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Finance Bill

To be frank, the real potential is in abuse. I am not persuaded that the Inland Revenue is in a position to check, in particular because, as I understand it, the provision is open to investments in property both inside the UK and outside it, certainly throughout the European Union. On other occasions, the Treasury’s desire to tackle tax avoidance proves altogether too blunt, as seen in the provisions on authorised investment funds. The fund management industry is a small jewel in the crown of British financial services, with some £2 trillion in assets under management in this country, third only to the United States and Japan. Moreover, it is a branch of the industry that does not need to cluster in the great financial centres, which is why there are thriving asset managements in Edinburgh as well as in London and other centres across the UK. In Committee, we will voice detailed concerns about the possible reintroduction of double taxation for some types of qualifying investor scheme, which might prove unhelpful to the objective of ensuring that Britain remains a highly competitive centre of fund management. Wider principles are raised in the provisions on authorised investment funds. In general, it might be sensible to delegate the technical regulatory powers to the Treasury, as clause 17. At present, the AIF tax code details are mainly in primary legislation, which can be changed only annually, as the hon. Member for Runnymede and Weybridge (Mr. Hammond) said. The delegation of those enabling powers seems as sensible for us in the UK as the similar delegation of enabling powers at European level under the Lamfalussy proposals, which all the parties welcomed. However, we find in the Government’s proposals none of the safeguards that became normal in European financial services legislation. There is no obligation on officials to proceed with openness and through drafts for consultation, nor any mechanism whereby Parliament can satisfy itself that such commitments to openness and consultation have been honoured. In all European financial services legislation since the Lamfalussy report, the European Liberal Democrats have proposed—with the support of all the other parties represented in this place—a sunset clause on delegated powers, which removes them after four years. I hope that Treasury Ministers, if not their officials, can see the value of inserting such a provision in respect of the newly delegated powers. At present, there is a simple approval of new regulations by the House when they are first introduced; thereafter, revisions are subject only to the negative resolution procedure. There is no trigger point at which a general assessment of the operation of delegated powers can be undertaken, but it seems to us that there should be. Another issue that is always a matter of concern in any Bill, and certainly in any Finance Bill, is the inclusion of retrospective provisions such as those in clause 12. I recognise that there is a hue and cry about retrospection every year, and also that retrospective tax provisions are less of an intrusion into the personal freedom of the individual than, say, retrospective criminal offences. However, retrospection is surely a sign of failure of foresight. It is representative of Treasury officials recognising that a particular tax avoidance scheme is so serious that it must be dealt with retrospectively. Surely it is better to anticipate problems than to tackle them after they have occurred. It is also surprising, given the Treasury’s new powers to insist on the disclosure of schemes marketed to clients for tax avoidance, that these retrospective measures are still deemed necessary. Perhaps the Paymaster General will give some thought to encouraging her officials to keep their ears to the ground.