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Finance Bill

My Lords, I was delighted to give way to the noble Lord, Lord Wakeham, the chairman of the sub-committee. If I may say so, he was an excellent chairman. I welcome in advance the maiden speech of the noble Lord, Lord Hamilton. During my nearly 20   years in the other place I do not recall him speaking on a Finance Bill so I particularly look forward to this occasion. I shall speak briefly on only two aspects of the debate. First, I shall have a few words to say on the economy, the Finance Bill itself and the sub-committee’s report. As regards the economy, the central issue, as the noble Baroness, Lady Noakes, again dwelt upon, is the golden rule and its potential breach. She never takes my advice, I am sorry to say. She constantly gives us those party political views which in your Lordships’ House no one listens to, and, if they do, it makes no difference because they do not have any votes. As regards the potential breach in the golden rule, on this occasion all the forecasts—if the cycle had not been changed—may well have been right. On the law of averages, it is possible. They were always wrong in the past, as was the noble Baroness, but they could have been right this time. However, even if they were right, what exactly should we be doing? I read in the Times and Financial Times this morning about the delayed review of public spending. They stated—I shall not bother repeating the exact words—that that implied that the Chancellor was taking a firmer grip on public expenditure. He could not take a firmer grip on his control of public expenditure because since 1997 no one else other than the Chancellor has had the slightest grip on public expenditure. No departmental spending Minister had any control over public expenditure. Therefore, I am not at all clear that this will be any firmer a grip that the Chancellor is said to be taking. However, as I say, the noble Baroness, Lady Noakes, again gave us her party political views on these matters. Indeed, on this occasion her party political views were writ even larger than usual, which is difficult for her but she managed it. On the other hand the noble Baroness and the forecasters may be right on this occasion that there would have been a breach in the golden rule. What do the forecasters tell us about what should be done? Of course, they do not tell us anything because the forecasters only forecast and do not give us answers to any problem that might arise. On the other hand to be credible an opposition should give us the answers if there were to be a breach in the cycle, or at least give us their view of what should be done—but that we did not get. I do not have to give my views on what should be done if there is a breach, but I shall. The plain fact is, as has always been said, that the golden rule is a much better method of control than the growth and stability pact that is used by the euro-zone. The golden rule is, indeed, a more flexible approach. While the figures for this year may be down, it does not mean to say that they will be over an economic cycle, whether extended or not. On this occasion there may well be a breach. As the noble Baroness asked, should the Chancellor in those circumstances either increase taxation or cut public expenditure? I do not think that he should do   either of those things. The plain fact is that the flexibility of the golden rule is excellent. Our borrowing as a percentage of GDP is lower than that of most countries in the West. In those circumstances, a small breach on one occasion would be no disaster and would not require either an increase in taxation or a cut in public expenditure. That said, I shall leave the noble Baroness to tell us again about the economy in the future and I shall say a word or two about the subject that we are supposed to be debating; namely, the Finance Bill. I was going to congratulate the noble Lord, Lord   Wakeham, in advance of his speech; he knows that I believe him to be an excellent chairman of the sub-committee, as was my noble friend Lord Peston. Both were truly independent in their consideration of these matters. Select Committees in your Lordships’ House have always done an excellent and independent job and that applies particularly to the Economic Affairs Select Committee and to the sub-committee on the Finance Bill, which the noble Lord, Lord Wakeham, chairs so admirably. Sadly, my right honourable friend the Chancellor—and he is a good friend of mine—takes no notice of what your Lordships’ House says. He is not alone in that. In my experience no Chancellor—a former Chancellor will speak a little later—has ever taken any notice of what this place says. Neither does the House of Commons, because, in my experience over many years, it never looks at the detail of the Finance Bill. The opposition pick out the sexy bits. When I began introducing Finance Bills in 1974, my opposite number was the noble Baroness, Lady Thatcher, who led for the opposition. She never discussed with me any detail of the Finance Bill, either on the Floor or outside, because that was not the way of oppositions—I refer to all oppositions, both Labour and Conservative. They never took a serious look at how a Finance Bill might be amended. I am delighted that that is now being done by the Lords Select Committee. But I also regret that the Chancellor does not recognise that, as he should. In my experience, Chancellors never themselves looked at Finance Bills. My noble friend Lord Healey left it to me and my noble friends and I felt that I did not need to consult him much on such matters; I should imagine that that has applied to most Chancellors of the Exchequer over the years. However, the Chancellor is wrong not to take any sensible view of what your Lordships’ sub-committee on the Finance Bill says, because it is truly independent, unlike the other place—even the Select Committees in the other place. The reports of the Treasury Select Committee invariably conclude with votes on party political lines. Our reports are always unanimous, because we look not at the party political views of the committee but at the sense—or nonsense—of Select Committee amendments. I hope that we do a job that should and would be helpful to a Chancellor of the Exchequer, because complex tax issues do not lend themselves to party political considerations. Complex tax issues deserve serious consideration, such as those that our Select Committee addresses. Indeed, issues such as those to which the noble Lord, Lord Wakeham, has referred have received our consideration and we were truly independent on those matters. He has already quoted paragraph 59. There is another. Just to indicate how independent we were, paragraph 61 stated:"““Given the vast amount of tax at stake and in the light of that history we were persuaded that an exception to the normal approach to backdating was justified. Moreover, it seemed to us that the suggestion that professionals””—" the accountants and tax lawyers—"““might now find it difficult to advise about remuneration packages that included share schemes and share option plans for the generality of employees was an exaggeration.””" Of course it was an exaggeration. It was not going to catch innocent taxpayers. Indeed, there is a conflict of interest here. The accountants and tax lawyers who said that they were in agreement with cutting out tax avoidance schemes—perhaps not those who gave evidence to us but others—were proposing precisely those tax schemes and we all know that. That is why I say that these do not lend themselves to party-political considerations. On the other hand, I am worried that the current Chancellor, my good friend the right honourable Gordon Brown MP, might take these matters more seriously. I fear that neither my noble friend the Minister who will reply to the debate nor his officials will be able to convince the Chancellor. Therefore, I suggest to the noble Lord, Lord Wakeham, that he drops a note to the Chancellor who, I must tell him, is a very nice fellow. I also suggest that he and a few members of the sub-committee should have a meeting with the Chancellor to discuss these matters because they are in his interest and that of the public. That is what I believe we should do.