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Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 7:33 pm on 20th April 2004.

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Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury) 7:33 pm, 20th April 2004

I thank all Members who have spoken. It has been a good debate. At the beginning, Opposition Members asserted that this was a dull Finance Bill, but during the afternoon and evening they got quite worked up. I agree with Mr. Prisk that the debate was wide-ranging.

My hon. Friends the Members for Newcastle upon Tyne, North (Mr. Henderson) and for Bexleyheath and Crayford (Mr. Beard) rightly pointed out that sustained growth has been combined with low inflation, low interest rates and the lowest levels of unemployment for a generation. New employment figures show that, since 1997, more than 1.8 million jobs have been created and that, every working day, 600 businesses start up. Instead of the record under the previous Government, when we were first in and last out in downturns in the economy, it is right to conclude, as my right hon. Friend the Chancellor did in his Budget statement, that the UK has weathered the global downturn and will continue to grow in 2004.

Our economic stability, matched by sustained growth and a sound and fair tax system, allows us to commit more investment not less to public services and to choose long-term investment, which matters most to the people of this country. As Mr. Laws rightly said, economic stability provides a secure background against which we can consider in greater depth public services, unlike in the 1980s, under the previous Government, which were dominated by bankruptcy, unemployment, house repossession, Government debt and disaster for millions of families. The Finance Bill will build on those economic strengths for the future and prepare the UK for the challenges of the future.

I want to deal with pension simplification and the points made by the hon. Members for Arundel and South Downs (Mr. Flight) and for East Carmarthen and Dinefwr (Adam Price). Basically, the hon. Member for Arundel and South Downs misunderstood completely the pension simplification arrangements. He said that we are replacing eight pensions with six. Clearly, he is confused about the fact that there will be only one regime for taxation, which replaces the existing eight. It is only right that there should be a variety of schemes to meet the range of needs. He went on to say—I do not know whether he was suggesting that we should have different valuation factors—that the single valuation factor was somehow unfair. I know that he must appreciate, as he is knowledgeable on these subjects, that a single valuation factor ensures that administration of the schemes is kept simple. Surely he does not propose that we make it more complex.

Both the hon. Gentleman and Mr. Prisk, in winding up this debate, complained about the length of the Finance Bill. As they well know, the pension simplification alone replaces approximately 350 pages of existing legislation, along with thousands of pages of guidance and has been widely welcomed, particularly as it puts back the implementation date to 2006. The point made about women on maternity leave or in career breaks is absolutely wrong. What we have is simplification. The rule that was referred to is no longer needed, as women are not restricted and can contribute more before and after their career breaks, providing much more flexibility and the ability to save more.

On the point made by the hon. Member for East Carmarthen and Dinefwr about second homes and the housing market—clearly, we will debate the issue in more depth in Committee—it is simply not true that our proposals will encourage speculative investment. There was much misunderstanding in the early stages and I know that he has quoted in good faith the points that others are making. Now that the proposals are clear to them, I think that he will find that his concerns are misplaced. I look forward to that debate.

I congratulate Mr. Jack on running in the London marathon and I am sorry that I was not there to cheer him on his way past the Treasury. I want to touch on his points with regard to avoidance and whether Parliament has got it wrong. That is a crucial debate, on which the hon. Member for Hertford and Stortford touched in his closing remarks. In 1997, Lord Nolan described avoidance as

"when a taxpayer reduces his liability to tax without incurring the economic consequences that Parliament intended to be suffered by any taxpayer qualifying for such a reduction in his tax liability. Tax avoidance is a course of action designed to conflict with or defeat the evident intention of Parliament".

Of course, we would expect all individuals and companies to want to make the most efficient use of the tax system and its reliefs, but we have seen systematic, abusive schemes that give relief for economic activity that was never undertaken or multiple reliefs for the same action that was never intended. The right hon. Gentleman talks about losses or capital allowances and how they are being used now. He cannot seriously be suggesting that we take out of our tax system all the capital allowances or lease proposals that so help business to deal with the point.