HC Deb 19 July 2000 vol 354 cc465-77 8.15 pm
Mr. Flight

I beg to move amendment No. 14, in page 72, line 23, leave out clause 104.

Mr. Deputy Speaker

With this it will be convenient to discuss the following: Amendment No. 15, in schedule 31, page 532, line 3, leave out schedule 31.

Government amendment No. 91.

Mr. Flight

We believe that there are some major deficiencies in the schedule, which we did not address in Committee.

Mr. Letwin

The charade that we have just witnessed is necessitated by the fact that I must declare an interest. Again, I am not quite clear which, but I am sure that there will be one. Therefore, I am prohibited by the rules of advocacy from moving the amendment. I do not know what relationship my interests have to schedule 31. However, the rules of the House do not let one speculate, so we will, as always, play by the rules.

We did not discuss schedule 31 in Committee and the sole responsibility for that lamentable fact lies with me. I was so concerned with schedule 30 that I did not notice that schedule 31 was on the agenda and failed to leap up in time. However, nothing much has been lost, because the right answer on Report is the same as the right answer would have been in Committee, which is that schedule 31 needs to be no part of this Bill. It is radically misconceived and the Government have just as good an opportunity to remedy it now by accepting the amendment to delete it as they would have had in Committee.

I want to put on the record two critical points. The first is that the Conservative party has no truck whatever with the idea of people being able to construct arrangements for avoiding tax out of controlled foreign companies as a way of going about something quite other than trading business. That is the reason why we introduced controlled foreign companies provisions 16 years ago. There is nothing between us and the Government on the general principle that where a UK company seeks to engage in Bermuda cashbox activities or the like with a straightforward controlled foreign company, that needs to be stopped. The whole purpose of CFC legislation is to stop it. So far, so good.

The second point is that, unfortunately, this is an area of great delicacy and complexity, involving a huge range of different transactions. As a consequence, it is extraordinarily difficult to disentangle entirely legitimate business manoeuvres from tax avoidance manoeuvres. I do not hold it against Ministers or officials that they have made a muck-up of schedule 31 because it is difficult to separate the two matters. However, the fact is that they have made a muck-up of it and, as a consequence, it needs to be withdrawn. That is not to say that some better constructed analogue of it could not come forward next year and do some good in the service of the British taxpayer. This, however, is not that analogue. It is a schedule that does some very wrong things—albeit, I think, unintentionally.

I think that the Paymaster General is aware of some of those things, but she may not be aware of all of them. If she is aware of all of them, I apologise for going through them rather laboriously; but as, if she is aware of them, she should have done something about them, I think I can be forgiven for assuming that she is not. That is the only charitable explanation for the existence of schedule 31.

I wish to draw attention to two problems in particular. The first is caused by a combination of paragraphs 4 and 8 of the schedule, and relates to the 50:50 joint venture. Let us suppose that there are two corporations, one UK-based and the other US-based, each of which holds an interest of more than 40 per cent. and less than 50.1 per cent. of a joint venture vehicle. If each corporation holds an interest of 50 per cent., both will fall into the category of companies holding an interest of more than 40 per cent. and less than 50.1 per cent., and will therefore be caught in the nexus of paragraphs 4 and 8.

I am sure that the 40 per cent. rule is intended to capture certain nefarious tax-avoidance practices—practices unknown to me but, doubtless, known to the Minister and her officials. I do not doubt that such practices exist; nor do I doubt that we should find ways of dealing with them. The problem is that the Minister, I think unintentionally, will also catch an entirely legitimate set of business practices which I consider particularly important.

Let us imagine that the UK and US companies that I mentioned earlier are involved in internet communications, or telecommunications generally. Let us suppose that they operate on the basis of a joint endeavour to provide major multinational customers with voice telephony or data transfer between the US and the UK, and that—not unnaturally—the UK partner seeks to service the UK-based elements while the US partner seeks to service the US-based elements.

A standard voice telephony call along a straightforward transatlantic cable with indefensible rights of user attached has three components. There is the local and long-distance domestic access within the UK; there is the local and long-distance domestic access within the US, which involves two people, or sets of people, picking up their telephones; and there is the transatlantic component.

A perfectly rational business structure to be used in such circumstances—a structure that may emerge from detailed negotiations in the setting up of a joint venture—may be the holding of three "pick and mix" sets of accounts. One may relate to the part of the pool charge that originates from the UK caller, and represents the resource cost of providing the UK domestic section of the call facilities. Another may relate to the US termination. The third may relate to the transatlantic element—and the transatlantic element may be accounted for through a 50:50 joint venture.

It would be perfectly reasonable for that joint venture to be registered in, for instance, the media. We are not talking about a cash box: there is no intention to stuff the system with earnings from the UK in order to collect tax-free interest. The intention is simply to identify a low-tax jurisdiction, for legitimate taxpaying purposes and as part of a legitimate business structure, in which a 50:50 joint venture can be sensibly located—a venture in which the shared part of the call revenue can be placed, and in which the cost of that shared part will be recognised. In this instance, we are talking about the cost of the IRUs on the transatlantic cable and, perhaps, associated transmission equipment.

I have described an entirely legitimate business practice and an entirely legitimate business structure. I do not know whether such things currently exist, although I speculate that they do, and if they do not they soon will. There are many other such cases, some of which I know exist, from personal experience. All those cases will be captured by the intersection of paragraphs 4 and 8. The joint venture that I have described will be regarded as a controlled foreign company, and that is wrong. The Financial Secretary will smile at this, inwardly or outwardly, but the effect of the provision is irrational. Moreover, it is unintentional. At least, I assume that it is; the Bill cannot have been intended to clobber such legitimate business practices.

That is the first defect of schedule 31. I thought long and hard—and, more importantly, tried to persuade experts to do the same, as my capacities in this respect are distinctly limited—about the possibility of tabling specific amendments to deal with that defect, but I am afraid that it defeated us. I think that the structure of the schedule militates against a solution, and that is my first reason for believing that the schedule should be rewritten.

I am mindful of the fact that, as the hon. Member for Kingston and Surbiton (Mr. Davey) said repeatedly in Committee, we do not want to complicate the situation by tabling "right" amendments on top of "wrong" schedules, ending up with a provision that no one understands. I fear that that would be the very result of trying to weave a solution into schedule 31 as it stands. Surely it would be far better to scrap the schedule, and bring it back next year. The amount that the Government will lose as a result of loopholes they have discovered will not be hugely significant in one year. Over time it may prove important, but I am sure that over time a solution can be found to whatever problems the Paymaster General considers to be real—and arise from tax avoidance manoeuvres—without the need to clobber the joint ventures to which I have referred.

I do not know whether the Paymaster General already knows about the problem that I have identified. As I have said, if she does, she should have killed it already. I shall charitably assume that she does not.

Dawn Primarolo

If the hon. Gentleman looks at the Bill, he will see that the motive test would apply. He has described a situation that revolves around not an intent to avoid tax, but the structure of the joint venture. The motive test, and other exceptions, would exempt a case of non-avoidance.

I do not understand the hon. Gentleman's point. He says that he is against avoidance, but that there are some structures that do not fit the 50:50, 40:40 arrangement. Ours is the only country with the motive test and the other exemptions. If the purpose was not to avoid tax, presumably such structures would be all right.

Mr. Letwin

I hardly dare suggest it, but we may be making progress. If I tell the Paymaster General what I find worrying, perhaps she can lay my fears to rest for Pepper v. Hart purposes.

I freely admit that I only dimly understand how the motive test will be applied by the courts. Indeed, I am not convinced that the great lawyers understand that yet. As I dimly understand it, however, the test does not distinguish clearly between two things. We need such a distinction here, and if the Minister can make the right statement we may be able to achieve it.

The test does not distinguish clearly between manoeuvres designed purely to avoid tax—I agree that they should be clobbered—and arrangements of the kind I have described. While such arrangements are perfectly legitimate business manoeuvres, an element of them will have been the hope that—through onshore pooling and other legitimate means; by causing the subsidiary to be chosen to be in a low-tax jurisdiction—the net effect would be beneficial. That constitutes tax planning of a legitimate kind, not tax avoidance.

if the Paymaster General is saying that the motive test—not only as she plans it but, much more importantly, as she intends it to apply to this case—would mean that, in the type of circumstances I was describing, that would be regarded not as an avoidance mechanism but as legitimate tax planning, as part of legitimate business activity, I think that we probably do have a solution to this particular problem.

8.30 pm
Dawn Primarolo

The motive test has been in place since 1984, when the previous Government introduced it, and has consistently worked perfectly well without the problems that the hon. Gentleman is describing. I assure him that the type of structures that he is identifying are not new ones. He has advanced two arguments, the first of which deals with what would happen if the activity was not avoidance under the 40:40 test. As I told him, the motive test is the key to determining how to deal with the matter.

Secondly, the hon. Gentleman questioned whether the motive test was adequate. As I said, it has been working perfectly well since 1984 and has withstood the test of time. I think that I am right in saying that we use it also in transfer pricing. However, I shall double check on that to ensure that I am correct.

I apologise for making a rather long intervention. Nevertheless, both the hon. Gentleman's points are answered in the legislation.

Mr. Letwin

There is no need to apologise for the length of the intervention. I think—as long as I am thinking straight through the haze of my indisposition—that the Paymaster General is probably saying what needs to be said. We shall later entirely discover. However, I think that she may have succeeded in removing my anxiety on that score.

Dawn Primarolo

I think that we can certainly clear up these points, and it is important that the explanation is on the record. The motive test exempts controlled foreign companies that do not have United Kingdom tax avoidance as one of the main—I emphasis, the main—reasons for their existence or the transaction. I think that we can see a clear audit trail—involving motive, motive test, exemptions and current and past interpretation—that deals with the point that the hon. Gentleman is making. Clearly, CFC legislation takes account of legitimate activity, but—putting it very directly—nails those who are avoiding tax and for whom the CFC exists purely to help them to do that.

Mr. Letwin

If the hon. Lady is putting the emphasis that I think she is putting on the word "mainly", I think that it probably will capture the case that I was describing and similar cases, and that we probably will have a solution. Therefore, I think that we can probably rest easy on that—although, as I said, time will tell, as we go through the courts and hear how these matters are interpreted. Nevertheless, the hon. Lady's comments were very helpful.

Mr. Edward Davey

I believe that the Paymaster General is right on this point. My only concern with the motive test in the legislation is whether, in the Inland Revenue's examination of a company's motive, there should be an appeal procedure. There is an appeal procedure in other spheres in which the motive test operates. Does the hon. Gentleman think that the absence of such a procedure is a deficiency in the Bill?

Mr. Letwin

I agree with the hon. Gentleman that if the motive test is to have placed on it the weight that the Paymaster General has most helpfully placed on it, it would also be helpful if there were an appeal procedure within the Inland Revenue—as the courts already have one. I certainly agree on that point.

Let us turn to the second problem with schedule 31, which I think that the Paymaster General became aware of at a considerably earlier stage in our deliberations on the Bill. I think that she became aware of it through the representations of one particular company. In Committee, at a certain moment in the discussion of something quite else, the Paymaster General sounded as if she was saying that there was only one company in the whole of the United Kingdom that really was affected in the way that I am about to describe. I think that that was incautious and, in fact, false. Certainly, however, one company has brought to her attention the problem that I am about to bring to her attention. I can only assume that she thinks that the problem is not serious enough to worry about. It is serious enough to worry about.

What is this particular problem? It is the problem of the Swiss-Lux Finance Company being used as part of a structure whose basic intention is not to avoid United Kingdom tax, but to benefit from the tax shield on interest costs of a higher-tax jurisdiction where the subject of an acquisition resides in the higher-tax jurisdiction. Let me try to disentangle that absolutely ghastly sentence.

Dawn Primarolo

I think that I may be able to help the hon. Gentleman to untangle that ghastly sentence. Is he describing the transfer of losses into a country where the losses were not generated, to get the benefit of that country's relief?

Mr. Letwin

In a word, no. I am describing a situation in which a United Kingdom company, as a perfectly ordinary part of its business, acquires a company in another jurisdiction that has a higher corporate tax rate—it is a standard merger and acquisition by one trading company of another trading company; there is no question of any type of sheer financing manoeuvre—and in which it funds that acquisition, as many acquisitions are funded, partially or wholly through debt. Because company A, the United Kingdom company, is the acquirer, it will naturally fund the acquisition through debt raised by itself from its bankers. Therefore, stage 1 of the transaction is that the United Kingdom company—which was previously, for example, debt free—has acquired a huge lump of debt as a result of raising the money to buy company B in, shall we say, Germany, which has a high corporate tax rate.

So far, there would be nothing between the Paymaster General and the Opposition. Everyone would agree that that is a completely legitimate acquisition activity. It may even lead to the creation of a great United Kingdom company. In fact, there is one instance in recent British history when it has led precisely, as I have described, to the creation of a great United Kingdom trading company.

The next stage of the transaction is that the United Kingdom company in question—having acquired, first, the German subsidiary, and, secondly, the lump of debt in the United Kingdom—wants to find a way of refinancing that debt in the German subsidiary, so that—

Dawn Primarolo

It can transfer losses.

Mr. Letwin

No. We are talking about transferring not losses, but acquisition debt. There is no reason on earth why the United Kingdom tax authorities should object to the transfer of acquisition debt from a United Kingdom acquirer to a subsidiary in a higher-tax jurisdiction. I cannot see any reason at all why that should be something to which the United Kingdom Treasury objects.

I should point out that, if it really is something to which the United Kingdom Treasury and the Paymaster General object, they are signalling to all such potential acquirers in the United Kingdom that they should do reverse takeovers and end up with their headquarters in the higher-tax jurisdiction. I know that the Paymaster General is the chairman of an important—to my mind rather misguided, but, nevertheless, important—committee of the European Union that looks into these things, and I understand that she may have other interests and motives in the matter—which certainly are not illegitimate in any personal sense, but are part of an agenda that the Opposition do not share.

None the less, just dwelling on this particular type of case, I cannot see any United Kingdom interest in trying so to arrange things that, in the circumstance that I have described, the United Kingdom acquirer prefers to have headquarters located in the high-tax jurisdiction by doing a reverse takeover. Such an arrangement would be a great disadvantage to the United Kingdom, its financial institutions, its accountants, its lawyers, its office cleaners and all the rest. It is all part of the same syndrome that we thought we had got over when the Government reversed the double tax relief provisions. What we are all trying to achieve, I hope, is attracting—not repelling—companies from locating their headquarters here.

It is clear to me that I do not need to explain to the Paymaster General—I shall therefore only very briefly explain to the House—that, currently, the manoeuvre of locating acquisition debt in the high-tax jurisdiction subsidiary proceeds by means of having a Swiss-Lux Finance arrangement, whereby the Luxembourg company effectively lends money to the subsidiary in the high-tax jurisdiction and receives interest from it.

That money is then used by the subsidiary to purchase shares in the acquirer so that the acquirer can pay off its UK debt. By those means, the debt is effectively relocated to the high-tax jurisdiction. That manoeuvre will be prevented by schedule 31(7). However, it is not in the interests of the UK to arrange matters so that such a manoeuvre is illegitimate, because the effect will be to persuade companies to locate their headquarters in the high-tax jurisdictions, which are likely to be other European countries. That cannot be to our national advantage.

Having said all that, I am most preoccupied by the unfairness involved. Although the disadvantages are considerable, they are not as great as in the case of the double tax relief. Schedule 31(7) is an important, but not a catastrophic, mistake. What makes it necessary for us to oppose the provision is the fact that companies have already performed the manoeuvre in the legitimate expectation that it would not be clobbered retrospectively. The least that the Government should do—which would reduce the schedule from being appalling to merely very bad—is to agree that the provisions will not apply retrospectively. People will know in future that they need to plan around the provisions, but to apply them retrospectively is unfair and the Opposition cannot concur to that.

I expect that the Paymaster General has received intensive briefing and clear explanations from at least one company. I happen to know that it is not the only one that will be affected, but it is the only one that has stuck its head above the parapet. The Paymaster General will probably admit—while displaying the same delicacy as I am in not naming the company—that the company is a reputable company. It is not a fly-by-night tax avoidance mechanism, but one of Britain's great trading companies. I disagree with the Paymaster General on many things, but I know that we share the patriotism that means we wish to encourage business to locate here. I cannot think that she wants to send out the message that if companies based in the UK behave in certain ways based on legitimate expectations, they will be retrospectively clobbered by Acts of Parliament. That has not been part of the tradition of our tax legislation and the Paymaster General cannot wish to see it happen now.

if the Paymaster General can tell us, in the same tremendous spirit of co-operation and sympathy that she displayed in relation to earlier problems, that the legislation will not apply retrospectively, for some reason that I have missed, it will at least not be catastrophic, although it will militate against future acquirers locating in the UK. A much better solution would be to redo schedule 31(7) so that it would not have that effect. That is the solution that we seek and the reason why we shall push the amendment to a vote.

8.45 pm
Dawn Primarolo

I shall clear up a couple of points before I turn to the issue of acquisition. It was, I believe, the hon. Member for Kingston and Surbiton (Mr. Davey), as well as the hon. Member for West Dorset (Mr. Letwin), who raised the issue of whether the motive test was appealable. The answer is yes. Under self-assessment, it is for companies to assess whether their controlled foreign companies pass the motive test. They have been capable of doing that since 1984, as I explained. If the Inland Revenue disagrees with the self-assessment, it can amend it. As in any other case in which the Inland Revenue makes such an amendment, the company can appeal against it. The case goes to the commissioners and can then go to the courts.

Mr. Letwin

That is helpful.

Dawn Primarolo

Thus far, but no further. I have a feeling that we will have to agree to disagree on the rest, because we do not accept the amendment. To remove in their entirety the anti-avoidance measures on controlled foreign companies would be crazy. I am a little surprised that the hon. Gentleman suggests doing so because he is otherwise clear on the issues of avoidance. The amendment is reckless and the beneficiaries would be those multinationals which wish to avoid paying their fair share of UK tax. The losers would be the hard-working families of this country and other companies which would face increased taxation or poorer services because of lower tax receipts. I am sure that the hon. Gentleman does not wish to be seen to support the corporate tax scams and wheezes that the amendment would allow.

The hon. Gentleman will be familiar with the opinion in the International Tax Review, which in September 1998 specifically highlighted the fact that the use of the controlled foreign company and exempt international holding companies was a method of avoiding tax. Indeed, the article expressed surprise that the arrangements were not being blocked and it was written by none other than the leading accountant at the then Price Waterhouse, which the Opposition have been keen to quote during these debates.

On the issue of acquisition, I shall make a few preliminary points and then deal specifically with debt transfer.

There are four sets of changes in the arrangements for controlled foreign companies, and the point about acquisition is pertinent to the fourth. That change stops the automatic exemption for holding companies from being abused to avoid UK tax on intra-group interests and royalties. As we have discussed, holding companies are generally outside the controlled foreign company rules if at least 90 per cent. of their income comes from companies that meet one or more of the controlled foreign company exemptions.

Generally speaking, that makes sense when the income is a dividend paid out of post-tax profits. There is a logic in saying that, from the point of view of the UK Exchequer, it is largely immaterial whether the post-tax profits of a non-resident subsidiary are held in the subsidiary or in the non-resident holding company. However, the current rules are not restricted to holding companies that receive their income from post-tax profits. They apply equally where the income consists of interest and royalties paid from pre-tax profits. In those circumstances, pre-tax profits are shifted from the subsidiary to the holding company. There is a tax deduction in the subsidiary, and a new source of income in the holding company.

The current exemption distorts the way in which some investments are structured, and is leading to a loss of tax for the UK. Multinational companies use offshore holding companies to extract tax-free profit from overseas subsidiaries. They then keep those profits outside the UK tax net. That is part of the problem that the Government are dealing with, but I hope that the hon. Member for West Dorset will accept that several relationships are involved.

The Bill will ensure that the automatic exemption for holding companies is passed only when more than 90 per cent. of the holding company's income is received in the form of a dividend that is not tax deductible. The change does not introduce any new principle to the controlled foreign company rules. Other ways of diverting the pre-tax profits of overseas subsidiaries into tax havens and preferential regimes are already covered. The Bill will introduce a logical and coherent set of rules by applying to the holding company exemption the same principles that apply to the rest of the controlled foreign company legislation introduced by the Conservatives in 1984.

It has been suggested that some multinationals—I shall not name them for reasons of taxpayer confidentiality—are using loans from holding companies to reduce foreign tax, rather than UK tax. That is the point that the hon. Member for West Dorset is focusing on, and I hope that he will be happy with what I have to say next. If a company is not seeking to avoid UK tax it will, of course, get through the motive test—end of story. However, holding companies typically use debt finance to reduce both foreign tax and UK tax. It is in those circumstances that the controlled foreign company legislation would bite.

I hope that the hon. Gentleman appreciates the distinction. He said that he does not agree with avoidance of UK tax, and that he was talking about the transfer of debt into foreign jurisdictions. As long as that transfer does not lead to a reduction in UK tax liability, the CFC legislation will not bite.

Mr. Letwin

That is helpful, but although the main purpose of the manoeuvre that we are talking about was to reduce costs through reducing tax in a foreign jurisdiction, the by-product was that tax in the UK was also reduced. Does not the Paymaster General think that it would be wrong retrospectively to clobber people who had made plans based on legitimate expectations regarding the law as it previously existed?

Dawn Primarolo

With respect, I do not understand how the hon. Gentleman can say that the Bill will clobber such people retrospectively. The rules have made it clear that companies could not use controlled foreign companies to reduce their UK tax liability, or to avoid it completely. The Bill proposes amendments to our controlled foreign company legislation because some have sought to circumvent the clear intent of that legislation.

The hon. Member for West Dorset will know that controlled foreign company legislation is used throughout Europe and north America. The UK is the only country in the world that has a motive test, and we recognise that it can be commercially legitimate to use such companies. However, a company that is avoiding its UK tax liability will be caught by the controlled foreign company legislation. I make no apology for that, as such a company should pay to the Government the tax for which it is liable.

Mr. Letwin

I persist in believing that the Paymaster General is missing a point. The fundamental purpose of the manoeuvre that we have been discussing is to obtain a reduction in the foreign jurisdiction tax by displacing the debt to the subsidiary; in that case, the CFC is being used not to avoid UK tax, but to reduce tax in the other jurisdiction. However, it may be that a by-product is to reduce UK tax liability, and in that case it seems quite unfair retrospectively to deal a blow.

Dawn Primarolo

I do not agree. As we discussed in our previous debate, there has been much comment and many representations on the double taxation relief set out in schedule 30. We have received far fewer observations on the controlled foreign company provisions in schedule 31. Indeed, without breaking any confidences about which companies were involved, it is accurate to say that the majority of companies that made representations on the double taxation relief entirely supported our measures in respect of legislation on CFCs—in fact, some thought that we should go further than we have done. A small number of companies were attempting to use CFC legislation to avoid UK tax, and they have, of course, been quite vocal, but their comments are not representative of the far larger number of companies and professional advisers who have discussed these matters with us. The hon. Gentleman should not expect us to make legislation for the exceptions that attempt to reduce their tax liability in the UK when every other multinational is paying that liability. Therefore, should the hon. Gentleman push his amendment to a vote, I shall ask my hon. Friends to reject it.

Mr. Letwin

Although I appreciate that the Paymaster General is attempting to block off a species of tax avoidance that we agree should be blocked off, she is also blocking off manoeuvres that are perfectly legitimate, and I am bound to say that I persist in believing that she is doing so retrospectively and unfairly. In the circumstances, we shall press the amendment to a vote and I urge my right hon. and hon. Friends to vote against the schedule and in favour of our amendment. I hope that the Paymaster General will reconsider the measure, as she has on double taxation relief, because its long-term effects will be severely deleterious to our industry.

Dawn Primarolo

I shall urge my hon. Friends to support the Government amendments, including Government amendment No. 91, because I am not persuaded by the hon. Gentleman's arguments. We shall not be able to reach agreement on the matter.

Question put, That the amendment be made:—

The House divided: Ayes 120, Noes 344.

Division No. 279] [8.58 pm
Ainsworth, Peter (E Surrey) Chapman, Sir Sydney (Chipping Barnet)
Amess, David
Arbuthnot, Rt Hon James Chope, Christopher
Baldry, Tony Clappison, James
Beggs, Roy Collins, Tim
Bercow, John Cormack, Sir Patrick
Body, Sir Richard Cran, James
Bottomley, Peter (Worthing W) Davies, Quentin (Grantham)
Bottomley, Rt Hon Mrs Virginia Davis, Rt Hon David (Haltemprice)
Brazier, Julian Day, Stephen
Brooke, Rt Hon Peter Donaldson, Jeffrey
Bruce, Ian (S Dorset) Evans, Nigel
Burns, Simon Faber, David
Butterfill, John Fabricant, Michael
Flight, Howard May, Mrs Theresa
Forth, Rt Hon Eric Moss, Malcolm
Fox, Dr Liam Norman, Archie
Garnier, Edward O'Brien, Stephen (Eddisbury)
Gibb, Nick Ottaway, Richard
Gill, Christopher Paice, James
Gillan, Mrs Cheryl Paterson, Owen
Gorman, Mrs Teresa Portillo, Rt Hon Michael
Greenway, John Prior, David
Grieve, Dominic Randall, John
Gummer, Rt Hon John Robathan, Andrew
Hague, Rt Hon William Robertson, Laurence
Hamilton, Rt Hon Sir Archie Roe, Mrs Marion (Broxbourne)
Hammond, Philip Rowe, Andrew (Faversham)
Hawkins, Nick St Aubyn, Nick
Heald, Oliver Sayeed, Jonathan
Heathcoat-Amory, Rt Hon David Shephard, Rt Hon Mrs Gillian
Hogg, Rt Hon Douglas Shepherd, Richard
Horam, John Simpson, Keith (Mid-Norfolk)
Howarth, Gerald (Aldershot) Soames, Nicholas
Hunter, Andrew Spelman, Mrs Caroline
Jack, Rt Hon Michael Spring, Richard
Jackson, Robert (Wantage) Stanley, Rt Hon Sir John
Jenkin, Bernard Steen, Anthony
Johnson Smith, Streeter, Gary
Rt Hon Sir Geoffrey Swayne, Desmond
Key, Robert Syms, Robert
Kirkbride, Miss Julie Tapsell, Sir Peter
Lait, Mrs Jacqui Taylor, Ian (Esher& Walton)
Lansley, Andrew Taylor, John M (Solihull)
Leigh, Edward Taylor, Sir Teddy
Letwin, Oliver Townend, John
Lewis, Dr Julian (New Forest E) Tredinnick, David
Lidington, David Trend, Michael
Lilley, Rt Hon Peter Tyrie, Andrew
LIoyd, Rt Hon Sir Peter (Fareham) Waterson, Nigel
Loughton, Tim Whitney, Sir Raymond
Luff, Peter Whittingdale, John
Lyell, Rt Hon Sir Nicholas Widdecombe, Rt Hon Miss Ann
MacGregor, Rt Hon John Willetts, David
McIntosh, Miss Anne Wilshire, David
MacKay, Rt Hon Andrew Winterton, Mrs Ann (Congleton)
Maclean, Rt Hon David Winterton, Nicholas (Macclesfield)
McLoughlin, Patrick Yeo, Tim
Madel, Sir David Young, Rt Hon Sir George
Malins, Humfrey
Maples, John Tellers for the Ayes:
Maude, Rt Hon Francis Mr. Peter Atkinson and
Mawhinney, Rt Hon Sir Brian Mr. Geoffrey Clifton-Brown
Abbott, Ms Diane Blears, Ms Hazel
Adams, Mrs Irene (Paisley N) Blizzard, Bob
Ainger, Nick Blunkett, Rt Hon David
Alexander, Douglas Borrow, David
Allen, Graham Bradley, Keith (Withington)
Anderson, Donald (Swansea E) Bradley, Peter (The Wrekin)
Anderson, Janet (Rossendale) Bradshaw, Ben
Armstrong, Rt Hon Ms Hilary Brand, Dr Peter
Ashton, Joe Breed, Colin
Atkins, Charlotte Brinton, Mrs Helen
Austin, John Brown, Rt Hon Gordon (Dunfermline E)
Ballard, Jackie
Banks, Tony Brown, Russell (Dumfries)
Barnes, Harry Browne, Desmond
Bayley, Hugh Bruce, Malcolm (Gordon)
Begg, Miss Anne Buck, Ms Karen
Beith, Rt Hon A J Burgon, Colin
Bell, Martin (Tatton) Burnett, John
Bell, Stuart (Middlesbrough) Burstow, Paul
Benn, Hilary (Leeds C) Butler, Mrs Christine
Benton, Joe Caborn, Rt Hon Richard
Bermingham, Gerald Campbell, Mrs Anne (C'bridge)
Berry, Roger Campbell, Ronnie (Blyth V)
Best, Harold Campbell-Savours, Dale
Betts, Clive Cann, Jamie
Caplin, Ivor Griffiths, Nigel (Edinburgh S)
Casale, Roger Griffiths, Win (Bridgend)
Caton, Martin Grocott, Bruce
Cawsey, Ian Grogan, John
Chapman, Ben (Wirral S) Gunnell, John
Chidgey, David Hall, Mike (Weaver Vale)
Chisholm, Malcolm Hamilton, Fabian (Leeds NE)
Clapham, Michael Hancock, Mike
Clark, Rt Hon Dr David (S Shields) Hanson, David
Clarke, Charles (Norwich S) Harman, Rt Hon Ms Harriet
Clarke, Eric (Midlothian) Harvey, Nick
Clarke, Rt Hon Tom (Coatbridge) Healey, John
Clelland, David Henderson, Doug (Newcastle N)
Clwyd, Ann Henderson, Ivan (Harwich)
Coaker, Vernon Hepburn, Stephen
Coffey, Ms Ann Hepburn, Stephen
Cohen, Harry Heppell, John
Coleman, Iain Hesford, Stephen
Colman, Tony Hewitt, Ms Patricia
Connarty, Michael Hill, Keith
Cooper, Yvette Hinchliffe, David
Corbett, Robin Hodge, Ms Margaret
Corston, Jean Hoey, Kate
Cotter, Brian Home Robertson, John
Cranston, Ross Hood, Jimmy
Crausby, David Hoon, Rt Hon Geoffrey
Cryer, Mrs Ann (Keighley) Hope, Phil
Cryer, John (Hornchurch) Hopkins, Kelvin
Cummings, John Howarth, Alan (Newport E)
Cunningham, Jim (Cov'try S) Howells, Dr Kim
Curtis-Thomas, Mrs Claire Hoyle, Lindsay
Dalyell, Tam Hughes, Kevin (Doncaster N)
Darling, Rt Hon Alistair Hughes, Simon (Southward N)
Darvill, Keith Humble, Mrs Joan
Davey, Edward (Kingston) Hurst, Alan
Davey, Valerie (Bristol W) Hutton, John
Davies, Rt Hon Denzil (Llanelli) Iddon, Dr Brian
Davies, Geraint (Croydon C) Illsley, Eric
Davis, Rt Hon Terry (B'ham Hodge H) Jackson, Ms Glenda (Hampstead)
Jackson, Helen (Hillsborough)
Dawson, Hilton Jamieson, David
Dean, Mrs Janet Jenkins, Brian
Denham, John Johnson, Miss Melanie (Welwyn Hatfield)
Dismore, Andrew
Dobbin, Jim Jones, Rt Hon Barry (Alyn)
Dobson, Rt Hon Frank Jones, Helen (Warrington N)
Doran, Frank Jones, Ms Jenny (Wolverh'ton SW)
Dunwoody, Mrs Gwyneth
Eagle, Angela (Wallasey) Jones, Dr Lynne (Selly Oak)
Eagle, Maria (L'pool Garston) Jones, Martyn (Clwyd S)
Edwards, Huw Keeble, Ms Sally
Efford, Clive Keen, Alan (Feltham & Heston)
Ellman, Mrs Louise Keen, Ann (Brentford & Isleworth)
Ennis, Jeff Keetch, Paul
Ewing, Mrs Margaret Kemp, Fraser
Fearn, Ronnie Khabra, Piara S
Fisher, Mark Kilfoyle, Peter
Fitzpatrick, Jim King, Andy (Rugby & Kenilworth)
Fitzsimons, Mrs Lorna Kirkwood, Archy
Flint, Caroline Kumar Dr Ashok
Flynn, Paul Ladyman, Dr Stephen
Follett, Barbara
Foster, Don (Bath) Lammy, David
Fyfe, Maria Lawrence, Mrs Jackie
Galloway, George Laxton, Bob
Gardiner, Barry Lepper, David
George, Andrew (St Ives) Leslie, Christopher
George, Bruce (Walsall S) Levitt, Tom
Gibson, Dr Ian Lewis, Ivan (Bury S)
Gilroy, Mrs Linda Lewis, Terry (Worsley)
Godsiff, Roger Liddell, Rt Hon Mrs Helen
Goggins, Paul Linton, Martin
Golding, Mrs Llin Lloyd, Tony (Manchester C)
Gordon, Mrs Eileen Love, Andrew
Gorrie, Donald McAllion, John
Griffiths, Jane (Reading E) McAvoy, Thomas
McCabe, Steve Ruddock, Joan
McCartney, Rt Hon Ian (Makerfield) Russell, Bob (Colchester)
Russell, Ms Christine (Chester)
McDonagh, Siobhain Ryan, Ms Joan
Macdonald, Calum Salmond, Alex
McDonnell, John Salter, Martin
McFall, John Sanders, Adrian
McGuire, Mrs Anne Sarwar, Mohammad
McIsaac, Shona Savidge, Malcolm
McKenna, Mrs Rosemary Sedgemore, Brian
Mackinlay, Andrew Shipley, Ms Debra
McNamara, Kevin Simpson, Alan (Nottingham S)
McNulty, Tony Skinner, Dennis
MacShane, Denis Smith, Rt Hon Andrew (Oxford E)
Mactaggart, Fiona Smith, Angela (Basildon)
McWalter, Tony Smith, Miss Geraldine (Morecambe & Lunesdale)
McWilliam, John
Mahon, Mrs Alice Smith, Jacqui (Redditch)
Marsden, Gordon (Blackpool S) Smith, John (Glamorgan)
Smith, Llew (Blaenau Gwent)
Marshall, David (Shettleston) Smith Sir Robert (W Ab'd'ns)
Marshall, Jim (Leicester S) Snape, Peter
Marshall-Andrews, Robert Soley, Clive
Martlew, Eric Southworth, Ms Helen
Meacher, Rt Hon Michael Squire, Ms Rachel
Meale, Alan Starkey, Dr Phyllis
Merron, Gillian Steinberg, Gerry
Michie, Bill (Shef'ld Heeley) Stevenson, George
Michie, Mrs Ray (Argyll & Bute) Stewart, David (Inverness E)
Miller, Andrew Stewart, Ian (Eccles)
Mitchell, Austin Stinchcombe, Paul
Moffatt, Laura Stoate, Dr Howard
Moore, Michael Strang, Rt Hon Dr Gavin
Morgan, Alasdair (Galloway) Stringer, Graham
Morgan, Ms Julie (Cardiff N) Stuart, Ms Gisela
Morley, Elliot Stunell, Andrew
Morris, Rt Hon Ms Estelle (B'ham Yardley) Sutcliffe, Gerry
Taylor, Rt Hon Mrs Ann (Dewsbury)
Morris, Rt Hon Sir John (Aberavon)
Taylor, Ms Dari (Stockton S)
Mountford, Kali Taylor, David (NW Leics)
Mullin, Chris Thomas, Gareth R (Harrow W)
Murphy, Jim (Eastwood) Thomas, Simon (Ceredigion)
Naysmith, Dr Doug Timms, Stephen
Oaten, Mark Tipping, Paddy
O'Brien, Bill (Normanton) Todd, Mark
O'Hara, Eddie Tonge, Dr Jenny
Olner, Bill Touhig, Don
O'Neill, Martin Trickett, Jon
Öpik, Lembit Truswell, Paul
Organ, Mrs Diana Turner, Dennis (Wolverh'ton SE)
Osborne, Ms Sandra Turner, Dr George (NW Norfolk)
Pearson, Ian Turner, Neil (Wigan)
Pendry, Tom Twigg, Derek (Halton)
Pickthall, Colin Tyler, Paul
Pond, Chris Tynan, Bill
Pound, Stephen Vaz, Keith
Powell, Sir Raymond Vis, Dr Rudi
Prentice, Gordon (Pendle) Walley, Ms Joan
Prescott, Rt Hon John Wareing, Robert N
Primarolo, Dawn Watts, David
Prosser, Gwyn Webb, Steve
Purchase, Ken Welsh, Andrew
Quin, Rt Hon Ms Joyce White, Brian
Quinn, Lawrie Whitehead, Dr Alan
Rammell, Bill Wicks, Malcolm
Rapson, Syd Williams, Rt Hon Alan(Swansea W)
Reid, Rt Hon Dr John (Hamilton N)
Rendel, David Williams, Alan W (E Carmarthen)
Rogers, Allan Willis, Phil
Rooker, Rt Hon Jeff Winnick, David
Rooney, Terry Winterton, Ms Rosie (Doncaster C)
Ross, Ernie (Dundee W) Woodward, Shaun
Roy, Frank Woolas, Phil
Ruane, Chris Worthington, Tony
Wray, James
Wright, Anthony D (Gt Yarmouth) Tellers for the Noes:
Wright, Tony (Cannock) Mr. Robert Ainsworth and
Wyatt, Derek Mr. Jim Dowd.

Question accordingly negatived.

Amendment made: No. 91, in page 533, line 43, leave out "(3)" and insert "(4)".—[Mr. Jamieson.]

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