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Mr. Mark Hoban (Fareham) (Con): My hon. Friend is outlining a problem that many constituents have experienced. Constituents of mine have been advised by the person at the call centre to ring their MP, as that is the quickest way to get their problem resolved. That demonstrates the problems that constituents face with the computer systems already in place, dealing with the CSA and tax credits. The Paymaster General shakes her head, but that is a common concern that constituents raise with me. They are told that the MP is there to sort things out.
Mr. Francois: I thank my hon. Friend for that pertinent intervention. I did not intend to mention individual constituency cases, but I, too, have had people who have come to see me at my constituency surgery because someone at a call centre has advised them that the only way they will get their problem sorted out is to see their Member of Parliament.
In fairness to the Minister, it appears to be the Child Support Agency that is the worst offender, but the Inland Revenue is not far behind with its maladministration of tax credits. I know that Ministers do not like to hear it, but that is stark reality.
Dawn Primarolo indicated dissent.
Mr. Francois: I remind the Minister that the system is supposed to help people and provide them with value for money, not to drive them mad. We must do better than we are doing at present. People out there deserve better than they are getting from people in here. I cannot stress that strongly enough to the Minister.
In conclusion, we are not opposed to the Bill per se, but we are concerned about how its provisions will be implemented. Specifically, we are worried about the degree of risk inherent in the information technology aspects of the merger, given that the new system will be expected to handle more than 250 million contacts in any one year. Were there to be another foul-up on the scale of the Child Support Agency, the threat is not just that it would cause widespread confusion among the taxpayer and business community, as it undoubtedly would do, but that the Government's revenue stream would start to dry up as a result.
For this merger, we will need a combined system that provides a high-quality service to both taxpayers and companies and ensures that they receive genuine value for money in return for the considerable capital costs that are likely to be involved. Crucially, we need evidence of clear ownership and leadership by
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Ministers. When that falls to future Ministers in a Conservative Government, we will endeavour to provide it.
The Economic Secretary to the Treasury (John Healey): This has been a full debate, and I shall try to do full justice to the detailed contributions made by nine hon. Members from both sides of the House since my right hon. Friend the Paymaster General opened it earlier this afternoon.
The Bill is important and will bring important changes. It concerns the machinery of government, but it matters to 30 million HMRC customers, including 4 million businesses around Britain. It enables the early steps in bringing together the Inland Revenue and Customs and Excisefull integration is a long-term, large-scale undertaking. As my right hon. Friend said, the process goes beyond a simple merger between two departments.
Between them, the two departments collect £400 billion in revenue each year. They pay out £17 billion in tax credits and a further £9 billion in child benefit, and they handle almost 40 million telephone contacts. The two departments employ 100,000 staff, operate from more than 300 locations, run 250 separate IT systems and carry out a wide range of functions from traditional tax gathering and assurance to enforcement of the minimum wage, payment of tax credits, facilitating British exports and securing the UK's frontiers. Between them, Customs and the Revenue have a proud history of more than 1,000 years' service to the British state and the British people. I pay tribute to their professionalism, their technical expertise and their commitment to the public service ethos, which have been the special hallmarks of both departments over the years.
Some have questioned the case for integration. Earlier this year, Gus O'Donnell, the permanent secretary at the Treasury, produced the O'Donnell report, which examined not only the case for integration but a couple of other options not involving integration. It set out the clearest conclusions on the case for integration, and I refer hon. Members on both sides of the House to page 6:
"The case for organisational change rests on potential improvements in customer service, effectiveness and efficiency. It results from an analysis of
international experience, which has shown that the current separation of direct and indirect taxes in the UK, as opposed to organising around functions and customers, is behind best practice;
the functions of the revenue departments, which shows that there are benefits from bringing them closer together;
the experience of closer working between the departments since 1994, which has been promising but limited in its results; and
the success of the creation of the Department for Work and Pensions, with the formation of several customer-oriented agencies, including the integration of benefits and employment advice in Jobcentre Plus".
The Treasury Committee has been in no doubt about the sense in creating a single Revenue department. I, like others, pay tribute to the hon. Member for Sevenoaks (Mr. Fallon), who led the work on the recent report, and
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to his colleagues, both past and present, who have contributed to this afternoon's debate. Last month, the Sub-Committee produced its report, which welcomed the decision to merge the two departments and reminded us, as the hon. Member for Sevenoaks did this afternoon, that the Treasury Committee, under different chairmanship, recommended a merger in 2000.
The Sub-Committee observed that witnesses believe that the merger should produce benefits for both taxpayers and the Government. It endorsed what the Government saw as the pragmatic approach adopted in this initial Bill to create HMRC, which will be followed by further work. Finally, although this is not related to the Bill, the Committee endorsed steps to strengthen the Treasury's capability in the area of strategic tax policy making.
In that respect, the Committee was reporting afresh on an issue that was first examined by one of its predecessor Committees in 1863, although that Committee published two reports that year which came to exactly opposite conclusions on amalgamation. The Committee chaired by the hon. Member for Sevenoaks has had no such second thoughts. Indeed, it made recommendations to the Government about proceeding on integration. It made further recommendations on quantifying the expected costs and benefits; on ensuring that business as usual is a top priority during the merger period; on proper parliamentary scrutiny, including a second stage of legislation for any substantive changes; and on safeguarding the confidentiality of taxpayer information. My right hon. Friend the Paymaster General explained that we have taken those recommendations into account in framing the Bill, and she set out the Government's point-by-point response to them.
I shall try to do justice to the very detailed contributions that hon. Members made to the debate, starting, if I may, with the hon. Member for Chichester (Mr. Tyrie). He said that as a country we are very lucky in our Revenue departments; we would share that sentiment. He said that he worked with both departments in the 1980s; I fear that he may have to wait for a little longer than a few months until he gets the chance to do so again. He mapped out the rationale for integration and quoted a section of the O'Donnell review, which summarised the principal benefits on page 7 of its report.
Mr. Tyrie: Will the Minister give way?
John Healey: So soon? By all means.
Mr. Tyrie: I also pointed out that the Government have not provided the quantification of those benefits that is necessary in taking this decision, and that the project has real downside risks whereby if it goes wrong it could be very costly for the country in terms of lost yield. I would not want the Minister to paint a picture suggesting that we are giving unalloyed and unqualified support to the merger.
The hon. Gentleman did indeed make a substantial contribution to the debate. If he will be patient, I propose to move on immediately to his point about costs and benefits, then to deal with the concerns that he expressed about IT, as one of at least six of his points that I intend to respond to directly.
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The hon. Gentleman mentioned cost-benefit analysis of integration, as did the hon. Members for Yeovil (Mr. Laws), for Sevenoaks and for Hexham (Mr. Atkinson). All did so in the context of being generally favourable to the plan to integrate the two departments. Essentially, their questions concerned detailed cost-benefit analysis of full integration. Let me try to explain the situation. A change management centre has been set up for the departments with the specific role of identifying and tracing the benefits that may flow from integration. As part of that, it will ensure that all proposals for bringing work together are tested to identify the benefits that they deliver and to establish proper priorities for the integration work. Of course, the National Audit Office will subject the new department to scrutiny and monitoring on efficiency and effectiveness, just as in the case of its predecessors; and any legislation on reforms that are required will be accompanied by a regulatory impact assessment that will spell out the anticipated costs and benefits.
I remind the hon. Member for Chichester that, as my right hon. Friend the Paymaster General said, until this House gives the Bill its Second Reading, the departments do not have the legal authority to spend money to analyse and model the options in sufficient detail to quantify the costs and benefits that can flow from integration in the way that he seeks. Clause 38 provides for expenditure by HMRC in carrying out all its functions.
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