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Mr. Jacques Arnold (Gravesham): On a point of order, Mr. Deputy Speaker. Can you confirm, as I have just entered the Chamber, that we are discussing the Finance Bill? I have heard nothing to do with the Finance Bill for many minutes.
Mr. Deputy Speaker (Sir Geoffrey Lofthouse): I do not think that the hon. Gentleman has just entered the Chamber; he was here before I took over the Chair. I have been listening very carefully, and the hon. Member for Oxford, East (Mr. Smith) has been in order. He referred to the Finance Bill. He nearly got outside it, but he referred to it, although very late.
Mr. Smith: The tragedy of today's Conservative party, in the Finance Bill and in everything else it does, is that it has allowed itself to be enticed down the road from one-nation Conservatism to the unthinking, uncaring free-for-all, where the only duty of Government is to hang on to power.
Lady Thatcher can talk. There are a few Conservative Members who know that she started it all when she said that there was no such thing as society. When social cohesion is weakened, as the Government have weakened it, and when broken promises, incompetence and weak leadership destroy confidence in what we can achieve together, there is nothing left but everyone out for themselves. That is how we end up with a Government who stumble from one crisis to another, whose only abiding function is survival, where the dismal calculus of avoiding defeat for the party always comes before the needs of the country.
Demoralised Conservative party members will search in vain for any hidden strengths, in the Finance Bill or anywhere else. I know Conservative Members who believe that rarely has so much paper, as in the Bill, included so little substance. It is extraordinary that a Government who are so long on the rhetoric of tax and regulation burdens on business should add so copiously to tax legislation: the longest Finance Bills ever produced have been introduced by them since the last general election.
Last year, we joined the hon. Member for Beaconsfield in defeating the Government on tax simplification; yet this year's Bill--the second longest presented to the House since the last election--shows how much further there is to go. According to the Financial Times, the former president of the Institute of Taxation read the Bill with
"resignation and desperation", because of the underlying complexity of British tax law.
Although, for the first time, nine clauses and three schedules were drafted by private sector practitioners, there is no evidence that they were able to improve on the work of the Office of Parliamentary Counsel. The Chancellor's separate Budget proposal to rewrite the revenue tax code in plain English followed our own calls for simplification, and
we support it, but the House will have to give careful consideration to how that is to be done. We shall need to examine how far clarification of the language can be achieved if the underlying tax structures and the literal interpretation of tax law are left unchanged. We shall seek further debate on that in Committee.
We shall scrutinise the Bill closely, and we shall take every opportunity to improve it as we improved last year's Bill. We shall continue to expose the Government's failure to implement the Greenbury report fully, or to get to grips with abuses in the privatised utilities. We shall press for full disclosure of directors' pension entitlements. Disclosure and transparency are sound principles, in the interests of shareholders and regulators as well as the general public.
We shall raise important questions in regard to the way in which the privatised utilities' affairs are being obscured from public scrutiny when they are incorporated as subsidiaries of larger groups. It cannot be right that, as the water regulator puts it,
There is no doubt that the public want proper accountability and an end to abuses, and it is up to the House to ensure that they get that. It was the Labour party--speaking up for public opinion--that forced the need for action on to the agenda. We shall keep up the pressure until the people are given a fair deal.
We welcome the Government's climbdown on share options, but we shall scrutinise the detail of the Bill's proposals very closely. Our aim will be to promote wider shareholding and make opportunities available to employees, while ending the excesses that brought the executive share option scheme into such disrepute. We shall challenge aspects of the Bill that add to the burdens on business or damage job generation. We shall question the way in which the landfill levy has been introduced, and ask why the Chancellor described the cut in employers' national insurance contributions as a
"matching cut" in his Budget speech, but does not match the timing in introducing those measures into law.
We are aware of the enormous challenge--already turning into an enormous burden--that businesses, especially small businesses and the self-employed, will face in the next year and beyond because of the way in which tax self-assessment is being introduced, and especially because it is being introduced at the same time as the shift from previous-year to current-year assessment. For a long time, Labour has warned of the enormous difficulties and costs that that can cause.
We are talking about a big switch in responsibilities from the Government to taxpayers, some 9 million of whom will become responsible for calculating their own tax liability. For businesses starting up, it involves a period of double taxation of profits which will be relieved only in future years; it puts new burdens on employers, who will have to take responsibility for quantifying the taxable value of benefits that they provide for employees, and who at the same time will face a new penalty regime for their pains, as unpaid tax collectors.
Mr. Nigel Forman (Carshalton and Wallington):
Perhaps the hon. Gentleman was just about to tell us, but what would he do differently? Would he postpone self-assessment for another year?
Mr. Smith:
I was coming to that. There is a strong case for postponing the introduction of parts or all of
The Inland Revenue's own compliance cost assessment admits to extra costs of between £130 million and £250 million a year, but assumes that they are going to be offset by savings on estimated assessments, postponements and appeals. Even if that is right-- it sounds rather optimistic to me--there will be a period of double jeopardy as the new system comes in. The self-employed will still be tied up in delays, appeals and postponements under the old system, while they are simultaneously having to gear up to deal with the burdens of the new system. Furthermore, it seems likely that everyone will face the extra costs of complying with the new system, while the savings will be distributed more partially.
In addition, page 112 of the Red Book contains the revelation that the extra tax yield arising from self-assessment is going to be £850 million. That figure appears to arise in two ways: first from the effect of assessment of taxable profits on a current rather than a previous year basis, and secondly, because personal allowances will be set against the current rather than the previous year's profits. We shall debate in Committee the extent to which that will be a one-off or an on-going effect.
In any event, it means an extra £850 million tax take from schedule D taxpayers. It is a tax increase that the Government have tried to hide by smuggling it in the back door and hoping that no one will notice before the election.
The Financial Secretary to the Treasury (Mr. Michael Jack):
I have a straightforward question for the hon. Gentleman. I know that he has difficulty in dealing with this type of question, but I shall try again. I published a letter in The Independent which dealt point by point with the hon. Gentleman's allegations about self-assessment. I made it absolutely clear that profit growth accounted for the figure in the Red Book, and that there will be no double tax hit on companies. Does he agree with the analysis in that letter in The Independent? Did he even read it?
Mr. Smith:
If the Financial Secretary expects me to read his letters, it would be good if he addressed them to me in future. I should then certainly read and study them. I did not see his letter in The Independent, but he cannot dispute what appears on page 112 of the Red Book. There is a list of all the measures arising from the Budget, along with a list of other revenue and cost effects. The lists reveal an extra £850 million tax yield. Before I issued the news release, I checked the figures with the Library, which in turn checked with the Inland Revenue. We shall examine in Committee whether that is a one-off or an on-going effect.
The fact is that taxation self-assessment is going to impose an enormous extra burden on small businesses and the self-employed. If the Financial Secretary and his colleagues do not believe that, they should talk to small business men and the self-employed in their own
constituencies, who will tell them how great the extra burden will be. The Federation of Small Businesses, for example, said that it felt
Leading tax advisers are saying that the Government have not yet got the system right, and that there might well not be sufficient Inland Revenue staff available to give advice to sort things out.
"Without a listing requirement, a utility's operations could take place in darkness only penetrable by the regulator."
"strongly that at least a transitionary period of two years should be put into place during which time there should be no recourse to hefty penalties for late returns."
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