In a world where the draft Finance Bill is published three months before the Budget, you might expect that the Queen’s Speech, which sets out the government’s legislative plans for the next year, would hold little interest for tax practitioners. However, in practice, the speech – or indeed the briefings that accompany it – can provide deeper insight into the thinking of the government.
This year’s speech was novel in that it addressed the remaining 11 months of a fixed parliament. With the election approaching, preceded by the Scottish independence referendum, much of the legislation was focusing on delivering previous commitments made by the Coalition.
What were the key messages?
The speech wasted no time in setting out the overall theme of the remaining period of this parliament: building a stronger economy and a fairer society. This echoes the approach adopted in the government’s report on the OECD/G20 base erosion and profit shifting project, which was published alongside the Budget and appears now to be the mantra we can expect up to the election.
Which tax measures were featured?
The speech referred to many of the items announced in the Budget, from relatively uncontroversial items such as the increase in personal allowances and the new ISA, to others where there are differences between the Coalition members, such as the transferrable allowance for married couples and those in civil partnerships. Even the abolition of the ‘10p’ rate on savings was featured.
Like the Budget, the centrepiece of the speech was the reform of the pension regime. In addition to the Finance Act, this year will also feature a Pension Tax Bill to deliver many of the changes. The fact that this will be the sixth pensions Bill in a decade is testament to the extent of change in this area.
And on national insurance?
Given that changes to NIC are not implemented through the Finance Bill (which has a special status as a Money Bill), there was more detail about the changes to what for many continues to be, in all but name, a second tax on earned income. The changes included the NIC equivalents of the anti-avoidance being applied to the rest of the tax base, such as the follower penalties and the high-risk promoters provisions, as well as the implementation of the far from radical simplification offered by allowing class 2 NIC to be collected via the self-assessment regime.
Any new taxes?
One of the briefing notes covered the charges being introduced in England in October 2015 for single-use plastic bags, following the experience of Wales and Northern Ireland. Rather than introducing this as a formal 5p duty on the bag itself, the government’s approach will be to require large retailers to impose a 5p charge and to encourage them to enter into voluntary agreements to donate the proceeds to good causes.
The intention is more to reduce use rather than raise revenue, with previous experience in Wales showing a 76% reduction in use in the first year of the charge. If this experience was repeated with England’s 7bn bags per year, the charge would generate £84m (£1.60 per person), reducing the number of such bags per person by almost a hundred a year.
What about the devolved economies?
The other area of particular interest was the discussion of the devolved economies. The Queen’s Speech repeats the government’s commitment to the argument that Scotland is, and will remain, better off within the UK. It also provides for a Wales Bill, which will provide the legislative framework to implement the new financial powers recommended by the Commission on Devolution in Wales. This provides for the devolution of SDLT and landfill tax, in a similar way to Scotland. It also provides for a referendum on whether an element of income tax should be devolved, as well as confirming that Wales will host the biennial NATO summit in September.
On corporation tax, the commentary confirms that the government remains on track to make a final decision on the potential devolution of corporation tax powers to Northern Ireland no later than Autumn Statement 2014. This will be closely watched by the other devolved administrations.
This devolution of power appears somewhat consistent with the subsidiarity approach adopted with the EU, with the guiding principle being: ‘European where necessary; national where possible’.
What next?
With the legislative programme now announced and the Finance Bill making its orderly way through the House, much of the anticipation will now turn to the content of the manifestos. On such items, the Queen had nothing to say.
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