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JOHN BURNETT, now of Stephens & Scown, but MP for Torridge and West Devon until the last general election, considers the legislative processes for taxation.
JOHN BURNETT, now of Stephens & Scown, but MP for Torridge and West Devon until the last general election, considers the legislative processes for taxation.
THE HEADLINES AND principal debates and comment in relation to each finance bill concentrate on the macro economic points. The level of government borrowing, employment, investment, balance of payments, the golden rule, inflation and so forth inform the main debate and argument between the political parties. The micro points of taxation do get a look in, but invariably in broadbrush terms. The increasing length and complexity of tax legislation, a hike in excise duties, sometimes make their way to the front pages.
As readers of this magazine know only too well, these vitally important matters form just the tip of the iceberg. Each finance bill — and they seem to get more lengthy and complex as the years go on — contains many pages of detailed legislation covering every aspect of our business and much of our private lives. Of course, tax legislation does not end there, because throughout the year the Treasury and HM Revenue & Customs bring forward a series of statutory instruments covering every tax and, in addition, new or updated international tax treaties or protocols. Recently we have debated and agreed new information-sharing agreements with the Channel Islands and the Isle of Man.
The Budget
Budget day is especially tough for the leaders of the two main opposition parties. The Chancellor makes his statement which has been worked up over a period of months and then, in a matter of an hour or two, the leaders of the two main opposition political parties have to respond. The remaining debate on the floor of the House and the second reading are invariably in general terms.
It is when the bill goes upstairs into committee that the real detail is debated and fought over. I should add at this point that the recent and growing practice of successive governments in circulating some detailed draft legislation in advance for consultation before publication in a finance bill is extremely useful.
The finance bill
The finance bill is not an even contest: it is more like David and Goliath. Goliath, the government, obviously has an inbuilt majority on the committee and ministers have a team of thousands of officials to support them. There are often half a dozen specialist officials during the committee debates to support ministers. Written messages are swiftly passed through parliamentary private secretaries to ministers in response to questions, interventions and debate. Anyone unfortunate enough to have to read the committee Hansard reports will know what is happening when Members say: 'I think the Minister might be reconsidering that point', or 'If we wait for a few seconds we may well be getting an answer to that question'.
Each opposition party has, at best, a small team of researchers and, in the case of my party, the Liberal Democrats, at the most two researchers, one of whom has to spend a good deal of time dealing with more general treasury matters. This problem is compounded by the short time available between publication of the bill, second reading and committee stage. The fact that the legislation is more lengthy and complex, coupled with the shortage of time and lack of resources for opposition parties (notwithstanding the recent sharp increase in Short money), leads to less detailed scrutiny and debate than the bill deserves.
Finance bills are not static. The bill evolves with numerous amendments and new clauses not only tabled by opposition parties, but also important new clauses and amendments tabled by the government. There is frequently little time for opposition Members and outside bodies to follow the amendments and new clauses and to appreciate their repercussions.
Once the finance bill is then published, our opposition treasury team, usually the Shadow Chief Secretary, Shadow Financial Secretary and Shadow Economic Secretary meet to discuss who will take what during the committee stage. I was a tax practitioner before I became a Member of Parliament — I have now resumed that role with Stephens & Scown, a leading Devon and Cornwall law firm — and I helped share the burden from and including the 1998 Finance Bill onwards.
The committee stage
In committee, opposition parties endeavour to go into greater detail and try to make some sense of provisions that can be arcane, complex and damaging to business and enterprise.
From my days in Parliament, I do remember, for example, a particularly lively meeting with colleagues when the 2003 bill was published.
I drew one of the short straws, namely stamp duty land tax. Now, that I am back in practice I have been confronted with a land transaction return form just dealing with an ordinary transfer of property. As many lawyers will know only too well, it requests considerable detail, adding to the cost of even a simple house purchase. It is a shame that the form itself was unavailable for the committee to scrutinise and comment upon. I believe that ministers would now be amazed if they realised the level of 'gold plating' that takes place in order to implement what we were assured would be a relatively straightforward change.
At this stage, it is worth putting on record the gratitude that opposition politicians owe to organisations such as the Law Society, the Institute of Chartered Accountants, the Chartered Institute of Taxation, and the Confederation of British Industry, as well as others. These organisations produce their own finance bill memoranda and commentary dealing with most of the clauses and schedules of the bill. Before my election, I was for twelve years a member of what is now known as the Law Society's Tax Law Committee. I am still a member of a sub-committee. I know the level of effort and expertise that goes into the finance bill memorandum — all done at the rush.
The MP's role
A Member of Parliament leading for his party on the finance bill has to juggle so many priorities. The Member has to fulfil his or her portfolio role, give time to be involved with any committees of the House of which he is a member (and I was a member of five), and prepare and attend to all other Parliamentary business including questions and adjournment debates.
Members will also have to set aside time to see lobby groups, deal with constituents' and other correspondence, prepare and deal with any statutory instruments that come their way, and also cope with the demands of the media. This is just while the Member is in London — there is invariably an immense amount of work to do when a Member returns to the constituency and so the weekend really does not give much respite and time to prepare for what is a crucial role in holding the Government to account for its tax legislation.
For the reasons I have given, finance bills and other tax legislation really do not get the scrutiny they deserve in committee. Some very positive steps have already been taken to deal with these problems. There is continuing extension to pre-legislative scrutiny and consultation takes place on most of the controversial measures contained in the finance bill. Sometimes, tax professionals are not entirely convinced that this consultation is always a two-way process. The Tax Law Rewrite project started by the last Conservative government continues apace. Gradually, the plethora of tax legislation is being translated into more modern and more comprehensible English.
Nevertheless, there are further steps that could be taken to assist Members in their scrutiny of the bill. It is unusual for opposition parties to have access to officials except with ministers present. There are now informal relaxations to this rule, but understandably only with ministerial consent. The intelligence, ability and integrity of civil servants are frequently underestimated. The public and Parliament are usually well served by the civil servants. Some of the most effective work I was able to do was through informal meetings with officials discussing tax legislation.
Consultations
Before any double tax treaty or protocol is debated, the lead opposition spokesmen will have an opportunity to meet and be briefed by officials of the Treasury on the background to the treaty, its contents and its implications. This is of considerable help and the debate on the treaty is thus far more constructive.
The Finance Act 2004 laid out the ground rules for a controversial charge to income tax on an individual's gain, in certain circumstances, from the continuing enjoyment of assets he or she formerly owned. This is effectively an inheritance tax anti-avoidance measure. There was only a short time given to debate the measure in committee, but in response to the number of points I had put to ministers I was able to have informal discussions with senior officials who were drafting the important statutory instrument to supplement the provisions in the 2004 Act.
As the order was not going to be published for some months and the provisions were not going to come into force until this year, there was a good deal of consultation with outside professional bodies. With the consent of the Paymaster General, I called a series of meetings direct with senior officials to endeavour to resolve some of the problems relating to this measure.
Rightly, officials will always support the policy set out by ministers; however, it is fair to say that in matters of taxation the repercussions are often not entirely apparent even to the experts. At the meetings to which I have referred, I was joined by the two senior members of the Law Society's capital taxes sub-committee and by a chartered accountant representing the Society for Tax and Estate Practitioners. Whilst not all taxpayers' doubts and objections were met, the regulations introduced earlier this year certainly met a few of the concerns that I had raised on behalf of taxpayers in Parliament.
Conclusions and committees
The House of Commons jealously guards its exclusive competence on tax legislation. Recently, however, members of the House of Lords have been doing some excellent work on the economy and have produced a number of reports.
I used to sit on a joint committee of the House of Lords and Commons in relation to consolidation bills. It is for this committee to gauge whether a new bill is really a consolidation bill and does not in fact enact fresh legislation. The committee works well. It is, of course, possible for peers to take an active interest in the finance bill, but they cannot be members of the committee.
The House of Commons might consider allowing a few peers the privilege of serving on the committee. There are a number of peers with considerable expertise on treasury and tax matters. The peer in question would be able to speak, but supremacy of the Commons could be ensured by not allowing the peer to vote. Peers, whilst busy, are not weighed down by the considerable demands of constituents and a constituency.
In conclusion, I have enjoyed the numerous finance bills with which I have been involved. Ministers are invariably extremely courteous and helpful, but not sufficiently helpful to change much!
John Burnett is a consultant at Stephens & Scown, the largest law firm in Devon and Cornwall. John Burnett can be contacted on 01392 210700, and further information is available by logging on at www.stephens-scown.co.uk.
