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Lord Thomas of Gresford: My Lords, there are clear advantages in having a single body responsible for the administration of the tax system. This merger—or integration, as the noble and learned Lord put it—should be taken as an opportunity to rationalise and harmonise the different procedures of both departments.

One of the concerns which we propose to address is the extent to which the Bill permits the disclosure of confidential information. Confidentiality is certainly stated as a principle in Clause 18(1) but subsection (2) appears to give the widest powers of disclosure to various people. Similarly, Clause 20 gives wide disclosure powers under the guise of public interest. We shall need to look at these clauses very closely. My noble friend Lord Newby will address other issues that arise under the creation of HMRC.

I turn to the Revenue and Customs Prosecutions Office, which we welcome. The creation of that office under the direction of a director responsible to the Attorney-General is something that we have sought for some years.

The report of Mr Justice Butterfield, to which the noble and learned Lord referred, into the collapse of the London City Bond prosecutions in November 2002 highlighted how the existing system of prosecution had imploded. There were 13 separate prosecutions in which 109 defendants faced charges. Of these, 52 either pleaded guilty or were convicted, 16 were acquitted and the prosecution offered no evidence in respect of another 40. But, following the result of an abuse of process hearing in Liverpool, all the convictions, both of those who had pleaded guilty and who were found guilty, were quashed by the Court of Appeal, so that, ultimately, no one was convicted.

The public purse was allowed to lose up to £688 million according to the National Audit Office. The fees of prosecuting counsel alone amounted to £3.5 million, while legal aid for the defendants cost £14.3 million. They have not even begun to work out
 
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the compensation for the defendants who were successful in their appeals against conviction. Such was the state of the prosecution service that no defence lawyer would ever advise his client to plead guilty.

What went wrong? Mr Justice Butterfield found muddle, confusion and uncertainty, mostly stemming from a lack of systems to ensure co-ordination between the various investigations at any stage. This resulted in the prosecution failing to comply with its obligation to make full and proper disclosure to the defence of relevant documents. Fair trials were impossible.

The learned judge identified in particular with regard to Customs investigators, first, a culture of excessive secrecy, with information closely guarded and disseminated only on a need-to-know basis; and, secondly, a culture where the need to fulfil the requirements of the criminal justice system was not accepted as an essential part of the investigation process.

Those findings cause me to welcome very much the provisions of this Bill which permit Her Majesty's Inspector of Constabulary to oversee the work of investigators. I also welcome the fact that the Police Complaints Commission can be involved in matters of abuse that may arise in the course of an investigation.

Such a culture is nothing new. I recall a case of alleged heroin importation being thrown out by a trial judge as long ago as 1983 as a result of oppressive questioning by investigators over many days. The prosecution service of Customs and Excise lost the confidence not only of the lawyers involved in the case but of the judges as well.

The Gower/Hammond review, set up in 2002, recommended that the Customs and Excise Solicitors Office should retain its prosecution function but that the solicitor should be responsible to the Attorney-General. That was the beginning of the move to what we have in the Bill, which is a great improvement on that. Even so, the Gower/Hammond review led to significant progress. A report by the Crown Prosecution Service Inspectorate in December 2004 found that the lawyers in the service were beginning to think much more as independent prosecutors and not merely as an arm of the Treasury, and that the problems of disclosure which had caused the collapse of the Liverpool case were being addressed.

However, the report found that the additional demands made on the organisation and the increase in the size and complexity of the cases had not resulted in additional resources being made available to it by the Government. The report found that lawyers often did not appear to be in control of their cases, largely because they did not attend all court appearances to instruct counsel, either in the magistrates' court or at the Crown Court, and counsel was left to its own devices.

A further specific criticism of the inspectorate's report was that local Customs and Excise staff still prosecute cases, a practice which has long ceased where the CPS are involved. I ask the noble and learned Lord the Attorney-General whether the
 
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practice of using investigators to prosecute will cease. It takes me back 50 or 60 years ago to the days when my father, who was an inspector in the police, a town inspector, was prosecuting in the magistrates' court.

Despite progress, therefore, the inspectorate concluded that some aspects of the work and organisation constrain the prosecutors. There is a need to improve staffing levels and case coverage; there is still inadequate accommodation; there is a lack of some basic equipment and services; and there are cumbersome IT systems to support management information requirements. That is as the office now is.

So it all comes back to resources. The CPS was under-resourced for many years, to the extent that one began to wonder whether the Government replaced cash with the rebalancing of the criminal justice system in favour of the prosecution to which the noble Lord, Lord Kingsland, has referred in recent days. It may be better to introduce evidential presumptions of dubious legality in sexual offences and the previous convictions of the accused. Better to abolish jury trial in an attempt to secure more guilty verdicts and to risk wrongful convictions and improve the statistics than to invest in a thoroughly modern and competent investigatory and prosecution system.

Things have greatly improved with the CPS. I hope some new money will be put into the new organisation to ensure that it has the competent staff and technical resources so that it can be a first-class and, above all, a fair and responsible prosecuting authority, which commands the confidence of the judiciary, the legal profession and, of course, the public. The appointment of Mr David Green, QC, as the director, is an excellent beginning.

The essential element is that this new prosecuting authority is seen to be wholly independent of Her Majesty's Revenue and Customs, just as the CPS is independent of the police, making its own decisions and protecting not just the Revenue but the individual citizens against whom allegations are made.

We welcome these provisions; we hope that the resources will be available to back them, and we look forward to seeing an improvement in what has been a very difficult and unhappy area of prosecutions.

6.1 p.m.

Lord Barnett: My Lords, I welcome my noble and learned friend the Attorney-General to our debate on the Inland Revenue and Customs and Excise. As we normally say after maiden speeches, we look forward to hearing him again often in our debates on these matters.

I hope that my noble and learned friend will forgive me if I do not reflect upon the legal parts of the Bill but deal rather with what I thought was the major part of the Bill—namely, merger. We are told by my noble and learned friend that it is integration rather than merger. I do not know whether that is a legalistic phrase. He sought to spell out for us why it was integration rather than merger; perhaps we will debate that further on another occasion.
 
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Much as I am delighted to see my noble and learned friend here, I wonder why he opened this debate. On Second Reading in another place, they managed to find two Treasury Ministers to speak; they did not bother with any legal Ministers. Despite that, I am delighted to see my noble and learned friend. Of course, the Bill is not party political; even the noble Baroness, Lady Noakes, will find it difficult to take a party political view of the Bill.

Initially, my main concern was whether the department and the Government were ready to implement the Bill. Reading Gus O'Donnell's excellent report, I am even less certain about the benefits that will accrue from this integration. Introducing the Bill in another place, the Paymaster General said that it was, as my noble and learned friend the Attorney-General said, a huge task, and she explained why. It is worth repeating what she said:

To put it mildly, it is, as my noble and learned friend said, a huge task.

We were told that the integration could not start until after Second Reading in the other place, which was on 8 December. The new chairman is David Varney, a businessman whom we wish well in his task. We were told that he could not do anything until 8 December, but he was appointed, and took up his post on 1 September. Presumably, all he could do in the interim period was think about the task. I hope his thinking took him well on the way to understanding what is going on here.

Despite having a comparatively short time in which the new chairman will have to work, paragraph 30 of the Explanatory Notes states that the Government hope to implement this huge task "shortly after Royal Assent". I find that hard to understand, but will come back in a moment to what my noble and learned friend the Attorney-General said about it. Do we not need to worry about whether we are ready to have this integration in the timescale set out? In practice—this seems to flow from what my noble and learned friend was saying—little will happen initially. The two departments may be called HMRC but, in practice, they will simply carry on as before. Nothing will happen when the new chairman takes over, except that he will start on integration. I should be glad to know whether I am right in assuming that.

I have a few questions on the Bill. Paragraph 9 of the Explanatory Notes states:

as set out in Schedule 1. It goes on:

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I suppose it is all right if it is advertent, and that this is only to prevent inadvertency. I hope that I am not being too legalistic.

Paragraph 12 of the Explanatory Notes says that Clause 17 and Schedule 2,

What are the management controls? I am sorry to trouble my noble and learned friend the Attorney-General with these little matters, but perhaps he will tell us.

Paragraph 14 says:

I should like a little more information about who will authorise them to do so.

We are told that Clause 19 widens the current criminal offence of unauthorised disclosure. Why is it necessary to widen it? Paragraph 16 of the Explanatory Notes says that Clause 20 will introduce a provision enabling the commissioners to instruct officers to disclose confidential information where it is in the "public interest" to do so. What is the reason for the change, and what is the public interest referred to?

Finally, we are told in the Explanatory Notes to Clauses 24 and 26 that rewards may be paid by the commissioners. That is very interesting, and I think we need to know a little more about it. What size are the rewards likely to be—large, small or medium? Perhaps my noble and learned friend could give us some idea of the level of reward. Would the size of the reward relate to the amount of revenue saved or tax obtained? It is an interesting new idea, and I look forward to hearing my noble and learned friend's answers to those questions.

On the question of benefits, we are told that there will be staff savings—apart from the Gershon review, which we have all heard about. We are told that there will be some 3,200 staff savings or cuts by 2007-08. That is out of 100,000 staff, so I do not think that my noble friend Lord Brooke need worry too much. Then we are told that that is only a working assumption and that the cut is not definite. There will not be huge cuts so my noble friend can leave the room now.

My main concern remains that this is a huge task. Has the solution to this huge task been properly thought through? I still have my doubts. On page 8 of his excellent report, Gus O'Donnell told us that the initial costs were likely to be about £75 million. Clearly, we do not know whether that is a working assumption, because the costs of £75 million could be spread over two years. We are told that, above all, the benefits will be long term, so we cannot expect to see benefits in the short term, in the next few weeks or months. When will we see the benefits? I am sorry to
 
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intrude on my noble friend's Inland Revenue and Customs experience in these matters, but perhaps he could tell us when we can expect see the whole of these benefits in the "long term".

Finally, the implementation of this Bill, when it becomes an Act shortly after Royal Assent, remains a concern to me. I hope that the Government will not seek to rush it through. We are told already that it will initially be only a start of the proceedings. Assuming that there is an election on 5 May, if we have to wait until after that, I hope that the Government will not try to wash it all up together with other Bills in agreement with the usual channels. There are important matters to be resolved. It would remove the concerns that I have—and I imagine that others have—if the Government do not rush to put the Bill on the statute book and try to implement it very soon thereafter.

6.12 p.m.


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