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Mr. Prisk: I do not wish to interrupt my hon. Friend's flow, because he is making an extremely powerful point, but one problem is that there has been a five-year delay. Does he share my bewilderment and concern that although the Government have had five years to introduce the measures, they are now saying, "We need to get this through now, put a timetable on the Committee and rush ahead", when we do not know the content of the regulations?

Mr. Ruffley: I share my hon. Friend's concern but I do not share his surprise. We have become used to the Minister who oversees the department of the Inland Revenue having lapses of concentration—to put it mildly. I urge those who think that that is a partisan point not to say so, because her recent tenure in office overseeing the Inland Revenue department is comprehensively criticised by an all-party group—the Treasury Committee, which includes a preponderance of Labour Members. I shall quote again the last sentence of our 2002–03 report on the Inland Revenue, which said:

"This inquiry has raised serious questions about how the Department has been led"—

a reference to the Mapeley shambles, NIC notification periods and the tax credit shambles. I share my hon. Friend's concern about the tardiness with which some of the department's business is brought to the House.

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Clauses 7 and 8, relating to officers' powers to check employers' records, illustrate a further slackness in the Government's management of our national insurance system. National insurance contributions and the administration of statutory sick pack and statutory maternity pay were the responsibility of the Contributions Agency. That was transferred to the Revenue in 1999. We were told at the time that that would ensure an alignment of the tax and NIC rules of administration and that everything would be much more efficient, businesslike and clear. However, as the Institute of Chartered Accountants said in April 2002, on the third anniversary of the merger, progress has been slow. The ICA was justified in making that criticism.

We were given a further commitment by the Chancellor of the Exchequer on 21 March 2000:

"The Inland Revenue will set out options for ensuring that its officers have common and appropriate powers for their examination of employers' tax and NICs records"—

the issue covered by clauses 7 and 8. That statement was made in the Inland Revenue Budget press notice REV10, comically entitled "Helping to Get it Right". In July 2001, the Revenue published a summary of the comments it had received following its much vaunted consultation issued in June 2000. Although clauses 7 and 8 are welcome and seem technically adequate for reducing inspection powers relating to national insurance that do not exist for straightforward income tax inspection, it tells us a lot about Treasury Ministers that it has taken the best part of five years to make the change, as my hon. Friend the shadow Paymaster General observed.

The different inspection powers for income tax and national insurance have been difficult for some employers to understand. Clauses 7 and 8 achieve alignment. In particular, clause 7 dispenses with the powers that allow officers involved in NIC inspection to enter premises, question anyone found on those premises and compel them to provide information and documents without first subjecting those requests to third-party scrutiny. I add my voice to that of other hon. Members and ask the Paymaster General to explain in more detail how future third-party scrutiny might occur. Above all, perhaps she will explain why the misalignment rectified in the two clauses was first flagged up as something that required action during the passage of the Social Security Contributions (Transfer of Functions, etc.) Act 1999. That is hardly a great advertisement for the efficiency of Treasury Ministers.

The concern about efficiency, and the way in which the Paymaster General dispatches business, was raised, as I said, in "Inland Revenue Matters", the 10th report of the 2002–03 Session produced by the Treasury Sub-Committee. It exposed not just one but a catalogue of administrative failures in the Revenue, oversight of which is provided by the Paymaster General herself. In relation to the Mapeley fiasco, we concluded:

"The conflicting evidence given to the Committee by the Chairman of the Inland Revenue and the Paymaster General has not resolved the vital question of whether in future the tax haven status of bidders for Government contracts can or cannot be taken into account."

Our Committee then examined last year's tax credit shambles—there is no other word for it. Let me remind the House that the chairman of the Revenue is the

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gentleman responsible for the fair and proper administration of the national insurance contributions system. He had few answers as to why the tax credit system ground to a halt, and, to be honest, his evidence did not inspire confidence in his office. As was made clear, by 2 July 2003 nearly a quarter of a million applications had not been resolved, more than 100,000 unresolved applications had been received more than a month earlier, and as a result of delays the Inland Revenue had to make nearly 200,000 emergency payments. In addition, more than 400,000 applicants received their first payment of tax credits on a date later than the one of which they had been notified.

At the time, the Paymaster General offered her commiseration, but not her resignation. The fact that a flagship project for which Treasury Ministers were responsible disintegrated as it did says a lot about the way in which Treasury Ministers run the Revenue.

The third and in many ways most potent criticism in that report on the Revenue and its Ministers focused on the national insurance contributions deficiency notice failure. The notices are a means of informing individuals about gaps in their contribution record in any given year, so that, if they want to, they can make up those contributions. Doing so will enable them to ensure that they get their full basic state pension entitlement, so it is an important notice—or so one might have thought. Amazingly, however, no Minister was consulted or informed of the decision, taken in 1998, to suspend NICs deficiency notices. Admittedly, the responsibility belonged to the Contributions Agency, but that agency's functions had passed to the Treasury, via the Department of Social Security.

Following the transfer of responsibility for that important function to the Inland Revenue in April 1999, the Paymaster General became the responsible Minister. It is astonishing that it took her officials until March 2003—the best part of four years—to inform her of the problem and its significance. As our Committee reported, that was not a happy state of affairs and it did not inspire confidence in the Revenue. That is why in our conclusions we stated that serious questions had been raised about communication between the Minister and her senior officials at the Inland Revenue.

I mention those failures in the context of a Bill that purports to make the NICs system more efficient and better for the people who pay that levy, whether they are employers or employees. Many of the clauses are tardy responses to long-standing problems, and one might ask senior Inland Revenue officials and the Paymaster General herself why from time to time there appears to be a culture of complacency in that important area of public policy, which affects individual families as well as wealth-creating businesses. I make my comments more in sorrow than in anger, and certainly in the hope that a clear message will be sent to Ministers and Revenue officials that Parliament is watching them. Only then will their performance improve when implementing the provisions of the Bill—if, indeed, it is passed.

On a less critical note, I hope, I shall close by raising a point that Deloitte unearthed in its pre-Budget analysis in December 2003. In connection with the Bill, it noted the lack of any legislation for funded unapproved retirement benefits schemes, or FURBS. It noted that when the Bill was published on 27 November 2003, the anticipated draft NIC legislation on FURBS

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was missing. Deloitte said that it understood that the intention to effect a class 1A liability on employer contributions from 6 April 2004 was overtaken by the Government's move to simplify the tax treatment of pension schemes from 2005.

Deloitte observed that the Government's pension proposals had been published, and it appeared that from 6 April 2005 there would be no NICs on employer contributions to FURBS, either class 1 or class 1A, and in addition that there would be no NIC charge on benefits paid out of FURBS if those payments were within registered scheme limits, the employer relationship had ceased and the benefits were consistent with the new pension benefit rules. Deloitte observed that that looked as if it were good news for national insurance contributions in relation to FURBS after 6 April 2005—but the business community is not entirely sure that that reading of the situation is correct, and wants to see more detail relating to FURBS and NICs.

If Deloitte is right, the corollary is that the contested Revenue claim to class 1 NICs on employer contributions to FURBS will continue for another year. Can the Paymaster General shed some light on that narrow but important technical point?

In conclusion, I believe the Bill includes provisions that should have been passed years ago, or which are needed now to undo the damage caused by the pernicious tax-raising consequences of the Chancellor's own actions. As such, the provisions are not, in themselves, wholly objectionable. Nevertheless, the Paymaster General needs to answer the detailed questions posed to her this afternoon by my hon. Friend the Member for Hertford and Stortford and me.

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