Question proposed, That the clause stand part of the Bill.

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.

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.

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.

Will the right hon. Lady give way?

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.

Will the Paymaster General give way?

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.

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?

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.

The trust fund?

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

Will the right hon. Lady give way?

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.

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?

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.

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.