My Lords, before I say what I am going to say about the Finance Bill, I have been waiting for an opportunity to say how much I appreciate my noble friend’s contributions from the Front Bench. He seems to be speaking on all kinds of different subjects at all kinds of different times and every time he does so he is well informed, has done his homework, is courteous and is a great tribute to the House in the way he acts as a Minister. I hope he does not mind me saying that because, as my next sentence, I am going to say that I have been party to the Select Committee report that the noble Lord, Lord Turnbull, has spoken about and it is the most critical report I have ever been associated with in over 40 years in Parliament—so I thought that would be a good way to start.
We all think that making tax digital is the right way to proceed, and it is strange to be as critical as we were of a proposal which, in essence, we think ought to happen. It is a peculiar situation in which to find ourselves. No doubt there are objections to what has been done. This morning I received in the post something like 15 pages of criticism of the proposals from the Chartered Institute of Taxation. I have to say to the Minister that the Government are not yet finished in terms of getting these proposals right, although in principle they are.
I want to comment on how it could have happened like this because it is intriguing. As soon as I saw that this was the way we were working, I made sure that the Prime Minister in No. 10 knew what was coming, because that is where it would have ended up. The proposition that a Government could bring in taxation changes that would be damaging to the small business community in our country while more sophisticated operators with their advisers could get away with it is a proposition that you realise was simply never going to run in the way it was originally envisaged. There was a great deal of logic in what HMRC was trying to do, but in my view the way it set about doing it was
completely wrong. I want to discuss briefly what went wrong and perhaps how that can be avoided in the future.
We have to ask the Government to look at the effectiveness of HMRC’s consultation process. I have had no part in it for a long time now, but when I was a Treasury Minister, my boss Geoffrey Howe asked me to see if we could improve the consultation process. I have to say that my work was not entirely successful. The Inland Revenue, as it was known in those days, wanted to know exactly what issues were going to be raised, particularly so that at meetings its officials could speak with one voice and carefully make sure that they did not have to concede anything. I am afraid that the special advisers were not in a much different position because they themselves had negotiated with all the other professions what they were going to say, so as far as I could see those meetings were, at best, things of minds that were not really prepared to negotiate at all; they just wanted to reiterate their points. I do not say that some good was not produced from time to time, but the consultation was not nearly as effective as it should have been. If that is the sort of consultation which is going on at the moment, it is not surprising that we get some of the results wrong. Going back all those years ago to when I was a Treasury Minister, I asked Geoffrey Howe’s permission to have another go. We found two or three eminent professional people who would come in and talk about these things informally, off the record and in a quiet and effective way. That was infinitely more effective than the formal process of the two sides marching in and doing battle, so it was much more useful.
To its credit, HMRC can see the problems and has tried to deal with some of them, but I am not convinced that its process of consultation, which should have avoided many of these problems, was anything like as good as it could have been. I say that because it was obvious what was going to happen. My recommendation to the Government is that they should take another look at the consultation process to see whether it could be more effective in the future for other things they want to change.
8.13 pm