§ Mr. Chris SmithTo ask the Chancellor of the Exchequer what will be the amount of tax forgone by the Exchequer as a result of(a) the decision by Lloyds bank to make provision of £ 1.2 billion against Third world debt and (b) the decision by National Westminster bank to make similar provision in the sum of £575 million.
§ Mr. Lilley[holding answer 14 November 1989]: Tax relief due to banks in respect of loans which cannot be recovered in full is governed by the ordinary tax rules which apply to any trader who gives credit in the course of his business. The tax test is whether the principal of the debt is shown to be irrecoverable. Because of the rules of confidentiality which govern taxpayers' affairs, I am not in a position to say how far commercial provisions made by an individual bank meet the tax test.