Commissioners for Revenue and Customs Bill

Public Bill Committee, 11 January 2005.

Standing Committee E

Commissioners for Revenue and Customs Bill

Dawn Primarolo (Labour, Bristol South)

I beg to move,

That—

(1) the Committee recommends that the programme order of the House [8th December 2004] should be amended by substituting ''18th January'' for ''13th January'';

(2) during proceedings on the Commissioners for Revenue and Customs Bill, in addition to its first meeting on Tuesday 11th January at 9.25 a.m., the Standing Committee shall meet on Tuesday 11th January at 2.30 p.m., on Thursday 13th January at 9.25 a.m. and on Tuesday 18th January at 9.25 a.m.;

(3) the proceedings shall be taken in the order shown above and shall (so far as not previously concluded) be brought to a conclusion at 11.25 a.m. on Tuesday 18th January:

Clauses 1 to 6; Schedule 1; Clauses 7 to 15; Schedule 2; Clauses 16 to 30; Schedule 3; Clauses 31 to 45; Schedule 4; Clauses 46 and 47; Schedule 5; Clauses 48 to 52; remaining proceedings on the Bill;

Good morning, Sir John. It is nice to see you in the Chair this morning. I am looking forward to your keeping us in order as we discuss this important Bill, which is the beginning of the process of merging Inland Revenue and Customs and Excise into a new department, Her Majesty's Revenue and Customs. First, I welcome the Hansard Reporters, the Clerks—who will advise the Committee—members of Her Majesty's Opposition and my colleagues to our consideration of the Bill.

On the programming motion, there have been extensive discussions between the Government and Opposition parties on our progress on the Bill, and that includes agreements on sittings. There are to be two sittings today and one on Thursday, and we are to conclude our considerations next Tuesday morning. I will do my very best to ensure that the Committee is fully informed of the Government's thinking on the Bill. As promised, draft regulations have been made available to all Committee members.

Perhaps I should say something, by way of introduction, on the Government amendments. They represent, for the most part, clarifications of or modest improvements to the Bill as introduced. I have been keen to ensure, through the early introduction of the Bill, that hon. Members have had the opportunity to consider its contents well before this scrutiny stage. That has meant that there are now some areas where the Bill needs to be improved. I have done my best to ensure that the Committee had advance notice of the amendments and an explanation of what they do.

As I have explained, the Government amendments fall into various groups. First, there are technical and consequential amendments on the establishment of Her Majesty's Revenue and Customs. Also, there are improvements to secure the operation of the new department—for example, to ensure that provisions are applied appropriately in Scotland—and amendments consequential on the establishment of the Revenue and Customs Prosecution Office, including the introduction of three clauses providing for the disclosure of information to the director of that office.

I will provide members of the Committee with as much detail as they require when I move the amendments, but I assure Members that none of the amendments introduce new concepts to the Bill, and none make any changes to the principles embodied in the clauses that would mean that they were different from what is set out in the explanatory notes. Both in my letter sent before the Christmas recess—dated, I think, 20 December—and in the letter that I sent to all members of the Committee yesterday, I provided the full details. I explained to hon. Members on Second Reading that such Government amendments would be necessary.

Now that I have made clear how the Government intend to improve the Bill, I hope that the Opposition will forgive us these amendments. However, I am sure that they will have something to say on the number of them, but such a number is inevitable given the scale of the task of bringing such huge pieces of legislation together. I look forward to our deliberations in Committee.

Andrew Tyrie (Conservative, Chichester)

First, may I welcome you to the Chair, Sir John? It is good to see you.

I was concerned about the scale of the amendments, even though, as the Minister suggested, they appear to be technical and consequential, and in their full impact relatively minor. I was depressed to find that so many amendments had been tabled at this late stage, for which the Minister has already apologised. After all, this is not exactly rushed legislation; it has been a gleam in the eye of a number of people for many years. People have been thinking about how to put it together for a long time, yet right at the last minute and even despite the clarity with which the Opposition put forward their preparedness to give the Government a fair wind on the principle of the Bill, we find them wanting to rush through amendments at a late stage. I deprecate that. It looks like poor drafting and management of the Bill. I regret that, but as the Minister has apologised I will not prolong this discussion.

David Laws (Liberal Democrat, Yeovil)

May I also welcome you to the Chair, Sir John? It is a pleasure to serve under you again. I also welcome the Paymaster General and the Economic Secretary to the Committee.

We had a good debate on the substantive issues in the Bill on Second Reading on 8 December. I suspect that our discussions in Committee will be far narrower. As we discussed, it is a fairly minimalist Bill, so there are no big issues of principle at stake in most clauses. There are some important issues, particularly that of the prosecuting authority, which I look forward to debating, and I look forward to being joined by my hon. Friend the Member for Torridge and West Devon (Mr. Burnett), who is an expert on some of these matters and will no doubt make an effective and useful contribution.

Dawn Primarolo (Labour, Bristol South)

Indeed.

Question put and agreed to.

John Butterfill (Conservative, Bournemouth West)

I remind the Committee that there is a money resolution for this Bill, and copies are available in the Room. I should also like to remind right hon. and hon. Members that adequate notice should be given of amendments. As a general rule, I do not intend to call any starred amendments that may be raised during an afternoon sitting of the Committee.

Clause 1 - The commissioners

Andrew Tyrie (Conservative, Chichester)

I want to use clause 1 to make only three points. You can rule me out of order on each one, Sir John, but I will be so brief that by the time you have got up I will have finished.

First, I want to commend the minimalism of the Bill and thank the Minister for delivering pretty much what she said she would deliver when we met to discuss it. We will not oppose the principle of the merger, as we made clear on Second Reading. Secondly, we have specific concerns about powers, confidentiality in particular, and the assessment of the overall benefits of the merger. We will need to discuss those points as the Bill goes along. Finally, we are blessed with an excellent report by the Treasury Committee. The Deputy Chairman is sitting behind me, and I commend him and that Committee for having produced a document that will enable us to scrutinise this Bill much better than would otherwise have been the case.

David Laws (Liberal Democrat, Yeovil)

The clause deals with the responsibilities of the commissioners in the new combined department. One issue that came out of Second Reading, which the Paymaster General may wish to comment on, was the question of their responsibilities to Ministers in the Treasury and whether the existing structure, where the new combined department will report to a number of different Ministers, is sensible in the long term. That issue was raised by the Chairman of the Treasury Sub-Committee in the debate on 8 December. The Paymaster General appeared to indicate that her mind was not entirely closed to developments in the Treasury and to consolidation of the accountability of the commissioners to one Minister, rather than two or three, which I understand to be the present situation. Will she comment on that?

Dawn Primarolo (Labour, Bristol South)

The hon. Member for Chichester (Mr. Tyrie) has laid out the parts of the Bill that he wishes to concentrate on. I will respond to those points when we reach the relevant clauses.

For clarity, we also provided the policy areas that the Economic Secretary and the Financial Secretary work on within that remit. If the hon. Member for Yeovil wishes to explore that further, I will be more than happy to do so when we come to clause 10—or to other clauses, if that is appropriate. There are amendments tabled to clause 10 about Treasury independence of direction, and how to meet the requirements for confidentiality while protecting taxpayers and discharging statutory responsibilities—I was going to say in a quasi-legal fashion, but actually to enforce the law. Other matters are also involved, such as what the relationship is with the Ministers on policy, and what the routes are for Parliament in ensuring that there is a Minister and a chairman who will be accountable to it, so that Parliament is properly involved.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.

Clause 2 - Officers of Revenue and Customs

Dawn Primarolo (Labour, Bristol South)

I beg to move amendment No. 5, in clause 2, page 2, line 4, at end insert—

'( ) Anything (including anything in relation to legal proceedings) begun by or in relation to one officer of Revenue and Customs may be continued by or in relation to another.'.

The amendment gives me an opportunity to demonstrate the type of technical amendment that is before the Committee. The amendment will clarify the legal position, not change it.

As the amendment is technical, it might help if I briefly explain the clause. It establishes a single work force for Her Majesty's Revenue and Customs. It provides for the commissioners of Revenue and Customs to appoint staff, who will be known as officers of Revenue and Customs. Officers will work under the direction of the commissioners, whether they are exercising a commissioner's function under clause 12 or one of the officer's initial functions under clause 5. Like the commissioners, officers will be civil servants.

The description of officers of Revenue and Customs replaces the previous descriptions of staff of the predecessor departments—for example, inspectors, collectors and receivers. Thus, I think that Committee members will welcome the amendment; what it does is fully in line with the modern approach to the designation of Inland Revenue staff, such as that taken by the tax law rewrite project—which I know Committee members are very familiar with. The amendment to clause 2 makes it clear that there is continuity for actions, including proceedings, that are begun by one officer of Revenue and Customs and continued by another. This minor and technical amendment applies provisions in existing legislation: section 1(3) of the Taxes Management Act 1970 and section 145(2) and (4) of the Customs and Excise Management Act 1979. It applies those requirements across Her Majesty's Revenue and Customs activities.

For example, if an officer in the process of routinely examining a taxpayer's records considered that there was a possibility that a criminal offence had been committed by that taxpayer, it would be highly unlikely that the initial officer would have the skills and experience to investigate such a case. Therefore, although the initial officer may well raise an assessment of tax due, they would refer the case to specially trained officers, who would conduct the investigation, relying on the work that had already been undertaken by the case officer, and who would have the authority to use the powers appropriate to such cases. Although the two Acts that I mentioned provide for that, for the sake of clarity the provision should be included in the Bill as well, so that it is absolutely clear that those sections move across. That is what the amendment provides for.

I hope that, with that explanation, the Committee will agree that this is a reasonable amendment. It is intended to ensure that when people read the Bill they will clearly understand the continuity that is laid out in other legislation. They will not have to go to the other two pieces of legislation to understand that point.

Amendment agreed to.

Clause 2, as amended, ordered to stand part of the Bill.

Clause 3 ordered to stand part of the Bill.

Clause 4 - Commissioners' initial functions

Andrew Tyrie (Conservative, Chichester)

I resisted the temptation to ask the Minister to read out clause 1(2) or clause 3(2) to the Committee—I certainly could not have managed to do so myself.

The one general point that I want to make at the beginning of this group of clauses is that because this is, to a large degree, a consolidating Bill—I am talking not only of this group of clauses, but more widely—or a tax law rewrite, it would be immensely helpful if we could have a derivations table for the legislation. We have had a clear briefing that the legislation is minimalist, that there is nothing of substance, that there is no fundamental change in powers and that it is purely mechanistic. The Minister has reiterated that today.

There was a meeting on 6 December between officials and interested parties—30 or 40 people who follow these things closely. The Government have listened to a number of their concerns in the Bill. That is important. However, at that meeting, officials were asked to relay to Ministers a request for a derivations table. As far as I am aware, we have not yet received that table. Is the Minister prepared to commit to producing one? I think that interested parties and those following the Bill carefully would find that table extremely valuable. It is the best test of the extent to which the Bill is minimalist.

David Laws (Liberal Democrat, Yeovil)

Clause 4(1) clearly sets out the areas in which the commissioners will have responsibility. It is divided into paragraphs (a), (b) and (c), which relate to existing areas of Inland Revenue responsibility, Customs and Excise responsibility and the management of tax credits. We accept that the Bill is minimalist and, to some extent, we welcome both that and the fact that there will be an opportunity to put together the two departments without dealing at this stage with some of the bigger issues about powers.

However, when we are setting out what the powers of the commissioners should be, there is a real issue about whether tax credits should be included in the new department. This is an opportunity to consider whether they should be included. I want to probe whether the area of tax credits, which many people feel is, in reality, more of a social security benefit, belongs in the new, merged department, which will have considerable responsibilities and a large number of staff and, as I understand it, will focus for its primary responsibility on closing the tax gap. That is different from much of the work that is involved in the administration of tax credits.

Without going beyond the bounds of the Bill, I think that there is a great deal of feeling in and beyond Parliament that tax credits may be in the wrong area. They should not be controlled by the Treasury, but are naturally part of the Department for Work and Pensions. Perhaps this moment, when we are thinking about what the new, merged department should consist of, is a good opportunity for us to think about whether we want clause 4(1)(c), which would give commissioners the responsibility for tax credits as well.

The Paymaster General may well say that it is premature to consider the organisation of the new, merged department. However, Sir John, you will no doubt have seen some of the speculation in the last couple of weeks about Government plans to restructure the Treasury after the general election—the so-called Birt plans, as referred to in a recent article. The article said that there are plans to strip down the Treasury after the election, take away its powers of public expenditure and transfer Treasury Ministers and others to the Cabinet Office under the existing Chancellor of the Duchy of Lancaster. So there is a real issue about whether the Government have plans for the future structure of the Treasury and whether those might, as the recent article in The Sunday Telegraph suggested—

John Butterfill (Conservative, Bournemouth West)

Order. I am perfectly happy for the hon. Gentleman to refer to this issue briefly but I hope that we will not be drawn into a debate on speculation about the future of the Treasury.

David Laws (Liberal Democrat, Yeovil)

I certainly would not want to get drawn into that debate and I am grateful for your guidance, Sir John. Obviously you appreciate that the issue is extremely relevant because if the Government plan to restructure the Treasury, possibly in a few months, while we are passing new legislation that would cut across those longer-term plans of the Government, and that would be damaging in terms of Government organisation. It would also be a waste of Parliament's time. I hope that the Paymaster General will be able to comment on that issue and shed some light on the stories about the longer-term intentions of the Government for the powers of the Treasury and the merged department.

Dawn Primarolo (Labour, Bristol South)

Two issues were raised. First, the hon. Member for Chichester asked about the derivations table. It is not appropriate for it to be part of the Bill. [Interruption.] I did not think that the hon. Gentleman meant that. I am glad to see him agreeing with that because it is not a matter for consideration. However, I can see no reason why we should not produce that table. We can produce it for the Committee. It could be part of the explanatory notes. That has been done before. Tax law rewrites established that process. I think that during the proceedings dealing with one Finance Bill I agreed that we would produce a table in the explanatory notes as an explanation for some clauses. I shall try and get that completed as quickly as possible so that Committee members have it for their reference, as will those outside the House, but it will not be part of the Bill. I do not think that the hon. Gentleman was actually asking for that.

Andrew Tyrie (Conservative, Chichester)

I thank the Paymaster General for her co-operation on that point. I know that there are many people outside this Room who will be delighted to see that document.

Dawn Primarolo (Labour, Bristol South)

I am glad to hear that. I am sorry that I did not provide it before so that the hon. Gentleman did not have to ask.

On the question raised by the hon. Member for Yeovil, I want to make it clear that the O'Donnell review considered the issue of tax credits and their importance within the Revenue department, and thus the new merged department as an integral part of the tax system. It is a matter of Government policy that tax credits are dealt with by the Revenue department.

The hon. Gentleman has expressed his agreement with the idea that the Government should use a minimalist Bill to begin the merger. In considering the new department, it was clear that tax credits should be clearly included in its responsibilities. If at some later stage, in decades to come, another Government decide that they do not want tax credits to be dealt with by the new merged department, primary legislation will be required to move it, which is right and proper, as I have stressed on Second Reading and at the beginning of today's proceedings.

We have taken the two departments and brought them together in a machinery of Government Bill to ensure that they can continue their functions and that we can begin the process of considering the duplications and ensuring efficiency. I say to the hon. Gentleman that if changing that is the policy of his party, primary legislation would be required. That is absolutely crucial in order to give security and clarity to our staff and the commissioners concerning what the new department is expected to do.

David Laws (Liberal Democrat, Yeovil)

I am grateful to the Paymaster General for giving way. We are dealing with a serious point, and to put it on the record, would she explain what the reasons are for keeping the administration of tax credits in the department for the foreseeable future rather than allowing them to be dealt with by the Department for Work and Pensions?

Dawn Primarolo (Labour, Bristol South)

I shall look up the references in the O'Donnell review and give them to the hon. Gentleman during the next sitting so that he can re-read the published review of why tax credits are dealt with by the Revenue and why it is Government policy that they should remain there.

I do not think that it is appropriate—you may possibly stop me, Sir John—to rehearse the policy and political reasons for the existence of tax credits: the importance of their being within the tax system, the removal of the stigma, the encouragement to work and the contributions to child care and to children as part of an anti-poverty strategy, which is central to the functions that the Treasury has outlined and that the new department will continue to administer. I know that the hon. Gentleman has a different policy review in mind but that is not a subject with which I feel I should engage more directly today. I would just say to him that one should be careful about what one reads in newspapers.

Question put and agreed to.

Clause 4 ordered to stand part of the Bill.

Clause 5 - Officers' initial functions

Andrew Tyrie (Conservative, Chichester)

I beg to move amendment No. 78, in clause 5, page 3, line 16, at end add—

'(4) Insofar as an officer of Revenue and Customs is exercising a function which relates to Value Added Tax, subsection (1) shall not apply.'.

I may, as I mentioned earlier, and with your permission, Sir John, refer in passing to one or two other clauses; of course I should not reiterate those points on stand part. The clauses in question are of course closely interlinked. They are outwardly mild-looking clauses, dealing with Customs and Revenue powers. My amendment is, as I am sure the Minister knows, a probing amendment. I shall not press it to a vote. I want to test the Minister's commitment to a thoroughgoing review of the new HMRC body's powers.

It is important to have the current position clear in one's mind. Clauses 5 and 6, taken together, limit the extent of the new HMRC officials' powers over revenue matters. The provisions are intended to prevent revenue matters from being made subject to excessive powers such as those that the Customs can at present exercise. For example, the extensive Customs powers to collect VAT, by which its officers can turn up with a warrant, raid a place and smash down the door to get a document, would not be available for a standard income tax assessment. It is important that we maintain that distinction.

That discrepancy in powers can be illustrated in many ways. It is worth comparing for a moment section 20 of the Taxes Management Act 1970—which enables the Inland Revenue to go to commissioners for a warrant to obtain a document—with what Customs does, which is to exercise a much more draconian power on the back of a police-style search-warrant. Clauses 5 and 6 reflect the concerns that have been expressed by many that the Revenue should not have those much more heavy-handed Customs powers—the Treasury Committee report and the written evidence that was given to the Committee provide elaboration on that topic.

In quite a clever way—I commend the drafting—clause 6(4) provides that former Inland Revenue matters cannot be dealt with under Customs powers; at least, that is what I take that subsection to mean. My amendment investigates what happens if things are the other way round. What about circumstances—and this is just possible—in which the Revenue may have more powers than the Customs? What restriction is there on Customs using Revenue powers? Are we sure whether we have that stable door bolted before the Bill is passed? Why is there no parallel restriction on Customs officers using Revenue powers?

The amendment that I have tabled is intended to provide assurance of that kind only with respect to VAT. I could have drafted it more widely, but I think that it serves its purpose in making the points that I want to make. I should be grateful for an explicit assurance, if this is the view being taken, that Customs already has all the powers enjoyed by the Inland Revenue. Even with that reassurance, we should be left with a very uneven distribution of powers within the new body, HMRC. That is inevitable, stemming from the different cultures of the two bodies. We have discussed that many times: Customs has a quasi-policing inheritance—the cutlasses on the wall have been mentioned in the House—whereas the Inland Revenue has a gentler established approach to getting the money in from, as I think I put it on the Floor the House recently, reluctant but largely honest taxpayers.

My second question is: what plans do the Government have to harmonise that discrepancy? I gather that the Government are considering a consultation document that may come out in the next few weeks. I should be grateful if the Minister would say more about that. As part of that process, are the Government going to commit to a full consultation—that is, one in which ample opportunity is given to all parties to offer their views?

If the Government are committed to a full and meaningful consultation, is there not a case for a more thoroughgoing review of the whole issue? You probably remember well, Sir John, the Keith Committee review of 20 years ago—I am not alluding to your age, but to your political experience. Some 20 years ago Lord Keith looked into the issue and came up with a number of balanced and interesting recommendations. He did a good job, as everyone agreed. For example, he decriminalised many VAT offences. I believe that those who sent in late VAT returns prior to Keith thereby became criminals. That was a crazy situation and there needed to be an adjustment, so such acts were made civil offences. The world has moved on a lot in the 20 years since Keith and we could probably do with another thoroughgoing review.

Let me give four reasons for that change. The first is the electronic revolution. When tax authorities have to consult eBay to collect revenue, that reflects a new reality in the tax collection world. The second reason why we may need to consider a review is the emergence of Europe in tax matters and the intrusion of the European Court of Justice in our affairs. Whatever the Government's formal position on Europe not having any influence on tax, the truth is that it does—do not worry, Sir John; I will not elaborate on that issue, but Europe is a factor.

Thirdly, there is increasing oversight of customs practices by the European Court of Human Rights. The Court has recently reviewed the Hansard procedure, whereby those who own up will be all right. However, some people have found themselves being Hansarded several times over, which is what happened to Lester Piggott and Ken Dodd. I think that Piggott was Hansarded three times, after which the decision to prosecute was taken. The Hansard procedure has been given a brush-up in the light of the ECHR review, but that brush-up was an ad hoc, piecemeal improvement. I suggest that a more thoroughgoing review might be necessary. The fourth reason is that recent massive Finance Acts have moved us into another physical dimension, owing to the sheer volume of legislation. The size of those Acts probably justifies looking at the extent to which, bit by bit, they may have altered the relevant powers.

My final question is: will the Minister agree to a full, Keith-style review? Will she set out the principles that would lie behind any change in, or harmonisation of the powers that she might consider? I could do that for her now—clearly, one would allow a department to take a power only if it was deemed necessary, if its application was not onerous for taxpayers and if it was subject to appropriate checks and balances. I would be interested to hear the Minister's view on that.

I have a fifth question: what is the Minister's time scale for harmonisation, bearing in mind that any changes will be in primary legislation and there will be quite a lot of that to amend? The existing powers are, I believe, in the Taxes Management Act 1970, the Customs and Excise Management Act 1979, and the Value Added Tax Act 1983. There is of course also some landfill tax and environmental legislation.

In looking at this area, we are dealing with something that is of great concern to the outside community. I have some advice here from the Institute of Chartered Accountants of Scotland, which has picked up on a point in a draft Government document on the review of powers. The Government statement said that

''any officer of HMRC, whether formerly an officer of Customs and Excise or of the Revenue, can use those powers that exist in relation to the specific tax they are looking into. If an officer of HMRC obtains information that is also relevant to other areas of HMRC they may pass on that information for immediate and future follow-up action.''

The great concern of ICAS is that this statement may lead to the transfer of powers resulting in an extension by stealth to the powers that each department currently possesses. In other words, an officer could say, ''While you are in there, would you take a look to see if you can find X or Y?'' We would then find that these powers are being used in much more extensive ways than were ever initially intended. We do need reassurance on that issue. A thoroughgoing review, such as I am calling for, is probably the best way to provide that reassurance and I hope the Minister can help on that point.

David Laws (Liberal Democrat, Yeovil)

Briefly, I want to agree with many of the general points about powers that the hon. Member for Chichester has raised under amendment No. 78 to clause 5. I really have only two brief points to add. The first concerns the serious point about the consultation document which came up as a reference on Second Reading. We need to have as much information as possible about when that will emerge, and whether it will be before the end of Committee hearings. Secondly, on a more detailed point, I want to ask the Paymaster General for clarification on clause 5(2) and the definitions under paragraphs (d), (e), (f) and (g). May we have clarification of the precise distinction between paragraphs (d) and (e), and (f) and (g) in subsection (2), and whether it would be possible to consolidate these definitions in some way, so as to reduce the burden of things? Surely it is not necessary to list all of these particular roles in this way?

Dawn Primarolo (Labour, Bristol South)

I assumed on seeing amendment No. 78 that the hon. Member for Chichester was tabling a probing amendment. I could not believe that he would actually remove powers that would enable the effective and efficient collection of VAT. So I am going to respond to the points he was making with regard to powers, rather than the substance of the amendment, unless he particularly presses me. The substance of the amendment basically removes the ability to enforce and collect VAT. He referred to those very few taxpayers who, none the less, require consistent encouragement and persistence from Customs in order to pay the VAT that is due to the Revenue departments. So I shall concentrate on the points made by both hon. Gentlemen about the principle of powers stretching across the clauses. The hon. Member for Chichester identified why we need to read clauses 5 and 6 together. I start with the first position.

Hundreds of different powers apply across the many regimes currently administered by the Inland Revenue and Her Majesty's Customs and Excise. I take the word power to mean the right of the department concerned to take discretionary action in respect of an individual taxpayer in order to monitor and assist and, when necessary, to enforce compliance with the law. It is almost always capable of being backed by sanctions.

I want to deal with all the questions on consultation and its scope in one go. First, I shall deal with the specific questions about the restrictions on Revenue and Customs powers as they are transferred to the new department. The hon. Gentleman asked about a point that he said had been raised in their submission by the Scottish accountants, which was on information sharing between departments. That already goes on. I understand that such information has been collected at information gateways for some time. That adds to the complexity of trying to approach a difficult series of questions.

The hon. Gentleman said that Customs uses its more extensive powers to enforce Customs and Excise-based tax, but that sharing the information could result in what might be called information creep. However, that already happens; and in order to ensure that the departments fulfil the objective of protecting the Revenue base through the merger, which I know is of concern to the hon. Gentleman, that has to remain the case.

Andrew Tyrie (Conservative, Chichester)

There is a huge difference between the staff of two independent and separately run departments deciding to exchange a piece of information—having thought about it carefully and perhaps having consulted a superior—and two people sitting side by side, cheek by jowl or on opposite sides of the corridor having a chat each afternoon about a particular client.

Dawn Primarolo (Labour, Bristol South)

I do not know whether the hon. Gentleman has noticed, but those teams have been working side by side for a considerable time, both under the previous Government and under the closer working strategy. It is not new.

The hon. Gentleman asked whether there was a parallel provision—he said that the Bill appeared to restrict Customs powers only to Customs taxes, but that it seemed to work differently for the Inland Revenue. [Interruption.]

John Butterfill (Conservative, Bournemouth West)

Order. I remind hon. Members that long and extensive conversations in Committee are not permitted. Brief conversations on matters before the Committee are permitted. I should be grateful if right hon. and hon. Members recognised that.

Dawn Primarolo (Labour, Bristol South)

Thank you, Sir John.

As the hon. Member for Chichester said, clauses 5 and 6 are closely related. A parallel arrangement for the Inland Revenue can be found in clause 6(2), which states that the Revenue has a new transfer ability insofar as it is exercised in relation to Revenue functions. That brings me directly to the question of consultation.

I agree entirely with the hon. Gentleman that it is about checks and balances. The consultation will be a large exercise, given the overriding requirement of the new department to protect the Revenue base. It will cover the appropriateness of existing powers regimes, including the option of the abolition of the risk assistance, the name for the Customs powers that the hon. Gentleman was referring to. It will look at the benefits of greater consistency of approach across taxes and duties in respect of requirements to provide information, interest, surcharge regimes for late payment, penalties for non-compliance and rights of appeal. The hon. Gentleman alluded to that when he was comparing the level of authority required in some of the Customs legislation for use of some of the powers with that required in the Inland Revenue. It works in the other direction as well—there are some Revenue powers where Customs powers require a higher authority. It will go to the heart of the question that the hon. Gentleman is also raising: what are the modern powers and practices that the new department—I think the hon. Gentleman said ''in this changed world''—might need to allow it to build on the considerable success to date and deliver its public service agreement targets? What might it need to ensure the taxpayers'—on Second Reading I said ''experience'', which caused some hilarity in the Chamber, so let me rephrase it—contact with the department is efficient for the taxpayer as well? Rather than having to go to lots of different places, if the taxpayer is dealing with one department, the taxpayer should be able to tell it certain types of information once, to ensure that we have efficient services with improved compliance.

In addition, the hon. Gentleman raised a question, as an example of the Hansard approach, about serious fraud. The revenue departments are currently reviewing their civil procedures and working practices in cases of suspected serious evasion. This may involve—I will have to wait and see what the review says—changes and new procedure under Her Majesty's Revenue and Customs. It is important to say clearly that the department will be seeking the views of all those that the department regularly consults with, and who will have views on these matters.

I am sure that the hon. Gentleman and Members of this Committee can see that that is a vast task. The process is that a consultation document will hopefully be issued by the end of the month—that is my intention and what we are working towards.

As the Minister, I am hoping to start the legislative process for the required changes in the Finance Bill 2006. It is difficult to say whether it will all be dealt with in that Bill, whether that is the appropriate vehicle, or how large the exercise is. That may need to be revisited. I am trying to emphasise that we are going to try to be clear, that there will be proper consultation and that this matter should not drift for a considerable time. However, we need to have some causal principles and everybody—Members of this House, Ministers and the bodies that we shall be consulting—needs to understand the direction that we intend to take. We shall use as a model—this is a compliment to the previous Government—the very successful model that they used for consultation when introducing self-assessment. It works extremely well, is focused and moves us forward.

I hope that that supplies the information that the hon. Gentleman was seeking with regard to the intentions. I have clarified the check in relation to the Inland Revenue and I have made it clear that there is already information sharing between the two departments, and has been for some time. He referred to the harmonisation of powers. I call them the appropriate powers. I think that we are basically talking about the same thing. However, that will be underpinned by the fact that in some respects we have quite different taxes operating. VAT is very different from corporation tax or national insurance. None the less, there needs to be some understanding so that people are clear on the current process.

The last point was that raised by the hon. Member for Yeovil in connection with the drafting. The Bill converts all of the terms used in current legislation to ''officer of Revenue and Customs'', as I said earlier. We are attempting to simplify things. All the terms are listed to ensure that all references from different legislation over many years are picked up. That returns to the point that I made on the programme motion: it is complex ensuring that all the legislation dovetails in. That is the answer to the hon. Gentleman's question.

I hope that the hon. Member for Chichester will not press his amendment to the vote. It would be a very expensive commitment by the Opposition. I am not going to be mischievous, because I know that it was only a probing amendment. I hope that I have dealt with all the issues. He made a point about having a Keith-type commission. I hope that he can see that the process is to deal with all the issues, but in a certain time frame and with openness. That is a good way to proceed, as he said, in a modern world—rather than using a process that worked 20 years ago.

Andrew Tyrie (Conservative, Chichester)

We have travelled some distance. The Minister has managed to be mischievous and reasonable at the same time on one or two occasions. She has taken us some distance, but she has fallen short of explaining what—to use her phrase—''proper consultation'' is. It would be helpful to know. She says that we will use the precedent of self-assessment. Although self-assessment was a big process, it was far less fundamental and far less sensitive—although it is sensitive in itself—than the issues that would be raised by a fundamental change in the powers of the institutions. There is nothing that upsets our constituents and businesses more than the heavy-handed use of those powers, or worse, their occasional abuse or the act of apparently overstepping them. On the Revenue side, the commissioners spend quite a deal of time policing that and, as we know, there is a tribunal system on the Customs side. Again, those are different approaches to bringing the checks and balances to the whole system.

I am a little perturbed. The Minister says that she will do this in the Finance Bill 2006. That is a relatively short time frame and, who knows, perhaps I will be presenting the Finance Bill 2006 and she can stand here and have a go at what I propose, which would be putting somebody in charge of a thoroughgoing review who is demonstrably independent and who commands widespread respect in the business community and among those who are affected by the exercise of those powers.

I do not expect the Minister to make a decision on the spot because I have not discussed the matter with her beforehand, but I ask her to give me some reassurance that she will go away and think about whether it might be worth while finding somebody of that type to put together a small committee with a relatively tight time frame to do exactly what I am describing: to go through the issues that we have both agreed we need to examine, to report back, probably to go through some quick scrutiny by the Treasury committee and then to bring the matter before us as legislation that amends the four or five major Acts to which I have referred.

Dawn Primarolo (Labour, Bristol South)

The self-assessment process saw a consultation document, a response to it, a committee drawn from the representative bodies set up to consider the proposals for the new department, draft legislation produced, its consideration by that committee and its presentation to Parliament. It was a pre-pre-legislative process. There are smaller examples of that: the review of intellectual property rights and the consideration of the large tax changes we made, for example. The only point missing is that which the hon. Gentleman made, when he asked whether we should appoint someone specifically. I have not got so far as to determine who would be responsible. I will consider it, but I envisaged the process as this Committee expressing its view and, if the Government did not quite agree, the Government being accountable. When the legislation came before Parliament it would be up to us to explain why we had chosen the drafting that we had. This is not a particularly huge issue. I will consider it and write to the hon. Gentleman when I have taken a view. It is not that interesting. I can say, however, that the appointee will not be a Member of the House.

Andrew Tyrie (Conservative, Chichester)

I am very grateful for that answer, and it sounds to me as though I have got somewhere between half and a whole loaf. In this game, you quit while you're ahead. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.

Clause 6 ordered to stand part of the Bill.

Schedule 1 agreed to.

Clause 7 - Power to transfer functions

Michael Fallon (Conservative, Sevenoaks)

I am grateful for the chance to speak to this clause. It gives me more concern than any other. The power to transfer functions within the new department is almost a Bill within a Bill. The Paymaster General describes the approach of this two-stage legislation as minimalist. With a 40-page Bill and a 60-page catalogue of new amendments before the Bill has even started, I shudder to think what the maximalist approach would be. Leaving that aside, she says that a major Bill will follow. However, before that major Bill follows or further clauses are inserted in the Finance Bill, this clause has the effect of a licence, allowing Ministers to transfer powers willy-nilly under the Ministers of the Crown Act 1975. There has been widespread concern about that, expressed on Second Reading and in my Committee. I draw this Committee's attention to our recommendation in the report that I had the honour to Chair, to which reference has been made. We said that

''we are concerned that the powers that the new department needs to discharge its functions should be subject to proper parliamentary scrutiny.''

I shall return to that point.

The Opposition are not alone in that concern. The Public and Commercial Services Union has also written to me and, I suspect, to other members of the Committee to say that it is concerned about the strength of the clause. It would like the entire clause to be deleted. If it is not deleted, the PCS would like to ensure that the transfer of any functions in the future is subject to full debate in both Houses, ideally through primary legislation. That is the issue: whether the clause should be considered in isolation.

Let me run through the various concerns. First, the clause appears to treat commissioners and their officials almost as if they were Ministers of the Crown. That, presumably, is not and could not be the case with existing Revenue or Customs board members or their staff. I am therefore bound to ask the Paymaster General why this power is being taken now when it was not considered necessary back in 1975. After all, we are constantly told that this is a modest Bill.

Secondly, it seems that we are being asked to approve the transfer power before we are clear about exactly what powers will be involved. I believe that the Paymaster General told us this morning that the consultation on the powers for stage 2 will not now be available until the end of January. It is unfortunate that we are being asked to approve the clause and to conclude our deliberations in Committee before the consultation document is available and before we know what powers may be transferred back and forward.

Thirdly, the general nature of the power makes a mockery of the Paymaster General's assurance on Second Reading, when she said:

''The Bill achieves that''—

that is, not changing the purpose of the power—

''by ring-fencing powers to prevent their inadvertent extension within HMRC.''—[Official Report, 8 December 2004; Vol. 428, c. 1175.]

However, clause 7(3)(b)(i) states that when the power is transferred:

''An Order in Council . . . may''—

not ''shall''—

''restrict or prohibit the exercise of specified powers in relation to that function''.

Hard though I may try, I cannot reconcile the looseness of ''may restrict or prohibit'' with the Paymaster General's assurance that she is ring-fencing the power.

Fourthly and finally, my concern is that the orders made to transfer the various functions will not, as others have wanted and as the Treasury Committee recommended, be subject to full parliamentary debate, because—I hope that the Paymaster General will correct me if I am wrong—the statutory instruments under the Ministers of the Crown Act 1975 are subject only to the negative procedure. Therefore, when an important power is transferred, it will very likely be transferred without the full parliamentary debate that it warrants.

The clause ranges too wide and gives rise to serious concerns that the Paymaster General should now address.

David Laws (Liberal Democrat, Yeovil)

I very much support the comments made by the hon. Member for Sevenoaks (Mr. Fallon) on clause 7. I hope that the Paymaster General will have a convincing explanation for the clause, or will reconsider whether it is appropriate. She will know that others outside this place have expressed concerns about the clause, including the PCS, to whose representations the hon. Member for Sevenoaks referred.

Clause 7 clearly enables the new Revenue department's functions, other than revenue or tax credit functions, to be transferred to a ministerial Department and for any such Department's functions to be transferred to the HMRC by, as the hon. Gentleman said, Order in Council, rather than primary legislation.

I do not want to take us back to our earlier debate about Lord Birt's proposals for reorganising the Treasury after the next general election, and I am suspicious about whether the Paymaster General would allow extensive reorganisation. None the less, the list of the Inland Revenue's existing functions and responsibilities on pages 26 and 27 of schedule 1 is quite long, with 31 items in total. I may be missing something, but page 3 of the explanatory notes indicates that it is the revenue or tax credit functions that are ring-fenced in existing legislation and which would therefore need primary legislation to change them.

It is fairly clear what the tax credit functions are, and the revenue functions are defined at the bottom of page 3 as relating to

''taxes, duties and national insurance contributions''.

Unless I am missing something, however, that leaves out a considerable number of the Inland Revenue's existing responsibilities. I tried to count how many of the 31 items are covered by the ring-fencing referred to in the explanatory notes, and I would say that more than half are not. It is a long list, going from child benefit and child trust funds right down to more contentious alleged duties such as stamp duty land tax and responsibilities for statutory pay issues.

I would therefore like the Paymaster General not only to respond to our other points about clause 7 and to explain the justification for the clause, but to state explicitly—either today or in a letter to the Committee—which of the Inland Revenue's existing responsibilities, including those listed on pages 26 and 27, can be transferred without primary legislation.

As the hon. Member for Sevenoaks said, it is unfortunate that we are dealing with something of this significance without understanding more about the Government's intentions in respect of the powers involved. We will not get the consultation paper on the issue until quite a lot later in January, if then. It would, therefore, be sensible to defer these issues to a later date.

Dawn Primarolo (Labour, Bristol South)

Both hon. Members are under a misapprehension about what can and cannot be transferred in or out of the department of Her Majesty's Revenue and Customs. It would therefore help to explain what other Departments do, and to explain that this is a standardisation to reflect that practice, that it works perfectly well and that nobody has complained. I have been in the House since 1987, and there have been different machineries and Government changes, and such powers have been used.

The arrangements for parliamentary scrutiny of transfers into or out of Her Majesty's Revenue and Customs will be no less rigorous than those that already exist for transfers between other Departments. The Ministers of the Crown Act 1975 applies to a transfer by Order in Council, and the hon. Member for Sevenoaks is right that such a provision would be subject to the negative procedure. Those arrangements already work for ministerial Departments and have done so successfully for a long time. However, the Bill provides the additional protection of a ring fence for Her Majesty's Revenue and Customs on all revenue and tax-credit functions.

So, there can be no transfer of anything connected with either tax credits or taxation in any shape or form from the new department by an Order in Council. The Government are merely putting in place the arrangements that work for other ministerial Departments. That means that the transfer of a function—for example, the collection of student loans, which the Inland Revenue collects on behalf of the Department for Education and Skills—is possible. A function could go in and out. The transfer of taxes is not possible. They are the core functions of the Department and are subject to a restriction.

Let us be absolutely clear, because the department has a crucial function. Any transfer of anything to do with tax and its associated powers, or tax credits and national insurance, would require funding legislation, not an Order in Council. A power cannot be transferred under the provision without the associated function for which that power is bestowed. I want to keep repeating that point because it is a cause of misunderstanding. People think that the Departments will be broken up and that tax functions will disappear somewhere else or that there is some other agenda—the hon. Member for Yeovil keeps referring to that. Her Majesty's Revenue and Customs will have responsibility for revenue, tax credits and national insurance and those responsibilities cannot be transferred under the clause.

David Laws (Liberal Democrat, Yeovil)

Will the right hon. Lady give way?

Dawn Primarolo (Labour, Bristol South)

Let me finish my point because it is very important. I will consider the hon. Gentleman's example. He does not want tax credits to be in the remit of the new department. If ever he thought that he might want to implement that, he would require primary legislation. If he decided that some other function needed to come into the remit of the new Her Majesty's Revenue and Customs that was not connected with the tax base, but that he thought would be sensibly administered by the department as an agency for another Department because it could do it efficiently—I cannot think of such an example—that could be done by an Order in Council.

That restriction maintains the integrity of the tax system. It keeps the administration of those functions at arm's length from Ministers as those functions, and the powers that attach to them, cannot be transferred.

In the case of other functions, other ministerial Departments already exercise powers intended to facilitate, for example, criminal investigations. Those Departments exercise those powers effectively and responsibly. The arrangements for parliamentary scrutiny of any future transfer are, with the exceptions that I have tried to explain, exactly the same as those that apply to transfers between ministerial Departments, subject to the additional protection for revenue functions. Those arrangements work effectively. Nobody, including PCS, has ever raised any complaints about the sensible way in which transfers between ministerial Departments operate.

I am trying to be clear. I understand clearly why it is important for PCS, the other unions and the staff in the two departments that are soon to be the new department to be clear about the Government's intention. I understand their fear but I am trying to make it clear that, while understandable, it does not apply. Those arrangements already work for ministerial Departments and have done so for a long time. However, the Bill provides the additional protection of a ring fence for Her Majesty's Revenue and Customs department on all revenue and tax-credit functions.

So there can be no transfer of anything connected with either tax credits or taxation in any shape or form from the new department by an Order in Council. The Government are merely putting in place the arrangements that work for other ministerial Departments. That means that the transfer of a function—for example, the collection of student loans, carried out by the Inland Revenue on behalf of the Department for Education and Skills—is possible. A function could go in and out. The transfer of taxes is not possible. They are the core functions of the department and are subject to a restriction.

Let us be absolutely clear, because the department has a crucial function. Any transfer of anything to do with tax and its associated powers, or tax credits and national insurance, would require funding legislation, not an Order in Council. A power cannot be transferred under the provision without the associated function for which that power is bestowed. I want to keep repeating that point because it has caused misunderstanding. People think that the departments will be broken up and that tax functions will disappear somewhere else, or that there is some other agenda; the hon. Member for Yeovil keeps referring to that. Her Majesty's Revenue and Customs will have responsibility for revenue, tax credits and national insurance and those responsibilities cannot be transferred under the clause.

David Laws (Liberal Democrat, Yeovil)

Will the Paymaster General give way?

Dawn Primarolo (Labour, Bristol South)

Let me finish my point because it is very important. I will consider the hon. Gentleman's example. He does not want tax credits to be in the remit of the new department. If ever he thought that he might want to implement that, he would require primary legislation. If he decided that some other function needed to come into the remit of the new HMRC that was not connected with the tax base but which he thought would be sensibly administered by the department as an agency for another Department because it could do it efficiently—I cannot think of such an example—that could be done by an Order in Council.

That restriction maintains the integrity of the tax system. It keeps the administration of those functions at an arm's length from Ministers, as those functions, and the powers that attach to them, cannot be transferred.

In the case of other functions, other ministerial Departments already exercise powers intended to facilitate, for example, criminal investigations. Those Departments exercise those powers effectively and responsibly. The arrangements for parliamentary scrutiny of any future transfer are, with the exceptions that I have so clearly tried to explain, exactly the same as those that apply to transfers between ministerial Departments, subject to the additional protection for revenue functions. Those arrangements work effectively. Nobody, including PCS, has ever raised any complaints about the sensible way in which transfers between ministerial Departments operate.

I am trying to be clear. I understand why it is important for PCS, the other unions and the staff in the two departments that are soon to form the new department to be clear about the Government's intention. I understand their fear but am trying to make it clear that, while understandable, it does not apply.

As to the powers to restrict functions, once again, revenue functions cannot be transferred. Beyond that, we would need to consider whether transferring functions would need to be restricted in another way.

David Laws (Liberal Democrat, Yeovil)

Could the Paymaster General give more insight into what makes one item in an area of responsibility a ring-fenced item whereas another is not? For example, will the child tax credit effectively be ring-fenced, in that primary legislation would be needed to transfer it, whereas child benefit and child trust funds will not be?

Dawn Primarolo (Labour, Bristol South)

The hon. Gentleman is absolutely right with regard to tax credits, which cannot be transferred without primary legislation. He makes an interesting and important point about child benefit or national minimum wage enforcement.

David Laws (Liberal Democrat, Yeovil)

The trust fund?

Dawn Primarolo (Labour, Bristol South)

The trust fund is associated tax and part of the provision of the department.

David Laws (Liberal Democrat, Yeovil)

Will the right hon. Lady give way?

Dawn Primarolo (Labour, Bristol South)

If I can answer the hon. Gentleman's first question, I will be more than happy to give way and let him ask another one.

There are some functions—I would hesitate to call them minor—that are ancillary to revenue functions, particularly the national insurance fund. However, I want to check; I feel that I need a little more time to ensure that I can give a clear answer. My absolute intention was only to put the department on a par with the functions of all other Departments and to consider anything that it was doing outside what we might call its core responsibilities.

David Laws (Liberal Democrat, Yeovil)

I am grateful to the Paymaster General for being so patient. She seemed to indicate a moment ago that child trust funds would be one of the ring-fenced functions that would require primary legislation for transfer, which was not my assumption. Will she clarify whether that is the case?

Dawn Primarolo (Labour, Bristol South)

On the hon. Gentleman's other points, stamp duty, stamp duty land tax and stamp duty reserve tax cannot be removed. I said that the child trust fund could not be removed, but he pressed me. The child trust fund is not part of the reserve on tax, whereas tax credits are. Again, I would be grateful if the hon. Gentleman allowed me to come back to him, because those points are important. Of course I will make my answer available to all members of the Committee.

I want to come to the heart of the concerns. Could the department be broken up and is that the intention? Reference keeps being made to that, but it is not the case. The hon. Member for Sevenoaks has rightly made it clear, both in the Treasury Select Committee and in this Committee, that the department needs to focus on the core functions identified in the Bill and that there is a need for protection. However, from time to time there are changes to the machinery of government. All the proposals allow is for those not associated with tax to be undertaken.

I have no knowledge of any changes in the pipeline and would like in concluding to make it absolutely clear to those who work in the two departments that there is no hidden agenda. The Bill does exactly what it says it attempts to do. It does not set the foundations for a future action or a future agenda that is not being spelt out. The Bill makes sensible change where appropriate, transfers functions and flags up the need for change of discretionary powers, where there is agreement by everybody at a staged process. I hope that on that basis, and with that clarification, the hon. Member for Sevenoaks will not press his amendment. If he does, I will have to ask my hon. Friends to oppose it.

John Butterfill (Conservative, Bournemouth West)

Order. There is no amendment to press. The amendment was not called, and was dealt with by the debate on clause stand part.

Question put and agreed to.

Clause 7 ordered to stand part of the Bill.

Clause 8 ordered to stand part of the Bill.

Clause 9 ordered to stand part of the Bill.

Clause 10 - Treasury directions

Michael Fallon (Conservative, Sevenoaks)

I beg to move amendment No. 2, in clause 10, page 5, line 20, leave out 'of a general nature'.

John Butterfill (Conservative, Bournemouth West)

With this it will be convenient to discuss amendment No. 3, in clause 10, page 5, line 20, at end add

'and a copy of any such direction shall be placed in the Library of each House.'.

Michael Fallon (Conservative, Sevenoaks)

Amendment No. 2 is a probing amendment. Amendment No. 3, which has been grouped with it, is perhaps less so, but I would like to hear the Paymaster General's response.

I raised this point briefly on Second Reading, because I was concerned that the clause was too wide. It seemed to me that the distinction that the Paymaster General sought to make between directions of a strategic character and directions that might interfere or seek to micro-manage day-to-day or operational issues within the Department, which is a perfectly fair distinction, was not covered by the clause.

The clause does not refer to directions of a strategic nature, but simply to directions of a general nature. I am concerned about that. The Paymaster General said that the reason that she wanted the power to issue directions of a general nature was first that she may want to direct strategy at some stage, which is an issue in itself. Secondly, she said that she wanted to be able to use the direction to call the department to account for the overall effect of the actions that it had taken. I do not actually think that that has anything to do with issuing directions. I think that it is a function of ministerial or parliamentary accountability, which can be—and probably is—covered in other particular ways.

The difficulty is that when Ministers say that they will deal with strategy and that they will not interfere with day-to-day operations, in the end it is always up to Ministers to determine exactly where that dividing line should fall. The inclusion of the phrase ''of a general nature'' does not help us to draw the distinction that the Paymaster General wishes to draw between directions of a strategic nature and those that might seek to interfere with the day-to-day operation of the Department.

Amendment No. 3 will, I hope, commend itself to the Paymaster General and to both sides of the Committee. If such directions are to be given—whether they are to be ''general'', as in the Paymaster General's wording, or strategic, as I think she intends—it is important that Parliament is informed of them. Amendment No. 3 simply requires, as is the case in other legislation, that a copy of each such direction should be placed in the Library of the House.

Dawn Primarolo (Labour, Bristol South)

The debate about the amendments goes to the heart of the issue; the balance to be struck in the new Department, and its relationship with Treasury Ministers. The Department needs to be accountable, through Ministers, to the House and its Select Committees, and to the Public Accounts Committee and the Treasury Select Committee through their Chairmen. It is not unique in that respect. However, some Departments have other functions, whereas this is its core function. In the interests of taxpayers' confidentiality, it has to protect information even from Ministers, and it has to administer the law—legislation passed by this House—without interference from those Ministers, or anybody else, to give favours. It also has to ensure that Ministers develop policy in a proper way, without favour. The balance of accountabilities, within the Department and between it and Parliament, is complex.

Revenue and Customs is, first and foremost, a Government department. The clause is essential in setting the limits of ministerial control, because of the important sets of obligations that the Department needs to discharge to the taxpayer, to the law and to the Minister in assisting in the development of policy. Ministers are accountable to Parliament for that Department. Therefore, they require powers—I hesitate to use the word, but I cannot think of an appropriate substitute—over the way in which commissioners exercise their functions. Without such control, HMRC would be autonomous and the important link of accountability to this House, which the hon. Member for Sevenoaks and others are keen to see remaining strong and vibrant, would be broken. While ministerial control is essential, right and proper, and it is important to ensure that Ministers' control is at arm's length so that they cannot intervene in the affairs of individual taxpayers.

Some might argue that there is a bit of a blur between operation and policy. For example, tax credits is a policy, but the way in which it is delivered, which is operational, is none the less of great interest to the House and I, as Minister, was held to account for it. In those circumstances, I was most certainly under pressure—if I did not feel it already, which I did—from individual Members as well as from debates and the Select Committee. I was being encouraged to be involved in that area of operation. The definition of ''direction'' is somewhat difficult. Lots of things apart from the clause converge to comprise the Minister's responsibilities and duties. Those are separate from the accounting officer regulations and the civil service code on how the Department should perform.

The clause seeks to set out the relationship between the Treasury and the commissioners, and deals with the exercise of their statutory functions as transferred to them under clause 4. Clause 10 carries forward the existing nature of the Treasury's oversight of the predecessor commissioners' exercise of their statutory functions. It introduces a consistency of expression when dealing with Treasury power. The phrase

''any directions of a general nature''

replaces different expressions of general Treasury control used in previous legislation covering Customs and Revenue, and applies to all the functions of the commissioners provided for under the Bill. Clause 10 will not change existing arrangements, and does not disturb other Treasury controls, such as those that apply to other Government Departments.

The key issue is whether the Bill should limit the Treasury's power over the commissioners. Clause 10 recognises that a limit is required for one overpowering and overriding reason. It is a continuing commitment for the Government, and all hon. Members, to safeguard the collection and management of revenue and to keep taxpayers' confidentiality at arm's length from Ministers. Clause 10 limits the Treasury's power to requiring the commissioners to comply with

''directions of a general nature'',

thus preserving the situation in which the Treasury does not have the power to direct the commissioners' actions—as a Minister, I do not have such a power—over specific taxpayers. I understand what the hon. Member for Sevenoaks seeks, and it is crucial to reassure not only the House but all those who read our proceedings. They need to know that there is no way in which present or future Ministers could ever demand information of the department; it is not appropriate they should have it and, frankly, it would be totally wrong for them to have access to it.

By removing limits to the Treasury's power over the commissioners' exercise of their statutory functions, amendment No. 2 would provide no safeguard on the level at which the Treasury might exercise direction. It would allow the Treasury, but not Ministers, to intervene in the affairs of individual taxpayers. I do not believe that that was the intention, but we simply cannot allow it. I am trying to explain why we used those words, and how we approached the problem.

I turn to amendment No. 3. Again, because HMRC will be a Government Department, albeit a non-ministerial one, it will operate by and large along the same lines as all Departments. In that context, a direction should not be considered as a single decision or document. Rather, directions arise from the entirety of the relationship between the Treasury and the department. If a ministerial decision raised issues of propriety or regularity, it would be subject to the normal arrangements; the accounting officers would raise the issue directly with the Minister, request an instruction if necessary, and report that instruction to the Comptroller and Auditor General. In practice, however, HMRC proposals are often made to Ministers on the basis of routine submissions, and Ministers will sometimes make proposals to HMRC. I smile at that, because Ministers sometimes pass on proposals from Members of Parliament about what the department should be doing.

Clearly, on key issues there is likely to be a significant dialogue between Treasury Ministers, the commissioners and their offices. The outcome is a ministerial decision which may have the effect of a direction, even though, almost invariably, there will be an agreement on the way forward. Departments have always operated in that context.

Is it necessary or helpful for all such decisions to be copied to the Libraries of both Houses? I have some difficulty in seeing why, when routine directions of Government Departments by other Ministers are not subject to such treatment. Why should this department be subject to it, when it has not impeded or undermined our democracy or the function of this House?

That is not to say that these routine decisions will not be disclosed. Treasury Ministers are fully committed to meeting their requirements under the Freedom of Information Act 2000, just as they were to the previous code of practice, and will make information on ministerial decisions available, whether or not they take the form of a direction, in accordance with the Act. Therefore, I do not consider the hon. Gentleman's amendment, which would result in each and every one of these routine decisions by Ministers being lodged in the Libraries of both Houses, to be either necessary or helpful.

Returning to the incident where the accounting officer considers that a ministerial decision is in conflict with the standards by which we expect Ministers to perform, the existing arrangements adequately cover the reporting of such occurrences to Parliament. For example, the Comptroller and Auditor General, to whom the accounting officer must report any such incident, will draw occurrences to the attention of the Public Accounts Committee, and include coverage in his report on HMRC's annual accounts.

In summary, if the hon. Gentleman really feels he want to push amendment No. 2 to a vote—so that the qualification to Treasury authority over the commissioners' exercise of their statutory functions would be removed by the deletion of ''a general nature''—I will ask the Committee to reject it on the grounds that it removes all limits on Treasury powers over the commissioners. Those limits are important.

If the hon. Gentleman wishes to push Opposition amendment No. 3, which would require a direction from the Treasury to be placed in the libraries of both Houses, to a vote, I would ask my hon. Friends to oppose it on the basis that the routine exercise of a general Treasury direction—sometimes informally, sometimes in the nature of a direction—does not need to be lodged in the Libraries of both Houses. It is unnecessary duplication of the arrangements now in place under the Freedom of Information Act 2000.

I hope that I have not only covered the hon. Gentleman's amendments, but given an indication of the complexity of the balance that it is important to strike in the department between the relationship of Ministers of the Treasury and the operations of the functions of the departments. I hope that, on reflection, the hon. Gentleman will decide not to pursue his amendments.

Michael Fallon (Conservative, Sevenoaks)

I am grateful to the Paymaster General. I think I made it clear that amendment No. 2 was a probing amendment. I can assure her and the Committee that I shall not seek to press it; partly because it was a probing amendment, but also because what she said was extremely helpful and has gone a long way to assuaging some of my concerns.

Having said that, I am bound to say that I found her response to amendment No. 3 far less encouraging and rather puzzling. She spoke about these directions possibly not being a single direction, or that there may be several directions, or a generic direction. At one stage she referred to them as proposals that might go from the Minister to the department. At another stage, she referred to them as decisions by Ministers. Finally, just before she wound up, she referred to them as informal or routine, almost announcements. That is not, of course, the power that has been taken under clause 10. The clause 10 duty is that the commissioners must comply with a direction of a general nature given to them by the Treasury. As it is now clear from the Paymaster General that these are only general directions, not involving the day-to-day operation of the Treasury, it is all the more important that we know exactly what they are.

The Paymaster General has suggested that the directions will be revealed on application under the Freedom of Information Act 2000, but that is not satisfactory. When a direction is issued and the commissioners are forced to comply with it—such as a direction that the Revenue should take a slightly different approach to certain classes of company paying corporation tax, or that certain classes of individual, such as those non-resident for tax purposes, should be treated more leniently than others—it is extremely important that those people who follow such affairs, such as tax practitioners, know about it. Inviting people to make an application under the 2000 Act to find out whether such a direction might have been made is not helpful.

The Paymaster General also said that if the decision—she kept using that word—was unusual, out of the ordinary or out of line, it would have to be disclosed through the accounting officer. That is perfectly true, but where the Treasury issues a general and strategic direction, I do not see that it should be kept secret. She has not fully dealt with this case. A copy of a direction of a general nature should at least be placed in the Library. Before I decide what to do with the amendment, I invite her to address some of those concerns.

Dawn Primarolo (Labour, Bristol South)

In the working relationship between a Minister and a department—any department, but particularly those under discussion—given the overriding importance of taxpayer confidentiality, there is not always an outcome every time a Minister speaks to officials. If there is, it does not have to be logged in the Library. I fail to see what the hon. Gentleman thinks Ministers may or may not be doing that requires disclosure to the Library. I remind him that the new department has its public service agreement targets. His own Committee calls Ministers regularly to account on the issues that it considers important, issues that this Committee is settling today by discussing clauses that it considers important and not pressing those on which there is general agreement. He knows that PSA targets are directions in the broadest sense. They are targets and they must be reported. I have been before his Committee to explain that when he has been in the Chair.

The hon. Member for Sevenoaks will know also that the new department will receive an annual remit from the Chancellor that will set its strategic direction. That will be published. The hon. Gentleman has the checks and balances; there is the annual report, the comments and the report of the Comptroller and Auditor General, all the accounting officer powers and the PSA targets, and there will be a published annual remit. Members of the House will be fully aware of the strategic direction. What they will not have—I cannot see the point in them having it—is the Minister's diary logged in the House of Commons Library, with the time of meetings with officials and the subject discussed.

Unless the hon. Gentleman can be more specific about what he thinks is happening without his knowledge, but which he should know about, I continue to be of the view that the checks and balances are in place. Many of those did not exist before 1997. The general direction from Treasury Ministers to the departments was not then considered a problem. The Bill merely carries that state of affairs forward with the additional safeguards that the Government have established.

David Laws (Liberal Democrat, Yeovil)

I was hoping to save my comments on clause 10 until we reached amendment No. 79, but I was a little disappointed with the Paymaster General's response to amendment No. 3. The amendment seems to touch on the heart of the relationship between the Treasury and those parts of it that are, in theory, run separately; the Paymaster General spoke of arm's length ministerial accountability.

The description that she gave us was of a Revenue department that would be able to run its own affairs from day to day without interference from the Minister, as part of a situation in which the Minister would clearly take an interest in strategic direction and in any major issues that might arise for discussion in Parliament. She would of course engage in continuing discussion and debate. She might be having meetings with the commissioners in the new department. She might have a block booking in her diary for discussion of relevant issues with them.

The amendment is not an attempt to obtain from the Minister all sorts of information about her diary engagements and discussions with the commissioners. It is designed to get the Treasury specifically to put into the public domain those occasions when it gives the commissioners explicit directions—even if they are general in nature—to guide them in their activities. Surely the point is that, if the Paymaster General is correct in her description of the relationship between the Treasury and the commissioners, such directions will be quite few and relatively specific about what they relate to. If the relationship between the Treasury and the Revenue department is really as we have heard, surely it will be possible—and sensible, and in the public interest—for the directions to be put into the public domain.

I am sure that the hon. Member for Sevenoaks is right to say that it is not realistic to think that freedom of information legislation will result in people constantly trawling for information in general to discover what directions the Paymaster General or the Treasury have given to a department such as the Revenue department about ongoing matters. The tax credit issue, which was mentioned earlier, is one on which we might well want the Minister to be very active.

If we are really to understand clause 10 and what the relationship between the Treasury and the Revenue department will be in practice—something that we shall debate further on amendment No. 79—the Paymaster General should be willing to go further on amendment No. 3. The only reason for not accepting amendment No. 3 would be that the relationship between the Treasury, the departments and the commissioners was rather different from the one described by the Paymaster General, with more being dictated, and more attempts to micro-manage the departments. That would mean a ream of directions having to be put in the public domain. That might be uncomfortable and embarrassing for the Government, as it would appear that there was less of an arm's length relationship than the Paymaster General has suggested. It is a great pity that the Paymaster General has not been willing to go any further in underlining her view of the right relationship between the Treasury and the new Revenue department by accepting the amendment.

Andrew Tyrie (Conservative, Chichester)

I shall be brief. I agree with almost everything that the hon. Member for Yeovil and my hon. Friend the Member for Sevenoaks have said. Having listened to the argument, I am more concerned than I was before the sitting. I understood the clause to refer to directions that would need to be made only in the most exceptional circumstances. The relationship between a Revenue department and the Treasury involves constant dialogue. It does not involve someone sending out countersigned instructions with dates at the bottom by which everything must be complied with. At that point, the relationship between the Treasury and the Revenue department would clearly have broken down or would be close to breaking down, or an issue of great sensitivity would have led to a clash between the commissioners and Ministers that Ministers believed they needed to resolve by exercising this power. That is what I had assumed the clause to mean. When the Paymaster General defended her position, she seemed to be saying that the amendment would mean that she would have to put her diary and other miscellaneous details into the Library. As I understood it, that is not what it is about, and it worried me that she seemed to believe that it might be. The amendment relates to rare and exceptional circumstances.

We all know that Revenue powers are often one of the methods used in countries with less effective and less highly developed democratic checks to bring pressure to bear on institutions, businesses or individuals. We see that in an extreme form in Russia at the moment with respect to Yukos. Such an infringement of what people consider to be their rights in this area lies at the far end of the spectrum. It is of concern that the Paymaster General is not prepared at least to consider some means by which these rare instructions—I would be grateful for her confirmation that they are rare—could be put into the public domain.

My hon. Friend the Member for Sevenoaks insisted on them being put into the Library, which seems to be a successful approach. By giving the Opposition that assurance, she will reassure us at a stroke that the clause does not mean what I took it to mean when we started debating it about 25 minutes ago.

Michael Fallon (Conservative, Sevenoaks)

The Paymaster General has rather disappointed me. We are not talking about diaries, informal working or any meetings that she may have with the chairman or others; we are talking about what the clause means. It refers to Treasury directions, so somewhere between the annual remit, which I fully accept is published with the PSA targets, and the day-to-day operational area, there is provision for directions to be given. The clause imposes a duty on the commissioners to abide by those directions. If those directions are issued, I can see no reason why they should be secret. I beg to ask leave to withdraw the amendment, but I shall seek to press amendment No. 3 to a vote.

Amendment, by leave, withdrawn.

Amendment proposed: No. 3 in clause 10, page 5, line 20, at end add

''and a copy of any such direction shall be placed in the Library of each House.''—[Mr. Fallon.]

Question put, That the amendment be made:—

The Committee divided: Ayes 3, Noes 9.

Standing Committee E

Clause 10 - Treasury directions

Andrew Tyrie (Conservative, Chichester)

I beg to move amendment No. 79, in clause 10, page 5, line 20, at end add

'except insofar as such directions conflict with the duty to act on behalf of the Crown as laid down by section 1(4)'.

We had a go at considering this issue via a couple of other amendments this morning and I shall now have another go at persuading the Minister that, as it stands, the Bill is not right. After what was said this morning, I am more worried than I was before. I was expecting some clarification that would assuage my concerns and go some way to address my future concerns, but I have not received it.

There are two basic issues in clause 10. With your permission, Mr. Hurst, rather than asking for a debate on clause stand part, I will cover all the points that I want to make about the clause in relation to the amendment. The first issue is: who controls Her Majesty's Revenue and Customs? The second is: who formulates tax policy?

The amendment addresses the question whether HMRC really is a non-ministerial department. It is worth exploring some basic principles about what we want the relationship between the two departments to be. We want the department to retain its independence and we want the tax collection process to be entirely disengaged from politicisation or putative politicisation. As I understand it, clause 1(4) is designed to do exactly that. It says that HMRC is a non-ministerial department and that it is technically responsible to the Crown.

However, clause 10 gives the Treasury a large slice of influence. Is it right that clause 10 should give the Treasury that amount of influence? On the basis of what the Minister said, I do not know what

''directions of a general nature''

are and how they contrast with directions of a specific nature, which are, by implication, ruled out. If ruling specific directions out was the intention, the clause could have said ''the commissioners need not follow directions of a specific nature given to them by the Treasury'' and added, ''in this clause, specific nature means'' and then had a definition. However, we do not have such a definition. We have a clause in which I fear that the Minister has muddied the waters.

I say in parentheses that I do not think that the Paymaster General or other Treasury Ministers have, in recent years, been engaged in nefarious activities or have tried to put pressure on the Inland Revenue to do specific things. At any rate, I have no evidence to that effect; nobody has come to me to say that that is the case. What we are doing is putting in place legislation that may have an effect on some future Minister who may not act properly.

When thinking about the issue, I decided that the best way to illustrate my point was to take an example. Let us take corporation tax. A Minister decides to introduce a corporation tax and feels the need to direct the commissioners to introduce it. That seems to me to be clearly a direction of a general nature. The Minister then decides that they want collection of that tax to be a priority. More resources are to be put into the collection of that tax than into the collection of other taxes. That is still probably a direction of a general nature. However, I am already in an area about which, on the basis of what the Minister said, I am not sure. What if the Minister tells HMRC to collect every last penny due under the corporation tax, even if that means the non-settlement of cases and a huge increase in the number of disputes taking place about that tax—cases going to court and so on? Would that be an instruction of a general or a specific nature? We can use common sense but we have no way of knowing on the basis of what we have been provided with so far. I think that it would be a specific instruction with very far-reaching implications for the way in which tax is collected, and not what was intended and what I think any reasonable person would want to find capable of being directed under the clause. We have no way of knowing whether the clause would exclude such a direction on the basis of what the Minister said to me in Committee this morning.

I worry very much that there is a risk about powers. I think that the Paymaster General's words this morning, which I wrote down, were that ''they'' would need powers over the way in which the HMRC exercised its functions. I think that that is a very dangerous phrase and we need to know what it really means. What are the limits to those powers that the Treasury is taking on? So, I am not clear, after considering the clause, on the first question of who is really controlling HMRC.

Now I want to tackle something trickier. Under the clause, who will run tax policy? It is clear that the Treasury wants more of the cake. It has wanted more influence on tax policy on every occasion that I have been aware of, or have been involved in any way with, the Treasury. This is not quite the same thing and I acknowledge that, but page 10 of the excellent O'Donnell report by the Treasury states that

''the Treasury's capacity to advise on tax policy should be enhanced.''

There is a clear indication. However, I think that the Paymaster General said this morning that it was not the Government's intention to change the existing arrangements in any way. Whatever her intention might be, I am not too sure whether we will end up with exactly the same thing that we have had before.

I think that there are real dangers in this area and I am not alone in that. It is worth considering what the Institute of Chartered Accountants in England and Wales said about the new arrangements for policy making, which was quoted in the Treasury Committee report. It said,

''there is a danger that this will widen the gulf which undoubtedly already exists between policy and operational issues.''

PricewaterhouseCoopers said:

''There is a risk that the policymaking of the combined body becomes more detached from the implementation and operation, and indeed from practical experience.''

Therefore, we are not talking about the Minister trying to do things that a reluctant commissioner or group of commissioners might not want to do. We are talking about whether the integration of tax policy with the operational side of tax collection is adequate and satisfactory in the light of the clause.

Let us consider other institutions that have been created, such as the Financial Services Authority. It is a body with a fine group of people at the top who, right from the start, have been thinking through very intelligent theoretical approaches to financial regulation. However, a great gulf has opened up between that and what is really occurring on the ground and what people have experienced as a consequence of regulation. What such voices—PWC and others—have been complaining about is that we might bring about a repetition of exactly that situation.

No doubt the Paymaster General will tell me—I think that she has already implied this—that she has not ever issued any of these directions. Of course, the relationship between a Minister and a Department is all about timing. Ministers do not turn up in the office and say, ''I want the following five things done and I want them by 3 o'clock; this is a direction under subsection (3) with something or other.'' Quite clearly, people ask for something to be done and nine times out of 10 it is done.

Occasionally, there is a row and when that happens the Chancellor will get involved and try to clear it up with a quiet word with the chairman of the Board of Inland Revenue, and when that fails there is a review meeting. Nearly 15 or 20 years ago I sat in on some of the meetings at which such interesting discussions took place. Such matters are resolved amicably—at least that was so in every case that I came across. This piece of legislation, however, might be entrenching the power to override the iterative process that I have just described. The Paymaster General will tell me that the process is exactly the same as we have had in the past and there is really no change at all, but we are not satisfied.

The danger is that this dispute will mean that the O'Donnell report turns out to provide a much weaker distinction than Gus O'Donnell alleged. In his own evidence, he made a distinction between strategy and policy development and policy maintenance and delivery. There is a problem of creating a Division 1 and Division 2 Inland Revenue, with one group of people who feel that they are top dogs, because they are involved in rarefied, terrifically exciting policy work and another group made up of the poor souls who are given instructions from the top table and told to run off and find a way to collect the money without their views being taken fully into account as part of the policy-making process.

I am not happy with the clause. I would like a clear explanation of what ''a general nature'' means. I should also like clarification of the department's independence, which the Government say that they will retain. Perhaps the existing rules were always wrong—that is often so—but they were protected by precedent and how people did things. Perhaps the two changes—the creation of a new department plus the fact that there are existing policy-making arrangements whereby a group of people from the Inland Revenue are now sitting cheek by jowl with Treasury officials in the Treasury building—will create conditions in which understanding will be strained for the first time. That is one of the issues that has been perturbing me.

John Burnett (Liberal Democrat, Torridge and West Devon)

I am very grateful to the hon. Gentleman for giving way. I was not here this morning, for which I apologise, Mr. Hurst.

Do I understand the hon. Gentleman correctly? Does he believe that there are compelling reasons for greater co-ordination of tax policy and might that be done better by the Treasury? Nevertheless, there should be greater safeguards.

Andrew Tyrie (Conservative, Chichester)

Yes, that is dead right. We do not want to find Ministers getting a bit closer to the business of collecting the money. However, we do not want the iterative process, with a distinction between those who have to collect it and those who are thinking up policy—which has historically made for a reasonably well-functioning tax system—to be fundamentally altered. The review makes it clear that the Government intend to alter that process; that is not denied. By altering the process—as is set out in the O'Donnell report and the Treasury Committee report—the Government may put pressure on what has previously been assumed to be a perfectly satisfactory level of protection on the point of ministerial direction. We could have lived with that, because we always have done so and have got used to it. However, that protection will not be so robust now in the defence of what we want to see defended.

I want to end by drawing the point a bit further. I said a moment ago that Treasury officials will find themselves sitting on the wrong side, although to Revenue officials down the corridor that may sound like a good idea. One group of them will have signed the oath and another group will not have done. To start with, there will have to be a Chinese wall between those two groups. One group will know about some cases coming up and that is why they will be concerned to get a particular clause in, and another group will not know about the cases as they discuss a particular measure. I think that that is perfectly possible but it would require a lot of attention. What worries me is that there could eventually be some leakage. It is absolutely crucial that taxpayer confidentiality is maintained. The moment that people think that there is not proper taxpayer confidentiality, the revenue base will be at risk because people will get very nervous about what they tell the Revenue authority.

Worse still would be the appearance or allegation that pressure, coming ultimately from politicians, was being put on a business or a wealthy individual, although I strongly suspect that that would be untrue. That would be extremely unfortunate. I will not go on about the Vodafone case, but that was an illustration of the fact that, whatever the reality, just the appearance of the weapon of the public domain has partially eroded big companies' trust in what is being kept confidential.

We shall discuss the oath later, but I say in passing that I wonder whether, far from getting rid of it, we may be able to extend it to those officials working on policy alongside Revenue officials to enable them to hear some of the conflicts of information that may lead the Revenue to make proposals.

Having said all that, I feel that clause 10 will not do; it needs much greater clarity and we need to know what is meant by ''a general nature'' and ''a specific nature''. We need more reassurance from the Minister. We are not minded to support the clause.

David Laws (Liberal Democrat, Yeovil)

Welcome to the Chair, Mr. Hurst. We had a useful debate on the clause during this morning's sitting, particularly when we discussed the amendments tabled by the hon. Member for Sevenoaks (Mr. Fallon). I had intended to leave all my comments on this part of the debate. However, we had a very interesting debate on amendment No. 3, which was pressed to a Division. It is a pity that the Government did not accept the thrust of that.

However, the debate is focused in particular on concerns about the ambiguity of the—relatively short—clause 10 and therefore about the supposedly arm's length nature of the relationship between Ministers and the Revenue and Customs. How will that work in practice? The hon. Member for Chichester (Mr. Tyrie) said that he was unclear about what ''of a general nature'' means in practice, and he is right to be so. I ask the Paymaster General how she would feel if she were told by a member of the Government that in the Treasury she was to remain liable and accountable to the Chancellor, but that she was expected to comply with any directions of a general nature given by the Prime Minister or some other member of the Government. It would be very unclear what ''of a general nature'' meant and how that would limit her normal powers of independence. What would that boil down to in practice?

I do not want to go back to our earlier discussion, but the hon. Member for Sevenoaks tabled an amendment whose effect would have been to take out the words ''of a general nature'', and he said that that was a probing amendment. If it had been accepted, I would have been, if anything, slightly more concerned about the final situation. We would have been left with a situation in which the commissioners were obliged to comply with any directions given by the Treasury. That would have sounded even more worrying, and would be even more liable to result in interference by Ministers in commissioners' day-to-day operations.

The Paymaster General has given us a little insight—I hope that we shall get more from her on this—into the working relationship between herself and organisations such as the Inland Revenue and Customs and Excise, which are in theory at arm's length from her, but for which she is accountable in the House of Commons. Very often, for example for initiatives such as tax credits, Parliament will want the Minister to take a close interest in the effectiveness of a policy.

The hon. Member for Chichester mentioned the development of tax policy and how the clause would work in those circumstances. Can the Paymaster General enlighten us as to how the relationship would work in practice at present, in a situation where, for example, we have had concerns about the operation of the tax credit system? Where a relatively simple system of rules and regulations is applied by the tax credits department of the Inland Revenue to particular cases—for example, in the case of overpayments—but where the Minister has concerns about how the policy affects people on low incomes and how the rules and regulations are interpreted, how would the Minister relay her concerns? Would it be in the form of a direction, or through some sort of debate? The nature of that relationship is critical to the right drafting of the clause.

The Minister's earlier comments suggest that she fears that Opposition Members want her to publicise and be accountable for every element of her relationship with the Inland Revenue, Customs and Excise and the new body. We certainly do not expect that; we do not expect to see her popping into her diary her engagement with Mr. David Varney and others. But we are interested in cases when the Minister or her Department have given clear policy directions or advice to the Inland Revenue and Customs and Excise that may have an effect on how Government policy is implemented. Sometimes, directions could have a material impact on how Government policy is implemented, even though they might not change existing rules and regulations laid down in statute or elsewhere. The operation of the tax credit system is a good example of that. It would be interesting to hear more from the Minister about that.

I was disappointed that the Minister did not accept another amendment tabled by the hon. Member for Sevenoaks on the issue. The amendment moved by the hon. Member for Chichester is not perfect, in that it does not deal with some of the issues highlighted in the early discussions, but at least it focuses the Government on their responsibility to allow the two bodies day-to-day responsibility and independence, as far as possible, unless they want specifically to interfere and lay down clear instructions that might otherwise counteract what the departments concerned are doing.

These are quite important issues. They may seem somewhat esoteric, but one can certainly imagine circumstances in which they would lead to significant problems in the operation of Government policy, if not under this Government, then under some successor Government.

Michael Fallon (Conservative, Sevenoaks)

I am grateful to you, Mr. Hurst, and you have been generous in allowing such a wide-ranging debate on the amendment. I am sure that you were right to do so, because this is an extremely important, although brief, clause. I hope that you will forgive me if I do not progress some of the arguments made about the nature of Treasury directions. As the debate has unfolded, both through the amendments that I moved this morning and the amendment moved by my hon. Friend the Member for Chichester, the Committee has become less clear about what we mean by a direction ''of a general nature''. I hope that the Paymaster General can give us a little more on that.

First, it is not clear to me at all what we mean by ''the Treasury''. That, presumably, is officials and senior officials as well as Ministers. This clause is not limited to ministerial direction. In fact, it means that a senior official involved in tax policy could give the commissioners a direction. I should be grateful if the Minister would comment on that.

Secondly, as my hon. Friend the Member for Chichester argued, it is all the more important to be clear about what a direction ''of a general nature'' is, because we now have a unified department that is virtually inside the Treasury building itself. That is precisely why we need the relationship between Ministers and officials, commissioners and their staff to be as clear as possible when they are sharing the same cafeteria, when they are walking the same corridors, when they may be promoted or moving along different career paths within the same building, and when a number of them are moving from tax policy on one side of the House to tax policy on the other. We must get this relationship right.

Mr. Hurst, in your absence this morning we heard a blurred definition of what ''directions'' might mean from the Minister. She referred to her discussions. She referred to decisions, matters she might perhaps have discussed with the commissioners that they may have wanted a steer on. She would give a decision and commissioners would then go and act on it. She referred at one stage to diaries. We are not talking about decisions, discussions or diaries. We are talking about formal directions that the Treasury decides to issue to the commissioners.

I can well envisage the circumstances in which such directions are issued. For example, there may be a discussion about the use of resources. Halfway through a financial year, it may become clear that Ministers want far more priority accorded to one particular area of work than another, which is not covered by the annual remit that the Paymaster General referred to this morning, but is a creature of time and changing circumstances. The commissioner may say, ''That is fine; I am happy to do that'', but they should have a direction to do it. If that is not the kind of direction ''of a general nature'' that this clause is intended to cover, I should be grateful if the Paymaster General would perhaps give us some examples of directions ''of a general nature'' without going into detail, perhaps describing one or two that have been given under previous legislation, or the sort of direction that she has in mind.

The other suggestion that I would make to the right hon. Lady and the Committee is that if we are still unclear as to what a direction ''of a general nature'' is, perhaps we ought to include a definition of it in the Bill. The easiest way to do that would be to include a definition of ''direction'' in clause 46, the interpretation clause. After all, I see that in subsection (2) of that clause we define ''function''. If we define ''function'', I see no reason at all why we could not be clearer and define in the statute itself what we mean by a direction ''of a general nature''. Until we do this, the uncertainty surrounding this clause, the lack of clarity as to what a direction is, this hinterland between the annual remit given to the commissioners and their daily operational activity, this grey area between the two, will remain grey. Both sides of the House will be unclear as to exactly what kind of direction the Treasury is giving the commissioners and their staffs.

We need more clarity in this area, and I think the Committee now realises that the Paymaster General ought to provide it.

Dawn Primarolo (Labour, Bristol South)

Welcome to the Chair, Mr. Hurst. We are rehearsing most of the discussion we had this morning on a very important issue. As I was listening to the contribution of the hon. Member for Chichester, I reflected that there was something I should recommend as reading for the Committee: Jim Cousins's excellent book—he is also an hon. Gentleman—

Alan Hurst (Labour, Braintree)

Order. Hon. Members should be referred to by their official titles.

Dawn Primarolo (Labour, Bristol South)

Thank you, Mr. Hurst. I apologise. Many hon. Members, including Opposition Members, have commented on the relationship between Ministers and Departments. That would have put into a helpful context what is a complex relationship. The idea that our excellent civil servants would allow a Minister from any Department to direct matters in something that was inappropriate, in breach of a Minister's code of conduct or an accounting officer's duty or value for money is truly repugnant.

Mr. Tyrie rose—

Dawn Primarolo (Labour, Bristol South)

Do not get up now, please. I listened carefully to the hon. Gentleman and I now wish to elaborate on my argument. I understand clearly the idea that Ministers do not cherish and uphold the high principles of the civil service and its relationship to elected Ministers and the House. The debate is revolving around the general direction as it has always been used in relation to the Revenue department, the Revenue and Customs and Excise, the Ministers and the Treasury.

We must bear in mind the word ''direction''. I want to ensure that there is no question that a Minister would have the power to intervene in a way that would contravene taxpayers' confidentiality. Direction does not imply an instruction or order that overrides the rules or views of the commissioner. To say that that would be exceptional is an understatement.

I shall refer to why we settled on a general direction. The hon. Member for Chichester wanted to explore the definition of policy as opposed to operation. On the one hand, he argued for a clear separation but on the other he realised that the two aspects merge with each other and that there needs to be a clear understanding about that. The phrase ''general direction'' provides that Ministers can exercise control over the activities of the department in a sensible and fairly broad way as, indeed, the Secretary of State can in any Government Department. As I have made clear, during the course of exercising that control Ministers would expect to be engaged in discussions with departments in several ways. They would communicate their intentions and seek advice.

In the process of developing policy, a Minister is working closely and directly with departments to inform them whether the policy is do-able, reasonable, value for money, whether it would require more resources or whether there should be a diversion of resources, to which the hon. Member for Chichester referred. That would leave the Minister accountable to Parliament and have an effect on the public service agreement target. The Minister would have to explain his action to the Treasury Committee, as I did. I said that I took a priority view because I knew that Parliament wanted such matters to be delivered and, as a consequence, I was informed that I was responsible. I did not point a finger at my civil servants; they told me what would happen and that it was reasonable value for money, but that I would be accountable for such action and not to blame my civil servants. Of course, that is absolutely what we are not going to do.

Ministers can set the strategic, high-level protection for the department on policy and issues around it in dialogue and engagement with the department, and the clause seeks to ensure that that does not extend to taxpayers' information. The words ''general direction'' were carefully chosen to ensure that the day-to-day business of the Government continues through HMRC as it is created—[Interruption.] I wonder whether the hon. Member for Yeovil (Mr. Laws) will allow me to elaborate, because this is a complex argument. I am trying to explain how the relationship between a Minister and a department works and why ''general direction'' is not a problem.

This morning and this afternoon the hon. Members for Sevenoaks and for Chichester raised specific issues regarding some rare and unusual circumstances, if they were ever to occur—I have been a Treasury Minister since 1997 and in my experience such things have never occurred, and I have checked with my officials for all other Ministers—where a Minister might direct the department, although the department had given advice against that decision, perhaps because it contravened value for money. In fact, I think I would refer to that as a special direction. In such circumstances the accounting officer would have to issue an accounting officer letter, because if value for money were breached, or if there were issues around the poor use of resources or a breach of another area, that would be notifiable immediately to the Comptroller and Auditor General, who would then notify the Public Accounts Committee.

The hon. Member for Chichester is trying to focus on whether the department can be instructed against all its knowledge, experience, expertise and understanding to do something that contravenes everything else that it has tried to do as a Government department under the rules of accounting, PSA targets or what is right and proper.

The commissioners do not have to decide what is ''general'', or what that means. They have to decide whether a decision is appropriate and whether what the Minister has asked, requested, ordered, directed, or otherwise given as a ministerial decision, is inappropriate within organisation rules. If it is inappropriate, the Minister will receive an accounting letter that will be in the public domain and will be known, which is what the hon. Member for Sevenoaks wanted to know this morning.

The hon. Member for Chichester asked about a specific matter, so I will deal with his example. If the Minister directed the department to collect every single penny of money that was due, regardless of circumstances or anything else, would that be a ''general direction''? That is an interesting example, because it raises all the issues. The first half of the answer is that that is a general direction, because it is an instruction to collect the money and not specifically about a taxpayer. However, it would immediately bring into play all the other requirements on the commissioners in deciding whether they would proceed with the ministerial request. For example, would it be value for money, or fair and equitable given the complex circumstances when we do not sometimes collect all the money back? Even though it is of a general nature, the decision would be subject immediately to the accounting officer arrangements, before we have got anywhere near the taxpayer's confidentiality—which we cannot do.

That example is hypothetical and the hon. Gentleman acknowledged that. If it were to occur, the working relationship between the Minister and the department would have broken down to such an extent that I find it impossible to think how the department might function. All sorts of other issues would arise. I understand that the hon. Gentlemen see ''general'' and ''direction'' as an instruction on the way down and therefore that a direction is an order from a Minister. What does ''general'' mean? Perhaps in reality it is the other way round. ''General'' means that it cannot be specific. For example, a Minister cannot instruct the department or ask for information on taxpayers, or seek to design a tax policy with a particular taxpayer in mind to give an advantage. All that would be prevented, even though it is in the general policy area.

The interesting thing about the two groups of amendments—

Michael Fallon (Conservative, Sevenoaks)

Will the Minister give way?

Dawn Primarolo (Labour, Bristol South)

I will, but I will just return to the amendments that we considered this morning and the amendment before us.

Amendment No. 2 sought to remove all the—

Alan Hurst (Labour, Braintree)

Order. Unless the Paymaster General is doing this by way of analogy, we cannot return to those amendments.

Dawn Primarolo (Labour, Bristol South)

I am indeed, Mr. Hurst. For this morning's debate and this debate I shall run either side of the same principle; should the Treasury Ministers have ultimately specific control or should they have no control? This morning's amendments sought to make specific controls and amendment No. 79 goes in the opposite direction—to the opposite extreme.

I take it that the amendments were tabled in order to have a decent debate about what was meant by ''general direction''. However, the amendment seeks to provide the commissioners with an independence across the whole function that they exercise. That would mean that the Minister would have a remaining function to express an interest and to give possible guidance on how they should perform, but would be completely unable to be accountable, because the Minister would have no control.

Andrew Tyrie (Conservative, Chichester)

Will the Minister give way on that point?

Dawn Primarolo (Labour, Bristol South)

I will, but let me finish the point. The question is where we set the balance. First, we must protect taxpayer confidentiality at all costs, which is why ''general'' is used. The provision cannot be specific; there cannot be direct intervention. Why was ''direction'' used? I was looking for consistency and such things have always been called that. They are called that in all Departments and it did not cross my mind that the two words together would create some loss of control or a way of asserting a Minister's control.

The Government's intentions are clear. The provision is not just about what is meant by general direction, which means not specific and not affecting taxpayers' confidentiality. It is one of the requirements on Ministers, civil servants and accounting officers that combine in a complex model to protect taxpayer confidentiality on the one hand and appropriate behaviour by Ministers on the other. It will ensure sensible advice from the departments both on operation and policy delivery, and a clear line of accountability to Parliament. Finally, it will develop the policy ability to give greater co-ordination and understanding in order to improve the tax system and make it fairer, more direct and accessible, in a sensible way, for taxpayers; and, dare I say it, to make it occasionally simple.

David Laws (Liberal Democrat, Yeovil)

I am grateful to the Paymaster General for giving way and for her clarification, which takes matters a little further. To be clear about this particular clause, is the Paymaster General saying that she would not expect the commissioners to comply with a direction of a specific nature if it were given to them by a Minister?

Dawn Primarolo (Labour, Bristol South)

It would be for the accounting officer to decide whether the decision from the Minister was inappropriate. I cannot think of an example to illustrate that. The department would advise me. A Minister does not just suddenly say, ''I want the department to do this''. There would have been a discussion of the issues and advice would have been given. If Ministers ignored good advice and still insisted on issuing the decision, the accounting officer would, as I said, decide whether that was inappropriate. If they decided that, the other rules would come into play.

Does the hon. Gentleman want to pursue that point?

David Laws (Liberal Democrat, Yeovil)

I am very grateful to the Paymaster General for giving way. I appreciate that she is trying to be helpful. Let us take one example of a direction that the Minister might want to give to part of the Inland Revenue in certain circumstances, for instance. If the Minster decided that she wanted to give a direction to the tax credits department to treat overpayments in a particular way when they appear not to be the fault of the individual who received the overpayment—because of computer error, for example—it is quite possible that legislation would take either the very strict approach that the department itself was taking, or would allow greater latitude. Would not the Paymaster General be prepared to give a specific direction, and would not it be acceptable to most people under those circumstances that she should do so?

Dawn Primarolo (Labour, Bristol South)

I may give a specific direction but, on that basis, the Department would advise me as to whether or not there was a breach of value for money, equity or finance to all other taxpayers, whether the Government would be open to a legal challenge for unequal treatment and whether or not the National Audit Office would consider writing off an appropriate amount. The Department would advise me on procedure to deal with that.

I can only speak for myself in this example. If a Department tells me that a decision breaches value for money, accountability and fairness, and does not comply with the rules required of a department of civil servants within a Government Department, I can think of no circumstances in which, having been told that, I would then say to the Department, ''I have heard what you say, but go ahead''. The dialogue and advice that Ministers get is complex. We trust that the advice we receive from our civil servants is accurate, and we act on that basis; the hon. Gentleman has chastised me a number of times when he has not considered that the advice has been accurate.

Michael Fallon (Conservative, Sevenoaks)

The Paymaster General continues to present this clause almost as a dialogue concerning some debate between her and the commissioners. She has been helpful in getting over to the Committee the fact that she sees this clause as restrictive, and I fully accept that. But she describes the directions as ''of a general nature''; that is restrictive. That is a safeguard and is welcome, and it is why I did not press amendment No. 2 this morning. The difficulty the Committee has had this afternoon is simply the definition of the word ''direction''. It is not a decision that resolves an argument. We are seeking to establish what kind of direction that would be.

The Paymaster General would help us if she gave an example of a direction of a general nature that she has given in the past three or four months, or three or four years—she has been in her position for a while—or an example of the kind of direction of a general nature that she might give in future. If she could describe one such direction, perhaps we could wrap the issue up and move on.

Dawn Primarolo (Labour, Bristol South)

I have never directed the department. With the exception of PSA targets, which are published and set for all Government Departments, which strive to comply with them, I can find no examples—my officials have checked back to before the election of this Government in 1997—of the Minister of the day directing the department to do something. The words ''general direction'' have existed for a very long time; they are well understood and built into the training qualifications and the operation of all Government Departments of the civil service. For them, the words are clear.

Having been a Minister in a previous Government, the hon. Member for Sevenoaks will know that there are sometimes robust discussions between Ministers and officials when the Minister would like to develop a policy area but the officials say that it cannot be done; there is probing until the Minister is satisfied that it cannot be done. However, there have been no examples of officials being directed. The hon. Member for Chichester described very well the working and day-to-day relationships between the department, the Treasury and the Minister.

Mr. Burnett rose—

Mr. Tyrie rose—

Dawn Primarolo (Labour, Bristol South)

I am going to give way to the hon. Member for Chichester.

Andrew Tyrie (Conservative, Chichester)

I am quite worried by what I have just heard. Am I making an intervention or is the Minister giving way?

Dawn Primarolo (Labour, Bristol South)

I am giving way.

Andrew Tyrie (Conservative, Chichester)

I shall say something at the end of the Paymaster General's remarks.

John Burnett (Liberal Democrat, Torridge and West Devon)

The Minister responded to the point about tax credits by giving a hypothetical example of her receiving advice, overruling it in a particular manner and giving a direction contrary to that advice. Earlier, she said that such a direction would come to light and eventually arrive before the Public Accounts Committee. Would that invariably be the case? How long would a case of a Minister overruling officials' advice take to get to that Committee?

Dawn Primarolo (Labour, Bristol South)

I do not know. I have no experience or knowledge of Ministers' overruling direct, specific advice from within any of the Treasury departments or any others. That is a very hypothetical question. If the hon. Gentleman really wants me to pursue it, I shall ask my officials what the process would be if I had been that foolhardy.

I shall ask my hon. Friends to reject this amendment if it is pressed to a Division, although I think that the hon. Member for Chichester said that it was a probing amendment. However, I seem to have made him more unhappy rather than less.

Andrew Tyrie (Conservative, Chichester)

I am afraid so.

Dawn Primarolo (Labour, Bristol South)

Maybe the moral of the story is that Ministers should not try to be helpful, but should just speak very narrowly to the point.

Andrew Tyrie (Conservative, Chichester)

When the Paymaster General was being helpful this morning, I regretted that we moved on speedily, so she should not feel that. She seemed to imply that my amendment might lead to Ministers being virtually written out of the piece. That is an astonishing interpretation of what is a relatively straightforward clause. The overriding duty of a Department of the Crown is protected.

Perhaps inadvertently, the Paymaster General said something else that was astonishing. She said that she had not only looked to see whether any directions had been issued since 1997, but that she had asked officials to look prior to 1997 to see if there had been directions under a previous Administration. If she directed officials to do that, she was in breach of all sorts of rules, regulations and codes, which I shall not begin to enumerate because it would take too long. However, that is a very serious breach, and the officials concerned should have immediately come back and said that they were not prepared to do that.

Dawn Primarolo (Labour, Bristol South)

Will the hon. Gentleman give way?

Andrew Tyrie (Conservative, Chichester)

I will in a moment. I hope that, in fact, there was a slight slip of the tongue and that all that someone was tasked to do was refer to a few memoirs—''The View from No. 11'' for example—and to look up the word ''direction,'' and when they found nil return to report back to that effect.

Dawn Primarolo (Labour, Bristol South)

First, I said I asked about other Ministers. Secondly, the issue of whether there was a direction is about whether or not an accounting officer letter was left, and that would be in the public domain. The hon. Gentleman is right; there is no way that I would ask that investigation to go back prior to May 1997. He knows that, but it was a good point to make; he has, as ever, been helpful, and I am grateful to him for allowing me to correct the record.

Andrew Tyrie (Conservative, Chichester)

Good; I am grateful for that. I am left bereft of any understanding of why we will have this clause if the Paymaster General has concluded that she cannot conceive of any circumstances in which such a direction would be required. She said that there had never been any such direction, and that she could not think of any circumstances in which one would need to be made.

The Paymaster General also said that if a direction had been made, relations would have broken down so badly that it is inconceivable that the normal work of the department could have continued. That suggests that the clause has been written for a set of circumstances that are inconceivable, in which case what is the point of putting it in the statute book? However, I do not think that that is correct; the clause has far more substance than that. That is why I am nervous.

One specific reason why I am nervous is that the Paymaster General said that we cannot work out what the clause means by defining the word general. What we have to do is define a word that is not in the Bill; that word is ''specific.'' When pressed on what that word means, she said that she thought that we are partly talking about codes and inappropriate behaviour that Ministers might get up to, and other statutory limitations and conventions. However, officials will alert Ministers to them even without this clause, to make sure that things are fair. Finally, she referred to only one word, which is confidentiality; confidentiality of individual tax cases. What this clause really means—what it only means, as far as I can tell—is that a Minister may make any direction to the Treasury except where that direction will lead either to the creation of a tax that targets a specific individual or company or a demand for information about a specific taxpayer. That is a very narrow definition of what the clause means. I now find the clause deeply satisfactory.

John Burnett (Liberal Democrat, Torridge and West Devon)

One reason why we ask for fetters on the clause is that occasionally the taxpayer base is very small. Sometimes, there can be a taxpayer base of just one company and one major transaction. I am thinking particularly of stamp duty reserve tax. We were told in proceedings on the 1998 Finance Bill that all loopholes had been closed; I think that that related to the fact that stamp duty had changed so much. Contrary to those assertions, when British Petroleum merged with the non-US assets of, I think, Mobil—I might have the names wrong—something like £1 billion or £1.5 billion in stamp duty reserve tax was lost because the companies used a perfectly legitimate avoidance method.

The loopholes have not been blocked satisfactorily, and that gives a specific taxpayer's case relevance to Ministers. That is why we really need to know whether the duty that we are talking about is a duty to the Crown and a duty always to act in good faith. That is not to impugn the integrity of the Paymaster General here today. We want legislation that inures all Ministers, whatever the party in government. We want statute that ensures integrity, whoever has conduct of our affairs.

David Heathcoat-Amory (Conservative, Wells)

I shall intervene briefly. I could not be here this morning—I apologise for that—so I shall just emphasise two points that were made. I do so from the perspective of having been a Minister in the Treasury, and having had charge of Customs and Excise. I do not know whether that is an interest that I should declare. I am totally proud to have been in charge of the department for a year or two. On the basis of that experience, I am rather alarmed by the clause.

First, on the phrase ''general nature'', I understand that the Paymaster General believes the phrase to be a helpful restriction, but it is still fairly vague. In my view, it might not catch directions of a fairly specific but broad character, such as a direction to the new Revenue department not to pursue certain investigations involving other Government Departments or agencies, or even public servants or Ministers. Such a direction might be interpreted, or at least varnished, as being a direction of a general nature. Such an act might not be specific to an individual, but nevertheless it would make considerable mischief. I am not sure that the restriction ''general nature'' gives an adequate safeguard.

My other point is about the nature of the direction. I know that I missed this point being made, but has it been illustrated and confirmed that the new direction would have to be in writing? One assumes so. Quite apart from everything else, if it were not, the Minister would not know whether any direction had been given by previous Governments or Ministers. I would also like to probe the Paymaster General further on what she told the Committee about going through what had been done by previous Ministers in the Department to see whether they had issued directions. I do not know how she can be so sure whether those directions had been given orally. I have met the head of Customs and Excise regularly and nothing that I have said to him could possibly be interpreted as a direction. However, under the clause, the Minister of the day might have a new power to issue oral instructions. The instructions must be in writing and must be made public. When defending her remarks, the right hon. Lady said that matters were not known about previously because they had not been published and were not on the public record. Presumably, that means that instructions will be in writing and publicly available. Will she reassure the Committee about that?

Dawn Primarolo (Labour, Bristol South)

I am happy to do so. I am surprised by what the right hon. Gentleman said. I refer him to the customs legislation. I shall provide the Committee with Inland Revenue evidence, too. Section 6(2) of the Customs and Excise Management Act 1979 states:

''the Commissioners shall, subject to the general control of the Treasury''.

Section 1(2) of the Inland Revenue Regulation Act 1890 states:

''subject to the authority, control and direction of the Treasury''.

There is no statutory requirement to signify that such action be carried out by convention.

The general direction requirement was used in 1890 in respect of the Inland Revenue and, under the more recent Act, for Customs and Excise. Ministers, including the right hon. Gentleman, operated within the definitions of general direction, using PSA targets, spending settlements, advice from Departments, and the priorities and policies pursued on behalf of the Government of the day. There is a saying, ''If something works, why fix it?'' Such a policy has worked. Everyone understands how it works.

I say to the hon. Member for Sevenoaks that, when bringing together the two departments, it is important that in no way should there be any diminution of taxpayers' confidentiality. Even though such a requirement is set out in the Act to which I referred, it should be contained in the Bill. Our discussions today have been extremely helpful, but I am puzzled by the response of the hon. Member for Chichester, who has knowledge of the Treasury, and of the right hon. Member for Wells (Mr. Heathcoat-Amory), who has been a Treasury Minister and operated within such general control and authority.

David Heathcoat-Amory (Conservative, Wells)

Could the Paymaster General now answer my question? I know how I operated under such legislation, but will she tell the Committee how she will operate under future legislation and say, in particular, whether the directions under the clause are to be in writing and are to be published?

Dawn Primarolo (Labour, Bristol South)

The departments will ask me to make a decision when I have sought information from them. There will be a copy of that in writing. I then make a decision that is transmitted to the departments in writing. There will be a lot of dialogue and exchange of information. There will be meetings and an audit trail.

Andrew Tyrie (Conservative, Chichester)

Will the Paymaster General give way on that point?

Dawn Primarolo (Labour, Bristol South)

No. I want to finish my point before giving way. If I am being asked whether I have ever given an instruction to override specific advice given to me by either Department—I have been a Minister in both—the answer is no, I have never issued such an instruction.

Andrew Tyrie (Conservative, Chichester)

We want to know what a direction is. In answer to my right hon. Friend the Member for Wells, the Paymaster General said, ''I send letters out all the time.'' Are those directions, or not? As I understand what she has said until now, they are not. She has now used the word ''instructions'', but this is the first time that we have heard it. They seem to be some higher layer, above directions.

We are thoroughly confused about what the clause means, and I do not think that the Government are too sure about it. Practice that has been rolling along for the best part of a century is going to be disturbed by the creation of the new department and the need to codify legislation. The provisions have not been thought through, so we shall press our amendment.

Dawn Primarolo (Labour, Bristol South)

Although I gave way to the hon. Gentleman, I said a very long time ago what the provision means. It means that Ministers can set strategic, high-level direction. I really regret what hon. Members are saying about their difficulty with the word ''directions''. They have asked whether it means instruct, enforce or require. In responding, I have tried to probe what it means. It means that Ministers can set the strategic, high-level direction on policy, expenditure, the use of resources, PSA targets, spending settlements and—the Bill provides for this for the first time—the annual remit, which will be published. That is what it means.

Question put, That the amendment be made:—

The Committee divided: Ayes 6, Noes 8.

Schedule 2 - Functions of Commissioners and Officers: Restrictions, &c. Amendments made:

Clause 16 - Use of Information

Clause 17 - Confidentiality

Alan Hurst (Labour, Braintree)

With this it will be convenient to take the following:

Amendment No. 4, in clause 17, page 7, line 31, at end insert

'and at the time of their appointment shall make a declaration in the form set out in new Schedule [Form of declaration] before another official.'.

Government amendments Nos. 90, 91 and 92.

Amendment No. 80, in clause 17, page 8, line 9, at end insert—

'(4) A disclosure made under subsection (2) may only be made under terms which will preserve the confidentiality of the information involved in the disclosure.'.

Government new clause 3—Disclosure to prosecuting authority.

Government new clause 4—Data protection &c. Government new clause 5—Disclosure of information to director of revenue and customs prosecutions.

New schedule 1—Form of declaration.

Mr. Fallon Thank you, Mr. Hurst. You are working hard today. To give you some relief, I shall speak to amendment No. 4, tabled in my name and that of my right hon. Friend the Member for Wells, although it is largely self-explanatory.

The issue of confidentiality has been demonstrated throughout our debates to be extremely important. It was important to the O'Donnell review; when Mr. O'Donnell gave evidence to the Sub-Committee, he said that maintaining taxpayer confidentiality is vital. I hope that you will bear with me if I quote in full paragraph 53 of our report:

''The transfer of responsibility for tax policy development to the Treasury and the move of some Customs and Excise and Revenue staff to the Treasury building have raised concerns about confidentiality. We welcome the commitment given to maintaining taxpayer confidentiality and the assurance that there will be no access by Treasury officials or Treasury Ministers or special advisers to individual tax records and recommend that this principle be carried forward into the bill.''

The issue is whether that principle has been properly carried forward into the Bill by clause 17. It is often thought that taxpayer confidentiality is something so secret that it can never be breached. At the risk of upsetting the Committee, I have to remind it that the confidentiality of one taxpayer, Mr. Norman Scott, was breached back in 1976, when the then Labour Prime Minister, Harold Wilson, instructed that Mr. Scott's DHSS file be researched by the Secretary of State. I quote simply one sentence from a book that will be familiar to you, Mr. Hurst, ''The Castle Diaries 1974–76'':

''Thursday 12 February I hurried into Cabinet early to give Harold the résumé Jack has done of the Scott file.''

The Jack there is Mrs. Castle's former special adviser, the current Foreign Secretary. So, we know that there have been breaches of confidentiality, but some time ago. Let us take at face value the assurances that we have been given that this Government accept that we should do everything possible to maintain taxpayer confidentiality. If we are to maintain it, it is essential that the oath of confidentiality that every member of both the Revenue service and the Customs service takes on his or her appointment be continued. However, it has emerged since the Bill was published that the Government intend to scrap the oath. That is something that we need to resist.

The Paymaster General, when she was pressed on those matters on Second Reading, implied that the oath, or the statutory declaration that the oath has become, will be part of a more general employment contract that will presumably list all sorts of other terms and conditions, including bank holidays, holiday entitlement and sick pay and all the rest of it, in a long document that the new official entry department will sign: an all-embracing terms and conditions document with one signature appended to it. I do not think that that is satisfactory and it does not maintain the kind of confidentiality that I want to see enshrined.

The oath currently takes the form of a statutory declaration made in front of another official in the same service at the time of appointment. The wording for that is cobbled from existing legislation and is, as hon. Members will see immediately, a solemn act that is not bound up with other terms and conditions that are undersigned. The oath is a solemn act that carries some weight and I think that it makes the declarer think for a moment about what he or she is declaring and acknowledge the formal importance of the confidentiality. Instead of that, however, I understand that the Paymaster General is now offering us the duty of confidentiality only—not an oath or statutory declaration—which will be tucked away in an employment contract with the other terms and conditions. That divests the declaration of confidentiality of the weight and singular importance that should attach to it. As I said this morning, that is all the more worrying because we have a vast, new merged department with all the officials and records together that is being placed in the same building as the Ministers and special advisers who transgressed before and may do so again.

I repeat that the Treasury Committee recommended that taxpayer confidentiality should be maintained, welcomed an assurance that there would be no access to individual tax records and recommended that that principle be carried forward into the Bill. Clause 17 is not adequate for that purpose and there is no good reason to dispense with the existing statutory declaration.

John Burnett (Liberal Democrat, Torridge and West Devon)

I support amendment No. 4. I am a lawyer like you, Mr. Hurst, although I do not practice and I do not know if you do—that is none of our business. I declared on Second Reading that in 25 years as a tax practitioner I had no cause to complain about the conduct of the Inland Revenue and its employees. I had many disagreements, but those were resolved professionally. Having said that, there are of course bad apples that can get through the system one way or another and have to be brought to account.

The Inland Revenue culture is admired worldwide, and part of that culture is the professionalism of its members, who know that they have similar responsibilities to those that lawyers have for their clients and doctors have for their patients. That is brought home to them at an early stage by, among other things, high training standards, high-calibre recruits and the statutory declaration that they make, which illustrates that being a member of the Inland Revenue is not like any other Government job. It is not like most other employment. It carries very special responsibilities. We all know that any breakdown or erosion in taxpayer confidentiality will have the most appalling effects on the collection of tax.

We should be taxed by law, and we are taxed in major part by consent, albeit reluctantly. I believe that anyone with confidential taxpayer information should make a special statutory declaration to bring home those special responsibilities to her and to him.

The principle of confidentiality is simply not clear to individuals when a 22-page employment contract is put in front of them that contains this and that provision, information about holidays and pay and all the other matters that are included in an employment agreement. It must be brought home to employees at the Inland Revenue in a special and compelling way. This oath would do exactly that. We support the amendment. It is important, and anyone, including the Treasury officials, who has taxpayer-sensitive information should make a statutory declaration. That includes members of the supervisory bodies, including the Independent Police Complaints Commission, which we will debate. They should make the declaration if they are going to have taxpayer-sensitive information.

The Inland Revenue has a fine record, and I do not believe that any Opposition Member will demur from what I have said. When I have debated other matters in other Committees with the hon. Member for Chichester, he has been only too willing to confirm exactly what I have said about the high standards of our Revenue. We want to keep it that way. There is no reason for change. A statutory declaration in the form suggested by the amendment would, like nothing else, hit home to bodies such as the Inland Revenue and Customs that they have a special duty of care and confidentiality. Many of us said on Second Reading that it is important that the Inland Revenue culture prevails in this matter. Many aspects of the Inland Revenue culture came in for praise on Second Reading. I want this oath to be retained for all the combined agencies.

David Heathcoat-Amory (Conservative, Wells)

I very much support the remarks made by my hon. Friend the Member for Sevenoaks. As a member of the Treasury Committee, I, too, support the recommendation that there should be no dilution in the defences against unauthorised disclosure. We should not simply take taxpayer confidentiality for granted. It is important, and it is very much in the interests of the Revenue departments, because people will co-operate freely with the Revenue authorities only if they can be sure that the information given is protected. I do not know if it is still the case, but I was told some years ago that all tax returns in Greece are published. A book is published every year of the tax returns of all the taxpayers in that country, which is immediately filed in the fiction department of all public libraries. It is often said that openness and transparency has a beneficial effect on the client.

John Burnett (Liberal Democrat, Torridge and West Devon)

In a similar vein, I understood that the same prevails in Italy. When Fiat took over Ferrari, people looked to see what contributions the Ferrari family would make in the tax year in question, but I do not know whether they managed to do so and to locate where they were in the order of merit, as it were.

David Heathcoat-Amory (Conservative, Wells)

The hon. Gentleman is right. It is a Latin habit to publish everything of that nature, but it does not help compliance—quite the reverse; it is when people feel that their private affairs are to be respected that they co-operate most freely and give the necessary information.

It is vital that that culture and the safeguards are reformed in the way proposed in amendment No. 4 and in the new schedule. The financial temptations for Revenue officers are considerable. The tabloid press would love to get detailed tax returns of prominent people, and companies would like to see the tax returns of their competitors. That reinforces the point that our every defence, including the statutory declaration, should be carried forward.

Government amendment No. 92 allows disclosure for certain purposes. It mentions

''the purposes of a criminal investigation or criminal proceedings (whether or not within the United Kingdom) relating to matter in respect of which the Revenue and Customs have functions''.

The amendment is a late addition. The Bill is littered with Government amendments, which is regrettable; the Government have had months to prepare the legislation, yet many amendments are being brought forward. Will the Minister explain precisely why the amendment is to be made? The Bill already provides for disclosure for the purposes of civil or criminal proceedings, so why are we adding criminal investigations, whether or not within the United Kingdom?

I can easily envisage a situation in which foreign Governments and authorities would wish to receive information about British taxpayers, companies or partnerships, in pursuit of real or imaginary crime, or acts that may not be crimes under our own law. The amendment authorises the Revenue to disclose information to people in other countries for unspecified purposes, because ''a criminal investigation'' is very wide.

The notes on the amendment simply say that the amendment provides for disclosure to the prosecution authorities. I do not know whether that means foreign Governments, Revenue departments, governmental and quasi-governmental agencies elsewhere, the United Nations or agencies of it, and countries within or outside Europe. The amendment is very wide. I would like the Minister to tell us what she envisages under it, particularly as there has been a change as to whether it should relate to Revenue or Customs functions. Under the Bill as originally published, disclosure for criminal proceedings has to relate to a function of Revenue and Customs. That has now become much more contorted. It has only to relate to a

''matter in respect of which the Revenue and Customs have functions''.

We are getting further away from the function of the Revenue and Customs. I am unclear as to why that should be. It seems to me that it will simply widen the possibility of allowing the departments to pass on information to pretty well anyone, in any part of the world, who purports to be an authority that may be undertaking a criminal investigation. Perhaps the Minister could give advice on those specific points about the Government amendment in addition to taking on board my strong support for the amendment that we have tabled.

Andrew Tyrie (Conservative, Chichester)

I rise to support amendment No. 4. I agree with just about everything that I have heard so far. It seems to me that this clause raises two questions, one of which was put to me by a number of accountancy bodies.

The first is whether clause 17(2)(a)(i), which states that disclosure can be

''made for the purposes of a function of the Revenue and Customs'',

could mean that a decision could be made by officials to trigger the disclosure of information to bring about a demonstration effect in order to secure a better practice by an industry. If the Minister and the Revenue department conclude that the behaviour of a section of an industry or a tax loophole is unacceptable, could the clause be used to expose what that company is doing, as a demonstration in order to achieve a particular outcome?

I raise that point not for hypothetical reasons, but because I have in my hand an extract from Accountancy Age, which states:

''Vodafone, one of the world's biggest mobile phone companies, has denied dodging hundreds of millions of pounds worth of VAT, following a confidential meeting with Customs and Excise.''

It goes on:

''Details of the meeting were leaked to the Financial Times just hours after the meeting took place.''

I do not think that Vodafone had much interest in leaking that information. It is possible that it was somebody at Vodafone, such as one of the advisers, but it is also possible that it was leaked by someone in government, who should not have done so. The main beneficiaries of the leak were the Government, because it is widely held in the industry that the demonstration effect has shocked parts of that sector into wondering whether the way in which they were hoping to achieve tax liability was appropriate.

I am confident that the Minister will reply that that has nothing to do with the Bill, and I will believe her if she tells me so. I am fairly confident that she will be able to tell me that the intention of the proposal is not that it would be used to trigger such demonstrations. I would like that reassurance, because a number of people who work in the industry have told me that they are worried that it could be used for that purpose.

The second major issue about this clause is the one that has seen most debate so far. Will the fact that the Government intend to remove oaths of confidentiality result in a change in the culture of confidentiality? I worry that it might. I support David Varney's appointment. He seems to be a good man, from everything that I have read about him. I have met him only once. He has been heard saying at a number of functions, talking to the tax industry, that his experience of Sweden has shaped his thinking about the way to collect tax.

I heard my right hon. Friend the Member for Wells say that it is a Latin trait for countries to want to make information public, but in Sweden one can apparently look up any citizen's tax returns for a token fee. David Varney goes around telling everybody this, and then points out that this is one possible route that countries might want to pursue in the long run. Doubtless this is his policy, and I hope—referring back to clause 10—that it will remain an election priority.

It is not only not our policy; it is not our culture. We do not have a culture of such disclosure in this country. Nor is it our culture to disclose information about people in public life; in the United States there are very clear limitations on the duty of confidentiality laid down in order to produce a higher level of accountability for politicians, for example.

In the UK, we start with the principle of confidentiality and we stick with it. We do not want the Swedish model, and we do not want the American model. I think political culture is crucial to the whole matter. I once had a meeting with the then Finance Minister of Malta, and we ended up discussing champagne socialism. He certainly was not a socialist. He said, ''I do not know why you are so squeamish about exposing champagne socialists, Andrew. Just get hold of their tax returns and publish them! What are you doing?''. He continued, ''You are far too soft. You should realise that, in Malta, at various times, if you are on the wrong side of the political fence you can soon find yourself pushing up the tulips.'' He described to me a political culture that was, with respect to tax collection, completely alien to the one I was trying to describe to him.

John Burnett (Liberal Democrat, Torridge and West Devon)

It sounds Sicilian.

Andrew Tyrie (Conservative, Chichester)

Of course, Malta was ruled from Sicily for a while.

Dawn Primarolo (Labour, Bristol South)

That is a very interesting story. Perhaps the hon. Gentleman could tell us in what capacity he was meeting a Minister of another country. Was he an adviser? Was he employed in the Treasury? Or was he there as a shadow Minister?

Andrew Tyrie (Conservative, Chichester)

I cannot—

Alan Hurst (Labour, Braintree)

Order. We should return to the subject under discussion.

Andrew Tyrie (Conservative, Chichester)

I will certainly tell the Paymaster General in some detail after the sitting.

The oath is important to us. I am sorry that the Government seem to think that we should get rid of it. We accept oaths as part of our culture in many ways. We accept that they bring an extra degree of solemnity and a sense of importance to what people say in courtrooms. We accept that it is important to take oaths before we take our seats in the House of Commons. A good number of my colleagues think that it should be appropriate for people giving evidence before Select Committees to take an oath to reinforce their duties.

I cannot see any harm at all in keeping the oath. I cannot see any downside whatsoever in the status quo. Even if some who take the oath consider it a bit old fashioned, it cannot do any harm. Even if only a minority of those who take the oath find they are the few that it means something to, it must surely be worth keeping. I feel that there is a spurious cult of modernity about with respect to the oath. I do not think that that will do anybody any good.

John Burnett (Liberal Democrat, Torridge and West Devon)

Will the hon. Gentleman give way?

Andrew Tyrie (Conservative, Chichester)

I am just winding up. I support my hon. Friend's amendment. We need to send a clear signal that we should keep things as they are.

Dawn Primarolo (Labour, Bristol South)

This is has been an interesting and important debate. We want to ensure beyond any shadow of doubt that those who have access to taxpayer-confidential information for the purposes of their employment should be under a duty not to disclose it. There should be a sanction for any civil servant foolish enough to do so. The issue is how we do that, rather than whether it should exist.

The hon. Member for Torridge and West Devon (Mr. Burnett) talked about Treasury officials and said that if they had access to taxpayer-confidential information they should be covered by the confidentiality provisions. I must make it clear that Treasury officials will not have access to taxpayer-confidential information. If they do not need it to discharge their functions they will not receive information. The new Department of Her Majesty's Revenue and Customs will not disclose to the Treasury officials any confidential information. Members of the Committee are correct to raise that matter. I want that to be clear on the record.

Mr. Burnett rose—

Andrew Tyrie (Conservative, Chichester)

Will the Minister give way?

Dawn Primarolo (Labour, Bristol South)

I will give way, but as I was responding to a point made by the hon. Member for Torridge and West Devon, I will take his intervention first.

John Burnett (Liberal Democrat, Torridge and West Devon)

I am grateful to the Paymaster General. I know that she regards this issue as one of great importance. I am glad that she has put that point on the record. There will be other organisations, for example, the Independent Police Complaints Commission—

Dawn Primarolo (Labour, Bristol South)

I was coming on to that point.

John Burnett (Liberal Democrat, Torridge and West Devon)

Fine. I will wait for her to knock that point on the head.

Dawn Primarolo (Labour, Bristol South)

I am grateful to the hon. Gentleman for being patient. I wanted to make it clear that Treasury officials will not have information and that any disclosure to them will be a criminal offence. Secondly, where information is required to carry out the responsibilities of, for instance, the Revenue and Customs prosecution service, the duty not to disclose it will transfer with the information together with a criminal sanction. Where taxpayer information is disclosed to the Independent Police Complaints Commission or to the Crown Prosecution Service there will be the same requirement to protect it.

Before I deal with the demonstration effect in the case that has been quoted, does the hon. Member for Chichester want to intervene?

Andrew Tyrie (Conservative, Chichester)

I am very grateful to the Paymaster General. A moment ago she said that Treasury officials would not have access to the information, but they will be sitting in offices next door to people who presumably will have access. We all know how offices work. Will the Revenue officials who are in the Treasury building have access to individual files and information on cases? Will the files containing that information be stored in the Treasury building?

Dawn Primarolo (Labour, Bristol South)

Yes, the Revenue officials who require access to that taxpayer information in discharging their duties will have access to information and they will be under a duty not to disclose that information. The hon. Gentleman seems to suggest that, despite that, the location, in a complex of offices, will somehow blur things. There is a requirement to protect information and the duty on an individual official is enforceable by prosecution for a criminal offence. That is extremely important. On protection, the question is not just whether offices happen to be shared, but how information is transmitted in offices.

The hon. Member for Chichester raised two points, one of which was about the demonstration effect. I am happy to reassure him that is not the Government's policy to name and shame, which would in any case require access to confidential information. As a Minister, I do not think that it would be possible to maintain taxpayer confidentiality under such a scheme. Taxpayer confidentiality and the confidence of the taxpayer to comply with the obligations relates exactly to the hon. Gentleman's point about disclosure of information in the knowledge that it will be used appropriately and not inappropriately, which must be continued.

The hon. Gentleman went on—I am mystified by this, quite genuinely—to refer to a individual taxpayer, Vodafone. I am afraid I have no knowledge of that. I could not comment on a taxpayer's information. Sometimes hon. Members laugh when I say that I cannot answer a question because of taxpayer confidentiality. In fact, that happened at the last Treasury questions, when I was asked about a taxpayer. I said that I was afraid I could not answer the question because of taxpayer confidentiality, which prevented me from having access to information on whether the organisation in question paid corporation tax.

I genuinely have no idea about the answer to the question that the hon. Member for Chichester asked. I am not aware of any complaints. No issue has been raised with me. The matter is important and I checked quickly with the Economic Secretary to ensure that the issue had not been raised with him. I am genuinely mystified and do not know the answer. The clear and important answer is that the demonstration effect is not being applied, will not be applied and is not sensible.

On the issue of whether to have an oath, the current state of play is that the Inland Revenue requires a declaration, but Customs and Excise does not and never has done. Provisions are written into the legislation and even into employment contracts. Staff understand clearly that they are not to breach confidentiality and have not taken the view that they should not protect it. Therefore, we needed to consider how to take forward the powerful arguments that hon. Members have made today, and I absolutely concur about the importance of protecting confidentiality.

Perhaps it would be helpful if I explained how the statutory duty will work, why it is preferable to the oath and why we took this route. The essential issues are standards and confidentiality. Clause 17 sets out a binding statutory duty of confidentiality, which will automatically bind all the staff of the new department on its creation, without the need to wait for any formal agreement on their part. It will also become binding on any new members of staff upon their taking up their job, even before the formalities have been concluded. Therefore, our approach immediately places a binding statutory duty on staff, whether they are in post at HMRC at its inception or join later.

I recognise the point hon. Members have made about culture, but a culture of taxpayer confidentiality requires continuous reinforcement within the organisation. That culture must be constantly reinforced during the working lifetime of an official. I appreciate that hon. Members see a formal statement on joining the department as important, but I think that we need to go further. The letter of appointment to the new department will include a specific section on the duty of confidentiality, and officers will have to sign to acknowledge and accept the terms.

I entirely recognise, as I did on Second Reading, the points that hon. Gentlemen have made about provisions in someone's employment contract not being drawn to their attention and about people not reading all their contract. However, the duty will be drawn to officers' attention and will be emphasised during induction training and in regular messages throughout their career. The uniform way in which the statutory duty will apply to every member of staff will be a valuable tool for building and maintaining the culture of confidentiality that we all want.

The route that the Government have taken is to place the duty in the employment contract and to require all staff to have the contract on moving to the new department. We want to ensure that the requirement of confidentiality is drawn specifically to their attention and that they are constantly reminded of it throughout their career through regular intranet communications. All of that is vital.

I need to correct myself about what I said was the current position. For Inland Revenue staff, it is at the beginning of their career; for Customs and Excise the matter is in legislation, but I think that I said it is not in long contracts. That is not correct. It is in the employment contacts of Customs and Excise. However, I want to go further.

My hon. Friend the Economic Secretary and I are looking at the matter. First, on appointment, it has to be drawn to the attention of the individual. Secondly, it must be done on induction, so that new members of staff know. Thirdly, it must be constantly reinforced throughout the career, which does not always happen. That underlines my contention, in reply to the hon. Member for Chichester, that being in the same building will not necessarily result in slippage, and that those who have the duty will not somehow forget it or breach it, even inadvertently. It is an enforceable part of their duty, yet we have gone much further.

We take many oaths at the beginning of a process; we do, as Members of Parliament, and so do Ministers. I certainly did as Paymaster General. However, I consider that not to be enough. The fact that taxpayer information is confidential will be constantly reinforced in the department, and it will be underlined in the employment contract. With respect to the strongly held views of the Treasury Select Committee, of which I took a great deal of notice, and with respect to the points that have been made today, I am still of the view that the route that the Government have chosen is stronger and better. I say that with regret because it is something on which we should agree. Should the matter of the oath be put to the Committee on a vote, I would ask my hon. Friends to oppose it.

Other, wider questions were put by the hon. Member for Torridge and West Devon about IPCC, the HMRC and the Crown Prosecution Service. Lawful disclosure of that information is covered in clauses 25 and 26. It is absolutely correct to make that clear.

Lastly, I shall deal with Government amendment No. 92. The amendment changes the wording because, on advice from my officials—I concurred with them—it was thought that the original formulation could be improved. There are proceedings to recover unpaid taxes; for example, it would relate to matters for which HMRC had a function for the collection of tax. However, the function proceedings themselves mean that there must be a drafting change to ensure that the wording is right but without changing the substance of the provision. The proceedings and investigations are limited to those having a connection with a function. It seems sensible to have a parallel power to make foreign disclosures, so that those HMRC and RCPO—Revenue and Customs Prosecutions Office—provisions can continue. However, they should be limited. We already have those arrangements.

The hon. Member for Torridge and West Devon and I frequently discuss double taxation treaties. There is an exchange of information provision to facilitate this type of exchange of information. That is provided for, improved and tightly controlled. It is negotiated within treaties. For the record, we have followed the agreements on the exchange of this information that are in double taxation treaties that have been negotiated.

David Heathcoat-Amory (Conservative, Wells)

Before the Paymaster General finishes, will she answer the question I asked her? It was about the width of the powers. They go way beyond provisions for information exchange and provide for information to be given not just for criminal proceedings but for criminal investigations and to any body holding itself up as a prosecuting authority anywhere in the world. Therefore, the powers appear to go much wider than the example that has been given.

Dawn Primarolo (Labour, Bristol South)

That was the right hon. Gentleman's second point on Government amendment No. 91. His first point was about Government amendment No. 92. I was going to come on to his second point.

Investigations from prosecutions will now be shared between HMRC and RCPO. Disclosures for the purpose of criminal investigation cover matters such as disclosing evidence to the Scottish sheriff to serve a search warrant under common law, and may cover disclosure of civil proceedings to get an injunction to freeze assets as part of criminal investigations.

Disclosure to foreign investigators and prosecutors are necessary when fraud spans national jurisdictions. Parliament has already endorsed that; it did so in the Criminal Justice (International Co-operation) Act 1990. The UK co-operates with our European partners for the mutual recovery of tax duties throughout the European Union. We want to make sure that those arrangements that already take place—they will have taken place when the right hon. Gentleman was a Minister—can continue to do so, but only within specific requirements. The amendments are as clear and precise as necessary; the right hon. Gentleman is right that information should be disclosed only for the intended purposes, and not for any other purposes such as fishing expeditions, or where the safeguards that I have outlined do not exist.

David Heathcoat-Amory (Conservative, Wells)

I am grateful, but the Paymaster General has still not answered my point. If the measure is to comply with international obligations, why is that not stated? I can think of examples where other countries—Zimbabwe, for example—might want information about one of their citizens who is now a resident of the UK. They could apply for and receive that information on the basis that it is for what they call a criminal investigation. That would have nothing to do with any international framework, and disclosure of that information would be against the interests of that taxpayer. Can the Paymaster General answer the point that I raised, rather than the one that she wished that I had raised?

Dawn Primarolo (Labour, Bristol South)

With respect, I did answer the question that the right hon. Gentleman asked. The example he gives is totally erroneous. I made it clear that the crime has to span national jurisdictions, and things have to fall within the requirements of the Criminal Justice (International Co-operation) Act.

David Heathcoat-Amory (Conservative, Wells)

Where is that stated?

Dawn Primarolo (Labour, Bristol South)

I am saying it to the right hon. Gentleman now, on the record. If he would like me to write to him chapter and verse on it, I should be happy to do so. These are powers from prior to 1997, and it is not necessary for their machinery to be included in the Bill. It is only necessary that the provisions tie in with the relevant legislation.

Michael Fallon (Conservative, Sevenoaks)

I am grateful to the Paymaster General for the seriousness with which she has taken this debate, a seriousness that this issue deserves. She has accepted that we need to reinforce confidentiality. There is common ground among Committee members of all parties. The difference between us is how best to reinforce confidentiality. The Paymaster General says that the duty of confidentiality will be written into contracts; that there will be a section on it in the letter of appointment; that it will be included in induction training; and that the message about confidentiality will be repeated throughout an official's career.

First and foremost, none of those four things is incompatible with having the oath. She says that we would go further than the oath. If that is the position, why dispense with the oath? None of those things would replace the oath. It could stay at the beginning, and those four additional points could be incorporated. I do not see any case for dispensing with the oath.

When we asked Mr. O'Donnell about that point, he replied, as I have said, that

''maintaining taxpayer confidentiality is vital.''

He went on to say:

''The Chancellor made it absolutely clear to me at the start that under no circumstances should anything we do damage that.''

Dispensing with the oath would damage that. I welcome the steps that the Paymaster General offers to reinforce confidentiality, but I still think that there is a very strong case for retaining the statutory declaration. I shall press for a Division on this issue.

John Burnett (Liberal Democrat, Torridge and West Devon)

None of us demur from what the Paymaster General has said. We all want to ensure confidentiality, and we want Inland Revenue employees to be buttressed in that. Making an oath is not just a symbolic, but a solemn matter. We ask for an oath from executors and those applying for letters of administration. We want to keep a Rolls-Royce system of Inland Revenue confidentiality and we want it grafted on to the combined agency of the Inland Revenue and Customs. The Paymaster General has made admirable points, and the criminal sanction is spelled out clearly in the relevant clauses. However, let us not allow even the perception of watering down to occur; let us keep the oath. I ask the Paymaster General to consider that matter again in the interests of preserving the highest standards at the combined agency of the Inland Revenue and Customs.

Dawn Primarolo (Labour, Bristol South)

I want to respond specifically to the hon. Gentleman's point, but I am not sure how to do that. I am clear in my own mind. The Economic Secretary and I have taken lots of advice. Having an oath requires a wait for formal agreement. However, the requirements for the contract become immediate and because many staff are already employed, they will transfer as the contract becomes enforceable.

I do not see the oath as comparable to the mechanism that I have put in place in the Bill, the employment contract. I do not want to do anything that will lead any individual to believe that what we propose is less powerful, and I am not prepared to give the hon. Gentleman an undertaking today that I will reconsider the answer—that may not be strong enough for him—but I am prepared to consider the matter again in discussion with the Economic Secretary.

Let me be absolutely clear, as I do not want to mislead the hon. Gentleman; that may result in me not changing my mind. I am trying to be helpful to the hon. Gentleman. I do not want to say that I will go away and look at the matter, raising his expectations so he thinks that that really means that I will go away and add the oath. I am not prepared to give that undertaking. But I am prepared to say that I will consider looking at the Hansard report of exactly what the hon. Member for Sevenoaks said. I will look again at what I am doing and I will come back to the Committee. If that is not a strong enough undertaking, Opposition Members may want to press the amendment to a Division. If so, I ask my hon. Friends to oppose it. However, it would be better if the Committee agreed rather than had a vote on such an important issue.

John Burnett (Liberal Democrat, Torridge and West Devon)

I would just like to say that I have often debated with the Paymaster General, a person of great integrity who is held in high regard in the House. I shall await the result of her deliberations.

Michael Fallon (Conservative, Sevenoaks)

I suspect that that puts the onus back on me. I am grateful to the Paymaster General, who has listened to the debate. I am particularly grateful for her undertaking, which I fully understand comes with certain conditions. However, I do not see why we cannot have the new provision, providing the reinforcement that we are after. If I accept that that itself reinforces the oath, she may accept that there is some solemnity and some exceptional value to the statutory obligation. I hope that on that basis she will undertake to reflect further on the matter. I fully understand if she cannot commit herself to doing so. However, should she come to such a conclusion, of course she will understand that we may want to return to the matter at a later stage.

Andrew Tyrie (Conservative, Chichester)

I thank the Paymaster General for being prepared to read Hansard and for agreeing to come back to us following her deliberations. I am very grateful for that.

Amendment agreed to.

Amendments made: No. 90, in clause 17, page 7, line 38, at end insert

'or [Disclosure to prosecuting authority],'.

No. 91, in clause 17, page 7, line 39, leave out from 'civil' to end of line 40 and insert

'proceedings (whether or not within the United Kingdom) relating to a matter in respect of which the Revenue and Customs have functions,'.—[Dawn Primarolo]

Amendment proposed: No. 92, in clause 17, page 7, line 40, at end insert—

'(ca) which is made for the purposes of a criminal investigation or criminal proceedings (whether or not within the United Kingdom) relating to matter in respect of which the Revenue and Customs have functions,'.—[Dawn Primarolo.]

Question put, That the amendment be made:—

The Committee divided: Ayes 8, Noes 4.