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Finance (No. 2) Bill

I would like to make some progress, if I may. I want to turn to trusts and inheritance tax, which are covered by clause 157. Like the home computer initiative, those proposals caught the industry and individuals totally by surprise. At this stage, it is not exactly clear what the proposals are, since there seems to be a lot of debate between professionals and the Treasury about the number of individuals and wills affected and the amount of revenue that will be raised. In some respects, the Treasury seems to contradict itself. On the one hand, it says that the changes will affect only a very small number of individuals and will raise a very small amount of revenue, yet, on the other hand, the change could not be put out to consultation prior to being announced, in case it had an impact on the market. How many people will be affected by the changes? How many people will have to go back and change their will or trust arrangements regardless of whether they are currently over the inheritance tax threshold? I urge the Minister to look at paragraphs 109 and 110 in the Treasury Committee report, which urge the Treasury to consider those issues prior to the Bill going to Committee. The scheme also seems to create anomalies, rather than resolve them, and assumes that trusts are mainly used for tax avoidance. At the moment, the taxation of trusts mirrors the taxation of individuals. Income tax is paid on income from a trust, and people are treated as the owners of the trust asset for inheritance tax purposes. That logical system need not necessarily be changed because discretionary trusts are already subject to a different regime. The anomaly is that those who are richer and have the liquidity to give money before their death will be unaffected because the ruling that allows gifts to be made tax-free still remains, provided that they are given seven years before death. Whatever the actual impact of the measure, it is clear that the changes will not create clarity and simplicity to help the public’s ability to understand their effect on them. Perhaps, as was the case for self-invested personal pensions last year, a lack of planning could result in significant unintentional consequences and might yet force embarrassing compromises from the Government. To sum up, while the Government’s macro-economic record to date has largely been one of stability, one of the fundamental reasons why that has been the case was that the Bank of England was given independence—that policy was called for by the Liberal Democrats. However, the Government tend to spoil their own narrative with endless hype and exaggeration, which becomes easier when they are responsible for marking their own exam papers when analysing their economic record. The hallmark of the Chancellor’s time in the Treasury has been vast over-complication and endless meddling with minutiae. Such tinkering creates instability because of the uncertainty with which the changes leave both individuals and businesses. What is the point of medium and long-term financial planning if tax incentives and implications are likely to change and every change proposed does not take place in isolation, but has cross-cutting effects and unintended consequences? Individual learning accounts, self-invested personal pensions and even the changes to corporation tax are classic examples of the Government creating problems for themselves by rushing through changes and not investigating the likely consequences, which have to be addressed after the changes have already been introduced, thus creating a cycle of complication and change. The fundamental reason why we will vote against Second Reading is that the Government have missed the opportunity to address the key environmental issues that we face. Last week, at the most superficial level, the Chancellor and the Leader of the official Opposition showed willing to talk the talk, but the substance of the Bill, and the Conservatives’ omission of not even mentioning those issues in their opposition to the Bill, clearly indicate that they have no intention yet of walking the walk.