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Finance Bill

I beg to move amendment No. 17, page 25, line 21, leave out '2008' and insert '2009.'. I suspect that the debate will be relatively short—the Committee has a heavy agenda—but it is timely. Hon. Members will agree that we could not let the opportunity pass of discussing something that touches on arrangements for the Mayor of London and the Greater London assembly when that is very much in the public eye. There is much activity ahead of Thursday's London mayoral election. One blog that I read this morning even reported that shredders working overtime in the basement of City Hall were responsible for blowing its electrical system and causing the basement to flood. Whatever is going on in City Hall—it will be interesting to discover just how many documents have been shredded and how many computer hard discs have been crushed—it is clear that as the Livingstone regime draws to an end, the Labour party is determined to look after the soon to be ex-Mayor, which is as clear a demonstration as we could ask for that it has written off his chances on Thursday. Amendment No. 17 is probing. It gives us the opportunity to raise important issues and, hopefully, to gain an understanding of the Government's thinking on this specific measure and, perhaps, slightly wider issues. Unless the Financial Secretary sorely provokes me when answering my questions, I do not expect that I will press it to a Division. Essentially, four separate questions arise out of clause 49 and the amendment, the first of which is whether severance payments should be made to the outgoing Mayor of London. I understand that that is not the practice for other elected mayors. The Government have come under pressure from representatives of councillors throughout the country—I think that the body is called the Councillors Convention—to extend arrangements for severance payments to elected members of local authorities. Do the Government have any plans to extend the availability of such payments, or is this a Ken special and what Brian Paddick has referred to as"““Labour looking after its own””" This House granted powers to the Greater London authority, in the Greater London Authority Act 2007, to set up a scheme for termination payments. In the spirit of devolution, therefore, we have to accept that the decision is no longer ours, but one for the assembly. The assembly must account for that decision to its electorate, who were promised, when the assembly was set up in 2000, that the cost of the Mayor and assembly together would be 3p a week to each council tax payer. Under the Livingstone regime, the spin doctors, publicity, staffing, jollies, jaunts and left-wing jamborees have spiralled out of control, so that the non-borough council tax element in London is now three times higher than it was in 1997-98. A £70,000 payment to the ex-Mayor on his departure will make his going entirely in keeping with the manner of his occupation of the office. The second question to be addressed, which is more directly relevant to this Committee, is whether the payment should be given tax-privileged status. The measure brings the treatment of a severance payment to the Mayor into line with that of termination payments to Members of Parliament. However, I note that a Mayor aged between 55 and 64, with three years of service, will get rather more than twice as much as an MP of a similar age who has completed a similar length of service. When I looked into the statute underlying this issue and the arrangements for Members of Parliament, I was surprised to discover that the resettlement grant is payable to Members whether or not they achieve office. As I understand it, a Member who retires is treated in the same way as one who offers himself for election but fails to be elected. I understand that a similar arrangement will be in place for the GLA. The payment is not so much the equivalent of a redundancy payment in the private sector, but a payment that will be made in all cases to a Mayor when standing down. If I am wrong, I am sure that the Minister will correct me, but that is what I have gleaned from the papers published by the House authorities and from my understanding of the GLA scheme. The general rule is that redundancy payments of up to £30,000 are not taxable if they are ex gratia—if they are not provided under the terms of the contract of employment. Interestingly, Her Majesty's Revenue and Customs has been seeking to widen the definition of what is provided under a contract of employment to include not only what is provided for in the specific terms of a contract, but benefits that are provided on a routine or customary basis upon termination. Employees have long been able to argue at tribunal that something has been customary in their employment, so it is understandable that HMRC now seeks to extend that logic to attack payments that are non-contractual, but customary, on termination of employment. Given that the Treasury controls HMRC, it is unclear to me why, on one hand, it seeks to limit the scope of the £30,000 exemption while, on the other, it proposes to extend it in this Bill. I am certainly not arguing that Members of Parliament should have special treatment which should not then be available to others. Indeed, as I have said, I was surprised to discover that the practice of granting tax-free status extended to payments irrespective of whether the Member had suffered an involuntary redundancy, as it were. Why are payments like this given favourable statutory tax treatment when any other termination payment has to be defended on a case-by-case basis against the Revenue? It is not clear to me why Members of Parliament and Mayors of London should be offered statutory protection from such a challenge. If we believe that this discrimination between the treatment of politicians and that of everyone else is indefensible—and having now studied it, I think it is—why on earth are we extending it? Surely two wrongs do not make a right. If we are uncomfortable with the current regime, should we really seek to extend it to include the Mayor of London? Perhaps there is a specific reason for defining the tax treatment for MPs in statute, and then a specific reason for extending such treatment to an outgoing Mayor of London. If so, I look forward to hearing the Minister's explanation of the thinking behind that logic. The third question is a matter of the timing—hence amendment No. 17 to change the commencement date of this provision from April 2008 to April 2009. I have assumed that the measure before us is not technically hybrid, but there is something uncomfortable—this is not specific to the current, about-to-be former, Mayor of London, but a more general point—about dealing with public legislation that specifically benefits a defined individual or small group of individuals. It means that the merits of the measure inevitably cannot be considered in isolation from the debate about the merits or demerits of the individual or individuals concerned or the manner and circumstances of that individual's going. I thus ask the Minister whether we should put this change clearly beyond any hint that it could benefit any specific individual currently at risk of receiving a termination payment. The fourth question is whether there should be a rethink about what is or is not tax-free on termination. I understand that the Liberal Democrats have tabled a broader amendment that looks at the tax treatment of termination payments more generally, rather than just how to deal with Members of Parliament or Mayors of London, so the House will have an opportunity to reflect in further detail when that amendment is debated. It raises the interesting issue of the Government's general view on this area of taxation of income. I look forward to hearing the Minister's explanation of the thinking behind this clause, particularly of why the Government are proposing to extend the statutory tax relief. I look forward to hearing clarification of whether the Government have any plans to extend it further to any other parts of local government, clarification of the Government's view on the tax treatment of MPs' resettlement grant payments, and perhaps clarification of the wider issue of the taxation of termination payments.