Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 12:00 am on 3rd May 1976.

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Photo of Mr John Pardoe Mr John Pardoe , North Cornwall 12:00 am, 3rd May 1976

I have no objection to subsidising people. Subsidising goods and services is what worries me because it distorts the economy.

We have no evidence whatever to suggest that industrial subsidies ever increase the totality of investment. Indeed, one begins to wonder whether it is the totality of investment that is the problem or whether it is not the problem of low output of investment in Britain.

The problem of tax evasion is a matter of great controversy. Tax evasion is a serious matter and it is not something which should be dealt with lightly either by the Opposition or by the Government. It is a fraud on society, and many of us in all parts of the House reckon that the powers of investigation should be the same as for other frauds.

The Conservative Party waxes wrathful about the proposed powers, but there are precedents in their own legislation. The powers of entry given to the Customs and Excise when the Conservatives introduced VAT were formidable indeed. The Social Security Act 1975 gives powers to solve problems which are trifling when compared with the amounts that we are dealing with in tax evasion. The Inland Revenue is asking for similar powers to those which the Customs and Excise already has. I understand its needs for the powers—it wants them to do its job better.

I do not think that the Chancellor made out his case today. No one should be persuaded easily by arguments for these powers; we should have very powerful arguments, and we have not heard them yet. I am open to be persuaded. I am not committed to voting against the introduction of these powers at this stage. But the Chancellor will have to do far more to persuade us. Perhaps the Second Reading debate is not the place for the full panoply of his arguments, but I hope we shall hear them in Committee.

The need for these measures—if there is a need—is not because, as the Chancellor half suggested, the British people are now less honest than they were five or 10 years ago but because they have become ruinously over-taxed.

Compare this with the history of Customs and Excise when duties rose too high centuries ago. There was mass evasion and the Government of the day tried every conceivable method to block the loopholes. They hanged Cornishmen for smuggling goods across Cornwall to Jamaica Inn, which is in my constituency. Indeed, the severity of the penalties for smuggling is part of Cornish history. However, it did not do the blindest bit of good and the Government of the day had to retreat and lower the customs and excise duties. People became much more law-abiding and revenues from customs and excise duties rose magically at the lower rates.

I suspect that there is a parallel with our situation here. Just as customs and excise duties had risen to a point beyond which a free people could not be taxed, our rates of tax, certainly above the 35 per cent. standard rate, up to 98 per cent. on investment income and 83 per cent. on earned income, are beyond all reason. As long as they are beyond all reason, all the investigative powers that the Government can get and all the penalties they can provide will not do anything to stop tax evasion, because tax evasion is a disease of a nation that is over-taxed.