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On Question, amendment agreed to.



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Lord Henley moved Amendment No. 121:

The noble Lord said: This follows quite neatly our earlier debate on Amendment No. 120. Schedule 7, according to the ever-ready and wonderfully written Explanatory Notes—although they could have been improved by the noble Baroness—amends the Proceeds of Crime Act and other relevant legislation to repeal or transfer functions currently conferred on the Assets Recovery Agency and its director. Part 6 of the schedule inserts new Section 2A to ensure that the exercise of SOCA’s new functions from the Assets Recovery Agency must be in the way best calculated to contribute to the reduction of crime. In doing so, it must have regard to guidance set out in subsections (3) to (7).

Amendment No. 121 would insert an additional subsection into new Section 2A of the Proceeds of Crime Act which would ensure that any guidance issued or changes to guidance made under this section will be published and laid before both Houses of Parliament. The aim of the amendment is to probe the transparency of the work that SOCA will take over. Indeed, in the previous debate, I highlighted the fact that the work and procedures of the Assets Recovery Agency to date were relatively transparent, particularly when compared with SOCA, whose approach, as my noble friend Lady Anelay said on Second Reading, one might call “quasi-secret”. We need to question what impact these changes will have on how SOCA is currently run and to whom it will be accountable.

The amendment also offers the opportunity for a discussion on what might be included in the aforementioned guidance. Do Her Majesty's Government have targets in mind? They usually do—they are rather keen on targets. If so, how are we to see that such targets, or even the aims and objectives behind them, are being reached unless an annual report is published? Indeed, the argument works both ways. How can we judge if the annual report shows SOCA’s new powers are being used efficiently and effectively if we do not have sight of the guidance as a benchmark by which to measure them? I hope that the noble Lord can give more of an indication as to what the Government are hoping for in this guidance. I beg to move.

Lord Burnett: Although our names are not attached to the amendment, we on these Benches support it, for the very reasons that the noble Lord, Lord Henley, asserted so succinctly. It is for Parliament to have sight of any guidance issued to the various agencies in respect of how they are exercising their functions to contribute to the reduction of crime. There is no other way that we can measure the performance. It is important that this guidance is laid before both Houses to enable proper scrutiny.

Lord Bassam of Brighton: I am very grateful to the noble Lord, Lord Henley, for moving the amendment. I think that I can satisfy his concerns and perhaps persuade him that it is not necessary.



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Noble Lords know that reduction of crime and fear of crime, including organised and international crime, are key government aims. The Serious Organised Crime Agency and the main prosecuting bodies have an important role to play in helping to achieve those aims because of their role in attacking the proceeds of crime. SOCA and the prosecuting authorities will use their powers to remove illegally gained wealth from circulation. That will in turn disrupt organised criminal gangs by removing the money that fuels their enterprises.

Under this section of the Proceeds of Crime Act 2002, the Serious Organised Crime Agency and the main prosecuting authorities must exercise their functions under the Act in the way they consider is best calculated to contribute to the reduction of crime. In doing this, they must have regard to any guidance issued by the Secretary of State, the Attorney-General or, for that matter, the Advocate-General for Northern Ireland. The guidance must indicate that the reduction of crime is in general best secured by criminal investigations and proceedings. This principle must therefore underpin the way in which SOCA and the other relevant authorities under this section exercise their asset recovery functions.

The current guidance, under Section 2 of the Proceeds of Crime Act, which was issued to the director of the Assets Recovery Agency, provides that she must do her best to facilitate and promote criminal investigations and criminal proceedings. That guidance is published on the agency’s website.

I can give an assurance that the new guidance under this section will be based on the same principles as the current guidance. It will not, however, seek to influence decisions on which individual cases to pursue. There is no power for the Secretary of State to give such guidance, nor do we think it right or appropriate.

I can also assure Members of the Committee that the guidance will be published and copies will be placed in the Library of both Houses. However, it should not be necessary for the Secretary of State or the Attorney-General to lay the guidance before both Houses. There is no such requirement for the current guidance given to the director of the Assets Recovery Agency. Having given that commitment, I hope that the noble Lord will withdraw his amendment.

Lord Henley: I have had an assurance from the Minister that the first half of my amendment will be covered in that the guidance will be published. Therefore, I probably have to accept that it would be a suboptimal use of resources to go that one step further and lay it before both Houses of Parliament. I therefore accept the advice of the Minister that my amendment is unnecessary. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 7, as amended, agreed to.

Schedule 8 agreed to.

Clauses 67 to 69 agreed to.

Schedule 9 agreed to.

Clauses 70 and 71 agreed to.



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Schedule 10 [Powers to recover cash: financial investigators]:

Lord Bassam of Brighton moved Amendments Nos. 121A and 121B:

On Question, amendments agreed to.

Schedule 10, as amended, agreed to.

Clauses 72 to 74 agreed to.

Clause 75 [Extension of powers of Revenue and Customs]:

Baroness Noakes moved Amendment No. 122:

The noble Baroness said: The amendment would delete “regulation of” from the first line of Clause 75. Clause 75 merely introduces Schedule 11 and explains in parenthesis that it,

Schedule 11 contains 31 paragraphs. Four of them amend the Police Act 1997; 25 paragraphs amend the Regulation of Investigatory Powers Act 2000; and two amend the Commissioners for Revenue and Customs Act 2005. Not a single paragraph refers to the regulation of investigatory powers, notwithstanding the Title of the 2000 Act which I have just mentioned. Each and every one of them grants additional powers to HMRC.

I come from the call-a-spade-a-spade school of legislative drafting, and I hope that the Government will welcome my amendment because it would make plain what they intend with their Schedule 11. Schedule 11 is one part of a much broader initiative to increase the powers of HM Revenue and Customs. When HMRC was created out of the merger of the Inland Revenue and Customs and Excise last year, the existing scheme of powers was broadly maintained on the basis that there would be a review of them in due course. Before the merger, Customs and Excise had many more powers than the Inland Revenue. Many of us warned at that time that the review of powers would be an excuse for levelling them up, and we have been proved right.

I shall come to some substantive points about increasing HMRC’s powers in my later amendments, but, for the present, I wish with Amendment No. 122 simply to ensure that the Bill is honest in stating that it is increasing HMRC’s powers and not regulating them. I beg to move.

5.45 pm

Baroness Scotland of Asthal: I hate to disappoint the noble Baroness, particularly on her first outing on the Bill today, but I must say to her that both the regulation and the scrutiny are important. Simply because the extension of the powers is referred to does not mean that the regulatory nature of the safeguards in Schedule 11 is in any way diminished. For that reason, I shall resist the amendment.



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As the noble Baroness said, Clause 75 introduces Schedule 11, which makes changes to the investigatory powers of HMRC and is headed:

I get the impression that the noble Baroness is more familiar even than me with this schedule. Clause 75 states that Schedule 11 makes provision about the regulation of investigatory powers of HMRC. The amendment would change this so that Clause 75 referred to Schedule 11 as making provision about investigatory powers of HMRC with no reference to the regulation of those powers. This description of Schedule 11 would be inconsistent with its title and would not be as accurate as the current wording. Schedule 11 seeks to regulate as well as investigate: it relates to the regulation of the investigatory powers. I know that the noble Baroness has in the past emphasised the need for both. The current wording is accurate and allows the schedule easily to be identified from its description in the clause.

Baroness Noakes: I thank the Minister for that reply. This is a warming-up amendment. I am not sure that the Minister responded to the points that I made. She said that regulation is not diminished by the schedule—I never suggested that it was. The only point that I was trying to make was that the schedule does not introduce regulation, except to the extent that some of the extra powers come with regulation attached. The purpose of the schedule, therefore, is not to introduce regulation; it is to increase powers, and it just so happens that a bit of regulation comes tagged on the back of them. That is why it is not honest to state in Clause 75 that this is what the schedule does. However, these are not points of substance for today and I shall not press them further. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes moved Amendment No. 123:

The noble Baroness said: The amendment deals in more substance with Clause 75 and Schedule 11. It would insert three new subsections into Clause 75. I shall speak also to Amendment No. 126, which would delete the major part of Schedule 11. These are probing amendments, designed to tease out some of issues about the extra powers that are being given to HMRC.

The Inland Revenue was equipped with powers which were appropriate to the paying of tax being a civil obligation. On the other hand, when Customs and Excise was set up, it was equipped with powers which were appropriate to policing our borders and dealing with the physical activity of smuggling. When we introduced VAT, it was, for reasons largely lost in

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the mists of time, placed with Customs and Excise rather than the Inland Revenue; hence, VAT attracted more extensive powers in relation to business taxation than have ever existed in relation to taxes dealt with by the Inland Revenue.

Both VAT and the Inland Revenue taxes are fundamentally civil obligations and for the vast majority of taxpayers the criminal law is irrelevant. The Inland Revenue worked well in the past by involving the police whenever criminal activity involving a tiny minority of taxpayers was suspected. It did not need police-type powers. The Chartered Institute of Taxation believes that there are important public policy reasons for the administration of tax and the enforcement of criminal law being conducted by separate agencies and that changes to that will strike at the heart of the nature of the relationship between taxpayers and tax administrators.

The Chartered Institute of Taxation believes that the extra powers for HMRC should not be sought until a fully independent review, such as the one conducted some years ago by the late Lord Keith, is carried out. The view is echoed by the Institute of Chartered Accountants in England and Wales, that if any directional change is made it should be to level down the powers of HMRC to the civil Inland Revenue powers, provided—and this is an important proviso—that the police and agencies such as the Serious Organised Crime Agency have sufficient powers to tackle the important areas of fraud and other criminal activity in relation to tax matters. I emphasise that no one suggests that a full battery of powers should not exist for tax fraud, especially with regard to organised crime. That is why I have tabled Amendment No. 126—so that the powers of HMRC are not increased. The Minister may be mystified why I left in the Bill the first four paragraphs of Schedule 11, which grant more Police Act 1997 powers. I can say only that it mystified me, too, when I came to prepare my speaking notes—but since this is a probing amendment, I decided that the amendment could stand for the purposes of today’s debate.

This is the first legislative opportunity for the Government to make their case on new powers for HMRC. I hope that the Minister will deal with the rationale for overturning the underlying premise, which is that the payment of tax is fundamentally a civil obligation that should be matched with appropriate non-criminal powers. I am aware that the Government have also announced that the Finance Bill will include some more levelling-up powers, which increases the sense of dismay among those who believe that the HMRC and the Treasury are pressing ahead without a proper independent review and without meaningful consultation.

I have little or no hope that that the Minister will accept Amendment No. 126 or even an improved version of it. Therefore, as a fallback position, I have taken the suggestion of the Chartered Institute of Taxation that if additional powers such as those in Schedule 11 are granted, there should be proper independent oversight mechanisms in place. My Amendment No. 123 addresses that point, adding a new subsection (2) to Clause 75, giving the Secretary

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of State power to make arrangements for the effective public scrutiny of how HMRC uses the powers granted in Schedule 11.

The amendment is not specific about the nature of the public scrutiny; clearly, there are many options available. I would say only that it should have a proactive scrutiny process and not a reactive one, such as with the adjudicator arrangements with the Inland Revenue, which are directed at specific disputes or complaints. Parliament would obviously want to satisfy itself that the scrutiny arrangements were appropriate, which is why new subsection (4) involves the affirmative procedure, and it would also be important that the new powers in Schedule 11 were not brought into effect until the scrutiny arrangements were in place. New subsection (3) provides for that.

I hope that the Minister recognises that concerns are felt about the development of HMRC’s powers. This debate is rather odd in connection with the Serious Crime Bill but, since the Government have chosen this mechanism to introduce the new powers for the first time, we feel that we cannot let this part of the Bill pass without a proper debate. I beg to move.

Lord Burnett: I shall say one or two words about both amendments. I am sympathetic to Amendment No. 123 and I think that my party would be, because we think it important that we ensure that there is an appropriate level of scrutiny for the exercise of these powers.

The noble Baroness, Lady Noakes, is right to say that the criminal law is rarely invoked in tax matters, which are usually dealt with on a civil basis, largely because it is very difficult to find 12 good people and true who are sympathetic to the demands of HMRC. That is different in respect of Customs and Excise, with which there have been many criminal cases. Nevertheless, the Revenue must have a full armoury of powers to deal with tax fraud.

Can the Minister explain why the HMRC powers are being substantially increased? None of us has any sympathy for tax evaders because, as I said last night, the more that is evaded, the more is paid by others. However, when the Bill was passed that merged the Revenue with Customs, there was considerable debate about culture in the two organisations. The Revenue culture has always been one of compliance by consent, which sometimes could not have been said of Customs and Excise. I should be grateful to hear a little more about this from the Minister. We shall consider her comments before Report.

Lord Crickhowell: I support my noble friend on this issue. I read with concern the evidence sent to a number of us by the Chartered Institute of Taxation, which is expert on this subject—much more expert than I am, as is my noble friend. The institute accepts fully that tax fraud needs to be investigated and that surveillance techniques may be required, but it points to the difficulty that sometimes may arise for individuals in distinguishing between the protection of Revenue and criminal activity and strongly urges

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that there should be a form of external monitoring of HMRC to ensure that there is no abuse of what is potentially a very intrusive power.

Among the most remarkable bits of evidence obtained in January by the Treasury sub-committee in another place was the fact that at that time in the Inland Revenue there were 20,000 people with power of arrest. It was welcome to hear that that number was to be reduced to about 2,000. None the less, as the institute points out, the situation had been allowed to grow so that there were 10 times the number of people with power of arrest than are apparently needed, which supports the case for effective monitoring of these organisations so that such a situation is not allowed to develop in future. The institute points out, too, that there seems to be nothing in the Bill or Explanatory Notes that positively restricts HMRC’s use of surveillance techniques to criminal investigations.

These are very extensive powers. This is a hugely powerful and, by its nature, intrusive organisation, which intrudes into all our affairs, though usually for perfectly proper reasons. But surely there must be very strong monitoring of such powers. For that reason, I strongly support my noble friend’s amendment.

Baroness Carnegy of Lour: My noble friends have raised very important points and we shall all listen with a lot of interest to what the Minister says in response to these huge issues. I want to ask another of my rather annoying small questions. The first four paragraphs of Schedule 11 amend the Police Act 1997 to bring the Revenue into the drafting, which previously referred only to Customs. However, the Police Act 1997 is not a Scottish Act. Are amendments intended to the relevant Scottish Act, too? Perhaps they are elsewhere in the Bill—I may be wrong.

6 pm

Baroness Scotland of Asthal: I am happy to give the noble Baroness, Lady Anelay, a more comprehensive answer on these issues than perhaps I came ready to give. I see that the amendments are exploratory so that she can gain a fuller answer on the Government’s rationale. I hoped that I had partly satisfied her on Second Reading, but I am more than happy to assist the Committee at this stage as I think that it will help us as we go forward.


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