Mr.
Bone: Will the Economic Secretary explain the scale of
those recent errors? There might have been only a few, but if they are
due to IT failures it is important to know whether massive amounts of
money were transferred. I know that she mentioned commercial
confidentiality, but surely she could tell us how many millions of
pounds are
involved.
Kitty
Ussher: I want to respect commercial confidentiality, but
it is probably all right for me to say that the amounts transferred are
potentially very large and the interest tends to be tens of thousands
of pounds in the recent individual
cases.
Mr.
Hammond: I cannot let that pass without commenting that an
amount that has been transferred cannot be potentially very large: it
is either very large or it is not. It is probably fair to record that
the Economic Secretary has given the Committee the critical assurance
that this is narrowly focused and deals only with the specific issue of
interest in erroneous payments. That having been clarified, we have no
further
concerns. Question
put and agreed
to. Clause
152 ordered to stand part of the
Bill.
Clause
153Payments
from certain Exchequer accounts:
mechanism Question
proposed, That the clause stand part of the
Bill.
Mr.
Hammond: The clause is linked to clause 152 and provides,
among other things, that any issue made under subsection (2) in respect
of a payment to be made under clause
152 “shall
be recorded in the daily account under section 15(5) of the Exchequer
and Audit Departments Act
1866” —one
wonders whether it shall be recorded with a quill pen.
I wonder
whether there is something more significant here. The clause seems
rather long and detailed if all it does is tell us that any payments
made under clause 152 shall be recorded in the books of accounts.
Perhaps the Economic Secretary will clarify why it is necessary to have
this complicated mechanism set out in half a page for what I would have
thought could be done with three key strokes on a computer
somewhere.
Kitty
Ussher: The lesson that I have drawn from today’s
debate is that while it was probably useful to have been in a former
life a sovereign risk analyst, perhaps I should also have had some
training in parliamentary counsel so as to be able to answer the
specific legal and drafting points that have arisen. Thankfully, we
have people to advise us, and I can reassure the hon. Gentleman that
all that clause 153 does is ensure that any payments that are made
under the new power to simplify things, as I have previously described,
are subject to audit by the Comptroller and Auditor General, as indeed
are any payments made by Government. Payments from these funds can
generally be made only for services specifically authorised by
Parliament via primary legislation, but the Treasury is obviously not
required to seek Parliament’s separate approval for every single
payment made under the powers.
Mr.
Hammond: There’s an
idea.
Kitty
Ussher: We would be here for some time if that were the
case. Instead, the Treasury is required to seek the approval of the CAG
and his team, who check on Parliament’s behalf that the Treasury
is making proper use of the powers to provide the right checks and
balances before payments are made, to enable the Treasury to make the
payments needed to meet the Government's obligations without undue
delay while ensuring that parliamentary control is not jeopardised.
Since it is the avoidance of undue delay in the accumulation of
interest that we are trying to achieve here, this is a sensible thing.
I am sure that the writing of things in a book is now being done
electronically, and if the hon. Gentleman wishes to know the exact
details, I will be happy to let him
know. Question
put and agreed to.
Clause 153
ordered to stand part of the Bill.
Clause
154Power
to give statutory effect to
concessions Question
proposed, That the clause stand part of the
Bill.
Mr.
Hammond: This is a more substantive issue. The clause
introduces legislation enabling existing HMRC extra-statutory
concessions to be made into statutory
provisions by the issuing of a Treasury order. In other words, tax law
will be made by statutory instruments rather than by primary
legislation. While statutory instruments are extremely useful and have
a role to play, particularly in this kind of detailed, technical
legislation, as my hon. Friend the Member for Wellingborough pointed
out this morning, they have the major disadvantage of being
unamendable. The clause proposes that the Treasury or HMRC will be able
to propose that an existing extra-statutory concession be given
statutory effect with such amendments as they see fit, but Parliament
will not have any opportunity to add its own amendments, even, for
example, to remove Treasury or HMRC amendments so that the
extra-statutory concession is given statutory effect in the form in
which it has in fact operated for many
years. Existing
extra-statutory concessions normally give relaxations in tax liability
to which taxpayers would not be entitled under a strict interpretation
of the wording of the legislation. They are usually introduced on the
grounds of fairness, where it has been discovered that an unintended
consequence arose, or for administrative simplicity, for example where
a class of taxpayer would have to be pursued for a trivial amount of
tax in a way that does not make any sense for anyone, or for
clarification of poorly drafted legislation.
There has
been effort in recent years increasingly to put extra-statutory
concessions into statute, mostly through the tax law rewrite process. I
am told that the famous example, much beloved of accountants, is the
Christmas party exemption, which is now enshrined in section 264 of the
Income Tax (Earnings and Pensions) Act 2003, but previously had effect
as an extra-statutory concession. It could be called the
“anti-Scrooge” concession, and waives the usual
prohibition on tax-deductibility of entertaining expenses in the case
of reasonable entertainment of staff at Christmas.
During the
case in the House of Lords of R v. Her Majesty’s
Commissioners of Inland Revenue applied for by Adrian John Wilkinson,
it became apparent that HMRC’s powers to make extra-statutory
concessions on the strict application of the law were not as wide as
had been understood. The case established that HMRC has discretion
under section 1 of the Taxes Management Act 1970
“to formulate
policy in the interstices of the tax
legislation”. Although
it is not for me to criticise the judgment, I would have thought that
it would be for HMRC to interpret rather than to formulate policy in
the interstices of the tax legislation. The judgment goes on to say
that HMRC can formulate
policy “dealing
pragmatically with minor or transitory anomalies, cases of hardship at
the margins or cases in which a statutory rule is difficult to
formulate or its enactment would take up a disproportionate amount of
Parliamentary
time.” One
sometimes sits in Committee and is moved to wonder what a
disproportionate amount of parliamentary time would be. The judge
clearly thought that there was such a concept. Crucially, the judgment
established that HMRC’s powers under section 1 of the Taxes
Management Act 1970 could not be
construed “so
widely as to enable the commissioners to concede, by extra-statutory
concession, an allowance which Parliament could have granted
but”
had not granted. Since
Parliament could have granted anything, I take that to mean that an
extra-statutory concession cannot be used to give a concession to a
taxpayer that Parliament could reasonably have anticipated could have
arisen and that Parliament could have given but chose not to, because
either the Government or the Opposition of the day chose not to bring
forward such a concession. My layman’s understanding is that
HMRC’s powers are thus restricted to dealing with the
unforeseen, the unenvisaged, the trivial and the minor, rather than
creating any new significant provisions.
Hopefully the
Minister will be able to give us an update, but I understand that HMRC
is reviewing the legality of all currently operational extra-statutory
concessions. The Committee will be interested to know how many of them
there are and whether HMRC still expects to complete that review in
autumn 2008. Since seasons in Government-speak often have a
non-intuitive meaning, for example the spring normally ends when
Parliament rises for the summer recess and the autumn
has been known to run till the Christmas recess, could the Minister
clarify, in calendar-speak, when we can expect that process to be
completed? In
summary, the point is that extra-statutory concessions had become a
lazy answer to the problems of slack drafting and gaps in tax
legislation. To that extent, we acknowledge that clause 154 is a
practical measure to ensure that concessions relied on by taxpayers and
HMRC can be preserved. That is proposed to happen through a Treasury
order to give the concessions statutory effect. Therefore, they cease
to be extra-statutory concessions and become statutory provisions. Will
an extra-statutory concession that falls foul of the Wilkinson judgment
be able to be enacted under the clause? Clause 154 (2) defines an
“existing HMRC concession”. What if the concession was
ultra vires ab initio? I assume that that is the effect of concluding
that a concession contravened the provisions of the Wilkinson
judgment.
It being
One o’clock, The
Chairman adjourned the Committee
without Question put, pursuant to the Standing Order.
Adjourned
till this day at half-past Four
o’clock.
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