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We made it clear that the PBR was not to be taken as an indication of all tax policy areas in which the Government might choose to act. The policy has been supported by the conclusions of a recent investigation by the Treasury Committee, and it was not opposed by Opposition parties when voted on during deliberations on the 1998 Act.
Mr. Philip Hammond: The theory sounds credible, but the announcement about non-doms, for example, was made as a set of final policy proposals in the PBR, and the lack of detail invited people to speculate about how the policy would impact on them. This Chamber is not always the best place for a constructive debate, given the party political sensitivities involved, but many of the concerns that most upset the people who would be affected turned out to be less serious than was at first thought. The lack of technical detail caused people to speculate, and in many cases they assumed the worst. That was how the damage was done.
Kitty Ussher: We shall deal with the non-doms issue later, and my right hon. Friend the Financial Secretary to the Treasury will no doubt comment in detail on the entire process, but it was precisely by introducing our proposals in the PBR that we allowed time for work with stakeholders to make sure that we got the matter right.
The code also sets out that publication or consultation on all tax changes—background tax issues as well as rates—before their introduction carries significant risks. The Opposition accepted that when the matter was debated in the House, and those risks include the possibility of significant forestalling activity by existing or prospective taxpayers that could result in a damaging impact on public finances. That activity could also lead to significant temporary disruptions to the behaviour of taxpayers and markets, and to wider disruption in financial markets.
The publication of a report containing information about the technical content of any non-rate tax changes proposed for inclusion in the following year’s Finance Bill would have significant risks, as I have just mentioned. It would also prevent the Government from taking action to address any avoidance or evasion activity arising between the PBR and the Budget that could have further significant ramifications for tax revenue and therefore a negative impact on public finances. The general point—that the Government should consult through the PBR, where possible, and then implement proposals in the Budget—is correct, but new clause 17 would be unduly restrictive and against the national interest.
That is not to say that we do not want to consult at all. Quite the opposite: we currently have 29 consultative tax groups routinely working through HMRC. We are consulting far more than in previous years, and I hope that Opposition Members agree that that is a good thing. We had 38 formal consultations last year, and 80 per cent. were for the full 12 weeks. Consultation is definitely a good thing, and we want to do as much as possible, but new clause 17 would constrain us in a damaging way.
I turn now to new clause 18. Simplification is of course a stated priority when designing and reviewing tax policy, alongside having sound public finances and fairness. After work with business and tax professionals,
there is already a significant rolling programme of tax simplification in place, and the Government continue to use PBRs and Budgets to simplify the tax system wherever they can.
The hon. Member for Runnymede and Weybridge is quite wrong to say that the length of the tax guide indicates how complicated the tax system is. We want to ensure that our legislation is accessible and simple to users, which can involve increasing its length. [ Interruption. ] I will give the right hon. Member for Wokingham (Mr. Redwood) a specific example: the tax law rewrite project, which is a good example of a consultative, collaborative project and has been widely welcomed by industry, has increased the physical length of legislation but successfully simplified it and improved its clarity for legislators, tax professionals and the public. For example, 150 pages of this year’s Finance Bill will simplify and modernise the tax system. So the hon. Member for Runnymede and Weybridge makes a slightly incongruous point.
2 pm
The Government already make advance announcements of many proposed simplifications to the tax system. I shall give a few quick examples. We launched three tax simplification reviews last autumn, with the Treasury and the HMRC working in partnership with business and tax professionals, to evaluate how a range of tax policies can be simplified. We received 600 representations. The initial outputs of those reviews were announced in the 2008 Budget, with further updates to follow this autumn. A further review to consider how corporation tax calculations and returns can be simplified was also announced in this year’s Budget and is being progressed.
This open approach provides the opportunities for the users of the tax system to have genuine input, through consultation, in the shape of those changes and/or the way they are implemented. Taken together with other announcements already made in earlier PBRs and Budgets, there is a far more extensive rolling forward programme of tax simplification in the public arena than ever before, including under previous Governments, and there is greater opportunity than ever for business and others to become involved in shaping the tax system of the future.
We believe that these new clauses are unnecessary. They would add little to an extremely extensive process of tax simplification. They would carry significant risks, associated with an absolute, definite requirement to publish or consult on every tax change before its introduction. I therefore ask the hon. Member for Runnymede and Weybridge to withdraw the motion.
Mr. Philip Hammond:
I have listened to the Economic Secretary, and I am afraid that I will disappoint her. She says that the Government have 29 consultative tax groups and that they have had 38 formal consultations. One is tempted to wonder how they got it all so wrong if they have so much consultation going on and so many experts apparently at their disposal. The experts whom we talked to knew that it would all go wrong. They knew about the non-doms thing and that the capital gains tax regime needed to be amended. They saw the problems with the 10p tax changes. They understood that the proposed income-splitting rules were unworkable and that the foreign profits consultation could have led to something that was disastrous for Britain. Indeed, we
have already begun to see the early effects, with the exit of one or two key companies from this country, as mentioned by my hon. Friend the Member for Billericay (Mr. Baron).
The Economic Secretary said that simplification was a priority for the Government and that a significant rolling programme of simplification was in place. We understand how easy it is for Ministers to be briefed by civil servants and to read out what they are told, but as we now have the longest tax code in the world, and given the complexity of our tax code, does she really believe that an effective simplification programme is in place? She says that longer means simpler and easier to access. I wonder whether the Treasury has bought a share stake in Tolley’s tax guide; I can think of no other reason for her to believe that statement. I urge my right hon. and hon. Friends and right-thinking Members in all parts of the House to vote in favour of new clause 17.
Question put, That the clause be read a Second time—
The House divided: Ayes 190, Noes 267.
AYES
Afriyie, Adam
Alexander, Danny
Arbuthnot, rh Mr. James
Atkinson, Mr. Peter
Bacon, Mr. Richard
Baldry, Tony
Baron, Mr. John
Barrett, John
Beith, rh Sir Alan
Bellingham, Mr. Henry
Bercow, John
Binley, Mr. Brian
Boswell, Mr. Tim
Brady, Mr. Graham
Brazier, Mr. Julian
Breed, Mr. Colin
Brokenshire, James
Brooke, Annette
Browne, Mr. Jeremy
Browning, Angela
Bruce, rh Malcolm
Burrowes, Mr. David
Burstow, Mr. Paul
Burt, Lorely
Butterfill, Sir John
Cable, Dr. Vincent
Campbell, rh Sir Menzies
Carmichael, Mr. Alistair
Chope, Mr. Christopher
Clappison, Mr. James
Clark, Greg
Clifton-Brown, Mr. Geoffrey
Cormack, Sir Patrick
Crabb, Mr. Stephen
Curry, rh Mr. David
Davey, Mr. Edward
Davies, David T.C. (Monmouth)
Davies, Philip
Djanogly, Mr. Jonathan
Dodds, Mr. Nigel
Dorries, Mrs. Nadine
Duddridge, James
Duncan, Alan
Duncan Smith, rh Mr. Iain
Dunne, Mr. Philip
Ellwood, Mr. Tobias
Evans, Mr. Nigel
Evennett, Mr. David
Fabricant, Michael
Fallon, Mr. Michael
Farron, Tim
Featherstone, Lynne
Foster, Mr. Don
Fox, Dr. Liam
Francois, Mr. Mark
Fraser, Christopher
Gauke, Mr. David
George, Andrew
Gibb, Mr. Nick
Gillan, Mrs. Cheryl
Goldsworthy, Julia
Goodman, Mr. Paul
Goodwill, Mr. Robert
Gove, Michael
Gray, Mr. James
Grayling, Chris
Green, Damian
Greenway, Mr. John
Hague, rh Mr. William
Hammond, Mr. Philip
Hammond, Stephen
Hancock, Mr. Mike
Hands, Mr. Greg
Harper, Mr. Mark
Harris, Dr. Evan
Harvey, Nick
Heald, Mr. Oliver
Heathcoat-Amory, rh Mr. David
Hemming, John
Hogg, rh Mr. Douglas
Holloway, Mr. Adam
Holmes, Paul
Horam, Mr. John
Horwood, Martin
Hosie, Stewart
Howard, rh Mr. Michael
Howarth, David
Howell, John
Hughes, Simon
Huhne, Chris
Hunter, Mark
Jackson, Mr. Stewart
Jenkin, Mr. Bernard
Jones, Mr. David
Kawczynski, Daniel
Keetch, Mr. Paul
Key, Robert
Kirkbride, Miss Julie
Knight, rh Mr. Greg
Kramer, Susan
Laing, Mrs. Eleanor
Lait, Mrs. Jacqui
Laws, Mr. David
Leech, Mr. John
Liddell-Grainger, Mr. Ian
Lidington, Mr. David
Llwyd, Mr. Elfyn
Loughton, Tim
Maclean, rh David
MacNeil, Mr. Angus
Main, Anne
Maples, Mr. John
Maude, rh Mr. Francis
May, rh Mrs. Theresa
McCrea, Dr. William
McIntosh, Miss Anne
McLoughlin, rh Mr. Patrick
Mercer, Patrick
Miller, Mrs. Maria
Milton, Anne
Moss, Mr. Malcolm
Mulholland, Greg
Mundell, David
Murrison, Dr. Andrew
Newmark, Mr. Brooks
O'Brien, Mr. Stephen
Öpik, Lembit
Ottaway, Richard
Penrose, John
Price, Adam
Prisk, Mr. Mark
Pugh, Dr. John
Randall, Mr. John
Redwood, rh Mr. John
Reid, Mr. Alan
Rennie, Willie
Rifkind, rh Sir Malcolm
Robathan, Mr. Andrew
Robertson, Angus
Robertson, Mr. Laurence
Rosindell, Andrew
Ruffley, Mr. David
Russell, Bob
Sanders, Mr. Adrian
Scott, Mr. Lee
Selous, Andrew
Shapps, Grant
Shepherd, Mr. Richard
Simmonds, Mark
Simpson, David
Simpson, Mr. Keith
Smith, Sir Robert
Soames, Mr. Nicholas
Spicer, Sir Michael
Spring, Mr. Richard
Stanley, rh Sir John
Steen, Mr. Anthony
Streeter, Mr. Gary
Stunell, Andrew
Swayne, Mr. Desmond
Swinson, Jo
Syms, Mr. Robert
Tapsell, Sir Peter
Teather, Sarah
Thurso, John
Timpson, Mr. Edward
Tredinnick, David
Tyrie, Mr. Andrew
Vara, Mr. Shailesh
Wallace, Mr. Ben
Waterson, Mr. Nigel
Watkinson, Angela
Webb, Steve
Weir, Mr. Mike
Whittingdale, Mr. John
Willetts, Mr. David
Williams, Hywel
Williams, Mark
Williams, Mr. Roger
Williams, Stephen
Willis, Mr. Phil
Willott, Jenny
Wilshire, Mr. David
Wilson, Mr. Rob
Wilson, Sammy
Winterton, Ann
Wishart, Pete
Wright, Jeremy
Young, rh Sir George
Younger-Ross, Richard
Tellers for the Ayes:
Mr. Richard Benyon and
Mr. Crispin Blunt
NOES
Abbott, Ms Diane
Ainger, Nick
Ainsworth, rh Mr. Bob
Allen, Mr. Graham
Anderson, Mr. David
Anderson, Janet
Armstrong, rh Hilary
Austin, Mr. Ian
Bailey, Mr. Adrian
Baird, Vera
Balls, rh Ed
Banks, Gordon
Barlow, Ms Celia
Battle, rh John
Beckett, rh Margaret
Begg, Miss Anne
Bell, Sir Stuart
Benton, Mr. Joe
Berry, Roger
Betts, Mr. Clive
Blackman, Liz
Blackman-Woods, Dr. Roberta
Blizzard, Mr. Bob
Borrow, Mr. David S.
Brennan, Kevin
Brown, rh Mr. Nicholas
Brown, Mr. Russell
Browne, rh Des
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burnham, rh Andy
Butler, Ms Dawn
Byers, rh Mr. Stephen
Byrne, Mr. Liam
Caborn, rh Mr. Richard
Cairns, David
Campbell, Mr. Alan
Caton, Mr. Martin
Cawsey, Mr. Ian
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Clapham, Mr. Michael
Clark, Ms Katy
Clark, Paul
Clarke, rh Mr. Tom
Clelland, Mr. David
Clwyd, rh Ann
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Connarty, Michael
Cooper, Rosie
Cousins, Jim
Crausby, Mr. David
Creagh, Mary
Cryer, Mrs. Ann
Cummings, John
Cunningham, Mr. Jim
Curtis-Thomas, Mrs. Claire
David, Mr. Wayne
Davies, Mr. Dai
Davies, Mr. Quentin
Dhanda, Mr. Parmjit
Donohoe, Mr. Brian H.
Doran, Mr. Frank
Dowd, Jim
Durkan, Mark
Eagle, Angela
Eagle, Maria
Efford, Clive
Ellman, Mrs. Louise
Ennis, Jeff
Etherington, Bill
Farrelly, Paul
Field, rh Mr. Frank
Fisher, Mark
Fitzpatrick, Jim
Flello, Mr. Robert
Follett, Barbara
Foster, Mr. Michael (Worcester)
Foster, Michael Jabez (Hastings and Rye)
Gapes, Mike
Gardiner, Barry
Gerrard, Mr. Neil
Gibson, Dr. Ian
Gilroy, Linda
Godsiff, Mr. Roger
Goggins, Paul
Goodman, Helen
Griffith, Nia
Griffiths, Nigel
Grogan, Mr. John
Gwynne, Andrew
Hain, rh Mr. Peter
Hall, Mr. Mike
Hall, Patrick
Hamilton, Mr. David
Hamilton, Mr. Fabian
Hanson, rh Mr. David
Harman, rh Ms Harriet
Harris, Mr. Tom
Havard, Mr. Dai
Hepburn, Mr. Stephen
Heppell, Mr. John
Heyes, David
Hill, rh Keith
Hillier, Meg
Hodge, rh Margaret
Hodgson, Mrs. Sharon
Hoey, Kate
Hoon, rh Mr. Geoffrey
Hope, Phil
Hopkins, Kelvin
Howarth, rh Mr. George
Howells, Dr. Kim
Hughes, rh Beverley
Humble, Mrs. Joan
Iddon, Dr. Brian
Illsley, Mr. Eric
Ingram, rh Mr. Adam
Irranca-Davies, Huw
Jackson, Glenda
James, Mrs. Siân C.
Jenkins, Mr. Brian
Johnson, Ms Diana R.
Jones, Helen
Jones, Mr. Kevan
Jowell, rh Tessa
Joyce, Mr. Eric
Kaufman, rh Sir Gerald
Keeble, Ms Sally
Keeley, Barbara
Kemp, Mr. Fraser
Kennedy, rh Jane
Khan, Mr. Sadiq
Kidney, Mr. David
Knight, Jim
Kumar, Dr. Ashok
Ladyman, Dr. Stephen
Lammy, Mr. David
Laxton, Mr. Bob
Lazarowicz, Mark
Lepper, David
Levitt, Tom
Linton, Martin
Lloyd, Tony
Love, Mr. Andrew
Lucas, Ian
MacShane, rh Mr. Denis
Mactaggart, Fiona
Malik, Mr. Shahid
Mallaber, Judy
Mann, John
Marris, Rob
Marsden, Mr. Gordon
Martlew, Mr. Eric
McAvoy, rh Mr. Thomas
McCabe, Steve
McCafferty, Chris
McCarthy, Kerry
McCarthy-Fry, Sarah
McCartney, rh Mr. Ian
McDonagh, Siobhain
McDonnell, John
McFadden, Mr. Pat
McFall, rh John
McGovern, Mr. Jim
McGuire, Mrs. Anne
McIsaac, Shona
McKenna, Rosemary
McNulty, rh Mr. Tony
Meale, Mr. Alan
Merron, Gillian
Michael, rh Alun
Mitchell, Mr. Austin
Moffat, Anne
Mole, Chris
Moon, Mrs. Madeleine
Morden, Jessica
Morley, rh Mr. Elliot
Mudie, Mr. George
Mullin, Mr. Chris
Munn, Meg
Murphy, Mr. Denis
Norris, Dan
O'Brien, Mr. Mike
O'Hara, Mr. Edward
Olner, Mr. Bill
Osborne, Sandra
Owen, Albert
Palmer, Dr. Nick
Pearson, Ian
Plaskitt, Mr. James
Pope, Mr. Greg
Prentice, Bridget
Prentice, Mr. Gordon
Prosser, Gwyn
Purchase, Mr. Ken
Rammell, Bill
Raynsford, rh Mr. Nick
Reed, Mr. Andy
Reed, Mr. Jamie
Riordan, Mrs. Linda
Robertson, John
Robinson, Mr. Geoffrey
Rooney, Mr. Terry
Ruane, Chris
Ruddock, Joan
Russell, Christine
Ryan, rh Joan
Seabeck, Alison
Sharma, Mr. Virendra
Shaw, Jonathan
Sheerman, Mr. Barry
Sheridan, Jim
Simon, Mr. Siôn
Simpson, Alan
Singh, Mr. Marsha
Skinner, Mr. Dennis
Smith, rh Mr. Andrew
Smith, Ms Angela C. (Sheffield, Hillsborough)
Smith, Angela E. (Basildon)
Smith, rh Jacqui
Snelgrove, Anne
Soulsby, Sir Peter
Southworth, Helen
Spellar, rh Mr. John
Starkey, Dr. Phyllis
Stewart, Ian
Stoate, Dr. Howard
Strang, rh Dr. Gavin
Stringer, Graham
Stuart, Ms Gisela
Sutcliffe, Mr. Gerry
Tami, Mark
Taylor, David
Thomas, Mr. Gareth
Thornberry, Emily
Timms, rh Mr. Stephen
Todd, Mr. Mark
Touhig, rh Mr. Don
Trickett, Jon
Turner, Dr. Desmond
Turner, Mr. Neil
Twigg, Derek
Ussher, Kitty
Vaz, rh Keith
Vis, Dr. Rudi
Walley, Joan
Waltho, Lynda
Ward, Claire
Watson, Mr. Tom
Whitehead, Dr. Alan
Williams, rh Mr. Alan
Williams, Mrs. Betty
Wills, Mr. Michael
Wilson, Phil
Winnick, Mr. David
Winterton, rh Ms Rosie
Woodward, rh Mr. Shaun
Woolas, Mr. Phil
Wright, Mr. Anthony
Wright, David
Wright, Mr. Iain
Wyatt, Derek
Tellers for the Noes:
Tony Cunningham and
Mr. Dave Watts
Question accordingly negatived.
Mr. Philip Hammond: I beg to move amendment No. 89, in schedule 3, page 127, line 5, leave out ‘B,’.
Mr. Deputy Speaker (Sir Michael Lord): With this it will be convenient to discuss the following amendments: No. 90, in schedule 3, page 127, leave out lines 12 to 16.
No. 91, page 127, leave out lines 23 to 25.
No. 93, page 128, line 1, at beginning insert
‘In respect of qualifying business disposals within section 169H(2)(a) and (b),’.
No. 92, page 130, leave out lines 31 to 36 and insert—
‘(a) that during the period of ownership of the individual or from 6 April 2008 if later—
(i) the assets which (or interests in which) are disposed of have not been in use for the purposes of the business throughout that entire period, and
(ii) only part of the assets which (or interest in which) are disposed of are in use for the purposes of the business,’.
No. 88, page 133, line 21, at end insert—
‘4A For paragraph 15 of Schedule 7D (taper relief on disposal of qualifying shares) substitute—
“15 For the purposes of claiming entrepreneurs’ relief on a disposal of qualifying shares, in applying sections 169I and 169S(3) the shares are treated as if they had been acquired when the original option was granted.”’.
Mr. Hammond: This is a technical but important group of amendments relating to the detail of entrepreneurs’ relief. The abolition of taper relief in the capital gains tax changes that were announced in the pre-Budget report sent a very negative signal to business and, as I said in the previous debate, provoked a ferocious response from business organisations. Indeed, it created what I think is a unique coalition of all the business organisations: the CBI, the EEF, the British Chambers of Commerce and the Federation of Small Businesses. I apologise to any others that I have missed, but they all coalesced in an unusual way—perhaps not surprisingly, given that they represent disparate types of business. Faced with that wall of opposition, the Government’s tactics were, to put it bluntly, opportunistic. They decided to try to buy off the most numerous but least expensive group of opponents. I am thinking of very small businesses, which are largely represented by the Federation of Small Businesses.
Let me be unambiguous: small businesses play a crucial role in our economy. Businesses that employ no one other than the principals or one or two people deliver a major part of the economic activity in our economy. Beyond that, small businesses play a crucial part in the social fabric of our society, and we support them entirely. However, the great majority of them are not going to—indeed, have no aspiration to—grow into large businesses. Many people establish small businesses as an alternative to other employment; running a small business gives them a different lifestyle and working style and the opportunity to succeed in a way that suits them.
Some people, of course, want their businesses to become the next Microsoft, but many do not want that. For the economic future of the country, we do not need only small businesses, which provide the bedrock of our economy; we also need to foster small but scaleable businesses—those that have aspirations to grow, create substantial employment and raise ever larger amounts of capital. We need to be concerned about those businesses because of their importance in creating jobs and prosperity and because the entrepreneurs who establish them—such businesses are often in high-tech industries—tend to be more mobile, so the option of relocating overseas tends to be more realistic for them.
When this debate first broke, I met a group of serial entrepreneurs. They had established successive businesses, built them up, sold them on and then started again. Some of them were quite young—in their 30s or early 40s—but already had a chain of business successes behind them. We have to encourage such people if we are to have a future in the globalising economy.
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