Clause 100 is a technical measure that makes changes to put it beyond doubt that tasks that are being done by an individual officer of Her Majesty’s Revenue and Customs may be carried out by HMRC using a computer or other means. It ensures that the intention of Parliament is appropriately reflected in the legislation and confirms that the rules work as they have been widely understood and applied over many years. No new charges or obligations for taxpayers will result. The changes merely clarify legislation.
If I may explain the context for the introduction of the clause, the Government announced by written ministerial statement on
“an officer of the Board.”
The relevant legislation in the Taxes Management Act 1970 is 50 years old and was designed to support a paper-based manual tax system.
The way in which HMRC administers the tax system has evolved over time, in line with taxpayers’ expectations for a modern and digital system. Decisions made by HMRC officers are often given effect by computer-driven processes, so that HMRC can assess and collect taxes in the most efficient and cost-effective way.
As he expatiates on the value of digital technology to tax collection, will my right hon. Friend share with the Committee his thoughts on making tax digital and how the recent opportunity to make furlough payments has shown the value of a digital tax system?
My hon. Friend makes an acute comment. The response to covid has undoubtedly highlighted the need for greater investment in digitisation within the tax system, and specifically put a greater emphasis on the ability to reach taxpayers quickly to respond to a national emergency and to improve resilience.
As my hon. Friend will be aware, we are introducing making tax digital for VAT, but it is widely thought that there is a case for taking it further. We have it under close consideration. As her question highlights, taxpayers—and people more generally—expect nothing less than to have a tax system that is digital, effective and integrated, and not one where the lack of digitisation can be exploited for the purposes of legal suit.
To avoid any doubt, the clause clarifies the legal basis for the existing policy, which has been in place for many years, allowing for the use of automated processes. It puts beyond doubt that the law operates in the way Parliament intend it to and as it has been widely understood to work to date. It does not introduce new or additional obligations, and will help to ensure the tax system applies fairly to all, while preventing loopholes opening up in tax law that could be exploited by people who do not wish to pay their proper share of taxes.
The changes made by the clause will clarify that tasks being done by an individual officer of HMRC may be carried out by HMRC using a computer or other means. The legislation is treated as always having been in force. The effect of that is to protect over £100 billion in tax revenue, already collected. Failure to legislate would result in enormous disruption and uncertainty for taxpayers and HMRC alike. For these reasons, I commend the clause to the Committee.
The Government have brought forward clause 100 for obvious reasons. As we have heard from the Minister, it is patently absurd that we would be in position where HMRC was dragged through legal processes simply because section 8 notices were issued used automated processes, for example.
There is obviously a good case to be made for applying ever-changing technology to improve the efficiency of processes within HMRC’s systems, to try to improve the customer experience of HMRC customers, which, as we know as constituency MPs, can sometimes be very good and sometimes be absolutely abysmal. Where HMRC can automate processes to free up people time, the focus should be on redeploying those people to try to give people and the state overall a better service. There is nothing to quibble about there.
It is important to lay down a cautionary note about how automated processes and algorithms are used, particularly when it comes to decision making that can have substantial impact on citizens, organisations and businesses. Writing in Tax Journal, Catherine Robins and Steven Porter of Pinsent Masons were critical of the Government’s announcements, arguing that:
“Some of HMRC’s powers can have very serious consequences for taxpayers and the fact that a human being has to decide to exercise them is an important safeguard, which should not be eroded.”
I share their concern, up to a point. I think it is important that there are safeguards, checks and balances and, ultimately, opportunities for people to appeal to human judgment, to account for technical error and to appeal technical error. As the capacity and scope of technological change continues to widen, it is even more important that Ministers and civil servants think very carefully about the application of technology and whether it is indeed right and proper for a decision to be made by an automated process rather than a human being.
Those are much bigger, wider principled and ethical considerations. For the reasons that the Minister has outlined, clause 100 is a perfectly reasonable and sensible provision, and it is one that we are happy to support.
I want to raise some of the concerns expressed to us by the Institute for Fiscal Studies’ Tax Law Review Committee, which sent an extensive note earlier in the week. It is looking for ministerial reassurance that the powers will not be used without proper consultation and discussion of safeguards to replace the discretionary decisions, especially about penalties, currently made by human officers. It is the discretionary point that I am most worried about. We must not get to a situation where computer says no and that is the end of the story, because sometimes it can be quite difficult for businesses to get the decision pulled back and unpicked, and reconsidered.
I will highlight the case of uploading real-time information, because businesses in my constituency had serious issues with the technology for uploading RTI prior to coronavirus and now find themselves unable to claim under the job retention scheme, for example. That has been an issue with technology, and it has been very difficult to resolve it. Meanwhile, those businesses are on the brink, on the point of going bust, with employees whom they are struggling to pay. That is because in an emergency it is difficult to unwind a technical, computer-based decision, made months ago.
I ask for reassurance about the automating of discretionary decisions. What safeguards will be put in place to ensure sure that no businesses find themselves in a situation where they cannot unpick a decision made by a computer, and to ensure that they will be able to speak to a human who has discretion and is able to exercise it effectively?
Again, I thank Opposition colleagues. Let me pick up a couple of the points raised. The hon. Member for Glasgow Central asks for safeguards, and of course she makes a very important wider point. In a rule of law society we want as little discretion as possible to be exercised—and, in particular, personal discretion—so it is important that within HMRC there is baked in a culture of accountability for decisions. From that point of view, nothing is changing. This measure is ratifying an existing set of arrangements by putting them on a legal basis. However, I can reassure her that the issue of safeguards and the balance of powers between HMRC and taxpayers is taken very seriously, and I have specifically commissioned work within HMRC to ensure that that balance is appropriately maintained, not just at customer level but more generally.
The hon. Lady and the hon. Member for Ilford North raised the question of decision making more generally. I think I have, in a way, spoken to that, but I recognise that there is a distinction between the automated exercise of a decision and the capacity to make a decision itself. Of course, HMRC does increasingly rely on computerised systems, and it is absolutely right for our purposes as a nation that it should do so. It is, for example, inconceivable that we could have responded to coronavirus with either the self-employed scheme or the furlough scheme without heavy reliance on computing. It is to HMRC’s enormous credit that it was able to commission and bring into effect a platform and an approach to those schemes in a matter of weeks, using that computing expertise. I also agree with the hon. Gentleman when he points out that there are benefits not merely in terms of customer service, but in freeing up people and, we hope, improving the quality of work by taking HMRC staff away from the more routine operations and more towards higher quality work that can give more professional satisfaction.