Freedom of Tax Information (Hansard, 20 April 1999)

§ Mr. Tim Loughton (East Worthing and Shoreham)

I beg to move,

That leave be given to bring in a Bill to require the Government to issue taxpayers with an annual schedule detailing the taxes they have paid compared with previous years and to require information concerning the taxable component of prices on products sold to be made available. I am currently engaged in a detailed questionnaire xercise in my constituency. One of the questions that I ask is whether constituents think that they are paying more tax now than they were two years ago. Most say yes, and of course they are right, but a great many say that they do not know. It is very complicated to make proper comparisons.

Until a few years ago, I completed my own tax returns. Despite having spent 15 years working in the financial services industry advising clients on investment matters, I now have to employ an expensive accountant to do it for me. The titanic complications of the capital gains tax system resulting from last year's Budget were the last straw. Last week, a large package from the Inland Revenue landed on my doormat with a resounding thud. It contained a 12-page tax return, a 40-page guide to filling in the tax return and an eight-page help sheet, as well as separate forms for parliamentary calculations, sundry other advice forms and—the final straw—a sheet of helpful hints from a bowler-hatted "Hector the tax inspector" pushing a particularly archaic-looking lawnmower bearing the logo "Self Assessment—A clearer tax system".

In fact, it is about as clear as mud. I have little idea of how much tax I have paid or am due to pay; I have little idea whether I shall be paying more tax this year than last year, in gross terms or as a percentage of my earnings, let alone all the stealth taxes used increasingly liberally by the Government. The plethora of forms gives me no indication of how the total Government tax revenue is made up, or of how it is then spent.

I believe that the system has become far too complex for the ordinary man or woman in the street, who will have little chance of making a fair assessment of whether he or she faces an increasing tax bill, in what form the taxes are paid and in what areas the tax revenues are spent.

I believe that it is the basic right of all taxpayers who contribute to the national Exchequer to have easy and transparent access to that information, so that they can make informed choices about what to spend their money on and on whether the tax record of the Government of the day matches up with the rhetoric of the tax policies promised.

This year's Budget underlined the confusion and arbitrariness of the whole system. Indeed, the Prime Minister and the Chancellor of the Exchequer seem to have been particular victims of that confusion and complexity. Before the election, the Prime Minister assured us categorically that Labour had "no plans to increase tax at all". Before the Budget, he tried to claim that it had not, but on 3 March he was forced to admit that the tax burden will increase over this Parliament".—[Official Report, 3 March 1999; Vol. 326, c. 1075–76.] 700 Indeed, we have calculated that it will increase by £41 billion as a result of Budget announcements made so far.

On Budget day, the Chancellor claimed that the Budget offered "tax cuts for business". Simultaneously, the president of the Confederation of British Industry maintained that over the next four years as a result of Budgets which we've seen in the last two years, we are going to face something like a £20 billion increase in business taxation.

The Adam Smith Institute has calculated that tax-freedom day has been delayed by a further two days this year, to 27 May, as a result of Budget increases by stealth. Incidentally, tax-freedom day comes as soon as 9 May in the United States, but as late as 21 June in the eurozone.

The truth is that people are being deceived by a Government who pretend that taxes have not gone up by pointing to the headline rates of tax while the overall tax burden goes on rising by stealth. The overall burden, rather than just the rate, is all-important and difficult to extrapolate.

Tables available from the House of Commons Library reveal about 300 different types of taxes and reliefs available to the Chancellor to alter at his will: 25 main headings, under "Public Sector Current Receipts", which include the usual suspects such as income tax and corporation tax; 83 "Principal Tax Expenditures and Structural Reliefs", ranging from exemption from value added tax on burials and cremations to—hon. Members should just wait—VAT refunds to the BBC and ITN when that tax is incurred on non-business purchases; 42 minor tax allowances; and 146 tax allowances and reliefs for which the Government do not know the cost, ranging from the exemption for agricultural societies on profits of shows to gains on sales of motor cars.

In short, there are about 300 ways to skin a cat. This Chancellor has been doing a lot of skinning by stealth—not to mention fleecing, too. It is no surprise, therefore, that, after the use of smoke and mirrors which reclassified the treatment of the abolition of mortgage interest relief at source and the introduction of the working families tax credit in particular, the Select Committee on the Treasury criticised the Chancellor's use of selective figures and called for clear tables showing the cumulative effect of tax changes and the separate effects of new announcements. As the Financial Times put it, more succinctly: Government spin does not always stand up to scrutiny.

My Bill therefore proposes three main measures. The first is an annual tax and spend statement. Each taxpayer would be entitled to receive an annual statement of how much income tax and national insurance he or she has paid and on what that money is being spent. The statement would have to be clear, concise and user-friendly. The aim would be to provide people with objective and useful information so that they can better understand how much they contribute each year to the provision of public services and how the Government are spending that money.

The second measure is the requirement for the Government to establish an independent Budget office. It would scrutinise and audit the contents of the Budget and other documents and statements made by the Treasury. It has become almost impossible to trace tax changes 701 over years. To rebuild public trust, I believe that an independent body is required to audit the Budget's contents and ensure consistent methodology and presentation of figures.

Thirdly, the Government would be required to institute ways of ensuring that the amount of tax that people pay for goods—particularly road fuel, alcohol and tobacco—is clearly displayed at the point of sale. It has taken the recent furore over the penal increases in petrol and diesel duty and the uncompetitive extension of the fuel escalator, all under the dubious guise of environmental taxation, to alert the public to the fact that, typically, 85 per cent. of the price of a litre of fuel represents tax. A litre of fuel costs 67p and 57p of that is derived from duty and VAT; only 10p is for the petrol.

A packet of cigarettes costs —3.69, 82 per cent. of which is accounted for by duty and VAT, so just 68p of that sum is for the cigarettes. Similarly, 66 per cent. of the price of a bottle of spirits is made up of tax. I believe that consumers should have easy access to those figures, which should be clearly and unequivocally presented, rather than having the money removed from their pockets by stealth. That is achievable, without loading prohibitive extra costs on retailers—most obviously by including details of the tax element on till receipts at the point of sale, which would require only minimal adaptations of cash tills.

Producers and retailers have welcomed the idea. The Petrol Retailers Association has said that it would most certainly be interested in a more open approach being taken to highlighting the total amount of taxation included in the retail price of commodities". The Automobile Association's "Fair Deal for Motorists" campaign seeks to give drivers access to that taxation information, and the Scotch Whisky Association says that 702 the campaign to highlight the tax element in the cost of alcoholic drinks is a matter that it has been pursuing for a number of years.

The aim of the Bill is simple and achievable, at minimal cost, but with enormous benefits to the ordinary taxpaying members of the public, who have a right to easy access to clear information about where their taxes are going and where they are levied.

Raising the tax threshold by stealth, as the Government have become increasingly adept at doing, means dishonest tax. My Bill seeks nothing more than freedom of information for the public, enabling them to make informed choices and comparisons.

The Government have declared that they are committed to freedom of information, so I hope that they will be able to support my own amateur home-grown effort and hasten its passage on to the statute book, ahead of their own long-awaited opus on the subject.