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I accept that even if it is amended by statutory instrument, it will still be in statute, but there is a genuine point that if the Government are going to use orders to amend legislation in that way, it will not be “visible” and it will
not be as easy for practitioners to go to one or two schedules set out in Acts to work out how it works. Anyone who works on Bills knows how difficult it can be to juggle various legislative instruments to find out the most up-to-date status. There is thus a practical point about trying to achieve legislative change through orders, as it is harder for professional groups to monitor.
In conclusion, in determining the balance between the rights of individuals—in this case, taxpayers—and the sanctions necessary for the state to enforce its powers, Parliament has a vital role. In the context of income tax on the low paid, we hear that Parliament has taken control of the matter, so we, Parliament, should not surrender our rights to control the penalties imposed on taxpayers either. It would appear that this set of proposals has been somewhat rushed and that the consultation has been inadequate. There is a danger that Parliament will not be able to scrutinise measures made pursuant to schedule 40 as closely as it should. For those reasons, we tabled the amendments and we look forward to hearing the Minister’s comments on them.
The Temporary Chairman (Sir Nicholas Winterton): Before I call the next speaker, I remind the Committee that we can discuss all four amendments in the group, but that amendment No. 1A is the lead amendment.
Mr. Breed: Let me say straight away that I share all the concerns of the hon. Member for South-West Hertfordshire (Mr. Gauke) about what the Government have done, or rather not done, so far. The amendments are very pertinent.
As has been said, schedule 24 to the Finance Act 2007 introduced the single penalty regime for inaccurate documents. I recall that there was considerable discussion when it was introduced. The taxes, levies and duties for the penalties that are payable have been considerably extended to include environmental taxes such as the aggregates levy, the climate change levy and landfill tax; excise duties such as those on alcohol, tobacco, oils, gambling and air passenger duty; stamp duties such as stamp duty land tax and stamp duty reserve tax; and inheritance tax, insurance premium tax, pension schemes and petroleum revenue tax. It is difficult to think of any instance in which a penalty would not have to be paid if someone inadvertently supplied false information. The level of penalty is dependent on the amount of tax that has been understated, the underlying behaviour and the extent of the disclosure by the taxpayer. I suppose that we would not argue with that, as none of us wants to give any comfort to people who deliberately try to avoid paying taxes for which they are liable.
I am particularly pleased that the new provisions do not apply to tax credits. I cannot imagine what might happen if they did; I do not know how many million people might suddenly find themselves liable to investigation.
Mr. Bone: In my experience, it is the Revenue that is making the errors, so it would have to pay penalties to my constituents.
Mr. Breed:
That is an excellent point. Indeed, some payments have been made, but I suspect that they were nowhere near adequate compensation for what people
will have had to go through—not only all the telephone calls and letter writing, but all the stress, and sometimes negotiations with banks—because they properly provided information, but it was not taken into account, so they found themselves in great difficulties.
There are two overall themes to our concerns. One is the lack of certainty. Most people would accept that good legislation requires certainty. The current group of amendments, like the previous one, deals with the fact that there is very little certainty on which people can rely. We also feel that HMRC should be putting its own house in order. We are very cautious about extending the powers of HMRC—an agency that has consistently sought to push to the absolute limit the powers that it already has. I am thinking of its attitude to chasing tax on contractual termination payments under clause 49 and the attempts in this year’s Bill to give it unlimited access powers to businesses. Those are draconian powers, and when such an approach is combined with uncertainty, we will have an unacceptable mix.
Reference has been made to the Financial Secretary’s letter of 24 April, which clearly went to a number of colleagues, and to the penalties for errors dealt with in clause 117. It is the fact that no real certainty is provided that concerns us. To say that work in this area is ongoing, which is a bit like what was said about the last set of amendments, gives no great reassurance to anyone. Good legislation requires certainty, so if the Government believe that interim rules are required, they should state them in primary legislation and not try to bring them in through the back door in regulations later in the year. The Government need to provide real reassurances, and it is essential to tighten up the clause.
We think that it would be better to tighten up the provision, if that is possible, than to remove it. We agree that there is a legitimate expectation that individuals who deliberately provide false information for the purposes of tax evasion should be penalised, but we cannot support the clause as currently drafted. We support amendments Nos. 1A, 2A, 3A and 4A, however, because they would introduce a measure of control over what the Government are trying to do. We urge the Government to abandon the drip, drip method of using regulations to amend these powers, as it seems to be catching on far too much, and we think it should be curtailed.
May I also give advance notice that we shall certainly want to oppose the inspection powers in clause 108? We will no doubt discuss that provision upstairs in the next few weeks. We feel that it is just another example of the powers that are being provided to an already over-powerful agency, and that does very little to assist us in being convinced about it. What the legislation proposes is sensible, but it is not clear enough for us to be able to support it. Therefore, we will support the amendments if they are pressed to a Division.
Mike Penning: I rise to support the amendments of my hon. Friend the Member for South-West Hertfordshire (Mr. Gauke). I am deeply concerned about two points. First, I am concerned about why the Government are so worried about their own 2007 legislation, which they have not managed to enact yet; indeed, they have got their knickers in such a twist that they want to bring in new legislation long before that 2007 legislation takes effect and in a rush, as has been mentioned by several Members.
It seems frightening that legislation that we debated at some length last year in Committee and on the Floor of the House on the industry and individuals getting together to discuss and try to understand what the penalties for errors will be is being dealt with in such a way. The Government have rushed through what sounds like quite a bogus consultation, as they have not been able to give the time that everybody—particularly the experts in the field—would need in order to consult and so that the Government could respond with answers to concerns, and so that proper consultation could take place. From what I have heard this evening, it sounds like the Government had already made their mind up before the consultation even took place. It seems a complete sham to give only such a short period, when their own regulatory advice is that it should be three months.
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I also wish to address the point about the Henry VIII clause. My hon. Friend—I think he is my friend—the Member for South-West Hertfordshire alluded to the power of such a clause, and also made some other comments in respect of my intervention. I fully accept that Henry VIII clauses were used before the current Government were in power, but that does not make them right. They should be brought in only in exceptional circumstances. I am deeply concerned that this House will be excluded from debating, and being consulted on, important measures that have an effect on almost all our constituents, and that we will leave that power with the Minister of the day. I agree with my hon. Friend that the current Financial Secretary is exemplary in her— [Interruption.] I am pleased I have cheered up the Financial Secretary, especially after the couple of days she has had. She will almost certainly not be in her current position after the next general election, however. I have grave concerns about other Ministers of whatever party having such Henry VIII powers.
I will support the amendments, so that this House continues to have the powers it should have, fulfilling the promise of the current Prime Minister, and to make sure that we debate measures of significance to our constituents, especially on penalties they may incur.
Mr. Newmark: First, let me make the same observation that I made last night: it is a pity that once again not a single Labour Back Bencher is present to support the Government’s proposed legislation. That is disappointing, not least because I enjoy a good debate.
As my hon. Friend the Member for South-West Hertfordshire (Mr. Gauke) is a solicitor, I am sure he is far better placed than me to scrutinise the Government’s use of the Henry VIII powers in clause 117, and he does so through his amendments Nos. 3A and 4A. I am grateful to him for his thoughtful explanation of the amendments. Nevertheless, the name that has been given to the powers is an evocative one that summons all the images of unaccountable government that we could ever need. The Government’s use of such powers should be of interest, and ultimately of some concern, to each and every Member, because of their impact on our ability to exercise effective scrutiny and hold the
Government to account. Crucially, the matter should also be of concern to Members in another place; indeed, I believe it already is. The fact that these powers crop up in a money Bill will exclude them from further scrutiny in another place, particularly by the Delegated Powers and Regulatory Reform Committee, whose Members take a special interest in these matters. That is the key point I take from my hon. Friend’s arguments.
I note that there are some specific requirements relating to the scrutiny of such powers which do not, by default, apply to the passage of the Finance Bill because it is concerned with supply. Indeed, the DPRRC’s guidance for Departments on the role and requirements of the Committee lays those requirements down clearly, including the submission of a memorandum that is required to justify the necessity of the power in some depth. I understand the general situation regarding the right of another place to scrutinise and delay Bills that Mr. Speaker has certified as money Bills under the Parliament Act, and perhaps it follows that another place cannot delegate scrutiny powers that it does not itself enjoy to one of its own Committees. However, I question the general principle that another place should not be able to scrutinise delegated powers that are to be exercised under the Finance Bill simply because it deals with supply. The other place’s right to scrutinise this Bill may well be truncated by the Parliament Act, but it is not entirely removed.
The scrutiny of the sort of powers that appear in clause 117 has attracted considerable attention. The Delegated Powers and Regulatory Reform Committee looked in depth at the issue of the Henry VIII powers in its third special report of 2002-03, upon which its departmental guidance draws. One of the report’s striking conclusions was on standard wording for Henry VIII powers. The Committee shied away from recommending the use of standard wording, because on the advice of parliamentary counsel, its concern was that any standard wording would need to be as broad as possible if it was successfully to catch all potential situations. The concern was thus that Departments would automatically grant themselves powers for which they had no need and would justify the decision to do so by dint of the standard form of words.
A letter from the parliamentary counsel to the Committee gave the draftsman’s perspective in some detail, but the germane point was that draftsmen should always refer to the specific needs of any particular Bill when framing Henry VIII powers. Typical terms might include “incidental”, “supplemental”, “consequential” and “transitional”, as appropriate. However, clause 117(4) contains not only the words “incidental”, “supplemental”, “consequential” and “transitional”, but the words “transitory or saving”. Furthermore, subsection (6) seems to widen the scope of the powers further still. I am no draftsman, but it seems to me that the power is framed as widely as it could possibly be. Is the Minister confident that that is necessary, and can she justify that necessity to the Committee?
My second main concern is the sheer potential breadth of operation of the powers in practice, given that they can amend not only the Act that will implement them, but every Act that it in turn amends. I have not yet gone through the Bill to see how many other Acts it will amend, given its length, but I suspect that the list will be very long indeed. Can the Minister confirm whether the
proposed powers under the clause will give the Treasury the right to amend any part of any other Act that this Bill itself happens to amend, without further recourse to Parliament?
During the Delegated Powers and Regulatory Reform Committee inquiry into Henry VIII powers, questions were raised as to what level of parliamentary scrutiny over them is appropriate. The parliamentary counsel’s opinion was:
“The question is one of policy for ministers.”
As this is a policy matter and not one of drafting, can the Minister therefore justify why the powers, as they stand, provide only for the negative procedure, instead of the affirmative procedure, despite appearing to be drafted as widely as they could have been?
A third concern is derived from the Delegated Powers and Regulatory Reform Committee’s 2002 special report findings. The report states that
“we are persuaded that the Government should, in the Explanatory Notes accompanying any new bill...offer an explanation of the reasons why a particular form of wording has been adopted in each case.”
I am sure that the hon. Member for Wolverhampton, South-West (Rob Marris), who is an assiduous user of explanatory notes, would concur. The report specifies any new Bill and does not exempt money Bills, yet the explanatory notes on clause 117 are very brief indeed—brevity is not apparent elsewhere in the 1,148 pages, so I am a little puzzled. The notes do nothing beyond paraphrase the subsections to which they refer, and that seems explicitly to contravene the recommendation that I just cited. Perhaps the Treasury believes that because this Bill does not fall formally within the Committee’s remit, its guidance does not apply to it. I would be interested to hear whether that is the case, as I am sure would the Committee.
Given that the staff of the Delegated Powers and Regulatory Reform Committee confirm that they cannot examine the Finance Bill, and given that there seems to be no explanation for that in the Standing Orders of the House beyond the supply exemption, is it not time for the Government and for Parliament to re-examine this issue? The Delegated Powers and Regulatory Reform Committee has no equivalent in the House of Commons and, as such, it could be said to be exercising its functions on behalf of Parliament as a whole, rather than just on behalf of another place. The Committee is very widely respected in both Houses for its thorough and timely work, as was emphasised in its rapid handling of the Banking (Special Provisions) Act 2008, for which I am sure the Chancellor was grateful.
The Government have at least three options in responding to what is undoubtedly a legitimate concern. First, they could simply extend that Committee’s remit, so as to allow it scrutiny of the very wide powers in this Bill and future money Bills, notwithstanding the limitations implicit in the Parliament Act. Secondly, even if the powers really are necessary and expedient, the Government could still remove the clause and schedule 40 from this Bill and reintroduce them in a future non-money Bill, which would be subject to proper scrutiny in another place. Finally, the Government should accept our amendments Nos. 3A and 4A and remove the powers altogether. Their doing nothing would contravene the Prime Minister’s reaffirmation of his respect for the House and for Parliament as a whole.
Jane Kennedy: It is a pleasure to see you in the Chair this evening, Sir Nicholas. I hope that you will agree that this has been a very good debate. I congratulate the hon. Member for South-West Hertfordshire (Mr. Gauke) on tabling these amendments. I do not adopt an ideological or partisan line on this area of work, and I have found listening to the concerns that have been raised helpful.
Before I deal with the amendments, I would like to discuss the background to the clause. As we have had a wider-ranging debate instead of dealing with the two groups independently, it might be helpful if I were to respond more broadly. The clause is part of a larger package of measures in the Bill. It is the latest stage of the review of the powers, deterrents and safeguards of Her Majesty’s Revenue and Customs, which is aligning and modernising the powers inherited from the Inland Revenue and Customs and Excise. Many, if not all, the anomalies in the law result from the piecemeal way in which tax legislation has evolved, particularly in two separate departments. Those differences are confusing for taxpayers, they are costly to administer and they reduce HMRC’s ability to ensure that the right tax is paid.
Our aim is to provide a modern framework of law and practice for HMRC. Penalties are a good example of the wide variety of approaches across different taxes that exist in the law at present. For example, a person filing an incorrect excise duty return may receive a fixed penalty of £250, whereas an understatement on a corporation tax return resulting from the same behaviour could attract a penalty in law of up to 100 per cent. of the tax lost. Neither approach has proved effective or fair, so reform is needed. The review has been commended for its approach, especially the breadth and depth of its consultation and the willingness of HMRC officials to listen and make changes.
Inevitably, there will be tensions as we seek to ensure that HMRC has appropriate powers to work effectively and that taxpayers have strong safeguards. The hon. Gentleman questioned why we were doing this now, and suggested that it was rushed, as did other hon. Members.
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HMRC inherited different powers from the two former departments. Those were inconsistent in places, which is confusing for taxpayers and imposes undue burdens on them and on the Exchequer. The full benefits of merger cannot be delivered until those powers have been aligned where it makes sense to do so. The way in which the review of powers and safeguards works is to engage stakeholders in an ongoing round of consultations that include formal public documents, workshops and literally dozens of face-to-face meetings.
Development of the provisions in the Bill has been an iterative process, and stakeholders acknowledge that HMRC has made changes throughout in the light of their views. The January consultations were therefore part of a very long process. I accept what the hon. Gentleman says about the relevant part of the Cabinet Office code of practice on written consultations and I take that very seriously. The code clearly states that we should consult widely throughout the process, allowing a minimum of 12 weeks for written consultation at least once. I assure him and others who have expressed concern that those guidelines have been followed for all the powers clauses in the Bill.
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