Corporation Tax

HC Deb 01 March 1999 vol 326 cc820-45

9.4 pm

Mr. Nick Gibb (Bognor Regis and Littlehampton)

I beg to move, That the Corporation Tax (Instalment Payments) Regulations 1998 (S.I., 1998, No. 3175), dated 17th December 1998, a copy of which was laid before this House on 17th December, be revoked. I thank the Government for allowing a debate on this important and far-reaching statutory instrument. The regulations are yet another example of the Government's policy of raising taxes by stealth. The Prime Minister, in the months leading up to the general election, said: We have no plans to raise taxes at all. In response to a phone-in caller, he promised: Our proposals do not involve raising taxes, and if we have any such proposals we will make them clear before the election. Within three months of his election as Prime Minister, his Government raised taxes. Those additions now amount to some £40 billion of tax increases, including the cuts in married couple's allowance, the cut in mortgage interest relief at source, extra petrol duties, higher stamp duties, especially on businesses, and a £5 billion a year tax on pension funds. The corporation tax regulations will cost industry £1.6 billion in the first year, £2 billion in the second year, £3.1 billion in year three and £2.2 billion in year four.

The regulations change the whole system of corporation tax. As such, it is wrong that the regulations should be implemented by secondary legislation—and by negative resolution at that. The regulations amount to just 15 paragraphs and they could and should have been included in last year's Finance Bill, so that they could have been debated at length and, more importantly, amended. As the Institute of Directors has said: The dates on which tax is payable and any associated penalties are fundamental matters, which should be dealt with in primary legislation. Senior accountants have expressed their concern about this use of secondary legislation. It prompted Richard Collier-Keywood, a partner at PricewaterhouseCoopers, to say: I think we are getting perilously close to some constitutional issues. The regulations change the dates on which companies have to pay their corporation tax bills. Under the current system, which has been in place for nearly three decades, companies pay their tax bills nine months after the end of their accounting period. A company with an accounting period ending on 31 December 1998 would pay its tax bill on 1 October 1999. Under the system proposed in the regulations, companies will have to pay their tax in four quarterly instalments, with the first instalment being paid six months before the end of the accounting period, the second three months before the end, with the final two instalments being paid at year-end and three months after it. In other words, whereas currently companies pay their tax some 21 months after the beginning of an accounting period, under the new system companies will start to pay their tax after just six months.

That is an enormous change and brings forward the tax bills of 20,000 of the largest companies in this country. Together, those companies employ more than half of all employees and represent half of the total turnover in businesses in the United Kingdom. That is why the measure will raise £8.9 billion of extra taxes over the four-year transition period, money which has to be found and paid over by the corporate sector. That money could have been used for investment and job creation.

Mr. John Bercow (Buckingham)

In regularly and wrongly claiming that the burden of corporation tax has been reduced since the general election, is the Prime Minister guilty, in my hon. Friend's opinion, of knavery or folly?

Mr. Gibb

My hon. Friend makes a good point.

The Government were elected on a clear mandate of no tax rises, but there have been £40 billion of tax rises in a mere two years. In addition to the taxes that I have mentioned, we have seen a £5.2 billion windfall tax, a £5 billion tax on pension funds and the £15 billion regulatory burden on business. Those are staggering sums of money to take from British business. Anyone who claims that it will not damage British industry is at best naive and at worst negligent of, and reckless with, the job prospects of hundreds of thousands of employees.

Ms Sally Keeble (Northampton, North)

The hon. Gentleman tells us that my right hon. Friend the Prime Minister said that there would be no tax increases under the Labour Government. The hon. Gentleman also mentioned the utilities tax—the windfall tax—which was part of our manifesto commitment and was clearly flagged up. His two statements are incorrect—or incompatible.

Mr. Deputy Speaker (Mr. Michael J. Martin)

Order. Although the hon. Lady was making an intervention, I should make it clear to hon. Members that we are discussing a statutory instrument that deals with the collection of corporation tax; not taxation in general.

Mr. Gibb

The hon. Lady makes a valid point. The windfall tax was the one tax measure highlighted in the manifesto; no other tax measures were mentioned. The tax changes that we are discussing were not mentioned in the Labour manifesto.

Mr. Christopher Leslie (Shipley)

In proposing to revoke the statutory instrument, the hon. Gentleman suggests that there will be a significant drop in Government revenue. How would he plug that gap? What other taxes would he raise, and which public services would he cut?

Mr. Gibb

rose—

Mr. Deputy Speaker

Order. I am sure that the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) does not want to go into that matter, as that would be straying from the motion before the House.

Mr. Gibb

Thank you, Mr. Deputy Speaker. Of course, the money will have been spent by the time that the Conservatives return to office, but, when we return, we shall clear up the mess left by the Government.

No one should be taken in by the Government's argument that the cost of the regulations will be offset by the cut in the corporation tax rate. One glance at the Red Book will dispel that myth. In 1999–2000, the introduction of quarterly corporation tax payments will cost industry £1,600 billion. The benefit of the rate cut, according to the Red Book, will be "negligible". In the following year, the quarterly payment will cost industry £2,000 million, but the benefit from the rate cut will be only £700 million. That is why the Confederation of British Industry states: The reduction in the Corporation Tax rate does not amount to full compensation for earlier payment. The introduction of quarterly payments was not a carefully constructed and well-motivated reform of the corporation tax system by the Government, but pure firefighting. It is the latest stage in a saga of incompetence that began in July 1997, in the Labour Government's first Budget, when they abolished the repayment of dividend tax credits to pension funds. That measure meant that the Government had to abolish foreign income dividends, leading to a huge protest by British multinationals, which had surplus advance corporation tax problems that foreign income dividends had been helping to alleviate.

The Government were in chaos and did not know what to do. The Paymaster General proposed a range of hopeless solutions. In the end, the Government decided to abolish advance corporation tax altogether. However, that created a cash-flow cost to the Exchequer, so the Government proposed the introduction of quarterly corporation tax payments. As a by-product, the new system also raised a huge chunk of extra revenue for the Government for which British industry is paying the price.

We now have a system that not only costs industry an extra £2 billion, but creates difficult and burdensome compliance problems. The quarterly payments are based on a company's current year profits, with the first payment being made halfway through that year. In other words, companies will have to estimate their profits for the year and then calculate their taxable profits and pay the first quarterly instalments after only six months of the year.

The Government claim that all the 20,000 so-called large companies affected by the regulations have sophisticated budgeting and forecasting systems in place. That may well be true of the top 1,000 companies, or even of the top 2,000 or 3,000 companies, but not of the 17,000, 18,000 or 19,000 next largest companies in Britain. Even if all those companies had sophisticated forecasting and budgeting systems, no company can forecast the state of the economy, changes in the weather, in taste or in fashion, or a change in a competitor's product or service. All those changes have an impact on sales and profits. No company can forecast with certainty a change in the price of a raw material, or the exchange rate or interest rates. How can an insurance company forecast a major national disaster, or a large accident, in the final quarter of its accounting period? Yet the Government expect companies to do so and to calculate their tax bills, down to the last pound, on the basis of those forecasts.

For many companies, there is an additional problem in that the majority of their profits are determined in just two or three months of the year. That is true of seasonal companies in, for example, tourism, toy manufacture, jewellery retailing and agriculture. For such companies, a few months are critical and it is usual for them to have a year-end just after the important months so that shareholders may have the results from those months as soon as possible.

The majority of profits for those companies are therefore earned at the end of the accounting period. However, the regulations mean that they are expected to estimate the profits, and pay tax on them, in the first half of the accounting period. Not only is it difficult, if not impossible, to estimate the figures with any accuracy but the companies are also required to pay tax on profits that have not yet been earned. For many companies, that will create real difficulties. One major seasonal company has said: We will need to borrow funds to pay 50 per cent. of our annual tax liability in advance, which will result in punitive interest rates.

Mr. Geraint Davies (Croydon, Central)

Is it not the case that significant companies that trade on the stock market must declare their position on a quarterly basis to buoy up their share prices? I am glad to see the right hon. Member for Horsham (Mr. Maude) on the Opposition Front Bench: is it not true that, on 23 June, he tabled an amendment to the Finance Bill asking for special treatment for the retail industry without having disclosed his directorship of Asda?

Mr. Gibb

When companies declare results to the stock exchange, they do so in retrospect. They do not have to forecast their profits a year or six months in advance. Supermarkets do not suffer from seasonal variations.

The Government claim that quarterly payments work in other jurisdictions, particularly Australia, Canada, France, Germany, Japan and the United States. In all those countries, except Australia and the United States, instalments are based wholly or mainly on the previous year's taxable profits rather than on those of the current year, as the regulations require. In Australia and the United States, the systems allow some alternative methods to mitigate the difficulties faced by seasonal companies. No such help is provided in the regulations, despite promises by the former Paymaster General on Second Reading of the Finance Act 1998 and during its Committee stage that he would carefully consider such matters and return to them.

What, according to the regulations, is the consequence for a company that wrongly estimates its tax charge and its quarterly instalments? The first penalty if the company understates its instalment will be an interest charge 2 per cent. above base rates. Overpayment will be compensated for by rates of one quarter of 1 per cent. below base. Despite the reduced margin differential, those are punitive rates for companies to suffer simply for failing to calculate accurately a sum that it is impossible to calculate accurately.

Penalties are set out in paragraph 13. The original consultation document said that penalties would be chargeable only if a company "deliberately and flagrantly" failed to make an instalment of sufficient size. That sounded fair enough. The document also said that that would result in penalties being paid in no more than a handful of instances each year.

I do not know whether the Treasury received representations that the penalty regime was not harsh enough, but the regulations now say that a penalty will be imposed on a company that "deliberately or recklessly" fails to pay the right amount. It need not be a deliberate miscalculation; it need only be reckless.

How do we define "reckless"? How much forecasting effort are companies expected to engage in to avoid the charge of being reckless? The penalties are not small—they amount to up to 200 per cent. of the amount of interest charged on the underpayment. It would be helpful of the Paymaster General to explain why the wording changed between the consultation document and the regulation. What does she mean by "reckless"?

The Government seek to give the impression that they are business friendly, but we are debating a statutory instrument that will cost business dear. It will result in higher tax bills for the next four years, to the tune of £8.9 billion. Therefore, this is a hugely important issue, which should not be sneaked through as secondary legislation in a one-and-a-half hour debate—a debate that, incidentally, would not have been held but for the fact that the Opposition prayed against the regulations.

The regulations are yet another example of where the image and posture of the Government differ from the reality. They pretend to be business friendly while loading on to Britain's top 20,000 companies billions of pounds of extra taxation. Do not take our word for it, Mr. Deputy Speaker. Adair Turner, the Director General of the CBI, said recently: There is a concern about the accumulation of extra costs which have been imposed on business of which the biggest was actually the Corporation Tax changes which were very carefully"— portrayed— as a reduction in tax rates, but were actually a tax increase". Those are not our words, but those of the CBI.

The Government portray themselves as a Government of better regulation, while piling on mountains of complex regulations. They pretend to be concerned about jobs, while presiding over measures such as these regulations, which will damage the job prospects of hundreds of thousands of employees. They posture about investment, while taking from industry £40 billion that would otherwise have been used for investment. As the Institute for Fiscal Studies said recently: The net increase in taxation of company profits sits uneasily alongside the desire to raise business investment. The regulations amount to no more than yet another of the Government's stealth taxes. They are anti-business, anti-investment and anti-jobs and I urge the House to reject them.

9.21 pm

Sir Peter Lloyd (Fareham)

I found the regulations difficult to follow. I realise that effective drafting invariably produces impenetrable prose. There have to be complicated references to other legislation and draftsmen have to cater for every eventuality that their ingenuity can envisage. I tried to understand paragraph 3—the crucial regulation—which defines the large companies that will be affected. I could not make sense of it. If you read it, Mr. Deputy Speaker, you will find several sub-paragraphs stating what a large company is not, but none stating what it is. I turned hopefully to the explanatory note, which clearly states and I quote in full: Regulation 3 defines a 'large company' for the purposes of the Regulations. That is it—not a hint as to how big a company has to be to qualify as such under the regulations.

It would have been useful if, accompanying the regulations, there was an explanatory note that really explained that, not merely for hon. Members but for interested parties outside—not least the managers of the companies affected. Perhaps it would be even better, as my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) said, if matters of such moment were included in primary legislation, so that they could be fully debated and amended.

I hope that the Paymaster General will tell us, as her personal contribution to open government, that she will ensure that, in future, subordinate legislation from the Treasury will always come with reasonably full explanations for the layman.

As my hon. Friend the Member for Bognor Regis and Littlehampton said convincingly from the Opposition Front Bench, the Government have stumbled into these changes. They started by abolishing tax credits for pension funds and others, found that they created anomalies and a cash flow difficulty for themselves and had to go further, hence the regulations. No one would mind the stumbling too much, if only the outcome were reasonable and fair. It is not. Instead of the potential cash flow reduction for the Government, they have contrived a hefty cash windfall for themselves for the next four years because payment of corporation tax by large companies will be brought forward. That will be handy for the Chancellor, and the Exchequer will get a substantial bonus, peaking at £3 billion in 2001–02, which may well be election year.

The Government could have organised a neutral system, but they did not. Despite the reduction in the nominal rates of corporation tax, for the next three years they will be collecting more. That additional cash flow, which the Government find so useful and which creates confidence in their accounts, is exactly matched by a reduced cash flow in the large companies from which it is taken. Their finances are weakened, with an obvious consequent reduction in their ability to invest and create jobs. With these regulations, the Government are hurting the large businesses that they claim to support and encourage. They are raising the burdens on them stealthily when profit margins are likely to be under pressure from subdued world trade.

Moreover, the Government seem to have made their arrangements far more complicated and uncertain than they needed to. Companies will have to estimate their profits for the whole year and pay the appropriate fraction quarterly. That will make error inevitable and create unwelcome opportunities for honest companies whose forecasts prove unreliable to be accused of bad faith by the Revenue. It would surely save much time, trouble and misunderstanding if we adopted the procedures used for individual taxpayers and based forward payments on the previous year. There would be no argument and no extra work; it would be eminently straightforward. I hope that the Minister will explain why the Government chose a more difficult and complicated method when a simple one was readily available.

My hon. Friend the Member for Bognor Regis and Littlehampton made an important point about the interest rate at which overpayments and underpayments are charged. In all good faith, forecasts are often bound to be overestimated and underestimated. However, as I understand it, the Treasury will give a lower rate of interest on overpayments made in good faith by large companies than it will charge on underpayments made in equally good faith. I realise that that is merely a continuation of current practice, but that can perhaps be justified under present arrangements because payments are made in arrears; companies should get it right each time. It is unfair and unreasonable to make the distinction under the estimate-based system that the regulations introduce. I hope that the Minister will say whether the Government are prepared to reconsider.

The regulations serve as a tax increase on large companies. The Government would gain more trust and respect if they admitted as much instead of posing as their friend anxious only to reduce the burdens with a cut in the rate of corporation tax. I hope that the Minister will also address that point.

9.28 pm

Ms Sally Keeble (Northampton, North)

I am grateful for the opportunity to speak on this matter. I speak neither as a tax expert nor as one with huge experience in private companies, but the matter is of concern to my constituents because, behind what look like technical regulations, lie several issues about the Government's approach to the tax regime and welfare state changes that have been constantly raised by the public. That was recognised by Opposition Members because they spoke not only about technical issues, but about the factors behind them and some of their consequences.

A consequence repeatedly raised by the Opposition and by my constituents is the impact of the changes on the income of pensioners, particularly those who are partly reliant on investment income. It is important to recognise that, to such people, the prospect of losing some of that income as a result of the changes is a substantial concern. The loss for the average person will be about £75 pounds a year, but that must be offset against the many other changes that the Government have made that will increase pensioners' individual incomes by more than that sum. In addition, whatever changes are made to tax regimes, pensioners, including the ones in my constituency who have investment income, will be far better off if there is a healthy economy, created in part by the sort of measures included in the regulations.

Mr. Bercow

What is the ethical basis on which the Government propose to charge more interest on underpayment than they propose to pay in cases of overpayment?

Ms Keeble

I shall come to that point, which was raised by the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb). However, first, I shall finish my remarks on the impact that the regulations will have on pensioners' investment income. I am sure that Opposition Members recognise that, as a result of their repeatedly raising and debating the issue, considerable concern has been aroused within the pensioner community and Members' postbags now contain quite a lot of correspondence on the subject. Having considered the facts of the matter and the long-term interest in having a sound economy that will ultimately be of far greater benefit to pensioners, I have no difficulty in justifying the proposed regulations.

Sir Robert Smith (West Aberdeenshire and Kincardine)

I cannot quite understand how the hon. Lady envisages the creation of a sound economy being assisted by taking out of the cash flow of industry several billion pounds that could be invested.

Ms Keeble

The regulations are not the only measure that the Government are taking to build a sound economy; they are one set of proposals, which affect companies in one particular way but, when talking about a sound economy, we have to consider the full range of Government actions. Those measures will build a sounder economy and so benefit pensioners.

If one wanted to look at one of the most direct measures of confidence in the economy, where one might expect to see any shaking of confidence resulting from the changes, one might look at the stock exchange. That is currently at record levels, so if companies have felt any qualms and investors' confidence in companies has been shaken, that has not yet shown up.

The Opposition have made much of the assertion that the proposed regulations would be profoundly damaging to companies and long-term investment. In fact, the regulations form part of a range of proposals to encourage investment. I am no expert, but I ask Opposition Members to consider the impact of the Conservative Government's decision to abolish the 100 per cent. tax relief on capital allowance, and to change the arrangement for the writing down of assets from 25 to 4 per cent. Those measures had two effects: first, to increase the tax base and secondly, to discourage investment and encourage other uses to be made of the money.

Much has been made of the reasons why the Government have decided to make changes, rather than leave matters as they were. There are two main reasons: first, to encourage investment and secondly, to deal with anomalies in the existing structure of corporation tax, especially some of the pressures on British companies that have substantial interests abroad.

The Opposition have also made much of the arrangements for differential interest rates on penalties paid. In looking at those issues, the Government responded substantially to representations made during the consultation process.

In opening the debate, the hon. Member for Bognor Regis and Littlehampton mentioned advice provided by PricewaterhouseCoopers and the fact that it appeared that we would have to deal with a constitutional issue. I have great respect for PricewaterhouseCoopers and for the advice that it gives. However, the company comprises management consultants and accountants who are not constitutional experts, and I believe that they have made a mistake in this case.

The Opposition's concerns and the proposals that they wish to discuss do not include the detailed workings of the measure or the constitutional niceties of its introduction in the House. I am sure that, if the Government had got it wrong, points of order would have been taken and a different procedure would have been followed. In all discussions so far about these issues, it has been apparent that the Opposition are using this legislation and these regulations to pursue a different agenda: attacking the Government's economic record.

Mr. Bercow

I suspect that the hon. Lady probably knows that her explanation of differential interest payments is nonsense on stilts. In light of her comments about listening to consultation, will she explain why the British Chambers of Commerce, the Confederation of British Industry and the Institute of Directors are uniformly hostile to the proposals in their present form?

Ms Keeble

That might be so. During the consultation process, particular points were made about the difficulties that companies would face, some of which were taken into account in the final arrangements. I do not claim to be able to do things that I cannot and I made it clear at the outset that I am not a tax expert or an expert in company law. The Whip has not told me what to say: I have had long and genuine experience in this area and received many constituency letters about the issue. Many of my constituents have investment income and have shifted their affiliations away from the Conservative party. I am sure that the Opposition know the income levels and particular political interests of that community. I am extremely interested in ensuring that I can respond fully to my constituents' arguments.

Opposition Members demonstrated clearly that they are using the measure to attack the Government's economic and welfare proposals, and their implications for pensioners.

Mr. Bercow

That is nonsense.

Ms Keeble

It is not.

I support the proposals before us tonight. They are part of the Government's wide programme to build a sound economy, promote public confidence, encourage investment and strengthen industry. We want to ensure that those who invest in our economy—particularly those who invest long term for their pensions—can have real confidence in their actions and a secure future. I hope that the Opposition motion will be defeated tonight.

9.39 pm

Mr. Brian Cotter (Weston-super-Mare)

I am glad that the regulations have come before the House tonight, because that gives us another opportunity to debate what amounts to a major change in the country's tax regime and denies the Government the chance to slip the change through quietly.

The taste that the Government have developed for secondary legislation should be discouraged. The Liberal Democrats will oppose the regulations, not because we oppose the principle of advance payments—we have conceded that the previous system needed reform—but because we harbour significant doubts about the manner of their introduction.

The Chancellor has trumpeted long and loud in his Budgets about his reduction of the rate of corporation tax, but we all know that the regulations will result in a considerable net gain to the Exchequer, something to which attention has been drawn tonight. The Paymaster General has recently claimed that the Treasury has estimated that the long-term effect of the changes will be a net reduction in companies' liabilities. If the Chancellor is not concerned about that and if he does not intend to hit businesses, why are the regulations framed so that they will increase the short-term liability of businesses so dramatically?

The transition period allowed by the regulations is insufficiently generous if the Government's primary intention is indeed to move towards a fairer tax regime.

The transition arrangements seem concerned only with the changes to companies' cash-flow arrangements. However, it seems likely that the regulations will require an extremely substantial change in accounting procedure in affected companies. To cope with the new system of estimation, it would surely be wise to give a far longer time to adjust than the brief period allowed by the regulations.

The Government seem instead to have arranged the regulations to maximise their incidental increase in revenue from the transition. If the Chancellor wants to increase his net gain from companies, does he not owe it to them to be open and honest about that? The regulations are central to the Chancellor's public sleight of hand, which makes him appear to be giving while secretly gathering.

I am further concerned that some of the undertakings given in a debate last April by the previous Paymaster General, the hon. Member for Coventry, North-West (Mr. Robinson), do not appear to have been given any house room in the regulations. In the face of an amendment concerned with companies whose profits were subject to seasonal fluctuation, he undertook carefully to consider the matter.

The regulations are complex and thorough on the punitive arrangements put in place for non-compliance and error, but do not have a crumb of comfort for those companies whose cash flow could be severely compromised by the new arrangements. Is the House to conclude that the Paymaster General thought carefully, as promised, about the unfortunate position of those companies, but then decided to do nothing about them?

I do not support the regulations. The Government's rhetoric and practice do not add up. If I may paraphrase a well-respected authority, that which we call a tax rise by any other name would sting as hard, and that would be the effect of the regulations.

9.43 pm

Mr. John Townend (East Yorkshire)

Unlike most Labour Members, who have never run even a small corner shop, I have had 35 years' experience of running medium businesses, so I understand the problems of businesses and business men, and I have a slight knowledge of accountancy. I do not have to declare an interest tonight because, regrettably, my companies make less than £1.5 million.

I approach the regulations by asking whether the proposed changes in the payment of corporation tax are aimed at benefiting industry or the Inland Revenue. When we hear the Government continually trumpeting that Labour is the new party of business, there should be only one answer—the changes should benefit industry. However, as in so many cases, Labour says one thing and does the exact opposite. The proposals will result in industry having its cash flow reduced. As my colleagues have said, beginning in 1999–2000, that reduction will be a modest £100 million. The next year, the figure rises to £1.6 billion, then it is £2 billion, then £3 billion and then £2.3 billion. Only after that does the figure start to turn positive. The Inland Revenue will benefit for five years, by more than £8 billion, out of industry's cash flow. That will have to be paid for with jobs and it will affect investment.

Mr. Geraint Davies

He has dropped his papers.

Mr. Townend

Indeed, I seem to have lost my papers.

The Government's answer is that they have reduced corporation tax, but they have reduced it in those years by only £2.8 billion. That leaves £5.2 billion, which the taxpayer has been left to pay, but the proposals really worry me in respect of the administration. As the hon. Member for Weston-super-Mare (Mr. Cotter) said, there will be a considerable increase in the burden on industry. There is a fundamental flaw in the proposals: as has been mentioned, tax will not be assessed on the previous year's profits, as in the past, which made for certainty for industry. Tax will be based on a guesstimate for a year, and that guesstimate will have to be made when only six months of that year have passed.

I suggest to the Minister that, considering what has happened over the past 18 months and considering the enormous, sudden changes in the world economy—the crises in Asia and Brazil, the debt default in Russia and the speed at which currency and interest rates change—it is difficult to estimate profits. With the best will in the world, industry can get it wrong—without trying to defraud the tax person. As my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) has said, when we consider what will happen, we realise how appalling the proposals are.

First, industry is faced with paying interest, but there is no justice in that, because the interest that has to be paid if someone underestimates is more than that which has to be paid if someone overestimates. How can anyone justify that? It is no good saying—

Mr. Davies

Will the hon. Gentleman give way?

Mr. Townend

In a moment.

It is no good saying, "That was the practice before," because before, we were dealing with the previous year's profits so we knew what we were doing. If the hon. Gentleman can justify that, I will be delighted to give way to him.

Mr. Davies

Did the hon. Gentleman work in any business that did not project trading and profitability on a monthly basis for the year ahead? If he did not, he could not have worked for any serious company. Are not differential interest rates obviously rational because, otherwise, there would be an incentive to industry to underpay? What is more, because of what the previous Government did, are not we talking only about the levels, not the principle? This is hogwash.

Mr. Townend

Certainly not. Our Government never produced legislation in which taxation was based on estimates. I do not know what the hon. Gentleman did before he was elected to the House, but he clearly—

Mr. Davies

I ran a number of companies, which I started myself—they all had monthly projections of profit and sales—after a very successful career in multinational companies. I think that the hon. Gentleman was in wine and spirits, which he shows by the way that he drops his papers.

Mr. Townend

I can assure the hon. Gentleman that I have not even had any dinner tonight. Clearly, we have the most perfect business man in the world in the House—he makes projections that are always 100 per cent. right. Of course all the businesses with which I have been involved have had budgets, but how often—at the end of the year, the month or the quarter—did we go to our various managers to ask why a budget was 15 per cent. higher than forecast or why sales were 10 per cent. lower than forecast? If the hon. Gentleman is able to budget and always get it right, he is much cleverer than I am.

The regulations are vague about the level of penalties. I have looked through them carefully, but have found no mention of the level of penalties. That will create uncertainty, which is most unfair to businesses. As the hon. Member for Weston-super-Mare said, some firms are subject to seasonal variations. If they get their budgets wrong for that reason and a tax inspector does not accept the extent of those seasonal variations, they will have to pay penalties.

When I read the regulations, I was taken back to the time when I was studying to be a chartered accountant. As on so many occasions, Treasury Ministers have produced regulations that demonstrate that they have become the lackeys of the Inland Revenue.

The Paymaster General (Dawn Primarolo)

May I try to help the hon. Gentleman? I am sure that he has read the regulations, so he will have seen that regulation 13, entitled "Penalty for unpaid tax", says: penalty not exceeding twice the amount of interest charged". I think that he will find that that gives the answer that he seeks.

Mr. Townend

It depends on the interest charged. We do not yet know what that will be, do we?

Will the Government think seriously again about two matters? First, let us have some morality in the regulations. Let us say, at this late stage, that the interest charged on money paid in excess will be the same as interest charged on money underpaid. Secondly, will the Government look again at the basis of assessment? Will they listen to all their friends in industry—they are always telling us how the CBI is a great supporter of new Labour, so why not listen to the CBI? It says that the first three quarters of the financial year could be based on the previous year, and the fourth quarter, paid in the 16th month, could be a catch-up quarter. The Institute of Directors and the British Chambers of Commerce say that payment should be based on the previous year.

Mr. Barry Gardiner (Brent, North)

So they do not even agree among themselves.

Mr. Townend

Not at all. The CBI maintains that, under its proposals, there would be no loss of revenue to the Government.

The regulations convince me that this is a Government who, when the chips are down, believe in high taxation and regulation, and that all the talk about being the party of business is a load of old codswallop.

9.53 pm

Sir Teddy Taylor (Rochford and Southend, East)

I should like to make just one brief point and then ask the Minister four questions.

The hon. Member for Northampton, North (Ms Keeble) said that she would support the regulations. I greatly appreciate the point that she made about the taxation of pensions. I find it difficult to understand, particularly coming from a Labour Government whom I often admire for the good things that they do. By removing the right of pensioners to reclaim the tax on dividends, we have achieved a situation in which a pensioner with an annual income of £100,000 a year is now treated in exactly the same way as a pensioner with dividends of £500 a year. In the past, someone who did not pay income tax was entitled to reclaim the tax, but he or she no longer has that opportunity. A mistake was made in principle and I hope that the Minister will listen to the hon. Lady.

Will the Minister look at the answer that she gave in Hansard on 22 February at column 83, when she was asked about the regulations? She was asked whether she would explain what they were all about and what impact they would have. The point that I want to make, although I would not made it to the Minister, who is an honourable person, is that there is a terrible danger, when giving answers, in not telling the whole truth. The danger to Governments of both parties is that, if they do not tell the whole truth, they end up with the public not believing a word that they say.

The Minister was asked about the regulations. I throw in the point that she did not write the answer, but this is what it said: This measure was part of a package of measures introduced in the 1998 Budget which included the abolition of Advanced Corporation Tax (ACT)"— is that not good?— and a 1 per cent. cut in the main rate of corporation tax from April 1999"— is that not wonderful? After a four year transition period, the effect for these companies of introducing quarterly payments, abolishing ACT and the 1 per cent. rate cut is likely on average to be a reduction in liability."—[Official Report, 22 February 1999; Vol. 326, c. 83.] The regulations were going to be great news. They were going to mean the scrapping of the appalling ACT, whatever it was, the cutting of corporation tax—hoorayand—and the average company paying less.

All that is true, but the Minister's answer does not refer to the fact that, in the interim four years, there will be a massive rise in taxation. It would be much better if Governments of all parties, as I say, told the whole story. If a change in the arrangements will mean a big rise in tax and better times later on, why not explain that—that there will be a big rise in tax in the meantime?

I ask four brief questions. The first is simply: why are we making a change at all? Why are the Government introducing quarterly payments? My understanding is that they are being introduced because the Government abolished advance corporation tax following problems that were created by their decision to end the repayment of dividend tax credits to pension funds in the 1997 Budget. A catalogue of consequences has arisen from what appeared to many people to be the smash-and-grab raid on pension funds in the first Budget. That is the information that I have from people who claim to be experts. If that is not the reason for the change, what is the reason?

Secondly, will the Minister say clearly and precisely what she thinks the increase in revenue to the Government will be as a result of the changes? We have heard a number of figures from Back Benchers. Some people have said that the increase will be £8.9 billion. Some have said that it will be £8 billion. Some have said that, if we take into account the reduction in corporation tax, it will be £5 billion. It would help if the Minister would say clearly—they are a very clever and talented Government—what extra revenue they think they will receive as a result of the changes in the next four years.

I hope that the Minister does not think that I have been critical. I think that she knows that I have a high regard for her, but I genuinely think that it would help us, and help to establish the proper way in which to treat Parliament, if she said what the Government believe the net extra money will be as a result of the changes.

The Minister will be aware that there is much suspicion about the Government because many tax changes have been introduced without people noticing. One of the estimates, again by clever people, who may be totally misinformed, is that, as a result of all the changes in taxation made by the Government, by the next election the average taxpayer will have paid an extra £1,500.

I do not know what would have happened if this Government had not been elected and some other Government had; the position might have been worse or much better. The crucial thing is to tell people the truth and to say what the estimate is.

My third question is simple. We are told that interest is to be paid both on overpayments and underpayments. Is the interest on overpayments and underpayments the same? If not, why is it not the same? It would be sensible if companies that paid too much tax were allowed to get interest on it or to get something back. If they are overpaying or underpaying, the interest should be the same.

I come to my final question. As the Minister must be aware, I come from a seaside town, where we tend to make all our profits within one week in summer time. Some companies make a lot of money at one time in the year and others make their money at other times of the year. That will create problems if they pay quarterly in advance.

The Minister should be aware that many companies find life a bit difficult, because things can change suddenly and dramatically. Some of the leading companies in Britain which have been very profitable suddenly find themselves in a difficult situation. Some companies that depend on changes from time to time within a year find that they will have a major problem.

Overall, I genuinely fear that we are imposing an increasing burden of taxation on industry and commerce. We should realise how lucky we are in Britain, given how well our economy is doing in general compared with the nightmare on the rest of the continent. Our unemployment levels are low, whereas the unemployment average on the continent is 10.1 per cent. Our economy is generally in a good state, compared with the appalling situation in the Federal Republic of Germany and other countries.

We should appreciate that we have secured our benefits because, by and large, we have tried to keep taxation low. I hope that, despite all their previous endeavours, the Government will try to keep it low. If they do not, we shall end up with the same nightmare that is experienced by so many European countries: high unemployment, and a great deal of human misery. That is the last thing that we want.

10.1 pm

Mr. Richard Page (South-West Hertfordshire)

I suspect that, when the history of the Government is written and judgments are made, the standard response to all criticisms will be, "It seemed like a good idea at the time." That will certainly cover the reason for the business-damaging regulations that we are discussing. They are by no means a triumph, despite what the Minister will no doubt have us believe, and despite what a single Government Back Bencher tried to persuade us of a little earlier.

I vividly remember the Chancellor coming here immediately after the election of May 1997, and trying to convince us that he could produce a reforming Budget over a weekend. It took the Treasury—even with Ed Balls and Charlie Whelan on its staff—a week or two to convince him otherwise, and a month or so of frantic efforts by Treasury officials followed. I can imagine the scene when the Chancellor revealed his election Budget to the Cabinet.

I rather like Budgets, because they are just about the only Government announcements that are made to the House before they are made to the media. I am strongly in favour of that, and I hope that the Government will rigorously maintain the same rule in the future. I can envisage the Chancellor saying, on that morning in the Cabinet—

Madam Speaker

Order. The hon. Gentleman is ahead of his time. We are not yet discussing the Budget; we are dealing with regulations. Perhaps I can draw the explanatory note to his attention, so that he can refer to it from time to time. That would be interesting.

Mr. Page

Thank you, Madam Speaker. You are right to draw such matters to my attention, but I want to explain how I believe what appeared to be a good idea at the time of the removal of advance corporation tax led to a disaster.

Madam Speaker

Order. No doubt the hon. Gentleman will now turn to the regulations.

Mr. Page

As night follows day, I shall do so. I shall leave out all that I was going to say about hitting utilities, and deal with the question of hitting pension levels.

I have no doubt that a complaint was made that the removal of ACT would hit pension levels. What was not clear to the Government at the time was that their removal would have severe cash-flow consequences, but, inevitably, the decision of July 1997 had that effect—the decision to phase out corporation tax and end tax credits for pension funds and companies when they receive dividends. The consequences of that were, as we know, disastrous.

By then, the mandarins at Great George street had persuaded the Chancellor that measures could be used to circumvent the shortfall in corporation tax. Here we come—as you requested, Madam Speaker—to the wheel that turns towards the whole matter of advance payments of corporation tax on a quarterly basis. As my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) has said, over the next four years, £8.9 billion will be sucked out of British businesses into the Treasury to make up for the shortfall—and not just to make up for the shortfall, but to make £8.9 billion more. How convenient! How business friendly!

Mr. Leslie

Will the hon. Gentleman give way?

Mr. Page

If the hon. Gentleman will allow me to develop my few comments, I shall let him intervene afterwards.

Mr. Leslie

On that point.

Mr. Page

The hon. Gentleman has had plenty of opportunity to make his own speech in the debate. Only one Labour Member—the hon. Member for Northampton, North (Ms Keeble)—has had the courage to speak, undoubtedly after being pressurised by the Whips. Every hon. Member knows what it is like to be pressurised by the Whips to make appropriate comments.

The regulations are full of theory, but are just a tad short of practice. I look the Minister straight in the eye and ask her whether she has had any experience of running a business. I should be delighted to hear her reply. My hon. Friend the Member for East Yorkshire (Mr. Townend) hit the nail on the head: unless one has run a business, the regulations will seem fine in theory, but not very good in practice.

One of the regulations' fundamental problems is that larger businesses will, each quarter, have to pay their corporation tax instalment on the basis of what they expect their profits to be over the whole year.

Mr. Bercow

Will my hon. Friend allow me to intervene?

Mr. Page

If my hon. Friend will give me 30 seconds, we shall enter the intervention stakes.

As someone who—like my hon. Friend the Member for East Yorkshire—has a modicum of business experience, I should go on bended knee to ensure that the profit that I make at the end of the year is exactly what I forecast at the beginning of the year. If only projections could be translated into profits at the end of the year, I should be a very happy bunny. But life ain't like that.

Mr. Bercow

Does my hon. Friend agree that, in all fairness to the Paymaster General, as long ago as 1986, she ran a very effective corporation, which drove out of business the noble Lord Cocks of Hartcliffe?

Mr. Page

My hon. Friend will understand if I am timorous in entering into such a matter of private expertise. However, I shall give way to the hon. Member for Shipley (Mr. Leslie).

Mr. Leslie

I have waited very patiently, but am very grateful to the hon. Gentleman for giving way. I have a simple question, on the earlier point that he made on the revenue impact of revoking the statutory instrument. Earlier, I asked the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) a question on the same matter, but he did not give much of a reply to it. Will the hon. Member for South-West Hertfordshire (Mr. Page) please enlighten me? From where does he propose finding alternative revenue for the Exchequer? Would he levy additional taxes, or cut public expenditure?

Mr. Bercow

On a point of order, Madam Speaker. Is it in order for the hon. Member for Shipley (Mr. Leslie) to raise again in the debate a point that he raised earlier, but was ruled out of order by the Deputy Speaker?

Madam Speaker

We often hear repetitions here, particularly at this time of night.

Mr. Page

Far be it from me to try to gallop over ground that has already been covered. Nevertheless, I tell the hon. Member for Shipley that, simply because the Government have got themselves into a sticky problem, it does not follow that the solution is not to return the situation to where it was before—by giving current and future pensioners the ACTs that they require to ensure that they will have the decent pensions that the Government have so effectively denied them.

I only wish that, in any business that I had anything to do with, I knew what my profits would be at the end of the year. I ask the Paymaster General whether it would be nice if the Treasury knew that, at the end of the year, its projections were right. How often have the Treasury's various projections been within the right percentage points? That happens more rarely than commonly.

I endorse the submission of the Confederation of British Industry that to avoid serious compliance problems for companies, the regime should allow them the option of basing the first two instalments on actual profits in the first half of their financial years, rather than having to be based on an uncertain forecast for the first year. This is why I ask the Paymaster General whether she has any experience of running a business. The measure means that, every quarter, companies will have to run not just an ordinary profit and loss account, but an end of year account. That will be bureaucratic and will cause extra work and immense cost. Some companies will pay corporation tax not more rapidly, but before they have received the sale income on which their profit forecast depends.

What happens if a company makes more profit in the third and fourth quarters than it expected in the first and second? Unless I have read the regulations wrong, it will be hit by a charge of extra interest. That is unfair—heads the Treasury wins, tails the business loses. If too much tax has been paid over the first two quarters, the compensatory repayment by the Treasury is at approaching 5.3 per cent., which is a margin in the Treasury's favour of 2 per cent., because, if the company has not paid enough, the figure is nearly 8 per cent.

The Government say that they are business friendly, but their measure is just another burden on business. Completing the calculations every quarter will be an immense amount of work. It will not be sufficient to take just the ordinary profit and loss management accounts. Companies will have to make all sorts of calculations and make end of year accounts every three months. What happens if a company buys a machine tool? It will have to factor the depreciation into the figures. It would be simple if the company knew at the start of the year that it was going to buy the machine two thirds of the way through the year, but the company does not know whether the machine will break or extra orders will come in. The Government are treating businesses as mechanistic operations in which there is no element of chance or difficulty.

The change will cause difficulty for companies with seasonal factors. The CBI's submissions show that some companies make their money in the last quarter. A firework manufacturer has a limited season, as does a business that grows Christmas trees or a toy seller. If we are not careful, a raft of companies will be changing their year end to just before their most profitable quarter so that they will not have to pay interest charges on profits that they have not yet earned, just to satisfy the regulations.

All that will create extra work, more computer files, more paperwork, and even broader smiles on the faces of accountants. Perhaps that is the intention. Unless profits are equally spread throughout the year, a lot of unnecessary work will be needed to ensure that the end-of-year tax liability is not distorted by overpayments during the year.

No mention has yet been made of groups with several companies in them. If they all earn more than £1.5 million a year, there is no problem, but if one company earns £1.5 million and several others earn just £100,000, the calculations will cause immense problems. The Government have not recognised the fact that, often, companies want separate trading entities to enable more sensible and viable marketing to occur.

It is all very well for the Government to present themselves as a business-friendly, reforming Administration, being better and bigger, but they do not understand business. The quicker the business community realises that, the better it will be for Britain.

10.14 pm

The Paymaster General (Dawn Primarolo)

This has been an interesting debate, in which Opposition Members have raised a number of detailed questions about the regulations. In the time left to me, I will try to deal with them.

First, companies which will not have to pay by instalments—the overwhelming majority of companies—will gain £1 billion in cash flow as a result of the abolition of advance corporation tax alone. After the transitional period is through, in the year 2003–04, companies will gain £1.6 billion a year from the combined effect of the changes.

The hon. Member for Rochford and Southend, East (Sir T. Taylor) raised a number of points, but I will deal first with the points raised by the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb). His first point was the old chestnut that secondary legislation was undemocratic and the wrong way to make regulations. Other Opposition Members called for morality in the regulations. Essentially, they believe that it is unconstitutional to modify existing tax law through regulations made under the negative resolution procedure.

There is nothing in those allegations—as Opposition Members know full well. Regulations must be laid before Parliament before they come into effect. The previous Government made extensive use of tax regulations under the negative resolution procedure. The use of regulations facilitates consultation on the fine details of schemes, such as the instalments and the shadow ACT.

I wish to refer to the consultation. On 24 April last year, the Revenue published draft instalment payment regulations to give tax practitioners, business and others an opportunity to comment. A further draft of the regulations was made available to members of the self-assessment consultative committee last autumn. Further comments were then taken into account. Many of the points raised by Opposition Members about the changes arise from that consultation.

The first point was that instalment payments give a tax rise. No company will pay more tax as a result of the regulations—they bring forward the time at which the tax is paid. There is no effect on the amount of tax to be paid.

Mr. Page

Will the Minister give way?

Dawn Primarolo

With respect, I will not. The hon. Gentleman spoke for quite a long time and I wish to answer the important points made in the debate. If I have time at the end of the debate, I will be happy to give way. As Opposition Members well know, the new instalment payments result from the abolition of ACT—not through some chaos, but through the Government's policy of moving to a position where we encourage investment and take the distortions out of the tax system.

The hon. Member for Bognor Regis and Littlehampton referred to the interest charge, which he said was penal—he can correct me if I have overstated his point—and somehow a penalty. It is not. It is to ensure that the correct use of the money is available either to the Treasury, if there has been underpayment, or as a refund to the company if there has been an overpayment to ensure that there is a proper result and no financial loss either way.

The hon. Gentleman referred to the right of appeal. There is a penalty power, which will be used in cases of flagrant abuse. The Revenue will determine the penalty to be properly applied and that companies have a right of appeal to the commissioners.

In the consultation, the companies felt that the ordinary meaning of the word "reckless" was better than "flagrant", so they suggested that amendment, and it was perfectly reasonable for the Government to have accepted that.

The hon. Member for Bognor Regis and Littlehampton said that our regime was more penal than that of other countries, and especially the United States. That is not the case: other countries apply a regime to companies with much lower profits; I will not cite them, because I know that the hon. Gentleman knows them and that, having spent a long time as an accountant, he knows the details full well.

Mr. Charles Wardle (Bexhill and Battle)

Will the Paymaster General give way?

Dawn Primarolo

No. The hon. Gentleman has only just come in and, out of respect to hon. Members who made points in the debate, I really should try to deal with them.

Mr. Townend

rose—

Dawn Primarolo

I will not give way to the hon. Gentleman, as I have not dropped my papers or lost my place, so I do not need any assistance.

Mr. Bercow

rose—

Dawn Primarolo

I will get on to what the hon. Gentleman has said, but I must show respect to the hon. Member for Bognor Regis and Littlehampton, the Front-Bench spokesman, by answering his points first.

Through the consultations, the Government have taken proper account of how the introduction of instalments will work, and we will continue to work closely with the companies.

The right hon. Member for Fareham (Sir P. Lloyd) made a thoughtful contribution, as always. He talked about the definition of companies and what counts as a large company. The regulations make it clear that a large company is one whose profits exceed £1.5 million for a 12-month accounting period ending on or after 1 July 1999.

The right hon. Gentleman asked about interest. He asked why there should be a differential rate between overpaid and underpaid. That was a feature of the tax system under the previous Government, of which I seem to remember that he might have been a member. It represents the difference between rates on borrowing and on investment: the same arrangement as in banks and other financial institutions. There is no skulduggery; it is straightforward. The system is finely tuned, so it can respond to changes in interest rates, unlike the previous system.

Mr. Bercow

rose—

Dawn Primarolo

Much as I appreciate the hon. Gentleman's interventions and little jokes, I will not give way at present.

The right hon. Member for Fareham went on to say that the interest rate regime was unfair to companies. In the consultations, we responded to companies' concerns about interest rates, and we have introduced a new regime for the instalment payments. There is a smaller spread on the charge on amounts overpaid and underpaid, and the system is more sensitive to changes in the base rate.

The right hon. Gentleman asked why the instalment for the current year should not be based on the previous year's payment. A good number of companies said in the consultations that they already produced profit forecasts in year and could manage the instalment based on their estimated current year corporation tax liability.

Some companies wanted a mixture. They wanted to pick and choose between current and previous year. They thought that one year it might be good to have a previous year calculation, and another year a current year calculation. We came to the conclusion that, if they can show such flexibility, they must be able to do current year calculations.

The hon. Member for Weston-super-Mare (Mr. Cotter) was in danger of losing the plot of the regulations. He talked about cutting rates on the one hand but taxing via the instalment regime on the other. I am sure that he has noticed the following point, but I shall point it out to him anyway. Small and medium companies, as I have already said, gained £1 billion in cash flow from the abolition of ACT. Only the 20,000 largest companies will pay by instalments.

Hon. Members asked a series of questions about the results of the consultation. Companies with profits between £300,000 and £1.5 million were removed from the instalment regime as a result of the consultation. Following discussions with business, penalty and information powers will focus more clearly on cases of flagrant or, as business prefers to say, reckless abuse, and the anti-avoidance provisions were amended to help companies involved in a legitimate restructuring rather than a scheme designed to avoid the instalment regime.

Mr. Gibb

Will the Paymaster General give way?

Dawn Primarolo

No, I want to answer the questions of the hon. Member for Rochford and Southend, East (Sir T. Taylor). He made some generous comments and I hope that he will not be too disappointed with the replies. I have already covered his first point about the £1.6 billion a year gain as a result of the combined effects of the changes when the transition period is over. I also dealt with his second point when I said that no more tax will be paid, it is a question of when it is paid.

The hon. Gentleman raised a point about the clarity of the figures and whether the forecasts had revealed the true intent. In the March 1998 Budget press release, and in the "Financial Statement and Budget Report"—I am happy to send him copies of those—£5.8 billion for 1998–99 to 2002–03 is shown as the cash flow figure for that item. It was not a secret, because it was there in the papers. I hope that the hon. Gentleman will accept that all the information has been there, even though he does not agree with it. I hope that he will also accept that small and medium companies, especially those in seaside towns to which he was perhaps referring, will not be affected.

The hon. Gentleman's final point, and one that many other hon. Members made, was about companies whose trade is seasonal. Following discussions with companies, we believe that they can cope with the forecast and be able to pay their instalments. However, if a company feels that its forecast has turned out to be wrong and its instalments are too high, it can apply to the Revenue for some of the money back if it proves that its cash flow has changed and it will not reach the profit levels that it originally forecast.

Mr. Page

rose—

Mr. Bercow

Will the Paymaster General give way?

Dawn Primarolo

No, I will not give way. On the question of companies that have excessive seasonal problems, I can tell the hon. Member for Rochford and Southend, East that we will keep an eye on the issue. We are not convinced that there will be a problem, but we will not ignore it.

Mr. Gibb

rose—

Dawn Primarolo

I understand that the hon. Gentleman is entitled to speak at the end of the debate.

My hon. Friend the Member for Northampton, North (Ms Keeble) was right to point out the need to address questions of poor growth and investment and the productivity gap in the economy that the Government inherited from the previous Government. We set about tackling those problems by focusing on how to create long-term stability. The corporation tax changes, the tax credit reform and the abolition of ACT are part of that comprehensive agenda. We have a simplified corporation tax system, which supports and encourages companies. We have an instalment method that will benefit companies, not cause problems for them.

The House has heard the error of the Opposition's ways and will have realised that they did not read the regulations as carefully as they should have. The House should feel reassured, and I hope that my hon. Friends will vote for the regulations.

10.30 pm

Mr. Gibb

That was an appalling wind-up speech. The Paymaster General claims to have listened to the businesses that made representations during the consultation process, so why has she not listened to the representations of companies faced with seasonal profits? Her predecessor, the hon. Member for Coventry, North-West (Mr. Robinson), intimated that he would listen and would return with changes to the regulations to assist the companies that have serious problems in that they generate the majority of their profits in just two or three months a year.

The hon. Lady has done nothing to accommodate those real concerns, and she has said nothing about the consultation and the representations made. Will she use the remaining three minutes of the debate to tell us why she did not listen?

Mr. Bercow

Does my hon. Friend, who is developing a powerful case, agree that the proposed treatment of company overpayments amounts in practice to legalised theft? The very least that the hon. Lady should do is to tell us whether she and her colleagues have satisfied themselves that the regulations are consistent with the requirements of the European convention on human rights.

Mr. Gibb

My hon. Friend makes a very good point. We are dealing not with the current situation, in which companies make calculations nine months after the year-end so that they can be made with great accuracy, but with a new system that will involve companies having to estimate six months or a year in advance what their profits will be, and in particular what their taxable profits will be. Companies, particularly those with seasonal variations, that make the majority of their profits in just two or three months each year—generally towards the end of an accounting period—find it difficult to make those estimates. The interest payments are also punitive.

During the final two minutes of the debate, will the Paymaster General tell us why she has ignored representations from all the companies in tourism, jewellery retailing and toy manufacture that have real concerns about the proposals?

Question put:—

The House divided: Ayes 130, Noes 289.

Division No. 80]	[10.32 pm
AYES
Ainsworth, Peter (E Surrey)	Boswell, Tim
Allan, Richard	Bottomley, Peter (Worthing W)
Ancram, Rt Hon Michael	Bottomley, Rt Hon Mrs Virginia
Arbuthnot, Rt Hon James	Brady, Graham
Atkinson, David (Bour'mth E)	Brazier, Julian
Atkinson, Peter (Hexham)	Brooke, Rt Hon Peter
Baker, Norman	Browning, Mrs Angela
Ballard, Jackie	Bruce, Ian (S Dorset)
Bercow, John	Bruce, Malcolm (Gordon)
Beresford, Sir Paul	Butterfill, John
Blunt, Crispin	Campbell, Menzies (NE Fife)
Body, Sir Richard	Cash, William

Chapman, Sir Sydney (Chipping Barnet)	MacGregor, Rt Hon John
	MacKay, Rt Hon Andrew
Chope, Christopher	Maclean, Rt Hon David
Clappison, James	McLoughlin, Patrick
Clark, Rt Hon Alan (Kensington)	Madel, Sir David
Clarke, Rt Hon Kenneth (Rushcliffe)	Malins, Humfrey
	Maples, John
Cotter, Brian	Maude, Rt Hon Francis
Cran, James	Mawhinney, Rt Hon Sir Brian
Curry, Rt Hon David	May, Mrs Theresa
Davies, Quentin (Grantham)	Moore, Michael
Davis, Rt Hon David (Haltemprice)	Ottaway, Richard
Day, Stephen	Page, Richard
Duncan, Alan	Paterson, Owen
Duncan Smith, Iain	Pickles, Eric
Faber, David	Prior, David
Fabricant, Michael	Randall, John
Fallon, Michael	Robertson, Laurence (Tewk'b'ry)
Feam, Ronnie	Roe, Mrs Marion (Broxbourne)
Flight, Howard	Ruffley, David
Forth, Rt Hon Eric	Russell, Bob (Colchester)
Foster, Don (Bath)	St Aubyn, Nick
Fraser, Christopher	Sanders, Adrian
Gale, Roger	Sayeed, Jonathan
Garnier, Edward	Simpson, Keith (Mid-Norfolk)
Gibb, Nick	Smith, Sir Robert (W Ab'd'ns)
Gill, Christopher	Soames, Nicholas
Gillan, Mrs Cheryl	Spicer, Sir Michael
Gorman, Mrs Teresa	Spring, Richard
Greenway, John	Stanley, Rt Hon Sir John
Grieve, Dominic	Steen, Anthony
Gummer, Rt Hon John	Swayne, Desmond
Hamilton, Rt Hon Sir Archie	Syms, Robert
Hammond, Philip	Tapsell, Sir Peter
Harris, Dr Evan	Taylor, Ian (Esher & Walton)
Hawkins, Nick	Taylor, Matthew (Truro)
Heald, Oliver	Taylor, Sir Teddy
Heath, David (Somerton & Frome)	Townend, John
Hogg, Rt Hon Douglas	Trend, Michael
Horam, John	Tyler, Paul
Howarth, Gerald (Aldershot)	Tyrie, Andrew
Hunter, Andrew	Viggers, Peter
Jack, Rt Hon Michael	Walter, Robert
Jones, Nigel (Cheltenham)	Wardle, Charles
Key, Robert	Waterson, Nigel
Kirkbride, Miss Julie	Whitney, Sir Raymond
Laing, Mrs Eleanor	Whittingdale, John
Lait, Mrs Jacqui	Wilkinson, John
Lansley, Andrew	Willetts, David
Leigh, Edward	Winterton, Mrs Ann (Congleton)
Letwin, Oliver	Winterton, Nicholas (Macclesfield)
Lewis, Dr Julian (New Forest E)	Young, Rt Hon Sir George
Lidington, David
Lilley, Rt Hon Peter	Tellers for the Ayes:
Lloyd, Rt Hon Sir Peter (Fareham)	Mr. John M. Taylor and
Loughton, Tim	Mr. Tim Collins.

NOES
Abbott, Ms Diane	Berry, Roger
Adams, Mrs Irene (Paisley N)	Best, Harold
Ainsworth, Robert (Cov'try NE)	Betts, Clive
Alexander, Douglas	Blears, Ms Hazel
Anderson, Donald (Swansea E)	Blizzard, Bob
Armstrong, Ms Hilary	Blunkett, Rt Hon David
Ashton, Joe	Boateng, Paul
Atherton, Ms Candy	Borrow, David
Atkins, Charlotte	Bradley, Keith (Withington)
Banks, Tony	Brinton, Mrs Helen
Barnes, Harry	Buck, Ms Karen
Barron, Kevin	Butler, Mrs Christine
Bayley, Hugh	Caborn, Richard
Beard, Nigel	Campbell—Savours, Dale
Begg, Miss Anne	Caravan, Dennis
Bennett, Andrew F	Cann, Jamie
Benton, Joe	Casale, Roger
Bermingham, Gerald	Caton, Martin

Cawsey, Ian	Heppell, John
Chaytor, David	Hesford, Stephen
Chisholm, Malcolm	Hewitt, Ms Patricia
Clapham, Michael	Hill, Keith
Clark, Rt Hon Dr David (S Shields)	Hodge, Ms Margaret
Clark, Paul (Gillingham)	Hoon, Geoffrey
Clarke, Charles (Norwich S)	Hope, Phil
Clarke, Eric (Midlothian)	Hopkins, Kelvin
Clarke, Rt Hon Tom (Coatbridge)	Howarth, Alan (Newport E)
Clarke, Tony (Northampton S)	Howells, Dr Kim
Clelland, David	Hughes, Ms Beverley (Stretford)
Coaker, Vernon	Hughes, Kevin (Doncaster N)
Coffey, Ms Ann	Humble, Mrs Joan
Cohen, Harry	Hurst, Alan
Coleman, Iain	Illsley, Eric
Colman, Tony	Jackson, Helen (Hillsborough)
Cook, Frank (Stockton N)	Jamieson, David
Corbett, Robin	Jenkins, Brian
Corbyn, Jeremy	Johnson, Miss Melanie (Welwyn Hatfield)
Corston, Ms Jean
Cousins, Jim	Jones, Barry (Alyn & Deeside)
Cox, Tom	Jones, Helen (Warrington N)
Crausby, David	Jones, Ms Jenny (Wolverh'ton SW)
Cryer, Mrs Ann (Keighley)
Cryer, John (Hornchurch)	Jones, Dr Lynne (Selly Oak)
Cunliffe, Lawrence	Jones, Martyn (Clwyd S)
Cunningham, Rt Hon Dr Jack (Copeland)	Jowell, Rt Hon Ms Tessa
	Kaufman, Rt Hon Gerald
Cunningham, Jim (Cov'try S)	Keeble, Ms Sally
Curtis—Thomas, Mrs Claire	Keen, Alan (Feltham & Heston)
Dalyell, Tam	Keen, Ann (Brentford & Isleworth)
Darling, Rt Hon Alistair	Kidney, David
Darvill, Keith	Kilfoyle, Peter
Davey, Valerie (Bristol W)	Kumar, Dr Ashok
Davies, Rt Hon Denzil (Llanelli)	Ladyman, Dr Stephen
Davies, Geraint (Croydon C)	Lawrence, Ms Jackie
Dawson, Hilton	Laxton, Bob
Dean, Mrs Janet	Leslie, Christopher
Dewar, Rt Hon Donald	Levitt, Tom
Dismore, Andrew	Linton, Martin
Donohoe, Brian H	Livingstone, Ken
Doran, Frank	Lloyd, Tony (Manchester C)
Dowd, Jim	Lock, David
Drew, David	Love, Andrew
Dunwoody, Mrs Gwyneth	McAllion, John
Eagle, Angela (Wallasey)	McAvoy, Thomas
Ennis, Jeff	McCabe, Steve
Etherington, Bill	McCartney, Ian (Makerfield)
Fisher, Mark	McDonagh, Siobhain
Fitzpatrick, Jim	Macdonald, Calum
Flint, Caroline	McDonnell, John
Flynn, Paul	McGuire, Mrs Anne
Follett, Barbara	McIsaac, Shona
Foster, Michael Jabez (Hastings)	Mackinlay, Andrew
Foster, Michael J (Worcester)	McLeish, Henry
Foulkes, George	McNulty, Tony
Fyfe, Maria	MacShane, Denis
Galloway, George	Mactaggart, Fiona
Gapes, Mike	McWalter, Tony
Gardiner, Barry	McWilliam, John
George, Bruce (Walsall S)	Mahon, Mrs Alice
Gerrard, Neil	Mandelson, Rt Hon Peter
Gibson, Dr Ian	Marsden, Gordon (Blackpool S)
Godman, Dr Norman A	Marsden, Paul (Shrewsbury)
Godsiff, Roger	Marshall—Andrews, Robert
Goggins, Paul	Martlew, Eric
Golding, Mrs Llin	Maxton, John
Griffiths, Jane (Reading E)	Meacher, Rt Hon Michael
Griffiths, Nigel (Edinburgh S)	Meale, Alan
Griffiths, Win (Bridgend)	Michie, Bill (Shef'ld Heeley)
Grogan, John	Milburn, Rt Hon Alan
Hall, Patrick (Bedford)	Miller, Andrew
Hanson, David	Moffatt, Laura
Heal, Mrs Sylvia	Moonie, Dr Lewis
Henderson, Ivan (Harwich)	Morgan, Ms Julie (Cardiff N)
Hepburn, Stephen	Morley, Elliot

Morris, Ms Estelle (B'ham Yardley)	Smith, Miss Geraldine (Morecambe & Lunesdale)
Mountford, Kali
Mudie, George	Smith, Jacqui (Redditch)
Mullin, Chris	Smith, John (Glamorgan)
Murphy, Denis (Wansbeck)	Smith, Llew (Blaenau Gwent)
Naysmith, Dr Doug	Southworth, Ms Helen
O'Brien, Bill (Normanton)	Spellar, John
O'Brien, Mike (N Warks)	Squire, Ms Rachel
O'Hara, Eddie	Starkey, Dr Phyllis
Olner, Bill	Steinberg, Gerry
O'Neill, Martin	Stevenson, George
Osborne, Ms Sandra	Stewart, David (Inverness E)
Pearson, Ian	Stewart, Ian (Eccles)
Pendry, Tom	Stinchcombe, Paul
Perham, Ms Linda	Stoate, Dr Howard
Pickthall, Colin	Strang, Rt Hon Dr Gavin
Pike, Peter L	Stringer, Graham
Plaskitt, James	Stuart, Ms Gisela
Pollard, Kerry	Sutcliffe, Gerry
Pond, Chris	Taylor, Rt Hon Mrs Ann (Dewsbury)
Pope, Greg
Pound, Stephen	Taylor, Ms Dari (Stockton S)
Powell, Sir Raymond	Taylor, David (NW Leics)
Prentice, Ms Bridget (Lewisham E)	Temple—Morris, Peter
Prentice, Gordon (Pendle)	Thomas, Gareth (Clwyd W)
Prescott, Rt Hon John	Thomas, Gareth R (Harrow W)
Primarolo, Dawn	Timms, Stephen
Prosser, Gwyn	Touhig, Don
Purchase, Ken	Trickett, Jon
Quinn, Lawrie	Truswell, Paul
Rapson, Syd	Turner, Dennis (Wolverh'ton SE)
Raynsford, Nick	Turner, Dr George (NW Norfolk)
Reid, Rt Hon Dr John (Hamilton N)	Twigg, Derek (Halton)
Robertson, Rt Hon George (Hamilton S)	Twigg, Stephen (Enfield)
	Vis, Dr Rudi
Roche, Mrs Barbara	Walley, Ms Joan
Rogers, Allan	Wareing, Robert N
Rooker, Jeff	Watts, David
Rooney, Terry	White, Brian
Ross, Ernie (Dundee W)	Whitehead, Dr Alan
Rowlands, Ted	Wicks, Malcolm
Roy, Frank	Williams, Rt Hon Alan (Swansea W)
Ruane, Chris
Ruddock, Joan	Williams, Alan W (E Carmarthen)
Russell, Ms Christine (Chester)	Wills, Michael
Ryan, Ms Joan	Winnick, David
Salter, Martin	Winterton, Ms Rosie (Doncaster C)
Savidge, Malcolm	Wood, Mike
Sawford, Phil	Woolas, Phil
Sedgemore, Brian	Wray, James
Shipley, Ms Debra	Wright, Anthony D (Gt Yarmouth)
Short, Rt Hon Clare	Wright, Dr Tony (Cannock)
Simpson, Alan (Nottingham S)
Singh, Marsha	Tellers for the Noes:
Skinner, Dennis	Mr. Graham Allen and
Smith, Angela (Basildon)	Mr. Mike Hall.

Question accordingly negatived.

Mr. Roger Gale (North Thanet)

On a point of order, Mr. Deputy Speaker. I am, as the record will show, not one of those who has criticised the Home Secretary for taking what I am sure was a much-needed break with his wife over the weekend. However, the record will show that, at 12.30 on Thursday afternoon, when the Home Secretary was in Eltham delivering soundbites and should have been here making a statement, I queried with Madam Speaker the removal from the Vote Office of the appendices to the Lawrence report. Madam Speaker kindly investigated the matter and a statement was, as the House knows, made on Friday morning. The House and the Vote Office were given to understand that the expurgated version of the appendices would be made available in the Vote Office today. I have inquired of the Vote Office and the document is still not available. Mr. Deputy Speaker, will you inform the House whether Madam Speaker has been given any idea by the Home Office as to when the appendices will be available; and, if not, whether the Home Secretary has asked to make a statement?

Mr. Deputy Speaker (Mr. Michael Lord)

That is a matter not for the occupant of the Chair, but for the Government. I have no doubt that those on the Treasury Bench will have heard the hon. Gentleman's point of order.

Mr. Win Griffiths (Bridgend)

Further to that point of order, Mr. Deputy Speaker. I am rather mystified by that point of order because, about 15 minutes ago, I was told quite explicitly by the Vote Office that the appendices would be available tomorrow, and I should have thought that the same information would have been given to the hon. Member for North Thanet (Mr. Gale).

Mr. Deputy Speaker

I have already dealt with that point of order.