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Mr. Burnett: Does the hon. Gentleman agree that one aspect of the co-operation between taxpayers and the Inland Revenue is the fairly widespread system of clearance procedures? It would be interesting to incorporate that approach rather more frequently in customs matters.

Mr. Ruffley: I am sure that those implementing this huge change will reflect on the good point that the hon. Gentleman has just made.

Mr. David Varney said that there is a need to look further into the different powers and cultures of the current Revenue and the current Customs and Excise. He said:

the new department

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It will be incumbent on the House and associated Select Committees carefully to scrutinise how well the powers vested in the merged department are meshing together. Clearly, there are different kinds of powers and a different enforcement culture in the two departments pre-merger.

For all those reasons, it is fair to say that this side of the House welcomes the merger in principle. Some of us have argued in favour of it for four or five years. We wait to see whether Ministers will clarify whether some of the savings that they talk about are Gershon savings or other savings. What are the medium-term savings and what are the short-term transitional costs? We look forward to greater clarification of those matters.

Finally, we expect the Paymaster General to make two specific undertakings. First, she or her successors should not come back to the House with rather poor or lame explanations for why the IT has not worked. That will simply not be good enough. She and her officials must redouble their efforts, and not lapse into some alibi society as they did with the working tax credit computer model, when they said that they stress tested it, that everything was ready to go and that they simply could not understand why it was a dog's breakfast on the day it went live. No more excuses of that sort will be acceptable to the House.

Secondly, in view of the different cultural mores of these organisations, new uniform management and working together will have to be forced through. We cannot allow excuses such as saying that organic change takes a long time. We want the merger to work and to work as soon as possible. I therefore give a qualified welcome to the Bill on Second Reading.

4.9 pm

John McDonnell (Hayes and Harlington) (Lab): First, I apologise for attending the debate so late. I had a constituency engagement, the Ealing Family Housing Association annual pensioners' Christmas dinner. When they reached the Christmas carols, particularly "Oh Come, All Ye Faithful", I thought that it was time to come to the Chamber.

Normally, out of politeness to the House, I would not intervene in a debate that I joined so late. However, I do not appear at risk of being trampled to death by other Labour Members wishing to speak so, in my capacity as chair of the Public and Commercial Services Union all-party parliamentary group, I shall make some comments about staffing matters.

I want to begin with a general point about how legislation is considered these days, and what information is provided to the House in connection with staffing and manpower issues. Over recent years, the consideration of Bills has been refined. The explanatory notes accompanying a Bill now contain detailed assurances in respect of costs and compliance with human rights legislation. They also refer to staffing implications—that is, the impact on public service manpower.

That information enables the House to try and identify individual costs and, in some cases, potential savings, but the system gives us a minimum amount of information about manpower issues. The one sentence
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on the topic in the explanatory notes for this Bill states:

Admittedly, the Treasury Committee looked in more detail at the staffing reductions consequent to the Bill, but even then the information provided was fairly peremptory. It identified that about 3,000 jobs would be cut as a result of this Bill, in the context of the other staffing reductions that were taking place. About 8,000 jobs will go as a result of the Gershon review and other studies, but the losses implied by the Bill will bring the total of jobs lost in the relevant departments to something like 12,500.

Elsewhere in the public and private sectors when departments are rationalised and merged on such a scale, or when an organisation is reviewed or restructured, it would be expected that some significant detail about the new staffing levels would be made available. In addition, matters to do with staff structures would be covered in a report from the human relations department involved—what used to be called the personnel department—setting out the range of posts that would be lost, and the responsibilities that rested with those posts. Such a report would also outline the new structures being established, and possibly offer some detail about new posts and their functions. As a result, people could use that report to determine whether the new structures would be workable, in comparison with what had gone before.

Interestingly, only a minimum amount of information on staffing implications has been provided with this proposal. More importantly, however, we know in some detail what went on before. The Treasury Committee has conducted many reviews and produced many reports over the years. Those studies have made it clear that both Customs and the Inland Revenue are world-class services. There is no doubt about their probity and the efficiency of their tax collection in many respects, but it is also clear that both services are open to innovation.

I compliment the Government on their spend-to-save and spend-to-raise initiatives, which are proving exceptionally successful, and have enjoyed cross-party support. That success has been highlighted by the Treasury Committee.

I pay tribute to the hon. Member for Sevenoaks (Mr. Fallon), as the Treasury Sub-Committee has also been very frank about mistakes that have been made. That may have embarrassed the Government, but the Select Committee has a job to do and it has done it effectively. To be candid, it is clear that most failures in the past have not been blamed on staff at Customs and Excise or the Inland Revenue. To a certain extent, we as politicians have to take the blame for some of the failures, because some of the policies were wrong and certainly some of the initiatives that we thrust on the staff were ill thought through. At no time has the Treasury Committee made extensive criticisms of the staff and their professionalism. Indeed, the reverse is true: the Committee has been complimentary.

If we know that the existing staffing structures and levels work effectively—indeed, provide a world-class service—we need to be careful when we seek to adjust, review, revise or change those structures. Anyone who has gone through a merger, in the public or private sector, will know what turbulence it can cause in an
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organisation. Mergers can lead to breakdowns in efficient delivery of services. My anxiety about the proposals is that it is almost impossible to judge from the information that we have been given about staffing whether the proposals will be effective.

Mr. Laws: I am not sure whether the hon. Gentleman was in his place earlier when the Paymaster General acknowledged that the reduction of 3,200 in staff numbers as a consequence of the merger was a guess—it does not come from a precise analysis but from examining how such mergers have been managed in the past. Does he think that it is sensible to produce such numbers, which are very sensitive for those people affected, in such a manner?

John McDonnell: We can always rely on my right hon. Friend the Paymaster for her integrity and honesty. She gives straightforward answers to questions and, although I missed that part of the debate, her response does not surprise me. Indeed, that was the flavour of the discussion in the Treasury Committee and it is contained in the report. At different times, we have had different figures. The overall number of staff savings has been a moveable feast, and that is an issue not only for this merger, but for Gershon.

I have some anxiety about this proposal—not in principle, because the merger may prove to be successful. My concern is that if the merger takes place with a predicted number of more than 3,000 job cuts, without detailed information on how the organisation will work, posts may be cut that will be needed later. It might be that we rely on some of the Gershon proposals for savings, especially in relation to the introduction of information technology, but Members on both sides of the House will have their own views on our past performance on IT contracts.

I am concerned that we may lose a large number of professional staff on whom we have relied in the past. We are about to create turbulence within departments that will reduce efficiency of service delivery. We may lose some professionalism in the process, at some cost to us all. That may all happen just at the time we need to collect more revenue because of the taxation gap that has been identified. Is that the time to introduce instability into the system? I would have thought that rather than pluck a figure for job reductions out of the air, which then becomes a target, it would be better to plan the merger, develop the staffing structures, and bring the information back to the House. We should plan for investment in staff rather than reductions in staff.

The evidence that the PCS provided to the Treasury Committee set out the objectives of the service effectively and showed a real commitment on the part of staff to make the process work. However, I would not like to see the merger driven through on the back of staff cuts in a way that alienates a dedicated staff. Should we alienate our employees at the same time as launching what some have described as an attack—the Government call it a review—on other rights that they have had for a long time, especially their pensions?

In the public sector, and in that particular part of it, we shall see the build up of a disgruntled staff who face job cuts and a review on reducing their pension
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entitlements, yet on whom we are putting an increased burden of tax collection due to the Government's overall fiscal problem with the taxation gap. Instead of a successful merger, we shall have produced something that will be counter-productive to everything that we all want to achieve on the efficient delivery of service.

I am especially concerned about the loss of expertise. A managed merger of this sort must be handled extremely carefully. When we have undertaken such exercises in the past—not just mergers but privatisations, too—we have found that it has taken, literally, a decade to overcome the loss of expertise. We debated the railway industry earlier this week. That is a classic example: the system was privatised, staff numbers were reduced and we lost the very experts on whom we should have relied to develop the new service we wanted to deliver.

Staffing and personnel issues must be handled with incredible care. I cannot accept that blanket job cuts of 3,200 are rational at this stage, before we have even examined the merger and staffing structures in detail. At the end of the day, the cuts will prove counter-productive to the Government's overall policy of increasing tax collection and tackling tax avoidance.

Many Members have mentioned the tax credits experience. As constituency MPs, we all highlight the need for a human being at the end of a telephone to explain benefits and the taxation system, rather than some impersonal computerised system. If the Bill goes through, we are about to lose 3,200 human beings who are desperately needed to explain the system and support our constituents; we should not be putting them on the dole queue where they, too, will have to claim some form of tax credit.

There is support for the Bill, but not for the proposed post reductions. In future, when we consider Bills of this sort, we need much more detail, as a matter of course, about the staffing implications, rather than merely a sentence in the explanatory notes.

4.22 pm

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