House of Commons Hansard Debates for 7 Mar 1990

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changes. That is obviously a most welcome development. How much better it would be if a technical Finance Bill could be published at the beginning of each Session. Ample time could then be given for representations to be made and for proper consideration in Committee.

I appreciate that Treasury Ministers dislike the prospect of two Finance Bills every year, and that they like to save everything up and put it in the Budget. But the Budget is about fiscal policy, that is to say, total tax revenue and total borrowing or debt repayment, not about the minutiae of taxation. Many of the matters that take up most room in the subsequent Finance Bill do not even rate a mention in the Budget Statement. I am sorry, therefore, that my right hon. and learned Friend dropped the idea of a technical tax Bill as soon as he became Chancellor. No doubt the Inland Revenue persuaded him of its impracticability, but one way or another we have to try to avoid the situation that arose last year.

Philip Hardman, senior tax partner of Grant Thornton, to whom I pay tribute for the tenacity with which he has pursued the cause of tax simplification, has written about last year's Finance Bill : "Certain battles need not have been fought. If the Government had sought the views of experienced tax practitioners beforehand, we would not have seen the close investment company legislation crawling out of the ashes of the apportionment legislation only to be squashed to death by the tanks of the accountancy and legal professions." I am sure that when my hon. Friend the Minister replies he will refer to the abolition of development land tax and investment income surcharge and to other improvements. I went out of my way at the beginning of my speech to acknowledge the many changes for the better that have been introduced since 1979. The fact remains, however, that Finance Bills have been getting bigger and bigger and more and more complex. Philip Hardman tells me that parts of our tax legislation are ignored--by accident, not design--as they are too complex. This is a serious situation, which merits urgent consideration. I hope that my hon. Friend will agree to set up the inquiry that I have suggested.

11.4 pm

The Financial Secretary to the Treasury (Mr. Peter Lilley) : I pay tribute to my hon. Friend the Member for Beaconsfield (Mr. Smith) for his success in securing this debate and for the unparalleled expertise that he brings to this subject ; it is unrivalled among Members of this House. I share his worry about the length and complexity of tax legislation. I suppose that I should declare an interest in this subject. No one has a greater interest than I have in ensuring that legislation is kept as simple as possible so that my little brain can understand it, and as brief as possible so that my time on the Finance Bill is minimised.

Inevitably it is something of a perplexity to a party whose members are of our disposition to understand how a Government committed to the minimum of laws find themselves, none the less, producing a great number of taxation laws. I have looked into the matter, and I can tell the House that there is a number of reasons for this. Undoubtedly they do not explain everything, but I think that they should be borne in mind when this problem is being considered. Even simplification takes Finance Bill space. In the last Finance Bill--my hon. Friend will understand why I take the last one rather than the forthcoming one--we introduced a measure to simplify schedule E receipts. It

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took 11 pages, but we now have a simpler law. Even abolition takes Finance Bill space. As my hon. Friend mentioned, we abolished much of the legislation affecting close companies. There were 20 pages on the statute book. It took eight pages to repeal and, in so far as it was necessary, replace that legislation.

Another of our objectives is to make legislation more user-friendly. This results in its being longer. For example, in simplifying the schedule E matters to which I have referred, we have used the modern and, I hope, more user-friendly approach. The draftsmen deliberately sought to help practitioners and others who need to refer to the legislation by making it self-contained. Legislation by reference would have been shorter, but it would also have been less convenient for those who have to understand and apply the new rules. That is why we had to go to 11 pages. I hope that in doing so we simplified the legislation in a way that practitioners welcome.

The structural reform to which my hon. Friend paid tribute is essentially a process of reducing rates and reducing the number of allowances and reliefs so that the tax burden is spread more widely. Inevitably that has involved some major tax reforms over our period in office--sometimes comprehensively replacing a whole mass of legislation by a new structure which it is felt is less onerous but which requires a great deal of legislation. In the last Finance Bill, for instance, we carried out the major part of the reform of life assurance taxation, reducing the rate and spreading it over a wider tax base. That itself took quite a sizeable chunk of space--10 pages, plus a couple of schedules, with more to come.

Inevitably, if one is reducing the rate and spreading it more widely, one wants also to stop tax avoidance. If some people avoid paying tax, others have to pay more. Therefore, there is a dollop of tax avoidance measures to try to keep up with the amazing ingenuity and fertility of mind of those in the profession who perhaps are over-assiduous in seeking to minimise the tax burden on their clients. In the last Finance Bill, 28 pages fell roughly under that heading.

If we are to keep the tax system up to date and in a form which is usable and relevant to practitioners and the ultimate clients of practitioners, we must modernise constantly to take into account the changing and increasingly sophisticated environment in which we live. There were about 18 pages in the previous Finance Bill on adapting the tax system to deal with deep discount bonds. They were welcomed largely by the practitioners in the City because they met a more complex situation which did not exist before those financial vehicles had been invented and developed.

My hon. Friend the Member for Beaconsfield mentioned the possibility of a major inquiry into various aspects of the tax system which concern him. I understand his concern, and I shall think deeply about it as I study what he said this evening. I remind him, however, that we had a major inquiry under Lord Keith into compliance with taxation. We consulted extensively and major parts of the report have already been implemented. About 30 pages of the previous Finance Bill--it was probably the largest single item in the Bill--were used to implement some of the recommendations

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resulting from the Keith commission. There has been a major investigation resulting in major legislative reforms. Perhaps the reforms need time to bed down before we take up those matters again. I am sure that my hon. Friend the Member for Beaconsfield is aware of a non-governmental inquiry into the tax system that has been carried out by Professor Sandford of Bath university, with the help and active co- operation of both Customs and Excise and the Revenue. A measure has been attempted of the burdens of compliance on industry and business, and there is no escaping the fact that they are onerous. Professor Sandford pays tribute, however, to the United Kingdom and its tax authorities. In his opinion, they are clearly ahead of the rest of the world in taking into account the compliance burdens--on this account, my hon. Friend paid tribute to the tax authorities--that tax law inevitably imposes.

We can see how far we are ahead of some countries when we compare our legislation--it embraces direct taxes and secondary legislation and has reached the giddy heights of 3,700 pages--with that of the United States, which extends to nearly 10,000 pages of direct legislation and regulation. We can claim that we have kept our legislation more continent than that of some of our competitors internationally.

My hon. Friend the Member for Beaconsfield mentioned the possibility of a technical Finance Bill which would break the present Finance Bill into two parts and, he argued, permit more consultation. We consult, and we are in the habit increasingly of publishing draft clauses. Last year we published draft clauses in respect of the European Court of Justice ruling on VAT on property, which I proudly referred to as my green budget--no one took the blindest bit of notice--in February 1989. It is quite common for us to consult in depth with the active participants of industries which are organised enough to participate. That is the case when we are involved in reforms such as those of life assurance and those affecting the oil industry.

Two Bills might well conflict with the desire for less legislation rather than more. I know that that is not the intention of my hon. Friend the Member for Beaconsfield, but such is the nature of this place that if we had two Bills passing through the House I cannot believe that it would result in less than half as many pages in each measure. Each would tend to be an opportunity for insiders and outsiders to add to the initiatives which we already had. Although the organisations of accountants and so on share my hon. Friend's concern about the burden of taxation, they are not slow to come forward with suggestions. For the coming Budget we have had from the Institute of Chartered Accountants in England and Wales 12 proposals, from the Institute of Chartered Accountants of Scotland 24 proposals, from the Chartered Association of Certified Accountants 76 proposals, from the Law Society of England and Wales 30 proposals, from the Law Society of Scotland 33 proposals and from the Law Society of Northern Ireland, commendably, a modest one. If they were given two bites at the cherry annually, those numbers would be unlikely to diminish. Although we do not satisfy them all, inevitably they put ideas in our mind.

My hon. Friend has highlighted a serious matter, to which the Government attach the highest importance.

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They will constantly strive to simplify and lighten the burden which the tax system imposes on practitioners and on industry. I shall consider my hon. Friend's proposal for an inquiry or commission to study the matter. Obviously, if that idea bears fruit, he will hear more about it in due course. I am grateful to him for bringing the subject to the attention of the House.

Question put and agreed to.

Adjourned accordingly at sixteen minutes past Eleven o'clock.

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