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In the Caribbean, there is Anguilla, the British Virgin Islands and Turks and Caicos Islands, along with Montserrat, which is known as the emerald isle and has suffered so much from volcanic eruptions, and the Cayman Islands, which were so cruelly devastated in 2004 by Hurricane Ivan. There is also Bermuda in the mid-Atlantic and, in the south Atlantic, St. Helena, Ascension Island and Tristan da Cunha. The Falkland Islands, which last year celebrated their 25th anniversary of liberation, following the conflict of 1982, have grown and developed into a self-sufficient, prosperous and modern democracy since the illegal invasion by Argentina was repelled by Her Majesty’s forces. Then there is the
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island of South Georgia and the South Sandwich Islands, as well as the British Antarctic Territory and, in the south Pacific, there are the Pitcairn Islands.

The British Indian Ocean Territory and the British sovereign bases of Akrotiri and Dhekelia are now vital military outposts, serving both the United Kingdom and our NATO allies. I also pay tribute to the Crown dependencies of the Channel Islands, including Jersey, Guernsey, Alderney and Sark, whose association with the Crown and with Britain goes back to before 1066, and which survived so gallantly the Nazi occupation during world war two. Then there is the Isle of Man, an ancient kingdom to be found at the heart of the British isles, whose people are fiercely proud of their Manx nationhood and home rule, while always remaining loyal to Britain and the monarch, or, as they say, “Lord of Man.”

Yet I fear that we in the United Kingdom have not always given the British overseas territories and Crown dependencies the recognition, status and honour that they richly deserve. The Bill would enshrine in law an obligation on Her Majesty’s Government always to promote, uphold and defend them, through education and recognition at state occasions, when they should automatically be given the status befitting a territory of the Crown.

In schools, libraries and all educational institutions, maps of the United Kingdom should always include insets of the British overseas territories to demonstrate their existence and to show their importance to Britain today. Just as the Danish include the Faroe Islands and Greenland, and the French include Guadeloupe and New Caledonia, so we should include Gibraltar, the Falklands Islands, Montserrat and so on.

Every pupil should be taught at school in the United Kingdom of Great Britain and Northern Ireland about the overseas territories and Crown dependencies and be given the opportunity to learn about their place in the history of the British peoples. In lessons on citizenship, history, politics and geography, they should be given their rightful place on the curriculum.

At state occasions, my Bill would seek to oblige Her Majesty’s Government to include the flags, emblems and representatives of all our territories. On days such as the Queen’s birthday parade of trooping the colour, those nations and territories where Her Majesty remains the Head of State should expect to see their flags displayed most prominently. I regret to inform you, Mr. Speaker, that, despite my calls in the House for that to happen, on Saturday 14 June this year, no flag of any of our territories was displayed in Horse Guards parade on that most British of occasions.

On Remembrance day, surely it is only right that representatives of the overseas territories and Crown dependencies should be permitted to lay a wreath at the Cenotaph, alongside those from the Commonwealth nations. Indeed, at all national events and state and royal occasions, and here in Parliament, too, their representatives should be received as a part of our British family, and not as if they were from a foreign country.

In tourism, much more could be done to promote the British overseas territories and Crown dependencies, especially the Channel Islands and the Isle of Man, which are geographically so close to the United Kingdom.
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My Bill would enable all those positive ideas and many others to be carried forward.

The British overseas territories and Crown dependencies are magnificent examples of places that exercise self-government and home rule over their own affairs, while firmly remaining a cherished part of the British family. We in this House and the people of the United Kingdom as a whole should be immensely proud of them all, for their uniqueness, their character and charm, their strength and spirit, and their ability to prosper and retain their constitutional stability and democracy in an ever-changing world. But above all, we must salute and thank the Crown dependencies and British overseas territories for their unshakeable loyalty to the Union flag, the British nation and the British Crown. It is precisely this that my Bill seeks to do. I commend it to the House.

Question put and agreed to.

Bill ordered to be brought in by Andrew Rosindell, Mr. Henry Bellingham, Daniel Kawczynski, Sir Nicholas Winterton, Angela Watkinson, Mr. David Evennett, Mr. Nigel Evans, Mr. Nigel Dodds, Mr. Lindsay Hoyle, Geraldine Smith, Jeff Ennis and Bob Russell.

British Overseas Territories and Crown Dependencies

Andrew Rosindell accordingly presented a Bill to place duties on Her Majesty’s Government regarding the participation in and recognition at State occasions of the British Overseas Territories and Crown Dependencies; to make provision about educational material concerning their constitutional and historical status; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 17 October, and to be printed [Bill 128].

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Orders of the Day

Finance Bill

[2nd Allotted Day]

Not amended in the Committee and as amended in the Public Bill Committee, further considered.

New Clause 17

Report on proposed tax changes

‘(1) The Treasury shall publish each year, not later than the Pre-Budget Report, a report containing information about the technical content of any tax changes which it proposes to include in the following year’s Finance Bill.

(2) Subsection (1) does not require the publication of any information about proposed changes to rates of taxation.

(3) A copy of the report must be laid before the House of Commons.

(4) Standing orders may make provision for the scrutiny of the report.’.— [Mr. Philip Hammond.]

Brought up, and read the First time.

12.42 pm

Mr. Philip Hammond (Runnymede and Weybridge) (Con): I beg to move, That the clause be read a Second time.

Mr. Speaker: With this it will be convenient to discuss new clause 18— Tax simplification—

‘(1) The Treasury shall publish each year, not later than the Pre-Budget Report, its proposals for the simplification of the tax code of the United Kingdom.

(2) A copy of the proposals must be laid before the House of Commons.

(3) Standing orders may make provision for the scrutiny of the proposals.’.

Mr. Hammond: New clauses 17 and 18 are what I might describe as specimen clauses, and deal with simplification and transparency in the tax system. Our intention is to have a debate and to get a response from those on the Treasury Bench on the crucial issues of simplicity and transparency in our tax system. New clauses 17 and 18 allow us to do that, by focusing on two aspects of that wider agenda.

It is perhaps worth noting—I am sure that Government Members will have spotted this already—that new clause 17 replicates proposal 37 of the report of the tax reform commission, which was set up my hon. Friend the shadow Chancellor and is ably chaired by the noble Lord Forsyth.

Mr. Jeremy Browne (Taunton) (LD): Will the hon. Gentleman update the House on the intention of his Front-Bench team to adopt all the proposals put forward by Lord Forsyth’s commission? I remember that Lord Forsyth recently described the Conservatives’ current tax proposals as “mad”. A gap appears to have opened up between the hon. Gentleman’s position and that of the chairman of the commission.

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12.45 pm

Mr. Hammond: If I were to choose a word to describe the report produced by my noble Friend, it would not be “mad”. I would describe it as “extremely interesting and very helpful”. Some of the proposals are clearly ones that we will wish to adopt. Others might fall into the category of things that we would love to adopt while recognising that we would be unable to do so because of the mess that the public finances are in and the chaos that we are likely to inherit. It is also fair to say that other proposals do not resonate with my colleagues on the Front Bench.

We do not need to be coy about this. The job of a party in opposition aspiring to government is to do the work. That involves asking people—including experts and outsiders—to look at issues and to report on them. If we were to create an environment in which, every time the Government or the Opposition asked a third-party organisation or outside body to look at an issue and put forward proposals, our political opponents were able to present those proposals as though they were adopted policy, we would simply shut down the debate. I urge the hon. Gentleman not to go down that route.

Mr. Browne: I strongly agree with the point that the hon. Gentleman has just made; such an approach would discredit the wider political process. I remember, however, on that same line of inquiry, that the shadow Chancellor said that he would support a flat-rate tax. In fact, he cited examples in eastern Europe that we should learn from. I presume that that is the kind of imaginative thinking that the hon. Gentleman is talking about. Can he tell us what progress has been made in that regard?

Mr. Hammond: If the hon. Gentleman looks carefully at what my hon. Friend the shadow Chancellor has said, he will see that my hon. Friend supported a flatter and simpler tax system. He has always recognised—as, I think, do all hon. Members on both sides of the House—that a flat-tax system that might be attractive in an economy that is in the early stages of development and that has, in particular, an undeveloped system of tax collection, would not be appropriate in a mature tax jurisdiction such as ours. It is important that we look at all these issues, however, and that we are able to do so with no holds barred.

Many people to whom we speak, including those with an intimate knowledge of how government works, and including some who were sitting on the Treasury Bench only a couple of years ago—[ Interruption.] No, I said a couple of years ago, not a decade ago. Those people tell us repeatedly that there is little opportunity for strategic thinking in government. That strategic thinking needs to be done while in opposition, and a party needs to come to government with a clear idea of where it is going. If we are fortunate enough to be elected to government, we certainly intend not to repeat the mistakes of Mr. Anthony Blair, who knew a lot about getting elected, but not a lot about what he wanted to do when he got there.

Mr. Speaker, I am sure that you would like me to return to the subject of the debate. The commission looked at many aspects of our tax system, including matters of process. In scrutinising the Bill so far, our attention has rightly been focused primarily on the substance of the individual measures in it. Now, however,
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it is appropriate to pause to consider the processes by which we make and manage our tax law.

There is a long-term driver and a short-term driver to this agenda. Over the past decade, the tax system has—partly by design—been made much more complicated. In our submission, it is now in urgent need of simplification. Public confidence in it has been undermined by the endless stream of stealth taxes, which began with the great pensions raid at the beginning of this Labour Government, when none of us knew about stealth taxes. We had not heard the term before; indeed, it had not even been coined. It was some time before people understood the fiscal implications of what was being done. This has continued right up to the proposals announced in this year’s Budget for a retrospective increase in taxation on cars purchased before 2006, about which we will hear more—perhaps a great deal more—later this afternoon.

Over the same period, it has become clear that the vast weight of new tax legislation has simply overwhelmed the capacity of Parliament effectively to scrutinise it. That is the long-term driver. The more immediate driver and what has focused our attention rather urgently on this issue is the fiasco of last year’s pre-Budget report and the elements of Budget 2007 that are enacted in the current Finance Bill.

The Chancellor’s proposals—when I refer to his “proposals”, I do so in the loosest sense to mean what he stood up and announced in the pre-Budget report—on the taxation of non-domiciled residents and on the abolition of taper relief provoked a furious reaction from the business community. I am sure that all hon. Members will remember the fierceness of the response and the unity of purpose across a group of business organisations that, quite frankly, do not often sing from the same hymn sheet. On this issue, they were united, partly on the substance of the proposals, but significantly on the manner of their introduction on account of the total absence of advanced signalling and of consultation with interested parties.

Mr. Browne: Does the hon. Gentleman agree that his case, which I agree with, is further strengthened by noting the number of Government amendments to their own legislation that are to be debated later? They follow dozens of amendments on the same section of the Bill. Would it not have been better if the Government had engaged in processes of thought and deliberation before making their announcements rather than during the legislative process?

Mr. Hammond: The hon. Gentleman is right. He is making a slightly different point about a different part of the tax legislation process, which I will also address in due course.

The Chancellor was eventually forced into humiliating climbdowns on both issues, as well as subsequently having to kick his ill-thought-out, unworkable and highly damaging proposals on the taxation of foreign profits and on income splitting into the long grass—and, presumably, the grass must be long enough to get him to the other side of a general election. All those issues affect businesses. The saga of the 10p tax rate does not affect businesses directly, but is yet another example of poor scrutiny and poor process. I am sure that Government Members would say amen to that. They must realise
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more than most how desperately important it is not to repeat the type of mistakes made with the abolition of the starting rate of tax. It was not only a bad measure in principle, as it was badly explained, poorly understood, deferred in implementation for all the wrong reasons and then reversed—or at least mitigated—in a way that has further undermined confidence in the stability and structure of our tax legislation system.

Although the measure was announced in 2007 and immediately identified as a potential problem, it was the failure to grasp the scale of the problem among those who later became concerned about it that has been so highly damaging to the Government. Although it is not my job to worry about the damage that the Government seek to inflict on themselves, it is instructive to note that this not particularly complex piece of tax legislation impacted negatively on 5.3 million ordinary people—whom we often think of as voters—rather than businesses, yet it still took the best part of a year before the debate on the issues really got going. I am trying to make a serious point, as this indicates the failure of the House’s mechanisms for scrutinising tax legislation. We need to ensure that such legislation is understood, if not by every hon. Member, but by a wide enough audience so that any serious political problems can be identified at the earliest possible stage.

To return to the issues of non-doms and capital gains tax changes announced in the pre-Budget report, the Chancellor’s U-turns, which I have already mentioned, were not very neatly executed. Immediately after the pre-Budget report, No. 10 began briefing that there might be concessions on capital gains tax. What happened is that the Prime Minister was taken aback by the scale and ferocity of the business response and saw his laboriously constructed base of business support—not to mention business donors—evaporating overnight. He responded accordingly by kicking the man next door. The concessions dribbled out over the following weeks and months, but in a way that meant businesses, and particularly those entrepreneurs considering a sale of a business in the near term, did not know where they stood until as recently as early March.

I remember meeting groups of entrepreneurs and small business owners back in late October or November after the announcement had been made. There seemed to be an even split between, on the one hand, those who felt that the only safe route was to gain the benefit of the taper relief by cutting and running and trying to sell their businesses even as the economy was slowing down against the backdrop of the credit crunch, which made the financing of business acquisitions quite challenging, and, on the other, those who put their faith in the trickle of news from sources in the Treasury indicating that concessions would be made. It was a very destabilising situation.

Stewart Hosie (Dundee, East) (SNP): The hon. Gentleman mentioned that there was clarity by March, but any such clarity over capital gains tax applied only to the easy things, like selling a business that one might have sold anyway. He will be aware—I suspect that this is part of the reason for his new clause 17—that it emerged in Committee that share option schemes, approved or otherwise, in respect of the CGT changes looked like treacle and there was no clarity at all. Will he turn his mind back to the share option debate we had upstairs in Committee as an exemplar of why we need new clause 17 or something similar to it?

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Mr. Hammond: The hon. Gentleman is exactly right, but I do not want to pre-empt our debate on the next group of amendments.

I do not deny that I have made some partisan points so far, but I hope that everyone will recognise that there is a genuine problem. I shall address it in more detail in a few moments, but the real problem is our capacity as parliamentarians to deal with vast volumes of complex and technical legislation. Of crucial importance is the Government’s capacity, against what is a pretty tightly constrained timetable in respect of the Finance Bill, to deal with the many technical issues that need to be clarified between the headline announcements in a Budget speech and the passage of the legislation on to the statute book. It goes beyond that because, in addition to the capital gains tax changes, a raft of guidance has to be published, understood and commented on. As we shall see when we debate the next group of amendments, the guidance can sometimes be critical in debating the detail of legislation. Clearly, we need a new and more effective mechanism for the scrutiny of our tax legislation.

As with CGT, the Government’s original proposals for non-doms soon disintegrated as item after item on the Revenue’s shopping list was scrapped as the political masters of the process finally grasped the scale of the damage that risked being inflicted and the extent to which they had lost control of the process to their own bureaucrats. I do not expect the Economic Secretary to answer this point, but it is pretty clear to us that the problem with the non-dom legislation was due to what is known in this place as gold-plating.

The usual example is the European Union handing down a directive. In this instance, the Chancellor made a decision on the taxation of non-doms, and then handed it to British civil servants whose natural instinct is to reach for the nearest kitchen sink and try to bolt it on to the original decision. I have an image of officials of Her Majesty’s Revenue and Customs going to filing cabinets that may have been left untouched for years, dusting off packets of documents containing various wish lists of ideas for taxing non-domiciled residents, and bolting them on to the original idea that the Chancellor and his team presented, in a way that not only made the legislation complex but—and I suspect that this is something that a politician might see more readily than a civil servant—caused it to send a very negative set of signals that would be extremely damaging.

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