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10.13 pm

Mr. Jack: Before the Division, I was referring to the complexity of the legislation. For the record, I want to make an observation on chapter 10, which deals with long-life assets. I am delighted that it retains the exceptions from long-life asset expenditure. They include railway assets, which reflect the proper assistance that the previous Administration gave in the capital allowance regime to encouraging investment in railways.

The privatisation of the railways is sometimes criticised, especially in current circumstances. Certainly in tax terms, the retention of those exceptions in the rewrite Bill is important. However, the fact that there are exceptions, even from something as straightforward as differentiating long-term from short-term life assets, again illustrates the complexity of tax legislation. [Interruption.]

Mr. Douglas Hogg (Sleaford and North Hykeham): On a point of order, Mr. Speaker.

Mr. Speaker: Order. I think I can anticipate what the right hon. and learned Gentleman is about to say. Hon. Members must be quiet in the Chamber.

Mr. Jack: I am most grateful, Mr. Speaker.

One of the most interesting observations in the debate was made in a commentary by an outside body. It is interesting to carry out on the Bill the benchmark exercise occasioned by the Institute of Chartered Accountants in England and Wales in its publication on a better tax system, in which it identified 10 tenets of taxation. The tax system should, for example, be statutory, certain, simple and easy to collect and to calculate. Certainly, the Bill is statutory. Greater certainty is introduced by the improved language. However, the Bill begins to fail on the question of simplicity because, as I have already demonstrated, it contains complexities re-enacted in plainer language. Will the Bill make tax easier to collect and calculate? It will probably be easier for people to calculate their tax position, but the Bill does not deal with collection.

The fifth tenet is that tax law should be properly targeted. That goes beyond the terms of this debate.

Sixthly, it should be constant, and changes to the underlying rules should be kept to a minimum. In rewritten legislation, the changes are as defined by the

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Paymaster General. However, the greater transparency of the rewritten legislation shows that many changes and exceptions have been built into the law.

Another interesting tenet is that legislation should be subject to proper consultation. On that point, the rewritten legislation scores very highly. That raises an interesting point for the future of our tax system. Many have argued that there should be a separation of the mechanics of the tax system and the more contentious legislation on new tax policy introduced in the Budget. The exercise that accompanied the new Bill, which involved a great deal of consultation with practitioners, has shown how high- quality tax legislation can be produced as a result of the consultative process. The lesson for the Treasury is that, in tax management Acts, wherever possible, more consultation should be the order of the day.

The eighth tenet is that tax rules should be regularly reviewed. I shall say more about that, and about other lessons that have been learned from the rewrite exercise, in my concluding remarks.

The ninth tenet is that tax law should be fair and reasonable. I shall leave others to comment on whether the Bill meets those conditions.

The final tenet is that tax law should be competitive. My hon. Friend the Member for Croydon, South touched on that earlier, and my hon. Friend the Member for Christchurch (Mr. Chope) asked whether there would be any saving to business as a result of the rewritten legislation. The greatest potential for progress in that respect is that the Bill teases out those parts of the tax code--in this context, those on capital allowances--which may be causing business problems. For example, on the 100 per cent. allowance on investment in films there is a question whether the investment is good. I trespass no further than that, except to say that the clarity with which the Bill is written will itself be the precursor for greater debate on issues such as competitiveness and the cost of administering the tax.

What of the future? What does the Bill offer?

Mr. Forth: Not a lot.

Mr. Jack: I ever so slightly disagree with my right hon. Friend because the Bill will have certain results.

The word "simplification" is used in the context of both the proposed procedures and the Bill, but constraints on rewrite legislation have made taking out some of the complexity difficult to achieve. Let us consider the overall debate on simple tax. My right hon. and hon. Friends will remember Nigel Forman, the former Member for Carshalton and Wallington, who did much work on the concept of flat tax--a simple, no-allowances based system, with a single rate of tax.

Mr. Speaker: Order. I am listening to the right hon. Gentleman. Perhaps unintentionally, he is going wider than the content of the Bill.

Mr. Jack: I entirely respect your guidance, Mr. Speaker. I simply wanted to illustrate that the holy grail of simplification is easily stated, as it has been by former Members, but much more difficult to achieve. The minutes of the steering committee, the work of the consultative committee, which gave rise to the Bill, and the Hardman lectures commenting on the matter, to which

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my hon. Friend the Member for Croydon, South referred, take us to the heart of the matter of how we might achieve greater simplification.

My right hon. and noble Friend Lord Howe said that part of the problem, which is reflected in the Bill, is that the provisional collection of taxes legislation almost gives the Treasury carte blanche to introduce yet more change every year. Part of my right hon. and noble Friend's recipe to try to simplify matters was to desist from that practice.

If we are to learn something from the exercise, we should establish a committee--preferably a parliamentary committee, but involving outside advice--to re-examine every element of tax law, questioning, for example, whether we need the provisions in the rewritten Bill.

Mr. Speaker: Order. Once again I say to the right hon. Gentleman that he is going beyond the scope of the debate.

Mr. Jack: I understand your point, Mr. Deputy Speaker--Mr. Speaker. Forgive me for thinking of you as you were and not as you are. Old practices should not die hard in this place. I mentioned the point because the Paymaster General referred to the exercise in introducing the Bill. Some of the lessons that we should learn from that merit some mention--

Mr. Speaker: Perhaps I can help the right hon. Gentleman. Passing reference is one thing, but detail is another. He has made passing reference to the matter. Perhaps now he can move to something else.

Mr. Jack: I am grateful, Mr. Speaker. The last thing that I would want to do is fall foul of your advice. I conclude my en passant reference by saying that the Bill should be followed up by the Treasury forming a committee to consider in a wider context the fruits of such labour. That would benefit all those who have supported the exercise so fully, as both Front-Bench spokesmen said.

Without doubt, the Bill brings transparency and clarity to capital allowances. It should command the support of everyone in the House. I look forward to consideration of it in the Joint Committee. Adequate signposting in the explanatory notes of the changes should answer some of the points about the difference between major and minor changes. In its first line, the Bill states clearly that the measure deals with "minor changes". After textual analysis of some of its parts, I would say that it has achieved that. However, it is difficult directly to compare the old and the new, because the new is radically different. The exercise deserves our support as a signpost for the way in which tax law should in future be written. The Bill will have my support.

10.25 pm

Mr. Peter Lilley (Hitchin and Harpenden): I am grateful for the opportunity to speak in this debate. I welcome the fact that the first tax simplification Bill deals with the subject of capital allowances. For me--as, I suspect, for other hon. Members who entered the House at the same time as I did--it has a nostalgic feel about it.

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In 1983, when I was first elected to Parliament, simplification of the tax system was in vogue, and capital allowances were the first in the proposed list of candidates for simplification. I remember when the then Chancellor of the Exchequer, now Lord Lawson of Blaby, summoned a meeting of Parliamentary Private Secretaries and other ambitious young men and women to take their views on what he should include in his forthcoming Budget, which was the first of a new Parliament. I think that the first person to speak was Tim Smith, who proposed that we should go for a tax-simplifying Budget, central to which would be the simplification of capital allowances. It is fascinating to recall that everyone at that private meeting agreed with him--all concurred that that was the way to reduce tax rates by spreading the burden of tax more widely.

I confess to being the only person who demurred: for what it was worth, I argued that changes so radical should be introduced to the tax system only if there were substantial benefits, and preferably when one was reducing the overall burden of tax, rather than merely shifting it from one set of taxpayers or from one activity to another, which was all that would have been achieved by the changes supported by Tim Smith and the others. I argued that those changes would merely reduce the burden on some taxpayers, who would never thank the Chancellor--no one is ever grateful in this life--and increase it on others, who would resent the Chancellor for making the changes.

The consequence of my arguments was that, shortly thereafter, I was made the Chancellor's Parliamentary Private Secretary. That might have been because he liked those who were sufficiently strong-minded to disagree with him, or because he wanted to shut me up--I have never bothered to ask. However, it meant that I worked with him as his humble bag carrier and ears and eyes around the House. I sat alongside him on the Committee on the Finance Bill in which he carried through the reforms of the capital allowances system in his simplifying Budget, which I think was a couple of Budgets later.

The paradox facing the House today is that the first tax simplification Bill introduced under the new process is to simplify the very element of the tax system that was previously simplified back in 1968 under the radical reforms introduced by the then Chancellor. My question is, in what sense does the Bill further simplify our existing tax system? Several different senses of the word "simplification" can be applied. The first is to make the system shorter, terser and more succinct, but I have to say that the Bill does not qualify as a short, terse and succinct statement of the tax system as it applies to the single element of expenditure--capital expenditure--to which it is addressed. It is 334 pages long, not counting the accompanying notes, which are almost as long, or the annexe explaining how it relates to existing tax law. So it is not a shortened tax Bill.

The second sense of simplification is clarification and moving towards plain English, which is welcome. I have always been an advocate of legislation in plain English, wherever possible. That is applied to a much greater extent in the United States and some other Anglo-Saxon countries. Of course, that does not involve any change in the incidence of taxation and who pays tax. Although the Bill is not, as the Paymaster General said, exclusively about moving to plainer English, it is undoubtedly a

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clearer statement of the law than we have had in the past, and is therefore welcome. Opening it at random, the first clause I came to was clause 344, which states:


I do not query the fact that that is simpler than that which may have gone before. However, it is certainly difficult for a person of limited mental capacity such as myself to understand offhand. When I was a Minister, I had a rule that I would not read any submission from any official that contained a sentence with more than four lines. That clause is a single sentence of six lines. I am sorry that the Government do not go in for greater abbreviation of sentences in the procedure.

The third sense in which simplification is involved in the process concerns consolidation: bringing together provisions from a variety of different Finance Acts so that it is easier for people to find their way round them. That had to be done, and it is a great and welcome advance. Of course, it means that we will need to go through the same process again when future changes are made, to consolidate those in the Bill. Simplification also makes the layout of the Bill more accessible, although, like my right hon. Friend the Member for Fylde (Mr. Jack), I regret that the Government have not adopted the simpler numbering system, which the experts thought would make it far easier to keep track of the law and future changes in it.


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