TAX (Hansard, 22 July 1999)

§ Lord McIntosh of Haringey
My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 1. In moving this Motion, I shall speak also to Amendment No. 2.
Amendment No. 1 is a paving clause for the new schedule in Clause 9 which, for the convenience of the House, I should point out that the noble Baroness, Lady Rawlings, wishes to have debated separately. Amendment No. 2 removes the amendment on taxation purposes added to the Bill at Third Reading by the noble Baroness and the noble Lord, Lord Redesdale. I understand that they agree that the need for the amendment has been dealt with by the insertion of Amendments Nos. 4 and 5. I beg to move.

§ Baroness Rawlings
My Lords, in speaking to Amendment No. 1, I shall speak also to Amendment No. 2. It is with considerable relief that we see this amendment, which seeks to include on the face of the Bill a reference to a schedule laying down the CDC tax arrangements. I should like to thank the Minister for his clear description of this unusual arrangement, and for the briefing notes provided by his department. We should also like to take the opportunity to pay tribute to the achievement of the Secretary of State in finding a solution to this difficult question with the Inland Revenue and the Treasury.
Our relief, however, is mixed with a persistent sense of disquiet. We shall have the opportunity to discuss the detail of the tax provision when considering a later amendment. Now, we should like to raise only a few more general points. As the Minister will recall, during the first passage of the CDC Bill through the House, both opposition parties felt very strongly that the tax status had to be resolved at the outset; otherwise, the PPP design would be half-baked and its chances of success dramatically reduced.
We shall not detain the House rehearsing the arguments yet again. Nevertheless, I wish to record that I remain sceptical about the PPP concept. We remain convinced that three elements are crucial to the CDC public/private partnership if it is to have a chance to succeed: that it has a strong balance sheet; that its sale is not rushed; and that its tax status is clarified. On the first two elements, the Minister gave us assurances at Report stage. On the third, the Government have introduced in the other place two very important amendments settling the issue. It is a step in the right direction.
1185 Of course, we cannot legislate for success, but we can try to create the right framework. In the Bill the Government have applied considerable ingenuity in creating a framework for a third way—between public and private—which we on these Benches doubt exists.
When passing the Bill, my honourable friend the Shadow Secretary of State said, we are taking a step of faith".—[Official Report, Commons, 14/7/99; col. 529.] It is in the nature of faith never to be disjointed from hope. For the sake of the third-world beneficiaries of the CDC's work, we therefore hope that the Bill does not just embody a clever abstract construct, which in practice will fail to live up to its expectations. Notwithstanding those anxieties, we agree to Amendment No. 1.
I turn now to Amendment No. 2. Subsection (3), which we are now being asked to take out, was inserted in this House at Third Reading, after grappling with considerable drafting difficulties. I am very grateful to the noble Lord, Lord Redesdale, for his support in this matter. Our intention was to put pressure on the Government to settle the tax status of the new CDC at the outset. We felt that achieving tax efficiency was of paramount importance and that it would be wrong to postpone it.
I appreciate that both CDC and DfID wanted the tax issue settled as well, but it has ostensibly been a long and difficult struggle with the Treasury, not least because of its difficulty in terms of delivering the Government's vision of PPP. I feel that our amendment contributed in nudging it in the right direction. I am therefore glad that we were able to do something, however small, to put pressure on the Inland Revenue and the Treasury to assist in the negotiations. We agree that the subsection is now redundant.

§ Lord Redesdale
My Lords, I shall speak only to Amendment No. 2. I start by thanking the noble Baroness for her kind words. It was indeed a hard and lengthy process to put our amendment on the face of the Bill, but I am happy to remove it. I feel that there is almost an air of satisfaction about the Minister that it is now being removed. However, we shall be discussing the tax schedule later.

§ Lord McIntosh of Haringey
My Lords, I rise to express my gratitude to the noble Baroness and the noble Lord for agreeing to the removal of their amendment. I trust that their faith in the Government's solution to the problem will be justified when they hear our arguments.