HC Deb 19 December 2000 vol 360 cc317-25 10.40 pm
The Paymaster General (Dawn Primarolo)

I beg to move, That it is expedient that a Joint Committee of both Houses be appointed to consider tax simplification bills, and in particular to consider whether each bill committed to it preserves the effect of the existing law, subject to any minor changes which may be desirable. This is a narrow motion for the process of agreeing new procedures by which Parliament can scrutinise tax simplification Bills and ensure that they are fit to be enacted. These are Bills produced by the Inland Revenue tax law rewrite project, and we are considering this motion now because the first such Bill is due before the House shortly.

These are not consolidation Bills, but they have much in common with such Bills. They will restate the law rather than change it. It was clear from the outset that a new procedure would be needed so that Parliament could scrutinise the rewritten legislation properly.

The question was considered in 1996 by a working party set up by the tax law rewrite committee, chaired by Lord Howe of Aberavon. The group proposed that the Bills should be introduced in the House of Commons and then referred after Second Reading to a Joint Committee of both Houses, with a Commons majority and chaired by a Member of that House.

The general approach was broadly endorsed by the Commons Select Committee on Procedure in February 1997, following which this House passed Standing Order No. 60 on 20 March 1997, setting out the broad procedure for tax simplification Bills. The detailed procedure, including such matters as the composition and the proceedings of the Joint Committee, was deferred until such time as it appeared in the new Parliament that a Bill would be ready for enactment.

Today's motion is the first step in setting up this Joint Committee. If the House agrees to the proposal, a message will be sent to another place inviting agreement. If it is agreed, each House will set up its own Committee which, together, will meet as the Joint Committee.

Mr. Douglas Hogg (Sleaford and North Hykeham)

Will the hon. Lady be good enough to tell the House how the Committee will be composed, and what balance of party representation there will be?

Dawn Primarolo

That was to be my next point. At present, we expect the Committee to be composed of 13 members in all, of whom seven will be from this House. The details of the Committee's procedure are still being discussed through the usual channels and will be subject to final agreement.

The fact that the tax law rewrite Bill deals with matters that are traditionally the concern of the Commons is recognised by the fact that the Committee is expected to have a Commons Chairman and a Commons majority, as recommended by the Procedure Committee. The Committee will consider the Bill and amend it if necessary. It will, of course, be alert to ensure that no more than minor changes are made and that the procedures are not abused.

The Bill will bring together some 300 pages of legislation, which is currently found in various places. The main legislation is in the Capital Allowances Act 1990, which is, itself, a consolidation Act that brought together earlier legislation.

Mr. Hogg

Will the Committee be able to call evidence as though it were a Special Standing Committee? The House may well think that, in this sort of technical matter, accountants and others should testify to the merits or defects of a Bill to such a Committee.

Dawn Primarolo

The project has already produced four drafts of legislation—the latest in August 2000. I understand—this will be for the final agreement of the House when the procedure is agreed—that the Committee will decide how best to proceed on scrutiny of the legislation. That will be a matter for the Chairman and members.

Mr. Hogg

Are we to understand that the Committee can take evidence if the Chairman and the Committee so determine?

Dawn Primarolo

Yes. I think that I made that clear. If the Committee determines to do that, it would be the case. It is for the Committee to determine how it wants to proceed.

Extensive consultation procedures have been the hallmark of the rewrite project's work to date. There was a round of consultations on four separate drafts of the proposed legislation between October 1998 and February 2000, with the latest draft Bill published in August 2000.

This project is immensely worth while. It will modernise our direct tax legislation, making it clearer and easier to use. The first Bill is a milestone in the projects's work and will show what improvements are possible. In order for it to become law, we need to continue the work undertaken by the previous Administration. In fairness, I must acknowledge the work that they undertook to initiate the project and set the broad parameters. We are taking it forward—I hope with the agreement of the House—to establish a new procedure by which this and successive Bills can be scrutinised and enacted.

The measure is an important step in that direction and I hope that it will command the support of the House. I also hope that, as the legislation proceeds through Parliament, it will enlighten the House about how such Bills can be scrutinised.

10.45 pm
Mr. Richard Ottaway (Croydon, South)

I am grateful to the Minister for recognising that the previous Government initiated the project. I share her view that it is worth while and I look forward to producing something constructive through the passage of the legislation. Under the circumstances, we do not oppose the measure.

10.48 pm
Mr. Edward Davey (Kingston and Surbiton)

The Liberal Democrats will also support the measure, which is historic in that it changes the way in which we deal with tax legislation.

The tax law rewrite project, which was proposed by the previous Government, is incredibly important. Simplifying the language in which the House and its Committees write our tax legislation is long overdue. Anyone who has tried to work out what tax statutes mean knows that they can be incredibly confusing. As we move towards more self-assessment in both the personal and the business tax sectors, it is important that the legislation by which people have to abide is easily accessible to the wider audience.

We have no problem with the procedure before us. However, we need to go much further. One problem is that the previous and the present Governments have made the tax system far more complicated. The tax law rewrite project is restricted in the way in which it can simplify the tax system. It has been given the remit to restrict itself simply to the language in which the law is expressed, not to deal with the effects that it gives to tax liabilities.

The technical aspects—as well as the language in which the law is expressed—need to be simplified to ensure that there is real tax simplification. I hope that the House accepts this historic measure and that we use it to modernise our procedures with cross-party support. That will ensure that the output of this place is better—not merely in its language, but in its impact on business and compliance costs.

We should develop the link with the other place. The fact that there is to be a Joint Committee is welcome, because Members of the other place can make a positive contribution to some of the complex aspects of these matters. I should like to see the establishment of a House of Lords Select Committee on tax simplification as well as the Joint Committee; it could offer this place some serious lessons.

I do not want to detain the House; but I want to mark this historic occasion. I hope that the Government will be motivated by the success of this measure, which has received cross-party support, to go further in reforming our procedures so that we can more effectively scrutinise tax legislation and make it much simpler.

10.51 pm
Mr. David Wilshire (Spelthorne)

In principle, the measure is a good idea. I am bound to say that because we thought of it in the first place. I am grateful to the Paymaster General for acknowledging that we got something right—I am always pleased to hear that, although I knew it all along.

I am a little confused by the wording of the motion. Will the hon. Lady explain it? I had assumed that we should take a decision on the matter this evening, so I expected the wording of the motion to be "That this House decides to set up a Joint Committee". As those words do not appear, I am baffled.

The motion states: That it is expedient that a Joint Committee of both Houses be appointed. I take that to mean that such a Committee is a good idea, but my response to that is, "So what?", because the motion is merely an expression of opinion. If I am wrong, I should be grateful if the hon. Lady could tell me. The House is only expressing an opinion tonight; we are merely saying that the proposal is a good idea.

The hon. Lady tells us that the other place will discuss the motion; presumably the Lords will say, "Hey, this is a good idea" and send it back to us. It is only at that stage that we shall be asked to pass a motion that states that we shall do something. I hope that is the position—otherwise the wording of the motion makes no real sense; it merely expresses a good idea.

When the motion comes back to this place for decision, I hope that we shall be given more detail than was included on today's Order Paper. The Paymaster General kindly gave us some information, but it took the prodding of my right hon. and learned Friend the Member for Sleaford and North Hykeham (Mr. Hogg) to elicit details such as how many people would serve on the Committee. It would be helpful if such matters could be decided by the House, rather than by the usual channels carving things up between them in a quiet corner. If the usual channels want the backing of the House, they should ask us to endorse matters rather than telling us about them after they have made a decision. I hope that the hon. Lady can help me on that point.

I am not an expert in financial matters, but I was schooled in the principle that there should be no taxation without representation. The motion is on tax, but I am being asked to agree that Members of the other place, who are not elected, should have a say in taxation matters. I thought that did not happen in this country. The Paymaster General has not yet explained why undemocratic and unelected people should have a say in such matters.

Perhaps that is an admission that, at long last, the Government are going to finish the job of reforming the other place and will ensure that its members are elected. Thus, when the Committee is finally set up—after we have been asked to vote on it—its members from the other place will have a democratic mandate and will be entitled to an involvement in taxation matters. If my understanding is correct, at present, they are not so entitled. I should therefore be grateful if the hon. Lady could put me out of my misery on that point when she sums up.

10.55 pm
Mr. Michael Jack (Fylde)

I speak as the former Financial Secretary who established the mechanisms that, I hope, the House will approve this evening, and as a member of the rewrite steering committee. I thank the Paymaster General for supporting the endeavour that the previous Government started in trying to translate the existing tax code into plain English. I also thank her for enthusiastically developing the project.

It would be wrong if I did not put on record my appreciation of the work of the Inland Revenue officials who have laboured very hard indeed to start translating into plain English our complex tax legislation, for without their efforts, we could not discuss the procedure for dealing with the first Bill produced by the tax rewrite exercise.

The product that the Joint Committee will consider reflects the input of many tax practitioners, who have enthusiastically welcomed the efforts involved in such improvements. As the hon. Member for Kingston and Surbiton (Mr. Davey) said, the exercise has thrown up several issues that go beyond the original Committee's remit. The previous Administration designed the procedures and the remit; the current Administration have followed them to the letter. However, many members of the Revenue feel frustrated because they would like the next step, following the rewrite exercise, to involve not necessarily a change in tax law, but a modification to improve the existing procedures. I should like both things to happen in parallel, but I do not wish to trespass too far beyond the motion.

Mr. Hogg

Is not the problem the fact that, if the House entrusts to a Committee the ability to change procedures and thereby to impose obligations on the citizen, we shall entrust to a Committee a role that should be reserved for the whole House? The House should set obligations and impose penalties.

Mr. Jack

My right hon. and learned Friend would be entirely correct if that were what the exercise was about, but it was not. The exercise was simply and straightforwardly intended to rewrite the existing law in plain and understandable English so far as is possible, given the technicalities of the tax code. We are considering the mechanism by which the House and the other place will be invited to review the fruits of that exercise.

Mr. Hogg

I understand what my right hon. Friend says. I am happy to agree with him, provided that the process does not go beyond that which he outlines. That is why I did not intervene in the Minister's speech. However, my right hon. Friend said that another exercise should exist in parallel. I understood him to say that that exercise would address the merits of any tax requirement with which the citizen had to comply.

Mr. Jack

As a member of the Committee that had the opportunity to listen to some of the remarks made by those who have been closely associated with the exercise, I can see that there are evolving ideas and concepts, which, if they were able to find their place in legislation, would go beyond the exercise of rewriting the tax code in plain English, but would further improve it. However, that is not what the House is invited to approve. I am merely saying to the Paymaster General that I hope that the present Administration will not lose sight of the fact that good ideas that have come out of the exercise are within the scope and purpose of existing tax legislation.

Indeed, ideas have come, for example, from the Institute of Chartered Accountants in England and Wales, which would like to go further in developing an exercise to simplify our tax code. The House is invited to approve a mechanism to make certain that the work of draftsmen and officials has been true to tax law.

Mr. Edward Davey

May I help the right hon. Gentleman and the right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg)? If I understand the right hon. Gentleman correctly, he would like to extend the tax law rewrite project to other areas in order to develop some of the ideas. He is not suggesting that the procedure to which the House is asked to assent is the one that will be used to develop those ideas. Perhaps he would like to describe the procedure that he envisages for such development.

Mr. Jack

I entirely agree with the hon. Gentleman's intervention. If we have a chance to debate another Finance Bill before the election, the Paymaster General might embrace the idea of developing some of the sensible ideas on, for example, the way in which pay-as-you-earn legislation operatesߞsensible, improving measures that do not fundamentally alter the PAYE legislation but make its operation even more effective than the one that will result in due course from the rewrite exercise.

I do not want to detain the House unnecessarily, but it would be wrong if hon. Members did not put on record their appreciation of the efforts of my right hon. Friend Earl Howe for chairing the Committee and making progress on the exercise with incredible dedication and enthusiasm.

In response to a point raised by my hon. Friend the Member for Spelthorne (Mr. Wilshire), I reiterate that the exercise that we are asked to approve does not change in any way the present tax code. It merely invites the expertise of both Houses to approve that the new plain English law enacts the existing law in every respect, but in a more understandable linguistic form.

11.2 pm

Dawn Primarolo

I pay tribute to the right hon. Member for Fylde (Mr. Jack), who I know has been a keen enthusiast for the tax law rewrite project, both as a Minister in the previous Administration and as a member of the Steering Committee, on which he worked hard. I certainly underline strongly our appreciation of the dedicated work of all those involved with the tax law rewrite, particularly Lord Howe of Aberavon, who has a passion for driving through the legislation.

It is important for hon. Members to rememberߞI did not think that I would need to remind them given that the act was one of the last of the previous Governmentߞthat the project was required to look at rewriting the code, without alteration, so that it was more user-friendly, had a more logical structure, used shorter sentences, was more consistent in the use of definitions, used modern language, clearly signposted related provisions and grouped together similar laws. The project was told that there should be no change in the underlying tax system, although some minor, obvious changes could be made to tidy up legislation. They will be flagged up in the procedure, so that everybody is aware of where they are.

Full consultation with interested parties throughout the life of the project will continue, and a new streamlined parliamentary procedure for enactment of the rewrite Bills will be produced. That was provided for in Standing Order No. 60 and included provision for the Joint Committee, for the involvement of the other place, and for the structure that is similar to that of a Select Committee with all the powers that that entails. The provision recognises that the majority of the Committee's members will be from the House of Commons and that it will be chaired by a Member of this House. That will ensure that the clear interest that this House has in such matters is preserved.

Mr. Hogg

I am not against the proposals that the Paymaster General is outlining, but I want to be clear about one point. It appears to be common ground that the Committee will not be able to alter the substance of underlying tax law. Who will have the overarching role of supervising the work of the Committee, so that we can be sure that the underlying tax law is not changed by the decisions taken by the Committee?

Dawn Primarolo

I will check that point, but my understanding is that the person appointed to chair the Committee will have the lead responsibility on how the Committee manages its business. It is important that parliamentary draftsmen and Ministers ensure that information is available to members of the Committee, so that they can satisfy themselves of the position. It is not an adversarial Committee structure. It seeks to use the expertise of both Houses, without duplication of procedure, to undertake what seemed to be the simple proposition of rewriting the tax code. Into—dare I say it—a more user-friendly form. The Committee will report to the House and the House will finally have to decide whether it agrees to a Bill. A double lock is in place.

I have covered the points about Members of the other House that were raised by the hon. Member for Spelthorne (Mr. Wilshire). If he examines what the Conservative party did when they were in government, he will see that there is a common thread. The procedure to be established is similar to that for consolidation Bills, and it was recommended by the Select Committee on Procedure in 1997.

The right hon. Member for Fylde and the hon. Member for Kingston and Surbiton (Mr. Davey) referred to simplification. That issue is outside the tax law rewrite requirements, but, in principle, I am sympathetic to their point. I have served on the Finance Bill Committee both in opposition and in government, and I am well aware of the arguments of professional tax bodies, such as the Institute of Chartered Accountant; and the Chartered Institute of Taxation. Last month, this issue was the theme of the Hardman memorial lecture that was given by Lord Howe. It is important to acknowledge that pressure from tax professionals was the stimulus for the review in 1995 that led to the establishment of the tax law rewrite project.

However, the issue gives rise to difficult questions and there is no consensus on how tax simplification should be carried out or on what should be simplified. The rewrite project does not just simplify the tax code; it makes it much clearer and easier to understand.

The Government have taken steps on tax simplification. We included such measures in the Finance Act 2000, and the drafting of new elements of tax legislation and the phraseology that is used follow the example of the tax law rewrite. However, Members will know that such simplification is not always possible, particularly when such measures have to be cross-referenced with parts of the tax code that have existed for a long time.

Mr. Jack

Will the hon. Lady consider calling a half-day meeting, between now and the election, of all the interested parties, some of whom she has mentioned, at least to discuss with the Treasury and the Inland Revenue what is meant by tax simplification? They could then perhaps define the scope and scale of such an exercise.

Dawn Primarolo

I have already had such discussions with those organisations. The right hon. Gentleman will know from his experience as Financial Secretary that when a Minister seeks to defend revenue that does not arrive in the Treasury as planned by tax law because of highly complex tax planning measures, responding to those complex proposals requires a complex solution. One of the big issues for us is anti-avoidance legislation, which all Governments have increasingly used.

I hope, Mr. Deputy Speaker, that you will allow me to make a brief point that is slightly wide of the debate. The Government undertook consultation on a general anti-avoidance regulation. We offered the profession alternatives: a general regulation or the continuation of specifically targeted anti-avoidance measures. We went further and consulted on two solutions to a specific problem; one of those solutions was targeted and the other was a general regulation. The profession decided that it wanted to stick with the specific legislation. That has clear implications for the complexity of the tax code and the operation of the system.

Those issues go beyond the tax law rewrite but they are pertinent to the wider debate on the tax code. I am sure that the House will continue to debate those matters, not only in proceedings on finance Bills but in general finance debates. I say to the right hon. Gentleman that I am aware of those issues and I pay particular attention to them. However, as he will know, it is not always as simple to introduce a measure as it is to agree to it.

Mr. Edward Davey

Has the Minister given any thought to other procedures that the Government could adopt to try to further the tax simplification process? For example, Lord Howe has argued that we could separate the Finance Bill into two parts, one containing the key political tax-raising measures and the other technical tax measures that could be debated at greater length with more consultation.

Dawn Primarolo

I shall try to be careful on this point, Mr. Deputy Speaker, because it is wide of the debate. If the definitions of policy issues and technical issues were so clear cut, I am sure that Governments would have separated them long ago because it seems to be an obvious proposition. The Opposition might take a slightly different view from the Government on what counts as a technical issue and what is a policy issue.

The general point concerns how we can simplify our tax system so that it is understandable, because modern economies such as ours have complex tax laws. We must also ask how we can make the system accessible, and the tax law rewrite project is a means of doing that. Another means is to ensure that taxpayers have a positive relationship with the tax authorities. The Government are making changes to make that relationship as easy as possible. Of course, the drafting of new legislation is crucial. We are alive to those issues. These are all issues outside of the debate, Mr. Deputy Speaker, and I shall not try your patience any more. I have tried to give a flavour and respond to the points that have been made.

I am delighted that there is so much agreement in the House that we have adopted the right way to proceed, and that we have been prepared to pay tribute to those who have worked so hard on our behalf in the tax law rewrite committee. The new procedure will prove to be effective, provide the scrutiny that the House requires and produce the tax legislation for which we would all hope. I hope that the House agrees with the proposed procedures.

Question put:

Mr. Deputy speaker

I think the Ayes have it.

Hon. Members


Division deferred till Wednesday 20 December, pursuant to Order [7 November 2000].