New Clause 1

Finance (No. 2) Bill – in a Public Bill Committee at 10:00 am on 28 October 2010.

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Brought up, and read the First time.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

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

The new clause may appear to be a small technical change to alter the definition of “incapacitated person”. However, the more that I look at the current way in which the legislation is written, the more it occurs to me we are proposing quite a significant and symbolic change.

I should not claim total credit for the new clause. I want to thank the Chartered Institute of Taxation’s low incomes tax reform group for highlighting the issue of the definition of an “incapacitated person”. Digging back, it appears that this issue has been raised from time to time during the consideration of Finance Bills over several years. On this occasion, however, pretty much most of the arguments against making the change proposed in the new clause have been well and truly exhausted.

For the benefit of the Committee, especially those who have not been members of Finance Bill Committees before, section 118 of the Taxes Management Act 1970, which is still extant, defines incapacitated persons as

“any infant, person of unsound mind, lunatic, idiot or insane person”.

Clearly, those are almost laughable definitions. In fact, they are highly insulting and derogatory to the individuals to whom they refer, and in many ways inaccurate and outdated. Those forms of description were essentially incorporated into the 1970 Act from the 19th century lunacy Acts of days gone by. However, for a variety of reasons the provisions have never been updated or modernised. On the basis that this is not a party political matter but a drafting issue, we thought it was important to be constructive and to bring this new clause before the Committee in the hope that the Government would accept it.

Section 72 of the Taxes Management Act 1970 provides that an incapacitated person’s tax liabilities should apply to the trustees, guardians, tutors, curators or committees of that incapacitated person as if he were a non-incapacitated person. We are in an era of tax law rewrites, and tax law rewrite Bills come along every decade or so, but it is necessary to make this modest change now.

This simple and discrete new clause would replace and modernise the definition so that it aligned with the more appropriate meaning set out in the Mental Capacity Act 2005, which defines incapacitated persons in a far better and more sensitive way. The 2005 Act provides that someone lacks capacity in relation to a matter if at the material time they are unable to make a decision for themselves

“because of an impairment of, or a disturbance in the function of, the mind or brain”.

That is a much better definition, and we hope that it will also encompass the arrangements on trusteeship that have accrued since 1970. For instance, it would cover donees, the power of attorney and Department for Work and Pensions appointees.

The arguments against our approach have fallen away over the years. The all-party group on mental health highlighted the fact that UK law still includes this anachronism of using offensive and potentially discriminatory language to describe people with mental health problems. In 2003, the low incomes tax reform group called for the provision to be updated. Such action was pressed for in previous Finance Bills, including that of 2006. Indeed, Her Majesty’s Revenue and Customs fully accepted the case for change four years ago. However, the planned rewrite of the 1970 Act fell by the wayside for various unrelated reasons, so the provision remains on the statute book.

We believe that this is a good opportunity to update the provision. The new clause would make a minor change. It is discrete and free-standing, and it has no Revenue implications. As I said, we have been promised rewrites by various Governments in times gone by, but they have not been delivered. There is clear evidence that people feel insulted or hurt by these definitional vestiges of a bygone age, and I hope that the Minister will accept the new clause.

Photo of David Gauke David Gauke The Exchequer Secretary

As we have heard, new clause 1 seeks to change the definition in the Taxes Management Act 1970 of an “incapacitated person”, not substantially, but in a way that would ensure that the Act better reflected the modern understanding of an incapacitated person.

A definition is required to ensure that the obligations of the 1970 Act properly fall on those acting for children or those with mental health problems. The existing definition can be traced back to at least 1880, and I entirely agree that the wording—it includes words such as “lunatic” and “idiot”—appears more appropriate to the Victorian age than to today.

I know that a change has been requested for some time by the Low Incomes Tax Reform Group. It pressed the previous Government on the matter from 2003, and I believe that it was promised a consultation on the matter in 2005, but we still have the old definitions. I have a great deal of time for the group; it has been most helpful to me, both in opposition and in government, and I recognise the valuable role that it plays.

Before addressing some of the technical points in the new clause, I would like to reassure Opposition Members that I broadly welcome the fact that the subject has been raised. It is a change that I will ask my officials to consider. However, I do not think that the new clause would achieve its intention, or that it is an appropriate way to make that change. It seeks to link the definition of an incapacitated person from the Taxes Management Act 1970 to the Mental Capacity Act 2005. The initial amendment referred to section 1 of that Act, but I believe that it has been revised to refer to section 2, as that provides a specific definition. However, referring to section 2 would mean omitting children, and I am sure that Opposition Members do not intend to restrict the definition.

Although the new clause could be changed in an attempt to address that definitional point better, I believe that there is a better way to do what is intended. As Members will be aware, the Treasury launched at the time of the June Budget a new approach to tax policy making. We wish to avoid the previous experience of making reactive and piecemeal policy announcements that are unexpected and insufficiently thought through. Instead, we believe that appropriate consideration should be given to changes and that opportunities should be provided for those affected to comment and to have certainty about our decisions. Any change to the measures that we are discussing should go through that process, not least to prevent any group of people from being inadvertently moved in or out of any new definition.

I am sure that Committee members appreciate that it would be inappropriate for me to give a definitive timetable at this stage. None the less, I can assure the Committee that we are keen to address the issue. Any changes will be undertaken in the open and transparent way that we have set out. I appreciate the hon. Member for Nottingham East raising that important point and agree entirely with the sentiments behind the new clause, but I ask him, for the reasons I have outlined, not to press it to a Division. I am sure that he will engage with us on how to make the change that is behind the new clause.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I am grateful to the Minister for his comments, although I take issue with them slightly. I do not want to make a party political issue of the matter,  because clearly the previous Administration did not make that change; however, the Minister and his advisers still appear to be a little bit in that groove. I have a couple of points to make. I do not think that we are in a position to talk about “reactive and piecemeal” changes, given the number of years we have been debating this matter, and having pored over it from time to time. I was interested to hear the technical point about whether the reference in the Mental Capacity Act 2005 does not include children; perhaps I should have spoken with the Minister before tabling the new clause to ensure that we covered those points.

Having been a Minister, I know that it is tempting for both officials and Ministers to get into a habit of resisting all amendment at all costs, no matter what they are. Having a clean Bill go through Committee might be regarded as a feather in the cap. However, I think that it would reflect well on the Department in general, and on the Minister in particular, if we were able to amend the law by the time the Bill is enacted, particularly as we are talking about one, non-contentious issue. If he gives me an assurance that, on Report—we have plenty of days before then in which to look at changing the provision in respect of children—he will bring forward a new clause on the subject, we will be more than happy to praise him and accept that arrangement. That would be a good way of doing it.

If the Minister makes such a commitment today, which is within his power—that privilege is what being a Minister, albeit a junior one, can be about, and I am sure that the Chancellor is more than happy to concede on the matter—we can all agree on the issue and go away happy. Otherwise, we will try to bring the matter back on Report. I do not think that it would help anyone if we were to divide on the new clause today, so I hope that we can talk about the issue outside Committee and bring forward an amendment on Report, perhaps in his name.

Photo of David Gauke David Gauke The Exchequer Secretary 10:15, 28 October 2010

Let me assure the Committee that I would have no reluctance in accepting the new clause if we thought that it was technically right, and if there had been sufficient consultation and the opportunity to examine that technical area. The issue was first raised in 2003 by the Low Incomes Tax Reform Group, and a promise was made in 2005 to address it. It is very important, when we examine tax law, that we ensure that we get it right. Too often, under Governments of both colours, we find, in Finance Bill deliberations, that we are debating clauses that amend measures that were passed only the previous year, or two years ago, because something has come to light. That is why it is very important that we have a consultative and deliberative process in making tax law. I accept that the issue is not entirely new, but it is important that officials and outside bodies, as well as the LITRG, can examine the matter.

I am not able to give the assurance that the hon. Member for Nottingham East, quite reasonably, asked for—that we will come back by Report with a solution—because I cannot confidently state that we will be in a position to do so. In any event, we believe in consulting more fully, as we have done with the Bill across the board. However, he raises an important point, and I can assure him that the Government are determined to address it. The terminology in the current law is archaic  and offensive. We want to solve the problem, but in such a way that there are no inadvertent, unexpected consequences, which requires a more deliberative approach.

I am sorry, but much as I respect the intentions behind the new clause, that is why I cannot accept it. I hope that we do not divide on it, because hon. Members on both sides of the Committee want to work constructively to address the issue. It would be a pity if the issue proved to be a dividing line between the parties when we recognise that the hon. Member for Nottingham East has raised a very fair point, and we want to find the right way of addressing it.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I hear what the Minister says and I accept his honourable intentions in respect of the change. I know that it would be very difficult to make a decision on a potential Government new clause by as early as next week, perhaps, or whenever we come to the final stages of the Bill on the Floor of the House, but the argument about further consultation and more rounds of deliberation has pretty much run its course by now, given the number of years we have pored over the issue.

For that reason, I will not withdraw the new clause but will press it to a Division, in the hope that when we return on Report, either I will table a technically correct version of the new clause or the Minister, on reflection, will table that new clause himself. That is still my hope. On the Floor of the House, when there are far more people watching, it would be far more embarrassing to have Divisions, but for now, I really feel that we need to take the issue to the next stage, because we have been, to use a famous phrase, faffing around on it for too many years.

Question put, That the clause be read a Second time.

The Committee divided: Ayes 7, Noes 9.

Division number 2 Decision Time — New Clause 1

Aye: 7 MPs

No: 9 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Clauses 32 and 33 ordered to stand part of the Bill.

Question proposed, That the Chair do report the Bill, as amended, to the House.

Photo of David Gauke David Gauke The Exchequer Secretary

Before we reach the conclusion of our detailed consideration of the third Finance Bill of 2010, I would like to put on the record my thanks to those who have participated in and assisted with our deliberations. As always, the Hansard Reporters, Doorkeepers and police officers have provided essential help in ensuring the smooth running of the Committee, for which I thank them. I also apologise to the Hansard Reporters for troubling them with the name of the Dutch VAT. As  they say in the Netherlands, “Het spijt me.” It is not the first time that we have heard double Dutch in a Finance Bill debate.

I thank all the officials from Her Majesty’s Revenue and Customs, the Treasury and other Departments, whose help has been invaluable. They have repeatedly inspired me when I have been clutching for the right words. I am particularly grateful to parliamentary counsel, whose hard work and dedication provided the means for the Government to present our views in the Bill, as well as the means to help those who will benefit from it. As the Committee will be aware, this is the first time that we have consulted on all a Finance Bill’s clauses in draft. It is part of our new approach to tax policy making. I thank all the representative bodies and other interested parties who came forward with suggestions for improving the legislation. They have demonstrated that the new approach makes for better legislation, and I look forward to their participation in future Bills consulted on in the same way.

Although this is a technical Bill covering a range of minor measures, the Committee has managed, through determined probing, to draw some surprising themes from the Bill. We have travelled far and wide in our deliberations. Although our departure was slightly delayed, we soon had the wind in our sails. We have gone to the cold waters of the North sea in considering both the mackerel wars and the possible red herrings involved in seafarers’ earnings deductions in clause 4. I thought that we risked descending into fish-based puns—

Photo of David Gauke David Gauke The Exchequer Secretary

Yes, this is not the plaice. I know that some hon. Members put their heart and sole into discussing the issue, maybe with the advice of John Whiting. We considered the aircraft affected by clause 21, the plans for a hydrogen-powered ferry in Bristol harbour, and the cross-country travels of the post bus. We even made  some hobbit sidesteps into Middle-earth, which might now be further from us than my hon. Friend the Member for Watford would wish.

However, it would be wrong to think that we have not considered important and difficult issues, from the tax treatment of carers in clauses 1 and 2 to the impact of asbestos exposure in clause 31 and the definition of incapacity in new clause 1. Hon. Members approached those issues in a constructive and non-partisan way, showing the value of these considerations.

A number of new Members are now dealing with Finance Bill matters. I congratulate the shadow Front-Bench Members, who have taken a robust and considered approach on their first outing on the shadow Front Bench in a Finance Bill Committee. I thank them and other Opposition Members for their dedication and constructive opposition. Despite a shaky start, the hon. Member for West Ham and my hon. Friend the Member for Scarborough and Whitby have helped ensure that the Committee ran smoothly alongside other business in the House, for which I thank them.

As for my hon. Friends, I see exactly how the coalition Government can benefit from both parties being involved. I wish my hon. Friends the Members for Elmet and Rothwell, and for Dover, well in kicking their smoking habits with the assistance of the hon. Member for Bristol East. I also thank my hon. Friends the Members for Bristol West, for Solihull, and for Reading West, and all my hon. Friends, including my hon. Friend the Member for Putney, for their support. Finally, I thank you for your help, Mr Caton, and I also thank Mr Chope and the Clerk, Mr Patrick. I look forward to further debates on Report.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

In the interests of not bringing us back this afternoon, I agree and wish everybody on the Committee well.

Question put and agreed to.

Bill, as amended, accordingly to be reported.

Committee rose.