Clause 100 - Increase in membership of the Office of Tax Simplification

Finance (No. 2) Bill – in a Public Bill Committee at 10:15 am on 11th January 2022.

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Question proposed, That the clause stand part of the Bill.

Photo of Christopher Chope Christopher Chope Conservative, Christchurch

With this it will be convenient to discuss the following:

New clause 9—Composition of the Office of Tax Simplification—

“The Government must publish within 12 months of this Act coming into effect an assessment of the composition of the Office of Tax Simplification membership with a view to ensuring it is diverse and representative.”

New clause 10—Capacity of the OTS—

“The Government must publish within 12 months of this Act coming into effect a review of the membership and capacity of the OTS, including consideration of the capacity the membership would have to deal with an expansion of its remit to include fairness in the tax system.”

Photo of Lucy Frazer Lucy Frazer The Financial Secretary to the Treasury

Clause 100 increases the maximum independent representation on the board of the Office of Tax Simplification by two members, giving a total membership of 10. The OTS is the independent adviser to the Government on simplifying the UK tax system. The clause provides the ability to add two additional members to the board of the OTS following the publication of Her Majesty’s Treasury’s five-year review of the effectiveness of the OTS, which was required by the Finance Act 2016. Allowing for the appointment of two additional members will ensure that the board comprises the fullest appropriate breadth of skillsets to support the work of the OTS.

Sir Christopher, I very much look forward to the submissions from the SNP on new clauses 9 and 10.

Photo of Richard Thomson Richard Thomson Shadow SNP Deputy Spokesperson (Treasury - Financial Secretary), Shadow SNP Spokesperson (Wales), Shadow SNP Spokesperson (Northern Ireland)

New clause 9 ought to speak for itself. On 23 November, in a written response to Dan Carden, the Financial Secretary to the Treasury said:

“The Government has an ambition that by 2022 half of all new appointees should be women and 14 per cent of appointments should be made to those from ethnic minorities.”

Clearly, we are interested in ensuring diversity going forwards, but we should also be interested in diversity in the here and now, and in ensuring that all our public institutions are as representative as they can be of the country that we seek to govern and administer.

In looking at that diversity, both present and future, it is important that we have it in the board, in the team and in employment within the OTS more generally. We must not only have an understanding of where we are in the present, but ensure that the pipeline of talent for future appointments to senior positions is flowing as it needs to, so that we benefit from the widest and deepest possible pool of talent as the body carries out its functions.

Moving on to new clause 10, we spoke earlier about the estimated tax gap of £35 billion. An important aspect of tax fairness is being sure that we apply the tax code equally and consistently, and we need to understand the impact of it’s being applied equally and consistently and how fair the outcomes are. There are still many inconsistencies and perverse incentives across the entirety of our tax code, not least in how it interacts with the benefits system.

If we are serious about ensuring fairness, the Office of Tax Simplification would be an excellent starting point. Our view is that the OTS should have the remit and capacity to look at fairness, and new clause 10 would provide evidence on the OTS’s current capacity to achieve that.

Photo of James Murray James Murray Shadow Financial Secretary (Treasury) 10:30 am, 11th January 2022

As we heard from the Minister, clause 100 relates to an increase of two members in the maximum independent representation on the board of the Office of Tax Simplification, bringing the overall membership to 10. The OTS was brought in by the coalition Government in 2010 and put on a statutory footing by the Finance Act 2016. It is an independent body that sits alongside the Treasury to advise the Chancellor on the simplification of the tax system and suggest ways to increase system efficiency. We recognise the value in adding further expertise to the board, although we also recognise the important principle in the SNP’s new clause 9, which would require the Government to report on the diversity of the OTS board.

We note the wider concerns of the Chartered Institute of Taxation, which questions whether the broader changes suggested by the OTS will be implemented. Between 2010 and 2015, only 166 of the OTS’s 403 recommendations to Government were wholly accepted. It is therefore surprising that there is so much enthusiasm for increasing the size of the OTS board, given that the Government do not always seem to listen.

We note a suggestion from the Chartered Institute of Taxation that the Government formally respond to every OTS recommendation within a prescribed timeframe. I would be grateful if the Minister set out whether she is willing to commit to doing so.

Photo of Lucy Frazer Lucy Frazer The Financial Secretary to the Treasury

I thank the hon. Members for Gordon and for Ealing North for their contributions. I was very interested to hear about the new clauses from the hon. Member for Gordon. New clause 9, which was tabled by the hon. Member for Glasgow Central, would require the Government to publish

“an assessment of the composition of the Office of Tax Simplification” to ensure that it is diverse. I assure hon. Members that the OTS is an independent office of HMT, so all appointments are made in line with the principles of the Office of the Commissioner for Public Appointments. Public appointments to the OTS should therefore reflect the diversity of the society in which we live and increase in diversity. The Government have an ambition that, by 2022, half of all new appointees should be women and 14% of appointments should be made to those from ethnic minorities.

I know that the Government are very committed to this issue, as my first appointment to Government was as a Parliamentary Private Secretary in the Cabinet Office. I dealt with and saw the work of the Cabinet Office on this issue, and it is doing a broad amount of work across Government to ensure diversity.

New clause 10, which was also tabled by the hon. Member for Glasgow Central, would require the Government to publish

“a review of the membership and capacity of the OTS”.

The Government remain committed to supporting the OTS to provide advice on the simplification of the tax system, and published their first five-year review of the OTS’s effectiveness this autumn. The review makes a number of recommendations on the resourcing and governance of the OTS and recognises the value of a mix of skillsets and expertise on the OTS board. It recommends that HMT build on that further and, following the nomination by the chair, appoint additional independent members to bring in expertise in areas not currently represented. Given the recent examination of the OTS’s resourcing and governance, the Government do not believe that a review of the membership and capacity of the OTS is necessary.

To respond to the point the hon. Member for Ealing North made about the value of the work of the OTS, as he will know, the OTS will be looking into how it produces its reports and carries out its reviews. The fact that the Government do not always fully accept the recommendations of the OTS is not a sign that the OTS is not performing an important function: it is performing an important function in making recommendations that the Government can look at. The OTS also has a power to make suggestions on proposals that the Government themselves are thinking about, and it works with officials to make suggestions as to how we can change and improve the legislation and proposals that we are putting forward.

For those reasons, I encourage Members to reject the new clauses.

Photo of James Murray James Murray Shadow Financial Secretary (Treasury)

The Minister may have missed my question in my earlier comments, which was whether she would commit to responding formally to every OTS recommendation within a prescribed timeframe.

Photo of Lucy Frazer Lucy Frazer The Financial Secretary to the Treasury

I understand why the hon. Member has made that suggestion, but the OTS is independent and can look at what it wishes to look at. That might not necessarily be what the Government are focusing on at any particular moment, so for those reasons and others, I will not be accepting that proposal today.

Question put and agreed to.

Clause 100 accordingly ordered to stand part of the Bill.