I am expressing the concern that the OBR was somehow seen as a panacea of independence in a lot of its projections when it has got things uniformly wrong almost every time. As I have said, that is partly because of international events that one cannot exclude. We live in a global economy and are a great global trading nation. The problem is that we have not been able to get the export-led growth that we all want and as a result there has been constant downgrading.
There was some good news in the Budget, as the Exchequer Secretary has said, about the co-operation between the Treasury and our Crown dependencies of Jersey, Guernsey and the Isle of Man on new financial disclosure agreements. As an adviser to the law firm Cains, I am pleased that our Crown dependencies have led the way with the FATCA—Foreign Account Tax Compliance Act—arrangements. That is to the Treasury’s credit. We saw at ECOFIN only last weekend that we are also looking to bring on board the Cayman Islands and the British Virgin Islands to ensure that there is more transparency. It is very easy to berate a lot of the international financial centres—many of which have long-standing historical links with not just the City of London, but the UK—but the importance of the liquidity that they bring into play should not be underestimated. It made a big difference in the immediate aftermath of the crash of September 2008 and might yet do so at some point in the future.
I am a little more concerned that the Treasury is not making entirely clear what is considered abuse and avoidance when it comes to tax arrangements. The earlier exchange between the hon. Member for Burnley (Gordon Birtwistle) and the Exchequer Secretary brought that to mind. [Interruption.] I apologise: it was the hon. Member for Redcar (Ian Swales)—my view of the hon. Gentleman means that it was an all too easy mistake to make. Without clarity about what amounts to avoidance as opposed to abuse, we risk throwing a veil of uncertainty over the UK’s business environment.
I speak to firms large and small in my own constituency. I say to those on the Treasury Bench that, suddenly, for the first time ever, global corporations are beginning to consider the almost unthinkable prospect of a certain amount of political risk being attached to the UK. Foreign direct investors would be right to feel aggrieved if legitimate tax-planning activities suddenly were deemed by Her Majesty’s Revenue and Customs to be aggressive tax avoidance, with punitive fines and damaging public relations to follow.
On that note, I should like to raise a specific instance of retrospection that is causing financial hardship among some of my constituents. Section 58 of the Finance Act 2008, brought in by the previous Government, was designed to close down certain tax-planning arrangements with retrospective effect. I am afraid that it has left some residents in my constituency with demands for huge amounts of back tax, which in some extreme cases is leading to threats of bankruptcy.
The Exchequer Secretary is aware of those concerns, because he has responded to my correspondence on them. Unfortunately, however, some of those affected
by section 58 are not convinced that he is properly listening to the argument. One constituent advised:
“The tax arrangements I used were not only legitimate and openly declared, but expressly considered, debated and approved by parliament back in 1987. This means that according to the HMRC’s declaration, I was not engaged in aggressive and abusive tax avoidance but simple, legitimate tax planning.”
Although I accept that HMRC wants to bring more money in and to close down aggressive tax avoidance schemes, if it has known that arrangements or schemes have been in place for 25 years and has made no move to close them down, it cannot be right for retrospective activity to take place. My constituents therefore request the repeal of section 58.
I would be grateful if the Treasury gave serious consideration not only to the arguments of the campaigners, but to the message that retrospective legislation sends to business people who are trying to act in a lawful and transparent way in planning their taxes. The Exchequer Secretary rightly pointed out that we should be proud of being a country that is open for business, but we must ensure that what we do and what we say in that regard coincide.
To conclude, if I have one message for the Treasury as we consider the Finance Bill in the days ahead, it is to forget about the pressure for quick fixes and transient boosts, and instead to focus relentlessly on delivery and longer-term measures to make the UK an ever more tempting prospect as a place in which to do business. If the UK economy is not to get substantial growth before the 2015 election, let the coalition at least get some credibility for doing the right thing for the nation and giving our people a genuine sense of hope for the future.
6.51 pm