Clause 25
Finance Bill
5:15 pm
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
With your leave, Mr. Atkinson, and that of the Committee, I hope that we might be able to discuss the amendments and clause stand part at the same time. It would make life easier.
To call clause 25 a tidying up measure may not be to use quite the right phrase, but it stems from the agreement reached between the Government and Royal Bank of Scotland earlier this year. In a statement of 26 February, the Chancellor said of RBS that
“It has also agreed for a number of years not to claim certain UK tax losses and allowances, meaning that when they do return to profitability it will not be able to benefit from the losses accrued in the intervening period.”—[Official Report, 26 February 2009; Vol. 488, c. 369.]
It is worth remembering the scale of Government support for RBS through the asset protection scheme, which was announced on 26 February. RBS intends to protect £325 billion of eligible assets; it will bear the first £42.2 billion of loss and then 10 per cent. of the balance, with the taxpayer bearing 90 per cent.
The Chancellor’s statement in February was not particularly detailed about the areas covered, so I thought that I might chance my arm by tabling a parliamentary question to ask what would happen to losses incurred in 2008 and whether they would they be available for offset against the tax paid by RBS in previous years. The response was:
“RBS have agreed not to claim certain UK tax losses and allowances for a number of years, meaning that when they do return to profitability, they will not be able to benefit from the losses accrued in the intervening period.”—[Official Report, 13 March 2009; Vol. 489, c. 810W.]
That is effectively a repeat of the Chancellor’s words in February, and not a very clear answer to what I thought was a relatively simple question.
The clause does not help us to work out when the agreement that RBS and the Government have reached kicks in. Which losses are covered by the agreement? Is it only losses on those assets covered by the asset protection scheme? Is it losses on that element of the asset protection scheme that the Government guarantee? Is it on the £42 billion? Is it on the 10 per cent.? What happens if RBS writes off debts outside the APS pool? Will those losses be available for offset against future profits? Are they covered by the agreement? The situation is not clear. An agreement has been reached between the Government and RBS on the losses, but there is no transparency for the House or other taxpayers regarding which losses have been forgone by RBS.
It is equally unclear whether it is just RBS that is subject to the agreement or whether Lloyds has also agreed to forgo losses. The taxpayer might say, “I get some value from the break-up of RBS because I know it will pay more corporation tax in the future, but Lloyds appears still able to take advantage of the losses on assets guaranteed by the asset protection scheme without having given up those losses.” Will the Minister provide some clarity on the losses that are covered by the scheme, and on whether Lloyds bank is in or out of the agreement?
The technical problem that I have with the clause, which gives rise to my amendments, is that it is not clear what parliamentary process will be gone through when agreements are reached between the Government and P—the company that receives the guarantees is referred to as P. How will those agreements be scrutinised in Parliament? Subsections (1) and (3)(b) refer to
“such modifications as are necessary or expedient”
being made. That takes us back to the Henry VIII powers in the Banking Act 2009. I want to know what parliamentary scrutiny will be in place to ensure that the agreements are monitored. That is why amendment 38 sets out that there should be a regulation-making power in the clause, which would enable this House to have proper scrutiny of the arrangements.