Standing Committee B
Tuesday 4 May 1999
(Morning)
[Mr. John Butterfill in the Chair]
(Except clauses 2, 28 and 99)
10.30 am
The Paymaster General (Dawn Primarolo): I beg to move,
That during proceedings on the Finance Bill, the Committee do meet on Tuesdays at half-past Ten o'clock and at half-past Four o'clock and on Thursdays at Nine o'clock and at half-past Four o'clock except on Thursday 13 May when the Committee shall meet at half-past Two o'clock only and on Thursday 6 May and Thursday 10 June when the Committee shall not meet.
I am delighted to see you in the Chair, Mr. Butterfill, and I welcome you to the Committee. As an experienced Chairman and an experienced member of Standing Com mittees on previous Finance Bills, you will ensure that our proceedings are thorough, courteous and to the point, and your skill and diplomacy will, doubtless guide our debates. I also welcome the fact that your co-chairman is Mr. Cook, who has much parliamentary and Committee experience. I am sure that he, too, will ensure that Com mittee members stay in order.
I welcome the opportunity to debate the Bill with the right hon. member for Wells (Mr. Heathcoat-Amory) and his team. The Opposition Members are roughly the same cast who entertained us during our consideration of last year's Finance Bill, with the addition of the right hon. Members for Charnwood (Mr. Dorrell) and for Fylde (Mr. Jack), both of whom served as Financial Secretary to the Treasury in the previous Government. They will doubtless bring their expertise to bear on our considerations, and we shall bring our experience of their deeds to the attention of the Committee.
As always, I look forward to debating with the hon. Member for Kingston and Surbiton (Mr. Davey), and his team. The Liberal Democrats bring their own distinctive views to our proceedings--sometimes they support the Government, and sometimes they do not.
I welcome my hon. Friends to what I know will be a thrilling and enjoyable experience. I am ably supported today by my hon. Friends the Financial Secretary to the Treasury and the Economic Secretary to the Treasury. Alas, my right hon. Friend the Chief Secretary to the Treasury was unable to attend this morning's sitting because of a Cabinet committee meeting. I understand that, out of courtesy, he informed the right hon. Member for Wells that he would be absent.
I hope that we shall proceed with, a civilised and well-ordered frame of mind and that, although our exchanges will doubtless become a little heated, the issues will be properly examined. We shall do our best to ensure that Opposition Members appreciate the Bill's finer qualities.
Mr. David Heathcoat-Amory (Wells): I echo many of the Paymaster General's remarks, in particular her welcome to you, Mr. Butterfill, and to your co-Chairman, Mr. Cook.
We look forward to a constructive consideration of the Bill, which is, as always, highly complex. Although we dealt with some of the issues on the Floor of the House, many of its nooks and crannies remain unexplored. Our experience of recent Finance Bills shows that the detailed clauses require close scrutiny because they often contain unannounced tax rises. For that reason, we have assembled an unusually strong team on the Conservative side of the Committee, including two former Financial Secretaries to the Treasury who know where all the bodies are buried in the Treasury, and who can bring their many years' expertise to the Bill.
I also welcome the Government Members. On pre vious Finance Bills, some of them have been referred to, rather unkindly, as nodding donkeys. I did not use the phrase, but it gained currency when they appeared to accept almost any tax rise or increased complexity in taxation. I suggest to the whole Committee that we have a duty not only as supporters or opponents of the Govern ment, but as parliamentarians, to scrutinise an important Bill on behalf of all our constituents. I hope that we can bring a non-partisan expertise to some of the technical measures, to ensure that the final version of the Bill will be a credit to the House of Commons in its clarity, if in nothing else.
We have already debated parts of the Bill in Com mittee on the Floor of the House, where Conservative Members criticised the fuel duty tax increases. That is a matter to which we can refer obliquely here, because one or two other clauses also refer to it. We are adamant that the Government have made a mistake in ratcheting up fuel duties; the so-called escalator has now gone beyond a level that can be justified on environmental grounds. It is now rendering an important British industry uncom petitive in European terms, and adding to the cost of all manufactured goods. We believe that the Government will eventually admit their mistake, although unfortu nately, it does not appear that we shall succeed in persuading them to reverse that tax increase in the Bill. None the less, we shall continue to try.
We have also debated stamp duty and married couples allowance, and we shall have the opportunity to return to those subjects. There are many other areas that we wish to explore, and for that reason, Conservative Members of the Committee have retained the services of a tax expert supplied by a firm of City accountants, PriceWaterhou seCoopers. That has been registered in the Register of Members' Interests, but I also wish to inform the Com mittee of the fact orally, to avoid any misunderstanding.
The Bill is part of a series of Budgets that is raising enormously the tax burden on every section of the British public. It is sometimes thought that tax rises can be neatly categorised into those that affect businesses and those that affect individuals. That is a mistake, as the effects of all taxes are eventually borne by individual members of the public.
Mr. Geraint Davies (Croydon, Central): Is there a danger that advice given by PriceWaterhouseCoopers might be given in the interests of their clients, and might therefore bias the contributions made by the right hon. Gentleman?
Mr. Heathcoat-Amory: No, I do not think that there is any such danger, as will become clear from our deliberations. The hon. Gentleman knows, as a veteran of previous Finance Bills, that all Committee Members rely heavily on the advice of outside professional and trade bodies. Their activities are sometimes described as lobbying, but that description diminishes their contribution. It is important for us to bring to the Committee well considered views, criticisms and even draft amendments that have been suggested to us. However good we are, we cannot assemble all the necessary expertise from among our own Committee Members.
Mr. Michael Jack (Fylde): Would my right hon. Friend care to reflect on the hon. Gentleman's question, and whether it might imply a rejection by Government Members of any advice--however well-intentioned or well argued, and however correct and proper--in framing their views on the Bill?
Mr. Heathcoat-Amory: I hope that that is not the case, but my right hon. Friend is right to draw our attention to that danger. We have already seen that the Government do not listen. Many of the matters that we shall criticise in the Bill were drawn to the Government's attention during the previous consultation period. For example, they could have avoided the fuel duty fiasco if they had listened to outside bodies.
Mr. Geraint Davies: Will the right hon. Gentleman give way?
Mr. Heathcoat-Amory: I hope the hon. Gentleman will forgive me, but I want to complete my remarks on tax rises, which go to the heart of our deliberations.
Our complaint is that the Government are not only raising taxes, but doing so by stealth. That was shown immediately after the Budget speech when the Prime Minister asserted, quite shamelessly and wrongly, that the Budget would cut taxes by £4.5 billion. That has been contradicted by the Library, as well as by many outside experts. In that figure, the Government included all the public expenditure increases and called them tax reductions, with the absurd result that extra expenditure on green transport, recorded in the Budget report as £5 million a year, was called a sort of negative tax, instead of being classified as public expenditure. So the Chancellor knocked that amount off tax increases and came up with the bizarre figure of a £4.5 billion tax reduction. That subterfuge lasted for about 24 hours. It would be useful if the Government agreed early in the debate that that was a misrepresentation, and that the true effect of the Budget was to raise extra taxes, it is one of a series of three Budgets that do so.
The Government compounded that error by referring to matters that are not in the Finance Bill as Budget tax reductions. Conversely, the Finance Bill includes matters to which the Chancellor did not refer in his Budget speech. Another example is that "Budget 99", the brief version of the Budget that was circulated to the public, mentioned research and development tax credits, which were proudly announced as a measure to boost productivity. That measure is not in the Finance Bill at all. The same leaflet did not mention some measures that are in the Finance Bill and do raise taxes.
There are many matters to which the Chancellor did not refer at all, or that he glossed over, in his speech. For example, he did not mention the fact that, although a 10p starting rate of tax will be introduced, the 20 per cent. tax band will be abolished, so that for many people, the marginal rate of tax will go up to 23 per cent, not down to 10p. Nor did the Chancellor refer to the fact that, although the fuel escalator will continue at a rate of at least 6 per cent. in real terms, there is a particular penalty for drivers of diesel cars, for whom fuel tax will go up by almost 12 per cent. in cash terms.
10.45 am
The Chancellor also did not say that the new marginal rate of 10 per cent. for those on earned income at the lower end of the scale will not apply to savings income. Savers will continue to pay tax on non-dividend savings income at 20 per cent.
The question of the system's complexity also arises. Last year, we continually pointed out that a complex tax system not only creates difficulties for the Inland Revenue and Customs and Excise, but is a business overhead that the whole country must bear. I am sorry that the Government have not learned that lesson. Small businesses will have to grapple not only with the regulations governing working time, the minimum wage, and so on, but make sense of two new bands of stamp duty; instead of two bands, there will be four. Last year, the capital gains tax system was made much more complicated. Sadly, little has been done this year to correct that. Given that certain changes are in prospect, we may well deal with that point later in our deliberations.
There is plenty to occupy the Committee. Opposition Members will try to approach the Bill in a genuinely constructive spirit. We ask that Labour Members keep clearly in mind not only their slavish devotion to the Government, but the needs and representations of their constituents. Perhaps the sensitivity that the hon. Member for Croydon, Central (Mr. Davies) demonstrated in respect of the Opposition's enjoying the services of a tax expert arises from embarrassment about the many representations from his constituents, which he is not always inclined to raise with his Front Bench. I hope that I am doing him an injustice, and we look forward to his contributions. However, it is in all our interests to improve--and, if necessary, to shorten--the Bill during our deliberations.
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