposition are not allowed to bring forward proposals for alternative means of raising revenue. Those have to be proposed by a Minister of the Crown and accompanied by a Ways and Means resolution. That is unfortunate. The hon. Members to my right, for example, have spent a number of hours in Committee proposing tax cuts without the intellectual necessity of imagining from where they might raise the revenue instead. However, those appear to be the rules.
Mr. Philip Hammond: The hon. Gentleman may not have paid attention to what his party was doing in the last Parliament. When I was a local government spokesman listening to the drivel about local income tax that his party was producing, I do not remember it being shy about proposing alternative ways of raising revenue in that sphere.
Chris Huhne: The hon. Gentleman knows the strict proposals as far as tabling new amendments or clauses
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to the Finance Bill are concerned. However, Liberal Democrat Members have made an exceptional effort to provide Ministers with an extremely good idea.
With the help of the Clerk, the hon. Member for Normanton will find a new clause. Unfortunately, under the rules we are not able to debate it, but it would have the effect of saving very substantial amounts of money for the Treasury by closing a loophole that was opened up by last year's Finance Act. That loophole is self-invested personal pensions, which under the new rules make it possible to invest in directly held residential property, for example, and in personal chattels. That will be an extremely expensive new measure, and it will come into effect from the beginning of the next financial year.
The hon. Member for Normanton will find that it is possible to make significant amendments to the current proposals, and I hope that he will press for those with the Chancellor of the Exchequer, given his substantial influence in the Treasury building on the other side of the road. For example, I hope that he considers the amendment under discussion—and amendment No. 104—and ponders the potential revenue implications of £35 million. In contrast, the Government would make extraordinary savings if they were to adopt this modest measure.
Ed Balls (Normanton) (Lab): The intervention that I made was simply to ask whether the Liberal Democrats were still committed to a new top rate of tax in order to cover the loss of revenue that their proposals would cause.
The Chairman: Order. This exchange is very entertaining and quite interesting, but it bears little relevance to amendment No. 105, which is the topic under discussion. I am happy for a bridge to be built between comments made in the current sitting and those made in our last sitting on Tuesday, but we have spent enough time doing so, and we should move on with the issue at hand. Can we discuss amendment No. 105, please?
Chris Huhne: Absolutely, and it is precisely the question of how one would pay for amendment No. 105 that makes my point relevant. I am hoping to give some idea of the scale of the proposed reduction in insurance companies' taxation in comparison with the total of the Government's proposed measures by pointing out that revenue to the Consolidated Fund would be reduced by about £35 million. That cost to the Exchequer would be only a small fraction of the at least £500 million per year, building up to even more than that in later years, that the Treasury will lose in tax revenue if it persists with the revision of the rules on self-invested personal pensions. These calculations are directly relevant to the amendment.
Mr. Philip Hammond: I am struggling to understand the hon. Gentleman's logic. As I understand it, amendment No. 105 seeks to remove an order-making power. There are good reasons of principle—which I am glad to learn that the Liberal Democrats share with the official Opposition—for resisting the wide extension of order-making powers. However, the hon. Gentleman cannot tell us what the revenue consequences are of an enabling provision that
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would give the Treasury the power to make orders. He can speculate, but he cannot put a price on an order-making power.
Chris Huhne: I am grateful for the hon. Gentleman's intervention. I regret that he has not been brought into the confidence of advisers to the extent of being made aware of the draft regulations tabled by HMRC in this respect. If he had been, he would be able to put a figure on the likely consequences of these enabling measures. That figure is as I have suggested. The calculations of the relative consequences of this amendment—and of the amendment that we tabled, which we are unable to discuss thanks to the rules—are £35 million as against £500 million. The £500 million calculation is based on estimates by a City firm whose business is market research. The Treasury should be worried about that.
It is sensible for me to put my remarks about this on the record, because I believe that the Treasury will return with an amendment to a Finance Bill—if not this one, perhaps the one for next year or the year after—when the full scale of the reliefs under self-investment personal pensions becomes clear and a reality. Does the Minister not think that it would be better to withdraw these proposals, and to return with new and carefully worked out proposals for life insurance on which there has been sensible consultation for the Finance Bill in 2006?
Mr. Lewis: That was one of the most extraordinary Committee performances. The hon. Gentleman turned up late—perhaps for very good reasons. He then claimed that the Liberal Democrats were unable to come forward with revenue proposals. Those of us who have campaigned against them for years will find that extraordinary, reflecting on the ''Focus'' leaflets that make promise after promise to spend more and more money.
Chris Huhne: I think that if the hon. Gentleman were to consult the Clerk he would find that the clause that we have tabled is not selected for discussion. That is what I was referring to, so the points that I was making stand.
Mr. Lewis: I have not even come to that bit yet. That is related to the contribution by my hon. Friend the Member for Normanton, not the point that I was just making, and not your statements, Mr. Cook, which are full of common sense as I have already said once this morning. The hon. Member for Eastleigh said that Members of the House in opposition were not able to come forward with revenue proposals. That is misleading.
The Liberal Democrats said immediately after the election that the revenue and spending proposals with which they had gone to the people had suddenly been scrapped and they would have a comprehensive review. No doubt they will advance revenue proposals at some point during this Parliament, all of which will equally lack credibility.
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