§ Many hon. Members have pressed the case for helping two specific industries this year: shipping and films. While I sympathise with their aims, I have to say that there is a limit to the extent to which we can—or should—bend the tax regime to meet the special needs of any particular industry.
§ The Gulf hostilities have reminded us of the important contribution which our Merchant Navy can make to our defence. I recognise that there is a strategic case for measures to encourage shipping companies to draw their crews from seamen in the United Kingdom, who would be willing and able to serve in time of war. Towards this end, I propose a further relaxation of the rules giving tax relief to seafarers working mainly overseas. This will mean that more seafarers will be exempt from United Kingdom tax on their overseas earnings.
§ The film industry makes an important contribution to entertainment and culture in this country. The industry has put forward a number of proposals, but having studied 174 these carefully, I am afraid I cannot accept them. However, I remain sympathetic, and if it has any alternative proposals that it wishes to put to me over the coming year, I will very happily consider them.
§ I know that the tax treatment of foreign exchange gains and losses causes difficulties for many businesses. This is one of the most complex and intractable areas of the tax code. Our 1989 consultative document elicited a valuable response but no consensus on the way forward. I am publishing today a further document setting out my specific proposals for reform, which I trust will bring greater rationality to this very important and complex area of the tax system.
§ I have also to correct one defect in the law affecting building societies. In a recent judgment, the House of Lords concluded that regulations covering the 1986 composite rate transitional provisions for building societies were technically invalid. If I were to take no action about this, there would be a windfall gain to building societies—not their depositors—of £250 million, distributed arbitrarily according to their accounting dates in 1985–86. I have therefore decided to include legislation in the Finance Bill to establish, as the Government and Parliament intended, that interest and dividends paid by societies in these transitional periods may be taxed at 1985–86 rates.