Mr.
Hoban: Will the hon. Lady give
way?
Angela
Eagle: Before the hon. Gentleman leaps to his feet, I will
deal with the point that he might wish to make. I can assure the
Committee that clause 25 will only have effect when the company has
given an undertaking to surrender its right to benefit from tax losses
and other reliefs under arrangements entered into with HM Treasury, or
any other public body, and when the Government are providing financial
support. The clause will only become relevant in those narrow and
particular
circumstances.
Mr.
Hoban: The hon. Lady is absolutely right that the clause
relates to those circumstances, but as I indicated in my remarks, the
Government have supported several schemes in which they give financial
support to see businesses through this time. We are talking about
European Investment Bank guarantees, and there are
other schemes. What criteria will be used by the Treasury to determine
whether the agreements it has reached or the support it has given to
businesses should lead to those companies forgoing their tax
losses?
Angela
Eagle: This is not a general approach that we are going to
apply across the piece. The hon. Gentleman knows that we have not
applied it to Lloyds in its access to the asset protection scheme, even
though we have agreed with RBS that it should forgo some of the tax
reliefs and losses.
Mr.
Hoban: Will the Minister give
way?
Angela
Eagle: I will in a minute when I have finished what I am
trying to say.
Therefore,
the approach will apply only when it is explicitly part of an agreement
that is made between the particular company and HM Treasury. It will
not be applied retrospectively to a range of general agreements that
have already been reached. This is about having access to particular
assistance, in this case from the asset protection scheme, through an
arrangement made between HM Treasury and the company concerned. I hope
that will reassure the hon. Gentleman that this is not just a general
sweeping power that we intend to apply across the piece to help and
assistance that the Government may wish to give to industry in general.
It is much more specific and narrow than
that.
Mr.
Hoban: I understand the Minister’s point about it
being specific. She drew a distinction between the treatment of Lloyds
and RBS. But once this power is in the Bill, and given the breadth of
the power and the range of circumstances it could cover, businesses
will ask whether they want to accept this help from the Government in
return for forgoing tax losses and in what circumstances the Government
would ask them to forgo those tax losses. Although the Minister says
that it refers to a particular historical event, the breadth of the
clause makes it more widely applicable in future to agreements reached
between the Government and particular businesses. Those businesses
might want some clarity about when the Government might seek to take
advantage of this clause.
Angela
Eagle: The asset protection scheme is not one of those
things that comes into existence every day of the week. We are not
likely, hopefully, to need schemes such as that regularly in future. It
is a response to a critical situation that has arisen in the global
financial markets and the credit crunch. I hope the hon. Gentleman will
accept
that.
Stewart
Hosie: The Minister is right about the asset protection
scheme: there are one or two banks involved and there may be one or two
more. In terms of the potential scale, there is also the working
capital scheme, the enterprise finance guarantee scheme, the capital
for enterprise fund, the asset purchase scheme, the direct assistance
to the automotive industry and £1.3 billion of EU additional
funding. That could cover a large number of companies receiving aid in
one form or another that might be invited to surrender tax reliefs as
well. Should we not have some concerns that the proposal might grow
arms and legs unnecessarily?
Angela
Eagle: Although Opposition Members have said that this is
a wide-ranging clause, they have also acknowledged that it would be
applied in a very narrow range of circumstances in which a bilateral
agreement has been reached between HMT and a particular company in
order to pay for access to Government support. Effectively, we are
talking about getting good value for taxpayers’ money, if we are
essentially acting as insurers of last resort to companies who have got
themselves into difficulties. That is one of the ways that access to
such support might be paid for in certain circumstances. In those
circumstances, there must be a bilateral arrangement as part of an
application to get Government
support. [Mr
Jim Hood in the
Chair] What
we propose is not a general principle to be applied across the board. I
hope I have made that clear and I hope that offers some reassurance to
Opposition Members. In addition, subsection (3) ensures that giving up
tax reliefs in return for Government assistance under such designated
arrangements does not create any new tax relief either to a company
that has given up reliefs or to any other person. For example, no tax
relief will be due when one company in a group that has benefited
directly from the asset protection scheme compensates another company
for forgoing tax relief. In that circumstance, the clause denies any
relief for the compensation payment. I therefore move that it should
stand part of the
Bill.
Mr.
Hoban: We are debating amendments, Mr. Hood,
although it has transformed into a wider debate about the clause. I
would not have spent so much time on this matter if it had been
restricted purely to the one transaction of RBS and the asset
protection scheme. I understand why the legislative underpinning needs
to be in place to enable RBS to surrender its losses. If there had been
a way of drafting the measure to restrict it, I think that it would
have gone through on the nod without much debate, other than my asking
when the APS might be signed off.
6
pm My
concern is that the clause is much more widely drafted. It relates to
particular companies and financial support, but it can also be used to
enable an agreement to be reached with a company to forgo its losses in
return for financial support. In the Minister’s statement, there
is no clarity as to the future circumstances in which the measure will
be used. That is where I have a problem, as it is a wide-ranging clause
that could be used in the future.
Let us return
to the example of Vauxhall, or let us suppose, for example, that a rail
franchise collapsed. If the Department for Transport wanted to bail out
the company, the Government could say that in return for that support,
they wanted the company to surrender its tax losses. That might be
restricted to the losses made on that franchise, or could be related to
the wider business. I am not comfortable with the breadth of the
clause.
Angela
Eagle: The hon. Gentleman should at least acknowledge that
for tax losses to be surrendered in that way, there would need to be a
bilateral agreement
between the company and the Treasury. That is true whatever company it
is—I do not wish to speculate on which companies might be
involved in that. That is a part payment for the support given, which
obtains value for the taxpayer. Surrendering tax losses is merely one
option. The clause makes it certain that any such bilateral agreement
between a company and HM Treasury would be effective in tax law. To
that extent, it is a technicality.
I hope the
hon. Gentleman is reassured that for other support—of which
there is a great deal at the moment, with a number of schemes that
support various parts of industry—we have not insisted on tax
losses being relinquished as part of the structure or payment that we
expect for that support. This is a narrow provision and must be agreed
between the company that is asking for support and HMT. Although it is
potentially wide, paradoxically it is also narrow at the same
time.
Mr.
Hoban: I take that point and that is why in my remarks to
wind up the debate I said that if the provision had been entirely
related to the narrow example of RBS, it would have gone through on the
nod. The fact is that it could be used more widely in the
future.
The Minister
talks about the RBS scheme, which is potentially a huge financial cost
to the taxpayer and a big event. We have seen other examples in which
seemingly innocuous clauses in Bills have been used with a wider impact
at a later stage, in ways that had not been envisaged at the time. Yes,
a bilateral agreement must be reached with the company, but there is
sometimes an asymmetrical relationship between the Government and a
company in terms of the power that each has and how one might be
prepared to do the other’s bidding because of the circumstances
at the time.
I am not sure
that there are sufficient safeguards for the use of this power in the
future, and I would be happier if it had been restricted to
implementing what is seen as a one-off deal in the context of RBS and
the asset protection scheme. What has happened before provides some
comfort, but not total confidence, about how the power will be used in
future.
As the
Minister has made points about the uncertainty that might arise as a
consequence of waiting for parliamentary scrutiny, I am not minded to
press the amendment this evening, although I am not sure how robust her
argument is. I will reflect on a different approach to tackling clause
25 on Report. I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn. Clause
25 ordered to stand part of the
Bill.
Clause
26Contaminated
and derelict
land Question
proposed, That the clause stand part of the
Bill.
Mr.
Hoban: I wish to explore some of the background to land
remediation relief in the Bill. The Government have tabled a number of
amendments to schedule 7. As I understand it, land remediation relief
is given at 150 per cent. of the actual cost of remediation.
Remediation costs include labour and materials incurred directly or
through a contractor. When a business is profitable, the
relief can be used to reduce the corporation tax payable. When a
business is not profitable, it can claim a repayment capped at 16 per
cent. of the lower cost of the qualifying expenditure or unrelieved
losses. I
understand that the objective of the relief is to bring forward
brownfield sites for development, particularly ones that have been
contaminated. The draft statutory instruments that have been published
alongside the clause discuss three aspects of contamination: radon,
arsenic and Japanese knotweed. I will return to Japanese knotweed in a
moment. The
Government have put great pressure on brownfield developments. A long
time ago, the Office of the Deputy Prime Minister set a target that 60
per cent. of new developments should be built on brownfield sites.
However, the definition of a brownfield site is quite elastic. Many
houses have been built in my constituency on brownfield sites that
other people might know as back gardens and former nursing homes. On
brownfield sites previously used as industrial sites, chemicals may be
left behind that have to be eradicated before the site is
developed. The
pressure to build on brownfield sites meant that their value was pushed
up until the recent property crash, particularly when there was a
relatively low cost of remediation. The cost of remediation is a
barrier to sites being used for development. It is therefore
understandable that relief is made available to help mitigate the cost
of remediation of the land. That is such an obvious point that it is
difficult to understand why it has taken so long to get to the point in
legislation where we try to improve the availability of the
relief. Lord
Rogers’s urban task force, which reported in 1999, suggested
that additional relief should be given to developers to decontaminate
land. That did not include long-term derelict land. The Barker review
of 2004 cited decontamination of brownfield sites as one of the
principal barriers to redevelopment of such areas. Two years later,
Professor Barker carried out another review. The Chancellor in those
days was keen to commission a review in every Budget on all sorts of
subjects. Professor Barker got good work out of that. Her review of
land use and planning in 2006 said that the Government should consult
on the reform of remediation relief to encourage new
developments. In
2007, there was a consultation on tax incentives for the development of
brownfield land that looked at better targeting of land remediation
relief and increasing certainty and publicity for the relief. The
Government concluded:
“In
light of the responses to the consultation the Government is minded to
take a number of steps to improve the certainty of this relief. In
particular, HMRC will be considering how to improve guidance and what
mechanisms could be used to ensure that the relief is better
publicised. This should help to ensure that financial planning takes
full account of the relief from the
start.” We
seem to have spent an awfully long time talking about and consulting on
this, to get to the process before us today. Even after that long
gestation period, the Government are still minded to table two
amendments. I should have thought this would be a textbook bit of
legislation after so much consultation, and that it would pop, fully
formed, into the Bill, without needing to be amended at this
stage.
An important
issue that I have noted from my constituency is that the relief should
be extended to Japanese knotweed. The draft statutory instrument refers
specifically to the three botanical types of Japanese knotweed, which
apparently holds the title as Britain’s most invasive plant.
According to the BBC, its removal from the Olympic site in east London
could cost hundreds of thousands of pounds. Apparently, it has
bamboo-like stems and clusters of creamy flowers. It sounds exotic, but
it is very expensive to remove. It can flourish in any soil, so hon.
Members with poor soil in their garden might consider that it would
provide an attractive plant, but it overwhelms other plants and damages
ecosystems. It has the ability to grow through walls, tarmac and
concrete.
Mr.
Todd: It kills horses as
well.
Mr.
Hoban: Indeed. Experts say that a new plant can grow from
a piece of root the size of a garden pea. It is clearly a problem, and
I know that from my experience, because there was a development plan
for my constituency to build the final stage of a road through a site
that is known locally as Warsash motors.
Mr.
Todd: I used to live down
there.
Mr.
Hoban: I know. The road was planned when I was elected in
2001, and has been completed only recently. The reason why it has taken
so long to complete is that the county council looked at the cost of
removing the knotweed, and thought it easier to poison it and allow it
to die naturally rather than try to dig it out. So, I think that people
will welcome the fact that Japanese knotweed is covered by the measure,
although they might regret the fact that it has taken rather longer
than expected to get to this point.
I want to
raise with the Minister a few points that emerged from the regulatory
impact assessment. The cost of the measure is about £30 million
to £40 million a year over a five-to-10 year period, so there is
an aggregate cost of somewhere between £150 million and
£400 million, but in the RIA, there is no monetised
amount for the benefit of that cost. Will the Minister indicate how
much land she thinks will be brought forward for development as a
consequence of the measure? Alternatively, have the Government been
waiting so long that the measure will not bring forward any land at
all? I am interested to know what work they have done to understand the
benefits and the sort of sites that would come forward for development
that have not been coming forward, so we can protect some of our
greenfield sites and allow these contaminated brownfield sites to be
developed. According
to the RIA, very few people would be disadvantaged by the measure, but
one group that will be disadvantaged are those who deal with knotweed
currently and send it to landfill sites. Are there many contractors who
just take it to landfill sites? What will be the impact on the landfill
levy of the introduction of this remediation relief, which will reduce
the number of people taking knotweed to landfill sites? I presume that
the cost has been netted off, or factored in, to the
RIA.
6.15
pm
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