Finance Bill

My Lords, I am grateful to all noble Lords who have spoken in this debate, particularly the noble Lord, Lord Wakeham, for introducing his important Select Committee report and for highlighting the points that the committee identified. I emphasise the fact that about 60 per cent of the Budget represents the result of extensive consultation with all those affected, which is why we have, in crucial areas, an element of consensus on the changes. I understand what the noble Baroness, Lady Noakes, and the noble Lord, Lord Newby, have said about the general issues with regard to the Budget and the management of the economy, but they will not be surprised that I disagree with their analysis. As I said in my opening remarks, when I tried to presage the Government’s response to the important aspects of the report, we take the report very seriously indeed. As the report recognises, the issue of managed service companies is complex, but we are resolved on tackling it and we will engage in further consultation. We need to produce legislation that balances clarity and certainty and is robust against abuse. An important technical area to which we need to address more thought in the light of the report is the growth of these companies and the problem of the issue of taxation with regard to employment, or other returns as far as taxation is concerned. That is the most important aspect of the report and the Government will pay serious attention to it. I want to reassure the noble Lord, Lord Wakeham, who mentioned online taxation, and my noble friend Lord Sheldon, who devoted the bulk of his speech to the issue. I agree with both of them. Progress in this area is a reflection of the increasing capacity of business to cope with online demands, which will improve relationships between the tax-gathering authorities and business and the taxpayer. My noble friend is right; we must not run before we can walk. We must bear in mind the fact that not everyone is totally familiar with IT capabilities. We could not possibly make it mandatory. Compliance could not be met by those who were incapable. We have to approach this with some care, but as my noble friend will recognise, because he played his part in the committee, and as the noble Lord, Lord Wakeham, identified, this is an area where, certainly as far as business is concerned, we are getting an increasingly voluntary approach to online compliance, which we expect to grow. Percentages are increasing right across business. I am not just talking about the big corporations; small businesses, too, are showing increasing capacity to comply. We will therefore seek to extend against the capacity of taxpayers to respond while recognising that reserve point of my noble friend Lord Sheldon that we would not dare to make it mandatory in law in circumstances where people were just not able to comply. So we will make progress on those issues. My noble friend Lord Barnett raised a wide range of issues. He is not going to get an answer from me on the Barnett formula today. He asked a direct question only a week ago and I thought that I gave him a perfectly satisfactory answer—he totally disagreed with it, of course, as he said to me outside the Chamber afterwards. I have no doubt that he is going to sustain the pressure, but I have nothing more to add such a short time after I last tried to give him satisfaction on the matter. He will have to rest content with the Government’s position for the time being. I heard what my noble friend said about the tax credit system; he said that he thought that the American system was better. I am not in a position to comment. I have enough trouble keeping up with British systems of taxation and support without trying to verse myself deeply in American systems, so I cannot be authoritative in my response about the comparison with the American system. Despite the difficulties, we all recognise that the tax credit system, as we seek to make it work effectively for everyone who is entitled to it, still provides 20 million people, including 6 million families and 10 million children, with support. The take-up is a significant success. The latest figures show that the take-up rose from 79 per cent to 82 per cent in 2004-05. There is no doubt that it has decreased the level of poverty among many of the people whom we always had difficulty reaching with any other form of support in terms of benefits. Therefore, the Government, as my noble friend knows only too well, will seek to improve the system while defending the concept behind it. Where I did enjoy my noble friend’s contribution was when he referred to the extent to which any proposals from the Lib Dems on the reduction and even the abolition of income tax in favour of massive increases in green taxation would be a very heavy burden. The noble Lord, Lord Vallance, also gave voice to certain aspects of possible reductions in taxation. Unless the proposal is to significantly reduce resources to the Exchequer, noble Lords on those Benches will have to address themselves to where the costs would lie. Of course, they may be able to convince the electorate that very heavy emphasis on green taxes will produce these resources.