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Lord Saatchi: My Lords, I am grateful to the Minister for explaining the Finance Bill so clearly, as he always does. I hope that the noble Lord will forgive me if I do not respond on a line-by-line basis to the clauses in the Bill to which he referred but concentrate instead on one particular aspect of the Bill before us.

Let us consider the Finance Bill 2000 in the House of Commons: 572 pages, two volumes; official status, the longest Finance Bill ever; length of debate in the House of Commons: First Reading, one minute; Second Reading, six hours; Committee stage on the Floor of the House, seven hours; Standing Committee, 24 sittings, 70 hours; Report stage, six hours; Third Reading, six hours; total sittings in another place, 101 hours 39 minutes over 93 days. Now let us consider the Finance Bill 2000 in the House of Lords: length of debate: First Reading, one minute; Second Reading, say, two hours; Committee stage, nil; Standing Committee, nil; Report stage, nil; Third Reading, nil; total in your Lordships' House, two hours--all on a Friday morning in July on the last day of the parliamentary Session.

On Wednesday, Madam Speaker said in her retirement address in another place:

Perhaps it is fair to ask ourselves to what extent we consider that today's proceedings meet that brief. The need for greater parliamentary scrutiny is, I believe, appreciated not only by Madam Speaker but on all sides in your Lordships' House; and it may even be evident to the Government. Exactly a year after we last debated a Finance Bill in your Lordships' House, 57 per cent of the public believe that the Government have not kept their promises, and 62 per cent believe

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that they have not kept down taxes, even though they say they have. Apparently, the opposition party enjoys greater trust on tax than the Government.

Research shows that one of the main reasons for all the cynicism to which Madam Speaker referred in her speech is that by these Finance Bills the Government take full advantage of the complexity of the tax system to implement their brilliant strategy to cut visible taxes on voters while raising invisible taxes elsewhere. Unfortunately, since the previous Finance Bill that strategy has begun to lose its charm. In the Budget the Government said, for example, that they would uprate certain items by the rate of inflation. However, people found out only later that the Government used the historic rate of inflation for pensions, which was 1.1 per cent. But the forecast rate for taxes--fuel and alcohol duties--is up by 3.4 per cent. Tax allowances in this Bill are also indexed at the lower rate of 1.1 per cent.

This Finance Bill increases government spending faster than the growth in the economy and opens up a dangerous gap between government expenditure and national income. But people found out only later that to fill the gap taxes will rise by the equivalent of 5.3p on the basic rate of income tax. But it was not the Government who told people about that. The Government rely on invisible fiscal drag, a delightful aspect of our complex tax system, from the point of view of the Treasury, in which tax allowances rise more slowly than earnings. Therefore, the Government's tax receipts rise faster than the growth in GDP. This year, as last year, the Government's tax receipts are rising by 9 per cent, more than three times faster than the growth in GDP and more than double the growth of earnings. That is how the miracle of what the Minister described as the Government's "sound finance" is being achieved.

It was precisely such practices in Finance Bills that led the Treasury Select Committee in the House of Commons to ask the Government to display greater transparency in their tax policies and for more disclosure so that the Government could not hide from the political consequences of their tax actions. The Institute of Chartered Accountants said:

    "This is out of all proportion to anything we have ever seen before. I do not know how ordinary people have a hope of understanding their tax affairs. Even accountants are struggling".

The chief adviser on financial reporting to the Chief Secretary to the Treasury, Professor Likierman, said in a report:

    "Those who wish to find out what is going on are faced with major hurdles".

The Institute of Chartered Accountants summed it up by saying that the tax system had,

    "spun out of democratic control".

That is the background to my main point today. Our approach is that there are resources in your Lordships' House which could be harnessed to improve the quality of Finance Bills without in any way threatening the right of the House of Commons to raise taxes. At the moment those resources simply cannot be put to use, and we believe that they should

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be in order to enhance the quality of legislation. Your Lordships' House is one of the bodies in our constitution and integrated Parliament that is best equipped to deal with the details of financial matters, but it is not called upon to do so. One is told that membership of your Lordships' House includes seven former Chancellors of the Exchequer, seven former Paymasters General and nine former Chief Secretaries to the Treasury--before one even mentions the many professors of economics, academics and men of business in your Lordships' House, several of whom are present this morning.

Concerns have been raised on all sides of your Lordships' House about the present difficulty in giving such a detailed Finance Bill proper scrutiny in Parliament. For example, my noble friend Lord Norton of Louth, the distinguished professor of government at the University of Hull, says:

    "This is increasingly recognised as a very serious issue. The longer [the Finance Bill] is, the greater the problem for Parliament".

In its excellent report Strengthening Parliament, the commission chaired by my noble friend comments:

    "We see no reason why the House of Lords, given the expertise of some of its Members, should not monitor the impact of Bills falling in the economic sector".

The report went on:

    "We ... believe the House of Lords has a role to play in scrutinising cross-cutting subjects such as ... macro-economic policy".

Why does this not happen? Your Lordships will recall that it was a decision by your Lordships' House, from which much of our political history, and certainly the debate today, takes its origin. When the Peers of 1909 threw out Lloyd George's Budget, the Parliament Act 1911 followed and governed our affairs for the rest of the 20th century. That Act provides in Section 1(1):

    "If a Money bill, having been passed by the House of Commons, and sent up to the House of Lords at least one month before the end of the session, is not passed by the House of Lords without amendment within one month after it is so sent up to that House, the Bill shall, unless the House of Commons direct to the contrary, be presented to His Majesty and become an Act of Parliament on the Royal Assent being signified, notwithstanding that the House of Lords have not consented to the Bill".

So it was that the role of your Lordships' House on money Bills became different from its role on all other Bills. But what was the motivation behind that Act? Commending the Parliament Bill to the House of Commons on Second Reading, the then Liberal Prime Minister, Mr Asquith, said:

    "'Take the hereditary principle. What can we get out of it?' Hon Gentlemen opposite have got a great deal out of it ... a practical working instrument for securing the absolute supremacy of this House when there is a Tory majority [in the House of Commons], but a working instrument to frustrate and nullify the functions of this House when there is a Liberal Government in power ... That is what the right hon Gentleman [Mr Balfour, leader of the Opposition] gets out of it".--[Official Report, Commons, 2/3/11; col. 584.]

Then the Prime Minster said of the hereditary principle:

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    "'Let it not be our master'. So say we. It is because it has been our master ... because it enslaves and fetters the free action of this House--that we have put these proposals before the House and we mean to carry them into law".

It is clear from that passage that the Parliament Act 1911 was fuelled overwhelmingly by the hostility of the government of the day towards the power of hereditary Peers. But has that position not now changed? Did not the House of Lords Act 1999 remove the hereditary Peers from your Lordships' House? Does not the noble Baroness the Leader of the House now say that your Lordships' House is more democratic, more legitimate and more authoritative?

Earl Ferrers: My Lords, perhaps I may intervene. Would my noble friend also like to add that the hereditary Peers who are here are the only Members of this House who are elected?

Lord Saatchi: My Lords, I am pleased to confirm the truth of that.

Is it not also the case that the Royal Commission chaired by my noble friend Lord Wakeham has suggested an elected element in your Lordships' House--increasing the number already here--and that the Official Opposition have indicated that it may consider an even higher elected proportion in your Lordships' House?

In the light of all those changes, is it perhaps appropriate to look afresh at the levels of scrutiny given to Finance Bills in your Lordships' House? There are many ways in which this can be addressed without jeopardising the primacy of the House of Commons. It is perhaps worth mentioning in passing that the constitution of the United States of America (Article 1, Section 7) gives the Senate of that country the right,

    "to propose or concur with amendments as on other Bills".

I have not noticed the American economy grinding to a halt as a consequence. I hope that there may be cross-party support in your Lordships' House for asking the new Joint Committee to review some of the possibilities for better holding the executive to account in the field of finance.

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