Mark Francois (Shadow Minister, Treasury; Rayleigh, Conservative)

I rise to voice briefly our approval of the clause. In doing so, I declare for completeness an interest as a member of the Conservative Friends of Israel.

The clause exempts from tax payments by UK and foreign banks and building societies to holocaust victims and to their heirs for dormant accounts. The issue is sensitive and I do not think that it needs to be rehearsed at length here. It seems that the consultations on it have been successful, and we welcome the clause.

Celia Barlow (PPS (Ian Pearson, Minister of State), Department for Environment, Food and Rural Affairs; Hove, Labour)

May I say to my right hon. Friend that the clause is very welcome in Hove and Portslade where there is a large Jewish population, many of whom moved here in the 1930s and 1940s or are the children of the people who did so. Many local families fled central Europe, and some of them still remember the horrors.

It is reassuring that the clause was drafted after negotiations with the Association of Jewish Refugees. I realise that the provision already existed as an extra-statutory concession, but enshrining it in law will give victims of Nazi persecution and their heirs the security of knowing that their family money can be retrieved without loss. That is why I support the clause wholeheartedly.

Brooks Newmark (Braintree, Conservative)

I join my hon. Friend the Member for Rayleigh in welcoming the clause. We do not often congratulate the Paymaster General on her written ministerial statements, but it was heartening to see the intention that she expressed on 19 July last year carried into effect in the Bill.

The numbers involved are small, both in terms of the assets involved and the people who stand to receive them. The Times estimates that since 1998 claimants in the UK have shared nearly £7.5 million from the Claims Resolution Tribunal, which handles claims on deposits in dormant Swiss accounts. The average award has been approximately £74,000. The Guardian is, unfortunately, a little more parsimonious, stating that the Government estimate that those affected in the UK are owed an average of £31,000 and that around 1,000 people will benefit from the clause. The Exchequer cost is also minimal if we accept the Government’s estimate of between £5 million and £10 million.

The principle of the clause is important. Payments under Restore UK to those who are eligible should be indistinguishable from compensation under comparable international schemes such as the Claims Resolution  Tribunal. That has not been the case under the existing extra-statutory concession, which in applying only to the domestic scheme has introduced an unwanted distortion into the taxation of compensation payments.

David Rothenberg, treasurer and vice-chairman of the Association of Jewish Refugees, has responded positively to the proposals and the thorough consultation that preceded them. He said:

“We are delighted that the Government has responded positively to our request to introduce this important extension to Holocaust victims and their families of the concessions which applied to compensation from British banks so that the families of Holocaust victims will receive the full benefit from their compensation awards.”

I also welcome the fact that the tax exemption will be given a statutory footing rather than being couched as an extra-statutory concession. It is important that the tax exemption should carry the weight of parliamentary approval rather than bearing the stigma of being perceived as a Revenue fiddle. HMRC describes extra-statutory concessions as necessary

“when strict application of the law would create a disadvantage, or the effect would not be the one intended.”

We would argue the toss whether a simple and equitable tax system should need such concessions to unintended consequences, but there is a consensus that the exemption of compensation payments from taxation is morally right. That being so, I think that we would all agree that a clause in the Finance Bill dedicated to that purpose is preferable to the Revenue backhander that has persisted for the past six years.

It is good to see the Government taking a clear lead on the issue, and I congratulate them. Elsewhere in Europe, those who suffered from national socialist persecution still face an uphill battle to receive the compensation to which they are justly entitled. For example, the Austrian general settlement fund, a£210 million compensation fund created in 2001, is still experiencing problems administering claims. As of last November, not a single claim had been paid out. For once, the Government are in a position to lead by example. Let us hope that other countries catch on.

Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)

I am sure that any Member of this House occupying my role in Government would take the clear view that the restoration of accounts to their original owners or heirs stems from a very dark episode in global history. As all Committee members who have spoken acknowledge, it was considered only right and proper to make provision in the clause for the exemption.

I am grateful for hon. Members’ comments. Rarely is a clause in any Finance Bill so welcomed. The words “morally right” are not often attached to considerations of taxation, but they could apply anywhere. They might apply to other points, but they definitely apply to the clause’s objectives. I commend it to the Committee.