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Mr. Davey: I welcome that news. It makes this debate even more important. It is the job of the House and of the Committee to ensure that we play our part in turning around that failing organisation. There could be many reasons for the failures. It could be under-resourcing, although I think that it has much to do with poor leadership over several years. The new head of the board faces a real challenge.

Two major issues were identified in the report. The first is smuggling and the measures that are needed to bear down heavily on that abuse. The second is the merger. The Committee came out strongly in favour of merging Customs and Excise with the Inland Revenue.

Customs and Excise might not be capable of taking on both those challenges simultaneously. However, that is not an argument against having a strategic vision for that important Department of State. It is crucial that the Government go much further than they did in their reply to the Committee. Although this may not be the time to take a rapid approach to merger, they should tell us that merger is the goal. It may take place in four or five years, but the Government should tell us that that is what they want for Customs and Excise.

Many of the remarks made by the hon. Member for Newcastle upon Tyne, Central were especially pertinent. He referred to the failures of co-ordination and communication within Customs and Excise. Those are shown clearly by the report. It is thus doubtful whether a quick merger would be possible, because of such weaknesses--mainly in Customs and Excise. However, merger must be the vision.

I was delighted to read, in Wednesday's Financial Times, the suggestion that the Government may be considering merging Customs and Excise with the Inland

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Revenue because of the failures of Customs and Excise in relation to alcohol smuggling. Obviously, the Paymaster General will want to put on record the Government's position and whether, after the recent evidence, they have shifted from their reply to the Committee's report.

Dawn Primarolo indicated dissent.

Mr. Davey: The hon. Lady shakes her head, so it appears that they have not done so.

I hope that she will leave the door open to that policy goal--as she did when she came before the Committee. Possibly, she will suggest that there will be a review or an independent inquiry into the possibility, so that the debate can progress. That is the right route.

The Committee's arguments for a merger should be put clearly to the House. The evidence showed many benefits, such as improved compliance with taxation. Presumably, that would bring a greater yield to the Exchequer. Another important advantage is often overlooked--indeed, far too often overlooked in Whitehall: the reduction in business compliance costs.

When we debate the regulations that we impose on the private sector, we often overlook the fact that taxation is the biggest source of regulation, involving not just the cost of the tax itself, but the compliance costs for completing forms, keeping records and contacting the tax authorities. Taxation--be it VAT, excise duties or corporation tax--is the largest regulatory burden faced by business.

For too long, the House has paid too little attention to that fact--especially as it relates to Customs and Excise. We must bear down on business compliance costs; they are far too high, especially for small businesses, which face too many inspections. If there was only one point of contact with Government in respect of taxation, that would simplify their affairs. They would expend less senior management time and less anxiety on their relationship with the tax authorities. From the point of view of the private sector, that is a strong case for merger. It should be one of the clinching arguments.

The reduction in the Government's revenue collection costs is a strong argument. I was struck by some of the examples in the Committee's evidence. In a former life, I undertook a little research into the Swedish taxation system. For my sins, I visited the centre outside Stockholm where taxation forms are printed, as my job was to ask about the questions on the forms. It was interesting to see how many taxes were dealt with by one form; for example, income tax, VAT and property tax.

Sweden may be smaller than Britain, but there is no reason why we should not take that route. We could try to include as many aspects of taxation as possible--especially for business--on one form. That is a real goal. It certainly coincides with the Committee's recommendations.

I would go a little bit further, but I promise that I will not spend too long on this subject because you would call me out of order, Mr. Deputy Speaker. I believe that we have far too many bureaucracies in our town halls. One of the strongest arguments for abolishing council tax and introducing a local income tax is that it could piggyback on the Inland Revenue. We could then get rid of a lot more of the tax bureaucracies in this country and save an awful lot of money in the process.

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The Committee heard some very strong arguments for a merger of Customs and Excise with the Inland Revenue; so why do the Government persist in not going ahead with it? I was interested in the physical reaction, from a sedentary position, of the Paymaster General when I said that perhaps Customs had lot on its plate at the moment, especially in tackling the smuggling problem. That may be the reason why the Government are not pushing ahead with considering the merger. If that were so, it would be slightly more understandable. If it is the case, I hope that the Minister will confirm it, because I found the arguments in the Government's reply unconvincing.

There were two main arguments. It was said, first, that a merger would entail risks, costs and structural upheaval. Of course there would be up-front costs; of course it would be an upheaval. Of course there are risks in the process--there are in any structural change, and certainly one of this magnitude. That is why there would be a long process of consultation, a process in which the merger was planned out over a period of four or five years, to ensure that we got things right. That is not an argument against the merger; it is just an explanation of the obvious.

The second main argument is that closer working can achieve the benefits of merger without the disbenefits. Well, we have been experiencing closer working and it does not seem to have been very effective, for many of the reasons that the hon. Member for Newcastle upon Tyne, Central has just stated. The Government really must do an awful lot better to produce--

Dawn Primarolo: I shall answer that point now, as the hon. Gentleman will not be present for the end of the debate. That is a contradiction that continually runs through this debate. My hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) asked why the Inland Revenue was doing some more visits while Customs was reducing its number of visits. The answer to that question is that, through closer working and shared experience, the two Departments have a better understanding of when they should visit and how to conduct such visits. Therefore, what appears to be a negative--that is, a reduction in visits--is actually--[Interruption.] My hon. Friend the Member for Newcastle upon Tyne, Central laughs, but it is about understanding risk, sharing information and visiting where necessary, but not burdening business with unnecessary visits. That is just a minor example of some of the things that are emerging from closer working.

Mr. Davey: I am grateful to the Paymaster General for intervening then and explaining that point, and I am pleased to hear that some benefits are emerging from the closer working programme. However, from the evidence that the Sub-Committee heard, and that I have read, it does not appear that the closer working programme is progressing apace. There does not appear to be a huge degree of commitment at senior level to it, and as I--

Mr. Cousins: I was trying to bring to the attention of the House the fact that visiting policies clearly differ. I draw it to the hon. Gentleman's attention that the Sub-Committee had evidence that there had been a previous programme of joint visits by Customs and Excise

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and Inland Revenue, which had been quietly abandoned and ditched by both organisations. That gives rise to some concern about what the present course of action might be.

Mr. Davey: I am grateful for that intervention. The hon. Gentleman shows that he is a rather greater expert on the details of this subject than I am.

That intervention backs up the point that I was coming to, about whether there is commitment, and sufficient commitment, to the closer working programme. We hear that Customs and Excise has undergone a restructuring programme. It restructured its board recently; I am not quite sure why. I am sure that the Paymaster General will enlighten us in due course. However, interestingly, when that restructuring was going on, no board-level closer working director was appointed. If there was a commitment to closer working at the highest level, one would have expected that. One would have expected the board to take the matter seriously.

We are told by Ministers that closer working is really important--that the two organisations will learn from each other, and understand the benefits and share information and so on, which is what we believe could happen after merger. However, I am not convinced that experience of closer working has shown that the benefits of merger can be achieved in that way without the disbenefits. The closer working programme must do an awful lot better, and be undertaken with far greater commitment and extremely quickly if the House--and, I believe, the Sub-Committee--is to have faith in it as an alternative to merger. I am not convinced by it at all.

When, elsewhere in government, some successful mergers of Departments have taken place, the risks, the costs and the structural upheaval--all the excuses that have been made for not merging Customs and Excise and the Inland Revenue--have not been considered. I pay tribute to the Government for the way in which they have integrated the Contributions Agency with the Inland Revenue. It was an excellent idea; I totally support it. The Government have also set up ONE, by merging parts of the Benefits Agency and the Employment Service. The political will was there to carry out that merger. Why is not the political will there to carry out this merger? It seems that when the political will is there, the practical arguments against merging sometimes fade away.

I shall now move on to the smuggling issue. The Paymaster General knows that, in debates that we have had on that issue, in the House and in the Committee of the Finance Bill, I have in many ways supported what the Government have said about administrative changes and the introduction of new technology, such as X-ray scanners. However, I have been concerned about the delays in action, and the report increases my anxiety.

I know that the Paymaster General is committed to hitting the smugglers hard, and she is coming up with a set of policies which, I believe, will be effective; but there are delays. As the hon. Member for Newcastle upon Tyne, Central said, many people are worried about those delays.

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