I beg to move amendment No. 1, in page 1, line 13, after 'Treasury', insert

', following consultation with the Commissioners for Revenue and Customs,'.

With this it will be convenient to discuss the following amendments:

No. 14, in page 1, line 17, leave out

'appears to the Treasury to be expedient' and insert 'is reasonable'.

No. 4, in page 1, line 17, after 'Treasury', insert

', following consultation with the Commissioner for Revenue and Customs.'.

No. 15, in page 1, line 17, leave out 'expedient' and insert 'reasonable'.

No. 7, in page 3, line 16, after 'Secretary of State', insert

', following consultation with the Commissioners for Revenue and Customs,'.

No. 17, in page 3, line 16, leave out

'appears to the Treasury to be expedient' and insert 'is reasonable'.

No. 10, in page 5, line 43, after 'Treasury', insert

', following consultation with the Commissioners for Revenue and Customs,'.

No. 11, in page 13, line 37, after 'Treasury', insert

', following consultation with the Commissioner for Revenue and Customs,'.

It might be appropriate to say a word or two about the context of this afternoon's business, because this is one of those Bills that sadly seems to have received all-party support to date, and that usually means very bad legislation indeed. Time and again in the House, we are confronted with that revolting political concept, consensus, which usually involves a lack of proper debate and scrutiny of the legislation. A few of us hope to put that right and give the Bill something of a proper examination in the limited time that is now available to us this afternoon. In doing so, I start with the group of amendments that you have just identified, Madam Deputy Speaker.

It is fair to say that the thrust of the amendments covers two principal areas of consideration—one is the general concept of consultation and the other is the contradistinction of expedience and reasonableness, which we shall perhaps come to later. In framing the amendments on consultation that my hon. Friend Mr. Chope and I have tabled, I underwent a rollercoaster ride in deciding finally where to end up, because the amendments suggest that the Treasury be obliged to consult the Commissioners for Revenue and Customs. I was in two minds about that, because when I looked at the genesis of the Commissioners for Revenue and Customs, I found a rather mixed picture, and it is fair to say—I should warn the House—that this is perhaps not quite so straightforward as it would seem.

I wanted to create a vehicle, a mechanism, whereby somebody other than the Treasury can look at the very important matters that we are dealing with in the Bill—retrospection and all that goes with it—and I lit upon the commissioners as the most appropriate body. In doing so, I went to the Act that set up the commissioners and, indeed, to the explanatory notes to that Act, and I want to share them briefly with the House, so that hon. Members can judge whether my amendment is appropriate. Obviously, I will argue that, on balance, my amendment represents the way forward, but I want to attach a health warning to it.

I refer first to paragraph 7 of the explanatory notes to the Commissioners for Revenue and Customs Act 2005, which states:

"The Act provides that, in the exercise of their functions, the Commissioners will comply with directions of a general nature given to them by the Treasury. It provides the legislative structure within which the Commissioners have the operational discretion to organise in the most appropriate way, and to make changes over time as necessary."

Straightaway, we have run into a possible problem in that I am arguing that we give the commissioners the opportunity to be consulted, whereas we have right there in front of us the phrase,

"the Commissioners will comply with directions of a general nature given to them by the Treasury."

That is my first health warning on the amendment.

Is not what my right hon. Friend has just read out a lethal health warning in that, in effect, even if amendment No. 1 were accepted, the provision would have no teeth?

I understand what my right hon. Friend is saying. If he will bear with me for just a short while, I shall try to balance out the argument. I thought that, in fairness to him and other hon. Members, I should make them aware of these things, as part of their judgment and that of the House on my amendment.

I am afraid that my right hon. Friend's reservations will be perhaps strengthened by the fact that paragraph 36 of the same document says:

"the Commissioners act on behalf of the Crown and are civil servants. This continues the arrangements for the predecessor departments, and it is intended that one of the Commissioners will be appointed by the Prime Minister to be Permanent Secretary of HMRC, and by the Treasury to be Principal Accounting Officer."

I confess to my right hon. Friend that things are going downhill rapidly, and we must bear that in mind.

I am happy to say that the ray of light comes somewhat later because, further on in the document—this is slightly more encouraging—paragraph 46 says:

"The Commissioners' responsibility for the collection and management of revenue is defined in section 51(3) as meaning the same as 'care and management' in previous enactments. It thus preserves continuity of treatment for those revenues that previously were subject to a duty of care and management, as this term is familiar to the wider business, legal and tax practitioner communities".

It then makes reference to national insurance contributions, just to tie this into the Bill and the amendments that we are considering.

Switching back from the explanatory note to the 2005 Act itself, I shall now draw the attention of the House to section 5(1) to (4), which spells out how the commissioners will be

"responsible for . . . the collection and management of revenue" and "other functions". Section 5(4) states:

"'revenue' includes taxes, duties and national insurances contributions."

We are on reasonably firm ground there.

The ray of light that I have detected in the 2005 Act—this may help my right hon. Friend and other hon. Members to balance their judgment—is that section 9(1), on ancillary powers, states:

"The Commissioners may do anything which they think—

(a) necessary or expedient in connection with the exercise of their functions, or

(b) incidental or conducive to the exercise of their functions."

So we have in the 2005 Act itself the possibility that the commissioners will be able, where they see fit, to act rather more independently of the Treasury than the previous words that I mentioned would suggest.

I am not convinced by the point that my right hon. Friend makes. Perhaps he could clarify. If the Government make the overarching decision on the direction of Her Majesty's Customs and Revenue, I do not understand how there can be any real discretion.

My hon. Friend makes a fair point. The judgment that we must make is between the overall statutory framework in which the commissioners operate on the one hand and their more detailed management and day-to-day responsibilities on the other. What I want to go on to suggest in support of the amendment is that we can be perhaps somewhat more optimistic that, in the detailed implementation of the Bill, we should expect the commissioners to be able to exercise that rather more detached position that I suggested just a moment ago in that they may do anything that they think

"necessary or expedient in connection with the exercise of their functions."

Has my right hon. Friend noticed the difference between what he is now reading from the text about such things being "necessary or expedient" and the wording of the Bill, which refers particularly to expediency, without any reference to necessity?

I am sure that my hon. Friend would not want to hurry me on to the next part of my argument because that relates, quite properly, to some of the other amendments in the group, on which we will consider whether we prefer the words "expedient" or "reasonable", as set out in the amendment that he has tabled. I will not get to that quite yet, if he will forgive me, because we are about to get to the meat of this section of the amendments.

We are seeking in our amendments to oblige the Treasury to consult the Commissioners for Revenue and Customs and we are faced with a straightforward and simple proposition that occurs fairly frequently when we consider Bills of this kind: are we content with what the Government are trying to tell us in the Bill? Clause 1(1) states:

"it appears to the Treasury to be appropriate to make regulations under a relevant power for the purpose of reflecting the whole or part of the provision made by the retrospective tax provision."

We see the phrase, "it appears to the Treasury", full stop. That is what the Government want us to accept. In other words, they are saying "Trust us. We are the Treasury; we are the Government, so it will all be okay." That would be bad enough in any normal circumstances, but we are talking about retrospective tax provision and we are asked to be doubly trusting of the Government and the Treasury's ability to implement a retrospective provision. That, of course, is the theme of the Bill.

I hope that, on Third Reading, we might have an opportunity to reconsider the principle of retrospection, with which I feel as uneasy now as I did when I first had the honour of coming to the House in 1983. Sadly, I recall being told by much wiser and more senior people than I was at the time—although I am now very wise and very senior, as you know, Madam Deputy Speaker—back in 1983 that retrospection was completely out of the question given the traditions of the House, the terms of our unwritten constitution and Magna Carta and all that.

While the right hon. Gentleman is setting out his views on retrospection, will he explain why he voted with the Conservative Government on a Finance Bill that introduced a retrospective tax arrangement? He did not seem to have such an objection then.

The answer is probably shame and guilt. I slaved in the low foothills of government for some nine years, as the Minister might recall, and there were occasions on which I was less than happy with what the Government did. I am sure that she has been utterly content with everything that her Government have done during her honourable period in the Treasury, but, frankly, that is not always the case. It will not wash for her to suggest that I cannot criticise her Government now just because I voted for something as a loyal Minister in the lower levels of government because, as I said, I am now older and wiser. I am now guilt-free, and I hope that the Minister shares that condition.

Has my right hon. Friend not missed a point in his reply to the Minister? The Bill introduces unspecified retrospection—that is the difference.

Perhaps we will come back to that broader question later, but my right hon. Friend is right. The Bill is shot through with all sorts of broad and worrying powers with an assumption that retrospection is desirable and something for which the Treasury can reach almost at will. That is the whole point of amendment No. 1, because I wanted to find a safety net that would give us a degree of reassurance about what the Treasury might be able to do under the broad terms of the Bill's present wording. I lit upon the commissioners as being probably the best bet.

The fact that my amendment was selected was an important first step in that direction. Hon. Members will know that it is one thing to table an amendment, but quite another for it to get through the rigorous filters and mechanisms that exist to ensure that our amendments are properly as they should be. I was encouraged—there was a skip in my step—when I read the selection list this morning and found that my amendment had got through that rigorous process. That indicates that it has real substance and that the House can thus consider it carefully and seriously.

I congratulate my right hon. Friend on moving the amendment and seek his wise counsel as someone who has been involved in parliamentary matters for much longer than me. I was worried about retrospective legislation when I entered the Chamber and I am now more worried after hearing what he has said. Is this part of a broader trend? I made my maiden speech on the Consumer Credit Bill, which introduces retrospection. Is it the case that the Government are using many Bills to go back and change the rule book?

I share my hon. Friend's reservations. He and I must chide our Front-Bench spokesmen a little—I do that from time to time—because we are being sucked into this modern idea of consensus. We are being asked to sign up to the idea that the more Bills and Government measures to which we agree, the more popular we will somehow be outside the House. I plead guilty to the fact that I regard the proper work of the Chamber as that which is being exemplified today. Our proper job is to assume the worst of the Government until they prove otherwise, not the reverse. We should not assume that the Government are doing—

Order. Of course the proper job of the right hon. Gentleman now is to speak to his amendment, which I am sure that he will do.

I will do that with enthusiasm, Madam Deputy Speaker.

I am asking hon. Members to judge whether they are content that the Treasury should be able to make regulations without any further mechanisms or consultation, or whether, as I suggest in the amendment, the commissioners should be able to examine the proposals, or at least be consulted about them. Although I have been open with the House about my reservations about the powers and role of the commissioners, I thought that they had sufficient substance, and that we should respect them sufficiently, to allow the Bill to be amended in the way in which I suggest.

Let me move on to the second broad theme of the amendments. That revolves around proposed new subsection (2), which states:

"Those regulations may be made so as to have retrospective effect if it appears to the Treasury to be expedient, in consequence of the retrospective tax provision, for the regulations to have that effect."

Amendment No. 14, which was tabled by my hon. Friend Mr. Chope, would remove the word "expedient" and insert the word "reasonable".

I have resorted to the oldest trick in the parliamentary book because given the words that we are considering, I thought that it would be appropriate to look up the word "expedient" in the dictionary. The definition was:

"advantageous; advisable on practical rather than moral grounds . . . suitable, appropriate . . . a means of attaining an end".

I thought that that summed up the word rather well. Straight away, we find that the Treasury is amoral, or even immoral, because according to the dictionary definition, expediency is not moral.

Will my right hon. Friend tell the House in which dictionary he looked up that definition? I, too, have consulted a dictionary. The "Concise Oxford English Dictionary" gives another definition of the word "expedient" that is highly relevant to what he is saying. It defines expedient as "politic rather than just".

I looked at one of the longer versions of the "Oxford", but I prefer my right hon. Friend's definition. We do not have to choose. We can look at both definitions because they seem to be moving us in the same direction. We have flushed out the Treasury and the Government easily. By using the word "expedient" in the Bill, which we wish to change through amendment No. 14, the Treasury has bared all. The Minister will have to defend herself, her Department and the Government against a charge of immorality because that lies behind the definitions of the word.

My hon. Friend the Member for Christchurch and I would like to replace the word "expedient" with the word "reasonable", my dictionary definition of which reads:

"having sound judgement; moderate; ready to listen to reason . . . in accordance with reason; not absurd . . . inexpensive; not extortionate".

Could we have a better choice of terms before us in the context of the Bill?

Although I do not wish to be pedantic about the use of language, I am still not clear why we should rely on reason, especially the reason prevailing at the Treasury, if the Department is given the right to create regulations that impose retrospective taxation. Why should we leave the reason to the Treasury because that would take us to the logical result of retrospective taxation?

My hon. Friend is challenging the whole principle underlying the Bill, which I would love to do. We will, of course, have the opportunity to do that on Third Reading. We are examining in a focused way the mechanism by which retrospection would be implemented by the Treasury—after consultation with the commissioners, as I would prefer it. The Bill would allow the Treasury to make its judgment on retrospection simply on the basis of expediency. As we have discovered, no moral judgments would be allowed because the decision would be based on what was practical. That might suit the Government, but I hope that it does not suit the Opposition.

I would like the words "in exceptional circumstances only" to be added to the Bill before the word "reasonable".

I wish that my hon. Friend had tabled an amendment to that effect. I suspect that it might well have been selected, and he would then have been able to share the limelight with me by speaking to it. I accept what he says. Now that he mentions it, I wish that I had tabled such an amendment. Perhaps he and I can get together next time to see what we can do.

You can see, Madam Deputy Speaker, that we are trying to introduce this concept of reasonableness, which of course has been well established over a long period. My right hon. and hon. Friends behind me who are eminent lawyers will be able to expand on that, I hope at some length, in a way that I could not possibly do. I am just trying to lay the groundwork in suggesting that expediency in this context is positively undesirable, whereas reasonableness is something that people want to see in such a measure.

Will my right hon. Friend explain why the Minister has not risen to her feet to explain the difference between the two concepts, and why "expedient" will remain in the Bill rather than being replaced with "reasonable"? This "reasonable" amendment seems reasonable, and the word "expedient" should be replaced.

I suspect—and, looking behind you, Madam Deputy Speaker, I can see that a piece of paper is about to wing its way to the Minister—that Ministers these days do not know the difference between expediency and reasonableness, and need their officials to tell them what it is.

rose—

I will give way to the Minister, who rises with papers in her hands that probably came to her from her officials, and I will, of course, welcome her telling us what they say.

Those comments were unworthy of the right hon. Gentleman. He is entertaining the House very well this afternoon but knows full well that I will reply to the points that have been made when he and his hon. Friends have concluded their remarks, to ensure that I have heard all their points before I venture to reply. Perhaps, as he is so experienced in the House, he would like to explain that to James Duddridge.

We seem to have touched a rather raw nerve there, Madam Deputy Speaker, do we not? The Minister will, of course, have plenty of time this afternoon. We have two or three hours to go before we are forced by the Government's wicked programming and timetabling to curtail our remarks. I look forward to hearing what the Minister has to say. Perhaps she and my hon. Friend the Member for Rochford and Southend, East can get together afterwards and have a quiet word about morality.

I have simply tried to lay the groundwork for a short debate on these matters. I have tried briefly to outline why we should introduce the commissioners into this part of the process and why a distinction should be made between expediency and reasonableness. I very much hope that my right hon. and hon. Friends will be able to support me in this. I hope, too, that in spite of the Minister's prickliness, when she comes to reply, she will able to see the strength of our argument and, who knows, perhaps even accept one, if not both, of those amendments.

I congratulate my right hon. Friend Mr. Forth on stealing most of my thunder on the amendments in my name, Nos. 14, 15 and 17, to which I want to address some brief remarks.

The purpose of the amendments is to introduce a degree of equity, fairness and, most importantly, objectivity that is lacking in the current wording about the power to make retrospective provisions under delegated legislation. The whole issue of retrospection is contentious and controversial, and I am sure that when we come to discuss the next group of amendments, which are designed to limit the extent of that retrospection, we will be able to look at that subject in more detail.

In amendment No. 14, I am trying to introduce a requirement that the retrospection power could not be used unless it was reasonable to use it. I find it hard to believe that the Minister can cavil at that. Why should the Government be seeking powers to exercise retrospective legislation other than in circumstances when to do so would be reasonable?

In looking at the amendments, I am torn between those tabled by my hon. Friend and those tabled by my right hon. Friend Mr. Forth. My hon. Friend's amendment No. 14 would leave out the words

"appears to the Treasury to be expedient", whereas my right hon. Friend's amendment would leave in the word "Treasury" and insert

"following consultation with the Commissioner for Revenue and Customs".

I hope that during his remarks my hon. Friend will be able to advance the case for his amendment over that tabled by my right hon. Friend.

The first point is that, as a rule of thumb, my hon. Friend should be inclined to prefer what my right hon. Friend says to what I say, because I am merely one of his hon. Friends. The presumption is that the arguments of those Members of the House who are right honourable should be preferred. Nevertheless, that will not stop me trying to make my case.

My hon. Friend is, if I, as a Privy Counsellor, may say so, far too self-effacing. Perhaps the answer to the point that was made is that both of the amendments have their merits.

My right hon. Friend was not Deputy Chief Whip for nothing. We can see that he has great powers of diplomacy. I am sure that he is right to suggest that there is merit in all the amendments.

To summarise why I think that my amendment, No. 14, is important, I tell the House that it changes the test of expediency or reasonableness from one that is carried out by the Treasury to an objective test, which would make it much more justiciable. It would mean that if a measure were thought to be unreasonable, it could be challenged in the court. At the moment, the test of whether something is reasonable or expedient would be solely for the Treasury.

Perhaps my hon. Friend will be able, as I was not because I wanted to leave time for my hon. Friends to contribute, to elaborate a little on the idea that expediency rests almost entirely on practicability, so the test would simply be, "Can it be done?", whereas reasonableness introduces more of a concept of fairness and, therefore, of judgment. That, surely, is the distinction that we are trying to make and that is so important to those who may well suffer from retrospection in its worst forms.

My right hon. Friend is absolutely right. He and I are saying to the House that if, as we will no doubt hear from the Government, they believe that the extreme circumstances justify the use of retrospection, we should ensure that those powers are exercised with moderation and reasonableness.

I am sure that my hon. Friend is aware that clause 1 allows the Treasury to adjust earnings on any liabilities to national insurance contributions that have already been determined, with the result of changing the amount of contributions that are payable or even creating a new liability. Clearly, according to my hon. Friend's definition, that can be done, but the question is whether it is fair or reasonable that it should be done.

My hon. Friend, a distinguished member of the Standing Committee that considered the Bill, is right to draw attention to that point, and I hope that he will have the chance to expand on it in his own speech in due course.

I find it hard to believe that the Minister will not accept the change proposed in amendment No. 14 so that subsection (2) would read:

"Those regulations may be made so as to have retrospective effect if it" is reasonable

"in consequence of the retrospective tax provision, for the regulations to have that effect."

That would mean that the judge of that reasonableness would ultimately be the courts; it would not be left to the Treasury to decide whether the measure was expedient. It is hard to think of any circumstances in which the Treasury would not think it expedient to legislate in favour of getting more revenue, however just or unjust that might be. That is the big problem with the wording at present; it encourages the Treasury to say, as we often hear from the Chancellor of the Exchequer, that if something will generate revenue it is expedient and must be good, irrespective of how fair or unfair it might be.

I have given the Minister a safety net. If she believes that the Treasury should continue to be the judge, it would, under my amendment No. 15, have to satisfy the test of reasonableness rather than of expediency. I hope that she will accept my amendment No. 14 but if she thinks that would cause great loopholes that the Treasury would not be able to close, as an alternative she could fall back on amendment No. 15, which would still give the Treasury the say, but on grounds of reasonableness rather than expediency.

My right hon. Friends the Members for Bromley and Chislehurst and for East Yorkshire (Mr. Knight) have been consulting the dictionary. In preparation for this short debate, I resorted to "Words and Phrases Legally Defined", a useful reference for legislators. It draws attention to decided case law in the UK and the common law jurisdictions and sets out how particular phrases have been interpreted in the courts, which enables us as legislators to decide which phrases and words we want to incorporate in our own legislation.

In a Canadian case, "Words and Phrases" refers to the "Shorter Oxford English Dictionary" definition of expedient as

"advantageous; fit, proper, or suitable to the circumstances of the case: Useful, politic, as opposed to just or right".

I realise that my right hon. Friend the Member for East Yorkshire was referring to the "Concise Oxford Dictionary", but with the greatest respect, I think that the "Shorter Oxford Dictionary", which is in fact longer, sets out the definition more clearly and precisely. In the case of Health Care Developers Inc. v. Newfoundland, in 1996, there is a reference to whether the terms of the Public Tender Act were wide. The conclusion is that, due to the use of the word "expedient", the Act is extremely widely drawn.

Similarly, a reference in the "New Zealand Law Reports" to a case in 1998 notes:

"'Expedient' is frequently used in statutes . . . While there may be shades of meaning of the word, depending on the context, reference to standard dictionaries brings out its basic meaning . . . Clearly, 'expedient' as used in the section"— of the New Zealand Criminal Justice Act 1985—

"sets a lower threshold than 'necessary', a conclusion reinforced by the consideration that the legislature often employs the alternative standards of 'necessary or expedient' ".

That is especially material, as my right hon. Friend the Member for Bromley and Chislehurst referred to the statute that set up the Customs and Excise commissioners and the powers to deal with what was "necessary or expedient". However, we notice that the words "necessary or" have been left out of the Bill. If the very commissioners are set up under arrangements that enable them to do that which is necessary or expedient, why should the Treasury be given even greater power, without the inclusion of the necessity test?

That is what gives us a little ray of hope. As my hon. Friend rightly points out, in the Bill the Treasury is grabbing everything and basing it on expediency, yet the word "necessary" appears in the detailed terms for the commissioners. By including the commissioners in the process, as our amendment suggests, we are giving ourselves a little extra protection, through the word "necessary", which certainly does not exist in the Bill.

My right hon. Friend is right. That is an important point for the Minister to address when she responds to our arguments. Although we probably will not be able to have more than one vote on this group of amendments, it is open to the Minister to say that she is prepared to accept any number of our amendments, or that she will propose a collective amendment in the other place. My understanding is that as the measure is not a money Bill it will be considered in another place.

I hope that the right hon. Lady will look carefully at our proposals. Although we know that she is a reasonable lady and a reasonable Minister, that is not in itself sufficient. We need safeguards in the statute book against a future Government or Ministers who may not be quite so reasonable. That is why we should include the reasonableness test.

I shall not go through all the other legal precedents and definitions for expedient. The definition can be extremely wide, and if the Treasury is to decide whether something is expedient, it is hard to think of wider terminology. We would be legislating to say that the Treasury could do whatever it wanted if it thought it was expedient, and no one else would have the chance to challenge that. It is almost trite to refer to draconian laws, but even Draco would have been unable to achieve anything as all-embracing as the provisions that we want to amend.

By contrast with the word "expediency", the word "reasonableness" has been tested in the courts on many occasions and is much better understood in our ordinary language. The Government should be prepared to accept that any of their measures should pass that test before they introduce retrospective regulation.

I was not able to consider this point, but my hon. Friend may be able to come to a judgment: does he think that the word "reasonable" would survive in a European context? As so much of what we do in this place is subject to European scrutiny and judgment, does he think that any continental would remotely begin to understand "reasonable"?

I am only just beginning a close examination of the European convention on human rights, as I have recently had the privilege of being appointed by the Prime Minister a parliamentary representative at the Council of Europe, which oversees human rights in Europe.

Order. I hope that the hon. Gentleman will not be led too far astray by Mr. Forth, and will restrict his remarks to the amendment.

I shall certainly endeavour to do so, Madam Deputy Speaker, and I am sorry if my previous response suggested a certain immodesty on my part.

In considering what is reasonable, the Europeans tend to look at human rights and reflect on whether our proposals fit in with the ECHR. We shall deal with that in more detail when we debate the next group of amendments. There is a strong argument, which has almost been conceded by Ministers, that their proposals may not fully satisfy the ECHR. That is therefore the answer to the question that my right hon. Friend the Member for Bromley and Chislehurst asked about the European interpretation of "reasonable".

My hon. Friend's amendment would replace one word with another. Did he consider adding both "expedient" and "reasonable"? If his proposal is not accepted by the Secretary of State and Ministers, would that mean that they could do something unreasonable? Would the addition of both words therefore not be sensible?

Obviously, it would be better than not accepting the amendment at all but, in deference to my hon. Friend, the word "expedient" is far too broad for the Bill, which gives the Government power by regulation to introduce retrospective legislation to penalise British citizens with higher taxes, especially national insurance contributions. If my hon. Friend had tabled such an amendment, I would have been happy to address it, but I do not wish to encourage a joint test of reasonableness and expediency, as there is an inherent conflict between the two concepts. That is why I did not table such an amendment.

"Stroud's Judicial Dictionary" says:

"The word 'reasonable' has in law the prima facie meaning of reasonable in regard to those circumstances in which the actor, called on to act reasonably, knows or ought to know".

That is exactly what we are trying to achieve. The Government should act reasonably in the exercise of the great powers that it seeks in the Bill. There is no reason why we should discuss all the other uses of the word "reasonable", but it is worth remembering that expressions such as "reasonable acts", "a reasonable amount", "reasonable and probable cause", "a reasonable time" and "reasonable care" are frequently included in legislation, and have been the subject of judicial decisions. If we are to introduce strong regulations that can penalise people retrospectively and if the Government act unreasonably, it should be possible to challenge such action in the courts.

Although the concept of reasonableness frequently occurs in legislation sponsored by other Government Departments, it may be strange and foreign to the Treasury which, uniquely in government, lives a completely unreasonable existence. Although my hon. Friend has found other examples of such usage, they may not impress the Treasury sufficiently to persuade it to include the word in Bills such as the one that we are considering.

My right hon. Friend is right, as I have not been able to find any reference in a Treasury statute to the word "reasonableness", but I am sure that the Minister will correct me if my inquiries were insufficient.

I may be able to help my right hon. Friend Mr. Forth. The Treasury may consider the perspective of my hon. Friend Mr. Chope unreasonable. However, it may view it as reasonable, necessary and even expedient to claw back more money through the tax system. I suggest that my hon. Friend look at measure from the Treasury's perspective, which may well deem such behaviour reasonable. That, however, makes me uncomfortable with the use of the word "reasonable".

My hon. Friend appears to be criticising amendment No. 15, which would leave the test of reasonableness with the Treasury. Amendment No. 14, however, would leave the test of reasonableness to the objective observer or the courts so, even if he does not support amendment No. 15, I hope that he will support amendment No. 14 for the articulate reasons that he gave.

So the case is made. That does not mean that nobody else needs to participate in the debate, but we already have evidence that the Government are on the back foot. They want to be seen to be reasonable, and what could be more reasonable than accepting the amendments, particularly amendment No. 14?

My right hon. Friend Mr. Forth and my hon. Friend Mr. Chope have done the House a service by tabling the amendments. When I perused the amendments last night, I was more attracted to my right hon. Friend's amendment No. 2, which unfortunately has not been selected. I was unsure whether his amendment No. 1 would have any effect at all if implemented. The commissioners are not at arm's length from the Treasury. They have a similar purpose, and one struggles to think of occasions when the commissioners have stood up strongly to a Treasury view on a particular matter.

I started out not being sympathetic to my right hon. Friend's amendment because I took the view that it was too weak to be worth the candle, but on reflecting on the matter and listening to what he said, it occurred to me that if approved by the House, it may bring some benefits in that Ministers might decide to set out guidelines to the commissioners telling them, if the power of consultation was incorporated in the Bill, that they were required to take evidence from interested third parties and listen to representations made to them. The issuing of guidelines, which is not part of my right hon. Friend's amendment but which Ministers could nevertheless do, could make his amendment worthwhile. I have been won over as the debate has progressed, because the amendment could be made to work and have some effect. So, on balance, I can say that my right hon. Friend has my support.

I am with my hon. Friend the Member for Christchurch all the way on the amendments that he tabled. I cannot see how the Minister can justify resisting the use of the word "reasonable". A number of definitions were quoted to the House, but the essence of my hon. Friend's argument is contained in the "Concise Oxford English Dictionary" quotation that I read to my right hon. Friend the Member for Bromley and Chislehurst earlier. The "Concise Oxford English Dictionary" defines "expedient" as "advantageous" and goes on to say—this is a killing phrase—"politic rather than just". The Paymaster General is asking us to accept the use of a power that can be taken to be unjust. I wonder why she has not thus far signified that she accepts my hon. Friend's amendments.

I suspect it is highly likely that the courts would not interfere with the use of a power where that power can be used expediently. I do not think the courts would interfere with a Minister saying, "I took that decision because I deemed it was expedient", whereas we know from a raft of court decisions that the courts eagerly give their view where the statute concerned refers to "reasonable". Using the word "expedient" in effect gives Ministers carte blanche.

I agree with what was said earlier. I have nothing but praise for the Paymaster General, but when we are making law and examining the phraseology that we use, we must assume the worst. I am far from happy to allow a future Government of whatever political persuasion to give powers enabling a Minister to deem, on a whim, that a decision is expedient. I hope that on reflection the House will accept my hon. Friend's amendment, and I hope the Minister will accept it.

First, may I apologise to Mr. Forth? I missed the opening part of his speech when he moved his first amendment, but I think that he will accept that I got the flavour from his subsequent remarks.

The amendments are an attempt to make mischief, which is arguably what the Opposition should do. The right hon. Gentleman has discussed his disquiet about the concept of consensus. I think that I understand where he is coming from, but the amendments involve "consultation", which is meaningless mischief making unless there is hope that consensus, compromise and agreement will be reached, so his position is contradictory.

I congratulate the right hon. Member for Bromley and Chislehurst on his verbal sleight of hand when we got into definitions. He more or less accused my right hon. Friend the Paymaster General of siding with the forces of immorality and contrasted that with definitions of "morality" and "expediency", which he got from a dictionary. In this context, however, the converse of the moral position is not immorality but amorality, which is a point that the Opposition do not seem to grasp when they discuss morality and definitions of reasonableness. It is almost impossible to discuss reasonable taxation, which is almost an oxymoron.

I shall provide a parallel to illustrate where I am coming from in the moral argument. Most hon. Members accept that it would not be reasonable in criminal law to carry out the death penalty on someone who had shoplifted a bar of confectionary.

Presumably we can draw the conclusion that the hon. Gentleman and the Government whom he supports impose unreasonable taxation.

Not at all. If the right hon. Gentleman allows me to develop my points, he will understand them in a more rounded way—he may still disagree with them and we may not achieve consensus, but he will understand them.

Most hon. Members would regard it as unreasonable to hang a man for shoplifting a bar of confectionary, although that is a moral decision and I accept that the result might not be unanimous in this House. I sense that there are differing views in this House about what is a reasonable level of taxation and whether a tax is reasonable at all. For example, I think that a windfall tax on the profits of oil companies, which have made the market and considerably increased the price of oil in the past few months, would be reasonable, but I suspect that many Opposition Members would not think so.

The hon. Gentleman is making an amusing and interesting point, but may I draw his attention to the scope of the amendment, which he has missed? The use of the word "reasonable", as my hon. Friend the Member for Christchurch seeks to apply it, does relates not to the issue of taxation per se, but to the introduction of retrospective taxation, which is an entirely different matter.

It is not an entirely different matter, because we are discussing the word "reasonable" in the context of a tax regime.

On retrospection, which has been raised by my right hon. Friend Mr. Knight, it may well be expedient for the Treasury to decide that it wants to claw in more tax revenues. As my hon. Friend Mr. Chope has said, however, an independent body making an independent judgment may well say that such a decision is not reasonable, although it is expedient for the Treasury.

I am grateful to the hon. Gentleman, who makes my point for me. In the light of his remarks, I urge my right hon. Friend the Minister to be very cautious about accepting the amendment. The judgment of what is reasonable in a tax regime—whether we are talking about retrospectivity, the level of a given tax or its very existence—is ultimately a political judgment, as many such things are. It is much more difficult to make that political judgment if one tries to step away from it by suggesting that in some fantasy world taxation, per se, is reasonable. Some people regard it as reasonable and some do not. Some people do not want to pay tax at all.

Will the hon. Gentleman answer my question about the retrospectivity of taxation? It may well be expedient for the Treasury to claw in more money, but it may also be unreasonable for it to take that action. That is the point that we are making.

I accept that some Members would see it as unreasonable. That is why I urged my right hon. Friend to be cautious when considering the amendments. I prefer the word "expedient" to the word "reasonable" for the very reason that the hon. Gentleman highlights. These are political decisions; they are not, and cannot be, moral decisions.

I say to the hon. Member for Christchurch that I cannot comment on the antipodean definition of expediency that he mentioned. However, as a citizen of Canada who lived there for nine years, I am familiar with the way in which the English language is used across Canada, which is particularly distinctive in Newfoundland. I shall try to make the difference graphic. As Members may be aware, there is a federal election going on in Canada. The Canadians call constituencies "ridings". That word means something in this country, but it has nothing to do with parliamentary constituencies. That is an example of the way in which language evolves over time. One would have to be cautious about trying to import a definition from a Canadian law case into this Chamber—and doubly cautious, as most English-speaking Canadians would agree, when it comes from a case in the province of Newfoundland and Labrador, as in that cited by the hon. Member for Christchurch. I am not sure, with due respect to him, that using that definition throws much light on our discussions in this Chamber.

Let me focus for a minute on the question of retrospectivity, which the right hon. Member for East Yorkshire—

East Riding.

I thought that the East Riding was bigger than East Yorkshire, but perhaps not.

Behind the amendments lies a great dislike of retrospectivity. I understand that, but I do not agree with it in this context, as they are halfway to being wrecking amendments.

Does the hon. Gentleman agree that the greater duty of care involved means that one needs to be much more careful with the wording in retrospective legislation than in normal legislation? That has been raised several times, but I am still unclear as to whether the hon. Gentleman recognises the distinction.

I agree that one needs to be particularly careful when addressing matters retrospectively through legislation. That is why the question of retrospectivity deserves particular scrutiny in our debates today and in Committee and on Second Reading. In terms of these amendments, the House needs to put retrospectivity in the context—bluntly—of the rich friends of the Conservative party. We are dealing with a measure and amendments to it that are in no way addressed to the average person in the street. I made a calculation, which might have been wrong, on Second Reading and I am now working from memory. I calculated, using the regulatory impact assessment of how many people would be affected and how much money would be raised, that the average person affected by the measure would earn £300,000.

On Second Reading, the hon. Gentleman held a discourse, which I am sure we are about to hear again, on rich friends in the City and across the world. In Committee, my hon. Friend Mr. Newmark asked the Paymaster General whether she could provide only two examples of what the clause would do. She said that she had provided a long list on Second Reading. I reread the Second Reading debate and could not find it, and she then said that she would provide it for us. I hope that she will do that later. However, perhaps the hon. Gentleman could give two clear examples of the effect of the clause before embarking on his long discourse about prejudice against the City of London.

I reject the concept of prejudice against the City of London.

If one reads the regulatory impact assessment, one realises that the clause will raise £240 million per annum after the initial £95 million in 2004–05.

rose—

The hon. Gentleman is eager—I shall give way shortly. The amendments essentially seek to strip retrospectivity out of the Bill. As I said, we are not discussing a measure that affects the average employee in the street. It tackles artificial tax devices. They are artificial because they change people's conduct so that they behave in ways in which they would not normally engage. The individuals affected should sue their accountants if they did not warn them of the written ministerial statement that was made on 2 December 2004. That is as far back as retrospectivity would go if the Bill were passed as it is worded and the Government chose to exercise retrospectivity through the Treasury. There is a sort of long stop backwards behind the wicket.

The hon. Gentleman speaks of limiting retrospectivity to 2 December 2004. However, he knows that, although the Paymaster General has given us an assurance to that effect, the Bill does not provide for that. That is clear especially from clause 5. We need to re-examine the matter and I am sure that we will do that on Third Reading.

I shall not be pulled into discussing clause 5 because I am sure you would not allow that, Mr. Deputy Speaker. However, clause 5 is entitled "Agreements and joint elections: Great Britain", so I am not sure whether the hon. Gentleman meant to refer to it. We can discuss that on Third Reading, as he suggests.

We are considering artificial schemes, which do not cover the average person in the street but deal with people who earn on average £300,000. Almost all, if not all, receive professional advice. Their accountants should have warned them that, if the national insurance contribution device into which they entered began on or after 2 December 2004, they might be caught by what the Paymaster General had said in a written ministerial statement.

I am grateful to the hon. Gentleman for giving way yet again. He mentions tax advice. On Second Reading and in Committee, we developed the point that we have changed to a general anti-avoidance regime and that a tax clearance scheme from Her Majesty's Revenue and Customs or the Treasury should therefore run in parallel with that.

That is way beyond the scope of the amendments. I am prepared to discuss it with the hon. Gentleman if we have time in the Chamber, or outside the Chamber, but it would not be appropriate to consider general clearance now.

Before the hon. Gentleman allows us to believe that there is nothing wrong with the date of 2 December 2004, does he accept that the Institute of Chartered Accountants said:

"We do not think that anyone reading the Paymaster General's 2 December 2004 statement could have expected the content of this Bill"?

I have no reason to doubt that such words were said—I think by the Chartered Institute of Taxation—but it does not mean that I agree with them. Professional advisers should have warned those who were about to engage on the schemes or devices of the risk, and I am sure that many reputable advisers did so. If they did not warn of the risk, they could be sued because of effects that were unknown to the individual who entered into a device. If the advisers warned of the risk, the individual entered into it with eyes wide open and knew that the House could introduce a change in the law.

Given the time that has been spent on this first group of amendments, and the importance of the succeeding groups, I do not want to spend too much time on this group.

I shall comment first on amendments Nos. 1, 4, 7, 10 and 11, tabled by my right hon. Friend Mr. Forth, which deal with consultation. I share my right hon. Friend's view that tax legislation should be based as far as possible on consultation. It is important that good legislation should reflect discussions that the Treasury has had with tax advisers, professionals and representatives of industry, so that their views can be taken on board. The Treasury has a fair record of consultation with external bodies. Indeed, when retrospective taxation was discussed in the debates on what became the Finance Act 1978, one of the preconditions of retrospective taxation in trying to close tax loopholes was that there should be consultation with professional bodies and institutions. That is an admirable principle, and it is usually followed. However, it is not always followed. My hon. Friend Mr. Chope highlighted, in his brief intervention on Rob Marris, the view of the Institute of Chartered Accountants that, based on the Paymaster General's statement of 2 December 2004, no one would have expected the Bill to have taken this form. So, surprises do occur, despite the efforts of the Treasury, and sometimes legislation does not take the form expected by those who take a keen interest in these matters, both inside and outside the House.

I am sure that the hon. Gentleman will have noticed that the tax part of this anti-avoidance measure was in the Finance (No. 2) Act 2005. It was linked to the 2 December 2004 statement, and it was made absolutely clear at that time that there would also be a national insurance part.

At this early stage, I am loth to break the spirit of consensus that my right hon. Friend the Member for Bromley and Chislehurst accused the Government Front Bench of creating. However, while the Paymaster General believes that those comments were clear, they were not as clear or explicit to others as she would like to think.

I understand why my right hon. Friend has tabled these amendments requiring consultation with the commissioners to appear in the Bill, but, for some of the reasons that he elaborated earlier, I question whether the Commissioners of Revenue and Customs are the right people to consult. He identified their remit and scope from the Act that was passed earlier this year. I put it to him that the short list in amendment No. 2—which was not selected for debate—might have made a better list of parties to be consulted than those referred to in these amendments.

My hon. Friend the Member for Christchurch tabled amendments Nos. 14 and 15 to tackle the question of whether the Treasury should act in an "expedient" or a "reasonable" manner. He has done the House a great service by offering an alternative approach to discussing these matters and to determining who should be the judge in such cases. I shall not trade dictionary definitions with hon. Members, but my hon. Friend and others have flushed out some interesting issues about expediency and reasonableness. I am sure that those whose job it is to implement and follow this legislation will be interested in what the Paymaster General has to say about this.

One issue on which we might want to touch for a moment is the suggestion of the hon. Member for Wolverhampton, South-West that morality does not necessarily play a role in taxation. His strictures on the City of London and avoidance schemes, however, suggest that he applies his view of morality when he chooses.

I think that the Official Report will show—obviously, I stand to be corrected—that I only mentioned the City of London in response to an intervention. I did talk about rich people in relation to the legislation, but I never mentioned the City of London except in response to an intervention.

I apologise for using the hon. Gentleman's remarks in response to an intervention. Next time we come on to the topic, perhaps I should refer to rich people, and that will make him happy. It just shows the problems of responding to interventions from the Opposition, or from the Government Benches, depending on the side of the House on which one sits.

I want to support amendment No. 14, which seems reasonable and sensible—"reasonable" is the operative word.

We are considering the principle of retrospective taxation. Rob Marris has referred to that being applied in this case against fat cats. One can support the principle, but it might be applied to fat cats today and poor people tomorrow. There is an underlying principle of retrospection that must naturally concern us.

It might particularly worry Mr. Forth that his position has quite a lot of support not just from me but from the European Court of Justice. He did not cite that in his defence, but European law, not just the Magna Carta, appears to have some concerns in this area. On Second Reading, I quoted a relevant passage from an April judgment by the Court, which was important and would be applied by anybody seeking to use the law in relation to this Bill. It made two points, one unequivocal and the other more nuanced.

The unequivocal point was that

"The principles of the protection of legitimate expectation and legal certainty form a part of the Community legal order. They must accordingly be observed . . . by the Member States".

That makes it clear that infringement of legitimate expectation by retrospective legislation is unacceptable in legal terms. The more nuanced expression, on which the legal battles will ultimately be fought, was that

"Although in general the principle of legal certainty precludes a Community measure from taking effect from a point in time before its publication— that is, retrospectively—

"it may exceptionally be otherwise where the purpose to be achieved so demands and where the legitimate expectations of those concerned are duly respected".

We are concerned with trying to build into the legislation the maximum possible protection for those legitimate expectations, to ensure that they are respected. Something that is merely expedient from the standpoint of the Treasury, which is practical from its point of view and helps it to garner more revenue—which, of course, we support in a broad sense—is dangerous when applied to that principle. Building in the limited protection that would be given by the word "reasonable" seems the very minimum that one could ask. Mr. Chope is therefore to be commended for tabling the amendment, and I will certainly support it.

This has been a long and broad debate, covering a number of areas. I want to touch on each of them in responding to the amendments. First, I need to remind the House of the context of the proposals that we are considering this afternoon.

Both Mr. Forth and Mr. Chope referred to the question of whether this action was just or right, and the hon. Member for Christchurch spoke about using the mechanism to raise higher national insurance. I remind the House that between 1998 and 2005, both the Conservatives and the present Government produced anti-avoidance legislation in Finance Bills to counter an abuse of tax and national insurance, particularly involving high-value bonuses. Individuals were seeking to disguise their bonuses in order not to declare them as salary, or employment remuneration. They tried to conceal the bonuses, or pretended that they had received the largesse for some other reason and that therefore it was not subject to the normal, straightforward rules of national insurance and tax.

Will the Paymaster General give way?

I want to make some progress.

As the hon. Member for Christchurch implied, this is not about making people pay more national insurance. It is about ensuring that they pay the national insurance that the House, over decades, has decided that everyone should pay. It is a question of fairness. Unfortunately, however, all Governments faced the same problem. Governments would see a contrived avoidance scheme and close it down; the avoiders would then move to another highly sophisticated scheme, which would have to be targeted.

The current Government took a number of steps. I announced the first in a statement on 2 December 2004, making it clear not just that the Government would close the loopholes that they had identified so far, but that any future attempt not to pay the right amount of national insurance or tax would be prevented. Mr. Hoban, whom I welcome to his first debate as a member of the shadow Treasury team, said that that statement was unclear. Let me read a sentence from it, because I am not sure how people can claim to be confused by it or not to understand it.

"We intend that from today both tax and NICs legislation should achieve our objective of subjecting the rewards of employment to the proper amount of tax and NICs, however the rewards are delivered."—[Hansard, 2 December 2004; Vol. 427, c. 41WS.]

That seems perfectly clear to me.

The statement announced the closing of existing loopholes, which was dealt with by Finance Bill tax measures and is dealt with by measures in this Bill. It also introduced a strong deterrent. It said "Just don't do it, because however you do it, we will close down the scheme." The amendments would remove, or weaken, that deterrent. They effectively say to those in the tax avoidance industry "Let us continue to play this game of cat and mouse. You carry on finding ways not to pay tax, and we will close the schemes down after the Treasury has lost the revenue." That is not acceptable to any fair-minded or, dare I say, reasonable person.

The hon. Gentleman also brought up the question of consultation, and the roles of the commissioners and the Treasury. It was a good debating point, but was based on a fundamental misunderstanding of the workings of Her Majesty's Revenue and Customs. As the Bill only completed its passage through both Houses earlier this year, I find that a bit strange.

Her Majesty's Revenue and Customs is a statutory body, and Treasury Ministers represent it in Parliament. It is therefore appropriate for the Treasury to introduce the legislation. Both here and in the other place, there were debates on exactly what was meant by the term "Treasury" in legislation. It means the Treasury as a Department, meaning the Treasury and HMRC.

On the specific amendments, I have to ask why the Treasury and HMRC would not be working together on the regulations. Of course they would, so amendments Nos. 1, 4, 7, 10 and 11 are wholly unnecessary. Whenever Treasury regulations are to be made to supplement primary tax and national insurance contributions, officials from both the Treasury and HMRC always discuss and consult each other on the wording. It is simply unnecessary to enshrine such a normal practice, which has been accepted as straightforward administrative practice for an extremely long time, in the Bill. Doing so would be a waste of parliamentary and drafting time.

Conservative Members then went on to stress the need for consultation, but they know perfectly well that the regulations are subject to consultation and affirmative procedure. Anyone who wants to express their views on regulations can do so. The notion of consultation, as it appears in the amendments, is simply preposterous.

What of amendments Nos. 14, 15 and 17? I do not believe that the right hon. Member for Bromley and Chislehurst intends to destroy the Bill, but if he does, he should have said so when he moved his amendments, rather than dress up his aims in linguistic niceties about the meaning of "reasonableness" and "expedient". The amendments strike at the heart of the caveat of a deterrent. If the statement of 2 December 2004 holds in its deterrent effect, no legislation will be necessary because people will not try, through remuneration—this applies only to employment remuneration—to avoid paying their proper taxes or insurance.

The idea that in those three amendments—Nos. 14, 15 and 17—all that the right hon. Gentleman is doing is a bit of linguistic tidying-up is simply not the case. If he wants to know the use of "expedient", he needs to see it in the wider context. He knows full well that it is not about looking into whatever dictionary one cares to take off the shelf because the context of the word is important as well. In the particular case of proposed new section 4C, the expediency applies to certain specified purposes, which is quite right. If he wants precedent for using the word "expedient" rather than "reasonableness", he need look no further than to his own Government in 1992, although I can understand why he now wants to distance himself from decisions that he was happy to vote for at the time.

This has been an interesting debate, but it would have been better if the right hon. Member for Bromley and Chislehurst had been more straightforward with the House about what he was attempting to do—to remove the strong and important deterrent effect of the regulations. If the right hon. Gentleman still wants to put his amendments to the vote, I ask my hon. Friends to oppose them.

It certainly has been a revealing debate and the Paymaster General's petulance gives the lie to some interesting aspects of the Government's attitude—not least the fact that she has reduced the commissioners to a mere cipher of the Treasury. I do not know what the commissioners think about that or whether the Government would want to view their role in those terms. We now have it on the record that the Paymaster General is asking why we should bother consulting the commissioners because they are one and the same with the Treasury and there would be no point in doing so. We can leave that matter hanging for future study and reference, but it has been a remarkable revelation from a senior Minister about the diminished role of those commissioners.

The Paymaster General's defence of the word "expedient" and her rejection of our attempt to introduce the word "reasonable" were equally revealing. She seems to be saying that any measures designed to counter tax avoidance must be expedient, or they would not work, and that any suggestion of reasonableness is unacceptable. Well, that is very revealing of the Government's attitude both generally and specifically. So from that point of view, this debate, through the vehicle of the amendments, has shone a searchlight not just on the Bill's wording but on the attitude of Ministers and Departments—in this case, the Treasury.

Having listened carefully to the debate and to the—

Is not the Paymaster General's earlier answer to my right hon. Friend a case in point? It may well have been an expedient response to his amendment, but it certainly was not a reasonable one. Perhaps we should look at this discussion in that context.

I am grateful to my hon. Friend, who has elegantly summed up the tone of this debate and illustrated the attitude of the Paymaster General and the Treasury.

I know that my right hon. Friend is normally suspicious of consensus, but has he noted the support among Liberal Democrats for my amendment No. 14?

Yes, and I thought that it was very significant.

Having listened to what my hon. Friend Mr. Chope said about my amendment—I indicated at the outset that I had a realistic view of what I was trying to achieve—I beg to ask leave to withdraw the amendment. I understand, however, that my hon. Friend may wish to press his amendment No. 14 to a Division.

Amendment, by leave, withdrawn.

Amendment proposed: No. 14, in page 1, line 17, leave out

'appears to the Treasury to be expedient' and insert 'is reasonable'.—[Mr. Chope.]

Question put, That the amendment be made:—

The House divided: Ayes 44, Noes 237.

Question accordingly negatived.

I beg to move amendment No. 5, in page 2, leave out lines 10 to 12.

With this it will be convenient to discuss the following amendments:

No. 6, in page 2, leave out lines 13 and 14.

No. 16, in page 2, line 14, leave out '2nd December 2004' and insert '11th October 2005'.

No. 18, in page 3, line 23, after second 'any', insert 'future'.

No. 19, in page 3, leave out lines 32 to 38.

No. 20, in page 3, leave out lines 39 to 41.

No. 9, in page 4, leave out lines 16 to 18.

In many ways, these amendments bring us to the core of the Bill. I shall leave my right hon. and hon. Friends perhaps to concentrate on other aspects of the measure, but the matters in clause 1(1) that attracted my attention relate to subsections (4) and (5) of proposed new section 4B of the Social Security Contributions and Benefits Act 1992, which I seek effectively to delete from the Bill.

I shall look first at proposed new subsection (4), which says:

"It does not matter whether the retrospective tax provision in question was passed or made before the day on which the National Insurance Contributions Act 2006 was passed."

That is blatant beyond all belief. The Government now no longer even attempt to conceal what they are up to or to divert our attention from it. I suppose that I grudgingly give them almost a degree of credit for the fact that they are being perfectly blatant in what they are saying. We now have a Bill, for which the Government have aspirations of its becoming an Act on the statute book, that says, "It does not matter. We can do pretty much what we want, whether or not it was passed now or at some other time—who cares?"

My right hon. Friend is being uncommonly generous. In fact, the Government are being just as arbitrary about what they pay out, let alone what they get in—for example, the discrimination against any of our pensioners who live in Canada, rather than the United States, or in the rest of Europe, rather than the European Union. That happens all the time.

Of course I agree with my hon. Friend. The Government would probably say, "Well, it does not matter really, does it?" because those folk are far away and do not have a direct voice in what is going on here. We are talking about the Government saying that it does not matter how, when or whether they raise money, but I suspect that that would apply equally to their attitude to whether they disburse money.

Proposed new subsection (5) says:

"But nothing in subsection (2) authorises regulations to be made which have effect in relation to any time before 2nd December 2004."

My hon. Friend Mr. Chope has tabled an amendment by which he seeks to alter that date. I would prefer to remove it altogether. The Paymaster General attempted to justify that date in summing up the previous debate. She said something along the lines of, "If a Minister says on a certain date we may legislate in the future to do something that you may do in the future but we are not sure and we really don't care very much, that is all right."

We are now into the era of blanket provision, forecasting or attempting to forecast what might be and giving the Government what amounts to a blank legislative cheque to do whatever they like. That may be all right in the minds of Ministers whose attitude, frankly, to government and Parliament over the past seven or eight years has been consistently contemptuous—we have almost come to accept that—but to have it spelled out in a Bill is going way too far. It is one thing to alter the procedures of the House, to reduce, curtail or deny debate or to cut down almost to nothing the time available to scrutinise legislation in Committee, but when phrases such as "it does not matter" or "any time before" this or that date are included in a Bill, we are getting into extremely dangerous territory.

My right hon. Friend is making a good point. If passed, will not the Bill rip up the rights that we have enjoyed in this country since Magna Carta? Under legislation passed by the House, the citizens of this country should know precisely where they stand. Are we not returning to the pre-Magna Carta age, when law used to be made at the whim of the king, but it is now being made at the whim of the Government?

Yes, I fear that my right hon. Friend is right. I am worried that we are finding that gradually over time—Bill by Bill and Act by Act—what we always thought was sacrosanct, even though we do not have a written constitution, is being eroded by such phrases. For most of my life, I have taken a lofty attitude to written constitutions. I thought that we did not need them and that they were for only people such as the Americans and the French. I have now come to the view that only a properly written constitution will protect us from Governments such as this. Such phrases in Bills have the effect—whether openly or surreptitiously and gradually or suddenly—of removing from our lives what we thought were precious certainties. If we do nothing else, surely we must remove phrases such as "It does not matter" from our legislation.

I am following what the right hon. Gentleman says with great interest and agree with most of it. However, I am puzzled about the effect of amendment No. 6. Surely leaving out those lines from the Bill would increase the Government's powers under proposed new section 4B(2) and thus make things worse?

I concede to the hon. Gentleman that that is a possibility. It is something that he and the House must take into account when they decide what to do about the amendment. I am trying to make the general point at the moment that such provisions appear to give the Government enormous and unlimited powers to do whatever they want, whenever they want, and, indeed, to do so retrospectively. That danger exists throughout the Bill.

When we consider the other amendments in the group, we will find that they address a similar area of concern. Proposed new section 4C(3)(a) is a similar measure that says that regulations may make provision to modify

"any provision of any enactment".

Again, the Bill will give extraordinarily wide powers under regulations. The problem is that owing to the way in which our parliamentary procedures work, regulations cannot be amended. Whether regulations are considered under the affirmative or negative procedure, they come before the House on a take-it-or-leave-it basis.

Bad enough though such a phrase is, it is in many ways worse than it would be if it related to primary legislation. Such legislation is at least, in theory, amendable, although goodness knows that we get little opportunity to amend legislation these days, unless the Government have cocked something up and have to amend their own legislation, which happens all too frequently.

Proposed new section 4C(3)(b) says that regulations may make provision

"for any provision of any such enactment to apply in such cases, and with such modifications (if any), as the regulations may prescribe."

The wording is becoming more general and generous, but less restrictive and specific. When confronted with such wording, the House is being asked to say to the Government, "We trust you. We think that this is generally rather a good idea,"—which, by the way, I do not, but we will come back to that on Third Reading. However, the Government are saying to us, "If you sign up to these words, there will and can be no comeback whatsoever." By using the word "any" over and over again, the Government are telling us that they will do what they think is appropriate at the time, retrospectively or otherwise.

I draw the attention of the right hon. Gentleman to the bit of proposed new section 4C(3)(a) that he did not read out. It says:

"including this Act and any enactment passed or made on or after the commencement day".

That is not retrospection.

That line is not retrospective—it must be the only provision in the Bill that is not. I congratulate the hon. Gentleman on finding the one line of the Bill that is not retrospective, but that does not exonerate the Government from any guilt about, or blame for, the way in which they are trying to give themselves the broadest possible powers to do almost anything that they want at any time. Regarding that provision, I concede to the hon. Gentleman that the Government may use such powers only after the commencement day, but I am not sure that that gives me much comfort.

I understand the right hon. Gentleman's remarks about the powers of the Government and I tend to agree with him about the lack of ability to amend certain statutory instruments. However, in terms of the part of the Bill that I read out, it would be open to the House in a subsequent enactment to say that new section 4C(3)(a) and so on will not apply. There could be an override, decided in the House, in subsequent legislation, so the House could have the opportunity to decide.

The hon. Gentleman has been here long enough to know that subsequent legislation is not as easy as it sounds when he says it quickly. If he were to ask his hon. Friends who are Ministers how easy it is for them to get the Bills that they want, to do the things that they want or to correct the things that they want to correct, he would get a pretty dusty response. There is always a debate, and it is a very important one, as to whether it is better to have a measure in a Bill, thus making it difficult to change by subsequent primary legislation, or whether, ironically, it is preferable to have it in regulations because although, under the current procedure, they cannot be amended, they can be returned to somewhat more easily.

I make a half-concession to the hon. Gentleman in the sense that if something were to be done by regulations, and they were faulty, that could at least be picked up. In fact, I can assure him that the Joint Committee on Statutory Instruments spends its entire life doing just that, if I may say so with all due modesty, very well indeed and with great competence and élan.

I am struggling to follow the argument, but I was interested in some of the right hon. Gentleman's earlier comments about constitutional reform and a commitment to a written constitution, which seemed to be an important statement. He said that having a written constitution was a rather French thing to do because, in the past, the French—and the Americans—have tended to have such constitutions. Presumably, a written constitution would, in some ways, make us a bit more French, rather than a bit more British, although presumably we would have a British written constitution rather than a European written constitution. I thought that more clarity would be helpful.

I am grateful to the hon. Gentleman for saying that something I said was important—it is the first time that anyone has said that to me in my time in the House.

The hon. Gentleman's comments were interesting, but were they in any way relevant to this debate?

I can see that the hon. Gentleman is getting himself into training for elevation to the Chairmen's Panel one day. He beat me to the draw. What he said is very apposite, and what Ed Balls said was not.

My frustration, of course, is that I am unable to give the hon. Gentleman the answer that I would love to give him. Knowing you, as I do, Mr. Deputy Speaker, I dare not even attempt it.

rose—

I will give the hon. Gentleman another go, provided that he will not tempt me to get into your bad books, Mr. Deputy Speaker, which is the last thing I would want to do.

I am grateful for the chance to intervene again, and I shall try to make sure that I phrase my question more properly. If we had a British written constitution, would that mean that concerns such as those that the right hon. Gentleman has about the Bill would be tackled in another place or through the courts rather than in Parliament? Does he think that that would strengthen or weaken our parliamentary democracy?

With more than half an eye on you, Mr. Deputy Speaker, I say briefly that we should have a British written constitution, which would, among other things, protect us from further depredations from the ghastly European Union and go a long way towards protecting taxpayers from the ghastly Government. I hope that gives the hon. Gentleman some idea of where I am coming from and where I would like to go.

I have given enough of a flavour of my reasons for believing that these amendments, too, are an important part of our scrutiny of the Bill. Given my unhappiness about the whole concept of retrospection in any case, it is the words in the parts of the Bill that I have highlighted that give me great unease. For that reason I hope that the House is able to support, if not all the amendments before it, certainly the one referring to amendment No. 5.

I enthusiastically support amendment No.5. With no collusion, my right hon. Friend the Member for Bromley and Chislehurst and I filed amendments in exactly the same terms. That must show something, although I am not quite sure what. I hope the House will take the view that it shows that we are working on the right lines.

Amendment No. 5 is important as it removes one of the worst and most oppressive elements of the Bill, which offends against all the principles of natural justice. I am not convinced about amendments Nos. 6 and 20.

I shall devote most of my remarks to the support of amendment No. 16, which proposes leaving out the words "2nd December 2004" and inserting instead "11th October 2005"; in other words it substitutes the date when the Paymaster General made her written statement to the House for the date when the Bill was published and thus available for inspection of its contents. Although ideally, retrospection should not take effect before the date of a Bill's enactment, it is a well-established convention for Finance Bills that retrospection can apply from the date when the Bill was published.

My hon. Friend has just pointed out that the measure was originally promulgated through a ministerial written statement. Does he share my extreme unease that written ministerial statements are an ever more common way of promulgating Government policy because they cannot be questioned? Ministers know that instead of coming to the House, making a proper statement and subjecting themselves to questioning by Members of Parliament the written statement cannot be subject to questioning.

I very much agree, especially as the title of the ministerial statement was "Finance Bill".

I think that I can help the hon. Gentleman and Mr. Forth. The 2 December 2004 statement was part of the pre-Budget report, which was subject to statement and questions in the House. It was then subject to debate, as some of their right hon. and hon. Friends can confirm, in the proceedings on what became the Finance (No.2) Act 2005 when the tax measures, the sister measures to national insurance, were debated. It has in fact been questioned and debated a lot.

The point at issue is whether on that date in December 2004 anyone reading that written statement, which was headed "Finance Bill"—it did not say "National Insurance Contributions Scam", which might have put people on notice—

Does my hon. Friend share my concern that such written statements will create a precedent for further retrospective legislation?

Certainly. The idea of governing by ministerial fiat, by statement, is dangerous, and not only in the context of the measure that we are discussing. One might consider the consequences of this year's pre-Budget report, where the Treasury unsaid what it had previously said about the eligibility of the inclusion of ordinary houses in self-invested personal pensions. An earlier ministerial statement had announced that from April 2006 it would be possible for people to include property in their SIPPs and on that basis many companies set up businesses and incurred expense and risk. The Government will not compensate people who were adversely affected by anticipating Government legislation. I have no quarrel with people anticipating legislation. They took the Government's word as a true intention of what would happen.

It turns out that that is not going to happen. As recently as 14 November this year, I received a letter from the Economic Secretary justifying and, indeed, commending the proposals that SIPPs should include assets such as houses. He pointed out that that would not have an adverse effect on the property market. In any event, he said, only 1 per cent. of pension funds would be affected. Anyone who assumed from that letter that they should invest in such pension funds or set up schemes to facilitate such investment would have been acting in advance of the Finance Bill and therefore at their own risk. Unfortunately, no compensation is available in such a situation, but the Government are suggesting that if they make an announcement through a written answer on national insurance contributions, it should be regarded as gospel. Their approach is therefore inconsistent. We appear to be moving into a new era of government by fiat—whatever Ministers say goes—while, at the same time, letters are written to introduce provisions for compensation for people who act on the basis of those Government statements only to find that they have acted to the detriment of their interests.

Does my hon. Friend agree that since the SIPPs fiasco, no one should ever believe a Government Minister again, if, indeed, they ever did so? If there is any doubt about that at all, they should pay attention to the distinction that he made between the Minister's suggestion that, if the Government said something, everyone should believe it and act on it, and the fact that people did act on SIPPs and had their fingers burned. We now know where we stand—we should never ever believe what a Government Minister says, especially one from the Treasury.

I wholeheartedly agree, which is why Magna Carta, to which my right hon. Friend Mr. Knight referred, and the wise words of Adam Smith in "The Wealth of Nations", which have been mentioned by my hon. Friend Mr. Dunne, are pertinent.

Is my hon. Friend aware that he can pray in aid the judgment in the case of The Sunday Times v. The United Kingdom 1978–80, in which the European Court concluded that a citizen must be able, if necessary with appropriate advice, to foresee to a reasonable degree the consequences of a given action? That case required Governments to make their laws predictable and known to the citizens whom they are supposed to serve. If the Bill is enacted, does my hon. Friend share my view that it is likely to be challenged in the European courts because it breaches human rights?

Yes, that seems extremely likely. Indeed, page 12 of the explanatory notes, which carries the sub-heading, "European convention on human rights", suggests that the Government half-expect that to be the case. Paragraph 82 states:

"The Government also considers that regulations that may be made under the power are capable of maintaining a fair balance between the individual's interest and the general community interest without placing an excessive burden on the individual, and therefore that the regulation making powers do not breach obligations".

The Government are talking about capability, but we should ensure that it is impossible for the regulations to do anything other than comply with the ECHR. The Bill, however, does not make any such provision.

I am confused, as the front page of the Bill carries a statement by the Chancellor of the Exchequer that I find difficult to reconcile with my hon. Friend's argument:

"In my view the provisions of the National Insurance Contributions Bill are compatible with the Convention rights."

Will my hon. Friend clarify the position?

The Chancellor would say that, wouldn't he?

Indeed. My hon. Friend James Duddridge is an assiduous legislator, and he knows that we must look at the small print.

If one could take the statement at face value, there would be no need for the explanatory notes, which are after all produced by the Government. The notes make it clear that there is an issue, which has been raised in the other place and by accountants and tax lawyers. If the Bill is passed into law in its present form, we may well find that it results in the sort of challenges to which my right hon. Friend the Member for Bromley and Chislehurst referred.

My hon. Friend mentioned Adam Smith. There is a great passage in "The Wealth of Nations" that has a bearing on our debate. Adam Smith wrote in 1776 that

"the tax which each individual is bound to pay ought to be certain and not arbitrary. The time of payment, the manner of payment, quantity to be paid ought to be clear and plain to the contributor and to every other person."

Is not the problem with the Bill the fact that it is vague and arbitrary? That is our concern.

My hon. Friend is right. I did him a disservice in attributing the use of that quote to my hon. Friend the Member for Ludlow. It is good that we have relatively new Members of the House who are so familiar with that great work, "The Wealth of Nations". That augurs well for liberty and freedom as issues that will be debated much more fully in the House. I am glad my hon. Friend Mr. Newmark is present today to develop the argument that he started articulating in Committee.

We are discussing not a practical matter, but an issue of supreme principle and importance. There are practical consequences of Governments legislating by fiat, and there are times when, as a Member of Parliament, one might wish that the law could be retrospective. For example, I have a constituency case where somebody is arguing bitterly that a single prostitute living above a shop should be deemed to be running a brothel. Unfortunately, the law says that in order for it to be a brothel, there must be more than one prostitute operating. My constituent would be delighted if the Government introduced legislation making it retrospectively criminal to be doing what that individual is doing, but those of us who believe in the rule of law and the principle of parliamentary legislation would not support such retrospection, even if it was thought to be expedient. I am sure there are people who would say that such legislation was expedient, but I do not believe we should allow that.

It is true—this is the point that the Paymaster General made—that there are precedents for retrospection. They go back to the time of the second world war, but during the 1970s, under the Labour Government of the day, the then Chancellor, Denis Healey, now Lord Healey, brought in rules to deal with tax avoidance. Retrospection was a controversial issue at the time and the debate about that resulted in the development of the Rees rules. Those were drawn up by Lord Rees, who at the time was shadow Chief Secretary to the Treasury and went on to be Chief Secretary to the Treasury and an important member of the Government of my noble Friend Lady Thatcher.

Mr. Rees, as he was in those days, argued that retrospective legislation should be subject to four conditions. First, the warning given in the House of Commons

"must be precise in form. A mere suggestion that there are vague schemes of tax avoidance that must be counted should not suffice. Secondly, the problem at which the warning has been directed should immediately be referred to a committee".

He referred to one that he understood existed, made up of members of the Inland Revenue and the accountancy and legal professions.

"Thirdly, if the committee can hit on appropriate legislative provision, the draft clause . . . should immediately be published in advance of the Finance Bill so that those who are likely to be in the field of fire will have a second clear intimation of what to expect. Fourthly, such a clause must, without fail, be introduced in the following Finance Bill . . . I believe there may be situations in which" that approach

"is the only solution if we are to counter avoidance of the sophistication and scale which we understand has been current of late. But if a Government are to adopt that remedy, it must be on" that basis.

The Paymaster General cannot suggest that there are no precedents for retrospection, because there are precedents for retrospection with safeguards, and I tabled amendment No. 16 because those safeguards have not been met in this particular case. The statement by the Paymaster General on 2 December 2004 was not the subject of immediate consultation with the relevant professions, and it was not the subject of a clause in the next Finance Bill. I agree that that is true of the tax provisions, but they are a separate issue, because we are discussing provisions relating to national insurance contributions.

I thought it telling that the regulatory impact assessment states:

"As this is a measure directed at tax avoidance, consultation was not appropriate before the publication of the Bill. The proposal is to apply to NICs the existing rules for disclosure of tax schemes. These rules were the subject of detailed discussions with the accountancy and legal professions, and other businesses during 2004".

Now I am puzzled, because I am sure that my hon. Friend heard, as I did, the Minister boasting that consultation is in the bloodstream of the Treasury and that the Treasury does nothing without consulting generously and in detail, but my hon. Friend's argument seems to run counter to that. Can he explain that paradox?

Hon. Members must draw their own conclusions. When the Paymaster General made her statement, if the Rees conventions had been complied with, consultation with the relevant parties would have been carried out immediately and the Bill would have included the appropriate draft clauses. However, the regulatory impact assessment tells us that no detailed consultation took place before the Bill was published, because the measure is directed at tax avoidance. If the Paymaster General is right in saying that everything was plain and apparent back in December 2004, what harm would there have been in working out the detailed legislative formula that was to flow from the proposition set out on 2 December 2004?

As the Institute of Chartered Accountants has said:

"We do not think that anyone reading the Paymaster General's 2 December 2004 statement could have expected the content of the Bill."

"Anyone" includes not only dullards, but smart lawyers, accountants and others. I know that my hon. Friend Mr. Hoban, who is on the Front Bench, is a distinguished accountant, and perhaps he will tell us later whether he knew exactly what would happen when he read the Paymaster General's statement. If it was obvious, there could have been no harm in having detailed consultations with the profession, but that never happened.

Amendment No. 19 would remove a grotesque Henry VIII provision that gives a power to change primary legislation by regulation and to do so, in certain circumstances, retrospectively. That is wholly unjustified, even in what the Minister described as the extreme circumstances that make the Bill necessary. I hope that she can explain why she thinks that this particular provision is necessary. This is a very serious issue. We are talking about an assault on fundamental freedoms that go back to the days of Magna Carta. The Minister will say, as always, that there is a precedent. The problem is that every time we take away one of those freedoms, or salami-slice it a little bit, we are gradually giving the state more power.

The Government argue that the Bill has an element of proportionality. I should like to draw the House's attention to what the explanatory notes say about article 8 of the European convention on human rights. Paragraph 84 states:

"Clause 7 enables, but does not require, provision to be made requiring disclosure".

Paragraph 85 states:

"The Government considers that any perceived interference with rights under Article 8 of the Convention created by these provisions is justified under paragraph 2 of that Article on the grounds that it is necessary in the interests of the economic well-being of the country."

If the provision was in the interests of the economic well-being of the country because it would raise vast sums of money proportionate to the overall budget of the Exchequer, one could begin to see that it might comply with the article.

Let us consider this in context. At its height, the provision will raise £96 million for the financial year 2004–05. Yet, earlier this month, the Government announced in the pre-Budget report that they propose to borrow £151 billion over the next five years. It is hard to see that raising £96 million—which equates to £3 or £4 per person in employment—through retrospective legislation can be justified on the basis of proportionality. Is that modest gain justified by the enormous assault on our civil liberties and human rights represented by this provision? I do not think so, and that is why I hope that the House will support the amendment.

I want to start by speaking about amendment No. 18, which is a probing amendment. If the Paymaster General can satisfy me that it is unnecessary, I will not press it to a Division. However, I should like to hear her comments on it.

Amendment No. 18 would add the word "future" to the sentence

"any purpose relating to any statutory payment", so that it would read, "any purpose relating to any future statutory payment". I believe that there are only four sorts of statutory payment: sick pay, maternity pay, adoption pay and paternity pay. The amendment would remove the potential for retrospection from any statutory payments. I should therefore like to know whether the Paymaster General envisages the use of the retrospective provisions for statutory payments. If not, should not the amendment be incorporated in the Bill? If she does envisage such use, will she give an example of when it would be justified?

Statutory pay is given for a good reason and people who receive it often spend it almost immediately. If the Government intend to claw it back, the reason for doing that should be placed on record.

The concept of retrospective maternity pay is rather interesting.

The retrospective clawback gave me cause for concern.

I should like to make some general comments about the speeches so far. We have heard some powerful contributions and I agree with everything that my right hon. Friend Mr. Forth said when he set out his concerns. I part company with him because I am not sure whether his amendments would have the effect that he wishes. The intervention of Dr. Cable hit the nail on the head. If the amendments are accepted, there may be less, not more, protection in the Bill for matters that my right hon. Friend would wish to have protected.

Would not amendment No. 16 provide some protection and some improvement on the clause? Mr. Chope tried to raise matters for debate in the amendment. However, were he to press it to a vote, he might do more damage.

I am still reflecting on whether I would support my hon. Friend Mr. Chope if he pressed amendment No. 16 to a Division, but I believe that it would provide greater protection.

I am worried about the human rights effect of the Bill. Others share that concern. It was interesting to read the evidence that was given to the Treasury Committee in December 2004. John Whiting from PricewaterhouseCoopers went as far as to suggest that the avoidance measure that we are discussing

"does have . . . human rights implications".

He contradicted the Chancellor's statement that the Bill complies with human rights legislation. He stated:

"There is never any objection to the Government, the Minister, standing up and saying, 'As of today, we are going to block such and such", so let's get that clear . . . The idea that you can stand up and say, or put a written statement down and say, "Right, if something turns up in the future, we don't know what it is, but we reserve the right to come back to today and basically change the way the tax law operates', let's be clear, the system of tax we have in this country is that you are taxed on the basis of what the law says. If, therefore, there is a possibility of retrospectively altering your tax bill, then it does have very interesting human rights implications and it has been mooted that this idea of retrospection could now be vulnerable to human rights challenges if we go that far."

Anne Redston from Ernst and Young gave written evidence to the Committee. She said of the Bill:

"This is a radical new departure for the UK, which has for centuries accepted that tax cannot be levied unless parliament has passed specific legislation authorising its collection."

That principle is enshrined in the Magna Carta. As Simon Schama put it in his "A History of Britain":

"The Magna Carta . . . spelled out for the first time, and unequivocally . . . that the law was not simply the will or whim of the king but was an independent power in its own right."

The history of democratic government in Britain has, as one of its fundamental themes, the establishing of the right of citizens to be taxed not by government fiat but by the clear words of statute, following the introduction of specific legislation. What is the Minister's answer to those charges? Many of us fear that the Bill rips up the rights that were enshrined in the Magna Carta, and that it should not therefore be proceeded with in its present form.

In respect of the date of retrospection, it is not that 2 December 2004 is a particularly offensive date. It may well have been a lovely day; I do not know, because I was not fortunate enough to be a Member of this House at the time. It might well be reasonable to backdate to that date national insurance contributions that have been avoided by means of "dishonest schemes"—to use the Paymaster General's words—although we continue to disagree on that point.

The implication of the Bill is that we shall set a dangerous new precedent for the way in which the House conducts its business. Would it become a requirement that all financial services professionals should, instead of reading the Financial Times over their cornflakes, thumb through a copy of Hansard, looking for ministerial statements that might affect them two years down the road? Should they believe that whenever the Government express an intention to legislate, they will follow it through? We have had broken promises from this Government before. Should tax advisers warn their clients of the potentially earth-shattering—or at least profit-affecting—implications of the Paymaster General's words every time she addresses us with her customary eloquence? No, that would be absurd. We have endured the loss of clarity in our tax system. We must not endure a further erosion of certainty, otherwise we will become prohibitively uncompetitive as a nation.

Legislation should be proportionate. It is said that this legislation will affect only the dishonest. It will not. It will have a knock-on effect throughout the financial services industry. Will the Minister at least exclude one knock-on effect by confirming that the use of ministerial statements to signal retrospective taxation will not proliferate into a general principle?

I shall try to be brief, for the sake of my right hon. Friend the Paymaster General.

I would be interested to hear from Mr. Chope whether the Rees principles to which he referred dealt with tax avoidance. If he said that in his speech, I did not pick it up.

indicated assent.

I see the hon. Gentleman nodding. In the case of this legislation, we have precision, consultation—albeit before the statement—and now the equivalent of a Finance Bill to deal with national insurance. So those principles seem broadly to have been met.

Mr. Knight and Mr. Newmark talked about predictability and certainty. The right hon. Member for East Yorkshire referred to a 1979 legal case, and with his usual generosity, he included a quote to give the House a rounded picture. It contained the words "with appropriate advice". That is at the heart of the amendments, of the issue of retrospectivity, and of the practical sense of where we are at in regard to this possible legislation.

I said earlier—and I will say it again because it is absolutely right to point this out—that the people who engaged in the kind of manoeuvres that might be caught, were the Bill to become an Act of Parliament, as I hope it will, were people who would almost invariably have sought professional advice, unless they were themselves accountants, in which case they would advise themselves.

We are not talking about the average person in the street who has been caught unawares. We are talking about those who, almost invariably, took advice—whether the advice was appropriate or not, we do not know, because it depends on what the accountant told them. There would have been some predictability and certainty from what they were told by their accountant. It is somewhat dodgy of the right hon. Member for East Yorkshire to pray in aid statements made by accountants to the Select Committee about legal matters.

What comment does the hon. Gentleman have about those modest-income people who took advice to go into self-invested personal pensions and who have now had their fingers badly burned as a result of the Chancellor letting them down?

I am glad that the right hon. Gentleman raised that issue, as I was just about to come on to that—

No, the hon. Gentleman was not.

It is written in my notes. Does the right hon. Gentleman wish to see it? He can probably read it from where he is sitting—SIPPs is on the second line down.

I believe the hon. Gentleman.

I am glad that the right hon. Gentleman believes me.

The right hon. Gentleman referred to people of modest means. I suspect that his definition of modest means is slightly different from mine. It is right, however, to discuss SIPPs in this context. The Government listened to the considerable representations made on SIPPs and changed their approach in the pre-Budget report. That might appear to be a contradiction to some Members, but I do not think that it is. To me, the underlying theme is that if one has modest means—I would say that they were considerable means in terms of what is dealt with in this Bill, and in terms of SIPPs and second homes—getting involved in such tax avoidance measures is dodgy until the law is passed.

In the statement that my right hon. Friend the Paymaster General made on 2 December 2004, she included a statement of intent that she and the Treasury team wished to be put into United Kingdom legislation. That was not government by fiat. If it were, we would not be here, because we would not have a Bill in front of us. My right hon. Friend would have introduced the changes by fiat from 2 December 2004. I would have objected strongly. From what I know of her, there is no way that she would ever wish to govern by fiat. The matter would rightly come before the House, as it has done today. To suggest that this is government by fiat, which brings in all the arguments about the Magna Carta, takes us off track.

I echo what the right hon. Member for East Yorkshire said about amendment No. 6. Were it to be passed, it would make things worse in terms of what Mr. Forth, as I understand his view, appears to want to happen. On amendment No. 16, tabled by the hon. Member for Christchurch, either he and other Members who keep using the word "principle" have a principle on retrospectivity or they do not. We cannot have half a principle going back to 11 October this year, but not going back to 2 December 2004. Either one can envisage that retrospectivity, as I do, going back to a ministerial statement that is yet to be enacted but will be enacted if the Bill is passed, or one cannot. What he said about a convention in relation to Finance Bills seems to undermine his position. Either he has a principle or he does not.

Surely the principle is knowing what the situation is. On 11 October, the Bill was published and anybody could see its content. When the Paymaster General made her statement on 2 December last year, however, the situation was opaque in the extreme.

That is a helpful intervention, because my right hon. Friend the Paymaster General and I differ from the hon. Gentleman on whether the written ministerial statement of 2 December 2004 was opaque. I do not think that it was, and my right hon. Friend has made it very clear to the House that she does not think that it was. I accept that the accountancy body to which the hon. Gentleman has twice referred said that it was not quite clear, but I do not think that it was opaque. I think that it said, "Watch out if you're trying to get involved in some strange tax avoidance scheme. We have clamped down on them in the past and we are going to clamp down in the future." My right hon. Friend put out a kind of caveat-avoider warning on 2 December 2004.

The hon. Member for Christchurch made a point about his amendment No. 19 and the Henry VIII clause. The amendment proposes the removal of new section 4C(3), which the hon. Gentleman said was retrospective. When I intervened on the right hon. Member for Bromley and Chislehurst earlier, I quoted subsection (3)(a) to demonstrate that it was not retrospective. I realise that the hon. Gentleman has worries about retrospectivity, but he seems to be interpreting the phrase in brackets in subsection (3)(a) differently from me. There is retrospectivity in the Bill, but I do not think there is any in subsection (3).

The hon. Gentleman is a distinguished lawyer, but surely if his interpretation were correct, the subsection would read "modifying any provision of any enactment passed after the commencement day", without the restriction to

"this Act and any enactment passed . . . after the commencement day".

Surely it is retrospective in that regard.

The hon. Gentleman and I differ, in that I do not agree that it is retrospective, but I understand his interpretation and I hope that my right hon. Friend the Paymaster General will clarify the wording.

I take the hon. Gentleman's point about economic well-being, but I think he rather over-egged his case. He referred to a projected Government deficit of £151 billion over the next five years, and contrasted it with the sum of £95 million. With due respect, he inadvertently did not present a true picture. The £95 million is the projected increase in tax revenue for 2004–05 as a result of the Bill. According to the regulatory impact assessment, thereafter it will be £240 million a year. In round terms, if the £240 million continued for the whole five years, the total would be more than £1 billion. I appreciate that £1 billion is about two thirds of 1 per cent. of £151 billion, but the comparison is not quite as extreme as the hon. Gentleman suggested.

Amendment No. 5 proposes the removal of new section 4B(4) in clause 1. Will my right hon. Friend explain what the subsection means? As I said earlier, I think that if it were removed, the effect would not be what the right hon. Member for Bromley and Chislehurst wants, but I may have misunderstood. If I may use the word employed by the hon. Member for Christchurch, the subsection is slightly "opaque". I hope that my right hon. Friend will explain it, and why she wants it to remain—as I imagine she does.

rose—

Order. It might make for a better debate if Mr. Hoban spoke at this point, before the Paymaster General winds up the debate.

The amendments deal mainly with the retrospective nature of the Bill, a topic that was considered both on Second Reading and in Committee. It is right for it to receive full and proper attention on Report as well, given the importance of retrospection in the context of tax. As has been pointed out a couple of times, when our party were in government, retrospection was used on occasion to tackle tax avoidance, but that should not create a precedent. It should not mean that measures containing an element of retrospection should go unchallenged. I welcome the amendments in that context, as they urge the Treasury to justify certain parts of the Bill.

I share the uncertainty of Rob Marris about the precise meaning of the wording. I suspect that it boils down to the fact that the Bill follows anti-avoidance measures enacted in respect of other taxes. As I have said, one problem is that NICs and other taxes are dealt with by different Acts, so changes need to be enacted separately. It still has some retrospective provisions and I want to make some general comments about retrospection in response to amendment No. 16, proposed by my hon. Friend Mr. Chope.

I join other hon. Members in chiding my right hon. Friend Mr. Forth on amendment No. 6. I fear that it creates a position whereby, if the rest of the Bill goes through unamended, the removal of the specific provision would enable retrospection right back to the initial introduction of national insurance contributions.

The Magna Carta.

The hon. Gentleman shouts out "the Magna Carta", but I am not entirely sure that national insurance was even thought of when that document was drawn up.

Amendment No. 6 would, as explained in paragraph 20 of the explanatory notes, remove the limitation whereby the backdating applies to 2 December 2004.

Amendment No. 16 brings out one of the key issues relating to retrospection. It is designed to put back into the Bill a particular date from which retrospection can start—11 October 2005. My hon. Friend the Member for Christchurch and other hon. Members have already referred to the surprise of those who follow these matters closely outside this place about the Bill's relation to the Paymaster General's statement of 2 December 2004. We had a brief exchange on that matter earlier. In tax representation document 53/05, the Institute of Chartered Accountants said:

"We do not think that anyone reading the Paymaster General's 2 December 2004 Statement could have expected the content of this Bill."

In view of that surprise, it may be reasonable to move the date forward to 11 October 2004.

In the same paragraph of the representation, the Institute of Chartered Accountants expresses, albeit somewhat less eloquently, the sentiments of my hon. Friend Mr. Newmark in speaking about Adam Smith. It cites passages from the European case "Stichting Goed Wonen". Paragraph 32 states:

"The principles of the protection of legitimate expectation and legal certainty form a part of the Community legal order. They must accordingly be observed . . . by Member States".

And paragraph 33 states:

"Although in general the principle of legal certainty precludes a Community measure from taking effect from a point in time before its publication, it may exceptionally be otherwise where the purpose to be achieved so demands and where the legitimate expectations of those concerned are duly respected".

I suspect that the Institute of Chartered Accountants was surprised on reading paragraph 33 and felt that its legitimate expectations had not been respected. The principles of paragraph 32, it probably thought, should apply—that people should have legitimate expectations and be able to rely on legal certainty.

People have asked how that differs from the Rees rules that were set out in the Finance Act 1978, to which my hon. Friend the Member for Christchurch referred. It reminds me of further comments from the accountancy profession. I do not want to go into all the Rees rules again, but I would draw attention to the first of the four:

"First, the warning must be precise in form. A mere suggestion that there are vague schemes of tax avoidance that must be countered should not suffice".

It is the generalised nature of the Paymaster General's statement of 2 December 2004, that leads people to ask whether the first Rees rule principle has been met. The Paymaster General was explicit in saying earlier that it had been met, but others feel that it has not. That poses the question of how people should have reacted to that statement. Is it perhaps more appropriate to start the period of retrospection from 11 October 2005, when the Bill was published, and to thereby present clearly to advisers, professionals and others interested in tax matters the nature of the Government's concerns? That is the issue that we have been debating through this group of amendments and it is important to the principle of retrospection. People are looking for clarity and certainty, which the Paymaster General's statement of December 2004 perhaps did not possess in the eyes of some. I would welcome her comments on that and on other aspects of retrospection.

Through amendment No. 18, my right hon. Friend Mr. Knight seeks to amend just one line in clause 1, but leaves untouched other payments that are themselves linked to national insurance contributions. If his amendment is accepted, another one should be tabled and accepted to bring all contributions and payments into line with each other, instead of singling out statutory payments.

Given that there is another group of amendments that we want to discuss later, I will conclude my remarks and look to the Paymaster General to be much clearer about the issue of retrospection and how it fits in with the Rees rules set out in the Finance Act 1978.

Conservative Members quote the Rees rules but I am not sure that they understand exactly how they are implemented. I remind them that HMRC issued a detailed technical note on the day of the pre-Budget report that made it clear that contrived and complex avoidance schemes were being closed down. Draft legislation was issued shortly afterward and comments on the technical detail were invited. The reference in the regulatory impact assessment to which Mr. Chope drew attention relates to the disclosure rules, not to the retrospective aspect.

Given that we are dealing with inconsistencies, I should point out that one minute Conservative Members claim that nobody understood the meaning of the statement of 2 December 2004, yet the next they pray in aid accountants' and accountancy firms' explanations—given in December 2004—of their understanding of the statement's meaning. Let me give Conservative Members three helpful quotations from the people at PricewaterhouseCoopers, as provided by John Whiting. The first states:

"we recognise the problem that the Government is trying to tackle by taking this unusual power."

So the people at PricewaterhouseCoopers know what we are dealing with. They continue by saying that they

"congratulate those responsible for . . . this Bill" and for

"the package of explanatory notes and frequently asked questions that accompany it and (seemingly) the potential for proper time to debate it" on the Floor of the House and in Committee. The third quote is probably the most important:

"the first use of powers in this area will be to bring in NIC regulations to parallel the charges imposed by Schedule 2 F(2)A 2005 in the employee securities area. There can be no objection to this".

So the idea that people do not understand the very precise way in which the Government are approaching this issue—

Will the Paymaster General give way?

No, I will not, if the hon. Gentleman does not mind. He has not been here for all of this very long debate, and in the few remaining moments I want to reply to the amendments of Mr. Forth.

So the idea that people could not comprehend this measure or that they did not have sufficient details from the Government is a misunderstanding on the part of Conservative Members. The confusion, moreover, is perpetuated in the amendments, which seek to do lots of different things and contradict—[Interruption.] Yes, I suppose that it is a case of betting both ends against the middle.

Amendment No. 5 would have the effect that regulations made under the provisions in the Bill could apply only to tax measures made after the Bill had been passed. Clearly, that would undermine the deterrent effect of the statement of 2 December 2004, and put at risk national insurance yield of £95 million in 2004–05. I disagree with the hon. Member for Christchurch, as I do not think that that is an insubstantial sum. It could also put at risk all the 2005–06 yield of £240 million, as the end-of-year bonus season could escape liability for national insurance.

Amendment No. 5 would also produce an anomalous result between tax and national insurance. The Opposition spoke about human rights challenges, but the amendment would mean that people using an avoidance scheme that gets caught by any of the tax provisions having effect from 2 December 2004 would have to pay back their income tax liabilities, but not their national insurance liabilities.

Amendments Nos. 6 and 20 would increase uncertainty. Ironically, or perhaps deliberately, they would contradict amendments Nos. 5 and 16. They would remove proposed new section 4B(5), which specifies that regulations cannot have effect before 2 December 2004. The amendment would therefore extend the scope of retrospection, and mean that there would be no limit on how far back Ministers or regulations could go. I am sure that Opposition Members would not want that.

Amendment No. 16, like amendment No. 5, would undermine the deterrent effect of the 2 December 2004 statement. As I described earlier, it would put at risk substantial amounts of revenue, as bonuses paid through the contrived schemes could escape the national insurance liability if the operative date for the regulations were 11 October 2005. That would produce another anomalous result: tax would be collected through a scheme whose purpose was considered to be avoidance, but the national insurance liability under the same scheme would not be collected. Frankly, that would be an unreasonable—to put it politely—use of legislation.

Amendment No. 19 would restrict the scope of regulations that may be made for modifying any provision of any enactment for the purposes specified in proposed new section 4C(2). That would mean that the regulations could not amend primary legislation, so that where such legislation deals with matters in 4C(2)—such as contributions, contributory benefits and pension scheme matters—it could not be amended, even where not to amend it would be to the detriment of employees. The current arrangement is to allow such amendments where that is fair to employees and ensures that they receive their entitlement as a result of a change of national insurance liability.

Amendment No. 9 is unnecessary, and frankly unwise. It would omit proposed new section 4C(5)(g), which enables regulations to be laid that will redetermine matters to the benefit of contributors. Without that provision, it is possible that increased entitlements that arise from retrospective legislation will be denied by virtue of a previous determination. That is, when people are deemed to be required to pay national insurance, that will affect their entitlement to contributory benefits. The amendment would prevent increased benefit entitlement being assigned to those individuals.

I shall deal briefly with amendment No. 18, which addresses the Bill's impact on the provision of statutory payments, such as maternity, paternity, adoption and sick pay. Retrospective regulations made under the powers in the Bill could have an effect on entitlement to those statutory payments. Eligibility for statutory payments is based in part on the employee's average weekly earnings assessed over a specified calculation period. As a result of an avoidance scheme an employee may therefore receive less than they may have been entitled to if they had paid the correct amount instead of the lower amount. The amendment would prevent the employee from receiving that additional payment.

I think that Mr. Knight thought that the Bill prevented the restoration of those statutory payments, whereas it is the amendment that does the damage. The Bill provides for that to happen. Therefore I urge hon. Members to reject amendments Nos. 5, 6, 16, 19, 20 and 9. They undermine the deterrent effect of the 2 December 2004 statement, increase uncertainty for employers, are detrimental to employees and will put at risk a substantial amount of national insurance money that is due to the national insurance fund. If the amendment is put to the vote, I urge my hon. Friends to vote against it.

At least we have got the Minister to come to the House and give explanations, for which we are grateful. That surely is one of the objectives of this part of our proceedings and I look forward to many more such prolonged examinations of Bills at this crucial Report stage.

Mainly because I want to give my right hon. Friend Mr. Knight an opportunity to move the next group of amendments, I reluctantly beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.