Orders of the Day — Finance Bill

– in the House of Commons at 3:32 pm on 7th June 2005.

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Order for Second Reading Read.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury) 3:39 pm, 7th June 2005

I beg to move, That the Bill be now read a Second time.

As my right hon. Friend the Chancellor outlined in the Budget debate in March, we now have a foundation of fiscal strength, enabled by our decision in 1997 radically to reduce national debt. We have the lowest debt interest payments for a century, matched by the lowest unemployment costs for a generation. As the Chancellor pointed out, social security bills for unemployment have been halved since 1997, saving another £5 billion a year, and inflation has been 3 per cent. or less annually for the past eight years, making Britain's the least volatile and most stable of all major industrialised economies. We therefore have sound foundations on which to face up to global challenges and provide domestic success, and a record of macro-economic stability that lets us invest in the future.

The Bill and the measures contained therein reflect the Government's ongoing determination to ensure that our tax system is fair and competitive. Only last September, the World Bank ranked the UK first in Europe and seventh in the top 20 countries in which to conduct business. Before that, in January, the Organisation for Economic Co-operation and Development ranked our economic and administrative regulations as among the lowest in the OECD.

Looking forward, and faced with the accelerating pace of technological change and the rapid expansion of global competition, it is clear that our economic future cannot be founded on low-skilled, low-tech enterprises. That is why we must focus on establishing British leadership in skills, science and the knowledge economy, and on evolving a sensible, flexible fiscal framework that supports business as we face world competition.

It is against that backdrop that we introduce this Finance Bill containing the legislation announced in the last Budget statement which, owing to the election and following negotiations with the Opposition, was not enacted in the Finance Act 2005. Our aim is to support and encourage business as it tackles global economic challenges. Our underlying philosophy is both to produce fair taxation—thus reducing avoidance of taxation, which is not appropriate in a modern, fair economy—and to simplify the business environment to ensure clear, dependable and fair interaction with the state.

Before I discuss the individual elements of the Bill, let me inform the House that the committal motion on the Order Paper has been changed, at the request of the Opposition. The revised version is now available in the Vote Office.

Photo of Michael Fallon Michael Fallon Chair, Treasury Sub-Committee

Will the right hon. Lady confirm that we are to add 159 pages to the 203 pages of legislation that we passed only two months ago? Might there not be a better way of supporting business than passing one page of tax legislation for every day of the year?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I know that, as a distinguished member of the Treasury Committee—no doubt he is keen to be reappointed—the hon. Gentleman follows these matters closely. So he knows that the full Budget and the full Finance Bill were announced before the general election and that all the Budget resolutions were passed by the House—not one was opposed. In that Budget, the balance was struck between facilitating business and removing unnecessary regulation and acting on behalf of taxpayers who comply with their responsibilities. Our aim is to make sure that avoidance—with which a substantial part of the Bill before us deals—is prevented and that tax due is paid.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I agree that we have a strong economy, especially compared with those of the eurozone. Does my right hon. Friend agree that the main reason for that is that we have sustained good consumer demand by implementing appropriate fiscal and monetary policies, which would not be permitted inside the eurozone? Will she commit herself to continuing those strong policies to keep our economy going as it is?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

My right hon. Friend the Chancellor will be delighted to hear that my hon. Friend supports his fiscal rules and stewardship of the economy, which does not surprise me given the success that these policies have produced in constituencies such as his and mine in achieving a massive reduction in unemployment.

Photo of John Bercow John Bercow Conservative, Buckingham

Working on the principle that one ought to be grateful for small mercies, perhaps my hon. Friend Mr. Fallon ought to be relieved that, this year, the Finance Bill does not amount to the 488 pages represented by a previous Finance Bill that the Chancellor introduced. Will the Paymaster General tell me whether the principle of reform of the regulatory process, on which the Chancellor has rightly spoken recently, has in any way informed the construction of this Bill?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I know that the hon. Gentleman follows these matters closely. Perhaps he will allow me to continue making my speech, so that I can illustrate which parts of the Bill he will be ecstatic about on the basis that they will reduce regulation and make changes within the tax system to assist the processes that businesses enable. He will be able to identify a number of clauses that will do that. If he has the time to sit on the Finance Bill Committee, I am sure that we will all benefit further from his incisive analysis of the matters before us.

Let me now turn to some of the individual components of the Bill. I shall begin with VAT avoidance. I know that hon. Members will agree that, for a tax system to be effective, everyone must pay their fair share of taxes and receive the reliefs to which they are entitled. We are fully committed to combating all forms of tax avoidance, including VAT avoidance. Indeed, we have introduced a compliance strategy specifically to target the VAT gap, which has been discussed in the House before.

There are concrete measures in the Bill that will help to combat VAT avoidance. They include legislation in clause 1 that will enable Her Majesty's Revenue and Customs to combat avoidance schemes that abuse UK customs warehousing rules. Clause 3 will extend the provisions dealing with "unjust enrichment" so that no business will unfairly benefit from charging too much VAT. The disclosure rules introduced in the 2004 Budget, which were debated in the House, require promoters and users of certain avoidance schemes and arrangements to provide information to the revenue Departments. Much of that information has been translated into this Finance Bill to close down active avoidance schemes. So, following the announcement made in the 2005 Budget, clause 6 and schedule 1 will extend the disclosure rules to encompass two new listed VAT schemes and a new hallmark.

Secondly, on gift aid, recent events have demonstrated the generosity of the British people in donating in times of need, and the use of gift aid by charities and donors has grown considerably. For example, £586 million of tax was repaid to charities on gift aid donations in 2003–04. That is why we have included clause 11, which will amend existing gift aid legislation in relation to admissions. John Bercow might wish to take note of that proposal, which will assist business and make the rules simpler. The measure will clarify the circumstances in which gift aid will apply when free admission is given in return for a donation. Crucially, this amendment will uphold the core principle of gift aid in generating new and additional giving, and it will broaden the types of charities that can benefit.

Thirdly, on scientific research organisations, the Government are committed to enabling Britain to achieve its full potential. However, as global restructuring continues, advanced industrial nations are moving away from low-skill, low-tech products and processes, and focusing closely on technology, science, research and development.

Britain will continue to enjoy its competitive edge only if we develop world leadership in the most technologically intensive and science-based industries and services. In last summer's spending review, the Chancellor set out our 10-year plan for science. That includes a new and stretching target to increase UK investment in both private and public sector research and development from 1.9 per cent. of national income to 2.5 per cent. in 10 years' time. Clauses 13 to 15 present measures to help foster the wider benefits that scientific research organisations can provide to our economy and business. They will update the exemptions for scientific research organisations, enabling them to widen their activities and undertake a broader range of research and development.

Fourthly—and turning to financial measures—I am sure that the House will be happy to join me in recognising the vital role played by the City and the financial sector across Britain in driving forward our economy. Professionally managed, well communicated and diverse financial services support our economic growth and are key to our continued prosperity. That is why we have been keen to tackle issues from improved financial inclusion to the workings of the investment chain. As part of the package of reforms of the tax system for authorised investment funds, this Finance Bill includes powers to rationalise the legislation that applies to those funds. Clause 16 specifies a reduced rate of corporation tax of 20 per cent. that will apply to open- ended investment companies, ensuring that they are subject to the same treatment as authorised unit trusts. In addition, clauses 17 to 19 introduce powers to change regulations and are designed to facilitate a more flexible approach to investment strategies.

Photo of Andrew George Andrew George Shadow Secretary of State for International Development

Has the Minister had the opportunity to reflect on Government proposals to extend self-invested personal pensions to residential properties from April next year? Is she aware of the tidal wave of interest in moving money in that direction and of the impact that that will have on tax avoidance and the availability of affordable housing in constituencies such as mine, which already have high levels of second and holiday homes?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I am certainly aware of the press speculation pointing to the sort of trends that the hon. Gentleman identifies, but the pension schemes that use property as part of a pension fund are very tightly controlled. Only 50 per cent. of the current value of the pension fund can be raised as a loan to fund a property purchase. The property becomes an asset of the pension fund, and there is a requirement to put all rental income into the pension fund and to lock it away. Any currently owned property that is placed in the pension fund is subject to the normal constraints. On maturity, when the pension fund needs to be drawn on, that property is deemed part of the pension fund and not the individual's. Therefore, much of the press speculation is based on a misunderstanding of how the clauses work. If the hon. Gentleman serves on the Committee, I am sure that by probing the clauses he will be able to assure himself and the House that that is so. However, I am following carefully the speculation and ensuring wherever I can that it is speculation and not the actual result of the proposals.

Photo of Adam Price Adam Price Spokesperson (Economy and Taxation; Education & Skills; Miner's Compensation; Regeneration; Trade & Industry)

Has the Treasury come up with its own estimate of the tax revenue that will be forgone as a result of these new measures? Standard Life has suggested something in the order of £4 billion. Can we take it from the Paymaster General's remarks that the Government have no plans to introduce any amendments on this matter during the later stages of the Bill?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I can tell the hon. Gentleman that there are no plans for the Government to make changes to these particular provisions. I have seen the speculation about the amount that a particular organisation is suggesting. There has been correspondence with that organisation to explain to it why we believe that that figure is totally incorrect. Given the very tight controls that will exist on property transferring into a pension fund, and what happens when that property comes out of it, I do not recognise the points that are being made by that organisation. We need to be clear that this is part of—the property of—a pension fund, and the pension fund decides how it is used. Much as I pay a great deal of attention to any suggestions that this will be used as an avoidance vehicle, such suggestions are at present unfounded.

Photo of Edward Balls Edward Balls Labour, Normanton

Does my right hon. Friend agree that the fact that in Britain we now have a 10 per cent. rate of capital gains tax for long-term investments means that Britain now has one of the most attractive tax regimes for small businesses to invest and grow? Does she recall that, when that measure was first introduced in this House, Opposition Members of all parties attacked it on the ground that it would lead to tax avoidance and does she agree that, had we taken their advice, we would have denied British business and small business the real benefits that have flowed from that reform?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I well remember that, during the debates on the capital gains tax reforms introduced by this Government, Opposition Members forecast that it would be a disaster and would not assist in the rebalancing of the economy, particularly in relation to investment rules. They are in danger of confusing the rules on capital gains, and the very fair tax regime that exists in that regard, with the specific proposals on putting together a pension fund that enables investment to produce an income for individuals in retirement. The continual rationalisation and equalisation of those investment choices led to the changes in the pension fund.

Let me return to the specific measures on avoidance in this Bill. As I said, the Government have always made clear our determination to ensure that the tax system is fair and is seen to be fair. We have taken a series of concrete steps to prevent abuse of the tax system, and we will continue to close tax avoidance schemes as we become aware of them. Indeed, that was also the policy pursued by the previous Government. Any Government who acted fairly on behalf of the vast majority of taxpayers would pursue a policy to prevent a small number of taxpayers from receiving tax payments to which they were not entitled.

Such avoidance schemes create economic distortion, provide commercial advantage over compliant taxpayers, and redistribute tax revenues in an unfair and arbitrary manner. Therefore, in addition to the VAT measures and extension of the disclosure rules I mentioned earlier, this Finance Bill will introduce legislation to counter various forms of exploitation. That includes clauses 24 to 31 and schedule 3, which will close down schemes where companies seek to gain a UK tax advantage by exploiting differences within and between tax codes; clauses 32 to 34 and schedule 4, which prevent arrangements that enable individuals and trustees completely to avoid tax on capital gains; and clause 39 and schedule 7, which will prevent avoidance by companies and individuals using financial product-based schemes.

As announced in December 2004, this Finance Bill will also introduce legislation to close arrangements that seek to avoid or reduce income tax. Clause 12 and schedule 2 will tackle that specifically with regard to remuneration using employment-related securities—a matter to which the House, the Government and previous Governments have had to return repeatedly, to prevent this abuse. Clause 40 and schedule 8 will update the transfer pricing rules introduced by the Finance Act 1998. Those prevent parties who have a control relationship over a company from entering into transactions on a non-arm's-length basis to obtain a tax advantage. A further change ensures that the rules cannot be avoided by putting financial arrangements in place up to six months before a control relationship exists. To counter a number of stamp duty land tax avoidance schemes, clause 49 and schedule 10 will close known loopholes: for instance, limiting artificial group relationships which have been set up purely to avoid clawback of group relief. The definition of "undertaking" will also be restricted in relation to acquisition relief to trades other than property trading, so that only genuine businesses can benefit.

The clause that I have just mentioned has been subject to some amendment, which I want to draw to the House's attention, as compared with the legislation originally presented to the House in the first Finance Bill back in March. We have listened, and amendments have been made to ensure that stamp duty land tax measures work as intended for home reversion plans, loans or deposit schemes and to ensure that group relief clawback cannot be avoided by the use of leases. There are a small number of other amendments to clauses in the Bill, which include ensuring that legislation introduced by clause 39 and schedule 7 does not affect routine arrangements concerning preference shares—another matter on which we received representations. They will ensure that other common corporate structures not set up for the purpose of avoidance are not affected. We have also extended the period of transitional protection to some companies allowed by clauses 24 to 31 and schedule 3, and we have time-limited the regulation-making power to amend a number of life assurance company tax provisions granted by clause 42 and schedule 9.

In addition to those and other minor technical changes, the Bill includes a new clause and schedule—clause 37 and schedule 6—which were not included in the previous Bill. Those make amendments to the international accounting standards legislation in the most recent Finance Act, again responding to representations: in this case, that legislation would inhibit commercial restructuring.

To conclude this summary of the Bill, let me mention the further international measures introduced by clauses 51 to 65. Those make changes to legislation that will give certainty regarding the tax treatment of some transactions involving new European companies, particularly when they are formed by merger. They will also enable UK businesses to take advantage of this new type of corporate vehicle, if they so wish.

The Budget laid down measures that enable our country to respond to and meet the challenges of a changing society facing a competitive global economy. This second Finance Bill will enact legislation that ensures fair taxation by reducing avoidance, simplifying regulation and supporting important actions such as gift aid. I commend the Bill—

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I was on my last sentence, but I will give way to my hon. Friend.

Photo of David Winnick David Winnick Labour, Walsall North

The measures mentioned by my right hon. Friend will be very much welcomed by Labour Members. On the tax credit system, however—which has benefited many people and could only have been introduced by a Labour Government—in view of the constant mistakes and overpayments that cause difficulties to many constituents, and certainly mine, will she promise that she will examine the workings of the Preston office and see what can be done to improve administrative arrangements and minimise those difficulties?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

Tax credits are not the subject of this debate, but there was an excellent debate about them in Westminster Hall this morning to which Members from all parts of the House contributed. If, after reading the transcript of that debate, my hon. Friend feels that my attention needs to be drawn to any further issues, I shall be more than happy to listen to him.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I think I will end my speech now. I commend the Bill to the House.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury 4:05 pm, 7th June 2005

I draw the House's attention my entry in the Register of Members' Interests.

I congratulate the Paymaster General on her presentation of the Bill. This is the first time since Labour came to power that a Finance Bill has not been presented by the Chief Secretary. He is presumably in Luxembourg trying to save the rebate, something of rather more significance to the Exchequer than the measures that we are discussing.

As the Paymaster General acknowledged, the Bill consists largely of anti-avoidance clauses that were excluded from the truncated pre-election Finance Bill on grounds of complexity and the need for more detailed scrutiny. Since then, the Government have made a number of minor changes, which we welcome as far as they go and which vindicate our decision not to allow such complex legislation to go through on the nod. On key issues, however, major concerns remain.

Let me say at the outset that Conservative Members recognise the need for the Government continually to address tax avoidance and the racier forms of tax planning in order to protect the Exchequer, although it would probably help if the Treasury started with a bit of housekeeping at home and tried to avoid giving away £2 billion of overpaid tax credits. Many of the tax avoidance opportunities themselves arise from the increasing complexity of tax legislation. Since 1997, the volume of tax statute in force has almost doubled, creating a bonanza for lawyers and tax accountants.

This is a practical issue. Tax planning is a fact of life for international business, as is tax competition between Governments. Governments everywhere face the same challenge: to reduce the loss of revenue from tax avoidance and tax planning, while ensuring that they do not weaken their international competitiveness. The right balance must be maintained between those competing objectives.

We understand the Chancellor's predicament. He faces a fiscal black hole, with independent commentators—including the Institute for Fiscal Studies, the International Monetary Fund, the Organisation for Economic Co-operation and Development and the Item Club—all predicting that tax receipts will need to rise sharply if the golden rule is to be observed. He is in any case already projecting a hefty additional contribution from United Kingdom corporations. The Budget projections show corporation tax takes soaring from £34 billion this year to £43 billion next year—a 28 per cent. projected increase in the corporation tax burden, on the back of a growth forecast of 3 per cent. for the economy, at a time when our competitors are increasingly lowering their corporation tax rates.

We have two overarching concerns. The first is practical—we fear that the Treasury's collective judgment may have faltered under the pressure to find additional sources of revenue and the temptation to address all the avoidance schemes disclosed under the Finance Act 2004. Complex legislation is being proposed to produce additional revenues in the short term. Consultation has been limited, and the Treasury's response to some of the concerns raised has been, to say the least, rather high-handed. Assurances that wide powers will be used only narrowly in practice are no substitute for tightly drafted legislation. There remains a real possibility of inflicting damage on some of the UK's most dynamic business sectors in the medium term, and thus of damaging the UK economy's international competitiveness in the long term.

A successful anti-avoidance measure must increase the tax take while neither adversely affecting transactions not primarily designed for tax-avoidance purposes nor imposing on business a burden of compliance disproportionate to the additional revenue generated. Not all the measures in the Bill will pass those tests, and in Committee we will offer suggestions for achieving its anti-avoidance objectives without the collateral damage that the current drafting risks.

Our second overarching concern is the direction in which the Government are taking the tax code. Certainty and transparency are the hallmarks of a fair, effective and competitive tax system. A taxpayer is entitled to know with certainty—be it an individual or a multinational corporation—what he may or may not do in planning his tax affairs. He is entitled to expect that his treatment be laid down in statute, not determined by administrative fiat; he is entitled to expect that another taxpayer in similar circumstances will receive treatment similar to his; and he is entitled to be protected from retrospective or retroactive legislation.

There can be no doubt that this Bill carries us further down the path away from that ideal in several key respects: by giving powers that ought to be exercised by Parliament to officials, so that Revenue guidance will determine how much of the complex corporate anti-avoidance legislation works in practice, and by the use of retroaction not just back to the date of a press release—it is bad enough, but perhaps fitting, that a Government who govern by spin have determined to legislate by press release—but back even further, fundamentally altering the future commercial outcome of arrangements entered into perfectly legally, and sometimes, as in the case of the venture capital industry, with the active endorsement of the Treasury. In so doing, the Bill introduces an arbitrariness that undermines the fairness and predictability that are essential elements of an effective tax system.

Photo of John Bercow John Bercow Conservative, Buckingham

My hon. Friend will recall, probably very accurately, the many racy and intoxicating debates that took place on the Floor of this Chamber in each of the last two Parliaments—to name but two—on the tax simplification rewrite project. He will also recall that the Paymaster General has never accepted a link, in theory or in practice, between the project and the potential implications for the composition of Finance Bills. Does he think it time that the Paymaster General accepted that there should be a link between the two, and that unless and until we reduce the size of Finance Bills we will be effectively ensuring that wealth is redistributed in favour of large businesses that can pay for specialist tax advice, and against small businesses that cannot?

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

I suspect that the actual outcome is that wealth is redistributed in favour of specialist lawyers and accountants, who benefit in proportion to the tax code's size and complexity. The Paymaster General will have heard what my hon. Friend said. I rather suspect that I am intruding into a long-running private debate between the two of them. I am sure that she will respond in due course, or perhaps the Financial Secretary will do so.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

The hon. Gentleman is espousing some principles and arguing that, in a sense, the Bill offends them. Can he put some flesh on the bones and give actual examples that we can get our teeth into concerning the need for certainty and the use of excessive regulatory powers?

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

If the hon. Gentleman, who will perhaps be a member of the Standing Committee scrutinising this Bill, will bear with me, I am about to come to some of the Bill's specific provisions.

Part 1 deals with VAT and, as far as it goes, is largely uncontroversial. I say as far as it goes, because one of the surprises is that the Bill does not contain more VAT anti-avoidance legislation. More than 700 VAT-avoidance schemes have been disclosed under the regime introduced last year, but the Government seem unwilling or unable to address them, presumably because of the involvement of EU institutions, particularly the European Court of Justice, in the interpretation of VAT rules. If the Government have lost the ability to take measures against VAT avoidance and, depending on the outcome of the Marks and Spencer case, which is currently before the European Court of Justice, against the loss of supposedly red-lined direct tax, where intra-EU losses are involved, that is grim news for domestic direct taxpayers, who will find that the Government's hunger for revenue is focused upon them.

The disclosure regime, which is being extended by part 1, is a significant burden on business and will increase with the proposals. We will seek an assurance from the Paymaster General during the Committee stage that there is a point to the extension of the disclosure regime and, indeed, to the continuation of the VAT disclosure regime. If business has to incur the cost and burden of disclosing, we must know that the Government have the will and the ability to deal with what is disclosed.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

The Paymaster General has been notified of more than 700 avoidance schemes that are in use, yet nothing in the Bill shuts down any of them.

While I am on the subject of the ECJ, experts are sceptical whether a number of other provisions in the Bill comply with the United Kingdom's treaty obligations. Perhaps the Financial Secretary will, in his winding-up speech, confirm that the Government have clear legal advice that clause 32, relating to chargeable gains of temporary non-residents, the anti-avoidance provisions of clauses 43 and 44, relating to double taxation relief, and the provisions of part 4 implementing the European company statute are all compatible with our treaty obligations and cannot be struck down by the European Court of Justice. The consensus of expert opinion outside the Treasury is not confident on that point, just as the consensus of expert opinion outside the Treasury seems to believe, unlike the Treasury, that the Revenue is likely to lose the Marks and Spencer case.

I want to touch briefly on clause 11, the gift aid clause, if only because it acts as a timely reminder that tax planning opportunities are open to all taxpayers, not only corporate giants and city whiz kids. The clause addresses the loophole in the gift aid scheme that has allowed many charities charging admission to museums or heritage sites to dress up those charges as gift aid donations. I readily accept that that was not the original intention of the gift aid scheme. However, the House will recognise that the proposed changes will impact on a significant number of charities, some of which are competing on a very uneven playing field against Government grant-aided museums that are able to offer free admission. What is the Government's estimate of the net revenue effect of that measure? The concern remains that some charities may be significantly affected and even that some small museums may have to close as a result of the loss of revenue resulting from the closure of that tax loophole.

Clause 12 deals with employment-related securities and provides us with an example of the risk of unintended consequences. The Government are rightly determined to close tax planning that reduces PAYE and NIC charges on salaries. There is no doubt that employment-related securities have been used to avoid tax and national insurance contributions, particularly on bonus payments. However, I hope that the Paymaster General will acknowledge that employment-related securities are also an important tool in seeking to align managers and staff in a business with the interests of the shareholders.

Let us not throw the baby out with the bath water. The proposed regime gives such wide discretion to the Revenue that, although the Government have said that this widely drafted legislation will be applied only to blatant avoidance schemes, employers may shy away from issuing securities to employees where there is any risk that they could be held liable for failing to account for PAYE and national insurance contributions that the Revenue determines, at a later date, should have been paid. That would be a great pity and a potential loss of competitive advantage to Britain.

Clauses 16 to 23 deal with the taxation of authorised investment funds and introduce a series of minor but burdensome changes, as well as paving the way for future changes to legislation affecting the taxation of authorised investment trusts to be done by regulation rather than by primary legislation. Will the Financial Secretary tell the House whether it is now envisaged that the proposed major reform of the taxation of authorised investment funds will be implemented by regulations? Fund management is a major UK industry and one in which we enjoy considerable competitive advantage. Changes affecting such a significant and tax-sensitive industry should be made by primary legislation, not by regulations. I hope that the Financial Secretary will reassure the House on that matter later this evening.

Chapter 4, which deals with tax arbitrage, remains one of the most controversial and complex areas of the Bill. While attacking tax avoidance, this group of clauses raises significant concerns because of its wide scope and the substantial new Inland Revenue discretions that it introduces, with consequent substantial uncertainty for both UK multinationals investing abroad and inward investors. So-called hybrids, which are at the root of the tax arbitrage targeted by these provisions, are extensively used in international financing arrangements. Experts tell us that much of the interest paid on many billions of pounds of debt, funding US corporate investment in the UK—almost all of which is arranged through some kind of hybrid entity—is vulnerable to being disallowed by a notice issued by the Revenue under clause 28.

It is far from clear to us that the Government have made any assessment of the longer-term effects of that measure. Multinational corporations will reorganise their affairs in response. Will the UK, seeking to act as the world's policeman on hybrid entities, actually bring about revenue gains for the UK Exchequer in the long term through this measure, or will multinational corporations simply rearrange their affairs so that tax authorities in other jurisdictions benefit at the expense of UK investors?

These provisions are not simply anti-avoidance measures: they introduce wide-ranging and arbitrary new Revenue powers to determine tax liability by the issuing of a notice, even when the Revenue believes only that avoidance "may" be occurring. The Government will be aware of the extent to which the draft legislation unsettled US investors in Britain. The operation of this chapter will have significant consequences for competitiveness, both through revenue raising and through the uncertainty that it will create. If it is not to damage British business, it will require a detailed review in Committee and a tightening of its scope and of the proposed enforcement procedure.

Photo of Stephen Dorrell Stephen Dorrell Conservative, Charnwood

My hon. Friend is raising an important point. If this degree of discretion is to be granted to the tax authorities, is it not essential that the Government guarantee that any taxpayers seeking clearance of any set of proposals before they are introduced will gain tax certainty by securing such a clearance from the tax authorities? They will then know precisely what the tax consequences of any measures will be before they are introduced.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

My right hon. Friend is absolutely right. As he knows, many jurisdictions already have general anti-avoidance regimes—some of the provisions in the Bill are so widely drawn that it looks as though we are moving in that direction—but they typically have strong pre-clearance regimes, which allow taxpayers to establish their position precisely and with a statutorily protected degree of certainty. That is certainly one of the issues that we shall want to explore in Committee. If taxpayers are to be subject to the wide discretionary powers that are proposed not only in relation to tax arbitrage but in other parts of the Bill, the provisions will have to be matched with a strong pre-clearance regime to give taxpayers real certainty over a defined period of time that is not left to the Revenue's discretion.

I come now to clause 39, which introduces schedule 7. It is an anti-avoidance measure, as the Paymaster General said, aimed at complex financial instruments, and it is largely a response to schemes that have come to the Revenue's attention through the disclosure rules introduced by the Finance Act 2004, which often involve attempts to convert income receipts into capital form to exploit the wide difference between capital gains tax rates and corporate income tax rates. Although some changes have been made since March, experts remain concerned that the Bill is still too wide in scope, that it is poorly and widely drafted and that it will still catch too many innocent commercial activities that it is not intended to catch.

We accept the need to address that type of sophisticated tax avoidance, but in Committee we shall want to look closely at the provisions' retroactive effect and at the powers granted to the Revenue under this schedule. We shall also seek concrete assurances that rapid action will be taken if any of the provisions, once in operation, impose additional tax liabilities on innocent commercial transactions.

Photo of Stephen Hesford Stephen Hesford Labour, Wirral West

I am listening to the hon. Gentleman with care, but I am somewhat confused. On the one hand, he says that the Opposition understand what the Government are about in respect of tax avoidance, but on the other, he lists a raft of measures to which he takes exception. Will he say whether the Opposition will agree later tonight to the Bill getting a Second Reading?

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

I can tell the hon. Gentleman that I shall not ask my hon. Friends to vote against the Bill this evening. We accept the principle that the Government must constantly maintain their armoury against the evolution of tax avoidance and tax planning practices. However, as I said earlier, it is a question of balancing the desire to protect the revenue with the need to maintain our international business competitiveness. Our contention is that although the principles on which the Bill is based are sound, the Government have got the balance wrong in the drafting. The arbitrariness of the powers to be given to the Revenue and the wide scope of many of the provisions in the Bill have created a climate of business uncertainty. Ultimately, that damages the UK economy.

Schedule 7 is a long, detailed and incredibly complex catalogue of measures. Ten minutes with it is worth about half a dozen Mogadon tablets, so I shall not go into the detail now. However, I advise the House that we shall go into great detail when we consider the Bill in Standing Committee.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

If my hon. Friend will allow me, I want to make a little more progress.

Clause 40 and schedule 8 are designed to prevent businesses owned by private equity and venture capital organisations from obtaining what the Revenue regards as excessive tax deductions for loans made from overseas. Typically, in the venture capital and private equity model, the UK acquisition vehicle is funded with debt, and the tax deduction for interest on that debt shelters the corporation tax liability arising in the business acquired. There are real concerns in the City about whether the measures are based on a proper understanding of the private equity business. Moreover, there is strong resentment about how the changes have been badged as anti-avoidance, when private equity financing traditionally has followed a model agreed with the Revenue.

As drafted, the Bill will catch a wider range of transactions than the Treasury appears to have envisaged. For example, bank debt raised by acquired companies will be caught, which will increase uncertainty and inevitably affect the pricing of transactions. The provision could also catch financing structures under the private finance initiative, so I hope that the Financial Secretary will say how the proposals in clause 40 and schedule 8 are expected to affect the Government's PFI funding programme.

As a result of the proposed measures, the UK will become less attractive at a time when our European competitors are attempting to expand their share of inward private equity investment and to promote themselves as bases for private equity houses. As the British Venture Capital Association has urged the Chancellor, there is a need to reconsider the proposals in their entirety if we are not to damage an important sector of the UK economy.

Clause 42 and schedule 9 deal with life assurance companies. They have retroactive effect and have caused at least two companies to issue profit warnings. However, I am sure that the House will be more concerned about the possible impact on policyholders, including pension fundholders, who are already being clobbered by the Government's annual tax raid of £5 billion.

Disconcertingly, paragraph 3 of schedule 9 would allow a fundamental change in the way that life assurance companies are taxed, to be introduced by means of statutory instrument. This area of specialist taxation is highly complex and the agenda is being driven by one or two senior Revenue officials who, no doubt, are committed to increasing revenue yield. Perhaps they are on performance-related pay. However, they are not in the best position to balance the revenue- raising imperative against the wider issues raised by the pensions crisis. In such a specialist area, it is difficult to be confident of effective peer review within the Revenue or, dare I say, of adequate ministerial oversight of the policy agenda.

The intention, as I understand it, is to change the treatment of income arising on certain assets within the life assurance companies' funds which, on the basis of current actuarial assessments, are deemed to be surplus to what is required for the protection of policyholders. Life assurance companies face a complex regime that taxes policyholders at 20 per cent. on the funds invested to support their life and general annuity policies and 0 per cent. on funds invested to support their pensions, and taxes profits made by shareholders of the company, quite properly, at the full corporation tax rate of 30 per cent. The Government's proposal is to insist that surplus funds are treated as shareholders' funds so that income on them is taxed at the higher rate. As we understand it at the moment, that proposal will apply, absurdly, even to mutual insurers that have no shareholders, but will still be taxed at the shareholder rate.

We accept that there is scope for tax avoidance where genuinely surplus funds are allowed to roll up at a lower rate of deduction and then potentially transferred out to the benefit of shareholders at a later date. However, the recent history of pension funds and life assurance companies in this country should lead us to be very careful about taking any short-term view as to what constitutes surplus assets that may be required to support future liabilities, and thus can be treated as shareholders' funds subject to the higher rate of tax. I hope that the Financial Secretary will acknowledge the extraordinary complexity of this area and the special dangers that arise when very few people genuinely understand the issues. I hope that he will agree that in such circumstances it is all the more important that in Committee we scrutinise the proposals in schedule 9 very carefully.

Finally, can Ministers explain why, at a time when all building societies, most banks and most investment product providers fall under the compulsory jurisdiction of the financial ombudsman service, with rules set by the Financial Services Authority, the Government propose, in clause 69, that the statutory adjudicator for national savings should be abolished in favour of the voluntary jurisdiction of the financial ombudsman service? At a time when the Chancellor's fiscal deficit means a greater role for national savings and the consequent need to enhance consumer confidence in national savings products, and at a time when other providers are increasingly subject to compulsory regimes, that seems to us like a case of, "Do as I say, not as I do" by the Government.

It will be clear to the House that the Bill deals with complex matters. There is a very real concern that a substantial share of the burden of this legislation will fall on some of the most dynamic sectors of the UK corporate economy—UK headquartered multinational groups, fast-growing venture capital and private-equity-backed businesses and UK-based investment houses. As a result of its very wide drafting, UK multinationals potentially face higher costs of investment in overseas markets than their competitors; growing UK businesses will potentially find it more difficult to attract investment by international, and particularly US-based, venture capital and private equity funds; London will potentially become a less attractive base for international investment business; and the UK will become a more expensive location for internationally mobile investment.

We recognise the anti-avoidance driver behind much of this legislation, but in Committee we must ensure that the correct balance is restored between drafting anti-avoidance legislation widely enough to ensure that it is not circumvented and maintaining a regime that is sufficiently clear, certain and fair not to deter investment in the UK or by UK businesses abroad. We cannot act as the world's policeman. If the UK Government do not like international tax practices, they must address them by negotiation and by treaty. To try to tackle them unilaterally will not solve the problem—it will simply disadvantage British business to the benefit of our competitors. However tempting the shortcut, we must maintain the distinction between Parliament making our tax laws and the Revenue enforcing them.

Since 1999, Britain's position in the international competitiveness league has fallen from fourth to 11th place. Our trade has gone from a surplus to a record deficit and a million manufacturing jobs have been lost. Productivity growth is down by a third, as is the savings ratio, and average take-home incomes for families have fallen for the first time in 15 years. At the same time, the burden of corporate tax is growing faster than the growth rate of the economy.

Back in 2001, in response to those emerging trends, the Chancellor announced his intention to make the UK tax regime more modern, more competitive and fairer, and to remove tax distortions that impact on commercial decisions. What he has delivered is a projected huge increase in the corporate tax burden in the coming year and, on top of that, a raft of widely drafted new anti-avoidance legislation which, if we are not careful, will further erode the long-term competitiveness of British business in the short-term pursuit of extra revenue to fill his fiscal black hole.

We accept the principle that there is a need constantly to update anti-avoidance legislation, but the Government do not have the balance right in the Bill. As I said to Stephen Hesford, I shall not ask my hon. Friends to vote against the Bill tonight, but I can tell the Paymaster General that in Committee we shall seek further to limit the scope of some of the measures, to reduce the potential for collateral damage and unintended consequences and to increase certainty for taxpayers. We shall seek to reduce the scope for arbitrary decision making by officials and, as my right hon. Friend Mr. Dorrell suggested, increase the opportunity for taxpayers to achieve certainty through rigorous pre-clearance processes.

The Bill before us today is better than the one published in March, thanks to our insistence on an opportunity for further scrutiny. With a constructive engagement on both sides of the House to digest and analyse the huge volume of input from outside experts and interested parties, I hope that the Bill will be still further improved by the time it completes its parliamentary passage, to the benefit of British business as a whole.

Photo of Doug Henderson Doug Henderson Labour, Newcastle upon Tyne North 4:37 pm, 7th June 2005

First, I draw the attention of the House to my entry in the Register of Members' Interests.

While Mr. Hammond was making his straightforward and fairly analytical contribution I thought that he would avoid mentioning the macro-economic background that his party articulates. I was somewhat surprised by that, as I cannot recall a debate on a Finance Bill where the official Opposition spokesperson managed to speak for 25 or 30 minutes without mentioning macro-economic policy. However, the hon. Gentleman let me down, because in the last two or three minutes of his speech he could not resist the chance to make a point about the macro-economic background, which gives me the opportunity to refer to those issues, too.

As my right hon. Friend the Paymaster General mentioned in her introduction, it is always difficult to deal with a Finance Bill after a general election. When part of a Bill is taken before the election and part afterwards, most of us forget which part has already been dealt with and which part remains, so we are indebted to the guidance notes for keeping us right on those points. But when people voted at the general election they knew what was in the first Bill.

People recognised the importance of measures that would improve the economic situation, especially the economic well-being of poorer families. After the tax changes in the first Bill, a family on £400 a week with two children was £25 a month better off. That was a telling statistic, which people understood during the general election. They also understood the provisions in that Bill about council tax assistance for pensioners. There were many other aspects, including some of the changes to the industrial context in which our manufacturers and service providers operate.

We are debating the second Bill today. Those on both Front Benches have said that it deals with a lot of complex, technical issues, but some important principles are involved, and we will consider them further in Committee. A section of part 2 that is of interest to me is formed by clauses 7 to 10, which raise the important principle of having a flexible approach to taxation on pensions. That will become an ever more important issue, which the House will have to face as the years go by. Choice and flexibility will be more important in pensions, and our tax law must reflect that, so it is right to include those clauses.

Clause 13 deals with the important principle of providing assistance to those who will invest in research and development. I have always believed that continually pressing home technical know-how and continuing to invest in future science and technology are what the core of this country's manufacturing and service industries are based on. Although small, such changes are important in establishing that principle. That is also the right thing to do.

Clauses 16 to 23 deal with the regulatory reform of various forms of investment vehicle, and it is right that the tax system should respond to changes in their structure. There is a lot of detail on which, no doubt, those who are fortunate enough—or unfortunate enough—to serve on the Standing Committee will receive many submissions from industry. Those are important clauses.

Clauses 24 to 31, in chapter 4, are also of particular interest to me, as they deal with tax arbitrage—something that has bedevilled Governments for many years in trying to achieve a fair taxation system, so that an institution or individual pays tax fairly in at least one country's tax regime. Again, it is important to deal with that issue not only to improve fairness and justice in the taxation system, but, quite frankly, as a matter of revenue raising. It is important that we get our share of revenue from economic activity that has been based in this country or has been generated by the people of this country. Those clauses are important—that is the right thing to do—and, taken together, they will have the effect of helping us to maintain high revenue, which allows us to do the things that we want to do as a nation.

As I have said, the people of this country have clearly supported the macro-economic background on which the first Bill was based. They have recognised that stable economic policies, which have led to the lowest unemployment for 30 or 40 years and the lowest interest rates, have been not only socially desirable—they have given jobs to people who previously did not have jobs—but economically essential to raise the revenue that was necessary to invest in health and education, which all hon. Members believe are important aspects of expenditure. That macro-economic context was the background to the first Bill, on which the public have already had the opportunity to express their views.

When the public know of our deliberations on the second Bill and when we have simplified, if we possibly can, some of the complexities, they will again show their support for the provisions that have been included. The public of this country want a fair and just taxation system in both the private and the corporate sectors. They want to ensure that what the law says people should pay is actually paid, and it is incumbent on all of us who deal with the Bill to ensure that that happens.

Although the hon. Gentleman was wary of entering into macro-economic policy until the last few minutes of his speech, the same wariness has not been as notable from many of his colleagues, who have argued that the Government's revenue expectations in their financial plans will not be met for several reasons, such as getting the sums wrong. I believe that the Government have taken the right approach. Governments can never be perfect in this regard because things happen that cannot be predicted at the time when plans are drawn up. However, for the past eight years the Government have tried to achieve stability in economic policy, fiscal expectation and monetary policy. They continue to do that, which will be absolutely crucial if we are to be able to continue on the course of raising revenue so that we can achieve the expenditure patterns that we all want. I was pleased that that approach was continued in the Budget and that it has been carried through into both this year's Finance Bills.

My right hon. Friend the Paymaster General would not expect me to go the whole way with her all the time—[Laughter.] If I thought that it would help me to rephrase that comment, I would. My right hon. Friend would expect me to raise a cautionary note. Although plans and designs are drawn up to bring about economic stability, we all recognise that things can be blown off course. The situation in the middle east is a problem that faces that whole world. If there is political instability, it usually follows that there is economic instability, so if we do not maintain political stability throughout the middle east and Iraq, there is the danger that economic instability could flow through across the world, the effects of which one economy of 60 million would not be able to avoid. I thus urge the Government to continue to press for political solutions in the middle east and Iraq.

My second cautionary note relates to what is happening in the European Union. Political instability has been created due to the events in France and the Netherlands, so I fear that that will bounce over into economic instability. I said in the House yesterday that I welcomed my right hon. Friend the Foreign Secretary's statement because he realised that we should not rush into anything premature on either the political or the economic agenda to deal with the situation facing us in the European Union. I am pleased that he intends to try to get as much agreement as possible to build political stability at the Council of Ministers next week, rather than trying to exploit matters on which there might be disagreement among members of the European Union.

A great onus will be laid on this nation from 1 July when we take over the European presidency. I cannot remember a more difficult time at which any country has taken over the presidency—certainly in the past 25 or 30 years. The challenge will be maintaining political stability. Many economic arguments will be put that could affect the European economy and thus our economy.

There must be some change. People in France were not really voting on the detail of the constitution, but the political situation in which that constitution was put before them. They were worried about the apparent failure of the European Union to respond to the country's 10 per cent. unemployment. We will have to tackle such issues during our presidency so that we can help to contribute towards greater stability. Other EU members can probably learn from this country's success on supply-side issues and they might be prepared to consider changes, but other macro-economic issues cannot be avoided. The stability pact has not brought about success throughout the European Union. The pact has led to recession in Germany and France, and in some of the other nations. Before the votes on the constitution last week, the Germans and French recognised this point and minor changes were made to the stability pact in March this year. I believe that there is a responsibility on our Government to take forward those discussions during the presidency and to look at how changes might be made to the pact so that it brings greater stability to the other economies in Europe. Without that, I fear that there could be serious repercussions for our economy.

I have said what I intended to say. There are many technical issues in the Bill and those who serve on the Committee will attend to them. There will be many submissions from interested parties. We can be thankful that the Opposition have recognised that these important changes need to be made and are demonstrating that by not voting against Second Reading this evening.

Photo of Christopher Huhne Christopher Huhne Shadow Minister, Treasury 4:51 pm, 7th June 2005

We have had a salutary reminder from Mr. Henderson that the great thing about economics and finance is that everything affects everything else. I will try to be a little more focused on the Finance Bill itself but, since he has given us the invitation to talk about macro-economics, I should pay tribute to the Government, as there is no doubt that their track record on macro-economic stability is a very good one. We are all in favour of macro-economic stability, which has been the happy result of the Chancellor's granting of independence to the Bank of England and of the framework for fiscal policy that has been pursued, including the golden rule.

As for the economic record, it is worth pointing out, before Ministers allow hyperbole to get the better of them, that their record is good but not as stellar as is usually claimed. In fact, no fewer than six of the other old European Union countries have grown on average more rapidly since 1997. Embarrassingly for the Conservative party, perhaps, five of those countries are in the euro area—Finland, Ireland, Spain Greece and Luxembourg.

Unemployment is far too high across the continent and particularly in the big three economies of Germany, France and Italy. However, unemployment is primarily the result of national labour market policies, which is why its pattern varies so much from one country to another. Those countries such as our own that have embarked on the process of structural reform and have made their economies more flexible have been rewarded with a good growth record and a good fall in unemployment; a third in the case of Spain, a quarter in the case of Finland and a half in the case of Ireland since 1997.

If a little more modesty is in order on macro-economics, a good deal more modesty on micro-economics is in order. In the period since I started looking at the British economy, the boom and bust in the housing market has repeatedly been the ghost at the feast. Yet what have the Government done on the housing market? Ministers disparaged my hon. Friend Dr. Cable when he first warned of the consequences of another house price ramp at the end of 2002. I hope that the unwinding of that boom will be less painful than the unwinding of the last one under the previous Conservative Administration, as it should be given the more stable macro-economic environment.

However, our household liabilities are now exceptionally high both by our own standards and by those of other countries; we are a nation in hock to our homes. That is lovely and warming when house prices are rising, because the effect of making tax-free capital gains with other people's money is highly gratifying. However, it is much less comforting when prices stagnate or fall, as they are now doing. That may be one explanation for the sluggishness of retail sales that has been widely reported and which may begin to have an impact on the underlying finances that we are addressing in this Bill.

Perhaps concern about the end of the feel-good boom in house prices and on the high street is one reason why the Finance Bill signally fails to correct a taxation error that will come into effect on 6 April 2006 and on which the Paymaster General has provided a partial defence to criticisms. Under the provisions of self-invested personal pensions, anybody can invest their personal pension pot in a buy-to-let home and benefit from full tax relief on the money put in, up to a limit of £215,000 a year. Indeed, people can benefit from full tax relief on assets such as vintage cars, wine collections, flats purchased so that children may live in them while at university, and even what my noble Friend Lord Oakeshott of Seagrove Bay pithily described in another place as the occasional jet-to-let property in St. Jean Cap Ferrat.

Let us take the example of a successful professional person who decides to buy a £215,000 flat as part of his or her SIPP for a child to live in while at university. No less than £86,000 of the purchase price will be paid by all other taxpayers. The purchasers will be able to sell the flat on in three or four years and pay no capital gains tax because the property is held within a tax-free fund. Those provisions are a serious and imminent threat to the public finances. We will argue in Committee that there must be an amendment if there is not to be an important loss of revenue. I hear what the Paymaster General said—indeed, we should bear in mind the invitation extended by Ed Balls—that that will not necessarily happen because of other examples of capital gains tax taper relief not coming home to roost.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

The hon. Gentleman criticises an important element of the Bill. Is he against the tax break for people who invest in real estate in their pension funds, as introduced in the last Finance Bill? Presumably it is retained in this Bill, which is why we are discussing it, and I think that the provision comes into force next year. Is he against tax breaks for pension investment altogether, or does he think that there should be no tax incentive if the asset acquired in the pension fund happens to be real estate rather than some other investment?

Photo of Christopher Huhne Christopher Huhne Shadow Minister, Treasury

Let me come to that. The hon. Gentleman anticipates the obvious solution that I was going to suggest at the end of my remarks on this section. Although the Paymaster General reassured us on the matter, I remind her that when my party raised similar concerns about the disadvantaged areas provision, the Treasury rapidly decided to close the loophole.

Photo of Danny Alexander Danny Alexander Shadow Spokesperson (Work and Pensions)

Does my hon. Friend share the view that a further worrying aspect of SIPPs is the likely increase in demand for a second home, particularly in rural areas, thereby fuelling the rapidly rising house prices in areas such as my constituency and pricing houses beyond the means of people on local average wages?

Photo of Christopher Huhne Christopher Huhne Shadow Minister, Treasury

That will be a problem and I am not reassured by the Paymaster General's response that the Inland Revenue will make substantial checks to ensure that that does not happen. Under existing provisions, people could buy a second home—I see Mr. Davies perk up at this prospect—on the Côte d'Azur or somewhere in Croatia, for example. It beggars belief to imagine that Inland Revenue inspectors are going to be hopping on easyJet to check out whether people have used those homes themselves or are letting them out properly, which is the purpose of the exemption.

The obvious solution is not to undermine the principle of a SIPP, but to exclude the more exotic assets and to postpone the inclusion of residential property until properly constituted and regulated real estate investment trusts are available. That would allow pension funds to continue to invest in residential property, but on a similar basis to the way in which most institutional investors invest in residential property, which it is rare for them to do directly because of management issues. That is a way to close the loophole.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

The hon. Gentleman is wrong about institutional investors: sometimes they decide to take a direct stake in a property. By denying them the right to do so, he will both distort the market and ensure that, to get the benefit of the pension investment, people have to pass through intermediaries, who will presumably deduct fees, commission, management charges and so on. Does he really believe that it is a good idea to distort the investment market in that fashion and to tell people that, if they want a tax break, they will have to give up some of the benefit to an intermediary? We have been through that before and found it foolish, since it diverts resources from the taxpayer to financial intermediaries, rather than encouraging the taxpayer to save more, which is what we want.

Photo of Christopher Huhne Christopher Huhne Shadow Minister, Treasury

I know of no institutional investors who directly manage residential property: they may own it directly, but they have an intermediary managing the property for them. However, I shall enter into correspondence with the hon. Gentleman on the subject. My understanding is that relatively little, if any, investment goes into residential property directly, as opposed to via other investment funds, so I doubt that a distortion such as he describes would be created.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I understood the Paymaster General to say that the assets would be owned by the pension fund, rather than by the individual. Therefore, in the example the hon. Gentleman gives of a person who invests in a property for children at university, to fulfil their statutory obligations, the trustees of that SIPP fund would have to set the rent at the market rate. There would be no gain for the family, because the children at university would not be getting a cheap rent, but would have to pay a market rent. Where is the gain?

Photo of Christopher Huhne Christopher Huhne Shadow Minister, Treasury

To be frank, the real potential is in abuse. I am not persuaded that the Inland Revenue is in a position to check, in particular because, as I understand it, the provision is open to investments in property both inside the UK and outside it, certainly throughout the European Union.

On other occasions, the Treasury's desire to tackle tax avoidance proves altogether too blunt, as seen in the provisions on authorised investment funds. The fund management industry is a small jewel in the crown of British financial services, with some £2 trillion in assets under management in this country, third only to the United States and Japan. Moreover, it is a branch of the industry that does not need to cluster in the great financial centres, which is why there are thriving asset managements in Edinburgh as well as in London and other centres across the UK. In Committee, we will voice detailed concerns about the possible reintroduction of double taxation for some types of qualifying investor scheme, which might prove unhelpful to the objective of ensuring that Britain remains a highly competitive centre of fund management.

Wider principles are raised in the provisions on authorised investment funds. In general, it might be sensible to delegate the technical regulatory powers to the Treasury, as clause 17. At present, the AIF tax code details are mainly in primary legislation, which can be changed only annually, as Mr. Hammond said. The delegation of those enabling powers seems as sensible for us in the UK as the similar delegation of enabling powers at European level under the Lamfalussy proposals, which all the parties welcomed. However, we find in the Government's proposals none of the safeguards that became normal in European financial services legislation. There is no obligation on officials to proceed with openness and through drafts for consultation, nor any mechanism whereby Parliament can satisfy itself that such commitments to openness and consultation have been honoured.

In all European financial services legislation since the Lamfalussy report, the European Liberal Democrats have proposed—with the support of all the other parties represented in this place—a sunset clause on delegated powers, which removes them after four years. I hope that Treasury Ministers, if not their officials, can see the value of inserting such a provision in respect of the newly delegated powers. At present, there is a simple approval of new regulations by the House when they are first introduced; thereafter, revisions are subject only to the negative resolution procedure. There is no trigger point at which a general assessment of the operation of delegated powers can be undertaken, but it seems to us that there should be.

Another issue that is always a matter of concern in any Bill, and certainly in any Finance Bill, is the inclusion of retrospective provisions such as those in clause 12. I recognise that there is a hue and cry about retrospection every year, and also that retrospective tax provisions are less of an intrusion into the personal freedom of the individual than, say, retrospective criminal offences. However, retrospection is surely a sign of failure of foresight. It is representative of Treasury officials recognising that a particular tax avoidance scheme is so serious that it must be dealt with retrospectively. Surely it is better to anticipate problems than to tackle them after they have occurred. It is also surprising, given the Treasury's new powers to insist on the disclosure of schemes marketed to clients for tax avoidance, that these retrospective measures are still deemed necessary. Perhaps the Paymaster General will give some thought to encouraging her officials to keep their ears to the ground.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The hon. Gentleman has referred to quite a bit of stuff that is not actually in the Bill, so he will have difficulty referring to it in Committee. On his point on clause 12, the measures are not retrospective. If he cares to look at the history of the previous Conservative Government and this Government in dealing with this particular kind of avoidance, he will see that measures targeted at tackling such avoidance did not work. So the Government have made a clear statement that said: "This is subject to tax, and it will be paid." This has nothing to do with retrospection.

Photo of Christopher Huhne Christopher Huhne Shadow Minister, Treasury

I thank the Paymaster General for that clarification, but we hope that the retrospective elements in the Bill will prove less necessary over time, as the Treasury's new powers come into greater use. It now has far fewer excuses for retrospective measures, and I hope that she will point that out to her officials.

These provisions are also typical of the Government's obsession with complexity—often, it seems, for the sake of it. When it comes to macro-economic policy, the Treasury team has constructed an edifice that is simple and strong, with clear Palladian lines. However, it seems to compensate when it comes to micro-economic matters by indulging in a wild taste for the baroque. There is scarcely a tax provision unadorned in successive Finance Bills, to such an extent that the Government must now surely be the pride and joy of the professional advisers, whose fees grow fatter every year as a result of the expense of interpreting the Treasury's latest provisions. KPMG has pointed out that, over the past eight years, the annual Finance Bill has grown in length by 35 per cent. compared with the previous eight-year period. It is not obvious, however, that outcomes are so much better for the undoubted increase in inputs.

In sum, we support the macro-economic stability that has been a feature of this Government's record to date, although we note that the international comparisons are not quite as favourable to the Government as those on their Front Bench would have us believe. However, we have serious reservations about the omission from the Bill of measures on tax avoidance, particularly concerning self-invested pensions, that we shall seek to address. We also have reservations about the provisions on asset management, and about the checks and balances necessary to delegate powers to the Treasury in that respect. Finally, in approaching these measures, we shall attempt to ensure that simplicity is the watchword.

Photo of Jessica Morden Jessica Morden Labour, Newport East 5:08 pm, 7th June 2005

Thank you, Mr. Deputy Speaker, for giving me the opportunity to make my maiden speech in this debate. I represent with great pride the constituency of Newport, East, and I would like to express my thanks to the people of the constituency who have sent me here. I have heard rumours that hon. Members sometimes have difficulty in paying tribute to their predecessors. I am sure that that is not true, but I have no such problem. Despite the fact that my immediate predecessor originally came to the House as a Tory, I know Alan Howarth very well and I know of his diligence and his ability. During the election campaign, the people of Newport, East told me time and again of his determination and effectiveness in tackling their problems. He was also, of course, a splendid Minister in several Departments who left a lasting legacy in the shape of his contribution to widening access to higher education, to the arts, to developing disabled people's rights and to building a national child care strategy.

I mentioned that Alan started out as a Tory—as the Conservative Member for Stratford-on-Avon. Political parties do not always react well to Floor-crossers, but it was a sense of duty and conviction that led Alan to cross the Floor in 1995. He was welcomed very warmly by the Labour party in Newport, East—no mean feat for a Conservative in south Wales. I assure hon. Members and my constituents that, although I aspire to be as good a constituency Member and parliamentarian as he, I can categorically state that I will never cross the Floor. I am so pleased that Parliament will not be losing his talent, and that I will not be losing his sage advice and experience.

I also pay tribute to Alan's predecessor, the late Lord Islwyn, who like me and Alan Howarth, made his maiden speech on Second Reading of the Finance Bill. He represented Newport for more than 30 years and, sadly, passed away in the last Parliament. I note in passing that that makes two Members for Newport, East in a row who have been elevated to the other place.

My constituency of Newport, East stands at the gateway to England and Wales—or the other way around, depending on how one looks at it. It stretches from the eastern banks of the mouth of the River Usk to the communities of Roggiett, Undy, Magor and Caldicot.

Newport has a very proud political history. It was the cradle of the Chartists and later home of the Chartist riots in 1839. The demands made by the Chartists are the principles that we now take for granted and, indeed, formed the basis of modern parliamentary democracy: universal suffrage, secret ballots, the abolition of the property qualification for Members and, of course, wages for MPs so that not only the wealthy could represent the people.

Born—surprisingly enough—as a port, Newport became in the 19th century one of the most important places in the country for coal export. Later, the steel industry made its home in Newport, at Llanwern in the Corus plant. In light of recent experience, Lord Islwyn spoke prophetically when he said in his maiden speech in 1966:

"it would . . . be tempting fate to rely so exclusively on this one form of trade."—[Hansard, 25 May 1966; Vol. 729, c. 503.]

When, in 2001, Corus announced the end of steel making and serious job losses at the Llanwern steelworks, many thought that the town would be devastated. Newport, East has fought back, though, because of the enduring quality of its greatest asset—the people of Newport, East, who have always shown their ability to bounce back from setbacks and difficulties, adapting and responding to changes in industry and society.

Four years is a very long time in politics and so much has changed. My constituency is now enjoying a renaissance. The word "renaissance" is easy to use; nearly every local government strategy document proclaims a local renaissance, and it might seem overly grandiose, suggesting a perfect image of 15th century Italy—a combination of economic and cultural revival—but in Newport's case, it is true. There is certainly an economic renaissance. Despite losing part of its core industries, the city is proving that it can re- establish itself as a centre of modern industry and commerce. New industry in the high-tech and financial services sector is being attracted to the constituency. That includes companies such as EADS Defence and Security Systems, which I visited during the campaign, and which is bidding for the new UK fire and rescue services communications system.

Thanks to the good relations and teamwork between the work force, management and unions, Corus reported record profits this year. Thanks to Labour teamwork in Westminster, the Assembly and on the excellent Newport council, the city is home to Wales's first regeneration company—Newport Unlimited, which is redeveloping the city centre with £30 million for jobs and development.

The renaissance is built on the strong foundation of a better skilled work force. The University of Wales in Newport, in neighbouring Newport, West, has had the largest increase in full-time undergraduate applications of any university in the United Kingdom and is one of the top UK universities for widening access to higher education for students from the state school sector. That is a signpost of bright things to come for Newport, East, but the future development that Newport needs must be as a result of commercial decisions dependent on the Government continuing to create the conditions to ensure a strong and vibrant economy in Wales. The measures in the Finance Bill, however complex and technical, will enable us to do that.

I am very proud that we have the best economic background in Wales for decades, helping a huge cross-section of people to share in the prosperity that a stable economy is providing. There are now more people in Wales in work than ever before, and unemployment in Newport, East has been halved. It is vital that we continue that growth.

Some might say that the renaissance in Newport is due to the popularity of the GLC—not the Greater London council but the Goldie Lookin' Chain, Newport's rap stars whose spiritual leader is my hon. Friend Paul Flynn. What is certainly true is that Newport's renaissance is intimately associated with its cultural life. Thanks to the legendary club, TJ's, Newport is a cultural Mecca for the alternative music scene. It is a city with its own cultural and sporting heroes—Caldicot male voice choir, Newport Dragons rugby team, Newport County FC, the Welsh national velodrome and the sports village. Although it is just outside my patch, I am sure that my colleague in Newport, West will not mind my mentioning that I look forward to hosting the 2010 Ryder cup at the Celtic Manor. Newport was awarded city status in 2002. Some wag even suggested that with such a renaissance we should start to call Newport "new Newport", but that might be a little bit too new Labour for some.

I want to ensure that all my constituents get to share in Newport's growth. I am proud to represent a party that has done so much over the years to unlock human talent and to deliver social justice, but there is still much to do to improve people's day-to-day lives for the better. Child poverty still blights too many lives; too few people leave school without the skills and qualifications that they need to make their way in the world; there is too much antisocial behaviour, meaning that people cannot live in peace; and too many people rely on income replacement benefits. Working with my colleagues in this place and in Newport, that is what I want to help to change.


Yes well done the new Newport MP, in pointing out the fact that GLC come from Newport, something that most of us residents of the town, sorry city would rather forget.

Oh and a plug for TJ's as well, tell me does John slip you a bung for that (joke) , or do you get in cheap on a Saturday night?

Its good that you mentioned The Chartists, they were people driven to try to get social change, something that New Labour seems to have forgotten about in recent years.

Still I wish all the best in the house, although I have to say that I feel based on the polling figures that come the next election your place will most likely be taken by someone from the other side of the floor.

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Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford 5:16 pm, 7th June 2005

Jessica Morden gave an extremely attractive maiden speech that was very competently delivered. We learned a lot about Newport—or I certainly did, as I did not know much about it before. Many Members on both sides of the House will appreciate the hon. Lady's kind words of tribute to her predecessor, Alan Howarth. It was a model of a maiden speech that augurs well for a new parliamentary career, and I know that we would all want to welcome her to that.

My hon. Friend Mr. Hammond made an extremely well informed speech about the Bill that made me feel that I should try once again to get on to the Finance Bill Committee, because it sounds as though we will have some interesting subjects to discuss. Clearly, he could not give such a thorough account of the Bill's strengths and weaknesses and at the same time say much about macro-economics. However, that does not mean that there is not a lot that needs to be said about macro-economics, not least because the Government—I am afraid that the Paymaster General is very much in the model of her boss in this matter—continue to take a consistently self-righteous, self-congratulatory and complacent tone in everything that they say on the subject.

That is disgracefully reflected in the way in which the Red Book is drafted. The Red Book used to be regarded as something that was drafted as dispassionately as possible from a party political point of view by Treasury officials, but—I said this last year but I shall say it again as it remains true—it has increasingly become a work of political propaganda in which everything that happened before 1997 was terrible and everything that has happened since is absolutely brilliant. It is extremely difficult to find some of the essential facts that one needs because those facts, which are not flattering to the Government's performance, and any problems are skated over.

Against that background, it is important to use this debate to redress the balance—albeit slightly, because that is all that one can do in a very short space of time.

Photo of Helen Goodman Helen Goodman Labour, Bishop Auckland

My recollection, having been a Treasury civil servant throughout the Tory years, is that Tory Ministers were greatly interested in the drafting of the Red Book. Does not the hon. Gentleman recall that when Nigel Lawson was Chancellor of the Exchequer he personally decided that we should introduce into it the medium-term financial strategy? That was a direct ministerial intervention that was not in any way initiated by officials.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

No, the hon. Lady must be quite wrong about that. I remember Lord Lawson, as he now is, was Chancellor of the Exchequer when I entered the House, and the medium-term financial strategy, which he had devised as a junior Treasury Minister long before I entered the House, was the framework for economic policy at that time—a very successful framework. It would therefore have been extraordinary to have drafted the Red Book without making reference to the medium-term strategy—rather like drafting the Red Book now without reference to the golden rule or the sustainable investment rule, and I certainly do not protest that those two things are dealt with in the Red Book.

Photo of Richard Spring Richard Spring Shadow Minister, Treasury

I do not recall Lord Lawson double and treble-counting the figures for the first two or three years when he was Chancellor of the Exchequer, unlike the present incumbent.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

I think that standards in these matters have slipped and eroded, which is unfortunate. Were we to go back to the time of Sir Stafford Cripps, we would find that he adopted a more severe approach—not a more successful approach to the management of the economy—to the presentation of the facts in the documents produced in the Treasury.

A lot is right about the economy: of course, it has been doing well, although not so well since 1997, in terms of growth, as between 1992 and 1997—one would not learn that from reading the Red Book, but it is a fact. Nevertheless, the British economy has some favourable aspects currently, but also some worrying features, which also need to be discussed and addressed. I want the Government to be reminded of them and forced from time to time to address them.

First, the Chancellor is showing increasing signs of losing control of public expenditure. Those are strong words, but let us examine public expenditure as a proportion of GDP. In 1997, when this Government took office, public expenditure stood at 39 per cent. of GDP. It then fell, because, as we all know, the Chancellor continued with Conservative projections for the growth of public spending in the first two years, to 37.3 per cent. of GDP in 1999–2000. That was a favourable fall. It has now risen to 41 per cent. of GDP, and is projected to rise to 42 per cent. next year. That is a rise of five percentage points in five years, which is quite worrying. What will he do for an encore? Will it rise another five per cent. in another five years, which will be a rise of 10 per cent. over 10 years? It cannot continue rising indefinitely or we will have a major economic headache. The Government should address that sort of issue, and not try to bury it. Incidentally, I did not get those figures from the Red Book; I had to find them elsewhere, as they are not in it—I wonder why.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

May I refer the hon. Gentleman to the table on page 275 of the Red Book, which gives those figures? It also shows that in 1982–83, the figure was 42.7 per cent., in 1983–84, 42.3 per cent., in 1984–85, 42.6 per cent., in 1985–86, 41 per cent., and in 1986–87, 40 per cent. Need I go on?

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

The hon. Gentleman is partially correct, but I repeat my point: curiously, those figures do not go up to last year. Therefore, he will look in vain in the Red Book for the figures that I quoted for the previous year, 2004–05, and the estimate for next year, 2005–06, of 41 per cent. or 42 per cent. They are not there, and I wonder why, as the House of Commons Library was able to find them for me based on the Treasury's figures.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

I will proceed for a little longer before I give way again. I will no doubt do so later, but I do not want the whole of my speech to be taken up by the hon. Gentleman, who, I am sure, Mr. Deputy Speaker, will be able to catch your eye in due time.

Secondly, the Government are losing control over the current budget deficit, about which the Government's projections have been proved wrong successively. I will quote from the Red Book, for those who do not want to read it, to give the flavour of the complacent and potentially deceptive way in which it is sometimes drafted. Paragraph 2.39, on page 27, states

"The estimated 2004–05 outturn for public sector net borrowing is £34.4 billion, compared with £34.2 billion projected in the 2004 Pre-Budget Report"

—six months ago—

"and £32.9 billion projected in Budget 2004"

—a year ago.

Those figures seem very close. Anyone reading that would say "It is fine. Everything is under control. The outcome is almost exactly what was predicted six months ago and a year ago." Let me read on, however.

"For the public sector current budget, the estimated 2004–05 outturn shows a deficit of £16.1 billion compared with projected deficits of £12.5 billion and £10.5 billion in the 2004 Pre-Budget Report and Budget 2004 respectively."

In other words, over the last six months the Treasury's prediction of the current deficit has risen from £12.5 billion to £16.1 billion, and over a year it has risen from £10.5 billion to £16.1 billion. That means that in six months there has been an increase of a third in the estimated outturn for the deficit, and over the last year an increase of a good deal more than 50 per cent.

All well-run businesses make forecasts. If a business's forecast was found to be out by a factor of 50 per cent. every year, questions would be asked and answers required. There is no doubt that there is a series of instances of the Treasury's missing its forecast.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

I will not give way to the hon. Gentleman again immediately. He will have to be patient. I will develop my argument, if I may.

The other curious aspect is this. How is it possible, within the general figure for the Government's deficit—which is roughly the same as that predicted a year ago and in November—for the current deficit to have increased so much? The answer must be that investment spending has been cut. The Government have said "My goodness, it will be terribly embarrassing if we breach our forecasts, and the budget deficit is much greater than was anticipated only six months ago. Since the current element of the budget is out of control, we will have to compensate by cutting investment spending." I think that that is confirmed in the table on page 30 of the Red Book:

"Forecasting changes to net investment . . . -3.4".

The Chancellor is doing something that he always said he would never do. He is doing something that he accuses previous Governments, Labour and Conservative, of doing: playing around with investment spending, and using it as a cushion to absorb mistakes made in the management of current spending. Again, I fear that the full story is not clear. It is certainly not clear from the Red Book. If the Paymaster General wishes to intervene, I shall certainly give way. I hope that she will have an explanation for the House in due course. [Interruption.] The Paymaster General's sedentary intervention may have been very significant, and the House would probably like to know what it was, but I did not hear it.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I recommend the hon. Gentleman to read the Red Book before speaking in debates such as this.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

The Paymaster General will have to be more specific, and say which of the figures relating to the current budget or the total budget was quoted wrongly. She will be able to compare Hansard with the Red Book, and she will find that I quoted the Red Book precisely. What is more, she has not explained why the Government missed their forecast. We should be extremely interested to know the explanation. Some modesty or humility on the Government's part—some explanation when things go wrong, rather than an attempt to brush under the carpet everything that is not entirely favourable—would be very welcome.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

The hon. Gentleman might find some explanation on page 27 of the Red Book. I shall read out the second part of the quotation that he gave us, and then continue with the rest of the paragraph. This is what the hon. Gentleman quoted:

"For the public sector current budget, the estimated 2004–05 outturn shows a deficit of £16.1 billion compared with projected deficits of £12.5 billion and £10.5 billion in the 2004 Pre-Budget Report and Budget 2004 respectively."

The hon. Gentleman ended the quotation there, but the passage continues

"This is significantly lower than the deficit on the public sector current budget of £20.4 billion in 2003–04 as the impact of the strengthening economy has fed through to receipts. On the basis of cautious, audited assumptions, the Government is meeting its strict fiscal rules over the economic cycle."

Offering selective quotations is not helpful, and nor is comparing apples with oranges—comparing projected out-turns with actual ones—and not specifying the difference.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

The hon. Gentleman has just read out a completely irrelevant quotation. I asked why the Government missed so badly the forecast for this year's deficit, and the hon. Gentleman proceeded to read out a passage about the deficit for the financial year 2003–04 having been greater than that for 2004–05. I shall not make the mistake of giving way to him again, because that has not advanced the argument at all. He was clearly engaged in an exercise of obfuscation, perhaps in order to defend his right hon. Friend the Paymaster General.

There is a third big question-mark over the direction in which the Government's management of the country's finances is going; indeed, it has been discussed quite a lot recently. Is the Chancellor about to face the dilemma of breaching his golden rule? Will he have to put up taxes or cut spending? The jury is still out on this issue, and I shall not go into it in detail as it has been well aired in recent public debate. All independent forecasters are considerably pessimistic about the Government's chances of meeting the golden rule and balancing the current budget through the cycle, given that it is supposed to finish at the end of next year without recourse to further taxes.

This is an important issue not so much because of the potentially severe economic impact of breaching the golden rule or of increasing taxes—we would all very much regret such increases—but because the damage to the Government's credibility would be enormous. We would realise not only that the Chancellor had missed a whole series of forecasts, but that at the end of the cycle, he had failed to observe his own rule. He started out with the immensely ambitious plan of more than meeting the golden rule—of having a surplus over the whole cycle of more than £100 billion.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

I see that the hon. Gentleman is nodding. To move from a £100 billion surplus to the current break-even situation, with the possibility of going below the waterline and missing the golden rule altogether, is a significant turnaround.

Something more profound needs to be said about the Government's golden rule and sustainable investment rule, which I welcome in theory. They are right in principle and conceptually, but the question is whether they are being applied effectively, or so loosely that they do not represent the rigorous economic discipline that they purport to represent. If the latter is so, that is very dangerous for the long-term performance of the British economy and—once the cat is out of the bag—for the credibility of its management.

The golden rule says that the current budget must be balanced through the cycle. That involves a number of assumptions in deciding what the cycle is, which I shall not go into, but one's immediate reaction is that under such a rule, if the economy is growing above trend, the Government will be running a surplus, and if it is growing below trend, they will be running a deficit. So reduction in demand during a downturn is compensated by greater Government spending, and vice versa. That is the classic use of fiscal policy for stabilisation, but one need only look at what has happened since 1997 to see that it is not the golden rule on which this Chancellor bases his economic management.

When the economy was growing above trend in the late 1990s, public spending was growing at slightly less than the trend rate of the growth of the economy, which was 2.5 per cent. Then, when an election was about to be held in 2000, the Government suddenly took off the brakes, having been very fiscally prudent until then, and projected annual rates of expenditure growth of 3.2 to 3.5 per cent.—way above the economy's trend growth rate of 2.5 per cent.

Last year, the year before and this year, growth in the economy was significantly above the trend rate: 3.1 per cent., 3 per cent. and 3 to 3.5 per cent.—that is the projection for the current financial year in the Red Book. Nevertheless, there were substantial deficits. That must be contrary to any normal understanding of the golden rule. However, the Chancellor does not have a normal understanding of the golden rule. His definition of it is different: if we have had surpluses earlier on within the cycle, we can draw on those later and run up whatever deficits we like. As long as, when we get to the end of the cycle—whatever we decide is the end of the cycle—we have not drawn down all those surpluses, we balance the current budget through the cycle.

That is simply not good enough for several reasons. The first is that we never know when the end of the cycle is, so it is a pretty irresponsible way to manage the economy. We do not know over how many years to come we will still have, in practice, those accumulated surpluses to spend. We may think that the cycle will come back to the trend rate of growth at the end of 2005, but we may be wrong about that. No one knows, so that is not a responsible policy.

The Government have not properly focused on the other big problem with that approach to the golden rule. If the golden rule is taken to be—I am sorry, Mr. Deputy Speaker, I am not feeling very well this afternoon. I think I may have to interrupt my speech. I am so sorry.

Photo of Katy Clark Katy Clark Labour, North Ayrshire and Arran 5:37 pm, 7th June 2005

Thank you, Mr. Deputy Speaker, for giving me the opportunity to speak for the first time in the House and to follow my hon. Friend Jessica Morden. The first thing that I would like to do in the House is to thank the people of North Ayrshire and Arran, who have given me the privilege of coming here and speaking on their behalf in the Chamber.

I represent a diverse and beautiful constituency. It is almost a mini-Scotland. I have two islands in my constituency—Arran and Cumbrae—which face unique issues. I have more prosperous areas such as Largs but I also have other areas that represent the old industrial part of Scotland: Kilwinning, the three towns of Stevenston, Ardrossan and Saltcoats, and the Garnock valley. Therefore, it is a mixed constituency with proud Labour and parliamentary traditions: Keir Hardie was the miners' agent in North Ayrshire.

Like the others in Scotland, mine is a new constituency with new boundaries, so I have more than one immediate predecessor. I am lucky enough to be here today because of the retirement of Brian Wilson, who originally came from the north of Scotland. He was a radical journalist who founded the West Highland Free Press, but came to Ayrshire and used his skills on behalf of the people of Cunninghame, North, where he is well respected. He held ministerial office in this place and was a high-calibre politician.

I have other predecessors, given that Cunningham, South was also part of the new constituency. One of the people whom I must thank for the support that they have provided me over recent months is my hon. Friend Mr. Donohoe. Another previous Member for Cunninghame, South, David Lambie—he represented that constituency for many years—has also provided me with huge support on a personal level over the previous few months. David Lambie is a pacifist, a person of strong views and someone who I know will provide me with good advice over the coming years. He continues to be involved in my constituency Labour party and the wider community in North Ayrshire and Arran.

However, perhaps the previous Labour candidate in my constituency who means most to me is my great-great grandfather, who stood twice as Labour's candidate in what was then North Ayrshire and Bute. He increased Labour's vote there twice before becoming the hon. Member for South Ayrshire. It is fair to say from everything that I have heard about my great-great grandfather that he was very much a rebel, a pacifist and a socialist. He went on to become general secretary of the Scottish National Union of Mineworkers and came to the House as a miners' MP. He always stood up for what he believed in.

My great-great grandfather was brought up in Dalry, which is in the constituency that I now represent, but when the mine there closed, he and his family walked to south Ayrshire where the mine owners were opening up a new pit. I understand that their possessions were transported by railway and that when they reached south Ayrshire, a village had been built with pit houses identical to those from which they had come. The mine owners tried to keep control over as many aspects of miners' lives as possible. It was hearing about people like Sanny Sloan, my great-great grandfather, that really brought me into politics. He was part of the landslide 1945 Labour Government, for which all hon. Members have a huge amount to be thankful in respect of the creation of the welfare state and the national health service.

As I said, my great-great grandfather was a miner, but the mines have long gone in my constituency, and in their place came many other forms of heavy industry. However, through 18 years of Tory rule, we saw industry after industry closing and my constituency has still not properly recovered from that experience.

Since 1997, as my hon. Friend Mr. Henderson said, much has been done to improve Scotland's and Britain's economies and much has been done to get rid of unemployment. My constituency has seen a 25 per cent. increase in employment since 1997, but the reality is that a huge amount more needs to be done. Unemployment is still too high, as is poverty, deprivation and the social problems that come with that.

From the point of view of my constituents, the most important Labour manifesto commitments in the coming years will be the commitment to full employment so that everyone has access to a job, and the commitment to eradicate child poverty, backed up with targets to eradicate that and all forms of poverty. I view my job as MP as doing all that I can on the Labour Benches to ensure that Labour implements the policies that will deliver on behalf of my constituents.

I am proud to be in my place on the Labour Benches and particularly pleased, as we move towards the G8 summit, that we have a Labour Chancellor who is leading the way in pushing the policies internationally to make poverty history. We all have an obligation to do all that we can to ensure that poverty is dealt with throughout the world. It is in none of our interests that so many people in so many countries live in such dire poverty.

I am involved in politics because I came out of a socialist tradition and because I still believe that it is possible to change the world. During my time in Parliament I intend to work as effectively as possible to represent my constituents and to put forward policies to ensure that in future the gap between rich and poor in this country is reduced. The reality is that we live in one of the richest countries in the world. Britain is the fourth richest in the world, but the gap between rich and poor remains wide. Similarly, the gap in respect of power and wealth in society is still far too great.

In representing the people of North Ayrshire and Arran, I hope to advocate policies that will ensure that future generations inherit a world that is fair and gives all of us a better chance in life. I thank the House for listening to me so courteously today.

Photo of Ian Paisley Ian Paisley Leader of the Democratic Unionist Party 5:45 pm, 7th June 2005

I begin by congratulating Ms Clark. Her constituency looks 20 miles across the Irish sea at another very good constituency—mine. Her maiden speech was very interesting, as was the one made earlier by Jessica Morden. However, the hon. Lady has more faith than I, as she said that she would never cross the House. That was what I thought when I sat over there, but then the Government changed and I had to cross the Floor. Of course, I understand that she meant something different.

It is nice to hear about the background of new hon. Members and to see the fruition of seeds sown earlier in their family history. Speaking from the Unionist Benches, I wish the hon. Member for North Ayrshire and Arran well. Ulster and Scotland have much in common, and that applies to me more than most as my mother came from the city of Edinburgh. That means that I have a good Scots streak in me—as I am often told when things get hot in Ulster politics. Anyway, I congratulate the hon. Lady and wish her well.

I am not an expert on tax, but I welcome the Bill even though I find many of its paragraphs hard to understand. I shall not go into detail, lest my ignorance be seen. However, it is important for us to strike the right balance and achieve desirable outcomes without endangering other objectives. In tax matters, one needs to consider the policy issues that lie behind proposed changes, and whether the changes will deliver the stated objectives. As the Bill makes its way through the House, I hope that hon. Members of all parties will have a full understanding of the consequences of what is proposed. The parliamentary process can struggle with such technical matters, in which very few hon. Members are expert. We must ensure that our debates have the best possible outcomes and that we listen carefully to what is said.

I am concerned that some provisions in the Bill might harm British industry. In addition, I ask the Paymaster General to confirm that she is absolutely satisfied that the proposed anti-avoidance measures are not so broad that innocent people will fall foul of them.

As always, however, my primary concern is Northern Ireland, and I was surprised when I read clause 67 on page 56 of the Bill. It deals with the reorganisation of Northern Ireland's water and sewerage services—the hottest political potato of the moment. Over the past 30 years, we have had Conservative and Labour Governments and direct rule, but nothing has been done in that period to ensure that people have acceptable water quality at a reasonable price. In fact, officials at the Northern Ireland Office were very quick to say that some people in Northern Ireland did not pay anything for their water, but that is not so. The fact that there is not a separate tax for water does not mean that that cost is not considered when the level of rates is decided. We have an inferior water service and putting it right will need a big input of finance. However, to ask the people of Northern Ireland to pay for putting it right and then to pay for the water would be totally unfair. It is evident from the Bill, however, that that is what the Government intend to do—and that will come as a surprise to most people in Northern Ireland. The Bill will enable the Government to get rid of their responsibility and hand to others the terrible job of repairing the water machinery and supplying water at a reasonable price.

It is hard on the people of Northern Ireland to stick that suggestion in this Bill when it has not been properly debated. The issue is a hot potato and it unites all the political parties in Northern Ireland, which all believe that we need a proper water service. It angers me that the Shaftesbury estate, which owns Lough Neagh—the largest landlocked lough in the British Isles and an immense mass of water—offered the water from the lough to the Government free of charge, but they refused the offer. Now the water suppliers for Northern Ireland will have to buy the water of Lough Neagh for many millions of pounds and the cost will be passed on to the people.

Photo of William McCrea William McCrea Shadow Spokesperson (Environment, Food and Rural Affairs)

Does my hon. Friend agree that the setting up of this company will be the first step towards privatisation of our water services? This Government's policies have certainly strayed far from socialism—not only new Labour, but new clothes.

Photo of Ian Paisley Ian Paisley Leader of the Democratic Unionist Party

My hon. Friend makes a vital point. It disturbs me that the proposal will cause more misery in Northern Ireland. Surely it would have been possible to make the arrangements separately so that the people of Northern Ireland and their representatives in this House could have had a full debate on them. The Bill will go into Committee where the debate will concentrate on its substance, and Northern Ireland matters will be forgotten as appendices to the main debate. The Government owe the people of Northern Ireland an explanation of the haste behind this measure. The Government claim that they have not yet made up their minds, but the Bill contains the structure for handing over the water system in Northern Ireland. They failed to grasp the opportunity offered to them by the Shaftesbury estate to take over the supply of water in Northern Ireland, and I hope that the Paymaster General will be able to tell us how far they will take these proposals. Will the Government move quickly or will we be able to have a proper debate and find a way to give the people of Northern Ireland their water at a price similar to those charged in other parts of the United Kingdom?

Photo of Kerry McCarthy Kerry McCarthy Labour, Bristol East 5:54 pm, 7th June 2005

I am grateful for the opportunity to make my maiden speech today and it is a privilege to follow my hon. Friends the Members for North Ayrshire and Arran (Ms Clark) and for Newport, East (Jessica Morden). I congratulate them on their excellent speeches.

I begin, as is customary, by paying tribute to Jean Corston, my predecessor. Jean served the people of Bristol, East for 13 years and was a dedicated and tireless constituency MP. As Chair of the Joint Select Committee on Human Rights she monitored the implementation of the Human Rights Act 1998, one of the most important pieces of legislation of this Government. As the first woman to chair the parliamentary Labour party—I know that Jean regarded that as an immense honour—she handled relations between the Government and Labour Back Benchers not only with the discretion required of the role, but with great integrity.

Bristol, East has a proud tradition of political activity. Ben Tillett, the dockers' leader and co-founder of the National Transport Workers Federation, was born in Easton in my constituency, and Ernest Bevin, the first general secretary of the Transport and General Workers Union, started his political career there. He went on, of course, to become Foreign Secretary in a Labour Government.

The constituency was previously represented by Tony Benn and Sir Stafford Cripps, both towering figures in the Labour Party in their time. The two men had much in common. They both came from wealthy, privileged backgrounds. They were both the sons of MPs—one the son of a Conservative MP who in later life had the good sense to join the Labour Party and the other the son of a Liberal MP who showed equally good sense in doing the same. Both men embarked on political journeys that at times put them severely at odds with the leadership of their party.

I cannot claim such a distinguished background, and who knows where my political journey in this House will lead me, but I do share at least two traits with both men, in that they were both vegetarians and both teetotal—Rev. Ian Paisley may be happy to hear the latter. Indeed, Churchill said of Cripps, in disgust:

"He has all of the virtues I dislike and none of the vices I admire."

My constituency office is above the St. George labour club, a building bought for the local party by Cripps on the strict condition that no alcohol was to be served there. I am afraid that I must report that his legacy is now more honoured in the breach than in the observance. I would, I suspect, make myself extremely unpopular with my constituents should I ever try to enforce his wishes.

Sir Stafford Cripps was of course Chancellor of the Exchequer from 1947 to 1950, and it is therefore fitting that I make this, my first speech to the House, in the Finance Bill debate. Cripps became Chancellor after Hugh Dalton was forced to resign, having leaked Budget secrets to a journalist on his way to the House. I am sure that no modern-day Chancellor would dream of doing such a thing. Cripps was said to have been responsible for Labour's dramatically reduced majority in the 1950 election, by insisting it be held in February as he thought it morally wrong to hold an election just after a Budget, in case he should be accused of bribing the voters. Times have changed.

Having mentioned Hugh Dalton, I want to take this opportunity to pay tribute to his biographer, Professor Ben Pimlott, who, until his sad and untimely death last year, was my PhD supervisor. He was a kind and inspirational tutor. Although I suspect that now I have been elected to this place, my thesis will go the way of other great unfinished masterpieces, I am sure that many hon. Members will continue to enjoy Ben's works of political biography for many years to come.

I am, if not unique, certainly unusual on this side of the House in having spent much of my professional life working in the City, in the world of banking and the financial markets. I worked there throughout most of the 1990s, a time when the Tories' economic credibility plunged faster than the sterling exchange rate on Black Wednesday, and a period during which Labour began to nurture the reputation for sound stewardship of our economy that it boasts to this day.

The Chancellor's nine Budgets are the bedrock—the foundation—of all that we have achieved in government. The benefits can be seen across my constituency, in the increased prosperity in the suburbs of St. George, Eastville, Brislington and Stockwood, and in the regeneration of the inner-city wards of Easton and Lawrence Hill. I pay tribute to the community activists, the voluntary sector workers and the public sector workers who have done so much to help Labour deliver its programme of social justice and economic renewal in Bristol, East.

Unfortunately time allows me to cite only one example. I was fortunate enough the other week to visit our new city academy. In the heart of the most deprived area of Bristol, what would have been dubbed a failing school has been turned round because the head teacher, Ray Priest, had the vision and the dedication to lobby for city academy status, even though it meant putting his own job on the line. The school was successful in its bid to become a specialist sports academy and with the support of its sponsors, Bristol City football club, the university of the West of England, Bristol chamber of commerce and, in particular, its chair of governors, John Laycock, it has become the biggest employer in my constituency, employing 600 people.

The school reflects the diversity of that part of Bristol; more than 60 per cent. of the pupils come from a visible ethnic minority community and 31 languages are spoken there. Some of the pupils came to the UK as asylum seekers and in some cases their right to remain still hangs in the balance, but I have no doubt that each child is capable of making a real contribution to this country if only they are given the opportunity and life chances to do so.

I was privileged to spend some time talking to a handful of sixth-form students who are benefiting from the Government's £30 a week education maintenance allowance. With continued Government support and with teachers who are dedicated to the task of lifting the aspirations and nurturing the ambitions of children from humble backgrounds, I am sure that the academy will go on to produce a generation of winners, both on the playing field and off.

It is important that the school does not simply benefit the pupils who are lucky enough to be enrolled there. The capital investment has brought a deprived inner- city area truly first-class sports facilities, a theatre, a professionally equipped kitchen for catering students and computer suites that would certainly be the envy of the new Members who have spent the past few weeks fighting over the one PC in our room on the Upper Committee Corridor. The school wants to open its door to the community and indeed is obliged by its funding agreement to do so, and I shall be speaking to Ministers about what I can do to assist it in achieving that objective.

I am proud to become an MP at a time when the issues of trade justice, debt cancellation and overseas aid have come to the political forefront as never before. The people of Bristol have shown overwhelming support for the Make Poverty History campaign, and on Saturday I shall be joining them as they form a giant human white band around College Green in the city centre.

It is particularly poignant that the city of Bristol has taken that cause to its heart. Bristol's wealth was built on the 18th-century slave trade. More than 2,100 ships set sail from Bristol on slaving voyages, carrying about 500,000 Africans to slavery in the Americas. Bristol's wealth was built on trade in Africans and in slave-produced commodities such as sugar, chocolate, coffee, cotton and tobacco. Too few people questioned the moral legitimacy of that trade at the time. It was reported that, when William Wilberforce's Bill to abolish the slave trade was defeated in the House in 1791, the bells of St. Mary Redcliffe church in my constituency were rung amid general civic celebrations.

The city has put its past behind it. Today, Bristol is home to many Africans and African Caribbeans, who along with Asians and other ethnic minorities play an important role in the civic and cultural life of the city.

Bristol also has a growing reputation as a centre for environmentally and ethically sound trading, and I am proud to say that in March it achieved fair trade city status. It would be fitting if we could celebrate the bicentenary of the abolition of the slave trade in 2007 by genuinely embracing the fair trade ethos, not just in Bristol and not just across Britain but by using our presidencies of the G8 and the European Union to instil such values on an international scale. From the slave trade to fair trade—that would be a legacy of which we could be truly proud.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree 6:03 pm, 7th June 2005

I am most grateful for this opportunity to address the House for the first time. I congratulate the hon. Members for Newport, East (Jessica Morden), for North Ayrshire and Arran (Ms Clark) and for Bristol, East (Ms McCarthy) on their excellent contributions to the debate in their maiden speeches.

I would like to begin by paying a personal tribute to my predecessor, Alan Hurst. He served our constituency well for eight years, was an individual of the utmost integrity and was highly regarded in all our communities. Alan was particularly active in supporting a number of local campaigns, he served our farmers well on the Select Committee on Agriculture and he stood up for the need for pensioners to have dignity and security in their retirement. Above all, Alan was a gentleman and I wish him all the best for the future.

As I will be the last Member of Parliament to represent the Braintree constituency as it currently exists, I would be remiss if I did not also pay tribute to Alan's predecessor, Tony Newton, the first Member of Parliament for Braintree. Tony represented the constituency for 23 years and rose to become Leader of the House. The respect Tony earned here was mirrored in my constituency. Indeed, I can hardly go to a household or meet a constituent that Tony did not at some time or another help out. On a personal level, I thank Tony for his guidance and support over the past six years. Braintree has been well represented and well served by my two predecessors and I hope to live up to the standard of serving our community that they have set.

I understand that it is traditional in maiden speeches not to make controversial remarks, but I see nothing controversial in saying without hesitation that I am honoured and privileged to represent not only one of the most beautiful areas in Essex but also one of the loveliest parts of our country. The constituency is a mix of old and new, with some exquisite examples of mediaeval architecture and some attractive modern developments.

The constituency is dominated by two market towns, Braintree and Witham, which in turn are surrounded by more than 40 villages and hamlets. While Witham traces its origins to the Saxons, one can see in the town both post-war and modern developments, almost side by side with 16th and 17th-century dwellings. Further up the road is the village of Silver End, a model village built in the early 20th century by the Critall family, who did so much to bring employment to the area at that time, and whose name is synonymous with the creation of metal window frames.

We also have some extraordinarily beautiful mediaeval villages, such as Bocking, Coggeshall, the Colnes, Feering, Finchingfield, Gosfield, Great Bardfield, Kelvedon and Wethersfield, many of which have won the Essex county village of the year award. Perhaps the most notable mediaeval structures are the Cressing Temple barns, built in the early 13th century, which are the largest and most complete set of mediaeval barns in Britain.

Braintree itself began to develop back in 1199 when it was granted a charter to hold a market by King John, which is still held to this day. The town was a pioneer in seeing the benefits of immigration when, in the 16th century, Flemish Protestant immigrants brought their weaving skills to the area and the woollen industry prospered. In the 1830s, two centuries later, a descendant of those Huguenot refugees, Samuel Courtauld, opened his silk factory.

Today, Braintree is one of the fastest growing towns in Britain and has a number of extremely attractive developments, most notably Notley Garden Village. However, perhaps Braintree's most famous export in recent years has been one of the country's most innovative modern rock bands, The Prodigy.

As I moved to Braintree from America when I was nine years old, I was curious about any American connections with the area. Although first impressions might lead a visitor to believe that those are limited to the McDonald's, the Kentucky Fried Chicken, and the Pizza Hut on what is referred to locally as cholesterol corner on the Galleys corner roundabout, I was interested to learn that the last American to become a Member of Parliament, Chips Channon, who was elected in 1935, 70 years ago, as the Member of Parliament for Southend, lived locally in Kelvedon hall. Furthermore, the first US airfield in the UK during the second world war was Andrews Field station in Braintree, near the village of Great Saling. I mention the latter point as my father, who was an officer in the US armed forces at that time, and subsequently in the US State Department, spent a considerable amount of time in Britain and was a strong Anglophile. So it was not surprising to my mother's friends that, following his death when I was six, my mother married an Englishman and moved our family to Britain.

I have always believed that politics is about people and how we make their lives better, yet many of my constituents feel that the Government—however well meaning—interfere in their lives when they should not and do not really support them when they should. I draw the attention of the House to the concerns of three very different sections of our community.

The first section is made up of our hard-working public servants. The tendency of the Government to centralise the management of our public services and to set more and more targets for our public servants robs our front-line professionals of the freedom they need to get on with their work. For example, many teachers in my constituency feel that they are denied real autonomy over school discipline, while our doctors have been subjected to a growing number of targets that often subvert their clinical judgment while denying them the flexibility to respond to specific patient needs.

The second section is made up of those who live in our rural communities. Two thirds of my constituency is rural and many of my constituents feel not only that their way of life is under threat, but that the very fabric of their day-to-day lives is being diminished. Rural post offices and village shops are being closed down. Local bus services are being cut daily and there is almost a complete lack of police visibility, as our forces become more and more overstretched. In addition, the farmers in my constituency are increasingly burdened with more red tape and regulation.

Perhaps most important of all is my concern for the pensioners in my constituency—a concern that was shared by my predecessor. We have many local voluntary groups that support our pensioners, such as Age Concern and the Braintree Pensioners Action Group. I cannot praise them enough for the work that they do on behalf of the elderly.

A key concern of many pensioners is that the headline increase in pensions does not take into account what they actually have left to live on. While pensions may have increased in real terms by 21 per cent. in the past eight years, the reality is that higher fuel bills combined with a significant increase in the council tax—more than 70 per cent. in my constituency—have had a severe impact on pensioners' weekly cash budgets. Many pensioners in my constituency are fortunate enough to own their own homes and the Government therefore view them as asset-rich. However, in reality, those pensioners will become increasingly cash-poor, especially when they find their houses placed in a higher band, following the Government's decision to reband many properties.

If, as I believe, we should judge a society on how it looks after the most vulnerable, especially the elderly, surely the Government must address that issue by re-establishing the link between earnings and pensions, as well as by offering a significant rebate to pensioners from their council tax bills. Yet in finding a solution to the challenges that our society faces today, I draw hon. Members' attention to the words of Abraham Lincoln, who in his speech on government by the people said:

"you cannot strengthen the weak by weakening the strong . . . you cannot lift the wage payer by putting down the wage payer . . . you cannot further the brotherhood of man by inciting class hatred . . . you cannot help men by doing for them what they could and should do for themselves."

While the Government seem to believe that a few billion pounds more here and a little more Government interference there will resolve the nation's ills, we have seen little evidence that such an approach works. I believe that, if we want to create a better society, we need to constrain the ever-increasing power of government and to free ordinary people to make their own decisions.

I believe that ordinary people know much better than politicians what is best for themselves, their families and their community. I believe that teachers know what is best for their pupils, and I believe that doctors and nurses know what is best for their patients—not remote politicians and bureaucrats in Whitehall. Indeed, last week's rejection of the European constitution by the French and the Dutch was as much a rebuke to their own remote and increasingly out-of-touch politicians, as it was a rejection of the constitution itself.

Although, as a student, I was heavily influenced by the writings of Friedman, Hayek and Keith Joseph, it was my first year economics professor at Harvard, J. K. Galbraith, who taught me that

"politics is not the art of the possible . . . it often consists of choosing between the disastrous and the unpalatable"— which brings me to the Bill.

During the passage of the last Finance Act, my hon. Friend Mr. Osborne, the shadow Chancellor—the then shadow Chief Secretary—noted the importance of the tax avoidance measures proposed by the Government. However, the devil is in the detail, and as my hon. Friend Mr. Hammond, the new shadow Chief Secretary stated, we must be careful that we do not damage the competitiveness of the UK tax regime. We must also be careful that we do not drive offshore many of the huge multinationals which the Bill could affect. That risks costing UK plc jobs. It also risks costing the Treasury other tax benefits, such as the taxation that it collects from those employed by such companies.

As the shadow Chief Secretary recommended, we must use the opportunity in Committee to ensure that we have the necessary balance between casting the net of anti-avoidance legislation wide enough to prevent circumvention and maintaining a tax regime that does not prevent foreign investment in the UK. While I appreciate that the Government have attempted to ameliorate some of industry's concerns, the Bill still risks making Britain a less attractive location for multinationals and as it completes its parliamentary passage, let us not choose the disastrous over the unpalatable.

I should like to thank you, Madam Deputy Speaker, for giving me this opportunity to make my maiden speech today. I should also like to thank the people of Braintree for the honour of electing me as their Member of Parliament. I will be a strong voice in the House for all my constituents.

Photo of Stephen Hesford Stephen Hesford Labour, Wirral West 6:15 pm, 7th June 2005

I welcome Mr. Newmark to his place and congratulate him on his maiden speech[Interruption]—if he has the courtesy to listen to the House following a maiden speech. However, I offer him a note of caution: the House often gives the benefit of the doubt about humility when an hon. Member makes a maiden speech. He mentioned the tradition of making a non-controversial speech—a tradition that was well trodden and well spoken about in three other maiden speeches, on which I congratulate the hon. Members concerned—but he tried our patience in that regard.

I should also point out to the hon. Gentleman that, if he does pay heed to what the people say, he must want to reflect on the outcome of the general election, because much of the version of economics that he espoused was roundly rejected there. Although I welcome him to his place and congratulate him on his speech—I look forward to doing battle with him and his colleagues in coming years—I wish to offer him that note of caution.

Photo of Stephen Hesford Stephen Hesford Labour, Wirral West

No, not at this point.

In some sense, I follow Rev. Ian Paisley in saying that I speak with caution in this debate. This is certainly the first Finance Bill debate in which I have spoken in eight years, and I am no expert. Like him, I think that the detail is, of course, complex, but one cannot avoid these matters for ever. I understand that this is a rather small Finance Bill—it has only 72 clauses and 11 schedules—so I felt able to dip my toe into this economic debate.

On the Bill's background, it is sometimes said in Finance Bill debates that only two things are certain in life: one is death, the other is taxes. In terms of death, I want to place on record that the report of my electoral demise was premature. In terms of taxes, that is what the Bill is about. In terms of certainty about taxes, I look to the Liberal Benches and pose a question. We know that the 1p on income tax went by the board in previous elections. It is now reported that the 50 per cent. tax rate on income over £100,000 is about to go by the board. I wonder what the Liberal Democrat taxation policy will be at the next election—certainly, as things stand, it will be uncertain.

Photo of Susan Kramer Susan Kramer Shadow Minister, Treasury, Shadow Spokesperson (Business, Innovation and Skills), Liberal Democrat Spokesperson (Business, Innovation and Skills)

I hope that the hon. Gentleman will forgive me if I do not fully understand the manner in which to address the House, like many other recent hon. Members who have made maiden speeches. Does he think it extraordinary for a party both to keep to its principles and to consider changing circumstances, thus adapting and rethinking its policies as it responds to them? It seems that he has asked my party why we do not review the current situation, yet constantly puts to us issues that are in the past.

Photo of Stephen Hesford Stephen Hesford Labour, Wirral West

That would be a fair point, if there was a principle at stake. I understand that the debate in the Liberal party is whether it appears too left wing to the public to take constituencies from the Conservative party, which is why it wants to review its taxation policy. If the hon. Lady wants to persuade me that that is a point of principle rather than low politics, she can perhaps do so if she addresses the House later.

I endorse the words with which my right hon. Friend the Paymaster General opened the debate when she gave us a brief run-down of the economic climate, which is the background to the Bill. However, I want to widen those words. The Treasury under Labour has been an engine for beneficial social change and I have chosen to dip my toe in the water of Finance Bills at long last—after eight years—because this Bill follows on from that principle.

The Treasury, under my right hon. Friend the Chancellor and his Front-Bench colleagues, has not approached its business with the traditional dead-hand approach followed by the Conservative Government. The Treasury has been responsible for sustainable growth under Labour, which is set to continue. It has produced a climate in which we can afford public investment and enabled the party to set the trend for revitalising and modernising our public services. As several maiden speeches made by Labour Members have pointed out, the Treasury has helped to eradicate child poverty and underpin hard-working families. The Bill continues that trend. I do not wish to talk about the Bill in detail because this is a Second Reading debate, but I shall pick out a few aspects that support those propositions and are socially useful or business-friendly.

Mr. Hammond used the time-honoured debating tactic of threatening the House with complexity. He said any number of times that the matters in the Bill were complex—no doubt they are. Mr. Spring, who might wind up for the Opposition later, is looking at me quizzically—

Photo of Richard Spring Richard Spring Shadow Minister, Treasury

That is one way of describing it.

Photo of Stephen Hesford Stephen Hesford Labour, Wirral West

The point that I am making is that there is a simple principle behind the so-called complexity. I asked the hon. Member for Runnymede and Weybridge whether there would be a Division on Second Reading because although the simple principle behind the Bill is fairness, Conservative Members try to criticise it by saying that the provisions on tax avoidance are being over-strengthened. That demonstrates the difference between Labour and Conservative Members and the hon. Member for West Suffolk will no doubt explore the matter in Committee.

The Bill contains four elements relating to social justice. It has an environmental aspect and what I call a corporate social responsibility aspect—the anti-tax avoidance measures. It contains measures on pension assistance, it will encourage research and development and it will cut red tape.

I welcome clause 2, which will reform the fuel scale charges in line with the Government's wider environmental objectives. It will give tax incentives to less polluting cars because the VAT fuel scale charges system will be based on carbon dioxide emissions. I also welcome clause 6, which is in line with the VAT compliance strategy outlined by my right hon. Friend the Paymaster General. Clause 6 and schedule 1 are also in line with the principle of fair taxation because they deal with the disclosure of VAT avoidance schemes. Of course, the provisions are limited to firms with a turnover of more than £600,000, so it cannot be said that they are aimed at small business. As I suggested earlier, the measure represents a form of corporate social responsibility. I ask my hon. Friend the Financial Secretary his estimate of the amount that Treasury will gain from the measure during a full tax year.

Clause 7, which is titled, "Charge to income tax on lump sum", is what I would call a pension-assisting scheme. It will give pensioners added flexibility when retiring because, if they take a lump sum, they may be assessed according to their final salary or a year later according to their retirement pension. [Interruption.] I welcome Mr. Davies back to the Chamber and hope that he is feeling himself again.

Clause 13 relates to corporation tax exemption for organisations. It will benefit scientific research organisations and enable them to take wide-ranging research and development opportunities in addition to those development opportunities that my right hon. Friend the Chancellor has tried to entrench in the economy. It will remove red tape to boost R and D.

I welcome clause 47, which is small but will create opportunities to cut red tape. It will introduce the power to make regulations to facilitate the stamp duty land tax process through e-conveyancing initiatives. I am not an expert in the field, so I would like to know for my own benefit the categories of individuals or companies who will benefit most from the measure.

I have dipped my toe into the water of the Finance Bill and welcome what has been described as the second Finance Bill. It continues our aim of social justice and introduces an element of corporate social responsibility. I do not know whether I will have the opportunity to serve on the Standing Committee—I have not served on a Finance Bill Committee before—but if I do, I look forward to debating the Bill in more detail.

Photo of Stephen Dorrell Stephen Dorrell Conservative, Charnwood 6:29 pm, 7th June 2005

I draw the attention of the House to my entry in the Register of Members' Interests.

I congratulate my hon. Friend Mr. Newmark on a fine maiden speech. I do not agree with what Stephen Hesford said. I thought that my hon. Friend set out with admirable clarity his motivation as a politician, which, in my view, is exactly what should be contained in a maiden speech. I congratulate my hon. Friend on his expression of his motivation and vision, as well as his description of his constituency, as I congratulate the hon. Members for North Ayrshire and Arran (Ms Clark), for Newport, East (Jessica Morden) and for Bristol, East (Ms McCarthy) on expressing to the House their alternative political vision that motivated them and brought them here as well. We have heard four good maiden speeches and I confidently expect that we will hear one or two more before the debate has concluded.

It has been said that this is the second half of a Finance Bill of which we have already debated the first half. As others have made it clear that they do not claim any great expertise in the detail of the Bill, I will not put myself ahead of that and claim an expertise that others, wisely, have disavowed. It is not appropriate in a Second Reading debate to try to go through all the detail of the various tax avoidance points that are more properly debated in Committee.

I want to draw out two principles that are important for consideration at Second Reading and which should inform the development of tax policy in this and future Bills. The first principle is one to which I referred in a brief intervention on my hon. Friend Mr. Hammond. I hold absolutely no brief for those who market tax avoidance schemes and, like my hon. Friend, I make it crystal clear that I support well-thought-through, clear and well-defined anti-tax avoidance measures. There is no dispute between the two Front Benches—and, indeed, between Conservative Back Benchers and the Treasury Bench—on the need to ensure that the Revenue is protected. When people bring forward artificial avoidance measures, Ministers should be supported when they take steps to protect the Revenue. As a former Financial Secretary to the Treasury, I can say that there is a kind of camaraderie between us and it is important that we have some group therapy to ensure that this important principle is defended. I make no apology for that.

When we introduce anti-tax avoidance measures, we should observe some important principles. The first is that if we propose measures that are based on additional discretion for the tax authorities—the measures in this Bill concerned with combating tax arbitrage are a clear case in point, where there is an enhancement of the discretion granted to the tax authorities under clauses 24 and 26—we should do so only in clearly defined circumstances, mindful always of the need to protect the principle of taxpayer certainty. That is why I made the, I think, correct linkage that if we are to enhance discretion for the tax authorities, hand in hand with that should go a greater acceptance than has been our tradition in this country of binding tax clearances granted by the Revenue to the taxpayer when the taxpayer seeks the opinion of the Revenue before making certain dispositions in their affairs.

I am well aware of the resistance within the Revenue to that principle. Revenue and Customs, as we must now call it, says, quite rightly, that it is not in the business of giving advice to taxpayers and that if a taxpayer wants advice, he should go to his accountants. Free advice from the Revenue is not part of its businesses. That is perfectly true, but if a specific proposal is taken to the Revenue in an area of tax policy where the authority has an acknowledged discretion, it is entirely right that the taxpayer should be able to get a ruling in advance of implementing that proposal on how the Revenue will exercise its discretion. I regard that as part of the deregulation agenda.

It is worth considering the alternatives. One is that the taxpayer constantly has to weigh a range of different possible outcomes and the only winners will be the tax advisers who go to the nth degree to tease out all the possible options. That cost and waste of time and effort within a business could be eliminated simply by the Revenue telling the taxpayer in advance how the law will be enforced in a given set of circumstances that the taxpayer is planning to create.

I do not disagree with the principle contained in these clauses on combating tax arbitrage, and I absolutely do not want us to make tax arbitrage easier. However, if we are to introduce greater discretion as a way of combating tax arbitrage, it is reasonable to ask that there be greater certainty available to the taxpayer through the principle of greater availability of binding clearances given by the Revenue.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I think that I understand the thrust of what the right hon. Gentleman is saying, but he wants to have it all ways. He wants certainty; he wants discretion; he wants the state to be providing free tax advice; he does not want the state to be providing free tax advice. I appreciate that these are difficult issues, but he seems to be proposing the reverse of what he said earlier, which is that the state should be providing free tax advice. I draw a parallel with the planning system. When someone puts in a planning application and it is refused, he puts in another one and another one and keeps tweaking it until he gets approval. Someone proposing to get around tax rules for a tax gain might seek clearance, but get knocked back. He might then put in another request and then another. He is looking for free tax advice, which we just cannot give.

Photo of Stephen Dorrell Stephen Dorrell Conservative, Charnwood

The hon. Gentleman has shot his own argument out of the water. There is a sense in which one can draw a parallel with the planning system—planners are given advance clearance on how the authorities will use their power in the absence of planning consent to tell someone to take down a development that he might otherwise have contemplated putting up.

The position in tax law as it operates is that, too often, taxpayers have to make their arrangements blind and ignorant of how tax law will be applied in the given set of circumstances that they are creating. People putting up a building have certainty when they do so that they have finally got planning consent before it goes up. That is exactly the sort of certainty, in advance of people organising their affairs, that should be available to taxpayers, but too often is not because of the Revenue's resistance to the principle of advance and binding clearances.

That is the first point. The second point is more mechanical. I am delighted, for two reasons, to see my hon. Friend Mr. Davies back in his place. The first, and most important, is that I am delighted to see that he is smiling and clearly feeling better than he was earlier. The second is that I want to refer to some of the things he said about the way in which the Red Book has evolved over the years. If I may say so to my hon. Friend, I always think that we make a stronger case in politics when instead of saying that standards have slipped and that we want to go back to a previous golden age, we chart a way forward to the re-establishment of principles that I agree are very important. Those principles are the certainty and high quality of the information that should be available to the House in making decisions about the public revenues.

The Red Book published in March contains two tables on the revenue effect of measures that the Chancellor plans to take. Two lots of measures are listed as protecting the tax revenues. Those on page 186 total just over £1 billion of full-year revenue effect. Those on page 188, which were announced prior to the Budget, constitute a revenue effect of about £1.2 billion. In planning the public finances, the Chancellor assumed that those various measures to combat tax avoidance would protect the public revenues to the tune of about £2.25 billion, but the House has no external way of checking the numbers that the Government produce.

There is a suspicion abroad that every time there is a hole in the public finances, the Chancellor goes around the Treasury looking for a series of anti-avoidance measures that will allow the figures to look better than they otherwise would—to the tune of £2.25 billion this year—and that we never close the loop. We never know whether the anti-avoidance measures raise any money or, if they do, whether it comes close to the sums that are claimed for them. Although more recently the out-turns have come closer to the forecasts than they have done previously, there is a suspicion that one reason why there were significant gaps between forecast and out-turns is that the claims made for the anti-avoidance measures were never lived up to in practice. That is relevant to the problem as it relates to anti-avoidance, but it is also part of a much bigger problem.

One of the proposals by the Conservative party in the last Parliament was the need to strengthen the information that is available to Parliament, independent of the Government, on the likely course of events in the public finances—something akin to the Congressional Budget Office that serves the American Congress, giving it advice, independent of the Government, of the likely effect of both revenues and expenditure, and therefore of the likely scale of public borrowing. My right hon. and hon. Friends on the Front Bench described that as an independent fiscal projection committee. I hope that they follow that through.

There are two parallels in our system. The first is the National Audit Office, where a structure exists to provide advice to the House through the Comptroller and Auditor General and the institution of the Public Accounts Committee. We could establish a similar organisation to provide to the House an independent view of the likely course of the public finances.

The second parallel is the claim that is often—in my view, rightly—made by the Government that they improved the quality of macro-economic decision making by making the Bank of England independently responsible for monetary policy. I am not in favour of taking the fundamental Budget judgments away from the Chancellor. What I am in favour of is giving to this House, which is supposed ultimately to control the purse strings and to be the source of parliamentary power, an improved quality of information on the likely course of public revenues, the likely level of Government expenditure and the likely impact of individual Budget measures.

The proposal surfaced in the last Parliament, but in truth it has been talked about for much longer. If we are looking for ways—as we should be—of strengthening the accountability to Parliament of Ministers, it would be a huge step forward if Parliament had its own source of information about what the Government publish in the Red Book. That is why I linked the proposal to what my hon. Friend the Member for Grantham and Stamford said. One way of achieving that is, as he suggested, to go back to an independently produced Red Book, if such a golden age ever existed. Another way—in my view, preferable—is to give Parliament a stronger source of independent advice with which to challenge Ministers and to hold them to account.

Photo of Philip Davies Philip Davies Conservative, Shipley 6:45 pm, 7th June 2005

Thank you, Madam Deputy Speaker, for giving me the opportunity to make my maiden speech. I start by congratulating my hon. Friend Mr. Newmark on an excellent maiden speech. [Hon. Members: "Hear, hear."] The hon. Members for Newport, East (Jessica Morden), for North Ayrshire and Arran (Ms Clark) and for Bristol, East (Ms McCarthy) also made excellent contributions. They are a hard act to follow. I am also delighted to take part in the same debate as Rev. Ian Paisley, who is a great parliamentarian of our time. It is a great honour to speak in the same debate.

I intended to make my maiden speech when we discussed the Queen's Speech, but was thwarted for the best of reasons by my wife having a baby at a most inopportune moment. I hope that the House will be as patient with me as it always is with people who speak in the Chamber for the first time. I intend—much to everyone's delight, no doubt—to start off as I mean to go on by being brief.

There is no greater privilege than to represent one's constituency in Parliament. Shipley is a fine constituency within the Bradford district in West Yorkshire. Indeed, it is one of the few Conservative constituencies in a metropolitan area. Although Shipley is the largest place within the constituency, it is a rich and diverse area, with Bingley—home of the Bradford and Bingley building society—being the second-largest place. It also includes lovely villages such as Harden, Eldwick, Cullingworth, Wilsden, Denholme, Micklethwaite, Burley-in-Wharfedale, Menston and Baildon, where I have the pleasure to live.

The most famous part of the constituency is Saltaire, home of Salts mill, developed by the philanthropist Sir Titus Salt. It is a world heritage site and I recommend it as a great place to visit. Shipley, like the rest of Bradford, also has great curries. The Prime Minister and other members of the Cabinet like the Shipley constituency, too. I know this because of the number of times they visited it before the election. I hope they continue to do so.

The greatest strength in the constituency is the people who live there. They are generous, resourceful and compassionate in equal measure, but above all they have great common sense and speak their mind. They also respect people who speak their mind even if they disagree with them. I assure hon. Members that I am a straight-talking Yorkshireman who will not be afraid to be controversial—although, as tradition dictates, not on this occasion.

Shipley has been very lucky to have been represented in Parliament by men of great distinction, particularly over the past 50 years: Geoffrey Hurst was independently minded and served his constituents so well that people still refer to him today; Sir Marcus Fox represented Shipley for 27 years and was a hugely respected figure both inside and outside Westminster; and, for the past eight years, it was represented by Christopher Leslie.

At 24, Chris Leslie was the youngest MP to be elected in the Labour landslide of 1997, but he quickly made a reputation as one of the most able of that intake. As someone who had been born and brought up in the area, Chris clearly cares about the Shipley constituency. His talents in Westminster, acknowledged by Members on both sides of the House, marked him out as an effective Minister. Add to that the fact that he is a very nice guy and popular, it made him a formidable opponent. It was a great achievement of his to win the seat in 1997 and then to retain it in 2001. He came within a whisker of holding on to it again at the recent election. He should be proud of his record. He accepted defeat with the good grace that I knew I could expect of him. I suspect and hope that we have not heard the last of Chris Leslie in the political arena—although hopefully not in Shipley.

One thing was clear at the recent election: politics and politicians have never been held in such low regard by the public. We should all be greatly concerned by that. I feel that, all too often, politicians set out to be popular, with the inevitable consequence that they become anything but popular. I believe that politicians should set out to be respected rather than popular, and that respect can last for ever. We all have a responsibility to reverse the decline in the public's perception of us. If all I achieve in my time in Parliament is to have done my bit to change that perception, I shall feel that I have done something worth while.

My right hon. and hon. Friends, especially the most ambitious of the new intake, will be greatly pleased to learn that I have no desire to rise through the ranks as a shadow Minister and, after the next election, as a Minister of the Crown—that is, all my right hon. and hon. Friends will be delighted apart from my hon. Friend Mr. Atkinson, who has the great misfortune to be my Whip. I wish to remain on the Back Benches and to speak up for the things that matter to me and my constituents. I want people to know that when I say something, I say it because I mean it, not because someone has told me to say it. I believe that that is the best way I can help to restore people's faith in politics.

Before entering Parliament, I worked for the supermarket chain Asda in customer service and marketing. It provided the best possible grounding for a politician because I met so many people from so many backgrounds. Whoever said "the customer is always right" never worked for Asda. I encountered the customer who accused us of being racist towards Irish people, because we sold "thick Irish sausages". Trying to persuade her that "thick" related to the sausages and not to the Irish was beyond me. Hon. Members should therefore understand why I will campaign hard against the blight of political correctness, which is doing so much damage to our country. [Hon. Members: "Hear, hear."]

Although Asda is part of a huge multinational company, Walmart, I also have experience working some years ago for my mother in her small business—a betting shop in Doncaster. I gently suggest that the lack of business experience on the Government Benches should lead Ministers to listen carefully to those who have first-hand experience of creating wealth and employment in this country.

There are many issues that have to be dealt with in Shipley, including crime, the horrendous traffic problems at Saltaire and the finance of the local national health service trust. I will be a persistent advocate of action to improve the Shipley constituency. I also want a better country—a country in which hard work, thrift and doing the right thing are rewarded, unlike now; a country where the Government do less and encourage individual freedom and responsibility; and a country that has a sovereign Parliament, not one run by a corrupt and inefficient institution called the European Union, which we subsidise to the tune of billions of pounds a year.

During the general election campaign, I encountered not one business or constituent who thought that tax evasion and avoidance were a substantial problem—although many complained that taxes are too high. Businesses need less regulation, not more. I suspect that the real reason for the measures in the Bill is to raise extra money for an increasingly financially embarrassed Government, rather than to make the tax system fair. The best way to prevent tax avoidance and evasion is to have fewer taxes to avoid and evade.

As I said at the start of my speech, there is no greater privilege than to represent and serve one's constituents in Parliament. I am truly honoured that the people of Shipley have put their trust in me to follow in the footsteps of my illustrious predecessors. I shall work hard to ensure that I do not let them down.

Photo of Peter Bone Peter Bone Conservative, Wellingborough 6:54 pm, 7th June 2005

I am grateful to you, Madam Deputy Speaker, for calling me to make my maiden speech. I enjoyed all the previous maiden speeches, especially the one by my hon. Friend Philip Davies, which was amusing as well as thoughtful. I shall have great difficulty following him.

It is a great honour to me to stand here as the new Member of Parliament for Wellingborough. It has been a very long political journey. In 1992, I stood in my first parliamentary election for the constituency of Islwyn. There I met Sheila Organ, who became my agent and a good friend and who has encouraged me throughout what has been, at times, a difficult journey. During the campaign, we knocked on doors in Islwyn day and night; we must have called on hundreds, if not thousands of homes. Things looked good—we were well received—and come polling day, they still looked good. Only when I went to the count did I get an inkling that things were going slightly wrong. Before me were 40 or so trestle tables, but the returning officer took me to one side and said, "Mr. Bone, that table is for you. All the rest are for Mr. Kinnock." When the result was declared, it was a close-run thing. I lost to Mr. Kinnock by a mere 25,000 votes.

In 1997, I was selected as the candidate for Pudsey in west Yorkshire, where the retiring Member for the seat was the excellent Sir Giles Shaw. Despite the hard work of my team, we were swept away by the Labour landslide. On to Wellingborough, which in 2001 was the most marginal Labour seat in the country, with a majority of 187 votes. My campaign team, ably led by Lady Helen Fry, worked hard to achieve a Conservative victory and I thought that I must win this time. Not only did I lose, however, but I turned Wellingborough into a relatively safe Labour seat.

After 2001, I was beginning to wonder whether someone was trying to tell me something—

Photo of Ivan Lewis Ivan Lewis The Economic Secretary to the Treasury

Are you thinking what we're thinking?

Photo of Peter Bone Peter Bone Conservative, Wellingborough

That saying's time had not yet come, but there is another—"If at first you don't succeed, try, try and try again." The campaign to win Wellingborough at the last election started in August 2004, when my exceptionally talented campaign manager, Leigh Hooker, joined me. Had it not been for her skill and outstanding leadership, the result might have been different. Under her leadership, my able team, consisting of Paul Bell, Andy Mercer, Steven North, Barbara Jenney, Calum Heckstall-Smith, Peter Bedford, Malcolm Walters, Roger Powell, Richard Lewis and others I might have forgotten, set about on a campaign the like of which had never before been seen in Wellingborough. At the count, I was ready with my speech to congratulate another Labour candidate on his re-election and, sure enough, the pile of Labour votes was rising higher and higher, but to my great relief my pile of votes edged just ahead. What an honour and privilege it was to be announced as the new Member of Parliament for Wellingborough.

I pay tribute to my predecessors. Sir Peter Fry was MP for Wellingborough from 1969 to 1997. A great parliamentarian, he was known for much more than that. He was known as an MP who really cared for his constituency and worked hard for it. Many people in Wellingborough voted for Sir Peter not because he was a Conservative, but because of his outstanding service to the constituency. His successor, my predecessor, Paul Stinchcombe, was also a great local Member of Parliament. He worked hard for his constituents and was well liked and although I disagreed with him on almost every political matter, on some non-political matters he and I could agree. One of those matters was Alexine's law.

Mr. Stinchcombe strove to highlight the difference between the penalties for causing death by dangerous driving and causing death by careless driving. The campaign for Alexine's law highlights the story of 17-year-old Alexine Melnik who tragically, a year ago to this day, was killed by a careless driver. That driver received a punishment of a few points on his licence and a small fine. I will continue to campaign for what Mr. Stinchcombe was trying to achieve on that issue.

My constituency is at the heart of Northamptonshire and consists of the two towns of Rushden and Wellingborough and their surrounding villages. It is a very diverse community in which the rural and the urban live side by side. It is a wonderful place to live and to bring up a family, and I was delighted when my daughter, Helen, won the Hawkes scholarship and was able to go to Wellingborough school.

There is work to be done in the constituency, however. We have the six worst roads in the country. Our hospital is 159th worst out of 192 for cancelled operations. We have virtually no NHS dentists in Wellingborough and Rushden. A secondary school has been knocked down, resulting in some children being left at home and receiving no education at all. Twenty per cent. of the population are scared to go out at night because of their fear of crime, and we have one of the worst ratios of police officers to population in the country. However, when the previous county council proposed to cut the fire service in Rushden, that was a cut too far.

Rushden fire station is the only whole-time, professionally manned fire station in the whole of east Northamptonshire. Rushden is a hugely expanding town, and to cut that fire cover to save a few hundred thousand pounds would be ludicrous—even more so when the county council has a spin department that costs more than £500,000 a year. If I asked my constituents whether they would want a cut in the number of firefighters or the number of spin doctors, I think I know what their answer would be. All is not doom and gloom, however. We now have a new county council, ably led by Councillor Jim Harker, and he has promised to review the situation.

As a Member of Parliament, I believe that we should put country first, constituency second, and party third and last. I can see the anguish on the Whip's face as I say that, but I would like to explain briefly what I mean. On 31 March this year, I attended RAF Cranwell with my wife, Jenny, without whose support and kindness over the years I would never have got here. Perhaps it was her saying, "If you don't win this time, I'm going to divorce you" that provided the extra incentive that I needed. We were at Cranwell to see the graduation of 212 initial officer training, and escorting the colours that day was our eldest son, Alexander. As I watched those young people who were about to embark on a career that would clearly require them to put country first, and who might have to make the ultimate sacrifice, it was brought home to me that every politician must always put country first. I am delighted that Flying Officer Alexander John William Bone is sitting up in the Gallery to hear my maiden speech.

After my defeat in 2001, I had to ask myself what was wrong, and it seemed to me that so many politicians were arrogant and out of touch. They were all too willing to preach, but they were not particularly interested in listening. I was determined that that would not happen to me. So for the past four years, I have listened to local people and then campaigned on their behalf. However, I am afraid that there is still a great deal of arrogance among us. I am of course talking about the European elite. They always think that they know best, but I should like to suggest that they take a leaf out of my book, adopt a listening campaign like mine, and listen to the people of Europe. The people of France and the Netherlands have spoken, and they have put country first. We have heard the Government's financial plans in our debate today. The European Union takes £10 billion or £12 billion each year from this country. Now, there is a suggestion that our rebate, which was so successfully negotiated by Margaret Thatcher, might be withdrawn. Even my four-year-old son, Thomas, could tell us that that is daft. He might say, "Daddy, why do you want to pay and get nothing in return?"

I hope that my speech has not been too controversial, and I should like to leave the House with this parting thought. I hope that our Government are not becoming too arrogant and out of touch, and I hope that they will listen and always put our country first.

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness 7:06 pm, 7th June 2005

Thank you, Madam Deputy Speaker, for calling me to make my maiden speech in the House today. As my hon. Friends who have already made their maiden speeches have said, it is a great honour to be elected to this place. It is also a great honour to follow excellent speeches such as the eloquent one made by my hon. Friend Mr. Bone. Humility in the House and in politics generally can often be false, but the long road that he has taken to the House has taught him—a lesson that I hope all of us have learnt—to listen to the people and to respect them.

We have heard an excellent speech from my fellow Yorkshire Member, my hon. Friend Philip Davies, and I congratulate him on making an amusing and passionate speech. He is committed to what Yorkshire people and everyone else in the country are now looking for in their politicians: honesty. They want people who will tell it like it is. I hope that I am not being controversial when I say that something has happened in recent years to make people feel that that standard has dropped.

My hon. Friend Mr. Newmark made an excellent speech that went to the core of why he is in politics. I shall have to ad lib later, because it dealt with many of the themes that I had intended to address in my maiden speech. It was interesting that he, like me, has particularly identified older people as suffering under a system that puts means-testing ahead of dignity. Perhaps this is not a controversial issue, because there seems to be a growing consensus on the matter. Nearly everyone—with the possible exception of one person who often sits on the Government Front Bench beside the Prime Minister—now believes that older people need dignity, not means-testing. National associations have joined with all political parties bar one in believing that.

I should like to pay tribute to my predecessor, James Cran. He was described by The Guardian as a "flinty Aberdonian", but beneath the flint lay someone who was actually very considerate and kind. He was interested in improving things in general and individual people's problems in particular. Jim's lasting legacy is to be found in Withernsea. As a newly appointed Conservative candidate, I met several Labour councillors, and the first thing that they said was that the then sitting Member had helped to transform that town. If, after whatever career I have in this place, there are Labour councillors in the towns and villages around Beverley and Holderness who pay tribute to the work that I have done to help their communities, we can all accept that a true contribution will have been made.

My constituency has four towns: Beverley, Hedon and, on the coast, Hornsea and Withernsea. Beverley is famed for its beauty, its minster and its people. Many Members give quite a lot of history in their maiden speeches, but I do not plan to do that. One thing that I would offer is an invitation to an historic figure, the present Prime Minister, to join me on a visit to Beverley minster. There is a precedent for that. Henry V went to Beverley minster after Agincourt to give thanks. I suggest that the Prime Minister joins me in going to Beverley minster to give thanks for the French "non" in the referendum the other day. I am sure that, for different reasons, he joins me in a joyous reception of that historic decision.

The Beverley and Holderness constituency, which as I said has four towns, has existed only since 1997. In political terms, the area has an interesting reputation. We hear of rotten boroughs, and the truth is that in Beverley and Hedon we had two of the most rotten in the country. From—I think—1292, Hedon was able to appoint two Members of Parliament, and those appointed were a distinguished lot. One was Prime Minister for a day. Many of us in this House, even the strongest Back Bencher, might like to be Prime Minister for a day.

In Hornsea we have a tourist town. I heard my hon. Friend John Penrose inviting people to Weston. Hornsea and Withernsea offer equal attraction to anything that the south coast might offer, and I suggest that any Member visit east Yorkshire. We have Spurn point, which has the only full-time professionally manned lifeboat station in the United Kingdom. The crews are professional in their maintenance of the station, but the moment that they put their lives at risk in the lifeboats in the service of this country and its people, they are unpaid. Many medal winners for the Royal National Lifeboat Institution have served and worked at that point.

We have the largest onshore gas storage centre at Atwick. Indeed, at Aldbrough, we will have a larger still gas storage centre. I was interested—I hope non-controversially—to find when I went there just how low our gas stores become at the end of a winter. One thing that I hope to look at while in the House is the possibility of a strategic gas reserve for this country, so that industry or even households do not suffer from our running out of that vital substance.

The constituency has a large community with a predominantly agricultural and rural flavour. I am grateful for the fact that it is home to a farmer, Sam Walton, who is editor of Pig World. I thank him for taking me on a tour of farms in the area, and the National Farmers Union for helping me likewise.

Up from Spurn point, the Holderness coastline is one of the fastest eroding in Europe. My constituents want greater justice for the people whose homes, businesses and livelihoods are being drawn into the sea without compensation. It is a complex area, but I hope that the House can consider it. I know that hon. Members have discussed the issue and considered a fairer means of treating people who are paying a price for a natural process.

As has been said by other Members who represent rural areas, infrastructure is so important. Our area has an older than average population, yet they have inadequate public transport to link them to public services. It may take two or even three bus rides to reach the hospitals. We are lucky, however, in having community hospitals in Withernsea, Hornsea and Beverley. I was delighted to read in the Labour party's manifesto that it is committed to supporting community hospitals. It is all the more worrying, therefore, to find that the local primary care trust, which has a large deficit that is estimated to rise from more than £6 million to more than £8 million, is reviewing those hospitals, with the threat of closure. That was the No. 1 issue raised with me during the election campaign.

To follow my hon. Friend the Member for Braintree, in the national arena it is the plight of pensioners that particularly affects me and which I would like us to change. I am yet to meet the person—certainly in Beverley and Holderness, of any political persuasion and of none—whose vision of life is of paying taxes throughout their working life and contributing to society, and whose aspiration at the end of it is to have to fill out a 24-page council tax benefit form and a 12-page pension credit form in order to get enough money on which to live.

From talking to those in the new wave of Conservative Members, if I may call it that—it is certainly the first major new contingent of Conservative MPs since 1983—I believe that, regardless of traditional left-right politics, they are looking to meld a commitment to social justice with the traditional commitment to freedom and the belief that the Government should do less and set people free. I will work with colleagues to target that message. It is a message not to benefit the rich but to lift those on lower earnings.

I pay tribute to the commitment of Labour Members who are entirely sincere in their desire for a more socially just country. I even pay tribute to the Chancellor of the Exchequer for his efforts to try to lift those on the lowest pay. To some extent, he has been successful. However, the labyrinthine and complex system that has resulted means that a bus driver in my constituency who wants to improve his life and that of his family receives after deductions from his family credit just £1.97 an hour. That is not a vision of social justice; it is one of people trapped by a state that is holding them back. I hope that cross-party we can work to dismantle that, set people free and remove them from unnecessary interference—be they young or old, at the start of their career or at the end of it. If, regardless of party affiliation, we all work for that form of social justice during our time in this place, we will have done good work.

Photo of Michael Gove Michael Gove Shadow Minister (Communities and Local Government) (Housing and Planning) 7:16 pm, 7th June 2005

Thank you very much, Madam Deputy Speaker, for allowing me to catch your eye and giving me the opportunity to make my maiden speech in the House of Commons. Whatever any of us may have done before coming to this House, speaking in the Chamber for the first time is a nerve-racking moment, and I am therefore grateful for the courtesies that the House extends to new Members during their maiden speech.

I feel a particular sense of nervousness coming after the hon. Members for Bristol, East (Ms McCarthy), for Newport, East (Jessica Morden) and for North Ayrshire and Arran (Ms Clark), and my hon. Friends the Members for Shipley (Philip Davies), for Braintree (Mr. Newmark), for Wellingborough (Mr. Bone) and for Beverley and Holderness (Mr. Stuart), who all gave accomplished speeches.

The hon. Member for Newport, East spoke with great charm about her constituency and with great force about her passion for social justice. The hon. Member for North Ayrshire and Arran follows in the distinguished footsteps of Brian Wilson and a hero of mine, Sir Fitzroy Maclean. She is a worthy follower in that tradition. She spoke without notes but with great fluency and conviction. The hon. Member for Bristol, East also follows in distinguished footsteps, and she lived up to that in a speech of great wit and authority.

My hon. Friend the Member for Braintree spoke with great force and persuasiveness. He gave a maiden speech in the best traditions of the House and I congratulate him. My hon. Friend the Member for Shipley gave a witty and forthright speech which I greatly admired, and my hon. Friend the Member for Wellingborough gave a personally powerful and principled speech on which I congratulate him. My hon. Friend the Member for Beverley and Holderness also spoke without notes but with tremendous aplomb and authority. I wish them all well in their careers in the House.

This Bill is of particular concern to my constituency of Surrey Heath, which is an economically vibrant home to both multinational companies and a wealth of small and medium-sized enterprises. There have been a number of distinguished contributions to this debate. Mr. Henderson, as befits a former Foreign Officer Minister, ranged far and wide in his remarks. Other Members, such as Chris Huhne, were rather more tightly focused. With your permission, Madam Deputy Speaker, I hope to be a little less than tightly focused and to use this opportunity to look at the broader themes underlying the Finance Bill.

As the son of a small business man who ran a flourishing fish merchants in Aberdeen, at a time when that city's fishing industry was in ruder health than today, I know personally how regulation and legislation conceived from the best of motives can stifle enterprise and limit opportunity.

Any opportunities that I have in life I owe to my parents and to the sacrifices that they made. They adopted me when I was just four months old, and I was fortunate therefore to be raised in a secure and loving home. That has left me with a profound sense of the importance of helping families to withstand all the pressures placed on them by modern life, and I hope in my time in this House to do what I can to improve the lives of children born to disadvantage and to support all parents in the difficult but immensely rewarding task of raising families.

Before turning to the legislation that is before us, I should like to pay tribute to my predecessor as MP for Surrey Heath, Nick Hawkins. Nick served for 13 years in this House, first as Member for Blackpool, South and latterly as MP for Surrey Heath. During his time here, Nick set an example as a diligent and caring constituency MP, as well as a robust and principled scrutineer of legislation. During my time as a parliamentary candidate and in my brief weeks as an MP, I have met many constituents for whom Nick was an indefatigable champion; he set a standard that it would be difficult to match. I also know, not least from his many friends still in this House, how valuable Nick's sharp legal brain was in the scrutiny of legislation. Nick's belief in defending the principles of our common law and standing up for the liberty of the individual do him great credit, and I wish him well in the legal career to which he has now returned.

Following in Nick's footsteps is a challenge, but it is made far easier by the charm and friendliness of the people of Surrey Heath. It is both an honour and a pleasure to represent the most attractive and vibrant constituency in the county judged by "Country Life" to be England's most beautiful. I know that there may be some dissent among my hon. Friends, but as a flinty Scot, and someone who therefore judges English beauty with an unclouded eye, I can only say that I concur with the judgment of "Country Life". Surrey is indeed God's own county; it combines the best of England's civic traditions with large areas of still unspoilt rural charm.

Camberley is the largest town in my constituency. I am sure that memories of it will be dear to those hon. and gallant Members who passed through the Royal Military academy or the Staff college, both of which lie in its precincts. Camberley's particular charms are not, however, known only to those who pass through the RMA's gates. Thanks to John Betjeman's most famous poem, "A Subaltern's Love Song", the romance of Camberley is well known:

"nine-o'clock Camberley, heavy with bells,

And mushroomy, pine-woody, evergreen smells" is how he immortalised that beautiful town. While the scent of Camberley is now tinged with the odour of fumes from the M3, which cuts a swathe through my constituency, there is a still a pine-woody and evergreen quality to the town that is very pleasing to this Scottish exile.

John Betjeman is not the only great writer to have drawn inspiration from the air of Surrey Heath. John Gay's "The Beggar's Opera" draws on the history of Bagshot heath in my constituency as a haunt of highwaymen and cutpurses. "The Beggar's Opera" is a satire in which comparisons are drawn between the highwaymen of 18th-century Surrey and the politicians of 18th-century England; both, John Gay suggests, were charming rogues who made it their business to deprive honest citizens of hard-earned money, only to squander the plunder on their own vanities. I will leave it to other Members to decide what relevance, if any, John Gay's insights have to discussion of this Finance Bill.

One area where I believe that public investment continues to be more necessary than ever is in our security, and I want to touch briefly on that matter. The contribution of the military to the life of my constituency has been, and continues to be, immensely valuable. As well as the Royal Military academy, Surrey Heath also benefits from our association with the military in many other ways. Our excellent local hospital, Frimley Park, works closely with the Royal Army Medical Corps to provide a matchless service for the whole community. We also house the headquarters of the Royal Army Logistics Corps, and it was on the heathland of the Chobham ridges that the world-famous Chobham armour was developed, which has helped to give our armed forces the protection that they need on the field of battle.

I hope that during my time in this House I can play a small part in giving our forces the support that they richly deserve. Britain's contribution to extending the cause of liberty has been distinguished, and it is a source of pride to me. In a proper spirit of bipartisanship, I pay tribute to this Government for their role in defending the cause of freedom in Sierra Leone, Kosovo and Iraq. I hope that it will not be considered wrong of me, however, to pledge that I shall use my position here to ensure that in future those who risk their lives on our behalf are given all the support—political, moral and financial—that they need.

The tradition of public service that the military exemplifies is richly alive in many other ways in my constituency. We have some of the best state schools in the country, a superb hospital in Frimley Park, as I said, and thriving voluntary organisations as well as active parish councils that serve our more rural communities such as Chobham, West End, Bisley, Bagshot and Windlesham. But the quality of life that the people of Surrey Heath enjoy and have done so much themselves to maintain is, I fear, threatened by insensitive overdevelopment. Plans to build tens of thousands of new homes in our area, imposed by an unelected and unwanted regional authority, combined with planning guidance that demands an increase in housing density, is wholly detrimental to the character of our communities and risks placing great strain on already overstretched public services.

I firmly believe that all parties in this House in the past 25 years have ensured that power has become too centralised. Decisions are now taken at too distant and remote a level. Intimate questions of planning should be decided by the local people most affected. Planning decisions affect the social capital that individuals and communities have built up over generations. That is why planning law must be seen to be fair, responsive and sensitive. In Surrey Heath, like many other rural areas, we have suffered as a consequence of a small minority—I must stress, a very small minority—of Travellers, who have defied the planning rules by setting up unauthorised encampments on greenfield sites. I hope, while in this House, to be able to change the law in such a way as to ensure the fair application of planning rules. I appreciate the contribution that Britain's travelling community has made to our national life over many generations, but equality before the law is the best guarantee of civilised treatment for all.

As I said, one of the many attractive features of Surrey Heath is its economic vibrancy. We are lucky to have in the constituency a wealth of local entrepreneurs, including Bob Potter OBE, whose Lakeside hotel in Frimley Green is globally renowned as the home of the world darts championship, thus demonstrating that one does not have to risk going on to Ministry of Defence property in Surrey Heath to see targets being hit with rare skill.

We are also fortunate in employment terms in the opportunities offered to us by multinational companies that serve my constituency, such as Eli Lilly, BAE, Novartis and S. C. Johnson. All those companies are excellent corporate citizens playing a valued part in the life of the community as well as generating jobs, wealth and taxes for the Exchequer. It is with their contribution in mind that I want to say a few words about the precise measures in the Bill.

I recognise the need for legislation to reform the tax system and to limit tax avoidance, and there are many provisions in the Bill that may take us in the right direction, but I am concerned that in their zeal to regulate the Government may risk damaging Britain's competitive position. Retrospective and arbitrary changes to the tax code do not contribute to the atmosphere of stability and certainty that encourages investment. As my hon. Friend Mr. Hammond pointed out, chapter 4 and clause 39 give cause for concern, as they seem to create the power for arbitrary and retrospective application of the Revenue's powers. I find that a worrying element of the Bill.

Historians of this House will know that our finest hour came in the 17th century, when we in Parliament insisted on limiting the arbitrary powers of the Executive to impose taxation. In that battle between king and Parliament, I have no hesitation in saying that Parliament was on the right side. I know that Mr. Brown sometimes revels in his reputation as a roundhead; it is a great pity that in this legislation he should be so cavalier with the tax code.

To my mind, the best way of preventing tax avoidance—I agree with my hon. Friend the Member for Runnymede and Weybridge—is through tax simplification. At a time when economies in eastern Europe are making themselves more attractive to international investment by radically simplifying their tax codes, we should not go down the road of further complicating our own tax system.

I believe that my constituency has equipped itself well for the challenges of the 21st century by staying true to eternal British virtues—keeping what is cherishable and distinctive, celebrating excellence, having a pride in tradition, but always looking outwards. I hope that we can adopt a similar approach as a nation. Our economic strength has been built on sound traditions and an awareness of the importance of low and simple taxation, light and flexible regulation and wise and prudent investment. When we stray from those traditions, we undermine our future prosperity.

I want to thank you, Madam Deputy Speaker, for your indulgence in calling me, and in particular, I want to thank very much the people of Surrey Heath for giving me the opportunity to serve them in this Chamber.


I would like to thank Micheal Gove for his eloquent speech. He makes some vaild points about infrastructure when considering development in our area. Whenever house building is mentioned though, the infrastructure most focused on is roads, schools and hospitals. What about hidden infrastructure like water, sewerage and power. These are equally important, and we have an inaedquacy of them at the moment. With further devlopment these services will be overloaded and there could be a situation of not being sufficient. I wonder whether the government ever consider whether there will be enough water and waste facilities for extra development.

Submitted by Clive Handy

Photo of Susan Kramer Susan Kramer Shadow Minister, Treasury, Shadow Spokesperson (Business, Innovation and Skills), Liberal Democrat Spokesperson (Business, Innovation and Skills) 7:30 pm, 7th June 2005

May I congratulate Michael Gove on his maiden speech. To have so fluently managed to combine poetry, darts and the Finance Bill is a rare feat. We are not really surprised by his abilities, but we were very much impressed. May I also congratulate all the other maiden speakers today? I must say, however, that Mr. Stuart intimidated me greatly by suggesting that the Prime Minister might try to emulate Henry V. May I suggest that that is not an example that we wish to put forward to this or any other Prime Minister.

I hesitated to speak in this debate today, on the ground that just about everything had been said, if not yet by everybody, but there are two issues on which I want to touch briefly.

First, I want to return to the issue of the new capacity under the Bill, presuming that it becomes law, to hold in self-invested personal pensions residential real estate—with various safeguards, I understand. The issue for me is not so much tax avoidance, although that, and the possible impact on tax revenue, worries me, but the potential for pension mis-selling. When we consider pension mis-selling, we tend to focus very much on single instruments and on whether the risk associated with a particular instrument has been declared to people. We are all aware, however, that risk refers to the whole portfolio of assets that people hold.

One only needs to look in today's newspapers, and yesterday's newspapers, to see that many of those who will try to sell those new pension products are gearing up to take advantage of the preference of many people in the UK for holding real estate, especially residential real estate, and to buy into property as the safest and most secure type of investment. Many of those people will already be exposed to the real estate market through their mortgages, and their families in turn will be exposed through their mortgages, and they will now be encouraged strongly, because of such opportunities, to expose themselves through their pension funds to the mortgage and housing market, without necessarily being given the appropriate kinds of advice. Can we have some assurance from the Government that real care will be exercised to make sure that we do not enter into another round of significant pension mis-selling as a result of those expanded opportunities?

Secondly, on an entirely separate and broader issue, I was very disappointed that neither the first part of the Finance Bill prior to the election nor the second one after the election addressed one of the key financing issues in this country today—funding for major infrastructure projects. There has been a lack of success in terms of delivering major infrastructure projects—I speak with a London hat on as well as with my constituency hat on. It seems to me that the Government have missed the opportunity in the Bill to bring forward mechanisms that would allow public authorities to finance new and vital forms of infrastructure through taxes on the windfall increases in land values and rental that occur near new public works.

Everybody in the House will be aware of the history of developers obtaining about £13 billion as a consequence of public investment in the Jubilee line—the initial investment was about £3.5 billion. That was a huge gain to the private sector, to which it contributed relatively only a few pennies—£180 million would be the exact figure. Raising finance for Crossrail, a much-needed project in London, is now proving exceedingly difficult—an experience repeated for projects all over the country. I am sad that the Bill has failed to seize the opportunity to take advantage of the potential gains that I have identified.

I hope that those issues can be addressed when the Minister winds up the debate or on another occasion.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury 7:35 pm, 7th June 2005

I address the House with a degree of trepidation on such a difficult and technical matter as a Finance Bill. I might not be giving my maiden speech today, but I assure Members that maiden speech plus one is still an intimidating task to face.

Yesterday, I had the privilege of extolling the beauties of my constituency to the House, and of regaling the House with some obscure facts about it. I therefore decided to start in a similar vein on this matter—with the obscure. If Members will forgive my pronunciation of Latin, I will talk first about what is known as the Societas Europaea—the European company statute. It is covered by clauses 51 to 65 of the Bill, and is a scheme that has been in operation since October 2004 to allow people to set up pan-European companies. It is useful for the House to examine how the scheme has been operating, as it is an interesting case study in how things get done in the European Union and the problems that have occurred with single market legislation.

The scheme starts out as an inoffensive and even fairly good idea to allow companies to cut costs by having a single incorporation that will operate throughout Europe, rather than having to have different companies incorporated in different member states. A positive aspect of the scheme is that it is voluntary—it is an option for business to take up if it wants to do so; it is not compulsory. The less good news is that it took nearly 40 years to agree in the European Union—even longer than the notoriously long-drawn-out chocolate directive—which shows that decision-making processes there still leave a lot to be desired.

Another aspect of the scheme covered by the Bill is that the end result is cumbersome and bureaucratic, as one might expect of a scheme that took 30 years to agree. As a result, few companies have taken the opportunity to opt into the scheme. The EU legislative scheme has failed to produce an attractive framework for business to use, and companies are currently voting with their feet—the Economic Secretary will correct me if I am wrong—and opting for national corporate registration rather than this new EU-wide scheme, reinforcing the practical advantages of national decision making and national jurisdiction.

There is another lesson to be learned from this long-running saga, however, which has direct relevance to the Bill that we are considering today. If we examine the debates on the European company statute in the European Parliament, we see that almost every speaker called urgently for a European system of corporate taxation to match the European company statute that they had just created. In that, as in many other areas, measures introduced on the basis of trade and the single market are being used as vehicles to drive forward tax harmonisation and an expansion of the EU's role in tax. I fundamentally oppose that, as does everyone on the Conservative Benches. In pushing forward EU political integration and tax harmonisation by a series of such small, technical steps, that integration is disguised from public scrutiny. It has been described as a salami-slice approach—by a series of different technical measures, the EU seeks to enlarge its role in all sorts of areas of our national life, including tax, without drawing the attention of the people to what is happening.

In the tax area, the real threat is posed by the European Court of Justice. There is every danger, as we have heard already in this debate, that the proposals in the Bill on the taxation system to be applied to the European company statute might not be worth the paper on which they are written. The European Court of Justice might simply choose to overturn them, as it has done in a number of instances in relation to UK tax measures. I remind the House that that means instant, immediate tax harmonisation: no debate, no elections, no scrutiny and no referendums. It means instant EU involvement, and expanding involvement, in our taxation.

Her Majesty's Treasury has repeatedly, especially in recent years, expressed its opposition to further EU involvement in tax harmonisation. I should like to hear what the Minister and the Government propose to do to curb the power of the European Court of Justice. Will they take action if the Court continues to strike down British tax laws such as the one that the Government are presenting to the House today? What will they do if the UK Government lose the Marks and Spencer case, and the many others that await judgment in Luxembourg?

Labour loves to say that it is extreme to criticise the remit of the European Court of Justice and extreme to call for curbs on it, but I cannot believe that Her Majesty's Treasury is not concerned about the inroads into its revenue that are increasingly being made by the many cases finding their way through the Court in Luxembourg. As we heard from my hon. Friend Mr. Hammond, the problem involves not just the European company provisions in the Bill but a number of others.

Let me turn from one rather low-profile topic to another. Clause 37 and schedule 6 are fairly obscure and technical, but they are part of a bigger and more important project: the implementation of international accounting standards in this country. I welcome the fact that, in this draft, the Government have responded to many of the concerns of the securitisation industry—which, while not enjoying a high profile, plays an important part in our financial markets, and consequently in the economic health of the nation.

I supported the international accounting standards project, which represents a move towards a single global accounting standard. I consider it desirable because it will hopefully cut costs for business, and enhance transparency for investors by allowing them readily to compare the accounts of different companies and different investments in different countries. The real value of the scheme, however, can be realised only if it becomes a global and internationally accepted standard. It has been adopted in theory in the European Union, although the implementation process is slow. What we really need to do is ensure that there is a transatlantic consensus on international accounting standards.

At one stage it seemed that it would be impossible to reach such an agreement. The United States was perfectly happy with its accounting system, and was not interested in anyone else's. Recent corporate scandals have caused it to look at its systems afresh, and to adopt a positive approach to international accounting standards. That gave rise to a political opportunity, but following such a promising development it seems that the wheels are in danger of falling off the IAS project. Given the controversy over IAS 39, the standard on derivatives, there is every danger that the EU will dilute the international standard that it has only just adopted. In departing from that gold international standard, it risks creating a European gap and an IAS lite, and losing its political opportunity to build the transatlantic convergence that could save businesses many hundreds of thousands of pounds: they would no longer have to compile separate accounts for their branches in north America and in Europe. I urge the Government to press that important issue in both Brussels and Washington.

Let me now deal with the more high-profile issues relating to the way in which our economy is working. Many speakers have touched on them already today. Clauses 16 to 23 deal with taxation of investment funds. I share many of the anxieties expressed by my hon. Friend the Member for Runnymede and Weybridge about the extent of delegation to secondary legislation. Over the past 30 years, there has been a massive increase in the amount of such legislation. We need only visit a law library to see that the number of slim volumes containing secondary legislation, such as statutory instruments, covering most of the century has expanded massively over the past 20 or 30 years. I believe that that is bad for our democracy. In taxation matters above all, we should maximise democratic scrutiny and maximise transparency. I believe that delegation to secondary legislation is particularly dangerous when it involves measures to remove money from people's pockets.

I cannot contribute to a debate on finance, especially one that covers taxation of investment even in this technical way, without referring to what I consider to be the most important financial and economic issue facing the country: the crisis in savings, investments and pensions. I am profoundly concerned about the collapse in saving and the crisis in our pensions system. Like my hon. Friend Mr. Stuart, I believe that a number of the Government's economic decisions have been correct and could not be opposed by anyone. The Government have displayed a degree of common sense, most notably in giving independence to the Bank of England. However much we might debate aspects of the Government's record, one thing seems clear to me. When Labour was elected, Britain had some of the strongest pensions in Europe; now we have some of the weakest. In this country, we are saving about a third less than we were when Labour was elected in 1997. Estimates of the shortfall vary, but it seems likely that Britain should be saving about £27 billion a year more to be sure of a safe and secure old age for its people.

I am afraid that this Government must take their share of responsibility: responsibility for the extra £5 billion annual tax that they have imposed on pension savings, for the abolition of personal equity plans and tax-exempt special savings accounts, for their refusal to abolish the annuity rules, and above all for the massive increase in means-testing—a subject dealt with in a number of today's maiden speeches.

For every £1 of income from savings, a pensioner can lose up to 90p in means-tested benefits. Given such an excessively high level of marginal taxation on savings income, is it any wonder that savings have collapsed in this country? I return to the subject of our debate, the taxation of investment and arrangements for taxation. I strongly believe that the only way in which to tackle the current crisis effectively is to encourage people to save by giving them a tax incentive: not more obfuscation, not more complexity, but real, substantial tax rewards for those who are responsible, who do the right thing, who save and provide for their old age.

As I have said, in some respects the Government have made the right decisions for the economy. I have even been known to make common cause with the Treasury in my former role as a Member of the European Parliament. When it comes to savings and pensions, however, I genuinely believe that the Government are failing, and failing badly. Pensioner hardship is a serious problem today, but it is set to become infinitely worse unless we take action now. The Government are building poverty into the DNA of our economy, and creating a pensioner underclass for the future. Whatever the content of this Bill, I urge them to take serious action in their next Finance Bill to remedy what I see as the gravest and most serious economic threat facing us today.

Photo of Adam Afriyie Adam Afriyie Conservative, Windsor 7:48 pm, 7th June 2005

I am grateful for the opportunity to speak in such an important debate. Despite the haste with which I think the Bill was drawn up, dissected and delivered to the House, it will affect many people in their working lives and many hard-working people in their later lives, as was pointed out by my hon. Friend Mrs. Villiers. It will determine the competitiveness of British business both here and abroad. It will have an impact not just on the good will of charitable people, but on the good work that charities do. I shall say more about that shortly.

I thank the Paymaster General for her clear explanation of the Bill. I also thank my hon. Friend Mr. Hammond for raising the issue of charitable donations and gift aid. That is the issue on which I want to concentrate.

The Finance Bill is perhaps one of the most important Bills in the Queen's Speech. It is disappointing that there is so little time to debate such an important measure in this House. It is complex, as many previous speakers today have observed, and although it has been truncated it still runs to some 160 pages. I do not believe that four hours is enough time to examine all those pages. I am confident that, when it is considered in Committee, Members in all parts of the House will give the detail very serious consideration, irrespective of party politics. Indeed, it is in some of the Bill's detail that the devil lies.

I have chosen to contribute today because this Bill needs further fine-tuning and refinement. Although it contains some sensible measures on closing tax-avoidance loopholes, they are complex and I am concerned that they receive proper scrutiny. We must be sure that the Government do not drive through tax-avoidance measures that further erode British businesses' competitiveness, act as a disincentive for overseas firms to invest here, or create burdens for all businesses that undermine productivity and negate the benefits that will hopefully be gained from such tax-avoidance measures.

Lest we forget, British businesses are the engine of our economy. They generate all the jobs, incomes and taxes that make for a good society. British businesses, in a way, are the golden goose of our economy.

Photo of Tobias Ellwood Tobias Ellwood Opposition Whip (Commons)

Does my hon. Friend agree that the over-regulation imposed by this Government is stifling British businesses, which are calling for simpler and less regulation, rather than for more and more complex regulation?

Photo of Adam Afriyie Adam Afriyie Conservative, Windsor

I agree wholeheartedly. My background is in business, and it is clear that the Government, via the European Union, have allowed in swathes of detailed regulations and guidance notes; indeed, there are some 100 pages on working time directives. The weight of that paperwork, regulation and red tape knocks out a whole layer of productivity in British businesses.

I turn to the charities, charitable giving and voluntary work that underpin our society. Giving is an expression of our humanity: it is an expression of the care that we have for others who may be less fortunate than ourselves. It is also an expression, for charities that focus on these areas, of our concern to preserve and promote our natural environment and heritage. Hundreds of charities are based in or operate in my Windsor constituency. The Windsor, Ascot and Maidenhead volunteers' organisation encourages voluntary work throughout the constituency. The friends of the King Edward VII hospital provide voluntary help to support our local hospitals. The Thames Valley hospice and the Paul Bevan hospice—now combined—would cease to function without charitable giving and the work of hundreds of selfless volunteers and helpers. And of course, in terms of gift aid we should consider Windsor castle, to which clause 11 is particularly relevant.

Thousands of people work voluntarily for these charities and good causes. They give of their time freely and willingly to help others, to preserve our national heritage and to protect and promote our environment and historic buildings. Of course, thousands of people give to charities as a way of expressing their good nature and good will to others. Charities, voluntary organisations and trusts are the fabric of a healthy society. On this basis, I want to draw the House's attention to clause 11 of the current Finance Bill and, by way of background, to section 25 of the Finance Act 1990, which provided tax relief or gift aid for qualifying gifts from individuals making donations to a charity.

Broadly speaking, the 1990 Act defined a qualifying gift as a monetary gift that was non-refundable and was not used to buy an asset. Section 25(2)(e) made it clear that the person making a donation could not receive a benefit outside of prescribed limits. An individual donating up to £100 to a charity could receive a benefit of no more than 25 per cent. For a donation of up to £1,000, the benefit had to be no more than £25, and for donations in excess of £1,000, the maximum benefit to the individual concerned had to be no more than £250. In the Finance Act 2000, a special exemption for certain charities was laid down in subsection 39(5E), enabling them to bestow a right of admission to view certain charitable properties. Charities with that exemption are listed in subsection 39(5F). They consist of those whose main purpose is to preserve heritage property or to conserve wildlife for public benefit.

The problem is that this exemption remains in place, despite the changes made to the gift aid scheme in the Finance Act 2000. This is perhaps an example of insufficiently far-reaching Commons scrutiny of an incoming Act. The result is that a payment for admission is now eligible for gift aid. To put it simply, certain charities can offer free admission to certain properties equal to the entrance fee, and then claim gift aid on that contribution. That was not the intention of the Act, and although it is legal it is certainly unfair that certain heritage and wildlife charities benefit in this way.

Clause 11 of the current Bill aims to stop this inadvertent tax benefit of gift aid, if that gift allows the giver entry to an establishment of a certain type. My concern is that removing the benefit without proper scrutiny and consideration might cause some valuable charities to struggle, perhaps to falter, and even to fail in certain cases. Insufficient consideration has been given to the immediate effect of closing this gift aid loophole. Many charities may depend on the gift aid generated by allowing free admission, and they may experience a sudden drop in income. Just as the gift aid loophole was an unintended consequence of past Finance Acts, so this sudden failure of charities could be an unintended consequence of the current Finance Bill.

The charities concerned are doing their law-abiding business in undertaking good work in society. I am sure that it is not intended that this good work and these charities fail, so I ask the House that consideration be given in Committee to transitional arrangements, or to delaying introducing the proposed change to the gift aid scheme, so that the charities affected can have time to re-work their finances and to continue their good work. Such work is enjoyed not only by Members of this House, but by people throughout the country. I would hate them to be deprived of the pleasures of heritage, or of the charities that deal with our natural environment.

Photo of Stephen Hammond Stephen Hammond Conservative, Wimbledon 7:58 pm, 7th June 2005

You called me to make my maiden speech two and a half weeks ago, Madam Deputy Speaker, and I am extremely glad that you did. Compared with the eight or nine that I have heard today, it would have paled into insignificance.

Earlier today, Mr. Henderson gave us his views on the principles that backed up the first Finance Bill and this one. I recognise one or two trends in this Bill that form part of the Government's taxation policy theme. The tax burden is falling increasingly on those who do not have votes, by whom I mean this country's business community. Most of the rules effected in this Bill will impact on the business climate. Moreover, an environment is being created in which decisions are being made for taxation reasons, rather than for those relating to economic and business decisions.

It is also clear from the first Finance Bill and this one that the tax burden is increasingly falling in such a way that other people can be blamed for tax increases. A good example, which several Members have already mentioned, is the council tax. As a former local councillor, I know that there is lower central Government funding, greater regulation and pressure for increased planning. We have also seen council tax rises. The Bill continues those themes of taxation. The other discernible trend that is coming through is complexity. Stephen Hesford said that he thought that there were simple principles behind the legislation. There are over 250 pages of guidance on the Bill. It does not seem that it can be described as simple.

The increasing complexity of the whole tax system means that there are vast areas that no one can really understand. Small businesses and sole traders are spending increasing amounts of hard-earned income to get professional advisers to unravel tax legislation. Anything that is done by business now seems to require costly and detailed legal advice and that is starting to distort the economic basis in favour of larger firms. My hon. Friends the Members for Chipping Barnet (Mrs. Villiers) and for Surrey Heath (Michael Gove) mentioned the need to simplify the taxation process. That is something that we should all support.

The other general trend in the Bill is that quite a lot of the provisions are presented as anti-avoidance measures. Earlier, my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) mentioned what the shadow Chancellor said about part 1. We agree with the Government about the need to tackle avoidance, but clauses 24 and 31 do not necessarily do so. They are widely drafted clauses that potentially have significant consequences for our international competitiveness and inward investment, which is the key to future economic success and which could be damaged. A number of perfectly innocent transactions may be caught by the provisions. I am an economist by training and a financier by profession. I expect that I will struggle with the complexity of those clauses, should I have the fortune to be on the Committee.

Earlier, the hon. Member for Newcastle upon Tyne, North gave his wide-ranging views on the Bill and some economic history. He proved that economic history can be made to make any point one likes. As the Chancellor recognised in his Budget speech this year, we have had 50 quarters of growth—it is 51 now—so it is highly likely that the macro-economic climate did not change on 1 May 1997. Those people who have had the fortune to read the exposition by the former chief economist of the Institute of Directors will know that the inflation-targeting process, the interest rate decision-making process and the process to bring clarity and transparency started well before 1997.

An interesting fact to reflect on is that although much is made of the success and strength of economic growth, a number of City reports recently have suggested that the huge increases in taxation since 1997 have raised Government expenditure, which has boosted the underlying growth rates by about 1 per cent. over eight years. Were taxation to be raised to fill the hole that my hon. Friend the Member for Runnymede and Weybridge mentioned, we would expect to see a drop in the underlying growth rate of the economy.

My hon. Friend Adam Afriyie talked about gift aid. Like Windsor, Wimbledon has many small charities, some small museums and charitable premises containing exhibitions. I think particularly of the Wimbledon Society museum and the Wandle industrial museum. Many of those organisations have used the current rules that allow gifts to be equal to admission fees and to be taken as gift aid—the charity offers free admission and reclaims the gift aid tax relief. That will now be altered. That is probably correct in that that was not the original intention of the gift aid legislation, although a number would argue that the rules should be relaxed so that small museums and small premises showing these artefacts can survive.

Having read the legislation, it seems that there will still be allowable donations for the right of entry to qualify for gift aid if the donation is generally available, if the donor takes in one or more members of his family, if the right of admission is for over one year and if the gift is the fee plus 10 per cent. I am sure that there will be support for widening the measure to include charities that display plants, works of art and other artefacts. When the Bill is considered in Committee, I hope that the Government will consider making amendments to that clause. The legislation refers only to viewing those artefacts. In the 21st century, a number of museums, including small museums, have interactive and hands-on displays for young children. The way the clause is drafted would exclude them.

I wonder why the provision is limited to the donor plus one or more members of his family. Like a number of hon. Members, I have children. We sometimes take groups of children that are not members of my family to local museums. Perhaps the Government will consider widening the provision to include such groups. I accept that there should be a limit, but I hope that they will consider that matter. I am not entirely clear why the right of entry should be for the whole year. Three months would cover that adequately. I hope that the Government will look at that in Committee.

As I said, I spent the whole of my professional life in the financial world. Obviously, I approve of the City, which is a major source of investment wealth and funding. Therefore, I am particularly interested in some of the clauses in chapter 3. Much of that will be examined in detail in Committee, but, like my hon. Friend the Member for Chipping Barnet, I have noted the huge increase in the number of statutory instruments that are coming through. Many of the changes in the Bill will be dealt with by statutory instrument, not primary legislation.

There are concerns that the changes in clause 16 will have little revenue impact. There is due to be a reform of fund taxation within the next two or three years. It seems that these are interim changes. However, there are some huge cost implications for the industry. It would be easy not to bring clause 16 forward.

Clauses 24 to 31 fall into the category that I mentioned earlier: presentationally, they are anti-avoidance measures. There are a number of ways in which they could be enacted but, having read the Bill, and I am sure I will be corrected if I am wrong, it seems that the rules will apply in this way. If an American or other multinational company decides to build a factory in this country and create jobs, that could be financed by a bank and it would attract tax relief for the interest paid to the bank. However, if the Americans, or whoever, choose to finance the investment through lending from their own US parent company and in that way receive a subsidy from the American taxpayer for the investment in the UK, UK tax relief is unchanged. The only difference is that the American taxpayer is helping to finance the investment in Britain.

I believe that the new legislation and the guidance suggest that, in that case, UK tax relief will be denied. That seems to be simply because there is a subsidy from the American taxpayer. Without that subsidy, the loan might not be granted and the factory might not be built. Should we be concerned that the American taxpayer is providing that subsidy? I do not think so. I am not sure of the economic rationale behind that. The stance being taken on tax arbitrage in all circumstances must be bad. The effect of the new rules is to create uncertainty for UK multinationals, as some hon. Members have mentioned.

The legislation will affect the UK as the international policeman on the funding of debt through hybrid entities. Other tax authorities may gain revenue at the expense of UK investors. Those who choose those entities may then choose a different location to take their tax deduction. We may therefore see an expense to the UK investor and some gain in revenues for tax authorities abroad. That further hinders the prospects of inward investment.

The anti-avoidance clauses give huge discretionary powers to the Inland Revenue to give notices to taxpayers. They seem to be arbitrary, which is understandable, but they create uncertainty. As my right hon. Friend Mr. Dorrell said, he wants to see certainty and an appeal process. He also wants a clearance process initially. It seems to me that that is only fair. Notices are, by their very nature, individual and one cannot necessarily guarantee the same treatment to two identical taxpayers. I hope that we shall examine that further in Committee. When we debate the Bill in Committee, I hope that Treasury Ministers will be able to provide some clear interpretations as to the manner in which the clauses will be enacted, along with some practical examples of how they expect them to work.

Photo of Lee Scott Lee Scott Conservative, Ilford North 8:11 pm, 7th June 2005

I congratulate all hon. Members on their maiden speeches.

I have been approached by a charity in my constituency of Ilford, North, which has brought to my attention problems surrounding old manuscripts and books. Would it be possible to clarify in the wind-up debate whether new subsection (5G) in clause 11 on gift aid would apply?

My second point concerns VAT on charities. I understand the difficulties, but I was saddened by the VAT provisions and wonder whether it would be possible to abolish them for charities where it could be proved that their programmes were based only in the UK and were oriented towards social, educational or welfare purposes. That would help many charities and would mean a saving of millions of pounds for them.

As a previous director of a charity—I declare an interest, as someone who is still involved in charities—I fully understand the problems that charities face. Programmes such as distance learning projects, which link schools across the world, create a better understanding not only of religious but of other means of charitable provision, and they certainly benefit the schools involved. A finite amount of money is available from philanthropy and any movement to provide further help would be welcome. As I have already said, I am fully aware of the financial difficulties that might be caused by my suggestion.

Until recently, I was a cabinet member for the community in the London borough of Redbridge, so I know that large sums of money are given to charities through the voluntary sector grants programme. The suggestion that I have made would mean that some of those grants would no longer be needed, so they could be given to other groups in the voluntary sector. That would provide a better use of the taxes raised both locally and nationally.

As I said at the start, I am fully aware of the potential problems, but, like myself, the Economic Secretary has also been involved in charities for many years and understands what they have to grapple with when they face VAT costs. I would really like the matter to be looked into further, notwithstanding the difficulties.

Photo of Richard Spring Richard Spring Shadow Minister, Treasury 8:12 pm, 7th June 2005

We have had an excellent debate and heard some very good speeches, and I particularly welcome the maiden speeches from both sides of the House. We started off with a speech from Mr. Henderson, who referred to the taxation of pensions in clauses 7 to 10.

We then heard from Chris Huhne, who brings considerable experience from his time as an MEP to this place, so we welcome his contributions. He spoke about growth rates in the EU, about the impact of house prices and house liabilities. He also referred—it is an important issue, if slightly outside the confines of the Bill—to self-invested personal pensions and the whole "home to let" relationship. It is a matter of controversy and will undoubtedly be debated in the public domain.

I would argue, however, that it has become such an important issue because of the severe pressure on individuals to restore decent pensions for themselves. That has become a huge difficulty now in this country and I hope that the hon. Member for Eastleigh would concede that, if we go back eight years, the issue was not in the public domain or shared among the people of this country. Their anxieties were much less then, which says much about the collapse of savings, the attack by the current Chancellor on the pensions industry and, in a sense, the perfectly legitimate desire of people to put money into property in order to secure a decent income for their old age. The hon. Gentleman is absolutely right that we must look carefully into the problem in order to prevent any abuses, but we also need to understand how it has all happened—a development that none of us can welcome.

Jessica Morden—unfortunately, she is no longer in her place—made her maiden speech and spoke warmly about Alan Howarth, the previous Member, who is now, I understand, in the House of Lords. Indeed, he is well known as a personable individual, well liked on both sides of the House. I understand that he is the second of her predecessors who has entered the other place. She spoke about the history of Newport, the Chartist movement and the importance of local industry, and she used the term "economic renaissance" to characterise the new businesses entering her constituency that have brought employment growth. In my view, the hon. Lady delivered a confident and well presented speech. When she enters the Chamber, I will have the opportunity of wishing her well in her parliamentary career. I am sure that she will make a valuable contribution to our debates.

It is always a great pleasure to hear from my hon. Friend Mr. Davies—an outstanding and original thinker, who always presents telling arguments. He spoke about the abstruse nature of the Red Book, which has developed over the last few years, and he is entirely right about that. It is increasingly difficult to get to the essentials of what the Red Book is about. He also talked about worrying aspects of economic policy and argued, as widely asserted by many independent commentators, that the Chancellor appears to be losing the control over public expenditure that he has spoken about so often.

My hon. Friend is absolutely right to talk about the rising tax burden in this country—5 per cent. of GDP over the last five years, which is an enormous increase by any historic standards. The current budget deficit is now substantial and the Chancellor's capacity to miss the forecasts does not bode well for the future. My hon. Friend is also absolutely right to say that rules must be effective and he ably challenged the Chancellor's interpretation of the so-called golden rule.

Ms Clark also made her maiden speech, in which she spoke passionately of her constituency. She was extremely articulate and talked about Keir Hardie being part of the history of her constituency. I sometimes wonder what Keir Hardie would make of current Labour politicians, who seem to spend their summers not helping trade unionists and others, but staying in princely Italian palazzos. That is certainly a very long way from Keir Hardie.

There seems to have been some genetic programming, which was apparent when the hon. Lady talked about her great-great grandfather being a pacifist and socialist. Once again, I wonder what her great-great grandfather would think of the current reign of the Prime Minister, soon coming to an end, in that context—[Interruption.] I see that the hon. Lady is now in her place, so I can tell her that I have been praising her for her confident and competent speech, including her comments about Keir Hardie and her great-great grandfather, which we all enjoyed hearing.

The hon. Lady also spoke about our presidency of the G8, about world poverty and, indeed, about the importance of the UK taking a lead in that matter. That view is shared on both sides of the House. Now that she is here, I would like to applaud her further and wish her well in her time in the House. I know that she will make some excellent contributions to our debates.

It is always a great parliamentary treat to hear from Rev. Ian Paisley, who is a great parliamentary institution in himself. He talked about links to Scotland and about the need to strike a balance between desirable outcomes in the very complicated Bill before us. He said that he supported anti-avoidance measures, but also raised the valid point that he did not want to see any innocent person suffering by being brought into anti-avoidance measures because they were not properly defined. As a doughty defender of Northern Ireland, the hon. Gentleman went on to say that water and sewerage services there require urgent upgrading. That is long overdue, and I hope that the Government will say what progress is being made.

Ms McCarthy also made her maiden speech this afternoon. She spoke about her predecessor, Jean Corston, a valued Member of this House who concentrated on human rights and who was a distinguished chair of the parliamentary Labour party. The hon. Lady talked about some of the individuals who were part of her constituency's history. They included Ernie Bevin, who started his career there and who is universally acclaimed as an outstanding Foreign Secretary in his day. She also mentioned Tony Benn and Sir Stafford Cripps. The latter was known for his frugality, and I wonder what he would have made of the lifestyles enjoyed by some Members of the Government Front Bench today. That would be an interesting revelation. However, the hon. Lady will clearly be a passionate defender and promoter of the city of Bristol and its rich history. I certainly wish her well in her time in the House.

It was a great pleasure to hear the maiden speech by my hon. Friend Mr. Newmark. He refused to take no for an answer at the election before last, and came back to win his seat just over a month ago. That shows great strength of character, and his wealth of successful business experience will be greatly valued. It shone through very clearly in his speech this afternoon. He was rightly generous to his predecessor, Alan Hurst, and to my noble Friend Lord Newton, who will be remembered by many hon. Members with great affection as a dedicated Front Bencher, active both in the Cabinet and in the House. He really was greatly liked.

My hon. Friend spoke of the beautiful corner of England that he represents and he set out some of its history. He also mentioned the Anglo-American link that he embodies. Many of the original settlers in what became the United States came from the area covered by his constituency and mine. Many great parliamentarians, such as Churchill and Macmillan, shared his link with America, so we have high hopes and expectations for my hon. Friend. He talked too about the centralisation of public services—and I agree with him about that—and about the attack on our rural support structures. I am his near neighbour in parliamentary constituency terms, and I completely understand what he meant. He mentioned as well the terrible impact on pensioners and people on fixed incomes of the swingeing increases in council tax that have been especially devastating in constituencies such as ours. Quite rightly, he talked about the need to constrain the power of Government so that we can retain our competitiveness. After a maiden speech of that quality, we can expect many more excellent contributions from my hon. Friend in the years to come.

Stephen Hesford made some rather uncharacteristically churlish comments about my hon. Friend's contribution. I think that the hon. Gentleman's opponent in the recent general election was Esther McVeigh, and his remarks call to mind a conversation between Winston Churchill and Nancy Astor—in this case, I think that the substance of that conversation applies in the reverse. The hon. Gentleman spoke about the Bill's complexity. He said that we would have to explore the anti-avoidance proposals in detail, and he was right to ask specifically about the amount of revenue that they would raise. I hope that the Financial Secretary will give the House some clarification when he winds up the debate.

It is always a great pleasure to listen to my right hon. Friend Mr. Dorrell. He is a very experienced politician, having held many distinguished offices in a previous Cabinet, and he brings to the House an understanding forged in a successful business career. That combination is all too rare. My right hon. Friend said that all hon. Members support well thought out anti-avoidance measures, and that that was linked to the Revenue having more discretion. As a quid pro quo, however, he said that we needed to look carefully at getting the balance right in respect of pre-decision tax clearance. He is absolutely right: the Revenue authorities must be more available to help businesses deal with matters such as tax arbitrage rules, for example. In that way, greater clarity can be brought to the planning process. I hope that my right hon. Friend will continue to contribute to debates such as this.

My hon. Friend Philip Davies recently became a father, and I congratulate him on that, although I am not sure exactly when that happened. He spoke of his constituents' common sense and described himself as a straight-talking Yorkshireman. He spoke affectionately of Sir Marcus Fox, another great parliamentary character, and also paid generous tribute to his predecessor, Christopher Leslie. He was a fine Minister and, like my hon. Friend, I hope that he finds his way back to the House of Commons—but, also like my hon. Friend, not as the MP for Shipley. My hon. Friend said that he wanted to remain on the Back Benches. We shall see about that. He spoke of his business experience at Asda and about working for his mother. However, despite his modesty, it is clear from his excellent speech that he may be tested in an entirely different direction.

My hon. Friend Mr. Bone talked about how far he had travelled to reach the House of Commons. He described fighting Neil Kinnock in the Pudsey constituency, and spoke warmly about his predecessor, Paul Stinchcombe, who had sponsored Alexine's law. He spoke about his constituency and the problems encountered in his local hospital. He set out the pressures suffered by the road system in his area and he spoke about his constituents' fear of crime—a considerable problem all over the country.

My hon. Friend also spoke about visiting Cranwell and about the importance of putting our country first. He was right to do so, as he was to talk about the danger of elites becoming disconnected from their electorates. The events of the past few days entirely vindicate that observation. He said that the European elite was obviously out of touch and that that was underlined by the results of the recent referendums in Europe. The House will be aware that the British Government have chickened out of holding a referendum in this country for fear of being given a lesson about elitism. However, I hope that a referendum will be held in this country one day. My hon. Friend displayed a true and good Tory instinct when he said that we must put our country first, and I applaud him for that.

My hon. Friend Mr. Stuart, in another excellent maiden speech, talked about the problem of dignity and means-testing. I do not seek to make a party political point, but it is true that many people, especially the elderly, find the bureaucracy in the process of claiming their legitimate benefits very difficult. The huge growth of means-testing in our country has also played an adverse part in the decline of savings. My hon. Friend spoke about his predecessor, James Cran, who was a kind and funny person whom I knew well. He was very popular here. My hon. Friend also described the undoubted beauties of his constituency, including the famous Beverley minster, and how he hoped the Prime Minister would take up the invitation to visit. Well, my hon. Friend can try to invite the Prime Minister, but I expect that he has other geographic issues on his mind at present. My hon. Friend also mentioned the lifeboats and the Royal National Lifeboat Institution, a group of unsung heroes. He also talked about coastal erosion and the need to simplify the labyrinthine systems and overreaching bureaucracy that are part and parcel of our benefit system. I am truly delighted that he is now a parliamentary colleague and I know that he will make an excellent contribution to our debates.

I was very pleased to hear the speech by my hon. Friend Michael Gove. For some time, he has surveyed the activities of this House as a journalist, casting an eagle eye on our debates and issues of policy. He did so with great perspicacity for many years. I am delighted that he is no longer an observer of our activities but part of them and I know that he will contribute richly to our proceedings. He talked about his constituency and the vibrant multinational companies located there, as well as the small companies. My hon. Friend talked movingly about his own family experience and the implications for it of a destructive bureaucracy. That has obviously provoked much thought on his part, and I entirely share his conclusions. He was very generous in talking of his predecessor, Nick Hawkins, whom he praised as a hard-working constituency MP with a sharp legal mind.

My hon. Friend talked about the beauty and charms of his constituency and he also mentioned, with reference to Camberley, the importance of the military in our national life, a comment that will have struck a chord with many hon. Members. At a time when many of our national institutions are under something of a cloud our armed forces are probably held in greater esteem than any other institution, and they deserve our support. My hon. Friend also talked about the pressures of overbuilding in the constituency, of the terrible centralisation of decision making on such matters and the inability of local people to have any real influence on what happens in their environment in planning matters. He warned of arbitrariness and retrospective application in clause 39, and he was right to talk about the need for low taxes, a simplified taxation system, light and flexible regulation and for this nation to be outward looking. I am delighted that he is now a parliamentary colleague and I know that he will be a great contributor to our debates.

Susan Kramer warned of pension mis-selling and property linkage. The FSA is there to deal with that and I hope that the interests of investors will be protected with a lighter touch than has been the case. One has to ask why people are driven to such behaviour, and it is because of the decline in pensions as a factor in income, especially as people get older. It is to the eternal shame of this Government that what they inherited—probably the most generous, effective and well-funded pension system anywhere in Europe—has come to the present state. The hon. Lady also talked about money for infrastructure projects and she made an interesting suggestion, although I am not sure that it is Liberal Democrat policy, that windfall taxes should be levied on gains arising from property that rises in value as a result of infrastructure projects. That will be an interesting subject for discussion as the Liberal Democrats sort out their tax policy.

My hon. Friend Mrs. Villiers brings to the House her tremendous experience as a Member of the European Parliament. She was considered an outstanding MEP on Treasury matters. In the European Parliament she made a huge contribution and we got a flavour of her quality when she spoke today—she has already made her maiden speech. She talked about the European company statutes, clauses 51 to 65, to set up pan-European companies, and she warned that, although that will be voluntary, it will be very bureaucratic. As she said, after 30 years, most businesses favour national corporate registration as opposed to EU registration. She talked about the EU's encroachment on tax affairs, and she was absolutely right to talk about the role of the European Court of Justice in pushing forward tax harmonisation and to ask how its power could be curbed. She referred to the Marks and Spencer case, which will be an interesting one to follow.

Clause 37 refers to schedule 6 and the implementation of international accounting standards and I am pleased that the Government listened and have already amended the original Finance Act 2005. My hon. Friend talked about the need for transatlantic standards in accounting practices, and in respect of clauses 16 to 23, on the taxation of investment funds, she referred, as have others, to her concerns about the delegation to secondary legislation and the importance of proper scrutiny of all the proposals. She rightly emphasised, as I have sought to do in the last few minutes, the crisis in savings and pensions, which is in part due to the scourge of bureaucratic means-testing that has been so counter-productive in that regard.

It was excellent to hear from my hon. Friend Adam Afriyie, who talked about the importance of examining the Bill's impact on businesses. He was right to say that our private sector is the engine of our economy; for charities, it is the golden goose and we should consider the weight of regulation. He referred to the charitable giving and gift aid provisions in clause 11 and their impact on the hospices in his constituency and, indeed, on Windsor castle. He wanted some clarification and we shall certainly be considering the implications of those proposals in Committee.

My hon. Friend Stephen Hammond spoke about the complexity of the tax system. Of course, that is desirable for anti-avoidance but we must look carefully at the implications for international competitiveness. He talked about the small charities and museums in his constituency and raised an important point about what the definition of the viewing of artefacts is and whether that needs examination. Indeed it does and we shall consider it in Committee.

My hon. Friend Mr. Scott is an ex-director of a charity and he talked about old manuscripts and books. He asked whether clause 9 would apply and I hope that the Financial Secretary will refer to that when he winds up the debate.

As we consider the British economy, we can see that we have certainly come a long way from post-neoclassical endogenous growth theory. I looked up "endogenous" in the dictionary; it said "growing or originating from within". As we can see once again in the Finance Bill, what has certainly grown from within is the sheer, appalling complexity of our tax system—a culture in which announcements are made that leave everybody from ordinary citizens to business people in the dark, with professionals such as accountants and actuaries struggling to get to grips with what is happening. Whatever else the Chancellor's legacy may be, it will be the micro-management of the economy on a scale unprecedented in our history.

In Committee, we shall of course want clarity about retrospective or retroactive proposals. Naturally, illegitimate tax avoidance is something that nobody could support but we shall want to examine the entrails carefully.

In conclusion, of course anti-avoidance is at the heart of the Bill, but we shall want to examine it in detail in Committee and achieve a balance to ensure that anti-avoidance is clear and workable in practice. Undermining the attractions of the UK as a place to do business simply cannot be countenanced. We want to minimise arbitrary and unnecessary intrusiveness and to maximise the availability of pre-clearance to the taxpayer. We want to consider enhanced powers and the discretion of the Revenue, as in clauses 24 and 26 on tax arbitrage. We want a fair quid pro quo for the investor and for the business community.

Deregulation has been alluded to; for example, e-conveyancing, which is covered in the Bill, was mentioned. However, I say to the Paymaster General: there is no point in the Chancellor announcing, as he has done, that he is reducing the number of quangos and civil servants. There can never simply be effective deregulation without changing the very remit of the regulatory authorities, such as the Financial Services Authority, separating them more from Treasury influence and enforcing the principle rather than detailed prescription.

To talk the talk of deregulation, pile on yet more and more red tape and not change the underlying remit of the statutory authorities that are involved in regulation is, of course, to mislead the public about the true intentions of this control-freak Government on so many levels. The sheer cost of dealing with our rules and regulations and our tax system is now a huge burden on our businesses, our national life and our public services. We cannot deal with all that in the Bill—it is narrowly based—but we accept it in principle and will not seek to divide the House tonight.

Photo of John Healey John Healey The Financial Secretary to the Treasury 8:40 pm, 7th June 2005

It is a pleasure to follow Mr. Spring for the first time from the Dispatch Box and to respond to such a good debate: 20 Back Benchers have spoken, including nine who made their maiden speeches. I am not sure whether the Whips on either side have told those Members who made their maiden speeches that a speech on Second Reading is normally an indication of volunteering for service on the Standing Committee. They say that every Member should serve at some time on a Standing Committee that considers a Finance Bill; they also say that the wise ones do so only once.

I welcome the Conservative Front Benchers' recognition of the important role of anti-avoidance legislation. I welcome their decision not to vote against the Bill. I also welcome their intention rightly to subject its provisions to close scrutiny in Committee. I was interested by the remarks of Mr. Hammond who claimed in his speech and on his website and the Conservative website that the Bill will put at risk investment into Britain. He said that it could harm British business and deter investment.

I must say that I welcome that interest in investment. It is certainly true that, beyond entrenching Britain's long-term economic stability, probably the greatest imperative for our future prosperity is securing the sustained increases in investment, from both public and private sources, that will drive the improvements in productivity that will ensure that this country and our companies retain and improve their competitiveness in future. That is why, compared with 1997, we are now investing £1 billion more in science, £9 billion more in transport and £27 billion more in education and training.

Perhaps we can also look forward to a warmer recognition of the important tax reforms that the Government have put in place to promote private investment: the research and development tax credit; permanent first-year capital allowances; the cut in corporation tax from 33 to 30 per cent. and from 23 to 19 per cent. for small firms; and, of course, the cut in capital gains tax from 40 per cent., where it had been for many years, to 10 per cent. now. We will continue to consider other measures to boost business investment, and to the extent that we can do so with support from the Opposition, so much the better.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Opposition Deputy Chief Whip (Commons)

Would the hon. Gentleman not admit that the real mark of an economy's competence is the amount of foreign investment that a country gains? Under Margaret Thatcher, there was a time when we were gaining 40 per cent. of all inward investment from the European Community. That figure is now down to almost 10 per cent. Is that not a mark of the European Community's confidence in this economy?

Photo of John Healey John Healey The Financial Secretary to the Treasury

In recent years this country has done extremely well at attracting direct foreign investment, and we still do. We lead many other European countries on foreign direct investment into the European Community. Business investment has also been rising recently.

I look forward to the detailed debates on the Bill's specific provisions that I will no doubt have with the hon. Member for Runnymede and Weybridge, but in keeping with this Second Reading debate, I propose to respond to two of his principal questions now. He raised a concern connected with insurance companies about business transfers and apportionment under clause 42. He said that fundamental changes would be made through secondary rather than primary legislation, and that point was also made by the hon. Members for Chipping Barnet (Mrs. Villiers) and for Wimbledon (Stephen Hammond). The regulation-making power about which the hon. Member for Runnymede and Weybridge is worried will allow continuing consultation on the detail of the new rules with the insurance industry. The industry is actively involved in the process. It wanted more time for consultation and accepted that the way to achieve that would be to implement the provisions in secondary rather than in primary legislation. I think that it also accepts that that is a sensible way of ensuring that we can change provisions of tax legislation if the Financial Services Authority changes the regulatory regime.

The second principal point of concern that the hon. Member for Runnymede and Weybridge raised was what he described as retrospection. The Bill contains several provisions that were pre-announced in either the pre-Budget report 2004 or the Budget 2005. It is standard practice to make anti-avoidance provisions effective from the date of their announcement to prevent individuals and companies from taking advantage of the gap between the dates of their announcement and implementation in legislation. He and his colleagues will recognise that that is standard practice because it was done by the previous Government and has continued to be done by this Government.

Chris Huhne acknowledged that macro-economic policy is a sound backdrop to the Bill. I welcome the fact that he brings a strong European perspective to our debates, as does Susan Kramer made serious points about self-invested personal pensions and the scope to put property into pension funds. They both promised to give those provisions close scrutiny during the passage of the Bill, and I look forward to that because those measures are not in the Bill—they were legislated for in last year's Finance Bill.

The hon. Member for Richmond Park also raised alternative funding mechanisms, which are well beyond the scope of the Bill. She may know that the Government are considering as part of the package of proposals put forward by the Barker review the possibility of a planning-gain supplement, which might address her point.

I turn to the admirable and entertaining maiden speeches to which the House has been treated. My hon. Friend Jessica Morden gave us the model of a maiden speech. She, like her predecessor, will clearly be a committed and diligent MP. She set out the challenges that she wants to tackle as a Member of the House and made it clear how much progress her constituency has made under a Labour Government. I am pleased to say, however, that she will not be making a submission to the boundary commission to propose renaming her constituency "New Newport, East", despite the fact that she has given good service to new Labour in several roles, most recently as a regional director in Wales.

My hon. Friend Ms Clark made an impressive maiden speech with no speech notes, but lots of passion. She clearly brings a strong political family history and pedigree to the House and I look forward to the strong contribution that she will make to our debates in the future.

My hon. Friend Ms McCarthy treated us to one of a number of humorous maiden speeches made today. As she said, she follows several distinguished predecessors who have represented her constituency, but she brings significant experience of economic and financial matters to the House and, hopefully, to our debates on economic matters, too.

I was pleased to be present when Mr. Newmark delivered a courteous and kind tribute to his predecessors, including Alan Hurst. The hon. Gentleman treated us to a very interesting and entertaining maiden speech and talked about the history of his constituency and in particular the history of a local market, which dates back to the early 1200s under King John. That reminded me that King John introduced the first national customs service, although I do not know whether he did so with some of the hon. Gentleman's local markets in mind at the time.

The hon. Gentleman made a couple of rather strident political points, as did Mr. Stuart. Both tried to take the Government to task over our approach to support for pensioners. May I just say that means-testing is necessary for means targeting, and targeting resources on our poorest pensioners through pension credit means that the poorest third of pensioners now receive £32 a week more than they would have done had we simply raised the basic state pension in line with earnings since 1997? The pension credit now pays more than £6 billion a year to our poorest pensioners, guaranteeing them now a minimum income of £109 for a single pensioner and £167 for a pensioner couple.

Photo of John Healey John Healey The Financial Secretary to the Treasury

I will, and it is good to see the hon. Gentleman back in his place.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

That is very kind. Does the Financial Secretary think it right that pensioners in the category that he has just described should be paying an effective marginal tax rate of 40 per cent? What does he think imposing such a marginal tax rate on pensioners with small savings or other incomes does to the incentive to save among people on modest incomes during their working lives?

Photo of John Healey John Healey The Financial Secretary to the Treasury

I do not accept the hon. Gentleman's point. My argument is about the importance of prioritising the resources we have to help the poorest pensioners. I do not believe the prescription of the Conservative party, of simply increasing the basic state pension by the rate of earnings, is the answer. With over a fifth of pensioners retiring now on more than £400 a week, I do not believe that that would be a justifiable use of the inevitably restricted resources that any Government have at their disposal.

The House will welcome the fact that the wife of Philip Davies happily gave birth the other day and I am glad that he was able to deliver his maiden speech, even if it was slightly after the due date. He paid a generous and humorous tribute to Chris Leslie, a local Shipley lad, like the hon. Gentleman, who brought great abilities to this House. Like Opposition Members, I am confident that Chris will be back in this House, whether for Shipley or for somewhere else. However, the current hon. Member for Shipley's speech indicated that he might have some of the same qualities as Chris, and I wish him well.

Mr. Bone has worked hard to gain his place in this House and he paid generous tribute to his predecessors and to his constituency, and I pay tribute to his very good maiden speech.

The hon. Member for Beverley and Holderness is not in his place, regrettably, but he spoke with equal passion about his constituency and about Europe. I will alert my right hon. Friend the Prime Minister to the invitation to Beverley minster, although I say to the hon. Gentleman, "Don't hold your breath."

Michael Gove gave a classic maiden speech, although it may have been a touch too bipartisan for his long-term good within the Conservative party. He displayed the historical and literary breadth and background that we know he brings to this House, with references ranging from John Gay to John Betjeman to Country Life.

On the contributions by old hands, my hon. Friend Mr. Henderson argued in favour of clauses 7 to 10, which rightly bring more flexibility to the provision of pensions. That will increasingly be needed and he is right that the Bill supports the move in that general direction. He also argued that clauses 13 to 15, on scientific research organisations, are important because they will help to support more investment in that part of the British economy. He spoke with knowledge and long experience, both in the House and in his previous role as a trade union official.

Mr. Davies was just warming up when he abruptly sat down. We are pleased to see him back in his seat and hope that his temporary ill health was, indeed, only temporary. He was concerned in particular about the macro-economic position and treated us to his analysis of the fiscal rules. He argued that they are right in principle and right conceptually, but was pessimistic about the Government meeting the golden rule. One or two other hon. Members suggested the same thing.

This year's Budget shows that all tax and spending commitments that we set out are fully funded and that there is a margin of £6 billion against the golden rule in the current cycle. The Budget shows that the golden rule will be met whether the cycle ended last year or ends this year or next year. The forecasts are based on cautious assumptions that are independently audited by the National Audit Office. They also build in a safety margin against unexpected events. Alongside Canada, the UK is now the only G7 country with net debt below 40 per cent. of GDP. Public finances in Britain are sound. There is no threat to the sustainability of the UK public finances in the long term.

Rev. Ian Paisley was worried about clause 67. The Bill does no more than deal with the tax consequences of the proposed reorganisation of water services in Northern Ireland. The Water Service is due to be transferred to a new company in 2006. That company will remain within the ownership of the Department for Regional Development. The reorganisation is not due to take place until early in 2006, following the extensive consultation that he wants.

Photo of Ian Paisley Ian Paisley Leader of the Democratic Unionist Party

Will the Minister assure me that the service will be kept in public ownership and will not get into private hands?

Photo of John Healey John Healey The Financial Secretary to the Treasury

The hon. Gentleman will have to raise that in the consultation process. The Bill, and my responsibility in relation to clause 67, deals narrowly with the tax consequences of the proposed reorganisation.

My hon. Friend Stephen Hesford paid tribute to the wide set of policies that are the responsibility of the Chancellor. He described the Treasury as no longer being the dead hand of the Government. It put me in mind of the quote by Harold Wilson, when in contrast he said that the Treasury is full of very clever chaps who are expert at saying no. My hon. Friend was right to say that the principle of fairness underpins the Bill. It does so because we are dealing with those who evade tax and, by doing so, we help to ensure that they do not steal an advantage over their competitors and impose additional tax burdens on those who pay the tax that is due.

Corporate anti-avoidance measures in the Bill are targeted against avoidance. This means that they should have no impact on genuine commercial activity that does not have a UK tax advantage motive. I stress that concern because the hon. Member for Runnymede and Weybridge raised it. The Government are committed to maintaining a modern and competitive tax system, but for that to be effective, everyone must pay a fair share of taxes and the taxes that are legally due.

My hon. Friend the Member for Wirral, West asked who the beneficiaries of e-conveyancing will be. First, the taxpayer will be a beneficiary, because the process is simplified immeasurably. The solicitor carrying out the e-conveyancing will be aware of all the requirements and will discover automatically whether there are any errors, so the second beneficiary will be Her Majesty's Revenue and Customs, because of the efficiency savings resulting from that type of electronic communication and dealing.

Mr. Dorrell is a former Financial Secretary to the Treasury. I accept that his interest, like mine, is to ensure well-targeted action to counter avoidance, although I am less sure about the group therapy that he seemed to propose for current and ex-Treasury Ministers. He raised important principled concerns about the introduction of what he described as additional discretion for the tax authorities, especially in relation to the arbitrage clauses, 24 to 31. He also described the need for binding tax clearances for the taxpayer.

It might assist the more detailed scrutiny in Committee if I say that the anti-avoidance provisions relating to arbitrage apply only when all the conditions set out in the legislation are met and when HMRC issues a notice. That does not introduce discretion: the conditions of the legislation have to be met and the notice procedure ensures that the legislation is targeted. HMRC has issued guidance and examples of how the legislation will apply in practice. If companies are still unclear about how the provisions apply, they may approach HMRC for clearance, and if clearance is given, HMRC will be bound by it.

Photo of John Healey John Healey The Financial Secretary to the Treasury

I welcome my hon. Friend to the Chamber for the first time this afternoon, but of course I give way to him.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Of course tackling tax avoidance is important, but one of the benefits of having local tax offices is local knowledge. Given the good job that they do and the benefits that the community gets from having an accessible local office, will my hon. Friend ensure that the number of local tax offices is not reduced and, in particular, that the office in Chorley will remain open?

Photo of John Healey John Healey The Financial Secretary to the Treasury

My hon. Friend makes a powerful case for HMRC's local activities. He might have missed the finer points of this afternoon's debate, so let me point out that we are dealing with tax avoidance by multinational companies. I am sure that he is not proposing that we locate HMRC local offices in all the places where such information and advice might need to be provided.

Photo of Stephen Dorrell Stephen Dorrell Conservative, Charnwood

I doubt that any such certificates will be issued by the tax office in Chorley, even assuming that it remains open.

The Financial Secretary has offered an important undertaking to the House. If a taxpayer asks, in advance of making arrangements, whether the Revenue would issue a certificate under clauses 24 and 26, the Revenue will give a straight answer to the question and that answer will be binding on the Revenue in the event that the taxpayer goes ahead with the proposed reorganisation.

Photo of John Healey John Healey The Financial Secretary to the Treasury

We are engaged in discussions with companies and their representatives on that very point. HMRC is prepared to give clearances of that nature and is prepared to be bound by them as I have explained.

The hon. Members for Windsor (Adam Afriyie) and for Wimbledon voiced concern about clause 11, which relates to gift aid. The provision is designed to deal with the situation whereby free admission is given by a so- called donation equivalent to the admission price. The clause therefore upholds the core principles of gift aid in generating new and additional giving and, at the same time, broadens the type of charity to which the gift aid can apply. My officials and I have worked with the sector on the measure and the director of the Museums Association has said:

"To its credit, the Treasury has listened, and is not only modifying its original plan, but also giving museums an extra year to prepare".

Mr. Scott asked whether clause 11 would apply to old books. It will apply if the public are paying to view the books and if it is the charity's objective to look after and/or preserve those books.

The Finance Bill has been introduced with a foundation of fiscal strength and economic stability. Before 1997, Britain simply had not been accustomed to sound public finances or to a strong and stable economy. The challenge now is to lock in our economic success and stability for the future. That means securing the high levels of capital investment, innovation and science, technology, business support and skills that our economy needs for the long term. It means maintaining Britain's position as one of the most open, flexible and competitive countries for business, while still upholding high standards for consumers and employees. That will mean further reform to ensure that the British tax system is competitive, flexible and fair, which is exactly what the measures in the Bill are designed to achieve. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

I understand that the committal motion on the Order Paper will not be moved, and that the Government wish to move a different motion. I call Dawn Primarolo.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I beg to move,


(1) Clauses nos. 11, 18, 40, 43, 44 and 69 and schedule no. 8 shall be committed to a Committee of the whole House;

(2) the remainder of the Bill shall be committed to a Standing Committee; and

(3) when the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill shall be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.

This revised motion has been agreed following late requests from the Opposition parties, which I am happy to agree to on behalf of the Government. I commend the motion to the House.

Question put and agreed to.