House of Commons Hansard Debates for 5 Jul 1999 (pt 49)

1.15 am

I have the privilege to be joint chairman of one of the most important all-party groups in the House--the all-party racing and bloodstock industries group. The Government have already been forced to cut VAT on training fees because of action by the Irish Government in reducing theirs, and to stem what was threatening to be a flood of horse migration. We have a much reduced stallion base in this country at the moment. Why? Because the Irish have a better tax regime on stallion allowances, so more and more people are sending their mares to Ireland. That is the physical movement towards a lower tax regime.

To take a current example of the way in which electronic means are enabling companies to avoid tax, a well-known bookmaker has set up its operation in Gibraltar, letting its clients off the requirement to pay betting tax of some 6 per cent. on winnings--a loss to Government revenues. The age of digital cash is before us; we ignore it at our peril.

It is late at night--[Hon. Members: "Hear, hear."] I take those cheers as encouragement to develop my argument, but I feel that I should draw my remarks to a close.

New clause 11 peels back the first corner in drawing attention to the huge changes that are upon us. I hope that the Financial Secretary--who rescued small businesses in her first year as a Minister and has inflicted the might of the Treasury in her second--will grasp the point that is being made tonight.

Sir Robert Smith: The hon. Member for South-West Hertfordshire (Mr. Page) mentioned the problem that

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conscientious people face when the tax system is complex. The Government need to bear that in mind when considering new clause 11. The more complex one makes the tax system, the harder it is for the conscientious, but one does not necessarily catch those who are fleet of foot or less conscientious, who can evade or accidentally avoid the system. New clause 11 is partly designed to tackle the burden and stress placed on the conscientious.

I agree with the hon. Member for Arundel and South Downs (Mr. Flight) that new clause 11 would deter the Government from making a mess of IR35. I have with me a letter from the Institute of Chartered Accountants of Scotland, expressing great concern that IR35, as currently proposed and currently out for consultation, might do immense damage through its compliance costs.

The IT industry was mentioned. Worry has also been expressed in the media industry. However, as a result of where I come from, my postbag is obviously most heavily influenced by those who work in the oil industry, providing their services as single-person companies. There is concern about the extra burdens placed on the industries for which those people work, which must meet the costs of trying to police the system. Those who work in the industry have already experienced cuts in their income because contracting fees have been reduced, and further cuts are likely in order to pick up the extra costs of taking on board pay-as-you-earn and national insurance.

I hope that, when the Government consider IR35, they will show some of the flexibility and understanding that they eventually did when they considered roll-over relief for capital gains tax. I hope that they will enter into effective consultation with the industry to work out where the real concerns are on tax avoidance. In that way they will avoid using a sledgehammer to crack a nut, which appears to be their approach at the moment.

I urge the Government to accept new clause 11 because it is in their own interests to have it sitting there, waiting for them every year, to remind them not to put their foot in it, not to make mistakes, not to damage industry, and to think carefully before introducing any new tax system.

Mrs. Roche: The debate has been interesting, but new clause 11 is completely unnecessary; I shall say why.

First, the material published on Budget day contains comprehensive details of any changes in the number of taxes, tax rates, allowances and reliefs. Secondly, the Government also publish regulatory impact assessments for those measures included in the Budget that have compliance implications for businesses. Thirdly, the Government are committed to simplifying the administration of the tax system wherever possible. We are also looking to improve the administration of taxes and to restrict compliance burdens--for example, by introducing the new Small Business Service.

Including the new clause in the Bill would therefore add nothing. Indeed, it would be unnecessary regulation. The Treasury has already set out a transparent framework within which it will work in the code for fiscal stability. That outlines the Government's commonsense approach

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to managing fiscal policy in the long-term interests of the country. I therefore urge the House to reject the new clause.

Mr. Edward Davey: I take it from the number of hon. Members who are in their places tonight that the theme that is expressed in the new clause has caught the attention of the House. It is a compelling new clause and there is interest in it. There are more hon. Members in their places for this debate than there were for almost all of the previous debates during today's sitting. I am rather pleased that we have been forced to debate the new clause tonight because there have been enough Members present to listen to the serious arguments that have been advanced.

I am delighted that we have won the support of the hon. Members for Arundel and South Downs (Mr. Flight) and for South-West Hertfordshire (Mr. Page). I am grateful for their kind words. However, they should not be as surprised as they seem to be that the Liberal Democrats propose such reforms. We and our predecessor parties have a long tradition of trying to simplify the tax system and reduce bureaucracy. For example, there are also proposals to integrate income tax and national insurance contributions.

In the Minister's admirably short reply she was rather dismissive, and unnecessarily so. She said that the new clause and the proposals set out in it were unnecessary. When referring to paragraph (c), she said that the Government are committed to simplification. If they accepted the new clause, they could give some solemnity to that commitment and take on the requirement that they should report to the House on every Budget day about progress towards simplification. That is not a hugely onerous regulation. The Minister seemed to suggest that the new clause represented unnecessary regulation. The Treasury does not appear to like regulation of itself but often it likes regulation of the private sector. We are proposing a sensible regulation.

Given the lateness of the hour, however, and given the Minister's assurances that the Government will move the agenda on--I hope that that comes to fruition in next year's Budget statement--I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Further consideration adjourned.--[Mr. Jamieson.]

Bill, not amended in the Committee, and as amended in the Standing Committee, to be further considered tomorrow.