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Finance Bill

My hon. Friend is exactly right: it is a distraction Budget. What his constituents do not know, however, because understandably they have not sat and read the detail of the Budget Red Book, is that this is only the start. They will be hit by a further £45 billion a year of taxes as the Chancellor struggles to close the gap that his disastrous policies and those of his predecessor have opened up. Even if we accept the highly optimistic assumptions about the pattern of tax receipts in the recovery, the Chancellor still acknowledges that it will be 2017 before the current Budget is back in balance, and 2032 before our debt is back under control. One clear victim of this Budget is the credibility of Treasury forecasting. The whole process is undermined if nobody, but nobody—except the Chancellor—believes the forecasts for growth and for tax revenues. The case for an independent office of budget responsibility was made by the Chancellor's Budget speech more effectively than any of its proponents could have hoped. No Chancellor in future should be able to build his Budget on foundations of sand—to treat the Budget process as a political manoeuvre rather than an exercise in fiscal responsibility. We will attempt to insert into this Finance Bill provisions to ensure that before next year's Budget, a rigorous and independent approach to forecasting is established, ending the farce that we witnessed on Budget day, as the Budget growth projections unravelled before our very eyes, rendering the entire Budget Red Book almost immediately redundant. I have some specific issues to raise on several clauses, but first I should like to set out three key themes linking our main criticism of the Bill: first, its failure to rise to the challenge of building the competitiveness of the UK as a place to do business in the recovery; secondly, its failure to support savers at a time when rebuilding the savings culture will be critical to Britain's future; and thirdly, its abject failure to balance the rights and responsibilities of taxpayers and the Revenue as it extends and expands Revenue powers. I shall elaborate on each. Britain is in the depths of the worst recession since the second world war. Unemployment is rising at the fastest rate since records began and the public finances are set next year for a bigger deficit than that of any other G20 country. But even in these circumstances, this should have been a Finance Bill for the recovery. We do not know when it will come, but we need to be sending powerful signals to business about the tax landscape in the UK in the future, to ensure the investment and the jobs that Britain will need when Labour's recession is over. Rebuilding Britain's competitiveness should be the key focus of this Bill—and, of course, competitiveness requires a regime that ensures fiscal discipline in the future as the bedrock on which a strong economy can be built. It also means addressing the long-standing challenges that Britain faces in productivity, infrastructure and skills. It means modernising Britain's public services and its welfare system, but it also means ensuring a competitive tax system. That is not just about the quantity of tax, important as that is. Business understands that the disastrous fiscal position that the country faces means that there is no immediate prospect of moderating the overall tax burden, but powerful, revenue-neutral signals can still be sent, even at a time of intense fiscal pressure. The nature of the tax code, the certainty of its impact, the manner of its making and the clarity of its future direction all contribute to tax competitiveness. In a global marketplace, Britain will never be able to compete on tax burden with emerging economies with limited social infrastructure, but we can and must compensate for our higher taxes by offering a more stable and predictable regime with greater transparency and more certainty—in short, the benefits a business might expect from locating in a higher-tax, mature jurisdiction. What we cannot do—it is simply not an option—is expect to be able to levy developed-country tax levels with the uncertainty, arbitrariness and unpredictability more usually associated with the tax regimes in developing economies. Ten years ago, the Prime Minister set out his three principles for the UK's tax system: simplicity, fairness and competitiveness—a long-term, strategic approach to business taxation. However, what we have had in the last few Budgets is the very opposite: a shambles of initiatives, often half-baked, often unworkable and often reversed during the legislative process or thereafter, some of them—the 2007 pre-Budget report springs to mind—literally put together on the back of a fag packet in response to immediate political pressures. We have seen the abolition of the 10p tax rate, the fiasco of the non-dom tax charge and the disaster of the capital gains tax taper relief abolition—and the pattern continues. If we cannot reduce the tax burden on business, we have to redouble our efforts to reduce the compliance burden to maintain Britain's global competitiveness. Sadly, the Bill is a missed opportunity, at a crucial moment in our economic history, to send those powerful positive signals. It will further erode Britain's standing as a stable, predictable and business-friendly jurisdiction in which to operate. I now turn to the second theme, pensions and savings. The economy that will rise from the ashes of this recession will differ in shape and structure from the pre-August 2007 economy. It will be built on equity, not debt. It will depend on our savings ratio, not our borrowing capacity. The Prime Minister appeared to understand that important shift. As recently as last month, he was hinting in radio interviews that he would do something for savers in the Budget. What we got was a limited, complex change to the individual savings account regime that the industry has condemned as burdensome and confusing, and some very ambiguous signals on pensions that will further undermine long-term saving; I will return to those in a moment, when I address some specific provisions of the Bill. There was nothing in the Budget to match the Leader of the Opposition's bold proposal for this year's Budget. He proposed the abolition of income tax on savings income for basic-rate taxpayers, and an immediate increase in the pensioner tax-free allowance of £2,000 a year—all funded by advancing to the current year the introduction of the efficiency savings that, in the pre-Budget report, the Chief Secretary to the Treasury announced that she had identified, although apparently she could not bring herself to deliver them until after a general election. Let me be clear: it is not a fiscal tightening to take taxpayers' money back out of the pocket of Government, and redistribute it to hard-pressed taxpayers with a high propensity to spend—people, in particular pensioners, whose savings income has been very much squeezed, in some cases leaving them almost at the point of destitution. On that second count, the Bill fails miserably to rise to the challenge of shaping and building the new economy based on savings and equity, not mountains of excessive debt and easy credit. Thirdly, the Finance Bill advances still further the Government's agenda of enhanced powers and increased discretion for Her Majesty's Revenue and Customs. With additional powers should come additional responsibilities, and if Britain's business tax regime is to remain competitive and internationally attractive, the extra powers have to come with proper safeguards, and have to be matched by obligations on HMRC. The concept of a taxpayers' charter, setting out the rights and obligations of taxpayers and the Revenue, appears to be dead. In clause 91, it becomes an HMRC charter—nothing much more than a mission statement prepared and delivered by HMRC, setting out its aspirations. That is a far cry from the statement of rights and responsibilities for both taxpayers and Revenue authorities to which many thought that the Government were committed. Let me make it clear to the Chief Secretary to the Treasury that we will support the creation of powers that HMRC genuinely needs to prevent unlawful tax evasion and to counter complex tax avoidance, but the burden on ordinary, law-abiding taxpayers has increased exponentially over the past decade, as Britain's tax code has doubled in length to overtake India's as the longest in the world. We need a focus on the simplification that the Prime Minister promised, and pressure on the Revenue to deal fairly with taxpayers. For example, we could match the new restrictions on time for reclaiming overpaid tax with an obligation on HMRC to make prompt repayments. I would like to address a number of clauses in the Bill, making specific observations and putting questions to the Financial Secretary to the Treasury. Clauses 4 and 6, to which the Chief Secretary has referred, introduce the withdrawal of personal allowances on incomes above £100,000, and the multiple additional tax rates that will be required to give effect to the 50p tax proposal, which is to be introduced next year. We on the Conservative Benches—and, in fact, some on the Labour Benches—know the Prime Minister's motive in seeking to create another of his beloved dividing lines. It is a political gesture; he is throwing some red meat to the heartland vote as he abandons any pretence of reaching out to aspirational Britain ahead of the next general election. The right hon. Member for North Tyneside (Mr. Byers) was correct to say that the measure""has more to do with political positioning and tactical manoeuvring than a principled, strategic approach to taxation and the raising of revenue."—[Official Report, 27 April 2009; Vol. 491, c. 615.]"