Minister's tax break attacked

Gordon Brown, the Chancellor of the Exchequer, has declared "relentless" war on a tax avoidance scheme that includes a ministerial colleague, Lord Simon, as a pounds 1m member.

The revelation that the Minister for Trade and Competitiveness in Europe belongs to one of the Treasury targets for the "defeat and deterrence of tax avoidance" last night provoked a Tory attack on the "humbug" and "cant and hypocrisy" of the Government and the minister, Lord Simon of Highbury.

Ministers are increasingly distancing themselves from their new colleague, the former BP chairman who joined the Government as an unpaid minister in May.

As a man with a wide-ranging portfolio, he has been given offices in both the Treasury and the Department of Trade and Industry, but Whitehall insiders say that arrangements for his high-profile switch from business to politics have been "botched".

Lord Simon has been the subject of relentless Conservative pressure since it was revealed that he was holding on to BP shares worth more than pounds 1m, held in an offshore Jersey trust, in spite of the potential conflict of interest between his job and his continuing connection with the oil industry.

But the revelation that the Jersey trust is a specific target for Treasury and Inland Revenue attack puts Lord Simon in an even more invidious position - given the open contempt of the Chancellor for such schemes.

Announcing a tough new clampdown on tax avoidance, Mr Brown said in his Budget speech earlier this month: "The tax burden avoided by the few falls on the many ...

"A government committed to the proper funding of public services will not tolerate the avoidance of taxation and will be relentless in its war against tax avoidance."

Those words will now be taken as a direct attack on a scheme in which Lord Simon has a pounds 1m investment.

Confirmation that Lord Simon's Jersey scheme would be caught within the terms of an Inland Revenue purge came yesterday in a written Commons reply from Dawn Primarolo, Financial Secretary to the Treasury.

Asked by David Prior, Conservative MP for Norfolk North, what plans the Treasury had "to legislate against tax avoidance schemes relating to offshore trusts in Jersey", Ms Primarolo chose to meet the point head-on.

Instead of delivering a typically bland Treasury response, which would have left Lord Simon in the clear, she said: "The Chancellor announced in his Budget a wide-ranging review of all areas of tax avoidance." Any minister would have known the consequences of that reply - that the Tories would use it as a further, sharper instrument with which to beat Lord Simon. That is precisely what happened last night.

Mr Prior told The Independent: "There could be no more clear-cut example of cant and hypocrisy.

"The Government has got a very clear policy of attacking and trying to eliminate tax avoidance schemes. For a Treasury minister to be using a Jersey trust to shelter any gains he might make on his own shareholding is outrageous."

John Redwood, the shadow spokesman on Trade and Industry who has led a tenacious campaign against Lord Simon's conflict of interest, said that while Mr Brown wanted to penalise "Tory-type tax incentives", Lord Simon was making use of them. "The fact that he is a Labour minister makes this a delicious piece of humbug."

The issue is expected to be raised in questions to Margaret Beckett, President of the Board of Trade, before the Commons rises for its three- month break tomorrow.

A spokesman for BP said: "We have a trust arrangement for anybody who's involved in the long-term performance plan.

"There are something like 350 people involved here. Lord Simon's position is no different from any member of that scheme.

"It's a Jersey trust of the kind used by most British companies who've got schemes of this kind. All the trust does is to ensure that when the company goes out to buy shares, any appreciation on those shares, between the point at which they buy them and the point at which they distribute them, is not subject to tax.

"There is nothing illegal about it; it's standard practice; it's normal business prudence to do that. You'd be falling short of your duty to your shareholders if you didn't."