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Finance Bill

It is a pleasure to see you in the Chair this evening, Sir Nicholas. I hope that you will agree that this has been a very good debate. I congratulate the hon. Member for South-West Hertfordshire (Mr. Gauke) on tabling these amendments. I do not adopt an ideological or partisan line on this area of work, and I have found listening to the concerns that have been raised helpful. Before I deal with the amendments, I would like to discuss the background to the clause. As we have had a wider-ranging debate instead of dealing with the two groups independently, it might be helpful if I were to respond more broadly. The clause is part of a larger package of measures in the Bill. It is the latest stage of the review of the powers, deterrents and safeguards of Her Majesty's Revenue and Customs, which is aligning and modernising the powers inherited from the Inland Revenue and Customs and Excise. Many, if not all, the anomalies in the law result from the piecemeal way in which tax legislation has evolved, particularly in two separate departments. Those differences are confusing for taxpayers, they are costly to administer and they reduce HMRC's ability to ensure that the right tax is paid. Our aim is to provide a modern framework of law and practice for HMRC. Penalties are a good example of the wide variety of approaches across different taxes that exist in the law at present. For example, a person filing an incorrect excise duty return may receive a fixed penalty of £250, whereas an understatement on a corporation tax return resulting from the same behaviour could attract a penalty in law of up to 100 per cent. of the tax lost. Neither approach has proved effective or fair, so reform is needed. The review has been commended for its approach, especially the breadth and depth of its consultation and the willingness of HMRC officials to listen and make changes. Inevitably, there will be tensions as we seek to ensure that HMRC has appropriate powers to work effectively and that taxpayers have strong safeguards. The hon. Gentleman questioned why we were doing this now, and suggested that it was rushed, as did other hon. Members. HMRC inherited different powers from the two former departments. Those were inconsistent in places, which is confusing for taxpayers and imposes undue burdens on them and on the Exchequer. The full benefits of merger cannot be delivered until those powers have been aligned where it makes sense to do so. The way in which the review of powers and safeguards works is to engage stakeholders in an ongoing round of consultations that include formal public documents, workshops and literally dozens of face-to-face meetings. Development of the provisions in the Bill has been an iterative process, and stakeholders acknowledge that HMRC has made changes throughout in the light of their views. The January consultations were therefore part of a very long process. I accept what the hon. Gentleman says about the relevant part of the Cabinet Office code of practice on written consultations and I take that very seriously. The code clearly states that we should consult widely throughout the process, allowing a minimum of 12 weeks for written consultation at least once. I assure him and others who have expressed concern that those guidelines have been followed for all the powers clauses in the Bill. This is the last stage of an extensive consultation process over two years, involving previous 12-week consultations, dozens of meetings with interested parties and workshops. Knowing that time would be tight in March, HMRC raised key issues in meetings with stakeholders and sought suggestions for improvements. Changes to the draft law were identified and action was taken before the consultation period closed. All written responses were considered in detail and several changes were made in the final few days, as parliamentary draftsmen were about to be commissioned. A full response document was published on 27 March. Since 2005, the review has issued 13 consultations and has had meetings with representative bodies and interested parties, as well as exposing draft legislation. That is to be commended as a form of consultation on the Government's intentions. HMRC has worked with representatives of business, the professions and low-income groups on guidance and codes of practice. For this year's penalties changes, HMRC has made particular effort to reach out to more specialist representatives for the particular taxes involved—for example, the oil, alcohol and insurance industries. I wish to put on the record my thanks to all those who have given their time to participate in the development of the measures in the Bill, with particular thanks to those who attended meetings with HMRC throughout, which meant that issues could be considered and addressed at an early stage—