Clause 85

Finance Bill – in a Public Bill Committee at 4:30 pm on 5th June 2007.

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Search warrants

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

Photo of John Healey John Healey The Financial Secretary to the Treasury

I welcome you to the Chair this afternoon, Mr. Illsley, and Members back to the Committee.

We move on to a new section of the Bill, in which we deal with matters relating to the powers of Her Majesty’s Revenue and Customs and the penalties at its disposal. HMRC is responsible for criminal investigations throughout the United Kingdom where suspected offences relate to one of its functions—for example, a serious tax offence. Being of a United Kingdom nature, those investigations can involve more than one country of the UK. For example, evidence concerning an offence committed in England might be held at an address in Scotland or Wales. In those cases, it is important that evidence is obtained in a way that is acceptable to the court where the prosecution will take place and that it is clear which statutory provisions and safeguards apply.

Clause 85 ensures that a search warrant granted in England and Wales under section 8 of the Police and Criminal Evidence Act 1984PACE—in connection with an HMRC investigation can, when appropriate, be executed in Scotland once suitably endorsed by a court in Scotland. Schedule 23 has similar provisions for warrants granted in Scotland to be executed in England. In a similar way, clause 86 applies some existing provisions that allow various powers of arrest or detention of suspects, and search powers on arrest, to be exercised in another country of the United Kingdom when appropriate.

I make it clear to the Committee that the clause does not provide HMRC with new powers, but allows existing provisions to be used appropriately. It will provide greater clarity regarding which provisions can be used and which safeguards apply. It should therefore benefit citizens, the courts and HMRC.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

Will my hon. Friend briefly explain the position in relation to Northern Ireland, given that clause 84 and the schedule cover Scotland and that clauses 84 and 85 are two-way traffic, as it were? I do not see a mention of Northern Ireland.

Photo of John Healey John Healey The Financial Secretary to the Treasury

I shall complete my points about Scotland and then return to Northern Ireland.

Clause 85, and the equivalent provision for Scotland, was subject at the outset to thorough consultation. Its approach has been supported by most respondents. Indeed, a senior judge in Scotland commented:

“it is sensible to apply clear rules for cross border criminal procedures as suggested.”

It came out in the consultation that a minority of respondents did not accept that HMRC should be dealing with criminal investigations. My hon. Friend the Member for Wolverhampton, South-West is right to look quizzical at that comment. It has been pointed out that HMRC has had to tackle some of the most serious organised criminal fraudsters, such as the fuels fraud in Northern Ireland that was conducted by paramilitaries and some of the most organised, difficult and complex international missing trader VAT frauds. Nevertheless, some argue that, as a tax agency, HMRC should not have criminal investigation powers and thus, in such circumstances, it should have to call on the police or the Serious Organised Crime Agency instead to deal with certain matters for it.

Quite honestly, the police and SOCA have their own priorities. They do not have the tax knowledge or the expertise needed to undertake the sort of investigations that HMRC carries out. Even if there were large-scale secondments to and from HMRC to allow that sort of operational arrangement to work better, I am sure that members of the Committee would accept that there would be extraordinary complexity and a loss of scale if investigations then became the responsibility of 53 different police forces. I made that point because such an argument has cropped up consistently, although it has been a minority view throughout the consultations. It is important that we appreciate the nature of the criminal activities with which HMRC is dealing.

During the consultation, some representative bodies also asked for greater information on the procedures followed when an investigation involves more than one country in the United Kingdom. In its published summary of responses, HMRC said that it would discuss it with the prosecuting authorities because clearly it is a matter for them, not HMRC. It said that it would do so with a view to publishing a guidance note. I confirm to the Committee that the independent Revenue and Customs Prosecution Office and the Crown Office in Scotland have now agreed to work together on a guidance note. That should now put in place the arrangements that we require for cross-border co-operation with Scotland.

The situation in Northern Ireland is different in that suitable provisions already exist. That is why such matters are not covered in the Bill. I hope that the clause will provide greater clarity in relation to criminal investigations, and that it will stand part of the Bill.

Photo of Mark Francois Mark Francois Shadow Paymaster General

Welcome back to the Chair, Mr. Illsley. Will you indulge me for a moment so that I may offer my apologies to you and to the other members of the Committee for the fact that, because of my new responsibilities, I shall not be here on Thursday?

In that connection may I thank my hon. Friend the Member for Fareham and the Chief Secretary for their kind remarks this morning. There has been reference in this Committee before to Stockholm syndrome, whereby over time hostages begin to feel sympathy for their captors and, in certain circumstances, even grow reluctant to be free. I am beginning to understand how that feels. I joined the shadow Treasury team in late  2004 and for two and a half years, I have enjoyed working on Treasury-related matters. This is my third Finance Bill and, believe it or not, I am going to miss it immensely. I wish my hon. Friends the best of luck in the battles that lie ahead and all members of the Committee all the best in their continuing deliberations on the Bill, including on Report and at Third Reading. Thank you for your kind indulgence, Mr. Illsley, and I shall now get on with it.

Turning rapidly to the matter at hand, I have one point to make on search warrants as exercised under clause 85, which provides for a search warrant granted in England or Wales to be enforced in Scotland, as the Financial Secretary outlined. I gave the Financial Secretary brief private notice this morning of the question that I want to ask. Prior to the proposed introduction of PACE powers for search warrants, as envisaged in the Bill, the most commonly used powers in that respect have been those in sections 20C and 20CC of the Taxes Management Act 1970, which relate to search warrants, including the power to enter a premises to obtain documents. As I understand it, sections 20C and 20CC were supplemented in the Finance Act 2000 by an additional section 20BA, which was effectively inserted into the 1970 Act in order to facilitate production orders by which the Inland Revenue could compel suspects to produce documents that might relate to a case under investigation.

Part of schedule 22 of this Bill also relates to the operation of search warrants and part 2 of that schedule proposes the repeal of sections 20C and 20CC so that HMRC will rely on a combination of section 20BA and the Police and Criminal Evidence Act 1984 when searches need to be carried out, both in England and Scotland.

Under PACE, HMRC could use one of two procedural methods to apply for a warrant—section 8, which applies generally to search warrants, or schedule 1, which allows for more specialised warrants in certain circumstances, and for which a higher level of judicial approval is required. Given all that, my question to the Financial Secretary concerns the following: we have received representations from the accountancy profession to the effect that using the PACE powers, which would also now apply under clause 85, rather than the well-established sections 20C and 20CC, would be legally more complicated and might be open to challenge. The proposal replaces a piece of well tried legislation that has apparently worked well with something carried across from PACE that might not be as suitable for the task in hand, including in fighting organised fraud.

I would therefore like to press the Financial Secretary on the thinking behind the change, as the original power was well understood both by the courts and by professional advisers in the accountancy and legal professions. In other words, the rules of the game were well understood on all sides. Before we accept clause 85, which would allow the exercise of the revised powers across the border, is the Financial Secretary confident that the measure has been properly thought through?

Photo of Adam Afriyie Adam Afriyie Conservative, Windsor 4:45 pm, 5th June 2007

Thank you, Mr. Illsley, and welcome to the Chair.

I sense that a fairly major step has been undertaken with the introduction of clause 85. It extends the powers of HMRC so that, to a certain degree, they are like those of the police service. Will the Minister give examples of where such powers exist in other Departments or other areas of our state system? Are they available to social services, allowing staff to enter premises and arrest people? Are they available to the education service? Are they available to those who work in the benefit system?

It is a serious step and I wonder why there is no limitation on those powers—or, if there is a limitation, how it works. For example, might it not be a good idea to say that the powers of search or entry to premises or the power of arrest should be limited to serious organised crime rather than the day-to-day business of collecting tax from individuals?

Photo of John Healey John Healey The Financial Secretary to the Treasury

I congratulate the hon. Member for Rayleigh. I almost rose to my feet to say so this morning. Some members of the Committee might find his admission that he will miss Finance Bill Committees curious. We will certainly miss his presence on the Treasury Front Bench. None the less, we look forward to the hon. Member for South-West Hertfordshire occupying his position; indeed, I hope to be debating with him tomorrow and not having to wait until the Committee returns on Thursday. We know, with the hon. Member for South-West Hertfordshire, that we get two for the price of one, so I also congratulate Mrs. Gauke on her promotion.

I am grateful to the hon. Member for Rayleigh for the notice that he gave me of his question, but as he said, the matter had been raised before by one of the representative bodies. We have considered it carefully, but it is at odds with the majority of the respondents to the consultation and is therefore not consistent with the general view.

We chose to follow the path of the Police and Criminal Evidence Act 1984, and we rehearsed some of our reasons in the Committee of the whole House. Many of the statutory powers inherited from Inland Revenue on the merger have not been updated to match the changing circumstances that faced by HMRC, the changing challenges that it has to deal with and the changing operations that it has to undertake. On the other hand, PACE is a tried and tested piece of legislation. It is widely respected and understood, it already applies to the majority of criminal investigations in England, Wales and Northern Ireland and it has been continuously updated since its introduction.

The former Lord Chief Justice of England and Wales, Lord Wolff, has said that PACE 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. The majority of respondents to the consultation supported the adoption of that approach. Applying PACE to all HMRC’s criminal investigations will ensure that all the safeguards enshrined in that legislation will be directly applied to HMRC’s investigations.

That is my answer to the hon. Member for Windsor; we discussed the safeguards fully in the Committee of the whole House. I emphasise that clause 85 gives no new powers to HMRC. It makes more sensible arrangements, allowing those powers to be used when cases involve cross-border activity between Scotland and England.

I hope that I have reassured the Committee that the equivalent and appropriate powers and safeguards in the Taxes Management Act 1970 will be provided for by the adoption of the relevant provisions of PACE. I therefore hope that the Committee will allow the clause to stand part.

Question put and agreed to.

Clause 85 ordered to stand part of the Bill.