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Finance Bill

There are parts of the public sector that are unproductive. I was not referring to front-line services. However, there are a number of activities that do not add value to our nation. I do not think that the noble Lord would disagree with that. As I was saying, the Chancellor of the Exchequer has already admitted that the jobs tax will lead to rising unemployment. He did not deny the estimate made by the Centre for Economic and Business Research that it will lead to 57,000 people losing their jobs. Of course, it is a tax on people earning more than £20,000 per year, which is significantly below average earnings. When the Minister introduced the Bill, he said that the Government had made all the right calls. However, he ignored the fact that before the recession, the Chancellor made some very wrong calls. He peddled the false notion of having abolished boom and bust. The fact is that he borrowed too much, he spent too much, and he spent it inefficiently and unwisely. If he had not done those things, we would have entered the recession in a much stronger position and would have been much less badly affected. The Chancellor failed to fix the roof while the sun was shining and now we are all suffering from the effects of the storm that came with the bust. I turn now to the Bill. The Government wisely decided not to proceed with the immediate increase in the duty on cider, with the telephone tax and with the furnished lettings tax changes. We are glad that they agreed to remove these impositions, as well as some other technical provisions that needed more scrutiny. Nevertheless, the Bill creates another set of complex tax rules. The Minister said that this was a shorter Finance Bill than normal, and that is true; but it still has 70 clauses and 20 schedules. Many provisions are very complex. The Institute of Chartered Accountants and the Chartered Institute of Taxation have warned against the dangers of legislating in haste, and it is clear that a large amount of material in the Finance Bill will become law without any effective scrutiny, because a couple of hours in another place yesterday does not constitute effective scrutiny. My party's policy is that tax changes would be introduced only at the Pre-Budget Report stage, so that effective scrutiny would be held on a pre-legislative basis before the Finance Bill was published around the time of the Budget. In that way, we would never again be in this unsatisfactory position if an election were held at the time of the year when the Budget and Finance Bill were published. The Finance Bill has some lost opportunities. I will take just a couple of examples. In Clause 2, corporation tax rates are kept where they are, and the Government have missed an opportunity to recoup some of the ground that we have lost since 1997. In 1997 we were below the OECD average for corporation tax, and now we are above. Our tax competitiveness is significantly reduced, as we have seen in many of the league tables. Another example of where the Government have missed an opportunity is with air passenger duty in Clause 14, where the pre-announced increased rates are put into effect. They have missed the opportunity to shift to a plane duty, which could raise the same amount of revenue but in a way which was much more consistent with environmental commitments. Most of all, the Bill misses an opportunity for simplification. It has, as usual, a lot of complex anti-avoidance provisions. I refer briefly to the changes to pension taxation contained in Schedule 2. That schedule has 12 pages of the most complex rules for modifying relief on pension contributions. They were introduced largely to stop people avoiding the 50 per cent tax rate, so they are linked to avoidance. Perhaps I may read out one formula from page 63. We are told that something called the "appropriate increase" is: ""(ACR x CARARF) – (UOR x OARARF)"." I submit that this is not understandable by normal people, and it is quite complicated for tax advisers. It is clear that the Government have still not grasped the notion that we need our tax system to be significantly simplified, and not only in the area of pensions, which is hugely complicated and will doubtless be changed again because these formulae will be found not to work in some respects. Our own policies are designed to achieve tax simplification and we are committed to creating an office of tax simplification, which will start the long process of taking our tax law and turning it into something much simpler. By that, I do not mean rewriting it—that is a big project which has been done very effectively—but making the system much easier to use by those who are subject to it and also taking out a lot of the inefficiency that goes with working around such complex tax legislation. The Budget was not the Government’s finest hour and this Finance Bill is not the Government’s finest Finance Bill. Businesses know that after 13 years of economic management from this Government we have slipped down all the economic league tables. In the world economic performance league tables, we are now in the 80s for tax and regulation. These are not things to be proud of. People know that they have been taxed, both directly and by stealth. I shall not hold up our debate on this Finance Bill any longer. The verdict on the Government’s economic and fiscal management is due on 6 May and we know what the answer should be.