§ Before I leave the field of personal direct taxation, I must mention a major administrative simplification which is being considered. We have been thinking about the whole structure of the P.A.Y.E. system. This has now been operating much in its present form for 25 years, although the Revenue have begun a mechanisation programme under which, by the end of this decade, the P.A.Y.E. work of tax offices would be concentrated in a number of centres where many of the clerical operations would be carried out by computers. P.A.Y.E. in Scotland is already dealt with in this way.
§ This mechanisation programme would yield significant staff savings in the long run, but I came to the conclusion that the possibility of more fundamental changes in P.A.Y.E. should be considered. The Revenue have therefore begun a study into, among other matters, what would be the likely impact on the public, on employers and on the Department, if P.A.Y.E. were replaced by a non-cumulative system of deduction of tax from wages and salaries—that is, a system 1392 under which the tax deduction from any payment to an employee is made without taking account of previous payments and tax deductions. Because any such change in P.A.Y.E. would almost certainly involve substantial alterations in departmental organisation and in the Department's intended computer profile, management and computer consultants have been engaged to take part in this study and—as my hon. Friend the Financial Secretary announced on 7th December—the present mechanisation programme has been largely suspended. As soon as the studies are sufficiently advanced, the Revenue will get in touch with representative bodies for industry, commerce and the public to seek their comments on possible changes.
§ I know that the suspension of the present P.A.Y.E. mechanisation programme has caused some anxiety in towns where the computer centres were to be set up and I am therefore aware of the need to reach a decision as soon as possible. Several years' preparation will be necessary if it is decided to make the change to a non-cumulative system of P.A.Y.E.; but, if we do so decide, the further saving in the staff of the Inland Revenue would in due course be very great.