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AMENDMENT OF THE LAW

I agree because no investment can be risk-free. However, on the cost of investment, the Government tried the stakeholder pension—their only venture into that territory. Perhaps if the Financial Services Authority, the Bank of England, the Government and bankers came together to re-examine the matter, a fundamental rethink might occur of the cost of investing, the risk:reward ratio and the corporate social responsibility provisions to which many of the institutions subscribe, but which has been threatened by sub-prime. I want to comment on a couple of things that the Chancellor did not say. I find it intriguing that the former Chancellor said, when he first came to power, that the taper tax system had to be introduced because it would help capital accumulation in the economy. The current Chancellor has not explained why moving to a flat rate of capital gains tax is now better. I suppose that the only thing that is better is the £700 million in the Treasury’s coffers. However, a little more plain speaking would be nice to explain what has changed in the fundamental operation of capital gains tax. It is disappointing that the Chancellor has not tried to simplify inheritance tax. I suggested in my Budget speech last year that we could have a low single marginal rate of inheritance tax if we did away with the panoply of allowances, many of which are accessible only if one can afford the professional fees for the advice about how to use them. Again, that suggestion was ignored, and we retain an incredibly complicated, old-fashioned tax, which needs modification. I stress to Treasury Ministers, especially the Financial Secretary, who is in her place, that I hope that, as the tax law rewrite project, with which I have been associated since its inception, nears the end of its major change to the clarity of tax law, the Treasury will not shy away from reacting to the enormous amount of work on improving the operation of the tax system. That is different from rewriting the law in a legible and understandable way. If the Treasury is to take with it the support of the accounting profession and others in the financial community to make Britain’s tax laws work properly, the Financial Secretary needs to expand and change the tax law rewrite committee’s remit to consider more carefully modifying and improving the efficiency of the tax system. With respect to the Chancellor, changing the way in which small and medium-sized enterprises access the tax system and report their financial transactions is not the same as making the whole system work better and simplifying it. The word ““simple”” is often used but it is difficult to achieve. However, many lessons have been learned through the rewrite exercise and they need to be examined. Let me consider green taxes. The Select Committee on Environment, Food and Rural Affairs, which I chair, suggested trying to encourage local investment in decentralised energy systems. We suggested to the Chancellor the introduction of a green ISA—a unique instrument for investing in green technology or local, decentralised low-carbon schemes. Sadly, that did not figure in the Chancellor’s speech this year. However, there are some remarkable examples in Germany of small communities with local networks of investors, which have now got combined heat and power schemes, which would be the envy of many communities in this country. Sadly, there was no mention of a buy-in tariff to encourage more decentralised electricity generation or help to deal with emissions from the heat sector. We all talk about electricity and transport, but heat accounts for one third of emissions in this country, yet is the one area where revolution and change are under-encouraged. I hope that the Treasury will look carefully at what I have said about the state and security of our financial institutions. They are so vital to the well-being of so many of the millions whom we represent. If, as a result of reacting to Northern Rock, we could address some of those issues, there might be a different way of expressing the concept of financial stability, for the long-term benefit of the millions whom we represent.