Clause 16

HC Deb 04 July 1968 vol 767 cc1706-11

LIFE POLICIES, LIFE ANNUITY CONTRACTS, AND CAPITAL REDEMPTION POLICIES

Mr. Speaker

I have posted up what is the final list of selected Amendments for the Report stage. I should like to say how much I appreciate the help given by all who have assisted me these last three days in what has been a considerable task.

3.56 p.m.

The Chief Secretary to the Treasury (Mr. John Diamond)

I beg to move Amendment No. 188, in page 12, leave out lines 24 to 29 and insert: (ii) subsection (3)(e) of that section (exemption for interest etc. not exceeding £100 in the case of other premiums each of which is one of a series of equal premiums payable at equal intervals of not more than one year) shall have effect without the exclusion of premiums falling within the said subsection (3)(d), and, in the case of premiums payable under a qualifying policy within the meaning of Part I of the said Schedule 9, with the omission of the words from' each of which' to' one year'. This is the first of a series of Amendments which are broadly relieving, and relate to technical tax matters which have been mostly, but not entirely, discussed with the interests concerned. I imagine, therefore, that it might be the wish of the House that I should deal with this Amendment and the other related Amendments to the Clause and to Schedule 9 very shortly indeed. I am, of course, at the disposal of the House as regards any questions that hon. Members may desire to ask and which I have not covered in an opening statement.

I therefore merely say of this Amendment that it relaxes the conditions on which interest of up to £100 may be allowed as a deduction for Surtax, and provides that in the case of a qualifying policy any premiums come within the relief.

Mr. Patrick Jenkin (Wanstead and Woodford)

This is the first of no fewer than 55 Amendments to Clause 16 and to Schedule 9 which the Government have tabled. We very much welcome the fact that the Government have moved so far to meeting not only the views that were put from this side in Committee, but the views that were put very forcibly and very ably indeed by the outside interests concerned.

I very much welcome what the right hon. Gentleman has said about his intention to move all these Amendments extremely briefly. For my part, and I speak only for myself in this, I should have no objection to their being moved in groups, and moved formally, and any hon. Member could then ask questions—

Mr. Speaker

Order. Technically, the Amendments cannot be moved in groups. They can be considered in groups.

Mr. Jenkin

I appreciate that, Mr. Speaker, and I am grateful to be corrected. I should have suggested that they should be considered in groups, and that any hon. Member can then ask questions. These are highly technical matters and, as the right hon. Gentleman has pointed out, they have for the most part been very fully discussed with interests outside. I therefore do not think that we would be failing in the duty resting on Parliament in passing legislation like this if we were not to discuss it as fully as might be appropriate in other circumstances.

May I also express, on this Amendment and the proposed Amendments, great satisfaction that the Treasury went as far as it did in engaging in very full consultations with interests outside, particularly the Life Offices Association. The Treasury has done this since the Committee stage, and I am perfectly certain that it has been to the advantage of the whole insuring public and to the whole economy.

4.0 p.m.

When this suggestion of consultation was mentioned in Committee by a number of hon. Members, the hon. Member for Salford, West (Mr. Orme) appeared to take objection to it. He said: What his hon. Friends are saying in effect is' Let the vested interests write the policy.' That is what he is saying."—[OFFICIAL REPORT, Standing Committee A, 22nd May, 1968; c. 1317.] All I can say, and I place it firmly on record, is that I entirely support and fully endorse the Treasury's action in this regard. The Bill will be the better for it. I hope that the precedent will be followed when dealing with technical legislation of this sort that full consultations can be entered into—of course, in strict confidence—even before the Budget statement, so that we are not once again faced with a Clause and a Schedule which have to be amended at this stage with 55 separate Government Amendments.

Amendment agreed to.

Further Amendment made: No. 189, in page 12, line 29, at end insert— (1A) The supplementary provisions contained in Part III of the said Schedule 9 shall also have effect.—[Mr. Diamond.]

Amendment proposed: No. 190, in page 12, line 31, leave out from'insurance' to' then' in line 33 and insert: 'having as its sole object the provision on an individual's death or disability of a sum substantially the same as any amount'.—[Mr. Diamond.]

Mr. Speaker

I suggest that we take at the same time the Amendment to the proposed Amendment by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin), to leave out'sole' and insert' main'.

Mr. Patrick Jenkin

Perhaps it would be appropriate if I were to say a word or two about my Amendment. Briefly, subsection (2) is intended to exempt from the requirements of a qualifying policy insurance policies which are taken out to protect mortgages—so-called mortgage protection policies—and it is quite right that it should. Clearly, these are separate animals, and all the restrictions in Schedule 9 should not apply to them.

When the Bill was first discussed, however, it was apparent that the Clause was extremely narrowly drawn. We drew attention to this in Committee and, in particular, to the words to any policy of life assurance the only benefit secured by which is the payment". We emphasised the word "only" and we moved an Amendment to suggest that the right word should be "may" on the ground that if it were strictly construed, a policy containing any collateral benefits of any sort might fail to qualify for the exemption.

The Financial Secretary took the point and agreed to consider it. We now have Amendment No. 190, but it does not seem to me that the Chancellor has succeeded in meeting the point which we made. He has removed "benefit" and substituted "object". He is also taking account of the circumstances that it may not be exactly the same sum which is payable by the policy which may be necessary to meet the mortgage debt. Presumably, the argument rests on the proposition that the word "object" in Amendment 190 is to be construed as equivalent to "purpose" and that it would, therefore, be distinguishable from any subordinate advantages which would be benefits and that, therefore, there is a distinction to be drawn between "benefits" and "object".

Amendment No. 190 uses the words having as its sole object the provision on an individual's death". The Government would, no doubt, argue that they have taken the point and that if there are any supplementary collateral benefits, they will not disqualify the policy from the exemption. One must, however, remember that the court will come afresh to this matter, It will not have had the advantage of reading the arguments which we have had in Committee and on the Floor of the House. It will not have realised that "object" has been substituted for "benefits". The court will look at the policy as a whole. It will see that the object is to provide a sum and to provide a number of other benefits. It will look at the Section, which will say that the sole object is the provision … of a sum and it will say that because the other benefits are provided, the policy will be excluded.

I cannot believe that it is the Government's intention that it should be the sole purpose of a policy to provide the capital sum and that if any collateral benefits are included, that will disqualify it. I do not believe that the Government have remedied the defect the force of which they recognised when we raised the matter in Committee. I therefore suggest that my Amendment to leave out "sole" and to insert "main" is necessary to achieve the Government's intention.

Mr. Diamond

I suggest that essentially we have met the reasonable view of the interests concerned and the reasonable arguments put forward by the Opposition, but not precisely in the way that the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) has interpreted it. The situation is, as the hon. Member says, that to be excluded completely from the effect of the legislation, the objects must be narrowly defined as he has indicated; and as he has said, the court would come fresh to an interpretation. That, however, is so that the policies in question should be completely excluded from the provisions.

If further elements are brought into the policy as a result of which it would not be excluded from the provisions, we then get the situation that the provisions apply. There is nothing wrong with that, however, because if the policy is still a qualifying policy, there is no difficulty. There is, therefore, no reason to remove these policies wholly from the provisions of the Bill to achieve what the hon. Member wants to achieve and what I am glad to co-operate in giving him. In these circumstances, I think that the hon. Member would not wish to press his Amendment.

Mr. Patrick Jenkin

No doubt the interests concerned—who, incidentally, did not raise this matter with me; this is a view which I have taken myself on the construction—will read what the Chief Secretary has said and will be able to refer to it as necessary when advising their members.

Perhaps the right hon. Gentleman will be prepared to consider how the Clause operates in the year ahead and if it appears that an Amendment is necessary to give reasonable flexibility—

Mr. Diamond indicated assent.

Mr. Jenkin

—I am glad to see the right hon. Gentleman nodding consent—he will be prepared to bring in an Amendment.

Mr. Speaker

Order. We are not in Committee, and on Report it is unusual for an hon. Member to speak twice unless he is the mover of an Amendment or the Minister in charge.

Amendment agreed to.

Further Amendment made: No. 191, in page 12, line 37, leave out' annual instalments' and insert: 'instalments payable annually or at shorter regular intervals'.—[Mr. Diamond.]

Mr. Diamond

I beg to move Amendment No. 10 in page 13, line 20, at end add— (5) A policy of life insurance issued in respect of an insurance made on or before 19th March 1968 shall be treated for the purposes of subsection (4) above and the said Schedule 9 as issued in respect of one made after that date if it is varied after that date so as to increase the benefits secured, or to extend the term of the insurance: Provided that a variation effected before the end of the year 1968 shall be disregarded for the purposes of this subsection if its only effect is to bring into conformity with paragraph 2 of that Schedule (qualifying conditions for endowment policies) a policy previously conforming therewith except as respects the amount guaranteed on death, and no increase is made in the premiums payable under the policy. This Amendment is essentially an anti-avoidance proposal, the object being to stop people using pre-Budget policies as a vehicle for avoidance. The position is that if a pre-Budget policy conformed with the tests in Schedule 9, any variation must conform with the new rules if it is to continue to qualify for tax reliefs.

The general effect of the Amendment is that if anybody has a pre-Budget policy which does not satisfy the conditions, he may keep it as it stands and the new legislation will not catch it, provided that he does not vary it—because the Clause applies to policies entered into after Budget day. If, however, he varies the policy to increase the benefits or extend the term of the insurance, he will become exposed to the new legislation.

Therefore, the proviso to the Amendment allows certain pre-Budget policies to be rectified by the end of 1968. They will then be qualifying policies for all purposes. This provision was asked for by the unit trust movement, whose pre-Budget policies have failed to conform with the 75 per cent. guarantee test on a formality.

Amendment agreed to.