This is the first of a series of reports on the progress of this year's Finance Bill, as it goes through its various parliamentary stages.
For those not familiar with the parliamentary process for scrutinising bills (which is in any way a bit different for Finance Bills), it runs like this:
First reading - Presentation of Bill, no debate
Second reading - Full day's debate (about 6 hours) on the floor of the House of Commons on any aspect of the Bill MPs want to raise
Committee of Whole House - The opposition (mostly Labour but with a bit of say for the smaller parties) choose the key bits of the Bill which they want to have high profile debate and votes, with the opportunity to propose amendments, on the floor of the House of Commons. Two days of debate on these.
Standing Committee - 36 MPs, appointed from each party in proportion to their representation in the House of Commons, debate the remaining clauses and schedules of the Bill in order, in a committee room 'upstairs', with the opportunity to propose amendments.
Report stage - One or two days (probably two) debate on the floor of the House with another opportunity to present amendments.
Third reading - One hour debate on the Bill as amended, immediately after report stage.
Lords second reading - Peers debate any aspect of the Bill they wish to raise. (NB. There is no opportunity for Peers to amend the Finance Bill, and third reading is taken without debate.)
The progress of this year's Finance Bill has been both rapid (three days of whole House debate last week and already four sittings of standing committee, which started on Tuesday) and slow (by the end of the third sitting only one clause had been approved. The CIOT takes a close interest in tax legislation and speaks to MPs from all parties during its passage in support of our aim of a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities. We focus on drawing on our members’ experience in private practice, government, commerce and industry and academia to argue and explain how public policy objectives can most effectively be achieved. We are, of course, strictly politically neutral.
The reports on this blog are a by-product of our work following the Bill. They focus on the aspects of the debates most relevant to the CIOT and our members, which is primarily the technical elements of the Bill, although the reports also aim to give a flavour of the main issues debated, which will often be more political. I am not aiming to cover all contributions or all of the political debate about tax rates, inequality and the relative records of the current and previous governments.
Brief summary of debates on the floor of the House last week
Finance Bill 2nd reading – Mon April 16
Wide ranging debate. Exchanges between the frontbenches were mostly political and broad brush (not technical). Labour spokesmen and backbenchers criticised the Budget over fairness (tax cuts for millionaires, etc.) and failure to do enough for growth and jobs.
Some interesting contributions from Conservative MPs on the backbenches. Mark Field (MP for Cities of London and Westminster) expressed concerns about retrospective taxes (ref. Barclays) and the effect of the SDLT proposals in stalling developments in central London. Christopher Chope criticised the child benefit proposals over fairness (lack of) and complexity and suggested levying a charge on all taxpayers earning over £60,000 to avoid discriminating against those with children. Richard Harrington gave a thought-provoking speech in support of capping tax relief on charitable donations, asking: “Should people be able to choose to support, say, the National Theatre, the opera and Christian Aid, while choosing not to support the national health service, education and social services?” Edward Leigh spoke in support of a flatter tax system. Former tax lawyer Charlie Elphicke attacked “massive and inexcusable tax avoidance by multinationals” and set out a series of proposals, including that every MNC should be required to publish an effective rate of tax paid on UK revenues - from UK sources, from UK territory and from its UK trade – and called for reform of branch tax rules.
From the Lib Dem benches, Stephen Williams acknowledged concerns about the effects of CFC reforms, saying: “I hope we can find a way of measuring their effects and supporting overseas tax authorities more effectively to collect their tax liabilities so that they are not adversely affected by changes we are making to our basis for taxation.”
For the SNP, Stewart Hosie of the SNP emphasised opposition to high air passenger duty.
Finance Bill Committee of Whole House Day 1 – Wed April 18
The longest debate focused on the cutting of the 50p rate to 45p. There was a brief spat over Labour’s failure to table an amendment reversing the change, which it was argued would have been out of order had they done so. This prompted one Labour MP (Chris Bryant) to argue for changes to the rules that mean that the only people who can ‘lay a charge’ are ministers. The rest of the debate was essentially political 'back and forward', with more heat than light, although Charlie Elphicke (Conservative) made an interesting contribution, drawing on his experience as a tax lawyer to talk about some of the ways in which people may have avoided the 50p rate, in addition to forestalling, such as personal service companies and drawing income in dividends.
Debate on the bank levy was also highly political, with opposition comments mainly on proposals for a new levy on bankers’ bonuses to provide money for job creation for young people. Argument largely focused on how much different taxes on banks/bankers had raised or would raise. Karen Bradley, a CIOT member, argued that government actions to limit the level of cash bonuses that can be paid were far more effective in tackling the bonus culture than Labour’s bonus tax.
Debate was more cross-party on the VAT changes. Eight MPs (all with a constituency interest) spoke against VAT on static holiday caravans. Three MPs spoke against VAT on pasties and other baked products. Four MPs spoke against VAT on alterations to churches and other historic buildings. One argued there should be a VAT exemption for dial-a-schemes for people in wheelchairs. Exchequer Secretary David Gauke responded with a measure by measure explanation of the reasons for the changes. Despite substantial rebellions from government backbenchers no amendments got through. The narrowest margin was a 287-262 government win on VAT on static caravans.
Finally there was a brief debate at the request of the nationalists on air passenger duty, arguing for Wales and Scotland to have APD devolved as well as Northern Ireland. This was opposed by the Government, and Labour were essentially neutral and abstained.
Finance Bill Committee of Whole House Day 2 – Thur April 19
The day’s main debate was on the phasing out of age-related allowances. The Labour spokesperson, Rachel Reeves, accused the Government of attempting to hide behind the Office of Tax Simplification. The minister responded by saying the changes would remove complexity and confusion for some taxpayers and had to be looked at in the context of overall government policies for pensioners. Debate divided along party lines. The most interesting speech was from former accountant Nigel Mills (Conservative) who spoke in support of simplifying tax for pensioners, including support for putting the state pension into PAYE and for merging income tax and NI.
The child benefit charge got less than an hour of debate, which was a disappointment, given the number of questions which still remain around it. Christopher Chope (Conservative) proposed amendments that would limit the charge to households with an income of £100,000. Labour’s spokesperson, Cathy Jamieson, raised a series of pertinent questions around how workable the proposal was. The minister made a credible defence in the brief time available but there was not really enough time for a full debate and many questions remain unanswered. Sadly, because this has been debated in Committee of whole House, it will not get further debate during standing committee (though hopefully there will be an opportunity for further debate at report stage).
Links to the various debates are available here. A report on the opening sittings of the standing committee will be posted tomorrow (Friday).
CIOT External Relations Manager
Thursday 26 April 2012