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Mr. Forth:
Does my hon. Friend agree that since the SIPPs fiasco, no one should ever believe a Government Minister again, if, indeed, they ever did so? If there is any doubt about that at all, they should pay attention to the distinction that he made between the Minister's suggestion that, if the Government said something,
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everyone should believe it and act on it, and the fact that people did act on SIPPs and had their fingers burned. We now know where we stand—we should never ever believe what a Government Minister says, especially one from the Treasury.
Mr. Chope: I wholeheartedly agree, which is why Magna Carta, to which my right hon. Friend the Member for East Yorkshire (Mr. Knight) referred, and the wise words of Adam Smith in "The Wealth of Nations", which have been mentioned by my hon. Friend the Member for Ludlow (Mr. Dunne), are pertinent.
Mr. Greg Knight: Is my hon. Friend aware that he can pray in aid the judgment in the case of The Sunday Times v. The United Kingdom 1978–80, in which the European Court concluded that a citizen must be able, if necessary with appropriate advice, to foresee to a reasonable degree the consequences of a given action? That case required Governments to make their laws predictable and known to the citizens whom they are supposed to serve. If the Bill is enacted, does my hon. Friend share my view that it is likely to be challenged in the European courts because it breaches human rights?
Mr. Chope: Yes, that seems extremely likely. Indeed, page 12 of the explanatory notes, which carries the sub-heading, "European convention on human rights", suggests that the Government half-expect that to be the case. Paragraph 82 states:
"The Government also considers that regulations that may be made under the power are capable of maintaining a fair balance between the individual's interest and the general community interest without placing an excessive burden on the individual, and therefore that the regulation making powers do not breach obligations".
The Government are talking about capability, but we should ensure that it is impossible for the regulations to do anything other than comply with the ECHR. The Bill, however, does not make any such provision.
James Duddridge: I am confused, as the front page of the Bill carries a statement by the Chancellor of the Exchequer that I find difficult to reconcile with my hon. Friend's argument:
"In my view the provisions of the National Insurance Contributions Bill are compatible with the Convention rights."
Will my hon. Friend clarify the position?
Mr. Forth: The Chancellor would say that, wouldn't he?
Mr. Chope: Indeed. My hon. Friend the Member for Rochford and Southend, East (James Duddridge) is an assiduous legislator, and he knows that we must look at the small print.
If one could take the statement at face value, there would be no need for the explanatory notes, which are after all produced by the Government. The notes make it clear that there is an issue, which has been raised in the other place and by accountants and tax lawyers. If the Bill is passed into law in its present form, we may well
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find that it results in the sort of challenges to which my right hon. Friend the Member for Bromley and Chislehurst referred.
Mr. Newmark: My hon. Friend mentioned Adam Smith. There is a great passage in "The Wealth of Nations" that has a bearing on our debate. Adam Smith wrote in 1776 that
"the tax which each individual is bound to pay ought to be certain and not arbitrary. The time of payment, the manner of payment, quantity to be paid ought to be clear and plain to the contributor and to every other person."
Is not the problem with the Bill the fact that it is vague and arbitrary? That is our concern.
Mr. Chope: My hon. Friend is right. I did him a disservice in attributing the use of that quote to my hon. Friend the Member for Ludlow. It is good that we have relatively new Members of the House who are so familiar with that great work, "The Wealth of Nations". That augurs well for liberty and freedom as issues that will be debated much more fully in the House. I am glad my hon. Friend the Member for Braintree (Mr. Newmark) is present today to develop the argument that he started articulating in Committee.
We are discussing not a practical matter, but an issue of supreme principle and importance. There are practical consequences of Governments legislating by fiat, and there are times when, as a Member of Parliament, one might wish that the law could be retrospective. For example, I have a constituency case where somebody is arguing bitterly that a single prostitute living above a shop should be deemed to be running a brothel. Unfortunately, the law says that in order for it to be a brothel, there must be more than one prostitute operating. My constituent would be delighted if the Government introduced legislation making it retrospectively criminal to be doing what that individual is doing, but those of us who believe in the rule of law and the principle of parliamentary legislation would not support such retrospection, even if it was thought to be expedient. I am sure there are people who would say that such legislation was expedient, but I do not believe we should allow that.
It is true—this is the point that the Paymaster General made—that there are precedents for retrospection. They go back to the time of the second world war, but during the 1970s, under the Labour Government of the day, the then Chancellor, Denis Healey, now Lord Healey, brought in rules to deal with tax avoidance. Retrospection was a controversial issue at the time and the debate about that resulted in the development of the Rees rules. Those were drawn up by Lord Rees, who at the time was shadow Chief Secretary to the Treasury and went on to be Chief Secretary to the Treasury and an important member of the Government of my noble Friend Lady Thatcher.
Mr. Rees, as he was in those days, argued that retrospective legislation should be subject to four conditions. First, the warning given in the House of Commons
"must be precise in form. A mere suggestion that there are vague schemes of tax avoidance that must be counted should not suffice. Secondly, the problem at which the warning has been directed should immediately be referred to a committee".
He referred to one that he understood existed, made up of members of the Inland Revenue and the accountancy and legal professions.
"Thirdly, if the committee can hit on appropriate legislative provision, the draft clause . . . should immediately be published in advance of the Finance Bill so that those who are likely to be in the field of fire will have a second clear intimation of what to expect. Fourthly, such a clause must, without fail, be introduced in the following Finance Bill . . . I believe there may be situations in which"
"is the only solution if we are to counter avoidance of the sophistication and scale which we understand has been current of late. But if a Government are to adopt that remedy, it must be on"
4 pm
The Paymaster General cannot suggest that there are no precedents for retrospection, because there are precedents for retrospection with safeguards, and I tabled amendment No. 16 because those safeguards have not been met in this particular case. The statement by the Paymaster General on 2 December 2004 was not the subject of immediate consultation with the relevant professions, and it was not the subject of a clause in the next Finance Bill. I agree that that is true of the tax provisions, but they are a separate issue, because we are discussing provisions relating to national insurance contributions.
I thought it telling that the regulatory impact assessment states:
"As this is a measure directed at tax avoidance, consultation was not appropriate before the publication of the Bill. The proposal is to apply to NICs the existing rules for disclosure of tax schemes. These rules were the subject of detailed discussions with the accountancy and legal professions, and other businesses during 2004".
Mr. Forth: Now I am puzzled, because I am sure that my hon. Friend heard, as I did, the Minister boasting that consultation is in the bloodstream of the Treasury and that the Treasury does nothing without consulting generously and in detail, but my hon. Friend's argument seems to run counter to that. Can he explain that paradox?
Mr. Chope: Hon. Members must draw their own conclusions. When the Paymaster General made her statement, if the Rees conventions had been complied with, consultation with the relevant parties would have been carried out immediately and the Bill would have included the appropriate draft clauses. However, the regulatory impact assessment tells us that no detailed consultation took place before the Bill was published, because the measure is directed at tax avoidance. If the Paymaster General is right in saying that everything was plain and apparent back in December 2004, what harm would there have been in working out the detailed legislative formula that was to flow from the proposition set out on 2 December 2004?
As the Institute of Chartered Accountants has said:
"We do not think that anyone reading the Paymaster General's 2 December 2004 statement could have expected the content of the Bill."
"Anyone" includes not only dullards, but smart lawyers, accountants and others. I know that my hon. Friend the Member for Fareham (Mr. Hoban), who is on the Front
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Bench, is a distinguished accountant, and perhaps he will tell us later whether he knew exactly what would happen when he read the Paymaster General's statement. If it was obvious, there could have been no harm in having detailed consultations with the profession, but that never happened.
Amendment No. 19 would remove a grotesque Henry VIII provision that gives a power to change primary legislation by regulation and to do so, in certain circumstances, retrospectively. That is wholly unjustified, even in what the Minister described as the extreme circumstances that make the Bill necessary. I hope that she can explain why she thinks that this particular provision is necessary. This is a very serious issue. We are talking about an assault on fundamental freedoms that go back to the days of Magna Carta. The Minister will say, as always, that there is a precedent. The problem is that every time we take away one of those freedoms, or salami-slice it a little bit, we are gradually giving the state more power.
The Government argue that the Bill has an element of proportionality. I should like to draw the House's attention to what the explanatory notes say about article 8 of the European convention on human rights. Paragraph 84 states:
"The Government considers that any perceived interference with rights under Article 8 of the Convention created by these provisions is justified under paragraph 2 of that Article on the grounds that it is necessary in the interests of the economic well-being of the country."
If the provision was in the interests of the economic well-being of the country because it would raise vast sums of money proportionate to the overall budget of the Exchequer, one could begin to see that it might comply with the article.
Let us consider this in context. At its height, the provision will raise £96 million for the financial year 2004–05. Yet, earlier this month, the Government announced in the pre-Budget report that they propose to borrow £151 billion over the next five years. It is hard to see that raising £96 million—which equates to £3 or £4 per person in employment—through retrospective legislation can be justified on the basis of proportionality. Is that modest gain justified by the enormous assault on our civil liberties and human rights represented by this provision? I do not think so, and that is why I hope that the House will support the amendment.
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