PERSONAL EQUITY PLANS

HC Deb 08 July 1986 vol 101 cc172-91 3.46 pm

The Financial Secretary to the Treasury (Mr. Norman Lamont)

I beg to move amendment No. 37, in page 119, line 4, leave out 'in shares under a plan (a personal equity plan)' and insert 'under a plan'.

Mr. Speaker

With this it will be convenient to discuss Government amendments Nos. 38 to 47.

Mr. Lamont

The amendments refer to the personal equity plan. Under our original proposals, investment in unit and investment trusts was excluded from the personal equity plan scheme. That was because, as my right hon. Friend the Chancellor of the Exchequer made clear, the scheme was primarily designed to encourage direct investment in equities. However, it was put to us that many people, particularly small investors, might not be able to spread their risks as widely as they might wish, at least in the early years of the scheme. The Government accepted that there was some substance in that point, and that the needs of such investors should be catered for.

The purpose of the amendments is to enable a modest proportion of investment in unit and investment trusts to be allowed under personal equity plans. That was made clear in the consultative document that we published, but the Bill, as originally drafted, contained references only to "shares" rather than "investments". In Committee, it was said that schedule 8 would be amended if necessary. As originally drafted, the schedule referred to "shares", which does not cover investment in unit trusts.

I hope that the change will be seen as fairly non-controversial and that the reasons for it are clear.

Mr. Terry Davis (Birmingham, Hodge Hill)

As the Financial Secretary has said, the amendment is noncontroversial, as it has been moved in response to pressure and representations from several parties on this side of the House. We welcome the amendment and certainly do not seek to divide the House against it.

Mr. Douglas Hogg (Grantham)

I, too, welcome the amendment, as I regard it as rather important. The previous restrictions confining the scheme to shares were undesirable, because they would have limited the range and type of investor. As one of the Government's aims is to encourage wider ownership in investments generally, this move is both dramatic and welcome, and I hope that it will receive wide publicity.

Amendment agreed to.

Amendments made: No. 38, in page 119, line 6, leave out 'shares' and insert 'investments'.

No. 39, in page 119, line 12, leave out `shares in which they may invest'

and insert 'investments they may make'.

No. 40, in page 119, line 14, leave out 'shares' and insert 'investments'.

No. 41, in page 119, line 15, leave out 'shares' and insert 'investments'.

No. 42, in page 119, line 25, leave out 'in shares'.

No. 43, in page 119, line 27, leave out 'them' and insert 'the investments'.

No. 44, in page 119, line 32, leave out 'in shares'.

No. 45, in page 119, line 41, leave out 'shares' and insert 'investments'.

No. 46, in page 120, line 8, leave out 'shares' and insert 'investments'.

No. 47, in page 120, line 12, leave out 'shares' and insert 'investments'.—[Mr. Norman Lamont.]

Mr. Terry Davis

I beg to move amendment No. 49, in page 120, line 13, at end insert— '(4A) The regulations shall provide that an investor shall not be entitled to relief from tax in respect of shares in a company the whole or part of whose income derives

1. (a) from a trade or business carried out in whole or part in the Republic of South Africa; or
2. (b) from investment in a company or companies the whole or part of whose income is derived from a trade or business carried out in whole or part in the Republic of South Africa; or
3. (c) from transactions undertaken with or in connection with a company or companies the whole or part of whose income is derived from a trade or business carried out in whole or part in the Republic of South Africa; or
4. (d) from transactions with the Government of the Republic of South Africa.

(4B) The regulations shall provide that an investor shall not be entitled to relief from tax in respect of shares in a company which controls either directly or indirectly another company the whole or part of whose income is derived in the manner set out in subparagraphs (a), (b), (c) or (d) of paragraph (4A).'. I begin by putting the amendment in context. I must emphasise that the Labour party objects most strongly to the inclusion of clause 39 and schedule 8 in the Bill, because it completely opposes the idea of the personal equity plan on grounds of principle and priority.

When the scheme was announced by the Chancellor of the Exchequer in the Budget on 18 March, he claimed that the scheme would help to make The British people a nation of share owners. He went art to claim that it was, Specially designed to encourage smaller savers." [Official Report, 18 March 1986; Vol. 94, c. 177–78.] As we established in Committee, the scheme is worth very little to the smaller investor, but it is worth a lot to the big investor, especially the investor who has capital gains of more than £6,300 a year. The personal equity plan has little or nothing to offer to the genuine small investor. Frankly, we regard it as bogus.

We also oppose the scheme on the ground of priority. If the Chancellor can afford to give away £25 million a year, we could all think of many more deserving groups of people than those who can afford to invest in shares.

This afternoon, we are concerned about a different point. In the prospectus for potential plan managers issued by the Board of Inland Revenue, there is only one restriction on the shares which will qualify for tax relief. The investment must be confined to ordinary shares in United Kingdom incorporated companies quoted on the stock exchange. My amendment seeks to introduce another restriction—to ensure that the shares are not in a company whose income derives from conducting business in South Africa, or a company with investments in South Africa, or a company which conducts business with the South African Government.

The position in South Africa is well known to the Government and to all hon. Members; it does not need a detailed exposition from me. I simply remind the House that in South Africa only 15 per cent. of the population—the white people—are treated as full citizens and 85 per cent.—the black, Asian and coloured people—are treated as second-class citizens or worse. The system of apartheid is abhorred by the overwhelming majority of people in Britain. Hardly anyone on the House will stoop to defend it. But it is not enough o condemn apartheid The question is what should be done about it and what the British Government should do.

There is a clear difference between the Conservative Government and the Conservative party—or the Prime Minister and her friends—on the one hand, and the Labour party, all other political parties, even some Conservative Members and most of the people outside the House, on the other. Only the Prime Minister arid her more extreme supporters are resisting the call for international economic sanctions to be applied against South Africa, and the Prime Minister and those who think like her are rapidly becoming as isolated at home as they have become isolated abroad.

The amendment is concerned with a slightly different, although related, point. As matters stand, the Government are planning to encourage investment in South Africa by giving tax relief on the income derived from shares in companies investing in South Africa doing business in South Africa or doing business with the South African Government. Surely we can all agree that this policy is morally wrong and politically mistaken.

Surely even this Government would accept that the introduction of new tax incentives for investing in companies which are in turn investing in South Africa must constitute the wrong message to send to the South African Government now. Surely we must agree that, whatever our differences about the concept of the personal equity plan, we should exclude investors in companies conducting business in South Africa. I hope very much that the Government will accept the amendment.

Mr. Douglas Hogg

I hope that the Government will not accept the amendment. It is, as the hon. Member for Birmingham, Hodge Hill (Mr. Davis) has been frank enough to admit, an attempt to introduce sanctions by the back door.

The Labour party has no monopoly of concern about the policies of the South African Government. I am deeply opposed to the policies of the South African Government and I suspect that that is the position of almost the entirety of the members of my party. I support the mission of my right hon. and learned Friend the Foreign Secretary, and I agree entirely with those who say that we should introduce additional measures if it does not bring about any substantial concession.

The Government have already introduced measures against the South African Government and I feel certain that additional measures will be forthcoming if they are necessary. That, however, does not mean that the approach that is set out in the amendment is right. Indeed, it is wrong on at least two grounds. First, it is wrong to adopt a piecemeal policy. If Governments are to introduce measures against the South African Government, they must be part of a concerted approach and a general policy. I think that that is best done in concert with other EEC and western countries. Secondly, a policy of the sort that is set out in the amendment is curiously inflexible. A sanction that is incorporated in statute law is difficult to change. Therefore, it is not an especially effective method of inducing concessions. It is not something that can be used flexibly.

If the South African Government seek to make concessions, they will still be affected by the amendment if it is incorporated in legislation. On the grounds that we should not approach the problem of South Africa in a piecemeal fashion or adopt an inflexible method of the sort that is advocated by the hon. Member for Hodge Hill, I hope that the Government will not support the amendment.

Mr. Robert Sheldon (Ashton-under-Lyne)

No one can doubt that it would be far better to have a list of sanctions separate from the Bill. That is the obvious approach. No one would be happier than myself if the Prime Minister or the Chancellor of the Exchequer were to say that the amendment is not a suitable way of introducing sanctions, that there are many other and better ways and that the Government intend to implement them. Unfortunately, we do not have that option before us. However, we have the amendment.

We can express through the amendment our need to consider whatever sanctions it might be possible to introduce to bring pressure to bear upon the South African Government. There will be many flaws in any amendment of the sort that is before us—for example, it is hard to determine the limits of involvement of South African companies — but the view that is expressed in the amendment is important.

The clause represents the great hope of the Chancellor of the Exchequer to bring about a body of knowledgeable shareholders throughout the country that will bring pressure to bear upon certain companies and improve their performance by causing them to respond to it. I do not believe that it will have anything like that effect. The British people are not the same as the people of the United States. There are many in the United States who spend a great deal of their time investing and switching their investments from one company to another. They are extremely knowledgeable about their investments. I do not think that most of the British work force would take that approach. We are likely always to find that those who invest in shares in Britain will be a rather more knowledgeable part of the population than the majority and rather wealthier than the average person. The clause will not have anything like its intended effect.

The hon. Member for Grantham (Mr. Hogg) speaks with great concern, interest and understanding on these matters. He said that the amendment is an attempt to introduce sanctions by the back door. I do not agree. It is unfortunate that we do not have a front door. If we had a front door, I would be delighted to discuss much more effective methods of introducing sanctions. The amendment can be said to constitute a piecemeal approach, but if it were passed we could express in the Bill the fact that we shall use whatever means is available to us to show our detestation of the South African regime.

Mr. Douglas Hogg

I understand the right hon. Gentleman's position. I am not trying to denigrate the position he has adopted. Will he tell the House what would happen if the amendment were passed and it was incorporated into statute law and the South African Government made major concessions in their policy? Would we have to introduce primary legislation to delete the amendment?

4 pm

Mr. Sheldon

That would be a most happy occasion. There are not many opportunities for a Finance (No. 2) Bill. If we were to see in South Africa a position of one man, one vote, I should be pleased to be one of the signatories to such a Bill. Let us be realistic: that All not happen.

Mr. Hogg

The right hon. Gentleman is quite right. We shall not see a one man, one vote position in South Africa in the foreseeable future. However, we might see substantial concessions — for example, the freeing of Mandela and negotiations with the ANC. There comes a point when some concessions are so significant as to require this House and the Government to make changes in the statute law, which the right hon. Gentleman advocates.

Mr. Sheldon

I should be happy to negotiate with the hon. Gentleman if such an eventuality came about. I should be pleased to consider where, how and in what circumstances we might repeal the legislation.

Mr. David Winnick (Walsall, North)

Would the simple guide he that, when the representative organisations of the African majority and their white and coloured allies in South Africa say that no economic measures should be taken, it would be right for us to respond in the manner outlined by my right hon. Friend?

Mr. Sheldon

My hon. Friend has a most practical approach to such matters. At such a time when good fortune were to attend our labours, I do not think that there would be any problem about the repeal of a limited piece of legislation which the amendment proposes. We are concerned to express a clear view to put to disadvantage those companies that trade with and get a great deal of their profits from South Africa, and meet the conditions of the amendment. It is a muted clarion call, but at least it shows the views of my hon. Friends. It is a way in which we can bring to bear in some small way the revulsion that we feel about the events taking place in South Africa. This is a limited but useful amendment, and I hope that it will be supported.

Mr. Michael Hirst (Strathkelvin and Bearsden)

The amendment is undoubtedly a foolish piece of ideology. It is objectionable that Labour Members should try to pretend that they have a monopoly of concern to see the end of apartheid. When one looks back at speeches made by Labour right hon. and hon. Gentlemen, one may ask what they did in government to bring about the ending of apartheid.

I find it curious that the amendment is tabled in the name of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), because when the Prime Minister challenged him on economic sanctions at Question Time a few weeks ago, he wriggled out of giving any commitment to imposing economic sanctions and said that he w old prefer to think about other measures—measures short of economic sanctions. Yet he is the lead signatory on an amendment which, in its most naked form, intends to introduce such sanctions.

The wording of the amendment is ludicrous. Any company, any quoted security that invests, trades or invests in another group of companies that trades with South Africa would be excluded from PEP. There is hardly a leading British company quoted on the stock exchange in London—the sorts of investment that people would put by in their PEP—that does not have some form of investment in or trade with South Africa or with a third party that in turn trades with South Africa. I commend the hon. Member for Birmingham, Hodge Hill (Mr. Davis) for having the honesty to admit that the effect of such an amendment would be to emasculate PEP. I believe that I speak for my colleagues who welcome PEP. We certainly do not want to see the introduction of any wrecking amendments.

I had the opportunity to visit South Africa. Before I went, I condemned apartheid. I went there with an open mind, which is more than the hon. Member for Walsall, North (Mr. Winnick) has done. I am tired of people with open mouths and closed minds who will not see things for themselves. In the course of that visit, I looked at one of the investments of a British leading company—BP. BP has a substantial interest in coal mining. That interest produces a substantial number of jobs and a great deal of wealth for the people who work in those mines.

Moreover, the conditions in such mines are superior to anything that I have seen in mines in this country or those which I have visited in Europe. I was proud of the fact that a British company had set the highest standard of living and working conditions of its black African employees and that it was giving a standard to which other South African companies could aspire. I have no doubt that, if economic sanctions were introduced against South Africa, the jobs of a successful work force in that mine would come to an end overnight.

I do not believe that the amendment is likely to deter any company from trading with or investing in South Africa. It is likely to prevent people from taking advantage of what was intended in the Budget proposal for a personal equity plan. As such, I find it objectionable. I hope that my right hon. Friend the Financial Secretary to the Treasury will call upon his colleagues in the Government to oppose the amendment, should the Opposition choose to press it to a vote.

Mr. Ian Wrigglesworth (Stockton, South)

I share the anxiety that has been expressed on the Opposition Benches about putting economic pressure on the South African regime to change their policies. The amendment is drawn so widely that I think that there is virtually no organisation in the land that carries out business that would not be covered by it. I must say to the Labour Front Bench that that probably includes the Co-operative bank, Unity Trust and the other organisations to which they may he close. If transactions as well as investments arc included, any organisation or company— not to mention Mr. Maxwell and Pergamon printers, and so on—that is trading in almost any market, but especially internationally, if not directly, will be caught by the amendment. If the amendment had been better targeted and more tightly drawn, it would have been more effective and would have gathered wider support.

As I said in the Standing Committee, the PEP scheme is a poor scheme. In our view, it will not extend share ownership in this country in the way that the Chancellor trumpeted forth in his speech. It is a mouse of a scheme. I regret that the Government were not prepared to accept amendments that I and others tabled to make it a more effective and catch-all scheme that people could take up as small investors in the way that the Chancellor said he hoped would happen.

In my view, the amendment would not only undermine the scheme completely, because I can think of virtually no business organisation that would not be hit by it, but it would not achieve the purpose that the Opposition intend. I think that there are much more direct economic actions that can be taken and should be taken by the Government to persuade the South African Government to change their policies.

Mr. Winnick

My hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis) has explained the criticisms that we have of the scheme. He went into considerable detail when the Bill was in Committee. Despite all the ministerial optimism about helping the small investor and what is described as "people's capitalism" and other propaganda, the plain truth is that the scheme will help those with substantial incomes. The Government are perfectly aware of that. The Chief Secretary admitted as much when he replied at the Committee stage.

Far too many people in our community have been penalised as a result of Government action in the past few years. In more recent times, owner occupiers who become unemployed will face difficulties because the assistance that they receive towards mortgage interest will be reduced. That was the subject of a debate initiated by the Labour party.

Of course, no one is surprised when a Tory Administration substantially assist the most prosperous in the community. The Government have tried to cover it up, giving the impression that they wanted to help the ordinary person but, as with the tax concessions, those who have benefited in some cases in terms of thousands of pounds a week have been the most prosperous. That is the function and role of the Tory Government and only the most naive person would expect them to act otherwise.

It is even more unacceptable that such tax relief is given for any form of investment in respect of shares in a company with South African involvement. The hon. Member for Stockton, South (Mr. Wrigglesworth) echoed the comments of Tory Members. Of course, the hon. Member for Grantham (Mr. Hogg) said that he was against apartheid. I had not heard a single Conservative Member—even the hon. Member for Luton, North (Mr. Carlisle)—argue otherwise. I shall pay the hon. Member for Grantham the compliment of not putting him in the same category as the hon. Member for Luton, North and one or two other Conservative Members who might be associated with the South African lobby on the Tory Benches. I must say, with respect, that it is not sufficient to say that one is against the system in South Africa. The obvious question, which the Church of England debated yesterday with great seriousness, as one would expect, is: what does one intend to do about the events in South Africa? It is not sufficient to say, in effect, that one is opposed to the system and to leave it at that.

Mr. Douglas Hogg

I do not want the hon. Gentleman to misrepresent my position. I have made it clear, especially in this debate, that, if the concessions are not forthcoming as a result of the visit by my right hon. and learned Friend the Foreign Secretary, I hope that additional sanctions or measures will be imposed.

Mr. Winnick

That is a step forward, and it is about time, after all the years of tyranny. It is fortunate that, at long last, there are Conservative Members who take that line. I should be out of order if I were to discuss the Foreign Secretary's proposed trip.

Mr. Jeremy Hanley (Richmond and Barnes)

Does the hon. Gentleman know the policy of the Church Commissioners on their investments in South Africa?

Mr. Winnick

I am sure the hon. Gentleman will be pleased to take up that matter as soon as he can with the Church of England authorities. It would be inappropriate for me to act as a spokesman on behalf of the Church Commissioners. After all, a Conservative Member answers in the House for the Church Commissioners. I see no reason why the hon. Member for Richmond and Barnes (Mr. Hanley) should not table a written question for priority answer on Thursday or Friday, and he would then be satisfied.

The hon. Member for Strathkelvin and Bearsden (Mr. Hirst) has said that we have closed minds. Presumably, anyone who is against apartheid, including the hon. Gentleman, has a closed mind. It would he odd if we had an open mind in view of the type of racial tyranny and oppression that exists in South Africa.

It is unfortunate that so many leading British companies have substantial holdings in South Africa. I have a list of category A companies, which are British companies holding 50 per cent. or more of the equity of a South African company. That is a fairly large equity. Those companies are household names—Barclays bank, BAT Industries, the Beecham group, Blue Circle, the BOC group, Boots, Brooke Bond, Cadbury Schweppes, Dunlop Holdings, GEC, Great Universal Stores, Rio Tinto-Zinc, Rank Xerox, Plessey, Rowntree Mackintosh, Tate and Lyle, Vickers, Wilkinson Sword and Wimpey. They are all leading British companies.

Mr. Douglas Hogg

On a point of order, Mr. Deputy Speaker. If the hon. Member for Walsall, North (Mr. Winnick) is correct in saying that Barclays bank holds a substantial interest in South African companies, I fancy that the representative of the Social Democratic party—the hon. Member for Stockton, South (Mr. Wrigglesworth)—should have declared an interest. As I understand it, he is a paid representative of Barclays bank.

Mr. Deputy Speaker (Sir Paul Dean)

It is a point of debate rather than a point of order. The House knows that, if an hon. Member has an interest to declare, he should declare it.

Mr. Wrigglesworth

Further to the point of order, Mr. Deputy Speaker. I am not a paid representative of Barclays bank, as I think the hon. Member for Grantham (Mr. Hogg) knows. I am an adviser to Barclays bank. That is well known in the House. I have, of course, no hesitation in declaring that position.

4.15 pm

Mr. Winnick

Not only am I not the representative of the Church Commissioners but I am not, in any circumstances, a representative of or spokesman for that wretched group, the SDP. I leave it to the hon. Member for Stockton, South to square his conscience. No doubt he will do so in a way that is appropriate to him.

It is unfortunate that so many leading British companies have such a huge stake in the South African economy. Although Conservative Members—no doubt including the Financial Secretary to the Treasury—will tell us that this is all to the good for South Africa, I, like my right hon. and hon. Friends, have a different attitude. I believe that such involvement by leading British companies can do nothing but strengthen the South African economy and help the South African authorities to remain in power. The fact that some of those companies pursue a fairer employment policy than native companies in South Africa is beside the point. They play a leading role in the apartheid system, no matter how they argue otherwise. It is understandable that the South African authorities are so anxious that these British companies retain their stake in South Africa. We shall be taken seriously in our arguments against apartheid only when economic measures and sanctions are imposed, as inevitably they will be, and when British companies are clearly told by the Government of the day that their involvement in South Africa must end or be substantially reduced as I believe it should be.

The Labour party knows that the amendment will be voted down. The SDP and, no doubt, the Liberals will vote with the Tories. We are under no illusions. Anyone who believes that this is just a propaganda ploy and that, if the Labour party were in office, we would act differently does not understand. The other day, the Prime Minister baited my right hon. Friend the Member for Leeds, East (Mr. Healey) about what he did or did not do in Cabinet in 1967 in respect of selling arms to South Africa, but 140 Labour Members of Parliament made it clear then that in no circumstances would they allow their Government to change their policy. That policy was retained as a result either of the view of the 140 Labour Members of Parliament or of the way in which our views were made clear to the Whips. I was a Member at that time. We made it clear that we were not willing to support any Government, including our own, who pursued a policy of selling arms to South Africa. It is understandable that in 1967 the Labour Cabinet decided to continue their policy.

During the emergency debate on 19 December 1967, under Standing Order No. 9, Conservative Members were highly critical of the Labour Government for pursuing a policy of not selling arms to South Africa.

Mr. Deputy Speaker

Order. The hon. Member is straying from the subject. He must relate his comments to personal equity plans.

Mr. Winnick

I appreciate your guidance, Mr. Deputy Speaker.

We demonstrated in 1967 that we were not playing with words. We do not have to wait many years to understand the tyranny in South Africa. Although the amendment will he voted down, we shall have established an important principle. Other sections of the community here are making it clear that economic measures and sanctions should be imposed on South Africa. We say, as Labour Members of Parliament in a Tory-dominated House of Commons, that that should be done. That is the way in which we can associate ourselves with those in South Africa fighting tyranny who want us to take those economic measures. I am sure that people will understand what we are trying to do. In effect, we are saying to the country, "We totally oppose the Tory Government's collaboration policy. We are for sanctions and effective measures against South Africa." This is one way in which we are illustrating that measures could be taken, but will not be taken because of the Government's action.

Mr. Norman Lamont

I am sorry that the personal equity plan has received such a sour response from Opposition Members. The purpose of the personal equity plan is to increase share ownership and make it available to people of modest means. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) seemed to pooh-pooh the whole idea. He said that he did not think that the United Kingdom could acquire the same interest in investment as the United States. It may be difficult to get that sort of popular interest, but I think that most of my hon. Friends would agree that it would be excellent if we could imitate that part of American culture and that our economic success would be more likely to be assured if people took a close interest in the fortunes of individual companies.

The hon. Member for Birmingham, Hodge Hill (Mr. Davis) almost openly admitted that his amendment would have a severe effect on the personal equity plan. The hon. Member for Stockton, South (Mr. Wrigglesworth) agreed with the hon. Member for Hodge Hill that he did not think it was a satisfactory scheme because it did not go far enough. However, at least he had the grace not to want to wreck the scheme. He at least wanted to preserve it and enable it to get off the ground. It may be a modest start, but it could be the modest start of something very significant and far-reaching.

The hon. Member for Hodge Hill said that the scheme would benefit the wealthier investor. That was echoed by the hon. Member for Walsall, North (Mr. Winnick). At times there seemed to be a conflict between Opposition Members. Some were saying that it was a mouse of a scheme and did not amount to anything and others were saying that it gave too much benefit to the rich. We believe that it can benefit the small investor. I imagine that Opposition Members think that it may not because they believe that it is unlikely that a capital gain will arise which is anywhere near the indexed rate of £6,300 a year. However, that does not take account of two factors. The first is the relief that is avail able on dividends that are reinvested and the second is the gearing effect that will have over time as the portfolio and the value of the portfolio build up. I believe — I am sure that I carry my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Hirst) with me—that it could be significant for the smaller investor.

Mr. Terry Davis

I believe that the Financial Secretary missed the discussion on this schedule in Committee. At that time he had not been appointed as Financial Secretary. May I assume that he has taken the trouble to read our proceedings in Committee? Will he answer the point that I made in Committee about the comparison between the tax benefit and the cost of paying the manager of the PEP to run the plan? As the Financial Secretary will remember, in Committee I showed that the charge to be expected for the management of a PEP would exceed the income tax refund.

Mr. Lamont

Not having been in the Standing Committee, I do not know what the hon. Gentleman said about that.

Mr. Davis

Has the Financial Secretary not taken the trouble to read our debates? Perhaps that is why he has been put up to reply to this debate.

Mr. Lamont

I may have read innumerable copies of Standing Committee proceedings on the Finance Bill before I appeared on that Committee myself. If the hon. Gentleman will excuse me, I certainly do not carry in my head every argument that he puts when I am not present. I know that he expects me to follow his speeches very closely, and indeed I do. I understand the point that the hon. Gentleman has made because he has put it to me. However, the effect of the rolled-up relief available to dividends and the effect of the cumulative investment over the period of a plan could be significant to the small investor. That is the only point that I make, and I think it is important because an attempt has been made to suggest that the scheme is not important for the small investor. We intend it to be designed for the small investor and we intend to do what we can to encourage wider share ownership.

Most of the debate has been about South Africa. The purpose of the amendment is to take measures which, it has been argued, might have some effect on the problems in South Africa. I would like to explain to the House why the amendment would be quite unworkable. Apart from any other objection I might have to it—the amendment may give Opposition Members some moral satisfaction; it may be a moral free lunch—it is unworkable.

As my hon. Friend the Member for Strathkelvin and Bearsden pointed out, the amendment would exclude from the personal equity plan proposal not merely any company or its subsidiary which traded or invested in South Africa, but any company which had any transactions with such a company. That would be a far-reaching and wholly unenforceable provision. Who would enforce it? Would plan managers have to seek an assurance from companies that they would not trade with or invest in South Africa? Would United Kingdom companies have to check, before conducting any transaction with any other company in the world, that neither it nor any of its subsidiaries derived any income from South Africa? How, in the real world, would failures to comply with this restriction be discovered, either by plan managers or the Inland Revenue?

Secondly, is it fair that a personal equity plan holder should be denied his or her tax relief—however much Opposition Members may not sympathise with the concept — because, without his or her or the plan manager's knowledge, the company in which the money was invested turned out to have South African connections? What possible explanation would the hon. Member for Hodge Hill give to a widow who suddenly found herself subjected to unforeseen capital gains tax? How would the hon. Gentleman justify to any investor with a modest income that he would be presented with an unforeseen capital gains tax liability for which there were no funds?

As my hon. Friend the Member for Grantham (Mr. Hogg) said, it is the introduction of sanctions by the back door. It is penalising the wrong people because it is putting the penalty on the investor and the plan manager for investing in companies which would be doing something of which they had no knowledge and no way of finding out and something which was not illegal. If that is not sanctions by the back door, I do not know what is. My hon. Friend the Member for Grantham was right to describe it in that way.

Even if we accepted the principle of this amendment, which we certainly do not, we could not advise the House to enact legislation which is impracticable and cannot be enforced. The hon. Member for Walsall, North said that this concerns a matter of principle. The amendment is not about a matter of principle; it is about a gesture that the hon. Member for Hodge Hill is anxious to make. For that reason, I advise my right hon. and hon. Friends to reject the amendment.

Mr. Terry Davis

Once again, we have found that the Financial Secretary has been careless in his homework. I did not expect him to read all the reports of our proceedings before he joined the Committee after his appointment as Financial Secretary in succession to the right hon. Member for Croydon, Central (Mr. Moore), but he could have taken the trouble to read our discussion about PEP before he responded to the debate today. It is clear from what he has said that he has not taken the trouble to read the reports of the proceedings when we debated the schedule in Committee. If he had, he would not have dared to describe the investors who will benefit from the personal equity plan as "small investors of modest means".

The right hon. Gentleman would have known that we showed to the satisfaction, not only of my hon. Friends but of many people sitting in the Public Gallery listening to the debate, that the people who will benefit will he those whose income exceeds £25,000 a year. I am prepared to admit that the Financial Secretary may regard that as modest means, but I do not think that any Opposition Member would regard an income of £25,000 a year as modest. He talks about the classic Conservative widow and cries at the Dispatch Box about the widow of modest means who suddenly discovers that she has become liable for capital gains tax because she has invested in a company trading with South Africa. Elsewhere, in other investment, she will already have had to make a capital gain of £6,300 in that year alone, but that widow of modest means was not sharp enough to know that she was investing in South African companies. We recognise that the Financial Secretary, unfortunately, has maintained his usual standard in replying to the debate.

4.30 pm

The hon. Member for Strathkelvin and Bearsden (Mr. Hirst) fell below his usual standard in his contribution to the debate. Clearly he has not listened to what I said in moving the amendment. He said that he regarded it as objectionable that Opposition Members should claim a monopoly of concern over what is happening in South Africa. I specifically said, and took care to say, that I recognised that some Conservative Members were concerned about South Africa. The hon. Gentleman did not listen. I accepted that some Conservative Members, such as the hon. Member for Grantham (Mr. Hogg), who may be a Johnny-come-lately, said today for the first time that he shared the concern of my hon. Friend the Member for Walsall, North (Mr. Winnick) about what is happening in South Africa.

I was careful not to claim a monopoly of concern. The hon. Member for Strathkelvin and Bearsden is prepared to complain about what is happening in South Africa, like the hon. Member for Stockton, South (Mr. Wrigglesworth). In fact, I am not sure about the hon. Member for Strathkelvin and Bearsden. His hon. Friend the Member for Grantham was prepared to condemn what was happening, but he said that he took pride in some of the things that were happening. I see very little in which to take pride in South Africa.

Mr. Hirst

The hon. Gentleman, in turn, is falling short of his usual standard. I made it absolutely plain that I admired the positive and progressive way in which British investments in South Africa had advanced the economic and, in turn, political rights and conditions of people who work in South Africa. I fear that the hon. Gentleman has misconstrued my words. I should be interested to hear him say whether he accepts my proposition that his amendment will wreck the prospect of personal equity plans being successful in this country.

Mr. Davis

If I misconstrued what the hon. Gentleman said, I apologise unreservedly, because that is not my wont. Nevertheless, he objected to the alleged claim of a monopoly of concern by the Opposition. That has not occurred during debate. I hope that the hon. Gentleman will find an opportunity to apologise for that.

The hon. Gentleman made an important and interesting point about the effect on the British economy, which I shall deal with later. However, first, I should like to deal with the hon. Member for Grantham, who told us that he is deeply opposed to the policies of the South African Government and that he could conceive that additional measures—I think that he meant sanctions—may be necessary if his right hon. and learned Friend the Foreign Secretary returns empty-handed from South Africa, and there are not improvements in the situation there.

The hon. Member for Grantham said that the amendment represented sanctions by the back door. Like my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), I would much prefer sanctions by the front door. Unfortunately, we are not getting sanctions by the front door. We must look for other ways in which to express our concern and dissociate ourselves from economic policies that are bolstering and supporting the South African Government.

The hon. Member for Grantham also said that it was wrong to approach the matter in a piecemeal way. Again, as my right hon. Friend the Member for Ashton-under-Lyne said. I would prefer it if we could approach the matter in a comprehensive way and had a list of sanctions to be imposed upon the South African Government. Unfortunately, that matter is not before us. We have to deal with matters as they come before us and in the form in which they come before us. Today we are dealing with the Finance Bill and a schedule in it.

This Bill extends economic involvement in South Africa, and we say that it is wrong to increase the involvement of British investors in South Africa at present. If my amendment were accepted, it would still remain legal for people to invest in South Africa, but they would not get tax incentives to do so. Surely it is wrong for the British Government to give tax relief to people, to encourage them to invest, when that investment may go into companies that are taking part in economic suppression in South Africa.

Mr. Douglas Hogg

The hon. Gentleman's argument is most eloquent. He will recognise that his amendment would penalise companies that are trading with other companies that have an interest in South Africa. Was that a drafting mistake on his part, or was it intended?

Mr. Davis

It was my intention to avoid any loopholes. If the hon. Gentleman co-operated with us, in his new enthusiasm for measures to cope with the situation in South Africa, in drafting amendments that will not penalise companies that inadvertently do small business with other companies that are active in South Africa, we would welcome his assistance. That assumes that we share the ultimate objective. I do not think that we do. Unfortunately, that is the problem. Therefore, we must rely on my poor efforts of draftsmanship, which will encompass companies that do business with other companies that are active in South Africa.

The hon. Member for Grantham also said that it was wrong to approach the matter by way of statute law because statute is inflexible. I have a great deal of sympathy with that point. However, the answer lies in the hands of the Government. They have put a restriction on personal equity plans, but they have not put it in the Bill —it is not in the schedule. They have put it in a green document called "Prospectus for Potential Plan Managers". The Government have included in that prospectus, published by the Board of Inland Revenue, a restriction that requires that the shares must be in a company which is a United Kingdom incorporated company quoted on the stock exchange. If it would be inflexible to put the measure into statute law, as the hon. Member for Grantham said, let us have something in the prospectus instead. We should tell the potential plan managers that the measure will be included in regulations, which will be published, so that they can be amended when, on the happy day that cannot come too quickly for my hon. Friends and myself, the South African Government change. I fear that it will have to be the South African Government who change. The present one will not change their policies. On that day we can drop this little sanction. If the Government said that, I would withdraw my amendment. I appreciate the point that was made by the hon. Member for Grantham, but that is not what the Government said. The Financial Secretary did not give us that olive branch. He did not say, "We did not want to be so inflexible by writing the measure into the statute book." He has left us with no alternative. The Government will not do anything. They will not introduce any such restriction.

If the Government had said, "We shall let the measure go into statute law," of course, the situation might change and the hon. Member for Grantham would say to the House of Commons, "We must remove that restriction." Then it would be open for the Government to bring in one of their famous retrospective Bills. We are now used to dealing with their retrospective Bills. We have the restrospective Rate Support Grants Bill, which makes legal something which was illegal. It was admitted to be illegal by the Secretary of State for the Environment in a court of law. Yet, retrospectively, the Government will make it legal.

Similarly, the Government could introduce a Bill that retrospectively gave tax relief on investments in South Africa for the period between the change in the South African Government or in their policies and when the Government were able to get the Bill through Parliament. In the meantime, the Government could give us one of their extra-statutory concessions that we heard about in Committee. We can have an extra-statutory concession to exempt American service men from paying road tax while the Finance Bill goes through the House of Commons. I would not oppose a similar extra-statutory concession in these circumstances. Therefore, we shall not take too seriously that objection from the hon. Member for Grantham. This is not a case of imposing sanctions on people who are already doing business in South Africa.

Mr. Hirst

How does the hon. Gentleman propose to enforce the amendment? Upon whom will the obligation fall to determine whether a group has or has not traded with South Africa, or has or has not invested in South Africa and, more particularly, has or has not traded with a connected party that may or may not have traded with South Africa?

Mr. Davis

That is a fair point. I would envisage the measure working in this way. The plan manager, who has responsibility for the administration of the personal equity plan, would be responsible for ensuring that investments took place only in the shares of companies that were not disqualified, in the same way in which he must take care that investment takes place only in shares in United Kingdom incorporated companies quoted on the stock exchange. Of course, he would depend on the information provided by the companies. That is what I would expect. If companies in this country are as anxious as they should be to ensure changes in South Africa, to honour the law and to honour the wishes of Parliament, I would expect them to be able to provide that information which, in my experience, is not difficult to provide. The amendment would ensure that tax incentives should not be given to people to encourage them to invest in South Africa.

Mr. Hirst

rose—

Mr. Davis

I have given way to the hon. Gentleman several times.

Mr. Hirst

I am grateful to the hon. Gentleman for trying to ' tell the House how he would enforce the amendment. I ask him to address himself to one further point: how would he deal with a situation in which a fund manager, in good faith, invests in a company which has no such dealings in South Africa, but which, in the same tax year as the tax allowance is given, suddenly discovers that the company has subsequently some transaction in South Africa? What is the position of the personal equity plan holder in those circumstances?

Mr. Davis

I would he prepared to accept a plea of good faith as a defence in any sort of proceedings.

The hon. Members for Stockton, South and for Strathkelvin and Bearsden gave the game away because it was they who said it was difficult to find any leading company which was not involved in South Africa. The hon. Member for Stockton, South went further because he told the House that he regarded the personal equity plan as a poor scheme — a mouse of a scheme. When the Financial Secretary used those words in his speech, he was quoting from the hon. Gentleman. I must tell the Financial Secretary that I do not attach too much importance to those criticisms. The Minister should not take such criticism seriously because, if he took the trouble to read reports of our previous proceedings, he would know that, at one time, the hon. Member welcomed the personal equity plan. 1 do not mean that another spokesman for the alliance welcomed the plan—I will come to that later—but the hon. Member for Stockton, South told the House that he was pleased … to welcome the Government's announced intention to examine the possibility of giving tax relief on profit-sharing". I think he was referring to this personal equity plan because he went on to say: Similarly, we support in principle the Government's proposals for tax relief and other benefits for people buying shares for the personal equity plan." — [Official Report, 20 March 1986; Vol. 94, c. 456.] What was pleasure has now become a criticism of this mouse of a scheme. But even pleasure was something of a change because the hon. Member for Colne Valley (Mr. Wainwright) had previously said that he gave the personal equity plan an unqualified welcome.

Mr. Wrigglesworth

Will the hon. Gentleman at least have the good grace to read the whole of the speech? Perhaps he will read the remarks which I made in the Budget debate wherein, as the Minister rightly said, I welcomed the principle—I still do—of the plan. But it is being introduced in such an ineffective way that it can rightly be described as a mouse of a scheme. That does not mean that the principle is wrong and that is why, as the hon. Gentleman is aware, I sought to move amendments in Committee.

Mr. Davis

I believe we are getting closer to the heart of alliance policy, which is that it wishes to give more tax relief.

Mr. Wrigglesworth

Yes.

Mr. Davis

The hon. Gentleman says yes, but his party opposed taking a penny off income tax. It objected to taking a penny off the income tax of those on low earnings, yet it wishes to give more money to people who earn £25,000 a year and invest in shares on the stock exchange. That is its priority.

Mr. Deputy Speaker

Order. This is beginning to sound very much like a regurgitation of a Committee stage debate. I hope that the hon. Gentleman will return to the amendment.

Mr. Davis

Indeed, Mr. Deputy Speaker.

Mr. Wrigglesworth

As I am sure the hon. Gentleman has studied the Order Paper closely, and as he participated in last year's debate, he will be aware that our proposals are contained clearly in an amendment to the Finance Bill. It outlines the scheme that we would introduce.

Mr. Davis

I thank the hon. Member for that trailer. Now we all know where the hon. Member for Stockton, South stands.

I wish to deal with the more serious remarks of the hon. Member for Strathkelvin and Bearsden. He told us that there was hardly a leading company which did not trade with South Africa and he argued that the House should oppose the amendment because it would emasculate the personal equity plan. I did not make that claim; I am not going to describe the amendment as a mouse, but I did not claim that it would emasculate the personal equity plan. However, having listened to the hon. Gentleman and my hon. Friend the Member for Walsall, North (Mr. Winnick), I realise that it is clear that British business is so deeply enmeshed in the South African economy that it would be difficult for savers—these people of modest means, £25,000 a year — to invest in the shares of companies which are not undertaking business in South Africa, trading with companies undertaking business in South Africa or doing business with the South African Government.

4.45 pm

My hon. Friend the Member for Walsall, North came to the heart of the matter when he said that it is not enough to say that one is opposed to the system in South Africa; the question is, what are we to do about it? This is one small measure, but at least it sends a message to the South African Government. We are not prepared to allow the British Government to give tax relief to people who invest in the economy of that most evil regime. Therefore, I ask my hon. Friends to support me in the Division Lobby.

Question put, That the amendment be made:—

The House divided: Ayes 134, Noes 232.

Divison No. 246]	[4.45 pm
AYES
Archer, Rt Hon Peter	Cocks, Rt Hon M. (Bristol S)
Ashton, Joe	Cohen, Harry
Atkinson, N. (Tottenham)	Coleman, Donald
Banks, Tony (Newham NW)	Cook, Frank (Stockton North)
Barnett, Guy	Cook, Robin F. (Livingston)
Beckett, Mrs Margaret	Corbett, Robin
Bell, Stuart	Craigen, J. M.
Bennett, A. (Dent'n & Red'sh)	Cunningham, Dr John
Bidwell, Sydney	Dalyell, Tarn
Blair, Anthony	Davies, Ronald (Caerphilly)
Bray, Dr Jeremy	Davis, Terry (B'ham, H'ge H'I)
Brown, Hugh D. (Provan)	Deakins, Eric
Brown, N. (N'c'tle-u-Tyne E)	Dewar, Donald
Brown, R. (N'c'tle-u-Tyne N)	Dixon, Donald
Buchan, Norman	Douglas, Dick
Callaghan, Jim (Heyw'd & M)	Duffy, A. E. P.
Campbell-Savours, Dale	Dunwoody, Hon Mrs G.
Canavan, Dennis	Eastham, Ken
Carter-Jones, Lewis	Edwards, Bob (W'h'mpt'n SE)
Clarke, Thomas	Evans, John (St. Helens N)
Clay, Robert	Ewing, Harry
Clelland, David Gordon	Fatchett, Derek
Clwyd, Mrs Ann	Faulds, Andrew

Field, Frank (Birkenhead)	Morris, Rt Hon A. (W shawe)
Fields, T. (L'pool Broad Gn)	Nellist, David
Fisher, Mark	O'Neill, Martin
Flannery, Martin	Orme, Rt Hon Stanley
Foot, Rt Hon Michael	Park, George
Forrester, John	Pavitt, Laurie
Foster, Derek	Pendry, Tom
Foulkes, George	Pike, Peter
Fraser, J. (Norwood)	Powell, Raymond (Ogmore)
Garrett, W. E.	Radice, Giles
George, Bruce	Randall, Stuart
Gilbert, Rt Hon Dr John	Redmond, Martin
Gourlay, Harry	Rees, Rt Hon M. (Leeds S)
Hamilton. W. W. (Fife Central)	Richardson, Ms Jo
Hardy, Peter	Roberts, Ernest (Hackney N)
Harrison, Rt Hon Walter	Robertson, George
Haynes, Frank	Robinson, G. (Coventry NW)
Heffer, Eric S.	Rogers, Allan
Hogg, N. (C'nauld & Kilsyth)	Rooker, J. W.
Home Robertson, John	Ross, Ernest (Dundee W)
Hoyle, Douglas	Rowlands, Ted
Hughes, Roy (Newport East)	Sheerman, Barry
Hughes, Sean (Knowsley S)	Sheldon, Rt Hon R.
Janner, Hon Greville	Shore, Rt Hon Peter
John, Brynmor	Short, Ms Clare (Ladywood)
Jones, Barry (Alyn & amp;Deeside)	Silkin, Rt Hon J.
Kaufman, Rt Hon Gerald	Skinner, Dennis
Lambie, David	Smith, Rt Hon J. (M'ds E)
Leighton, Ronald	Snape, Peter
Lewis, Ron (Carlisle)	Spearing, Nigel
Lewis, Terence (Worsley)	Straw, Jack
Lloyd, Tony (Stretford)	Thomas, Dafydd (Merioneth)
McCartney. Hugh	Thomas, Dr R. (Carmarthen)
McDonald, Dr Oonagh	Tinn, James
McKay, Allen (Penistone)	Torney, Tom
McKelvey, William	Warden, Gareth (Gower)
MacKenzie, Rt Hon Gregor	Wareing, Robert
McTaggart, Robert	Wigley, Dafydd
McWilliam, John	Williams, Rt Hon A.
Madden, Max	Wilson, Gordon
Marek, Dr John	Winnick, David
Maxton, John
Michie, William	Tellers for the Ayes:
Millan, Rt Hon Bruce	Mr. James Hamilton and
Miller, Dr M. S. (E Kilbride)	Mr. Allen Adams.
Mitchell, Austin (G't Grimsby)
NOES
Adley, Robert	Clegg, Sir Walter
Aitken, Jonathan	Cockeram, Eric
Amess, David	Colvin, Michael
Ancram, Michael	Conway, Derek
Atkins, Rt Hon Sir H.	Coombs, Simon
Atkinson, David (B'm'th E)	Cope, John
Banks, Robert (Harrogate)	Corrie, John
Batiste, Spencer	Couchman, James
Beaumont-Dark, Anthony	Critchley, Julian
Bennett, Rt Hon Sir Frederic	Currie, Mrs Edwina
Best, Keith	Dickens, Geoffrey
Biggs-Davison, Sir John	Dunn, Robert
Blackburn, John	Durant, Tony
Boscawen, Hon Robert	Fallon, Michael
Bottomley, Mrs Virginia	Farr, Sir John
Bowden, Gerald (Dulwich)	Favell, Anthony
Brandon-Bravo, Martin	Fenner, Mrs Peggy
Bright, Graham	Finsberg, Sir Geoffrey
Brown, M. (Brigg & Cl'thpes)	Fletcher, Alexander
Bruinvels, Peter	Fookes, Miss Janet
Bryan, Sir Paul	Forsyth, Michael (Stirling)
Buchanan-Smith, Rt Hon A.	Forth, Eric
Budgen, Nick	Fowler, Rt Hon Norman
Burt, Alistair	Fox, Sir Marcus
Butterfill, John	Fraser, Peter (Angus East)
Carlisle, Kenneth (Lincoln)	Freeman, Roger
Carlisle, Rt Hon M. (W'ton S)	Galley, Roy
Carttiss, Michael	Gardiner, George (Reigate)
Cash, William	Gardner, Sir Edward (Fylde)
Chope, Christopher	Garel-Jones, Tristan
Clark, Dr Michael (Rochford)	Gilmour, Rt Hon Sir Ian
Clark, Sir W. (Croydon S)	Glyn, Dr Alan

Gow, Ian	Murphy, Christopher
Gower, Sir Raymond	Neubert, Michael
Greenway, Harry	Nicholls, Patrick
Gregory, Conal	Norris, Steven
Griffiths, Sir Eldon	Onslow, Cranley
Griffiths, Peter (Portsm'th N)	Osborn, Sir John
Hampson, Dr Keith	Ottaway, Richard
Hanley, Jeremy	Page, Sir John (Harrow W)
Hannam,John	Page, Richard (Herts SW)
Hargreaves, Kenneth	Patten, Christopher (Bath)
Harris, David	Pawsey, James
Harvey, Robert	Percival, Rt Hon Sir Ian
Hawkins, C. (High Peak)	Pollock, Alexander
Hawkins, Sir Paul (N'folk SW)	Powley, John
Hawksley, Warren	Prentice, Rt Hon Reg
Hayes, J.	Proctor, K. Harvey
Hayhoe, Rt Hon Barney	Pym, Rt Hon Francis
Hayward, Robert	Raffan, Keith
Heathcoat-Amory, David	Renton, Tim
Heddle, John	Rhodes James, Robert
Henderson, Barry	Rhys Williams, Sir Brandon
Hickmet, Richard	Ridley, Rt Hon Nicholas
Hicks, Robert	Ridsdale, Sir Julian
Higgins, Rt Hon Terence L.	Robinson, P. (Belfast E)
Hind, Kenneth	Roe, Mrs Marion
Hirst, Michael	Rowe, Andrew
Holland, Sir Philip (Gedling)	Ryder, Richard
Hordern, Sir Peter	Sackville, Hon Thomas
Howard, Michael	Sainsbury, Hon Timothy
Howarth, Alan (Stratf'd-on-A)	St. John-Stevas, Rt Hon N.
Howarth, Gerald (Cannock)	Sayeed, Jonathan
Howell, Ralph (Norfolk, N)	Shaw, Giles (Pudsey)
Hunt, David (Wirral W)	Shaw, Sir Michael (Scarb')
Irving, Charles	Shepherd, Colin (Hereford)
Jackson, Robert	Silvester, Fred
Jessel, Toby	Sims, Roger
Johnson Smith, Sir Geoffrey	Skeet, Sir Trevor
Jones, Gwilym (Cardiff N)	Smith, Tim (Beaconsfield)
Jones, Robert (Herts W)	Soames, Hon Nicholas
Kellett-Bowman, Mrs Elaine:	Speed, Keith
Kershaw, Sir Anthony	Spencer, Derek
Key, Robert	Spicer, Jim (Dorset W)
Knight, Greg (Derby N)	Spicer, Michael (S Worcs)
Knight, Dame Jill (Edgbaston)	Stanbrook, Ivor
Knowles, Michael	Stanley, Rt Hon John
Lamont, Rt Hon Norman	Stern, Michael
Latham, Michael	Stevens, Lewis (Nuneaton)
Lawler, Geoffrey	Stewart, Allan (Eastwood)
Lawrence, Ivan	Stewart, Andrew (Sherwood)
Lawson, Rt Hon Nigel	Stewart, Ian (Hertf'dshire N)
Leigh, Edward (Gainsbor'gh)	Sumberg, David
Lennox-Boyd, Hon Mark	Tapsell, Sir Peter
Lester, Jim	Taylor, Teddy (S'end E)
Lewis, Sir Kenneth (Stamf'd)	Tebbit, Rt Hon Norman
Lilley, Peter	Temple-Morris, Peter
Lloyd, Peter (Fareham)	Terlezki, Stefan
Lord, Michael	Thomas, Rt Hon Peter
Lyell, Nicholas	Thompson, Donald (Calder V)
MacGregor, Rt Hon John	Thompson, Patrick (N'ich N)
MacKay, Andrew (Berkshire)	Thorne, Neil (Ilord S)
McLoughlin, Patrick	Thornton, Malcolm
McNair-Wilson, M. (N'bury)	Thurnham, Peter
Madel, David	Townend, John (Bridlington)
Major, John	Townsend, Cyril D. (B'heath)
Malins, Humfrey	Twinn, Dr Ian
Marland, Paul	Vaughan, Sir Gerard
Marlow, Antony	Viggers, Peter
Marshall, Michael (Arundel)	Waddington, David
Mather, Carol	Wakeham, Rt Hon John
Maude, Hon Francis	Wall, Sir Patrick
Mayhew, Sir Patrick	Waller, Gary
Mellor, David	Ward, John
Merchant, Piers	Wardle, C. (Bexhill)
Meyer, Sir Anthony	Watts, John
Mills, Iain (Meriden)	Wells, Bowen (Hertford)
Mills, Sir Peter (West Devon)	Wells, Sir John (Maidstone)
Morris, M. (N'hampton S)	Wheeler, John
Morrison, Hon C. (Devizes)	Whitfield, John
Morrison, Hon P. (Chester)	Whitney, Raymond
Moynihan, Hon C.	Wiggin, Jerry

Wilkinson, John	Young, Sir George (Acton)
Winterton, Mrs Ann	Younger, Rt Hon George
Winterton, Nicholas
Wolfson, Mark	Tellers for the Noes:
Wood, Timothy	Mr. Archie Hamilton and
Yeo, Tim	Mr. Gerald Malone.

Question accordingly negatived.

Mr. Norman Lamont

I beg to move amendment No. 49A, in page 120, line 16, after 'income tax', insert `, corporation tax'.

This is a technical amendment which is necessary if the Government should decide to allow dividends from personal equity plan shares to be paid gross. This point has arisen from the proposal that such dividends can be rolled up tax free in the plan. The original intention was that dividends should be subject to the normal advance corporation tax rules, and that plan managers would reclaim the tax credits from the Revenue in the normal way.

Some potential plan managers have argued that this could increase the costs of administration and, therefore, the cost of personal equity plans to investors. It has been claimed that that problem could be solved by allowing companies to pay dividends gross in those circumstances. At present we are considering that in consultation with the various interested parties which would be affected by the procedure, but we are not yet able to make an announcement.

Therefore, we are moving this amendment in case we decide in due course that allowing payment of dividends gross would be the right course. The amendment enables the regulations to include provision for the purpose of the administration of corporation tax because we would be changing a detailed aspect of the ACT rules. If the Government decide against gross payments, the amendment would not be needed. Schedule 8 enables the Treasury to make regulations setting out the detailed rules of the scheme. The amendment enables the regulations to cover the ACT provisions for dividends and the gross or net point.

I stress to the House that, although we are taking this power, no decision has been made. We felt it right to make the amendment at this stage because we want the scheme to be launched on 1 January. We are considering this and consulting on it.

Mr. Terry Davis

Before the Minister sits down, can he give us an assurance that whichever course the Government follow it will not make any difference to the cost to the Revenue, and that it is simply a matter of administration?

Mr. Lamont

That is right. Amendment agreed to.