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Clause 317
Functions
Mr. Grieve: I beg to move amendment No. 480, in page 183, line 35, leave out paragraph (e).
The Chairman: With this we may take the following amendments: No. 481, in page 183, line 36, leave out paragraph (f).
No. 482, in page 183, line 37, leave out paragraph (g).
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Mr. Grieve: Clause 317 deals with functions. When I read it, I fully understood why the director might take over the functions of the Board of Inland Revenue in so far as it related to income tax, capital gains tax, corporation tax and—just about—national insurance contributions. However, when it came to statutory sick pay, statutory maternity pay and student loans, I wondered what lay behind the provision. Arguing against myself—as, at any rate, the amendment is probing—I acknowledge that administrative matters may have to be taken into account in relation to those elements in deciding the others, but I could not imagine the director taking a great interest in those three areas on their own. The best that I can do is listen carefully to what the Minister has to say, and when I am more enlightened, I may chip in and ask some more questions.
Mr. Hawkins: Before the Minister responds, I want to say that I was somewhat less charitable than my hon. Friend the Member for Beaconsfield when we discussed this matter. My initial reaction was that the draftsman must have a vivid imagination concerning the kind of thing that could be the subject of criminal behaviour. Although I have been involved in fraud cases relating to national insurance contributions on one or two occasions during my practice at the Bar, I certainly have not been involved in cases relating to statutory maternity pay or sick pay. It will take a great deal for the Minister to convince me of the relevance of subsection (1)(e), (f) and (g) to the Bill. It seemed to me that a sledgehammer was being used to crack a nut. The provision seemed to fall into the category about which one could say, ''If it is not necessary for it to be there, it is necessary for it not to be there.'' I can just about agree with the inclusion of paragraph (d), on national insurance contributions—although even that is pushing it a bit—but the provision is supposed to be hitting at serious criminal wrongdoing. I find it difficult to understand why paragraphs (e), (f) and (g) should be in a Bill of this sort.
Mr. Ainsworth: The hon. Gentleman should not underestimate other people's ingenuity. Some time ago, there was a case that he may have read about in the press, involving individual learning accounts,
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which on the surface was surprising, but it was lucrative none the less. We are talking about serious people involved in serious activities. However, that is not necessarily the reason for the inclusion of the matters under discussion.
Mr. Hawkins: I understand why the Minister raises that issue. I was equally concerned, as were all hon. Members, of every party, about the serious fraud involving individual learning accounts. As the Minister has raised it, it would be relevant for me to say that if the Government had taken a bit more notice of some of the concerns raised by my hon. Friends about the way in which the individual learning accounts scheme was set up, they might not have got themselves into quite such a mess. However, I shall not pursue that, as it would be wide of the debate.
The issue under discussion is taxation powers, which is different from organised fraud by supposed providers of individual learning accounts.
Mr. Ainsworth: If the hon. Gentleman is inviting me to believe that he previously flagged up the issues, I would want to look into that in some detail, based on his past record.
Clause 317 was drafted to provide clarity about which taxation functions the director is to have and which are not appropriate. An important feature during the development of the Bill has been the maintenance of a single, national and consistent taxation system. The amendments would result in a variation from that, as the director would not be able to undertake such taxation functions. It would also be extremely difficult for the director to take on general revenue functions in relation to the subject as an employer, without taking on SSP, SMP and student loans, as they are part and parcel of the PAYE process. To attempt to disentangle such functions from the process would be an unnecessary and time-consuming activity.
The clause will provide for the Revenue to carry on with certain functions if that is more appropriate. Even when the director has served notice on the Board of Inland Revenue, the Revenue is not divested of such functions and may continue to operate in the delivery of certain tasks, such as the more resource-intensive routine functions, which will free up the director to focus on using his taxation functions in the best way to contribute to the reduction of crime.
When speaking to earlier amendments tabled to clause 311, I said that the Board of Inland Revenue had no role in the tax affairs of a specified person or company to the extent set out in the notice. That is not, in fact, the case: the director and the board may both exercise functions when that is appropriate. I wish to put the record straight so that there is no misunderstanding about the Bill.
Mr. Mark Lazarowicz (Edinburgh, North and Leith): Will the Minister clarify one point that may deal with the concerns expressed by Opposition Members? Am I right in thinking that the subsection (3) will considerably restrict the sort of widespread use of the Bill that they have described? Will it not provide real protection against the possibility of the Bill being misused as they have hinted might happen?
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Mr. Ainsworth: My hon. Friend is right. The last thing we want is for the director to wander into areas that are not appropriate to his functions. We have a list of matters for which he may take responsibility. We also have a list of matters for which he should most definitely not take responsibility. It is not our intention to tie the director to dealing with statutory sick pay and other such matters, but they are part of the system. To disentangle them would be a lot worse than dealing with them as they are dealt with now, under the Revenue's procedures. That is our basic argument. The hon. Gentleman said that it would take a tremendous argument to persuade him that such provisions were justified—but the matter is relatively simple, in that those are the areas that it is necessary to include so that the director can pursue his functions.
Mr. Ian Davidson (Glasgow, Pollok): The Minister has explained well why he would keep paragraphs (e), (f) and (g). I understand that most of the roles are covered by the Board of Inland Revenue, but given that corporation tax is listed under subsection (1), should not VAT also be listed? Some complex fraud and financial arrangements will include cheating on VAT. To some extent, VAT will be indistinguishable from income tax, capital gains tax and corporation tax. All such matters should surely be taken together. Will the Minister expand on that?
Mr. Ainsworth: My hon. Friend is right. We are giving the director Revenue powers. VAT is not a Revenue function, but a function of Customs and Excise, whose powers are different from those of the Revenue. If we thought it necessary to involve the director in Customs and Excise powers, too, we would have included such a provision in the Bill and we would have had to justify it, but that is not a case that has been made to us.
As I have said, there is a case for pursuing the proceeds of crime by giving the director Revenue powers. However, VAT and the rest fall under the powers of Customs and Excise, which will continue to use the powers that are appropriate to it. Customs and Excise was consulted when the Bill was being drafted. It had a wide input with regard to what should and should not be included not only in part 6, but in the whole of the Bill.
Statutory sick pay, statutory maternity pay and the recovery of student loans may, however, have a bearing on the true tax position of an individual who is the subject of the director's inquiries. For the director to be able to establish the true tax position, he will need to have the full range of general revenue functions.
Mr. Hawkins: I was not persuaded by the Minister's first point, but I understand that there may be substance to his second point. Rather than including the existing paragraphs (e), (f) and (g), we could follow the logic of the intervention by the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz). Will the Minister say why there should not be a new subsection (3)(g) saying that the director should not waste his time investigating the minutiae of statutory maternity pay, statutory sick pay and student loans? That would be another way of addressing the point.
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Mr. Ainsworth: I do not think that there is a necessity for a new subsection (3)(g) saying that the director should not waste his time. Having taken on the responsibility for the matter, the director has to be able to make an assessment. When the individual concerned is an employer, the director has to be able to take into account the way in which the other issues, as well as income tax, are being dealt with. It is self-evident, therefore, why the list and the safeguard list are written as they are. Clearly, there are areas into which the director should not be required to go, nor would he be wanted there.
Mr. Grieve: This has been an interesting debate. As my hon. Friend the Member for Surrey Heath said, the most cogent argument presented by the Minister is the need for the director to take such issues into account. When a tax assessment is issued, such factors will have to feature when we are dealing with an individual who is, for example, an employer. I can see that argument.
In the context of taxing money suspected to be the proceeds of criminal activity, it is a fairly far-fetched idea—although still possible—that connected to the criminal activity there would be a legitimate business that provided for statutory sick pay and statutory maternity pay. I am not sure where student loans fit into such an example. However, that illustrates the complexity of the system.
Will the Minister give us an assessment of how many staff would have to be transferred from the Inland Revenue to the director's office? I suspect that, to administer the system, that is what would happen, because it does not sound as if only the director and a couple of other people would be needed. In view of the overall complexity of the tax system, it seems more likely that a discrete department would have to be set up. In taxing individuals and companies in that way, the objective is not only to locate particular sums and ask for 40 per cent., but to take into account the complex tax regulations that cover issues such as sick pay and maternity pay in determining the correct figure.
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