As the hon. Lady rightly pointed out, clause 36 and clause 215 fit together, and they facilitate the launch of tax transparent funds in the UK. As she pointed out, they are important to the long-term health of the fund management industry in the UK, which is the largest asset management sector in Europe. Other jurisdictions have tax transparent funds, which are attractive to investors, and the UK fund management sector is at a disadvantage as a consequence. The Government have sought to ensure that London remains competitive as a global financial centre. We identified when we came into office that this was one area where we needed to make further progress, so we have worked closely with the fund management sector on that. The hon. Lady is right that there are still issues outstanding about the nature of some of the vehicles that could take advantage of the scheme.

There are two types of authorised tax transparent funds, both of which are contractual funds under the UCITS IV directive. One type is the co-ownership fund, which is a new type of fund structure in the UK but which is already in place and used extensively in other European member states. We are also considering the introduction of an authorised limited partnership fund, which will be based on the already well recognised unauthorised limited partnership vehicle currently used in the UK, with fully transparent income and gains. Given the availability of such funds in other domiciles, there is a commercial demand for a similar vehicle in the UK, and we anticipate that they will be available for use later this year. Once introduced, the tax transparent funds will enable UK fund managers to take advantage of the opportunities created by UCITS IV and establish master funds here in the UK.

The hon. Lady asked about the cost to the Exchequer. The tax transparent funds move the point of taxation from the funds to the investor, so it is not a case of there being no tax, but the point of taxation has been moved.

The hon. Lady also asked about the regulations, and her question reflects the uncertainty of the structure. The Treasury and the FSA have consulted widely on tax transparent funds, and they are considering the responses. The tax regulations will depend on the overall regulatory structure of the tax transparent funds, which is still being finalised in the light of the consultation. The tax regulations that provide the powers will be subject to approval by the House once the regulatory structure has been finalised.

There is a close link between the regulation and taxation of the funds. Under the previous Government, a tax regime was built up to assist the fund management industry, but the regulatory structure did not quite work for the investors, which is why we are trying to develop the regulatory structure in tandem with the FSA at the same time as developing the tax rules. We want not only a taxation structure that works for the funds, but a regulatory structure that works, too.