Orders of the Day — Income Tax (Earnings and Pensions) Bill

House of Commons, 12 February 2003.

Dawn Primarolo (Labour, Bristol South)

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

I am pleased to open the Third Reading debate on a Bill that rewrites income tax rules on employment income, pensions and taxable social security benefits. It has been produced by the tax law rewrite project, which is a long-term undertaking to modernise direct tax legislation so that it is clearer and easier to use. Before dealing with the specifics of the Bill itself, it may be helpful if I explain a little about the work of the project.

The project was set up in 1996 to rewrite most of the direct tax law, currently running at more than 7,000 pages of legislation enacted over the past 200 years. The key aim of the project is to produce rewritten legislation that is acceptable by all the main users as clearer and easier to apply. While making measures more accessible, the project takes a great deal of care to preserve the effect of the present legislation apart from minor agreed changes.

Patrick McLoughlin (Conservative, West Derbyshire)

I wonder whether the right hon. Lady can help me. She said that the project reflects the 1996 announcement to rewrite tax rules over many years. How up to date is it? Has it taken into account all the new taxes that the Government have imposed on the British people?

Dawn Primarolo (Labour, Bristol South)

The project was started in 1996 by the previous Administration and the right hon. and learned Member for Rushcliffe (Mr. Clarke), and is supported by the Government. The answer to the hon. Gentleman's question is yes—both the Capital Allowances Act 2001 considered by the House two years ago and the Bill cover all the legislation to date. If he cares to scrutinise the Committee proceedings, he will find some interesting debate on the more unusual measures that the previous Government introduced into our tax system. I am sure that he is waiting with bated breath to read that as his essential bedtime reading.

Andrew Tyrie (Conservative, Chichester)

I am sure that there have been failings by Members on both sides of the House in the past. However, was the Inland Revenue asked to provide a full compliance cost assessment of each measure while, at the same time, looking at the way in which they could be rewritten? Will the right hon. Lady put that full compliance cost into the public domain? Having looked at the matter, has she concluded that the best way to simplify the burden of dealing with those forms is not merely to rewrite them but to simplify the tax system itself?

Dawn Primarolo (Labour, Bristol South)

On this occasion, it is not for me to criticise the previous Government on its foresight in establishing the tax law rewrite. As the hon. Gentleman will know, it is precisely that—a rewrite of the current tax legislation. The question of tax simplification, which the House has discussed many times, and will do so again in future because of its importance to the tax debate, is a separate issue. The hon. Gentleman asked about compliance cost assessment. As a measure in the new format, the Bill has to undergo an assessment on compliance costs. That information was available to the House on Second Reading and in Committee and is included in the explanatory notes. I am sure that the hon. Gentleman is pleased that there will be negligible compliance costs, if any. Because the increased compliance is so small it is impossible to measure. However, there is considerable evidence from everyone who was consulted that the new legislation is easier to understand and therefore less of a burden on taxpayers.

Dawn Primarolo (Labour, Bristol South)

I am happy to give way, but I hope that hon. Members will look at the tax law rewrite, rather than extend it into a wider debate.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. The right hon. Lady has a number of hon. Members from whom to choose.

Dawn Primarolo (Labour, Bristol South)

What an enviable position to be in! While not wishing to detain the House, perhaps we should work through them one by one. I shall give way to the hon. Member for Fareham (Mr. Hoban).

Mark Hoban (Conservative, Fareham)

On the issue of compliance costs, given that the Bill is the second measure to come before the House from the Joint Committee on tax law rewrite Bills, what research has the Treasury done on the beneficial effects of the first measure, the Capital Allowances Act 2001?

Dawn Primarolo (Labour, Bristol South)

I do not have the regulatory impact assessment of that Act with me, although it has already been discussed and passed by the House. However, I can make sure that a copy is sent to the hon. Gentleman. I draw his attention to the regulatory impact assessment accompanying the Bill, which is one of the papers available to the House today and will answer his questions. On capital allowances, he will know as well as I do of the enormous relief, amounting to many billions of pounds, that they provide for businesses.

Dawn Primarolo (Labour, Bristol South)

I shall give way to the hon. Member for Sutton Coldfield (Mr. Mitchell), as I am pleased to see him back in the House again.

Andrew Mitchell (Conservative, Sutton Coldfield)

I thank the Paymaster General for that kind endorsement from the Labour party, which I shall bring to the attention of my constituents at a subsequent election.

I strongly support the rewrite Committee and the work that the Paymaster General and her colleagues are doing. Of course, as she said, the project was set up by the last Conservative Government. Clearly, the rewrite is enormously technical and involves a lot of practitioners in the City and elsewhere. How does she go about ensuring full consultation with all interested parties and with practitioners in particular? Will she tell us whom she consults, and on what basis and how she consults them?

Dawn Primarolo (Labour, Bristol South)

In giving way to the hon. Gentleman, I said that I was pleased to see him back in the House on this occasion. I was not extending my remarks any further, much though I recognise that he may be an agreeable fellow.

I shall deal in my speech with the points that the hon. Gentleman raised about who was consulted and the consultation process. The point that underlies his question is extremely important. We must have very wide consultation. If the process is to achieve its objectives of being easy, clear and helpful to practitioners, the practitioners themselves must agree that that is the case.

Dawn Primarolo (Labour, Bristol South)

I shall give way first to the right hon. Member for East Yorkshire (Mr. Knight), who is sitting at the back, but I shall work back down the Opposition Benches and I shall not forget the hon. Member for Buckingham (Mr. Bercow).

Greg Knight (Conservative, East Yorkshire)

I am most grateful to the Minister for giving way. Will she not keep us in suspense until later in her speech, but deal with a point that follows on from that which my hon. Friend the Member for Sutton Coldfield (Mr. Mitchell) raised? I notice from the Committee's minutes that, on 14 January, it ordered that

"The uncorrected transcript of the oral evidence together with the associated memorandum be published on the internet."

When were those details placed on the internet and are they still there? If so, can the Minister tell the House the URL—universal resource locator—for the internet page? Has provision been made to encourage public feedback? Those of us who are interested in pursuing more online consultation want the public to be encouraged to give their feedback on such issues via the internet.

Dawn Primarolo (Labour, Bristol South)

At this precise moment, I cannot give the right hon. Gentleman the exact reference for which he asks.

Stephen O'Brien (Conservative, Eddisbury)

rose—

Dawn Primarolo (Labour, Bristol South)

I should like to answer one question at a time, even though the hon. Gentleman might be trying to help me.

I shall ensure that I provide to the right hon. Member for East Yorkshire (Mr. Knight) the information that he requests before the end of the debate. He is absolutely right in his comments, as the hallmark of the consultation on the Bill was that we continued the process even after the final drafts had been published to ensure that all possible corrections and errors could be put before the Committee. When I have given him the reference that he requests and he looks at the proceedings of the Committee, he will see that the Government had to table amendments even at the Committee stage to correct some aspects of the draft Bill. We will continue to pick up those issues.

The organisations that took part in the consultation are listed in volume 1 of the explanatory notes to the Bill: the Cardiff law school at Cardiff university, the Chartered Institute of Taxation, the City of London Law Society, the Confederation of British Industry, the construction industry joint taxation committee, Deloitte and Touche, Ernst and Young, Global Employment Solutions, the Holborn Law Society, ideasUK, the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants of Scotland, the Institute of Directors, the Institute of Payroll and Pensions Management and John Jeffrey-Cook. Other representations came from KPMG, Mayer, Brown, Rowe and Maw, the share scheme lawyers group and the special committee of tax law consultative bodies. The list goes on; I shall not read all the names into the record, but they are there for the right hon. Gentleman to see.

Stephen O'Brien (Conservative, Eddisbury)

rose—

Dawn Primarolo (Labour, Bristol South)

I shall give way to the hon. Gentleman on the Front Bench first, as that is what I am required to do, but other hon. Gentlemen should not be too worried, as I shall give way to them as well.

Stephen O'Brien (Conservative, Eddisbury)

I am most grateful to the Paymaster General for giving way. She has most helpfully read out a list of the many consultees that have been helpful and supportive in the project. In case it is of some help to her, I should like to point out that the URL that has just been requested is www.inlandrevenue.gov.uk/rewrite/index.htm.

Dawn Primarolo (Labour, Bristol South)

I thank the hon. Gentleman for supplying that information to the House. That reinforces the point about cross-party support for the tax law rewrite project. The Special Committee procedure was chaired by the right hon. and learned Member for Rushcliffe (Mr. Clarke)—who very skilfully saw us through our Committee stages—and Lord Howe of Aberavon, who has been energetic and committed to this project for some time. If anything had been awry or not correct, or if the Government had been attempting to do anything in the Bill that they should not have been doing, I am absolutely confident that those two right hon. and learned Gentlemen, whose skills are enormous, would have spotted it.

George Osborne (Conservative, Tatton)

The right hon. Lady will be aware that the Inland Revenue's 2002–03 annual report on this project stated:

"The current volume of new legislation annually on direct tax means that the project is now operating in a very different environment from that in which it was conceived."

I am not entirely clear what that means. Does it mean that there are many more taxes being introduced now than in 1996? The report also says:

"This has made it all the harder to find and maintain resources for our work."

Will the Paymaster General confirm that those resources are being provided to the Inland Revenue?

Dawn Primarolo (Labour, Bristol South)

I can confirm that the resources are being maintained and committed to the Inland Revenue tax law rewrite project. Indeed, if the hon. Gentleman reads our Second Reading debate in Hansard, he will see that the right hon. and learned Member for Rushcliffe complimented the Government on continuing their commitment to ensuring that the tax law rewrite project would work through the programme of legislation. He also took note that, when the tax law rewrite project was announced in 1996, the then Government gave it five years in which to complete the review. He accepted, as did Lord Howe of Aberavon, that that was somewhat optimistic, but good progress is none the less being made in what continues to be a complex area of taxation, particularly in the international dimensions.

John Bercow (Conservative, Buckingham)

I well recall the racy and intoxicating speech made by my right hon. and learned Friend the Member for Rushcliffe on a previous occasion in a debate not dissimilar to this one. I am grateful to the right hon. Lady for confirming that the Government's 53 new taxes are included in the rewrite project, but will she tell the House—in the light of the 2,000 new clauses and schedules proposed by the Government over the last five years—whether a distillation and synthesis of the material is intended, such that there will be a reduction from the current 7,000 pages to something altogether more manageable?

Dawn Primarolo (Labour, Bristol South)

It is part of the project to ensure that the legislation is easier to read, has shorter sentences, is easier to use, and has comprehensive signposts—[Interruption.] The hon. Member for Hertford and Stortford (Mr. Prisk) is pleading for larger print. It is true, however, that a simpler explanation that is easier to use can sometimes be of greater length than the original. Above all, however, the tax law rewrite project enables us to remove legislation that is no longer needed but happens still to be on the statute book, so this is a win-win situation. The legislation is usable and, where possible, shorter, and redundant legislation is removed so as not to confuse the taxpayer.

Tim Loughton (Conservative, East Worthing and Shoreham)

I have been listening intently to the Paymaster General's intentions regarding the simplification of the tax position that underlies the Bill. Surely the best way to simplify the tax situation is to abolish some of the taxes. The former Chancellor, Lord Lawson, made it a hallmark of his tenure of the chancellorship that he abolished a tax in each of his Budgets. Can the Paymaster General tell us how many taxes she or the Chancellor of the Exchequer have abolished over the past six years, in addition to the 53 extra taxes that her Government have created?

Dawn Primarolo (Labour, Bristol South)

I stress to the hon. Gentleman that the tax law rewrite project is not about simplification as it is understood within the tax debate, but about ensuring that the existing legislation is easy to understand. I can give him one clear example; there are many. The Government removed the tax relief for private medical insurance, which a Government of his party would apparently want to add to the system. That relief was complex, expensive and made no progress at all in terms of its use. I venture to say to the hon. Gentleman that if he suggested to business that the Government should remove capital allowances from the statute book—

Tim Loughton (Conservative, East Worthing and Shoreham)

Taxes.

Dawn Primarolo (Labour, Bristol South)

Well, he needs to be clear. The tax system and its complexity is made up of many areas. People want relief when it will help them, despite the fact that it brings complexity, but do not want complexity if the relief goes to someone else.

John Bercow (Conservative, Buckingham)

rose—

David Cameron (Conservative, Witney)

rose—

Dawn Primarolo (Labour, Bristol South)

I have already given way to the hon. Member for Buckingham, so I shall be fair to the hon. Member for Witney (Mr. Cameron), who is rising for the first time.

David Cameron (Conservative, Witney)

I am grateful to the Paymaster General for giving way. I am enjoying this debate more than some of us may have expected. Given that the rewrite has been delayed, can the right hon. Lady explain how much of that delay is due to the length of the Budgets of this Chancellor who, I believe, holds the record for the three longest Budgets in our history?

Dawn Primarolo (Labour, Bristol South)

The tax law rewrite project has not been delayed. I was being generous to the previous Administration, but that was clearly a mistake on my part. When the previous Administration made their original assessment that the entire tax code could be rewritten in five years, they were a tad optimistic, and that would be an understatement.

David Cameron (Conservative, Witney)

Will the Paymaster General give way?

Dawn Primarolo (Labour, Bristol South)

I know that hon. Members are enjoying the debate enormously, although it has taken a slightly different turn than I anticipated. I assure them that the rewrite is necessary because the central objectives and the central pieces of legislation involved in the tax law rewrite have been in place for some considerable time.

John Bercow (Conservative, Buckingham)

rose—

Dawn Primarolo (Labour, Bristol South)

Before I give way to the hon. Gentleman again, I should check that no other hon. Member is waiting in the queue. If not, I shall gladly give way to him before I make progress on my speech, for which I am sure he is waiting with bated breath.

John Bercow (Conservative, Buckingham)

I look forward to it with bated breath, eager anticipation and beads of sweat upon my brow. However, I must implore the Paymaster General to widen her intellectual horizons. Tax law rewrite and tax simplification need not be mutually exclusive. In the interests of good governance, she would be well advised to take note of the seminal ten-minute Bill on tax simplification that my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton) introduced in the last Parliament, as well as a similar Bill that I introduced for the edification of the House on 6 June 2000.

Dawn Primarolo (Labour, Bristol South)

I always follow closely everything that the hon. Member for Buckingham says on the Floor of the House, irrespective of whether I agree with his allegations.

The tax system—in terms not only of the language of the legislation and its accessibility to those who wish to use it, but also of balancing fairness, certainty and continuity for business with ensuring that all taxpayers get a fair response from the tax system—does not always lend itself easily to simplification. Simplification can be unfair, short and discriminatory, like the poll tax. I am sure that hon. Members will therefore agree that I should move on to consider the Bill.

It is beyond the project's remit to make any change in the main tax policies. However, as the long title suggests, the rewrite can encompass minor changes in detail that further improve the Bill. Examples include: new provisions to fill gaps in existing legislation; incorporating extra statutory concessions; abolishing obsolete material, and correcting minor anomalies. Major changes to tax legislation are matters for the Finance Bill alone. Hon. Members who want to discuss the complexity of the tax system should make their points during consideration of that measure, as they do every year.

Eric Forth (Conservative, Bromley and Chislehurst)

Will the Paymaster General give way?

Dawn Primarolo (Labour, Bristol South)

I have been very generous. I appreciate that the right hon. Gentleman is the only Conservative Member to whom I have not given way and I shall therefore allow him to intervene later so that he does not believe that I am persecuting him. First, I should like to make a little progress.

The Joint Committee focused on the minor changes and satisfied itself that their significance was small and thus within the Bill's remit. The Joint Committee also noted the wide public scrutiny of the Bill, especially the minor changes, which the consultation process clearly flagged up. The project drops any proposed changes that do not fulfil the public scrutiny test.

There is a rigorous system of public consultation for the rewrite Bills. For example, three exposure drafts and a draft Bill were published for formal consultation before the current measure was issued. Meetings have taken place with representative public bodies and informal contact has been made by electronic means with various interested parties.

The Bill is the second measure to emerge from the project. The first dealt with capital allowances two years ago. Tax professionals and other users warmly welcomed the Capital Allowances Act 2001. On Second Reading, I said that I was gratified to read the comments of a leading tax author, who wrote:

"For those learning about capital allowances for the first time, the Capital Allowances Act 2001 is an unqualified blessing. Besides consolidating the old law into one Act, the new legislation is much more clearly laid out than the patchwork of legislation which it replaced."

That is considerable praise.

I want to consider the second rewrite Bill. It makes a start on the rewrite of income tax by rewriting schedule E. Approximately 25 million people are taxed under it, giving rise to more than 90 per cent. of total income tax. The charge to income tax is currently broken down into several schedules. They have come and gone, but we currently have schedules A, D, E and F.

Schedule E deals mainly with income from employment but also includes some charges on pension income and social security benefits, when they are taxable. The Bill covers the current schedule E provision. It brings together all provision for pension income in part 9 and therefore includes even pensions that are currently taxable under schedule D. It also includes the primary legislation for pay-as-you-earn. In the spring, in response to users' representations, the project will publish for consultation a complete draft of the rewritten pay-as-you-earn regulations.

The Joint Committee concluded that the Bill was a welcome clarification of existing law and would be easier to use and more accessible to Parliament, the judiciary, informed professionals, business people and other users. Various techniques have been used in the Bill to effect that.

The first and most important element is the imposition of a coherent structure. Instead of the ramshackle order of provision in existing legislation, the Bill presents all the material logically and groups linked topics. For example, all provisions dealing with taxation of benefits in kind are drawn together to form a benefits code. And, for the first time, all legislation for share-related remuneration is brought together, including, for instance, the various types of share scheme and share option plan.

Another feature that makes the Bill easier to use is the inclusion of plenty of navigational aids for the reader, such as introductory scene-setting chapters and signposts to other relevant provisions. All those are designed to help readers find their way through this large body of legislation. Other features of the rewrite include shorter sentences, modern language, more consistent definitions and, where it is helpful, more use of reader aids such as formulae, tables and method statements.

All that combines to make a new style of tax law that is more accessible, easier on the eye and altogether more user-friendly. That is evidenced by public reaction. For example, the Confederation of British Industry described the Bill, as published in draft last summer, as

"a very great improvement on the existing legislation",

and the Institute of Chartered Accountants in England and Wales said it was

"another major step forward in improving the intelligibility of UK tax legislation in areas of the law that affect the majority of taxpayers".

The title of the Bill is self-explanatory. It is a Bill to

"Restate, with minor changes, certain enactments relating to income tax on employment income, pension income and social security income; and for connected purposes".

That is its limit. It is not a tax-reforming Bill. It is, however, an important Bill, and it is also a success. I am firmly convinced that it will make things better for everyone who uses tax legislation.

Before I finish my speech I will give way to the right hon. Member for Bromley and Chislehurst (Mr. Forth), if he still wishes to intervene.

Eric Forth (Conservative, Bromley and Chislehurst)

The Minister can now claim almost to have achieved a full house, or a running flush, or whatever the appropriate term may be.

In paragraph 3 of the Joint Committee's first report, we are told

"The Committee is satisfied that the only changes that the Bill makes to the existing law are of such minor significance that they need not be referred to the attention of Parliament."

I must confess that phrases such as that cause me some concern. I take the view that nothing is of such minor significance that it need not be referred to Parliament. While I accept that the process we are now undergoing constitutes a reference to Parliament, what reassurance can we have that these matters are indeed of "such minor significance"? Even if they are of minor significance, why is there an implication that the rest of us need not be bothered about them?

Dawn Primarolo (Labour, Bristol South)

Extra-statutory concessions would not normally be in the body of the tax legislation, but would be used alongside it. One example of a minor change would be the incorporation of such a concession in the legislation.

The right hon. Gentleman suggested that he might want to elaborate on his point. If he looks at the explanatory notes, he will see that every minor change in that category is flagged up. The notes explain what the change is, and where it can be found in the Bill. Committee members focused specifically on those changes to satisfy themselves as to the procedure. As the right hon. Gentleman knows, the Committee considering the Bill was not dissimilar to one that would consider a consolidation Bill. It is a Committee of both Houses, in which the Government do not carry their automatic majority. Its discussions follow a slightly different procedure from those in other Committees, and it is able to call independent witnesses if it so chooses.

John Burnett (Liberal Democrat, Torridge and West Devon)

Will the Paymaster General give way?

Dawn Primarolo (Labour, Bristol South)

This is the very last time that I shall give way before I sit down.

John Burnett (Liberal Democrat, Torridge and West Devon)

I am extremely grateful to the Paymaster General for giving way. Are those the only changes that are being made through this legislation? I had heard that one or two others are perhaps being made, particularly with regard to pay-as-you-earn regulations, some of which may well have been ultra vires since about 1960.

Dawn Primarolo (Labour, Bristol South)

I wish I had had written notice of that question. As I said in my opening remarks, the PAYE regulations are being re-drafted and are going out for consultation. They will be fully scrutinised through such public consultation before they are updated.

David Cameron (Conservative, Witney)

rose—

Dawn Primarolo (Labour, Bristol South)

I have been extremely generous in giving way, and if hon. Members want to make other points during the debate, I shall of course pick up on them, if I can catch your eye at the end of the debate, Mr. Deputy Speaker. I commend this Bill to the House.

Stephen O'Brien (Conservative, Eddisbury)

Let me begin by noting that when my colleagues saw that the Paymaster General would be taking this very interesting measure through the House on Third Reading, they could not resist packing the Chamber to listen to her. Hers has been a useful opening to this important provision, which affects everybody in this country who has income.

This Third Reading debate follows Second Reading upstairs in Committee on 16 December, and the formal granting by the House of a Second Reading two days later. I thank the Paymaster General for the lucid and comprehensive way in which she has set this important Bill before the House—[Interruption.] She seems to be implying from a sedentary position that that might be the kiss of death, but I should like to thank her for the courteous and patient way in which she dealt with numerous interventions from my colleagues, who on this occasion are themselves numerous. Collectively, they have provided a remarkable fount of wisdom to assist her in today's discussion. I hope to cover some of the points that they made in those interventions, to the extent that I can possibly add to the answers already given.

As the Paymaster General said, this is the second Bill to emanate from the tax law rewrite project. The first became the Capital Allowances Act 2001, which applies primarily to businesses. This Bill has a much wider application and involves many of our constituents, which is why it has attracted so much interest and attention. It is no mean Bill, as it consists of 725 clauses and eight schedules. That may come as no surprise, given that it deals with the significant arena within the overall income tax field of earnings and pensions and, as she rightly said, of social security income.

Against the background of the introduction of income tax in 1799, the Bill seeks to encapsulate law that has more than 200 years of history behind it. Given the Bill's sheer size, right hon. and hon. Members will doubtless have found that the best way to gain the clearest possible understanding of it—given the remarkable speed with which my colleagues have attended to it, they must have used this technique—is to start with the exceptionally helpful accompanying explanatory notes, and then to contrast and compare provisions and expressions in specific parts of the Bill with what they replace.

Greg Knight (Conservative, East Yorkshire)

May I associate myself with my hon. Friend's remarks about the Paymaster General?

Has my hon. Friend received any assurances from the Government that the whole rewrite process is not putting undue burdens on the office of the parliamentary draftsman? I am among those Members who want more pre-legislative scrutiny. The Leader of the House has told us that there are difficulties due to the pressure of work on the parliamentary draftsmen. This process—worthwhile though it is—should not mean the neglect of other work that I regard as more important.

Stephen O'Brien (Conservative, Eddisbury)

My right hon. Friend raises a fundamental and important point about both the rewrite project and the pressure on parliamentary draftsmen generally. Under the ghastly guillotining procedure, the bulk of legislation is passed with no scrutiny, which puts even greater burdens of responsibility on the parliamentary draftsmen.

Later, in what I hope will be relatively short remarks, I shall ask the Paymaster General to answer particular questions, one of which will address the point that my right hon. Friend has raised.

Eric Forth (Conservative, Bromley and Chislehurst)

My hon. Friend will have seen that the Order Paper helpfully notes that this debate can continue until any hour, so I hope that he will not deprive the House of his research and comments on the Bill by feeling any time constraints whatever. The House is at my hon. Friend's disposal. We want to hear what he has to say "until any hour", so I hope that he will take every advantage of that.

Stephen O'Brien (Conservative, Eddisbury)

I am most grateful to my right hon. Friend. No one in the House has a greater reputation than my right hon. Friend for day-in, day-out commitment to parliamentary scrutiny and for using this Chamber as the proper forum for debate and holding the Government to account. I noted the words on the Order Paper and, as we explore the issues, we may be glad to avail ourselves of the opportunities that they offer us. Under the hideous new hours to which we are subjected, the 10 o'clock motion is now the 7 o'clock motion, so we shall have to contend with that. If my right hon. and hon. Friends and, indeed, right hon. and hon. Members from other parties find that they are fully engaged with the issues, they may feel that they need time to explore them.

These important issues relating to income tax apply to many citizens.

John Bercow (Conservative, Buckingham)

The compassionate instincts of my right hon. Friend the Member for East Yorkshire (Mr. Knight) are never far from public view. Does my hon. Friend the Member for Eddisbury (Mr. O'Brien) agree, however, that my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) is indeed right, and that it is especially incumbent on my hon. Friend to discharge his responsibility and to offer us his exegesis of the work and lucubrations of the parliamentary draftsman, as represented by the 13 major publications in the form of exposure drafts issued during the past five years?

Stephen O'Brien (Conservative, Eddisbury)

I am grateful to my hon. Friend. I wonder whether "exegesis" might not qualify for the tax rewrite project itself, but I take his point on board. In what I thought were going to be brief opening remarks, I was trying to show that I had genuinely tried to understand this vast mass of documentation before we allow the House to enact the measure. I hope that gives my hon. Friend some comfort.

I am confident that the Bill is a genuine stride forward in making our existing primary, direct income tax legislation on earnings and pensions clearer and easier to use. I do not propose to take up too much time itemising, contrasting and comparing each clause—save to admit to donning an anorak for that purpose. With a wet towel wrapped around my head, I have studied the Bill. In my view, the Joint Committee has done a truly excellent and admirable job.

Mark Hoban (Conservative, Fareham)

Does my hon. Friend share my concern that a Bill of such magnitude and importance was covered by only four sittings of the Joint Committee? Notwithstanding that it received extensive pre-legislative scrutiny, should not the House spend more time on a Bill of such magnitude and importance?

Stephen O'Brien (Conservative, Eddisbury)

I believe that the Paymaster General had a genuine point when she made it clear that the process of consideration involving a Joint Committee of the House was designed to tap into the vast expertise and experience of individuals who are able to bring their work to the assistance of the House, in supporting that which we as legislators want to achieve: a rewrite in much clearer, user-friendly language of a measure covering the important subject of income tax law as it relates to earnings and pensions.

Although it may seem on the surface that there has been less than the full number of debates that my hon. Friend might have expected, I am satisfied with the process because so much has been done through a number of Committees that have reported to each other. Although it is up to the Paymaster General to give my hon. Friend the reassurance that he seeks to pass on to his constituents, I have taken the trouble to satisfy myself that the process has been well designed and properly adopted.

Mark Hoban (Conservative, Fareham)

Has my hon. Friend read the speech that my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) made in the Second Reading Committee about the process that led up to the Bill? He said:

"It is rather difficult to meet our duty of scrutinising legislation when these Bills come here after so much consultation, which usually leads to the full-blooded support of every professional body for the work that is produced."—[Official Report, Second Reading Committee, 16 December 2002; c. 10.]

Stephen O'Brien (Conservative, Eddisbury)

No doubt the Paymaster General has listened to my hon. Friend's point with care and wants to comment.

Dawn Primarolo (Labour, Bristol South)

I am sure that the hon. Member for Fareham (Mr. Hoban) is not seriously suggesting that the Government should not make every effort to ensure that legislation is properly drafted before it reaches the House, simply so that outside bodies can give Opposition Members something to say in debate? Surely the Government should be applauded for undertaking so much consultation and ensuring that legislation before the House is of the highest possible standard.

Stephen O'Brien (Conservative, Eddisbury)

The Paymaster General almost takes the words out of my mouth. It is wholly proper and appropriate that, in addition to the genuine tribute that I have paid to the Paymaster General, the House should record its gratitude to a number of the prime movers. The tax law rewrite project was established in December 1996 by the then Chancellor of the Exchequer, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who gave it the authority and impetus that has led to the overall project's success so far. My right hon. and learned Friend would like to have been with us today but is unavoidably detained.

I pay tribute to my right hon. Friend the Member for Fylde (Mr. Jack), who is elsewhere on Select Committee business. These ghastly hours mean that we all have to be in too many places at once. I pay tribute also to the hon. Member for Warwick and Leamington (Mr. Plaskitt), who has dedicated himself with great assiduity to the Bill. [Hon. Members: "Where is he?"] He is not in the Chamber, but that is forgivable, given the absence of my right hon. and learned Friend.

Eric Forth (Conservative, Bromley and Chislehurst)

As ever, my hon. Friend is a true gentleman in seeking to exonerate the other right hon. and hon. Members whom he mentions. However, if the Bill is as important as the Paymaster General suggested—and as important as my hon. Friend suggests by giving so much of his time to it—is he puzzled and disappointed that the very people to whom we should have looked for guidance today deem it to be more important to be elsewhere, rather than in the Chamber assisting us with the knowledge and experience that they gained in Committee? My hon. Friend and the Paymaster General apart, are we not left rudderless on the matter as a result?

Stephen O'Brien (Conservative, Eddisbury)

I am somewhat disappointed that my right hon. Friend feels that I am not up to the task. The absence of the right hon. and hon. Members is understandable in the circumstances. However tempting it is to make a cheap point by condemning hon. Members for not being present in the Chamber, I shall not do so. It is encouraging, however, that so many of my right hon. and hon. Friends have felt it necessary to ensure that the Bill is given proper scrutiny on Third Reading. The Bill is the result of a long and rigorous process and I therefore hope that my right hon. Friend will gain some comfort from the knowledge that proper scrutiny has been granted to it. During the debate, he will have many opportunities to assure himself that that is the case.

Greg Knight (Conservative, East Yorkshire)

May I reassure my hon. Friend that we make no criticism of his handling of the matter? He is a powerful advocate. However, can he reassure me that nothing in the Bill alters the ruling in the well-known revenue case of Hochstrasser v. Mayes?

Stephen O'Brien (Conservative, Eddisbury)

AC 376. We should pay tribute to the hard work that has gone into the explanatory notes that support the Bill. As is so often the case on other Bills, they are exceptionally helpful to Members. On this occasion, my right hon. Friend will find all the answers that he needs, and it would be tiresome and unnecessary to read out the paragraph concerned.

David Cameron (Conservative, Witney)

My hon. Friend's wet towel exercise—as we shall now have to call it—of looking through the Bill was obviously complete. Did he consider clause 700, which deals with the taxation of share options? Does he share my concern that the proposed law may differ from the existing law, because the Bill mentions taxing an option the moment that it is assigned, instead of the moment that it is exercised? In that case, the person holding the option would not have made a profit out of it, but would be taxed on the nominal value of its assignation.

Stephen O'Brien (Conservative, Eddisbury)

Accountability for the content of the Bill lies ultimately with the Government, but if it is of assistance to my hon. Friend in seeking further assurance from the Paymaster General, I can tell him that the annexe to the Bill contains a list of 183 changes, which are classified as minor.

Eric Forth (Conservative, Bromley and Chislehurst)

Oh!

Stephen O'Brien (Conservative, Eddisbury)

My right hon. Friend will no doubt be interested to learn how those changes are classified and how the House may be assured that they are not a cause for concern. He will then have to decide whether he is satisfied with the explanation.

If my hon. Friend looks at the schedule 183 changes, he may well find that the change in clause 700 is classified as minor. I shall look it up if he needs further clarification, but his challenge is appropriate in this debate. He mentioned the wet towel. I assure him that it was very wet, but I am satisfied that the change is in line with the original intent not to inflict unnecessary burdens on users of the Bill.

John Bercow (Conservative, Buckingham)

Will my hon. Friend allow me to intervene?

Stephen O'Brien (Conservative, Eddisbury)

This must be the last intervention, as I need to get to page 2 of my speech.

John Bercow (Conservative, Buckingham)

My hon. Friend is typically generous. My right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) said in his Budget speech in November 1996 that the project was as ambitious as an attempt to translate "War and Peace" into lucid Swahili. He and other senior and influential Members are too busy to be here today, but does my hon. Friend think that they would approve of clause 130 on the notional price of an accessory?

Stephen O'Brien (Conservative, Eddisbury)

I was born in Tanzania and my father speaks fluent Swahili. The Bill is more difficult than the translation suggested by my right hon. and learned Friend the Member for Rushcliffe. I suggest that my hon. Friend looks at the definitions of any terms contained in inverted commas. That is always useful in tax matters. He can then decide whether "notional price" amounts to correct English usage. It is helpful to wear an anorak when comparing and contrasting this Bill with the wording in the original legislation.

I want to make progress. The Paymaster General was exceptionally generous in giving way to interventions, and I do not want to be less so. However, Labour and Liberal Democrat Members seem unwilling to intervene.

As I was saying, I pay great tribute to my right hon. and learned Friend the Member for Rushcliffe, but also to my right hon. Friend the Member for Fylde and to the hon. Member for Warwick and Leamington, both of whom served with great dedication on the steering committee overseeing the project. I salute all the steering committee members, under the indefatigable, focused, charming and determined chairmanship of my noble Friend Lord Howe of Aberavon, which has been patently effective.

George Osborne (Conservative, Tatton)

Will my hon. Friend give way?

Stephen O'Brien (Conservative, Eddisbury)

I should like to make progress, but I appreciate that my hon. Friend wants to make a relevant point.

George Osborne (Conservative, Tatton)

We are praising the work of the Joint Committee and approving the project, but the regulatory impact assessment states that the costs of the rewrite project are almost impossible to quantify in advance, and that it is impossible to arrive at an objective measure of the benefits. Does my hon. Friend and constituency neighbour agree that it is surprising to be considering a Bill whose costs and benefits remain unknown to us? I hope that the Paymaster General will at least say something about the costs.

Stephen O'Brien (Conservative, Eddisbury)

My hon. Friend and constituency neighbour raises an important point, which the Paymaster General and I discussed in the Second Reading Committee, and I shall refer to it a little later in my remarks. If my hon. Friend will be patient until I reach that point, I shall perhaps be able to deal with it in the round and he will get a more contextual answer. We have to bear in mind where the offset of the costs may arise, as well as the actual numbers. However, given the assurances in the regulatory impact assessment, it would be fair to say that, overall, they are relatively de minimis.

I add our genuine thanks to the many members of the accountancy and legal professions and taxpayer representatives who have taken part in the consultative committee that has reviewed this work, as well as to all those who have participated in the consultation, among whom are those listed on pages 3 and 4 of the explanatory notes, which the Paymaster General so helpfully read out during her opening remarks in response to an intervention made by my right hon. Friend the Member for East Yorkshire (Mr. Knight).

I make no apology for taking time to pay tributes because the House would be unable to undertake such work without the support and expertise of so many people dedicating considerable time and effort. Our gratitude rightly extends, equally, to the Inland Revenue staff who have been involved and, not least, to the team of parliamentary draftsmen, to whom my right hon. Friend the Member for East Yorkshire referred, who have grappled with this complex and continuing project.

It is important to note that the Bill, as with all rewrite Bills, is not intended to change the effect of current legislation in any significant way. That point was made by my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth). However, each rewrite will include a number of minor changes to the law—for example, to legislate for extra-statutory concessions—and this one is no exception.

As I said earlier, 183 changes are listed in the second volume of the Bill. I ask the Paymaster General to highlight a number of those changes, including additional examples of where this project has afforded the opportunity to discard obsolete provisions, during our proceedings this afternoon—it is rapidly becoming this evening—to underwrite the crucial element of trust that has to inform our proceedings.

In the Second Reading Committee, I raised that issue with the Paymaster General and asked her to flag up those changes well in advance so that, in addition to the process being transparent, it continues to carry with it the crucial trust and integrity by which it has been characterised to date. That should provide some of the assurances to which my right hon. and hon. Friends alluded in earlier interventions.

Although it was estimated that the rewrite project would involve 6,000 pages of legislation and initially take about five years, it has long since been recognised that the original programme would not be attainable. I agree with the Paymaster General that it is more important for work to be done properly, rather than quickly, as she said in a written answer on 31 January 2002.

Since its inception, this project has rightly attracted interest and support across the political spectrum, as well as in the business and financial services community. We have to recognise that the whole tax law rewrite project is a continuing one and that it will improve the democratic settlement between taxpaying citizens and the state in terms of transparency, communication and clarity, as is our obligation, only if it maintains its momentum and the Government remain wholeheartedly committed to it.

I have no doubt, frankly, that that is the Paymaster General's intent, but I ask her to confirm to the House that, as a minimum, the same resources—not least the availability of appropriately skilled and experienced parliamentary draftsmen—are maintained and supported in moving on to the next stage in rewriting the PAYE regulations, which, as she rightly said, are out to consultation.

In answer to an intervention made by the hon. Member for Torridge and West Devon (Mr. Burnett), it is important to recognise that the Paymaster General would help the House enormously if she were to tell us the programme for the next stage of the project. Although the rewrite of PAYE regulations was not within the original remit of the rewrite team, it has rightly been included in response to representations. Will the Paymaster General confirm that resources will continue to be made available for a timetable within the overall tax rewrite project? Will she push the project forward?

Will the right hon. Lady tell us what resources will be made available for the third Bill of the rewrite project—covering trading, property, investment, miscellaneous, and exempt income—in 2004–05? The boundary between the Bill that we are discussing today and the third income tax Bill has, understandably, been fluid. However, it was said that the boundary definition would be finalised during 2002–03. Will she give us that boundary definition?

In the Second Reading Committee, there was confusion in one quarter, but it is important to acknowledge that this Bill, and the whole rewrite project, is not aimed at the simplification of tax policy. The Paymaster General rightly said that we must distinguish between clarification of tax, in the rewrite project, and simplification of tax, which is a separate project. The rewrite project concentrates on codifying English tax law. However, there is an important qualification. Were my right hon. Friend the Member for Bromley and Chislehurst still here, he would be able to hear the assurance that I promised. I will tell him that tomorrow's Hansard will make riveting reading. The qualification is that, under Standing Orders Nos. 60 and 152C, it is for the House, in scrutinising the Joint Committee's work, to determine tax law. The Committee's judgment on any changes made by the Bill will have to be scrutinised by the House in order to determine whether the changes are minor or not. That goes to the heart of the point that my hon. Friend the Member for Witney (Mr. Cameron) made a few minutes ago. That point underscores the point that I made earlier about trust. The powers of the House must not be prejudiced. On the issue of trust, I ask the Paymaster General to take a few examples from note 183 in the annexe to volume 2 to show that they are indeed minor.

This Bill is before the House as a result of considerable work and time devoted by many experts and professionals, who have had to consider a number of what are called exposure drafts. There has been concern—and even complaints—about a new syndrome, which has become known as exposure draft fatigue, or EDF. The 2002–03 tax rewrite annual plan says:

"In order to build on the consultation process—and with the full support of the project's Steering and Consultative Committees—we now take a more flexible approach to the development of draft legislation prior to a final round of formal consultation. This includes more use of the Internet and, as soon as Departmental IT resource permits, we hope to set up a discussion group for draft legislation—that is an Internet page where people can post comments, reply to comments posted by others, and read the project's response."

My noble Friend Lord Howe of Aberavon has taken that point on board and the process has become more streamlined. It is, I would say, the better for it. There is now a considerable amount of material on this project, which the Inland Revenue has helpfully published on its internet site: www.inlandrevenue.gov.uk/rewrite/index/htm.

Accompanying the Bill is a regulatory impact assessment, and some points have already been made about it. It is an important and useful document that was signed by the Paymaster General and discussed in Committee. While recognising that it is difficult to quantify the costs to taxpayers, it is important to recognise that there will be some costs involved in retraining tax practitioners so that they become familiar with the new structure. However, the regulatory impact assessment is fair in regarding the costs likely to be offset or, taken as a whole, to be relatively de minimis.

Will the Paymaster General confirm the Inland Revenue's view contained in the regulatory impact assessment? It said that although

"it would be difficult to quantify most of the costs in advance, and impossible to arrive at any objective measure of the benefits . . . the interested parties, whom we consult on our work, still firmly believe that any costs will be more than outweighed by the benefits flowing from the project."

George Osborne (Conservative, Tatton)

Unfortunately, I have not read the Hansard report of the Committee discussion on this point, but was there any discussion of the costs to the Inland Revenue of the project? What are the direct costs to government from all the work that has been done on the rewrite, the use of the parliamentary draftsmen and so on?

Stephen O'Brien (Conservative, Eddisbury)

I am grateful to my hon. Friend, not least for his rapier-like persistence that we should at all times discharge our duties to look out for the waste of taxpayers' money. He will see in paragraph 28 of the regulatory impact assessment that the cost to the Inland Revenue of producing the Bill has been estimated at about £7.6 million spread over a period of six years that started in 1997 and goes through to the current financial year. As the assessment says:

"These costs can in part be offset by the costs that would have been expended on the consolidation of the ICTA 1988"—

the Income and Corporation Taxes Act 1988—

"and the subsequent Finance Acts, but for the work of the project."

Paragraph 29 adds:

"There will also be a small cost to the Inland Revenue in updating the relevant parts of the guidance manuals and internal training material."

There is, therefore, a cost, but it has to be considered in the round. As my hon. Friend heard earlier, we have to consider whether making income tax law—particularly as it relates to earnings and pensions and income from social security—easier to understand represents value for money in terms of the significant cost that is incurred. I believe that it does.

Greg Knight (Conservative, East Yorkshire)

Is there not another cost that I touched upon earlier? That is the cost of a possible lack of scrutiny that results from the fact that the parliamentary draftsmen have been overworked by this project. They are therefore not able to devote their time to producing every piece of proposed Government legislation in draft. That is what we want. The Leader of the House said that he also hopes that that will happen.

Stephen O'Brien (Conservative, Eddisbury)

My right hon. Friend makes an interesting point. In a sense, I defer to him because he has experience in government and I do not. It is my impression from what I have managed to glean as a member of Her Majesty's official and loyal Opposition that the parliamentary draftsmen are not only an expert but a somewhat scarce commodity available to Government. They are under enormous pressure given the volume and weight of Bills that are continually being introduced. It is important therefore to recognise that we seek an assurance from the Paymaster General that the resources that have been devoted effectively to date will, at least, be maintained at that level. That will enable us to move ahead with the third Bill on the tax law rewrite in the 2004–05 Session and the additional rewrite on the PAYE regulations that will affect everyone who earns. I hope that that reassures my right hon. Friend, but the Paymaster General may have an opportunity to add to my remarks.

Mark Hoban (Conservative, Fareham)

I am grateful to my hon. Friend for giving way again. He has been very generous at taking interventions.

My right hon. Friend the Member for East Yorkshire (Mr. Knight) talked about the burden on parliamentary draftsmen as a result of the process of pre-legislative scrutiny. My hon. Friend has referred to exposure directive fatigue. In parallel with parliamentary draftsmen becoming involved, external bodies also have to look at these matters. It is not just the tax law rewrite that involves professional advisers. Before the last Finance Act, there was a considerable input from practitioners on capital gains tax. Is my hon. Friend concerned, as I am, that professional bodies may be devoting a great deal of resources to tax law rewrite, when they may have other tasks because of the Government's programme?

Stephen O'Brien (Conservative, Eddisbury)

I am grateful to my hon. Friend, because what he has said helps me to repeat the gratitude of the whole House to the enormous number of experts and practitioners who, because they are so expert—one can place enormous reliance on them for their judgement and expertise—are exceptionally busy in their professional and other practical work. To have a satisfactory consultative body that is effective in support of the tax law rewrite project, which I believe our consultation Committee is, inevitably puts an enormous strain and demand on the time and effort of those people, who are already very busy in their own right.

It was exposure draft fatigue, not exposure directive fatigue—if I may gently correct my hon. Friend—that led to the establishment of use of the internet for dialogue, rather than the many meetings and paper drafts. Those of us who have been in professional practice, as I was before I entered the manufacturing industry, know that it is very time consuming to have to measure one draft against another. On the internet, as my hon. Friend well knows, time can be saved, not least because, in a rather professional way, there is a chat room to exchange good ideas.

Eric Forth (Conservative, Bromley and Chislehurst)

I worry when I start to hear talk of chat rooms and e-things. Is not my hon. Friend worried that a large proportion of the population is disfranchised by this ghastly modern process? Every time I hear glib talk of internet chat rooms and the like, it comes to my mind that the latest figures show, I think, that only 40 per cent. of households are connected to the ghastly internet. Therefore, potentially 60 per cent. of households are disfranchised from the so-called consultation process. How do we non-cyber folk get to know about these things, and how are we simple, non-electronic people, consulted?

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. Before the hon. Gentleman responds, I would point out that we are going a little wide of the Third Reading of the Bill.

Stephen O'Brien (Conservative, Eddisbury)

I am grateful for your guidance, Mr. Deputy Speaker. Indeed, I could almost say "rescue". I was concerned that my right hon. Friend might be referring to E-substances in food, given the nature of his question at one point, but I understand where he is coming from in terms of his non-cyber existence. I recognise that he inhabits the non-cyber world in a very firm and, I suspect, unshakeable way. But when he quotes statistics as to who is and is not hooked to cyber, it is important to recognise that we are not talking about the broad citizenry at large. We are talking about the professionals and those with particular expert knowledge in the field, who can help on the consultation Committee and also as consultees in the process. It is also important to recognise that it would be very difficult for them to do their professional work if they were not prepared to join what is regarded as the more modern e-world, with all its opportunities—and indeed shortcomings, as my right hon. Friend is never remiss in observing and pointing out to the rest of the nation.

I shall move forward as rapidly as I can with opening remarks that have taken somewhat longer than I had expected. I support and reiterate what my right hon. Friend the Member for Fylde said in our Committee proceedings, that we not only hope that the precedent of issuing a regulatory impact assessment of the Bill will be followed for all future tax law rewrite projects, but also believe that it should be applied to all future tax changes, to include economic tests and an analysis of what the Chancellor expects any tax measure to achieve.

Dawn Primarolo (Labour, Bristol South)

Has the hon. Gentleman been following the same debate in the United States, where Congress and the President disagree on how to make an assessment on that basis? Given that they cannot resolve the problem, is he seriously suggesting that it would be helpful for us to engage in such a dispute?

Stephen O'Brien (Conservative, Eddisbury)

In a sense, the Paymaster General gives me the assurance that I seek. The fact that she is conscious of the debate in the United States means that Treasury Ministers are keeping a watching brief on it. That gives me some encouragement. The model in the United States is often much more fruitful than models nearer to home. It will be helpful to see how the debate develops and how—if at all—the Americans manage to resolve the problem. If it is resolved satisfactorily, it will help to underpin the settlement between the citizens of this country who have to pay tax and the state, as represented through the Executive, which takes and applies the money. We need to ensure that they have the best possible information to understand how the money is valued and what is expected up front.

It is no different in the private and commercial world. It is no bad thing for hon. Members to experience the discipline of working in the real world that everyone else inhabits before they come here. If someone wants to raise money by going to a bank, he would be held to his business and repayment plans and would need to have an idea of how things might work out. That is not the habit of Government, as the Paymaster General knows. It is worth considering such a project, especially on the back of what is being considered in the United States. I am grateful to know that that might be under the gaze of Treasury Ministers, and we look forward to further reports on it.

As my right hon. Friend the Member for Fylde said in Committee, tax legislation is too often enacted

"on a wing and a prayer, wondering whether it will do some good or hoping—for political reasons—that it will",

but all it can add is further complexity. Therefore, for all users of tax legislation, the overriding need is for both clarity and certainty. Indeed, the Paymaster General made that point in her opening remarks. Although the rewrite project addresses clarity, I hope that the Paymaster General and the Chancellor will listen carefully, especially as the Budget is coming soon and the planned tax increases, which will hit everyone's pockets, are just 53 days away. They need to act on that, not least to make it easier for tax practitioners and taxpayers, but also to gauge, as my right hon. Friend the Member for Fylde said, the "before-and-after effects" of tax measures. That is, perhaps, the equivalent of the proposal, coupled with a post-audit review that one would expect in any walk of private business and commercial life. My hon. Friend the Member for Chichester (Mr. Tyrie) touched on that in the context of the compliance issue. I am grateful that the Paymaster General is nodding. She obviously acknowledged the importance of that, and I look forward to further announcements from the Treasury.

I hope that I am pushing at an open door, because in Committee the Paymaster General concluded with the words:

"Tax legislation is not always perfect. It is, however, about striking a balance between fairness and enabling competition, and it is about giving certainty."—[Official Report, Second Reading Committee, 16 December 2002; c. 12-17.]

That is a fair test and we need to adhere to it.

As we said in Committee, there would be no harm in submitting the document for scrutiny by the Plain English Campaign. That would help with clarity. Some of us have tried to earn a return for shareholders' money while at the same time supplying high-quality goods and services that customers want at a fair price. Many of us who have worked in the manufacturing, wealth-creating side of the economy have had to produce annual reports, especially if we have done that on the back of other people's money. In this ever challenging, regulated and, at times, politically correct world, annual reports have to contain all manner of things. They assume that people are always driven by the worst of motives rather than the best. Given the plethora of regulations that have to be satisfied in companies' annual reports, the application of the crystal mark by the Plain English Campaign has been particularly helpful. One of the first companies to use it, to its credit, was the National Westminster bank, in which, I hasten to add, I have no interest. I was going to say that I have no money, but that is another point. The bank's annual reports are a model of their kind, especially as many of the areas that they cover, including compliance and liquidity, are not dissimilar to those covered by the Bill. As part of the rewrite project, it would be exceptionally useful to submit the Bill to the campaign, as it is more likely to be read by private citizens than by businesses, which, with their professional tax advisers, are more likely to read the Capital Allowances Act 2001, the first of the tax law rewrite measures.

It would be useful to submit the Bill to the Plain English Campaign to discover whether the test that the Government have set themselves satisfies the campaign as well. The campaign would also have to recognise that it is not possible to reduce everything to a small novella. In our earlier debate, there were some interesting examples of fictional novellas from Government Members, who were trying to pretend that they were delivering a critique of Conservative policy. We, however, had the chance at last to hold the Government to account for their disastrous economic policies. I am straying outside this debate, so I shall simply tell the Paymaster General that it would be helpful to introduce a further test in the tax law rewrite project by submitting the Bill to the Plain English Campaign to discover whether it could attain a crystal mark, which would be a signal demonstration of the success of all the fine work that has gone into it.

Clause 176, as my right hon. Friend the Member for Fylde highlighted in Committee, can be understood with the aid of the exceptionally helpful flow chart on page 72 of the first volume of the explanatory notes. For the assistance of Members following our debate with intense interest, there is another chart on page 91. It is unusual that explanatory notes should include helpful diagrams that make the flow of money readily understandable. In Committee, my right hon. Friend strongly recommended that such diagrams be more widely used, not just as part of the rewrite project but more widely in legislation, not least draft legislation to assist with pre-legislative scrutiny. I, too, urge greater use of that form of explanatory communication, and I ask the Paymaster General to tell us in her winding-up speech whether there are any impediments against the wider use of the technique. Diagrams are included in the explanatory notes, but are notably absent from the Bill. It would be helpful to have a flow diagram, even if only in a schedule or annexe, as our education system relies heavily on computer technology. I know that it would be a burdensome challenge for my right hon. Friend the Member for Bromley and Chislehurst, but the rest of the population is familiar with menu options—people are being educated to respond to more diagrammatic ways of learning and understanding. A chart may therefore have a greater resonance with them than the product of the more literary, arts-based education of the past.

John Bercow (Conservative, Buckingham)

Far be it from me to seek to check my hon. Friend's heady and almost Panglossian optimism about pages 72 and 91, and the charts therein, of the explanatory notes, but will he remind the House that, as is customary with all legislation, there is a proviso on the front page of the explanatory notes reminding us that they are to be read in conjunction with, but are in no sense a part of, the Bill? Does he therefore think it necessary to issue a warning that the charts may not be a full, accurate and exhaustive description of the matters to which they relate?

Stephen O'Brien (Conservative, Eddisbury)

I thank my hon. Friend for that intervention. I had hoped that he was listening a tiny bit more attentively, as I suggested that the charts were a helpful model that could be incorporated in legislation. I fully accept that the explanatory notes should be read in conjunction with a draft Bill and that they would always be available after a Bill was enacted. None the less, if such information were included in the legislation as a schedule or annexe, it would help us to understand whether it was a genuine, full and fair representation of reality. It would be readily understood by hon. Members as well as all the users who will have to deal with such provisions once they become law. Indeed, it would be reviewed from time to time if the legislation were amended.

I hope that my hon. Friend the Member for Buckingham (Mr. Bercow) will be reassured by that clarification or restatement of the position that I sought to outline earlier. He is an example to all hon. Members of the benefits of a tremendous arts-based education, not least because of the great literary prowess that he demonstrates on numerous occasions, as well as his acrobatic ability with the English language. I hope that he will recognise that not everybody's mind works completely as his does and that some people may find the more diagrammatic and figurative—and even, dare I say it, more numerate—approach of some help.

As I seek to bring what I hoped would be short remarks to a conclusion—I do so somewhat desperately, given the late hour—I must highlight one area of caution.

George Osborne (Conservative, Tatton)

Will my hon. Friend give way?

Stephen O'Brien (Conservative, Eddisbury)

I am trying not to be delayed, but I shall give way once more.

George Osborne (Conservative, Tatton)

My hon. Friend referred to the late hour, but I remind him that, as I am sure he knows, the business can continue until any hour. We are still only at 6 o'clock in the evening, which is fairly early in what used to be the parliamentary day.

Stephen O'Brien (Conservative, Eddisbury)

I am aware that the business can continue until any hour, but I would not regard it as our proper duty as Her Majesty's loyal and official Opposition to do anything other than use the time of the House effectively, as I have been seeking to do. Given the shortness of the earlier debate, which occurred in Opposition time and dealt with the absolutely crucial matter of holding the Government to account for their failed economic policies and failure on public services, the way in which Labour Members used that time was questionable. I therefore feel no compunction or compulsion to feel constrained except by the need to hold the Government properly to account in the Chamber, where we have the opportunity to do just that. If it takes us until any hour to do that, we will take until any hour, but I hope that that will not be necessary and, given the number of questions that I have asked, I am looking forward to the assurances that I am sure the Paymaster General will be able readily to give us.

I was about to deal with an area of caution. Everything that today's Chancellor does works in contrary motion to the underlying principles of the rewrite project. There is growing evidence to suggest that the tax system has become more complex, especially in recent years, as a result of the weight and size of tax legislation and the guides written to assist persons or businesses that wish to understand it. The cost of administering the system has grown along with feedback from professional surveys. There has been growing criticism of the complexity of the tax system. Accountants and others have been arguing that the situation is beyond the comprehension of most ordinary taxpayers and is imposing an unnecessary burden on business.

George Osborne (Conservative, Tatton)

Will my hon. Friend give way?

Stephen O'Brien (Conservative, Eddisbury)

My hon. Friend is exceptionally assiduous.

George Osborne (Conservative, Tatton)

My hon. Friend will be aware that "Tolley's Tax Guide", the bible of tax accountants, has grown in size by 30 per cent. in the past few years. Indeed, smaller print now has to be used to accommodate all the extra complication of the tax law that has occurred under the current Chancellor.

Stephen O'Brien (Conservative, Eddisbury)

I am most grateful to my hon. Friend. It is clear that he has received the same briefing as me. Indeed, I was about to deal with that point. Tolley's standard tax manual, the bible for tax accountants, has indeed grown by more than 30 per cent. in the past three years. This is a point with which I happen to be familiar, and I am grateful to my hon. Friend for raising it. The Financial Times on 24 November 2001 highlighted the increase in the weight of tax manuals since Labour came to power in 1997:

"Britain's 'tax bible' has grown by more than a third since Labour came to power as the nation's accountants struggle to understand the word of Gord. Tolley's manuals on VAT, income tax and corporation tax—the accountant's favourite reference tool—have had to add a total of 855 pages to explain the gospel according to Gordon Brown."

A gospel is normally described as good news, so I have to take serious issue with the Financial Times on that. It goes on:

"The three guides, which together have 3,414 pages, are longer than London's residential and business telephone directories. Tolley's has even had to reduce the print size to cram in more."

When my hon. Friend talked about reducing the size, I was worried that hon. Members might be confused and think that the volume had contracted. Far from it—it has grown and has had to reduce its print size so as to cram everything in.

This is quite an extraordinary record, and one that fully illustrates how this Government's actions are going in contrary motion to the very proper tax law rewrite project that is gaining tremendous consensual cross-party support—and rightly so—in the House. Throughout the Chancellor of the Exchequer's tenure in office, a feature of his Budgets has been the sheer size of the subsequent legislation published in each Finance Bill. According, again, to the Financial Times, the "door-stopping" Finance Bill of 2002, with 140 clauses and 39 schedules, was the third largest ever. The Financial Times states:

"At 488 pages, it is the third-longest in history and it does not even include some of the most significant legislation coming out of the Budget, such as the rise in national insurance contributions"

which we will all have to suffer in 53 days' time. Can you believe it, Mr. Deputy Speaker?

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. We are not discussing the Finance Bill this evening. Perhaps we can discuss the Third Reading of the Bill that is before the House?

Stephen O'Brien (Conservative, Eddisbury)

I am grateful to you, Mr. Deputy Speaker. I may have taken slightly longer than you think necessary to make my point about the 53 days—

David Taylor (Labour/Co-operative, North West Leicestershire)

Not true.

Stephen O'Brien (Conservative, Eddisbury)

I think that the hon. Gentleman is trying to place on record a comment about the question of 53 days. Of course, it depends on whether one is an employee or an employer. Both will face tax rises. The employers' contributions will increase at the beginning of the month and, as anyone who has worked in the real world of industry will know, the employees' contributions will rise at the end of the month, unless they have a special dispensation through their employer or through any other legislation or regulations—there are plenty of them—to change that to another date in the month. So it is 53 days until the employers' contributions will change, and we shall all have to suffer in 53 days' time—or more, depending on whether we are talking about employers' or employees' contributions. Given the appalling attack that this will represent on the pockets of the citizens of this country, I am very surprised that the hon. Member for North-West Leicestershire (David Taylor) should have the gall to highlight this matter in the way that he has done.

John Bercow (Conservative, Buckingham)

I am grateful to my hon. Friend for giving way so generously yet again. Surely the essence of this matter is that the tax law rewrite project has to be viewed in the context of the central charge against the Government, which is that of more complexity, on the one hand, and less information being made available to the public on the other. In that context, what consideration has my hon. Friend given to the verdict of the Treasury Committee, which is very germane to our considerations tonight, that the Chancellor is to be excoriated for his failure to publish the impact of his direct and indirect taxation measures on people in the respective income deciles?

Stephen O'Brien (Conservative, Eddisbury)

rose—

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. I am sorry, but the hon. Member for Eddisbury (Mr. O'Brien) is again being tempted into byways that are not really to do with the Third Reading of the Bill.

Stephen O'Brien (Conservative, Eddisbury)

I will certainly take your strictures to heart, Mr. Deputy Speaker, and leave on the record what my hon. Friend the Member for Buckingham has said. I hope that the Government will take serious note of his contribution in that intervention.

I was seeking to highlight, by way of example, why there is real concern about the consistency of the Government's action in relation to the tax law rewrite project, a crucial element of which is the Bill before us tonight, and to mention the assurances that we wish to see under the PAYE regulations.

Dawn Primarolo (Labour, Bristol South)

The hon. Gentleman was complaining about the Finance Act 2002, in which the Government took out all the provisions on loan relations— which were a complete mess—and rewrote them, which equates to less pages of legislation.

John Bercow (Conservative, Buckingham)

Fewer.

Dawn Primarolo (Labour, Bristol South)

I thank the hon. Gentleman for the grammatical correction—fewer pages. The hon. Member for Eddisbury cannot seriously suggest that the Finance Act 2002 entirely comprised new legislation, because a huge chunk of it rewrote legislation that his Government had messed up.

Stephen O'Brien (Conservative, Eddisbury)

Hon. Members on either side of the House will have different interpretations, but the recollection of my right hon. and hon. Friends is that the Financial Times was justified in calling that Finance Bill a doorstop, regardless of whether some clauses were taken out.

Given the consensual nature of the tax law rewrite project, the work of the Joint Committee and my support for what the Paymaster General has done, I hope that she realises that I do not intend to be unfair or difficult. However, there is a question in my mind about the consistency of devoting so much time and so many people to the valuable work on the tax law rewrite project, which is demonstrated by the Bill, and the inevitability of having such large Finance Bills. We do not know what will be in the forthcoming Finance Bill, and the Paymaster General will not disclose any of the contents of the Chancellor's Budget, whenever it takes place—I hope that we will soon be told the date. It will help the future work of the tax law rewrite project if the standards applied to that project are used in the drafting of Finance Bills. I believe that the Paymaster General indicated that that was the case in her opening remarks.

Dawn Primarolo (Labour, Bristol South)

It is the case that when legislation is rewritten and put into Finance Bills, it is rewritten in the tax law rewrite style. When, for a Finance Bill of a few years ago, we completely rewrote some VAT legislation using the tax law rewrite style, Opposition Members thought that it was a completely new piece of legislation and opposed it on that basis.

Stephen O'Brien (Conservative, Eddisbury)

The Paymaster General has the advantage of me, in that I was not party to that. Different interpretations can always be made, but the point is that every year we dedicate ourselves with a great deal of effort to the most important Bill that goes through Parliament, namely, the Finance Bill. I am simply asking the Paymaster General to recognise that it is important to take a consistent approach to the tax law rewrite project and to the framing of Finance Bills.

The Chancellor's Budgets of 1998 and 2000 were two of the biggest Finance Bills. As regards the 2002 Finance Bill, nine pages set out changes to rates of duty for small brewers, six pages dealt with new tax arrangements for community and amateur sports clubs, 14 pages set out new tax arrangements for vaccines research and five pages were given to revisions to the aggregates levy. Specialists are alarmed by the size of legislation. John Whiting of PricewaterhouseCoopers has said:

"The only thing that keeps it bearable is the fact that we have seen a lot of it before. But for that, we'd be utterly floored."

In response to the 600-page 2000 Finance Bill, John Whiting, who was then also vice-president of the Chartered Institute of Taxation, said:

"The whole of the personal tax area is ripe for simplification."

Again, I emphasise that point. We should not confuse the tax law rewrite project with tax simplification. That is another demand that the Government should note.

On the same subject, Frank Haskew, an executive at the Institute of Chartered Accountants, commented:

"This is out of all proportion to anything we have ever seen before. The volume of tax law has doubled since the 1980s. I do not know how ordinary people have a hope of understanding their tax affairs. Even accountants are struggling."

The trend of more complex and lengthy tax law is crucial to the debate. We hope that the Government will ensure that the standards that apply to the tax law rewrite project are adopted for all Finance Bills. I believe that the Paymaster General's intent is genuine, but the record to date gives no ground for hope.

As we rapidly reach the conclusion of my remarks on the subject, it is important to comment on the increasing complexity of the tax system in relation to the Capital Allowances Act 2001, which was the first measure in the tax law rewrite era.

John Taylor (Conservative, Solihull)

I had not intended to intervene, although I am an expert on income tax because I have paid it for approximately 40 years. However, my hon. Friend said that even accountants were struggling. In my experience, accountants do extraordinarily well out of such monsters as the Bill.

Stephen O'Brien (Conservative, Eddisbury)

My hon. Friend makes an interesting and important point. I do not want to decry accountants, because so many experts on whom hon. Members have relied to reach our current position of considering a tax law rewrite Bill are accountants. It is not right to condemn those who are properly and professionally able to make a sensible and sometimes rewarding living out of being experts. Perhaps simplifying the law will make it more challenging for them to earn a crust. That relates to the impact assessments that some of my hon. Friends wanted clarified earlier. I try to emulate my hon. Friend the Member for Solihull (Mr. Taylor) in many respects, but I dread the day when I shall have paid income tax for 40 years.

I am deeply conscious of your earlier guidance, Mr. Deputy Speaker, about not being tempted to stray too far down alleys, byways and cul-de-sacs by my hon. Friends, who are perhaps struggling to come to grips with the vast array of documentation.

The Capital Allowances Act 2001 was the first element of the tax law rewrite project. My noble and learned Friend Lord Howe of Aberavon said:

"The Finance Act 2000 . . . is almost twice as long as our only rewrite product so far—after about four years' work—the Capital Allowances Bill. As I said last summer, 'It is like trying to repaint Brighton Pier at a time when its owners are trying to extend it to the French coast.'"

That has a sad resonance in the light of recent events at the West pier and the Palace pier in Brighton. My hon. Friends and I send our condolences to people in Brighton. Lord Howe's comment was so apt that I quoted it as a memorable illustration of our argument on the current tax law rewrite project.

We are also considering burgeoning costs to the taxpayer.

John Bercow (Conservative, Buckingham)

Will my hon. Friend give way?

Stephen O'Brien (Conservative, Eddisbury)

I am in danger of never reaching the last paragraph of my speech, but I shall give way.

John Bercow (Conservative, Buckingham)

I know that my hon. Friend wants to be reminded of the integral relationship between the complexity of tax law and its implications for the introduction of each Finance Bill. Does he agree that it is therefore right to record what Lord Howe of Aberavon is too modest to note? His first Finance Bill, in 1979, in marked contrast to a measure of 488 pages that the current Chancellor introduced, was merely 28 pages long.

Stephen O'Brien (Conservative, Eddisbury)

I of course defer to the remarkable body of factual knowledge, both useful and completely useless, that my hon. Friend is so often able to deploy for our elucidation. The example he gives is, I think, an example for all time, and it would be most helpful if Chancellors—especially this Chancellor—heeded it. Under Parkinson's law, 22 pages are likely to receive better scrutiny.

David Taylor (Labour/Co-operative, North West Leicestershire)

Will the hon. Gentleman give way?

Stephen O'Brien (Conservative, Eddisbury)

I am happy to give way to the hon. Gentleman, who so far has spoken only from a sedentary position.

David Taylor (Labour/Co-operative, North West Leicestershire)

Does the hon. Gentleman agree that while there is sometimes a positive correlation between the size of Members—such as the hon. Member for Buckingham (Mr. Bercow)—and their quality, the correlation between the length of Acts and their quality can be inverse?

Stephen O'Brien (Conservative, Eddisbury)

I hesitate to stray too far in the direction of the analogy about size and other matters. It is important to recognise that the contributions of members of all parties here are always to be respected, because they are all honourable Members.

This has been a helpful and, indeed, somewhat surprising debate. Like the Paymaster General, I dare say, I had not expected so much interest to be displayed. I am glad that I put in all those hours of work before a debate on what is, after all, quite a dry and technical subject. Thank goodness I did not decide to go and do something else, instead of doing at least some of the homework that was necessary for me to understand the vast array of documentation with which the Joint Committee has so ably presented us.

As I was saying, all this comes at a cost—a burgeoning cost to the taxpayer. If we have any duty at all, it is to consider taxpayers' interests at all times. Despite computerisation and the increased use of companies in the administration of the tax and benefits system, it costs about £6 billion a year to run the Inland Revenue and the Benefits Agency. In 1950–51 it cost less than £1 billion, in 2001 prices, to run the Revenue and the equivalent of the Benefits Agency. We should look for any available way of making legislation relating to the Revenue simpler.

I hope that part of the benefit of the tax rewrite will be the elimination of waste in connection with the running costs of a Department. I also hope that, as soon as possible, the Paymaster General will deliver a positive assessment. I should like to think that, as a result of the clarification and ease of use that will result from the rewrite project, some of the administration costs in the Inland Revenue will be reduced. As the Paymaster General is the Minister responsible for such matters, it is incumbent on me to address these remarks to her. We must always be on the lookout for opportunities to minimise waste of the public money that has been so hard earned by the taxpayer.

Given all that I have said, and bearing in mind the warning that I gave in the latter part of my speech—and provided that the Paymaster General and the Chancellor are prepared to heed that warning—my colleagues and I, as Her Majesty's loyal and official Opposition, will be more than happy to support the Bill. We congratulate all who were involved in its presentation in its current form.

David Cameron (Conservative, Witney)

On a point of order, Mr. Deputy Speaker. Will you give us some guidance on the correct way to state Members' interests, including those of Ministers? The Bill deals with taxation arrangements for Ministers and other Members, specifically in clauses 291 and 295. Clause 295 covers transport and subsistence arrangements for Ministers. Should we have registered our interests, given that we all have an interest in the Bill?

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

The Bill does not change the law in any way. I am sure that the hon. Gentleman and, indeed, all other Members are well aware of what they must do to declare their interests during debates.

David Laws (Liberal Democrat, Yeovil)

I am delighted to be able, finally, to participate in this debate. My party welcomes the Bill, although my hon. Friend the Member for Torridge and West Devon (Mr. Burnett) may want to catch your eye later on, Mr. Deputy Speaker, to pick up on some points of detail.

I want to begin by making some general comments, and by following the hon. Member for Eddisbury (Mr. O'Brien) in congratulating all who put in the hard and not always enjoyable work involved in getting the Bill to this stage, including the Paymaster General, the right hon. and learned Member for Rushcliffe (Mr. Clarke), members of the other place and the officials who doubtless did some of the serious grind behind the scenes to introduce greater accessibility and, to some extent, simplicity to the Bill's wording.

We have consulted a number of tax specialists about whether the Bill is a success. Perhaps the kindest thing that I can say to the Paymaster General is that the salient comment of one tax adviser was that they take a very dim view indeed of measures such as this, which, in simplifying the tax system and making it easier for people to understand, could reduce their own fee income.

Dawn Primarolo (Labour, Bristol South)

I am grateful for the hon. Gentleman's point about whether practitioners are happy with the rewrite. I direct him to the support papers, which include a list of all the changes that tax practitioners would like to be made to the system, every one of which would increase the complexity but none of which would pass the test of simplification.

David Laws (Liberal Democrat, Yeovil)

I take the Paymaster General's point, but I hope that she noted the somewhat barbed compliment that was being paid to the work that she, her officials and others have done in respect of this Bill.

Dawn Primarolo (Labour, Bristol South)

indicated assent.

David Laws (Liberal Democrat, Yeovil)

In making the tax system more accessible and simpler for the ordinary man in the street, they have created a potential benefit for the economy—even if it is a disbenefit for tax accountants.

Several detailed points have been made in the debate, one of which concerned the potential cost of measures such as this. In her closing comments, will the Paymaster General say a little more about what we have learned from the Capital Allowances Act 2001—one of the first benefits of the work done by Tax Law Rewrite Committee—whether business or tax advisers have made representations about the effects of that measure, and whether it has made the system simpler or added to costs in any respect.

Perhaps the most important point that I want to make, which was touched on by the hon. Member for East Worthing and Shoreham (Tim Loughton), was also made in a debate in another place in January of last year. It is not the same issue that many Conservative Members sought to raise—whether the Bill's detail could change the precise nature of our tax law—albeit that that is a very important issue about which legitimate concerns have been expressed, including by my hon. Friend the Member for Torridge and West Devon; rather, I am referring to the point made by Lord Howe in a debate in January 2002 about the general desire of both Houses, and of those involved in the Bill, to make the tax system more accessible, simpler and more economic to use, not just for tax practitioners but for businesses and individuals throughout the country. There is a great danger that this attempt to make the wording of tax law simpler to understand will mask other problems with the way in which the tax system has developed in recent years, not least since 1997.

Lord Howe said:

"My central conclusion is that there is no chance of a knock-out success against tax complexity . . . we need to identify, define and establish not an event"—

such as the Bill—

"but a process—a comprehensive mechanism through which the problems can be addressed and managed tenaciously over the years. It is a long-haul business. The continuing insistence of the process on simplicity must be as irremovable and as constantly present as the voice of the tax-raising departments and as the politically restless, impatient input of successive Chancellors of the Exchequer."

Lord Howe was warning us that we have much to learn. That is especially true of the Bill. Changes introduced by successive Chancellors, not least the current Chancellor, may not complicate the words that we use in tax law but they can certainly complicate the tax system itself, which is far more important.

George Osborne (Conservative, Tatton)

The hon. Gentleman cites the sage words of Lord Howe. How would Lord Howe's comments apply to Liberal Democrat plans for local income taxes? We should then have 20, 30, 40—

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. The hon. Member for Yeovil (Mr. Laws) must not be tempted down that route.

David Laws (Liberal Democrat, Yeovil)

It is immensely tempting, but I shall adhere to your ruling, Mr. Deputy Speaker.

Lord Howe continued:

"We need to ensure that the neglected constituency of stability, as well as simplicity, is effectively represented at every level and every stage of the tax-making system." —[Official Report, House of Lords, 23 January 2002; Vol. 630, c. 1470–71.]

Without straying from the substance of the debate, will the Paymaster General describe how we can embed the simplification of new tax changes in the Finance Bill and Budget processes; and how we can move away from the general trend of tax policy, especially over the past five years, to complicate the tax system, thus making it more expensive for practitioners and businesses to use?

Finally, I pay tribute to the Paymaster General for her work on the project. I hope that it will be the beginning of a process that ensures not only that the words in the tax system are easier to understand, but that the system itself is simpler.

John Burnett (Liberal Democrat, Torridge and West Devon)

I, too, pay tribute to Lord Howe, the right hon. and learned Member for Rushcliffe (Mr. Clarke), the Joint Committee and its officials and the Paymaster General. The rewrite project has been her Herculean labour.

The Capital Allowances Act 2001 was a significant improvement; it was reasonably intelligent legislation in which numerous provisions were dovetailed. This Bill does the same thing. I hope that, as the right hon. Lady has assured us, successive measures will continue to be written in the same style so that they fit easily and intelligibly with the Bill. The Joint Committee's ambitions have mainly been achieved. The use of plain English, with shorter sentences and a clearer structure, is welcome.

As I have said before, successive Finance Acts have added countless complications and numerous rates of taxes. It is asking enough of the Committee to rewrite the plethora of existing legislation and to dovetail it in specific Acts; the Government must resist the temptation gratuitously to tinker with the tax system, thereby making it more complex.

I do not want to be too pedantic and long winded, but there have been one or two changes, and they may not be inadvertent. Clause 684 is intended to correct PAYE regulations, some of which have operated ultra vires since 1960, especially those on the coding-out practice—a system of re-coding in the subsequent year underpayments made in the previous year.

I do not mean to be churlish, but one or two parts of the Bill are unnecessarily long winded. I am grateful to the Law Society for prompting me. I cannot understand why there need to be 15 definitions of "employee" and why clause 66(1)(b) and 2(b) inexplicably contain two definitions of "employer".

Clauses 638 and 639 deal with exemptions for awards for bravery. Right hon. and hon. Members will recognise that individuals who have won the Victoria Cross or other decorations do not have any complexities attached to their tax affairs. It should be made clear beyond all doubt that the entire income gained from a hard-won award is free of taxation. Both clauses begin:

"No liability to income tax arises".

I am not convinced that that wording will be fully effective. The fact that liability may not arise on those specific items of income does not seem sufficient to exclude the recipient's total income, which might affect the individual's entitlement to age allowance. I raise that point not because I think that income will be taken into account by the Inland Revenue but because, in the interests of the House and all taxpayers, it should be made absolutely clear that my understanding is correct—that payments for valour will not adversely affect any aspect of an individual's liability to tax and that he will be entirely free of taxation.

That is a small but important point, not least given the great sacrifices made by our service men and their families, who are likely to be called upon to do the same in the near future. If we can get that clarification on record in the spirit of Pepper v. Hart people will know how the system should operate.

The Bill is a success and perhaps the Paymaster General will remind us about the next project, which is probably in tow as we speak. I congratulate all those responsible for the measure; it is a remarkable improvement on what has gone before.

Dawn Primarolo (Labour, Bristol South)

I begin with the point made by the hon. Member for Torridge and West Devon (Mr. Burnett) about awards for bravery. My understanding is that there has been no change, but I will check with my officials. As we have tried to demonstrate through the tax law rewrite project, we want to make the legislation clear.

It might help if I explain how minor changes are made to legislation in the rewriting process and how the tax law rewrite project undertakes consultation. Ministers receive the tax law rewrite project only when it has been completed and moves into its parliamentary stage. I said that I would give examples of minor changes to the legislation, such as new provisions to fill gaps in the existing legislation—for instance, the incorporation of extra-statutory concessions—the abolition of obsolete material or the correction of minor anomalies.

The project must first exercise judgment in deciding whether a proposed change is minor enough to fall within its remit. It identifies all proposed changes in the various consultations and asks for comments. That request does not come to Ministers. If respondents all agree that the change should be made, as part of the rewrite, it is placed in the Bill and flagged up so that Parliament may consider it. If the reaction is unfavourable, the change is generally dropped and a reason for it not being included is given. For example, an extra-statutory concession might need to continue.

In cases of doubt or mixed reaction to the consultation, guidance is sought from the Joint Committee, whose membership, of course, includes Members of both Houses; this evening, compliments have been paid to their work. Ultimately, it is for Parliament to decide whether the Bill should make those minor changes. Up to that point, however, the project is all embracing and, for Treasury Ministers, an unusual exercise in that it allows those outside the House who use the legislation to give their opinion on whether the change should be made. The hon. Member for Eddisbury (Mr. O'Brien) asked for examples of such changes and I shall provide them in a moment.

The next issues are not directly related to the Bill, but I hope that with your tolerance, Mr. Deputy Speaker, I may refer to them in passing. The hon. Member for Yeovil (Mr. Laws) raised the vexed question of complexity and simplicity, as if we lived in a perfect world in which the tax authorities never had to consider the practice of individuals or commercial organisations in respect of tax legislation and whether it followed the intent of Parliament in passing the legislation. The problem we have is mainly with anti-avoidance legislation, which is long and complex because it responds to complex relationships. The hon. Gentleman asked me to speculate on how we might overcome that. Could we get tax planners to agree a truce, under which they would stop their creative tax planning and we would not need our anti-avoidance legislation? I live in hope, but I think not.

David Laws (Liberal Democrat, Yeovil)

The Paymaster General's comments notwithstanding, would she accept that a Chancellor can pursue a policy of tax simplification and reduce the number of taxes, as Lord Lawson did in the 1980s, or he can introduce new tax allowances and reliefs that complicate the tax system—as most people believe the present Chancellor has done since 1997?

Dawn Primarolo (Labour, Bristol South)

With respect, the hon. Gentleman has never been in the position—and probably never will be—of receiving Budget submissions, be they from the CBI, the Institute of Directors or even the Liberal Democrats and the Conservatives. Without fail, those submissions ask the Government to intervene to assist in a particular area; they can be hugely beneficial.

For instance, the legislation on the research and development tax credit was widely celebrated and acclaimed by businesses small and large. I seem to remember that it took up some 90 pages, and that Liberal Democrat Members supported it in this House. However, when it comes to the question of simplicity and complexity, some hon. Members seem splendidly unaware that the UK economy is part of the global economy. Tax planners arrive at intriguing and interesting interpretations of tax law, and so the matter is never as straightforward as some hon. Members suggest.

I agree, however, that the idea that the Government set out to make tax law complex is rubbish. Even so, hon. Members must turn their minds to the challenges faced by all tax authorities, not simply by the authorities in this country. The hon. Member for Yeovil may be right to say that legislation that is easy to understand may not be so easy to get around; I doubt that but, again, I live in hope.

The hon. Member for Eddisbury (Mr. O'Brien) asked several questions about parliamentary drafters. A dedicated team of drafters is part of the tax law rewrite project, and that is taken fully into account in the resource planning for that office. That will continue. The PAYE regulations will be out in the spring, and the next tax law rewrite Bill will be available in the later part of this year or early next.

The hon. Member for Eddisbury asked about regulatory impact assessments. I know that he is familiar with the argument that they are difficult to achieve when the tax law remains unchanged. However, the assessment for this Bill makes it clear that when the rewritten legislation has been up and running for a number of years, the Government will work in conjunction with the relevant interested parties on the long-term and short-term cost of the Bill. In that way, a more meaningful understanding of how to proceed would be arrived at.

The hon. Member for Eddisbury asked for examples of minor changes. I draw his attention to the clause dealing with the exemption of certain lump sums from pension income, which now provides that the lump sums provided under retirement annuity contracts are exempt from income tax, as long as they are provided under the approved rules of the scheme. That change is in principle in the taxpayer's favour. Another example is the reporting requirements for the acquisition of shares. Those requirements used to be 30, 60 and 92 days, but the Bill sets them all at 92 days. That minor change introduces simplicity, and is clearly in the taxpayer's favour. The supporting material always makes clear whether a change is in the favour of the taxpayer or of the tax authorities. With only a couple of exceptions, the changes are all in favour of the taxpayer.

There are many examples of discarding obsolete provisions, but I shall give just one. Section 648(A)(2) of the Income and Corporation Taxes Act 1988 has not been rewritten. Explanatory note 2381 makes it clear that that transitional measure is no longer needed.

The redraft of the PAYE regulations will be out in the spring, and I hope that they will come before Parliament later this year. However, the third rewrite Bill will be published in draft in the first half of next year—not later this year, as I suggested. I apologise for that error. It will cover income tax, property income, trading income, savings and investment income and foreign income.

David Laws (Liberal Democrat, Yeovil)

Will the next tax rewrite Bill resolve any of the problems alluded to in today's Treasury Committee report, which touches on the issue of tax avoidance by the Inland Revenue?

Dawn Primarolo (Labour, Bristol South)

I have been in the Chamber all day, and I have not had a chance to read the report to which the hon. Gentleman refers, but I am sure that, when this business concludes, I will rush out and study it avidly.

The hon. Member for Eddisbury also asked about flow charts. I agree that they are helpful and that they can be used, but there is a slight problem with incorporating them in legislation: it is very difficult to frame legislative amendments to flow charts. We shall be as helpful as we can, but I wonder whether that might just be a trick question.

It is not for us to submit the Bill to the Plain English Campaign, but I am sure that those involved in the campaign will study it, although I do not think that they are necessarily noted for looking at technical legislation. I concur with the hon. Gentleman's view that the Bill is an excellent piece of drafting and that it is well understood.

I was asked about electronic consultation. All the tax law rewrite project drafts and draft Bills are published in paper form, announced in press releases in paper form and are accessible to everyone in every way.

Finally, I thank all the professional bodies, the Inland Revenue team, the tax law rewrite team and the Members of Parliament involved in the tax law rewrite project. I also thank all those hon. Members who have stayed in the Chamber this evening and made this debate so fascinating, if a little varied at times. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read the Third time, and passed.