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.
Payments 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 todays 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 Parliaments separate approval for every single payment made under the powers.
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 Parliaments 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.
Power 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
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 Majestys Commissioners of Inland Revenue applied for by Adrian John Wilkinson, it became apparent that HMRCs 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 HMRCs 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 laymans understanding is that HMRCs 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
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 oclock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.
Adjourned till this day at half-past Four oclock.
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