Finance Bill

The hon. Gentleman is right. I am sure that we could find hundreds, if not thousands, more examples in the Bill. I do not intend to criticise anyone, and I should place on record that the Treasury Ministers who took part in Committee did an excellent job. They were well-briefed and they answered questions as helpfully as they were able. I am sure, in the spirit of candour, that they would equally want to acknowledge that, in Committee, if I pulled from my pocket a question from a senior tax partner in a large firm of accountants, it occasionally caught them on the hop. I ask myself whether that is the most constructive way in which to scrutinise tax legislation. We are not experts in this place—we cannot be. People out there spend their entire lives dealing with tax, and not only that—they may spend their entire lives dealing with one tax, such as capital gains tax or the taxation of overseas domiciled residents. Sometimes, they deal with just a subsection of that subject. If we are to maximise the advantage that we can get from their embedded knowledge, we must, of course, try to involve them in the scrutiny process. At the moment, the scrutiny of tax legislation operates in a bit of a fantasy world. The debate is conducted in Committee between politicians who are essentially lay people, in tax terms, as a proxy for a real but unseen debate between the experts at HMRC and the tax professionals. To some extent, that is a pragmatic arrangement. While the Bill was in Committee, HMRC held an away-day for tax experts. A number of questions were posed and some answers were given. The questions and the answers then found their way to members of the Committee. It is a kind of shadow process. We ought to ask ourselves whether being a little more candid about our limitations would lead us to consider different scrutiny arrangements that could bring out of the shadows some of those people who contribute so much to the process but are unable to play a full part in it, whether they are independent experts or expert officials in HMRC. The Treasury Committee, of course, does an excellent job through its ability to call witnesses but there needs to be a legislative scrutiny arrangement as well as the oversight role that that Select Committee performs. I do not think that Parliament should be at all ashamed of the difficulty that even highly intelligent and very diligent lay people might have in dealing with some complex technical legislative changes. Instead of trying to conceal the scrutiny deficit, we should acknowledge it and try to put in place the mechanisms to deal with it. My noble Friend Lord Howe will tomorrow set out his ideas for addressing those concerns. I invite anyone who doubts the need to address them to look at the subject matter of the next group of amendments and to spend a little time reading schedule 3. I recommend inserted sections 169K and 169P as a starter—they are just a taster of the almost absurdly complex nature of tax legislation. We need to create the necessary arrangements to institutionalise the drive towards the simplification of our tax system. As a first step, new clause 18 would require the Treasury each year to publish specific proposals for the simplification of the UK tax code. It would not require a mere rewriting to tidy up the language and the cross-referencing, but a substantive simplification of the system. New clause 18 would also provide for Standing Orders to make arrangements for the effective scrutiny of proposals brought forward by the Treasury in the report that is called for. If we do not do that, our tax code will continue to grow exponentially, notwithstanding that it is already the longest in the world. It is now reaching the point where it is becoming self-defeating and self-perpetuating. Each new complex raft of legislation creates so many potential loopholes, avoidance mechanisms and technical difficulties that its intention is regularly undermined and often requires further rafts of legislation to plug the gaps, further lengthening and adding to the complexity of the tax code. My noble Friend's report will set out his proposals for institutionalising the drive for simplification of our tax system, not as a one-off exercise, but as a continuing embedded process. I am delighted to have had the opportunity to notify Parliament first of my noble Friend's initiative, which he will announce tomorrow, and I hope that the Government might take note of that and follow its precedent in giving Parliament a bit of warning of some of the announcements that are coming up. Finally, in order to deliver certainty to the system, we also need to address the growing discretion that is being given to HMRC officials in the interpretation of the law—that feature was particularly evident in the Bill. We need to create mechanisms that will allow taxpayers to obtain certainty about their tax position. Many other jurisdictions allow less discretion for officials but provide a clearer and more accessible pre-clearance regime that allows taxpayers to ascertain their tax position precisely. I am afraid that we are going in the wrong direction, with a limited pre-clearance regime and the exercise of an increasing amount of official discretion. Right now, Britain faces an economic downturn and considerable uncertainty about our economic future. However, alongside a response to the short-term challenge—we need such a response from the Government—we need to think about the long-term competitiveness of the UK as a place to do business. As we come out of this economic slow-down and investment starts to multiply again in the global economy, investors who are casting their eye around the world to decide where to make their marginal investment should see the UK as an attractive, stable predictable environment in which to deliver that investment. There is scope for a significant improvement to the UK tax environment without any tax cost to the Exchequer. Clear and open processes, with proper engagement and consultation at every stage; a grown-up approach to tax law, including the abandonment of the fascination for rabbits being pulled out of hats in the penultimate paragraphs of Budget speeches; politicians recognising the limits of their technical capabilities and restructuring the scrutiny process accordingly; a serious institutionalised drive towards simplification of the system; and clear rules, with limited official discretion to give taxpayers certainty of their position—those are the key issues that we need to address if we are to maintain Britain's competitive place in the global trading world. In the short term, the scope for reductions in the overall burden of business taxation is likely to be limited due to the state of the public finances, so, when the economic recovery begins, we must seek other routes to improve Britain's competitiveness and attractiveness as an investment and business expansion location. The agenda will send a signal to business that UK plc wants to begin the long process of rebuilding its reputation as a mature, stable and attractive location for business—a reputation that, I am afraid, the Government rather casually placed in jeopardy in their darkest hour last November—[Interruption.] The hon. Member for Taunton thinks that that was not their darkest hour; perhaps the darkest hour is yet to come. The message must be that our tax system is too important for the stability and prosperity of our country to be used as a platform for political posturing. There must be no more short-term stunts to wrong-foot political opponents and no more un-signalled changes. Stable—I might dare to say boring—is good when it comes to business taxation. We are clear where we stand on the issue. We have a long-term commitment to transparency, scrutiny, simplification and certainty in our tax system. New clauses 17 and 18 will make a start. Tomorrow, my noble Friend Lord Howe will offer detailed suggestions of his own as to how we might achieve some of the other objectives that I have mentioned. We will scrutinise his report carefully, and although it is a report to the Conservative party, we will be publishing it, so I invite the Government to scrutinise it as well. My noble Friend is an extremely experienced politician who has huge experience of simplifying and rationalising the UK tax system from when he inherited a top marginal tax rate of 98 per cent. from the Labour Government in 1979. I hope that the Government will take note of our initiative. They must surely have understood by now the risks of playing games with the tax system and the damage, including self-inflicted damage, that it can do. If they do not take up our agenda, the country, and especially the business community, will know that the next Conservative Government will do so. A reputation for fiscal stability and business-friendliness is hard-won over a long period, as I think even the Prime Minister will remember, but it can be blown away in the space of a few months, as we have seen since the pre-Budget report. Britain faces the challenges of a global economic slow-down, and in the longer term, perhaps even more challengingly, a shift in the balance of economic power from the established industrial nations to the emerging economies of the world. That shift is already under way, and I suggest that it is irreversible. We in Britain can ill afford such profligacy with our pro-business credentials if we wish to preserve the prosperity of our citizens and protect our tax base so that we can continue to enjoy high-quality public services. The process of rebuilding confidence in the UK's fiscal process will be slow and painful. It had better start now. I commend new clauses 17 and 18 to the House.