I want to make some brief comments on a number of issues that have come up in the debate so far: tax simplification, where the impression is being given that these measures will simplify taxation; avoidance and evasion, where there are major problems in delivering on the commitments the Government have given; welfare reform, where the Government’s track record is appalling; and the impact across the income distribution, where it is being suggested that those on the top incomes are most affected by the Budgets over recent years, when actually it is quite different.
First, let me join in the chorus of concern about the lack of scrutiny under this wash-up process. There have been many comments in the media today from various experts—taxation bodies, chartered accountants and others—all expressing concern that, given the level of complexity involved in this Finance Bill, we simply will not get adequate scrutiny by rushing through all its stages in one day. I share that concern, and I am pleased to see that it is a concern that is recognised across the House. I would have preferred a much simpler Bill that included only a limited number of provisions. When we return and there is a Labour Government, we can have a Finance (No. 3) Bill, enacting proper measures to deal with the problems in this country.
I wish to discuss four issues and the impact this Budget and previous Budgets since 2010 have had. The first issue is tax simplification. It would be wrong to suggest that our taxation code is not getting more complex, and this Bill will add significantly to the
complexity. I put it down simply to the way in which Whitehall operates; our bureaucracy is geared to the creation of legislation and of taxation measures. To take a perfect example, the Treasury is full of people who are there to guide and advise the Government on the latest taxation measures. Up against them we have a tax simplification project that consists of three nominated officials and a few civil servants. It is an unfair game; it is impossible for the tax simplification project to counter the further moves being undertaken towards complexity in our taxation system. It requires government—I include government on both sides—to address the real need, look carefully at whether all the taxation measures in our code are necessary, and take appropriate steps to reduce the number of codings and to make our taxation system simpler.
The second issue is avoidance and evasion. The Chancellor has said that his way of saving money over the next Parliament, should the Conservatives be re-elected, is to pencil in £5 billion-worth of reductions in avoidance and evasion. The first thing that has to be said is that that is an incredibly ambitious target. HMRC’s projection for the tax gap is currently about £35 billion, out of which about £4 billion is avoidance and £3 billion is evasion. So the total for avoidance and evasion, according to HMRC, is about £7 billion, yet we are being asked to believe that the Chancellor can deliver £5 billion through tackling evasion and avoidance in the next Parliament. That is a very tall order and we need to look very carefully at his proposals. The Office for Budget Responsibility has looked carefully at the suggestions being made, both in the Budget and in the consultation document released the day afterwards, and it can find only just over £3 billion-worth of savings. It has attached to those £3.1 billion savings either a “very high risk” or a “high risk” as to whether there will be delivery. So a gap is already opening up between what the Chancellor has promised and what he can deliver, and the OBR is suggesting that the task may be very difficult for the Government because of the high-risk nature of this. We can all recall the Swiss bank fiasco; it was suggested that £3 billion to £4 billion would be raised, but we now have a much more realistic figure, much below that. In order that that does not happen again, we ask that the Chancellor to be much more ruthless and realistic in his appraisals about what can be saved by tackling avoidance and evasion—it certainly is not the £5 billion that he has suggested in this Budget.
Similarly, on welfare reform the Chancellor is suggesting that he wishes to save £12 billion. I will discuss how he is suggesting it will be saved later, but first let me indulge a little in recent history. Over the past five years the Chancellor has instituted policy changes that he said would deliver £21 billion-worth of savings, yet according to the Institute for Fiscal Studies the actual reduction in the welfare bill—the actual cash saved—was £2.5 billion. So there is an enormous hole in his accounting. He is suggesting he will save £12 billion between now and 2020, but he has indicated only where £3 billion of that will be saved—there is another £9 billion to go. We hope that over the period of the general election he will give the electorate some idea of how he is going to save such an enormous sum, recognising his total failure to save the money in this Parliament. His track record is not good. Given all the other imponderables—the things
that are not under Government control that can affect the welfare budget—it is difficult to see how he can save that amount of money.
That leads us to the elephant in the room: if the Chancellor does not save money from avoidance and evasion or from welfare reform, where is he going to make up the difference in order to deliver the £30 billion-worth of savings? That is where we come back to VAT. That is where the Conservatives’ track record shows from the past, and that is where we will be scrutinising carefully the comments that are made. Tax rises are on the horizon. I am being asked to cut my remarks short so I do not have time to deal with the distributional impact, but let me just say that the Budget will not affect the highest paid but will affect those in the two lowest deciles of payment more than anyone else. It is a regressive, retrograde Budget, as previous Budgets have been.
This is my last speech in the Chamber. The experience has been great and I have met a wonderful group of people, on both sides of the House. I have enjoyed it immensely, and I retire having said my piece on this Budget.
2.27 pm