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Viscount Trenchard: My Lords, I thank the Minister for giving way. He refers to the report from the Pensions Policy Institute, which I have read. It is clear that the author has no comprehension of the connection between dividend payments and share price. He says that the Government claimed that ACT relief, when it was available—properly, in my view—encouraged companies to distribute more of their profits as dividends and reinvest less in their own businesses. Will the Minister predict what would happen to share prices if companies paid zero dividends and reinvested all their profits in the business?

Lord McKenzie of Luton: My Lords, there is a balance involved. I hope that the noble Viscount will forgive me; I must make progress. I shall have to reply in writing to some of the points raised. If one looks at what happened in the stock market immediately after the announcement in 1997 about the withdrawal of that tax credit, it increased for about three years.

The noble Lord, Lord Northbrook, raised a series of questions. I hope that he will forgive me; I do not have time to deal with them all here, but I shall follow up on each of the points that he raised. He and other noble Lords referred to flat taxes, with which I have already dealt.

On arbitrage, it is not right that it will hit unsuspecting parties. It is about those who try to avoid tax, and it is the sole objective of the arrangements. HMRC has said that it will agree to an informal clearance procedure, which should give the sort of protection required.

The noble Lord, Lord Sheldon, touched on the golden rule issues and the tax avoidance industry. We live in an increasingly complex world where sophisticated financial instruments are unpicked and unbundled to achieve tax
 
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advantages. The noble Lord, Lord Newby, referred again to a flat-rate tax system, and I sure that we shall return to that issue.

This is not about moving back to the start of the economic cycle arbitrarily, but is on the basis of NAO statistics, which has updated the projections. The Bill is a consequence of that, and the position will be kept under review.

The noble Baroness, Lady Wilcox, talked about tax simplicity. Again, we are on the flat-rate tax system. The cost of the Adam Smith Institute proposal was £50 billion per year.

In closing the debate, I thank noble Lords for their insightful and wide-ranging contributions. The Bill will endorse legislation that ensures tax simplification and fairness. It takes the logical and proper approach of reducing tax avoidance, while providing support for key activities such as scientific research organisations. It is imperative to remember that the amount of tax potentially at risk from avoidance schemes runs into hundreds of millions of pounds. The Government's reforms will protect revenue for investment in public services and will ensure that a unfair tax burden does not fall on the vast majority of taxpayers who pay their fair share.

Baroness Noakes: My Lords, before the noble Lord sits down, I have listened carefully to his 28-minute speech. In my opening speech, which seems a long time ago, I asked about an issue raised in Starred Questions on 28 June. I asked specifically about the economic cycle of the golden rule and whether the Government had plans to change the definition or measurement of it. The noble Lord, Lord McKenzie of Luton, said:

I put it to the Minister that that misled the House at that stage. I did not hear him explain how that arose.

Lord McKenzie of Luton: My Lords, I do not believe that it misled the House. On that occasion we were discussing the basis on which the cycle is computed. If the ONS has updated the data to indicate that, in those earlier years, growth under this Government was higher than originally projected, that will have an impact on the analysis of when the cycle begins. That is what has happened. There is no change in the basis on which that is done; the information has simply been updated. As I said, the 2000 Budget Report showed that to be a provisional assessment that the cycle started in 1999. It has been clear in everything that the Government have said on that; the House has not been misled.

On Question, Bill read a second time; Committee negatived.

Then, Standing Order 47 having been dispensed with, Bill read a third time, and passed.
 
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Finance Bill (EAC Report)

6.30 pm

Lord Wakeham: I beg to move the Motion standing in my name on the Order Paper.

Moved, That this House takes note of the report of the Economic Affairs Committee on the Finance Bill 2005 (2nd Report, HL Paper 13).—(Lord Wakeham.)

On Question, Motion agreed to.

Fraud Bill [HL]

6.31 pm

The Attorney-General (Lord Goldsmith): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Goldsmith.)

On Question, Motion agreed to.

House in Committee accordingly.

[The DEPUTY CHAIRMAN OF COMMITTEES (Viscount Simon) in the Chair.]

Clause 1 [Fraud]:

Lord Kingsland moved Amendment No. 1:

The noble Lord said: Grouped with this amendment is the Question on whether Clause 3 shall stand part of the Bill. The amendments test the purpose of Clause 3 in the scheme of the Bill. Clause 3 seems to add little to it. What, in the view of the noble and learned Lord the Attorney-General, is covered by Clause 3 that is not already covered by Clause 2?

Only one case comes to mind, the facts of which are as follows. A consultant refers his private patients to a hospital but does not inform the hospital of their private status. The patients receive treatment without paying and the hospital suffers a loss. In this case, it was held that the consultant's silence and the act of sending the patients to the hospital is the representation. So I can see that the way in which the Government have cast Clause 3 might appropriately cover those particular circumstances. But I am very hard-pressed, outside that single example, to see what Clause 3 adds. I beg to move.

Lord Goldsmith: The Law Commission, in the report that noble Lords complimented at Second Reading, set out a number of paragraphs why it thought, and the Government agree, that it is desirable to have a specific offence of non-disclosure.

The noble Lord is right that there are occasions when something that most of us naturally might think of as a non-disclosure is transformed by a fiction of the law into an implicit misrepresentation. But it is a fiction; it is not how people think about it. People will frequently say, "I was not misled because I understand that he was implicitly making this representation to me. He just did not disclose something; he was dishonest in not disclosing it; and the purpose of that
 
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was to make a gain or to do something else". One can think of many other examples where that would be the true basis on which a charge would be laid.

There are many occasions in the law where there is a duty of disclosure: in contracts of insurance, under certain market customs or certain contractual arrangements. In those circumstances, people may well be under a duty to make a disclosure and fail to make it. That will have consequences in law. The noble Lord may imagine, for example, the ability to set aside contracts on the grounds of non-disclosure and that sort of thing. Furthermore, those may have given rise to an economic loss to the person to whom the disclosure was not made or a benefit to the person who failed to make the disclosure. The Government believe, as did the commission, that it was right, fairly and squarely, to identify that as a form of unlawful conduct.

I hope that I have given some assistance regarding the understanding behind the clause. As I understood that the noble Lord's amendment was probing in nature, I anticipate that he will withdraw it.

Lord Kingsland: I am most grateful to the noble and learned Lord. I should have made clear at the outset that, like many of the amendments that I have tabled in Committee, this one is probing in nature.

I find the noble and learned Lord's reply entirely satisfactory and agree with him that the fiction of implicit misrepresentation is probably better dealt with by Clause 3, which brings out into the open, and puts on the face of the Bill, the reality of what the Government are trying to get at. The noble and learned Lord has made that very clear, and that is a perfectly appropriate way to deal with the matter. In those circumstances, I am content to withdraw my amendment and not to bring it back on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2 [Fraud by false representation]:


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