Finance Bill

I want to reiterate some of the points made by my hon. Friend the Member for Fareham (Mr. Hoban) in his comprehensive and thorough speech. I shall cover some of the same ground, however, because it would be difficult not to: my hon. Friend really did cover the waterfront. It is worth my repeating one or two of his points in the hope of provoking an answer from the Economic Secretary. It is not entirely clear what was the rationale for the simplification of the rules governing pension term assurance in the Finance Act 2004, which came into force on 6 April 2006. The Economic Secretary made it clear that it was never the Government’s intention to encourage the granting of tax relief on products that were not connected with pensions, but that gives rise to one or two questions. There was no real explanation or debate about the issue during the passage of the 2004 Act. As for the rationale, as my hon. Friend the Member for Fareham pointed out, it was rather slipped through. So what, if it was not simplification, was the justification for extending the relief to pension term assurance? What happened after 6 April 2006 to make the reforms in the Finance Act 2004 so unattractive and undesirable? We have had an answer from the Economic Secretary on that: the provision was used for non-pension purposes and for lump sum purposes. However, that begs the most important question, which my hon. Friend the Member for Fareham dwelt on: why was that not anticipated at the time? One has to put that in the context of a number of cases. Yesterday, we debated the rate of corporation tax for small businesses. We have seen change after change: the introduction of a 10 per cent. band, then a zero per cent. band, which was abolished last year, and now the small business rate is increasing. That is an example of the Government introducing a policy and businesses altering their behaviour accordingly. We have seen something similar with pension term assurance. Does it not worry Ministers that there often seems to be an almost systemic failure within the Treasury to anticipate the consequences of tax changes? Every year, a Finance Bill is presented and contains detailed provisions. The Treasury is keen to encourage certain types of behaviour and discourage others, yet it does not have a good record of judging what the consequences of the changes will be. This appears to be a very good example of that. Surely it could have been anticipated that pension term assurance would be used in the manner in which it has been. Within only a few months, the Treasury has been forced to change policy.