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Mr. Quentin Davies (Grantham and Stamford): Before I deal with the substance and the merits, or otherwise,of the amendment and the clause, I draw to the attention of the Committee and, I hope, of an increasing number of people outside who have not yet focused on what is going on, the extraordinary degree to which the drafting of the Bill represents an invitation to Parliament to abdicate its responsibility for deciding on the taxes to be levied on the British people.

As you know, Mr. Butterfill, I have served on Finance Bill Committees for several years. On many of those Committees, I had the pleasure of serving with you. I have never read clauses that were so open-ended in providing for the Revenue to make up our tax laws as it goes on.

Clause 30 states:

What does that mean? It simply means that the Treasury can write its own tax laws after Parliament has finished with the Bill.

Subsection (2) states:

What can be clearer than that? The Treasury may by regulations make provision for amounts to be paid to be determined under the regulations. In other words, we give a blank cheque to the Revenue.

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Similarly, schedule 4, which refers to new section 59E, states:

In other words, the Treasury will have the right to change existing tax law--in this case section 826(2)--and substitute more or less whatever it wants.

That is not hyperbole. It is what the Bill would allow. Such arbitrary taxation is associated with the Turkish empire, perhaps, but not with a free society and a regime in which the representatives of the governed discuss in detail, debate and determine the basis on which the public should be taxed. Parliament cannot pass the clause this evening and look itself in the face tomorrow morning.

When I read these clauses, I thought that it might be much easier if the new Labour Government, with a majority of 179 over all other parties, decided that they could do what they pleased with the House, and introduced a one-line Bill allowing the Treasury to impose such taxes as it wishes. [Interruption.] That is what is happening under the clause, which states that the Treasury shall impose such corporation taxes as it wishes.

I see some of the Labour Members who make up that absolute majority of 179 over all other parties sitting in the Committee this afternoon, not trying to take part in the debate--we have heard three contributions from the Opposition, without any interruption--but laughing. Perhaps they think that they were sent to this place to do whatever Walworth road or the Whips or No. 10 tell them, and not even to look at the implications.

The clause represents a sad and dangerous precedent. In a sense, it does not much matter what taxes we have, whether they are too high or too low, whether they are good or bad, if Parliament has considered them in detail and Parliament can subsequently amend them. However, we are invited this afternoon to hand over our own judgment to unelected officials in the Treasury and the Revenue.

We must read the Bill in conjunction with press releases from the Revenue, telling us what it might be minded to do if it were given the powers which, with the Government's majority, we know that it will be given. If one examines the Government's intentions under the clause, serious pragmatic issues for British business arise.

I reinforce the comments of my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) about the way in which the corporation tax provisions in the Bill are used to impose a surreptitious and covert increase in the burden of corporate taxation. The figures are in the Red Book produced by the Government.

The Paymaster General (Mr. Geoffrey Robinson) indicated assent.

Mr. Davies: I see the Paymaster General nodding.I wonder whether he will have the courage to quote the figures. In all the discussions that we have had on the Bill since the Chancellor's Budget speech, the Government have never done so. They have never drawn attention to the actual increase in the burden of corporation tax. They have disingenuously implied that the Budget relieves the burden of corporation tax. It does not. Although there is an apparent reduction in the rate of corporation tax, that

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relief, as my right hon. Friend pointed out, is more than compensated for by the cash flow effect of introducing quarterly payments of corporation tax.

The Paymaster General is leafing through his papers.I can tell him what the figures are. In the first financial year in which the provisions will apply, 1999-2000, the net burden on industry will be £1.6 billion; businesses will pay more in corporation tax, taking into account the apparent relief through reduction of the rates but the increase in the burden because of the acceleration of payments through quarterly payment. In the following financial year--I shall give way to the Paymaster General if I am wrong in quoting from the Red Book, but he knows that I am not--the net incremental burden on business will be £2 billion. If the Labour party has the slightest respect for the facts and the slightest inclination to be straight with the British people, it should not claim that the Budget reduces the corporate tax burden. This Budget increases that burden by a significant amount of money.

Let us turn to the merits in principle, irrespective of what is raised as a result of levying corporation tax on this new basis. I agree with my right hon. Friend the Member for Hitchin and Harpenden: I do not object to quarterly payments in themselves, but quarterly payments of what? The Government are introducing for the first time in tax law quarterly payments of tax for which a company is liable in the current year. In other words, companies will have to predict their profits for the current year and pay--not just make notional provisions in their accounts--those sums of money during the year in which those profits are earned.

That is an extraordinary state of affairs. At present, income tax payers who come under schedule D make payments twice rather than four times a year, on the basis of the profits on their earnings for the previous year. They know what the position is: they have closed their books for the year in respect of which they are making payments. They know the profits or the earnings on which they will make payments and they have received those profits or earnings. That is not the position here: this is a dramatic step and a dramatic change in British tax law.

The Temporary Chairman (Mr. John Butterfill): Order. I hope that the hon. Gentleman will start to address the substance of the amendment, as he is ranging rather wide of it at the moment.

Mr. Davies: When we are debating amendments to the Finance Bill, there is always slight confusion as to whether the Chairman will permit a subsequent clause stand part debate. If he decides not to do that because the discussion of previous amendments has ranged fairly widely and one has points that relate to the principles of clauses, one may find that one has lost the opportunity to put those points. I am in a difficult position as I know that Chairmen are sometimes reluctant to give guidance in advance as to whether they will allow a clause stand part debate. Perhaps you can help me, Mr. Butterfill.

The Temporary Chairman: I shall make that decision when I have heard what has happened during the debate. It is normally my practice to give guidance earlier if hon. Members have demonstrated that they wish to speak fairly widely on the amendments. At present, I propose that we have a clause stand part debate. Perhaps the hon.

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Gentleman could confine his remarks a little more closely to the clause under discussion--although I shall show a certain amount of tolerance.

Mr. Davies: I am grateful to you, Mr. Butterfill. I was trying to be guided in the extent to which I went wide of the amendment by the precedents that have been set in the discussion. I thought that I was not exceeding the margins that were established by earlier contributors, but perhaps I am in error. Nevertheless, I am sure that you would agree, Mr. Butterfill, that the essence of the clause and every amendment to it is that we are facing a dramatic--and, I believe, an extremely damaging--change to the way in which companies are taxed.

There are certain specific and pragmatic reasons why the concept cannot work in practice. That point has been made already, so I shall add to it. It will do even greater damage to the interests of British industry because it is not possible to predict what one's profits will be in the current year. Even in a relatively non-volatile market, such as retailing, one does not know whether one will have successful January or July sales. One does not know whether the car market will turn up or down: it can be affected by unpredictable changes in interest rates or in Government policy.

In other areas of business that are inherently much more volatile, profits are even more difficult to predict. For example, how could a company that has been exporting to Asia in the past year have predicted the collapse in the Asian markets? That will have had a dramatic effect on its profits. How will an insurance company know whether extraordinary claims will be made on it? It is like predicting the weather--and if a company is in the property insurance business, the weather will determine the claims on it to some extent.

There is something particularly curious about the concept of quarterly payments of corporation tax that is assessed on current year profits. It is an established fact that companies are very cautious about making profit projections for the current year. If they must pay tax to the Revenue on their profits in the current year, they cannot disguise their position from the market or from their shareholders. It is an established principle in financial markets that it is extremely dangerous to make those kinds of profit announcements, yet it follows that all British companies will have to make yearly statements on the stock exchange about their anticipated profits for the current year. As it is in the nature of things that companies will not achieve those profits--their actual profits may represent a substantial increase or shortfall on the figure predicted--the stability of financial markets will be undermined. False markets will occur and people will drive company share prices up or down for no reason. I shall give way to the hon. Member for Croydon, Central (Mr. Davies) who shares my name.

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