---

Mr. Forth: I recognise that, where a measure brought before the House is aimed at tax avoidance or evasion, a difficult balance must be struck between consultation and a pre-emptive strike. Listening to my hon. Friend the Member for Hertford and Stortford (Mr. Prisk), and hearing what so many respectable and legitimate bodies and organisations have said, it strikes me that the Government have probably got the balance completely wrong; today's debates have reflected that.

Of course the Government must take a view. As the primary collector and dispenser of taxpayers' funds, they bear the main responsibility, but we in the House share that responsibility—a responsibility that I hope
 
28 Apr 2004 : Column 969
 
we have been discharging today and will continue to discharge by examining whether the Government are acting properly. When the Government have such a large majority, and in a unicameral environment—which is what we are in matters of tax and finance, because we do not have the safety net of the other place—we are responsible for ensuring that taxes are properly and fairly levied, and properly and fairly collected, and that evasion does not occur. I hope that that would be unarguable.

It is equally incumbent on the Government, especially one with such a large majority in this place, to make sure that what they do is reasonable and based on a knowledge and understanding of the circumstances. In today's debate—my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) should take the credit for this—we have tried to identify whether that process has properly been observed. From my brief and superficial participation in events today, I remain to be convinced of that. Indeed, I would go further and say that it does not appear to me that the Government have properly discharged their responsibilities. Surely they would want to make sure that their tax policies are seen to be fair and viable.

Mr. Prisk: As usual, my right hon. Friend is giving a powerful exposition of the Government's weaknesses. Does he share my bemusement at the fact that the Government fill a 574-page Finance Bill with the aim of trying to close down tax avoidance, yet they make it so complex that it must encourage further such activity?

Mr. Forth: That is always a difficult judgment for the Government of the day to make, and it was an argument about tax rates—if he can, my hon. Friend will have to cast his mind back to when we had penal rates of taxation—that encouraged the tax avoidance industry and caused many upper income people to flee the country or to employ expensive experts to avoid tax. We brilliantly found the answer by cutting tax to what was regarded as a fair and reasonable level, and, lo and behold, tax revenues went up. Of course, that argument is an eternal verity, and it still applies now.

Mr. Prisk: We are getting to the heart of the point. The problem is a pincer movement. The Government are not only stealthily increasing the tax burden, but adding complexity. I think that it was Monsieur Colbert—I would be grateful if my right hon. Friend confirmed this—who decided that the best way of taxing a goose was to pluck the maximum number of feathers without it hissing. Am I right in saying that the current Chancellor is indeed trying to pluck the goose while generating the least possible amount of hissing?

Mr. Forth: I do not often do this, but I am prepared to pay a reluctant tribute to the current Chancellor, in this case for his skill in implementing stealth taxes. After all, that is the modern expression for the phenomenon that my hon. Friend has just described. However, we will not go into that issue in detail because, as ever, Sir Alan, your extremely expressive face and eloquent body language warn me that, if I were to attempt to say much more about it, I would get into some trouble, and you know that I will go to any lengths to avoid that.

Mr. Gummer: Will my right hon. Friend return to his point about fairness? Fairness is possible only if the tax
 
28 Apr 2004 : Column 970
 
system is clear enough for people to see why it applies to them. Is that not the fundamental explanation of why much of what is before us is so unfair?

Mr. Forth: I am grateful to my right hon. Friend. Like me, he will have studied the schedule, and he will know that it is lengthy and complex, and that it is, sadly, occasionally opaque, as has been identified in the debate.

The schedule deals with the very difficult issue of partnerships, and we have considered the different sorts of partnerships that may exist, examined the complex relationship between income and capital, taken a sideways glance at implementation dates and dwelt very briefly on the rationale behind the dates set out in the Bill. My conclusion is that the Minister has been unable to satisfy us, try though she has, on many of those points.

I return to the point about fairness made by my right hon. Friend. Not only are legitimate outside interests unhappy about the direction in which we are being taken and about the fact that they feel that they have been inadequately consulted in many cases, but we are getting the sense that this very important measure is being introduced on the hoof. We get a sense of constant adjustment to the principles that are being applied in the details, and the impression that that will lead to the phenomenon on which he touched: a sense of injustice and unfairness.

Nothing could be worse in the world of taxation than that very feeling among those who are being taxed. We heard earlier from my right hon. Friend the Member for Wokingham (Mr. Redwood) that it is anticipated that the measure will yield an additional amount approaching £2 billion. That is a lot of taxpayers' money. When such moneys are involved, I do not think that we can allow the Chancellor to repeat the exercise that he carried out in 1997, when he skilfully removed £5 billion from the pensioners of this country, as he has done in every subsequent year. We do not want to see that repeated under the guise of schedule 39. We want a measure of fairness, transparency and, it is to be hoped, comprehensibility.

The other worry that has haunted this debate and that lurks behind the schedule is our old friends the tax lawyers. I use the word "friends" in the loosest possible sense. To the extent to which the Financial Secretary is unable to convince us, legitimate outside interests and the individuals from whom £1.9 billion more is apparently going to be extracted, and to the extent to which none of the arrangements is as clear as it should be or can be easily implemented, all we are doing is creating yet another opportunity for tax lawyers, whom I concede are a necessary part of our society, to grow rich on the back of schedule 39 and the £1.9 billion.

All in all, a number of points—sadly, few of them are positive, and too many of them are negative—have been raised in the debate, and we are left in an unhappy state. We are reaching the end of today's proceedings, which point the way ahead and should encourage outside interests to look even more closely at the provisions. Perhaps hon. Members on both sides of the House will take an even closer interest than they have hitherto in improving the Bill. Even if we cannot reduce the £1.9 billion extra tax burden that will be thrust on taxpayers, at least we can make the process more transparent and, if possible, fairer. That must be our objective.
 
28 Apr 2004 : Column 971
 

My closing thought is that when the Conservative party is in government, we seek ways to reduce tax. I favour reducing tax evasion—avoidance is a different matter—but I hope that our aim is to reduce tax, not to increase it. I leave that thought with my hon. Friend the Member for Hertford and Stortford.

Ruth Kelly: Stamp duty land tax was successfully implemented on 1 December 2003, replacing stamp duty on land transactions within the United Kingdom. One commentator has been quoted as saying that that increased the percentage of property deals on which tax is paid at the full rate from 40 to 80 per cent.

We have had a full consultation on the clauses and schedules before the House. Indeed, to provide suitable time for consultation on how stamp duty land tax should apply to certain transactions undertaken by partnerships where interests in land form part of the partnership's assets, such transactions were specifically excluded from stamp duty land tax by part 3 of schedule 15 to the Finance Act 2003.

Mr. Prisk: On that specific point, if the consultations were so successful, why have most of the representations made to me by those self-same consultees been negative about the outcomes?

Ruth Kelly: I shall go on to discuss the principles that inform schedule 39. People do not always like paying tax, and often argue that it should be levied in a different way from that considered appropriate by the Government and Parliament.

Following the consultation announced on 20 October 2003, the transactions will be brought within stamp duty land tax by the schedule. I have heard much talk today about fairness and transparency, which is exactly what the schedule is about. The schedule ensures that the stamp duty land tax treatment of partnerships mirrors the treatment for other taxpayers, and most people would consider that fair.

The schedule will apply the principle of transparency to transactions undertaken by and within partnerships, and will therefore equalise the tax treatment of land transactions undertaken by an individual and by a partner in a partnership so that neither one enjoys a different stamp duty land tax treatment compared with the other.

The charge will be on the proportional market value of any land forming or underlying these partnership transactions, and we have listened to consultees on that point. Market value is used for partnership transactions to replicate the bargain struck by an individual with an arm's length seller. The proportion is equal to the underlying change in ownership as represented by a
 
28 Apr 2004 : Column 972
 
partner's share in partnership income for transactions moving land into or out of a partnership or on the increase in share of partnership income for those transactions involving changes in partnership share. As that reflects the underlying proportional change in ownership, it is consistent with the transparency principle.

As a result of those measures, the commentator whom I referred to earlier has been quoted as saying that the number of transactions on which full duty is paid will rise from 80 to 90 per cent.

---