Autumn Statement: Economy

Lord Wakeham Excerpts

Tuesday 29th November 2016 Lords Chamber

[Lord Wakeham (Con)]

My Lords, I am delighted to follow the speech of the noble Lord, Lord Fox—although perhaps not for the reason that he might reasonably anticipate. I was talking to an extremely old friend of mine who asked how the noble Lord was doing in the House of Lords. I had to confess to my awful shame that I had never heard him speak—so I will at least be able to ring her this evening and tell her that he spoke very well. That pleases me, even if it does not please him. I cannot say that I agreed entirely with what he said, but that is not the point. I declare an interest as I am a chartered accountant. I have now been so long a chartered accountant that they do not even collect a subscription from me any more.

Considering the Autumn Statement, it seems to me that so much has changed since the 2016 Budget that the Chancellor has done extremely well to set out a message of stability while at the same time showing confidence in the future, when he has been dealing with forecasts from all sorts of people who have been saying all sorts of different things. This is a very difficult time for a Chancellor. The Autumn Statement also gave me great hope that this Chancellor, with his practical business experience, will make some changes to our taxation system that will be beneficial to business and wealth creation without necessarily having to reduce the rates of tax. For example, his proposal to bring certain non-cash benefits into taxation is, in my view, a move in the right direction.

The Chancellor’s proposal to abort the Autumn Statement is very welcome. I do not think he made enough of how significant that is: not just because it will stop the twice-a-year go at altering taxation so loved by Gordon Brown but because it should mean that the changes he proposes will in future be better thought-out and debated. I do not think a lot of people know what a struggle it is to get a Finance Bill into law after a March or April Budget and before Parliament rises for the Summer Recess. Of course the Finance Bill has priority in that time, but it usually means that a number of smaller but significant matters are left out.

The effect on other business in the Commons is also significant. Anyone who has been Chief Whip in the Commons will know just how that has to work. A Budget in the autumn, with until the summer to get a Finance Bill through, will give Parliament a much better chance to scrutinise it and taxpayers much longer to know what is happening. This is a very important and welcome step. It is not that it has not been tried before—I think Ken Clarke tried to do it some years ago—but the idea was snookered by Gordon Brown’s desire to have two Budgets a year.

I also detect in the Chancellor’s Statement that he might be persuaded to look at some of the anomalies and inconsistencies in our present taxation system. I refer not to the rates of tax but to the way that liabilities are determined. Lower rates are always welcome but they may not always be possible.

The Government have started to do something about corporation tax. The important issue here is that UK companies are at a disadvantage compared with overseas companies that can hive off profits into a low-tax regime. I appreciate that international discussions are going on about all this, but I will believe the results when I see them.

Other taxes need reform—and I repeat that I do not mean rates of tax. For example, capital gains tax is for many people mainly a tax on inflation. Hold an asset for a long time and your effective rate of tax will be much higher than a quick in-and-out capital transaction. It ought to be the other way round. Stamp duty is a tax on change, and we should be encouraging change. Stamp duty is loved by the Inland Revenue because it is an easy tax to collect and cheap to work, but it is an economically bad tax. There are better ways than stamp duty to collect the same revenue. The differences in tax and national insurance rates between the self-employed and employed are much too high and need to be lessened. It may not be possible to make the same, but the differences are far too large. The same could be said for the taxation of sole traders and those who set up a company.

Those are just a few examples; there are many more where the Government should be looking at the effect of their taxation and not just at the money-raising system. I want taxation where everybody pays their fair share of tax and does not spend a great deal of time and effort, as a good many people do, trying to decide what form of structure to set up to maximise their tax benefit. I hope that the Chancellor and his colleagues will think in the same way.