Get Lords in on tax legislation.
There are interesting things afoot in the Upper House. Lord Saatchi has put forward a Private Members Bill to amend the Parliament Act 1911, which has excluded peers from any role in the scrutiny of financial legislation ever since.
With the removal of hereditary peers the time is now ripe to allow the Lords to take a more constructive role in scrutinising government legislation.
There are many currently in the House of Lords who have considerable knowledge of tax and business, arguably more so than many of the career politicians in the House of Commons. Such a repository of experience should be drawn upon. Lord Strathclyde put the case well when he said: ‘Nothing we propose affects the absolute right of the Commons to decide rates of tax and on whom tax should fall. But the House of Lords has unrivalled expertise in tax matters.’
This issue would be less critical if Commons debates around the Finance Bill stood up to close examination. In practice, most clauses go by without debate and very little scrutiny.
The mighty Finance Bill of 2000 ran to well over 600 pages but was subject to only a handful of meaningful amendments before enactment. During second reading of the Bill it was encouraging to hear a number of peers speaking out against the ever increasing complication of the tax system. The fact that some of this legislation has been hotly contested ever since highlights the need for greater technical parliamentary scrutiny.
As parliament is responsible for its own procedures it should be possible for it to set up a system to enable the Lords to review financial legislation.
This would be a welcome development and provide an opportunity for the Lords to apply its expertise in a constructive fashion, enabling the highlighting of issues deserving further scrutiny.
Lord McIntosh of Haringey has indicated that the government will oppose Lord Saatchi’s Bill in the Commons. This is disappointing. If the parliamentary process is to be prevented from becoming out-of-touch, it needs to draw on all the qualities it has at its disposal, including the expertise that is on offer in the Upper Chamber.
Failure to do so will mean inadequate review of key issues which impact on individuals and business alike.
– Francesca Lagerberg, senior technical manager, Tax Faculty, Institute of Chartered Accountants in England & Wales
BRING BUSINESS INTO THE EQUATION
While there may be some merit in allowing the House of Lords a greater voice in the formulation of tax legislation, it seems to me to be a concern that a group of unelected individuals should have significant influence on the tax landscape of the UK.
The debate on how tax legislation should best be drafted will probably never be resolved to everybody’s satisfaction but this should not stop us discussing the issues and considering the many plausible possibilities.
The starting point of any debate on tax legislation should be to understand and decide why new legislation is required. This means we should think not so much the unthinkable, but the common sense.
The primary reason for even discussing this issue is because there is far too much legislation being introduced each year. Why is this the case?
Why does there need to be an annual budget announcement?
We should start with a restructuring of the process by which government tax policy is formulated. Last year, in these pages, I suggested that consideration should be given to setting up a tax equivalent of the Monetary Policy Committee.
Government would set a framework and the Tax Policy Committee would draw up proposals and initiate legislation where it considered it appropriate.
A rolling programme of tax measures could then be seamlessly integrated into the business of government, in place of the headline-grabbing approach that currently prevails.
A fiscal framework, to complement the monetary framework, should be set up in such a way that consumers and those involved in business are the main contributors to the debate, rather than those from the Inland Revenue and Customs & Excise.
Measures which were judged appropriate (and one would imagine that, after the initial start-up years of hyper-activity there would be quite a small number in any given year) could be formulated and presented to parliament in a much more user-friendly fashion.
This user-focused approach, along with significant business involvement in the drafting process, would give a greater likelihood of the final legislation being credible. It would also require far less scrutiny and debate in parliament.
My plea is to roll back the juggernaut of ever more voluminous legislation which is proposed by those who never have to work within the tax system that they condemn the rest of us to work with.
– Chas Roy-Chowdhury is head of taxation at ACCA.
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