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Mr. Kelvin Hopkins (Luton, North) (Lab): Will the new arrangements make it easier or more difficult to sustain convictions? While billions of pounds are being evaded or avoided each year, it is important to ensure that the system is able to sustain convictions and that the Exchequer receives the maximum possible benefit from them.

Dawn Primarolo: My hon. Friend is absolutely correct. It is vital to ensure that a case has all the information and evidence required to secure a prosecution. These recommendations arose from the Butterfield report, which was commissioned by my hon. Friend the Economic Secretary, and will ensure that investigations will be able to benefit from the expert advice of the prosecution service, which will then take a decision on whether the evidence supplied by the department would secure a prosecution. It is also important that we set a high standard for operations in this area, in order to maintain confidence and to ensure that the tax system works as it should.

Mr. Burnett: Will the right hon. Lady give way?

Dawn Primarolo: I have given away many times, but I shall give way once more. I realise, however, that I must be testing the House's patience by speaking for so long.

Mr. Burnett: I do not think so: many of us are extremely interested in what the Paymaster General has to say. I have been bellyaching for years about taking
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the Inland Revenue prosecution service and the Customs prosecution service and putting them under the aegis of the Attorney-General, and I very much welcome this provision. As she knows, the Butterfield report related to a Customs case, and things have not been too happy in that prosecution service for some time. I should like to know the answer to one or two questions that might superficially sound mundane but are not. Will staff regularly transfer from the Inland Revenue to the prosecution service; and will the prosecution service be housed away from the Inland Revenue premises?

Dawn Primarolo: With regard to the staff, the necessary expertise currently in the two departments will transfer to the prosecution service. As the Bill states, the appointment of staff will be a matter for the director. I do not know exactly which office block the service will eventually be housed in, although I am sure that we can find out before we reach the winding-up speeches. From memory, I think that it will be in separate accommodation, but I do not want to mislead the House on that. I honestly cannot remember, but I will ensure that the hon. Gentleman has a reply to that question before we conclude our debate today.

The Bill establishes the office under a director, who will carry out his functions under the superintendence of the Attorney-General. I think that that will be widely welcomed. The director may designate appropriate members of his staff as prosecutors, who will enjoy the rights and responsibilities necessary to enable them to conduct prosecutions on his behalf. All staff of the office, including prosecutors, will be subject to the director's instructions.

Confidentiality remains as important an issue in the prosecutions office as it is in HMRC. The Bill therefore places a duty of confidentiality on RCPO staff, and backs this up with a criminal sanction for unlawful disclosure of information. The prosecutions office will operate to the highest possible professional standards. In order to provide independent assurance of those standards, the Bill provides for the office to be inspected by the Crown Prosecution Service inspectorate, and in a reflection of this focus on standards, the Bill sets out clear minimum requirements for qualifications, which all RCPO prosecutors must satisfy in order to be appointed to the role.

The Bill is modest, although the task that it sets in train is not, as it will involve a very substantial programme of reform and change, which will deliver incremental improvements to services over the coming years. A key challenge for HMRC management throughout the integration process will be to ensure ongoing, consistently high standards of service to taxpayers, and to ensure that the delivery of business as usual is not compromised. Indeed, this very point was identified as a risk in the Treasury Committee's report, and we are very alive to it. The House and the Treasury Committee will be pleased to hear that it is a challenge that HMRC management are absolutely committed to meeting, as am I.

The O'Donnell review acknowledged the importance of strong leadership in managing the transition process, and I am confident that the management team led by David Varney will maintain an absolute focus on business results alongside the delivery of the new
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departmental structures and processes. I have equal confidence in Inland Revenue and Customs staff, who have delivered, and continue to deliver, high standards of professional service in their respective departments.

We can trace a nationally organised customs service back over 800 years, to the time of King John. In 1671, King Charles II put the service into the hands of commissioners. In fact, anyone who visits Customs headquarters can see the swords that have been blunted, once used—I do not know what for—as a testament to the long history of the department. Direct taxes, in the sense of a contribution from the local community to royal expenses, are also ancient, but the modern national administration is much the younger of the two departments, dating from the introduction of income tax in 1842 and the creation of the Board of Inland Revenue in 1849. In all that time, the staff in both departments have served the House and the taxpayers of the United Kingdom to their greatest ability, and their professionalism is beyond question.

The formation of HMRC will build on the proven track records of people across Customs and the Inland Revenue, to deliver a world-class organisation that is truly fit for the 21st century. The challenge is significant, but so too is the potential for delivering real improvements in the way in which the new department does business. The Bill is a crucial first step towards delivering those improvements, and I commend it to the House.

1.28 pm

Mr. Andrew Tyrie (Chichester) (Con): I shall carry on more or less from where the Paymaster General left off, although I shall not try to match her symphony of heavenly length. That was partly because she gave way so generously that she had to make such a long speech, but I shall try to make mine in about half that time. I should like to thank her for inviting me, my hon. Friend the Member for Rayleigh (Mr. Francois) and the Liberal spokesman, the hon. Member for Yeovil (Mr. Laws), to the Treasury to discuss the Bill. We found that briefing very helpful.

I really will carry on from where the right hon. Lady left off in one particular regard. She talked about the culture of the departments. The Revenue departments come in for a lot of criticism, both from individuals and businesses—and sometimes from me—particularly when they fail to use common sense and end up making my constituents' lives a misery. Customs, in particular, has come in for a rough ride in recent years.

At the outset, however, I want to say that we are lucky in this country with our Revenue departments. In many ways, they are the salt of the earth. They probably provide the least corrupt revenue service of any major country in the world, and are assiduous in protecting the Revenue. Above all, they have a sense of collective loyalty and duty that only the best organisations can hope to nurture.

Some might think that I say all that because I might be sitting on the other side of the House shortly, so it would be handy for the early part of my tenure to have said it. As it happens, I say it because I believe it, having worked closely with both departments in the 1980s. I would like any criticisms and reservations that I and
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my party might express about the departments in the weeks ahead, as we consider the Bill, to be put in the context of those remarks.

Mr. Hopkins : I agree strongly with the hon. Gentleman's remarks, but does he agree that sometimes when the Revenue and Customs and Excise come in for flak, it is because of the bad legislation that they have to implement, or the absence of clear rules, particularly on the importing of alcohol and tobacco from the continent of Europe, on which we never quite know where we stand?

Mr. Tyrie: I shall not get drawn on the alcohol and tobacco point, but I agree with the hon. Gentleman's comment that a high proportion of the problems of Government departments are caused by politicians getting in the way and trying to run things, rather than getting out of the way and reducing the size of departments to enable the rest of the country to get on with their jobs.

The Opposition will not force a Division on this issue tonight. Our primary concern is not that, in principle, there are no benefits to be had from merger, but that in practice, we are not yet convinced that the Government have thought through fully how to capture the benefits of merger, or even tried to measure them much.

Although we have had the O'Donnell report, a regulatory impact assessment, a Bill and its explanatory notes, rafts of evidence to the Treasury Committee and much else, we have not yet obtained clear thinking from the Government on why we are merging these departments. The nearest that I have found to a clear summary for the reasons for merger is in Gus O'Donnell's March report—a very long report, which I have here—particularly in paragraphs 1.18 and 3.41. It would be far too tedious to read it all out, but I shall try to provide a summary, which I think the Paymaster-General will agree is connected to what she said earlier.

Mr. O'Donnell says that there are four benefits of a merger: first,



and fourthly, "better deterrence" through increased

I was not much the wiser having read that.

In a speech only a few weeks ago, Gus O'Donnell had a go at his predecessor, Lord Bridges: he read out a passage of Lord Bridges's prose, which he described as something of which Sir Humphrey Appleby would be proud. I think that I have worked out what Gus O'Donnell meant in his passage. Great man though he is, he seems to have fallen into a similar mandarin trap.

Much more worrying, however, is the lack of clarity in some of these documents about why the departments are being merged, which may conceal a lack of a sense of purpose in doing it. My concern is not just that it is not explained, but that those who are doing it may not be clear in their minds about why they are doing it.
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I sat down and tried to work out what tests we should use to measure whether a merger would be a success. Those can be much more simply stated than anything that I have seen in these documents. If the Paymaster General disagrees with what I say, I shall give way to her, and if I miss out a major item I am sure that she will be able to leap in.

The primary task of a revenue department is to get the money in. Therefore, task No. 1 is to protect the yield. Will this merger get more money in with fewer mistakes? If so, how much? That is the first issue that needs to be measured.

The second objective must be to reduce the hassle for millions of individuals, and hundreds and thousands of businesses throughout the country—the so-called compliance burden. Will that go up or down with this merger? The Paymaster General implied that it would go down. If so, by how much? What is her estimate?

Two consequential questions flow from those two simple ones, and they also need answering. Are we confident enough about the possible gains in extra yield and better compliance to be able to justify what everybody agrees would be transitional costs? I refer not only to the £75 million in the explanatory notes but to the enormous disruption that will take place—the Paymaster General implied at the end of her remarks that the merger was a Herculean task, with which I agree, and that will also impose a substantial transitional cost. Are we confident that the extra gains in yield and compliance are greater than those transitional costs?

Finally—this relates to a point that I made at the beginning—we need to have in mind a long-run strategic objective. Even if the benefits outweigh the costs, are we confident that we can achieve that without a decline in the high standards that Revenue departments have set themselves, including their duty of confidentiality? Will the morale of the departments suffer in the long run? In particular, we must bear in mind that both departments, particularly Customs, face major criminal efforts at evasion.

I have set out my four tests for attempting to measure the success of a merger. I agree that other considerations may be relevant, but the Paymaster General has not leapt to her feet to suggest that anything that I have said is mistaken or that I have missed out something substantial.

Let us try to move forward. As we now have some intelligible yardsticks, how does the merger measure up to them? The first port of call should be the regulatory impact assessment, a relatively thin document for such an important issue. I can find in it no overall estimate of the effects on the yield. Virtually the whole of the economic costs and benefits are dealt with in five very short paragraphs. On efficiency savings, we are told that there will be 13,000 staff savings, but when we consider that carefully, and as the Paymaster General clarified earlier, more than 9,000 of those will come anyway under the Gershon review, even without the merger, and only 3,000—3,200 now, I think—as a result of integration. Incidentally, those figures have moved around a bit as they have been examined.
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The Treasury Committee did a very good job generally on this subject. It is sensible, particularly with regard to subjects that are not absolutely urgent and immediate, that debate should take place on the basis of thorough scrutiny by Select Committees. The Treasury Committee also did a good job on this specific point, and I commend the hon. Member for Warwick and Leamington (Mr. Plaskitt), who is in his place, and the hon. Member for Bassetlaw (John Mann), who showed in questions in Committee just how much the numbers on potential savings had moved around.

We have arrived at the point of agreement that the Government are saying that staff savings directly from the merger will be about 3,200—just over 3 per cent. of the total work force. That is scarcely the sort of number that could justify what amounts to one of the biggest mergers in Whitehall, or indeed between any two organisations. No private sector institutions would go through all the administrative hell and business risk of a merger to secure 3 per cent. staff savings, but if we take the regulatory impact assessment at face value, that is what the Government appear to be saying as to why we should support the Bill.

At least, that was the position in all the documentation until today. Today, the Paymaster General came up with a variation: she told us that the total merger savings amount to £500 million. I should be grateful if she could tell us whether that £500 million is directly connected to the 3,000 staff saving, or whether it is also connected to the further savings that will result from the Gershon review.

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