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12 Feb 2003 : Column 966—continued

Mr. Cameron: On a point of order, Mr. Deputy Speaker. Will you give us some guidance on the correct way to state Members' interests, including those of Ministers? The Bill deals with taxation arrangements for Ministers and other Members, specifically in clauses 291 and 295. Clause 295 covers transport and subsistence arrangements for Ministers. Should we have registered our interests, given that we all have an interest in the Bill?

Mr. Deputy Speaker: The Bill does not change the law in any way. I am sure that the hon. Gentleman and, indeed, all other Members are well aware of what they must do to declare their interests during debates.

6.24 pm

Mr. David Laws (Yeovil): I am delighted to be able, finally, to participate in this debate. My party welcomes the Bill, although my hon. Friend the Member for Torridge and West Devon (Mr. Burnett) may want to catch your eye later on, Mr. Deputy Speaker, to pick up on some points of detail.

I want to begin by making some general comments, and by following the hon. Member for Eddisbury (Mr. O'Brien) in congratulating all who put in the hard and not always enjoyable work involved in getting the Bill to this stage, including the Paymaster General, the right hon. and learned Member for Rushcliffe (Mr. Clarke), members of the other place and the officials who doubtless did some of the serious grind behind the scenes to introduce greater accessibility and, to some extent, simplicity to the Bill's wording.

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We have consulted a number of tax specialists about whether the Bill is a success. Perhaps the kindest thing that I can say to the Paymaster General is that the salient comment of one tax adviser was that they take a very dim view indeed of measures such as this, which, in simplifying the tax system and making it easier for people to understand, could reduce their own fee income.

Dawn Primarolo: I am grateful for the hon. Gentleman's point about whether practitioners are happy with the rewrite. I direct him to the support papers, which include a list of all the changes that tax practitioners would like to be made to the system, every one of which would increase the complexity but none of which would pass the test of simplification.

Mr. Laws: I take the Paymaster General's point, but I hope that she noted the somewhat barbed compliment that was being paid to the work that she, her officials and others have done in respect of this Bill.

Dawn Primarolo indicated assent.

Mr. Laws: In making the tax system more accessible and simpler for the ordinary man in the street, they have created a potential benefit for the economy—even if it is a disbenefit for tax accountants.

Several detailed points have been made in the debate, one of which concerned the potential cost of measures such as this. In her closing comments, will the Paymaster General say a little more about what we have learned from the Capital Allowances Act 2001—one of the first benefits of the work done by Tax Law Rewrite Committee—whether business or tax advisers have made representations about the effects of that measure, and whether it has made the system simpler or added to costs in any respect.

Perhaps the most important point that I want to make, which was touched on by the hon. Member for East Worthing and Shoreham (Tim Loughton), was also made in a debate in another place in January of last year. It is not the same issue that many Conservative Members sought to raise—whether the Bill's detail could change the precise nature of our tax law—albeit that that is a very important issue about which legitimate concerns have been expressed, including by my hon. Friend the Member for Torridge and West Devon; rather, I am referring to the point made by Lord Howe in a debate in January 2002 about the general desire of both Houses, and of those involved in the Bill, to make the tax system more accessible, simpler and more economic to use, not just for tax practitioners but for businesses and individuals throughout the country. There is a great danger that this attempt to make the wording of tax law simpler to understand will mask other problems with the way in which the tax system has developed in recent years, not least since 1997.

Lord Howe said:

such as the Bill—

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Lord Howe was warning us that we have much to learn. That is especially true of the Bill. Changes introduced by successive Chancellors, not least the current Chancellor, may not complicate the words that we use in tax law but they can certainly complicate the tax system itself, which is far more important.

Mr. George Osborne: The hon. Gentleman cites the sage words of Lord Howe. How would Lord Howe's comments apply to Liberal Democrat plans for local income taxes? We should then have 20, 30, 40—

Mr. Deputy Speaker: Order. The hon. Member for Yeovil (Mr. Laws) must not be tempted down that route.

Mr. Laws: It is immensely tempting, but I shall adhere to your ruling, Mr. Deputy Speaker.

Lord Howe continued:

Without straying from the substance of the debate, will the Paymaster General describe how we can embed the simplification of new tax changes in the Finance Bill and Budget processes; and how we can move away from the general trend of tax policy, especially over the past five years, to complicate the tax system, thus making it more expensive for practitioners and businesses to use?

Finally, I pay tribute to the Paymaster General for her work on the project. I hope that it will be the beginning of a process that ensures not only that the words in the tax system are easier to understand, but that the system itself is simpler.

6.32 pm

Mr. John Burnett (Torridge and West Devon): I, too, pay tribute to Lord Howe, the right hon. and learned Member for Rushcliffe (Mr. Clarke), the Joint Committee and its officials and the Paymaster General. The rewrite project has been her Herculean labour.

The Capital Allowances Act 2001 was a significant improvement; it was reasonably intelligent legislation in which numerous provisions were dovetailed. This Bill does the same thing. I hope that, as the right hon. Lady has assured us, successive measures will continue to be written in the same style so that they fit easily and intelligibly with the Bill. The Joint Committee's ambitions have mainly been achieved. The use of plain English, with shorter sentences and a clearer structure, is welcome.

As I have said before, successive Finance Acts have added countless complications and numerous rates of taxes. It is asking enough of the Committee to rewrite the plethora of existing legislation and to dovetail it in specific Acts; the Government must resist the temptation gratuitously to tinker with the tax system, thereby making it more complex.

I do not want to be too pedantic and long winded, but there have been one or two changes, and they may not be inadvertent. Clause 684 is intended to correct PAYE

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regulations, some of which have operated ultra vires since 1960, especially those on the coding-out practice—a system of re-coding in the subsequent year underpayments made in the previous year.

I do not mean to be churlish, but one or two parts of the Bill are unnecessarily long winded. I am grateful to the Law Society for prompting me. I cannot understand why there need to be 15 definitions of "employee" and why clause 66(1)(b) and 2(b) inexplicably contain two definitions of "employer".

Clauses 638 and 639 deal with exemptions for awards for bravery. Right hon. and hon. Members will recognise that individuals who have won the Victoria Cross or other decorations do not have any complexities attached to their tax affairs. It should be made clear beyond all doubt that the entire income gained from a hard-won award is free of taxation. Both clauses begin:

I am not convinced that that wording will be fully effective. The fact that liability may not arise on those specific items of income does not seem sufficient to exclude the recipient's total income, which might affect the individual's entitlement to age allowance. I raise that point not because I think that income will be taken into account by the Inland Revenue but because, in the interests of the House and all taxpayers, it should be made absolutely clear that my understanding is correct—that payments for valour will not adversely affect any aspect of an individual's liability to tax and that he will be entirely free of taxation.

That is a small but important point, not least given the great sacrifices made by our service men and their families, who are likely to be called upon to do the same in the near future. If we can get that clarification on record in the spirit of Pepper v. Hart people will know how the system should operate.

The Bill is a success and perhaps the Paymaster General will remind us about the next project, which is probably in tow as we speak. I congratulate all those responsible for the measure; it is a remarkable improvement on what has gone before.

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