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House of Lords

Tuesday, 9th November 1999.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Lincoln.

Finance Act 1998: Conditional Exemption for Chattels

Lord Chesham asked Her Majesty's Government:

    Whether the statement of the Baroness Hollis of Heigham that "It is a general principle of English and Scottish law that retrospective legislation should be avoided wherever possible" (HL Deb, 13th October, col. 502) applies to conditionally exempt items for inheritance tax purposes.

Lord McIntosh of Haringey: Yes, my Lords, the presumption against retrospection applies to this as to all other legislation. The 1998 Finance Act made two changes; first, to tighten the conditional exemption quality standard for chattels, but only for future undertakings, secondly, to reaffirm the original principle of reasonable public access behind conditional exemption and to take steps to ensure that it is achieved.

Lord Chesham: My Lords, I thank the Minister for that Answer. Is he aware of the comment made by his noble and learned friend Lord Williams of Mostyn, who is sitting next to him, that,

    "we all bristle when we see retrospective legislation"?--[Official Report, 18/10/99; col. 856.]

If there is so much bristle in the Government over retrospective legislation, why on earth have they retrospectively withdrawn Writs of Summons in the House of Lords Bill?

Lord McIntosh of Haringey: My Lords, we seem to be going somewhat wide of a Question about conditional exemption for chattels under the Finance Act 1998. I believe that I had better leave it at that.

Lord Renton: My Lords, is the Minister aware that retrospective legislation leads inevitably to injustice, and that for centuries Parliament has avoided it? Will the Government therefore do their utmost to preserve the principle that, except in rare circumstances affecting the state, there should be no retrospective legislation?

Lord McIntosh of Haringey: My Lords, I hope that I made it clear in my original Answer that there is a presumption against retrospective legislation. There are of course exceptions--as the noble Lord, Lord Renton, is well aware--for finance Bills, where the Provisional Collection of Taxes Act 1968 allows taxes to be raised before legislative authority is given.

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However, I agree with the noble Lord that the presumption against retrospective legislation should be continued.

Lord Bridges: My Lords, I have an interest in the particular matter raised by the noble Lord, Lord Chesham, which I explained to the House on an earlier occasion. I do not propose to repeat it now. I invite my noble friend Lord McIntosh of Haringey to look again at the explanation which he gave to the House when replying to the debate on 26th May:

    "It is proposed that there should be improved access only where there is already in the agreement a requirement for reasonable public access".--[Official Report, 26/5/99; col. 1032.]

That statement makes it clear that the provisions under discussion are not retrospective legislation, as was claimed by the noble Lord, Lord Chesham, and others. It seems to me that my noble friend's words prove the opposite. The agreements between the taxpayer and the Revenue, freely reached on the basis of the earlier law, were deemed by the Treasury to be inadequate. In order to strengthen the provisions for public access, the Treasury decided to amend the law so that it could insist on more public access. That procedure had the effect of nullifying the agreements previously reached, because the legal basis upon which they relied was removed.

Does the Minister agree that the definition in the Oxford English Dictionary of retrospective legislation as,

    "operative with regard to past time",

applies in this case? Will the Minister please re-examine this question so that it may be resolved satisfactorily through agreement between willing taxpayers and the Revenue?

Lord McIntosh of Haringey: My Lords, of course in preparation for this Question I re-read my speech of 26th May and it will come as no surprise to your Lordships that I agree with it.

There is no element of retrospection. The undertakings given in exchange for conditional exemptions were that there would be reasonable public access. The experience following those agreements was that reasonable public access was not achieved--in other words, there was a unilateral derogation from that agreement by the owners of the chattels, not by the Government. It was necessary for the Government to ensure that the original undertakings were adhered to.

Baroness Gardner of Parkes: My Lords, in view of the statement of the noble Lord, Lord Bridges, about "willing taxpayers", will the Minister consider the number of unwilling taxpayers paying inheritance tax? Does he not believe that this tax is defined as one that can be avoided if one is clever or has good advice, because there is a great deal of inheritance tax avoidance planning in this country? Does not the Minister consider it time that the Government looked to the Australian system, where inheritance tax has

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been abolished completely, and other forms of taxation are used instead? Will he put that suggestion to his right honourable friend the Chancellor?

Lord McIntosh of Haringey: My Lords, certainly it is true that the issue of inheritance tax is a major concern for a limited number of people. I am not sure that there are any willing taxpayers for any kinds of tax, whether that is inheritance tax or any other kind. There are taxpayers who believe that paying tax is the right thing to do, but that does not necessarily make them willing.

The principle behind conditional exemption is designed to ensure that there should be public access to works of art and chattels owned by, on the whole, rich people. It has had some effect. However, because it has not had enough effect, the Chancellor felt it necessary to protect the public by ensuring that there really was access to those works of art on which tax had been foregone by the Exchequer.

Lord Saatchi: My Lords, will the noble Lord accept that the most generous interpretation that can be given to the dispute between the Government and the owners of the exempt chattels is that there has been a misunderstanding between them as to the rights and obligations under the terms of those provisions? Therefore, does he not believe that it would be gracious of the Government at least to offer to compensate owners who have been confused about the change of rules for the increased costs that they will suffer in terms of security and insurance?

Lord McIntosh of Haringey: My Lords, I believe I should make it clear that there is no disagreement, still less misunderstanding, between the Government and the vast majority of those who have taken advantage of conditional exemption. They are already compensated by not having to pay the tax. If they want to preserve their right to maintain those chattels without showing them to the public, they have a very simple solution: they can pay the tax. I do not believe that there is any obligation on the Government--either moral or legal--to contribute to security or legal costs.

The Armed Forces: Deployment of 16 and 17 year-olds

2.44 p.m.

Lord Campbell of Croy asked Her Majesty's Government:

    Whether they envisage any change of policy regarding restrictions on the employment and duties of members of the Armed Forces aged 16 and 17.

The Minister of State, Ministry of Defence (Baroness Symons of Vernham Dean): My Lords, no. UK recruitment and deployment policies accord with international standards laid down in the UN

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Convention on the Rights of the Child and International Labour Organisation Convention No. 182. The UK has played, and will continue to play, a full and active role in negotiations on this matter. We recruit only volunteers with parental consent if the volunteer is under 18, and ensure that all recruits understand fully their military obligations prior to enlistment. However, we keep our policies under review.

Lord Campbell of Croy: My Lords, I am grateful to the noble Baroness for that reassuring reply. As the British Army consists of volunteers, in contrast with some other NATO armies, does she agree that a 17 year-old should be enabled to be part of a combat unit if that is what he wants to do? As regards younger teenagers, are they not suitably placed in cadet forces at present, where training and discipline can do them only good and also possibly prepare them for later military service, including the Territorial Army?

Baroness Symons of Vernham Dean: My Lords, I believe that the noble Lord has hit exactly the right point. Ours is not a conscript army; it is a volunteer army. If young people of the age of 17 want to take part in combat, they can do so under the current deployment policies of the Armed Forces in the UK provided that they are fully trained--that is a very important point--and fully understand the obligations placed upon them. The noble Lord makes a most apposite point about 16 year-olds. Extensive training is given, not only within the Armed Forces but in vocational issues; for example, the opportunity to obtain a Level 2 NVQ. Therefore, proper pastoral care is given to those young people.

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