Recent moves by the Government to curb the powers of the House of Lords by making greater use of secondary regulations instead of relying on primary legislation could have disastrous implications for the scrutiny of tax legislation.
We are concerned that the Government plans to reduce the amount of tax legislation which receives scrutiny in the House of Lords, by making greater use of secondary regulations instead of relying on primary legislation.
While many think that the Government is making itself look like a 'bad loser' with the threat to reduce the House of Lords’ powers following the tax credit defeat, it’s worth taking a closer look at the background.
The Chancellor of the Exchequer has pointed out, extensively and on a number of occasions, that the House of Lords does not have the right to intervene in the passage of such legislation. To a point, he is correct. But no further. The Parliament Acts of 1911 and 1949 define the powers of the House of Lords in relation to various statutory measures. In relation to Money Bills (bills designed to raise money through taxes or to spend public money), the Lords have no power to make amendments. Money Bills start in the House of Commons and must receive Royal Assent no later than a month after being introduced in the Lords, even if the Lords has not passed them.
So the question is this: were the measures being debated by the House of Lords in connection with tax credits a Money Bill? It appears not. What was being debated was the magnificently entitled “Draft Tax Credits (Income Thresholds And Determination Of Rates) (Amendment) Regulations 2015”. Close examination of the document confirms that it’s not labelled as a 'Money Bill'. Indeed, it’s not a bill at all. So if it doesn’t look like a bill. And it’s not labelled as a bill. Then it probably isn’t a money bill. On that basis, the Chancellor seems to have protested too much when he asserts that the House of Lords had no right to intervene as they did.
Which brings us back to the Government’s response. Most regulations and statutory instruments are approved 'on the nod' after being placed in the House of Commons library for a month or so, to give members and honourable members the opportunity to inspect them. That’s hardly the detailed scrutiny required in a sophisticated tax system. And it’s definitely not the way to enact legislation which affects almost every man, woman and child in the country. As well as tax credits, virtually the whole of the PAYE system, the subcontractors tax system and – we predict – the practical operation of the government’s much-heralded digital strategy will all be dealt with by statutory instruments not by primary legislation. This is definitely not the right way to go. There are plenty examples of bad primary legislation getting through Parliament even when normal rules of scrutiny apply. Gordon Brown’s disastrous nil rate band of corporation tax, and the subsequent non-corporate distribution rate, are terrifying examples of that. So are the interests of the nation served well by the cursory scrutiny of wide-ranging powers? We think not and we call on both sides to pause, reflect calmly, behave like statesmen and develop a system which gives proper scrutiny to laws that affect everybody.