Taxation Freedom Day Bill

Philip Hollobone Excerpts

Friday 25th November 2011 Commons Chamber

[Mr Philip Hollobone (Kettering) (Con)]

I beg to move, That the Bill be now read a Second time.

It is a privilege to move Second Reading of the Taxation Freedom Day Bill. It is a small Bill with an important message to Her Majesty’s Government from the Great British taxpayer and provides for an annual taxation freedom day to reflect the proportion of tax paid by individuals from their income. The idea is that each year, the Chancellor of the Exchequer must, by way of a statutory instrument, specify a day that will be observed as taxation freedom day. The purpose of this taxation freedom day will be to mark the day in any given calendar year on which the United Kingdom’s net national income reaches the level of the United Kingdom’s estimated level of national taxation for that calendar year.

In the Bill, total national taxation includes all forms of direct, indirect and local taxation and it will be calculated not by Her Majesty’s Government and not by me, but by the independent and trusted Office for National Statistics. Likewise, the Office for National Statistics would also be charged with calculating net national income.

Each year, the Chancellor of the Exchequer will determine the day in the year when taxation freedom day will fall using the proportion of the United Kingdom’s estimated level of national taxation to the United Kingdom’s estimated net national income. Under the terms of the Bill, an order would not be able to be made unless it was laid before and approved by resolution of each House of Parliament. Each year, before 30 November, the Chancellor of the Exchequer will have to lay before Parliament the estimated date of taxation freedom day in the following year and, before 31 May, the Chancellor will have to lay before Parliament a report setting out whether the estimated date of taxation freedom day in that calendar year was correct.

The purpose of the Bill is to try to provide some transparency for the British taxpayer about the burden of taxation on them and on the national economy. It is essentially politically neutral and is not an argument for or against any particular level of national taxation. I have my own views on that, on which I hope to elaborate later, but all I seek to do is to get across, in a readily understood and straightforward way, the proportion of our economy that is taken up in taxation. The Bill is one of almost a dozen that I have put before the House in this Session. I should like to place on record my thanks to Jonathan Isaby at the TaxPayers Alliance for his contribution to the Bill’s drafting. I thank also the Adam Smith Institute for its germ of an idea about having a readily understood national taxation freedom day, as well as the Freedom Association, which has been extremely supportive.

Taxation freedom day in 2011 was 30 May—three days later than last year—which means that, on average, every British taxpayer had to hand over all their income to Her Majesty’s Government for the first 149 days of 2011. Only after 30 May did they get to keep for themselves any income they earned. Having recognition of such a calendar date would reflect and get across in a very simple and straightforward way the burden of taxation on our economy.

The date of taxation freedom day varies from year to year, and the point is to make it easy to understand how the burden of taxation changes each year. In 1964, taxation freedom day was 23 April, whereas in 2011, as I have mentioned, it fell on 30 May. So, over that period, taxation freedom day moved by 37 days. In 1964, the average British taxpayer had to work for only 114 days before they could keep their income for themselves, but in 2011 they had to work for 151 days before they could keep their income.

[Mr David Nuttall (Bury North) (Con)]

My hon. Friend is making a very cogent speech. Is he aware that these figures have been calculated back to the turn of the 20th century? In 1900, the figure was only 22 days and in 1910 it was only 19 days.

[Mr Hollobone]

I am grateful to my hon. Friend for that most helpful intervention. Such interventions highlight how well he serves his constituents with the depth of his knowledge and research into legislation such as this. The figures he gave put into context the horrifying advance in the burden of taxation that we all have to pay. The fundamental truth is that Her Majesty’s Government and Ministers such as the Economic Secretary to the Treasury, who is on the Front Bench, do not have any income or resources of their own. Everything that the Government spend on our behalf either comes from the British taxpayer or is borrowed. The burden of that taxation demand is of concern to everyone.

There may well be Members, perhaps on the Opposition Benches, who believe that the burden of taxation should go up. That is a perfectly respectable argument. There are those who believe that the state can marshal the resources of the British people better than the individuals themselves. I do not happen to agree with that, but it is a perfectly respectable point of view. I would expect them to welcome taxation freedom day going up the calendar, so to speak, perhaps into June, July or even August. My Bill does not say that that is a bad thing. What my Bill says, in a politically neutral way, is, “Let’s let the British people know what the burden of taxation is so that they might make a judgment about whether it is acceptable or not.”

The figures that my hon. Friend the Member for Bury North (Mr Nuttall) cited from the turn of the 20th century demonstrate how far we have come, in an adverse way, since those days. My humble remarks go back only to 1964, which happens to be the year in which I was born. In 1964 British taxpayers had to work for only 114 days until taxation freedom day, and now, in 2011, the equivalent figure is 141.

Taxation freedom day has moved around quite a lot in the past 47 years. The House might be interested to know, for example, that between 1964 and 1970, taxation freedom day moved by 40 days, from 23 April to 2 June. Those were the days of the devaluation crisis, a great deal of trade union militancy and the public finances being in some disorder. The burden of taxation went up by more than a month’s worth—40 days’ worth—over that period. Then, from 1970 to 1973, taxation freedom day fell by 21 days, from 2 June to 11 May.

[Philip Davies (Shipley) (Con)]

Good old Ted Heath.

[Mr Hollobone]

Indeed. Before the U-turn the burden of taxation on the British economy went down but then, as we know, it all started to go wrong, and from 1973 to 1975—three calendar years, in effect—those 21 days were reversed and taxation freedom day went back up to 2 June. One of the major reasons for that was the very high price inflation of that period. The Government of the day did not re-index all the taxation allowances and there was a huge fiscal drag effect, taking people into high rates of income tax.

Taxation freedom day did not change much until 1978. Between 1978 and 1982, it moved by 24 days, from 27 May to an all-time peak, 20 June, in 1982. In that period we had the rapid appreciation of sterling, particularly against the dollar, there was the doubling of VAT from 8% to 15% in Geoffrey Howe’s first Budget, a huge collapse in gross domestic product—not as sharp a fall as we are currently experiencing, but nevertheless a very dramatic slow-down in the economy—and another period of high inflation fuelled, in part, by a second big rise in oil and petrol prices. That meant that in 1982 the average British taxpayer had to work for 172 days, with all their income for those 172 days going, in effect, to Her Majesty’s Government.

There then followed quite a long period, from 1982 to 1996, just before the end of the Conservative Government, when taxation freedom day fell back by 25 days, from 20 June to 26 May. In 1997, when Tony Blair came in, taxation freedom day started to rise once again. Interestingly—I hope that this will convince the two Opposition Members present that I am trying to be as politically neutral as possible—taxation freedom day in 1997, when Labour took office, and in 2010, when Labour left office, fell on exactly the same day: 27 May. It rose in the middle of that period to 4 June, an increase of nine days, but in other years it fell by three days.

[Robert Halfon (Harlow) (Con)]

I congratulate my hon. Friend on his excellent Bill. Despite what he has just said, does taxation freedom day not generally fall earlier under long periods of Conservative government than under periods of Labour government?

[Mr Hollobone]

I am most grateful for that penetrating intervention from my hon. Friend, who serves his constituents with great enthusiasm and ability. Although I would like to think that there is an obvious correlation, my honest answer is that it might not be as strong as we would like it to be. That reflects the overall bad picture of all modern Governments settling a burden of taxation on the economy that is rather higher than he or I would like. Although brave attempts have been made to reduce that burden, particularly by Conservative Governments, they have not always been successful as problems have got in the way. For example, the oil price crisis in the early 1970s and the big increase in trade union militancy blew the Conservative Government of the day off course, which meant that they had to increase the burden of taxation in response. Likewise, in the first years of the Thatcher Government the burden of taxation increased sharply. As I have said, between 1979 and 1982 taxation freedom day moved from 30 May to 20 June, which was a sharp ratcheting up.

[Philip Davies]

I commend my hon. Friend on introducing his Bill. I presume that his aim is to try to shame the Government into making taxation freedom day fall as early as possible each year, which is certainly the basis on which I support it. With that in mind, has he considered specifying a date beyond which no Government can allow taxation freedom day to fall, to ensure that we guard against excessive taxation?

[Mr Hollobone]

I am most grateful for that intervention from my hon. Friend, who is a legend not only in his constituency, but in this place, precisely because of that sort of contribution. I also take it as a bid to serve on the Bill Committee. I for one would welcome that as an amendment that would improve the Bill, because I know that one of the major roles he performs in this place is providing helpful ideas to Members and the Government on how legislation might be improved, and what he suggests is one of the best examples I have heard. Like me, he believes that the burden of taxation in this country generally is too high and would like to see it fall. However, Members need not share our views to support the Bill. It is possible to be an enthusiast for more taxation to provide more public services and still to support the Bill. The Bill would make the burden of taxation transparent to everyone.

[Robert Halfon]

I hesitate to correct my hon. Friend, but it is possible to have more public services without necessarily increasing taxation.

[Mr Hollobone]

My hon. Friend is absolutely right. That is what Her Majesty’s Government are currently trying to do.

[Mr Nuttall]

More for less.

[Mr Hollobone]

Indeed. We can have better public services that are less dependent on public subscription. By making the burden of taxation transparent, through this calendar mechanism, the arguments for the more efficient use of public resources can be strengthened by the simple idea of trying to make taxation freedom day fall earlier.

The Conservative party has supported the idea of taxation freedom day in the past, but I am disappointed to see that, in the handout from the Government machine, the Government are going to oppose the Bill today.

[Mr Nuttall]

No!

[Philip Davies]

Surely not!

[Mr Hollobone]

I know that my hon. Friends are shocked by that news, and I very much hope that I am mistaken. When our hon. Friend the Economic Secretary to the Treasury rises to make her remarks, I hope that she will disabuse us of that notion, because in 2003 Lord Saatchi in the other place launched a Bill to make taxation freedom day a bank holiday. It was official Conservative party policy, supported at the time by the then shadow Chancellor, the right hon. Michael Howard, and a great deal of news was made about it.

I do not propose in my legislation to make taxation freedom day a bank holiday.

[Philip Davies]

Why not?

[Mr Hollobone]

That is a very good question, and it may well be the subject of another amendment that my hon. Friend tables in Committee, because I for one support the idea of a bank holiday to celebrate taxation freedom day. I personally think that it should replace the May day bank holiday, which for most of my constituents and most people throughout the country is not an appropriate day for a public holiday. If it were replaced by taxation freedom day, that would be a very good thing, but that is not in the Bill.

[Philip Davies]

I commend that idea to my hon. Friend. It might encourage the Labour party to bring forward taxation freedom day each year so that it coincides with May day.

[Mr Hollobone]

That is a very good suggestion, and yet another reason for Opposition Members to support the Bill today.

My Bill does not propose that taxation freedom day be a bank holiday. What it does propose is that, basically, Her Majesty’s Government make official recognition of what taxation freedom day does. In the Taxation (Information) Bill, the Conservative party Bill that was launched in the other place in 2003, Lord Saatchi suggested the following mechanism for calculating how taxation freedom day should be arrived at. He said that taxation freedom day is

“determined by taking total tax revenue, including direct and indirect taxes, local taxes, capital taxes and national insurance contributions as a percentage of total income”,

and that it is

“calculated as general government tax revenue as a proportion of net national income”. —[Official Report, House of Lords, 9 July 2003; Vol. 651, c. 380.]

Net national income differs from the more familiar gross domestic product, or GDP, in two ways: first, net national income adds in net property and the entrepreneurial income of UK citizens from abroad; and secondly, it subtracts capital consumption. Net national income is therefore smaller than GDP, making the ratio of tax revenue to net national income larger than that to GDP.

I do not particularly mind what mechanism the Office for National Statistics uses for calculating taxation freedom day, because there are all sorts of suggestions about how it be done, but whatever mechanism is used, it ought to be clearly explained and consistent year on year, with lots of backdated calculations—perhaps even to the start of the 20th century, as my hon. Friend the Member for Bury North suggests—so that we can track consistently how taxation freedom day has moved around. There we have an official Conservative party suggestion from 2003, however, and it is a helpful contribution to the idea of pushing this Bill forward.

None other than the current Chancellor, before he became Chancellor, has spoken about taxation freedom day on two occasions. First, interviewed by Polly Toynbee in The Guardian on 2 June 2006, he said:

“This Saturday—June 3—we celebrate Tax Freedom Day. That is the point in the year when people stop working for the chancellor and start earning for themselves.”

In 2006, according to this enlightened quotation, the then shadow Chancellor saw the value of taxation freedom day. I very much hope that now he is the actual Chancellor he can put his words into practice. On another occasion, when interviewed in 2007 about taxation freedom day having slipped to 1 June in 2007 from 27 May in 1997, he was quoted in the Daily Express as saying:

“Here’s the proof that Gordon Brown’s stealth taxes hit us every hour of the working day. Hard-working people hand their money over to the Chancellor and the tragedy is that they cannot trust him to spend it wisely.”

In his role as shadow Chancellor, my right hon. Friend the Member for Tatton (Mr Osborne), has on two occasions publicly backed the idea of taxation freedom day. That is extremely helpful, and I hope that point of view is now consistent with Her Majesty’s Treasury in its present form.

On 6 June—D-day—2000, Mr Deputy Speaker, none other than your boss, the Speaker, tabled a ten-minute rule Bill called the Taxation (Right to Know) Bill, which had three main elements. If I may quote Mr Speaker in his absence, he said:

“In my Bill, the Treasury is required to prepare and send to every household and business an annual statement of the rates of each tax and excise duty…My second proposal is that the proportion of the purchase price of key products that is represented by tax and excise duty should be publicly displayed on the bills that customers pay…My third suggestion is that each year the Treasury should publish an assessment of the merits of each tax, considering not only its yield but its administration cost, its compliance cost and its economic cost in terms of lost output and diminished competitiveness.”—[Official Report, 6 June 2000; Vol. 351, c. 175-176.]

In his remarks to the House, the right hon. Member for Buckingham (John Bercow) stressed that our taxation freedom day, which in 2000 was on 29 June, was no fewer than 20 days worse than in the United States, where it had fallen on 10 May. The Bill proposed by Mr Speaker—before he was Speaker—in 2000 and my Bill essentially try to do very similar things. We are trying to make the burden of taxation on every individual business and organisation in this land far more transparent so that taxpayers can understand how much of their money is going to the Government and what it is being spent on.

That drive for transparency is being promoted by all sorts of organisations, not least the TaxPayers Alliance, which, in a major tax transparency campaign, has launched a tax app. For those of us who are rather technologically challenged, that might not be immediately appealing, but that will not be so for enlightened individuals such as my hon. Friend the Economic Secretary, or even my hon. Friends the Members for Harlow (Robert Halfon), for Bury North, and for Shipley (Philip Davies), who are at the forefront of IT developments. The Tax Buster app for smartphones allows shoppers to find out how much they really pay when buying everyday items. With a few details about any particular purchase, it can calculate how much money from an item went on VAT and duties.

[Robert Halfon]

Can my hon. Friend confirm whether this app would be compatible with BlackBerrys?

[Mr Hollobone]

I am most grateful for that intervention. I think that the answer is yes. One would have to access the Tax Buster website to find out how to do so. I think that the app is available for all kinds of cellphone technology. I know that my hon. Friend has the very latest gadget.

When an individual puts into the app a few details about their purchase, it tells them how much they had to earn before they paid taxes to have enough money to buy the product. For example, 20 cigarettes that cost £6.49 would have cost £1.24 without indirect taxes. Paying the £6.49—I am looking at my hon. Friend the Member for Dover (Charlie Elphicke), who I believe might occasionally buy the odd cigarette—requires earnings of £11.35 before income and corporate taxes.

[Charlie Elphicke (Dover) (Con)]

I would like to put it on the record that I share wholeheartedly my hon. Friend’s concern that cigarettes are over-taxed. That is a clear case for reform, which I hope Treasury Ministers will take on board.

[Mr Hollobone]

I am most grateful for that helpful intervention.

My next point will be of interest to my hon. Friend the Member for Harlow. Filling the car with £60-worth of petrol would cost only £23.86 without indirect taxes. Paying that £60 requires £104.84 in earnings before income and corporate taxes. For higher rate taxpayers, the equivalent figure is £122.91.

[Robert Halfon]

I thank my hon. Friend for being so generous in giving way. Does he agree that if the Government do not raise fuel duty as planned in January, the day on which taxation freedom day falls will be much earlier?

[Mr Hollobone]

That is a very good point and the Economic Secretary has heard it. She will also have heard the voice of the House expressed only the other week in support of my hon. Friend’s motion. The burden of petrol taxation has got to such a level that it is probably constraining economic growth in an unacceptable way, at a time when growth from anywhere would be most grateful.

[Mr Nuttall]

My hon. Friend said what the gross figure would be for a higher rate taxpayer. Of course, we now have two rates of higher tax at 40% and 50%. Does he know to which of those rates his figure applies?

[Mr Hollobone]

I believe that the figure I quoted is applicable to the lower of the higher rates. The figure would be even worse for those who pay the top rate. I am sure that the Tax Buster app has a facility to calculate the tax burden for those on the very highest rate.

The aim of the app is to bring greater clarity and to illustrate for taxpayers the need for more transparent taxes. The Government have been pushing for more spending transparency, which is welcome. I hope that in her remarks, the Economic Secretary will welcome this effort to make our taxation system more transparent and offer the TaxPayers Alliance the Government’s support.

Another great concern for taxpayers is that this country has two big taxes on individual incomes: income tax and national insurance contributions. There are many in this Chamber and many organisations outside who believe that those two should be combined. That would make the taxation system more readily understandable for taxpayers. To most people, national insurance is almost indistinguishable from income tax. Its function is now essentially the same—raising revenue for the Government. Despite performing essentially the same task, the two systems operate in a different manner in eight key ways, for example in the collection period and the definition of earnings. That is unnecessarily complex and adds to the expense of collecting revenue for Her Majesty’s Treasury. Most importantly, national insurance contributions obscure the public’s understanding of how much they are being taxed. Most debate at the time of the Budget or the autumn statement focuses on the level of income tax. National insurance, despite being extremely important, is often overlooked.

I would support reforming national insurance to align it with income tax, which would cut costs, reduce complexity and improve transparency. I therefore believe that the Government should abolish national insurance for both employers and employees, and combine it into one taxation system. Abolishing national insurance would make the whole thing simpler, cheaper and more transparent.

I have spoken about the simple version of taxation freedom day, but of course we can take the matter a step further. As well as having a national taxation freedom day, we could break it down into regional variations. The Adam Smith Institute has done that for the United Kingdom. It calculates that in 2011, there are huge variations. In Wales, the regional equivalent is after 35 days, and in London it is after 51 days. The taxpayer in London is having to work for 51 days with all their income going to the Treasury, but in Wales it is far less. In the east midlands, where the constituency that I have the privilege to represent is located, it is 38 days.

The institute has also calculated the number of days that it takes Britons as a whole to pay off each individual tax. For example, income tax takes up the first 39 days of the year; national insurance the next 26 days; VAT the next 29 days; corporation tax the following 12 days; fuel duties and petroleum revenue tax the next seven days; local taxes including business rates and council tax the following 13 days; capital gains and inheritance tax the next two days; duty on alcohol and tobacco the next five days; and all other taxes the following 17 days. Again, that helps to clarify the burden of taxation on the hard-pressed British taxpayer and how it is split up by each of the individual taxes that we are all obliged to pay.

I mentioned earlier the briefing that the Government information machine has circulated about my Bill. I have to say, I am very disappointed by it, and it makes a number of points that need to be tackled head-on. I will do that now, so that instead of reading out those points the Minister can respond to them. The Government’s first attack point is:

“The methodology for calculating Tax Freedom Day includes all forms of direct, indirect and local taxes. This gives an exaggerated sense of the tax burden on an individual level and does not recognise the progressive elements of the tax system.”

I do not share that concern. I do not want to exaggerate anything; all I want is a transparent system.

I would welcome comments from the Government about how they feel the burden of taxation on the average British taxpayer ought to be calculated. I am not particularly fussed about the methodology of that, as long as it is consistent year on year and can be backdated for a reasonable number of years so that we can get a sense of the progression either way. As I stressed at the beginning, my Bill is politically neutral in that sense. It does not argue that taxation is a good or bad thing; it is simply intended to make the way of getting that across to the public as transparent as possible.

The Government’s second attack point is:

“Acknowledging the need for freedom from taxation disregards the public benefits that flow from the revenue raised, through public spending. These include some of the country’s most important priorities—the healthcare of our people, the education of our young, our nation’s security, and the infrastructure that supports our economic growth.”

Of course, that is right. We need taxation and public services. I am not arguing with that. My Bill is politically neutral in that sense and does not disregard the public benefits of taxation; it simply aims to get across to the British people how much they are obliged to cough up to pay for those public services.

The third point:

“In the past decade the date for Tax Freedom has varied very little. How can those supporting the Bill justify the expense and Parliamentary time that will be taken up designating a specific date each year?...What assessment have those supporting the Bill made of the costs to the Treasury of the proposed legislation?”

The Government must have been struggling to come up with attack points when they got to that one because I cannot imagine that much expense would be involved in designating taxation freedom day.

[Mr Nuttall]

Furthermore, as my hon. Friend has demonstrated, over the years tax freedom day has fluctuated wildly.

[Mr Hollobone]

Indeed. The Office for National Statistics is a thoroughly competent organisation whose judgment we all respect, and I cannot believe that to get this exercise under way would place a massive burden on it or Her Majesty’s Treasury. The Adam Smith Institute, through its good offices, has published its version of this information. That is a small, privately funded organisation. Given all of Her Majesty’s Treasury’s resources, at taxpayers’ expense, I am sure that getting this exercise under way would be a small matter. On parliamentary time, we are talking about one statutory instrument a year, and we know that passing hundreds of statutory instruments accounts for only a small fraction of the cost of running Parliament.

[Philip Davies]

Is it not bizarre that the Government, who are happy to give £18 billion a year to the European Union without so much as a by-your-leave, are quibbling over the cost of setting out when tax freedom day is each year?

[Mr Hollobone]

It does rather put it into perspective, does it not? I shall not be led too far astray, Mr Deputy Speaker, but I cannot resist adding to the strength of my hon. Friend’s point. Our bill to the EU for the last five years of the previous Government was £19 billion, but in the lifetime of the coalition Government to 2015 it is set to be £41 billion. It will more than double.

[Charlie Elphicke]

May I suggest one saving that could be made to help fund the cost of these regulations? The excellent TaxPayers Alliance recently published a document showing that we could save £113 million by getting rid of all the full-time paid union officials, which would also enable people to work more effectively.

[Mr Hollobone]

That is right. That so-called facility time is of huge concern to taxpayers up and down the land. [Interruption.] I know that this point exercises some Labour Members, and I can understand their concern —they have their views—but the Bill is a transparency exercise, so those, like Labour Members, who believe in facility time and recognise its value will have no problem recognising that that facility time, which costs hundreds of millions of pounds, will shift taxation freedom day. They can argue the benefits of facility time to the British taxpayer. I happen to disagree with facility time because I do not think that public money should be spent on such things, but I recognise that there are views on the other side. My Bill does not state whether such spending is good or bad; it simply tries to demonstrate its effect on the public purse. That is why I hope that Members on both sides of the House will support the Bill on Second Reading.

My Bill is a small Bill—it does not even run to two pages—it is concise and it proposes the establishment of a simple and straightforward mechanism to let British taxpayers know how much of their money goes each year to Her Majesty’s Government through all the different burdens of taxation. It is not just about income tax or national insurance contributions; it tries to add up the total burden of taxation on every man, woman and child in the country. There is a need for transparency, because a particularly enthused member of the public who was trying to work out the burden of taxation might, for example, go to the Finance Bill, which is typically more than 500 pages long, with hundreds of different clauses, or one of the Budget reports, with its supporting documentation, which also run to hundreds of pages, containing huge amounts of detail. However, a taxation freedom day—a calendar point each year that simply illustrated the burden of taxation—would be a lot more readily understood.

Importantly, a taxation freedom day would also help to expose the increasing burden of stealth taxes on our economy. It is all very well concentrating on the headline rates of income tax, the thresholds at which they kick in or national insurance contributions, but as we have seen over the last decade, one of the big increases has been in stealth taxes, particularly council tax, in the hope that the British public would not spot that. However, by having an effect on taxation freedom day, the burden of stealth taxation on our economy could also be exposed.

In closing, I would like to stress that my Bill is politically neutral. It is an attempt to make our country’s taxation system more transparent, in a way that, crucially, every individual in the land would readily and easily understand. I very much hope that my hon. Friend the Minister has been persuaded by the power of my arguments and that she will confirm that the Government will support the Bill, because there is enough time in the current Session for it to complete its passage.

[Philip Davies (Shipley) (Con)]

I commend my hon. Friend the Member for Kettering (Mr Hollobone) for introducing his Bill. He is a great champion in this House not just of his constituents, but of common sense. This Bill is a prime example of the common sense he is trying to bring to bear on this House and on the Government.

I am optimistic, and would urge my hon. Friend to be optimistic too, because in the Minister we have someone who is broad-minded. She will not just be persuaded by the drivel that was written by the Government machine—as I think he so delicately put it—but will listen to the force of his argument. I was certainly persuaded by the power of his argument, and I am sure that other hon. Members were. If we were persuaded, I see no reason why she would not be persuaded either, given her qualities and her open-mindedness. I therefore look forward to a rethink of the briefing from the Government machinery. Indeed, I am sure that her speech is being torn up as we speak, to reflect the points that my hon. Friend made.

My hon. Friend is a reasonable man—something that probably I am not—and he made the point that his Bill is neutral. He did not say whether taxes should be higher or lower; he is merely trying to introduce some transparency. Therein lies the weakness of his Bill, if he does not mind me saying so. I return to the point that I made in my earlier intervention. The Bill would be much healthier if it were far more partisan and made the point that taxes are too high and should be lower. I would therefore love to insert in the Bill a date each year beyond which tax freedom day must not fall, thereby acting as a safeguard to prevent taxpayers from excessive taxation, however bad the Government were in future. When his Bill goes to Committee, as I am sure it will, I would wish to move an amendment proposing that. I think that most taxpayers would welcome it.

My hon. Friend made the perfectly reasonable point that there is a slight discrepancy in how tax freedom day is calculated. I would therefore wish to guard against Governments obsessed with spin—I am sure he can think of some from the not-too-distant past—trying to manipulate the calculation of tax freedom day to suit their own ends and their own agenda. I do not know whether he considered this in preparing his Bill, but although the Government may well be strapped for cash—it seems that they cannot afford to announce when tax freedom day is; I am not entirely sure what the cost incurred in doing so is, but it is clearly substantial—perhaps we should encourage them to state where the UK is in the league table compared with other countries. If every country is being calculated on the same basis, at least we will know, however it is done, that every country is being calculated on the same basis, so we can look at where Britain stands in the league table and see whether we are doing relatively better or worse than other countries. Helpfully, the Molinari Economic Institute has provided such a document based on the reports it produces each year.

Relevant to this debate is the issue raised by my hon. Friend the Member for Kettering about the differences in calculations. He and I think that tax freedom day fell on 30 May this year, which was three days later than it was in the previous year, which might be one reason why the Government have changed their minds about the publication of tax freedom day. They might not wish to draw attention to the fact that tax freedom day is three days later this year than it was last year. I put that out there as a possible explanation for the change of policy.

Those who produced the document that calculates tax freedom day across Europe are clearly more generous because they have this country’s day as falling on 17 May —13 days earlier. I do not think we should be led astray by what date it is; what is important to me is where the United Kingdom falls in relation to other countries in the European Union—and, indeed, countries outside the EU, which also appear in the table. The figures show how competitive our economy is in comparison with our neighbours.

My hon. Friend may be surprised to know that the UK does reasonably well, even though 17 May might seem too long for those who believe that taxes are too high. I would urge my hon. Friend, however, to avoid Belgium like the plague, as Belgian tax freedom day, according to this document, is 4 August. I certainly urge people in Belgium to rise up against their Government and demand lower taxes.

In order that people do not become complacent, I point out that in Cyprus tax freedom day is 13 March. I do not know about my hon. Friend, but I would certainly urge the Government to move more towards a Cypriot level of taxation than to a Belgian one. This gives the Government something to aim for—perhaps a target. I am not usually a big fan of targets, but perhaps the Government could target themselves to beat Cyprus.

[Mr Hollobone]

My hon. Friend is making an excellent speech, which I am hugely enjoying. Does he have the figures for Greece? Can he confirm whether the Greek Government actually collected any taxes at all?

[Philip Davies]

My hon. Friend makes a good point. According to the document I have with me, Greece’s tax freedom day is 12 June. Whether that was simply an academic exercise rather than a real one, I am not entirely sure. I probably share my hon. Friend’s implied view that, for far too many Greeks, tax freedom day was 1 January. I am not advocating that this Government aim for a 1 January tax freedom day, but I am sure they can do better than they are at the moment—on the best analysis I have seen, the middle of May or what we think is actually the end of May.

[Philip Davies]

My hon. Friend is right, and I believe that the Bill will provide a good safeguard against Governments exercising sleight of hand in their presentation of figures. If we have an independent body—I do not really care whether it is the Office for National Statistics, which is mentioned in the Bill, or the Office for Budget Responsibility—and a set of figures that can be trusted, no matter how many times the Government announce the same tax increases or tax cuts, we would at least know where we stood as we would have trusted figures that overrode the spin. I think that the Bill is a particularly good safeguard against that.

The Adam Smith Institute has been on to this for quite some time, and has helpfully informed people when tax freedom day falls in this country. Although the transparency element is important, what I find most striking is the fact that British people must work for 149 days just to pay their taxes. I was also interested by the regional variations mentioned by my hon. Friend. The Welsh, for instance, spend 35 days paying their income tax, while people in London spend 51 days paying theirs.

I do not understand why the Government do not want to make people aware of how difficult the Government’s financial position is. The Adam Smith Institute used a tax freedom day-style mechanism to illustrate the extent of the United Kingdom’s debt problem. It calculated that our burden of debt was so great that UK taxpayers would need to work for nearly a year and a half, with their entire wage packet going to the Government and not a penny being spent on public services, just to pay off the national debt.

When the Government talks of our being heavily in debt, whether they are telling us that we are adding £150 billion a year to our debt or that the debt burden is more than £1 trillion, it is difficult for people to get their heads around the figures. Millions used to sound like a lot of money, but nowadays no one is interested unless it is billions. Explaining to people in simple terms that they would have to pay tax for a year and a half without any of it being spent on public services would make the extent of the debt clear to them.

We could also be shown a way out of our financial problems. Sam Bowman, head of research at the Adam Smith Institute, says:

“Tax Freedom Day underlines the huge burden of government on working people’s lives. For five months of the year, we are slaves to the state. No wonder growth is so slow—we need robust tax reform now, bringing lower, simpler, flatter taxes. The government should resolve to make Tax Freedom Day something we can celebrate earlier and earlier each year.”

I think that Sam Bowman is on to something. When we can see the facts for ourselves, when we worry about where growth in the economy will come from and conclude that it depends on people having more and more disposable income so that they can go to the shops and buy things—thus helping businesses—and when we are made aware of how long people are having to work just to pay their taxes without even having a disposable income, the way out of our debt problem begins to become clear. If we can indeed make tax freedom day arrive earlier and earlier, people will have more and more disposable income that they can use to try to get the economy going. I think that that would help the Government to see a way towards economic growth, which is what will solve our debt problem—together with, I hope, a cut in Government expenditure at some point. They do not seem to have been able to manage that so far.

Let me draw my hon. Friend’s attention to the position in other parts of the world, particularly America. Traditionally, America has been far better at generating economic growth than the wretched European Union ever has. This year, tax freedom day in the United States will arrive on 12 April, well over a month before it arrives in this country. Whereas in this country people must work for 149 days just to pay their taxes, in America they need work for only 102. Many of my constituents would much rather work for 102 days than 149.

The great recession has reduced tax collections even faster than it has reduced income. After a long debate, President Obama and the Congress extended the Bush-era tax cuts for two additional years, which is very welcome. Despite those tax reductions, Americans will pay more in taxes in 2011 than they will spend on groceries, clothing and shelter combined, despite the fact that tax freedom day falls much earlier in America.

The statistics in America are calculated by state—my hon. Friend the Member for Kettering gave figures for different parts of the UK—and they are very revealing. Mississippi has the lowest average tax burden of all the states, and its tax freedom day falls as early as 26 March, whereas in Connecticut it falls on 2 May and in New Jersey it falls on 29 April. There are massive regional variations, therefore, and drawing comparisons can serve to promote competition between states. If voters in America can see how their state compares with other states, they might be encouraged to say, for instance, “Well, hold on a minute; if Mississippi can have tax freedom day on 26 March, why can’t we have that in Connecticut, too?”

One of the best ways to get Governments to reduce the tax burden is to introduce an element of competition. That is why I want the Bill’s provisions to be strengthened so that we encourage the Government to set out in the calculations how the UK compares with other countries in respect of a tax freedom day, and in particular how we compare with countries such as America whose economic growth has traditionally been stronger than ours. After all, if we want to grow the economy, we should want to adopt best practice. Any business that wants to improve its performance will look at what its competitors do. That is how most organisations seek to improve; they benchmark their own performance against that of similar organisations to see what they might do better. I would like the Government to start doing that in respect of taxation rates. If they are forced both to show that lower taxes can be delivered in other parts of the world and to consider how those countries achieve that, they might then try to introduce a similar discipline and focus to this country.

[Mr Hollobone]

I am sure there will be intense competition for places on the Committee, but does my hon. Friend share my optimism that the Bill might be able to pass through that stage and complete its passage during this parliamentary Session, so that many of his welcome ideas become legislation?

[Philip Davies]

My hon. Friend is very kind. I would not be so bold as to say that my amendments would improve his Bill, as it is perfectly good in its current form. I am merely using this opportunity to suggest some ways in which it could, perhaps, be strengthened. If my hon. Friend is seeking cross-party consensus and therefore does not entirely share my agenda, I could, perhaps, be persuaded to ditch some of my more strident amendments in order to get the basic measures through. I merely offer these amendments up now to show that the Bill could be improved.

--- Later in debate ---

[Mr Nuttall]

My hon. Friend makes a very good point. That could be dealt with in Committee; we could amend the Bill to include that date as well. That opens up a whole new area of complexity, because there is not only the difference between income, expenditure and the actual spending programme to consider but the effect of existing debt that needs to be paid off.

Let me deal with the Bill in a little more detail. Clause 1(1) requires the Chancellor of the Exchequer to specify one day each year that

“shall be observed as Taxation Freedom day.”

Unfortunately, the Bill is silent on how we as a nation are to observe this great day. I understand the reluctance of my hon. Friend the Member for Kettering to suggest having another bank holiday, but I submit that it might be appropriate to mark the day with an annual debate in the House on the ways in which the burden of taxation could be reduced in future years and hence the day brought forward.

[Mr Hollobone]

I am enjoying my hon. Friend’s speech hugely, and that is a most constructive suggestion. In formulating the Bill, I had in mind that at the very least the Chancellor of the Exchequer could make an oral statement to the House and we could then question him or her on the taxation freedom day proposals, but an annual debate—with a motion, one would hope—would be excellent.

[Mr Nuttall]

I am grateful to my hon. Friend.

--- Later in debate ---

[Rachel Reeves]

I am not sure whether to celebrate that, but this does seem to me to be a strange thing to want to have a piece of legislation on.

[Mr Hollobone]

An interesting comparator would be the interest that my hon. Friend the Member for Wellingborough (Mr Bone) has taken in human trafficking. Her Majesty’s Government have designated an anti-slavery day and given it official recognition. All the Bill asks the Government to do is officially to recognise taxation freedom day.

[Rachel Reeves]

That does not seem necessary to me, but I guess that the hon. Gentleman and I disagree. If the work of the TaxPayers Alliance and the Adam Smith Institute is as fantastic as he thinks, why could they not organise a celebration, as other groups organise days to celebrate things? One does not necessarily need legislation in order to celebrate a day that one thinks important.

--- Later in debate ---

[Miss Smith]

Unfortunately, I do not have that figure to hand, but I will be happy to look into the matter.

As I suspect my hon. Friend has often argued, both small and large businesses find regulation burdensome, as do citizens. The Government have therefore endeavoured to reduce the amount of regulation, and I question the need for this measure as it is an extra piece of regulation. My hon. Friend also noted that as we can spend on Europe, we should be able to spend on this measure. I agree with his point: we all wish to keep firm control on what we spend in respect of the European Union.

In the March Budget, the Chancellor set out the Government’s principles of good taxation. Our taxes should be efficient and support growth. They should also be certain and predictable: they should be simple to understand and easy to comply with. The tax system should be fair, and should reward work, support aspiration and ask for the most from those who can afford it most. Those are the principles to which we are committed, and against which our tax system should be judged.

In trying to meet those principles, our taxes will necessarily become clearer, a goal to which we all aspire. In debating tax in general, its role in our economy and why the burden of taxation may be felt more keenly at certain times, we must bear in mind our current economic situation. Britain had endured the longest and deepest recession in living memory, we were borrowing £1 for every £4 we were spending, and we had the largest budget deficit in our peacetime history—one of the largest in Europe, and the largest in the G20—yet following the 2010 general election no detailed plan to deal with all that had been left in place by the previous Government.

That was not the end of the story. In the preceding decade Britain had slipped down the international league of competitiveness, falling from fourth to 12th. We had seen our share of world exports decline. We were considered to be a worse country in which to start a business than many of our European neighbours. That was this coalition Government’s inheritance.

We have therefore set about restoring confidence and stability to our economy, with a clear strategy for growth. At the heart of that strategy is a credible plan to tackle the enormous budget deficit, which we are already implementing.

One part of that plan is making changes to taxation. We must understand the changes this Government have made in order to see that a tax freedom day does not fully accord with what we want to achieve. For any taxation, we must, of course, make it clear why we are asking for a contribution, what we are doing in terms of public spending to balance changes in taxation, and why it is important to strengthen the public finances.

Growth is a key component of a strong economy; all parties agree on that. In the Budget we set out four economic ambitions: that Britain should have the most competitive tax system in the G20; that Britain should be the best place in Europe in which to start, finance and grow a business; that we should seek to be a more balanced economy by encouraging exports and investment; and that we should have a more educated work force, who should be the most flexible work force in Europe.

For the past decade Britain has been losing ground in the world economy. Other nations have reduced their business taxes further and faster, and some have removed barriers to enterprise, while ours have grown higher still. We cannot afford for that to continue.

Our plan for growth is based on private sector enterprise, not public sector borrowing. It is based on growing businesses, not growing debts, and on securing sustainable long-term investment. An essential aspect of that is creating a competitive tax system that enables our businesses to compete on the global stage and that gives value to businesses in ways that this Bill would struggle to measure.

[Mr Hollobone]

claimed to move the closure (Standing Order No. 36), but the Deputy Speaker withheld his assent and declined to put that Question.

[Miss Smith]

I shall briefly move on to something that will be of significant interest to hon. Members and to the businesses that I have just begun speaking about, which is modernising the administration of the personal tax system and creating proper tax transparency for individuals. I note that a fine document is being given out by Her Majesty’s Revenue and Customs at the moment. Hon. Members could encourage businesses and individuals in their constituencies to respond to it and help in the effort that we all want to see to improve the understanding of taxes—