Economy: Budget Statement

Lord Wakeham Excerpts

Tuesday 13th November 2018 Lords Chamber

[Lord Wakeham (Con)]

My Lords, the last time I followed the noble Lord, I had never heard him speak before. I was at a considerable disadvantage, because I had received a message—which came from his mother—asking how he was doing. I waffled on a bit about how good and effective he was, but I had actually never heard him say a thing in the House. This year, I am at least able to report—through my friend, who is a friend of his mother’s—that he is doing pretty well. I do not agree with what he says, but he made a good contribution to the debate.

I have been around long enough to have lived with a lot of Budgets. It is surprising how often, if they are a great success in the first few days, they are not too good a week later. That is the way it normally works. This Budget was not like that at all. Members on this side of the House, both here and in the Commons, were, by and large, supportive of it, and the opposition parties were opposed to it. Frankly, not much has changed since the original Budget, which is not the normal pattern.

I want to say one or two things about the taxation policies. I have some concerns, and there are some things that I think are right. First, I want to talk about stamp duty. In my view, stamp duty is a bad tax because it is a tax on change. We want change in our country, and for all my political life, that is what we have been seeking. There are many examples of where change is not happening because of the high rate of stamp duty. Take, for example, downsizing in housing. I would like the Government to look more at the economic costs of stamp duty to see whether there are ways—I believe that there are—to raise just as much money without the same amount of damage that stamp duty causes. It must be 25 years since I was in the Treasury. Then, it absolutely loved stamp duty, because it is an easy tax to collect. Ministers will have a hard job persuading the Treasury that stamp duty is not the right way forward, but they should have a try.

Secondly, the Government are absolutely right to try to get a fairer amount of tax from the enormous tech giants, which play an important part in our economy. But this brings into focus a problem that has been around for a long time: corporation tax itself is not a terribly fair tax. A UK-based company with no overseas affiliates pays the full rate, whereas if you are part of an international group and organise yourself in the way that these companies seem to be able to do, you get a lower tax rate. The Government are right to tackle this, but there are wider issues that they have to consider. The Government are also right to be cautious about what they do, because we as a country earn a great deal of money from intellectual property that is sold abroad. If we move too quickly and without agreement on the way to deal with the problems, we might find that we are paying more tax not less. The Government have made the right start, and I want to encourage them.

The third thing I want to talk about, very briefly, is the massive change in the way that we collect taxes, which was not even mentioned in the Budget speech. I refer, of course, to making taxation digital. Originally, this required all businesses, however small, to file their accounting information online four or even five times a year. About a year ago, in a Select Committee report, some of us said that while the object is right, it was likely to have the most disastrous consequences for the way that a lot of people operated. To its credit, HMRC persuaded the Chancellor—somebody did; I am giving it the credit—to delay the introduction by one year and to exempt many smaller businesses from its proposals. It is to be congratulated on that.

There are, however, still some pretty massive problems. According to a survey by the Institute of Chartered Accountants—of which I have been a member for over 60 years; it does not even charge me a subscription anymore, I have been a member for so long—only 51% of businesses registered for VAT have ever even heard of making taxation digital, and only 58% of the businesses that next year will have to file their returns under this new system have made any provision at all to go down that road. The Government and the Inland Revenue have got to work hard if they are not to have a disaster or difficulties on their hands.

The next stage in the revolution which will come is to make everyone file their income tax information in the same way. The Government have rightly said that they will not do this until they are satisfied that the first stages of it are working properly. That is an important pledge. I am glad that they have given it and I hope that they stick to it. Let us get the first thing done. It is the right policy—I am not arguing about that—but the changes are dramatic for many people.

The last thing I wish to address—this was not in the Budget but hardly a day goes by when it is not on the front pages of newspapers regarding business affairs—is the understandable concern about the significant number of audited company accounts that turn out to be in serious error. There are legitimate calls for inquiries into the role of the auditors. I am perfectly happy that those inquiries should happen to see whether some of the things they got involved in were not quite as they should be. However, I would also make the simple point, which seems to be elective, that it is not the auditors but the directors who prepare the accounts of the companies. It is with the directors who have presented phoney or incorrect accounts for their auditors to audit that the prime responsibility for inaccurate accounts lie. I like to take every opportunity to remind people that it is not always the auditors’ fault. Sometimes it is the auditors’ fault, but not as often as it is the fault of the directors of the companies. They need to take more care and perhaps make more provision to ensure that they present to their shareholders and the tax people accurate information.