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The Earl of Northesk: My Lords, I apologise for being a little late into the Chamber and not hearing the first few sentences of the noble and learned Lord the Attorney-General. That said, I express my thanks to him. I am particularly grateful for the consistently sympathetic hearing he has given to my concerns about the power to delegate. I am also particularly grateful for the distinction that is proposed to be drawn between class disclosures and those specific occasions when disclosure may be required and the presumption of a nominated commissioner for the disclosure regime.

For my part, I am content that the amendments deal with the concerns I have consistently expressed in an entirely admirable and satisfactory way. As I say, I am grateful.

Baroness Noakes: My Lords, I would like to add to what my noble friend said. From these Benches, we have been very appreciative of the way in which the noble and learned Lord responded to the concerns that were expressed in the earlier stages of the Bill which resulted in amendments being passed at Report, the speedy way that he dealt with the issues after that and the constructive way in which he and his officials developed a solution that was satisfactory to all parties. It is a model that I hope will be repeated in the next Parliament when we come to such difficult issues.

I should emphasise that we were never trying to stop Customs officials on the borders dealing with terrorism and other immediate threats of illegality. Our concern was about taxpayer information sitting in offices up and down the land. These clauses have highlighted the difficulty in putting together the two different kinds of organisation that Customs and the Inland Revenue represent. One deals with a rather static information and the other deals with real-life situations. The amendments focus our minds on how to accommodate both situations. The result is an improvement to the Bill.

Lord Thomas of Gresford: My Lords, my particular concern with this Bill has been, as the noble and learned Lord knows, the setting up of the Revenue and Customs Prosecutions Office. From the very beginning, we have supported the Government on this initiative, so it remains for me to express the thanks of my noble friend Lord Newby, who cannot be here today, to the noble and
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learned Lord and his officials for all the great assistance that they have given in coming to a satisfactory settlement of these issues.

Lord Goldsmith: My Lords, I am grateful for what the noble Earl said. Perhaps he missed the thanks that I expressed to him in my first few sentences. I repeat those now and also thank the noble Baroness and the noble Lord, Lord Thomas. I commend the amendment to the House.

On Question, amendment agreed to.

Clause 14 [Delegation]:

Lord Goldsmith moved Amendment No. 2:

"(3) The commissioners may not delegate the function under section 20(1)(a) except to a single Commissioner."

On Question, amendment agreed to.

7.45 p.m.

Baroness Noakes moved Amendment No. 3:

"( ) Where the Commissioner or a number of commissioners delegate a function to a committee by virtue of subsection (1)(b), and that committee includes a majority of persons who are neither commissioners nor staff of the commissioners nor officers of Customs and Excise—
(a) the Commissioner or those commissioners shall monitor the exercise of the function by that committee;
(b) in the exercise of the function, the members of the committee shall comply with any direction of the commissioners or those commissioners."

The noble Baroness said: My Lords, in moving this amendment I will also speak to Amendment No. 4 which deals in a different way with some of the loose ends around the delegations that are allowed by Clause 14.

Amendment No. 3 deals with the role of the commissioners once they have delegated their functions. We have no basic problem with the fact that the commissioners have to delegate their functions, but we do believe that having delegated those functions, they need to control what happens after they have delegated. That is what Amendment No. 3 is about. When the commissioners delegate under Clause 14(1)(b) to a committee, that committee can include commissioners and officers, but it can also include outsiders. It is the latter category that potentially causes the problem.

If there are outsiders on a committee to which functions are delegated and those outsiders are in the majority, we must ensure that the commissioners can control what happens in that committee. If the commissioners are delegated to a person rather than a committee under Clause 14(1)(c), other provisions kick in by virtue of subsection (4). First, the commissioners have to monitor the exercise of the delegated function and, secondly, the delegate has to comply with the directions of the commissioners. Therefore, Amendment No. 3 provides a mirror of subsection (4) and repeats these two provisions for committees controlled by non-HMRC people.
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This concern is not entirely fanciful because it is clear that committees can be comprised wholly or mainly of outsiders. In Grand Committee we talked about an audit committee that would be comprised wholly of outsiders and I do not suggest for a moment that audit committees would be a problem. However, the Act does allow virtually all the functions apart from very limited restrictions that apply to old Inland Revenue functions which are laid out in the clause. Therefore, all of the existing Customs and Excise functions and the vast majority of the old Inland Revenue functions can be delegated to a committee and that committee can be wholly or mainly comprised of non-HMRC people. That is what concerns us.

The theme of confidentiality also drives Amendment No.4. We were pleased that the Government amended the Bill in another place to ensure that there was a declaration of confidentiality for commissioners and their staff, but because the way in which both the Inland Revenue and Customs and Excise now work has changed over time and more contractors are involved in the operations, there is a concern about how those involved in the private sector organisations are aware of the confidentiality requirement. I accept that the duty of confidentiality applies to people who deal with taxpayer information: the issue is how do we make sure that they are aware of their obligations?

Amendment No. 4 would ensure that people are aware of their obligations and it is designed in a way that does not force HMRC into a straitjacket. It can either use the declaration route or something similar. It would give the commissioners discretion. When we debated this matter in Grand Committee, the noble and learned Lord said that he would consider further what might be done about that category of person, so I am hoping that the noble and learned Lord will be able to respond positively to the thought behind the amendment. I beg to move.

Lord Goldsmith: My Lords, I will first take Amendment No. 3 because that looks, as the noble Baroness explained, at the position of monitoring and control by the commissioners of committees on which neither commissioners nor their officers sit as a majority.

I can clarify the arrangements for her. She is right to note that the Bill makes a different provision between that where there is a delegation to another person and that to a committee that is established. However, as far as monitoring is concerned, which is the first of the noble Baroness's issues, the procedures will be the same. Those committees established by the commissioners will be under the direct supervision of the commissioners and monitoring will be part and parcel of that supervision. In particular, under Clause 12(1)(b), the commissioners are required to make specific arrangements for the conduct of the proceedings by their committees. Therefore, as far as monitoring is concerned I can assure the noble Baroness that the monitoring aspect will be dealt with.

However, there is a difference so far as the directions of the commissioners are concerned. That is an important distinction because there will be some committees—an
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audit committee is the best example—where it is important that the committee has independence in its actions. As I described in my letter to the noble Baroness of 2 March, senior committees of the HMRC will include as members,

that is, non-executive directors.

HM Revenue and Customs is committed to establish an audit committee. In accordance with best corporate governance practice, membership would be restricted to only non-executive directors, so that the whole point is that this committee is independent of executive directors. Therefore, to provide in that situation that the committee should be subject to the directions of the commissioners would go against that necessary independence. That is the fundamental reason for the difference between the arrangements that are in place.

Having said that, I am sure that the noble Baroness will also see that, in relation to all the functions delegated to their committees, the commissioners will remain accountable for the work that is delegated. Therefore the proper performance by those committees of their activities can be assured.

I turn to Amendment No. 4. I said that even if I would not consider what further should be put into the Bill, I would at least consider what more I could say about the position on confidentiality, and I am happy to put that position on the record. It has been absolute common ground from when I made my opening speech on Second Reading that we agree about the paramount importance of taxpayer confidentiality, and the importance therefore of ensuring the awareness of confidentiality obligations. Let me therefore spell out the safeguards. I have already said what they are on several occasions, but lest there be any misunderstanding, I shall repeat them again.

The requirement in Clause 3 is for new officers and commissioners of the department, but the other obligations of confidentiality imposed by the Bill—the statutory duty of confidentiality backed by the criminal sanction—will apply to non-executive directors and those acting on behalf of the department, not just to regular staff. So those obligations are there. That message is made clear to anyone first gaining access to confidential information and is supported by further periodic messages from managers and others for so long as they are in contact with the information.

I shall take that a stage further. Non-executives will sign contracts with the departments which will contain acknowledgements of the duty of confidentiality. As for contractors, who could be IT support staff, consultant security staff and so on, there will be a number of safeguards appropriate to the circumstances. First, access to confidential information will be limited to business need. Access to information services will be available only when it is necessary and important to the job to be done. For example, security staff will not need or be given any access to taxpayer-confidential information, and in the main nor will those working in IT support, so there will be no need for those contractors to make any specific declaration of confidentiality.
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Secondly, when the department judges it necessary, it can compel every person working for a contractor to sign an undertaking of confidentiality. That will be written into all the contracts of those working under contract. The department may not consider it necessary in all cases. One would not, for example, think that those contractors who were making travel bookings needed to make such specific declarations of confidentiality. But the ability will be exercised when it is needed.

Thirdly, a confidentiality clause will be written into all contracts at the company or service provider level.

I hope that that answers the substance of the noble Baroness's point. It is slightly churlish of me to draw attention to a technical error in the drafting of the amendment, but I had better do so, because it refers to,

when previous versions correctly referred to,

But I hope very much that we need not trouble about that, because I hope that we have reassured the noble Baroness about the substance of the two amendments to persuade her that we are entirely in agreement on what we are trying to achieve, that there is enough to achieve those objectives and that she need not press either of her amendments to a Division.

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