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Finance (No. 2) Bill

I shall review briefly some of the comments that have been made. We began with the hon. Member for Rhondda (Chris Bryant) who expressed with passion his support for inheritance tax and his criticism of the exemptions. We then heard from the hon. Member for Falmouth and Camborne (Julia Goldsworthy) who drew on a theme mentioned by many Opposition Members. She pointed out that the proposed changes could affect as many as a million wills and referred to the 4.5 million people who would probably have to review their life assurance policies. She also mentioned the problems in relation to people who have died since the Budget. My right hon. Friend the Member for Wokingham (Mr. Redwood) referred to the fact that many people of modest means will be affected by the proposed changes. He pointed out that they are retrospective. I agree with him wholeheartedly, especially because it may not be possible to vary existing trusts. They are affected by the provisions and the courts may refuse variations. It may also be difficult to vary wills, especially when the person who made the will has lost capacity. There will be retrospective effects. My hon. Friend the Member for South-West Hertfordshire (Mr. Gauke) said that the current rules generally deem trusts to be tax-neutral, so they are treated similarly to outright gifts. He pointed out that the Government’s proposals would impose penalties on trusts that do not apply to outright gifts. He referred to the long history of the spouse exemption and to the practical difficulties of meeting the six exacting conditions of the draft proposals. Most tellingly, he drew attention to the suspicion that prejudice must be motivating the Government’s approach to trusts and argued for a more targeted solution, rather than taking a sledgehammer to crack a nut. My hon. Friend the Member for Grantham and Stamford (Mr. Davies) said that it was important to improve the rationality of the proposals. He, too, pointed out that the Bill seems to attack trusts for no good reason. My hon. Friend the Member for Braintree (Mr. Newmark) noted that the provisions would hit the vulnerable. He sought clarity and emphasised the importance of retaining the spousal exemption to prevent double taxation of the single estate of a husband and wife. The hon. Member for Dundee, East (Stewart Hosie) talked about the impact of the proposals in Scotland, where thousands of people could be affected. He made the good point that the Government have not held proper consultations. My hon. Friend the Member for Ludlow (Mr. Dunne) emphasised the point about retrospectivity and said that the proposed changes would affect a wide range of people, giving instances of their impact on divorce. The proposals on spousal exemption will have a significant impact on a wide range of ordinary, hard-working people. If the Paymaster General is not prepared to take our word for that, she should take the word of the professional organisations to which I referred earlier. They say:"““The Government’s proposed changes to inheritance tax on trusts amount to a tax on prudent families. They will affect millions of ordinary families and not, as the Government has suggested, only the super-rich.””" Unless the proposals are amended, in line with our new clause and the many more amendments that we shall table in the Standing Committee, they could leave a million people having to redraft their wills, facing a legal bill of about £275 million. The measure will hit the vulnerable, the young and the bereaved, so I intend to press the new clause to a Division. Question put, That the clause be read a Second time:— The Committee divided: Ayes 193, Noes 285.