Mr Tim Boswell (Shadow Minister, Home Affairs; Daventry, Conservative)

I beg to move amendment No. 27, in

clause 12, page 7, line 4, after 'gifts', insert

'(including the sale of assets at a discount or at less than money's worth.'.

Mr Alan Hurst (Braintree, Labour)

With this it will be convenient to discuss the following amendments: No. 210, in

clause 12, page 7, line 10, at end insert

(c) for any purpose an amount expressly provided for in the power of attorney,'.

No. 211, in

clause 12, page 7, line 11, after 'if', insert

'(in the case of a gift made subject to the power in paragraph (a) or (b) above).'.

Mr Tim Boswell (Shadow Minister, Home Affairs; Daventry, Conservative)

The provision is designed to curtail the powers of an attorney to make gifts under an LPA. There is, perhaps, an understanding, consistent with Committee members' arguments, that there need to be safeguards in that direction. It is one thing to be generous with one's own money, but another to be generous with somebody else's, particularly when there is an overriding duty to act in that person's best interests.

I shall speak to the amendments and their implications in turn. Amendment No. 27 is small and designed to obtain Government confirmation on one kind of situation. It is by no means uncommon within families to decide to reduce the price of an asset—for example, a house owned by a family member—instead of charging the full price. Perhaps that would be done for a young person who could afford some of the cost, but not the whole cost.

There is also the separate issue of cases in which the attorney himself might be in receipt of property. That might be a perfectly proper transaction, at arm's length and at full market value. However, the situation would be difficult if the attorney manipulated things so as to receive a property or asset at less than market value. I am sure that the Minister can imagine lots of other situations in which, instead of charging the full market price, a reduction was envisaged.

I do not seek to open wider issues about the taxation of retirement equity release schemes, for example. We could spend the whole day on such matters, which would not be appropriate. I just say to the Minister that if he is making provision for gifts, he ought to pause on whether it is desirable to consider assets sold at a discount or at less than market value. That is the purpose of the amendment.

The numerical order of amendments Nos. 210 and 211suggests that they are afterthoughts, tabled after I revisited the matter on the advice of a colleague. There

is a potential difficulty with the clause. I understand that the Minister seeks to confine gifts made by the attorney, who is acting on behalf of the person without capacity, to what might be termed normal acts of charity and ordinary, decent family relations. The person, when he had capacity, would have wished to make provision for birthday presents to his spouse or child or a friend and would have wished to subscribe modest, regular amounts to a charity of which he was fond. That is not an issue. However, there is apparently a bar at that point.

The Minister, who has been so liberal and non-interventionist in his constraints on the use of the power of attorney, is saying, ''Thus far, and no further.'' He will rightly draw my attention to the fact that the explanatory notes signpost us to clause 23(4), under which the court could give permission for a more substantial gift. The example in relation to the clause is that if the older person has substantial assets, there might be a good reason in terms of tax planning for making a larger gift. Surely that would be the case if the person were asset rich, but no longer able to administer their assets, and somebody with a lasting power of attorney to administer them could say that it made little sense for the person to hang on to them; it would be more tax-efficient, and, perhaps, useful to other family members, if they were to divest themselves of them. There would then be the safeguard in going to the Court of Protection.

That is not the only scenario that could arise. I can imagine one in which two siblings—brothers—were sadly seriously injured and lost mental capacity as a result of their injuries in a car accident. If one had substantial life insurance, or insurance against permanent disability, and the other had none, the one would be in receipt of a large sum from the insurance company—assuming the claim were legitimate, which I suspect it would be—and the other would receive nothing.

An attorney—perhaps the joint attorney for both—might say that provision should be made for both, or that if the younger brother survived the death of the older, it would be a comfort to know that the assets could be spread around, because it was probable that both brothers, if they had a good relationship, would want that to happen. This is not simply about tax planning and fat cats. There might be various scenarios, large and small.

There is provision for the assets to be the subject of an application to the Court of Protection for permission to divest them. I do not say that that procedure is unreasonable, but it will be expensive and may delay things for a time. It would not be possible to get a decision quickly, although a quick decision on some assets would be desirable, particularly in respect of a house or property and perhaps in relation to stocks and shares. Amendment No. 211 would merely facilitate or define a way to do that.

The exceptions to clause 2(10) provide that if the person drawing up the power of attorney against an eventual loss of mental capacity wished to specify that

the attorney should have the power to make gifts—and if they gave a definite set of instructions to the attorney, as they might on other matters, such as their health care or financial arrangements—and if they said that they wanted to make a gift, it is reasonable in principle that they can do that without reference to the court.

The donee of the power of attorney would still have an obligation to consider the person's best interests and not give away assets when it became dangerous to do so, regardless of the instructions they might have received. Nevertheless, that would be a sensible prior indication of something that somebody might want to do and the Minister should consider it.

Amendment No. 27 is designed simply to get the Minister to define what is and is not a gift. Amendment No. 210, which is accompanied by amendment No. 211, is intended to get him to give the flexibility that he has given in other parts of the Bill to the issue of gifts. I hope he will consider them seriously.

Mr David Lammy (Parliamentary Under-Secretary, Department for Constitutional Affairs; Tottenham, Labour)

Clause 12 allows the donor to authorise his chosen attorney to dispose of his property by making gifts. However, subsection (2) limits that to customary occasions, birthdays, marriages and religious festivals, where presents are traditionally given, or

''to any charity to whom the donor made or might have been expected to make gifts''.

That broadly reflects the restrictions in the Enduring Powers of Attorney Act 1985.

Subsection (2) also provides that when an attorney makes gifts he must have

''regard to all the circumstances and, in particular, the size of the donor's estate.''

Any gift he makes must not be unreasonable in relation to those factors, even though the donor can place any conditions or restrictions on the making of such gifts when he draws up the LPA. Clearly, regardless of the passage of time and changing circumstances, an attorney must have regard to what the donor can reasonably afford.

I suspect that the amendments tabled by the hon. Member for Daventry are intended to ensure that the donor could authorise the making of gifts in such a way that he could make practical arrangements to provide for any dependants or a spouse or an important event years into the future.However, there is a problem with them that makes them undesirable. Amendment No. 27 proposes that the references to gifts in clause 12(1) should include

''the sale of assets at a discount or at less than money's worth.''

Clause 12(1) provides that a property and affairs LPA does not authorise an attorney to make gifts of the donor's property

''except to the extent permitted by subsection (2).''

Amendment No. 27 would lead to the following odd situation under clause 12: attorneys could sell assets at a discount provided that they did so on customary occasions or to a charity. From what the hon. Gentleman said, I am sure that that is not his intention.

As the Bill is drafted, selling assets at a discount could be grounds for the Court of Protection to revoke an LPA under clause 22(3)(b). The court could revoke

an LPA if it was satisfied that the attorney had misbehaved or was behaving in a way that was not ''in P's best interests.'' I say ''could'' with regard to clause 22(3)(b) because, as the hon. Gentleman has mentioned, there may be occasions on which that might in P's best interests—for example, if the person lacking capacity needed his house to be sold and there was a timing issue so that it was thought necessary to sell the property urgently even though it was undervalued.

Many of us in this Committee Room might also decide to accept less money for our property than we could get if we left it on the market a little longer, because we needed the cash. An attorney might need to make such decisions in the person's best interests.

Mr Tim Boswell (Shadow Minister, Home Affairs; Daventry, Conservative)

The Minister is trying to assist us. Does he agree that where there is a genuine attempt to release an asset, perhaps ahead of time, or to make a gift, whether or not of a customary nature, one of the critical elements of such action may be to document what is being done and the extent of the implied discount or other circumstances and, if necessary, to seek the advice of the public guardian about what is contemplated, through some form of pre-clearance before the action is taken?

Mr David Lammy (Parliamentary Under-Secretary, Department for Constitutional Affairs; Tottenham, Labour)

We return to our discussion about choice, although I accept the underlying theme of the hon. Gentleman's argument. In relation to amendments Nos. 210 and 211, he talked about two siblings in a car accident and an attorney acting for both of them. An attorney has a duty to do what is in the best interests of the donor. Clearly, spending money on behalf of the donor is easy; spending money on someone else is more problematic, and—subject to the provisions on minor gifts that are dealt with in clause 12—people should usually go to the court in such circumstances.

Amendment No. 210 is undesirable because it would not be wise for the donor to be able to authorise the making of gifts for just any purpose—the authority would be too wide, and the attorney would face conflicts between his duties and responsibilities. Under clause 23(4), the court has the power to authorise a more substantial gift if it is satisfied that that would be in the donor's best interests. Amendment No. 211 is also undesirable, because it would remove the requirement that the attorney have regard to the circumstances and size of the donor's estate when making gifts. For example, if an older person has substantial assets, tax planning might be a reason for making gifts; the size of that person's estate would therefore be highly relevant.

It is important that we have probed such an important area, but as the provision is presently framed in combination with clause 23(2) and (4), the balance is about right. On that basis, I hope that the hon. Gentleman will withdraw his amendment.

Mr Tim Boswell (Shadow Minister, Home Affairs; Daventry, Conservative)

The Minister has given reasonably satisfactory assurances, which is one of the purposes of our exchange but I wish to place on record my abiding

concern that, whereas the aim of the Bill is to use the Court of Protection as a proper last resort and to refer a limited number of cases—perhaps 200 to 300 a year—to it, additional recourse to it will be required in respect of gifts. I doubt that the Minister's estimates will be exceeded, as I suppose that, at least in theory, he has taken such cases into account. However, the procedure is likely to be expensive, and of a High Court type. I am also worried that the applications will be expensive and belated.

I need to reflect on whether the assurances that the Minister gave are sufficient, or whether some other means of meeting our concerns, or a halfway house, can be found. For the time being, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 12 ordered to stand part of the Bill.