Social Security Contributions (Share Options) Bill

HC Deb 23 January 2001 vol 361 cc801-16

Order for Second Reading read.

Mr. Speaker

I must inform the House that I have selected the amendment in the name of the Leader of the Opposition.

3.31 pm

The Financial Secretary to the Treasury (Mr. Stephen Timms)

I beg to move, That the Bill be now read a Second time.

The Bill is part of the Government's response to companies' legitimate worries about the effects of aligning the income tax and national insurance treatment of employee share options.

Before 6 April 1999 the national insurance liability on employee share options arose at the date of the grant of an option, whereas for many years income tax liability has crystallised at the date of exercise of the option. That differential treatment ended in 1999. Options granted on or after 6 April 1999 relating to shares that are readily convertible into cash are now subject to treatment under national insurance rules that is similar to that under the income tax and PAYE rules. Provided that the option is not capable of being exercised more than 10 years following granting of the option, there is no national insurance liability at the time of grant instead, the liability arises at the date of exercise, and the figure is the same as that which is chargeable to income tax.

Following the change many companies, especially those involved in international activities, expressed concern about accounting difficulties caused by the unpredictability of their secondary national insurance charges. The liability for a company as secondary contributor is uncapped, and is dependent on the volatility of the company's share price. Following a period of consultation, we introduced measures last year that went someway towards meeting those concerns.

Mr. Michael Jack (Fylde)

Will the Financial Secretary tell me what, during the process of legislative preparation, caused the Treasury or the Inland Revenue to miss the point to which he just referred—the inability of the legislator to perceive the practical implications of the proposal with which the Bill seeks to deal?

Mr. Timms

Many changes have been made since the introduction of the measure. I think that the rapid rise in the share prices of some of the companies affected was unforeseen by them and others when those changes were made; certainly what has happened in the stock market was not predicted at the time.

We announced that employers would be able to ask employees to bear the secondary national insurance charge on the share option gain. That announcement was made on 19 May last year, and has generally received a good response. Companies have said that it has removed their accounting difficulties in relation to future awards of options.

Last year's legislation was drafted to cover all the options that had already been granted. In practice, it has been difficult for employers to negotiate with employees terms that change options already granted to them. For many companies, uncertainty has remained in regard to options granted between 6 April 1999, when the change was made, and 19 May last year, when the new rules were announced. One company, for example, has a provision somewhere in excess of $100 million in its accounts for options granted during that period which it cannot currently remove. We have accepted the strength and seriousness of those concerns and I suggest to the House that the Bill meets them in a simple and practical way.

We are giving companies the chance to settle their national insurance liabilities on the options granted between 6 April 1999 and 19 May 2000 and to do so early, in advance of the date when the actual gain is made by the employee. Companies that choose to take advantage of this will calculate the amount of national insurance due by reference to the accrued gain up to 7 November 2000; the day before the pre-Budget statement when the proposals were announced. They will be required to notify the Inland Revenue and pay the appropriate amount within a period of 60 days of Royal Assent of the Bill. That effectively caps the national insurance liability by reference to the company's share price on 7 November last year and provides the company with complete certainty.

The benefits to the company are that it will be able to remove the need to make further provision against profits; it will be able to remove the provision for the liability from its balance sheet; and it will save national insurance contribution costs in relation to any further upward movement of the share price. The Bill offers early settlement as a quid pro quo for certainty.

Mr. John Bercow (Buckingham)

The Minister said that companies had welcomed the delegation of responsibility to employees for secondary national insurance contributions. Could he explain in terms of the accounting benefit to those companies whether he thinks that the saving can be quantified in terms of money or simply in manpower and inconvenience avoided?

Mr. Timms

I am not sure whether it is either of those. The benefit of the change is that the employee taking on the liability is the person who controls when the liability falls, because that is the point when the options are exercised. The uncertainty in the company's accounts about when the exercise will occur and what the share price at the time will be is removed. The removal of uncertainty is the key benefit of the new arrangement. However, that leaves a problem in terms of those options that had already been exercised between the change in April 1999 and the announcement on 19 May last year. It is that period, and the uncertainly left by options issued in that period, that is addressed by the Bill.

Sir Nicholas Lyell (North-East Bedfordshire)

Could the Minister explain the principle that underlies the requirement to pay national insurance contributions on those increases in the price of the company's shares in relation to readily convertible assets? Is it not to prevent an abuse of that system? Could that not have been simply dealt with by always capping it at a modest figure which reflected the use of that money as an artificial settlement to pay, but left completely untouched genuine increases over time in the company's share price?

Mr. Timms

The right hon. and learned Gentleman is quite right that there is a problem of abuse being addressed, but the mechanism that he proposes would leave unresolved a significant part of the problem, which was that there was a significant incentive for organisations to find ways to reimburse their staff through options—because the national insurance liability would not arise—rather than through salary.

We want an arrangement where the national insurance system is not biased in favour of either of those options. A number of organisations had come up with some quite ingenious methods of doing that. If we capped the national insurance liability, it would leave the bias in favour of the options route, as opposed to the salary route. We felt that that should not be allowed to continue.

When a company opts to settle its national insurance liabilities in this way, a special contribution will be payable by the employer on the deemed gain. This will be an employer-only charge, payable at the current class 1 secondary contribution rate of 12.2 per cent. A special employer-only contribution has been created so that the employee is not required to pay employees' national insurance as a result of the employer's decision to settle early.

When an option is settled, the employee will not be required to pay employees' national insurance on either the deemed or the actual gain. When an employee has taken on the liability for the employer's national insurance contributions under the measures introduced last summer, the employee will also be able to take advantage of this measure and settle his or her liabilities. We have ensured that the tax relief available to the employee, when the employee takes on the employer's liability, will still be available when the employee settles the liability in accordance with the Bill.

Mr. Simon Thomas (Ceredigion)

The Minister referred to the contingencies that companies must have in their accounts for what might be the increase in national insurance liabilities. Has he made any estimate of the costs to the Treasury of the difference between the deemed gain on 7 November and what might have occurred with the payment of these options at the end of this financial year?

Mr. Timms

Yes, I have made an assessment of that, and we have published the figures. In the first year we anticipate that there will be a higher level of receipts to the Treasury because payments will be made early, but in later years there will be a significant loss. I have the figures but, from memory, the net loss to the Exchequer over the period would be about £150 million.

The Bill responds to the concerns of employers. We anticipate that many companies will take up this opportunity to crystallise their national insurance liability. I have pleasure in commending the Bill to the House.

3.42 pm

Mr. Howard Flight (Arundel and South Downs)

I beg to move, To leave out from "That" to the end of the Question, and to add instead thereof: this House declines to give a Second Reading to the Social Security Contributions (Share Options) Bill because, while it contains provisions which improve upon the existing unreasonable situation, it would be unreasonable to require companies to gamble on their tax liabilities where share options may never be exercised and possibly contrary to the provisions of the Financial Services and Markets Act 2000. I begin by declaring an interest, as indicated, as a director of a company that has option schemes. The Bill is the Government's second attempt to correct measures that they got wrong in the April 1999 legislation which introduced the gains on options as subject to national insurance and income tax.

Mr. Dale Campbell-Savours (Workington)

On a point of order, Mr. Speaker. I am not being silly, but there is a point of principle involved here, and I should be grateful for your clarification. Surely when a declaration is made, it is meant to be more specific than simply a general declaration.

Mr. Speaker

The details of a declaration are for the Member and the Parliamentary Commissioner for Standards.

Mr. Campbell-Savours

Further to that point of order, Mr. Speaker. The details of a registration, as opposed to a declaration, are a matter for the Member and the Commissioner. I am speaking specifically about a declaration on the Floor of the House of Commons which has been the subject of some consideration by the Standards and Privileges Committee. I ask you to clarify the position, Mr. Speaker.

Mr. Speaker

That is also a matter for the hon. Member concerned. I notice that on the Order Paper, the hon. Member for Arundel and South Downs (Mr. Flight) has declared an interest. As far as I can see, the hon. Gentleman has conducted himself properly.

Mr. Flight

Thank you, Mr. Speaker.

The Bill might better he described as the share options (correction of further mistakes) Bill. The whole saga illustrates the hollowness of the Government's alleged support for entrepreneurship. In the beginning, back in April 1999, they saw scope for a major stealth tax. They expected to raise about £1 billion of revenues, as confirmed to me in correspondence from the Treasury. They then forgot that many companies' share prices may perform as a result of future expectations, but that they may not have the cash to meet the liability. Indeed, the national insurance contributions liability could have put such companies into financial difficulties. As outlined, the measures in May 2000—

Mr. Timms

I thank the hon. Gentleman for giving way. I do not recognise the figure of £1 billion that he cites. Will he tell the House what that figure relates to?

Mr. Flight

I wrote to the Treasury last August in order to clarify matters and asked what revenue the Treasury expected from the levy of NICs on the exercise of options. The reply was that the revenue was expected to be about £1 billion per annum. I will be happy to send the Minister a copy of the letter. However, estimates made by employment accountants do not show anything like that figure, because existing measures are likely substantially to reduce the attractiveness of unapproved option schemes for new businesses.

The Government first endeavoured to deal with the problems that they had created by enabling employers to transfer their liabilities to employees, but they forgot that, between April 1999 and May 2000, many companies had granted options which they were not able to transfer. The legislation is thus a response to the howls of many high-tech and young businesses and to the many companies who have advised that they will move their entrepreneurial endeavours overseas. The measure addresses those specific complaints.

The Bill introduces a most unacceptable principle; it invites companies to gamble with their NIC tax liabilities. In essence, it says, "Pay up on the gain to 7 November or run the risk of higher NIC liabilities in the future". However, such liabilities may never arise; staff may leave or be sacked and the options will lapse, or the share price may not perform. Company managements will have to take unreasonable decisions with shareholders' funds.

One of the main intentions of the Financial Services and Markets Act 2000 is to get rid of the scope for market abuse through the sending of misleading signals to the public on share prices and on the potential performance of companies. A company may decide not to elect for the special NIC payment because it may estimate that its business will not perform well, so the value of its shares will not rise. Equally, it may decide not to do so because it wants to initiate staff changes, or—more likely—it may not have enough cash.

A company that decides not to exercise its option within the 60-day period will send a signal that will be interpreted by the markets as negative for that company and its share price and vice versa—the signals may be entirely misleading. That is a classic example of what market abuse is all about. Even if the abuse is unintended, committing it is a criminal offence The measures that have been introduced will lead to such problems.

The Government could not resist including a further stealth tax angle in this relieving measure. The Bill brings forward NIC payments; it may elicit NIC payments that might not otherwise be made. Worse than that, when individuals are giving the election, they will pay their NICs but may never exercise the options and will be unable to offset the NIC payment made against income tax.

The Bill is deficient in that it does not make clear when those people exercising that special provision will be able to offset against income tax the NICs they have paid. It gives insufficient notice; 60 days is unreasonable. The Minister assures me that the detailed regulations will be available if and when the Bill becomes law, but they have not been published in draft. Many small businesses do not have legal advisers on tap. If companies are foreign subsidiaries—as is so often the case in the UK at present—options are frequently handled outside the UK in the parent company. That company may not be aware of that and may not act in time. Therefore, the provisions could be unfair. The sharp companies will avail themselves of the gamble if it apparently makes sense; the smaller businesses and foreign ones may not. The Bill is, dare I say, very poorly drafted. No doubt, we shall address that in more detail in Committee.

Mr. Jack

Does my hon. Friend agree that it is rather odd that representations by companies, such as NTL, Micromuse and Cisco, caused the Government to react to a potentially damaging event in this case, yet on the climate change levy, which will vastly affect manufacturing industry to its great detriment, companies have received absolutely no response from the Government?

Mr. Flight

My right hon. Friend makes a good point, but I would add that such companies complain that they were not consulted about the Bill, which came out of the blue. The lack of consultation is one of the reasons why the Bill contains many technical errors.

Clause 3 is a complete drafting mess, and roll-overs are misconstrued and mishandled. The arrangements are over-complex. It would be much more straightforward if the special NIC were payable on the exercise of the options, which would remove the gamble and the need for notice. It would make much more sense to exclude companies whose shares are not readily convertible assets and those whose option prices are any way under water on 7 November. That would save companies and the Inland Revenue a huge amount of unnecessary time and effort.

The individual appointed by the Government as chairman of the small business investment taskforce has said that, in his view, the whole share option-NIC arrangements are punitive and will be highly negative to entrepreneurship in this country. Contrary to the Minister's previous comments on Report on the Finance Act 2000, United Kingdom tax and other arrangements on approved and unapproved option schemes are significantly less generous than those in the United States. Unapproved option schemes in the US involve a 39.6 per cent. charge on exercise, but the tax paid can be offset against the issuing company's corporate tax, producing an overall net tax charge of about 15 per cent. and enabling companies to be much more generous in option issuance. In the case of approved options, US individuals can have $100,000 per annum; they pay tax only on sale, not on exercise; and social charges are capped at incomes of $74,000. Therefore, there is virtually no US equivalent in practice to the UK NIC charge.

Mr. Timms

I am grateful to the hon. Gentleman for giving way again. Will he confirm that, as I said when we have previously debated such matters, the figure of 39.6 per cent. refers only to federal tax, on top of which there are state taxes?

Mr. Flight

The Minister is correct, but nothing like a 47.32 per cent. gross rate is achieved. If the Government were to tell companies that the tax paid by individuals could be offset against corporation tax, they would readily agree that the overall taxation of unapproved options in the United Kingdom was competitive with that in the United States. At present, the overall situation is wildly uncompetitive, which is why so many new, growing companies, such as those to which reference has been made, are increasingly undertaking their entrepreneurial activities outside the United Kingdom.

Sir Nicholas Lyell

My hon. Friend rightly expresses the concerns of small businesses. In November 2000, the Government issued a code of consultation on such matters, but there is a feeling abroad that they have not fulfilled it. Will he comment on that?

Mr. Flight

There is a feeling that, bluntly, the proposals are all about raising further stealth taxes. There is no argument in principle for applying NICs to option gains; they are different from remuneration. Someone may go to work for a small business, take a lower salary and be awarded options in the hope that he will gain from them. However, there is no certainty that he will; it will depend entirely on whether the company does well and the share price goes up. If he leaves a well-paid job in a mature company such as Unilever, he will forgo his certain salary. There is a complete mismatch between certain and uncertain income, The logic for the argument that options are the same as salary does not exist.

Conservative Members accept that the Government have shown some good faith in trying to tackle this problem. However, to put it candidly, the Bill is a dog's dinner and it has been drafted on the hoof. It is full of errors that we shall consider later and it will introduce a flawed principle that will make companies gamble with shareholders' funds. Consequently, they could even contravene the law by committing the offence of market abuse that was introduced by the Financial Services and Markets Act 2000. We need to start again and recast this relieving measure, which is necessary and fair.

Mr. Speaker

I take it that the hon. Gentleman moved his amendment.

Mr. Flight

I did, and it stresses that it is wrong to invite companies to gamble with their tax liabilities. That could result in the unintentional commitment of the offence of market abuse.

3.56 pm

Mr. Matthew Taylor (Truro and St. Austell)

I shall be brief, because the Bill primarily attempts to make amends for the errors that the Government made in their original proposals. It is the second time that they have had to correct such errors and it remains to be seen whether it is the final time that they have to do so. The hon. Member for Arundel and South Downs (Mr. Flight) suggested that it will not, but I am not sure whether I agree with all his criticisms. It will be interesting to hear the Minister's reply.

The Bill appears to fill the most obvious gap in the Government's previous proposals. It left some companies facing the potential for serious liabilities without their having an exit route, and that partly answers the point made by the hon. Member for Arundel and South Downs. The Bill is intended to give companies an opportunity to resolve the problem of potential liabilities without forcing them down a route that might not be in their interests. The Conservatives describe that as gambling; I would describe it as offering choice to businesses that know their own position and can assess what is in their best interests. Although we have criticised the Government's approach, we shall support the Bill because it provides an answer to the most fundamental flaw that currently exists.

I wish to raise two issues that flow out of the mess that has brought us to this point. First, the tendency of the Chancellor of the Exchequer to meddle in tax detail rather than to seek to simplify and reform the broader tax system creates unnecessary problems and complications. Although he has had many successes, many people believe that the over-complication of the tax system has not done him a service. It certainly has not done the House and those who seek to understand the tax system a service, but it might have helped many accountants to increase their profits.

Secondly, the reason for the complication, for all the difficulties that the hon. Member for Arundel and South Downs outlined and for the Government's difficulty in making sense of the changes is the fundamentals of a tax system in which the income tax and national insurance systems are not in line. If the Government wanted to bring the treatment of national insurance and income tax in line to create a single, more sensible structure, they would release a great many costs that fall on businesses and individuals who have to deal with a two-tier system that bears no relation to the realities of the way in which the national insurance fund is used.

There is a fundamental deceit. National insurance is not a fund that people pay into to cover their future liabilities, but a vehicle that is treated simply as current taxation. Yet we have to go through all the complications that imply a system that is otherwise. That structure cannot be reformed rapidly without creating some unfairness. A long-term process of reform, which has a clear structure that is followed by the Government, would benefit everyone and remove the need for intensely technical debates. Such debates attract few hon. Members and hold even less interest for people outside the House, but go a long way to making a complicated tax system even worse.

4.1 pm

Mr. Timms

With the leave of the House, Mr. Speaker, may I say that I followed both speeches with interest? The hon. Member for Arundel and South Downs (Mr. Flight) concluded his remarks by saying that the measure was necessary and fair. Although I did not agree with many of his remarks, I could at least agree with that.

The hon. Gentleman characterised the Bill as a measure for correcting further mistakes. He is wrong about that. It completes the process that began with the announcement of the transfer on 19 May last year, and provides a necessary and fair resolution of the position with regard to the options that were issued in the gap period.

Mr. John Burnett (Torridge and West Devon)

As a result of this measure and earlier changes, a company will want to shift the national insurance contributions liability to employees, but they will not want to assume it for nothing. How will Indemnity payments that companies make to employees For assuming that liability be treated in terms of tax and national insurance contributions?

Mr. Timms

I am not sure what the hon. Gentleman means by indemnity payments. We have arranged an offset against income tax when the additional liability is taken on. An employee will pay an effective rate that is rather more than 7 per cent., instead of the full 12.2 per cent., which is the effective rate that the employer pays. If income tax is paid at 40 per cent., the rate will fall to 7 per cent. That is a helpful step.

Mr. Burnett

If a payment that is made to an employee by way of an indemnity for assuming the liability for NIC is fully deductible in a company's accounts, will it be tax and NIC free in the employee's hands? I accept that an element of guesswork will be involved.

Mr. Timms

I shall reflect on the hon. Gentleman's question and respond to it before I conclude my remarks.

I was asked about the overall cost of the measure to the Treasury over the five-year period. I said that it would be about £150 million. In fact, we estimate the cost to be £160 million, which is roughly in line with what I said.

The hon. Member for Arundel and South Downs said that the measure would require companies to gamble. Like the hon. Member for Truro and St. Austell (Mr. Taylor), I do not accept that characterisation. The Bill gives companies the opportunity to make a judgment and to decide which way forward is in their best interest. It gives them additional flexibility and freedom, which is helpful. I do not believe that companies will share the view of the hon. Member for Arundel and South Downs.

The hon. Gentleman suggested that if a company's shares were not readily convertible assets, or if they were options that were under water—that is, the share price was less than when the option was granted—it might be helpful if it were possible to deem that those options had been settled in accordance with the provisions of the Bill, rather than requiring companies to make an application and to follow the full procedure. That is an interesting point, on which I will reflect. No doubt we will return to the matter in Committee.

I welcome the support of the hon. Member for Truro and St. Austell for the measure. He made a case for further integration of the taxation and national insurance systems—an argument that we have heard in other forums. We have made good progress in aligning arrangements for the two. The measure that started the process that we are debating is an example of that alignment. We have brought together the organisations administering the two systems—the National Insurance Contributions Office is now part of the Inland Revenue. I expect the trend to continue.

In Committee we will consider in detail the way in which the Bill will operate.

Mr. Campbell-Savours

The hon. Member for Arundel and South Downs (Mr. Flight) asked an interesting question—whether there was a danger that in certain conditions, the wrong signals would be sent to the market, dependent upon whether a company was prepared to adopt within a 60-day period the right to the course of action outlined in the Bill. Is there not a danger that that might happen? Can my hon. Friend elaborate on the possibility?

Mr. Timms

I am grateful to my hon. Friend. As he says, the hon. Member for Arundel and South Downs raised an interesting point, but I do not believe that there are grounds for concern. The great benefit to a company of taking the proposed route is the certainty that it brings to its future liabilities. The company is not making a public statement about what it believes will happen to its share price in future.

The uncertainty that the measure removes relates not just to the future share price pattern, but to the future occasions on which the option will be exercised. That is under the control of the employee, not the company. It would be difficult to draw much inference about a company's expectations of its future share price from the decision that it makes with regard to the measure. Everyone accepts that the benefit of certainty is immense. It will remove an unknown and uncertain future liability, which will justify the change made possible by the Bill.

Mr. Campbell-Savours

Would not the information to which the hon. Member for Arundel and South Downs referred be gleaned from the accounts? Has not the Accountancy Standards Board laid down rules as to how that information is defined in the accounts? is not that body in a position to redefine the rules so that share options could appear elsewhere in the accounts, where they would not be immediately identified with the failure to exercise the rights set out in the Bill?

Mr. Timms

My hon. Friend is right: the continuing debate in the accountancy profession about how options should be accounted has not yet been resolved. However, I do not think that the outcome of that debate will affect how we proceed with the Bill, which gives a helpful new certainty to companies that have issued options in the period.

Mr. Flight

Would the Minister agree that the market would assume that a company that did not avail itself of the special NIC option was pretty pessimistic about its future? However, might not there be some good practical reasons, which were not negative with regard to a company's prospects, to explain why a company had not availed itself of the option? The most obvious would be that a company wanted to make a substantial change among its executives, with the result that many options would lapse. Cash flow may also be relevant, so it is possible that a misleading signal could be given to the markets. The hon. Member for Workington (Mr. Campbell-Savours) is right to say that the information will appear in the accounts, but the news is likely to be in the markets beforehand.

Mr. Timms

The hon. Gentleman argues against his own point, as he said earlier that many interpretations could be placed on a company's decision not to avail itself of the opportunity provided by the Bill. For example, it might consider—reasonably enough—that many of the options would never be exercised, but that would not have anything to do with the company's future prospects. Because there could be so many reasons for a company not availing itself of the option, we need not fear that the market would interpret the decision in any particular way.

Mr. Campbell-Savours

Little things often go wrong. Has my hon. Friend the Minister consulted widely on the impact of possible events that have not been considered in the House today? Is he satisfied that he has considered all the relevant issues in detail, and that there is therefore no need to worry?

Mr. Timms

I have discussed the matters widely with many companies. I was accused a few minutes ago of taking too much notice of what people had said on the matter. I cannot give the House a categorical assurance that I have thought through every conceivable element of the Bill, and I am sure that there will be some fruitful discussions in Committee. However, I can assure my hon. Friend that we have consulted widely, and talked to people specialising in the accounting treatment of the provisions of the Bill. I am reasonably satisfied that we will not run into unforeseen difficulties such as my hon. Friend quite rightly described.

The hon. Member for Torridge and West Devon (Mr. Burnett) asked about would happen when a company chose to "indemnify"—as he put it—the payments made to an employee. Any payment from an employer to an employee is subject to tax and national insurance. The tax relief that will be offered is only the relief that I described—that is, for the amount of secondary national insurance contributions that the employee bears. However, if the employer takes back some of the liability—if he, for example, cancels some of it out—the employee will not pay further tax and national insurance on that. In other words, I consider that in the situation that the hon. Gentleman has described, there would not be what one would regard as an indemnity; rather, the employer would take back some of the liability, and if that happened the question of tax and national insurance would not arise.

We anticipate that as many as two thirds of eligible companies will choose to take advantage of the measure; we have already had expressions of interest from more than 50. The ability to settle the liability based on current values and remove future growth from the charge to national insurance will help many companies. I believe that it will be widely welcomed and I commend it to the House.

Question put, That the amendment be made—

The Committee divided: Ayes 117, Noes 280.

Division No. 74]	[4.15 pm
AYES
Amess, David	Forth, Rt Hon Eric
Arbuthnot, Rt Hon James	Fowler, Rt Hon Sir Norman
Atkinson, Peter (Hexham)	Fox, Dr Liam
Baldry, Tony	Fraser, Christopher
Bercow, John	Gale, Roger
Beresford, Sir Paul	Garnier, Edward
Blunt, Crispin	Gibb, Nick
Boswell, Tim	Gill, Christopher
Bottomley, Peter (Worthing W)	Green, Damian
Brazier, Julian	Greenway, John
Browning, Mrs Angela	Grieve, Dominic
Burns, Simon	Gummer, Rt Hon John
Butterfill, John	Hague, Rt Hon William
Chope, Christopher	Hamilton, Rt Hon Sir Archie
Clappison, James	Hammond, Philip
Clark, Dr Michael (Rayleigh)	Hawkins, Nick
Clarke, Rt Hon Kenneth (Rushcliffe)	Heald, Oliver
	Heathcoat-Amory, Rt Hon David
Clifton-Brown, Geoffrey	Hogg, Rt Hon Douglas
Collins, Tim	Horam, John
Cormack, Sir Patrick	Howard, Rt Hon Michael
Cran, James	Jack, Rt Hon Michael
Davies, Quentin (Grantham)	Jenkin, Bernard
Davis, Rt Hon David (Haltemptice)	Key, Robert
Donaldson, Jeffrey	Laing, Mrs Eleanor
Duncan, Alan	Lait, Mrs Jacqui
Duncan Smith, Iain	Lansley, Andrew
Emery, Rt Hon Sir Peter	Leigh, Edward
Evans, Nigel	Lewis, Dr Julian (New Forest E)
Fabricant, Michael	Lidington, David
Fallon, Michael	Lilley, Rt Hon Peter
Flight, Howard	Lloyd, Rt Hon Sir Peter (Fareham)

Loughton, Tim	Shepherd, Richard
Luff, Peter	Simpson, Keith (Mid-Norfolk)
Lyell, Rt Hon Sir Nicholas	Smyth, Rev Martin (Belfast S)
MacGregor, Rt Hon John	Soames, Nicholas
McIntosh, Miss Anne	Spelman, Mrs Caroline
MacKay, Rt Hon Andrew	Spicer, Sir Michael
Maclean, Rt Hon David	Spring, Richard
McLoughlin, Patrick	Stanley, Rt Hon Sir John
Madel, Sir David	Steen, Anthony
Malins, Humfrey	Swayne, Desmond
Maples, John	Syms, Robert
Mates, Michael	Tapsell, Sir Peter
Maude, Rt Hon Francis	Tredinnick, David
May, Mrs Theresa	Trend, Michael
Norman, Archie	Tyrie, Andrew
O'Brien, Stephen (Eddisbury)	Viggers, Peter
Ottaway, Richard	Walter, Robert
Page, Richard	Waterson, Nigel
Paice, James	Wells, Bowen
Randall, John	Whitney, Sir Raymond
Redwood, Rt Hon John	Whittingdale, John
Robathan, Andrew	Winterton, Mrs Ann (Congleton)
Robertson, Laurence (Tewk'b'ry)	Winterton, Nicholas (Macclesfield)
Roe, Mrs Marion (Broxbourne)	Yeo, Tim
Ross, William (E Lond'y)	Young, Rt Hon Sir George
Rowe, Andrew (Faversham)
Ruffley, David	Tellers for the Ayes:
St Aubyn, Nick	Mr. Stephen Day and
Sayeed, Jonathan	Mr. James Gray.
NOES
Abbott, Ms Diane	Casale, Roger
Ainger, Nick	Caton, Martin
Ainsworth, Robert (Cov'try NE)	Cawsey, Ian
Allan, Richard	Chaytor, David
Allen, Graham	Chidgey, David
Anderson, Rt Hon Donald (Swansea E)	Clapham, Michael
	Clark, Paul (Gillingham)
Anderson, Janet (Rossendale)	Clarke, Charles (Norwich S)
Armstrong, Rt Hon Ms Hilary	Clelland, David
Ashdown, Rt Hon Paddy	Clwyd, Ann
Atherton, Ms Candy	Coaker, Vernon
Atkins, Charlotte	Coffey, Ms Ann
Bailey, Adrian	Cohen, Harry
Bayley, Hugh	Colman, Tony
Beckett, Rt Hon Mrs Margaret	Connarty, Michael
Beith, Rt Hon A J	Cooper, Yvette
Bell, Martin (Tatton)	Corbyn, Jeremy
Benn, Hilary (Leeds C)	Corston, Jean
Benn, Rt Hon Tony (Chesterfield)	Cotter, Brian
Bennett, Andrew F	Cousins, Jim
Benton, Joe	Cranston, Ross
Berry, Roger	Crausby, David
Best, Harold	Cummings, John
Betts, Clive	Cunningham, Jim (Cov'try S)
Blackman, Liz	Dalyell, Tam
Boateng, Rt Hon Paul	Darvill, Keith
Bradley, Keith (Withington)	Davey, Edward (Kingston)
Bradley, Peter (The Wrekin)	Davey, Valerie (Bristol W)
Bradshaw, Ben	Davidson, Ian
Brand, Dr Peter	Davies, Rt Hon Denzil (Lianelli)
Breed, Colin	Dawson, Hilton
Brinton, Mrs Helen	Denham, John
Brown, Russell (Dumfries)	Dismore, Andrew
Buck, Ms Karen	Dobbin, Jim
Burden, Richard	Dobson, Rt Hon Frank
Burnett, John	Donohoe, Brian H
Butler, Mrs Christine	Doran, Frank
Byers, Rt Hon Stephen	Dowd, Jim
Cable, Dr Vincent	Drew, David
Campbell, Mrs Anne (C'bridge)	Drown, Ms Julia
Campbell, Rt Hon Menzies (NE Fife)	Dunwoody, Mrs Gwyneth
	Eagle, Maria (L'pool Garston)
Campbell-Savours, Dale	Edwards, Huw
Cann, Jamie	Efford, Clive
Caplin, Ivor	Ellman, Mrs Louise

Ennis, Jeff	McFall, John
Fearn, Ronnie	McIsaac, Shona
Fitzpatrick, Jim	Mackinlay, Andrew
Fitzsimons, Mrs Lorna	McNulty, Tony
Flint, Caroline	MacShane, Denis
Foster, Rt Hon Derek	McWalter, Tony
Foster, Don (Bath)	McWilliam, John
Foster, Michael Jabez (Hastings)	Mahon, Mrs Alice
Foster, Michael J (Worcester)	Mallaber, Judy
Gapes, Mike	Martlew, Eric
George, Andrew (St Ives)	Maxton, John
George, Rt Hon Bruce (Walsall S)	Michie, Bill (Shef'ld Heeley)
Gerrard, Neil	Michie, Mrs Ray (Argyll & Bute)
Gibson, Dr Ian	Milburn, Rt Hon Alan
Gilroy, Mrs Linda	Miller, Andrew
Goggins, Paul	Mitchell, Austin
Griffiths, Win (Bridgend)	Moffatt, Laura
Grogan, John	Moore, Michael
Hain, Peter	Moran, Ms Margaret
Hall, Mike (Weaver Vale)	Morgan, Alasdair (Galloway)
Hall, Patrick (Bedford)	Morgan, Ms Julie (Cardiff N)
Hamilton, Fabian (Leeds NE)	Mountford, Kali
Hanson, David	Mudie, George
Harvey, Nick	Murphy, Denis (Wansbeck)
Healey, John	Murphy, Jim (Eastwood)
Heath, David (Somerton & Frome)	Murphy, Rt Hon Paul (Torfaen)
Henderson, Doug (Newcastle N)	Naysmith, Dr Doug
Henderson, Ivan (Harwich)	Oaten, Mark
Hendrick, Mark	O'Brien, Bill (Normanton)
Hepburn, Stephen	Olner, Bill
Heppell, John	O'Neill, Martin
Hewitt, Ms Patricia	Öpik, Lembit
Hill, Keith	Pearson, Ian
Howells, Dr Kim	Perham, Ms Linda
Hoyle, Lindsay	Pickthall, Colin
Hurst, Alan	Pike, Peter L
Hutton, John	Plaskitt, James
Iddon, Dr Brian	Pond, Chris
Illsley, Eric	Pope, Greg
Jackson, Ms Glenda (Hampstead)	Prentice, Ms Bridget (Lewisham E)
Jackson, Helen (Hillsborough)	Prentice, Gordon (Pendle)
Jamieson, David	Primarolo, Dawn
Jenkins, Brian	Purchase, Ken
Johnson, Alan (Hull W & Hessle)	Raynsford, Nick
Jones, Rt Hon Barry (Alyn)	Rendel, David
Jones, Mrs Fiona (Newark)	Robertson, John (Glasgow Anniesland)
Jones, Helen (Warrington N)
Jones, Jon Owen (Cardiff C)	Roche, Mrs Barbara
Jones, Dr Lynne (Selly Oak)	Rooker, Rt Hon Jeff
Jones, Nigel (Cheltenham)	Rooney,Terry
Joyce, Eric	Ross, Ernie (Dundee W)
Keetch, Paul	Rowlands, Ted
Kelly, Ms Ruth	Ruane, Chris
Kemp, Fraser	Ruddock, Joan
Kennedy, Jane (Wavertree)	Russell, Bob (Colchester)
Khabra, Piara S	Russell, Ms Christine (Chester)
Kidney, David	Sanders, Adrian
Kilfoyle, Peter	Sarwar, Mohammad
Kirkwood, Archy	Savidge, Malcolm
Kumar, Dr Ashok	Sedgemore, Brian
Ladyman, Dr Stephen	Shaw, Jonathan
Lammy, David	Sheerman, Barry
Lawrence, Mrs Jackie	Sheldon, Rt Hon Robert
Laxton, Bob	Shipley, Ms Debra
Lepper, David	Simpson, Alan (Nottingham S)
Leslie, Christopher	Singh, Marsha
Levitt, Tom	Skinner, Dennis
Lewis, Ivan (Bury S)	Smith, Angela (Basildon)
Lewis, Terry (Worsley)	Smith, Rt Hon Chris (Islington S)
Linton, Martin	Smith, Jacqui (Redditch)
Livsey, Richard	Smith, John (Glamorgan)
Llwyd, Elfyn	Smith, Llew (Blaenau Gwent)
Love, Andrew	Smith, Sir Robert (W Ab'd'ns)
McAvoy, Thomas	Snape, Peter
McCafferty, Ms Chris	Soley, Clive
McDonnell, John	Southworth, Ms Helen

Spellar, John	Turner, Dr George (NW Norfolk)
Squire, Ms Rachel	Turner, Neil (Wigan)
Starkey, Dr Phyllis	Tyler, Paul
Steinberg, Gerry	Vaz, Keith
Stewart, David (Inverness E)	Wareing, Robert N
Stewart, Ian (Eccles)	Watts, David
Stinchcombe, Paul	Webb, Steve
Stringer, Graham	White, Brian
Stuart, Ms Gisela	Whitehead, Dr Alan
Stunell, Andrew	Wicks, Malcolm
Taylor, Rt Hon Mrs Ann (Dewsbury)	Williams, Rt Hon Alan (Swansea W)
Taylor, David (NW Leics)	Williams, Alan W (E Carmarthen)
Taylor, Matthew (Truro)	Williams, Mrs Betty (Conwy)
Temple-Morris, Peter	Wills, Michael
Thomas, Gareth (Clwyd W)	Winnick, David
Thomas, Gareth R (Harrow W)	Wood, Mike
Thomas, Simon (Ceredigion)	Woolas, Phil
Timms, Stephen	Worthington, Tony
Todd, Mark	Wright, Tony (Cannock)
Touhig, Don
Trickett, Jon	Tellers for the Noes:
Truswell, Paul	Mr. Kevin Hughes and
Turner, Dennis (Wolverh'ton SE)	Mr. Gerry Sutcliffe.

Question accordingly negatived.

Main Question put forthwith, pursuant to Standing Order No. 62 (Amendment on Second or Third Reading):—

The House divided: Ayes 302, Noes 3.

Division No. 75]	[4.29 pm
AYES
Abbott, Ms Diane	Butler, Mrs Christine
Ainger, Nick	Byers, Rt Hon Stephen
Ainsworth, Robert (Cov'try NE)	Cable, Dr Vincent
Allan, Richard	Campbell, Mrs Anne (C'bridge)
Allen, Graham	Campbell, Rt Hon Menzies (NE Fife)
Anderson, Rt Hon Donald (Swansea E)
	Campbell-Savours, Dale
Anderson, Janet (Rossendale)	Cann, Jamie
Armstrong, Rt Hon Ms Hilary	Caplin, Ivor
Ashdown, Rt Hon Paddy	Casale, Roger
Atherton, Ms Candy	Caton, Martin
Atkins, Charlotte	Cawsey, Ian
Bailey, Adrian	Chaytor, David
Ballard, Jackie	Chidgey, David
Bayley, Hugh	Clapham, Michael
Beard, Nigel	Clark, Paul (Gillingham)
Beckett, Rt Hon Mrs Margaret	Clarke, Charles (Norwich S)
Beith, Rt Hon A J	Clelland, David
Bell, Martin (Tatton)	Clwyd, Ann
Bell, Stuart (Middlesbrough)	Coaker, Vernon
Benn, Hilary (Leeds C)	Coffey, Ms Ann
Benn, Rt Hon Tony (Chesterfield)	Cohen, Harry
Bennett, Andrew F	Coleman, Iain
Benton, Joe	Colman, Tony
Berry, Roger	Connarty, Michael
Best, Harold	Cooper, Yvette
Betts, Clive	Corbyn, Jeremy
Blackman, Liz	Corston, Jean
Boateng, Rt Hon Paul	Cotter, Brian
Bottomley, Peter (Worthing W)	Cousins, Jim
Bradley, Keith (Withington)	Cranston, Ross
Bradley, Peter (The Wrekin)	Crausby, David
Bradshaw, Ben	Cummings, John
Brand, Dr Peter	Cunningham, Jim (Cov'try S)
Breed, Colin	Dalyell, Tam
Brinton, Mrs Helen	Darvill, Keith
Brown, Russell (Dumfries)	Davey, Edward (Kingston)
Buck, Ms Karen	Davey, Valerie (Bristol W)
Burden, Richard	Davidson, Ian
Burnett, John	Davies, Rt Hon Denzil (Llanelli)
Burstow, Paul	Dawson, Hilton

Denham, John	Johnson, Alan (Hull W & Hessle)
Dismore, Andrew	Jones, Rt Hon Barry (Alyn)
Dobbin, Jim	Jones, Mrs Fiona (Newark)
Dobson, Rt Hon Frank	Jones, Helen (Warrington N)
Donohoe, Brian H	Jones, Jon Owen (Cardiff C)
Doran, Frank	Jones, Dr Lynne (Selly Oak)
Dowd, Jim	Jones, Nigel (Cheltenham)
Drew, David	Joyce, Eric
Drown, Ms Julia	Keetch, Paul
Dunwoody, Mrs Gwyneth	Kelly, Ms Ruth
Eagle, Maria (L'pool Garston)	Kemp, Fraser
Edwards, Huw	Kennedy, Jane (Wavertree)
Efford, Clive	Khabra, Piara S
Ellman, Mrs Louise	Kidney, David
Ennis, Jeff	Kilfoyle, Peter
Fearn, Ronnie	Kirkwood, Archy
Fitzpatrick, Jim	Kumar, Dr Ashok
Fitzsimons, Mrs Lorna	Ladyman, Dr Stephen
Flint, Caroline	Lammy, David
Foster, Rt Hon Derek	Lawrence, Mrs Jackie
Foster, Don (Bath)	Laxton, Bob
Foster, Michael Jabez (Hastings)	Lepper, David
Foster, Michael J (Worcester)	Leslie, Christopher
Gapes, Mike	Levitt, Tom
George, Andrew (St Ives)	Lewis, Ivan (Bury S)
George, Rt Hon Bruce (Walsall S)	Lewis, Terry (Worsley)
Gerrard, Neil	Linton, Martin
Gibson, Dr Ian	Livsey, Richard
Gidley, Sandra	Liwyd, Elfyn
Gilroy, Mrs Linda	Love, Andrew
Goggins, Paul	McAvoy, Thomas
Griffiths, Win (Bridgend)	McCafferty, Ms Chris
Grocott, Bruce	McDonnell, John
Grogan, John	McFall, John
Hain, Peter	McIsaac, Shona
Hall, Mike (Weaver Vale)	Mackinlay, Andrew
Hall, Patrick (Bedford)	McNulty, Tony
Hamilton, Fabian (Leeds NE)	MacShane, Denis
Hanson, David	Mactaggart, Fiona
Harris, Dr Evan	McWalter, Tony
Harvey, Nick	McWilliam, John
Healey, John	Mahon, Mrs Alice
Heath, David (Somerton & Frome)	Mallaber, Judy
Henderson, Doug (Newcastle N)	Martlew, Eric
Henderson, Ivan (Harwich)	Maxton, John
Hendrick, Mark	Meacher, Rt Hon Michael
Hepburn, Stephen	Merron, Gillian
Heppell, John	Michael, Rt Hon Alun
Hewitt, Ms Patricia	Michie, Bill (Shef'ld Heeley)
Hill, Keith	Michie, Mrs Ray (Argyll & Bute)
Hoey, Kate	Milburn, Rt Hon Alan
Howells, Dr Kim	Miller, Andrew
Hoyle, Lindsay	Mitchell, Austin
Hughes, Simon (Southwark N)	Moffatt, Laura
Hurst, Alan	Moore, Michael
Hutton, John	Moran, Ms Margaret
Iddon, Dr Brian	Morgan, Alasdair (Galloway)
Illsley, Eric	Morgan, Ms Julie (Cardiff N)
Jackson, Ms Glenda (Hampstead)	Mountford, Kali
Jackson, Helen (Hillsborough)	Mudie, George
Jamieson, David	Mullin, Chris
Jenkins, Brian	Murphy, Denis (Wansbeck)

Murphy, Jim (Eastwood)	Smith, Sir Robert (W Ab'd'ns)
Murphy, Rt Hon Paul (Torlaen)	Snape, Peter
Naysmith, Dr Doug	Soley, Clive
Oaten, Mark	Southworth, Ms Helen
O'Brien, Bill (Normanton)	Spellar, John
O'Brien, Mike (N Warks)	Squire, Ms Rachel
Olner, Bill	Starkey, Dr Phyllis
O'Neill, Martin	Steinberg, Gerry
Öpik, Lembit	Stewart, David (Inverness E)
Palmer, Dr Nick	Stewart, Ian (Eccles)
Pearson, Ian	Stinchcombe, Paul
Perham, Ms Linda	Straw, Rt Hon Jack
Pickthall, Colin	Stringer, Graham
Pike, Peter L	Stuart, Ms Gisela
Plaskitt, James	Stunell, Andrew
Pond, Chris	Taylor, Rt Hon Mrs Ann (Dewsbury)
Pope, Greg
Prentice, Ms Bridget (Lewlsham E)	Taylor, David (NW Leics)
Prentice, Gordon (Pendle)	Taylor, Matthew (Truro)
Primarolo, Dawn	Temple-Morris, Peter
Purchase, Ken	Thomas, Gareth (Clwyd W)
Radice, Rt Hon Giles	Thomas, Gareth R (Harrow W)
Raynsford Nick	Thomas, Simon (Ceredigion)
Rendel, David	Timms, Stephen
Robertson, John (Glasgow Anniesland)	Todd, Mark
	Touhig, Don
Roche, Mrs Barbara	Trickett, Jon
	Truswell, Paul
Rooker, Rt Hon Jeff	Turner, Dennis (Wolverh'ton SE)
Rooney, Terry	Turner, Dr George (NW Norfolk)
Ross, Ernie (Dundee W)	Turner, Neil (Wigan)
Rowlands, Ted	Tyler, Paul
Ruane, Chris	Vaz, Keith
Ruddock, Joan	Wareing, Robert N
Russell, Bob (Colchester)	Watts, David
Russell, Ms Christine (Chester)	Webb, Steve
Sanders, Adrian	White, Brian
Sarwar, Mohammad	Whitehead, Dr Alan
Savidge, Malcolm	Wicks, Malcolm
Sedgemore, Brian	Williams, Rt Hon Alan (Swansea W)
Shaw, Jonathan
Sheerman, Barry	Williams, Alan W (E Carmarthen)
Sheldon, Rt Hon Robert	Williams, Mrs Betty (Conwy)
Shepherd, Richard	Wills, Michael
Shipley, Ms Debra	Winnick, David
Simpson, Alan (Nottingham S)	Wood, Mike
Singh, Marsha	Woolas, Phil
Skinner, Dennis	Worthington, Tony
Smith, Angela (Basildon)	Wright, Tony (Cannock)
Smith, Rt Hon Chris (Islington S)
Smith, Jacqui (Redditch)	Tellers for the Ayes:
Smith, John (Glamorgan)	Mr. Gerry Sutcliffe and
Smith, Llew (Blaenau Gwent)	Mr. Kevin Hughes.
NOES
Donaldson, Jeffrey	Tellers for the Noes:
Ross, William (E Lond'y)	Mr. Eric Forth and
Smyth, Rev Martin (Belfast S)	Mr. Douglas Hogg.

Question accordingly agreed to.

Bill read a Second Time.