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Mr. Forth: Further to that point of order, Madam Deputy Speaker. Can you confirm, or at least reflect on, the Government's tendency to assume that putting information on to something called a website, or something called the internet, is an acceptable substitute for the provision of information directly to MPs in the House of Commons for the purposes of a House of Commons debate?
I hope you will be able to confirm, Madam Deputy Speaker, that even in this day and age we as MPs can still expect the Government to provide information in written form when it is necessary for a debate in the House of Commons. Will you confirm that until the day comes when I am forced to use the internet or a website--neither has happened yet--or when we have those ghastly appurtenances in the Chamber, we can require information in written form when necessary?
I said earlier that what is in the Vote Office is not the responsibility of the Chair. The Minister has offered Members an explanation, and will have heard the further comments that have been made. I think we should now return to the Budget debate.
Madam Deputy Speaker: Order. The hon. Gentleman is continuing to discuss an issue raised in earlier points of order. Members have heard the comments that have been made and the Minister's reply, and I hope that due note will be taken.
Mr. Bottomley: The point is, does the Treasury, or do Treasury officials, have any copies of these press notices in the House at present? If they do not, it is disrespectful to Parliament; if they do, we want them as well.
Mr. Jonathan Sayeed (Mid-Bedfordshire): I greatly enjoyed the wander through the history of past Budgets that was the speech of the hon. Member for Stafford (Mr. Kidney). I wish that it had been a little swifter, but it was very enjoyable.
I want to take up two points made by the hon. Gentleman. Halfway through his remarks--after his Budget history--he made a statement with which I must take issue: he suggested that it was as though the Chancellor had invented a strong economy. I put it to the hon. Gentleman--in fact, I am certain of this--that we are talking about a Chancellor who has taxed a strong economy. He did not invent it. He is one of the fortunate Chancellors who managed to inherit a strong economy from a previous Administration.
Towards the end of his speech, the hon. Gentleman spoke of a war on poverty. I agree that a war on poverty is important--it is important to deal with poverty abroad and at home--but let me make a point to the hon. Gentleman that I trust he will make to his colleagues. It is likely that, at the end of the current Parliament, the amount of foreign aid that we provide from this country as a percentage of gross domestic product per person will be less today than it was under the last Conservative Government.
My other point is this. We can say all the nice things about war on poverty at home, but if we have--as I intend to demonstrate that we do have--a thoroughly inefficient tax and benefits regime, we cannot send help to where it is really needed.
One of the benefits of being in opposition--and there are very few--is that it provides an opportunity for radical thinking about policy. In no area is that more necessary than in the area of taxation. The intrusiveness, the complexity and the counter-productive nature of the current tax regime, and the failure of many tax proposals to do what they are designed to do, should have persuaded
The evidence is clear. Tax legislation, even prior to this Budget, occupied more than 6,000 pages. In four years, the number of basic tax rates has risen from 15 to 38. Tolley's "Standard Tax Manual", the bible of tax accountants, has grown by more than 30 per cent. in the last three years. More tellingly, despite computerisation and companies' now being unpaid tax collectors, it costs £6 billion a year to run the Inland Revenue and the Benefits Agency. In 1950-51, when we did not have computers and companies were not unpaid tax collectors, it cost less than £1 billion in today's money to run the Inland Revenue and the equivalent of the Benefits Agency.
Things continue to get worse. Last year's Finance Act was the longest ever. Even before this Budget, a bewildering array of different rates, credits, tapers, allowances, rebates, reliefs, means tests and adjustments led us to a point at which even those with a fair degree of financial knowledge have not a clue about the true extent of their tax liabilities. An estimated 1 million people failed to return their self-assessment forms by the 31 January deadline. Because of the complexity and the weight of bureaucracy, there is clear evidence that those who are most in need are not receiving the help that they urgently require. Here I return to the point I made previously to the hon. Member for Stafford.
Government figures show that, although 750,000 pensioners inquired about their minimum income guarantee entitlement, only 62,000 entitled non-recipients made a successful claim. Additionally, only 2.9 million children's tax credit forms had been returned by February 2001. Consequently, 2.1 million eligible families have not applied for the tax credit. Moreover, although Ministers have repeatedly claimed that 1.5 million families would receive the working families tax credit, Department of Social Security figures show that, currently, it is going to only 1.1 million.
That situation is not right: it is the most needy who are being hurt. Yet it is a direct and unavoidable consequence of a labyrinthine tax system. It was wrong that many amendments to last year's Finance Bill became law without time for scrutiny. It is of no benefit to the nation's long-term prosperity that the cost to business of red tape and taxes introduced since May 1997 is £32.3 billion. Nor is it in anyone's interest to stifle the growth of small and micro-businesses. Yet figures from the Institute of Chartered Accountants show that, for micro-businesses, the average cost per business of implementing new legislation increased from £1,700 in 1999 to £3,600, in 2000. For small businesses, the average cost per business increased from £4,700, in 1999, to more than £8,000, in 2000.
I therefore hope that, whatever our political perspectives, we can all agree that the tax system that we have is not the tax system that we want or need, and that no amount of tinkering will remedy it. Consequently, I am drawn to the conclusion that radical reform of the tax and benefit system is necessary. However, before we can undertake such reform, we shall have to define our objectives.
More contentiously, I believe that wealth and job creators should make their expansion or diversification plans solely on the basis of business factors. Their decisions should not be skewed by tax considerations. I would hope that we can all agree that our tax system should attract inward investment. One thing that we know about large international companies is that, increasingly, they are basing themselves--and paying the majority of their taxes--in the most tax and regulation-friendly environment. Therefore, our tax regime should encourage multinational companies and individuals with skills that are easily portable to base themselves here.
The consequence of the IR35 legislation was that thousands of our brightest information technology entrepreneurs moved to countries where their efforts are better rewarded. Last year's row about so-called mixer taxes showed just how quickly multinationals can rework their investment strategy.
The final objective of our tax system should be to make tax avoidance unnecessary and tax evasion easier to detect and not worth the risk. The more complex and burdensome the tax regime, the more people will avoid or evade tax. Each year, from the homeowner who pays a workman in cash to large-scale international smuggling, billions of pounds worth of potential revenue is lost.
Today, my hon. Friend the Member for East Londonderry (Mr. Ross) rightly raised the issue of tobacco smuggling. The Treasury itself estimates that, between 1997 and 1999, it lost £5 billion of revenue because of smuggled tobacco products. The Treasury's forecast total, just for 2000, is £4 billion. The size of the black economy has been estimated at between 7 and 10 per cent. of recorded GDP. In money terms, that is between £66.5 billion and £95 billion. It represents an annual loss to the Treasury of between £25 billion and £35.5 billion.
So much for the deficiencies of what we have and the principles that I believe should define what we need. The question that follows is whether we can construct a system of taxation and benefits that fulfils those objectives. I believe that we not only can but must build such a system. I suggest that a flat-rate tax on income, sales and businesses is one way of constructing that system.
On personal taxation, I would argue for the abolition of all income tax allowances and the imposition of a single tax rate on all forms of income. I believe that we should aim for a flat rate of tax of 10p. All other taxes on income and savings, including inheritance tax and capital gains tax, should be abolished.
I asked the Library to compute the revenue effects of moving to such a system. Imposition of a flat 10p tax rate on all income would produce a revenue gain for the Treasury of approximately £9.6 billion per annum, which could be used to reduce national insurance contributions.
For indirect taxes, we should restructure the current VAT system to charge one universal rate. Again, the Library estimates that a flat 10 per cent. rate on all goods and services would be revenue neutral. However, the behavioural changes that would flow from a flat-rate tax would mean that the figure could be substantially lower--or, as I would prefer, that the extra revenue could be used to reduce excise duties.
The third and final tranche of these tax-simplification proposals is for companies. We should abolish all capital allowances and different rates of corporation tax and reliefs and establish a single, flat rate of corporation tax, which again should be set at 10 per cent. Unlike the two earlier proposals, this would lead to an initial loss of revenue of around £6 billion, but I believe that the economic fillip that would follow from such a simplification--and from the reduction in the overall tax burden--would mean that we could set a 10 per cent. rate with no net loss to long-term Treasury revenues.
However, it is clear that these figures have been calculated on the basis of a static snapshot of current revenues from current economic behaviour. I am convinced that if we simplified the tax system we would increase the revenues available to Government and thus be able to lower the rates still further.
Reducing the tax and benefit system administration costs by £5 billion, and cutting the black economy by £35 billion, would produce £40 billion. This additional money could reduce significantly, without impact on spending plans, the projected tax receipts for the current year of £150 billion from income tax and corporation tax and the £100 billion from VAT and other Customs and Excise duties.
The gains, however, would not stop there. The fact that businesses would not be wasting so much of their time, strategy and resources on tax concerns would produce a boost to our economy and attract inward investment. That, in turn, would generate extra tax revenues. Moreover, a reduction in Customs and Excise duties would add another revenue gain when the incentive for legally or illegally buying alcohol, tobacco and even fuel products abroad was reduced.