§ The Earl of KINNOULLMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government whether the announcement on the composite rate of tax for building societies could be made immediately after each spring Budget and whether the rate so announced could be made to take effect from the beginning of that fiscal year rather than announcing the rate in July to take effect retrospectively from the preceding 1st January.
§ Lord JACQUESMy Lords, I understand that the Board of Inland Revenue are currently engaged with the Building Societies Association in a joint review of the working of the arrangements for dealing with the composite rate agreement. The points raised by the noble Earl will be considered in these negotiations.
§ The Earl of KINNOULLMy Lords, while thanking the noble Lord for that reply, may I ask him whether he could say how soon these negotiations will be finalised, and when he expects that the matters appertaining to the Question may be accepted by the Government?
§ Lord JACQUESMy Lords, first, it is hoped that agreement may be reached in time for the proposals to be implemented in the current year. Secondly, I must point out that some time-lag between the Budget and the announcement of the composite rate is inevitable. The composite rate is not an arbitrary percentage of the standard rate; it is the rate which will yield the same amount of tax had the depositors been taxed in the ordinary way. After the Budget the parties make 522 their provisional calculations, and consult and eventually reach agreement. That takes time.
§ The Earl of KINNOULLMy Lords, would the noble Lord agree that in the Budget the basic rate of tax is announced for that year? That is what the noble Lord is referring to when he talks about the possible difference between the basic rate and the composite rate. If that is acceptable to the noble Lord, why could not the composite rate be announced at the same time?
§ Lord JACQUESMy Lords, the composite rate does not depend only on the standard rate. It depends upon the allowances and the level of income of taxpayers and non-taxpayers. Research, provisional calculations, consultations and agreement are needed. It could not be announced at the same time. It takes several weeks.
§ The Earl of KINNOULLMy Lords, finally, may I ask the noble Lord whether the research to which he is referring happens every three years at the present time, and that therefore the Government's information tends to be a little out of date?
§ Lord JACQUESMy Lords, some research is inevitable every year, because there are changes in the level of income each year and there are changes in the allowances. There can be differences of opinion as to how these allowances affect the tax liability of building society depositors. This occurs every year.