§ Motion made, and Question proposed, pursuant to Standing Order No. 52(1)(b),
§ That provision (including provision having retrospective effect) may be made in the Finance Bill amending paragraphs 10 and 13 of Schedule 13 to the Finance Act 1996 and section 92 of that Act.—[Mrs. Roche.]
6.17 pm§ Mr. St. AubynI rise to point out that, yet again, we have a motion with retrospective effect. In Standing Committee, we raised several objections to the phrasing of clause 61 and others. There was a great deal of consternation among Ministers, and they had to go away and think again. The Government new clauses on Report propose significant changes to the way in which they hope to address the highly technical problem of tax leakage resulting from the current legislation. I should be grateful if the Minister would confirm that.
Before we pass the measure, will the Minister confirm that the retrospective effect will not mean that companies that have honestly, but ingeniously found a way to minimise their tax liability will see an increase in their tax bill? I have no truck with tax evasion, but it is right that businesses should be able to plan their tax affairs with some certainty. Clauses should not be sprung into Finance Bills, retrospectively changing the law, to deny companies exemptions or advantages in the tax system that they legitimately believed that they could make use of. If we breached that principle, we would undermine the rule of law on which the whole tax system is based. If taxpayers feel that the Government will introduce retrospective legislation every time that they find a legal way to use the tax system to their advantage, they will eventually feel that they are unable to challenge the Government through the court of law on the tax system. The costs of doing so 683 may be great, but we could lose an important constitutional test and a brake on the power of the Executive to raise tax at their whim. That is what is at stake.
Will the Minister confirm that the problems that we highlighted with the original phrasing of the clause, in terms of the ordinary call provisions for securities, and the possible effect of the introduction of a withholding tax are dealt with by the new phrasing of the clause? I look forward to her response.
§ Mrs. RocheI am surprised by the remarks of the hon. Member for Guildford (Mr. St. Aubyn), who gave his version of what happened in Committee. It was an interesting version, and there are always many different historical interpretations of what has happened.
In Committee, I said that when we had consulted on this complex proposal, we received representations from the financial sector. It appeared that the way in which the clause had been drawn went too wide and was taking in some matters that we did not wish to be included. Therefore, in consultation with the industry, we made some new proposals and we have had a favourable reception. That is another example of how this Government listen—unlike the previous Government.
I remind the hon. Member for Guildford that the Tory Government tried to introduce this measure, and that this Government, once again, have had to deal with some unfinished business that the Conservative Government were unable to get through.
The hon. Gentleman asked why the resolution was retrospective. Clause 61 was founded on retrospective resolutions, and operates from 15 February 1999, when it was announced—a few weeks before the Budget. In that sense, it is technically retrospective. The Conservative Government did this on many occasions to stop tax avoidance, which was the right thing to do.
If the hon. Member for Guildford wants to honour the pledge of the shadow Chancellor on public spending, making sure that proper tax avoidance measures are in place is the right thing to do. I had hoped that he would give us some credit because we propose to make the clause—which takes effect from 15 February—less wide ranging. As to the other matters that he raised—yes, I can assure him on both those points.
§ Question put and agreed to.