Select Committee on Economic Affairs Third Report


  3.1  The Sub-Committee was formally set up by the Economic Affairs Committee on 28 April 2003 and held its first meeting on 29 April 2003. The Sub-Committee's terms of reference followed the recommendations of the Procedure Committee that it should address only technical issues of tax administration, clarification or simplification and not the rates or incidence of tax. The Sub-Committee sought the advice of the Clerks who confirmed that our work would not offend any Commons financial privilege as no legislative activity was envisaged in the Lords on the basis of the scrutiny we proposed to undertake.[4]

  3.2  The Sub-Committee also took note of the Working Practices Group's wish that it should complement and help the work of the House of Commons and the Procedure Committee's proposals that it should aim to report before Commons remaining stages and in time for the second reading debate on the Bill in the Lords.

  3.3  The membership of the Sub-Committee is set out in Appendix 1.

  3.4  Mr Leonard Beighton and Mr Brian Shepherd, both retired senior officials of the Inland Revenue, were duly appointed as Specialist Advisers to the Inquiry. We are most grateful to them for steering us so ably in such a short time through the complexities of the Bill and the mass of documentation which our Inquiry provoked.

  3.5  A Call for Evidence[5], which noted the Sub-Committee's terms of reference, had already been issued immediately after the publication of the Finance Bill on 14 April 2003. Respondents were invited to suggest, in time for the first meeting of the Sub-Committee, what issues the Sub-Committee might usefully investigate within their terms of reference and given the time constraints.

  3.6  At our first meeting, and again the following day, we studied the Bill and considered the initial responses to the Call for Evidence and the advice of our Specialist Advisers. Having done so, we identified three key aspects of the Bill which had evidently aroused concern and which seemed to us to be matters on which we should concentrate because we were most likely to able to contribute constructively on them, given our collective expertise, in the time available. These were:

  • The introduction of Stamp Duty Land Tax (Clauses 42-124 and Schedules 3-19)
  • The new provisions against evasion of Value Added Tax (VAT) (Clauses 17/18) and,
  • The introduction of mandatory electronic payment of tax by large employers and associated provisions (Clauses 201/202)

  3.7  Some concern was also apparent from the initial responses to our Call for Evidence over the effectiveness of the consultation process carried out by the Inland Revenue and HM Customs & Excise in preparation for the introduction of these and other proposed provisions of the Bill. Similarly, several respondents had expressed concern over the extent of the recourse to secondary legislation through regulation-making powers proposed in the Bill. We felt that these were also potentially significant issues which we could and should investigate within our remit as they related to the key aspects we had chosen for concentration.

  3.8  In the intervening five weeks we have had oral evidence from eleven sets of witnesses. We have had thirteen meetings and have considered 25 separate items of written evidence[6] and other documents provided for our information, as well as other background material. The oral and written evidence is published in Volume II of this Report.

  3.9  We were impressed by the very warm welcome given by many respondents to our Inquiry and are most grateful to all concerned for responding so rapidly and thoughtfully to our requests for information and views about the Bill. Their contributions have been invaluable.

  3.10  The following chapters set out our findings on the key topics for concentration outlined above. Our recommendations are set out in Chapter 7.

4   Extract from Memorandum by the Clerk of Committees circulated to Sub-Committee members on 6 May 2003: "Commons financial privilege does not affect the ability of the Lords to debate financial or fiscal matters, not to consider matters in select committees. As Erskine May says (page 797), 'The Lords…express their opinion upon public expenditure, and the method of taxation and financial administration, both in debate and by resolution, and they have investigated these matters by their select committees'. So far as concerns the proposed scrutiny of the Finance Bill by a sub-committee of the Economic Affairs Committee, the House has agreed the recommendation of the Procedure Committee. Adapting the words used by the Procedure Committee, it is clear that the House expects the Economic Affairs Committee to establish a sub-committee with orders of reference 'to consider so much of the Finance Bill as relates to technical issues of administration, clarification and simplification but not the incidence or rates of tax'. Following this injunction will confine the activities of the sub-committee rather more strictly than any issue of financial privilege." Back

5   See Appendix 3. Back

6   See Volume II (HL Paper 121-II). Back

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