Commissioners for Revenue and Customs Bill

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Dawn Primarolo: The self-assessment process saw a consultation document, a response to it, a committee drawn from the representative bodies set up to consider the proposals for the new department, draft legislation produced, its consideration by that committee and its presentation to Parliament. It was a pre-pre-legislative process. There are smaller examples of that: the review of intellectual property rights and the consideration of the large tax changes we made, for example. The only point missing is that which the hon. Gentleman made, when he asked whether we should
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appoint someone specifically. I have not got so far as to determine who would be responsible. I will consider it, but I envisaged the process as this Committee expressing its view and, if the Government did not quite agree, the Government being accountable. When the legislation came before Parliament it would be up to us to explain why we had chosen the drafting that we had. This is not a particularly huge issue. I will consider it and write to the hon. Gentleman when I have taken a view. It is not that interesting. I can say, however, that the appointee will not be a Member of the House.

Mr. Tyrie: I am very grateful for that answer, and it sounds to me as though I have got somewhere between half and a whole loaf. In this game, you quit while you're ahead. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.

Clause 6 ordered to stand part of the Bill.

Schedule 1 agreed to.

Clause 7

Power to transfer functions

Question proposed, That the clause stand part of the Bill.

Mr. Michael Fallon (Sevenoaks) (Con): I am grateful for the chance to speak to this clause. It gives me more concern than any other. The power to transfer functions within the new department is almost a Bill within a Bill. The Paymaster General describes the approach of this two-stage legislation as minimalist. With a 40-page Bill and a 60-page catalogue of new amendments before the Bill has even started, I shudder to think what the maximalist approach would be. Leaving that aside, she says that a major Bill will follow. However, before that major Bill follows or further clauses are inserted in the Finance Bill, this clause has the effect of a licence, allowing Ministers to transfer powers willy-nilly under the Ministers of the Crown Act 1975. There has been widespread concern about that, expressed on Second Reading and in my Committee. I draw this Committee's attention to our recommendation in the report that I had the honour to Chair, to which reference has been made. We said that

    ''we are concerned that the powers that the new department needs to discharge its functions should be subject to proper parliamentary scrutiny.''

I shall return to that point.

10.30 am

The Opposition are not alone in that concern. The Public and Commercial Services Union has also written to me and, I suspect, to other members of the Committee to say that it is concerned about the strength of the clause. It would like the entire clause to be deleted. If it is not deleted, the PCS would like to
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ensure that the transfer of any functions in the future is subject to full debate in both Houses, ideally through primary legislation. That is the issue: whether the clause should be considered in isolation.

Let me run through the various concerns. First, the clause appears to treat commissioners and their officials almost as if they were Ministers of the Crown. That, presumably, is not and could not be the case with existing Revenue or Customs board members or their staff. I am therefore bound to ask the Paymaster General why this power is being taken now when it was not considered necessary back in 1975. After all, we are constantly told that this is a modest Bill.

Secondly, it seems that we are being asked to approve the transfer power before we are clear about exactly what powers will be involved. I believe that the Paymaster General told us this morning that the consultation on the powers for stage 2 will not now be available until the end of January. It is unfortunate that we are being asked to approve the clause and to conclude our deliberations in Committee before the consultation document is available and before we know what powers may be transferred back and forward.

Thirdly, the general nature of the power makes a mockery of the Paymaster General's assurance on Second Reading, when she said:

    ''The Bill achieves that''—

that is, not changing the purpose of the power—

    ''by ring-fencing powers to prevent their inadvertent extension within HMRC.''—[Official Report, 8 December 2004; Vol. 428, c. 1175.]

However, clause 7(3)(b)(i) states that when the power is transferred:

    ''An Order in Council . . . may''—

not ''shall''—

    ''restrict or prohibit the exercise of specified powers in relation to that function''.

Hard though I may try, I cannot reconcile the looseness of ''may restrict or prohibit'' with the Paymaster General's assurance that she is ring-fencing the power.

Fourthly and finally, my concern is that the orders made to transfer the various functions will not, as others have wanted and as the Treasury Committee recommended, be subject to full parliamentary debate, because—I hope that the Paymaster General will correct me if I am wrong—the statutory instruments under the Ministers of the Crown Act 1975 are subject only to the negative procedure. Therefore, when an important power is transferred, it will very likely be transferred without the full parliamentary debate that it warrants.

The clause ranges too wide and gives rise to serious concerns that the Paymaster General should now address.

Mr. Laws: I very much support the comments made by the hon. Member for Sevenoaks (Mr. Fallon) on clause 7. I hope that the Paymaster General will have
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a convincing explanation for the clause, or will reconsider whether it is appropriate. She will know that others outside this place have expressed concerns about the clause, including the PCS, to whose representations the hon. Member for Sevenoaks referred.

Clause 7 clearly enables the new Revenue department's functions, other than revenue or tax credit functions, to be transferred to a ministerial Department and for any such Department's functions to be transferred to the HMRC by, as the hon. Gentleman said, Order in Council, rather than primary legislation.

I do not want to take us back to our earlier debate about Lord Birt's proposals for reorganising the Treasury after the next general election, and I am suspicious about whether the Paymaster General would allow extensive reorganisation. None the less, the list of the Inland Revenue's existing functions and responsibilities on pages 26 and 27 of schedule 1 is quite long, with 31 items in total. I may be missing something, but page 3 of the explanatory notes indicates that it is the revenue or tax credit functions that are ring-fenced in existing legislation and which would therefore need primary legislation to change them.

It is fairly clear what the tax credit functions are, and the revenue functions are defined at the bottom of page 3 as relating to

    ''taxes, duties and national insurance contributions''.

Unless I am missing something, however, that leaves out a considerable number of the Inland Revenue's existing responsibilities. I tried to count how many of the 31 items are covered by the ring-fencing referred to in the explanatory notes, and I would say that more than half are not. It is a long list, going from child benefit and child trust funds right down to more contentious alleged duties such as stamp duty land tax and responsibilities for statutory pay issues.

I would therefore like the Paymaster General not only to respond to our other points about clause 7 and to explain the justification for the clause, but to state explicitly—either today or in a letter to the Committee—which of the Inland Revenue's existing responsibilities, including those listed on pages 26 and 27, can be transferred without primary legislation.

As the hon. Member for Sevenoaks said, it is unfortunate that we are dealing with something of this significance without understanding more about the Government's intentions in respect of the powers involved. We will not get the consultation paper on the issue until quite a lot later in January, if then. It would, therefore, be sensible to defer these issues to a later date.

Dawn Primarolo: Both hon. Members are under a misapprehension about what can and cannot be transferred in or out of the department of Her Majesty's Revenue and Customs. It would therefore help to explain what other Departments do, and to explain that this is a standardisation to reflect that
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practice, that it works perfectly well and that nobody has complained. I have been in the House since 1987, and there have been different machineries and Government changes, and such powers have been used.

The arrangements for parliamentary scrutiny of transfers into or out of Her Majesty's Revenue and Customs will be no less rigorous than those that already exist for transfers between other Departments. The Ministers of the Crown Act 1975 applies to a transfer by Order in Council, and the hon. Member for Sevenoaks is right that such a provision would be subject to the negative procedure. Those arrangements already work for ministerial Departments and have done so successfully for a long time. However, the Bill provides the additional protection of a ring fence for Her Majesty's Revenue and Customs on all revenue and tax-credit functions.

So, there can be no transfer of anything connected with either tax credits or taxation in any shape or form from the new department by an Order in Council. The Government are merely putting in place the arrangements that work for other ministerial Departments. That means that the transfer of a function—for example, the collection of student loans, which the Inland Revenue collects on behalf of the Department for Education and Skills—is possible. A function could go in and out. The transfer of taxes is not possible. They are the core functions of the Department and are subject to a restriction.

Let us be absolutely clear, because the department has a crucial function. Any transfer of anything to do with tax and its associated powers, or tax credits and national insurance, would require funding legislation, not an Order in Council. A power cannot be transferred under the provision without the associated function for which that power is bestowed. I want to keep repeating that point because it is a cause of misunderstanding. People think that the Departments will be broken up and that tax functions will disappear somewhere else or that there is some other agenda—the hon. Member for Yeovil keeps referring to that. Her Majesty's Revenue and Customs will have responsibility for revenue, tax credits and national insurance and those responsibilities cannot be transferred under the clause.

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