Joint Committee on Tax Simplification Bills Minutes of Evidence

Examination of witnesses (Questions 29 - 39)




  29. Thank you very much, ladies and gentlemen. I think, Mr Munro, you are the project leader. Although some of you are from the Inland Revenue and at least one person is from the Parliamentary Counsel Office, you are with us as the project team. Would you introduce yourself and, perhaps, introduce your colleagues?
  (Mr Munro) Certainly, Chairman. As you say, I am the project director for the rewrite and I would hope to be able to assist the Committee on any questions they have in particular relating to the background to the project and the process of consultation, which has already been discussed. On my right, Helen Caldwell and Mark Hudson are both members of the Office of Parliamentary Counsel and are on loan to the project. Helen is the leader of our drafting team and Mark is one of the members. On my left is Robin Willis and Satnam Singh. Robin is the leader of the rewrite team which has been producing, if you like, instructions for the drafting team on Capital Allowances. He is a permanent member of the Inland Revenue. Satnam Singh is a tax professional who we recruited on fixed term contract from the private sector who has been working for Robin's team.

  30. Thank you very much. What I suggest is perhaps we just begin with a short discussion with each part of the team on the broad approach and perhaps these examples that I referred to which you have produced and discuss them at this stage with the Committee. Thereafter we will plunge into the text of the Bill itself and deal with it part by part, I would suggest, following your helpful table provided by your project team showing how it is divided up.[1] Can we begin just with a general drafting point, the simplification of the drafting. I cannot resist following up on Lord Brightman's question a moment ago and repeat what I have just been saying to my neighbour. I was never able to understand as Chancellor why each year Finance Bills got longer and longer. Looking at Gordon Brown's Budgets and my Budgets; the Finance Bills they produce are twice the length of those of Lord Howe's produced in the early 1980s. I am not persuaded the complexity we had in those days is greater now. It started to go wrong in the 1980s when things started to become lengthy. I wonder if the draftsman amongst you have any explanation why it is so long and why putting it into plain English has not produced any brevity at all? We have these door stopping Bills coming forward which mean that future Finance Bills will have to be of some extraordinary lengths.
  (Dr Caldwell) I think the answer to that is that the complexity really is a matter of policy and it is not our brief to make significant changes in the policy. That is why we cannot make the legislation significantly shorter. All we can try to do is to try to make the legislation easier to understand even though it is so complex.

  Chairman: I am not prepared to start arguing whether Lord Howe's policies were so much clearer and simpler than those of his successors that they enabled the Bill to be shorter though he probably will.

Lord Howe of Aberavon

  31. I would like to follow up on that with Dr Caldwell. My recollection is the Finance Bill (No. 1) of 1979, which was the one introduced after the election had been announced, introduced by Dennis Healey in order to consolidate the existing tax system and make one or two adjustments on rates was one of the shortest on record. It introduced no policy changes and it simply changed the rates. It was followed in due course by my first Finance Bill which was done in a hurry in June 1979 and that was not notably long because we did not have that much time to put it together. You come to my 1981 one I think with the Business Start Up Scheme and then in 1982 with the Business Extension Scheme and you were beginning to see policy changes immediately. Is it not the case that you are making, Dr Caldwell, the length is almost entirely a produce of policy changes but not exclusively, also generated by necessary tax avoidance changes and by responding to representations made by the private sector for "improvement" of what is already there. Is that a fair summary of why it is so long?
  (Dr Caldwell) Yes, I think that is right. I think we are in agreement there that the complexity is, by and large, a product of policy. I think one of the problems is that if you make a little addition this year and it does not seem too complicated, then next year when you make another addition you are actually adding an extra layer on to something that has become more complex. It is with this exponential curve that you get complexity because each extra layer makes the next layer more difficult to add.


  32. Can you perhaps begin by briefly explaining the approach you brought to this particular exercise? You were dealing with slightly more than ten years of that, the last consolidation was in 1990. This time you are rewriting the up-to-date situation on Capital Allowances. What are the broad principles brought to bear so far as the language, drafting and lay out are concerned?
  (Dr Caldwell) I think the way we see it is that we are not really able to make significant changes in policy and we have got a lot of very complicated rules to get across. What we are giving the reader is we are giving him a big problem because we are going to be putting a very big strain on the reader's brain, and in particular on the reader's memory when he is trying to understand these very, very complicated legal rules. That is the underlying problem we are trying to address. We have been doing five main things to try and tackle this problem for the reader of brain strain, if I can put it like that. The first thing that we are doing to try and help him out is to put things in the right order which can lead to restructuring of provisions in the current legislation. The second thing that we are trying to do to help out is to deliver information in the right sized pieces, if I can put it like that, and that often means shorter clauses and shorter subsections. The third thing that I think we have been doing is that we are trying to avoid particular drafting techniques which assume that the reader is carrying around a big chunk of text inside his head. That may sound a rather puzzling thing that I am saying but if I can draw an analogy. Quite often in the existing legislation you find that provisions are drafted a bit in the way you might issue a train timetable for Saturdays and Sundays and you say that the trains that are going to run on Sundays are the same as weekdays except that one of them is not going to stop at Slough. That kind of approach presupposes that you have got an awful lot of information already inside your head and you can work out the message that is being conveyed to you. We have tried to avoid those kinds of drafting techniques. The fourth thing that we have been trying to do to help the reader out is to use words that are familiar, as far as we can, where it is possible to do that without changing the legal effect, to keep the language register in ordinary English. The fifth thing that we have been trying to do is to include signposts, to offer reminders to the reader of where he is about to go to. That, again, we hope will help to ease the brain strain. I have given those five types of things we are trying to do. If you like I will give you some illustrations?

  33. Yes. I was going to say I hope you have got the Committee's request that perhaps we might have one or two illustrations which you or your colleagues could take us through of a before and after kind of existing tax legislation and the equivalent piece of legislation as redrafted. Is there something to be distributed to us which will illustrate this?
  (Dr Caldwell) The first thing I was going to offer by way of illustration, the first point that I am making is that we are restructuring things, trying to put things in the right order so that things are in the right place and are easier for the reader to follow. I thought an illustration of that could be found by making a brief comparison of the structure of the existing capital allowances legislation compared with the structure of the Bill. I am looking in overall terms here. There is a piece of paper that you may have available to you which has a table which sets out on the left hand column the structure of the existing legislation.

Baroness Cohen of Pimlico

  34. CA2, headed Summary of Changes—
  (Dr Caldwell
) No, I am afraid not.

  Dawn Primarolo: No, CA4, 6 and 7.


  35. Can you give us the numbers you are referring to. CA4?
  (Dr Caldwell) I am afraid it is this piece of paper. It is your CA4 that I am referring to[2].

  36. CA4 has two columns. CA4, the left hand column is headed "Existing legislation" and the right hand column is headed "Capital Allowances Bill". Has every Member of the Committee got a copy?
  (Dr Caldwell) Just looking at this, there are some very simple points one could make about the different structures that we have got for the legislation. If one looks at the Capital Allowances Act 1990, the first part of that Act is about industrial buildings, and industrial buildings is not the most important allowance in financial terms. The second part of the Capital Allowances Act is about machinery and plant which is, in fact, the most important allowance in capital allowances terms. The third part is about dwelling houses let on assured tenancies. That is about allowances which actually are moribund because the expenditure has to have been incurred and they will run out after a while. Just looking at that, and comparing now how we started the Capital Allowances Bill, we started with an introductory part to give some basic concepts for the reader and then we have moved on to the first allowance. We have made the first part, the part which deals with the first actual substantive allowance, the part about plant and machinery which is the most important allowance in financial terms. Then Part III, which were these moribund allowances, we have demoted those to the end of the Bill because they are not going to be of such great interest to the average reader. So we hope, therefore, that the structure—that just gives some examples—we have adopted in the Bill will be more helpful to the reader. An illustration of what Mr Broke was saying viz. that it is more logical.

  37. We will turn to the introduction in detail in a moment. This process of having Part 1, the Introduction in these general terms, that seems to be rather new itself actually. Is there tax legislation which has tried this before?
  (Dr Caldwell) I think you might not want to start with the same Clause 1 as we have in a policy tax Bill. It might not be such an interesting thing to kick off with in the parliamentary debate.

  38. That is your first illustration. Could you give us another illustration?
  (Dr Caldwell) Yes. The second thing I was saying we were trying to do was about delivering information in the right sized pieces. There is an example here, it is called, I am afraid, CA7[3].

  39. Has everybody got CA7? Clause 159 of the Capital Allowances Act 1990.
  (Dr Caldwell) Yes, that is right. What Section 159 of the 1990 Act does is it deals with two quite distinct topics. It deals with some rules about what is capital expenditure and then it moves on to deal with some rules about when capital expenditure is to be treated as incurred. Those two topics seem quite different. What we have done in the Bill is to break Section 159 up into two clauses, they are Clauses 4 and 5 of the Bill, because we regard the two topics as being discrete and it is more useful to present them as separate entities.

1  Evidence, p 3. Back
2  Evidence, p 14. Back
3  Evidence, p 24. Back

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