Finance Bill

My Lords, I confirm to the noble Lord, Lord Myners, that the proposals are indeed for an 18 per cent capital gains tax rate and for 28 per cent on those who are on the higher bands for income tax. We have no other proposals. I shall respond briefly to the point made by the noble Lord, Lord Desai, about unearned income needing, in his view, to be taxed at rates as high as earned income. Taxing unearned income at lower rates maintains incentives to save and invest, and it is critical that we continue to think about and promote savings and investment in this country. Lower rates for unearned income allow for the fact that income has already been taxed before it is saved. Higher tax rates on savings would lead to high levels of double taxation, which would not be conducive to increasing savings and investment. One or two comments have been made today about pensions, because the Bill will provide the first step in freeing employers from the complicated and poorly targeted pensions legislation that the previous Government introduced. We will use this power, which expires on 31 December this year, only if a sensible alternative system can be found that provides the same necessary revenue. We will also be clear about the impacts of this alternative, so I am glad that my noble friend Lord Blackwell recognises the benefit of what we are doing. I will certainly make sure that the ideas which he puts forward are fed into our consultation on this issue. On annuities, the Government, as I have said, will remove the requirement to purchase annuities at 75. In answer, I think, to the point that my noble friend Lord Higgins was making, this Bill brings in transitional provisions that prevent anyone turning 75 on or after Budget day from being disadvantaged by having to make a decision before the new rules are in place. We are consulting on the mechanics of the new system now, and in that context I will make sure that we look at my noble friend’s previous amendments on this subject. Lastly, I want to do justice to the points that have been made in the debate. If noble Lords will permit me, I will say a couple of words on points that have been raised on the general structure of the tax system. This topic was first brought up by the noble Lord, Lord Stern. The noble Lord, Lord Desai, also made some comments, as did my noble friends Lord Northbrook and Lord Bates. As set out in the coalition’s programme for government, the tax system does indeed need to be reformed to make it more competitive, to make it simpler, to make it greener and to make it fairer. In addition to structural reform, at the Budget the Government committed to reforming the way in which tax policy is made to restore the UK tax system’s reputation for predictability, stability and simplicity. The Government will consider the conclusions of the Mirrlees review when they are published later this year and, as announced at Budget, the Government are considering improvements to specific green taxes, including changes to the climate change levy and to the aviation tax system. I do not know whether I will be able to get access—I rather doubt it under the arrangements that apply—to the 2004 paper of the noble Lord, Lord Stern, but I hope if he can remember some of the critical ideas in it that he may drop me a line. I remind him and my noble friends Lord Northbrook and Lord Bates that the Office of Tax Simplification has now launched, and it will address the critical issues to which they properly draw attention. Before we conclude, I will explain briefly how the Government will ensure greater scrutiny of the next two Finance Bills. Given this unusual year, the Government will publish a further Finance Bill in the autumn. I cannot promise my noble friend Lord Bates that it will be as short as this one but it will introduce those measures inherited from the previous Government. For the first time, draft legislation and Explanatory Notes are available on the Treasury website. To conclude, this Bill sets out our priorities, our vision and a credible path to a sustainable recovery. We are encouraging enterprise and protecting those most in need, yet tackling the stratospheric debt left to us and this country. This Government are taking action where others have not. Bill read a second time. Committee negatived. Standing Order 47 having been dispensed with, the Bill was read a third time and passed.