| Previous Section | Index | Home Page |
Mr. Clarke:
Our Committee paid particular attention to the question of whether tucked away in this huge Bill was a power enabling the Treasury to make substantial changes to tax law without reference to the House. I am sure that the Minister did not intend that, but it is best not to tuck such powers away in lengthy legislation. In fact the power is extremely limited, and the Minister has given us very adequate assurances by which I am sure any subsequent Minister in any Administration will abide. Moreover, it exists
only for the purpose of returning the law to its original state; it is not some tremendous blanket power to sweep the House aside. I think the Committee was generally assured that there was no danger lurking in the provision, and I am glad that my hon. Friend seems to have reached the same conclusion.
Mr. Francois: My understanding of the Joint Committee’s role was that it should examine any particularly interesting aspects of the Bill in detail, and that is exactly what it has done. It has provided, in a sense, a constitutional safeguard. As the Committee seems to have been satisfied and the Minister has given a firm commitment, we are satisfied as well. The matter has been scrutinised, and I think that we can leave it there. I note, however, that there is already an intention to use the power.
I want to say a little about the tax law rewrite project and its interaction with the rest of the United Kingdom tax code. This is the fourth in a series of tax law rewrite Bills, and in the Second Reading Committee the Financial Secretary confirmed that it would shortly be followed by a further rewrite Bill dealing with corporation tax. The consultation exercise on this new Bill has only just been initiated. We have speeded up the process of rewrite Bills to a pace of about one a year from about one every two years. Unfortunately, it seems as though some rewriting and clarification of our tax code may be necessary—largely thanks, it has to be said, to the Chancellor of the Exchequer rather than to the tax law rewrite project.
Tolley’s tax guide, which I have here with me and which is usually referred to as the accountant’s bible, has almost doubled in length since Gordon Brown, a man who loves complexity, became the Chancellor of the Exchequer back in 1997—
Mr. Deputy Speaker: Order. The hon. Gentleman needs to recognise that he should not refer to hon. Members by name, but by their position or constituency.
Mr. Francois: You are entirely right, Mr. Deputy Speaker.
The current Chancellor of the Exchequer, who took up his post in 1997, has had some responsibility for expanding the length of the UK’s tax code. In 1997, Tolley’s was 4,555 pages long, whereas today it now stretches to 9,841 pages. That was picked up by the Financial Times in September 2006, when it specifically pointed out that the tax code had doubled in length under the Chancellor’s stewardship. In an article entitled, “Guide to tax code doubles in length under Brown”, Vanessa Houlder commented—
John Healey: Does not the hon. Gentleman accept that quality and clarity are more important in tax legislation than brevity? That underlies the purpose of the tax law rewrite project, and its production has been welcomed by professionals in the field.
Mr. Francois:
I would accept that in principle and I have already complimented the work of the tax law rewrite project. I am simply commenting on the fact
that our tax code appears to be getting longer and longer. As I shall briefly explain, that is not down primarily to the rewrite project, but to the Chancellor of the Exchequer.
“The burgeoning of Tolley’s commentary on the code reflects the growth of tax legislation and the increasing complexity of the system according to LexisNexis, the publisher. It said this year’s budget alone was responsible for adding more than 600 pages of the guide, which is now almost 10,000 pages long.”
Moreover, The Economist pointed out prior to Christmas that the problem of the length of our tax code, of which today’s Bill will eventually become a part, is becoming worse. Citing recent research by PricewaterhouseCoopers and the World Bank into the comparative length of tax codes around the globe, The Economist highlighted the fact that Britain now has virtually the longest tax code in the developed world, coming second only to India.
John Healey: The hon. Gentleman may go on to make this point, but if he does not, does he recognise that the PricewaterhouseCoopers report referred only to primary legislation? It does not refer at all to state or local taxes, which are a significant feature of the tax code in many other countries, but not, of course, in the United Kingdom.
Mr. Francois: The Minister pre-empts me, as I was just about to provide the definition that was used in the PWC-World Bank study. I thank the Minister for his alacrity, but if he will bear with me for just a moment, I will define exactly what it refers to.
Of the major countries examined in the PWC-World Bank study, the comparative length of their respective tax codes, defined as the number of pages of primary tax legislation, was as follows: India, 9,000 pages; the United Kingdom, 8,300; Japan, 7,200; Germany, only 1,700; France, 1,300; and Switzerland only 300 pages of primary tax legislation. That shows a major disparity in the length and complexity of tax legislation across a number of major economies, with the UK now coming almost top of the league.
The study was based on the compliance burden of a company actually manufacturing flower pots in the different countries in question. That led The Economist to publish an article on the complexity of UK tax legislation in its 11 November 2006 edition entitled, “Bill and Ben and Gordon, Business Taxation”, which argued:
“Of the world’s 20 biggest economies, Britain is second only to India in the number of pages taken up by its primary legislation. Each episode of the flowerpot men, a children's television show, used to end with the question: ‘Was it Bill or was it Ben?’ Where Britain’s rising tax burden is concerned many businessmen know the answer: it was Gordon.”
At that point, I gladly give way.
Stephen Hesford (Wirral, West) (Lab): I do not know about the hon. Gentleman’s attempted joke, and I am not sure what point he is making. He listed France and Germany, but does he accept that their tax burden is higher overall than the tax burden in the UK, so the example bears no relation to the point that he is making—if, indeed, there is any practical point to what he is saying?
Mr. Francois: As I understand it, when it comes to the tax burden we are actually in the process of overtaking Germany, so I am not quite sure that the hon. Gentleman’s point is entirely correct —[Interruption.] Well, he asked me about both countries, so he should have been more careful in the question that he asked.
Our tax code is being added to all the time. The PWC study was completed prior to the Finance Act 2006, which itself comprised 181 clauses and 25 schedules of additional tax legislation. On top of that will now be added the 1,035 clauses of the Income Tax Bill that the House is considering tonight—and on top of that will shortly come the Finance Bill 2007, to turn the Chancellor's next and probably final Budget into law. Even if that Bill is only the same size as the Finance Bill 2006, the combined effect of all of this legislation will almost certainly be to present the UK with the longest tax code of primary tax legislation in the entire world.
While the rewrite Bills help to clarify tax law, which itself is a welcome thing, when combined with the Chancellor’s innate love of complexity and long Finance Bills—something for which he has become renowned—it means the production of an ever-expanding tax code. It is the Chancellor of the Exchequer who is the main culprit here and we have to be careful that we do not discourage enterprise further by his love of devising ever-greater complexity and anti-avoidance legislation.
Mr. Francois: The Financial Secretary is always courteous in giving way to me, so I shall be courteous in giving way again to him.
John Healey: I am grateful to the hon. Gentleman, whose research team has obviously done its work. Does he accept that it is less the length and more the way in which a tax code operates that is important? Is he aware of the World Bank report last autumn, which identified the UK as first rank in Europe and sixth worldwide in terms of ease of doing business? When it came to ease of paying taxes, the UK was second in Europe only to Ireland and 12th worldwide.
Mr. Francois: I shall pass the Minister’s compliments, which are gratefully received, to my researcher. As he asks me, I would say that it is a constant feature of Finance Bills that we are dealing with ever-greater complexity. One of the reasons for that is that the Chancellor is a great fan of anti-avoidance legislation. Because it attempts to provide for all sorts of different contingencies, it tends to be very detailed. The Government would argue that they are protecting the revenue, but the way in which they have proceeded in recent years has certainly made the tax code more complicated.
In summary, we welcome the Bill and its contribution to trying to clarify our complicated tax code. We accept that the measure has been the subject of extensive consultation with experts, both before it was drafted and since, and that it has subsequently been looked at afresh by both a Second Reading Committee of MPs and a Joint Committee of MPs and
Peers with specialist knowledge in this area—and certainly with a very specialist Chairman. We therefore believe that, despite its massive size of more than 1,000 clauses, the Bill has still received detailed scrutiny in the course of that two-year process.
Specifically, we are pleased that the Joint Committee looked in more detail at issues such as the accrued income scheme, the new definition of “associated operation” and the practical operation of the novel powers now contained in clause 1,029 and are about to get a run-out. We note that the Joint Committee has subsequently provided some reassurance on each of those points in its report. Having looked into the Bill, the Joint Committee report concluded:
“The Committee is of the opinion that the Bill is a welcome clarification of the existing law and will be easier to use and more accessible to Parliament, the judiciary, informed professionals, business people and other users of the legislation."
Our only proviso, if it can be called that, is the length of the tax code in which the Bill will now be incorporated. Given the 1,035 additional clauses of this Bill and then the additional clauses of the Finance Bills of 2006 and 2007, it seems to us that the United Kingdom will almost certainly have the longest tax code in the entire developed world—if, indeed, we do not already have it. Britain under this Chancellor will finally be a world-beater, but perhaps not in the way that the Chancellor would have wished. When the Minister responds to the debate, will he answer the question that he so artfully ducked in the Second Reading Committee? I am sure that he will welcome the entire rewrite project as I do, but will he now confirm whether, in terms of primary legislation, we have the longest tax code in the world?
7.29 pm
Julia Goldsworthy (Falmouth and Camborne) (LD): I was going to start by saying that we would not break the consensus on the Bill, but the hon. Member for Rayleigh (Mr. Francois) came dangerously close to doing so. We broadly welcome this rewrite, because it is important to present our legislation in language that is simpler and easier to understand. That is the aim of the Bill, rather than to simplify the existing legislation, although there is an argument to be had about whether that needs to be done too. The Bill is about producing tax legislation in a language that is easier to understand. Anything that makes a long complicated tax code easier to understand is most welcome. We also welcome the extensive consultation process that preceded the drafting of the Bill, as well as the consideration that it was given by the steering committee and the Joint Committee.
I do not want to detain the House for too long, but I want to raise one or two issues that were highlighted in the Joint Committee report. The first relates to the concerns expressed on Second Reading about the way in which additional clauses had been added to the Bill after its publication. This point has also been raised by other hon. Members. The Committee noted that in normal circumstances such substantive clauses should be introduced at the outset, but that in this case they could be added to the Bill because they had been the subject of extensive consultation, and had already been considered for a previous rewrite Bill. We stand by those recommendations. We shall also stand by the
further amendments tabled by the Government, which were mainly technical and consequential to the proposed new clauses.
I also want to comment on clause 1029—formerly clause 962—which grants the Treasury the power by order to amend the Bill until 5 April 2010, in order to restore the law to its previous position in the case of any inadvertent change to the law having been made by the Bill. I welcome the Minister’s clarification, in giving evidence to the Committee and when speaking to the House today, that that power would be exercised only after reference to the consultative committee and with the agreement of the steering committee. I smile somewhat ironically as I note that there are already two instances in which that power might need to be exercised.
I have a couple of questions for the Minister on this point. What would happen if changes were put forward which the consultative committee or the steering committee did not agree were only minor changes? What would happen in the reverse of the example that the Minister gave earlier, when he said that if there was an unintended change in the sense of the legislation, the law could be changed back to what it was before? What would happen if there were an omission to which the provisions needed to be extended? I mention this because we recently debated a statutory instrument on civil partnerships that dealt with changes to income tax, in which definitions had not been applied in every case. How would the clause apply to such a situation? Would the problem have to be dealt with through a statutory instrument, or would clause 1029 be able to deal with it? I would appreciate the Minister’s clarification of those matters.
John Healey: I might be able to help the hon. Lady on both those counts. First, clause 1029 would be used only if we had consulted and received the agreement of the two external committees. If they did not agree, we would not use it. Secondly, it can be used only to revert to the original state of the law amendments made by a tax law rewrite Bill, as the right hon. and learned Member for Rushcliffe (Mr. Clarke) made clear. The circumstances to which the hon. Lady is referring would not therefore be covered by the provisions of the clause.
Julia Goldsworthy: My concerns are allayed. I understand that such issues would be dealt with in a Finance Bill or by other instruments; I think that the Minister is nodding his head.
My hon. Friend the Member for Twickenham (Dr. Cable) spoke for many in the Second Reading Committee when he said that this tax law rewrite project continues to be a labour of love. We should not lose sight of the intended aim of that labour of love, which is to simplify and codify tax law, not to create more. We should therefore ask whether that has been achieved through this process. It was pointed out by my hon. Friend in that Committee, and by the Chartered Institute of Taxation, that rewriting the legislation is worth doing only if it enables the users of the law to understand the relevant points more quickly or more easily. The institute has said:
“It is doubtful whether this has been achieved. Not only does much of the old legislation still remain in force...but the quality of drafting is questionable, being long winded and often imprecise”.
That raises the issue of whether existing practitioners will have to consult not only the new but the old legislation in order to understand the position. I realise that for new practitioners the process will be much simpler.
I understand from the Second Reading Committee that although 49 obsolete provisions will be removed from tax legislation as a result of the Bill, a further 159 provisions will be added. There will be a real benefit in providing a clear and simple quantification of the impact that this tax rewrite Bill will have on Tolley’s tax guide. Such a quantification would give a tangible sense of what the rewrite had achieved, not only for the practitioners to whom the Joint Committee report referred, but for the wider public. There is a real issue about making the language easier to understand, but the separate issue of simplifying the taxation process also needs to be taken into consideration.
7.36 pm
Mr. Kenneth Clarke (Rushcliffe) (Con): I welcome the Bill, and congratulate the Minister on the way in which he has handled the production of this enormous piece of legislation. He and my hon. Friend the Member for Rayleigh (Mr. Francois) have already described the process through which the Joint Committee went, and I can confirm that their description of the Committee’s deliberations entirely accords with my recollection. The Joint Committee paid attention to all the points that we should have considered, including whether the consultation had been adequate, and whether any substantive changes were being slipped through that might alter the incidence of taxation in any significant way. We paid particular attention to the points raised on Second Reading, and all those matters have been covered. The process was comprehensive.
This debate gives me the opportunity to thank the members of the rewrite committee. After a little over 10 years, we have reached a significant landmark. Rewriting in plain English the entire law on income tax in this country has been a labour of Hercules. The leaders of the team gave evidence to the Joint Committee and impressed us with their clarity and almost instant recall of the most minute details of parts of the provision. The whole thing has obviously been embarked upon extremely conscientiously and very professionally by those people from the Inland Revenue and the office of the parliamentary draftsman. I congratulate all involved.
| Next Section | Index | Home Page |