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Mr. George Osborne: The Chief Secretary persists in calling this new tax a stamp duty. Will he confirm that there is no stamp involved, and no duty?
Mr. Boateng: We have grown very fond of the hon. Gentleman in the course of our deliberations—[Interruption.] Well, I am of a naturally generous disposition. The hon. Gentleman repeats the same old canard. I referred him to the measures introduced in 1986 by his party, which sought to start the modernisation process but never got anywhere. This Government have had the determination, courage and commitment to modernise and, as a result, we have the SDLT, which we commend to the House, despite
unhelpful attempts by Opposition Members to amend it. Where the provisions have been amended in a helpful way, we have accepted the proposals; where the amendments have not been helpful, we have resisted them. So far the House has been with us in resisting the Opposition's attempts to delay an important and welcome act of modernisation.The Finance Bill also meets our environmental responsibilities to use our resources sustainably. To ensure that we carry out our responsibilities to future generations, it contains a carefully calibrated tax and economic incentives to encourage that, while not undermining the necessary incentives to promote the competitiveness of British business.
Mrs. Gillian Shephard (South-West Norfolk) rose—
Mr. Boateng: I give way to the right hon. Lady, whose particular interest in biofuels will, I hope, be shared with us in tonight's proceedings.
Mrs. Shephard: My intervention will provide me with that opportunity. I am listening to the Chief Secretary talk about the Bill's environmental credentials, so I remind him that the proposed fuel duty reduction of 20p on bioethanol is in no way sufficient to match the Government's own objective to meet the biofuels directive. In that respect, I intend to meet the Economic Secretary—hopefully, with his encouragement—shortly.
Mr. Boateng: I know that the Economic Secretary looks forward to meeting the right hon. Lady. It will be good to see her back in the Treasury again, although I am bound to say that according to my recollection of her time as a Treasury Minister, that period was not characterised by the same environmental and fiscal incentives that have, in all fairness, characterised the present Administration's stewardship of the Treasury. She will correct me if I am wrong, but I do not believe that her record on that matter compares favourably with our own.
Mrs. Shephard: The Chief Secretary is misremembering our time in the Treasury. When he was my opposite number during a particularly memorable period in our lives, I do not recall him pressing that case. Furthermore, his own Government's stated objectives of meeting the requirements of the EU biofuels directive now oblige them to take action. I hope that he can reassure the House on that score.
Mr. Boateng: The right hon. Lady has had an uncharacteristic lapse of memory, but I can certainly assure her that we take our commitments in that respect very seriously indeed and that I look forward to hearing the outcome of her discussion with the Economic Secretary.
We now have new duty differentials for sulphur-free fuels and bioethanol; a new low-carbon band of vehicle excise duty for the lowest CO2 emission cars, which will allow motorists to save up to £110 per year by choosing
those vehicles in preference to others; and an increase of £1 per tonne in the landfill tax rate for this year and the next to provide business certainty. Inevitably—
Mr. Boateng: I hear the right hon. Gentleman muttering, "Customers pay" from a sedentary position, but it is right to recognise the "polluter pays" principle, which has not divided the parties in the past—and it would be rather sad if it were to divide us now. We have taken a range of important initiatives, which I hope will find favour on both sides of the House.
The Finance Bill is also about meeting our responsibilities to those in need. The 10 per cent. Government supplement on gifts to charity through payroll giving is extended for a further year to April 2004. That will be welcomed in the sector and throughout the House. Importantly, clause 175 recognises the role of foster carers with an income tax exemption to support their recruitment and retention by ensuring that they are not unfairly taxed on the expenses that they incur in making their invaluable contribution to society. Also importantly, in clause 174 we act to ensure that payments made to adoptive families under the Adoption and Children Act 2002 will continue to be free of tax.
The Finance Bill continues our drive towards maintaining economic stability; our commitment to enterprise and fairness, which has enabled us to meet our responsibilities; and our drive to move forward with investment in public services, tackling poverty and social exclusion, despite the global turndown. I commend it to the House.
9.30 pm
Mr. Flight: I thank the Chief Secretary for his kind comments. Although there has manifestly been insufficient time, the Opposition have done our best to provide effective scrutiny of the Bill. The right hon. Gentleman put a good-natured gloss on what we feel is a bad Bill, which we shall vote against it for three essential reasons.
First, there simply has not been the time for proper scrutiny. Large chunks of the Bill will hang in mid air, unresolved and waiting for Inland Revenue guidelines or further consultation. That is no way to run a country's tax affairs. Secondly, in spite of the spin, virtually nothing in the Bill is positive for the economy or addresses the economy's pressing needs. Indeed, some of it could do substantial damage. Thirdly, behind all the language of tax avoidance, it is clear that the Bill has been about a lot of detailed work, scratching around to leech the tax system and to sweat the maximum possible revenue from all sorts of hidden, little, new stealth taxes.
This very day has given an example of the insufficient time allowed to address important territories. We did not have time to get round to several new clauses and important amendments. The time allotted in Committee was clearly inadequate for a long, complex and, dare I say it, not very well drafted Bill. The Government have been unacceptably arrogant in not giving way on allowing sufficient time. I have had the privilege of serving on three Finance Bills, and there is no record of
our filibustering or wasting time. There has been constructive collaboration, and there was no need not to allow enough time and to put in knives that resulted in some things not being covered that should have been covered while leaving potentially too much time for some other matters. Much of the Bill had to be rushed to allow us to cover as much territory as possible. Although the Government have given full responses in many areas—even if we may not have been satisfied with them—there are many others in which responses are required.As we all know, the Bill contains 180 pages rewriting the law on and changing the nature of stamp duty. Indeed, there is a new tax, and it is widely accepted that that was not properly consulted on. About 40 Government new clauses and amendments have been required to change that provision at this stage, for which only two and a half hours of debate was allowed. I should have hoped that the Government would take note of the measured House of Lords advice to delay until they could get those provisions right.
Schedules 21 and 22 are the other big area of tax law rewrite, and they relate to employee securities and options. They are not well drafted; much of schedule 22 is still quite impenetrable, and we believe that there may be unintended consequences for which the only break will be Revenue guidance. To have the Revenue acting in that executive capacity is somewhat less than proper. Allowing the Revenue discretion is not a proper alternative to getting the law correct in the first place.
With reference to the impenetrable drafting, the Institute of Chartered of Accountants said in its summary:
- "This poor redrafting of a large section of newly rewritten provisions is disappointing. We are concerned that our members will start to question our commitment of time and resources to the project"—
- "if all that happens is that, within a few weeks of legislation being enacted, the Government makes wholesale amendments to it with no proper consultation. The result is that the case for us continuing our involvement in the Rewrite of the UK tax rules is undermined. We would welcome clarification as to the Government's policy concerning the Tax Law Rewrite project given the above comments."
As is traditional, the legal and accounting professions assist in the scrutiny of Finance Bills by making representations for improvements and pointing out shortcomings that are available at the Committee stage and on Report. As the Chief Secretary recognises, the Opposition have done their utmost to give voice to those representations, but much in the Bill is still not properly resolved; to quote the Foreign Secretary, there is a lot of Horlicks. Much has been left hanging in the air, waiting on Revenue guidelines and future consultation. I cannot believe that the Chief Secretary really thinks this is the best way to run a successful country's economy, let alone its tax laws.
It is clear that the normal two days were necessary for Report and Third Reading. Many of the Government's new clauses and amendments were tabled extremely late; I did not receive some of them until yesterday afternoon and I confess that I have not had time to digest them. The country knows that if it elects a Government with a large majority, it is bringing in an elected tyranny. By God, we certainly have an elected tyranny; it is not right for the Government to ride roughshod over the traditional co-operation in dealing with a measure such as the Finance Bill.
The Government might take notice of the fact that they are no longer so popular. They are behind in the polls and business and professionals are deeply displeased at being shortchanged by the Finance Bill.
Our second major objection is the negative nature of the Bill. Given the problems facing our economy, little in the Bill will have a positive material impact and boost productivity and the business sector. What is there for our pension funds and pension fund assets, which are in trouble and which will be so important to the stability of the economy in the near future and in the long term? What is there that will materially restore business profitability or encourage investment, which is at its nadir for many years?
Even ECOFIN—not a body of which I am deeply fond—pointed out that the UK economy's two weaknesses were our poor productivity record and, especially, the out-of-line growth in the number of claimants for disability and incapacity benefits. Although those are not Finance Bill matters, neither has been effectively addressed.
The Government say that the Bill is about enterprise and meeting their obligations to business. I suggest that, from its representations, the CBI views that as an entirely tongue-in-cheek comment.
There have been major contradictions. The Chancellor's speech included commitments to advance deregulation and to remove unnecessary legislation, but we are dealing with 447 pages of highly complex legislation that will be expensive for businesses to get on top of and implement. That is on top of the costs of assimilating the income tax, earnings and pension legislation rewrite.
The Budget's only positive proposal for middle England—it is not in the Bill—was the child trust fund, but where are the proposals? They were promised in the summer, but we are only 16 days away from the recess. I hope that the Government will be able to tell us when the proposals will be forthcoming. The general understanding is that, even after they have been forthcoming, nothing will be implemented until 2005, by which time it looks certain that the Government will be out of power.
My third point is that the reality that has emerged from scrutinising and debating the Bill is that it is largely about sweating the tax system. Significant new stealth taxes lie within virtually all the anti-avoidance measures. We have had a long debate about stamp duty, and the Red Book gives extra revenue figures of £350 million this year and £450 million next year. During the debates, the Government admitted that £190 million of that will come from the new lease duty this year and some £290 million next year, but the estimates emerging from the industry are truly concerning. The total stamp
duty tax take could well rise from £6 billion to £8 billion. As has been pointed out, the cost to the retail sector alone will be £228 million. Indeed, it is extremely worrying that the only two sectors of the economy that are still reasonably robust are retailing and property, yet the Bill threatens major damage to both.The change to stamp duty land tax was spun as a modernisation and reform of the system, but, as my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) pointed out, it fails to address the major problem of the slab that millions of citizens experience when buying and selling houses and it could leave first-time buyers with double charges when new housing estate lands are parcelled up among different builders. In that sense, the proposal has not addressed the full subsale issues.
As my colleagues have pointed out, for small to medium-sized businesses, including virtually every business in London, the cost of the lease tax could not just double or quadruple, but rise by 10 or 15 times, with 35-year leases. The dangers of that are clearly a freezing of commercial property mobility, a move to short leases, inadequate investment in infrastructure and a major undermining of something that we have been good at: retailing.
Schedule 21 prompted sharp exchanges today. I will not repeat them in depth, but there was an act of bad faith. There was never any legal position, nor any suggestion, that employers would be liable for national insurance contributions if their employees exercised certain rights within three years and that the latter would be liable for income tax. Those changes could have been made for the future, but the proposals have been implemented by changing the tax law. Again, we have a new tax.
Unfortunately, we did not reach schedule 22 today, which leaves a great deal outstanding. In essence, the risk is that the definition of securities relating to employment is so wide that it could include employees who own shares in their companies. Even where shares are not part of a remuneration structure, employees could become liable to income tax and national insurance on the gains. The situation could be especially difficult for the venture capital industry and management buy-outs.
Contrary to what the Chief Secretary said, business and commerce have been given the impression that the Government are biased against employee option motivation. The Government have already wrecked unapproved options and are now tightening up other areas. They do not understand that it is crucially important for companies with a market capitalisation between £100 million and £500 million to get the right people with talent—the entrepreneurial drivers—and lock them in. Those companies have to compete with bigger ones, but they are too large to qualify for the enterprise management incentive scheme and they have new problems with the limited approved scheme. At least the Government are no longer claiming that the UK share option regime is comparable in any way with the positive aspects of the US regime.
Today, we debated the Government's reaction to the Eversden judgment. Although I appreciate the need to tighten things, their proposal amounts to a new stealth tax on people in middle England who want to transfer
their houses to their children and let the old mother live there in her latter years. The Government did not even honour the commitments on bingo tax that the Chancellor made in his Budget speech.The Chancellor is well aware of his over-optimistic forecasts on tax revenue. Goodness knows why a person who argues that he is so intelligent based his tax forecasts on the top of a nine-year boom period, because any practitioner could have told him that tax revenues were artificially inflated at that time. The situation has resulted in a depressing Bill that has the main objective of sweating out whatever additional tax it can. I remind hon. Members that taxation is increasing by 7.5 per cent. this year—more than £26 billion—in a climate that is less than healthy. Real household disposable incomes are expected to fall this year.
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