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Mr. Edward Davey: If I may bring the hon. Gentleman back to the Budget debate and to the documents before us, can he tell us whether he has read the Treasury Committee report published today, and whether he agrees with it?
Mr. Bercow: I am familiar with the report. I am grateful for the hon. Gentleman's prompting, because I have read it and have a view on it that I shall reveal to the House shortly. I know that the hon. Gentleman numbers patience among his qualities and I will happily offer him my verdict on that important matter in due course. However, even if the Liberal Democrats do not agree, I would have thought that many important features of the Bill remain to be addressed, including North sea oil taxation.
Clause 90 will introduce a 10 per cent. supplementary charge on companies producing oil or gas in the UK on the UK continental shelf. That charge will apply to companies' profits from the extraction of oil or gas in the UK or on the UK continental shelf. The Red Book predicts that the tax will cost the industry £100 million this year, £450 million next year and £600 million the year after that. However, commentators Wood McKenzie put the figures at £127 million, £454 million and £771 million, followed by £1 billion in 200506. Already it is predicted that investment will be discouraged, with a serious adverse impact on the Scottish economy. That is the considered judgment of the United Kingdom Offshore Operators Association and of the respected head of BP, Lord Brown, who said only last Tuesday:
Sir Robert Smith: I raise a constituency concern, and the hon. Gentleman is right to say that Scotland's economy is highly dependent on the industry. However, it is important to point out that the whole UK economy benefits from that investment. Businesses far from the North sea will find that their supply chain ends there.
Mr. Bercow: The hon. Gentleman is right and I agree with every word he said. Industry experts Wood McKenzie are understandably anxious that the changes could make the UK less attractive to investors and may delay or postpone the development of marginal fields.
Even before the Budget, we saw signs that activity in the North sea was slowing. What appraisal have the Government made of the latest round of licensing? I am told that one company has withdrawn its bid since the Budget, and many fear that the outcome of this round will be disappointing. In suggesting, as the Chief Secretary did, that the industry warrants further taxation, I put it to him that there is widespread concern that the Government have too little regard to the enormous capital requirements of UK continental shelf projects and the long time scales over which returns on investment are achieved. Measured by the return on capital employed, oil exploration and production has in fact been one of the lowest performing sectors over the past 20 years, underperforming in the overall UK market by more than 40 per cent. Furthermore, the Government's tax take is now up from 40.1 per cent. to 46.5 per cent. as a result of the Budget. That rate is higher than in the gulf of Mexico, Canada and Ireland.
The treatment of controlled foreign companiesa matter of breathtaking insignificance to the economic illiterates who pepper the Labour Benchesis a cause for concern to us and to many outside the House. The controlled foreign companies rules are designed to stop UK companies reducing their UK tax liability by diverting profits to subsidiaries in low tax regimes. Those rules work, broadly, by charging the UK parent companies of CFCs on an amount equal to the profits that would otherwise avoid tax.
The important point in this context is that clause 88 provides for a reserve power to make regulations specifying overseas jurisdictions to which the exemptions from the CFC rules will not apply. That is clearly targeted at the Crown dependencies of Jersey, Guernsey and the Isle of Man. The proposals concern subsidiaries of groups that have their headquarters in the United Kingdom.
Dawn Primarolo: I am grateful to the hon. Gentleman for giving way so graciously. Will he remind the House of when the Conservative party introduced a similar reserve power when it was in Government, and why?
Mr. Bercow: No, I will not. I simply say to the hon. Lady that the circumstances in which the oil industry finds itselfthe margins on its work, the extent of the investment required and the cost of the capital that is put into the processare on a radically different scale from those that applied then. The verdict of Lord Brown of BP and the view of the United Kingdom Offshore Operators Association show that they see no comparison between the tax behaviour of the Conservative Government, in
This feature of the Finance Bill has nothing to do with tackling money launderingrather, it is but the latest instalment in the Government's maniacal war against tax competition. The uncertainty resulting from this reserve power threatens the UK's position as a location for multinational companies' headquarters in the future.
A report in The Sunday Telegraph on 21 April offers a lurid account of telephone calls allegedly made by the Paymaster General to Senator Pierre Horsfall, Jersey's senior politician. He is said to have been given an ultimatum that unless his Government signed the European Union code of conduct by 16 Aprilthe day before the Budgethis island would have to face unpleasant consequences, even though, as Crown dependencies, the Channel Islands are not in the European Union. The Channel Islands and the Isle of Man could scarcely be expected to offer to destroy the sector that provides 70 per cent. of their income. It is reasonable for them to rely on the guarantee given by this country 30 years ago when we joined the European Economic Community that their tax sovereignty was untouchable. For the Government to contemplate wrecking the economies of those dependencies is both financially short-sighted and, if I may say so, the most objectionable form of Executive bullying[Hon. Members: "Hear, hear!"] Well, I wanted to get that off my chest.
On vehicle excise duty, schedule 5 makes changes to the vehicle taxation and registration system to provide that liability to tax the vehicle shall rest with the registered keeper. It creates the offence of failing to re-license a vehicle. It provides that a supplement may be charged where a vehicle keeper fails to re-license a vehicle, and that the amount of such a supplement and the circumstances in which it is payable shall be specified in regulations. The schedule will provide that vehicle excise duty shall be payable on any vehicle on the register, or used or kept on a public road, or on any former mechanically propelled vehicle that remains registered as a vehicle.
The trouble with that is twofold and simply stated. The Government are giving themselves the power to levy vehicle excise duty on vehicles that are neither used nor kept on the public road, and to tax things that used to be, but are no longer, mechanically propelled vehicles. If there is a new Labour logic somewhere in that bizarre and eccentric proposal, the Government will no doubt advise us of it, although the prospect seems improbable. In the circumstances
Mr. Bercow: No, I will not. I have already given way to the hon. Gentleman and I do not intend to do so again. I know that he wants to make a contribution and I look forward to it with bated breath and eager anticipation.
The Chancellor has boastednot an uncommon phenomenon in the present incumbentthat he will cut beer duty by 50 per cent. for about 350 pub, local and micro-breweries that produce fewer than 2,500 pints of beer a day. However, the reaction to that has by no means been universally favourable, as Jim Burrows, the chief executive of Brakspear, has told us. He said: