Finance Bill

The Opposition welcome the opportunity to debate the impact of tax changes on different income decile groups. New clause 14 is a constructive contribution to that important debate and we sympathise with the sentiment that underlies it. It is, of course, vital for any Chancellor to carry out a proper and effective empirical assessment of the impact of proposed tax changes, and I shall explain why I believe that that is particularly important in relation to those on low incomes—the right hon. Member for Birkenhead (Mr. Field) has already stated many of the reasons. We understand the arguments in favour of using transitional measures, where appropriate, to ease the hardship that tax rises can cause. However, it is with regret that I say that, although we will not vote against new clause 14, we cannot support it this evening, because we are concerned how it would work in practice were it actually to be written into legislation. For example, we have some concerns about how feasible it is always to assess the changes in the relative share of national wealth. That assessment would not be easy, because it would be difficult to find the data. Unlike the case of income, there is no obligation to report one’s wealth to the Inland Revenue. We also have some concerns about the idea that all tax measures that fall within the scope of the new clause must be phased over a reasonable period, because importing that obligation into statute as a general rule might be too inflexible. As I will discuss—no doubt the Chief Secretary will discuss this, too—the Government could take a number of different measures to mitigate the impact of a tax change, which might involve phasing in a measure or using the benefits system. Indeed, it is important that we debate the use of tax credits in that context. Furthermore, I fear that the new clause might mean that almost all tax changes would have to be subjected to phased implementation, and while such measures would certainly be justifiable and welcome in some contexts, we hesitate to impose a blanket obligation in all cases. We also believe that the underlying issues raised by the new clause—the importance of moving to greater transparency and objectivity in tax policy—are so important as to merit further detailed consideration before we could make a commitment to a proposal such as this. That is one reason why the shadow Chancellor asked my noble Friend Lord Howe a few months ago to investigate how we might implement some of our independent tax reform commission’s proposals for improving the way in which we make and scrutinise tax law.