Tax avoidance confessions of a former Shadow Treasury Minister

By Paul Goodman
^{Follow Paul on Twitter}

I apologise for writing about the same subject twice in one morning, but readers may appreciate the chance to reflect further on how tricky all this tax avoidance stuff is. As some know already, I was a member of George Osborne's Shadow Treasury team during the last Parliament.  One of the annual joys of the post was abandoning real life for several weeks in order to serve on the committee of the Finance Bill.  (I have already given an account on this site of the pleasures of dealing in this capacity with Ed Balls.)

The content of the bills obviously varied, but one feature of them did not - and won't now.  Each year, Treasury Ministers devote a major part of the bill to closing tax avoidance loopholes, rather in the spirit of local government officers removing offensive graffiti from the walls of a sink estate.  And each year, clever accountants open up new ones, in the spirit of local yobs finding new insults and obscenities to spray.  This annual cycle has all the lumbering grace of a ritual dance.

It would fall to me to ask questions about some of the Government's tax avoidance, and fall to Dawn Primarolo, now a Deputy Speaker and then Gordon Brown's human shield, to answer them. (The Fearty from Fife would send her out to field any enquiry about the tax credit shambles.)  To put it diplomatically, we were both operating at the limits of our understanding - sailors adrift on the Far Side of the World, at the mercy of the wind and waves, like those in Peter Weir's stirring film.

Or to put it less diplomatically, neither of us had a clue what we were talking about.  Or at least I wouldn't have done had not Mark Hoban, who really did grasp all the arcana, laboriously explained the relevant clauses to me beforehand in the committee corridor.  Mr Hoban was the Shadow Financial Secretary.  He is also an accountant.  He has since gone on to be the real Financial Secretary.

The ritual dance then took place.  Watching Ms Primarolo and I work our way through the clauses must have been like doping two out-of-condition pandas with paracetemol and trying to get them to mate.  When baffled by a question, she would drop one hand to her hip - her right hand, if I remember correctly - and swivel sideways in the direction of the bench of supporting Treasury civil servants, who tended to have pointed ears and sport giant black-framed spectacles.

"I am waiting for inspiration," she would declare, as one of these mekons frantically first scribbled out a note and then passed it like a baton to her Parliamentary Parliamentary Secretary, who would then, in turn, pass it to her. "Ah!" she would then pronounce.  "Inspiration has arrived!  The answer to the honourable gentleman's question is that the aforesaid scheme in Clause 47, sub-section 23, was presaged in last year's Finance Act by Clause 106, sub-section 3901..."

My point is an obvious one: no-one, but no-one, understands the midrash of the British tax system, made all the more incomprehensible by the Tolley's Tax Guide-expanding Fearty from Fife himself.  David Gauke, once more sent out into the breach this morning to defend the Treasury's position, is doubtless right to seek to close some of the loopholes, as his predecessors did before him and his successors will do after him, too.

But the more complex the system is, the more avoidance there will be.  And the more avoidance there is, the more amendments there will be to each year's finance bill.  The solution is as evident to grasp as it is difficult to effect - namely, taking on every lobby group in the land, despite all the media arts at their disposal, by scrapping reliefs and leaving in their place a "flatter, simpler" tax system.  Now just remind me: whose phrase was that?