I beg to move amendment No. 19, in clause 81, page 56, line 7, leave out 'thinks' and insert

'has reasonable grounds for believing'.

I should like to incorporate the few remarks that I have to make in the clause stand part debate with my comments on the amendment, tabled by me and my hon. Friend Dr. Cable. Clauses 81 to 84 amend the Police and Criminal Evidence Act 1984, and I want to place it on the record that it was argued forcefully from our Benches at the time that powers should be extended beyond the police to other arresting authorities, including Customs and Excise. In relation to the 1984 Act, the Bill seeks to reflect the fact that the Inland Revenue and Customs and Excise have since merged. Having said that, we need to be clear about what powers HMRC will take on, and the context in which they will be used. The need to amend the Act must not result in some kind of mission creep in relation to its scope.

Amendment No. 19 flags up an issue that I will flag up again in clause 96 and schedule 24, which deal with penalties issued by HMRC for errors. The issue relates to the burden of proof for action that can be taken depending on what an HMRC officer "thinks". I want to query not the substance of the clause, but how we deal with the issue of objectivity. There is a range of options. We could take it that an officer just "deems" something to be the case, whereas the use of the word "thinks" implies some element of objectivity and some grounds. There should, however, be some burden of proof, whereby the officer

"has reasonable grounds for believing" that the previous section should not apply. If we wanted total objectivity, that reference could be taken out altogether, and the clause would read, "if an application under Schedule 1 would not succeed". I would not want to push it that far; I am simply saying that there should be "reasonable grounds for believing" that to be the case. That issue becomes even more important when we deal with penalties for errors.

I hope that the Minister will respond favourably, as I will raise those issues later, and what he says may have a bearing on the amendments that we choose to table. I hope he will give positive consideration to the need for more objectivity in the language. Although it could be argued that the present wording is easier to understand, there are other more complex drafting issues. It must be clear that there is that element of objectivity.

I, too, welcome you to the Chair, Mr. Illsley.

Amendment No. 19 appears to relate specifically to the production of documents under the proposed new section 14B of the Police and Criminal Evidence Act 1984. As the amendment is so specific, I propose to speak about it very briefly in order to reserve the main part of my remarks on clause 81 to our amendment No. 2.

Amendment No. 19 seeks to alter the wording relating to the conditions under which an officer of Her Majesty's Revenue and Customs may use PACE to apply for an order that documents may be produced. The change in the wording from "thinks" to

"has reasonable grounds for believing" represents a tightening of the circumstances in which the power may be exercised, and the Conservatives do not object to it.

The present wording represents a subjective test, whereas the wording proposed in the amendment represents an objective test. I urge my hon. Friend the Financial Secretary to think very carefully about the Government's response to the amendment.

Following the recent Channel 4 programme and with reference to our previous debate, let me say that a number of my constituents "think" that human activity does not contribute to global warming. Personally, I do not "think" that those individuals have "reasonable grounds" for believing that. There is a difference between the two.

I acknowledge the broader comments made by Julia Goldsworthy, and the fact that Mr. Francois promised to make his own broader comments on his amendment in the next group. With your permission, Mr. Illsley, I shall make my broader comments in response to him when we debate the next group of amendments.

On amendment No. 19, however, I want to be quite precise. I can tell the hon. Member for Falmouth and Camborne that it is not necessary. The phrases "the officer thinks" and "the officer has reasonable grounds for believing" have the same meaning and effect in the circumstances covered by the clause, but I consider that "think" is clearer, simpler and shorter. Under administrative law a public officer must think reasonably; otherwise, his decision would be unlawful.

I hope that the hon. Lady will reflect on another point. The word "thinks" is well established in United Kingdom law to identify cases in which a judgment must be made, and also to make clear who will make that judgment.

As a veteran of countless criminal justice Bills, I would say that it is normal for the concept of reasonable belief, rather than the word "think", to be used in them. It appears in an awful lot of criminal justice Acts. The reasonableness of an officer's thought can be challenged only through administrative court proceedings, which is a very long-winded way of arriving at the right decision. I do not think that the concepts "the officer thinks" and "the officer reasonably believes" are entirely congruent.

As I have just explained, an officer has a duty to think reasonably, because otherwise his decision would automatically be unlawful under administrative law. I respect the hon. Gentleman's experience of criminal justice legislation, and the Government have given him plenty of opportunity to accumulate it in recent years when he has spoken on such legislation from the Front Bench. He may be interested to learn, however, that the word "thinks" is used over 3,000 times on the statute book, and I believe that its use here is appropriate.

I can tell the hon. Lady that we have received no representations suggesting that the word "think" in clauses 81 and 82 should be removed or amended since the Bill was published at the end of March—apart, of course from her amendments.

The hon. Lady mentioned clause 96. She may be aware that representative bodies and tax professionals have expressed reservations to us about the phrase "HMRC thinks" in respect of the clause and the schedule on civil penalties, but the underlying concern raised on those provisions is entirely separate from the clauses on criminal investigations. I will not go into the distinction here. I am sure that we will have a chance to do so in Committee, but in recognition of the anxiety that has been expressed and in response to those representations that have been made, I intend to table an amendment in the Public Bill Committee to clause 96 and schedule 24 on civil penalties. However, it would be inappropriate to change the word "thinks" in clause 81, as her amendment suggests. I therefore hope that she will not press the amendment.

I am somewhat reassured by that. I was hoping to ensure that the Bill was consistent in terms of the language used. I think that, under the amendment, there would be a change from the subjective to the objective. I would be quite happy with "reasonably thinks" if the Minister wants straightforward language. He is right, however, that the key area of concern has been around clause 96 and the schedule that relates to it and there have been concerns about the use of exactly that language. I and my hon. Friend Mr. Heath have tabled amendments on that. I hope that the Minister will accept them when we debate the measure in the Public Bill Committee. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment No. 2, in page 56, line 47, at end insert—

'(2B) Any power or function conferred by a provision of this Act shall, so far as it is exercisable by an officer of Her Majesty's Revenue and Customs, only be exercised by an officer who has been duly authorised for that purpose by the Board of HMRC and who has been properly trained and supervised.

(2C) For the purposes of subsection (2B), what constitutes "properly trained and supervised" shall be decided by the Board of HMRC with the approval of the responsible Minister.

(2D) Subject to subsection (2E), the number of officers authorised under subsection (2B) shall not exceed 500 at any one time.

(2E) The Treasury may by order amend the number of officers mentioned in subsection (2D).

(2F) The annual report of HMRC shall include an analysis of the use made by officers of HMRC of the powers or functions conferred on them by this Act. The report shall cover the frequency of use of the relevant powers or functions and the circumstances in which they were invoked.

(2G) The report mentioned in subsection (2F) shall also include an analysis of the use made by officers of HMRC of the equivalent powers and functions in Northern Ireland and Scotland.'.

With this it will be convenient to discuss the following amendments: No. 18, in page 57, line 12, at end add—

'(12) This section shall come into force on a day which the Treasury may by Order appoint.

(13) No Order under subsection (12) may be made unless—

(a) the Treasury has prepared and laid before the House of Commons a code of practice relating to the exercise of the powers conferred by this section, setting out in particular the circumstances in which the relevant powers of arrest are expected to be used; and

(b) the code mentioned in sub-paragraph (a) has been approved by a resolution of the House of Commons.'.

No. 20, line 12, at end add—

'(12) Any power of arrest conferred by a provision of this Act as it amends section 114 of the Police and Criminal Evidence Act 1984 shall, so far as it is exercisable by an officer of Her Majesty's Revenue and Customs, only be exercised by an officer or officers serving in the Criminal Investigation Directorate of HMRC.'.

As the Minister mentioned it, may I say quickly that Conservative Members welcome his admission that there has been concern on clause 96? We have received representations on the matter and we look forward to seeing his amendment in due course.

On amendment No. 2, any extension of the powers of the state relative to the individual is a matter that should rightly provoke parliamentary scrutiny, particularly, as in this instance, where it potentially involves powers of arrest. Given that, my purpose this evening is to seek some specific assurances from the Minister about how the proposed new powers will operate in practice and some guarantees—I use that word deliberately—that they will not be used arbitrarily to put undue pressure on legitimate taxpayers.

The background to all this is the merger of the Inland Revenue and Customs and Excise, which was brought about by the Commissioners for Revenue and Customs Act 2005, which received Royal Assent on 7 April 2005. Before the merger which created Her Majesty's Revenue and Customs, the two heritage organisations had different roles and different powers accordingly. HM Customs and Excise has historically had relatively strong powers, including powers of arrest and seizure, which evolved from its role in fighting smugglers and more latterly drug traffickers. Before the merger, those powers were based on the Police and Criminal Evidence Act 1984, or PACE as it is more generally referred to, and specifically section 114, which conferred specialist powers on Customs and Excise officers to help to fight crime.

In contrast, the Inland Revenue was equipped with more restricted powers designed predominantly to help it to combat so-called white collar crime in areas such as financial services and the deliberate evasion of tax. Importantly, however, Inland Revenue officers did not usually have any powers of actual arrest and needed to be accompanied by a police officer if and when that became necessary.

In the spring of 2006, the Treasury initiated a consultation process on how the powers of the two heritage organisations might effectively be combined. There have now, in fairness, been three separate consultation documents relating to that process, including a second technical consultation in August 2006 and a third revised consultation in January this year. The consultation included a draft copy of the statutory instrument that the Government intend to use to initiate the powers contained in part 6 of the Bill. Therefore, we accept that the change has not come out of the blue and that the Treasury has received a considerable number of responses that have led, at least in part, to the drafting of part 6.

Given that, we are not opposed in principle to combined powers for HMRC. Our concern is the extent of such powers and how they are likely to be employed in practice. The Treasury has apparently sought to reassure the professional bodies that those powers, including that of arrest, will be used sparingly; but, importantly, few such guarantees are stated in the Bill. My party is by no means alone in being concerned. The Chartered Institute of Taxation, in a consultation response of 16 February this year, stated:

"We continue to believe that, as a matter of principle,. HMRC should have civil powers to administer tax, whereas criminal matters should be for the police. We do not see any conflict between this and the need to ensure appropriate powers are available to tackle MTIC fraud and other attempts to steal from the taxpayer."

It went on that if HMRC is given the powers,

"the issue becomes one of ensuring those powers are used only by those who need them, and are subject to proper control."

I have a great deal of sympathy with what the hon. Gentleman is saying: there is a need to identify which officers have arrestable powers. I am, however, concerned about amendment No. 20. It appears to preclude a Customs officer at a port of entry having powers of arrest unless he is a member of the criminal investigations directorate; otherwise, he would need to be with a person in the office of constable to effect an arrest. That cannot be what the hon. Gentleman intends.

I take on board the hon. Gentleman's point, but it would be up to HMRC to decide where to deploy its CID officers. Also, there are usually police officers available at most ports.

In a more recent note produced after the publication of the Bill, the Chartered Institute of Taxation argued:

"We have had assurances that the use of the powers will be restricted to a small cadre of people, properly controlled and trained. There does not seem to be anything to give effect to that promise in the legislation—why not? It would be preferable to have such powers included in the legislation, rather introduced by 'administrative procedures'."

The Institute of Chartered Accountants in England and Wales, in its parliamentary briefing of 24 April, said:

"It is vital that HMRC make publicly clear the circumstances in which the powers of arrest will be used...In order for Parliament to properly debate these clauses, the promised statement of practice should be made available to coincide with the debate."

It added:

"Fundamentally, we question whether HMRC ought to have criminal investigation powers at all. We think that serious organised tax crime ought to be dealt with by the Serious Organised Crime Agency (SOCA) in the same way as any other organised crime."

The Law Society reflected those concerns in its parliamentary briefing of 20 April when it said:

"HMRC have made significant efforts to separate out functions so that criminal investigation activity is not confused with civil investigation activity and separate personnel are involved...There is no statutory basis, however, for this separation of functions: it may be appropriate to consider whether there should be a separation."

It was also concerned that

"In the adoption of PACE under the statutory instrument no particular grade of officer is specified to exercise the powers...There is no statutory basis for the separation of criminal from civil powers within HMRC...HMRC have taken these issues seriously but it may be appropriate for a legislative framework to exist as well."

The Professional Contractors Group, which represents many small businesses including in the IT sector, stated:

"The culture of tax inspectors is becoming increasingly aggressive and destructive, and less concerned with the law."

With regard to the proposed criminal powers, the PCG states:

"PCG calls for clarification over when new powers will apply, a guarantee that they will never be used as part of routine compliance work and for this guarantee to be enshrined in statute. This separation must be as solid as possible and not liable to be eroded either by the misapplication of powers by inspectors or by any future administrative reorganisation within HMRC."

PricewaterhouseCoopers has argued—in a response to HMRC's consultation of 14 February 2007, given by its partners John Whiting and Tom Cawdron—that

"the use of powers must be separate from procedures for civil investigations...Criminal gangs allegedly committing MTIC fraud and tax credit fraud on a vast scale need to be tackled with an appropriate degree of tax specialist support. We believe that it is a mistake for tax officials (using the word 'tax' in the widest sense) who may return to a normal tax environment at the end of their spell of duty in RCPO to investigate such organised crime."

Given all those serious concerns, can the Minister now provide Parliament with some specific on-the-record assurances about how these powers will be exercised in practice? First, who can exercise the powers and how limited will their exercise be within HMRC? Our amendment No. 20 argues that the ability to exercise them should be confined to HMRC's criminal investigations directorate, which specialises in fighting fraud and criminal activity but does not ordinarily deal with day-to-day tax affairs. That might help reassure taxpayers, including businesses, that HMRC will not use the threat of powers of arrest as leverage in ordinary tax disputes.

The regulatory impact assessment that accompanied these proposals, under the heading "Training given to HMRC officers", states:

"The structure of HMRC with a separate Criminal Investigations Directorate, ensures the same officers do not deal with both criminal and non-criminal investigations. Officers responsible for criminal investigations will receive all the relevant training and will not have any other duties such as carrying out routine compliance work".

However, the RIA is not part of the Bill, which in clause 81(9)(2)(a) states:

"A certificate of the Commissioners that an officer of Revenue and Customs had authority under subsection 2(e) to exercise a power or function conferred by a provision of this Act shall be conclusive evidence of that fact."

Given that apparent dichotomy, can the Minister assure the Committee this evening that the powers in part 6 of the Bill will be exercised only by officers of HMRC's criminal investigations directorate, and not by other, wider elements of the organisation, as well?

Secondly, in what circumstances will the powers be used? It is important to establish that such powers should be used only to fight suspected fraud or other related crime, and not as leverage in ordinary day-to-day tax disputes. What is important is not just the power of arrest but the threat of its use. It would be quite wrong for HMRC officers—a number of whom are now incentivised regarding the annual revenue that they are targeted to bring in—to use the threat of arrest by HMRC as leverage in a tax negotiation in which there is no real suspicion of fraud or other criminality. What assurances can the Minister give the Committee that that will not be allowed to happen, and that potentially overzealous tax inspectors will be kept in check if these powers are granted?

Let us consider some simple instances. Can the Minister assure us that an individual who makes a genuine mistake on their annual tax return, even if it is in their favour, will not be threatened with arrest? Similarly, can he assure us that a small business that is experiencing genuine cash flow problems, and which is therefore having difficulty meeting its tax payments, will not have its partners or directors threatened with arrest as a result? We also presume that someone who is in dispute with HMRC over an attempt to recover an alleged tax credits overpayment—there were a third of a million such people last year—will not be threatened with arrest in any circumstances, save where there are reasonable grounds to suspect that they have been involved in an organised attempt to defraud the system? Conversely and for the record, we do expect such powers to be used in fighting organised fraud such as MTIC fraud, which is costing the UK taxpayer billions of pounds a year.

Thirdly, when will the specific guidance that relates to the operation of the powers be issued. The RIA, under the heading "Communication of the changes", states:

"HMRC has undertaken to publish material setting out information on which officers are entitled to use criminal investigation powers, how that work is organised in HMRC and how the powers are organised."

As I have already stated, the draft order to implement part 6 of the Bill has been published, but when I checked with both the Library and HMRC this afternoon, the specific guidance about the implementation of the powers in practice, as opposed to just the powers themselves, had still not been published. It would, obviously, have been very helpful to have that information before the House before today's debate.

In addition, it should be borne in mind that even when we do have such information, it will still only be in the form of guidance, or some form of code of practice as—in fairness—has been suggested by the Liberal Democrats in amendment No. 18, and so will not be on the face of the Bill.

Similarly, the RIA, under the heading "Implementation and delivery plan", also states:

"The changes being made come into force according to an order to be made by the Treasury. The order will not be made until the training has been rolled out appropriately."

The Treasury has already published the draft order as part of the consultation, but without a potential implementation date. So assuming for a moment that the Bill receives Royal Assent before the summer recess, when is the order intended to be made, and is the Treasury confident that all the relevant training will have been completed by that time?

In summary, we can understand why the Government might want to do this, following on from the HMRC merger. We accept that they have carried out a consultation exercise in advance of seeking to codify these combined powers in part 6 of the Bill. Nevertheless, we remain concerned by the extent of these powers and, specifically, how they might be exercised in practice. The concern spreads wider than just the Opposition. It includes the Chartered Institute of Taxation, the Institute of Chartered Accountants in England and Wales, the Law Society, the Professional Contractors Group and respected members of the accounting profession, including those from PricewaterhouseCoopers.

Parliament must be reassured that the powers will not be used arbitrarily and that HMRC officials will not use them or threaten to use them simply as leverage in tax negotiations. We have already seen a significant hardening of HMRC's attitude in respect of the adjudication of tax credit overpayments and we are concerned that such a hardening in other areas could take place once the new powers have been granted to the combined organisation.

To this extent, we have proposed two amendments to limit the exercise of such powers to a finite number of specially trained officers—amendment No. 2—or to those working specifically in the criminal investigator's directorate at HMRC, which is amendment No. 20. I shall listen carefully to the Minister's reply before deciding which, if either, of the amendments to press to the vote.

The full RIA outlines the necessary balance to be struck between meeting HMRC's needs and making the provisions consistent with PACE 1984, and safeguarding citizens. Amendments Nos. 2 and 20 make much sense, although amendment No. 2 makes more sense than amendment No. 20. If one is pressed to a Division, we would be more inclined to support the former.

Amendment No. 2 makes sense because it outlines clear requirements for training, supervision and numbers. I would be interested to know where Mr. Francois got the number of 500 from, but it can be amended by order if it is not right, and that makes sense. It is also sensible to ensure that HMRC has to report back on the issue in its annual report. We need change, because PACE 1984 relies only on Customs and Excise and we do now have a merged organisation.

Amendment No. 18 reflects our concerns that we are debating these powers without being clear about how they will be exercised, the circumstances in which they will be exercised and who will exercise them.

With any other Bill, the Government would have other opportunities—such as before it went to the Lords, for instance—to lay the code before the House, but the fact that this is the Finance Bill means that we will not have another chance to debate the matter after tonight. Moreover, we are holding the debate blind because we do not have the code, and that is why the amendment would ensure proper time for appropriate parliamentary scrutiny of this matter.

At the very least, I hope that the Minister will be able to assure the House that appropriate parliamentary time will be set aside to debate the code, when the Treasury makes it available. Although amendment No. 2 is better than No. 20, we cannot support it because, in reality, it is possible that only one officer will be present when an arrest has to be made. PACE was supposed to make sure that an arresting officer would be available when an arrest had to be made, so I hope that the Minister will respond to the proposition in our amendment No. 18.

I hope that my response will give the reassurances that the hon. Members for Falmouth and Camborne (Julia Goldsworthy) and for Rayleigh (Mr. Francois) are looking for. The new powers in clause 81 and those that follow it are very important, and I hope that what I say will expedite the business on those further clauses.

The Bill is designed to improve HMRC's ability to respond to serious criminal attacks on the UK's tax and tax credit systems. HMRC's criminal investigation powers will be based on the modern standard already set by Parliament for other agencies facing similar threats—that is, the Police and Criminal Evidence Act 1984. That Act is well understood by courts, lawyers and law enforcement agencies. It has been in force for more than 20 years, and the former Lord Chief Justice, Lord Wolff, has said that it is central to the working of the criminal justice system. He said that it reflects Parliament's intention as to what should be the balance between the necessary protection of the rights of the individual citizen and the right of the public as a whole that those who commit crimes should be convicted and then punished.

That is precisely what the 1984 Act's incorporation for HMRC is designed to do. As the hon. Member for Rayleigh said, it follows the merger of Inland Revenue and Customs and Revenue in 2005, which is when my right hon. Friend the Paymaster General launched the major review of powers. That review involved wide consultation about the powers and deterrents available to HMRC, and about the safeguards available to taxpayers.

Two elements of this year's Finance Bill cover criminal investigations and civil penalties that emerge from that review of powers. The proposals are based on extensive consultation that included discussion with the review's consultative committee of independent experts. In addition, there were three public consultation exercises, and meetings with representative bodies and legal experts from across the UK.

There was a time when the tax authority was a less obvious target for organised criminal attacks, but the threat of organised financial crime is now considerable and serious in both the public and private sectors. The MTIC fraud mentioned by the hon. Member for Rayleigh, and the organised criminal attack on the tax credit system that included the theft of thousands of identities from unsuspecting employees, are just two examples of what can happen. Staff at HMRC are uncovering serious criminal activity across a range of the agency's duties, and the globalisation of trade and financial services is enabling criminals to scale up the amounts involved in complex business frauds.

As a result, HMRC must have modern and effective powers to respond to the changing nature of the criminal threat. However, many of the powers inherited from the Inland Revenue and from Customs and Excise are no longer suited to that purpose. Furthermore, misalignment between the powers leads to confusion; for example, under existing legislation, an HMRC team investigating a case of fraud that covered direct and indirect tax would need two separate warrants to search premises, two separate teams to undertake the search and, if arrests were made, the suspect might have to be arrested twice—once by an HMRC officer for the indirect tax fraud and once by the police. Clearly, that is nonsense and undermines the advantages of the alignment and modernisation that Parliament approved in the merger to create a single UK tax authority.

The majority of responses to our consultation recognised the importance of consistent powers for all tax fraud investigated by HMRC and supported adoption of the relevant parts of PACE as a sensible way to achieve that. The Law Society of England and Wales supported the adoption of PACE on the principle that

"the powers should so far as possible be consistent with powers available to other agencies dealing with criminal offences."

The hon. Member for Falmouth and Camborne expressed concern about mission creep. Not all the PACE powers will be applicable to HMRC; indeed, the provisions we are debating would give HMRC access to only about one third of PACE. Powers not appropriate to the tax authority are not included; for example, PACE stop and search provisions and the powers to take fingerprints and to charge and bail suspects would not be available to HMRC. However, bringing HMRC criminal investigations into PACE would ensure that all the safeguards enshrined in that legislation are directly applied to those investigations. PACE codes of practice would apply to HMRC; they set out important safeguards, including that the powers of entry, search and seizure must be fully justified before use and that officers must consider less intrusive means before applying for search warrants.

Some people have argued that the exercise represents a levelling up of old Customs powers to the Revenue. That is not the case. In some instances, the provisions would introduce higher thresholds and stronger safeguards; they also mean a narrowing rather than an extension of the number of HMRC officers who can exercise the powers. The power of arrest would be restricted to authorised officers with the necessary training, who needed to perform an arrest in the course of their duties. That will mean removing the power of arrest from about 18,000 ex-Customs officers who at present have the power but no operational need to use it.

Some Members expressed concern that criminal and civil matters would get mixed up. I assure them that the law makes it clear that the powers we are considering can be used only where it is reasonable to suspect that a crime has been committed and only for the purposes of a criminal investigation into that crime. None of the powers can be used for civil matters. No HMRC officer is responsible for both civil and criminal inquiries. The only guidance not yet published by HMRC is on the detail of the training courses officers must complete before they are authorised to use the powers. As promised, the guidance will be published before any powers come into effect.

Subsections (2B) and (2C) of amendment No. 2 seem to be intended to ensure that PACE powers are used only by HMRC officers who are properly trained and authorised. However, that objective is already ensured by the clause. Under subsection (8) and the draft regulations applying PACE to HMRC, which were published on 2 April, PACE powers and functions are available only to HMRC officers authorised by the commissioners. Under administrative law, the commissioners may delegate functions only to properly trained and supervised officers, and only officers who need to use those powers to carry out their duties will be authorised.

The procedures for ensuring that the rules for authorising officers are applied correctly are subject to independent inspection by Her Majesty's inspectorate of constabulary. It is correct that none of the powers will be made available to officers of HMRC who carry out more routine duties such as checking tax returns. By restricting the powers to those officers within HMRC who have a direct business need, the number of officers with the power of arrest will be reduced from a current total of about 24,500 to 6,500—a reduction of less than a third and more than a quarter. Those 6,500 include 2,000 criminal investigators and about 4,500 officers working to protect the UK's borders, as mentioned by Mr. Heath. Those officers need the powers to carry out their duties.

That brings us to subsections (2D) and (2E), which are designed to limit the number of HMRC officers able to use PACE powers to 500—a figure that could be varied by order. Frankly, that is a ridiculous proposal and a random number. HMRC currently has 1,500 officers trying to tackle MTIC fraud, about 500 of whom have access to criminal investigation powers. The amendment would mean that the 200 criminal investigation officers tackling tax credit frauds, another 160 officers working on complex business fraud, 500 combating smuggling and about 230 tackling criminal finance and money laundering would simply be prevented from exercising their duties. That would certainly apply without the constraint of the constant legal amendments required to do so. What is important for the Committee to note is that the powers are available only to trained officers who need them to carry out their duties, who work in the relevant sections of HMRC and whose work is properly supervised and inspected.

The hon. Member for Rayleigh may be aware that PACE provisions already require statistics to be kept and published. HMRC will in future continue to meet the relevant standards set by PACE as applied to all law enforcement agencies and then exceed them by continuing to publish a much wider range of statistics than it does currently.

Amendment No. 18, and the requirement to prepare codes of practice relating to the exercise of powers, is also unnecessary. PACE codes of practice have been approved by Parliament and are available to the public. Clause 81, as drafted, applies those codes directly to HMRC's criminal investigations.

Finally, on amendment No. 20, the hon. Member for Somerton and Frome was again correct that it would restrict the exercise of PACE powers of arrest to officers currently and exclusively serving in the criminal investigation directorate. Although they require the power of arrest, it is also needed at the frontiers. It is obvious that officers at the frontier need to be able to arrest smugglers, where appropriate, as they are detected entering or leaving the UK. Officers carrying out that work are based in HMRC's detection directorate rather than its criminal investigation directorate.

On that basis, I hope that the hon. Members for Rayleigh and for Falmouth and Camborne feel that they have had their reassurances and that the hon. Gentleman will not press any of his amendments. If he does, I shall have to ask my hon. Friends to resist them.

I have listened very carefully to the Minister's case with regard to these important powers. He explained the background to what Her Majesty's Treasury is seeking to achieve. Conservative Members appreciate the need to combat fraud, especially highly organised fraud against elements in our VAT and tax credit systems. I am grateful for the Minister's assurance that the powers will be used only for criminal, not civil, matters. That is an important assurance placed on the record in Hansard tonight .

Nevertheless, the number of officers that the Minister mentioned as having been given these powers was 6,500. I understand, however, that in the Treasury's discussions with the professional groups, the limit was originally specified as 1,000. Then when the Treasury was pressed, it conceded that the figure might, at most, be 2,000. Now the Minister comes to the House and asks for 6,500 of these officers to be so empowered to arrest our citizens. We on the Conservative Benches feel that we need to place some constraint on that. We think that it is right that the powers should be given to specialised officers within HMRC, who are specially trained to use them.

Having listened to the Minister, I am minded to withdraw amendment No. 2, but to press amendment No. 20 to a vote, so that the powers would be confined to specially trained officers in HMRC's criminal investigations directorate and HMRC could then choose to deploy some of them at the border posts if it saw fit. If the Minister thinks that he can tell the professional groups that there will be only 1,000 officers, then that there will be at most 2,000, and then come to the House and say, "Oops. I actually meant 6,500", he should know that we think that perhaps he has not behaved as well as he might.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 20, page 57, line 12, at end add—

'(12) Any power of arrest conferred by a provision of this Act as it amends section 114 of the Police and Criminal Evidence Act 1984 shall, so far as it is exercisable by an officer of Her Majesty's Revenue and Customs, only be exercised by an officer or officers serving in the Criminal Investigation Directorate of HMRC.'.— [Mr. Francois.]

Question put, That the amendment be made:—

The Committee divided: Ayes 118, Noes 279.

Question accordingly negatived.

Clauses 81 to 83 ordered to stand part of the Bill.

Schedule 22 agreed to.

Clause 84 ordered to stand part of the Bill.

Schedule 23 agreed to.