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(g)   the working relationship between Her Majesty's Revenue and Customs and Her Majesty's Treasury including, but not restricted to, the adequacy of arrangements for accountability,

(h)   the performance of the Revenue and Customs Prosecutions Office including, but not limited to, a cost-benefit analysis,

(i)   the work undertaken preparatory to the merger, and

(j)   any other area that the chairman of the working group deems appropriate.

(4)   But a report under subsection (1) shall not be expected to include any assessment of—

(a)   the annual performance of the Commissioners for Revenue and Customs in discharging their responsibilities as tax administrators and collectors, except in so far as these have been affected by the merger, or

(b)   any matter (whether relating to value for money or otherwise) that would fall to be considered by the Comptroller and Auditor General in the course of annual audit.

(5)   A report under subsection (1) shall be completed within twelve months and shall be laid before the House of Commons and published.

(6)   In this section "the merger" means the merger between the Commissioners of Inland Revenue and the Commissioners of Customs and Excise.'.

Brought up, and read the First time.

Mr. Tyrie: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this, it will be convenient to take the following: Amendment (a), in line 26, after 'merger,', insert—

Amendment (b), in line 26, at end insert—

New clause 2—Transfer of property: management of assets

"(l)The Treasury shall make a scheme identifying any rights and liabilities in property and information technology systems owned and operated by the old commissioners which shall by virtue of sections 46 and 47 rest in the new Commission.

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(2)   The scheme shall include provision that any such assets identified therein shall be managed in accordance with best value and in the interests of both the customers and the staff of Revenue and Customs.

(3)   The scheme may not be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.'.

Amendment No. 4, in page 2, line 30 [Clause 4], leave out subsection (1).

Amendment No. 5, in page 2, line 40 [Clause 4], leave out

Mr. Tyrie: I shall be as brief as possible. The new clause could allow us to have another canter around the territory that we covered in Committee, but I do not intend to do that today.

The new clause goes to the heart of the Bill. It ensures that after two years the Government would be required to undertake a comprehensive review of the merger. We need to know whether the department is working as it should, and whether the planning needed to make the merger a success was undertaken.

I said on Second Reading that we did not oppose the merger in principle. On the contrary—the Opposition believe that with careful management and planning it might be possible to secure some modest savings and extract more value for taxpayers' money. However, have the Government done what is needed to secure those savings? If not, we may discover that the merger was not worth the candle.

We are talking about the merger of two huge departments—two leviathans that have been around a long time. Their cultures differ markedly, they have been governed by different statutes and the revenues that they try to collect are very different. This is a big undertaking. There is a world of difference between trying to secure an up-to-date income tax return from a self-employed physiotherapist in Dulwich and trying to secure revenue on tobacco at the ports to try and stop smuggling, but we are trying to bring the two cultures together.

On Second Reading, I expressed regret at the poor quality of the regulatory impact assessment and the paucity of information about the savings that the merger would secure. To clarify the issue, I set out four criteria to judge the performance of the new Revenue department. First, would its creation increase the yield or, to put that another way, would it reduce the tax gap? Secondly, what will happen to the compliance burden—that is, the hassle that millions of people could face if the merger goes wrong? Thirdly, how big are the transitional costs of the merger? Fourthly, what will happen to the quality of the department in the long run—to its morale and the standards that it sets itself?

6 pm

We pressed those points in different ways not only on Second Reading but throughout our deliberations in Committee, and to be frank, we have had very little but general assurances from the Government on any of them. That will not do, and we need to be clear what is at stake.
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The worst-case scenario is very bad. If the Government have not done enough of the necessary preparatory work, the merger could be a disaster—for the Exchequer and the taxpayer. Even if there is an adverse effect on the tax yield of, for example, only 0.1 per cent.—the hon. Member for Yeovil (Mr. Laws) made this point on Second Reading—hundreds of millions of pounds would be at risk, thereby adding to the black hole in the Chancellor's accounts. And even if the compliance burden increases by only a tiny amount, billions of pounds in extra costs could be imposed on businesses and the self-employed.

I should point out in passing that I think that I can support the amendments to my new clause standing in the name of the hon. Member for Hayes and Harlington (John McDonnell), who draws particular attention to the likely effect on the yield of changes in staffing levels. As I have said, with careful planning it should be possible to find substantial staff savings. To put it another way, as a result of the merger it should be possible to increase the productivity of both Revenue officers and customs officers. We succeeded in increasing productivity in the 1980s, but it was not an easy job, and it required a lot of care and thought; what worries me is that there is little evidence of that from the Government.

A lot is being spent on new IT systems, but I am afraid that that does not inspire me with much confidence. I shall not go through, as I did on Second Reading, the Government's sorry track record in that regard, but it is not a happy story. Nor does the Government's confusion on Second Reading as to the savings that they hope to make from, and the costs associated with, the merger fill me with confidence. At the beginning of that debate, the Paymaster General said that the merger would result in efficiency savings of £500 million, but in his winding-up speech, the Economic Secretary said that such savings would amount to only £100 million. I would have expected the Government to have a clearer view of the merger's costs and benefits, and this is why the Bill should contain a commitment to a review. We need to ensure that we have got this process right. We need the pressure of an impending review to bear down on those implementing these changes, to ensure that they do their utmost to deliver what we need.

Mr. Kelvin Hopkins (Luton, North) (Lab): The hon. Gentleman is making an interesting speech and I, too, am among those who have some doubts about the merger. Is he suggesting that if the review concludes that the merger has proved very bad, a de-merger should take place, or is he merely arguing for an ongoing inspection of the new service?

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