Finance Bill

Lord Wakeham Excerpts

Monday 15th July 2013 Lords Chamber

[Lord Wakeham]

My Lords, my noble friend Lord MacGregor has said in his usual clear way virtually all that needs to be said about our report, so I want to add very little. I would like to reflect for a few minutes on the process by which Parliament approves Finance Bills and how it has changed over the years. I have been involved in Finance Bills, year by year, for some 40 years, sometimes as a Minister in the Treasury, sometimes in opposition and sometimes as a Back-Bench supporter of the Government. In some ways things have improved and in some ways they have not, but there really is nothing more important in the parliamentary year than the granting of supply to the Government.

Many years ago, when I had some responsibility for these matters, one of the things that I tried to get agreement to was two annual finance Bills, one at this time of year dealing with rates of tax and major matters and one in the autumn to deal with technical and other smaller matters that otherwise get crowded out. For a number of reasons we were never able to get agreement to that and I do not think it has been pursued since, but it is an improvement that ought to be reconsidered. As a result, the passage of the Finance Bill is done mainly in a bit of a rush just before we rise for the summer.

The big change this year is that we have a draft Bill, which is an excellent innovation. The Minister has given us a good account of it and I congratulate him on what he said. What has also changed substantially in those 40 years is the ministerial representation in the House of Lords. For many years, under both Governments, we did not have a Treasury Minister in the House. That has now changed, and very good Ministers they have been, but quite often we did not have one.

I recall one instance when I was Leader of the House, when a Minister not in the Treasury made a very good speech from the Dispatch Box introducing the Finance Bill. Something made me ask to see the briefing that he had received from the Treasury, and it was an absolute disgrace—I was appalled. I put it in a brown paper bag and sent it to the Permanent Secretary, saying, “If you think this is the briefing a Minister in the Lords should be given to introduce your Finance Bill, it’s not my idea”. I got a very good letter of apology from him and I think that things have improved since, although of course now we also have Ministers who are able to look after themselves. Still, I hope that the message was received loud and clear in the Treasury that in this House there are many noble Lords who are more experienced than many Members of the House of Commons, and that that experience ought to be used.

Finance Bills are not always treated on their merits; sometimes they get caught up in a wider debate. For instance, a good many years ago the Opposition thought that a Conservative Government—this is strange, really—were about to bring in a Bill to change the trade union levy to opting in and not opting out. We were told that if this was true, their opposition to the Finance Bill would know no limits. I was government Chief Whip at the time and I knew this not to be true. I eventually managed to persuade the Opposition that it was not true, and the then opposition Chief Whip claimed credit for the whole thing. He had persuaded the Government not to go ahead with their proposal, but he had to agree to give us the Finance Bill in, I believe, one week, which was the object of the exercise in the first place. It was a great victory for their wonderful Chief Whip. The concession was given. The whole purpose of the exercise was to get a very difficult and dispirited Opposition into some sort of order and disciplined enough to pass the Finance Bill, with proper scrutiny but no filibustering, and to get both Houses up before the Summer Recess. I will not mention the name of the opposition Chief Whip but those sitting on the opposition Front Bench know exactly who I am talking about—a great man.

Some things change and some stay the same. One thing that has changed, of course, has been the Economic Affairs Select Committee sub-committee of this House that considers the Finance Bill. That has not always been easy. Gordon Brown, when he was Chancellor, strongly disapproved of it and did what he could to get rid of us because he did not approve of the House of Lords having any say on taxation matters. He was quite wrong. The House of Lords, of course, has an absolute right to discuss and debate Finance Bills in any way it wishes. What we do not have the right to do is to amend or delay them. The terms of reference under which the sub-committee operates are a self-denying ordinance that we, as the House of Lords, have imposed on the sub-committee, which we could change if we wanted to. In fact, I see no particular need to do so.

This year we considered, as my noble friend said, a draft Finance Bill under his excellent chairmanship, and we have done a very good job in a totally non-partisan way. We made a number of practical suggestions, which have found their way into the Finance Bill. They are sensible and often detailed suggestions that will make the legislation work better. One part of our work that I find particularly valuable is the hearing of evidence from experienced practitioners, who make mostly useful suggestions to us on how the legislation can be worked, with plenty of emphasis on the difficulties.

This year our deliberations on the so-called GAAR—the general anti-abuse rule—were especially important. We thought that the Government were right to bring this in, but it was never going to be able to solve all the problems of what we now call aggressive tax avoidance. We explain ourselves in some detail in our report, but I will make a further suggestion to HMRC to tackle these matters. Each new rule sets off clever people to think of ways to avoid it, and the more specific the rule, in some ways the easier it is to find a way around it. I was brought up in a different age, when “true and fair” were the watchwords. In a way, the GAAR seeks to replace them. However, the more we can relate our taxation, and particularly tax planning, so that the taxpayer is under an obligation to demonstrate that the records of the enterprise to be taxed show a “true and fair” view of what has been going on, the sooner aggressive tax avoidance will become yesterday’s problem. Years ago, in the Ramsay case in the House of Lords, which was a very special case, the courts gave a very clear signal that they would support that straightforward way of looking at things. The Government have certainly made a start in these matters, but there is still a long way to go.