(Except clauses 7, 8, 9, 11, 14, 16, 20 and 92) - Schedule 3
Finance Bill
1:00 pm
David Gauke (Shadow Minister, Treasury; South West Hertfordshire, Conservative)
I am grateful for that intervention; none the less, the announcement from Standard and Poor’s this morning is a timely warning that the public finances are in a perilous state and that the current level of borrowing is clearly unsustainable. I know that you do not want me to dwell on whether the VAT cut was wise, Mr. Atkinson, so I will turn to schedule 3.
Given the changes in VAT and the fact that it will return to 17.5 per cent. on 1 January, we accept that the Government’s concern about potential forestalling and their desire to prevent the advancing of the time of supply on standard rated supplies are legitimate. Consequently, and given where we are, we have no objections to the measures in schedule 3, as they are perfectly reasonable.
However, the Law Society has brought a couple of concerns to our attention, and it might help the Committee if I outline them. We have sought to bring the Committee’s attention to those concerns by tabling amendments 5, 6 and 7. If the anti-forestalling provisions in schedule 3 are to apply, certain conditions that need to be fulfilled, which are set out in paragraph 2. The first condition is that
“the supplier and the person to whom the supply is made are connected”.
The second condition is that the relevant considerations come to more than £100,000. The third condition is that
“a prepayment in respect of the supply is financed by the supplier or a person connected with the supplier”
I am simplifying the matter a little, but that probably serves the purposes of the Committee. The Law Society’s concern relates to condition A. It says that the test of connection, already wide, has been extended by a recent case, Kellock Brown. Indeed, the society has raised the possibility that some banks in partial public ownership and indeed, the state may be connected for the purposes of the test. I will be grateful if the Minister can respond to that point.
There may be a danger of condition A applying more broadly than is intended. Our amendments are intended to solve the potential problem of the provision applying where the supplier had no intention or knowledge that they would become connected to the person to whom the supply is made—people may find themselves caught up in the provisions when that was not the intention. We tabled amendments 5 and 6 to highlight that issue and obtain the Government’s response.
Our second concern relates to paragraph 10 of the schedule. Our first point is that we are back in the era of Henry VIII clauses, in that it will be possible to amend primary legislation by order. That is something about which, traditionally, the House as a whole has always been concerned. Those of us who served on the Committee on the Banking Bill will remember similar concerns being expressed, and the Economic Secretary and I debated Henry VIII clauses at some length. There is recognition of the potential problem with parliamentary scrutiny arising from any Henry VIII clause. In the case of the Banking Bill, the Minister set out his reasons for why there might be a need to amend legislation to deal with particular cases—indeed, if I recall correctly, that section of the Banking Act 2009 is now being used quite extensively in relation to the rescue of Dunfermline building society. The use of Henry VIII clauses is, none the less, a concern that hon. Members on both sides of that Public Bill Committee raised, and I raise it again here.
The second element of concern about paragraph 10 is that there is nothing in the paragraph that would prevent the Treasury from making an order that is, to some extent, retrospective—nothing that would prevent an order from applying to a supply that occurred before the date of the order. That concern was also raised by the Law Society, which we attempt to address in amendment 7, which provides that any order made under paragraph 10 should apply only to supplies made after the date of the order, or where there is a contractual provision enabling it to be varied subsequently. We think that that answers the concern. It may well be that the Government would not, in any circumstances, use the order in a retrospective manner, and we would welcome an assurance to that effect. Otherwise, I would be grateful if the Minister outlined the circumstances in which the Government would make an order that was not in compliance with amendment 7. That would be helpful to the Committee.
Subject to those technical points, we have no particular objections to schedule 3, for the reasons that I outlined earlier. However, we think that we have expressed legitimate concerns that we hope the Minister will be able to answer, perhaps by accepting the amendments.