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Finance (No. 2) Bill

I am sure that the whole House will appreciate that extremely important nuance. My hon. Friend the Member for Gosport (Peter Viggers) pointed to a number of deficiencies in the record of the Government and the Chancellor. He was particularly critical of the Government’s proposals on trusts—the theme arose again—and he deployed some of his previous legal expertise in drumming his point home. I welcome his contribution on that point, not least as he serves on the Treasury Select Committee. The hon. Member for Wyre Forest (Dr. Taylor) yet again managed inventively to bring the NHS into this debate, on which I congratulate him—it is more than the Chancellor managed to do. The hon. Gentleman also concerned about trusts, so they featured in yet another contribution, this time from an independent Member of the House. He said that the proposals impact not on the super-rich, but on ordinary aspirational families. I agree, and I will have more to say about that in a moment. My hon. Friend the Member for Rugby and Kenilworth (Jeremy Wright) welcomed the intention to tackle MTIC—missing trader intra-community—fraud, which I hope will find favour with the hon. Member for Wirral, West. He also criticised the operation of the tax credits system—something over which the Paymaster General and I have crossed swords on many occasions, as we will no doubt do in future. We then heard from the hon. Member for Dundee, East (Stewart Hosie), who speaks on these matters for the Scottish National party. He mentioned several issues in his contribution, including clause 61, which concerns the proposed abolition of the home computing initiative, and I hope that he will support our amendments to try to save the scheme. In his speech, my hon. Friend the Member for South-West Hertfordshire (Mr. Gauke) displayed his considerable legal knowledge and his impressive pronunciation of certain German court cases, which I shall not attempt to replicate. In particular, he focused on the proposals in the Bill to address the implications of the judgment in the M&S case. He clearly knows a lot about that subject, and we look forward to enjoying his expert contribution in Committee. The hon. Member for Northampton, North (Ms Keeble) is also a member of the Treasury Committee. She suggested that the Government should re-examine their proposals to abolish the home computing initiative, and I welcome that contribution. She is right, and I hope that Ministers heed her wise advice. The final Back-Bench contribution came from my hon. Friend the Member for Ludlow (Mr. Dunne), who also expressed reservations about the abolition of the HCI scheme. Indeed, he also expressed concern about the abolition of trusts, which is a point that we have heard again and again from both sides of the Commons, so Ministers are advised to take note. Turning to the hon. Member for Wirral, West, we welcome some parts of the Bill—for instance, we welcome in principle the proposals relating to the Olympics and part 4, which provides for the introduction of real estate investment trusts, which is an initiative that we have been pressing the Government to adopt for some time. We look forward to exploring the precise detail of the Government’s proposals in the 43 clauses in part 4 both on the Floor next week and subsequently upstairs in Committee. Suffice to say at this juncture, although the concept is welcome if not overdue, it will be important to get the regime right before it comes into force, and to do so in such a way that it is not likely to be subject to substantial revision thereafter. In short, we cannot allow REITs to become another SIPPs. There are a number of other aspects of the Bill about which we have greater concern. To begin with, there is the proposed abolition of the home computing initiative, which is presaged by clause 61. The Chancellor himself first facilitated the HCI back in Budget 1999 with the intention of promoting the spread of IT skills among our population, which was a laudable aim. The HCI scheme was subsequently endorsed by a variety of bodies, including the DTI, the CBI and the TUC. The Minister of Communities and Local Government said this about the HIC scheme to his own regional press:"““As technology and IT-based business becomes an ever-bigger part of our regional economy, it is vital that the workforce develops the skills which will keep us competitive. That process should begin in the home so that everyone has the opportunity to become comfortable and competent with computers. That is why the Government is offering tax breaks which reduce the cost of computers to employees while saving money for their employers.””" The general secretary of the TUC essentially agrees with him. On 19 January this year, which was the second anniversary of the HCI scheme, Mr. Brendan Barber issued a press release stating:"““experience has shown that when a business implements an HCI scheme, demand for learning services and training rises significantly.””" It is difficult to mistake the meaning of that press release. The DTI was also particularly keen to foster the HCI scheme. In fact, it was still promoting the scheme on its departmental website when the Treasury announced that the scheme had been scrapped. The DTI said—this has since been removed from the website—that"““The real beauty of HCI schemes is that they have the potential to improve performance in almost every area of the organisation. As well as traditional drivers—reducing costs, increasing profitability—they can also contribute to more recent imperatives such as corporate responsibility, individual learning and workplace development””." That is a good argument for keeping the scheme. Will the Paymaster General explain to the House in her winding-up speech the degree of consultation that took place between the Treasury and the DTI before the scheme was scrapped, because I suspect that there was not much? The measure has proved popular, with some 500,000 people taking advantage of the scheme to, in effect, hire a computer via their employer to help to improve their IT skills as part of a modern, knowledge-based economy. According to the HCI Alliance, 60 per cent. of participants are in blue-collar industries and 75 per cent. pay the standard rate of tax or lower. We believe that the scheme is worth while and that the Government should retain it, not abolish it, and we will table amendments to that effect. If the Government still argue that there have been abuses of the scheme that need to be addressed, we are genuinely willing to work with them, with the industry and with users to try to produce a revised framework that would allow users to continue to benefit while protecting revenue appropriately. I sincerely hope that the Government will be minded to take up that offer during the Bill’s progress through the House, and we will listen very carefully to what the Paymaster General says when she winds up. Then there are the measures in the Bill that will increase the tax burden on small companies, including the proposal in clause 26 to abolish the zero starting rate of corporation tax, which was, again, introduced by the Chancellor, this time back in 2002. The Treasury will now ask even new companies to pay 19 per cent. straight off instead. The Government have billed that as an anti-avoidance measure, but it is still a revenue-raising initiative. When one delves into the figures, the Treasury’s Red Book points out that the change, which is euphemistically described as ““tackling tax motivated incorporation””, is set to raise a net £870 million from small companies in the years 2006–07 to 2008–09 inclusive. With measures like that, it is no wonder that the Minister for Higher Education and Lifelong Learning admitted in The Sun on 28 March:"““We are probably about at the limit of what people are prepared to pay to improve public services.””" I think that he is right, and that small companies are probably at about that limit as well. I turn to the attack on trusts contained in part 6, about which we have heard a great deal in this debate. One thing that we have learned about the Chancellor in recent years, be it in his Budget speeches or in his associated Red Book, is that one must always read the small print—not least in the subsequent Finance Bill. Nowhere is that more true than in the proposals relating to trusts. This is not just an issue of retrospective legislation—that is usually a matter of some controversy and, as we have heard, it will be in this case—but of the very considerable uncertainty, doubt and worry that has been caused to many families by the proposed change. Graham Serjeant, the economics editor of The Times, said of the new regime:"““The proposals combine malice, prejudice and miscalculation.””" This not about combating tax avoidance, as the Government like to claim—it smacks of the politics of envy, and it is exactly the sort of measure that middle England could expect more of were the Chancellor ever to succeed to the premiership. We will want to explore the precise detail of what the Government have in mind in relation to all this, although in fairness the shadow Chief Secretary has done that commendably already, and to seek to ameliorate its worst effects on hard-working and aspirational families. This Bill will increase the tax burden, including on our small businesses, and reduce, rather than enhance, our competitiveness, but it is deficient in other respects as well. Despite being a major piece of financial legislation, it does precious little in part 7 to address the problems in our pensions industry following the Chancellor’s £5 billion-a-year smash-and-grab raid. It also comes as small comfort to pensioners who took advantage of Labour’s £200 council tax discount just prior to the general election, only to see it removed in the 2006 Budget once the votes had been safely counted. When the Chancellor first brought the measure in, The Sun responded on the following morning with the headline, ““Beware the bribes of March””. It was indeed a one-off bribe, and we hope that the electorate will reflect on it at the ballot box on 4 May this year. Britain needed a Finance Bill this year that boosted our competitiveness in an increasingly fierce global economy, rewarded enterprise, helped to stimulate growth, and provided a successful financial climate for genuine reform of our public services rather than financial chaos and 7,000 redundancies in the NHS. However, the House has been presented instead with a detailed and complicated measure—as ever from the Chancellor—that discourages business investment, does little to boost productivity, penalises families that seek to plan for their future and that of their children and betrays pensioners while failing to do anything practical to avert the mounting financial crisis in the NHS. For those reasons, hon. Members should decline to give the Bill a Second Reading. I urge them to vote for our amendment instead.