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"Huge swathes of complicated and often poorly drafted legislation have been passed into law 'at a stroke' with little or no debate and certainly no time for proper consideration and consultation. It calls into question whether parliament is fulfilling its constitutional duty to scrutinise legislation."
Mr. Cash: I hope that my hon. Friend will take what I am about to say in good part. As far as I am aware, our party is acquiescing in much of this, so we are perhaps to some extent contributing to the fact that this legislation, which will be either ill considered or unconsidered, is to be allowed through, in so far as it has not been excluded by amendments. I am sure that the Minister will introduce those in Committee. There is a bit of a problem there for all of us, is there not?
Mr. Hoban: My hon. Friend makes a helpful intervention, as he so often does on these occasions. I should say to him that it is the obligation of parties on both sides of the House, and of whoever forms the next Government, to listen to the concerns raised about the measures that we have passed, to understand where those measures are defective and to think about how they can be remedied in the future. Even when a Finance Bill receives full scrutiny, so often the Government-this is particularly true of the present Government-come back for a second bite of the cherry the following year just to tidy up the detail of the legislation in areas where perhaps proper, full consultation has not taken place. I wish to highlight some of the areas where adequate consultation has not taken place, and there are holes that the Government will need to think about carefully.
This Finance Bill contains much that is controversial, much that could be improved by scrutiny and much that could be amended, but Parliament has been denied that opportunity because the Government opted for the latest possible date for a Budget, thus precluding the opportunity to have a longer debate about the Bill. The Bill tells the tale of things left out, of things that should have been included in it, and of items that need further scrutiny and consultation.
Let us consider what is not in the Bill. The first things not included are the tax hikes planned by this Government for after polling day. The Prime Minister said on the steps of No. 10 Downing street yesterday:
"I have fought so hard for families on middle and modest incomes."
But they are the people who will have to pick up the bill for the Government's economic record after the election. My hon. Friend the Member for Stone (Mr. Cash) intervened on the Financial Secretary to ask why national insurance increases planned for April 2011 are not in
this Bill. Obviously, the Financial Secretary said that that Bill would come into effect in the next Parliament, but it is a pity that the Government did not have the courage of their convictions and did not seek to table that measure now for debate, because we could then have made the argument here in this House about the need to roll back those increases to protect those on the middle and modest incomes to whom the Prime Minister referred yesterday.
Let us also not forget that this is about protecting not just those people's incomes but their employment. My hon. Friend the Member for Sevenoaks (Mr. Fallon) caught out the Chancellor on that last week in the Treasury Committee, when he probed the Chancellor as to whether he had taken into account the impact on unemployment. The Centre for Economics and Business Research has said that in addition to raising the tax burden on families, 57,000 people would lose their jobs as a consequence of the Government's planned national insurance increase. Is this what the Chancellor meant when he said:
"We think the impact is manageable, it will be limited"?
"The Conservatives' plan to reduce next year's increase in employers' NICs is welcome, and will help large and small businesses alike."
"NICs are a tax on jobs and increasing them is a bad idea when we want to promote job creation. We continue to call for the proposed increase to be cancelled entirely, as and when action on the public finances makes this possible."
I wonder whether the Financial Secretary believes that the head of the CBI has been deceived, and whether he adopts the same line as the Prime Minister and the Secretary of State for Business, Innovation and Skills about the opposition that nearly 60 business leaders have expressed to the Government's tax on jobs. Other things have been left out, too. There is no reference in the Bill or in the Chancellor's Budget statement to the freeze on personal allowances-another stealthy tax grab by this Government.
Of course, there are some things in the Bill of which we do approve. The two-year first-time buyer's stamp duty holiday is welcome, but if the Government had wanted to copy our policy properly they would not have stuck a two-year time limit on it. The reduction in bingo duty was something for which we argued in the Budget last year, and we expect to hear "David's den-No. 10" to be called in bingo houses across the country in celebration of the Government's climbdown.
Despite those points, the Bill is not in as poor shape as it might have been. Three tax rises on families and businesses have been scrapped and the measure attacking small and new businesses has been dropped-all as a consequence of Conservative opposition. The Government have been forced into a U-turn on cider by us, and the swingeing increase in the duty on normal strength cider will be reversed on 30 June so cider will be treated like
any other drink; that will mean an 8 per cent. cut in duty rates. Again, as the Financial Secretary made very clear in the opening stages of his speech, the Government have pledged to reverse that if they are returned on 6 May. Cider drinkers have a choice: do they back the Government's across-the-board hike in the tax on a pint of cider, or do they back our option of increasing the tax on super-strength ciders, rewarding responsible drinkers and clamping down on problem drinkers?
We know how important furnished holiday cottages and flats are to the tourist trade, to rural areas and to seaside towns. That is why we forced the Government to drop their plans to increase taxes. According to the Tourism Alliance, 120,000 businesses would have been affected and 4,500 jobs lost at a cost to the UK economy of £200 million. We would consult on a regime to allow holiday cottages to be treated as a trade on a fiscally neutral basis. So people have another choice: another tax increase on business under Labour, or reforms to help the tourist trade under the Conservatives.
The telephone tax has also been dropped. A £7 per year tax on families and businesses has been binned. That was a tax that was attacked by the industry as regressive and disruptive, a tax which ordinary families would have to pay. Virgin Media said the duty
"risks distorting the market by penalising fixed line broadband and potentially disrupting existing next generation broadband investment plans".
"The broadband tax is an unfair, regressive, and wasteful way of funding superfast broadband which would deliver less benefit than it will cost, slow superfast broadband roll-out and drive around 200,000 homes off broadband."
One might think that someone from TalkTalk would say that-but the figure for the number of houses that would come off broadband was the figure given in the Government's regulatory impact assessment. Far from unlocking investment, the telephone tax would clearly hamper it, and we got it dropped. That is another choice that people will have to make: a regressive tax adding to the burdens placed by this Government on families, or no tax on families and businesses and reforms to roll out broadband under a Conservative Government.
Lastly, we have also removed the proposals for security of payment of pay-as-you-earn. In the Financial Secretary's letter to the Chartered Institute of Taxation, he said that where the Government have not consulted they would explain why not. Pending that explanation on these provisions, we have taken matters into our hands and forced the Government to drop them. The problem was that a criminal offence was being created in connection with a requirement that had not been properly explained or scrutinised. The CIOT put it best when it said:
"If enacted, there are concerns that the provisions could be applied to many small businesses facing cash flow problems in the current financial recession, leading to a number being put out of business at a time when the economy is starting to pick up."
The Bill gives the Treasury power to make regulations to require businesses to offer security for PAYE bills, but there are no safeguards in the Bill and nothing to protect businesses from the heavy hand of HMRC. It seems wholly at odds with the Government's much-trumpeted time to pay scheme to introduce such a measure at this time.
The Government's message stresses the importance of locking in the recovery, yet the Budget and the Finance Bill contain measures that will hurt small businesses and families, and we know that there are still more in the pipeline. There is concern that some of the measures that remain in the Bill have not been properly thought through and consulted on. We might not have much time in the Committee of the whole House to go through the Bill clause by clause, but I want to touch on a few of those measures now. I have chosen as examples measures that, although they are probably well-intentioned, might need to be revisited because of the lack of proper parliamentary scrutiny.
There is still widespread concern about the provisions in clause 24 and the 12 pages of schedule 3 about the taxation of pension contributions by higher-rate income tax payers. In addition to the pages in the Bill, there are 74 pages of detailed technical notes. We have no argument with the Government's seeking to protect revenues by restricting tax relief for higher earners, but there are widespread concerns about the cost and complexity of the provisions.
As I said in an intervention on the Financial Secretary, within two months the one-off costs of implementation have tripled. I hope that when the Exchequer Secretary winds up she will give a fuller explanation of why those costs have tripled over such a short period. Given the number of areas that the Financial Secretary has outlined in which greater clarification is needed about how the rules will work in practice, I wonder whether those costs will continue to rise. We need to make sure that the Government's chosen measure of restricting the value of tax relief is the most straightforward and least expensive option available. The Chartered Institute of Taxation has said that the measures were drafted in such a way as to put a heavy and expensive administrative burden on employers, employees and pensions provisions.
"The proposals are highly complex and will be difficult for those affected to understand, often creating unexpected and very high tax liabilities for those at whom the proposals were not aimed."
We will not oppose the measures at this stage because of the principle of protecting revenue, but we ought at this time to look very carefully at how they could be improved to make them easier for people to understand, easier to administer and cheaper to collect.
In clause 31, on charities and community sports clubs, a new definition of "fit and proper persons", with regard to those working with charities and sports clubs, is offered without proper debate or scrutiny. That would be monitored by HMRC rather than the Charity Commission, which is a major change.
On clause 35, the CIOT has again expressed concern about some of the technical details arising from the proposed changes to the remittance arrangements and the prevention of certain capital gains tax rules from producing allowable capital losses on disposals of amounts in foreign currency bank accounts.
Clause 36, on which the Financial Secretary and I had an exchange during his remarks, has been criticised by the low incomes tax reform group about the impact that it could have on unrepresented low-income taxpayers. Let me quote from its representations:
"Many unrepresented taxpayers who will be caught by these new provisions actually come from overseas territories which are likely to be placed in category 2 or 3. Will a Gurkha be affected because we do not have a double taxation agreement with Nepal? Will a nurse coming from a West Indian island without the 'correct' HMRC designation be affected disproportionately? Is every mistake in relation to a source of income or gains in their home country to be penalised at one-and-a-half times or double the normal rate, simply because of where they come from?"
The Financial Secretary will no doubt be aware of the experiences of the Minister for Borders and Immigration and the Under-Secretary of State for Defence, the hon. Member for North Durham (Mr. Jones), who has responsibility for veterans. They have both come off worse after locking horns with the Gurkhas. Does he want to be the Gurkhas' third scalp? We need to think carefully about how those on low incomes are going to be able to comply with the provisions, while ensuring that proportionate action is taken with regard to others.
Clause 57, which the Minister mentioned, contains controversial provisions on information that promoters and users of certain tax avoidance schemes have to disclose to HMRC, and it imposes new penalties for non-compliance. There are several options to achieve the same goal. The ICAEW has said:
"The existing £5,000 penalty will be replaced, it is proposed, with a daily £600 penalty. This £600 daily penalty was one of the two options set out in the consultation document but we preferred the option which provided for an increase in the penalty to the extent that there has been non-compliant behaviour by the promoter or user. We remain strongly of that view that this would be a better option."
Does not clause 66 say something about our tax system, in that it appears that we will have to have a special Champion's League final tax exemption to enable us to hold next year's final? Will that open the floodgate for other changes? Will the Royal and Ancient push for competitors in the Open to be exempt if they are not resident in the UK? Will Lady Gaga refuse to tour the UK unless the next Finance Act is amended?
The Government need to provide a much better rational for why these exemptions are in the Bill than they have done so far. Perhaps the Exchequer Secretary will be able to refer to that in her winding-up speech.
There is a long shopping list of concerns about this Bill that are usually rehearsed during the Committee stage or addressed through ministerial statements or amendments. Those opportunities are not available to us today, as a result of this accelerated process.
This Finance Bill is a testament to the dying days of a Labour Government. It is evidence of all that we have known about this Government. The best ideas are pinched from us, and it is a rag-bag of measures with no narrative, from a Government who have run out of steam. The fact that it is being rammed through in a matter of hours shows a brazen disregard for Parliament. In this area, as in so many, the problems of today are being left for tomorrow's Government to resolve.
Matthew Taylor (Truro and St. Austell) (LD):
It seems rather extraordinary for the hon. Member for Fareham (Mr. Hoban) to criticise the Government for
their brazen disregard of Parliament in short-circuiting debate on the Bill, when it is of course the two main parties that decide the timetable and agree which measures will remain in the Bills discussed during this wash-up period, after the general election has been called. People will wonder how far they can trust what they hear in the election, so comments of that nature are not a great start.
The reality of how business is conducted and timetabled here means that the Conservative and Labour parties have every opportunity to decide such matters. Other parties do not get the same privilege, so it is a mistake to make comments that so mislead people.
Matthew Taylor: We played a fundamental role in respect of the cider duty, in that we campaigned against it. I imagine that that is what lies behind the Conservative party taking the position that it has taken. It has taken the credit for the changes to the cider duty when they were announced. That is another example of a quick U-turn by Conservative Front Benchers.
I want to begin my remarks by concentrating on the big picture that underpins the Finance Bill, rather than on the detail of individual clauses. Massive choices have to be made about how we go forward, in the light of the credit crunch and its impact on Government budgets. It has also impacted on the real world of people's lives, jobs and housing, and on their ability to afford homes and to provide for their families. Risks remain of a further downturn in the economy and a double-dip recession, and there are questions about the economy's real value and worth.
How much of what happened in the last decade or so was real, and how much was unreal? We must never forget that we face the deficits that we face mainly because what was assumed to be real economic growth has been recast, at a stroke of a Treasury pen, as not growth at all, and therefore not real income.
Mr. Cash: I do not know what the position of the hon. Gentleman's party is on the actual debt, but to provide for the shortfall and to deal realistically with the reduction of the deficit, does he agree that the bottom line-as seen by bond markets, credit risk agencies and so on-is the net debt, which is at least three times the amount of debt disclosed by the Government in the pre-Budget statement?
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