§ 6.20 a.m.
§ Mr. Tom King (Bridgwater)
I appreciate very much the presence of my hon. Friend the Minister of State, Treasury at this late hour of the night or so early in the morning, but I make no apology, although the hour is strange, for raising the case of my constituent, Mr. L. W. Jury.
Most of the previous debates on the Consolidated Fund Bill during the afternoon and night have dealt with major national issues, but the rights of the individual represent a sacred cornerstone of our Parliament that we, as individual MPs, are here to protect. It is in the strongest belief in that duty that I raise the case of Mr. Jury.
The facts of the case are well known to my hon. Friend. I appreciate the close personal interest and concern that he has shown over the whole problem that this case has raised, but I must restate the facts.
This case arises from the tax return of Mr. Jury which was submitted on his behalf by his solicitors, Messrs. Thorne & Thorne, of Minehead, to the Inland Revenue, and subsequently they received a query whether all relevant income had been included in the return.
The solicitors were aware that that kind of inquiry is not made by the Inland Revenue unless it has good grounds for believing that something has been omitted, that the Inland Revenue is not normally prepared to disclose what it thinks has been omitted, and, further, that on a previous occasion there had been some queries over Mr. Jury's tax return. Therefore, they consulted Mr. Jury and decided that there was no alternative but to make a thorough investigation of his financial affairs going back to 1956 to satisfy themselves that nothing had been omitted.
The solicitors had been forced to point out to Mr. Jury that if proper investigations were not made, if he merely confirmed that he was satisfied that nothing had been omitted, only to be proved wrong, he could be liable to criminal proceedings. Therefore, they instituted the fullest investigation and had spent approximately £100 on the matter when 823 they received advice and an apology from the Inland Revenue for having failed to notice that one item that it thought had been omitted had in fact been included and stating that there was no further matter or query that it wished to raise.
Mr. Jury and his advisers immediately raised with the Inland Revenue the question of the costs which had been incurred in this further investigation which had been instigated as a result of its inquiry. The Inland Revenue said that it was never its practice to pay the costs of any agent, that the employment of an agent by a taxpayer was his own responsibility, and that it could not be held responsible for any costs incurred even though they resulted from an error on its part.
My constituent and his advisers then approached me and I submitted the case to the Parliamentary Commissioner for Administration who made a thorough investigation of the whole matter. I should like to pay tribute to the clarity and detail of the Parliamentary Commission's report to me. One must respect the Parliamentary Commissioner's experience in view of the number of Inland Revenue cases with which he has dealt during his time in that office. He approaches this subject with considerable experience, but I was surprised at the total clarity and lack of any query in the conclusion that he reached. Therefore, I think that I should repeat to the House the final sentences of his report:The inquiry should never have been made and was due to a mistake which the Department have acknowledged as particularly bad. In my view Mr. Jury thereby sustained a clear loss. The Department refuse to make this good, and I must report, therefore, that Mr. Jury has suffered injustice as a result of maladministration by the Inland Revenue and that this has not been remedied.No Member of Parliament with a sense of responsibility for his constituents could possibly accept that final sentence of the Parliamentary Commissioner's report that one of his constituents had suffered an injustice at the hands of a Government Department and leave the matter there if he knew that the injustice had not been remedied by the Parliamentary Commissioner in spite of his efforts to get that done. I therefore decided to raise the matter with my hon. Friend.
The Inland Revenue declined to respond to the proposal of the Parliamentary 824 Commissioner that this was an extremely clear-cut example of a serious mistake, as a result of which a taxpayer had suffered extra costs, and that therefore the Inland Revenue should recompense my constituent. I took the matter up with the Chairman of the Inland Revenue and made one last appeal to him to respect the findings of the Parliamentary Commissioner. Unfortunately, the Chairman stood on the previous ground, namely, that it would set a dangerous precedent if the Inland Revenue started to pay agents' fees.
I therefore took the matter up with my hon. Friend the Minister of State, and after what I know, from my personal experience of him, will have been the fullest consideration and sympathy for this case, he has not found it possible to depart from the view taken by the Chairman of the Inland Revenue and I should, therefore, like to examine briefly the grounds for this refusal.
The argument is that it would set a precedent, that it would be impossible in future to draw a line in deciding which agents' expenses might be paid on occasion by the Inland Revenue when it had to make further inquiries which an agent or taxpayer could claim resulted from an error or lack of intelligence on the part of the Inland Revenue.
The Parliamentary Commissioner said that this was a most unusual case, that the error was particularly clear-cut and that the costs incurred were particularly easily identified.
Three essential points arise from this case. The first, quite apart from Mr. Jury and the costs that he has incurred, concerns the very principle of the Parliamentary Commissioner. I considered that there were good grounds for submitting this case to the Parliamentary Commissioner, because it was clear that my constituent had suffered an injustice as a result of an error by the Inland Revenue. When I received the Parliamentary Commissioner's report, it was clear and unequivocal. What particularly shocked me—and I know that it shocked many others, too—was the total refusal of the Inland Revenue to accept the Parliamentary Commissioner's findings.
825 The abruptness of the ending of the Parliamentary Commissioner's report underlines that, because he says:… I must report, therefore, that Mr. Jury has suffered injustice as a result of maladministration by the Inland Revenue and that this has not been remedied.It is signed:Alan Marre, Parliamentary Commissioner for Administration.This underlines most clearly the lack of teeth and the lack of powers of action that the Parliamentary Commissioner has.
I recognise that in many circumstances that may well be the right situation. I am aware of the speech of the right hon. Member for Fulham (Mr. Michael Stewart) in a debate on the Select Committee Report on the Parliamentary Commissioner in which he strongly agreed that the findings of the Parliamentary Commissioner should not be mandatory on Government Departments and that they should not in all cases override the decision of a Government Minister. If we believe in our parliamentary system, it must be correct that Ministers must have the final decision.
Having said that, however, one must also recognise that the Ombudsman and his office were set up to meet genuine public concern at the power of bureaucracy and the lack of rights of the individual. In this situation there is widespread public belief that the Ombudsman has powers perhaps in some ways much greater than he possesses and that Government Departments rarely, if ever, will go against his findings.
I know that my hon. Friend the Minister of State will join me in supporting the work of the Parliamentary Commissioner and the value which he has in our complicated and at times bureaucratic society—a safety valve, a body to whom individual citizens through their Members of Parliament can appeal when they think they have had a raw deal from an action by a Government Department, when they do not believe that they have had proper treatment. It is vital that this office, the respect for it and public faith in it are maintained. Obviously a case like that of Mr. Jury, in which the Inland Revenue has declined to respect the findings of the Parliamentary Commissioner, does enormous damage to public faith in his office.
826 The second point that I would raise is the point which is claimed both by my hon. Friend and by the Chairman of the Inland Revenue—the objection to take action, the danger that it would set a precedent and that in future it would be impossible to draw the line. I have briefly referred to the fact that both the Chairman of the Inland Revenue and the Parliamentary Commissioner agreed that it was an unusually clear-cut error and one which was readily identifiable. Clearly the Parliamentary Commissioner felt that this was a case that could be easily distinguished. He made the point, moreover, thatthe costs in Mr. Jury's case can, in my view, be distinguished from other kinds of costs incurred in the normal exchanges between tax offices and agents, even where Inland Revenue mistakes may be in question. The departmental mistake in this case—a particularly bad one—led the Inspector unnecessarily to ask further questions".What concerns me about the objection of the Inland Revenue in this matter is that it has set above anything else the danger of setting a precedent. I believe that the risk of a precedent is the worst defence in many cases. It admits the justice of the case but says, "We cannot take action because it might lead to other cases of a similar kind." What has happened in this case is that the fear of what might happen in the future has carried more weight with the Inland Revenue than has individual justice to my constituent, since the Inland Revenue admits the error and apologises for it but finds it impossible to offer any recompense to my constituent.
There is a third and separate point which arises out of this case and which has not been adequately made before. I think that my hon. Friend will agree that it is rather fatuous that he and I should be discussing this case, raising these great points of principle with the Parliamentary Commissioner, when all that is involved is a suspected omission of £37 from a tax return, and that the whole issue should have arisen because of the practice of the Inland Revenue not to disclose what items it suspects to be missing from a tax return.
In his report the Parliamentary Commissioner confirmed:From my own investigation of other cases, I can confirm that, when they make enquiry of a taxpayer's agents about possible 827 undisclosed income, the Department are not generally willing to give details of the nature of the information on which they are acting.That is a practice that must be reviewed.
I can well understand that with people of substantial means, when it is suspected that a number of items are not being correctly disclosed, it is important that the Inland Revenue should not reveal its hand completely and it may prefer to couch its inquiry in a totally general way so that it does not reveal to the taxpayer, who may have many different sources of income, which items it has in mind. But this is simply not that sort of case.
Mr. Jury is an elderly gentleman who would not mind my describing him as of modest means. He has saved a small sum of money on which he now draws modest sums of interest. But this matter will involve him in an extra cost of £100 and it arose because the Inland Revenue failed to identify a return, an item of £37.94, in my constituent's return.
I think that my hon. Friend will agree that that could have been easily avoided. Is it not possible for the Inland Revenue to use its discretion? A simple telephone call from the Revenue to Messrs. Thorne and Thorne, who are acting for Mr. Jury, asking whether the £37 had been included in the tax return would have shown that it was and that would have saved all this worry and it would have saved Mr. Jury £100 and saved the Parliamentary Commissioner an investigation and saved the time of the Chairman of the Inland Revenue and my own. This is a change that could readily be made.
I know that my hon. Friend has already given serious consideration to this matter and I know that he recognises the arguments for Mr. Jury and has considerable sympathy with him. Nevertheless, this is a responsibility of the Inland Revenue. I recognise the risks, as anyone must, of starting the practice of paying the fees of agents when mistakes are alleged to have been made and when the agents are involved in greater expense. Of course there are difficulties and there may be many instances where there could be problems and even serious abuses. Nevertheless, as the findings of the Parliamentary Commissioner are so clear cut, I feel that this is a case which must be reconsidered.
828 As my hon. Friend and I have already had considerable correspondence on this matter and have so far failed to make very much progress, will he agree to arrange a meeting with the Chairman of the Inland Revenue which he and I could attend so that this matter can be reconsidered? Will my hon. Friend also consider particularly the proposal that the Inland Revenue practice on disclosing the details of its queries on relatively small amounts should be reviewed?
§ 6.40 a.m.
§ The Minister of State, Treasury (Mr. John Nott)
In raising the case of Mr. Jury, my hon. Friend the Member for Bridgwater (Mr. Tom King) is exercising one of the most important rights that is open to Members of the House. I know that my hon. Friend feels that his constituent has not been properly treated by the Inland Revenue on this occasion. It is clear that Mr. Jury and my hon. Friend feel a sense of injustice. Although I have written to my hon. Friend in some detail setting out reasons why the Government were not able to uphold the Parliamentary Commissioner in this case, I nevertheless fully accept that it is a proper and sensible matter for debate on this occasion.
As my hon. Friend said, the rights and liberties of the subject are the cornerstone of parliamentary democracy, and the raising of the problems of individual constituents is at the heart of that democracy. Even if my hon. Friend brings this matter before the House at 6.30 a.m., it is right and proper that a Minister should be present to answer the points which he makes.
In my original letter to my hon. Friend I agreed with him that it would be wholly wrong if the Parliamentary Commissioner's findings in particular cases were generally to be disregarded by Government Departments. Clearly such an attitude on the part of the executive would be unacceptable. It is essential in the interests of public confidence in not only the Parliamentary Commissioner but also Government Departments that the Commissioner's recommendations should be accepted and seen to be accepted in the vast majority of cases. At the same time, it has not been suggested very frequently—as I understand it, my hon. Friend does not suggest that it should be so on this 829 occasion—that the Parliamentary Commissioner's recommendations should be mandatory on Ministers. Indeed, as I shall want to show shortly, it would be a very odd constitutional principle if an Officer of Parliament, which is what the Parliamentary Commissioner is, were able to overrule the findings of Ministers who are elected to the House of Commons by the people of this country.
It is the purpose of the Select Committee on the Parliamentary Commissioner to monitor the extent to which Ministers of the Crown accept or reject recommendations of the Parliamentary Commissioner ; although I think that it would be true to say that the Select Committee does not suggest that it, as a Select Committee, should generally retry individual cases. The Select Committee has already been successful in persuading Treasury Ministers to make changes in the procedures of the Inland Revenue. As I shall mention shortly, we have certain other matters of Inland Revenue procedures under review now. Indeed, in the celebrated Sachsenhausen case, the House persuaded Mr. George Brown, as he then was, to change his mind. Nevertheless, the principles which were enunciated by the Chairman of the Select Committee, the right hon. Member for Fulham (Mr. Michael Stewart), in his speech on 24th October last year, set out the position very well indeed. I shall not quote them tonight, but they can be found in HANSARD for 24th October last year.
I have noted—it is a matter of concern to me—that the Inland Revenue has been under criticism in some parts of the House on Parliamentary Commissioner matters. I must say, first, that this department of Government is involved with the affairs of 25 million taxpayers. Much of the work is exceptionally complex and detailed. The Parliamentary Commissioner has so far examined only about 360 cases of alleged maladministration by the Inland Revenue. When one compares that figure with the 25 million taxpayers with whom the Inland Revenue is dealing, one sees that it is a fairly good record.
As I told my hon. Friend in only nine of these 360 cases have Ministers felt unable to rectify the situation revealed 830 and of the nine cases six are related to the payment of interest by the Inland Revenue on overpayments of tax on which the Government have undertaken to give further consideration. I can assure the House, although these are different cases from that which concerns Mr. Jury, that we are seriously looking at this matter. There are a further nine cases where part of the recommendation was accepted and part refused.
I do not need to give again the full details of Mr. Jury's complaint. The inspector, thinking that the taxpayer might have received some untaxed interest and not notified it in his tax return, wrote to the taxpayer's agents, a firm of solicitors, asking them to verify his tax return. When the inspector came to review the case four months later he noticed that the interest had been included—stapled, as my hon. Friend said, to the back of the return itself.
It seems a pity, although I am in no way critical on this, that the solicitors did not go back to Mr. Jury and ask him to confirm that he had returned all his income and then go back to the inspector and tell him that. Had that happened the inspector might have re-examined the whole situation and found his error immediately. For reasons outlined by my hon. Friend, the inspector did not discover his error until about four months later. Immediately he did so, and having satisfied himself that there were no omissions of income, he wrote to the solicitors saying that he wished to pursue the matter no further.
The solicitors then claimed that they had incurred expenses of £100 in investigating Mr. Jury's returns and claimed reimbursement. The Revenue refused and my hon. Friend then quite rightly passed the matter to the Parliamentary Commissioner. Following upon the rejection of the recommendation of the Parliamentary Commission by the Chairman of the Board of Inland Revenue, I naturally investigated the matter with very great care. I can assure my hon. Friend that it would be my wish to uphold the Parliamentary Commissioner's findings wherever possible. It is clearly much easier for Ministers to accept the Parliamentary Commissioner's findings than to take the opposite view.
831 On the other hand, there is always the difficult question of judgment for Ministers where the Parliamentary Commissioner's recommendations conflict with other essential factors and in this case, after full discussion with senior Inland Revenue officials, I had to come to the view that the reasons given by the Inland Revenue to the Parliamentary Commissioner—and they are contained in paragraphs 7 to 9 of his report—must be upheld.
The Department argued that once it accepted that there were cases in which it paid agents' fees, it would be very difficult, if not impossible, for it to resist claims by other taxpayers for their agents' fees. In paragraph 8 of the Parliamentary Commissioner said:I recognise that taxpayers may from time to time incur additional agents' expenses following tax office mistakes, and I would not suggest, as a general proposition, that in all such cases an obligation rested upon the Inland Revenue to meet those expenses. But the costs in Mr. Jury's case can, in my view, be distinguished from other kinds of costs incurred in the normal exchanges between tax offices and agents, even where Inland Revenue mistakes may be in question.The point at issue is whether Mr. Jury's case can be distinguished from other cases. It has always been the principle that whether or not a taxpayer employs an agent is for him to decide. It would be difficult to move from that position and at the same time rectify Mr. Jury's grievance as my hon. Friend would wish to see it rectified.
I realise that this is essentially a line-drawing argument, which is never very acceptable to the House, as my hon. Friend says. But the fact of the matter remains that once the Inland Revenue started paying the expenses of agents where it had made a mistake it would be very difficult, if not impossible, to decide where the line should be drawn between one claim for expenses and another.
The Inland Revenue, I think rightly, is extremely reluctant to conduct its affairs by ad hoc discretionary decisions. Rather, it seeks to proceed in dealing with taxpayers on the basis of clearly defined rules which can be scrutinised by Ministers and, if need be, by Parliament. Once it was agreed that the Revenue was liable for agents' fees, there would be likely to be an additional number of 832 claims from taxpayers for agents' expenses, and inspectors would be placed in the position of having to make a discretionary decision in a wide number of cases. They would be placed in the unenviable position of occasionally being judge and jury in their own case.
Much as I should like to take the Parliamentary Commissioner's view that Mr. Jury's case can in some way be distinguished from other claims for expenses, I had to decide that that was not possible. It is essentially a matter of judgment.
§ Mr. King
Of course, in any organisation it is much easier to have a complete set of rules by which everything is organised and run. As there are 25 million taxpayers, one recognises the desirability of that. But the very reason for the existence of the Parliamentary Commissioner is that all Government Departments would like to have rigid sets of rules for everything, with no discretion—that makes life much easier—and under such rules injustices can occur. The Parliamentary Commissioner exists to try to introduce a way in which serious injustices caused by those inflexible rules can be put right. I understand my hon. Friend's desire to support the smooth running of the Inland Revenue, under the strain that it has, but one cannot totally support the desire for a rigid set of rules.
§ Mr. Nott
My hon. Friend makes a useful point. I said earlier that only nine of the 360 cases of alleged maladministration by the Inland Revenue investigated by the Parliamentary Commissioner were proven, and that we have already made changes in Inland Revenue rules and procedures to meet criticisms from the Parliamentary Commissioner. The only point of difference between my hon. Friend and myself is the degree to which discretion should be placed in the hands of the Department in dealing with cases such as that of Mr. Jury.
I was only making the general proposition, which I think must be correct, that with such a huge Department, dealing with 25 million taxpayers, it would be extremely difficult—and there might be even greater injustice in a far greater number of cases—if it were not the normal procedure for the inspectors to proceed by a set of rules.
833 I can assure my hon. Friend that I came entirely fresh to the matter, with as much willingness as possible to find a solution to the problem. But I was convinced that if we accepted the findings of the report the Inland Revenue would be placed in a difficult position in relation to claims by other taxpayers. It was on that basis that I supported the line which it has taken.
I say immediately that there is clearly room for disagreement and that this is an important matter. If my hon. Friend wishes, I shall ask a member of the Board of the Inland Revenue to be present at a meeting where the three of us can review the case again. I offer that suggestion to my hon. Friend. If he wishes to get in touch with me we can fix a time.
My hon. Friend referred to Inland Revenue procedures. When the Inland Revenue learns of information which indicates that a taxpayer has not disclosed all his income in his return, there is a system under which it sends a general inquiry to the taxpayer or to his agent. Of course, information comes to inspectors from a wide variety of sources. It is in the interests of the general body of taxpayers that every matter should be investigated with care. It is true to say that there should be an investigation whether there is involved £37 or £370. I am not taking Mr. Jury's case as an example because it is clear that he never did anything which could be wrong. The position is that a mistake was made by the inspector. The fact that only £37 has not been disclosed does not mean that there is not another source of income amounting to very much more which has not been disclosed. The procedures which have been set out are intended to try to find out whether other sources of income might not have been disclosed.
Parliament has expressly provided that local authorities, banks and other bodies should provide to the Inland Revenue the details of interest paid. When the inspectors receive that information they seek to match it with information from individual tax returns. The procedure under which inspectors do not disclose to taxpayers the source of their information but ask them in general terms to check their return is of long standing. It can cause disquiet, and as a person who answers inquiries, including inquiries 834 from hon. Members, I know that that is so. On the other hand, it has been found in many cases that the erring taxpayer then discloses another source of income.
The Inland Revenue is, of course, responsible for the collection of taxes. It feels that if it were not able to follow the procedure which I have described it would be hindered considerably in countering evasion. I must uphold the procedures which are now adopted.
We are reviewing certain matters which have been brought to the attention of Ministers by the Select Committee. We shall in due course be saying more about the cases which we are reviewing. They are matters of a rather different nature from the complaint of Mr. Jury. Although I do not see any way in which we can meet my hon. Friend, I shall be prepared to see him with a member of the Board of the Inland Revenue and to discuss the affair again.