Clause 55 - Overview

Part of Finance Bill – in a Public Bill Committee am 11:00 am ar 19 Mehefin 2012.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury 11:00, 19 Mehefin 2012

Let me first correct an error made by the hon. Gentleman, who presented a rosy view of countries where there has been strong trade union representation and a tripartite system of pensions. I remind him, however, that not only was Belgium without a Government for 535 days, but in Denmark, we have repeatedly seen bank failures, and cross-border bank failures have happened in Belgium and the Netherlands. Perhaps the hon. Gentleman was late because he was studying those matters in more detail, and if so, I recommend that he is late for this afternoon’s sitting too, so that he can pay a bit more attention to what has happened in such havens of trade union-engendered stability. As you might ask me what clause that relates to, Mr Bone, the answer is none of them, so I will deal with the questions raised so far in the debate.

The hon. Member for Newcastle upon Tyne North asked whether any particular parts of the industry would not be affected. We do not calculate the tax impact in that level of detail, but we have sought to consult fully with the industry to ensure that we get the rules right. There was the process of consultation that I set out, and we have tabled amendments to the Bill at this stage in order to deal with some unintended consequences, so when such problems are found, we listen, as the hon. Member for Bassetlaw will be pleased to know, and we try to get them right.

The hon. Lady also asked about the Bill’s impact, in terms of burdens on businesses. Although there will be some one-off familiarisation and training costs for tax specialists, the measure simplifies the tax regime. Bringing the tax computations more closely into line with accounting procedures, rather than regulatory returns, will help to bring benefits to businesses in the long term. Bringing the tax computations more closely into line with accounting procedures, rather than regulatory returns, will help bring benefits to businesses in the long term.

The hon. Lady asked whether I could forecast the medium-term profits of life-assurance companies. I assure her that if I were able to do so accurately, my talents would be used down the river and not in this Committee Room. The profitability of those companies depends on returns on investments and, of course, the best help that we can give is to tackle the legacy we were left by the previous Government and create a more stable economy. I am sure she will welcome the fact that the consumer prices index fell today.

The hon. Lady asked whether these changes will make UK industry less competitive. I do not believe that these changes will damage the competitiveness of the UK insurance sector compared to foreign companies; that is why we have engaged closely with the industry in the design of this and will maintain close links with the industry and discuss the implementation and operation of the new regime regularly. Of course, industry is not slow to tell us when things are not going quite according to plan.

The hon. Lady asked whether it would require new information for policyholders. No new information is required for policyholders and there is no reason why it should have an impact on PAYE, upon which she sought clarification. The changes she referred to in the indexation of gilts had nothing to do with the RPI/CPI change. The hon. Lady asked about the process for parliamentary scrutiny of regulations. We are following the precedent set in previous legislation and the statutory instruments are by the negative procedure, but, of course, she and others are welcome to pray against those if she feels there is need for a debate on those statutory instruments. I look forward to that.

I can assure the hon. Member for Kilmarnock and Loudoun that Kilmarnock FC does not fall within the legislation, unless it happens to be a friendly society selling insurance products—I suspect not. The Government stand very firmly behind the ideals of mutual co-operation and support on which the friendly society movement and the mutual model generally are founded. All life companies and friendly societies have to be brought  within the new rules, because the existing regime will no longer work for them under solvency II, but we have been very clear that we are not making any changes to the fundamental principles on which mutual insurers are based. We have made specific consultation arrangements for the mutual and friendly society sector in order to ensure that any particular concerns are fully considered, which is why I do not think that the hon. Lady’s amendments are necessary. The fact that we are consulting with the sector at the moment demonstrates that they are unnecessary.

The hon. Lady asked whether the changes were necessary for friendly societies and whether they would have a disproportionate impact. If we were to maintain the existing regime for friendly societies, an additional set of computations would be required. Societies would need accounts under the solvency II regime and the existing regime. I do not think that that is efficient. We are able, as a consequence of this move, to cut the number of pages of regulations for existing friendly societies from 38 to 7; that is of use to them and I hope it is welcomed by them. The hon. Lady should be reassured, as the sector should be, that we will always consult on that. She raised the issue of the retrospective impact of the proposed instruments. Again, we are talking to the sector about those and should be able to clarify any concerns the sector has.

The hon. Member for Bassetlaw touched on pensions. There is some press coverage to suggest that some of the taxation issues related to solvency II will have an impact on pensions; that is not the case. With that, I hope that the Committee will see this large and capacious group of new clauses pass into legislation.