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10.5 am
Sir John Cope (Northavon): I am very glad that the hon. Member for Caithness and Sutherland (Mr. Maclennan) secured this debate. He has opened it in a very interesting way.
I am also glad to see on the Front Bench my hon. Friend the Parliamentary Secretary, Office of Public Service, the hon. Member for Havant (Mr. Willetts), who will speak from the Dispatch Box for the first time. I am sure that he will speak many more times, but it is good to be present on the first occasion on which an ornament to the Government Front Bench makes his first speech.
The House has, of course, two main duties. The first is to monitor the Executive, which incidentally is primarily done through the fact that Members of Parliament are the main members of the Executive, rather than by other processes. The second main duty is, of course, the passage of legislation. The record suggests, and the hon. Member for Caithness and Sutherland has suggested, that the House is not very good at scrutinising legislation. I do not quarrel with that, and I believe that we are bad at the drafting as opposed to the policy of legislation.
We often do not even attempt to draft legislation. For example, one frequently hears a Back Bencher say in Standing Committee that he is moving an amendment that he wants the Government to agree with in principle, and
that he is happy for them to redraft it using the proper words. In taking that attitude, which is common, we are negating our responsibility for the drafting completely. It is understandable, but it is an illustration of the way in which we fail to even attempt to look at the drafting of legislation.
For that reason, it is right to go back up the legislative chain and consider drafting as we are doing this morning. I have had experience in various Government Departments over 15 years, half as a business manager and Whip, but the other half in various Departments. I know, as the hon. Member for Caithness and Sutherland has said, that it is extremely difficult for Ministers and for Departments to deal with parliamentary draftsmen. They are a small, exclusive, highly skilled band. Incidentally, they occupy a very nice office in Whitehall which was formerly the office of the Paymaster General. However, by the time I became Paymaster General, that office had long been taken over by the parliamentary counsel.
Ministers are somewhat insulated from draftsmen by their departmental lawyers. Most of Ministers' dealings on the drafting of Bills are with departmental lawyers, and they only have contact with the draftsmen on relatively rare occasions. I fully recognise the difficulties that the hon. Member for Caithness and Sutherland described in his dealings with the Consumer Credit Act 1974. I do not actually recall that Act passing through the House--he was kind enough to suggest that I might--but I recognise the difficulties that he had in dealing with the draftsmen. There are always good reasons, not bad ones, why it is difficult to alter the drafting, as Ministers sometimes wish. Often the process does not allow enough time for parliamentary draftsmen to do their work thoroughly.
Finance Bills represent a particular piece of the jigsaw puzzle. A number of reports have been published recently on the drafting of Finance Bills. The hon. Member for Caithness and Sutherland founded the debate on that published by the Hansard Society, but the tax law review committee of the Institute of Fiscal Studies published an interesting one recently. Yesterday, the Inland Revenue published its report on clause 160 of the Finance Bill, which was considered earlier this year. I shall refer to that interesting report later.
Finance Bills are obviously long and obtuse. They represent the one part of the revenue-collecting machinery that is not yet in the process of a massive sea change. They are about to be so, however, as a result of the reports to which I have already referred.
Customs and Excise and the Inland Revenue are already engaged in a massive programme of sea changes involving computerisation, the streamlining of offices and so on. The Inland Revenue used to have 104 offices, but in a few months time it will have just 29. That is one measure of the changing nature of the Inland Revenue. Another is the self-assessment of income tax, of which we are all becoming conscious.
Sometimes it is necessary to go through to complex procedures to reach simplification. The change involved in self-assessment is extremely elaborate, and legislatively and in fact the learning process through which people will have to go to get to the simpler system at the end-- hopefully it will be simpler--
Mr. Austin Mitchell (Great Grimsby):
Hopefully.
Sir John Cope:
Yes, hopefully--that process is complex.
Both departments have made great efforts to make taxation more user friendly. While I was responsible for Customs and Excise, it won a number of plain English awards for its leaflets. I fear that the parliamentary draftsmen's office is still a long way from receiving such awards for its efforts to produce legislation. It is important to remember, however, that the preparation and drafting of legislation are the basis on which leaflets are produced. Those leaflets cannot be clear if the legislation is not clear. That is why I welcomed the recent report from the Inland Revenue and its positive attitude.
Tax legislation is included in Finance Bills by three routes. First, those Bills include the simple kind of tax legislation that implements a change in rates announced in a Budget. The Bill would act on the instruction to "delete 25p and insert 24p", to take the current example.
The second route relates to the complex changes to tax law announced in a Budget, and implemented straight away in the forthcoming Finance Bill. The third route relates to the slow-motion changes in tax law.
Even the simple change of rates can produce problems regarding drafting and complexity. I am glad to say that we reorganised the vehicle excise duty categories a couple of years ago. Over the years, the number of categories, of which there were far too many, had become encrusted with all kinds of detail. We were able to clean that up. Such problems are therefore evident even in the simple types of tax legislation.
The second type of change, the complex tax changes announced in a Budget, cause a much greater problem because of the speed at which they pass from the Budget speech--the first public announcement of the proposal-- into law.
The third category, of slow-motion changes, should be the one that causes the least problem, because there is no time pressure. In the past 10 years, there has been a greater tendency to spend far longer on consultation during the period of gestation of such tax reforms. There has been far more consultation, more Green Papers and White Papers, including the publication of draft clauses to the Finance Bill in those White Papers.
Those changes are not, of course, considered in the House until the last moment in Committee, but intense consultation is conducted by committees and trade and professional groups outside the House. The hon. Member for Caithness and Sutherland criticised the Government for the lack of such consultation, but I hope that he will acquit the Revenue departments of that charge. After all, the report of the Hansard Society specifically mentioned Customs and Excise and the Inland Revenue as examples of good practice on consultation.
Such consultation documents often include draft clauses, and I believe that the Law Society has frequently commented on such documents, so the attitude that the hon. Member for Caithness and Sutherland reported it as taking surprised me somewhat. It is certainly true that other professional bodies frequently comment on such documents.
The first reason for the complexity of tax law is a desire for equity. That is natural in politicians, but it helps to make for extra complications when extra categories of people must be dealt with and given special treatment.
The second reason for that complexity is the desire to prevent avoidance. Those reasons are policy reasons for complexity. Both are difficult to avoid, and both are at their worst when there are high rates of taxation.
There are other reasons for complexity. First, it feeds on itself. When one has complex laws, it involves great complexity to alter them. We must remember that the tax law and other legislation must reflect the increasing sophistication of the outside world, particularly the financial one.
Another reason for complexity is the parliamentary draftsmen's desire to avoid the uncertainty of novelty. That is why they constantly want to use the old words and phrases used in previous Acts. That is why they constantly want to bolt changes to the law on to existing law.
I have already said that avoidance rates are at their worst with high rates of tax. When the top rate of income tax was 98 per cent., there was a massive incentive for people to invent tax avoidance schemes. The Government therefore had to invent anti-avoidance schemes. They are largely responsible for the current complexity of income tax law.
The trouble is that, even though rates are now much lower, and the top rate is very much lower than it was, one cannot uninvent the tax-avoidance schemes worked out. One cannot therefore repeal that anti-avoidance legislation easily.
Complexity is also caused by the length of time a tax has been in existence. We have had income tax for a century and a half or more, so it is no wonder its legislation has become more and more complex. Value added tax is now getting complex because it is becoming an older tax. To start with it was a pretty simple tax, but it has now become extremely complicated. There is no serious accountancy firm that does not have a special department of experts to deal with VAT. An added complication are the various European Community agreements which we have made. They, too, are another reason for the complexity of VAT.
All those reasons seem to suggest to me that, to a certain extent, it is down to us as politicians--both the Government and the rest of us--to give a higher priority to the simplification of tax when putting forward policies and urging the Government to make changes.
I also think that it is important to examine our procedure in that respect. During the Budget debates, I drew attention to what my right hon. and learned Friend the Chancellor said--in column 1066 of Hansard, appropriately enough--on that matter:
He was referring to the rewrite covered in the Inland Revenue documents, which were published yesterday. My right hon. and learned Friend was right to draw attention to the issue and we should pay some attention to it.
Some say that the Finance Bill should be published earlier, perhaps before Christmas, so that there would be more time to consider it before it is debated in the House. I would prefer the Provisional Collection of Taxes Act to be altered, so that there is not the necessity, at the end of the Finance Bill, to complete it within the period presently allowed. The Finance Bill timetable could then move a little further around the year. Of course, changing the Budget
date to November has already facilitated that to some extent, but it is not easy to achieve it within the context of the whole of the Government's legislative programme.
We may need to consider a different procedure for simplification Bills. We already have a special procedure for consolidation Bills, when we can discuss only whether it is an accurate consolidation. In practice, it means that those Bills are not debated. We now have the new procedures for dealing with deregulation. I believe that we also need a new procedure for simplification Bills, so that we would be allowed to discuss only the substantive changes, but not changes made to the wording simply to improve drafting and clarity.
"We in the House will need to look at our procedures, to see how that tax rewrite can be sensibly handled."--[Official Report, 28 November 1995; Vol. 267, c. 1066.]
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