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Dawn Primarolo: I do not want to try the patience of the House. I was clear about the Department's efficiency savings, and my hon. Friend the Economic Secretary will deal with the hon. Gentleman's points in his winding-up speech.
Mr. Laws : Is the hon. Gentleman concerned about the lack of clarity on a point as important as whether the savings relate to the total Gershon staff savings or the merger? In his answer to the Chairman of the Treasury Sub-Committee, David Varney said:
"We have a series of targets over the 2004 settlement, where we have got to produce efficiencies of 507 million cumulatively and save 12,500 jobs net".
Does that not suggest that the figures cited by the Paymaster General relate to the total staff savings, not the merger?
Mr. Tyrie: That is a good point. I think that that is what we shall find, but we shall have to wait until the winding-up speech for clarification.
If the savings are based on the combined value of the 3,000 from the merger directly and the 9,000-odd from the Gershon review, we are talking about confusion between two quite different things. The merger is not necessary for the Gershon savings, so the £500 million does not represent savings from the merger. Only a small fraction of that amount should be attributed to it. I hope that issue will be clarified later, but it illustrates a point that I was trying to make at the beginning. The true costs and benefits, and why we are going about the merger now, are not clear in the documentation before us.
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The most important single question in the case of any Revenue department is "What will happen to the yield?" I can find no answer to that anywhere, but my best guess is "Not very much". That is why, although paragraph 3.43 of the O'Donnell report refers to the tax gap—which is another way of talking about the same thing: the difference between the amount that should be collected and the amount that is collected—there is no estimate of what will happen to it as a result of the merger. I think that that should have been addressed in some of the documentation.
While we are on the subject of staff, I want to refer to the slightly broader issue of relocation. I should be interested to know how many staff will be relocated out of London as a consequence of the Gershon review. I note that the Lyons review proposed the relocation of 500 from Customs and Excise and 1,450 from the Revenue—about 2,000 in all. How many extra jobs, if any, will be relocated as a specific consequence of the merger?
I hope that the Paymaster General and the Economic Secretary will forgive a hint of scepticism from the Conservatives about the relocation issue. After all, is it not the case that far the biggest relocation so far is that of 1,575 staff who have moved from the Inland Revenue office of Somerset house in the Strand to the Treasury building in Whitehall? I do not think that that is the kind of relocation initiative that the Chancellor wanted us to have in mind when he announced—I will not try to reproduce his blathering rant—
"I am publishing department by department plans to relocate civil service jobs out of the south east".
A move from the Strand to Whitehall does not quite match that.
Mr. Fallon : I hope my hon. Friend has observed from the Treasury's own efficiency technical note that the Chancellor proposes to relocate only 11.5 of the 1,000 people he employs in his own Department to Norwich.
Mr. Tyrie: I was not aware of the 11.5 full-time equivalent jobs going to Norwich, but that makes my point.
Let me return to the broader theme. The first of the two tests that I mentioned at the beginning was that of "getting the money in". We have virtually nothing from the Government to help us to assess the merger. What about the compliance-burden test? That is covered at length in the O'Donnell report, which points out that companies may obtain benefits from being able to engage with only one Department to fulfil their requirements for all their taxes. Here again, however, I have not been able to spot any figures, I suspect because most of the gains—although possibly there in the long run—are extremely difficult to capture. That is because the Inland Revenue and Customs have fundamentally different sets of skills as organisations, and are trying to collect two completely different types of tax—which is why the merger did not take place decades ago.
The Inland Revenue deals with organisations retrospectively. It is trying to capture income flows on which there is usually a great deal of ready documentation. Its approach is analytical. Customs, on
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the other hand, is dealing with transaction taxes. Its role is, of necessity, partly forensic—quasi-legal. It needs to capture the transaction as it happens. That is why it may not be easy for the new department to deliver the compliance gains that we should like for its customers. There is also a real danger that each organisation might find its skill sets diluted, to the benefit of neither. Of course there is the opportunity to get the best out of both skill sets, but that is easier said than done. It is a big undertaking. I think it will be particularly difficult to achieve in the next year or two, because both departments already have their hands full.
The Inland Revenue is grappling with the task of transforming itself from a revenue collection service into a very different institution: a tax and benefits agency. As we know, it has already been a bumpy ride. Customs has its own problems. It is about to install a massive information technology system, and we know the Government's history on those. I shall return to that subject later.
Explanation and justification of both those crucial issues—the effect on the yield and compliance—is pretty thin. To its great credit, the Treasury Select Committee has tried to elicit some by asking questions about long-term savings, but that has not helped us to obtain a better regulatory impact assessment. When David Varney was questioned by the Treasury Committee on the gains of merger, he said that it was impossible to answer without knowing the details of the sequencing—the timetable. The Government must have done the work required to establish that by now. Will the Paymaster General give us a quantitative analysis of the costs and benefits?
I have tried to describe how to assess whether the merger is really worth it by providing some basic yardsticks. We will of course have a couple of days in which to examine the Bill in detail in Committee, but a number of points should at least be alluded to now.
First and most important, the Minister has been at pains to stress—it is stressed in the documents—that this is a minimalist Bill. The Paymaster General has told us that, and the regulatory impact assessment assures us of it. The regulatory impact assessment tells us of two other possibilities that the Government rejected: a more comprehensive early Bill that would make substantive changes in relation to powers, and a fully comprehensive Bill in a later legislative Session. However, I am a little worried—we will explore this issue in Committee—that the Bill might have included provisions that fall into the category of a comprehensive Bill. I noted carefully that the Paymaster General sought to provide reassurance about powers of arrest, but an initial reading of clause 29 does not give me that reassurance. It appears to extend the power of arrest to new HMRC officers.
I was very grateful to the Paymaster General for making it clear that she will publish proposals on the powers in January; we will of course develop the proposals when we are in government. It is important that this issue—the one to which many pressure groups will pay the most assiduous attention—be given a full airing, and I am pleased that there will be a consultative document as early as January. The advice note on powers has only just been published, so I was unable to read it before today's debate, but I shall read it carefully as soon as I can.
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Another significant issue, which the Paymaster General hardly touched on, is policy formulation. My best guess is that the lion's share of the 1,500 people who are moving from the Strand all the way to the Treasury will be doing policy work. In justifying the new policy arrangements, Mr. O'Donnell has sought to distinguish between strategic policy and policy maintenance. I have thought quite a bit about this distinction. Is it really helpful? Perhaps it is in theory, but I am not sure that it will be in practice. The current arrangements work reasonably well. I could not help feeling that the ghost of Sir Humphrey—or perhaps I should say Lord Bridges—was lurking in Mr. O'Donnell's lengthy description of the distinction between strategic policy and policy maintenance.
Mr. Laws: Does the hon. Gentleman believe that we have good reason to be confident about the origination of tax policy in the Treasury in recent years? Can he cite any evidence to suggest that it has been doing a good job in developing tax policy in that time by, for example, simplifying the tax system?
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