HC Deb 15 February 1990 vol 167 cc387-8
15. Mr. Watson

To ask the Chancellor of the Exchequer what is the current policy of the Inland Revenue in relation to the tax treatment of United Kingdom banks which make provision against Third world debt.

Mr. Ryder

The Inland Revenue operates the test laid down by law. This provides tax relief to the extent that the principal is estimated to be irrecoverable.

Mr. Watson

Would it not be appropriate for the Chancellor of the Exchequer to introduce incentives for the banks to cancel outstanding debts to the Third world and thereby assist in the development of those countries to bridge the gap between the developed and the underdeveloped world?

Mr. Ryder

I thank the hon. Gentleman for his Budget representations, but judging from his remarks, I think that he does not quite understand the purpose of the matrix.

Mr. Viggers

Does my hon. Friend agree that the new bank matrix provides guidelines only? Can he reassure banks that the matrix will not be used as a revenue-raising mechanism? Can he confirm that banks will be able to write off Third world debt strictly on a business basis?

Mr. Ryder

This is a matter for the Inland Revenue, but I should point out to my hon. Friend that the increase in the matrix reflects the concern of the Bank of England over the past few years about the debt problem.