The press release issued by HM Treasury on 19 July 2001.

A consultation was launched by the Chancellor of the Exchequer, Gordon Brown, today. It sets out the Government’s strategy for modernising the corporate tax system, the policy objectives underpinning the reforms made since 1997, and takes forward the Government’s proposals on the taxation of returns from companies’ substantial shareholdings. The consultation document proposes an exemption for capital gains arising on the disposal of companies’ substantial shareholdings.

The Chancellor said:

“Four years ago, we set out our central economic aim of achieving high and stable levels of growth and employment. In the last Parliament, we put in place reforms to achieve macroeconomic stability and to promote work.

“In our second term, we have set ourselves the target of creating a new Britain based on enterprise for all. The UK has long been a hub for global business. There are many factors that make the UK particularly attractive, including our sophisticated financial markets and our strong trading links with all parts of the world. To ensure this remains the case, it is essential that the corporate tax system keeps pace with changes in the global business environment.

“In 1997, we started the process of reform of the corporate tax system. Our reforms centred on a tax system with low tax rates combined with a broad tax base, removing tax distortions and eliminating unnecessary rigidities that imposed administrative burdens and unwieldy structures on business.

“The consultation launched today focuses on the next stage of these reforms with a new relief for corporate capital gains to facilitate the process of restructuring and reinvestment, helping business to take advantage of emerging global opportunities. This is another essential step towards a more modern, more flexible and efficient tax system that will provide the stability that business needs to invest for the future.”

This consultation document:

•  confirms that the Government is committed to ensuring that the UK remains a very attractive location for business, and sees corporate taxation as a key element;
•  sets out that, within the general tax framework, the Government is committed to keeping taxes on business as low as possible and ensuring that the tax system reflects the realities of the modern business environment, and details the key principles for corporate tax
  reform – business competitiveness and fairness;
•  explains, as announced at the Budget, how a capital gains exemption for companies’ substantial shareholdings might work if introduced as part of the UK tax system;
•  identifies the substantial attractions that the Government sees in the proposed capital gains exemption approach;
•  explains how a parallel exemption for dividends might work, but also identifies the problems with such an approach, concluding that the Government feels that the current system based around a credit approach offers a better way forward;
•  indicates that the Government does not plan to restrict interest deductibility as part of the proposed reform of company gains or the possible exemption for dividends; and
•  announces a review by the Inland Revenue of the coverage and effectiveness of links with business on administrative matters, focusing in particular on feedback channels from larger businesses into the operational policy making process.

This consultation will help ensure that the UK remains an attractive location for business by creating the best possible environment for long-term business investment both in and from the UK.

The press release issued by HM Treasury on 19 July 2001.

The Treasury today published an updated and improved National Asset Register (NAR), providing for the first time a comprehensive list and valuation of all assets owned by Government Departments and their executive agencies.

The Government is breaking new ground with this updated NAR, by including valuations of all assets and detailing changes in asset holdings since 1997. The UK is a world leader in this area of public accountability. No other country publishes a list of everything it owns and what it is worth.

The NAR is a key tool in the management of these public assets, and shows that during 1999-2000 alone £1.3 billion worth of surplus assets were disposed of, unlocking resources that can be used more productively elsewhere. The total value of the assets listed was £274 billion at the end of the 1999-2000.

Welcoming publication of the NAR, Chief Secretary Andrew Smith said :

“Government Departments are responsible on behalf of the public for significant assets. It is essential that these are managed as effectively as possible, to deliver value for money or to free up resources which can be better used elsewhere.

The new NAR is central to this process. It is unparalleled. It is the most ambitious property inventory compiled in this country and the first such publication in the world. It is a clear, tangible benefit from the recent financial reforms of public finances, based on the introduction of resource accounting and budgeting principles.

Resource accounting and budgeting measures, for the first time, the full costs of holding and using assets. Departments will have to meet these costs rather than being encouraged to overlook them as under previous arrangements, giving a clear incentive to dispose of costly non-productive assets. 

This will focus the minds of public sector managers on getting the best value from the assets they are responsible for, and will make them more clearly accountable for their stewardship. The NAR shows the progress already made in improving asset management, and is a clear mark of our continuing commitment to better public finances.”

Examples of Departmental disposals of surplus assets include:

• FCO disposed of almost £50 million of surplus land and buildings since 1997, including properties across Europe, South America, Asia and the Middle East.
• Highways Agency disposed of £162 million of surplus roads and land and buildings.
• MAFF disposed of over £210 million of surplus assets in 1999-00 alone, including sale of Hurworth House for over £10 million.  MAFF expects sales income of £26 million in the next two years.
• MOD disposed of £234 million of assets in 1999-00, including Duke of York headquarters (£47m), Stanbridge Communication Centre (£17.5m) and Deepcut Barracks (£10m).
• LCD disposed of almost £6 million of assets in 1999-00, including Uxbridge County Court (£3.7 million).

The press release issued by the HM Treasury on 16 July 2001.

HM Treasury today issued revised advice to financial institutions on their dealings with persons and businesses domiciled in Antigua and Barbuda, following the introduction of improved regulation there.

Commenting on the announcement, the Economic Secretary to the Treasury, Ruth Kelly, said

“In recognition of regulatory improvements I have today revised the advice given to UK credit and financial institutions on their transactions and business relationships involving Antigua and Barbuda. We no longer believe that UK financial institutions need pay special attention to their dealings with persons or institutions domiciled in Antigua and Barbuda. From today UK financial institutions should apply normal due diligence procedures appropriate to transactions from jurisdictions that are not members of the Financial Action Task Force.

No system is perfect, and there is still significant room for improvement in Antigua. The UK Government will therefore continue to provide technical assistance to help the Antiguans meet the highest international standards in fighting money laundering. If implemented properly, we believe that Antigua and Barbuda has the mechanisms in place to guard against criminals taking advantage of its off-shore and on-shore financial systems.

The UK Government will continue to monitor the situation in Antigua, and will re-issue its original warnings if it believes that the new systems are not working properly.”

Foreign Office Minister, Baroness Amos said

“I welcome the decision to lift the advisory and congratulate Prime Minister Bird and the government of Antigua on the progress made in improving its legislative and regulatory regime in the international fight against money laundering.  We look forward to continued close co-operation with Antigua in this fight.”

The revised guidance is being sent out through the Joint Money Laundering Steering Group, and is available on the British Banking Association website.

NOTES FOR EDITORS

1.The UK issued its original advisory to UK financial institutions in April 1999, following legislative changes to the anti-money laundering laws in Antigua and Barbuda that weakened the capacity of that jurisdiction to deal effectively with money laundering, and put the offshore sector there at risk from criminals. A copy is available from this website.

2.  Since then the Government of Antigua and Barbuda has undone many of the more detrimental legislative changes. Further improvements are planned. The Government has also taken steps to ensure the independence of the off-shore financial services sector regulatory authorities, and has strengthened the capacity of the financial intelligence unit to handle suspected money laundering cases.

3.These improvements were sufficient to ensure that Antigua and Barbuda was not listed by the FATF as a non-cooperative jurisdiction in the fight against money laundering. Details of this exercise are available on the FATF link below.

The press release issued by HM Treasury on 13 July 2001.

The tax on punters will be abolished three months ahead of schedule on the first weekend in October, the Financial Secretary Paul Boateng announced today.

Gordon Brown announced in his March Budget that by January 1, 2002, the current tax on betting stakes would be replaced with a tax on bookmakers’ gross profits, a radical reform which means Britain’s bookmakers will end the deductions they currently charge punters, and look to grow their domestic and international business from a UK base.

Since the Budget announcement, rapid progress has been made both by the bookmakers in re-locating their off-shore operations to the UK and by Customs in preparing to switch to the new system. The Government has therefore decided to bring in the reforms to betting taxation a full three months early.

The new system will now be introduced on Saturday, 6 October.

Financial Secretary Paul Boateng said:

“The old tax on punters has been in place almost unchanged since 1966. But we realised it was not going to work in the 21st century and would mean UK-based bookmakers losing out on the global betting market. Our reforms mean punters will get tax-free betting, bookmakers will see increased turnover, and both racing and Government revenues will share in the benefits.

It’s a good deal all round. We’re therefore delighted to bring it in more than three months ahead of schedule. This demonstrates our ability to deliver real reforms with speed and efficiency – years ago, it would have been inconceivable to introduce these sorts of radical reforms, let alone push them through so quickly.”

Today’s announcement received a huge welcome within the betting industry.

John Brown, Chairman of William Hill, said:

“The Government is to be congratulated on the speedy implementation of the Chancellor’s initiative. We will be ready on the day for every bet we take worldwide to come back the UK.”

Bob Scott, Chief Executive of Coral Eurobet said:

“This will be the biggest day in the history of betting. I would like to applaud the Government not only for having the vision to introduce this revolutionary tax but also for the speed with which they have acted. This represents a major investment by the Government in the betting industry, and one we will demonstrate has not been misplaced. For customers, bookmakers, the racing industry and the Government, this is a win-win-win-win situation.”

Alan Ross, Managing Director of Ladbrokes, said:

“Every betting customer should thank the Government and put the date of October 6th into their diary as this marks the beginning of a new era for the industry. The decision today is a real boost to the betting industry and means that the significant increases in turnover, employment and international reach promised by tax-free betting will happen even sooner than anticipated.”

Tom Kelly, Director General of the Betting Office Licensees Association, said:

“This announcement is excellent news for punters and the betting industry alike. We are looking forward to a new era of deduction-free betting and the British punter getting the best deal in the world.”

Warwick Bartlett, Chairman of the British Betting Offices Association, said:

“Today’s announcement means the British punter will be able to bet tax-free for the first time in 33 years. The onus is now on the betting industry to deliver and make the UK a centre for global gambling. We have already received enquiries from the US, Canada, Australia, Japan, the Netherlands and Sweden from bookmakers interested in coming to the UK as a result of the introduction of a gross profits tax.”

The Gross Profits Tax

In Budget 2001, the Government announced that – following extensive consultation and analysis – the current General Betting Duty of 6.75 per cent on total stakes would be replaced by 1 January 2002 with a 15 per cent tax on bookmakers’ gross profits, defined as the difference between the stakes laid with them and the winnings they pay out.

This reformed tax structure makes it possible for bookmakers to absorb the tax and to end the 9 per cent ‘deduction’ that they currently charge punters. It therefore makes it possible for them to develop their domestic and international business from an onshore base, competing from a position of strength in the growing global market for telephone and internet betting.

Since the Budget announcement, Customs have been working with the bookmakers to make the necessary systems changes needed to implement the reforms, and those UK-based bookmakers with off-shore operations have been relocating them to the UK. Thanks to the rapid progress made, it will be possible to introduce the system from Saturday, 6 October, 2001.

Tax-free betting from October 6

Among the sporting events taking place on the first weekend of tax-free betting are the Prix de l’Arc de Triomphe at Longchamp, one of Europe’s premier horse races, always the subject of racing and betting interest from around the world, and England’s final World Cup Group match at home to Greece.

The international interest in these events reinforces one of the key objectives of the reforms, which is to enable UK-based bookmakers to target an increased share of the growing global market for telephone and Internet betting.

Customs will continue working with the betting industry to make the changes required prior to implementation. They will also shortly be conducting a series of seminars for bookmakers to explain how the new system will work.

The press release issued by HM Treasury on 12 July 2001.

Economic Secretary Ruth Kelly today announced that the Financial Services Authority (FSA) will become the statutory regulator under the Financial Services and Markets Act 2000 (FSMA) with effect from midnight 30 November 2001.

Speaking at a business breakfast this morning with FSA Chairman Sir Howard Davies and key industry and consumer players Ruth Kelly said:

“My predecessor made a commitment that N2 – the date for the commencement of the main provisions of the Financial Services and Markets Act 2000 – would be no later than the end of November 2001. I am delighted to honour that commitment today.

“FSMA will, for the first time, unite a wide array of legislation and supervisory bodies under one statutory regulator. The FSA will be a single point of contact for firms. Alongside this will operate the Financial Ombudsman Service to deal with customer complaints. This will bring much needed clarity, certainty and transparency to the industry and consumers alike.”

The Treasury will shortly be making the statutory instrument which allows firms? authority under old law to do financial services business to be “grandfathered” across into permissions to do equivalent business once FSMA commences. Ruth Kelly said:

“FSA powers to consider applications from financial services firms to modify their grandfathered permissions; grant new permissions; and other matters including waivers from the new FSA rules, will commence on Monday 3 September.”

Sir Howard Davies , welcoming these announcements, said:

“N2 has been a long time coming.  But the advantage is that there has been time to prepare properly.  We will be ready to switch on the new regime at the end of November, thanks in large part to the invaluable co-operation and patience of firms, their trade associations and consumer groups.”

The press release issued by HM Treasury on 11 July 2001.

Small businesses and other enterprises in disadvantaged communities will find it easier to attract funding from banks and individual investors following consultation on proposals to develop a Community Investment Tax Credit (CITC), Financial Secretary Paul Boateng said today.

Commenting on the Government’s initial response to consultation on the CITC proposals announced in Budget 2001, Mr Boateng said :

“Businesses developing in disadvantaged communities need to be able to draw on the widest possible range of suitable funding. The response to our consultation shows clear, widespread support for our proposals for a Community Investment Tax Credit as a means to encourage investment in these businesses. We are strongly minded to introduce CITC as planned to help them.

We have listened carefully to the views of those involved and decided that it would be right to extend the benefit of our CITC proposals to help businesses to raise money from individuals and banks, and not restrict them to investment from corporate and equity investment sources.

This will increase the options for the access to new capital vital to help reinvigorate some of our poorest communities.”

The Budget CITC proposal aims to stimulate business activity in disadvantaged communities through a tax incentive to encourage private investment in both commercial and not-for-profit enterprises. It is proposed that qualifying investments, made through qualifying Community Development Financial Institutions (CDFIs), will attract tax credits worth 25%, spread evenly over five years. Today’s announcement in a speech by Mr Boateng to a CDFI conference in Birmingham, will extend the initial proposals by:

– allowing individual investors to benefit from CITC.

– allowing both debt and equity investments to attract CITC.

These measures will encourage individuals to invest through either loans or taking shares in CDFIs rather than through equity alone, and enable CDFIs to raise loan capital for developing businesses in their areas from banks and other lenders as well as by issuing shares.

Together they will give CDFIs greater flexibility in raising capital for enterprises in their communities.

The press release issued by HM Treasury on 9 July 2001.

Better consumer services in banking and other financial services are the focus of a Government commissioned report published today.

Responding to the DeAnne Julius led review of banking services codes, Economic Secretary Ruth Kelly said:

“The report contains a number of useful recommendations directed at significantly improving competition and increasing the levels of customer service in banking services.

“We are therefore asking the bodies to whom the recommendations are directed to respond to these proposals.  We look forward to the industry responding positively to the challenges that have been set.”

DeAnne Julius said:

“While we found that there is much to commend about the current system of self-regulation through voluntary codes, we believe there are several areas where more should be done to help bank customers and sharpen competition.

“Our Group developed its recommendations after an extensive consultation process.  We believe the recommendations would help the market for banking services work more effectively and thereby deliver greater consumer benefits.”

The Banking Services Consumer Codes Review Group has set out twelve recommendations to improve the benefits to consumers from the industries’ voluntary codes of conduct.  The recommendations include:

•  measures to make account switching easier
•  improve information provided to customers
•  strengthen the processes for drawing up codes
•  more information on code compliance

The Government is asking those to whom the recommendations are directed to respond to the report by 30 September.

The press release issued by HM Treasury on 2 July 2001.

Gas and electricity, water, rail and telecommunications regulators have prepared individual action plans to implement the recommendations of an independent efficiency review published earlier this year. The key recommendations have been accepted, and each regulator has taken steps to implement priority recommendations. They will update industry and consumer representatives on further progress over the coming months.

Chief Secretary Andrew Smith commented:

“The independent report concluded that the UK Regulators are professionally run organizations. The regulators positive response to this report will led to further improvements in UK regulatory standards.

Implementation of their action plans will increase transparency in budget setting, lead to better assessment of the costs and benefits of major projects, spread best practice, and help the regulators recruit and retain quality staff.”

The key elements of the improvements are:

• Increased transparency in budget setting;
• more effective stakeholder involvement ahead of publication of draft annual plans;
• draft annual plans to include more detailed cost information including identifying all projects over £250k;
• policy and support costs identified separately wherever possible;
• better impact assessment of costs and benefits of major projects;
• annual publication of each regulator’s medium-term strategy. (Oftel which will review its medium term strategy as part of its preparatory work on Ofcom);
• developing the most appropriate form of regulatory impact assessment;
• post-implementation value for money reviews of major projects.

Retaining skills and expertise:

• regulators to pay more competitive rates to recruit and retain key staff; and, in return:
• regulators will continue to look for efficiency savings particularly in consultancy and support services.

Spreading best practice:

• better profile for joint working initiatives;
• more systematic identification and sharing of best practice;
• regulators to agree a consistent set of support service activity indicators with the eventual aim of publication.

The press release issued by HM Treasury on 31 August 2001.

INDEPENDENT INQUIRY INTO EQUITABLE LIFE

An independent inquiry into Equitable Life, to be headed by Lord Penrose, was announced today by Ruth Kelly, Economic Secretary to the Treasury.

The Inquiry will examine the circumstances leading to the current situation at Equitable Life and identify any lessons to be learned for the conduct, administration and regulation of life assurance. The Inquiry will report to Treasury Ministers.

Announcing the Inquiry, Ruth Kelly said

“The Government has considered carefully the concerns of policyholders and representative bodies including the Select Committee of the House of Commons.  Equitable Life raises important issues which deserve consideration by a full independent inquiry. We are announcing today that we have asked Lord Penrose to conduct an independent inquiry into Equitable Life and to consider what lessons can be drawn for the conduct, administration and regulation of the life assurance business. It is important that lessons are learnt from what has happened – this Inquiry will allow us to do that.

The Inquiry is being established on a non-statutory basis.  We hope everyone concerned will feel able to cooperate fully and frankly.  However, the Government will, if necessary, establish a statutory basis for the Inquiry.

Equitable Life is currently preparing proposals for a compromise deal which we understand are likely to be put to policyholders in the coming weeks.  In announcing the Inquiry now, rather than waiting until Parliament resumes at a time when policyholders would be considering the compromise deal, the Government is keen to ensure that there is no confusion between the Inquiry and the compromise deal.

The Inquiry will look into the circumstances leading to the current situation of the Equitable.  It will not comment or offer advice on the merits of any compromise deal proposed to Equitable Life policyholders; nor will it review past judicial decisions in relation to Equitable or pre-judge future decisions properly taken by the courts.

A review is currently being carried out by the FSA into the FSA’s role in the period from 1 January 1999 until the Equitable closed to new business in December 2000.  The Government looks forward to receiving that review.  However, the Government believes it is now in the public interest to have a wider, independent review that can look back as far as is necessary.  The Government expects the FSA review to be an important input into the Lord Penrose Inquiry.  The Government has said that the FSA review will be published.  The actual timing will need to be considered in the light of the timetable for Lord Penrose’s inquiry.

The Inquiry will take some time to complete and we want Lord Penrose to start work without unnecessary delay.”

Lord Penrose said:

“I am pleased to have been asked to lead this Inquiry. I believe it will cover some important and complex issues and I am looking forward to tackling the work ahead.”

Letter from Ruth Kelly, Economic Secretary to the Treasury, to Lord Penrose

Rt Hon Lord Penrose
Equitable Life Inquiry
Room 35a/G
Government Offices
Great George Street
Parliament Street
London SW1P 3AG

31 August 2001

Dear Lord Penrose

I am grateful to you for agreeing to conduct an Inquiry into the circumstances giving rise to the current situation at the Equitable Life Assurance Society. You will be aware of the public concern about this. It is in light of this general concern that the Government has decided to launch this Inquiry at this time.

The terms of reference for the Inquiry are:

to enquire into the circumstances leading to the current situation of the Equitable Life Assurance Society, taking account of relevant life market background; to identify any lessons to be learnt for the conduct, administration and regulation of life assurance business; and to give a report thereon to Treasury Ministers.

Within these terms of reference set out above, questions of how the Inquiry should be conducted, and what matters in particular should be examined, will be a matter for you.

However, for the avoidance of doubt, I should make clear that we are not asking you to review the decisions taken by the courts in litigation relating to the Equitable Life’s situation, in particular the decision of the House of Lords in Equitable Life Assurance Society v Hyman. That would clearly be inappropriate. It would be equally inappropriate to seek to resolve issues which ought to be dealt with by the ordinary courts in the event of a dispute which cannot be resolved otherwise.

Your Inquiry will look at circumstances which go back many years, even decades, up to today’s date.  Its purpose is to provide an authoritative account of the circumstances and to draw lessons for the future on the conduct, administration and regulation of life assurance business. It is important that these lessons are identified and learnt. The purpose of the Inquiry is not therefore, and could not be, to offer guidance to policy-holders of the Equitable Life on what course of action they might now pursue. In particular, it is not the function of your Inquiry to offer advice in relation to the Equitable’s arrangements with the Halifax plc, or on the scheme the Board of Equitable Life envisage consulting their members on shortly.  Particularly when looking at the recent past, I know you will be mindful of the fact that the Equitable is an ongoing business, which the Inquiry should not disrupt.

The Inquiry is a non-statutory Inquiry, so you will not have powers to compel the production of information or require the attendance of witnesses. We hope that everyone concerned will feel able to co-operate fully and frankly. However, if it proves necessary we  will consider putting the Inquiry on a statutory basis.

Much or all of the evidence will be private and confidential, some of which will be covered by restrictions on disclosure under UK and EC law. Because of this, we envisage that the Inquiry will generally be conducted in private, although you may consider it appropriate to hold some sessions in public.

Once again, thank you for agreeing to conduct this inquiry on behalf of the Treasury. The Treasury will co-operate fully with your Inquiry, which will have appropriate support, and will ensure that you are enabled to carry it out without undue impediment.

I look forward to reading your report.

RUTH KELLY MP

The press release issued by HM Treasury on 22 August 2001.

Ruth Kelly, Economic Secretary to the Treasury, today announced UK Government recognition of Nasdaq LIFFE, LLC Futures Exchange, which meets the criteria laid down in the Financial Services Act 1986.

Welcoming the decision Ruth Kelly said:

“I am pleased that Nasdaq LIFFE, LLC Futures Exchange has satisfied the criteria in the Financial Services Act and look forward to it opening for business in the UK. Today’s decision is further recognition of London’s status as a leading international financial centre.

UK investors can now directly trade on the  US Exchange using screens based in London. The advantages include wider choice and greater convenience, and demonstrates that London is both a competitive and efficient place in which to do investment business.”