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Lord Newby: My Lords, as noble Lords will know, we have supported this measure but have expressed doubts about the ease with which it will be possible to achieve all the claims the Government have made for it. Some of the sweeping claims about the quality of taxpayer service the new department will be able to offer were repeated last week in the Red Book.

A number of noble Lords have serious questions about those claims, not least because, to be successful, the integration will require a significant degree of additional training and improvement in computer systems, both of which are costly. In the case of IT systems, we are looking at an area where the track record, in virtually every department of government, has been poor.

The question is whether the existing mechanisms for reviewing the operation of the merger will work effectively. I have my doubts as to whether they will, and whether the focus will remain on them five years down the track. As the noble Baroness has said, Parliament has many qualities, but one of the things that intrudes upon looking back at the success of previous decisions and legislation is current events, which crowd out the work of Select Committees in another place to a considerable extent. Whether, in five years' time, the Treasury Select Committee would wish to have another look at the efficiency and effectiveness of the merger, given everything else that was happening, is open to doubt. Therefore we support the amendment.

Lord Brooke of Alverthorpe: My Lords, I wish to speak against the proposition. As there is the possibility of the Comptroller and Auditor General periodically reviewing what is happening in the Revenue, as the
 
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Public Accounts Committee carries out reviews, as the Treasury and Civil Service Committee reviews the Revenue regularly, and as from time to time the NAO carries out reviews, to add a fifth review on top is over-egging the pudding. There is ample opportunity, if parliamentarians want it, to ensure that we can sustain and maintain full scrutiny of what happens in the Inland Revenue.

I hope that the mover of the amendment, and others, will reflect on where they stand on this issue. An additional review is not needed. It will be costly, too. Given how much we hear about the desire to get public expenditure down in the coming years, particularly from the party opposite, it would be a waste of money, adding to already fairly costly exercises that are being undertaken.

When I reflect on where we started some weeks ago in scrutinising this legislation—all the parties being generally in favour of it and wanting to see it go through without too much difficulty, or so I thought—and then on what happened earlier this afternoon, and on what might happen now if we have another vote, I start to question whether in fact people want to see the legislation go through. I certainly do. I believe it is needed by the country. To risk the legislation falling if a general election is called, because of the difficulties with clearing all the business left over after Easter, would be irresponsible on all our parts.

I hope that some reflection will be given to those points, and that we do not proceed to a vote, but live with the existing mechanisms available to us to scrutinise the new department's operations.

7 p.m.

Lord Goldsmith: My Lords, I am grateful to my noble friend for the way he has spoken. I endorse his last remarks. I, too, hope that this matter is not pressed to a vote.

I hope to be able to tell noble Lords what will happen in a way that will give them all the reassurance they need that there will be proper reporting on the key matters to which the noble Baroness referred.

I want to raise one matter at the outset, which is a fatal objection, as far as I am concerned, to the amendment. Subsection (2)(h) of the proposed new clause states that the Chancellor of the Exchequer should appoint a person to report on, among other things,

"the performance of the Revenue and Customs Prosecutions Office including, but not limited to, a cost-benefit analysis".

As the noble Baroness, Lady Noakes, will recall, and other noble Lords may note, one of the key objectives of the Bill is the separation of the Revenue and Customs Prosecution Office from Customs and Revenue. That is one of the key recommendations of Mr Justice Butterfield, who inquired into customs-related cases that had been through the courts. Of all the provisions in the Bill, this one has been so free of any controversy that not a single amendment dealing with that aspect has been proposed. It is key to what Mr Justice Butterfield said; it is key to what we are seeking to do, which is to create a
 
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new, independent prosecuting authority—separate from Revenue; separate from Customs; and reporting not to the Chancellor of the Exchequer but to me.

It would be wrong for a report to be made to the Chancellor of the Exchequer on a department that is my department, on a prosecuting authority that is intended to be separate and independent from Customs, in accordance with a strong judicial recommendation, so that the interests of justice may be maintained. Even if I thought, which I do not, that the rest of the amendment made sense, I would oppose it on that ground. There is no way of separating that aspect of the amendment out, because it is part and parcel of what the noble Baroness has proposed. So I resist it on that ground.

I turn in what I hope the noble Baroness will think is a more conciliatory way to the issues with which she is concerned; that is, whether HMRC will be a success and whether we will have the opportunity of looking at whether it will be. I have previously indicated, and I want to enumerate them again, the number of different ways in which full and proper parliamentary scrutiny by existing bodies can, and no doubt will, take place, to judge the success of the new department. Some of those ways have already been referred to in the debate. What is necessary, therefore, is perhaps not any new mechanism for reviewing, because the scrutiny exists, but making sure that information of the sort that the noble Baroness wants is available.

In a spirit of meeting the concerns of the noble Baroness, I shall offer two firm commitments which I hope noble Lords will welcome. First, the spring report that HMRC will publish early this summer will specifically cover work undertaken preparatory to the integration, as envisaged by subsection (2)(i) of the proposed new clause. That will be an early test of the Government's wider commitment to ensuring that full and proper reporting on HMRC takes place. Noble Lords will be able to see the first instalment in just a few months.

Secondly, the reports that HMRC will make to Parliament in autumn 2005 and spring 2006, as well as autumn 2006—that will be the annual report that looks back over the first full financial year of operation of the new department—will each include a specific and additional chapter on the progress of HMRC since its creation. I can assure the House that the new chapter will draw together information that becomes available as progress is made following the integration during the next 12 months or so.

Lord Sheldon: My Lords, I am pleased to hear what my noble and learned friend says about the reporting of the changes that will be made, but what impact will that have on the Bill which we understand is going to come next year to take us to the second stage of the integration of the two departments?

Lord Goldsmith: My Lords, perhaps the noble Lord will permit me to finish what I was saying about what will take place. I will then give him a clear answer to that question.
 
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The new chapter that will appear in the reports will draw together information that becomes available as progress is made following integration. That will ensure, to the extent that other published information may not quite meet noble Lords' concerns, that noble Lords will be able to see, in a single document, an up-to-date report on progress. In those early reports, HMRC will seek to provide, in particular, information on the direct costs, where it is possible to identify them, of bringing the two departments together, updating estimates already made and providing the information required by subsection (2)(b) of the proposed new clause. That covers another subsection.

The spring and annual reports will also cover the benefits that result from integration in terms of greater efficiency and reduced costs, such as staff costs and overheads, thereby providing the information required by subsection (2)(c) of the proposed new clause. In addition, the annual and spring reports will, as a matter of course, cover the outcomes of the department's PSA and efficiency targets, which together will give a clear picture of how the new department is delivering success. The PSA targets cover in specific terms the department's commitment to improve compliance across the taxes by 2007–08 and to improve the extent to which individuals and businesses pay the amount of tax due and receive the credits and payments to which they are entitled. That is the information that subsection (2)(d) of the proposed new clause would require.

HMRC has undertaken to strengthen border protection against threats to the security, social and economic integrity and environment of the United Kingdom in a way that takes into account the need to maintain the UK as a competitive location in which to do business. HMRC's objective is to improve customer experience, support business and reduce the compliance burden. Reference to the latter is made in subsection (2)(e) of the proposed new clause.

In addition to those PSA targets, further commitments were made in this year's Budget. Mr David Varney, chairman designate of HMRC, has already committed publicly to a range of measures that will deliver real reductions in compliance cost. I will not weary noble Lords this evening with those, but I am happy to provide them in writing to the noble Baroness if she would like them. The annual and spring reports will also cover progress on those specific compliance cost measures as they develop.

So a great deal of information will be either covered in the spring or annual reports of HMRC or otherwise be publicly reported to enable Parliament, the Treasury Select Committee, PAC, the Comptroller and Auditor General and all the people about whom we have spoken previously to form a view on whether HMRC is meeting its desired objective of improving efficiency and customer experience and closing the tax gap.

I hope that noble Lords and the noble Baroness in particular will recognise that we, having listened carefully to the concerns that were expressed in Grand Committee in particular, have come forward with a
 
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substantial commitment to meet her desire to have information on such matters brought together in a single report. It will keep the pressure up on HM Revenue and Customs, which was a point that noble Lord, Lord Newby, made in Grand Committee. He wanted to see that as well.

I want to draw noble Lords' attention to another factor, mentioned by my right honourable friend in another place. The Chancellor will shortly issue an annual remit for the chairman designate of HMRC. That will include the general direction and priorities of the department; the monitoring arrangements for delivery against the remit; specific targets for the department; and the high-level policy delivery agenda. Where do we go from there? As we move forward in time, it will become increasingly unrealistic and theoretical to distinguish costs and savings that are attributable to the integration from the aggregate costs of running the department. It will emerge over time, but surely we would all agree that a stage will come when trying to separate them would become artificial, and potentially misleading. The content of the spring and annual reports that I referred to will be kept under review, so that a view can be taken on the continuing need for the special additional chapter that I have identified.

I have taken a few moments to put the detail on the record so that there is no doubt. I hope that the noble Baroness will receive that in the spirit in which it is intended; that is, to meet her concerns without the need to put formal requirements in the Bill for a specific report over a period of time. As the noble Lord, Lord Newby, indicated, that could give rise to artificiality—an additional and unnecessary burden. I hope that noble Lords, including the noble Lord, Lord Newby, who has been sympathetic to the amendment, will accept that that meets the concern. Nothing needs to be put in the Bill, as we have come forward, listened carefully to what was said in Grand Committee, and given an important assurance and commitment.

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