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Lord Higgins: My Lords, the noble Baroness was rather surprised at the number of amendments that I put down for Committee stage. I am rather surprised at the number of amendments that the Government are tabling on Report. I understand of course that the situation in Northern Ireland may have changed in a relevant way and I am certainly not going to call for recommittal at this point. I merely say that the House has ahead of it in this Session a massive amount of social security legislation. One certainly hopes that government amendments will appear at least at Committee stage. It is not very satisfactory for amendments to be tabled on Report, when one can only intervene once, as against bandying matters back and forth. Given the extraordinarily heavy and complex legislative programme, we should get amendments as soon as possible.

I have one simple question for the noble Baroness. Under these new clauses, does the Inland Revenue obtain greater powers than the Department of Social Security and the IR have at present?

Baroness Hollis of Heigham: My Lords, the noble Lord should accept the difference between Bills introduced in this House and legislation that is introduced in the other place and then comes to us. The noble Lord knows that this is a highly technical Bill, which is why he put down a whole lot of amendments before the Committee stage. I am grateful that the noble Lord accepts the Northern Ireland difficulties.

When a Bill starts in this House, one expects far more government amendments as a result of the complexities of cross-drafting and so on than would be the case with the two other major pieces of social security legislation. I hope that Members of the other place will give that legislation the careful scrutiny and revision that is the customary practice of your Lordships.

In answer to the noble Lord's final question, no, they will have the same powers.

On Question, amendment agreed to.

Clause 4 [Powers relating to enforcement]:

Lord Higgins moved Amendment No. 3:

Page 2, line 46, at end insert ("until 31st August 2001").

The noble Lord said: My Lords, on the point that the noble Baroness has just made, I am not sure that last year's Social Security Bill, which went through the other place first and to which we passed hundreds and hundreds of amendments, gives much cause for

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optimism. No doubt it will be easier, for the reasons she mentioned, to avoid amendments at Report stage to future legislation.

We have spent considerable time in Committee on the enforcement provisions and in particular on the relationship between the enforcement provisions available to the Inland Revenue and the Department of Social Security. The purpose of the amendment is to see how those changes work out. It has been suggested by the Institute of Directors that it would be appropriate that the matter be reviewed and that the powers ought not to be changed in the way proposed within a given timescale unless that review has reported. It might be worth having the noble Baroness's reaction.

We have debated that matter to some extent but the Institute of Directors raises some specific points. It seems that Inland Revenue inspectors will be able to enter business premises at any time without warning and question employees. I raised that issue on Second Reading. There is also the question of whether or not the employee can be seen alone. We have debated also whether the employee can insist on a professional adviser being present. Perhaps the noble Baroness will let us know what the position is.

The extent to which the Inland Revenue uses any additional powers is something that we shall have to see in practice. There is concern that with the combination of two sets of powers, because it is a cumulative process the dividing line between the powers of the IR as the tax-collecting authority and its powers as regards national insurance may become blurred.

The Institute of Directors makes a point that had not occurred to me but it may be one that the noble Lord, Lord Goodhart, will wish to raise. Will the fact that failure to supply information is being decriminalised alter the situation with regard to the right to refuse to incriminate oneself? It is somewhat of a backhanded argument as to whether the civil penalties may be imposed and people will be obliged to admit that they had erred. I hope that the Minister will consider that. In particular, does she feel it would be appropriate for these matters to be reviewed?

All of us have a history in relation to these matters. I well recall my attempt to steer through the original value added tax legislation. It was bad enough saying why all the various items should be taxed, but once the enforcement provisions, which the Inland Revenue had had for the past 700 years, were put into legislation, everyone was up in arms. I had the most terrible trouble with lots of lawyers. Often, it is only when matters are changed or codified that people become aware of the real powers of the revenue departments. Therefore, it would be helpful if the noble Baroness would respond to this point, which is causing some concern in the business community, even though, as she points out, business is basically in favour of the transfer.

4 p.m.

Lord Skelmersdale: My Lords, as a former managing director of a small business, I have had experience of visits by staff in what is now the social security Contributions Agency to the person who does

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the wages. I have also had experience of the Inland Revenue visiting for the same purpose; and also of not one, but two, inspections by the VAT man. So over a period of time I have become used to inspections by statutory bodies. I see no harm in that.

However, for the three departments that I just mentioned, we may now read two. We shall be told that the Inland Revenue wants to come and talk to the person who does the wages for the business. However, we shall not necessarily be told under what hat that person is coming--whether he or she wishes to examine the social security contributions part of the operation or the PAYE part. It is extremely important that when the initial contact is made regarding an inspection that is made absolutely clear. Otherwise, there could well be some confusion, and that is not right.

Baroness Hollis of Heigham: My Lords, I am in some difficulty and shall take your Lordships' guidance. Many of the detailed points raised were addressed to Amendment No. 39. As I am sure your Lordships will have noted, that amendment was tabled in response to most of the points raised by the noble Lord, Lord Higgins. I wonder whether it would be for the convenience of the House if I respond to Amendment No. 3 and speak also to government Amendment No. 39 so that effectively we group together the two issues. Perhaps that would be sensible. As many of the detailed points relate to Amendment No. 39 perhaps I may first address Amendment No. 3 and then turn to those detailed points.

Lord Goodhart: My Lords, if the Minister will excuse me, I do not wish to speak to Amendment No. 3; however, I do wish to raise a few questions in relation to Amendment No. 39.

Baroness Hollis of Heigham: My Lords, in that case, we shall have to proceed with the amendments separately. I must therefore ask your Lordships to wait for answers until we come to Amendment No. 39; otherwise, we shall be repeating ourselves.

I note that the noble Lord opposite looks surprised. Amendment No. 39 was designed to address the very issues that were raised by the noble Lords, Lord Higgins and Lord Skelmersdale, at our previous meeting and which they have raised again today. I am therefore rather baffled that the noble Lord has spoken to some 20 amendments before we come to them.

Lord Higgins: My Lords, I accept whatever is convenient for the House. If that is so, I am not quite clear why the Government did not ask for the amendment to be grouped. Perhaps the noble Baroness would deal with points that arise on this amendment but do not arise on Amendment No. 39, and then we may consider the remaining issues when we come to Amendment No. 39.

Baroness Hollis of Heigham: My Lords, Amendment No. 3 is a general amendment. It would time limit powers that successive governments have found acceptable for 50 years. Indeed, the party opposite

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were instrumental in adding to powers of inspection as recently as the 1997 Fraud Act. So we can see no case for such a dilution of powers merely on account of the Contributions Agency transfer.

This Bill is not he occasion for substantial change of powers since the aim of the Bill is to transfer the CA as a "going concern". We have been clear from the outset that professional advisers would be nervous that there might be a levelling up of powers. This we have very deliberately not done.

Nevertheless, we accept that the statutory powers of enforcement under NICs legislation that the Inland Revenue will inherit will not be fully consistent with the existing powers in relation to tax. It is in no one's interests to have any lack of clarity or certainty about the state's powers to ask questions or ask to enter premises.

We anticipate that, after this legislation takes effect, the Inland Revenue will be consulting with a range of opinion about desirable harmonisations of tax and NICs. Indeed, those discussions have already started. Some areas for discussion would be on the details of the charging rules. Others would be on the administration powers and administrative processes to the extent that they impinge on employers and others.

So we see considerable merit in conducting a review of inspectors' powers, taking into account the rights of individual contributors as well as the interests of employers and the need to block fraud.

Such a review needs to be done properly, running well beyond the timescale of this Bill. Moreover, the review needs to look at the wider context. The Inland Revenue is being given other tasks such as policing the national minimum wage and student loan recovery, and handling the working families tax credit. All three involve employers, although we hope to burden them as little as possible.

It may be that, on close examination, different powers are indeed needed for different purposes. But our starting-point must be that a Revenue officer visiting an employer should have much the same powers, and limitations on those powers, whatever the purpose of the visit--in other words, as much congruence as possible.

I am conscious that the Committee on the Enforcement Powers of the Revenue Departments, set up in 1980 under the distinguished chairmanship of the noble and learned Lord, Lord Keith of Kinkel, took some four years to produce its reports. And enactment of its recommendations, in detailed consultation with representative bodies, took another five years.

That committee was exemplary in its thoroughness and very wide-ranging in its scope. While we want this review to be thorough, we do not intend to be so wide-ranging. That is, not least, because we want to see the outcome--which I do not pre-judge--on a much faster time-scale.

Nevertheless, that precedent leaves me cautious about accepting a particular timetable for replacement legislation to be in place. Hence I should not see it as responsible to time limit the current, indeed ancient, inspectors' powers. Unlike the matters covered by the

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Keith Committee, we shall not be able to make all the changes that may prove desirable in the annual Finance Bill. Instead, we may need to amend social security legislation or, perhaps, DTI legislation where the national minimum wage is concerned.

I hope that what I have said reassures the noble Lord, Lord Higgins, that we seek clear, workable and effective powers for inspectors, which balance privacy against protecting contributors' rights and blocking fraud. Our detailed proposals are set out in Amendment No. 39. Given the review I have announced, I hope that the noble Lord will withdraw his amendment. We share what we understand to be the noble Lord's concern. It is merely that we believe that a proper review, especially in the light of the Bath study, is a more appropriate and robust basis for achieving the same end as the one he proposes in his amendment, which would effectively mean a guillotine and would therefore cut across a decent and proper review of several sets of concurrent but not at present fully consistent powers. I hope that in the light of that explanation--namely, that we accept the noble Lord's concern but believe a better way of dealing with the matter is by a properly informed consultative review, as we are currently exploring--he will feel able to withdraw his amendment.

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