Select Committee on Economic Affairs Third Report


  2.1  The Parliamentary scrutiny of Finance Bills has evolved over the years. This Report is our contribution to that evolving process.

  2.2  Although matters relating to taxation and public expenditure are often considered by Lords Select Committees in the context of other inquiries, this is the first time that a Lords Select Committee has specifically considered any aspects of a Finance Bill.

  2.3  The origins of this Sub-Committee stem from recommendations on the scrutiny of financial legislation made by the Report of the Leader's Group on Working Practices of the House, published in April 2002.[1]

  2.4  Having noted the restriction of privilege on the amendment of public expenditure bills, the Report stated:

    "However, there are a significant number of members on all sides of the House with considerable expert knowledge of financial matters. Their ability to debate and scrutinise annual financial legislation is not at present being well used, and could be better used without encroaching on the financial privileges of the Commons." (para.12)

  2.5  Accordingly, the Report recommended that:

"while we do not intend in any way to encroach upon the financial privileges of the Commons, a procedure be established to enable this House to deal more effectively with Finance Bills" (para.31 (c)).

  2.6  It also proposed (para. 13) the setting up of an ad-hoc select committee to "consider and comment on the budget and Finance Bill" which should start work once the Finance Bill had been introduced into the Commons and published and which should report after completion of the Commons committee stage of the Bill but before Commons remaining stages.

  2.7  The terms of reference which the Report proposed for the committee:

    " …would specifically prohibit it from considering the incidence or rates of tax, but would allow the committee to address technical issues of tax administration and whether the legislation could be clarified or simplified." (para.13)

  2.8  The Report envisaged that publication of the committee's views might enable the Government, if it wished, to move amendments to the Bill at the report stages in the Commons, as well as informing the second reading debate on the Bill in the Lords. (para.14)

  2.9  It took the view that: "A procedure on these lines would enable the Lords to make better use of its members' financial expertise while avoiding any infringements of Commons financial privilege. The aim of this proposal is to complement and help the work of the House of Commons, not to challenge it. Better scrutiny of Finance Bills by Parliament as a whole should result." (para.14)

  2.10  The Report also suggested that work of the proposed ad-hoc committee might be undertaken by the Economic Affairs Committee of the House. (para.15)

  2.11  The Leader's Group Report was considered by the Select Committee on Procedure of the House, which endorsed the relevant recommendation in July 2002[2] and proposed that the Economic Affairs Committee "… should be given the power to establish a sub-committee to undertake the task of considering the Finance Bill and a power to co-opt additional members to the sub-committee exclusively for its consideration of the Finance Bill." (para.9)

  2.12  The Procedure Committee Report considered that the Economic Affairs Committee's terms of reference were sufficiently wide to cover this task. But it recommended, in line with the recommendation of the Leader's Group, that those terms of reference: "should be amended specifically to prohibit the sub-committee from investigating the incidence or rates of tax, and to allow it only to address technical issues of tax administration, clarification or simplification." (ibid)

  2.13  The Report also stressed that: "As the Group's report makes clear, there is no intention to challenge Commons financial privilege." (ibid)

  2.14  The Procedure Committee's recommendations were adopted unanimously by the House on 24 July 2002.[3]

1   Report by the Group appointed to consider how the Working Practices of the House can be improved, and to make recommendations, HL Paper 111, 29 April 2002. Back

2   Fifth Report of the Select Committee on Procedure of the House, 10 July 2002. Back

3   House of Lords Hansard Vol.638, No 176, Col.508. Back

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