Joint Committee on Tax Simplification Bills Minutes of Evidence

Examination of witnesses (Questions 60 - 85)



Lord Blackwell

  60. Following on in a way from Mr Ashton's point, the communication of all those to smaller businesses interests me. Obviously a lot of this legislation is most relevant and most complicated for big multinational companies but a lot of it also applies to smaller companies. Chapter 4 that we were looking at just now sets out different qualifications for small companies. Was there any thought in going through this in terms of the structure given to trying to highlight or clarify or draw out in an indexed form those things which somebody involved in a small enterprise could go to more immediately in order to make it simpler for smaller companies to find the bits that are relevant? I suppose the alternative view you could take is that the manager of an enterprise will read the tax notes sent to him, in which case is there anything in this rewriting which helps make those tax notes simpler, or is that a completely separate project?
  (Mr Munro) I wonder if I could just make a general point in response to that. When we were setting up the project back in 1996 it had been announced that we had not decided in detail how we were going to do it and we wanted to consult interested parties on that. One of the questions that we spent a lot of time on was which audience are we aiming this legislation at, can we identify a particular target audience and say we will try to produce this legislation so that audience can understand it better than the present legislation? We looked at the various users of tax legislation, which at one level of course is taxpayers and then businesses, their advisers, Members of Parliament, judges and so on, and we very quickly formed the view that it probably did not make sense to try to target any particular audience because each of these users come to the legislation with rather different needs and rather different requirements. We were also struck by the fact that whereas some of it probably could be expressed in language so simple and straight forward that it would be comprehensible to any intelligent lay person, an awful lot of it was bound to end up complicated, despite our best efforts, because the underlying concepts themselves were so complicated and there was no way that we could simplify them. So in the end we decided that rather than try to target any of the legislation, particular bits of the legislation, to a particular audience, we would simply try to make it all as simple and as clear as we possibly could, accepting that some of it would still not be easy bedtime reading.


  61. If we may move on to the general evidence from the team. Can I ask some member of the team to respond on the question of what constitutes a minor change? Can someone perhaps explain what in the end the project team settled on by way of deciding what constituted a minor change necessary for this purpose and what was not a minor change? If you wish to go straight into a response to the question, perhaps you can give an example of proposals that were dropped because it was finally decided that they were not minor changes in order to give some indication to this Committee of where the line was drawn between a shift in tax burden policy on the one hand and a minor change on the other?
  (Mr Willis) The Committee have, I hope, a paper numbered CA3[6].

  62. This is Changes Suggested But Not Made?
  (Mr Willis) Yes.

Lord Howe of Aberavon

  63. I wonder if I could interrupt before the question is answered. I raised this point last time as a suitable topic for discussion. When I raised it I had in mind the changes that the drafting team, the rewrite team, had included initially in the consultative document which were dropped after representations because they were regarded as going too far. What I think is introduced is a document dealing with the other end of the telescope, dealing with policy changes which almost manifestly lay outside our terms of reference. I think to some extent I plead guilty to having provoked a misunderstanding here. These changes, I think I am right in saying, are way outside our terms of reference anyway. Would you agree with me?
  (Mr Willis) Indeed, with some exceptions, Lord Howe, I agree totally. I hope this paper will nevertheless help the Committee and, in a sense, answer the question because we have applied exactly the same criteria when looking at changes suggested to us and manifestly what this paper is about, deciding that we would not make them, as we applied when looking at changes that, if you like, we self-generated, we self-started by coming to them. We have not really seen any way of distinguishing or building any bias in. I do not think from what Mr Broke said earlier that those helping us with this exercise would have wanted any bias built in. We have approached a suggestion for a change, no matter where it came from, in the same way. In summary, it is a matter of judging the balance of the arguments that are made to us for or against making the change. I hope it will assist the Committee if I very briefly run through them as they are set out in the paper. We only really consider a change appropriate for a Tax Simplification Bill if it improves the legislation. That improvement might be that it makes the legislation shorter, simpler, clearer, more certain, more consistent; that it incorporates an extra statutory concession; codifies the law; corrects mistakes that can happen on consolidation; removes an anomaly which is patently unintended and unfair, confirms the intended and accepted interpretation; or just fills a gap where the legislation does not tell you anything. Conversely, we would then also have to be very much alive, and we are very much alive, to arguments against a change: it might make the legislation more complex; it could contradict what was clearly the intention; or it could lead to a change beyond the scope of the Bill, rather like the point about emoluments which we have mentioned a couple of times in this Bill but runs enormously wider. We would want to look at whether it involves more or less allowances for any particular person, or group of persons, and does it have more than a negligible effect on tax revenues? Lastly, is it going to cause a fuss? I would not like to have to define "fuss", Chairman, but it is a consideration because these are not Bills which are intended to make that sort of change. At least, that is how we have taken it. We have seen it that there is no clear dividing line. After any amount of analysis it is going to come down to a judgment in all but the most simple cases. We have made that judgment with the help of our Steering Committee and Consultative Committee as best we can. Clearly this is the first time that we have been around this track and if the Committee had any views on how and where we ought to draw the line we would obviously very much welcome them.


  64. What seems to me to be most difficult is where the changes in the drafting and move to the new Bill alters the burden of taxation. Where you are simply codifying a judgment of the court or putting into legal effect a long standing extra statutory concession there is no individual business or taxpayer remotely affected by that, indeed they have the advantage of seeing codified with certainty and clarity that which they have already come to expect. It seems to me that one or two of these changes do involve benefit to some taxpayers who will probably benefit from the minor change to the law and, correspondingly, perhaps an increased burden on other taxpayers. In all cases these are very minor indeed, but is that the case? What sort of judgment was brought to bear by your project team and what sort of judgment was brought to bear by the Consultative Committee when it decided in broad terms that there would be losers and gainers compared with the existing practice if you change the present law?
  (Mr Willis) Perhaps I can offer two answers to the question. The first point is to pick up a point that Mr Broke made in his evidence which is whether we are actually changing from the practice when we have something which is called a change in the law is in most of these cases questionable and a question that is intensely difficult to answer. These are not mainstream day to day issues that come up in the practice of a small accountant or even in the practice of a very large accountancy firm. In various cases what we are essentially faced with is "we are not absolutely certain whether anyone has met this point in practice; if they have done, what they have almost certainly done is taken it that the answer is this". On close forensic scrutiny of the legislation, and I look here to the right-hand side of the table with Helen Caldwell and her colleague from the Parliamentary Counsel's Office, the legislation either is or might be leading to the law being something different. So we then have a change and have very properly indicated that it is a change in the law, but whether it is a change in the practice which is going to affect people adversely, the honest answer in most of these cases is that it is very difficult to say; possibly not. Perhaps I could just say that in terms of the process of judging that, clearly we start off with any suggestion for a change by asking ourselves what happens in practice as far as we know, and having people who have been tax managers in the private sector actually helps rather a lot with that. We would then take it to the Consultative Committee and the consultative process on the basis that if we are really treading on toes then people will scream. The consultative process is, in our sense, a main test of this. If we are doing something that is going to upset people because they will be paying more tax, generally speaking they will let us know.

  65. Were there occasions when the Steering Committee and the Consultative Committee, or some of the people who have been consulted on the draft, came and said "if you put it this way, that is not my understanding of the present burden of taxation"? Were there points that were rejected on that basis?
  (Mr Willis) I think there were one or two. Forgive me, my memory may be failing here but I can only think of one or two very minor points where it was put to us that it was not quite so clear that that was happened in practice and perhaps it would be better not to do that in this Bill. Then we would all go away and think about it a bit further and consider whether or not we needed to actually pursue it through what I would call the "normal" Finance Bill channels.

Dawn Primarolo

  66. Would people not continue to act as practice dictated as it emerged? We have always got this slight problem with whether the legislation exactly reflects in discussion how it works. The practice should not change even with the rewrite unless, as happened in the construction industry scheme, for instance, it became clear that people were complying with more rules than they had previously even though the rules were the same and that caused a problem. That is the issue, that the practice should not change and, therefore, the question of burden, compliance, on the taxpayer is the same as before.
  (Mr Willis) I agree absolutely, Minister. The only slight qualification I would add is going back to the point that when we are actually trying to shine a bit of light into a very deep crack which is very narrow in an obscure part of the system—

  67. Yes, I know how difficult it is.
  (Mr Willis) I would not wish to give a guarantee that there is not someone somewhere at some time who has done something and looked at the legislation and decided that it needs X where we now think that the practice is Y and we have legislated for Y.

  68. I am not asking you for an absolute guarantee, I do not even get that on Finance Bills, that is the way of the world.
  (Mr Munro) I think if I may just add a word to what Robin has said. From the very outset, from the report that was produced at the end of 1995, we recognised that this was going to be an issue and on many of these things we were going to have to base our judgment on the best information that we had available and as long as these points were given as much public airing as possible so that people could tell us if our judgment was wrong then it might be acceptable to proceed in this way.

  Chairman: Before we move to the Bill in substance, are there any more general questions that Members would like to put to the project team?

Lord Howe of Aberavon

  69. Am I right in thinking that the Capital Allowances Bill area is one where there have been fewer examples of the rewrite team putting forward proposals which have been rejected as being more than minor after consultation? I think that has happened more often than in other areas, is that right?
  (Mr Willis) I think that is correct, Lord Howe, yes.

  Chairman: Let us, therefore, move to the actual contents of the Bill, if we may, with the assistance of the witnesses we have before us. Mr Broke is still at the back of the room if anybody wants to bring him back on any particular point. We have this break down provided by the team describing the distribution of changes between Parts of the Bill, which I suggest we follow as our broad agenda together with the list of changes set out in the Explanatory Notes. The first point is the Introduction, upon which we have already touched. There are no changes to the law in that. This is an innovation in setting up at the beginning of legislation a guide to the user of the remainder of the Bill that follows. I have no questions, it strikes me as a wholly original way of starting the process, and a very valuable one. Has any Member of the Committee got any points that they would like to raise arising out of Part 1 of the Bill, which is the Introduction, down to Clause 6?

  Lord Brightman: Are you including Clause 6?

  Chairman: I am including Clause 6 here.

  Lord Brightman: Is it a convenient moment to raise a drafting point or should I do that later?

  Chairman: It is perfectly convenient. I think this Committee can declare itself in a position to pass amendments if it wants, so if you raise a drafting point this morning we might be able to get an amendment drafted next time if the general consensus of the Committee is that we would like to see that amendment.

  Lord Brightman: Could I ask you to look at Clause 6(1) of the Bill on page three.

  Chairman: You had it in your note, Lord Brightman. Would it be possible for somebody to pass a copy of that note to the project team?

Lord Brightman

  70. I have got some spare copies. It is a question of which I gave notice. Clause 6(1) has got two expressions on page four in dealing with the meaning of "chargeable period". "For income tax purposes , a period of account, or for corporation tax purposes, an accounting period..." So you have got two expressions which seem to me prima facie to be expressing the same thing. "Period of account" is expressly defined in Clause 6(2). "Accounting period" is not defined in Clause 6 but is included in the Index of Defined Expressions on page 257 by reference to the definition in section 12 of ICTA. For the ordinary reader it does seem to me that it would be very convenient to have immediately after subsection (2) "Period of account means" to have (2A), or it will be numbered (3) presumably, "`Accounting period' has the same meaning as in section 12 of ICTA." I am thinking just of the convenience of the reader who sees immediately what "period of account" means but to find out what "accounting period" means he has got to make his way to page 257, which may or may not have been discovered at that stage, and then find what the meaning is. My suggestion is limited to this: that you will have immediately after subsection (2) "'Accounting period' has the same meaning as in section 12 of ICTA." There is a somewhat similar course taken on page two at line 19 where we find subsection (4) "In subsection (1)(b) `profits' has the same meaning as in section 6 of ICTA." All I am suggesting is that you have the same sort of thing in Clause 6 just for the ease of the reader.
  (Dr Caldwell) It is a very interesting point you make. There are a number of other uses of the expression "accounting period" in the Bill and possibly the implication of what you are saying is that we should put a similar definition in those other places in the other clauses. These occurrences of the phrase "accounting period" are not that numerous elsewhere in the Bill so we could perhaps do that, but doing that sort of thing would raise implications for the drafting of tax legislation more generally because if one goes into a Finance Bill there will be many, many references to an "accounting period" for a company and it may make the legislation a lot longer if one had a subsection every time the phrase appeared reminding people where "accounting period" is defined. We could, in theory, put a general provision in the Bill at the end. There is a general definitions clause at the end in addition to the index of defined expressions, and we could say "in this Act "accounting period" has the same meaning as in Section 12 of ICTA". If you are doing that it is not totally obvious that you would be making people a lot better off by putting such a definition in a clause in our Bill because, in fact, there is a general provision for the Corporation Tax Acts-which will include this because of the way the Corporation Tax Acts are defined-there is a general provision telling people that "accounting period" is to be construed in accordance with Section 12. This is in Section 834(1) of ICTA. There are a number of very general definitions at the end of ICTA, that is the Income and Corporation Taxes Act 1988, which are meant to apply generally and, on the whole, we thought the right answer is to leave them where they are, to operate generally, but to remind people they exist. It may be that in the fullness of time a long way down the rewrite process it might be useful for readers to have an Interpretation of Tax Legislation Bill so that they would realise that there was this package of general definitions to be found (currently) at the end of the 1988 Act and it might be nice to put them in a Bill all on their own so they stand out and people would be warned that this is a glossary of terms they ought to know about.

Lord Howe of Aberavon

  71. Can I ask a follow up. Lord Brightman's eagle eye has directed my sparrow eye to a follow-on question. As I understand your answer, all three of the phrases, "period of account", "accounting period" and "chargeable period" that appear in Section 6 have the same meaning throughout the Bill.
  (Dr Caldwell) "Chargeable period"?

  72. And "period of account" and "accounting period"?
  (Dr Caldwell) Yes.

  Lord Howe of Aberavon: If one goes to the defined expressions one finds that "accounting period" is there, Lord Brightman has drawn attention to it, and that refers to Section 12 of ICTA but not to Clause 6. Then if one looks for "chargeable period", that is in the Schedule and is referred to in Section 6. If one looks for "accounting period" that is there, but if one looks for "period of account", which one will find on para 259, "period of account" is not there.

  Chairman: "Period of account" is in 6(2). The point Lord Brightman is making is that everything else is defined later on.

  Lord Howe of Aberavon: The point is it does not appear in the Schedule either.


  73. My understanding—and I was trying to follow the explanation you were giving in response—is that "period of account" is defined here because it only occurs in this rather narrow context, whereas the other description "chargeable period" has a very wide application and occurs several times during this Bill and has a wider application in general law and Corporation Tax. You save that until the end so you do not have to keep reminding people all the way through and at the end refer people back to the 1988 legislation.
  (Dr Caldwell) "Accounting period" is used all over the place in tax legislation.

  74. "Period of account" is defined here because it is a much narrower term and it is only of relevance to this particular legislation. Is that your case?
  (Dr Caldwell) Yes, it is.

  Chairman: Otherwise I have got the wrong end of the stick. I need to make sure I have understood what you were saying.

  Lord Howe of Aberavon: You understood it better than I did!

  Lord Brightman: I entirely follow the reason for not having "period of account" in the general index. What I had in mind is the convenience of the reader. As he goes through Section 6 it will be much more convenient for the reader, and it will only take up one single line, to say "`accounting period' has the same meaning as in Section 12 of ICTA . . ."

  Chairman: Are you persuaded, Lord Brightman, by the argument that you then have to do that several times all the way through the Bill? Does that bother you?

  Lord Brightman: I would not have thought myself that consistency mattered particularly. The important thing is the convenience of the reader. I do not mind if it is inconsistent in the least but the convenience of the reader I think is absolutely really what we are getting at here.

Lord Blackwell

  75. Given that we have the innovation of an introduction here does that not make it different in that it does not have to be repeated everywhere else? In other words, "period of account" is defined in 6(2) and is not repeated every time "period of account" appears throughout the Bill. We have an introduction here so can we not in the introduction define "accounting period" without having to repeat it elsewhere?
  (Dr Caldwell) "Period of account" is not used elsewhere in the Bill. It is used to help define what "chargeable period" is.

  Lord Blackwell: My point about the difference of the introduction is still relevant, is it not?


  76. Just to follow up on what Lord Brightman and Lord Blackwell were saying. "Accounting period" is generally used so it would be irritating if every time the word was used it was followed by a reminder to the reader what it is, but Lord Blackwell makes the point that Clause 6 is a rather unique part of the Bill with its introduction, and we could do it there to remind people what you mean. It does not mean that every time in any subsequent legislation or later parts of the Bill you are doing it over and over again. That might meet Lord Brightman's point about the reader who wishes to read this introduction to get a general guide to the whole. That is the point being put to you. What is your reaction to that? Does it distress you the idea that you might put the definition there? You are not changing the definition. You put it in as Clause 6. Is there any harm in that?
  (Dr Caldwell) There is no real harm in it. But it is the case that people who have to read tax legislation will very quickly discover that they need to know the meaning of "accounting period" because it does turn up all over the place and there is a general definition telling you where to find it in the Income and Corporation Taxes Act. So it would be possible to put a subsection in but for a lot of people it would be telling them what they know so you have to weigh up the interests of the newish reader against those of the more experienced reader.

Ms Kelly

  77. A slightly different point on the same subject. The fairly newish reader reading this will presumably want to look up any term that is not understood in the defined expressions bit at the back. Part of the logic or rationale behind this was that you did not have to hold very much in your head at all, so the newish reader looks up "accounting period" and is referred elsewhere to Section 12 of ICTA. Would it not be more sensible to define it rather than refer the new reader to something else? Similarly, for all the other references to ICTA, and I can see there are not that many, all the other terms seem to be defined in the actual Bill itself.
  (Dr Caldwell) I think that would create a very awkward precedent because it would mean that perhaps in the future if you use "accounting period" you will have to copy out the whole definition in every Bill.

  78. It is long, is it?
  (Dr Caldwell) It is fairly long.

  79. It is not as short as the period of account?
  (Dr Caldwell) No.

  Ms Kelly: That settles it.

Lord Goodhart

  80. I have seen suggestions that words that are defined in an index or definition clause could be underlined or asterisked or somehow else given an indication that if you want to know what this means you will find it in the index. Has that been considered for this Bill?
  (Mr Munro) Perhaps I could answer that question. There certainly were proposals put a couple of years ago that changes like this should be made as part of a general consideration of statutory format that was undertaken anyway, to a large part influenced by some of the experiments that the project tried out for their consultative material. A working group was set up which reported on these various changes which proposed a considerable number, which resulted in the new statutory format that we now have from the beginning of this session. Other changes of this sort were expressly considered and not felt to be improvements and were not therefore recommended and that was the decision which was endorsed by the Procedure Committee of the House of Lords and the Modernisation Committee of the House of Commons and then by both Houses generally. I think the short answer is that these possibilities, which I know exist in other jurisdictions, have been considered but have not been supported.


  81. I see Mr Broke our witness is still at the back of room. You are still here as our witness, Mr Broke. Would you have any opinion on this question of—
  (Mr Broke) Chairman, yes I do, and I think Neil Munro has gone through one of the points. The team have come up with a number of ideas on how you deal with these things, that you either italicise, underline or put in bold print words that have defined expression that you will find somewhere else. Something I found a lot more helpful because I found italics slightly broke up the text, was the idea of having a footnote after each section which had defined terms—"accounting period", "period of account"—and that meant you would find it at the back. If there was a definition and that was in the section that was fine but if something was defined somewhere else you had a little footnote. Again, the project team were told that that was not acceptable as a way of producing legislation. As a user I regret it. Having been told that that is so, there it is, one must live with it, and it does mean compromises. I think that what Lord Brightman has proposed is an example of where the compromise does not necessarily fit all circumstances. Here we have got one definition that does stick out like a sore thumb in Section 6 and the rest are all found at the back in the table of definitions. We could have got round that with either a footnote or perhaps italicisation. We have not got that and I think we do finish up with a compromise. Once you have got a compromise, I would suggest, with diffidence, it is probably best to be consistent about how you apply your compromise although there may be cases where you would depart from that.

  Lord Howe of Aberavon: I wonder if I could be a quasi witness, if that is possible. I think I am right in saying that our original proposals did commend italicisation of defined words. It has been through several stages, consideration by the project team and then kindly submitted to the working parties set up in the Palace of Westminster, and then put before the Procedure Committee and the Modernisation Committee, and different pieces have dropped off the proposals put forward at each stage, so we are left with the core, so to speak. If I may offer an opinion, if we here in this Bill seek to go over all those possibilities then we shall find ourselves taking a great deal of time. If they are to be considered it might be worth this Committee, or something like it, looking at them for future tax law rewrite bills to see at an early stage in the process whether there is any aspect that might be reconsidered.

  Chairman: I think to go over all of them, as you say, might be difficult, but this is quite an interesting example. I am not quite sure, having listened to this so far, why on balance people came down against using italics as has been suggested, or a footnote, and Mr Broke obviously preferred a footnote as opposed to italics. Was it at the House of Lords Procedure Committee that this finally got upended? Was it simply because we do not do that in legislation or was there some practical reason why it could not be done?

  Lord Howe of Aberavon: The italics proposal, if it was a firm proposal, fell at a fairly early stage. The one that fell in the Procedure Committee was three part numbering to which many of us are still attached, but I do not think we ought to re-open that.

  Chairman: I read some of the stuff on three part numbering and we can return to that at leisure later. That was obviously debated at considerable length and lasted quite a long way before it finally got dropped.

  Lord Howe of Aberavon: On italicisation, I think I proposed to the then Parliamentary Counsel Sir John Fiennes italicisation of defined clauses and I received a six-page single-space letter telling me why it was not acceptable. I may even have a copy of it around somewhere. I think it shows that it is a case that requires a great deal of argument and it is not as easy as it looks.

  Chairman: I have been passed a helpful note by one of those assisting us which says that italics have a separate meaning in Commons' Bills where they are always used to indicate that that part of the Bill has expenditure implications. That sounds familiar.

  Baroness Cohen of Pimlico: That is the answer.

  Chairman: Which would complicate our procedure.

  Lord Goodhart: Halsbury's Statutes include at the end of each section a footnote which does explain where definitions can be found. That is one of the reasons why I think practitioners would use Halsbury or a similar book always in preference to an actual copy of the statute itself. There may be an argument that if Halsbury does it then the statute does not need to.

  Chairman: Where does that leave us? Those pressing the use of italics, are you happy at the moment who have asked me to look at that that it has been so far rejected? I do not know what the answer is to the point handed to me about the problem that Parliament has a different sense of italics. It is certainly the case in all these things we read Halsbury as opposed to the Act of Parliament and that may be a comment on the user-friendliness of Acts of Parliament. I made a reckless remark about the Parliamentary text of the Treaty of Maastricht and to this day I do not believe that a sane man or woman could understand the Treaty of Maastricht when I waved it way high. One had to get the Treaty as amended if one wanted to use it for any sensible purpose. On this question it may be that we ought, in due course, to consider the fact that everybody in practice has to use not the text but a text laid out with more explanatory notes and footnotes and references as in the case of Halsbury. Shall we explore that further now? Going back to the narrow point, does Lord Brightman wish to press this point? Does anybody else? What is the reaction to the specific point made by Lord Brightman about the way in which one definition rather anomalously crops up in Clause 6 whereas all the other definitions are at the back of the Bill? Do you have a reaction, Lord Brightman? Do you wish to take it any further? What is your reaction to the discussions we have had so far about this anomaly. Are you satisfied with that explanation? Do you want to refer to it next time? Are you going to table an amendment so we can consider it again next time?

  Lord Brightman: I would like myself to table an amendment for your consideration because it seems to me that it is helpful to the reader and the cost is nil and I do not think myself there is any obligation to have the same process throughout the Bill. It is stark. You have got "period of accounting" expressly defined in 2 and "accounting period" is left hanging, and it seems to me simply from the point of view of simplification, making things easy for the reader, this is an exceptional case when it is worth referring.

  Chairman: I wonder if I might ask one of our witnesses to draft a suitable amendment for us to look at next time and maybe you can come back and try and persuade us not to make it or some member of the Committee may disagree with Lord Brightman and think it ought not be made. Let us finish the discussion at this stage on Lord Brightman's narrow point about the particular definition. If we can have an amendment prepared next time the Committee can either decide on reflection what it wants to do about it or talk about it again.

  Dawn Primarolo: If we look at the amendment as well to see does it really make any difference? So far I have sat here and thought does it really? We will put something in but does it make substantially any difference to the ease of the use of this Bill? I am tempted to use the measurement that if there is not an improvement then do not put something else in. I cannot see what it adds but, equally, I do not have a strong view. Why add to legislation if what you add does not improve what you have?

  Chairman: The key argument is user-friendliness, as I understand it. If there is a general introduction, it saves you having to flick to the back to remind yourself of where you find definition of "accounting period". Most practitioners are probably even more familiar with it than I am. Let us have an amendment drafted and then return to this point next time and by that time people will have reflected upon it and we will probably find that we will come to one view or the other. I am not sure whether this Committee is allowed to ask you to produce an amendment and then come back and review it. It is part of the unique nature of these proceedings. I take the general sense of the Committee that we have discussed things like use of footnotes or italics. Is any member of the Committee minded to take that further? I know that it will be debated again frequently in future. I think there are some members of the Committee who do not disagree and they want the question to be left open and considered again in the future as this process goes on. What is your view, Lord Goodhart? It would involve rather a major process at this stage.

  Lord Goodhart: I think it would. I am, in principle, in favour of it but I would not at this stage press for it to be incorporated into this Bill.


  82. Any further points on the introduction? Then we go to Part 2 of the Bill, Chapter 2 onwards. This is plant and machinery. It is the part of the Bill with most meat, it is the part of the Bill with the most revenue implications, it is the part of the Bill loaded with the most policy implications, it seems to me, and it has no fewer than 31 minor changes made in the course of it. We have not discussed how we handle this. We have only got a few minutes left. Do members of the Committee wish to go through change by change with the brief explanation or are we content to be guided by the explanatory note and brief description of each one? Should we ask the witnesses—and they may need notice of this question—whether there are amongst these changes those which do have implications in shifting the burden? Are there any winner and loser type changes made in this part of the Bill?
  (Dr Caldwell) One of the pieces of paper that has been supplied to the Committee is CA5[7].

  83. The piece of paper gives a brief explanation of each and why it has been made.
  (Dr Caldwell) It is a landscaped table.
  (Mr Munro) It is a very recent paper, not the one we circulated a few days ago.

  84. So these are the clauses that are covered by the ways and means resolution?
  (Dr Caldwell) They are the ones with italics in.

  Chairman: Italics because they have expenditure implications, as was pointed out earlier. And the expenditure implications means they have an impact on revenue which means they have an impact on individual taxpayers. So that is the answer to my question. It identifies which of the changes have such an implication.

  Lord Blackwell: Chairman, if we are going to consider whether or not these are minor or more significant changes, it seems to me, if it were possible, it would be helpful as well as a description of what the changes are to be able to have some assessment, in total, of what level of revenue might be affected by this. Is there an aggregate amount of change in Inland Revenue income that might be affected by this as one indicator? It may or may not be possible. The other thing is a small change in total may be very significant for particular individuals or particular enterprises. Is there a way of calibrating whether there are individual enterprises for which these changes might have significant impact? Unless we know those two I am not sure how we can judge whether these are minimal or not.

  Lord Howe of Aberavon: I wonder if I might make another suggestion. If one looks at the notes on these changes, the larger document, you find that the notes on change 5, which is the first one identified as having italics, that note occupies a page and a half of explanatory notes and is pretty full. It may be that if we focus our attention on those that are identified in 5(a) as being italicised we will then find that the note on that clause gives us a broader insight into it and therefore gives the background for considering the question raised by Lord Blackwell. That also focuses primarily, if not exclusively, on the changes which are italicised. If one looks at the other matters, many of them are dealing with glitches and omitted cases and so on. I think that to focus this Committee's purpose on the italicised ones might be the most sensible way of enhancing the concentration of our work and a supplementary answer to the question raised by Lord Blackwell, if such an answer is available. I do not know whether that strikes the Committee, or indeed the project team, as being a sensible way of approaching it.


  85. It seems quite sensible to me. We all seem to share the view that insofar as we are concerned with minor changes, we accept as minor those which are aligning with existing practice and putting in statutory form long-established rules of course and so on. It is this question of winners and losers in the tax burden. Lord Howe's approach is that we might concentrate, as he says, on the italicised changes, the ones that are subject to the ways and means resolution. I do not know whether this morning the team is in a position to give an answer to Lord Blackwell's question on how far can one quantify? Will you be able to answer that?
  (Mr Willis) Chairman, perhaps I could offer the best help I can in response to Lord Blackwell's very reasonable question. Both in aggregate and individually the answer would be a negligible effect on revenues is our best estimate. The ten changes which involve italics in the Bill because they might impose charges, we can certainly go through those individually. I do not have, for the reasons touched on earlier, hard estimates of the number of people in those circumstances let alone the number of those who have not been doing what we are legislating. Similarly, where the change is relieving, in principle at least, it is giving people a statutory entitlement to more allowances, our best estimates are there are so few people who are not already taking that view or getting that treatment, that the net effect on revenues is going to be negligible. The other part of the question, obviously very reasonably, was it might be negligible in aggregate but could there be individuals that are very seriously affected by change? The honest answer to that is in a sense a reprise of what I said in answer to the Paymaster General. I do not think so. It has been one of our criteria for assessing this as a minor change. It is impossible to give a guarantee because the circumstances might be that one person has incurred a lot of expenditure thinking, from their reading of the legislation, that the answer is allowances, and the Bill says the answer is no allowances, but in all the consultation undertaken no one has come back and said that.

  Chairman: At this stage we must adjourn. Has anybody got any quick point they would like to make on the procedure next time? I suggest when we resume next time that what I will do—and I am open to suggestions made to me meanwhile—is turn to this part of the Bill and go down and ask has anybody got any points on changes one to five, tending to stop when we get to the italicised ones for the reasons Lord Howe gave and have an explanation of those. That gives us some idea of how we will proceed when this Committee next sits. We can explain that in some of these cases we are not even sure there is anybody who is going to be affected one way or the other by the ways and means resolutions or we might discover that one of these very narrow cracks does indeed have at the bottom of it somebody who will have to change their behaviour. On that happy note, I will adjourn.

6  Evidence, p 11. Back
7  Evidence, p 15. Back

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