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10.54 am
The Minister for Local Government and Housing (Ms Hilary Armstrong): We have heard a sorry tale this morning that does none of local government any good. Those of us who care about local government and that local people should be able to feel that it is working for and with them can only feel extremely sad about what we have heard and the response from the Opposition spokesman, hon. Member for Croydon, South (Mr. Ottaway).
I am grateful to my hon. Friend the Member for Hendon (Mr. Dismore) for raising this important issue, which provides me with an opportunity to set out the Government's proposals to improve standards in local government. A former member of Westminster city council, my hon. Friend is well qualified to introduce the debate because he was one of those who played an important part in bringing its discredited homes for votes policy to the attention of the district auditor.
My hon. Friend will appreciate that, in view of the likelihood of further appeals, I cannot comment on the Westminster case in detail, but he and my hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck) are right to remind the House that the saga has been grossly unfair to people who live within the boundaries of Westminster city council. We have a duty to be concerned about those people.
Those who have been waiting to be rehoused have had to suffer unsatisfactory accommodation for longer than necessary, with no means of redress, while the council tax payers of Westminster have had to meet the additional housing costs arising from the council's decision to keep perfectly good properties vacant, thus incurring high temporary accommodation costs.
The issues raised by the Westminster case will be tackled by the Government. In our manifesto, we set out a range of measures to ensure good local government.
We believe that that matters not only because it provides and supports many of our services and spends huge sums of money in doing so, but because it is the one government institution that empowers the citizen through the ballot box and other means to influence the way in which local issues are dealt with on their behalf.
The Government are determined to ensure that the integrity and credibility of the local democratic process are upheld and not further undermined by authorities that ignore or in some cases work against the needs of their communities.
The number of such authorities is small, but the damage that they cause to the morale of many dedicated local government members and officers and to the standing of local government in the eyes of the public is considerable. Probity in local government is essential: without the highest standards of probity, local government cannot gain the confidence of the people or the legitimacy that it needs to play a proper role in our country.
We have said all along that wrongdoing in local government should be investigated and dealt with accordingly. When the Nolan committee recommendations on local government conduct were published last year, the Prime Minister stressed the Government's determination to improve standards. We want to establish a new ethical framework for local government that will let members and officers know exactly where they stand and provide clear and equitable penalties for misbehaviour.
We will lay a good deal of the responsibility for the rehabilitation of local government on authorities, but we will also put in place procedures for monitoring what happens to ensure that complaints are properly investigated and that the appropriate action is taken. We are now considering the recommendations of the Nolan committee and we will announce our proposals for consultation in a few weeks.
One of Nolan's most prominent recommendations was that surcharge should be abolished and that a new offence of misuse of public office should be introduced across the public sector. We have heard much comment about the current system from Opposition Members. They seem to forget that they introduced it and continued to support and defend it throughout their period of office. Should we decide to abolish surcharge, we shall need to ensure that there is a workable alternative. However, we are clear that there must be an effective deterrent against financial wrongdoing and that, when it occurs, there must be an effective way of dealing with it. As hon. Members know, we are considering the offence of misuse of public office wherever people are represented.
The auditor is the financial watchdog for local authorities and is ideally placed to identify possible misconduct involving financial loss.
Mr. Deputy Speaker:
Order. We must move on to the next debate.
Mr. David Maclean (Penrith and The Border):
While it is always a delight to see the Financial Secretary in her place, I regret that the Paymaster General is not here to listen to the debate and reply to it. In accordance with the conventions, and out of courtesy, I dropped him a note on Monday saying that I intended to refer to him in my speech today. So it is an additional source of regret that he has not seen fit to be here in person and is letting the Financial Secretary answer questions on his behalf. We also saw that last week in Treasury questions.
I am delighted to have this opportunity to debate tax avoidance and offshore trusts. It is timely for three reasons. First, the Budget is less than two months away and we can soon expect to hear what progress has been made on the Government's plans for a general anti-avoidance law. Secondly, the taxation of offshore trusts is under review. Thirdly, that review has been steered by a Minister who is closely linked with a Guernsey-based offshore trust. Some might say that that makes the Paymaster General uniquely well qualified to conduct a review of offshore trusts. Others might say that he has a severe conflict of interest and that, for that reason and for others which I shall explain later, his position has become untenable.
No one likes to pay more tax than he has to. So I make no criticism of anyone who takes legitimate and legal steps to minimise his tax liability. However, where genuine loopholes exist, where unforeseen gaps in the tax system allow people who clearly should be paying to avoid tax altogether, the Government should act. Blocking loopholes helps to keep tax rates low for everyone. That is a principle which guided the previous Government. Our last Budget stepped up the campaign against people who cheated the system. We wanted to protect genuine taxpayers who paid their fair share.
The Inland Revenue was given extra funds to step up its work on the black economy, on income tax compliance and on corporate tax avoidance. Her Majesty's Customs and Excise received an extra £88 million to boost its campaign against excise fraud and VAT evasion.
Of course, there are other ways to prevent tax avoidance. More intensive policing of the system is not the only way. The best way is to keep the system simple in the first place. The fewer taxes there are, the fewer reliefs, exemptions and allowances are available, the less potential there is for tax experts to work the system to their advantage. That is one reason why we were working steadily towards the abolition of inheritance tax and capital gains tax. Both are surrounded by a thriving industry of accountants and lawyers specialising in tax avoidance. When my right hon. Friend the Member for Charnwood (Mr. Dorrell) was Financial Secretary, he made the Conservative Government's position on tax evasion clear. He said:
Naturally, I looked up the quotation that the Chancellor used. I can only assume that it is because of what No. 10 calls deep psychological flaws in his character that his imagination has run wild with the actuality. The shadow Chancellor, my right hon. Friend the Member for Hitchin and Harpenden, was asked a question by the then Member of Parliament, Mr. David Shaw. It will enrage the Prime Minister when he discovers that his Chancellor has been using with approbation answers inspired by David Shaw. David Shaw asked my right hon. Friend to consider a complicated system of prior notification whereby all companies, all trusts and individuals would have to inform the Inland Revenue of any proposed transactions between themselves and a tax haven. My right hon. Friend said in reply:
11 am
"The Government remain determined to prevent the growth of tax avoidance to the level that existed before 1979. And over the last 14 years a large number of measures has been introduced to counter avoidance, including some in the present Finance Bill. . . . But there is a point where avoidance can be regarded as improper and unacceptable, deserving to be looked at critically, and deserving to be stopped."--[Official Report, 18 June 1983; Vol. 226, c. 761.]
21 Jan 1998 : Column 949
That is what he said, but what about the present Chancellor of the Exchequer? In Treasury questions last week, he said from the Dispatch Box that when my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley)
So there we apparently have it. The Chancellor gave the House the impression that the previous Government, when asked to take action in 1990, did nothing.
"was Financial Secretary to the Treasury and was asked to take action on offshore trusts, he said that:
'It would impose a substantial and unreasonable burden on business.'"--[Official Report, 15 January 1997; Vol. 304, c. 482.]
"The Inland Revenue devotes substantial resources to countering tax avoidance and evasion, including the kind of offshore transactions involving tax havens to which the questions refer. Where appropriate, the Government would not hesitate to bring forward such further legislation as was found to be necessary. To require general notifications of business transactions with tax havens would, however, impose a substantial and unreasonable burden on business."--[Official Report, 10 January 1990; Vol. 164, c. 705-06.]
There is the true and accurate quotation. We can all now see why the No. 10 spin doctors are so keen to correct the Chancellor's perceived version of events in everything that he says and does.
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