The Paymaster General (Dawn Primarolo): I shall deal first with the style of the rewrite of section 96 of the Income and Corporation Taxes Act 1988. Hon. Members referred to the scheme that operates for farmers. Schedule 24 is written in the tax law rewrite style because it introduces the new scheme for creative artists, which has been widely welcomed by the Committee and by representative bodies. The rewrite arose out of the need to deal specifically with creative artists. The scheme that it succeeds was not well used, no doubt because of its complexity.
I hear what the hon. Member for West Dorset (Mr. Letwin) says when he asks why we did not rewrite the provisions for farmers, and the tax law rewrite project is examining that. However, we are simply replacing one scheme with another as opposed to an updateit would merely be a rewrite of what is working well for farmers. None the less, I am sure that we would all agree that the tax law rewrite style is vastly superior. I take the point about rewriting the scheme for farmers. We did not do that on this occasion, as will be appreciated by the hon. Members for West Dorset and for Torridge and West Devon (Mr. Burnett)I can get the county, but I always hesitate over whether or not it is west, for which I apologise. We have been focusing on other issues; especially with regard to the difficulties farmers are experiencing with foot and mouth disease. This part of the Bill is not the place to deal with farmers' difficulties. I have listened carefully to the points made by hon. Members about what measures are necessary to assist farmers and I will certainly examine them.
The tapering is quite straightforward. The Chartered Institute of Taxation made a similar pointwithout the tapering a cliff-edge would be created between those entitled to averaging and those who are not. The same tapering rules are in use for farmers and have been used without difficulty, notwithstanding the points that the hon. Gentleman made about other difficulties that farmers are experiencing. Again, the Government are always prepared to examine arguments, but we were not persuaded on this occasion. None the less, I shall bear in mind the points made by the hon. Gentlemen.
On provisional claims, the hon. Gentlemen answered their points themselves, because averaging is a composite claim affecting two years, not just one. Therefore, to adjust liabilities on the second year on expectationbefore the tax year was completedwould bring complications, if not unfair treatment, compared with other methods. The averaging principle, which we all agree is good, is therefore the right one to operate. The provision has been widely welcomed. It is narrow and specific in its application to creative artists, but, none the less, I shall consider again the points made by the hon. Gentlemen. On previous Finance Bill Committees on which I have served, Dr. Clark, you have that seen that I keep my word. When I promise to consider something again, I do so, and the Government would, of course, make the necessary judgments.
Mr. Burnett: I am extremely grateful to the Paymaster General for the points that she has made. I merely want to remind her that expectation of profits and losses is part and parcel of the self-assessment system.
Dawn Primarolo: I take the hon. Gentleman's point. I am trying to take a short cut through a debate on which we do not disagree. As I said, I shall look at some of the points made, but I must consider the balance across the tax system in terms of how other taxpayers are treated. Even though slightly different methods are used in different circumstances, it has the same result for all taxpayers. I acknowledge that the hon. Gentleman has made interesting and fair points, but I think that he will appreciate that they are not part of our current discussion. In good faith, I have taken his points on board.
Mr. Letwin: I am grateful to the Paymaster General for those comments. I know from experience that she means what she says in that regard.
First, I want to put on record a point about the taper. Although I do not regard it as deeply significant, perhaps the Paymaster General will reflect on it. It is perfectly true that the absence of a taper will create a cliff edgethat is evident to anybody. The general principle behind the Government's attitudes to a large number of tax and quasi-benefit tax credit issues is that they would like to avoid cliff edges. The Government, and, indeed, the Chancellor, are keen on relatively slow tapers. However, every taper has two features, and one appears here, alone, which is rather complicated. I do not want to over-stress the point with hyperboleit is not the end of the world, and it is not that complicatedbut it complicates a schedule that is otherwise blissfully simple. In the case of tax credits, the complexity multiplies manifold.
Secondly, by avoiding a cliff edge, tapers cause prolonged but reduced agony. I hope that the Government will reflect on the proposition that it is often better to have simplicity allied to a sudden 100 per cent. marginal rate applying over a tiny patch of terrain than, for example, the prolonged 55 per cent. withdrawal rate in relation to the working families tax credit, which stretches over a large terrain. That is a tiny example of the general phenomenon, and I do not want to claim, as it would be untrue, that artists are facing a massive disincentive in relation to this. However, the complexity is introduced even here. There is a general Inland Revenue or Treasury predisposition to avoid cliff edges. Somewhere in a permanent secretary's training book, it says, ``Avoid cliff edges''.
Dawn Primarolo: Fall off and be hurt.
Mr. Letwin: Yes. The manual should be rewritten to read, ``Seek cliff edges to avoid prolonged and complex tapers.''
Dawn Primarolo: The debate is extremely interesting. It concerns the hon. Gentleman's wider point, which is to ensure that balance, complicity and equity are proportionate. Some taxpayers may be sacrificed by ignoring the cliff edge on the basis that they make up a small number. That is interesting in terms of how a Government would approach the simplification of tax and it tends to cause tension in any debate about tax changes. I fully appreciate that it is the job of the Opposition to raise such points, however small the group that may be disadvantaged and we shall refer to that in later clauses.
I am looking forward to how the Opposition will approach the debate on equity and simplicity. None the less, the hon. Gentleman is not making a huge point. He does not want to go to the stake on the issue, and nor do I. I am grateful for his comments and I shall consider the matter again. He is right to say that we want to avoid cliff edges, when possible, but we must decide the point at which we say that, unfortunately, some people are subject to the best result, but that this is the best that we can come up with. That will vary in different debates, but the hon. Gentleman's general point is fair and I note what he said.
Question put and agreed to.
Schedule 24 agreed to.
Clauses 72 to 75 ordered to stand part of the Bill.
Clause 104 ordered to stand part of the Bill.
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