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Dr. Vincent Cable (Twickenham) (LD): May I add my support for what seems an eminently sensible and uncontroversial piece of legislation? I congratulate those who worked on the tax rewrite project and helped to produce the Bill before us.
Perhaps I should also congratulate the hon. Member for Tatton (Mr. Osborne) on managing to spin out to 20 minutes his contribution to a debate on legislation that we all agree is necessary and almost entirely devoid of controversial policy. He helped to fill in a couple of minutes of his contribution by referring to the Liberal Democrats' enthusiasm for income tax. I did not come here today to engage in party political banter, but I should be happy to respond to the point that the hon. Gentleman made. It is certainly true that one of our policies—our only tax-raising policy—is to increase the rate of taxation on earnings above £100,000 a year. We also propose that there should be greater reliance on the income tax mechanism by exchanging the council tax system for one based on local income tax. One consequence of working through the existing mechanisms of the Inland Revenue would be to show that there was less tax bureaucracy, because there would be no need for council tax benefit systems or valuation systems. We would thus be freeing up resources for more productive purposes. The hon. Gentleman is right in one sense: we are placing more reliance on income tax as a tax mechanism, rather than raising taxes.
Mr. Osborne: The hon. Gentleman's party claims to be the real Opposition. Does he think that real Oppositions should turn up to Second Readings of important legislation?
Dr. Cable: This is important legislation and we are here to respond and agree to it.
Mr. Osborne: What about Second Reading?
Dr. Cable: I am sure that I can give the hon. Gentleman an explanation. We all agree that the Bill is useful; it does not affect the course of parliamentary business. There are much more important issues when we do need to be in the Chamber and when we make an effective contribution.
At the end of the hon. Gentleman's speech, he made the entirely valid point that the fundamental problem is the extreme complexity of the tax system. Most of the complexity is not in the income tax field, but relates to capital gains tax and business taxes, where there is a case for major simplification. There are complexities in the income tax regime, however, and the measure will help with those.
On a personal level, I should like to mention a couple of points on which the legislation is helpful. Until recently, I had little experience of farming, but as I have just married a farmer I have come to appreciate some of the difficulties that many farmers face when dealing not only with the absurd bureaucracy of the Department for Environment, Food and Rural Affairs but also with tax complexities. The sale of a few bales of hay or the temporary renting out of a field to a neighbour for pasture cause enormously complex tax problems. The
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attention that the Bill devotes to clarifying what trading income means will, I hope, make farmers' lives a little easier.
Another interesting example from the legislation relates to the rent-a-room provisions. The idea that to deal with homelessness one might encourage house owners and householders to let out a room and get some tax relief was useful and sensible, and we should make more use of it. However, the problems presented by the legislation are exemplified by the 20 pages of the Bill devoted to explaining how the various provisions and reliefs are applied. Anything that the legislation can do to clarify those matters will be much appreciated.
The key point, at which the Conservative spokesman hinted, is that the way to deal with both the difficulties of tax language and the complexity of the provisions is for as many people as possible to be lifted out of tax altogether. Last week, we made a small contribution to that through our proposals on stamp duty. Millions of people are on low incomes—pensioners and low-paid workers—and pay income tax, so it would be desirable to lift the threshold for them. We know how difficult that is, because lifting thresholds is expensive; or, if they are tapered, they create higher marginal tax rates. None the less, that is an important strategic objective.
In the meantime, as elderly, frail and poor pensioners often pay income tax, it is important to focus on the specific problems and to give them help through the Inland Revenue to complete the forms and deal with the complexities involved. That is still relevant despite the language improvements in the measure.
I am neither a tax lawyer nor a professor of linguistics, so I have nothing of great substance to contribute to the debate other than to welcome the Bill as a useful piece of legislation, which we support.
4.4 pm
John Healey: There have been constructive and supportive comments from both Opposition parties. I appreciate the shadow Chief Secretary's welcome for the Bill. He described the project as a model for approaching the challenge of producing clearer, easier, more comprehensible and intelligible tax legislation. I welcome that. I am sure that the House appreciates the sense of history that the hon. Gentleman brought to the debate. Some might say, however, that he and his party are backward rather than forward looking—the party of the past still struggling to become the party of the future.
May I tell the hon. Member for Twickenham (Dr. Cable) that, although it is not really my part to stand up for the shadow Chief Secretary, the hon. Member for Tatton (Mr. Osborne) was able to contribute to the debate for almost 20 minutes in large part because he and his colleagues have given rather more scrutiny to the content of the Bill and its progress through Parliament than the Liberal Democrats? Nevertheless, I welcome his general support for the Bill.
I turn to three or four of the specific issues raised by the hon. Member for Tatton, although this is Third Reading. He talked about the need for a single tax form that would allow taxpayers to declare foreign and domestic sources of income. Especially under Her Majesty's Revenue and Customs, we will consider how to improve the process, particularly the forms that
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taxpayers must use, but a separate entry for foreign income is still likely to be needed because of double taxation relief, which is confined to foreign income.
On clause 882, as the hon. Gentleman explained, the issue that he raised was one for the Bill's previous stages, both Second Reading and the consideration by the Joint Committee on Tax Law Rewrite Bills. The clause has been examined carefully during the Bill's progress to date and in the Joint Committee. It is designed to make technical changes. However, I am happy to confirm, as I did to the Joint Committee, that it is our intention and our undertaking to introduce regulations under that clause only with the agreement of the tax law rewrite project's steering committee.
The hon. Gentleman believes that some issues may warrant the attention of the tax rewrite project in the future. Of course, such work is for future decision, but the project consults widely on its future work, and I am sure that it will note the hon. Gentleman's comments.
We have discussed schedule 22 before, but the value of such tax rewrite Bills is that they make it easier to fit in changes to tax legislation, while keeping the tax legislation clear in the future. New or amending tax legislation will generally be fitted into the draft structure and the style set out in the Bill. Schedule 22 was introduced in unfortunate circumstances—they were not ideal—and in large part to deal with a severe problem of tax avoidance, but I assure the hon. Gentleman and the House that we do our best to produce a good standard of legislation in Finance Bills and to maintain the style and structure established in such tax rewrite Bills, and we will continue to do so in succeeding Finance Bills.
The Bill is a milestone in the work of the tax law rewrite project. There is widespread and well-deserved recognition of the work of all those involved in producing this income tax rewrite Bill, but in drawing this Third Reading debate to a close, I wish to pay tribute, in particular, to Lord Howe of Aberavon, who has chaired the steering committee, and to the steering committee, which overseas the project. There are representatives from the Labour party and from the Opposition—my hon. Friend the Member for Falkirk, West (Mr. Joyce) and the right hon. Member for Fylde (Mr. Jack).
I pay tribute to the members of the consultative committee—a crucial part of the tax law rewrite project's structure that reviews the project's work and contains leading representatives of accountancy bodies, legal bodies and representatives of taxpayers, too. I welcome the contribution that many other individuals and bodies have made to the consultations. I also pay tribute to the right hon. and learned Member for Rushcliffe (Mr. Clarke), who started the project in 1996. He has maintained his commitment to it and has recently chaired the Joint Committee, as part of the Bill's scrutiny.
Finally, the real work—the day-to-day, week-to-week and year-to-year work—is done by the project team. Dedicated, detailed work is undertaken with great care by Inland Revenue officials, led by Robin Martin, with great distinction. I pay tribute, as many others have, to the project's work and to his leadership. This is not a tax reforming Bill, nor a tax simplifying Bill, but it is, as
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hon. Members on both sides of the House have said, an important Bill. It will make things easier for everyone who uses tax legislation. I commend it to the House.
Bill accordingly read the Third time, and passed.
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