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Mr. David Laws (Yeovil) (LD): The Paymaster General is right to say that the regulatory impact assessment contains some, but perhaps not all, of the costs relating to the merger. Will the merger result in a net cost saving over the period of the existing spending review? Will there be a total saving, taking into account all the cost savings and all the additional costs?
Dawn Primarolo: I shall make two points to the hon. Gentleman. First, the regulatory impact assessment includes an initial setting-up cost of £75 million for the department. If further costs are incurred, they will be identified in any subsequent regulatory impact assessment. Secondly, on savings, over the period to 200708, the reduction of 3,200 posts will produce a net saving in the region of £500 millionI will make sure that that figure is exactly rightby taking out duplication.
Mr. Laws: Will the Paymaster General clarify whether the £500 million saving will come from the gross staff reduction, to which the hon. Member for Isle of Wight (Mr. Turner) referred, or from the 3,200 posts, because the saving sounds rather large for 3,200 posts?
Dawn Primarolo: If I have not got the figure exactly right, I will make sure that it is corrected. The saving will result from the merger's taking out duplication in the departments as the services provided by the Bill are delivered more efficiently and effectively.
Dawn Primarolo: The total annual efficiencies and the figure that I have quoted are by 200708; I thought that I made that clear in my initial comments. Savings across the department as it delivers both its public service agreement targets and integration will produce the required savings.
Turning to the content of the Bill, hon. Members undoubtedly will be pleased to hear that I do not propose to describe the detail of each and every clause todaythat pleasure awaits us in Committeebut I want to take a moment to outline the key measures that the Bill introduces. I confirm that we will table a number of Government amendments later. That is unfortunately inevitable, because those technical amendments involve cross-referencing right across the tax system. However, with the exception of a measure, which is currently being finalised, to provide information gateways for the new prosecutions office,
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those amendments will be minor or technical drafting amendments; the Bill before hon. Members today is, in essence, complete.
The Bill establishes HMRC as a non-ministerial department, led by commissioners acting under the general directions of Treasury Ministers. That arm's-length relationship between Ministers and Revenue administration will maintain the existing convention that Ministers do not intervene in individual cases. The Bill transfers the statutory functions of the two existing departments to HMRC, and it provides for the manner in which the commissioners and their officers may exercise those functions. It also provides for the method of financing the costs of running HMRC, and creates a new framework for managing and accounting for the revenues, tax credits and other moneys that the department collects and pays out. That new framework includes measures to enhance parliamentary oversight of HMRC's finances; for example, it enhances existing arrangements for reporting daily revenue flows to the Comptroller and Auditor General.
The Bill introduces flexibility around the future functions of HMRC, putting it on a level footing with ministerial Departments to allow the transfer of functions into or out of HMRC by Order in Council.
Mr. David Heathcoat-Amory (Wells) (Con): The Paymaster General has just said that important functions could be transferred out. Those important powers could include intelligence gathering, enforcement and criminal prosecutions, and the transfer would simply be agreed by statutory instrument, which, as she knows, are seldom debated and not amendable. Does she think it right that important powers on enforcement and criminal prosecutions should be transferred in that way? Surely the point of the Bill is carefully to circumscribe and limit powers, so that Parliament knows in advance and in primary legislation who will exercise those powers, which should not exercised by Ministers as provided for in this Bill.
Dawn Primarolo: If what the right hon. Gentleman, who was a distinguished Treasury Minister, suggests were true, I would agree with him, but the Bill introduces flexibility without compromising either the integrity of the tax system or the principle that administration of revenues is held at arm's length from Ministers. The transfer from HMRC of taxes, duties, national insurance and tax credits work is not permitted under those arrangements, and the functions are the same as those of other departments. I assure the right hon. Gentleman that the Bill does not provide a gateway for transferring the responsibilities of the department without the proper scrutiny of the House.
The Paymaster General has mentioned tax-gathering powers and tax credits, which will remain in the department, but I have mentioned other powers, such as intelligence gathering, prosecution and enforcement. She has not said whether there is a block on those powers being transferred. It would be different if those powers went from the new department, which will be headed by appointments by the Crown and
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therefore will be at one remove from Ministers, to Departments headed by individual Ministers. Will she give an assurance on those points?
Dawn Primarolo: I want to be as clear as possible in giving the right hon. Gentleman an assurance on that point. I want to make it clear that all the department's current functions associated with tax and tax credits cannot be transferred under the Bill. The department could collaborate with a devolved Administration or undertake particular workfor example, the collection of student loanson behalf of another department, but that does not include the administration associated with any of its revenue collection or protection duties.
That leads me on to the department's powers. The Bill is, as I have mentioned, the first step in an incremental process of integration. It does not introduce substantive changes to the administration of regimes, and existing powers for enforcing regimes therefore will be transferred to the new department without any change to the way in which or purposes for which they may be used. The Bill achieves that by ring-fencing powers to prevent their inadvertent extension within HMRC.
Let me spell out what that means in practice. I think that the right hon. Member for Wells (Mr. Heathcoat-Amory) will recognise this from the time when he was Economic Secretary. It means that a VAT inspector will retain all her current powers in HMRC, with no changes. Similarly, the powers of a corporation tax inspector in HMRC will remain as they currently are in the Inland Revenue. The Bill ensures that the VAT inspector's powers do not become available to the corporation tax inspector, and vice versa. That applies across all HMRC functions. Powers in the new department remain as they currently are in the separate organisations.
This is, of course, only a temporary position. As the Treasury Committee report acknowledged, delivery of integration in the longer term on the scale that I described is likely to require greater consistency of approach to enable effective working across different taxes and duties. To that end, I can announce today that the Government will issue a consultation document in January that will consider the suitability of the existing range of powers, including the requirement to provide information; interest and surcharge regimes for late payment; penalties for non-compliance and rights of appeal; and the modern regulations and practices that HMRC will need to be a high-performing 21st-century tax administration.
The Government intend that following that initial consultation and the completion of the Bill's passage, HMRC officials should enter into more detailed discussions with representative bodies. The consultation exercise does not aim to deliver reform in time for the creation of HMRC, but will be the beginning of a thorough review, with the aim of legislating where necessary in the 2006 Finance Bill.
In the meantime, to aid clarity on and public understanding of the powers available to HMRC for its different functions, an advice note on the powers available to officers of the new department will be published in time for the inception of HMRC. The
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Inland Revenue and Customs today placed a copy of the draft of that advice note on their internet site, seeking comments. It is also available in the Vote Office and the Library. The departments will also write to key representative customer and tax bodies to invite their comments.
The Bill confirms HMRC's authority to pool information internally so that information supplied for one of its functions can be used for any of its other functions. That authority is vital to deliver the joined-up services that the O'Donnell review envisaged and to capture the consequent benefits in service and effectiveness. Again, that has been recognised by key external commentators as a necessary prerequisite for the successful integration of services.
I stress that HMRC will of course take taxpayer confidentiality every bit as seriously as the predecessor departments; the importance of that was recognised by the Treasury Committee's report. There will be no let-up in HMRC's commitment to safeguarding taxpayer confidentiality.
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