Finance Bill

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Mr. Browne: On a point of order, Sir Nicholas. Amendment No. 190 stands in glorious isolation to be considered separately, but would it be helpful to pile it in with what we are discussing, as well as the clause stand part debate, so that everything can be debated in one big go?
The Chairman: I am most grateful to the hon. Member for Taunton for that suggestion, but we have had a pretty major debate already and I would therefore be reluctant to include the amendment at this late stage.
Mr. Gauke: On a point of order, Sir Nicholas. In my opening remarks I raised a technical point and sought clarification from the Minister. There are significant issues to do with clause 109, including representations that have been made by professional bodies such as the Law Society, that have not yet been addressed. I do not think that a lengthy debate is necessary, but I think it would benefit the Committee to debate those issues if we could have that opportunity. Of course, your wisdom is not to be doubted.
The Chairman: Of course, if there is a demand for a stand-part debate, I am obliged to find time for it. If there is one, I hope it will be extremely brief and if there is any way that the hon. Gentleman, during the remarks the Minister is about to make, can seek clarification by way of intervention on one or more points, I am sure the Minister would be very happy to deal with it. Let us see how the debate proceeds.
Jane Kennedy: Thank you, Sir Nicholas. I was conscious of the fact that the hon. Member for South-West Hertfordshire had indicated he hoped for such a debate and I was trying to structure what I was going to say accordingly, but I will try to answer all the points that have been raised in the debate so far, which I thought was particularly well developed by the hon. Member for Dundee, East. He raised a number of very valid questions and I will seek to deal with those as far as I am able.
On the more general points raised by the hon. Member for Braintree, I do not intend to be drawn into a discussion around when we anticipate a report from Kieran Pointer. It is very tempting to respond to some of the details and the sweeping generalisations that he presented, but I will resist the temptation. It may be worth noting that the Exchequer Secretary to the Treasury tells me that information she has received electronically indicates that right at this moment there is a story running that 38,000 customers of the firm Cotton Traders have had their credit card details stolen by somebody who has hacked into its website. The kind of security breach that we saw at HMRC is not, sadly, as rare as it should be, but the responsibility on organisations that hold data, particularly data as important as an individual’s financial information, is very clear and we have made it clear that the recent, well-publicised lapse of security at HMRC means that, for HMRC, data security is at the forefront of everything that it does. One might say that it should always have been so, but it certainly is now.
Mr. Field: The Minister is making a statement and has been very open about the failings at HMRC, but there is a fundamental distinction between the public and the private sector. Most private sector data are kept voluntarily and the individuals who are involved work with some sort of provider or some sort of other business. That is in sharp contrast to data kept by the public sector which are kept on a compulsory basis. It is for that reason that there is, and should be, a higher barrier for data kept by the state rather than by private companies.
Jane Kennedy: I absolutely agree with everything that the hon. Gentleman just said and I am sure that the report we will receive shortly will be of immense interest to the House as well as to the public. However, the existing provisions on which this clause is based have not given rise to security problems, there are already powers to deal with computers in the way that this clause is describing and HMRC staff are trained not to operate a taxpayer’s computer in what we might call a “live” environment, in other words, an environment within which the data itself might be affected by the change. The opposite of a live environment would be a safe environment within which the data can be read, but not affected by the individual reading it. That is in order to ensure that there is no risk of data loss.
Clause 109 explains HMRC’s powers where such documents are stored on computer memory or otherwise recorded and it already applies to all taxes, duties and other matters for which HMRC is responsible. Amendment No. 229 responds to a point made by the Law Society to put beyond doubt that clause 109 applies not only to enactments about production or inspection of documents, but also to related provisions. The effect is that, for example, the protections applying to documents that we have already discussed in part 4 of schedule 36 also apply to electronically held equivalents of those documents. The intention is that the protections that apply to those documents also apply to their electronic equivalents. Amendment No. 229 makes that clear.
6.15 pm
The hon. Member for Dundee, East questioned whether the provisions of clause 109 go too wide. They do not go too wide as it sits under legislation. For example, protections in schedule 36 apply to requests under clause 109. He also rightly asked what would happen if an individual’s documents were created or held on websites maintained overseas. If the webpage can be accessed from a UK computer, it can be accessed under the power, as long as it is classified as a relevant document in a taxpayer’s power and possession. We have discussed how “relevant” would be defined.
Stewart Hosie: That comes to the nub of the matter. The document is no longer accessible on a computer in the UK, but remains in cache memory somewhere on a web server hosted halfway round the world. Clause 109(3) appears to give authorised people entitlement to check that computer, and the amendment would certainly allow any other provision to do that to be made. That is extra-territorial, unenforceable and possibly illegal. I wonder why we have an amendment that would allow nominally something to happen that could not be done.
Jane Kennedy: I have no reason to believe, from the advice that I have received, that that is not doable, as the hon. Gentleman suggests. I will respond to one or two of his points. Again, there is the tendency to dismiss the role of an authorised person. An authorised person will usually be a HMRC employer who has received appropriate training in information technology. HMRC also has a specialist team available to give advice. Electronic records are no different to paper records when it comes to boundaries and borders. For example, if a taxpayer keeps records in New Zealand, but those records relate to their UK tax affairs, HMRC can ask to see them. If the electronic record is stored offshore but forms part of a UK taxpayer’s records, HMRC can see it. HMRC already has those powers. Officers will not access taxpayers’ computers willy-nilly. They will only do so to view documents needed to check a tax position. Computers will only be removed for forensic examination in a case being considered for criminal prosecution. I hope that that gives some reassurance to the hon. Gentleman.
Amendments Nos. 230 to 234 correct a drafting error in that subsections (2) and (3) refer to provisions to which the clause applies. The amendments are necessary to ensure that the provision works as intended.
I make one final point regarding the hon. Gentleman’ very real concerns. HMRC officers can travel abroad only with the agreement of another country’s tax authority. Otherwise, HMRC has to ask another country to use its power to access the information. I hope that he will accept that the process is highly regulated and subject to scrutiny.
I appreciate that there will be a further debate, if members seek to catch your eye, Sir Nicholas, so I will curtail my comments. I hope that I have sufficiently answered the questions on our amendments to the clause.
Amendment agreed to.
Amendments made: No. 230, in clause 109, page 68, line 26, leave out ‘A provision’ and insert ‘An enactment’.
No. 231, in clause 109, page 68, line 27, leave out ‘provision’ and insert ‘enactment’.
No. 232, in clause 109, page 68, line 29, leave out ‘provision’ and insert ‘enactment’.
No. 233, in clause 109, page 68, line 37, leave out ‘a provision’ and insert ‘an enactment’.—[Jane Kennedy.]
Mr. Browne: I beg to move amendment No. 190, in clause 109, page 69, line 24, leave out from first ‘is’ to end of line 26 and insert
‘an officer of Revenue and Customs,’.
Many of the wider points that I wished to make about the drafting of the clause have already been touched upon, so I shall make a concise contribution. The amendment would change the definition of an “authorised person” in subsection (9), so that instead of the commissioners being able to authorise a class of person, which would mean that they could allow anyone, even outside contractors or untrained individuals, to undertake the work in question, only an officer of Revenue and Customs could access and inspect information.
The purpose of the amendment, as I am sure is obvious to the Committee, is to define more tightly the category of people who will be able to access potentially sensitive information. My view, and that of my colleagues, is that that would go a long way towards addressing many of the concerns that people have rightly expressed about the sensitivity and privacy of a lot of the documentation that HMRC will be examining. We believe that it would be more appropriate for a more limited and defined category of inspectors to have access to that information.
Mr. Gauke: In light of the amendment, may I ask the Financial Secretary why we have in the clause a definition of “authorised person”, rather than of “authorised officer”, which is used in schedule 36? No doubt she will pick up that point in responding to the hon. Member for Taunton.
I have two practical questions. First, will any guidance be produced to explain how the definition of “authorised person” will be applied and exactly whom we are talking about? Secondly, if a taxpayer is having their computer checked by someone performing the powers in the clause, how will they be able to ascertain whether the representative of HMRC or other person is an authorised person? What comfort will the taxpayer have in those circumstances that he or she is dealing with an authorised person?
Jane Kennedy: Those were thoughtful questions. The amendment deals with a matter that I started to explain in my response to the debate on earlier amendments. As I said, an authorised person will usually be an HMRC employee or officer who has received appropriate training in information technology. HMRC also has a specialist team available for advice. However, there may be exceptional circumstances in which it is necessary to engage a specialist agent from outside HMRC. The clause is drafted to enable that to be done. That answers the question why we are using the word “person” rather than “officer”. It would apply if a taxpayer’s record keeping systems were of a kind that HMRC did not have the necessary internal expertise to check. I can envisage a number of circumstances in which that would happen, but it would be rare.
Appropriate steps would necessarily be taken to ensure that the taxpayer was certain of the legitimacy of the person concerned and that confidentiality was maintained. I shall want to give some thought to the exact question I was asked, which was how they will know that. I will respond to the hon. Member for South-West Hertfordshire later, perhaps in writing if he will allow me to do so. It was a sensible question and was rightly put. HMRC will want to be very clear about how that legitimacy will be determined. I hope that the amendment will not be pressed to a vote.
Mr. Browne: I have some concerns about the Financial Secretary’s assurances, not just on this amendment, but throughout the Bill. She gives them entirely in good faith, but they rely on guidelines and the good will and decency of HMRC and its employees, rather than on being defined in legislation. Having made that point, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment made: No. 234, in clause 109, page 69, line 29, after ‘includes’, insert ‘an enactment contained in’.—[Jane Kennedy.]
The Chairman: I have received information through the usual channels that they will seek to go on after 7 o’clock. If there are two Divisions of 15 minutes each, that will take us to 7 o’clock. I say to the Committee and to the usual channels that I will have been in the Chair for three hours at 7.30. If it is the intention to adjourn the Committee at approximately that time, which is up to the Government Whip, I am happy to give the leeway of a few minutes. Other than that, I shall allow a break for dinner and refreshment. Does the Government Whip wish to comment on that?
Mr. Bob Blizzard (Waveney) (Lab): I think I made a comment in the note that I sent you, Sir Nicholas.
The Chairman: Indeed, and I will read it to the Committee:
“Sir Nicholas, It is my intention to make up today all the time lost through Divisions in the Chamber. I have agreed this with the Opposition.”
I have indicated my intention, whether or not the Committee can meet that. I think that after three hours’ debate a break will be appropriate.
Question proposed, That the clause, as amended, stand part of the Bill.
Mr. Gauke: Bearing your strictures in mind, Sir Nicholas, I will keep my comments as short as possible. Clause 109 contains powers for HMRC to gain access to computer records. It works on the basis that documents stored on computers or copied to another form of electronic media should be treated as though they are documents or copies themselves. That seems a perfectly reasonable way to deal with the matter.
Subsection (3) gives an authorised person powers to
“obtain access to, and inspect and check the operation of, any computer and any associated apparatus”.
There does not appear to be any limitation on that power. Computer records are equated with documents and there are protections with regard to the production of documents, which we have been debating. However, those protections do not appear to apply to the powers to inspect and check the operation of computers. First, why are those protections not in place? Secondly, is it the intention that guidance will restrict the operation of subsection (3)? Thirdly, as she has done during the debates on part 7, will the Financial Secretary provide some comfort to the Committee by setting out how HMRC will operate these powers in practice to ensure that individuals whose records are held on computer as opposed to hard copy are not disadvantaged? I would be grateful for the Minister’s response, either now or after a few moments, when she may have had an extended opportunity to think about these questions and then inform the Committee.
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