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Baroness Scotland of Asthal: My Lords, I can certainly assure the noble Baroness that that will be done extremely rigorously and with great care. Your Lordships will know that for a while there has been a policy that we are able to return asylum seekers to safe parts of countries, particularly where a country is very large. It is something that must be done cautiously, appropriately and in a way that ensures we are making the right judgments.
 
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Commissioners for Revenue and Customs Bill

5.37 p.m.

The Attorney-General (Lord Goldsmith): My Lords, I beg to move that this Bill be now read a second time.

The Bill creates two new organisations. First, it brings together the Inland Revenue and Customs and Excise to create a single new department called Her Majesty's Revenue and Customs. That was the key recommendation of the O'Donnell review which considered the best organisational arrangements for delivery of the Government's tax agenda.

Secondly, the Bill establishes a fully independent Revenue and Customs Prosecutions Office to conduct prosecutions on behalf of HMRC where appropriate. That was an important recommendation of the Butterfield review and introduces a new layer of independent scrutiny in relation to HMRC criminal prosecutions. The office will also have the power, alongside the Crown Prosecution Service, to prosecute cases generated by the new Serious Organised Crime Agency.

Perhaps I may consider first the creation of HMRC. When we talk about forming HMRC, we talk about "integration". Integration is not the same as a merger: it is a more fundamental change that brings services together to produce new and better solutions. But the goal is not integration for its own sake. Integration in parts of the business that share customers or functions—such as Customs' work on VAT and Inland Revenue's work on direct taxes—can deliver real benefits, and here it will be pursued with vigour.

But some Customs' social protection and border functions may have little obvious overlap with Inland Revenue functions. Here, too, however, there are opportunities for improved working, as they link into the HMRC structure and develop wider opportunities to enhance co-operation with other agencies at the frontier.

The integration of Customs and the Revenue is a huge job, and it will take time to deliver it. It will be an ongoing process of improvement, dependent on the introduction of new technologies and working methods to support a more coherent and consistent approach across HMRC. This Bill cannot of itself deliver that, but it establishes HMRC and thereby allows it to make some changes now and to begin working towards more substantial reforms.

There are clear benefits from integration. One of the most important is the improved customer focus that an integrated department can deliver. That will flow from a better understanding of taxpayers as a result of looking across their affairs, allowing the delivery of more joined-up services that better meet taxpayers' needs.

Integration will also improve the effectiveness of revenue administration. For example, better use of information will allow more effective targeting of resources to areas of risk, improving fairness by making it harder for the dishonest to avoid their
 
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obligations and reducing unnecessary interventions in the affairs of honest taxpayers. Integration will also produce efficiency savings of 3,200 full time equivalent posts by 2007-08.

I turn to the content of the Bill. On its structure, the Bill establishes HMRC as a non-ministerial department with the statutory functions of the two existing departments. Commissioners, acting under the general directions of Treasury Ministers, will be responsible for the management of the department and its functions. This non-ministerial status maintains the arm's-length relationship between Ministers and revenue administration, continuing the existing principle that Ministers do not intervene in individual cases.

The Bill creates a new framework, with enhanced parliamentary scrutiny, for managing and accounting for the revenues and other moneys that HMRC collects and pays out.

This Bill allows HMRC to be treated on the same basis as ministerial departments for the purpose of transferring functions into or out of the department. These arrangements, in the Ministers of the Crown Act, allow routine machinery of government transfers of functions between departments without the need for primary legislation. They work effectively for ministerial departments and, subject to certain exceptions that I will outline in a moment, it is sensible to apply them to HMRC. HMRC will be a large department with a wide range of functions, and it would be unnecessarily inflexible to exclude all of them from the transfer provisions that apply across the rest of government.

I mentioned certain exceptions to the transfer arrangements. The Bill ensures that these arrangements do not permit the transfer out from HMRC of its tax, duties, national insurance or tax credit functions. These functions are those where the O'Donnell review saw synergies in administration in one department. This restriction therefore maintains the integrity of the tax system and underlines the principle that the administration of revenues is held at arm's length from Ministers.

The provision in the Bill is sensible and allows for the effective use of parliamentary time. At this point I want to say that my right honourable friend in the other place, the Paymaster General, has listened to the concerns expressed in debate and has talked to the trade union representatives of staff who will be working in HM Revenue and Customs. We want to put on the record that this transfer provision will not be used to circumvent proper consultation with the recognised unions of the effects on their members of transfers of functions out of HM Revenue and Customs to another government department or agency. I understand that talks are due to take place between the management of the Inland Revenue, HM Customs and Excise and the recognised union representatives of Revenue and Customs staff on a Memorandum of Understanding, which will set out certain agreed forms of consultation on such transfers.
 
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I turn to the question of powers. This Bill deliberately makes only those changes necessary to establish HMRC. It therefore transfers the powers of the two existing departments to HMRC, but ring fences them to prevent their inadvertent extension within HMRC. There are therefore no changes in the way that powers can be used as a result of this Bill.

Of course, some reform may be necessary to deliver integration and ensure that HMRC has powers suitable for a high performing, 21st century revenue and customs administration. To that end, on 8 December in the other place, the Paymaster General announced a consultation exercise to consider issues around powers and linked matters such as rights of appeal.

The Bill confirms that HMRC may pool information internally, so that, subject to the usual rules about appropriateness and proportionality, information supplied for one of its functions can be used for any of its other functions. That enables HMRC to develop joined-up services and to realise the improvements to effectiveness that will arise from making better use of information.

Of course, taxpayer confidentiality will be just as important in HMRC as in the predecessor departments: there will be no let-up in the commitment of HMRC to safeguarding taxpayer confidentiality. The Bill therefore introduces a statutory duty for all officers to maintain the confidentiality of information that they acquire in the course of their duties. And all new HMRC staff will be required to sign a written acknowledgement of this duty when they join the department, emphasising the serious nature of this obligation. The duty is reinforced in the Bill by a criminal offence of unlawful disclosure of confidential information about an identifiable person by an HMRC officer. This extends the existing offence for Inland Revenue and HM Customs and Excise staff to all functions of the new department.

Underlining this high regard for taxpayer confidentiality, the Bill makes explicit the occasions when it is considered appropriate for officials of HMRC to disclose information held; for example, where permitted by another enactment and for the purposes of its functions, ranging from advice to Ministers on policy matters to day-to-day operational activities. Noble Lords will be familiar with many of these "disclosures" that provide information such as bulletins for employers and tax practitioners.

The Bill also introduces a provision that restricts the Commissioners to authorising disclosures of information in limited circumstances, defined in regulations, where there is a public interest case for doing so. The power will be used only to permit disclosures in accordance with the Human Rights Act. In particular, it will not be used unless necessary for the purposes of public health or safety, for the prevention of crime or for the prevention of fraudulent conduct. This much tighter provision replaces an existing authority for the Commissioners in either department to authorise disclosure of information without restricting the circumstances in which they can do so.
 
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I refer now to the issue of external scrutiny. The Bill introduces new arrangements for ensuring the highest possible criminal investigation standards within HMRC. It provides for Her Majesty's Inspectors of Constabulary to inspect HMRC's compliance with the requirements of the criminal justice system. It also gives the Independent Police Complaints Commission a key role in monitoring and reviewing HMRC's procedures for handling complaints of criminal or gross misconduct by HMRC officers. The Independent Police Complaints Commission will have responsibility for investigating the more serious of these matters.

These two measures implement the Butterfield review recommendation that Customs identify how additional external scrutiny can be introduced into investigation work. They will provide valuable external validation of the standards of conduct which are rightly expected of HMRC.

The Bill also provides for criminal offences of obstruction, assault or impersonation of HMRC officers. These consolidated offences replace provisions relating to the predecessor departments and align their penalties with their police equivalents in order to deliver consistency across the criminal justice system. The Bill stipulates that only officers authorised by the Commissioners to exercise the power of arrest for these offences will be able to do so. This gives statutory effect to existing administrative arrangements under which officers who do not need to use powers of arrest in their current jobs are administratively barred from using them.

I turn now, briefly, to the second important function of the Bill. The Bill establishes a fully independent Revenue and Customs Prosecutions Office. By advising HMRC investigators and conducting any subsequent criminal proceedings, the office will provide independent scrutiny of criminal cases investigated by HMRC. This was a key recommendation of the Butterfield review. I have referred already to the power to conduct prosecution cases generated by the new Serious Organised Crime Agency.

The director of the prosecutions office will be accountable to me rather than to Treasury Ministers. This important change ensures a clear separation of responsibilities from HMRC. This independence of the prosecutor from the investigator in cases requiring criminal proceedings helps maintain public confidence in the criminal justice system as it will ensure that the decision to prosecute is based on an entirely impartial assessment of the merits of a case.

The constructive relationship between HMRC and RCPO, the new prosecution office, will provide clearly defined and distinct roles for the investigator and prosecutor, allowing the prosecutor's expert and independent advice to be brought to bear on cases at all times. This independent involvement, ensuring the highest possible standard of work, is a development I strongly welcome.

The Bill places a duty of confidentiality upon RCPO staff that is comparable with that for HMRC staff, and backs this up with a criminal sanction for unlawful
 
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disclosure of information. These measures ensure that confidentiality will be taken just as seriously in the prosecution office as in HMRC.

The Bill also provides for the Crown Prosecution Service Inspectorate to inspect RCPO to provide independent assurance of the professional standards of prosecutors. I welcome this external scrutiny of the office. Like the creation of the RCPO itself, this provides public assurance of high standards throughout the criminal justice system.

Noble Lords will appreciate the scale of the challenge we are embarking upon. The Bill begins a lengthy process of change that will, over time, deliver real improvements to the administration of Revenue and Customs functions. The Bill is a crucial first step on that path and I commend it to the House. I beg to move.

Moved, That the Bill be now read a second time.—(Lord Goldsmith.)

5.52 p.m.


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