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Clause 138

Power to call for documents and information

Sir William Clark (Croydon, South) : I beg to move amendment No. 23, in page 103, line 45, at end add--

(7A) In subsection (8B) after the words "under subsection (8A) above" there shall be added the words "or under subsection (3) above".'.

I shall not detain the Committee for long. The amendment is rather technical, but it impinges on the rights of taxpayers vis-a-vis the Inland Revenue. The Committee will recollect that, following the Keith report, the Inland Revenue has taken powers to require third parties to disclose documents and information about individual taxpayers. Not only does the Inland Revenue have that right, but it does not necessarily have to name the taxpayer. For example, the Inland Revenue could ask

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an insurance company how many insurance policies covering inheritance tax had been taken out in the past six or 12 months. That can put a tremendous cost on third parties.

7.15 pm

The amendment endeavours to give the taxpayer the right of appeal because the Inland Revenue has to go before the commissioners to get permission to ask a third party for information about individual taxpayers, whether or not they name them. "Keith : Further Proposals", which came out last year, recommended that all third parties who were asked for information about a particular taxpayer, whether identified or not, should have the right of appeal, as some of the costs of complying with some of the Inland Revenue's requests to third parties could be pretty onerous. One could envisage that a third party might be asked by the Inland Revenue something about a taxpayer that happened 10 or 15 years ago. That would put an onerous and costly responsibility on that third party.

I hope that my right hon. Friend the Financial Secretary will not resist the amendment, as it gives the third party another appeal to which he should be entitled. In my view, the Inland Revenue should not have the right to ask a third party to produce information about a taxpayer if that third party does not have the right to say that the request is far too onerous without being allowed to go before the special commissioners. I am asking only that the third party should be able to go before the special commissioners.

I am sure that my right hon. Friend will say that the third party has the right not to comply with the Inland Revenue's request, and the non- compliance of that request then puts that third party into the penalty area. When that third party is subject to a penalty, he has the right to a hearing. It seems rather ridiculous that a third party, having been asked by the Inland Revenue to supply information, and having replied that the request is far too onerous and that it would be far to expensive to go back five or 10 years, then has to be in the penalty area before he can get a hearing in which he can say to the commissioners that the request is far too onerous. I hope my right hon. Friend will consider the matter. It is a simple amendment, but it seeks to give more flexibility and certainly more rights to the third party who may have nothing whatsoever to do with the taxpayer being investigated.

Mr. Norman Lamont : My hon. Friend the Member for Croydon, South (Sir W. Clark) has asked an extremely important question. The provisions that we are discussing relate not to unnamed but to named taxpayers. I make that clear, because I think that my hon. Friend bracketed the two together.

For many years, the Revenue has been allowed to require a third party to provide access to documents in his possession relating to the tax affairs of a named person. This power is not altered by the Bill, other than to remove a small loophole that allows some third parties, in certain circumstances, to be used as safe havens if taxpayers are intent on frustrating the Revenue. That power is subject to stringent controls. The inspector can require access only to documents that, in the inspector's reasonable opinion, contain information relevant to a tax liability of the person whose affairs are under inquiry. The inspector must first ask the third party

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to provide access to the documents voluntarily, and give him a reasonable time to comply. Only if this fails can the inspector proceed further. The inspector must next apply to an appeal commissioner, who is independent of the Revenue, for permission to issue a formal notice. The commissioner is required to be satisfied that in all the circumstances the inspector is justified in requiring access to the documents in question before he can give his consent. Only if the commissioner is satisfied can the inspector give a formal notice to the third party requiring him to provide access to the documents in question.

The existing procedures provide protection against any unnecessary or excessive invasion of privacy. In particular, they provide protection against unreasonable burdens on third parties. The commissioner is required to be satisfied that in all circumstances the inspector is justified in proceeding with his request. This means that he must inquire into whether the request is reasonable and must take account of all representations which have been made. In particular, the informal request by the Revenue to the third party provides the third party with an opportunity to raise any objections that he has to the notice, including objections on the ground that it would be burdensome, which must be reported to the commissioner by the inspector and taken into account.

The Keith committee agreed that this information power should continue to be subject to oversight by the independent appeal commissioners, but Keith thought that the public would be better safeguarded if the present procedures for an informal request and review by the commissioners, in every case before a notice was given, were replaced by a right of appeal to the commissioners after the notice had been given. Most of the respondents in the consultations on the recommendations of the Keith committee disagreed. The overwhelming majority of respondents, including all the bodies representing businesses and the accountancy and legal professions, believed that the existing provisions--with oversight by the commissioners before the event--would provide better safeguards for the taxpayer than oversight after the event through a separate right of appeal.

The Inland Revenue proposed, in the consultative paper published last July, to leave the procedures unchanged. The majority of respondents to that consultative paper agreed. A few suggested that there should be both oversight before the event and oversight after the event with a new right of appeal. The majority of respondents recognised that this was not necessary, and would put an unreasonable burden on the Revenue and the commissioners. The present procedures provide full safeguards for the taxpayer and it is not necessary to introduce further complications.

My hon. Friend the Member for Croydon, South suggests that a limited right of appeal should be introduced to allow third parties to appeal on the ground that it would be onerous to comply with the notice. When we introduced a new power, in last year's Finance Bill, allowing the Revenue to require access to documents about unnamed taxpayers, we included such a right of appeal. However, there is a distinction in the circumstances. A notice requiring information relating to an unnamed taxpayer can be in respect of a possibly large class of taxpayers. This means that the Revenue and the appeal commissioners may inadvertently require access to documents relating to a much larger class of taxpayers

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than was intended. For this reason, we provided a limited right of appeal on the ground that it would be onerous to comply with the notice. The circumstances are different for a notice in respect of a single, named taxpayer.

I am reluctant to accept the amendment. Although the third party does not have a direct right of appeal to the commissioners, he has full and proper right of appeal under the present procedures. First, the third party can appeal directly to the courts by way of judicial review. The Revenue is entitled to require access to documents that may reasonably be required for the purposes of determining the tax liabilities of the named taxpayer. A notice requiring access to more documents than could reasonably be required would be struck out by the courts, as was established in 1974 in Clinch v. Commissioners of Inland Revenue.

Secondly, the third party has an indirect right of appeal to the appeal commissioners. If the third party considers that the notice is unreasonable, he can object to the Revenue, explaining his reasons. The Revenue can accept his reasons and withdraw or modify the notice, or reject them and insist that he complies with the notice. If he refuses to do so, the Revenue can let the matter drop or institute penalty proceedings before the appeal commissioners. The proceedings give the third party an opportunity to appeal against the notice to the appeal commissioners by explaining his reasons for refusing to comply. If the taxpayer's appeal is upheld, there will obviously be no penalty.

I am not persuaded by the amendment. The subject was discussed in consultations on the recommendations of the Keith committee. It was widely recognised that one had a choice of oversight before or after the event, but not both. Although my hon. Friend made some comments about penalty proceedings, there is a longstop by which the taxpayer can gain access to the appeal commissioners.

My hon. Friend was as persuasive as he always is, but I cannot accept the amendment.

Mr. William Clark : My hon. Friend did not say that the third party is not represented before the commissioners. I cannot understand my right hon. Friend saying that the third party has access to the courts. Of course he has, but that is terribly expensive. If I am a third party and the Revenue is inquiring into the tax affairs of someone I knew years ago, I cannot understand why I should be put to the burdensome cost of complying. Who will pay the legal fees? They will fall on me. It would be simpler if my right hon. Friend were to reconsider the issue. It is simple to allow the third party a right of immediate appeal to the commissioners, whereby everyone is protected. It is convoluted to say that there is a longstop and that the third party can argue his case in the penalty proceedings. I do not think that my right hon. Friend can justify that.

Why can the inspector of taxes request a third party's documents from the commissioners without the third party or the named taxpayer being present?

Mr. Norman Lamont : The recommendations are based on the recommendations of the committee under Lord Keith. They were the subject of widespread consultation and there was a degree of consensus for them. However,

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my hon. Friend is clearly unhappy. I will reflect further on what he has said, but I hope that he will not take that as a commitment to bring a proposal forward on Report.

Sir William Clark : I accept that, and I am most grateful to my right hon. Friend. He said that there had been considerable consultation and that the consensus was that this provision was perfectly all right under the Keith proposals. However, the Confederation of British Industry, which represents a tremendous number of the business interest in this country, is not happy. As my right hon. Friend has promised that he will consider my proposal--I realise he will do so without commitment--I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

7.30 pm

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

Mr. Nicholas Brown (Newcastle upon Tyne, East) : On behalf of the Opposition Treasury Front Bench, I welcome you, Mr. McWilliam, to the Chair of the Committee on the Finance Bill. It is a pleasure to see one of my colleagues from the northern region in the Chair. The uncharitable might say that if I have to go through the Finance Bill, it is nice to know that I am taking someone with me--at least part of the way.

This debate is an opportunity for us to discuss on the Floor of the House some of the principal issues involved in a range of clauses which implement the recommendations of the Keith committee. Clause 138 deals with the Inland Revenue's right to information, and it is therefore an appropriate introductory vehicle to the more detailed examination that will take place in Committee upstairs. I must say at the outset that we welcome the clause and have no intention of voting against it. However, I regret that it has taken the Government from 1984 until now to introduce the important recommendations of the Keith committee into legislation.

The Keith committee was set up in 1980 and responses to its proposals were made in 1984 and 1985. It is significant that it has taken the Government so long to evaluate the Keith proposals and the responses. The time they have taken gives an insight into, among other points, the energy of the tax avoidance lobby.

Several issues arise directly out of clause 138. I want to highlight two of them, the first of which is the Revenue's right of access to accountants' working papers. The accountancy profession itself has mixed views about the proposed treatment under this clause. If Accountancy Age , is to be believed, and I am sure it is, some accountants have seen the clause as going some way to meet the reservations that the profession has expressed, whereas others in the profession are still concerned that the Revenue's powers may be too wide and that that could lead to an infringement of taxpayers' legitimate rights.

Many who have commented on this aspect of the clause have made the point that the proposal puts the accountancy profession on the same footing as solicitors--in other words, that the relationship that accountants have with their clients is privileged. I am not sure that the analogy with solicitors is helpful in this context or that it is the right way in which to proceed. A solicitor has a duty to represent his client's interests to the best of his professional ability and there can be no ambiguity about which side a solicitor is on. The position for the

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accountancy profession is less clear-cut. There has been discussion in the profession about the balance that has to be struck between an accountant's duty to the ethics of the profession and his natural desire to maximise the money accruing to his client--who is, after all, paying for the accountant's services--and those factors may sit uneasily alongside each other. Such issues are not always clear-cut, just as the dividing line between tax avoidance and tax evasion is not always plain to see.

Mr. Beith : I am not sure whether the hon. Gentleman intended to suggest that the dilemma between the ethics of the profession and the interest of the client does not arise in the case of solicitors. The hon. Gentleman seemed to suggest that there was no analogy between accountants and solicitors, but solicitors face the same problem. A solicitor must ensure that in pursuing the interests of his client, he does not offend the ethics of his profession or the law itself.

Mr. Brown : If the hon. Gentleman will allow me to develop the argument a little further, he will see the distinction I am trying to make. The intervention was premature.

The working papers of accountants are professionally prepared documents which show clearly how a particular decision or conclusion has been reached. Such papers might also show what other conclusions were under consideration, but were rejected. It is not hard to understand why the Revenue would like access to those documents or why the accountancy profession is uneasy about such Revenue access. To put it no more strongly, it would be quite understandable for accountants to think twice about what they would commit to paper if they knew that one day their views would be exposed to scrutiny by their opposite number in the Revenue, perhaps in an adversarial setting.

The decision that is made on clause 138 has an important impact on the debate about the balance between an accountant's duty towards the profession and professional ethics, and the accountant's much narrower duty towards his client. The clause places the emphasis firmly on the accountant's role as a professional adviser, who is clearly on the side of the person employing him. If that is the intention, the analogy with the legal profession to which I referred earlier begins to look better. However, there are implications for the future of the accountancy profession and, in particular, implications for its self-regulatory status and its relationship with the Revenue.

The other important issue in the clause is the Revenue's right to information--a right that can be exercised only if the Revenue has sufficient staffing to exercise it in all the cases in which it is necessary. The clear result of inadequate staffing in the Inland Revenue is that tax avoidance is encouraged because tax avoiders know that they have a better chance of getting away with it.

Tax inspectors are probably the most cost-effective employees of the Government. In 1987-88, the uncovering of tax frauds and undeclared tax raised just over £2 billion for the Exchequer, which was a 20 per cent. increase on the 1986-87 figure. The average yield brought in by a grade 7 inspector undertaking accounts work in one of the specialist tax offices dealing with large commercial firms was, on average, almost £1 million per head in 1987-88. It

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is perfectly clear that growth in that area would be cost-effective for the Government, and for the British taxpayer.

The other side of the coin is that it is also perfectly clear that failure to staff the Inland Revenue adequately is costing the country a great deal of money. In a parliamentary answer given to me last Monday, the Financial Secretary himself told me-- [Interruption.] The Financial Secretary himself told me that the amount of tax written off as impossible to recover has risen fivefold, from £60 million in 1979 to just over £333 million in 1987. The number of non-taxpayers involved increased over the same period from 57,191 to 119,520 by 1987.

The Select Committee on the Treasury and Civil Service has recently considered manpower losses in the Inland Revenue and has expressed its concern at the loss of tax inspectors from the Inland Revenue. In 1987-88, 260 left, and 170 left the year before that. According to the Committee, resignation rates have jumped significantly, especially in London and the south-east. Some of the blame for that has been put on the rates of pay, which have not kept pace with the remuneration offered in the private sector. If there are particular difficulties in London and the south-east, surely it is time for the Inland Revenue to look again at the relocation of some of its activities to the regions.

It is also time for the Government to look again at the rates of pay for Revenue employees. It is no good putting more power into the hands of the Revenue if it does not have sufficient staff to allow it to exercise that power. Sadly, it is said that careers officers at universities are advising graduates to join the Inland Revenue for training and then move across to the private sector for the money. The Treasury and Civil Service Committee was told that it costs £50, 000 or more to train a skilled tax inspector. I greatly resent the fact that the British taxpayer is paying to train tax inspectors only to watch them move across to the private sector to use that training for the opposite purpose to that for which it was intended. It cannot be in the interests of the British taxpayer to train experts in tax avoidance if they then go to work for the tax avoiders rather than the tax collectors.

The issue of manpower losses is serious--the more so when the initial understaffing of Revenue divisions is taken into account. In 1984 the Government said that they proposed to set up a new division to clamp down on schedule D evasions. The unit was to have 780 staff in post by April 1988. By mid-1988 there were only 588 staff in post.

It is important to set the Government's attitude to tax evasion in its wider context--their attitude to other types of evasion. The Public Accounts Committee has an important role to play in that regard. The PAC has alerted the House to similar problems in other Departments in a number of its reports. Last November, we debated staff levels--which we have just discussed in relation to the Inland Revenue--at Customs and Excise, which was dealt with in the Committee's 33rd report. Surprisingly--perhaps not surprisingly--that report made similar observations to those that I have made about the Revenue. Again, emphasis was placed on the difficulty of recruiting staff in London and the south-east. The House was told that one serious consequence of understaffing seemed to be that Customs and Excise found it easier to pursue smaller

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and more readily discerned evasion than tackling the larger issues. Our fear must be that exactly the same applies to the Inland Revenue.

In that context it is instructive to compare the lack of resources put into pursuing income tax evasion with the strenuous efforts that the Government are making to combat benefit fraud in England, Wales and Scotland--although not, according to the Public Accounts Committee, in Northern Ireland. There has been a steady increase in the number of fraud investigators employed by the Department of Employment. Since 1984-85, when the figure stood at 450, it has increased to 820 in 1988-89 with an attendant increase in support staff.

The figures for the Department of Social Security show a similar increase since 1979-80. In that year 2,311 people in full-time equivalent posts were directly employed in fraud-related work. The figure has grown to 2,940 in 1988-89. The Department of Employment can also report a substantial increase in the number of presecutions over the same period--2,250 in 1984- 85, rising substantially to 4,045 in 1988-89. That substantial emphasis on combating state benefit fraud sits unhappily alongside the Government's failure adequately to staff the Inland Revenue or Customs and Excise which could both return far greater sums to the Exchequer if resources were properly applied.

It is with those reservations that the Labour party approaches the clause, although we do not oppose any measure that will tighten up the current regulations and make tax evasion more difficult. We only wish that the Government shared our enthusiasm for such measures.

Mr. Tony Worthington (Clydebank and Milngavie) : I shall elaborate on some of the points made by my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown). It was interesting to hear, during our previous debate on amendment No. 23, the considerable concern expressed by the hon. Member for Croydon, South (Sir W. Clark) about the rights of accountants and their clients and the need to ensure that they were treated fairly and dealt with by approved methods. If only the same concern were shown for those who are being investigated for social security fraud. Let us be blunt about this. We are talking about stealing, and I believe that stealing should be treated in the same way whether it is stealing from a gas meter, from the Department of Social Security or from the Inland Revenue, yet we have very different ways of investigating and treating those different forms of stealing.

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Let me give the House an example from my constituency. A number of my constituents--who were very vulnerable because they were recovering alcoholics or drug abusers or were mentally ill--were living in a hostel and it was recommended that as part of their treatment they should go to work in another hostel and help the addicts there. They were given expenses. Someone at the Department of Social Security deemed that they were workers and receiving an income. That income was immediately confiscated--in the form of deductions from their benefits. Some 13 months later their case had still not been heard. During the investigation they were treated in what they described as in a thuggish way by the fraud squad, who made all kinds of threats.

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My constituents approached me and I wrote to the Department of Social Security asking it to investigate the case. Several months later, I received a letter from the Department saying that the allegations had been investigated and found to be groundless. The investigation did not even involve a representative of the Department of Social Security interviewing my constituents and asking them about the basis of their complaints. That was the quality of the investigation.

In contrast, it has taken the Government nine years to implement this tiny part of the Keith committee report on fraud and the Inland Revenue. As my hon. Friend the Member for Newcastle upon Tyne, East pointed out, the Government seem indifferent to the fact that in 1987-88 we were 200 tax inspectors short, and the Government have not said how they propose to fill those vacancies. It is the economics of Passchendaele. We are training people at a cost of £50,000 to perform a public service but that money is wasted because they go to work elsewhere.

Mr. Eric Illsley (Barnsley, Central) : There is a knock-on effect.

Mr. Worthington : As my hon. Friend says, there is a considerable knock-on effect. Nine years ago there was a 1.8 per cent. wastage rate among Inland Revenue inspectors in London, and in 1987-88 that figure had risen to 11.9 per cent.

According to the Select Committee on the Treasury and Civil Service, we could reduce income tax by 2p in the pound simply by recruiting enough tax inspectors. Perhaps the House could unite on that. The Inland Revenue admitted losing £5 billion in uncollected taxes and that 16 per cent. of tax inspectors resign each year. Surely it is not beyond the Government's wit to see what a splendid money-making venture these could be. All we need to do is to find a way of recruiting tax inspectors, and everybody could pay 2p in the pound less in income tax each year.

Why does that proposal not come forward from the Government? Why is there an absence of innovation and enterprise? Why can Lord Young's energies not be set free in this matter? We could have a wondrous advertising campaign to find tax inspectors. It would not matter what we paid them ; it would be extremely cost-effective. I suspect that energy has not been put into the matter because too many Conservative Members think that too many stones might be overturned.

Nevertheless, hon. Members should ask the Minister for an explanation of how the Inland Revenue will be adequately staffed. The matter cannot be left to the Civil Service Commission. It could not fill a pint glass, never mind rapidly fill a job vacancy. We need to do something more innovative than leave it to the Civil Service Commission to find an adequate number of tax inspectors. What will be done to fill the vacancies? It is clear that the country is losing a great deal of money by the failure to act energetically.

Mr. Beith : The appearance on the statute book of a chapter of Revenue powers might give cause for some concern, but deliberations of the Keith committee and the wide consultations that surrounded it have led to a set of provisions that have met with general satisfaction because of the combination of new provisions and new safeguards and the analogous way in which they have been related to the powers of other agencies. It seems a strange fact of life that, as Members of Parliament, we tend to come into

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contact with tax cases, when the powers of the Revenue have been inadequate properly to discharge a task and someone has got away. That applies to other matters. One has the vision of the Barlow Clowes affair and documents being shredded in an upstairs room-- incidentally, just across the road from where I was born--while the Department investigators were coming in the front door. It conjures up pictures of Miss Fawn Hall going out of the Pentagon with documents in her boots, as I believe she confessed to having done. Powers have either been insufficient or insensitively used. The taxpayer who may have made an error, rather than seek to defraud the nation, suddenly finds the apparatus descending on him with a degree of thuggishness, as the hon. Member for Newcastle upon Tyne, East (Mr. Brown) described in relation to a benefit fraud case. The powers seem to be necessary and accompanied by appropriate safeguards. I served on the Treasury Sub-Committee of the Treasury and Civil Service Select Committee that looked into the staffing problem at the Inland Revenue, and I listened to the arguments that were put forward. Like all members of the Sub-Committee, I was struck not only by the vast amount of money that is being lost by the lack of staffing but by the need for more radical thinking about how to deal with the problem. Several points came to light. One was that, to be successful, it would be necessary for the Government to devote a lot more attention to making it possible to recruit and retain women tax inspectors. That argues for part-time work, opportunities for career interruption, child-care facilities and a range of matters that would make the job one in which women could be retained. The private sector will certainly look for ways to make tax consultancy a suitable option for trained female tax inspectors.

There seems to be a lack of flexibility in the payment system, as I remember from my questioning of an Inland Revenue official. Any private concern faced with the drift away of such large numbers of people would move quickly to provide appropriate incentives and remuneration when required. I am thinking particularly of the south-east of England. I agree with the hon. Member for Newcastle upon Tyne, East that substantial relocation is desirable. Some work has been done, but more could be done. When there is an immediate crisis and staff are moving away quickly, the payment system in the public service must have the flexibility to respond as the private sector would respond. We will waste our time by adding powers to the statute book if we do not ensure that the Revenue has enough staff to carry them out.

Mr. Norman Lamont : I am grateful to the hon. Member for Berwick- upon-Tweed (Mr. Beith) for his comments about the background to the Keith committee's conclusions and their implementation. When a series of clauses such as this are put in the Finance Bill it is not always appreciated to what extent they modernise and build safeguards into the powers that already exist. The hon. Gentleman summed it up fairly and accurately. I do not think that the proposals have caused alarm. They have been widely supported by professional bodies. I am glad that the hon. Gentleman confirmed that view--I like to hear that other people have that view. The hon. Member for Newcastle upon Tyne, East (Mr. Brown) said the same thing.

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The only point with which I quarrel slightly is about the delay in introducing the recommendations. The hon. Member for Clydebank and Milngavie (Mr. Worthington) talked about these "tiny" provisions. They represent almost the last instalment of the Keith committee recommendations. We have been implementing them year by year. We have done so gradually for precisely the reason that the hon. Member for Berwick-upon-Tweed highlighted : they are sensitive matters. The Revenue has been right to move on the basis of consultation and consensus.

The hon. Member for Newcastle-upon-Tyne, East talked about legal and accountancy privilege. It is a controversial issue--one that I hesitated at the time to stray into in any way. There is no change in legal privilege. There is a change in the focus on the privilege of accountants. I was slightly surprised at what the hon. Gentleman said about accountants' concern. I do not think that that is true of representative bodies. They saw the clauses in the consultation exercise and did not express concern.

The Bill introduces a new and better-focused protection for confidentiality. The Revenue will not be able to require accountants to disclose their audit papers or the tax advice that they give their clients. That would broadly give the same protection for confidentiality to the taxpayer's accountant as to his lawyer. The Keith committee recommended that privilege, subject to the override, should be extended to tax advice given by accountants. As we decided against the override for legal professional privilege, it was not possible to extend legal professional privilege subject to the override to professional accountants as Keith recommended. The Government's approach is to provide a separate form of protection for accountants that is distinct from but similar to that given to lawyers. The present protection for accountants' papers needs a balance to ensure that the Revenue can see the papers that it needs to see, while properly protecting the confidentiality of the professional relationship.

In some instances, the protection is too broad. In many small businesses, accountants' working papers include most of the books of the business. In such cases it would be impossible for the Revenue to check and understand the accounts of a business if it were refused access to the accountant's working papers. On the other hand, the present protection for accountant working papers will fail to cover some of the papers that Keith thought should remain confidential. I believe that there is a degree of consensus for the proposals. The hon. Members for Clydebank and Milngavie and for

Berwick-upon-Tweed talked about the loss of tax inspectors in the Revenue. Of course I take the level of staff losses, especially in London and the south-east, extremely seriously. Steps are being taken to stem the losses. Some of the ideas mentioned by the hon. Member for Berwick-upon-Tweed are precisely ones that are being implemented in the Revenue. The Revenue is taking a number of steps, and the signs are that they are beginning to pay off. We are having special increases in pay targeted to groups with particular problems of recruitment and retention. Relocation was one of the points mentioned by the hon. Member for Berwick-upon-Tweed. We have a continuing and large programme to move work out of London to areas where costs are less. The Revenue is well in the van there.

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We have also done a lot in terms of moving staff into the areas where they can concentrate resources on those areas that have the highest yield in relation to staff costs. The number of inspectors investigating accounts has increased 10 per cent. in the last three years. We have increased the resources and effectiveness in areas of compliance work by clerical staff below inspector level. The number of higher grade tax officers dealing with the black economy has nearly doubled in three years and the annual yield per officer on PAYE audit has doubled, coverage has trebled and the yield has increased fivefold. Yield from Inland Revenue counter-avoidance and evasion activities is worth £2 billion a year, which is equivalent to saving £80 for every taxpayer or a reduction of 1 p in the basic rate, which is not short of what the hon. Member for Clydebank and Milngarvie spoke about.

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Turning to what we are meant to be talking about, the Keith committee and the reforms in detail, I should emphasise that they do not give sweeping new powers to the Revenue nor do they place new burdens on the taxpayer. They generally update and simplify the procedures while setting out clearly in law the limits on the power of the Revenue in establishing a full system of safeguards for the public.

Clause 138 is the first group of about 30 clauses whose purpose relates to the reform of the information of the Revenue. As I have said several times, they have been the subject of extensive consultation. Keith found that the powers of the revenue were neither excessive nor misused, but were out of date and needed revision. We need a balance between the interests of the tax gathering agency and its duty to the wider body of taxpayers. After Keith published its report in 1983, we invited parties to write in with comments. The revised proposals were well received. The consultative paper received a wide circulation. More than 800 copies were issued and there were many articles in the accountancy press on the proposals. There was a strong response from bodies representing the professions, businesses, firms of accountants and many individuals.

The vast majority of the proposals enjoyed the support of respondents. For example, the British Bankers Association "welcome the pragmatic response displayed by the Revenue." The Institute of Chartered Accountants of Scotland said--it is not often that we hear all these compliments to the Revenue--

"We wish to take this opportunity of commending the Inland Revenue. The consultation process which the Revenue has adopted for the introduction of the Keith Committee proposals has proved helpful. It has, we believe, been useful both to the Revenue and to the taxpayer."

The message has come through loud and clear that the right balance is rather difficult to reach. The solution of pleasing all of the people all of the time has perhaps not been reached, but I do not believe that there is any real reason for alarm or fierce criticism of the proposals. I am grateful to Opposition Members for what they have said about them.

Question put and agreed to.

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Clause 1


Dr. John Marek (Wrexham) : I beg to move amendment No. 1, in page 2, line 2, leave out £0.0272' and insert £0.0292'.

The Temporary Chairman (Mr. John McWilliam) : With this it will be convenient to take the following amendments : No. 11, in page 2, line 2, leave out £0.0272' and insert £0.0383'.

No. 2, in page 2, line 2, at end insert--

(2A) In section 13A of the Act (rebate on unleaded petrol for "£0.0272" there shall be substituted "£0.0292".'.

No. 12, page 2, line 2, at end insert--

(2A) In section 13A of that Act (rebate on unleaded petrol) for "£0.0272" there shall be substituted "£0.0383".'.

No. 3, in page 2, line 8, leave out subsection (4) and insert-- (4) Subsections (1), (2), (3) and (4) shall be deemed to have come into force at 6 p.m. on 14th March 1989. Subsection (2A) shall come into force at 9 a.m. on 10th May 1989.'.

Dr. Marek : I must point out that with amendment No. 1 we can discuss several other amendments that have been put down by Democrat Members who are not here at present, but who I hope will return quickly.

Hon. Members will notice that there is a bidding auction as to how much we should increase the rebate on unleaded fuel. Again, there may be a Division in the House on how far we should go in order to introduce unleaded petrol as quickly as possible. I do not believe, however, that there is any dispute about the desirability of doing so. The Opposition have reservations about how far the Government have gone. Perhaps we have even more reservations about the Government not doing anything about it until recently. To be fair, they have taken some measures, but we believe that they should have taken more.

The amendment is a moderate one, because we are a moderate party. We intend to continue along that path, but I will be interested to hear what the Minister says about the Government's programme and where it could be improved.

There is no doubt that lead poisons the brain. Lead additives in petrol find their way into all our bodies, and retard the development of children. Nearly all children are now affected to some extent by lead poisoning. Some recent research even suggests that lead is the primary risk factor for impairing the development of children. Of course, large particles of lead emitted by cars will fall out by the roadside, and small ones will permeate the atmosphere. That is not a local problem. Lead gets into the air and it can be blown from here to nearly every country within the European Community. All of us suffer damage because we breathe it. We can do no other than breathe the atmosphere. Of course, when lead settles on plants and in the environment, we eat it through our food.

Unborn children are especially at risk because they are still developing in their mother's womb. It is interesting that the fatal dose for a woman is a blood level of 40 mg per 100 ml and the fatal dose for a man is 100 mg per 100 ml. Recent research found that in London schoolchildren suffered a seven point handicap in their IQ when their blood level was more than 13 mg per 100 ml. We must be clear that we do not need large amounts of lead in our blood. Certainly children do not need to have large

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amounts of lead in their blood to suffer in their development and to suffer permanent damage for the rest of their lives.

I should like to examine what the Government have done and how they are doing it compared with the action in other countries.

Mr. Keith Mans (Wyre) : Will the hon. Gentleman point out the research that shows that higher levels of lead in the atmosphere lead to higher levels of lead in the blood of adults rather than children? I am not aware of any evidence to the contrary.

Dr. Marek : I was not comparing adults with children. I was saying that both were involved. I am relying on the words of Professor Smith, who is professor of organic chemistry in the chemistry department at Reading university. The hon. Gentleman can obtain all the evidence that he needs from that source.

Mr. Mans : I understand that that research was limited to children, but the most substantive research on adults concentrated on taxi drivers in London, who were reckoned to inhale a considerable amount of lead. Surprisingly, however, there was no evidence that the amount of lead in their bloodstream was greater than that of the control group.

Dr Marek : The hon. Gentleman is talking about one set of experiments and all I can say is that that result is unexpected and, therefore, it is likely to be wrong. We need a lot more research into adults and

Mr. Matthew Taylor (Truro) rose

Dr. Marek: I shall give way to the hon. Gentleman if he will allow me to finish my reply to the hon. Member for Wyre (Mr. Mans). Many more experiments are required to establish exactly what is happening. Although the metabolism of children is different from that of adults, it is not all that different and there could be a change in the relative intake of lead. However, what is certain is that most informed opinion would say that adults living in a lead environment would experience an increase in lead poisoning.

Mr. Matthew Taylor : The hon. Gentleman might be interested to know that in America between 1976 and 1980 there were substantial decreases in the lead emitted into the atmosphere through petrol and a substantial decrease--of 36 per cent.--in the amount of lead in average blood samples there. Therefore, there seems to be some evidence that runs contrary to that of the hon. Member for Wyre (Mr. Mans).

Dr. Marek : I am grateful to the hon. Gentleman for giving that evidence. I had hoped that we would have a discussion in which all hon. Members would be in general agreement about the problem so that we could simply seek a solution. Indeed, I think that we are probably all agreed that there is a problem that must be addressed and that the central question is whether the Government are approaching it in the right way and whether they are doing enough to get rid of the serious problem that we all agree exists, at least for children, and, some of us would add, for adults also.

It is a European if not a global problem because air circulates and I am fairly sure that lead emitted in this country would probably find its way right across Russia.

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