HC Deb 20 July 1989 vol 157 cc617-22

4A.—(1) Sub-paragraph (2) below applies to any disposal (within the meaning of the Capital Gains Tax Act 1979) which is effected, and sub-paragraphs (3) and (4) below apply to any lease which is granted, in pursuance of a provision included in a transfer scheme by virtue of section (Transfer schemes under sections 63 and 64)(2)(c) of this Act.

(2) A disposal to which this sub-paragraph applies shall be taken for the purposes of the Capital Gains Tax Act 1979 to be effected for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the disponer.

(3) Subsection (6)(a) of section 37 of the Finance Act 1978 (capital allowances; long leases) shall not prevent the application of that section in any case where the lease is a lease to which this sub-paragraph applies.

(4) Where, in the case of any machinery or plant which is a fixture and on the provision of which for the purposes of the transferor's trade the transferor incurred capital expenditure, a lease of the relevant land (with or without other land) is a lease to which this sub-paragraph applies—

  1. (a) the lessor shall not be required to bring the disposal value of the machinery or plant into account in accordance with section 44 of the Finance Act 1971 (writing down allowances and balancing adjustments); and
  2. (b) so far as relating to the bringing of disposal values into account, that section and Schedule 17 to the Finance Act 1985 (capital allowances for fixtures) shall have effect as if—
    1. (i) the capital expenditure incurred by the transferor had been incurred by the lessee on the provision of the machinery or plant wholly and exclusively for the purposes of the lessee's trade; and
    2. (ii) the machinery or plant had become a fixture, immediately after the grant of the lease.

(5) In sub-paragraph (4) above "the transferor" means the transferor under the transfer scheme in question and expressions which are used in Schedule 17 to the Finance Act 1985 have the same meaning as in that Schedule; and in construing that sub-paragraph the provisions of section 511(2) of the 1988 Act and the corresponding earlier enactments shall be disregarded."

Amendment (a), to the Lords amendment, to leave out sub-paragraphs (1) and (2).

Lords amendments Nos. 156 and 157.

Mr. Hardy

I shall not detain the House for long, Mr. Speaker, but, as you know, I am interested in the protection of the rare species. When I saw the word "disponer", which I had never seen in a Bill before, I thought it reasonable to table an amendment to the Lords amendment to give the Minister the opportunity of explaining it.

However, I also have a suspicious mind and the other day I asked a supplementary question when the Minister told the House that he had saved the public a lot of money by prosecuting people who had disgracefully and fraudulently falsely claimed unemployment benefit. I suggested that the same resources and the same energy would have yielded a greater harvest if the Government had gone after the tax dodgers. When I read Lords amendment No. 155 and saw a reference to capital gains and the proposal that the disposal should produce neither a gain nor a loss", it occurred to me that sometimes a capital gains loss is an asset.

I hope that the Minister will find my illustration interesting. Let us suppose that a writer of modern novels manages to produce one which is sufficiently salacious as to become a best seller. That property may be purchased for film rights, in which case there is a substantial capital gain. If the writer is allowed to set that capital gain against a loss, which could be an entirely notional loss, as a result of this privatisation exercise, he could be a considerable gainer, whether he were a disponer or not.

I shall not seek to press my amendment to a vote, but the Minister should offer us some reassurance and explanation. I have tabled the amendment partly because I want to know why the word "disponer" is included in Lords amendment No. 155 and partly because I want the Minister to give the House an assurance. Since those who have wished to evade income tax or many other forms of sometimes burdensome taxation have received a great deal of assistance during the past 10 years, I want to be absolutely sure that the privatisation of electricity will not also be possibly helpful in the longer term to those who are fortunate enough to select the small number of boards that might be successful and make a capital gain at the same time.

As I have said, I do not wish to detain the House or to force a Division on this matter, but we are entitled to a degree of reassurance and explanation from the Minister, which I am sure that he would wish to offer in view of the possibility of self-interest arising.

Mr Michael Spicer

It is perfectly fair game for the hon. Gentleman to start picking up words with junior Ministers at this time of night and to ask what they mean. That is a well known and legitimate game, and it is fine. The answer to the hon. Gentleman's questions may be coming from the Box, but I think and hope that I know it before it does.

These provisions are all about the transfer of assets and about disposals. They relate to people receiving new assets because of the schemes that will be coming forward. Through these technical and very neutral amendments, in which there is no question of tax breaks or of anybody gaining, the Government are allowing the transfer schemes made by the Central Electricity Generating Board, the Electricity Council or the Scottish boards to impose on one successor company an obligation to enter into agreements with another. In the case of the CEGB, I refer, for example, to a long-term lease in respect of land within the perimeter of a power station. The purpose of the amendment is simply to ensure that the fulfilment of such an obligation is tax neutral. The implications of that are dealt with in detail. If the hon. Gentleman is worried that gains could be set off against some future losses, the answer is that that could not happen. There is no question of any clever tax manipulation being permitted. The total effect is tax neutral.

Mr. Hardy

I am grateful to the Minister for that explanation.

It being Ten o'clock, the debate stood adjourned.

Ordered, That, at this day's sitting, the Electricity Bill may be proceeded with, though opposed, until any hour.—[Mr. John M. Taylor.]

Question again proposed, That this House doth agree with the Lords in the said amendment.

Question put and agreed to.

Lords amendments Nos. 155 to 157, 80, and 163 to 167 agreed to. [One with Special Entry.]

Lords amendment: No. 91, before clause 99, insert the following new clause—Amendment etc. of Electricity Supply Pension Scheme— . The provisions of Schedule (The Electricity Supply Pension Scheme) to this Act (which provide for amending the Electricity Supply Pension Scheme and for giving special protection to certain persons who have or may acquire rights under that scheme) shall have effect.

Motion made, and Question proposed, That this House doth agree with the Lords in the said amendment—[Mr. Lightbown.]

Mr. Speaker

With this it will be convenient to take amendments Nos. 92, 168 and Government amendment (a).

Mr. Frank Doran (Aberdeen, South)

The amendments relate to pension and superannuation schemes, which, at the moment, are on a statutory basis. It is unfortunate that pension arrangements did not receive much consideration in Committee. However, I appreciate that that was partly due to the fact that negotiations were continuing with the electricity boards' employers and trades unions and the amendments are the result of those negotiations.

The points that I am about to make relate to this and the subsequent group of amendments. What protection is there for members of existing pension schemes after privatisation? Paragraph 1(5) of new schedule 13 provides that regulations under that paragraph which provide some form of protection can be made only up to the new vesting day. Exactly the same applies to the pension schemes of the Scottish boards. We shall have to see those regulations when they are published, but what protection will there be after vesting day?

My constituents have already raised with me their fears in relation to the North of Scotland Hydro-Electric Board pension fund which is already embarking on a contributions holiday. I should declare an interest because I am still a member of that fund, having worked for the board for about five years.

Contributors to that board's pension fund and others are worried that employers are taking a contribution holiday. I have had experience of private employers who have tended to see the pension fund almost as an asset of the business rather than as an asset of the members of the fund, and I should like some clarification and assurances from the Minister of exactly what protections are on offer once those industries are privatised.

Mr. Michael Spicer

The hon. Member for Aberdeen, South (Mr. Doran) is right to say that the amendments have been brought forward at this stage as a result of consultations with those concerned. My hon. Friend the Minister of State, Scottish Office will answer his specific point on Scotland when he deals with the next group of amendments.

During our discussions of clause 99 in Committee, I gave an undertaking to bring forward an amendment to protect the pension rights of employees transferred to successor companies, in the event of the electricity supply pension scheme being wound up. This provision would replace the existing "no worsenment" protection under section 54 of the 1947 Act. My officials subsequently had long and detailed consultation with the industry and the electricity supply trade union council on the formulation of the no worsenment protection, which was the subject of a great deal of debate in Committee.

As a result of those discussions, the Government tabled amendments in another place to provide the framework for the continuing pension protection for existing employees, pensioners, dependants and frozen-benefit-holders on the transfer date. The Secretary of State is empowered to make regulations to place a duty on employers that such protected persons shall not be placed in any worse position because of the winding-up of the electricity supply pension scheme or through other specified circumstances, including transfers within the industry with continuity of employment. The regulations will enable any disputes arising in respect of the no worsenment provisions to be referred to arbitration. Because the provisions became so long and so complex, they were transferred into a schedule, together with the original contents of clause 99.

I hope that hon. Members are satisfied that that meets our commitment given in Committee to introduce protections for pensions.

Question put and agreed to.

Lords amendment No. 92 agreed to.

Lords amendment No. 168, as amended, agreed to.

Lords amendment: No. 93, before clause 100, insert the following new clause— . The provisions of Schedule (The Scottish Pension Schemes) to this Act (which provide for amending the Hydroboard Superannuation Fund and the South of Scotland Electricity Board's Superannuation Scheme and for giving special protection to certain persons who have or may acquire rights under those schemes) shall have effect.

Motion made, and Question proposed, That this House doth agree with the Lords in the said amendment.—[Mr. Lightbown.]

Mr. Speaker

With this we can discuss Lords amendments Nos. 94 and 169.

Mr. Doran

I should like the Minister to tell me about protection for the pension funds of Scottish boards.

The Minister of State, Scottish Office (Mr. Ian Lang)

It might be helpful if I said a brief word about the amendments. They transfer the contents of clause 100, which gives the Secretary of State power to amend the Scottish pension schemes, into a new schedule. They also introduce into the schedule new provisions relating to the protection of pension rights for certain persons. They have been prepared along similar lines to the amendment just introduced in relation to the electricity supply pension scheme in England and Wales. Like that amendment, it has two effects. First, it gives the Secretary of State for Scotland power to make regulations amending the two Scottish schemes. Secondly, it gives him the power to make regulations for protecting certain persons against any deterioration of their pension rights under the schemes. The amendments were introduced with the agreement of the Scottish boards and the trade unions in the industry in Scotland.

As I heard the question asked by the hon. Member for Aberdeen, South (Mr. Doran) in the last debate, I can save him from having to get to his feet. I understand his anxiety on behalf of some of the employees of the hydro board about the security of their pensions under the new arrangements. Privatisation brings no change to the arrangement; the trustees are still subject to the same obligations. If any trustees act fraudulently they will be subject to prosecution. Obviously, trustees must take decisions about investments in funds, and in so doing they take professional advice. Regular actuarial reviews are required by law to ensure that the trustees are aware of the value of the funds in relation to their liabilities. The hon. Gentleman mentioned trustees taking a contribution holiday, but that practice is by no means unusual—especially in recent years. Pension funds have substantial surpluses, and for that reason trustees feel able to take a holiday.

Paragraph 2(1) states: The Secretary of State may make regulations for the purpose of securing that … (a) no person to whom paragraph 3(1) or (2) below applies"— which, for the purposes of the provision, is an employee— is placed in any worst position by reason of … (ii) any amendment of a relevant scheme which results in benefits under that scheme being reduced, or contributions by employees being increased, and is made otherwise than in such circumstances as may be prescribed". In other words, the purpose of that paragraph is to protect employees' rights, and the trade unions are well content with those arrangements.

Question put and agreed to.

Lords amendments Nos. 94, 169 to 173, 175 to 181 and 96 to 99 agreed to. [One with Special Entry.]

Further consideration of Lords amendments adjourned.—[Mr. Lightbown.]

To be further considered tomorrow.