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Finance (No. 2) Bill

In the continuing debate about these matters, and especially in respect of the definition of a disabled person, the Paymaster General has made great play of the fact that a consultation process was held two years ago and that a particular answer was reached. I shall return to that in a moment, but we are discussing the question of trusts today, a matter that was debated at some length in Committee. It is therefore somewhat ironic that the right hon. Lady should praise the role played by consultation, given that the Government have produced a set of proposals in respect of trusts without engaging in any consultation at all. The proposals have been rushed out, but the Government have not asked legal professionals or accountants how trusts work in reality. They have failed to understand how insurance companies draft policies, or how lawyers draft wills. The hon. Member for Wolverhampton, South-West (Rob Marris) quoted from the explanatory notes, but they were drafted before the Government came up with the various amendments that they have tabled to schedule 20. In essence, the hon. Member for Wolverhampton, South-West said that straightforward interest-in-possession trusts would be unaffected by the Government’s proposals, but the reality turns out to be somewhat different. Under the original wording of schedule 20, a standard will—for example, one in which a person who gets married for a second time seeks to ensure that the second spouse receives an interest in possession but that the capital goes to the children of the first marriage—would indeed have been affected. As a result, both in Committee and again today, the Government have staged a series of withdrawals from their original position. Their approach deserves very serious criticism, as there is no good reason why the matter could not have been consulted on. The Paymaster General rightly said that, in Committee, she gave examples of potential abuses under the existing law, but Government projections suggest that we are talking about only £15 million in the first year. The amounts involved are not so sizeable, nor the abuses so great, that the Government had to deal with the matter with such enormous urgency. Why was there no consultation, especially when the Government were consulting about trusts in any event? Indeed, Her Majesty’s Revenue and Customs considered that trusts should be tax neutral. It said that, although trusts should not be used as a way to avoid tax—and I entirely agree with that—it also believed that artificial obstacles should not be raised against their use for that purpose.