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The hon. Member for Taunton raised one point about which I, too, have heard. When the announcement was made in the Budget, there had been no consultation with the Department for Culture, Media and Sport, which has responsibility for tourism. I should be grateful if the Minister would confirm whether that is true, and explain why the Government have voluntarily declared that the existing furnished holiday letting rules are incompatible with EU law. The Government usually
have to be dragged kicking and screaming before they ever concede one of those points, but on that issue they seemed rather to move ahead of any court judgment.
Why was there no consultation prior to the publication of the announcement? The Minister says that there will be consultation subsequently, but why has there been no attempt to look more imaginatively at whether there is a revenue-neutral approach that would still provide some protection or favourable treatment to those owning furnished holiday lettings, given the impact that the measure may have on the tourist industry and the unfortunate dynamic effects that may occur?
Mr. Gauke: I was going to conclude, but I will certainly give way.
Mr. Timms: Before the hon. Gentleman concludes, will he acknowledge the point that I made in our debate, which was in Committee not Committee of the whole House, about European constraints on activity here? The arrangements simply support UK-based furnished holiday lets, not those elsewhere in the European Union, and there is an issue.
Mr. Gauke: I do acknowledge that there is an issue, and extending the treatment to EEA properties clearly makes the concession—the favourable tax treatment—more expensive. I absolutely acknowledge that point. The point that I was seeking to draw out is that the Government’s usual approach is not to be so proactive in identifying areas of the UK tax system that appear to be in breach of EU law. There is a long list of cases on which the Government have fought long and hard before making the changes, yet on the issue before us they seem to have rushed rather quickly from identifying it to conceding the point that it is in breach of European law. The Government’s wording is that it may be in breach of European law, and I do not know whether that prevents them from running into retrospective difficulties, but I do not want to press the Minister on that. There seems to be some enthusiasm for creating the problem as a consequence of European law, and that is not always the case. If the Minister will respond to those points in his remarks, I shall be grateful.
In conclusion, and returning to the other new clauses in the group, we think that it is vital that everything be done to ensure that the UK has a competitive tax system. In the current fiscal climate, the priority has to be a predictable and workable tax system, and our proposals for an office of tax simplification go some way towards addressing that.
Rob Marris:
I want to make a few brief remarks about philosophy, to put it at its most general. Most of my first degree is in sociology, and one thing that I learned during my studies is that people are able to hold contradictory positions. So, for example, it is all the rage for politicians from all parts of the House to talk about decentralisation and local control. We see it most markedly with the national health service. People say, “Let local doctors make decisions, with the local distribution of resources to where health needs are locally determined to be greatest.” In the next breath, however, they say, “Oh! It’s a national health service and we don’t want a
postcode lottery.” We saw it graphically 12 months ago when the Conservative party’s position was that the NHS should not be run from Whitehall and there should be local control. In the very same speech, however, its spokesperson called for a national moratorium on all hospital closures. Both positions may be desirable, but they are contradictory.
We have seen a certain contradictory nature tonight, and I probed it during my first intervention on the hon. Member for South-West Hertfordshire (Mr. Gauke). On the one hand, the argument runs that we have a tax system that is indeed complex, includes subtleties and allows a measure of discretion; and then in the new clause, we have a proposal for an office of tax simplification, which, were it to proceed not only to be an office but to have a remit for tax simplification, would undoubtedly lead us along the spectrum towards a much more rough and ready system of taxation administration, of decision making on the taxes that should be paid, and so on. That would be rough justice. If that is what the House and the Conservative party want, however, that is an honourable and coherent position.
The difficulty is when the position becomes contradictory and people start running away from its inevitable trajectory. We have seen it graphically tonight from the hon. Gentleman. The group of amendments before us includes amendment 36, which would set up very small companies’ relief and mean greater complexity within the tax system. The hon. Member for Taunton (Mr. Browne) will shortly tell us why the measure is desirable, but let us leave that aside and consider the philosophy. We have very small companies’ relief in one amendment and tax simplification as the highlight of another. When I probed the hon. Member for South-West Hertfordshire, he did not make it very clear which way his party would like to go on the very small companies’ relief proposal—a proposal of complexity.
Mr. Jeremy Browne: Will the hon. Gentleman empathise with my frustration at another Opposition party saying one thing to one group and a completely contradictory thing to another, and seeming to be governed solely by a desire to have attractive headlines in by-election literature, rather than by a coherent alternative vision for government?
Rob Marris: I presume that the hon. Gentleman is talking about the Liberal Democrat “Focus” newsletter published around the country; that is frequently contradictory.
Mr. Gauke: Following the contribution from the hon. Member for Taunton (Mr. Browne), will the hon. Member for Wolverhampton, South-West (Rob Marris) confirm that the age of satire is not dead?
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Rob Marris: Indeed not; and the age of chutzpah is upon us.
I was discussing two of the new clauses in this group. In one, the Conservative party is pushing for tax simplification; that is understandable, coherent and logical, and in theory it might be desirable. At the first whiff of grapeshot, however, the party starts running in the opposite direction—it appears to be doing so on relief for very small companies, and it is certainly doing so on the furnished holiday lettings rules. Again, the rules
might be desirable and it might be right for us to keep them; I am not getting into that. I merely give that new clause as an example, within a single group of amendments, of what I am saying.
The hon. Member for South-West Hertfordshire gives us a lot of stuff about simplification and its desirability. In new clause 4, however, he is saying that a problem exists with the abolition of the beneficial capital gains tax rules for furnished holiday lettings and that he is worried about that favourable treatment being done away with. Doing that, however, would be a simplification.
Mr. Binley: The hon. Gentleman is a clever man, and I have admired his comments again and again. However, is he saying that he does not agree with tax simplification? Britain’s tax code rivals India’s as the largest in the world. Is he saying that that does not harm small businesses?
Rob Marris: What I am saying is that the issues are philosophically and politically much more difficult than is implied by simply standing up and wrapping oneself in the cloak of tax simplification. Life is more difficult than that, as we can see from the group of amendments. I gave those two examples. There are three new clauses and one amendment in the group. I leave aside new clause 6, which is about competitiveness. New clause 3 is about tax simplification. Amendment 36 would add complexity to the taxation of very small companies. In new clause 4, the abolition of a complexity is resisted by those who say that they pursue tax simplification.
Mr. Binley: Will the hon. Gentleman stop being a lawyer and tell me whether he believes in tax simplification?
Rob Marris: I am simply saying to the hon. Gentleman that the issues are difficult and that I am not going to stand here and show what I regard as chutzpah, to say the least. I shall use a politer expression. I am not going to say, “Oh yes, tax simplification is wonderful,” and then put myself in a contradictory position, as the hon. Member for South-West Hertfordshire has done.
Within a group of three new clauses and an amendment, the hon. Gentleman has one in favour of simplification and two in which he apparently comes down on the side of complexity. These things are difficult. Simply grandstanding and saying, “I believe in tax simplification,” and asking me whether I do, does not help the political discourse of this country.
Mr. Gauke: May I help the hon. Gentleman?
Rob Marris: I don’t need any help!
Mr. Gauke: Perhaps the hon. Gentleman should accept some. An amendment in the group has been tabled by the Liberal Democrats, although it appears to have been associated with us. Yes, we have a new clause on furnished holiday lettings; in it, we attempt to probe the Government’s thinking, as an Opposition should. We want to press them on a concern about the impact of a tax change they have announced—rather unwillingly I think; they do not seem particularly enthusiastic about the change, although they feel they have to make it.
We are also setting out an argument for a structure that will move towards a simplified tax system. I do not accept that there is an inherent contradiction. The hon. Gentleman appears to be saying that an amendment
tabled by the Liberal Democrats is inconsistent with a new clause tabled by the Conservatives, and that that suggests a contradiction.
Rob Marris: Let us be clear. Let us leave aside Liberal Democrat amendment 36 for the moment; we will get on to that. New clause 4 was tabled by the hon. Gentleman, among others. That new clause is about the tax position of commercially let, furnished holiday accommodation. New clause 3, also tabled by the hon. Gentleman, among others, is to do with tax simplification. All I am pointing out is that the issues are difficult and that simplifying simplification, to coin a phrase, is not helpful. We see it, however, in the position of the hon. Gentleman. He wishes to do the best in respect of commercially let furnished holiday accommodation; I understand his position, although I am not certain that I agree with it. He is concerned about the beneficial capital gains tax regime for that sector of small business being done away with. He wants the favourable treatment, as he called it, to continue. That is counterposed with a demand for tax simplification. All I am saying is that, to me, that is contradictory and demonstrates the difficulties of achieving tax simplification.
Mr. Jeremy Browne: It is difficult to follow that devastating dismantling of not only the new clauses put forward by the Conservative party, but the fitness to govern that the party professes to possess. I was impressed when I read in this morning’s edition of The Times that Conservative Front Benchers are taking guidance on budgetary affairs from the Liberal party of Canada, the sister party of the Liberal Democrats. The article says that when they met the Canadian Liberals,
“The Conservatives were impressed. Philip Hammond, the Shadow Chief Secretary to the Treasury, and Francis Maude, the Shadow Cabinet minister responsible for policy implementation, requested a private breakfast briefing with the Canadians.”
That is how impressed they were.
I am not surprised that the Conservative party is looking for guidance and leadership from Liberal parties around the world. I include the Liberal Democrats here in Britain; I say that because new clause 4 looked extremely familiar to me as I leafed through the Order Paper. I soon realised that that was because I tabled the same clause in Committee. I welcome the support from the Conservative party.
Rob Marris: I gently point out to the hon. Gentleman the perils involved in some of these issues. Having carried out a devastating tax-cutting approach as a federal Government in Ottawa, the Liberals lost the general election. They formed a minority Government under Paul Martin, but they fell shortly thereafter.
Mr. Browne: I defer to the hon. Gentleman’s expertise about Canadian politics, although I observe a constant theme: if one wants tough decisions about the future of a country, and balanced budgets, one should look to a Liberal or Liberal Democrat party to make those decisions.
That gets me neatly to new clause 3, and the hon. Gentleman’s dismantling of the credibility of the Conservative party.
Mr. Binley: Will the hon. Gentleman give way?
Mr. Browne: Let me talk for a moment about the difficulty that the hon. Gentleman will face when he makes his point. I very much support simplification. Don’t we all? Everybody would rather have a simple system than a complicated one. One of the difficulties faced by businesses and individuals is being confronted by a complex tax code and all kinds of micro-incentives that are meant to change behaviour but actually mean that accountants are needed to fill out relatively simple tax returns. That is to be regretted. The objective of a simpler system is shared by all parties; the question is whether new clause 3 is the right way to advance that objective.
Mr. Binley: Does the hon. Gentleman not recognise that in the simplification of any code, the emphasis changes? Part of the code might grow, but the overall effect is for there to be a simpler code in the end. That is how the system works.
Mr. Browne: My first concern is that I take seriously the speeches of the right hon. Member for Witney (Mr. Cameron); I have no reason to believe that he means to mislead anybody. He made a big speech to the think-tank Reform. I serve on its advisory board, so I had a direct interest in what he said. Yesterday, the right hon. Gentleman spoke about the great threat posed to the public finances of the plethora of quangos, which cost a huge amount to administer. When I heard that I thought, wow, here we have a substantial policy—something that I can really latch on to. I have always struggled to get a real feel for what the right hon. Gentleman believes, but yesterday I thought that, he had raised a tangible issue that meant something. I can tell that Conservative Front Benchers intend to follow that theme through in the House of Commons—lots of amendments and new clauses will be tabled to flesh out the agenda to remove the quango state.
Then the following day, and although I appreciate that all new clauses had to be tabled before the right hon. Gentleman made his speech, I find a Conservative new clause that proposes a new quango. I ask the hon. Member for South-West Hertfordshire (Mr. Gauke) this very simple question: how much would the head of the quango be paid? We could get into a bigger conversation about the overall cost, because I assume that it would need a secretariat, central London offices, and a new logo. The Conservatives would want its representatives at their party conference, so they would charge the quango lots of money to host fringe meetings there. It would have an entertainments budget—
Madam Deputy Speaker (Sylvia Heal): Order. Will the hon. Gentleman get back to discussing the new clause?
Mr. Browne: I am grateful for that guidance, Madam Deputy Speaker, but this is directly central to the new clause. This proposed new quango appears to be uncosted. The going rate for chairing such organisations is not cheap, so I can imagine that the person who ran this one would require a big salary, expenses and everything else.
Madam Deputy Speaker: Order. The hon. Gentleman’s remarks may well be correct, but perhaps we will restrict ourselves a little more to the terms of the new clause.
Mr. Browne: I think that I have made my point.
I am reluctant, in this time of difficult financial circumstances, to write a blank cheque to the Conservatives so that they can keep coming up with expensive quangos that I fear we cannot afford. The hon. Member for Wolverhampton, South-West (Rob Marris) has already mentioned the inconsistency in their argument. For example, we have just had a vote on a new clause tabled by the right hon. Member for Birkenhead (Mr. Field) that would have meant that we had to rejig thresholds, which would have been very hard to do and would have made the tax system more complicated, yet the Conservatives voted for that.
On the other hand, the shadow Chancellor has a history of being enthusiastic about flat-rate taxes. He came into office saying that he would consider their introduction, but it was only when he did so that he realised how foolish his initial proposal was. At one moment he seems to be in favour of an extreme form of simplification, but earlier this evening he seemed to be in favour of greater complexity.
Mrs. Theresa Villiers (Chipping Barnet) (Con): Surely it is bogus to accuse the Conservative party of undermining the support we have always expressed for simplification just because, on occasion, we support a change in the law that might possibly add one further small complication to the tax system. That argument does not hold together intellectually. We can show general support for simplification while accepting that in certain instances a small degree of additional complication is desirable to achieve policy ends.
Mr. Browne: I think it is legitimate to explore the motives behind the new clause. My fear—I may be wrong—is that the Conservatives tell different audiences what those people want to hear, even if the messages are contradictory. For example, they tell people who are, rightly, concerned about the size of the budget deficit that the Conservatives are the party that will get to grips with it. Then I read today on the front page of The Daily Telegraph that they have a wish-list of extra, completely uncosted spending commitments aimed at pleasing people in rural communities. How that is compatible with getting to grips with the budget deficit is a mystery to me. They tell groups who complain that the tax system is insufficiently simple, “Don’t you worry—we’re bringing in new clause 3 to set up a quango to deal with that”, yet the day before they told another group concerned about the growth in the number of quangos that they intended to cut their number. To another interest group that wants great complexity in the system because that would change it to its advantage the Conservatives say that they too favour that greater complexity because they share that interest groups’ concerns.
Let me offer the Conservative party some advice. My party has been in opposition for decades, and my colleagues and I have come to the conclusion that the path that the Conservatives have decided to take is not the right one. It looks superficially attractive to a party that has been in opposition for a long time, as the Conservatives have been, because it seems that it can thereby appease all those different groups and that approach will cumulatively add up to something credible. However, the problem with that approach, as I fear that the Conservatives are
increasingly discovering, is that those individual initiatives are less than the sum of their parts and do not add up to an alternative prospectus for government.
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