Snap Election called; Finance Bill faces uncertainty

24 Jul 2017

Prime Minister Theresa May has announced a snap general election will be held on 8 June 2017, subject to winning a vote in Parliament today (April 19), which is expected to be a formality. Under the Fixed Term Parliaments Act, two-thirds of MPs (434 of them) must back her motion.

Parliament is dissolved on the 25th working day before the election, on the evening of Tuesday 2 May 2017. Purdah typically starts around six weeks before an election. It describes the period of time immediately before elections or referendums when specific restrictions on the activity of civil servants are in place. The terms ‚ pre-election period‚ and ‚ period of sensitivity‚ are also used.

The Government have not yet announced when Parliament will be prorogued (ie when MPs and Peers will last meet) but informed opinion is that it is likely to be Thursday 27th April, leaving just a week for the ‚ wash up‚ when outstanding parliamentary business will be concluded.

The General Election will be separate to the local elections in some areas on 4 May 2017 when thousands of council seats plus mayors are up for grabs.

Finance Bill The Finance Bill passed its second reading last night (blog will follow in the next few days) and is theoretically scheduled for two days of Committee of Whole House debate on Monday and Tuesday next week. However the calling of the general election will affect the Bill substantially. It will be passed more quickly and parts of the Bill are likely to be dropped and brought back in a post-election Bill.

Rather than the expected two days of Committee of Whole House debate and 14-20 standing committee sessions, plus two days of report stage and third reading debate, precedent suggests that the committee and report stages will be compressed into a single day.

In exchanges at Treasury questions yesterday the Chancellor told the Chairman of the Treasury Committee: ‚ [A]ssuming that the House votes in favour of my right hon. Friend the Prime Minister‚ s motion tomorrow, there will then be the usual end-of-Parliament process of negotiation with the official Opposition on measures that are currently before the House, with a view to passing them in whatever form is appropriate before prorogation.‚ The Chancellor did not respond to Tyrie‚ s suggestion that making tax digital should be among the controversial measures removed from the Bill.

The Government are likely to want to keep the Bill substantially intact and just drop a handful of the most controversial measures, where pressed to do so by the opposition. However the CIOT are calling for most of the measures in the Bill to be held over for further scrutiny (see below). Under the rules, income tax and corporation tax have to be agreed by Parliament annually so it is extremely unlikely that the Bill will be dropped entirely.

A post-election Finance Bill will be brought forward once a new government has been formed, it is expected. If the Conservatives regain power, then it is likely the provisions of the Finance Bill will not alter, but a change in government could result in changes to the legislation.

CIOT letter The CIOT has today written to Chancellor Philip Hammond urging him not to rush through the Finance Bill without any real parliamentary scrutiny.

In the letter CIOT President Bill Dodwell says: ‚ We recognise the need to pass a basic Finance Bill before the election, containing those measures essential to the continuation of the tax system - primarily the renewal of income tax. This could also reasonably confirm changes to levels of duties announced on Budget day, and any other measures which are required urgently, such as anti-avoidance provisions. However, we believe most other measures should be left until a post-election Finance Bill where they can be scrutinised at greater length.

‚ This is not simply about the formality of parliamentary debate. Since the Finance Bill was published on 20 March, the Chartered Institute of Taxation has identified a number of changes that we believe are needed to the legislation on areas including in complicated areas such as loss relief and interest deductibility. No doubt other external bodies have identified concerns too. A truncated timetable - rushing through 762 pages of legislation in a single day or even two days next week ‚ will not allow for adequate consideration of the matters we have raised.

‚ A post-election Finance Bill would also enable more of the framework for Making Tax Digital to be put in statute, rather than brought in through regulations.

‚ The CIOT acknowledges, and welcomes, improvements in the level of consultation on tax issues by the Government over recent years. Our recent report, with the Institute for Government and the Institute for Fiscal Studies, on Tax Policy Making included recommendations for better scrutiny by Parliament of new legislation. We hope you will be able to reassure us that these general improvements on consultation will not be undermined by the rushing through of a huge Finance Bill without the chance of amendments and scrutiny in the final days of this Parliament.‚

The letter has been copied to the opposition who have a key role in determining which Finance Bill measures will go forward.

George Crozier CIOT Head of External Relations