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Lord Kalms: My Lords, I should like to approach the debate from a different angle. There are others far more qualified in this House to give chapter and verse to the statistics and data that lead inexorably to the conclusion that we have an overtaxed economy, as my noble friend Lord Blackwell so eloquently expressed when he put down his marker for this debate.

Rather, I want to provide some narrative to the statistics, using my business experience over a long period, and under many administrations, which, with honourable exceptions, were not able to tackle and control progressive and harmful taxation levels.

The debate should not be about tax alone. It must include its Siamese twin, regulation, because both have their impact on the profitability of business—the source of all wealth.

Having been at the sharp end of both tax and regulation and worn over the years several different hats, there is a path I want to develop in this debate.
 
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My theme is simply the foundation of all wealth creation—the bottom line—the amount after tax and imposed costs that is available for reinvestment or distribution. The seed corn line—the raison d'être of commerce.

Like others in your Lordships' House, at some time in the 1960s I was paying tax at 98 per cent and even at one time I was, due to a quirk in the system regarding one of my children's trusts, privileged to pay over 100 per cent tax. I was not amused. But of course there were consequences. And the whole process of wealth creation ground to a crawl. Motivation had been smashed; the return on effort annihilated.

It was not until the Thatcher government reduced tax sufficiently to spur the wealth creators that a damaged economy picked itself up and started moving ahead, one might have imagined towards Elysian fields.

But that is not the way of this Treasury. Blessed or cursed with a short memory, it never entered the soul of our financial master that taxation is a delicate instrument, to be used more as a rapier than a blunderbuss and to be used as a corrective device for overheating or stimulating and not merely to fill the coffers of a profligate bureaucracy.

Today we are facing a critical phase of the old confrontation between wealth creation and bureaucracy. For "bureaucracy" you can read "big government". Indeed, to know thine enemies we should also include Brussels, which is synonymous with uncosted regulation.

It is a conflict between strong forces. On one side there are those who create wealth, who add value, who invent, employ, manufacture, distribute, provide services, who understand risk in return for reward, who plan and dream the growth of their small empires and who accept the social responsibility of their teams by recognising the need to grow; and on the other side are government and bureaucracy who honourably need to regulate excesses and to provide safety nets, safeguard pensions, defend the borders and do all the necessary chores that democracy demands.

Seemingly it is a balanced relationship. I pose the question: have the wealth creators kept their part of the pact? Perhaps imperfectly, but decidedly yes. And the Government? I submit that they have fallen substantially short.

The bureaucrats grow, they need more feeding and grow bigger. A vicious circle of insatiable expenditure needs constant increasing nourishment—called taxation. The need for prudence is a wonderfully seductive word to set against tax increases: the gloved hand with the iron fist. Every time you read "prudence" try substituting "profligate".

There is insufficient resistance by industry to a creative Chancellor finding unending streams of tax sources. And they are not stealth taxes—a misnomer if ever there was one—they are just plain taxes on the wealth-creating community. Unwisely they slice away at the base of wealth creation, which is investment and distribution of profits, which instead are channelled into a bureaucratic pool skilled in the ways of embedded spending.
 
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Let me for one moment be anecdotal from a senior vantage view. Any businessman who in his career has been privileged to serve with the NHS will be very aware of the waste, layered bureaucracy, lack of economic discipline and the very large sums that slosh about looking for a home. It was for me a shattering experience when the hospital I chaired—a large London teaching hospital—was in my first year running a huge deficit for the first 11 months.

By a miracle, certain arbitrage, regional, balancing, retrospective adjustment funds appeared in the 12th month to enable us to hit all our financial targets and avoid embarrassing some central bureaucracy. In my self-defence, all the cuts and economies that I was pressing for during the year were agreed and then quietly ignored by those who knew about the miracle of the 12th month.

In business, as a chairman, I would have had to put out a profits warning after about two months, and regularly thereafter. And, of course, as things turned out all right at the end, I would have been fired for giving false warnings, incompetence and probably share manipulation.

Let me return to my own business patch. Over the years, the Budget period has been one of severe anxiety, impossible to forecast and so often seemingly adversarial. I remember when a sales tax went up from zero to 50 per cent at one swoop. I remember when an overnight import surcharge immediately added 5 per cent to all our costs. I remember one Budget when a new VAT rate was imposed that would start in 30 days, causing us the biggest boom and bust that I have ever known. In more recent years, an iniquitous premium tax was introduced, selectively and arbitrarily, on a potential growth area of business.

Yet on no occasion were we warned or were part of any discussions. How can any system of tax, which should be a privilege to pay, so often be so burdensome and unhelpful to business?

Within my critique there is another major aspect of the business point of view. I fear that our latest Budgets are contrived in soundproof rooms where sunlight never appears. Certainly our Chancellor has never appeared to take a holistic view of his captive market. If he had, he would find a rather unhappy image. Businesses today, in addition to his limitless impositions, are snowed under by a perverse expansion of corporate governance, almost limitless legislation on social and health and safety issues which are having a serious impact on the seed corn line.

Many of those schemes are ill-conceived but are approved by powerful bureaucracies which are for ever extending those powers. The cost of servicing the extraordinary amount of new legislation, much of it emanating from Brussels—and this Government do not miss their own opportunities—is, regretfully, totally unreported and is not an accounting imperative. Yet the true costs of implementing regulation are never clearly calculated, and therefore never isolated and identified.

My noble friend Lord Blackwell suggested the uncosted part of our regulatory overheads is estimated at £30 billion and yet, because it is only an estimate, it
 
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misses some of the glare of exposure. It is a sum so vast, so indefensible, that it must be reduced to meaningful components if it is to be significantly tackled.

That brings me back to my holistic argument. Surely any Chancellor, before imposing increased taxes, should consider the indirect costs that have already been imposed during a given period. I will propose today a better way of quantifying this massive sum. That completes my critique.

Perhaps I may now move into a constructive mode. The report and accounts of a company are the public exposure of its strengths and weaknesses. It is a powerful and respected document, audited and closely analysed. As of now, new accounting laws are being imposed that make accounts the grazing ground only for experts. New language accounting laws mean that we must be, inter alia, qualified crystal gazers, with penalties for gazing wrongly. Yet, perversely, there is no rule which states that it is a requirement of a company to state the true cost and impact of tax and regulations imposed during the previous year. That is a glaring omission. Now, that would be an interesting, indeed fascinating, figure that would expose once and for all the true cost of taxation and the impact on profitability, with all that that implies.

I am proposing that a company should, as good practice, provide in its annual report and accounts full costs and analysis of all the taxes that it pays and collects for government, including VAT, Excise duty, social security, the business rate, stamp duty, environmental taxes, imposts and surcharges. In addition, it should provide a full analysis of the real costs of all regulation—namely, the cost of absorbing, implementing and complying. It should also state the number of extra employees to supervise a Brussels initiative, and the true cost of employment tribunals, where most of the time it does not pay to defend against a claimant, the costs being so perverse and not reclaimable if you win.

In my industry, electrical distribution, a company should be required to state the massive moneys and costs involved in administering the new waste electrical and electronic equipment regulations. How about the real cost to a company of maternity and paternity leave? At this point, I am arguing only for a requirement to state the costs of so many government initiatives and not the merit, or otherwise, of any one initiative. I want a company to show its shareholders how much the myriad of tax and overhead imposition have cost them during the last accounting period.

I have given only a tiny handful of examples. I want this data fully audited and shown annually in the report and accounts of companies. I accept that some figures will be estimates. We need to show the real impact, present and future, on the potential profitability of the business. Yes, it would add a small cost to the audit fee, but it would have a massive impact on understanding the dangers of impacting the bottom line—the seed corn line, on which all progress and ambition is dependent. It would be a major data source for government and business, giving us at any one moment the hard evidence of the consequences of uncosted and often ill-conceived regulations and how they affect individual businesses.
 
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I recognise that, as a former chairman of a FTSE 100 company, I might have to be persuaded of the idea of separately reporting the year's tax and overhead imposition. After all, I had been trained to reassure shareholders not to panic. We would cope with the impositions of life in general and Chancellors, bureaucrats and Brussels in particular as, say, the Pharaoh dealt with nine of the plagues. But as a chairman I believe that I could be persuaded on the merit of the argument, particularly with pre-knowledge of the 10th plague; the dearth of seed corn.

I conclude by arguing that the battle for lower taxes, whether direct or bureaucracy-driven costs, will best be fought if companies, the largest bearers of these burdens, record the facts annually and in some depth of analysis. We would have an invaluable weapon in our hands, one which any sensible Chancellor will have to, and may well want to, take into account.

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