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Mr. Jack: I am grateful to the right hon. Gentleman and I have been following his line of argument closely. Does he agree, however, that it is to be welcomed that, wherever possible, the Inland Revenue consults widely on clauses which ultimately will find their way into Finance Bills? There is a real attempt to enable those who will be
affected by certain legislation to have a say at an early stage in the drafting of a proposed parliamentary enactment of such legislation.
Mr. Davies: The hon. Gentleman has not been in the House very long, but history reveals that when some of us were Ministers, we published entire Bills as draft clauses. The development land tax legislation was published as draft clauses as was the banking legislation that I introduced in 1976 or 1977. When the Conservative Government came to power in 1979, however, the policy of publishing draft clauses was stopped and they took a Leninist attitude to pushing through all legislation as quickly as possible. The Minister cannot say now, 16 or 17 years later, that draft clauses are a good thing. Why have not we seen more of them since 1979?
Mr. Tim Smith (Beaconsfield): When I asked the hon. Member for Oxford, East (Mr. Smith) whether the present level of interest rates were too high, too low or about right, he did not answer the question, but we should not be surprised about that because he does not answer any questions on matters of economic policy. He said that long-term interest rates are too high and something should be done about that. When he was asked what should be done, he said we should increase investment as if that would bring down interest rates.
Apart from the fact that that is economic gobbledegook, the reason why we have higher real interest rates than Germany is that we have a poor record on inflation over a 35-year period and people still do not believe that successive British Governments will commit themselves to consistently low inflation, although the very low inflation under the present Government will clearly remain in place under the present arrangements vis-o-vis the Bank of England.
One reason why we have a wide differential is that the markets naturally fear that we may have another Labour Government and Labour has the worst record of all on inflation. Labour Members may find that amusing, but in 1975 we had 26 or 27 per cent. inflation under Denis Healey and gilts, which were issued on a coupon of about 15.5 per cent.--the highest ever interest--not surprisingly, were known in the market as Healeys. Gilts are no longer issued at those excessive rates of interest today because we have low interest rates and low inflation, but the markets fear what Labour might do because of its appalling record. That is one reason why we have to bear the burden of higher real interest rates. To believe that increased investment will somehow solve the problem is to get the argument the wrong way around.
If one were to single out one criterion against which to assess whether the Government are pursuing a successful economic policy, undoubtedly opinions would differ as to what that should be. However, I believe that many people would choose to use the level and the trend of unemployment. On that score, the Government's record is one of the most successful in the European Union.
Of course, it suits the hon. Member for Oxford, East simply to quote the absolute figures and to say that the present level of unemployment is still too high at 2.2 million. I agree with that. However, we should compare our record with that of the other major member states of the European Union. Unemployment in France is rising and Germany faces considerable difficulties because of the huge on-costs associated with the employment of labour. Spain, under a socialist Government, has an unemployment rate of more than 20 per cent. Those countries have much higher rates of unemployment than Britain and they do not know how to tackle the problem.
Mr. Andrew Smith:
While the hon. Gentleman is making comparisons, will he recognise, first, that we are not talking about absolute numbers: we are talking about people, their lives and their prospects of making a decent livelihood? Secondly, will he tell the House why average unemployment under the last Labour Government was 960,000 when it has been 2.4 million under this Government since 1979?
Mr. Tim Smith:
I agree that the absolute number refers to an absolute number of people. That is why I have said that 2.2 million is an unacceptably high level of unemployment. My point is that the Government have put in place policies that are designed to decrease the level of unemployment by reducing employers' payroll costs. For example, the £500 million that will be raised by the landfill tax will be used to reduce a levy on employment. That is extremely welcome.
The Labour party wants to impose extra costs on employers--I suspect that that is what the Leader of the Opposition meant in his speech about a stakeholder economy. That is what the social chapter is about: it would introduce the very costs which are driving German manufacturers to ensure that products are manufactured anywhere but in Germany, where manufacturing costs are high. Although the present level of unemployment is too high, we can be proud of our job creation record.
Another criterion that one might choose is manufacturing productivity. Our record in that area is even better, as all independent assessments show that we have narrowed the gap with Germany very substantially in the past 16 years. On that basis, I believe that we have a successful and a growing economy.
I now turn to the Finance Bill and to the subject of self-assessment, which the hon. Member for Oxford, East touched upon. I do not think that there is any disagreement about the principle of self-assessment. I understand that the Opposition support the introduction of self-assessment and the Public Accounts Committee has argued consistently for a change from the prior to the current basis of assessment for the self-employed.
Self-assessment has had a long programme of introduction and I pay tribute to the Inland Revenue for the work that it has done. It has bent over backwards to consult taxpayers, to whom it has sent sample tax returns. We must accept the fact that, when one introduces a change of that kind, some people will pay no attention to it until the new tax return lands on their doormats. However, I do not believe that we should criticise the Inland Revenue, which has made a great effort to consult taxpayers.
The Inland Revenue recently sent a tax return consultation pack to all Members of Parliament. I do not know whether anyone has taken the trouble to read it, but when I received the pack requesting my comments I telephoned the Inland Revenue. Three officials came to see me and I discussed with them the form that they proposed to send to Members of Parliament. It seemed to be unnecessarily complex compared with the present system. I am glad to say that the form has been simplified considerably for the latest round of consultation. However, I understand that Inland Revenue must ensure that every contingency and possible situation is dealt with, which leads to a degree of complexity.
I think that we should allow the measure to proceed. I shall be interested to hear the arguments that are advanced in Committee, as I do not see how one can defer one part of it while introducing another. That does not make a great deal of sense to me, but we shall discuss the matter in detail in Committee.
The right hon. Member for Llanelli (Mr. Davies) referred to tax simplification. I welcome the report that the Inland Revenue published before Christmas to comply with section 160 of the Finance Act 1995. I particularly welcome the fact that the Inland Revenue seems to have had a substantial change of heart and that there appears to be the political will to address the problem.
The right hon. Gentleman was correct to draw the attention of the House to the speed at which the size of Finance Bills has increased. I have the figures for recent years. In 1986 the Finance Bill was 265 pages long. I think that the right hon. Gentleman said that this year's legislation comprised 408 pages. In 1993 it was 415 pages, in 1994 it was 616 pages and last year it was 505 pages. So we have seen a huge growth in the size of the legislation. Of course, the problem is not simply the growth in the legislation--if it were clear and easy to understand perhaps we would have no difficulty. More important is the complexity of the legislation.
I think that Inland Revenue has been persuaded that the problem is of sufficient scale that it must be tackled. I believe that the exercise will be justified in terms of the benefits that will accrue, although I know that some cost will be involved. However, I do not suppose that the man on the Clapham omnibus will be much the wiser. We are currently concerned that professional tax advisers-- accountants and lawyers--find the legislation difficult to understand. That is not a satisfactory situation and we must address the problem. Fortunately, most taxpayers are pay-as-you-earn and they do not need to read the Finance Bill every year--which is just as well--but we must produce intelligible legislation for sophisticated taxpayers and professional tax advisers. I believe that the Treasury is now committed to a programme that will deliver the desired benefits.
Of course, some consideration must be given to the parliamentary procedures, as the change will fall somewhere between consolidation legislation and the major changes in the law that we associate with a Finance Bill. As it will give rise to voluminous documentation, I believe that the Procedure Committee should consider how we shall deal with it.
The right hon. Member for Llanelli mentioned Pepper v. Hart. I do not think that the concerns are as great as he suggested because Pepper v. Hart applies only where the law is absolutely ambiguous and it is not possible for the
court to determine what Parliament intended simply on the basis of the words of the Act. It is only in those circumstances--which hopefully shall be rare when we simplify the wording of the legislation--that the courts will refer to Hansard to see what was said.
However, I agree that it must affect the way in which Ministers approach matters in Committee if they know that their every word will be scrutinised in the same manner as the words of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) in the matter of Pepper v. Hart, which I understand related to the 1976 or 1977 finance legislation. I welcome the tax simplification programme and I hope that we shall be able to make good progress with it.
Finally, while I welcome the fact that charities will be assisted by the increase in the maximum amount under the give-as-you-earn scheme from £75 to £100 per month, they will lose out as a result of a reduction in the standard rate of income tax. Although the Government have done a great deal in the past few years to encourage people to give money to charities--there is no tax reason to prevent it, as it is an extremely tax-efficient exercise--charities have been subjected to considerable extra taxation. I refer particularly to the value added tax burden on charities.
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