Clause 94

Finance Bill – in a Public Bill Committee at 5:30 pm on 23rd June 2009.

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Amendment of information and inspection powers

Photo of David Gauke David Gauke Shadow Minister (Treasury)

I beg to move amendment 87, in clause 94, page 47, line 11, leave out subsections (2) to (5).

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

With this it will be convenient to discuss the following: amendment 88, in clause 94, page 47, line 19, at end insert—

‘(3A) An order under this section may not—

(a) remove or weaken a safeguard available to a taxpayer, or

(b) increase a penalty or HMRC power.’.

Amendment 61, in clause 94, page 47, line 22, leave out ‘annulment in pursuance of a’ and insert ‘an affirmative’.

Amendment 62, in clause 95, page 48, line 2, leave out subsections (5) to (8).

Amendment 63, in clause 95, page 48, line 4, at end insert—

‘(5A) An order under this section may not—

(a) remove or weaken a safeguard available to a taxpayer, or

(b) increase a penalty or HMRC power.’.

Amendment 64, in clause 95, page 48, line 11, leave out ‘annulment in pursuance of a’ and insert ‘an affirmative’.

Hon. Members may note that amendments 62 to 64 relate to clause 95. However, because they are identical amendments, it seems more convenient to debate them all together.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

Thank you, Mr. Atkinson, for drawing the Committee’s attention to the grouping. That is helpful because essentially the same points are being made. Clause 94 relates to various amendments of the information and inspection powers brought in under schedule 47. Clause 95 relates to the extension of information and inspection powers to further taxes. I am sure that we will discuss briefly the contents of schedule 47 in a moment, but the concern raised by this group of amendments is that both clauses 94 and 95 are Henry VIII clauses that enable primary legislation to be amended by secondary legislation. Such measures are increasingly being used. Those of us who had the pleasure of serving on the Committee that considered the Banking Bill will remember the lengthy debates on that subject. This is perhaps not of a similar scale, but the concern remains the same.

Let us remember the context in which we are debating the Bill: again, it is a matter of balancing the powers of the state with the rights of the individual. That is an issue with which any liberal democracy has to wrestle. Again, I note that the Liberal Democrats are not present while we deal with that issue. When the new regime was brought in under the Finance Act 2008 in the context of information and inspection powers, the matter was debated in some length and in detail. The measure was set out in primary legislation, and rightly so.

In schedules 47 and 48, there are a number of amendments to what we debated in primary legislation. I suspect that we will not be detained for a great length  of time in debating these matters, but, none the less, the measure was published in primary legislation and there was an opportunity for outside bodies to examine and comment on it. There is an opportunity for the Committee to give its view on the provisions, but clause 94(2) states that

“The Treasury may by order make any incidental, supplemental, consequential, transitional or transitory provision or saving which appears appropriate in consequence of, or otherwise in connection with, Schedule 36 to FA 2008 or Schedule 47.”

So those matters that we debated carefully last year can now be changed by secondary legislation. The issues that relate to the important balance between the powers of the state and the rights of the individual can now be changed by secondary legislation, and clauses 94 and 95 enable the Government to do so.

We are concerned about that. We do not see why those matters could not be dealt with by future clauses and schedules contained in future Finance Bills, and we therefore suggest a number of amendments. First, I want to look at clause 94, although the same amendments essentially apply to clause 95. Amendment 87 would delete subsections (2) to (5) of clause 94, which deal with this matter altogether. So schedule 47 will remain part of the Bill, but the power given to the Treasury to amend primary legislation by secondary legislation would be struck out.

If the Government can make a strong case against amendment 87, amendment 88 is more difficult for them to oppose. It would provide a safeguard in the Bill that

“An order under this section may not—

(a) remove or weaken a safeguard available to a taxpayer, or

(b) increase a penalty or HMRC power.”

I believe that that is the Government’s intention in this area, or at least as far as these orders are concerned. Perhaps some sort of reassurance to the Committee would be helpful. None the less, amendment 88 would at least provide some safeguard from misuse of clause 94.

Amendment 61 states that any statutory instrument in this area should be subject to an affirmative resolution as opposed to the negative procedure, which it is envisaged will apply. Essentially the same amendment applies to clause 95. Amendments 62 to 64 relate to the extension of information and inspection powers to further taxes.

It is incumbent upon the Minister to explain why it is necessary to have clause 94. What do the Government have in mind? Why can the matter not be dealt with in primary legislation? What scrutiny will exist as far as these provisions are concerned? I can see that there is an argument for administrative convenience. However, given that we are talking about quite important powers that HMRC may have and that potentially there will be a loss of some safeguards for the individual, we are reluctant to allow clauses 94 and 95 to remain unamended. We look forward to hearing the Minister’s comments.

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

I was deeply disappointed not to be able to contribute to this morning’s proceedings, Mr. Atkinson, so it is a great pleasure that I can serve under your wise suzerainty this afternoon. As you rightly point out, the group of amendments relates to clauses 94 and 95, which introduce schedules 47 and 48 respectively.

As the hon. Member for South-West Hertfordshire indicated, the group of amendments also relate to the powers introduced in schedule 36 to the Finance Act 2008. As he also rightly pointed out, those powers are part of a package of measures to align and modernise the various powers, deterrents and safeguards inherited by HMRC from the former Inland Revenue and Her Majesty’s Customs and Excise. We had a significant debate last year on these matters.

The powers in schedule 36 allow HMRC to check if the right tax has been paid or claimed in respect of VAT, income tax, capital gains tax and corporation tax. They came into force on 1 April.

It is right to say that last year’s debate focused on the need for proper safeguards. I believe that that debate was invaluable as it directed HMRC to the key issues that needed to be addressed in the guidance to staff. In turn, that has helped to ensure that the powers can be used appropriately and proportionately. I can report to the Committee that that guidance, along with associated training information, has now been published, following consultation with key stakeholders.

What we are trying to do as a Government is to ensure that there is a balanced approach to the way in which HMRC uses these powers. That approach has been warmly welcomed and I want to put on record my appreciation and that of the Chancellor and the Financial Secretary to those who have helped HMRC to develop it.

Both clauses contain a provision to make Treasury orders and consequentially to amend other legislation as a result of the powers in schedule 36. The intention is to repeal existing information and inspection powers when schedule 36 can be used instead, and to make other consequential amendments to avoid leaving overlapping powers in place. The hon. Gentleman said that these are Henry VIII powers, and I think he was referring to our debates on clause 75 of what was then the Banking Bill. Clearly, we are discussing something of a different order here.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster 5:45 pm, 23rd June 2009

The Economic Secretary referred to repealing. Does he mean simply repealing, or is there a suggestion that something in the clause could enact, by secondary legislation or otherwise, new offences under which taxpayers, whether errant or otherwise, could find themselves falling foul of the law?

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

I will cover those points as I discuss the amendments.

Amendment 87 would omit from the clause the whole of subsections 2 to 5, which contain the provisions to make incidental, consequential or transitional changes by Treasury order. That would mean leaving the legislation unclear and prevent a significant number of repeals. We do not believe that that would be right. The orders proposed under clauses 94 and 95 will enable the repeal of more than 30 pages of legislation containing powers that are no longer required. We believe that it is a good thing to repeal them.

Amendment 88 would insert provisions to ensure that an order under clause 94 would not remove or weaken safeguards or increase a penalty or HMRC power. I appreciate that it is a probing amendment, and  I assure the Committee that the Treasury order provisions merely allow the repeal of legislation that is made redundant by the powers in the provisions, and consequentially to amend legislation as a result of those repeals or to take account of powers in schedule 36 to the Finance Act 2008, as amended by schedule 47 to the Bill. They will also ensure transitional arrangements for those repeals. Given the nature and scale of the changes, the broader power of amendment is needed to facilitate accurate consequential amendments to untangle a lot of old and complex tax legislation. I assure the Committee that orders will not be used to alter safeguards or the powers. Drafts of the proposed orders under clauses 94 and 95 are before the Committee and show that to be the case.

Amendment 61 would call for the provision to make orders under the affirmative procedure consequently to amend existing legislation and to repeal information powers that are no longer needed. The Opposition often raise that as a debating point. To make orders under the affirmative procedure would be contrary to normal practice for orders covering tax matters, which are usually made under the negative procedure. The consequential, transitional and incidental changes to be made under Treasury order, even to primary legislation, do not involve changes in policy and are simply tidying up, but they are essential to ensure that the law is clear. We believe that the negative procedure is appropriate because of the narrow scope and effect of the consequential changes that will be required, so there seems to be no sensible reason to make an exception to normal practice.

Amendments 62 to 64 would amend clause 95 in the same way as amendments 87, 88 and 61 would amend clause 96. The same reasons for resisting those amendments apply, and I invite hon. Members to resist them if they are pressed to a vote. It is important that, in clauses 94 and 95 and the associated schedules, we have an effective way of employing our tax legislation in this area. We have listened, and learned from the operation of schedule 36. We believe that we have the legislation right and that the proposed amendments are unnecessary.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

I thank the Minister for his response. I note his comments that wanting to use the affirmative procedure is a point that Oppositions frequently make and that Governments equally frequently reject. I dare say that we may have that debate again at some point—perhaps with the parties taking different views.

The assurances the Minister has given the Committee have been clear. If there was an attempt to use the provisions contained in clauses 94 and 95 in anything other than the manner in which the power was used to appeal existing provisions to provide transitional rules and very minor consequential rules, the Minister would be in great difficulty, because his wording is very clear. I wonder why the provisions could not be more narrowly defined. Clause 94(2) is still pretty broad, and the protection contained in the Bill is fairly minor. None the less, every time such a clause is presented to a Public Bill Committee, it is valuable to highlight such matters and Ministers should be forced to give the kind of assurance that we have heard today. On the strength of that, I beg the Committee’s leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 94 ordered to stand part of the Bill.