Finance Bill

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Mr. O'Brien: The Minister has tried to address whether Customs and Excise must establish the associated chain of relationships between companies. When we are considering the clause, it is wholly legitimate to quote paragraph 1 of the explanatory note, which I sought to do, and to which he did not give a specific response. It is therefore incumbent on me to repeat the quotation in the hope that I can get an answer:

    ''This clause extends the powers that Customs and Excise currently have to require the provision of security where it is considered''.

''Where it is considered'' is in the passive voice: it is not considered by them; it is considered by the authorities. The statement of condition and circumstances is passive, which means that somebody has to make the judgment. Who will make the decision? I assume that it must be those who seek some form of payment or redress from those companies rather than those within the association. The quote continues:

    ''where it is considered that a business is associated with other businesses whose pattern of trading poses a real threat to the proper collection of VAT.''

We all agree with the final sentiment. However, the issue is that in order to restrict appropriately, the necessary association must be established.

John Healey: I have explained how missing trader fraud by which the Exchequer is systematically defrauded out of massive sums of money operates, and that it is rooted in supply chain relationships and trading relationships. The place in the supply chain is the relevant factor. I remind the hon. Gentleman that no company will have the power raised against it without a warning from Customs and without the power and provision to challenge the power in the

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courts. Customs will make a judgment, but it can be challenged through the tribunal.

Mr. Burnett: Given the draconian nature of the provisions, what will be the burden of proof at the hearings? Will it be civil or criminal? If criminal, will the new Customs prosecution service now under the aegis of the Attorney-General be involved?

4.15 pm

John Healey: It will be civil.

The clause will allow us to disrupt the supply chains that underpin missing trader fraud. It will give us the powers that we lack to make further progress in stamping it out. Despite the best efforts of Customs, which has managed to control the expansion of missing trader fraud, we now need such powers, just as we needed them at the time of the pre-Budget report. Further action will increase the exposure of the main players and dramatically alter the risk-reward ratio for them. The clause is important and necessary. It is part of the fight against missing trader fraud and part of protecting huge amounts of money that are due to the public purse. On that basis, I urge the Committee to reject the amendments and support the clause as it stands.

Mr. O'Brien: I shall be completely frank and say that I am genuinely disappointed. I thought that the Government would at least take the opportunity to acknowledge that the arguments made in support of the amendments are genuine and have widespread support. I thought that I had made my opening remarks in a reasonable manner. I am aware that there is pride of authorship and so on in these situations, but I was not out to fight some war of pride about who had it right the first time.

These very serious issues affect the rights of individual citizens and the settlement between them and the public authorities. At the very least, I had hoped that the Economic Secretary might have said, “We do not like your amendments, but you have raised important points. Therefore, we will go away and draft our own amendments.” That might have tempted me to withdraw the amendments. Instead, as we discovered on the Floor of the House, the Government wrap all their arguments in either anti-avoidance speak or the need to address significant tax evasion.

Let us not play games. We all want to avoid stepping into the trap of thinking that we have to present arguments that could prevent the Treasury, Inland Revenue or Customs and Excise from collecting due and proper taxes. We are all responsible for maintaining the settlement between taxpayers and the public authorities, but it may be used as a cloak to stifle legitimate concerns about striking the wrong balance.

The amendments were modestly drafted, given that some representations that we received asked to have the entire clause deleted. They said that the measure was draconian. That word was used by the hon. Member for Torridge and West Devon (Mr. Burnett), who also asked who the prosecuting authority would

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be in a criminal as opposed to a civil action. The Economic Secretary sought to defend his position on that matter, because the Attorney-General has had to take the prosecution processes of Customs and Excise under his wing, given the very serious concerns about and abysmal track record of the prosecuting authorities in Customs and Excise, about which the Economic Secretary and I have recently debated on the Floor of the House.

At present, Customs and Excise is not covered in glory over its ability to make judgments about the rights of the citizen and its powers­and that is in an area in which its powers have been properly and more fully qualified. The very guidance that the Government issued has been reissued. We have seen the way that Customs and Excise used its powers to deal with various imports coming into the country in recent months and years.

I would like to have confidence that we are dealing with a public authority in which we can place considerable trust, but it is not actually appropriate that we as legislators, whether in Opposition or in Government, should place such trust in it in any event. Our duty is to stand up for the citizen and for our constituents in order to ensure that they have proper protection. Unless such checks and balances are in place, the state is almighty and is always open to abuse.

Mr. Laws: I agree with the case that the hon. Gentleman is developing. Does he agree that the minimum that would have been helpful from the Minister would have been an agreement to incorporate in the Bill some of the safeguards on which he touched in his comments? Then it would be clear what they were, and we could debate them, rather than have to rely upon the good faith of Customs and Excise.

Mr. O'Brien: The hon. Gentleman puts it succinctly, appropriately and accurately. I am grateful for the support and consensus. I realise that, ultimately, if the Government wish to whip their vote, we are outnumbered. However, it is our duty to challenge attempts to pass other than proper and good law. I sense­perhaps I am overoptimistic­that some of my arguments have struck a chord with Labour Members. I do not say that they agree with me entirely, but they recognise that the issues are genuine and that it would be appropriate for the Minister to acknowledge that there was a chance to look at a review.

In the absence of an offer from the Government to table their own amendments on Report, we must press the matter to a vote for no reason other than to stress the importance of recognising that the Government's case has not been made. We must register our disapproval on behalf of all citizens and taxpayers whom we represent, as well as the professional bodies who have made such thorough representations to us.

Mr. Jack: Does my hon. Friend agree that the Minister could have taken a lot of the steam out of the situation if he had volunteered to produce a note of explanation or to circulate to the Committee

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the Customs practice note that will no doubt accompany the operation of the clause, to assuage our concerns about how it will operate in the real world?

Mr. O'Brien: That would have been very beneficial and, for the Government, an advantageous thing to have done towards persuading us of their argument. Its absence has not been helpful. We are considering the potential legal cost and hassle that individuals will face when they have to defend themselves in the civil courts because things have got out of control due to the fact that they are in a chain­whether or not Customs and Excise, in the absence of an appropriate measure in the Bill, has to make any effort to discover whether they are in association.

Above all, particularly for small companies, it is a matter of reputation. Once company directors or sole traders become engaged in such matters­which are often widely known­their reputation is under threat. That can kill a small company before it has had any chance of redress and that is why it appears disproportionate. The Government are seeking to reverse the natural burden of proof that should exist when we, as democratic representatives, favour freedom under the rule of law. We are dealing with a proposed law in which that freedom is presumed not to exist unless proven. Although that might sound extreme, it looks as though the challenge is to the citizen, rather than to the authority, to make his case. It is incumbent upon us to register our great distaste and disapproval. I hope that the Government will understand that, having read what will now be recorded in the Official Report, not least because under the rules of statutory interpretation, the point that I made in an intervention on my right hon. Friend is correct. Because of the nature of the issues that we have raised, today's proceedings will be relevant and capable of acceptance and statutory interpretation.

Rob Marris: I must say that I accept the assurances of the Minister that warnings will be given. Does the hon. Gentleman not accept those assurances?

Mr. O'Brien: I do not take issue with the personal integrity of the Economic Secretary­of course I do not. Furthermore, it would have been helpful, as my right hon. Friend the Member for Fylde said, to have had a copy, at least in draft, of the intended guidelines. Clearly, the provision will not be included in the Bill according to the Economic Secretary's current thinking, so one would hope that the guidelines would include that. At the very least, we would be left to make a judgment on what is likely to be the behaviour of those practising under those guidelines, as opposed to those who simply have an obligation to do so under statute.

I also argued that we should make sure that the right of recovery from the party that had failed to pay back in the associated chain should be enshrined in the statute. Although the redress is there through the civil court, if it was a statutory expectation it would give rise to a presumption that there was that right of recovery, which would get the whole civil case­if it came to that­off to a more favourable start. That may save costs.

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