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Mr. Tyrie: By the time, after two years, that we have been through the merger and the review, we will need a de-merger like a hole in the head—but I note what the hon. Gentleman says. We will need to ensure that this thing works, and I would not be surprised to find that, despite the opinion polls, it is we Conservatives who will have to do so. We will try to find a way to ensure that the tax yield is not being imperilled and that the compliance burden is not rising inexorably as a consequence. But it is not an easy job.

The Government have had years in which to plan for this merger. We must bear it in mind that not long ago, the Paymaster General was saying that a merger was not
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worth the candle. She told the House in 2000 that the Government had looked carefully at and thought about a merger, but had decided that they could get all the benefits of the synergy of the two departments without a full merger. Now, we are told that those benefits can be achieved only through such a merger. That does not fill me with confidence, either—but I am repeating a point that I made on Second Reading, which I do not want to do this evening.

If the Government have done the careful planning about which I have been talking, I do not understand how a review such as that proposed in new clause 1 could worry them. On the contrary, it could provide a written testimonial to justify an award to the Paymaster General for getting things right. However, if she does not agree to new clause 1, thousands of professionals who deal daily with the Revenue and Customs and millions of taxpayers will have the right to ask why she will not permit a review of her own handiwork. If the Government do not like new clause 1, what are they afraid of? The measure is central to finding out whether the merger works. If the Government's response does not show that they will be flexible, we shall press the new clause to a Division.

John McDonnell (Hayes and Harlington) (Lab): I speak as the chair of the Public and Commercial Services Union parliamentary group, which has members from both sides of the House. We meet representatives of the PCS regularly, which enables us to draw on the experiences of staff who operate such services. It has been invaluable and enlightening for us to draw on that depth of professionalism. I associate myself with the Paymaster General's comments about the excellence of the service and the professional commitment of the staff.

The running theme of new clause 1, amendments (a) and (b) to it, which I tabled, and new clauses 2, 4 and 5 is an attempt to ensure that there is openness and transparency in the process and that there is adequate scrutiny and accountability, especially to the House. Let me be clear. The PCS and a large majority of hon. Members from all parties now support the merger of the departments and want it to work effectively. We take our lead from the Treasury Committee report that was published in 2000, and many of us are pleased that the Government took that on board, were flexible and returned with a commitment that the merger would go ahead. That demonstrates that the Government were listening to Parliament on that occasion and subsequently, as a result of various reviews.

We would all welcome assurances from the Minister that the process of the merger will be subject to close monitoring and that regular reports will be made to Parliament to identify, using clear criteria, whether the merger is proceeding successfully. If there were problems, corrective action could thus be taken following the scrutiny of Parliament. Additionally, hon. Members could be engaged in discussions about not only how the performance should be monitored, but how solutions could be found and implemented.

New clause 1 is a straightforward measure that details the review process and the elements that we would like the Government to include in such a review. I am not fixated on a two-year period or a formal review, but
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I want assurances that the Government will look at the agenda, that the process will go forward and that there will be adequate reporting to Parliament.

David Taylor (North-West Leicestershire) (Lab/Co-op): Does my hon. Friend agree that a key performance indicator of the newly merged department will be the extent to which it is able to bridge the tax gap, which is currently estimated to be about £30 billion a year? We should examine the shadow economy, law enforcement and the various forms of evasion that are too common in our economy at present.

John McDonnell: That is exactly one of the points that the amendments try to address. Amendment (b) sets explicitly and straightforwardly as part of the review process an examination of the extent to which customer service improves and the quality and consistency of practices. It also provides that it should be determined whether targets for increased revenue are being met so that we can tackle that tax gap.

Mr. Hopkins: On Second Reading, mention was made of the possibility of exposing the tax gap by increasing the number of VAT inspectors and Inland Revenue inspectors because they can generate many times their own salary. This would be beneficial. Is my hon. Friend implying that that will be taken into account?

John McDonnell: That links amendment (b) to amendment (a). In amendment (b), the purpose is to try to identify the specific targeted role that the merger can undertake in increasing revenue and tackling the tax gap. In addition to that, there are the issues of fraud detection and, as a result of that, deterrence. That can be achieved only if there is adequate staffing. That is why I tabled amendment (a). We need to have a continuous review of overall staffing levels in relation to the level of service that we are demanding from professional staff.

I reiterate my continuing anxiety, which I expressed on Second Reading, as did other Members on both sides of the House, that in the midst of the Gershon review proposals, which will hit the Department with a reduction of posts that has increased to 16,500, specific to the merger will be the reduction of 3,200 posts. We now have clarity about savings. Overall savings on staffing will be £500 million and the rationalisation process will result in savings of £100 million. My anxiety is that for a saving of £100 million we may be losing the professional staff that are required to recoup so much more tax, to detect crime and to deter tax avoidance. That loss of staff could undermine the savings figures.

We need to ensure that my right hon. Friend the Minister has a process that will enable staffing levels to be reviewed from the very start of the merger programme and throughout the settling down of the new department. There are real anxieties among the professionals on the front line. They fear that going for such a level of staff cuts will have a dire impact on service delivery. In that event, not only will customers complain but the Treasury will miss out on tackling the budget gap, which in past debates we have identified as between £30 million and £40 million.
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The second element of my amendments goes to the discussion that took place in Committee about the transfer of rights and liabilities. There was an extensive debate and I do not wish again to go through the history of the Mapeley STEPS contract. That matter was adequately exhibited in Committee. However, there is still a lack of confidence in the ability to ensure the proper management of these schemes and contracts, both in terms of property and of new technology. That is why there is an explicit reference in new clause 2, which was similarly debated in Committee, to best value.

The debate is taking place on a day when yet again we have had another report on the failure of a computer contract in government. The Child Support Agency report is a dire warning, again, of what can go wrong in information technology contracts that are not properly specified and monitored, and are not produced in a way that allows for parliamentary scrutiny.

The reason for introducing new clause 2 is explicitly to say that we need a scheme that embodies best value in the transfer of rights and liabilities. In Committee, my right hon. Friend the Minister said that that is integral to the overall processes of Government, and I accept that. However, given the concerns that we have had as a result of the Mapeley STEPS arrangement, the EDS performance within the Department and the revelations today regarding the CSA contracts, I think that there is a need to restore confidence by having a specific statement about the importance of best value within the development of these transfers.

Mr. Hopkins: Does my hon. Friend recall a point that I made on Second Reading, when I suggested that more extensive in-house IT capacity could overcome some of the problems inherent in contracting out?

6.15 pm

John McDonnell: The new clause demonstrates that if we had a thorough commitment to best value we would enable in-house bids to be made, as is the case with best value in local government and other services. There would not be prejudice against the public sector, as has sometimes been the case in the past in the awarding of central Governments contracts. There is a need to reassure the general public and the House with an explicit statement in legislation that best value will apply to the merger of the departments, and that there will be adequate scrutiny of the best value scheme that is introduced. Only when the House is confident that there is thorough parliamentary scrutiny will we restore confidence in the ability of the new department and other Government Departments to manage their own affairs with regard to new technology and property schemes.

Amendments Nos. 4 and 5 deal with the process of parliamentary scrutiny. There was some debate in Committee about the definition of the commissioners' functions. To put it bluntly, the amendments would require them to retain existing functions. If new functions are transferred to them, or if there is a transfer of functions away from the department, there should be parliamentary scrutiny and an explicit parliamentary decision by the affirmative procedure, rather than by the negative procedure envisaged in the Bill. That would restore confidence in the process of the merger and the future operation of the new department.
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In Committee, the Paymaster General said that the transfer of functions in the Bill would take place using the process that pertains to other Departments, and would be achieved either by Order in Council or negative resolution. That was a revelation to me, and I would prefer all transfers of departmental functions to be brought before the House so that it can make a decision using the affirmative procedure. That would facilitate proper scrutiny of such transfers and delegations of powers between departments. It is even more important, when establishing a new department, that we are clear about its functions, so the House should engage with the process of the construction, allocation and, at times, the transfer of those functions. We should participate in the bedding down of the new department and increase the confidence of the general public and the House in its operation.

I would welcome assurances from the Minister about the process of continuous monitoring. Will the agenda set out in new clause 1 and the amendments be followed in that process, and will there be adequate opportunities to report to the House? There should be opportunities for debate and participation by all hon. Members in the critical path taken by the merger, which we all support and believe is overdue.

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