Schedule 9 - Insurance companies etc
Finance Bill
7:15 pm
Christopher Huhne (Shadow Minister, Treasury; Eastleigh, Liberal Democrat)
I am delighted that the hon. Gentleman has asked me that, because I will come to it later. If he does not get full satisfaction, he will no doubt intervene again. However, I hope that he will first allow me to make a little progress in criticising the Government’s proposals.
The provisions would represent a remarkable raid if it were not for another feature of the HMRC’s enthusiasm, which is the damage that the rules are likely to do to the sound commercial judgment of the market’s main participants. AXA, Legal and General, and Britannic will all be hit as they have separated out such surplus assets and taken steps towards a court scheme. Aviva had intended to do that on sound commercial ground, but if the provision enters into law grounds, but I can safely predict that it will have no intention of doing so. Such a taxation measure will introduce adverse incentives to responsible behaviour that would otherwise crystallise that part of assets owing to shareholders and that part to customers of the concerned companies.
The HMRC has implicitly admitted that the measures are arbitrary and ill thought out, through not just through the application of a sunset clause but in its admission with the draft regulations earlier this month. It said in effect that it was
“intended to replace the temporary rules made by the regulations with a new substantive scheme for apportioning the income and gains of a life assurance company, designed to make the whole system fairer and more in tune with the way that companies operate”.
So there we have it: on the HMRC’s own admission, the regulations are less fair than they could be and are not ideally in tune with the way companies operate, which is why I have said that I will propose more substantive measures in future. The provisions are arbitrary, short term and ill thought out. They introduce the wrong incentives and are sufficiently embarrassing to Ministers to make them promise their disappearance within two years. Considering those qualities, we should encourage their disappearance even earlier: before they ever reach the statute book.
I come now to the point raised by the hon. Member for Normanton—