HC Deb 25 July 1977 vol 936 cc175-86
Mr. Peter Rees (Dover and Deal)

I beg to move Amendment No. 31, in page 21, line 29, leave out from beginning to end of line 41 and insert 'where having regard to the duties of the employment it is reasonable that it should be provided for him'.

Mr. Deputy Speaker

We may take in this group Amendment No. 32, in page 21, line 35, leave out ' customary' and insert ' appropriate'.

We may also take Government Amendments Nos. 33, 34, 49 and 89.

Mr. Rees

After the storm and stress of last week, when we debated grand questions of policy and macro-economics, we take up a rather fine brush now to fill in the details of the Finance Bill, but sometimes these miniatures or smaller pictures tell us a little more about the Government than might at first sight appear. I suggest that Clause 32, without the amendments which I urge are needed to embellish it, indicates a degree of ineptitude and meanness which I certainly would not attribute to the Financial Secretary, and I can only suspect that it derives from his hon. Friend the Member for Dudley (Dr. Gilbert), who played a certain part in our debates last year.

Last year the Government were minded to have a further look at benefits in kind—fringe benefits, as they are sometimes unattractively and unkindly called. I can only assume that the provisions then introduced were designed as a crust to be thrown to their right hon. and hon. Friends below the Gangway to satisfy the hon. Member for Coventry, South-West (Mrs. Wise), who presented herself this evening as a kind of tricoteuse sitting below the financial guillotine. Whether it satisfied the hon. Lady, I do not known. She still seems to be thirsting for fiscal blood.

As we looked more closely at the clauses introduced last year, we realised, with wry amusement, although it must have sent a thrill of horror through the Financial Secretary, that the proposal was likely to impose a charge to tax on such a wide and representative group of his fellow countrymen as the Prime Minister and the Archbishop of Canterbury, not to mention a few less well known inhabitants of this country.

Speaking for myself, I have always believed that people in positions of responsibility should be properly housed and properly remunerated. Those who discharge onerous responsibilities on behalf of the electors should be able to receive their foreign colleagues in an atmosphere of dignity, perhaps not of magnificence in these tawdry times, but at least of modest comfort and elegance and they should not be exposed to undue fiscal impositions.

I have never believed that this kind of privilege, if that is how we should describe it—I should have thought that it was a concomitant of high office—should be limited to those who hold positions of office under the Crown. The general secretary of the National Union of Mineworkers holds a position of great responsibility. He may well have to entertain foreign dignitaries, whether from East Germany or other countries—let us not particularise on the geographical location of the visitors these people may be called upon to entertain—

Mr. Russell Kerr (Feltham and Heston)

What about someone from Fascist Spain?

Mr. Rees

I am not aware that Spain should any longer be regarded as Fascist. The hon. Gentleman appears to be incapable of making a coherent speech on his feet, but he is ever ready to intervene from a seated position. I am willing to give way to him—

Mr. Deputy Speaker

Order. Sedentary observations do not help the House. We seem to be drifting away from the subject of the amendment.

Mr. Rees

I am, as always, grateful for your protection, Mr. Deputy Speaker. My sensitive nature recoils from the coarse and brutal interventions of the hon. Gentleman.

May I recount for the benefit of those hon. Members who did not have the privilege of hearing our debates in Standing Committee the history of these amendments. It must have been with a thrill of horror that the Financial Secretary realised that he had placed his political career in jeopardy by threatening a fiscal impost on the Prime Minister, the Foreign and Commonwealth Secretary, the Chancellor of the Exchequer and a whole range of other Government dignitaries in the measures which he proposed last year. When this was drawn to his attention in the most amiable and moderate way by the Opposition, he retreated and said that he would refer the whole matter to a departmental committee. Presumably the results of that committee's deliberations are embodied in—and I refer to the Bill as amended in Committee—Clause 32.

As you, Mr. Deputy Speaker, will have divined immediately on looking at the clause, it exhibits one or two peculiarities which were the subject of considerable debate upstairs. Since not all my right hon. and hon. Friends, nor even hon. Gentlemen opposite, were privileged to hear our debate, it would be presumptious of me to presume that they had read the Hansard report.

10.45 p.m.

If refer the House to the scope of Clause 32. A charge to tax is to be imposed on those who have accommodation provided for them by their employers—the definitions of employer and employee are given a fairly wide scope—unless they can bring themselves within the three relieving paragraphs of Subsection (4).

I apologise at this late hour for referring the House to the slightly laboured details of a Finance Bill, but it is important if one is to see just how deeply enmeshed the Financial Secretary has become, how ineptly his brief has been drawn and how impossible the task that has been posed by the draftsmen to refer the House to these three paragraphs.

Paragraph (a) relates to employees, whether a Crown servant or the employee of some private or public company, and states: where it is necessary for the proper performance of the employee's duties that he should reside in the accommodation". I suppose that relates to the time hallowed test with regard to Schedule 1 that expenses should be wholly, exclusively and necessarily incurred

I do not make too much of a point about that, except to observe, because the Financial Secretary was prone to remark on the modest amendment that I moved in Committee, that my amendment would occasion a certain difficulty with regard to Courts and the Inland Revenue. Even that test, well worn though it may be, and even though it may have been examined by the courts over the generations, could still occasion a certain difficulty.

I come to paragraph (b) which states: where the accommodation is provided for the better performance of the duties of his employment, and his is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees. That, too, is a comprehensible and intelligible test. But I venture to observe that that, too, might occasion a certain amount of difficulty when it comes to be applied to the facts of a given situation.

I also observe—this is the point of the second amendment standing in my name —that I see no particular point in limiting it to those cases where it has been "customary" for an employer to provide accommodation for his employees. Why "customary"? What does that add to the test? Why is it necessary? For the protection of the Revenue or the general body of taxpayers? Does it mean, for instance, that a person may have to limp on for two, three or four years in his accommodation, paying tax under Clause 32, until in the fourth year the Board of Inland Revenue says "Now your occupation has become customary we are not going to impose a charge to tax"?

That strikes me as a rather artificial test to be applied that that is why the second amendment, which I commend to the House, suggests that it should be "appropriate" in that particular case to provide employees with accommodation.

But now I come to the meat—that perhaps is a rather unattractive metaphor—and the most significant of the escape hatches, as we chose to describe them upstairs, which are enshrined in Clause 32. It bears studying rather closely. Paragraph (c) reads: where it is provided for him as the holder of an office or employment under the Crown and the Secretary of State certifies that there exists a special threat to his security and, accordingly, that special security arrangements are in force". I yield to none in my concern for the safety and the security, as well as the dignity, of officers and employees of the Crown. But it occurred to me, even with my naive and benevolent approach to these matters, that this paragraph had been drawn to exclude Ministers of the Crown from the ambit of Clause 32. There may be one or two others and, if so, the Financial Secretary will enlighten us.

It is right that we should be concerned with the care and welfare of the Prime Minister, the Foreign Secretary and the Chancellor of the Exchequer. But I detected during our debates in Committee a certain unease unusual to find in the Financial Secretary who, although given the most disagreeable tasks by his colleagues, still ploughs on with a reckless disregard for the sensitivities of Opposition Members. The right hon. Gentleman affected on that occasion to take no account of what we were saying. But I am happy to note that there is a Government amendment which extends this protection to anyone, whether a Crown employee or not.

Since the objection raised to my amendment in Committee—which is not substantially or in principle different from this one—was that it would be difficult to apply and that it would raise practical problems, the amendment which is designed to supersede paragraph (c) does not contain the provision that the Secretary of State—presumably the Home Secretary —should certify that there exists a special threat to the security of the employee concerned.

I am delighted that paragraph (c) should have been amended and should no longer be restricted to employees of the Crown. But I wonder how this test will be applied in practice and whether the Financial Secretary can assert with as much confidence as he did in Committee —[Interruption.] If the hon. Member for Feltham and Heston (Mr. Kerr) wishes to intervene, I shall be happy to give way to him. Apparently he does not wish to get to his feet. I proceed as well as I can in the face of ill-thought-out, deeply prejudiced and unhistorical objections from the hon. Gentleman.

Mr. Russell Kerr

A babe in arms.

Mr. Rees

We have been prone since last Wednesday to debate the ages of hon. Members, so it is rather flattering to discover that I am regarded as a babe in arms. In political subtlety, perhaps I am. I would never attempt to devise a provision which could have had as its intention only that Ministers of the Crown should be excepted from the general impost of tax.

The amendment sweeps away paragraphs (a), (b) and (c). It requires merely that this exemption from tax shall apply only where it can be demonstrated that it is appropriate, having regard to the duties of the employee's position, that he should be provided with accommodation. That is a simple test, it is a succinct test, and it is an equitable test in that it would apply to every one of Her Majesty's subjects, whether he happened to hold the high office of Prime Minister or was merely an employee of some public or private company.

On pondering the question, the House may realise that in fiscal matters it is right that we should not devise these specially tailored loopholes so that people who hold high office under the Crown should escape a burden of tax which is imposed on other subjects when there is no point of principle to distinguish their positions.

Let me say, lest I be misunderstood, that I believe that the Prime Minister, the Foreign Secretary, our Ambassador in Washington and the Chancellor of the Exchequer should be suitably housed. I have never aspired to visit the houses or flats in Kennington or Lord North Street that the Prime Ministers occupy, but I believe that they should be enabled to entertain with elegance, dignity and comfort those who are called upon to visit this country.

But it must be remembered that there are others, albeit in the private sector, who discharge responsibilities of a similar nature. I see no reason—and I say this at the risk of provoking some labour Members—why the chairman of Lonrho should not be able to entertain visiting dignitaries from—and I know that I will carry many Labour Members with me on this point—the African continent who may be moved to come to the United Kingdom to do business with his company at considerable advantage to the shareholders. I declare at once that I or my wife have a modest shareholding in Lonrho, but I do not press its case merely for that reason. We have to be scrupulous on these occasions.

I am led to make this point—and I hope that I shall not be misunderstood. Tomorrow we shall be debating very delicate questions of honour and political propriety. We in this House, because we have been carefully instructed, understand the fine lines that we must not transgress, but those outside are perhaps less instructed in these matters. They perhaps do not understand the delicate conventions that confine our debates. I hope that when they study this provision they will find it unattractive and unappealing that these matters have been drawn so as to exclude various of their fellow countrymen who occupy high positions of State from a charge to tax in this respect.

I appeal to the Fnincial Secretary—who is not only an honourable Gentleman but a right hon. Gentleman and a man who, when his official brief permits, is a person of sensitivity, not to say sensibility—to appreciate the enormity of Clause 32 as it stands and to accept Amendments Nos. 31 and 32, which perhaps will restore some faith to the country in the honour and good sense of this Administration.

11.0 p.m.

Mr. Robert Sheldon

The hon. and learned Member for Dover and Deal (Mr. Rees) referred to the purpose of the clause and showed that it derived from the Government's decision to tax those benefits in kind—those advantages—that are given to some employees in lieu of money and should come under the tax system, as do a number of other benefits which had been taxed before the introduction of the new legislation.

What we dealt with in the Bill this year was the problem of representative accommodation, where people have homes or residences provided for their use and may be called to pay tax upon them. Obvious examples are caretakers looking after schools and prison officers. A number of others have to live in such accommodation for the proper performance of their duties. Sometimes the accommodation is not that which they would normally select if they had a choice.

That is the reason for the examination that I announced during the passage of last year's Finance Bill, when I said that representative accommodation would have to be studied and that decisions would be announced this year. The first test for exemption from tax devised in this Bill was that it was necessary for the proper performance of their duties for people to reside in the accommodation, or that doing so made for the better performance of the duties, or that it was customary for employers to provide that kind of accommodation for their employees. Another test was that there existed a special threat to the security of the person concerned and that special security arrangements were in force.

Those are reasonably precise tests, tests that can be substantiated and proved. The hon. and learned Gentleman seeks to insert in their place vaguer tests of the kind that we see in Amendments Nos. 31 and 32. Amendment No. 31 would remove all the tests that I have described and substitute the test that it is reasonable that the accommodation should be provided. Reasonableness in these matters is astonishingly difficult to prove. It can be held to be reasonable because the accommodation is easy to get to. Under that test a whole range of new representative occupiers could be created.

Incidentally, last week the Opposition accepted the test that we had devised for mortgage interest relief for representative occupation. It is only right that the test for that relief should be the same as that for representative occupation more generally.

Amendment No. 32 proposes an even vaguer test—that the accommodation is "appropriate". "Appropriate" is as loose a definition as one can devise. It could cover almost every advantage of this kind that an employee desired or was given by a generous employer, and such advantages would thus escape the ordinary tax net to which others would be subject. The term is so hopelessly wide as not to be worthy of serious consideration in this narrow aspect of paragraph (b). Government Amendment No. 33 would extend the security test to employees generally, beyond merely those in the Government's employ. The hon. and learned Gentleman welcomed this change.

One change that the hon. and learned Member did not mention was that Government Amendment No. 34 includes directors in those benefiting from the advantages of the security test in cases where they would normally be excluded. The whole of this legislation deals with directors or those earning in excess of £5,000 a year.

We believe that where a higher-paid employee or director is given accommodation for reasons of security, the charge to tax should not apply because this is an absolute test which can be checked more readily.

Finally, we have Government Amendments Nos. 49 and 89 which are concerned with mortgage interest relief in job-related accommodation. One of the great advantages we have had in introducing the representative accommodation principle is that it has enabled us to grant mortgage relief to people buying their own homes who have to live in accommodation that is provided by their employers.

Hon. Members have raised this from time to time over the years, and it is the very insistence on these new tests that has enabled us to deal with the problem. People such as clergymen, who have to live most of their lives in accommodation that is quite unsuitable for what they would require normally, who want to make provision for their retirement, and who were not able to get mortgage relief in the past, will now be able to do so.

Mr. David Howell

It would be wrong to let this debate pass without commenting on Government Amendments Nos. 33 and 34, which are in response to the worries, if not the direct demands, of my hon. and learned Friend the Member for Dover and Deal (Mr. Rees).

My hon. and learned Friend reminded us that this seems to exempt from the full tax penalties of the clause certain persons living in representative accommodation. Two things have happened since the debate in Committee upstairs. A new concept has come into the legislation of job-related accommodation. This has been raised in connection with the Government's move to give mortgage relief to those who are living in one house that is related to their jobs, while trying to buy another house. Government Amendment No. 33 is an attempt to bring Clause 32 in the Bill into line with the earlier new clause to do with job-related accommodation for those requiring mortgage relief, and not hitherto entitled to it.

The Government amendments make the position a little less unfair and a little less vulnerable to query and doubt. The whole legislation and the tests seem to have been devised specifically to accommodate—if I may use that word in this context—the position of Ministers of the Crown who find themselves provided with flats, apartments and houses at the expenses of the State, and of whom there are a limited number in any Government.

I make it quite clear that we, on this side of the House, believe that it is right that those who, however temporarily, hold positions of high office in this country should have the appropriate accommodation to entertain and carry out functions associated with their office. But we looked at the clause upstairs in Committee and said that it was too blatant. It appeared to be a device specifically to exclude those who happened to be employed by the Crown to make them—surprise, surprise—exempt from the tax penalties of the clause.

The Government's amendments extend the exemptions under the clause. Now, instead of it being employment under the Crown, it is as set out in Amendment No. 33: where, there being a special threat to his security, special security arrangements are in force and he resides in the accommodation as part of those arrangements. That is an improvement. But it still will not quite do because, as we discussed upstairs, certain people—Ministers of the Crown are some of them—reside in accommodation for one reason or another. They are senior and lucky enough. They qualify, because they pursue their jobs in a better way, under subsection (4)(a) and (b), but they are not necessarily there for security reasons. Similarly, Ministers of the Crown who need security protection do not have special accommodation.

The two issues are still separate. Everyone knows, from the practices of successive Governments, that they remain separate. The attempt to try to bring them together as a devise for avoiding the imposition of awkward tax penalties was not very desirable or creditable in the earlier version of the clause, and it is only slightly better now. However, this is an improvement.

I put on record that we are still not satisfied with the situation that has arisen largely because of the Government's early attempts to produce detailed and minute legislation to improve, so they say, the effects of the employment tax legislation. We always doubted whether it would lead to real benefits. We believed that it would lead to difficulties. This is one difficulty, and the Government are still struggling to get out of it. That is the position. But we should be grateful for the small mercy that the Government are trying to make matters a little less bad than they were.

Amendment negatived.

Amendments made: No. 33, in page 21, line 37, leave out paragraph (c) and insert— '(c) where, there being a special threat to his security, special security arangements are in force and he resides in the accommodation as part of those arrangements'.

No. 34, in page 22, line 5, leave out from 'company' to unless ' and in-sert— 'then, except in a case where paragraph () of subsection (4) applies, no exemption is given by virtue of that subsection '.—[Mr. Joel Barnett.]

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