I thank the Minister for his explanation of the amendments, and of paragraph (3) on structural assets, which is a difficult part of the legislation, as it affects life assurance companies. Many such companies hold many structural assets in their funds, which are available for use in certain circumstances to meet the policy holders’ liabilities. There are some quite difficult interactions with FSA rules and tax rules about the valuation.

I should like to raise three areas with the Minister in connection with those rules. The first is the treatment of gains, which he has already touched on, but I want to come back to it in a little more depth in a minute. As I understand it, paragraph (3) excludes the movement in value on insurance dependants from tax, so ending the double taxation of insurance subsidiaries. Certainly in the past, although I am not sure that it is the case now, life funds have held other trading businesses within their funds. A distinction has been between those involved in insurance business and those involved in non-insurance business. I should like to understand why it is only insurance dependants that have been excluded from tax.

The second point concerns interest. Movements in value on loans for insurance subsidiaries will not be taxed and nor will the interest on those loans. However, my understanding is that the interest deductions on the other side of the loan transaction will be relievable against tax credit. If the interest payable is subject to relief, why is the interest receivable not going to be taxed? Does the Minister think it appropriate for debts and loans to be included in our structural assets? There is a slight risk that an asymmetrical treatment will arise where life assurance companies engage in tax planning, recognising the difference in treatment on the interest payable on loans.

The third point goes back to the central issue of the treatment of gains, on which there is most debate between the Treasury and the ABI. Taxation is charged when a qualifying asset leaves the long-term fund of the life assurance company. That is determined by taking the difference between the historic cost of the asset and its admissible value at the relevant time, which is 1 January 2007 for existing assets, and the time that the non-profit fund of the life assurer acquired the assets, for assets acquired after that date.

The ABI believes that such gains should be taxed as capital gains and therefore should attract indexation to give them the same tax treatment as other companies. There should also be an opportunity to compute such gains using either the higher of the original base costs  or, where relevant, the market value at March 1982. Again, that is the same treatment that is available to other businesses. It is a consistency point between assets held by life assurance companies and assets held by other companies. Will the Economic Secretary give us some background on the reason why there is a difference in treatment? Certainly, other businesses go through the process of being able to have indexation gains and looking at the base cost of the 1982 market value cost where that is appropriate. There seems to be a mismatch between general business taxation and the taxation of life assurance companies. Some issues of shareholder capital losses also float through. It is not a particularly straightforward piece of legislation which is why, despite the consultation that has been taking place since June last year, we are still making changes as we approach the end of May. The Government are still proposing changes, with the tantalising prospect of further amendments to come. I should be grateful for some clarification on those points.