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Baroness Hayman: My Lords, I am aware of the concern about small abattoirs. We have put 8.7 million into the charging structure, recognising the importance of small abattoirs in the rural economy. We shall continue to look at that issue and give support where we can. In terms of disease control and disease spread, the movement of live animals from market to market, being parcelled up and sold on, is a more potent factor in the spread of disease.

I appreciate what the right reverend Prelate said about the case for compensation. As I said earlier, it is being put very clearly. I have stated the position as it is at the moment. We are in continuous dialogue with those representing the industry. We have a meeting with all sectors of the industry tomorrow morning. These issues are kept under the closest review.

Lord Rotherwick: My Lords, perhaps I may ask the Minister about wild deer. I am a farmer and also manage park deer and wild deer. Is the noble Baroness aware that there are more freely roaming deer around than ever before--certainly more than was the case 25 years ago? They roam not just through forest and woodland. They are the muntjac that come into our gardens. Has the Minister considered the implications of our wild deer being infected by foot and mouth? It takes professional stalkers approximately a year to kill a significant number of deer. Can the Government make sure that the general public are made aware that the open countryside and forests are just as vulnerable to foot and mouth as the farmyards?

Baroness Hayman: My Lords, it is absolutely correct to state that deer are a susceptible species.

26 Feb 2001 : Column 1017

The export ban and controls apply to farmed deer as well as to cattle, sheep and pigs. The issues of wild deer and wild boar are being considered and have been included in the thinking of the Chief Veterinary Officer as regards any necessary action to be taken within infected areas.

Baroness Masham of Ilton: My Lords, I must declare an interest as the owner of a flock of pedigree Texel sheep which are presently lambing. Can birds such as crows and starlings spread the disease? Furthermore, what is the position as regards animals such as hedgehogs and foxes? What can be done about this?

Baroness Hayman: My Lords, I may need to make this up to an extent. As a matter of extrapolation from the fact that human beings and other non-susceptible species such as horses can carry the virus when travelling, then I must assume that, equally, other animals and birds could do so. However, a sentient vector is not needed because the wind can carry the virus.

Lord Elliott of Morpeth: My Lords, while I wholly agree with the noble Baroness that one should not be in too much of a hurry to reach a decision on where this awful business began, will she accept that I have often driven past the farm at Heddon-on-the-Wall and that two points have struck me about it? First, it is an extremely untidy farm. Secondly, if the wind is in the wrong direction, a strong smell comes from it.

The noble Baroness will know that the pig in the first abattoir came from that farm. Is she also aware that many complaints have been lodged about the conditions suffered by animals on that farm? Neighbours have complained over and over again. An animal welfare organisation took up the case as recently as last December. Local veterinarians have constantly appealed for action to be taken as regards this farm. However, officials from the Ministry of Agriculture, Fisheries and Food have turned down any requests to take action beyond telling the brothers who farm there to "get their act together".

Finally, does the Minister agree that it is appalling, having seen photographs in the local press of the conditions on that farm, to see animals being kept in such a way? Surely stronger regulation should be put in place to curb such fearful squalor, irrespective of whether the animals are the cause of this outbreak? We need better regulation to keep under control such appalling practices.

Baroness Hayman: My Lords, it is interesting to hear the call for more regulation.

I understand the points made by the noble Lord. However, I hope that the House will understand if I do not comment in any way on the circumstances of an individual farmer or an individual farm. As I said earlier, the necessary investigations are taking place. If the House will allow me, I should like to leave it at that.

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Capital Allowances Bill

5.24 p.m.

Lord McIntosh of Haringey: My Lords, I beg to move that this Bill be now read a second time. The Bill rewrites, with minor changes, legislation about capital allowances so that it is clearer and easier to understand. In one sense, therefore, this is a very narrow Bill. But the Bill also marks a major milestone on the way to making tax legislation more user friendly. It is the first Bill from the Inland Revenue's Tax Law Rewrite Project to come before the House. I hope that it will help if I put the Bill in its context before turning to its substance.

The Tax Law Rewrite Project was set up in 1996, following extensive consultation, to rewrite all or most of the United Kingdom's legislation for direct taxes--over 6,000 pages of legislation enacted over the past 200 years. The then Chancellor of the Exchequer, Mr Kenneth Clarke, said in his November 1996 Budget Statement:


    "The project will bring the benefits of clarity and certainty to businesses and ordinary taxpayers. It has been widely welcomed and deserves the continuing support it has enjoyed in all parts of the House".--[Official Report, Commons, 26/11/96; col. 170.]

The main features of the project can be summarised briefly. It puts the legislation into a clearer and more logical form for readers. This includes shorter sentences, modern language, clearer signposts to related provisions, more consistent definitions and, where helpful, greater use of reader aids such as formulae and tables. But restructuring the legislation is probably the biggest single benefit of the rewrite process.

What the rewrite process does not include is changes to tax policies. The project is not, and never was, about that. Proposals for changing policy will continue to be dealt with in the usual way in finance or other Bills. But it was accepted from the outset of the project that some minor changes might be proposed in order to improve the legislation--for example, by legislating extra-statutory concessions, filling gaps in the statute or correcting anomalies--subject always to such changes being flagged up very clearly.

The whole process is based on full consultation at every stage. The project's work is overseen by a steering committee chaired by the noble and learned Lord, Lord Howe of Aberavon, who I am delighted to see will be taking part in this debate, with members drawn from both Houses of Parliament, the legal and tax professions, business and consumer interests. There is also a standing consultative committee drawn from the main representative bodies for tax, business and consumer affairs.

The project also publishes draft legislation, with commentaries, for wider consultation. I am glad to have the opportunity to acknowledge the contribution made by the committees and all the others who comment on draft legislation.

I shall now turn to the substance of the Bill. Broadly speaking, capital allowances are tax allowances given to businesses which incur capital expenditure on assets

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they use in their business. They take the place of the depreciation charged in commercial accounts which is not allowed as a deduction for tax purposes. They cost an estimated 18.8 billion in terms of tax forgone for the year 2000-01.

As I have already indicated, the Bill is not about the substance of these allowances. The Bill rewrites, with minor changes only, the existing legislation about capital allowances. It brings together some 300 pages of legislation, much of it dating back to 1945, which is currently scattered across various Acts. That alone would be useful to users, but the Bill does much more than traditional tax consolidation Bills. It puts the legislation in a more logical and consistent order and makes it easier to understand.

Achieving this improvement was very much an iterative process. The consultation process I mentioned in general terms involved, for this Bill, the publication between October 1998 and February 2000 of four separate exposure drafts. In August 2000 the project then published a draft Bill for a final round of comments. Comments on all those drafts greatly improved the Bill.

Consultation also helped with the Explanatory Notes which accompany the Bill. They explain why the legislation has been written in the way it has. They also include, in Annex 1, extremely detailed explanations of each and every one of the 66 minor changes made by the Bill. These minor changes have been very properly the subject of particular parliamentary attention.

It was recognised from the outset that a new procedure would be needed for Parliament to handle rewrite Bills. A report, known as the Howe Report, made proposals for that in 1996. Its recommendations were largely adopted and developed by the Procedure Committee of the House of Commons in 1997 and then by this House in November 2000. Hence the Bill comes to us after scrutiny by a joint committee of the two Houses. This brought to bear on the Bill the expertise of Members of your Lordships' House.

The committee's report and minutes of evidence speak for themselves, but I should like briefly to comment on two points. First, the joint committee considered explicitly the question of whether changes in the Bill were both minor and appropriate. In the report the conclusion was that the Bill,


    "makes changes to the existing law that are of such minor significance that they need not be referred to the attention of Parliament".

Secondly, the Joint Committee was both able to make amendments to the Bill and considered doing so. The fact that it did not do so is, I suggest, a measure of the extensive consultation which preceded its introduction.

Against that background, the Commons dispensed with further detailed consideration of the Bill. There is, similarly, I suggest, no need for your Lordships to examine the Bill further after today. One of the benefits of the joint committee process is that the Bill has already been examined by noble and learned Lords

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and by noble Lords. That is the background to the Motion on the Order Paper in my name to negative the Committee stage of the Bill.

My final comment on the progress of the Bill concerns the amount of independent scrutiny that it has received. Every professional and representative body, business or individual had the opportunity to comment on the draft legislation. The successive exposure drafts and draft Bill were published with just that in mind. The Bill has been warmly welcomed by them. For example, the Law Society commented in a memorandum to the Joint Committee that,


    "we welcome the publication of the Capital Allowances Bill. We believe that it does represent a significant improvement upon the existing legislation".

The tax faculty of the Institute of Chartered Accountants in England and Wales commented last year that,


    "the quality of the draft reflects the enormous amount of work undertaken by the Revenue in consultation with organisations such as ours".

To sum up, the Bill is a significant milestone in the work of the project to make tax legislation clearer and easier to understand. It shows that it can be done. It will help businesses and other taxpayers and those who advise them. It has been welcomed by them. It has so far enjoyed the support from all parties which Mr Kenneth Clarke in 1996 quite rightly said the project deserves. I commend the Bill to the House.

Moved, That the Bill be now read a second time.--(Lord McIntosh of Haringey.)

5.31 p.m.

Lord Newby: My Lords, we on these Benches support the Bill, as we do the tax law re-write project. I begin by putting on record the credit that we believe is due to the noble and learned Lord, Lord Howe, and his steering committee, which has done a tremendous amount of work, and to other noble Lords and Members of the other place who have worked very hard on the Joint Committee.

The principles under which the work has been carried out are clearly welcome. It obviously makes sense that tax law should have a logical structure and be written in a way that is more easily understood. However, the time that has been necessarily taken to get to this stage underlines two matters which always go with tax law. First, by its very nature, tax law becomes complicated. If one looks at some of the provisions in this Bill and considers why and when they were introduced, one realises that, over time, complexities arise. The fact that there were special provisions for dredgers, for example, was no doubt hugely important in the 1950s, when I think they were introduced, but the reasons are certainly lost in the mists of time. That kind of accretion of tax legislation inevitably occurs and, over a period, makes the legislation more complex. The more that legislation can be put into a framework which enables change to be accommodated without making it unnecessarily complex the better.

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My second point, which flows from that, is that any hope that at the end of the day one would end up with a complete layman's guide--or, as it were, a "dummy's" guide--to capital allowances is a forlorn hope. We may end up with something which is more easily understood but it will not be something which will be easily understood by the layman. It is difficult for us as near laymen to understand much of the Bill without working very hard on it. However, we should not be too worried about that; that is part of its nature. The key issue is that the legislation is as simple as it can be; it is in the nature of tax legislation that it will end up being relatively complex.

Before moving on to make a point about procedure, perhaps I may ask the Minister one or two questions. The tax law re-write project was started in 1996. I believe that at that stage it was hoped that the whole process might be completed within a relatively limited period of time; I think five years was mentioned. We now have, as it were, Chapter I of this great re-write, which has taken five years. What is the programme of activity for going forward? Which chunk of tax legislation is the noble and learned Lord, Lord Howe, now getting his teeth into? What is likely to be the timetable before we are considering the next Bill in the project?

My more substantial point relates to the way in which the Bill has been dealt with by your Lordships' House. Here we are, in prime time in the middle of a working week, looking at an essentially second order Bill in terms of taxation, which has been through a Joint Committee on which Members of your Lordships' House sat. I contrast this procedure with the situation in which we find ourselves every year with the Finance Bill. The noble Lord, Lord Saatchi, and I have made these points many times. No doubt we will need to make them many more times before there is any change.

The Finance Bill comes to this House completely undigested, completely unlooked at by any noble Lord. It arrives on a mid-summer morning--usually the day on which the House is rising for the Summer Recess or, if we are lucky, the previous day--and it is given a couple of hours debate in your Lordships' House; and then everyone breathes a sigh of relief and we go off for our summer holidays. The noble Lord, Lord Saatchi, has attempted to address this problem with the Bill that he introduced last week--a Bill which we on these Benches are happy to support. This Bill and the way we are dealing with it underlines the nonsense of the current situation. We can spend a long period in prime time discussing this Bill, but when it comes to the main business we are almost completely excluded. Certainly in terms of looking at the detail of finance Bills we are completely excluded from that consideration.

I hope that, after the election, when the joint committee looks at the way in which this House should operate after the next stage of reforms, one of the items on the agenda of that joint committee will be the question of how we deal with finance Bills in a sensible manner. The expertise which the Government and the other place are very happy to bring to bear in

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considering this Bill is just as much available for every finance Bill. When we come to look at the way in which this House is run--and, indeed, when the other place looks at the way in which the reformed Second Chamber will work after the next stage of reform--it would be a logical step to get to grips with the procedure and for us to deal with finance Bills with the degree of thoroughness that has been possible with this Bill.

With those caveats, I repeat that we on these Benches give the Bill our warm support.

5.38 p.m.

Lord Howe of Aberavon: My Lords, it goes without saying that I am most grateful to both previous speakers for their tributes to myself in this connection. For me, this is the end of a long road that started when I gave an address to the Addington Society in 1977 calling for a wide-ranging upheaval and reform of our tax-registration machinery. I suppose a quarter of a century is not too bad by British constitutional standards.

I must confess that I was not able to do much about it while I was the Chancellor of the Exchequer. However, I make one plea in mitigation; that is, that although I introduced a number of benign schemes such as the business expansion scheme and the business start-up scheme--which turned out to be hideously complex and, in the end, fruitless--I found the opportunity to abolish development land tax, the national insurance surcharge, capital transfer tax and the reduced rate band. In those days we only had two bands of direct income tax, and I got rid of one of them. Since then my successors have been concerned to reverse the process. We now have immensely more complication than we had then. That only goes to show how difficult is the task.

I should like to take this opportunity to thank all those who have taken part in the campaign to get this subject onto the national agenda--in the professions, in the Institute of Fiscal Studies, and fellow members of the committee who worked with me. Above all, perhaps I may pay tribute to the work done by the Inland Revenue itself. There was some criticism at an early stage about placing this work in the hands of those whom some of us may regard as "enemies" in this field. But they are just as interested in securing simplification as anyone else. As an equivalent to the Law Commission, it was wise and essential to put people of their experience in the workshop of this project--cross-fertilised, if they do not mind my saying so, by the introduction of people from the private sector and above all strengthened by the secondment specially for this purpose of counsel from the Office of Parliamentary Counsel, who have dedicated themselves to innovative legislative techniques of enormous value in this field. I shall return to that topic in a moment.

I am grateful to the Minister for his very clear exposition of the whole process that has led to the production of the Bill and of the role played by the two

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committees, the Consultative Committee and the Steering Committee. I am grateful to the Minister also for making it plain that this is a "tax law rewrite" project, not a "tax policy simplification" project. As he says, that in itself is of enormous value. The chairman of the Special Committee of Tax Law Consultative Bodies, Mr Adam Broke, who has played a leading part in this work and who gave evidence to the Joint Select Committee, explained in his own words just how important that was when he said:


    "I need to be able to find the legislation that is applicable, understand how it operates and advise my clients accordingly. For me, the Capital Allowances Bill represents a revolution in accessibility. It has a logical structure and for the first time in my experience it has actually been designed to help the user".

His words echo those of the Minister. That is what we have tried to do.

Many people are understandably dismayed that we have not at the same time been tackling the simplification of tax policy. I shared the ambition for that objective. My right honourable friend in the other place, Mr John Redwood, expressed his dismay on a topic of that kind with remarkable vigour but with understandable anxiety. As I say, I wanted that to be achieved as well as the tax law rewrite. But people who have been concerned with this process recognise that we cannot do both at the same time. There are those who have said that we should postpone the rewrite until we can simplify the policy as well, or that we should do both at the same time.

It must be recognised that that would be impossible. If we were to try to postpone the rewrite until we had simplified the policy, we should be throwing out the horse before we had even found the cart, which would be a pretty perverse way of setting about it. One of the products of the rewrite process has been the identification--as John Redwood said in his speech--of excrescences and complications that can begin to be tackled by politicians later on. There is a huge agenda to be tackled.

As regards procedure, the Joint Select Committee recommended a change in the committee's name from the Joint Committee on Tax Simplification to the Joint Committee on Tax Law Rewrite Bills. I commend that proposition to the House. "Tax law simplification" raises expectations unduly high; "tax law rewrite" is the accurate description of the project.

Two criticisms were voiced in another place about the procedure adopted so far. The first was that there had been no opportunity for the committee to take independent advice in examining the Bill. The truth is that every conceivable independent voice in the country has been mobilised to look at the matter in one way or another. That has been the purpose of our consultative process. It is important that, as we have done already, when the Bill arrives before Parliament it should once again by publicised, so that the Toms, Dicks and Harry's in the hedgerows and by-ways of this country who have failed to notice it until that point themselves come along with independent experts if they wish to do so. But I do not think that we can do much more to get wider-ranging scrutiny than we have done.

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Another slightly curious criticism was voiced in another place by another old friend of mine--if that is not an unparliamentary way of putting it----Mr Eric Forth. He suggested rather curiously that this work was being done by what he called the "usual gang", the "usual suspects"--the people who were always involved in looking at tax legislation and knew all about it. I do not think that that is necessarily a bad thing, if their purpose is admitted by everyone to be benign and if the output is admitted by everyone to be of reasonably high value.

I should like to pay tribute, for example, to the contribution made to this whole process by the noble and learned Lord, Lord Brightman. He was concerned with shaping the ideas that formed the Joint Select Committee, drawing on his formidable experience having chaired many consolidation Bill committees. That precedent is one of the inputs that he has made. The noble Lord, Lord Goodhart, who is in his place, looking as benign and wise as ever, made his own contribution; this is also a field in which he has been active.

To be frank, perhaps the only one of the "gang of three" who served on the Joint Select Committee and who perhaps ought not to have been there was myself. If one goes back to the original precedent on which we drew--the handling of the Customs and Excise Act 1952, which was produced in this way by a Joint Select Committee--the oversight of that project was undertaken by the noble Lord, Lord Kennet, with a special committee designed for that purpose. The noble Lord produced the report which gave rise to the Bill that came before both Houses, but he did not sit on the Joint Select Committee: perhaps rightly so, because he was in effect one of the progenitors of the Bill, as I am to some extent--if not a progenitor, at least a promoter with a certain interest in its survival.

I confess that I was surprised to be invited to serve on the committee. I regarded myself rather more as a witness and a cheerer from the stands than a member of it. Who knows who may replace me when the time comes? That person may well not be a Member of this House. I offer that thought, not because I resented being on the committee, but because I can see that there is a certain validity in that analysis.

The question of our future work programme was raised by the noble Lord, Lord Newby. I agree with the noble Lord that it is disappointing that the task has proved as enormous as it has. We have produced 300-plus pages against an existing stock of 6,000 pages. So, 5 per cent in five years is not too good. Our immediate future programme involves the production of the income tax legislation--the heart of this problem. That was intended to produce a complete income tax Bill of over 1,000 pages long. Because of the scale of that task, the rewrite project team decided that it should be done in two stages. A first income tax Bill is planned for November 2002 covering employment income and related subjects such as social security and pensions income. A second income tax Bill is planned for November 2003. That will cover such topics as trading income, property income and savings and investment income. Those will be heartland topics.

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It will be quite difficult to keep up with that timetable. So it will be important for those who, as it were, service our work appreciate the need to keep us fully equipped with manpower as well as goodwill. The scale of the task is formidable. It involves, in the project team, about 42 people at the coal-face plus the seconded people from the Office of Parliamentary Counsel. Colleagues who have served in government will know that there is no more hard- pressed corner of the governmental machine than the Office of Parliamentary Counsel. Committee after committee has drawn attention to the scale of their work. The noble Lord, Lord Renton, produced work on it in the 1970s; the late Lord Rippon produced work on it within the past few years. Every time I have been in government I have urged addition to the resources of the OPC.

You cannot train parliamentary draftsmen overnight, least of all parliamentary draftsmen who are learning the rewrite technique. It is of the utmost importance to recognise that no single individual is responsible in the machinery of government for this office--indeed, it hovers between the Prime Minister, the Lord Chancellor and even the Law Officers' Department. That is a dangerous situation. I hope that the Minister will take this message: if this task is to be carried on even at its present pace, let alone a faster pace, we need to have enlarged resources available to support the magnificent work that has been carried out by those people concerned.

I should like to mention the point raised by the noble Lord, Lord Newby, and one that is demonstrated by the very powerful--though not looming--presence of my noble friend Lord Saatchi on the Opposition Front Bench. He, too, has taken an interest in the topic. There is no doubt that two factors should be acknowledged when studying the production of legislation generally, especially fiscal legislation. First, the Standing Committee procedure on a Finance Bill, like most other Standing Committee procedures in the other place, has become less and less effective, if it ever was effective, in the proper Committee stage study of complex legislation. I shall not go into that in detail now because it has been well studied in a book written by a Member of the other place, Mr Andrew Tyrie. Mr Ferdinand Mount has also written about it. Moreover, the Norton commission, under my noble friend Lord Norton, reached the same conclusion.

The way in which the Financial Services Act was handled in this House--again, I look with admiration at my noble friend Lord Saatchi--demonstrates the extent to which this House does most of the hard work in enhancing legislation. It is often said that what we are doing is tidying up the bits and pieces that have been identified with such clarity in the other place. That is nonsense. There is everything to be said for finding a way of engaging this House in the process. That is why I am delighted that we have taken this step so far. My noble friend Lord Saatchi has proposals before the House that seek to approach the matter in a different way. I am not sure that his is necessarily the best way, but I look with benign interest upon his intelligent activity on this front.

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Although we have what we have by way of this machinery, I express the hope that we can be sure that it will continue to work well as we enhance and strengthen it. It is a very valuable method of studying such legislation. I am delighted that governments of both parties have recognised that value. There remains the question of whether we can extend this technique, not just, as the noble Lord, Lord Newby, observed, to the study of routine finance Bills but also to the wider question of tax policy simplification. I addressed that subject at length last autumn in a speech that I gave to the Institute of Chartered Accountants, the Hardman Memorial Lecture. I believe that we can evolve that technique in order to begin studying the question of tax policy simplification, as well as tax law rewriting.

I turn to my final point, which is not unimportant. Quite aside from the complexity of tax legislation, the second most worrying aspect about it is its overwhelming volume--up from 2,000 pages in 1970 to 6,000 in the year 2000. Indeed, 600 pages were added last year alone. We must do something to stop this roaring torrent of fiscal innovation. I made that point during last week's debate on the report of my noble friend Lord Norton on the strengthening of Parliament. I put forward the one proposal that I believe is worthy of study; namely, a reform of the Provisional Collection of Taxes Act, so that the automatic guillotine that attaches to the rate structure and the core financial elements with which the Commons are rightly concerned--the automatic guillotine applies only to those provisions; it does not apply to everything that Chancellors of the Exchequer of whatever kind or complexity wish to hang on it--can be separated and thereby provide a different track, like this one, for consideration of tax law changes and tax policy simplification. Above all, we must stop the automatic juggernaut created by Lloyd George (no doubt per incuriam, as many other things that he did) in the original Provisional Collection of Taxes Act 1913.

I hope that I shall not trespass too long on the patience of the House if I make one additional point. I welcome very much what has been said by other noble Lords today. I speak for all those concerned with the project when I express our gratitude for the understanding support that has been given to what we are trying to achieve.

5.55 p.m.

Lord Simon of Glaisdale: My Lords, it is a singular privilege to follow the noble and learned Lord, Lord Howe of Aberavon, partly because of the authority and fertility of the speech that we have just heard, but also because he is the main, motive force behind the reforms of which this is the first instalment. The Minister explained the Bill and its background with his usual exemplary clarity. It has been received with acclamation on all sides of your Lordships' House. Therefore, I desire to make only one or two peripheral comments.

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My first point is on the question of draftsmen. There was a severe setback in 1997 to the proceedings of the committee charged with the rewrite. That was not surprising because any new government tend to put great pressure on the draftsmen. On this occasion, the process of rewrite was undoubtedly set back by the withdrawal of draftsmen. I hope that we can be assured that that will not occur after the next election. I do not know whether I ought to ask that question of the Minister, the noble Lord, Lord Saatchi, or whether the noble Lord, Lord Newby, should also be included. It is most important that the expert draftsmen on these matters should be kept in continual touch and that they should be continually available.

The second matter is the extent of the amendments that can be made in the rewrite. As I understand it, the committee can now make minor corrections and alterations, providing that it is thought that they are not sufficiently important to be drawn to the attention of Parliament. But one can go a little further on the analogy of what the Joint Committee on Consolidation Bills does. The noble and learned Lord, Lord Howe of Aberavon, referred to that, as has my noble and learned friend Lord Brightman.

Up until 1949, the consolidation was limited to re-enactment. However, that was importantly extended in that year so that a number of minor alterations could be made to eliminate obscurities, contradictions, and so on. But in 1965 we went much further. The Law Commission, set up under an Act of that year, was able to make recommendations for quite substantial changes designed to improve legislation. I should like to see the committee charged with this rewrite given those more extensive powers.

The third matter has already been mentioned by the noble Lord, Lord Newby, and by the noble and learned Lord, Lord Howe. I refer to the power of your Lordships' House and to its responsibility to improve the fiscal code. That was recently adverted to by the noble Lord, Lord Desai. The noble Lord, Lord Newby, gave it further encouragement and the noble Lord, Lord Saatchi, has a Bill which is awaiting Second Reading which would carry that matter much further. I hope that it will receive encouragement throughout the House.

The other place must deal with supply, as the withdrawal of supply is one of the two means of bringing down a government. The representatives of the people--the elected representatives as against the elite representatives of your Lordships' House--must propose on democratic principles the burdens that should be borne. But apart from supply in that wider sense, there is every reason why your Lordships, with their expertise and great experience, should not contribute, particularly as regards tax management.

That leaves entirely aside Customs and Excise. The deplorable verbosity and obscurity that now commands the attention of your Lordships' House would undoubtedly not have come to that pass had your Lordships been more closely identified with the process of tax management. When we discuss the Bill of the noble Lord, Lord Saatchi, we can discuss how

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that position came about. It came about by errors on both sides between 1909 and 1913. But that is long past. We can put the matter right now. So far, so well. But for the moment all we can do is to acclaim the present Bill.

6.3 p.m.

Lord Northbrook: My Lords, the Capital Allowances Bill is the first piece of legislation to be introduced by the tax rewrite project which was set up by the previous Conservative administration in December 1996. I congratulate the steering committee on its work and my noble and learned friend Lord Howe of Aberavon who has a job for life if he so wishes.

I welcome the Bill which standardises existing legislation for capital allowances on plant and machinery, industrial and agricultural buildings, mineral extraction, research and development know-how, patent allowances, dredging, assured tenancies and, finally, contributions. I note that the Joint Committee of both Houses set up to examine the Bill instead of the normal Committee stages has made no amendments to it.

However, as the shadow Paymaster General said in another place recently, unless future Finance Bills are drafted in the rewritten style, we shall forever go backwards. It will be a case of two steps back and one step forward. For instance, while this Bill to its credit runs to 334 pages, last year's Finance Bill ran to 558 pages. As today's editorial in the Financial Times states:


    "The Chancellor might also think about simplifying taxes: his incessant tinkering bemuses experts and annoys businessmen".

There are now five income tax bands, 15 rates of capital gains tax, 21 rates of company car tax and hundreds of exemptions from corporation tax.

One might think that the accountancy profession would be more than happy with this state of affairs, but even it is critical. One of its executives, Frank Askew, said last April of the Finance Bill 2000:


    "This is out of all proportion to anything we have ever seen before; the volume of tax law has doubled since the 1980s. I do not know how ordinary people have a hope of understanding their tax affairs. Even accountants are struggling".

Last year the Institute of Chartered Accountants in England and Wales launched a campaign for simpler taxation, arguing that the tax system was getting out of control and had become detached from the principles of good revenue raising.

The other problem is that it is becoming increasingly difficult to scrutinise the Finance Bill in Parliament. As my noble friend Lord Norton stated--the noble Lord, Lord Newby, made an interesting speech on the same theme today--in the Financial Times of 10th April last:


    "This is increasingly recognised as a very serious issue. The longer it is the greater problem it is for Parliament".

I believe that the Bill of my noble friend Lord Saatchi to amend the 1911 Parliament Act will be pertinent in that regard. My noble and learned friend Lord Howe stated that the Finance Act 2000 was almost twice as

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long as the Capital Allowances Bill. It is like repainting Brighton Pier when its owners are trying to extend it to the French coast.

I welcome the further rewrite projects still in exposure draft form but, like my noble and learned friend Lord Howe of Aberavon, I should like the process extended to other taxes such as capital gains tax. Many years ago--before I knew much about tax--the capital gains tax legislation was, I understand, quite simple. If one sold an asset, one deducted from the proceeds the cost and certain allowable additional expenditure. One had an annual allowance and the resulting profit was subject to one rate of capital gains tax. Then the indexation concept was introduced which made the position a little more complicated. Then this Government introduced an additional twist through the concept of taper relief and divided assets into business and non-business categories. To add to the complication, one was given a free year off tax in certain circumstances.

Capital gains tax has become increasingly complicated. I believe that it would be well worth the project team extending its endeavours to this area, perhaps in the more distant future. I ask the Minister to use his best endeavours to see whether the Tax Law Rewrite Project can extend its focus on this tax as soon as possible to save the shareholding public much time in working out their capital gains tax position. In summary, I fully support the Bill and wish the project team well in future endeavours.

6.10 p.m.

Lord Saatchi: My Lords, perhaps I may express my delight in hearing the Government's strong support for the Bill. It is one of the rare occasions in your Lordships' House when all the parties are in agreement. I congratulate the Government on maintaining what is surely one of the most impressive aspects of the Bill: its cross-part provenance; and on what the Minister described as the admirable level of consultation with the industry and affected parties which preceded its arrival in this House.

I should like also to congratulate the draftsmen from the Revenue and the tax law rewrite group on the Explanatory Notes. Unusually, they are in two volumes. The only criticism I have heard is that perhaps they are too good. The legal status of the law compared with the legal status of the notes on the law is perhaps a moot point. That is a matter on which noble and learned Lords like the noble and learned Lord, Lord Simon of Glaisdale, may advise the House. I am told that the Institute of Chartered Accountants of Scotland is not worried about this point. It has indicated that the Inland Revenue publishes many booklets and publications of guidance which are outside the law and do not cause any mishap. I am sure all will be well.

I commend the two volumes of notes. They give to laymen like the noble Lord, Lord Newby, and myself an excellent history of capital allowances. They explain their purpose and structure, who benefits from them and what is their current intent. As the Minister

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said, the document identifies the 66 cases of change and provides helpful notes on each. No one could have asked for a more thorough explanation of any Bill. Therefore, the Bill now before your Lordships' House is in impeccable condition.

I echo the sentiments of the tax faculty of the Institute of Chartered Accountants, which described the Bill as an impressive achievement and congratulated everyone involved. Our Front Bench agrees, welcomes the Bill and supports the Minister's plan to negative its Committee stage.

The need for a tax rewrite project in capital allowances was first flagged up in an article in the Financial Times on 11th August 1986. The report drew attention to the capital allowances provisions of the Finance Act 1986 and to the vitriolic comments from accountants and solicitors, who were irritated by the Act's length and some of its provisions. I agree with the noble Lord, Lord Newby, that a laymen's guide to such matters is almost an impossibility. I give an example from the 1986 Act of the incomprehensible drafting to which many commentators objected at the time. It gives a flavour of the complexity of the system which the Bill seeks to rectify. The 1986 Act states:


    "If, in a case where sub-paragraph (1) of paragraph 10 above applies, neither sub-paragraph (1) nor sub-paragraph (2) above has effect in relation to the expenditure referred to in sub-paragraph (1)(a) of that paragraph, then for the chargeable period related to the disposal or cessation referred to in sub-paragraph (1)(b) of that paragraph, any allowance in respect of that expenditure shall be a balancing allowance".

I am sure noble Lords take my point.

Perhaps I may spend a further moment looking at the origins of the tax rewrite project. I say with pride that it was initiated by the previous Conservative government. The first report was introduced in 1996 by my right honourable friend Kenneth Clarke, then Chancellor of the Exchequer. I hope that the Minister and your Lordships will agree that the decision to commence the rewrite was a tribute to the deregulatory instincts of the then Chancellor and his Ministers. Their aim was to achieve a more logical structure with rewritten tax legislation, involving shorter sentences, briefer, more lucid definitions and more modern language.

The scale of the ambition of the project was summed up brilliantly by the then Chancellor in his Budget speech. He referred to it as a project that was,


    "as ambitious as translating the whole of 'War and Peace' into lucid Swahili. In fact, it is more ambitious ...'War and Peace' is only 1,500 pages long. Inland Revenue tax law is 6,000 pages long and was not written by a Tolstoy".--[Official Report, Commons, 26/11/96; col. 170.]

That was a good description of the scale of the project.

I come now to the man who is the undoubted hero of the entire project. As the noble and learned Lord, Lord Simon of Glaisdale, said, he is its main motive force. As other noble Lords have done, I refer to the noble and learned Lord, Lord Howe of Aberavon, to whom the Chancellor entrusted the project. It is interesting to note that the noble and learned Lord, Lord Howe, spoke about the need for tax simplification in his

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maiden speech in another place in 1964. I hope that he does not mind my reminding him of that happy day. In response to the proposal for some new means-tested benefit, the noble and learned Lord said that it must be one that is simple. So my noble and learned friend has been consistent in his devotion to this cause. His personal aim was that the language of all existing tax law should be simplified, that the benefit would substantially outweigh the costs and that a rewrite of most of the existing code could be accomplished in a reasonable period.

The noble and learned Lord and his team resolved to use a variety of techniques, all of which have been incorporated in the Bill: first, that there would be a new, more logical structure; secondly, that there would be shorter sentences and better use of definitions; thirdly, modern language would be used as long as it was possible to do so without changing the law or making its effects less certain; fourthly, that there would be better signposts so that similar rules would be grouped together to make them easier to find; and, finally, a new format and layout would be adopted to make the legislation easier to read.

It is worth remembering that my noble and learned friend Lord Howe had initially become president of the tax law review committee set up by the Institute for Fiscal Studies in autumn 1994. Its purpose was, independently and objectively, to ask fundamental questions about whether the tax system was working as intended. The committee concluded that it was not. Miraculously, just as his committee published its final report, the Treasury arrived at a similar conclusion about the need for reform and my noble and learned friend Lord Howe was duly appointed chairman of the rewrite committee.

Initially, he confronted powerful forces of inertia, as I am sure noble Lords can imagine, from pre-existing institutions and bodies, and from time-hallowed processes, all of them stacked against change of any kind. Quite how my noble and learned friend overcame that inertia is a mystery to me; but somehow he did.

We should remember that the problems he began to tackle are not new. In 1853, Gladstone complained in another place that,


    "the nature of property in this country, and its very complicated forms, render it almost impossible to deal with the income tax in a very simple manner".

It has taken 150 years but I hope that this Bill begins to prove that Mr Gladstone may have been wrong.

In his remarks, my noble and learned friend Lord Howe drew a distinction between two meanings of simplification. The Bill seeks to address one: to rewrite the law in a way that makes it easier to understand. The second is to simplify the actual mechanics and administration of taxation. In opening the debate, the Minister said that changes to tax policies would continue to be dealt with in finance Bills in the usual way. I hope that the Minister will take to heart that the rewrite group hopes to apply itself to all of the output of tax legislation. Therefore, following the successful introduction of the Bill into Parliament, perhaps "the usual way" will not continue quite as it has in the past.

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It is also notable that the joint committee recommended to the procedure committees of both Houses that the joint committee should be renamed the Joint Committee on Tax Law Rewrite Bills in order to make that distinction. The authors of the Bill wisely point out that it is better to achieve something real than to fail through being over-ambitious or trying to do too many things at once. Although chapter after chapter of the Bill is admirable for the clarity of its language and the consolidation of the previous legislation, which was scattered among various Finance Acts--the table of repeals is four pages long, which is a staggering achievement--the Bill continues to distinguish between buildings and plant and machinery, between software and hardware, between cars and other vehicles, between short and long-life assets and all the other complicated aspects that politicians down the ages have decided are essential to the proper workings of the capital allowance system.

That is the root of the issue that the project has sought to address and that various noble Lords have talked about today. The system is based on the notion that tax relief should be given to behaviour that is to be encouraged and that behaviour that is to be discouraged should be taxed. It is then incumbent on the Treasury to define carefully those who should receive the relief or be punished with the tax. The result is the complexity that all noble Lords who have spoken this afternoon have referred to.

To continue in a cross-party spirit, in his evidence to the Treasury Sub-Committee, my right honourable friend Kenneth Clarke, the instigator of this Bill, said that he believed in a simple tax structure at the lowest rates that can be achieved, with no tax breaks, no complications and no distortions. He also said that he was against micro tax measures to try to make people behave in ways that they would not otherwise behave in. He was against taxes to stimulate investment in specific items, because that resulted in a very complicated structure.

Chancellor Brown is by no means the first Chancellor who has sought to use the tax system to achieve social objectives. My noble friend Lady Thatcher staunchly defended mortgage interest tax relief to encourage home ownership and both Conservative and Labour Governments have introduced incentives to encourage saving, such as tax-exempt special savings accounts, personal equity plans and individual savings accounts. The present Chancellor has introduced numerous reforms to make work pay, as he puts it, most notably the working families' tax credit.

The result of all that is what my honourable friend in another place, Andrew Tyrie, calls the "unstoppable juggernaut" of new tax law. To overcome those difficulties, to which many noble Lords have referred and which this exercise is about, I underline the request of my noble and learned friend Lord Howe that resources should be provided or perhaps increased to ensure that the initial enthusiasm of the rewrite project is sustained. That is reasonable. Compared with the high compliance costs in the tax management industry,

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the Government's modest investment in the project must be worth while. We urge them to continue with it and they show every sign of doing so.

It is essential that those involved remain independent of the Government and, as far as possible, able to focus exclusively on the project without being removed to assist with Budgets or other Treasury matters. Unless all Finance Bills are drafted within the rewrite principles, we shall continue to take one step forward and two steps backwards, as my noble friend Lord Northbrook said.

The noble Lord, Lord Newby, asked about timing. I think that my noble and learned friend Lord Howe said how the new Bills were to appear. When they appear, their terms will be arbitrated over and scrutinised by the Joint Committee on Tax Simplification, now correctly renamed the Joint Committee on Tax Law Rewrite Bills. I hope that your Lordships agree that that is an excellent forum and procedure for such examination.

The Opposition congratulate all the members of the review team on their efforts and we give the Bill our full support.

6.24 p.m.

Lord McIntosh of Haringey: My Lords, it is a great and unusual pleasure to be able to respond to a unanimous debate. I thank all noble Lords who have spoken for the support that they have given to the Bill. Much more importantly, I thank them for the support that they have given to the project since it has been in existence. I acknowledge that the Bill has been a long time coming, as the noble Lord, Lord Newby, rightly said, but it has been warmly welcomed by those who use tax legislation as a substantial achievement in its own right and a sign of continuing commitment to the rewrite project.

I echo the tributes that have been paid to the noble and learned Lord, Lord Howe of Aberavon, who inspired the project. I was glad to hear the noble Lord, Lord Saatchi, remind him that he took an interest in the issue as early as 1964. I also pay tribute to the other members of the project committee, the many bodies and individuals who support the work by taking the time to comment on the draft legislation, the project team at the Inland Revenue, to whom the noble and learned Lord, Lord Howe, paid particular tribute, and parliamentary counsel, who have lent a senior member to the project for a considerable period.

The noble Lord, Lord Newby, correctly said that the time taken reflected the inevitable complexity of the project. This is chapter one and it has taken five years. We are not going to take quite as long on future projects. The noble and learned Lord, Lord Howe, has already mentioned some of the future work. We intend to publish a draft Bill on employment income in the autumn of 2002. There will also be further work in 2003, although it is not yet as well defined as we would like. Meanwhile, the project will be looking at PAYE regulations, which, although it does not affect primary legislation, is an important issue that deserves a great

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deal of attention. The noble Lord, Lord Northbrook, asked about capital gains tax. The project will also deal with that, but I cannot say when.

It was important that the noble and learned Lord, Lord Howe, said that the rewrite project was correct to go ahead without waiting for tax simplification. I do not want to comment on whether the Joint Committee should be called a tax simplification committee or tax rewrite committee. That is a matter for the authorities of both Houses, not for the Government. Without in any way underestimating the importance of tax simplification, I think that the tax rewrite project stands on its own merits.

The relative responsibilities of the House of Lords and the House of Commons were also mentioned. I very much appreciated the reference made by the noble and learned Lord, Lord Howe, to his right honourable friends Mr Eric Forth and Mr John Redwood. Those who wish that we did more on the Floor of the House should bear in mind the comments of Eric Forth on 15th January. He said:


    "When I see the words 'tax' and 'Lords' mentioned together in one motion, I become suspicious and wonder why we have all suffered from collective amnesia on the history of this place and on the relative roles of the Commons and the Lords, especially in respect of tax matters".--[Official Report, Commons, 15/1/01; col. 54]

On the same day, Mr Redwood said that he wanted to increase the number of Members of the House of Commons required for the joint committee to be quorate in order to,


    "reinforce the message, which I am sure the Paymaster General wants to send, that the House of Commons is in charge of taxation matters".--[Official Report, Commons, 8/1/01; col. 72]

Those in this House who want to extend our powers in these matters have some formidable opponents in their own party in the other place.

The noble and learned Lords, Lord Howe and Lord Simon, and the noble Lord, Lord Saatchi, referred to the need for the assurance of continued resources. The noble and learned Lord, Lord Simon, referred in particular to the need for the availability of parliamentary draftsmen. We acknowledge that point. It is a fact that the resources being devoted to the project now are greater than they ever have been before. However, it is certainly true that, if we are to continue in the way that we wish, we shall have to keep up that record in the future.

Interestingly, the noble and learned Lord, Lord Simon, wanted the Joint Committee to have more extensive powers, comparable to the 1949 extension of consolidation Bills.


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