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Lord Fraser of Carmyllie: My Lords, it is not for me to give absolute guarantees what the business of the House might be after it returns in the autumn. I repeated

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a Statement by my right honourable friend the President of the Board of Trade. He said that his observations on this matter were in the nature of some preliminary comments. I do not believe that there is any understanding on anyone's part that this is the end of the matter. Clearly, there will be a considered debate, not only in your Lordships' House, but, I hope, throughout the City and industry, as this matter is more clearly understood over the coming months.

I believe I gave an answer to the second part of my noble friend's question when I indicated to the noble Lord, Lord Peston, that my understanding of the matter is that for the year 1995-96 the withdrawal of tax relief, which allows those who are within an approved scheme not to pay income tax, although they have to pay a greater amount of capital gains, will amount to something like £80 million.

Lord Dean of Beswick: My Lords, in the Minister's detailed reply, he referred to the former public utilities. Is it not the case that some of the City institutions charged with dealing with the valuation of these former public utilities when they were privatised, got it wrong by as much as 30 per cent.? That left a very full trough of money for people to put their snouts in. The Minister will understand if people on this side of the House are not very enthusiastic about self-regulation once again being the order of the day at the top end of the financial scale, bearing in mind the recent failures by the City of London and Lloyd's of London.

The Minister also referred to the fact that neither the Greenbury Group nor the Government are involved in levelling rates of pay. The Minister should be aware that, in fact, members of the Greenbury Group level rates of pay of as low as £3 an hour on their employees, which I think is an absolute disgrace when we talk about people being "adequately rewarded". Although I do not single out any particular member of the Greenbury Group, some are involved in that.

The announcements that have been made today by Mr. Clarke, the Chancellor, are extremely welcome, but they will operate only from today. However, in the intervening period—that is, from the date of privatisation of those utilities to today—huge sums of money have been taken from the trough and raided by those people. Is the Minister saying that there is no way in which the Government can claw back any of that? The Minister should understand that people no longer accept that the Government cannot legislate retrospectively because it is "not done" when over the past few years, the Government have used retrospective legislation whenever it has suited them.

I support what was said by the noble Lord, Lord Boyd-Carpenter. I am sorry that we are to rise for the Recess this week. It may well be a convenient time to do so —and it happens like this under governments of various colours—but I should have thought that your Lordships' House should debate this subject as a matter of urgency. I am not by any means completely satisfied with what Greenbury said. I should like to read it in closer detail; but I do not think that it means much in the long run.

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Lord Fraser of Carmyllie: My Lords, I am aware of the complaints that the Government sold the utilities at prices that were too low; but, having taken independent advice, the view was that the price was set at the maximum that the market would bear. I also recollect that when the price was set too high and a flotation was not all that successful, the noble Lord was equally vigorous in his condemnation of what was undertaken.

Given the noble Lord's anxieties, I invite him to consider what the Greenbury Group said in greater detail and its set of recommendations for listed companies. As I said in opening, the Stock Exchange accepted those recommendations and will be requiring listed companies to comply with certain specific Greenbury recommendations. Listed companies will be required, for example, to set out their remuneration policy and to disclose full details of all directors' remuneration, including share options and long-term incentive schemes. I apologise to the noble Baroness, Lady Seear, for not having answered her question on that earlier. Listed companies will also be required to invite shareholders to approve all new, long-term incentive schemes whether payable in cash or shares. They are to refrain from issuing executive share options at a discount.

Therefore, I advise the noble Lord that a set of important recommendations has now been put forward which is to be coupled with the requirement of clear disclosure if other recommendations are not to be implemented. We shall doubtless return to the matter at a later date but I hope that, having reflected on it, it will be appreciated that a real attempt has been made to address those issues that have caused public concern.

Lord Cockfield: My Lords, I wonder whether my noble and learned friend will clarify his point about the tax treatment of these matters. It will be within my noble and learned friend's recollection that capital gains tax used to be charged at 30 per cent., which corresponded to the figure which had been the standard rate of income tax for a considerable period of years. In those days, to charge capital gains tax instead of income tax represented a considerable benefit. But Mr. Nigel Lawson (as he then was) increased the rate of capital gains tax to 40 per cent.—

Noble Lords: Shame!

Lord Cockfield: —thereby removing a large amount of the incentive to dress things up as capital gains instead of income. In those circumstances, it is very difficult to see how an £80 million tax yield could come from charging those things to income tax instead of capital gains tax unless there is a great deal more which has not been revealed in the highly sanitised edition of the Greenbury Report to which your Lordships have been invited to listen.

There is another and perhaps even more important point. Does the fact that the Chancellor of the Exchequer regards this as so important a move, and one which will remove the sense of public outrage which rightly or wrongly exists, mean that for the more innocent members of the community he now proposes reducing capital gains tax to 30 per cent. or, indeed, to 25 per cent., which is the present basic rate of income tax?

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Lord Fraser of Carmyllie: My Lords, I am sure that my noble friend the then Chancellor of the Exchequer is more than able to answer for himself and to explain why he raised that rate. It was clearly right to do so to ensure that such valiant efforts would not repeatedly be made to shift income into capital or vice versa as has happened from time to time. I should point out that £80 million is the figure that has been given to me. The noble Lord will appreciate that the annual capital gains tax allowance is some £6,000. The noble Lord may be surprised that because of its presence such a significant global sum should emerge at the end of the day, but that is what I am advised.

The present Chancellor of the Exchequer will have to answer for himself on his proposals for the rate of capital gains tax. However, in addressing such issues it is important to ensure that those employees who receive free and tax-free shares from their employers of up to £8,000 per annum under approved profit-sharing schemes should clearly be excluded from the provisions. Such arrangements in favour of employees are clearly desirable and one would not want to do anything to damage them.

Lord Barnett: My Lords, having handled a few tax matters when the noble Lord, Lord Lawson, was in the other place and in another capacity—when we both were—perhaps I may first take up a technical point on taxation, following the noble Lord, Lord Cockfield. Everything depends not on what the Chancellor is now saying, but on what goes into a Finance Bill and on how it ends up in a Finance Act. As I am sure that the House is aware, that is not always the same as was intended.

I assume that the Minister will be able to confirm that the saving of £80 million which he mentioned is very much a guess and depends on a whole variety of factors, not least on the question of allowances. The Minister said that there would be no allowances, but allowance is made for capital losses when set against capital gains. Indeed, it is possible to create some if they do not already exist, especially for members of Lloyd's. Perhaps the Minister will confirm that that figure of £80 million is very much a guess.

I turn now to the central and more serious point, which is what the Government propose to do about the level of pay of senior directors in all companies, not just in the utilities. I take the point that the Minister is not in favour of an incomes policy. The Minister said that we do not need to worry because this is what happens in the United States and the institutional investors are happy. My noble friend Lord Peston did not mention institutional investors; but the fact is that many of the self-same institutional investors are also board members of large companies where they are paying themselves very substantial salary increases. Therefore, it is a bit much to say that there is no incomes policy when there clearly is an incomes policy which allows that to happen. Perhaps the Minister will confirm that the Government intend to allow all this to go on with very little in the way of change. Greenbury referred to one year and said that after that there would have to be re-election, but that does not mean very much, as I am

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sure that the Minister is aware. In effect, is he not saying that it is not proposed to do anything at all about either the public utilities or other public companies?

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