INVESTIGATORY POWERS (Hansard, 17 May 1976)

HC Deb 17 May 1976 vol 911 cc979-1049 979

§ 4.28 p.m.

§ Mr. John Cope (Gloucestershire, South)
I have an amendment on the Order Paper, No. 94, in page 31, line 44, leave out '20A and 20B' and insert 'and 20A'.
I am persuaded that licensing of housebreaking by the Inland Revenue might more conveniently be discussed with other matters when we debate the Question, That the clause stand part of the Bill, and I shall therefore not move the amendment.

§ Question proposed, That the clause stand part of the Bill.

§ Sir Geoffrey Howe (Surrey, East)
As the Committee will have seen, the Opposition have tabled a number of amendments, including that to which my hon. Friend the Member for Gloucestershire, South (Mr. Cope) has just spoken so briefly and so lucidly, to this important clause. It turns out that a number of the clauses cannot be discussed in the House at this stage of the proceedings but all the points covered by the amendments standing on the Notice Paper in the names of my right hon. and hon. Friends and myself can be taken when the schedule is discussed in Standing Committee upstairs.
I wish to make the position clear. At this stage we are discussing Clause 48 as a whole, and we seek to defeat the clause as a whole. If, by some mischance the Committee takes the opposite view of the detailed provisions contained in the schedule, these will be subjected to close scrutiny and examination in 982 Standing Committee upstairs. Each of the amendments on the Order Paper—for example, the one that provides that the right of search shall arise only on the authority of a High Court judge or of two special commissioners—will be considered in detail in Standing Committee upstairs. But all these would-be amendments of the main provisions are no more than a palliative. They can and will be pressed at that stage, but it is our hope that that situation will never arise.
Having considered these provisions in considerable detail, I wish to make it crystal clear that we on the Opposition side of the House are clearly opposed to them in their entirety. We shall oppose them root and branch and we shall invite the Committee to reject them outright tonight. If the clause does stand part of the Bill and is not rejected, the proposals contained in the schedule will be ruthlessly scrutinised, examined and challenged in Standing Committee, word by word and line by line.
We are not seeking, as the Chief Secretary will no doubt suggest, to defend or advance tax evasion. We do not challenge the principle that it is necessary for tax collectors to have reasonable powers as far as can be justified to prevent evasion. But that interest must always be balanced against the need to avoid any undue interference with the taxpayers and citizens of this country. The proposals in this clause do violate the rights of citizens to personal freedom and privacy—the right to privacy in their own homes, the right to call their homes their own. These provisions propose to invade these rights to an intolerable extent, and cannot be justified.
I draw the Committee's attention to the fact that the Chancellor of the Exchequer is unable to be here to conduct this debate because he had to attend a meeting of European Finance Ministers in Brussels. That may be inescapable, but it is much to be regretted. I would point out, however, that on the day that we are examining very important matters dealing with the liberty of the subject there are, on the Government Benches, only the hapless Chief Secretary to the Treasury and the Government Whip. The Chief Secretary is not supported by the presence of one of the Law Officers. We want to know how far 983 these important provisions have been considered by the Attorney-General and the Solicitor-General. Surely this House is entitled to look to the Law Officers of the Crown to give their views about these proposals, and to justify them if they can.

§ Sir John Hall (Wycombe)
Has my right hon. and learned Friend noted that not only is the Chief Secretary not supported by the chief Law Officer; he is not supported by any hon. Member of the Labour Party. It would seem that hon. Members opposite show no interest in this subject.

§ Sir G. Howe
My hon. Friend is right. I also point out that the Chief Secretary is not even supported by one of his ministerial colleagues. I make a serious point about our right to require the presence of the Law Officers on this issue. One of the prime functions of the Law Officers is to advise the House on issues involving the liberty of the subject. This is just such an issue.
The Chancellor's absence is regrettable, because he has accused the Conservative Party of hypocrisy in challenging these provisions. That strikes us as a characteristically disreputable charge, because concern about these matters is not confined to the Conservative Party, as is evidenced by the attendance of hon. Members of other parties for this debate. But far outside this House and the confines of Parliament there is—the Chief Secretary must acknowledge it, instead of smirking gently as he contemplates the speech that he is about to make—widespread and deep anxiety about these proposals. It has been expressed in the columns of the Press and in the professional Press. The accountancy profession and the legal profession are both gravely disturbed.
If the Chief Secretary ever dares to venture to his constituency, having brought forward this proposal, he will find that millions of ordinary, law-abiding citizens are rightly and gravely concerned about the proposals. It comes very ill from the mouth of the Chancellor to advance the charge of hypocrisy when one considers his own reaction to the similar powers given in relation to VAT in the 1972 Finance Bill. Speaking 984 in the Standing Committee on the Bill on 12th June 1972, he said: No Government in their right senses, and certainly no Government with a sense of Britain's legal traditions would ever have considered the introduction of powers of this nature had they not been frightened of large-scale evasion in the absence of these powers." —[Official Report, Standing Committee E;12th June 1972, c. 806.] He went on to talk about "a snooper's charter", "a vast extension of the powers of Custom and Excise" "frightening powers", and "un-English powers", of which the Government should be heartily ashamed. As so often, even today when he dons the mantle of ministerial office, there is no limit to the extravagance of the Chancellor's language.
As it has turned out, some concern about those powers in relation to VAT was well justified, even at that stage. In fact, it is the use of the VAT powers which is very closely related to the strength and depth of anxiety and concern about the matters that we are discussing today. We made plain in 1972 that we would be ready to review the form of operation of the VAT powers if there were any sign of abuse of them. The time for review has come. Certainly, the VAT powers should be re-examined. Many people feel that they should be withdrawn altogether. I do not go that far, but I have no doubt they do need to be closely examined and accompanied by stronger safeguards.
There is a profoundly unattractive feature about the way in which the Chancellor has sought to introduce these measures. He did so without expressing or implying any reference to the VAT powers and the way he felt about them in the past. He blandly presented these proposals as if they were in no way a matter for argument or anxiety, and he did so without any sense of shame. He should have referred to his anxieties of 1972, explained why they had all melted away, and told us how he could justify not only the maintenance of the VAT powers but the extensions that he is proposing today.
Why is there anxiety about the VAT powers? Perhaps it is because these powers have been used much more frequently than was originally visualised. They have been used on many occasions in private homes instead of trade 985 premises. Questions asked by some of my hon. Friends show that VAT powers have been used on many occasions in trade premises, but an answer given by the Financial Secretary on 10th May this year showed that private accommodation has been searched and investigated under the VAT powers on no fewer than 143 occasions. That is disturbing many people a great deal. The exercise of the powers of search—the Chief Secretary ignores this at his peril—is being undertaken in a way that is causing growing alarm and resentment among many people. The answers given to questions on 4th May and 10th May this year referred to two particular occasions, —the searching of the Black Cap public house in Camden Town, and the searching of the premises of a Mr. George Button in Dartford, to whom an apology was extended today.
The things which strike one about the powers of search are very serious. For example, when the Black Cap was searched the premises were visited and searched effectively by no fewer than seven officers of the Customs and Excise Department. The prospect, to a law-abiding trader against whom a suspicion may arise, of being faced with a posse of that kind is bound to cause real alarm.
Just as it is causing alarm to traders, so one should consider how it might be exercised under the new provisions. What is more, the seven officers concerned with the Black Cap case, according to the parliamentary Answer, proceeded so that diaries, handbags and items of a personal nature were examined, but only superficially. If these searches are to proceed into private homes, into diaries and handbags and other items of a personal nature, there is real cause for concern.
The facts were set out on 10th May concerning the visit to Mr. Button's home in Dartford. Seven Customs and Excise officers and two police officers arrived at Mr. Button's home and, according to the Daily Mail report, stayed there for eight hours. According to the parliamentary Answer they sought documentation relating to the business in cupboards, drawers and handbags. In addition, one car was searched".—[Official Report, 10th May 1976; Vol. 911, c. 49.] Again, according to Press reports, a child's school satchel was searched as the child was on her way to school. At the end no evidence of VAT fraud was 986 found and an apology has been extended to Mr. Button. He was an entirely innocent person. That shows why we are so anxious about the extension of these powers.
It is all very well for the Chancellor and Ministers to say that the powers will be used only in a handful of cases affecting suspected fraudulent people, but they can be used on the basis of suspicion of guilt. How many more wholly innocent people, therefore, will be afflicted in this kind of way under the VAT powers and how many more under the new powers?
According to an Answer given a few days ago, the VAT powers have given rise to no fewer than 150 complaints. The existence of 150 complaints about a power of this kind certainly suggests that it is not being used in a fashion which comforts or consoles, let alone exhilarates the citizen upon whom these powers are visited.
What is more disturbing is that according to an Answer given to my hon. Friend the Member for Macclesfield (Mr. Winterton) on 5th May there is certainly very little evidence in these 150 cases to suggest that the complaints are being taken seriously. We are told that on investigation only five have been shown to have some substance. Information has been of such a serious nature as to require no more than an oral admonition. But if the powers are being exercised so as to give rise to 150 complaints, and if the investigation into them leads to the conclusion that only five are of some substance and that none of them deserves more than an oral admonition, there is every cause to be gravely disturbed about that.
We would like to know from the Chief Secretary what are the standards of propriety being applied in such cases. Is it purely a matter of routine inquiry that seven people should descend upon a home and apparently search their way through it, dominating the premises for eight hours? Is it a matter of proper routine that these people are able to examine diaries, handbags and other items of a personal nature? Is it appropriate for a child's school satchel to be searched as a matter of routine in cases of this kind? Are these all routine matters, or were they matters which gave rise to some modest concern in the Customs and 987 Excise? Were they matters in which there was any oral admonition?
It has been stated by one person quoted in the Press for the Customs and Excise that all that happened at Mr. Button's home was no more than routine investigation. We should like to know whether that is a proposition by which the Chief Secretary stands. Are the matters relating to Mr. Button's home no more than a routine investigation and a yardstick by which we are to judge the new powers if they pass through this House? Is every citizen to be required to use the euphemism of "helping the Revenue in its inquiries" by submitting himself to this kind of treatment?
4.45 p.m.
Our anxiety is deepened when we find that the powers now suggested are not to be restricted but extended massively. The VAT powers apply to about 2 million registered VAT traders. The new powers are proposed to apply to about seven or eight times as many ordinary income tax payers, and it is nonsense for the Chief Secretary or any Minister to suggest that in some way these powers will not affect ordinary PAYE taxpayers. Such people are certainly not outside their scope. The clause applies them directly to each and every PAYE taxpayer, and it is no answer to say that it is not the ordinary taxpayer who will be affected. Is it suggested that the 2 million self-employed people already liable to VAT are fair game for this treatment? Certainly we believe that they are not. The National Federation for the Self-Employed and other organisations have made clear their view of what is proposed.
Anyway, who is the ordinary PAYE taxpayer? Taxes are now so high and widely resented that more and more people are taking more than one job, from weekend house repairers to boys who deliver papers or clean cars. Taxes are already felt to be so oppressive that, as the hon. Member for Tottenham (Mr. Atkinson) pointed out on Second Reading, we are well on the way to becoming a nation of moonlighters. Large numbers of people who do a PAYE job in one part of the week may find themselves in the position of supplementing their income in all sorts of ways at odd times.
988 It is idle to pretend that there is not also great fear on this matter because of anxiety about how the powers can be used in relation to capital transfer tax. The CTT reaches low down the income scale; and there are wide grounds upon which anxiety could arise there. There is also deep anxiety at these powers being used in connection with any future wealth tax.
Moreover, to apply these powers to income tax is to apply Customs and Excise powers in a quite different and new area. They may have been appropriate on indirect taxes of a kind normally and traditionally handled by the Customs and Excise. The Excise men have for long had to deal with smugglers and rum runners with the advantage of powers of this kind. But until now it was never thought appropriate to attach them to taxes on income of the sort we have had for about a century and a half and which have not required such powers hitherto.
The powers in the Bill are far more extensive than the VAT powers, but they have much less definition for that. They go far beyond the recommendations of the 1955 Royal Commission and we have managed to do without them for more than 20 years.
The proposed Section 20 in Schedule 6 contains the power to call for documents of taxpayers and others, and these arise simply for the purpose of inquiring into the tax liability of any person. No more than that is necessary. They arise in relation to any tax and can extend to whatever documents may seem relevant in the opinion of the inspector. They relate to any tax to which a taxpayer is or may have been subject, to whatever liability, however large or small. The powers to require the production of documents extend to the taxpayer's spouse, even if there is no evidence that she has been involved in her husband's business or has knowledge of his records.
The powers extend to any son or daughter of the taxpayer, apparently of whatever age and wherever that child is to be found, however long ago the child might have last had contact with its parents. They will be used in relation to an infant child, on the one hand, or, on the other hand, a 50-year-old child of a recently deceased business man who may not have seen its father for many years. 989 It is absurd and intolerable for the powers to range as widely as that.
They relate to taxpayers of whatever Infirmity or age, irrespective of the scale of fraud, suspected or not. They relate to tax liability in the past, however far back. They relate to the affairs of the taxpayer who has died, however long ago he may have died. They relate to the affairs of someone working as the director of a business long since extinct, however long ago that may have happened. The very breadth of these powers is a terrifying insight into the way in which they may be used by people who designed them on this kind of scale.
A further example, which causes concern, relates to the powers to call for the papers of a tax accountant set out in new Section 20A of Schedule 6. Apparently these are to extend to all the clients of a tax accountant. Under new Section 20A(2) there is no necessity even to name the client of the accountant against whom the powers are being exercised
New Section 20B contains the power of entry to obtain documents, if necessary by force, and at any time. One feels that this could affect many innocent people. Many people could be suspected—not just anyone who might ultimately be found guilty—and anything may be removed. No conditions have to be satisfied before the warrant can be issued, no list or receipt has to be left for the documents or other things which are taken away. It would be an advantage if these powers could be exercised only on the authority of a High Court judge or two special commissioners but, I suggest, they are powers which ought not to be placed in the hands of any one authority. They go far beyond the balance which is right for protecting the taxpayer and the rights of the ordinary taxpayer to privacy. To fortify one's anxiety, the powers of entry are to extend, as my right hon. Friend the Member for Crosby (Mr. Page) ascertained long ago, even to the premises of a legal adviser or accountant. There is no protection whatsoever in these circumstances.
Only the most thrusting and oppressive group of people would ever have asked for powers as wide as these. If those people are insensitive to the reaction to these powers, then one must surely 990 tremble at the way in which those powers might in the end be used.
It is said, in defence, that other countries have powers of this kind. That is not a very attractive defence from the Labour Party, who spent many months of many sessions in the last Parliament criticising the then Government for introducing "alien laws" into this country, whether in the European Communities Act or the Industrial Relations Bill. It ill becomes the Labour Party to argue on that basis in this case.
In the United States the system is entirely different. Self-assessment with spot checks is a quite different approach. The powers enjoyed there by the Inland Revenue Service are very sparingly used in a quite different tax environment, where top tax rates are far lower than they are here. The tax system as a whole is widely seen to be fair.
To add these powers to the tax system designed by the present Government in this country is quite intolerable. They would destroy altogether the relationship of confidence which should exist between the tax collector and the taxpayer. That is the context in which they have to be seen. More and more people in this country think they are living in a society in which their freedom and liberties are being chipped away—one more regulation, followed by one more right of inspection, followed by one more right of entry.
Yet they are not to be justified to this Committee. That is astonishing and intolerable. If anyone had told me that provisions like this would be introduced when the Government Benches were empty and without the advice of the Law Officers, I should not have believed it. I hope that the Whip will indicate our urgent anxiety for the attendance of at least one Law Officer. People regard this not as an isolated issue but as one more bar in the great ring fence which is curtailing their freedom. It is not just an idle comparison to consider the plight in Sweden of such a distinguished citizen as Ingmar Bergman because people here regard that kind of story as the hallmark of a society which is so over-governed that it is, in a real sense, oppressed by over-government.
This clause is one more addition to the armoury that this Government have introduced as part of the stock-in-trade of 991 Socialism. One wonders why on earth it is in the Bill at all. We know that Mr. Plant of the Inland Revenue Staffs Federation has boasted that it is in the Bill because that trade union pressed for its inclusion. This is one more disturbing example of the way in which authority is passing away from this House, even from the Government, and into the hands of people further away. That is the significance of the eerie feeling many hon. Members must have had as they heard the Chancellor justifying this provision in the very words of Mr. Plant two days before in The Sunday Times. How does this come about? Did the Chancellor write Mr. Plant's article or did Mr. Plant write the Chancellor's speech? The latter is more probable. Perhaps the Prime Minister wrote both of them. Most probably, the same member of the staff federation, in a key position, composed them both. How else are we to explain the Chancellor's change of tune?
Where is the valiant champion of freedom who trumpeted his way through the Standing Committee on the 1972 Finance Bill? How has he been overcome to bring this provision before us? He must face the fact that nothing has done more than this particular instance to arouse anxiety. We ask, who is in charge of this part of the Bill? Who is calling the tune? Whatever the answer may be—we hope to hear the Attorney-General amplify this as well as the Chief Secretary—we do not like this provision and we shall do our level best to change it. It is deeply repugnant to the Committee and I hope that it will be rejected.

§ Mr. David Mitchell (Basingstoke)
We all learned at school that the price of liberty is eternal vigilance. The heart of liberty is encapsulated in the phrase "the Englishman's home is his castle". It was perhaps the only place where with all his idiosyncracies and personal oddities a man, or woman, could shut the door and enjoy complete privacy. At least they could until 1976.
One has to ask, what has changed? The Inland Revenue has powers, and has always had powers, against fraud, such as the power to put an artificially high assessment on the citizen and leave the citizen to produce the papers to prove that that assessment was wrong. What has 992 changed? Is it a Government who themselves feel that their taxation is so excessive that the ordinary citizen will be driven to fiddle? Or is it a Government who, on assessing the balance of factors, regard the liberty of the citizen as a lesser matter than did any other Government in this century? What is it which has changed in 1976 over all the years of the past? Is it that this Government have now reached a situation in which they are proposing powers which will introduce "the knock in the night"? If that phrase may sound exaggerated, I shall return to it later to prove my point.
It is good to see that some hon. Members have joined the Government Benches, even if I recognise some of them as members of the next Government rather than the present Government.

§ Mr. Cranley Onslow (Woking)
I have not come to the Government side of the House in order to advance my own claims to be called next after my hon. Friend although, if the Chair is to adhere to the practice of calling hon. Members from both sides of the House, alternately, this would seem to be a consequence. I have come here simply to demonstrate a shameful situation and to give all the support possible to the proposition that this House is a Chamber of which both sides should be occupied.

§ 5.0 p.m.

§ Mr. Mitchell
I asked what safeguards were built into the clause. The Revenue does not even have to be sure that an offence has been committed. The Bill refers to "reasonable grounds to suspect". The Revenue does not even have to be sure that an offence is committed before the powers can be used. What an extraordinary situation. The citizen does not have to be there when this invasion of his home and privacy takes place; no such protection or safeguard is afforded in the Bill. Indeed, he could be on holiday and could come home to find that his house had been forcibly entered and broken into by the Inland Revenue. He does not even have to be asked to be there when he can reasonably be expected to be at home. Nor does he have to be formally notified that he will be visited in this way. This is literally the introduction of the knock in the night—1984 in 1976.
Do the police have to be present when this break-in by force takes place, as the 993 Bill describes it, to see that nothing else is taken and that the citizen's property is properly locked up after the forcible entry? I find no such safeguard in the Bill. What price an Englishman's castle and his privacy?
The Revenue does not even have to show that a large sum is involved. Could it be a matter of £5, or a piece of cheese or a pineapple? An offence may be committed by a greengrocer who takes home a pineapple which will not keep until Monday, eats it and does not declare it as a personal benefit from his business. The restaurateur or cafe proprietor who takes home some cheese which will be stale by Monday and eats it before it goes bad may be committing an offence. There is no indication in the Bill that he will not be harried like this. Safeguards for the citizen just do not exist.
I draw attention particularly to Amendment No. 75. I hope that the Government will accept that if this miserable clause gets to the statute book it should provide that any documents taken should be entirely relevant to the case, that they shall be copied and returned, so that the citizen may know what documents have been taken and may have them hack if he needs them for the working of his business. They should be listed before they are removed and he should be given the list of the documents removed. Without those simple safeguards, the citizen is even more at risk than one might at first have considered.
We should oppose these powers because they will sour the relations between the Inland Revenue and the ordinary taxpayer. His co-operation and sense of fair play is a necessary requirement for the proper operation of our tax system. If the Revenue intends to set itself up as the enemy of the people, it will be regarded in that light by the people and will therefore lose much of the co-operation that it could and should have expected.
These powers will inevitably lead to a growing dictatorial attitude among those who have them. Power corrupts. In a letter that I received only this week, a gentleman writes: In the light of past experience … I feel that it is virtually certain that the new powers would be used less to attack fraud than—in actuality or as an overhanging threat—to establish a domineering position vis-à-vis 994 honest taxpayers in what ought to be, but often are not, fair negotiations. He goes on to say that, before an appeal begins under the existing arrangements, the Treasury and the Inland Revenue … indoctrinate the Commissioners with their account of the nature of the dispute, including—so they say—the grounds on which a taxpayer complains. They refuse, however, to inform the taxpayer of what they have said even on his behalf'. If one writes to ask for an adjournment of a case or something like that, one gets a reply not from the Commissioners but from the inspector of taxes concerned. That is like having a reply from the police when one writes to the magistrates' clerk when a case goes to court.
These powers are abhorrent to the people of this country and I hope that the Committee will throw them out.

§ Mr. J. Enoch Powell (Down, South)
It is not without symbolic propriety that, during the whole of the speech of the right hon. and learned Member for Surrey, East (Sir G. Howe), the arrangements of this Chamber appeared to have been entirely altered, so that it was converted from a chamber of two-sided debate into an arrangement for placing in the dock the solitary figure or figures of the Chief Secretary and the Financial Secretary—accompanied distantly by what appeared to be the shadowy figure of a warder, in the form of the Government Whip. Only at a late stage did certain hon. Members bethink themselves of the best tradition of friends of the accused and do something to break up this symbolic arrangement.
But true it was, for this afternoon the Government. in the persons of the Treasury Ministers, are in the dock. They stand accused of an unjustified invasion on a major scale of the liberties and privacy of the citizens of this country. It is an invasion which is the more shocking for the virtual absence of any attempt to justify it.
On the Second Reading, the Financial Secretary urged two grounds, neither of them in itself at all a justification for seeking these powers. The first was that they would be used very sparingly. It will be the rarest occurrence. In only "a handful of cases "—that was the phrase—would the powers in Schedule 6 be thought necessary to be applied.
995 If the Government can be so sure that It will only rarely arise that these powers are necessary, they must surely be able to define, in a way that they have not even attempted to do hitherto, what those rare circumstances are. Let them come forward and tell the Committee that it can happen thus, thus and thus, that an evasion of tax can be dealt with only and quite exceptionally by the power forcibly to enter private premises. But no such attempt has been made. We have simply been assured, "Give us the powers in the Bill and it is our opinion that only in a handful of cases will they be used." The Financial Secretary, perhaps appropriately, appears to have very big hands.
The right hon. and learned Member for Surrey, East pointed out that, when powers similar to these have hitherto been restricted to VAT, they have been used in about 40 or 50 cases a year. What possible ground has the Financial Secretary for supposing that, if those powers are extended to cover the whole field of tax, there will not be hundreds of cases in a single year? If he has grounds, contrary to the evidence of experience in the last three years, for saying that only in five, 10 or a dozen cases per annum will these powers be necessary, then he is duty bound to show precisely what are those exceptional obstacles to the operations of the tax authorities which can be surmounted only by the powers which are being sought in this clause and the attached schedule.
The other ground which was given by the Financial Secretary was even more shocking and ought particularly to put the Committee on its guard. He said, "There is no reason for anxiety, for the honest taxpayer has nothing to be afraid of." "Give us these powers, agree to destroy in yet another sector the rights and privacy of the private citizen, and you need not worry about it, "says he to the House, "because if you are honest it will not affect you."
There is no invasion, no intolerable advance of tyranny which not merely could not but has not been justified by precisely that argument. I recall how in the 1930s, when there began to filter through to the populations of countries which had fallen under absolutist régimes the rumour of what was being done to 996 their fellow citizens, they were told "You need not worry, it is only the enemies of the State who are being deprived of their natural rights in this way. As long as you are a good citizen you have nothing to fear. It is only to the bad citizens that this is applied."
When we are considering the destruction of the liberties and the privacy of the citizen, we are not justified in setting out to divide the public in advance into two sections, the honest and the dishonest, and saying that these provisions apply only to the dishonest and it does not matter, therefore, to what sort of oppression they are subjected. Always it has been the argument of those who sought to defend the indefensible—whether it was an existing institution which needed to be reformed or a new advance of oppression—that there is nothing to worry about: "If you are innocent, it will not happen to you." I wonder.
It so happens that just at the time when this provision was in agitation I was reading the account of the debates in 1879 upon the abolition of flogging in the Army. I noted particularly apropos the speech made by the Financial SecretarY—I hope that he will like the company in which he finds himself—that those who defended the maintenance of that barbarous custom did so on exactly the ground on which he sought to defend the introduction of these provisions. Sir Henry Havelock, no doubt a very gallant gentleman, defended the status quo in this way. … he wished to say that no class of men would rejoice more than the officers of the Army when this punishment could be done away with but until this occurred the good soldiers knew that they were in perfect security, because there was not the slightest risk that, by any possibility, corporal punishment would be inflicted upon them. That is one of the doors through which tyranny enters and liberty disappears. It is said that we are bringing in this measure to deal with wrongdoers, that no one would wish to put himself in the category of tax evaders, and let no one, therefore, stand up to protest against provisions which are designed to deal with tax evasion. The very fact that it is that kind of argument and not the sort of argument which we ought to expect from those who are charged with defending and justifying the operations of the Inland Revenue and Customs and Excise, the very fact that 997 we have heard from the right hon. Gentleman the kind of retrograde argument that has been advanced in favour of the clause leads us to greet it not with suspicion but with hostility.
There is only one condition on which Treasury Ministers can excuse themselves for having brought forward a Bill which contains the clause, and that is if they are able to demonstrate to the Committee the precise circumstances in which there could be no alternative to the invasion of privacy and personal rights which the clause imports. More than that, they must also prove that those circumstances are of so exceptional a character as to justify the ground which was alleged in favour of the clause though that will by no means necessarily justify the Committee in adding the clause to the Bill.

§ 5.15 p.m.

§ Mr. Cope
I wish to make clear my repugnance for the clause. That phrase is not mine but the Chancellor of the Exchequer's. He used it in opposing, in the debate on the 1972 Finance Bill, the clause bringing in the VAT provisions. He persuaded the present Chief Secretary and the present Financial Secretary to vote against the clause. Today those Ministers are trying to extend the provisions to many more people. We must be absolutely clear how far the powers go. They go much further than the Chief Secretary sometimes implies.
An inspector will have power to break unto any premises, by night or day, regardless of whether they are occupied, to search premises and to remove any document he wishes from those premises. "Premises" includes any place of business or home, and the offices of a lawyer or accountant.
There is no point in writing professional privilege into the Bill by Section 20A in Schedule 6 if that provision is immediately annulled by Section 20B. If a barrister or solicitor refuses to produce a piece of paper under the professional privilege rules and the Inland Revenue still wants it, it will only have to wait until he goes home to break into his premises and take it away. Other offices, however loosely connected to the taxpayer, or even unconnected, are included. The person whose office or home it is may not be the person who is thought to have committed the tax fraud. Even if 998 he is. power is given to break into psychiatrists' offices, for example. As we have seen in America, that can lead to considerable trouble for political parties and their leaders.
We have not been told why these powers are required. A Back Bencher claimed on Thursday last at Question Time—and the Treasury Bench agreed—that there was massive evasion of the tax laws the extent of which could not be evaluated. We have been given no evidence to support that allegation and we have not been told why the clause and the provisions in Schedule 6 will help the Inland Revenue.
They will not help the Inland Revenue when dealing with ordinary taxpayers because, as my hon. Friend the Member for Basingstoke (Mr. Mitchell) said, if the Inland Revenue suspects fraud or the withholding of information, it issues an enormous assessment and makes the taxpayer justify his figure. The provisions will not be of much help to the Inland Revenue in dealing with major frauds because they come within the province of the police who already have rights of entry, with safeguards. The Chief Secretary has a duty to tell us why he is not satisfied with the existing powers of entry possessed by the police. The conclusion I draw is that the powers will be used only for small suspected frauds in which the police are not involved.
Several improvements and safeguards are suggested in amendments both in Committee of the whole House and Upstairs. I favour the idea floated in the Economist, which is supported in an amendment, that if these powers are to be taken by the Government, the personal signature of a Minister should be required by the information of the court. The Government have not yet justified the principle which lies behind these provisions.
There are also several other lesser points with which I hope the Chief Secretary will deal. One point concerns damage and the duty of care that any citizen owes to other citizens. What happens, for example, if the Revenue officer after ransacking somebody's bedroom slips on the carpet, falls downstairs and hurts himself? Who is responsible for paying damages in that case? It was surprising to me to discover not 999 long ago that the householder, owner or occupier of premises has a duty of care towards trespassers if he has been careless in allowing them to trespass. Does he have a similar duty of care to the house-breaker who turns out to be a licensed Revenue official?
What will happen if the official leaves his jemmy on the landing and the householder falls down the stairs? In that case does the Revenue have to pay damages to the householder? What happens if after the Revenue man has broken down the door and taken whatever he requires and gone away, a burglar then appears on the scene and takes advantage of the state of the premises to carry out the burglary himself? Who pays for the damage caused?
Supposing also that the taxpayer is present when the Inland Revenue official enters the premises and takes it on himself to hold on to a file or papers, and says to the tax inspector" You may search the premises, but you will not have this file. "Is the Revenue official then allowed to use reasonable force, any force, or no force at all, to get the file, if that is what he then wants?
What form of identity card or documents is it proposed that the Revenue official should carry in the course of going about this part of his work? We all know that other powers exist in respect of gas meter readers and similar workers. We also know that many householders have admitted what they thought to be a gas meter reader or other genuine official only to discover that he is a burglar who has then proceeded to steal. Obviously anybody may use the disguise of a Revenue official unless it is made clear to the public by some form of identity that he has come to carry out a search.
It seems to me that these are not mere details but are important aspects of a provision on which the House needs to be reassured. The most important part of this discussion is that the Chief Secretary must justify, if he can, the need for these provisions at all.

§ Mr. Onslow
I am glad to see that others have now taken the seats on the Labour Benches which some of my hon. Friends and I occupied a little earlier. No doubt it came to the attention of the 1000 Labour Members that their Benches were empty when we were discussing this important clause. It is striking that so few Labour Members appear to be interested in this subject.
My remarks could have been made by an hon. Member on either side of the House because I wish to read to the House extracts from a letter from a constituent who comments on the subject of snoopers and makes a specific reference to his own experience with VAT officials. His comments will no doubt have relevance to the situation if the clause is included in the Bill. I wish to emphasise that any one of us may have received a similar letter from a constituent. Therefore, I believe it is useful that I should quote from the letter, because nothing is better for Ministers than that they should know what people think about them—not from the point of view of politically-motivated opponents, but in the eyes of somebody who is affected by legislation and the treatment to which he is subjected by Ministers and officials. My constituent does not think much of that treatment and that is why I am quoting his letter.
My constituent refers to a letter from a Treasury Minister which I forwarded to him. He comments: I am surprised that he bothers to reply in English. The letter could be sanskrit for all the sense it makes to me. The Minister goes to great length to show why it is necessary for Customs and Excise officers to badger me he condones and excuses it. Customs and Excise officers are used to dealing with smugglers and racketeers, dope peddlars, bootleggers, forgers and counterfeiters and the methods they use for that kind of investigation should not be used to coerce and browbeat ordinary citizens going about their normal business. My constituent continues: My accountant fills in my income tax return and I sign it. The income tax authorities do not ring me up and demand to see my books. If they did, I would have to explain that I did not have any books and that my accountant has them. I would then refer the authorities to him. I am an actor, not an accountant … I realise that actors are still classed as rogues and vagabonds and the casual nature of our employment does not allow us to fall into any regular pattern or pigeon hole and that the foremost thought in any bureaucrat's mind is to keep the office and the records straight over everybody else's dead body. However politely any official cuts your throat, it is not an experience to be relished. I see that VAT hold me responsible for completeness and accuracy of accounts and 1001 returns. Who do I hold responsible for the correct interpretation of the VAT legislation which changes with great frequency and taxes the minds and ability of the most talented accountants. My accountant refuses to deal with it. I freely confess that for the past 40 years accounts, records, and business of that sort I have always left to my agent and my accountant. I am 58 years old. Do I have to start taking a special course in governmental legislation? Who is to pay for my training? Do I get an allowance for it—less VAT of course. Then he comments on specific points in the Minister's letter. He rejects a statement in the Minister's letter that he had never objected to visits by officials to his home. The passage in the Miinster's letter is as follows: It is relevant to add that Customs and Excise policy, as outlined above, has been applied in respect of visits to very many professional persons in a similar position and that experience since the inception of VAT has amply demonstrated the validity of this practice in relation to efficiency of control, It is recognised that removal of records for this purpose causes some inconvenience and expense, and this is regretted; but visits of this kind do not normally take place with any great frequency, and reasonable notice is given on each occasion. On that point my constituent says in his letter: In my opinion it demonstrated that VAT officers are prepared to walk roughshod over any and everybody without their having any redress. It is quite ironic that it should be run by civil servants, who in my experience are not civil and do not act like servants. 5.30 p.m.
My constituent then deals with the provision of duplicate forms, something for which he had originally asked. The Treasury's comment on this matter was as follows: As regards the question of the provision of duplicate forms, the position is that Customs and Excise used to provide duplicate forms VAT 100 on request, but in view of the paper shortage it was decided that they would not be justified in acceding to requests for blank return forms for the purpose of making copies for retention. In present circumstances taxable persons are normally expected to make their own arrangements for retaining copies of returns. However in individual cases, and on written application to Section SD, VAT Central Unit, Alexander House, 21 Victoria Avenue, Southend-on-Sea, Essex, SS99 1AT, Customs and Excise are prepared to supply a single blank return form to serve as a master copy for reference purposes. There is no limit to their generosity. My constituent does not seem to have been very impressed by that. He says of the reference to a paper shortage: in view of the numerous and voluminous publications about VAT that frequently clutter 1002 up one's letter-box, that would make a cat laugh. He goes on: I see that taxable persons are normally expected to make their own arrangements for retaining copies of returns. This aptly demonstrates the arrogant, high-handed, dictorial and impudent attitude of the VAT official mind that seems to have contimated the Minister. However, I shall write and see if they will deign to supply me with blank returns for reference purposes. My constituent says: I am sorry to go on so long and tediously"—

§ Dr. Colin Phipps (Dudley, West)
Hear, hear.

§ Mr. Onslow
I do not see why he needs to apologise. He says: but I feel that a fundamental principle of British democracy is at risk here. That is something with which Labour Members do not appear to agree. My constituent goes on: In England I was brought up to believe that a person was innocent until proved guilty. Increasingly in official minds this is being reversed and we are being assumed guilty and now have to prove our innocence … It is now suggested that these powers he extended to income tax officials who will be able to insist that your children (shades of the Hitler Youth and the Gestapo) and your wife testify against you. And the crowning argument of all is 'If you are innocent you have nothing to fear.' The awful point is that if you are innocent you have everything to fear An official can make a slanderous allegation against you with impunity and you have to prove your innocence. If an ordinary person were to call you a liar, a thief, a drunk and a cheat you could sue them and teach them a very sharp lesson. But now it is being arranged for these things to be implied against you and the innocent person, who is harassed, upset and humbugged about, has no redress. My constituent ends with a reflection, remembering a conversation he had a number of years ago with an expert on tax affairs, when he had said to the tax expert: "There must be an enormous amount of tax money you can never collect or get hold of it." The expert replied "That's nothing to the money we have that we shouldn't have."

§ Mr. William Clark (Croydon, South)
Throughout the country people are thinking that the Government have a fixation about tax evasion. In reply to a parliamentary Question last Thursday, in which I endeavoured to extract from the Chancellor the number of extra personnel who would be required to carry out 1003 these search powers, I was given the answer "None". That struck me as a bit odd. Here is the Revenue, or someone, saying that there is massive tax evasion and therefore powers of search are needed and yet the number of personnel is not expected to increase.
I put some specific questions to the Chief Secretary. Does the Inland Revenue agree with these powers? This is extremely important. The last time we had the opportunity of discussing the search and all that that implies was during the proceedings of the Select Committee considering the wealth tax. I refer to Volume II, page 49 and the answer to question No. 304, which funnily enough I posed to Mr. Green and Mr. Beighton. As will be known by everyone, Mr. Green is the Deputy Chairman of the Inland Revenue and Mr. Beighton is an Assistant Secretary. Their positions may have changed since February 1975. In answer to my question concerning the search Mr. Beighton said: I do not think that we necessarily propose that there would normally be powers to search. Whether there might be occasions on which the Inland Revenue would want to go to the courts as they can now, and ask for powers to search is perhaps for consideration. However, in the normal course, I do not think we would be likely to be going before Parliament and saying, Please can we, without any warning and without any notice, even if we have no reason to suspect the veracity of the man's return, have powers to go into his house and ask him to turn out every drawer he has?' That is a fairly serious thing to say. A week later Mr. Beighton, again dealing with this question of the power of search, said: I do not think we would need specific rights of entry for the purpose of dealing with household and personal goods. He talks about household goods and a little later says: We did suggest last week that probably we would want the same sort of rights as we have under the current position, in other words, we ought to have the power to go to the court and say, 'We think this is a proper case for us to be allowed to go in', but we are not thinking in terms of blanket powers to enable us to march in on a taxpayer and demand to look around his property without warning. There is an explanatory note given by the witness in which it is said: In appropriate cases the Revenue avails itself of the power to search conferred by 1004 the Forgery Act 1913; Revenue Statutes, however, confer no general power of search. I repeat my question. Is the Inland Revenue happy with taking of these powers? I hope that the country and House will be alerted to the fact that these are sweeping powers. Instead of entertaining this tax evasion fixation I wish that the Government would look at the other side of the balance sheet and see where they could start saving the money which they are currently wasting. The powers they propose to take are massive. They represent a diminution in freedom, in the right of a man to enjoy privacy in his own house.
I cannot think that these powers have no connection with the introduction of a wealth tax. When a wealth tax is introduced, if it is, it will be extremely unpopular. If, at the same time, the Government were to take these powers of search there would be an uproar. The Government hope that by using "Softly, softly" tactics, and bringing the legislation in in dribs and drabs, the public will be deluded. I hope that the public will not be deluded. Certainly we are not deluded. I hope that my right hon. and hon. Friends will push this matter to a Division.

§ Dr. Phipps
I would not wish the Opposition to believe in the notion of a defenceless Chief Secretary incapable of looking after himself. I do not specifically rise to defend my right hon. Friend. I take the point, which many of us regard as serious, made by Conservative Members. The principle at stake is one with which the House has been faced over many years and no doubt will be faced again. Surely the principle in all matters of this kind, when we are speaking of individual liberty, concerns the degree of abuse of the laws of this land we are prepared to accept before we feel it necessary to introduce a degree of restriction of liberty on the few to preserve the liberty of the many.
By and large this is precisely the kind of legislation being put forward today. It is now widely accepted that there is a large and considerable degree of tax evasion. For the great majority of people this possibility never arises. The bulk of the population pay their tax as they earn it. There would be no question of their being subject to snoopers, or any other kind of interference with their individual 1005 liberties. These are the people, by and large, who have to be protected. These are not the people who are evading tax. There is no possibility of evading tax if one is an ordinary worker operating on the PAYE system.

§ Mr. Tony Newton (Braintree)
Would the hon. Gentleman accept that we were debating a day or two ago the question of the limit on a child's income before a father starts to lose a tax allowance? Can the hon. Gentleman be confident that every working-class boy doing a paper round is having his income declared to the Revenue by his father?

§ Dr. Phipps
I can be absolutely confident that the loss to the Revenue in such a case is minute in comparison with the loss which might be occasioned by a major tax evasion. Let us be sensible. This is what we are discussing. We are not discussing the lady who goes out "charring" for 50p per hour for five hours a week or the boy who does the paper round. We are discussing major tax evasion. It is a perfectly legitimate defence of the ordinary citizen that major tax evasion should be subject to examination by the Revenue. I understand that warrants would be required for the kind of entry discussed. After all, evading a tax is as criminal an offence as anything else for which a warrant is required.

§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
The hon. Gentleman is putting a proposition that if someone robs a bank but steals only £5 it does not matter.

§ Dr. Phipps
As a magistrate, I would regard robbing a bank of £5 and robbing a bank of £500,000 as very different matters. The law recognises the difference as such and provides for different sentences for offences of that kind. We are looking here at a practical problem. Hon. Members can make points about the scale of what we are talking about, but by and large everyone understands that my right hon. Friend is bringing in this provision to tackle major tax evasion. There may be ways of tackling minor tax evasion, but major tax evasion must certainly be tackled, because it is a scandal. If it cannot be tackled in any other way. it requires the right, with a warrant, to enter if necessary and examine books to discover whether such evasion is going on. We as citizens ought to realize 1006 that this is designed as a protection. It is the degree of the abuse which is important.

§ Mr. Peter Rees (Dover and Deal)
The hon. Gentleman should not shelter behind the Chief Secretary. What grounds has he for thinking that there is widespread abuse of the tax system?

§ Dr. Phipps
If the hon. and learned Gentleman wishes me to do so, I can go into some detail. We were both members of the Select Committee which dealt with the wealth tax. In the evidence, I brought up quite a large number of cases of the kind of evasion going on, and also of possible evasions. I refer him to those proceedings. I mentioned many of the forms of evasion available, they are quite major, and I believe that they are being used. If this power is given, subject to warrant, for the purpose of catching major tax evasion, it will be protecting the ordinary citizen. That is acceptable in exactly the same way as a warrant is issued in the case of any other criminal offence. I see no reason why the Committee should not accept it.

§ Mr. John Pardoe (Cornwall, North)
Before any of us fulminate against the Government's proposal, we should get one thing straight. We are not supporting tax evasion. I remind the Chief Secretary of my remarks on Second Reading and that I at least take tax evasion as a very serious matter. I am not proposing to be soft on it.
We have heard the right hon. and learned Member for Surrey, East (Sir G. Howe) in great form, waxing very angry about what he called the hypocrisy of the Chancellor of the Exchequer. Before we are through, no doubt we shall have an enormous legal tome called "Howe on Hypocrisy". The right hon. and learned Gentleman quoted extensively from our debates in 1972 and rebutted the Chancellor's then accusation of hypocrisy. As I am sure the Chief Secretary will recognise, hypocrisy is a two-way thing. It is becoming a habit for speeches to remain on the same side of the House although the parties may move from one side to the other. Sometimes I wonder whether a member of the Front Bench who crosses the Floor does not leave his speeches behind in the Dispatch Box for his successor of the other party to take out and use the following year.
1007 I hope that everyone who reads of reports today's debate will read in detail the debates we had on the 1972 Finance Bill and compare them with this debate. They will find that reading not very attractive. They may even feel a sense of shame about the operations of this place.
The right hon. and learned Member for Surrey, East said that he and the Conservative Party proposed to oppose this measure root and branch. So do I. He said that it would invade the right of privacy and secrecy to an extent that is intolerable, and I entirely agree. But these are precisely the same powers in almost every detail as were passed by the Conservative Government in 1972. I see that the hon. Member for Horsham and Crawley (Mr. Hordern) nods assent. He at least did the honourable thing. He attacked his own Government then time and again for the introduction of these powers in their application to value added tax.
5.45 p.m.
I understand that it is perfectly possible for Members of the Conservative Party to change their minds—it is perfectly possible in any party. But is this latest change of mind only because the Conservatives have changed their side of the House? Or is it because some new facts have come to light about the workings of these powers which they introduced with relation to VAT? But it is not just a question of facts. There are no facts which could have come to light on the working of the VAT powers which could have substantially changed the principle. The right hon. Member for Down, South (Mr. Powell) spoke about principle, and it is with principle that we ought to be concerned in this debate.

§ Sir G. Howe
I made clear two points which the hon. Member for Cornwall, North (Mr. Pardoe) ought to take into account. The first was our concern that these new powers in any event go far beyond anything expressed in 1972. They extend far more widely. They apply to every income tax payer and not just to registered traders. Therefore, they extend into every home and not only into homes used for trading purposes.
Secondly, we have now experience of the way in which the 1972 powers have 1008 been used. I quoted cases which have given rise to concern outside this House. These powers gave rise to concern in 1972. Our experience justifies our now taking a much more comprehensive view, to put it no higher, of these present proposals.

§ Mr. Pardoe
I do not accept that these powers go very much wider than the VAT provisions in 1972. It is true that if they were applied to every income tax payer they would apply to a much greater proportion of the population. The argument was taken up in 1972 on the numbers which would be involved. But one of the arguments put forward by the Conservative Government in 1972 against the present Chancellor of the Exchequer was that VAT covered so many more people, and that therefore it was necessary to have these powers whereas it had not been necessary to have them with purchase tax and selective employment tax, which brought in about the same amount of money.
I do not accept that the points raised by the right hon. and learned Gentleman are material to changing his general position about the principal of these provisions. For example, is it true that today VAT is easier to enforce than was supposed in 1972? I have absolutely no evidence that enforcement is easier now than it was then.
The right hon. and learned Gentleman said that it was always stated in 1972 by the Conservative Government, that these powers in relation to VAT would be reviewed if in practice they became intolerable. But enough warnings were given—a great many of them by Conservative Members. The situation was clearly pointed out to the Conservative Government in 1972. It was pretty intolerable then. I agree that the burden of these powers in their relation to VAT has become totally intolerable by 1976, but I do not see why the Conservative Government did not accept the arguments then. Have there been more cases of their being used than they expected? I have not heard any evidence to that effect.
The right hon. and learned Gentleman says that it can now be seen that these VAT powers were inappropriate. Is there any legislation which the Conservative Government passed which has not subsequently proved to be a disaster? Is there 1009 any part of that Government's legislation which he does not regard now as inappropriate, whether it be the Water Act, local government reorganisation, the Industrial Relations Act, the reorganisation of the National Health Service—we could go on with the list all night?

§ Mr. Powell
And the European Communities Act.

§ Mr. Pardoe
I expected the right hon. Gentleman to put that in. We fought that battle and will have to re-fight it many times.
All I am saying is that it is not very different from 1972. I strongly suspect that the only material difference is that the right hon. and learned Member for Surrey, East now sits on this side of the House and that the Chief Secretary sits on the other side. I would bet my bottom dollar that if the right hon. and learned Gentleman were now in the Chief Secretary's position, he, too, would have surrendered to the Inland Revenue Staffs Federation, political bigotry and all. He, too, would have accepted the requirements of the Revenue to invade the privacy of people's homes.
We simply cannot continue with this ludicrous pattern whereby a Government introduce some new intrusion into privacy, pass laws to that effect, and the Opposition fulminate, rage, and say all manner of terrible things, after which they become the Government and do not scrap those laws. This Government have not scrapped the powers on VAT. If we go on like this, with Governments swapping backwards and forwards, without any attempt to scrap these laws, liberty will cease to exist entirely by a gradual process of parliamentary erosion.
The right hon. and learned Gentleman said that he was sorry there was not a Law Officer in the debate. He said that it was the duty of the Law Officers to advise the House of Commons on matters of privacy and intrusion. He was a Law Officer in 1972. Did he come to the House of Commons and warn us all that in 1976 we should be deeply sorry we had passed these things? No, he did not. He stayed away, of course. He did not come near us during those debates.
I suggest that "Howe on Hypocrisy" will be quite a tome for reading in the future. This is a disgrace to parliamentary democracy and the danger is that we 1010 are all coming to accept that it is quite normal for it to happen. It is no wonder that more and more people think we are taking part in a charade and a farce.
What, then, is the solution? There has to be a solution to this problem of tax enforcement, unless we are prepared to introduce taxes which no one in his senses will pay, I say to the Chief Secretary that the major solution is not to tax a free people to the level that ordinary reasonable men regard as unreasonable.
In the Second Reading debate I used the analogy of smuggling in Cornwall in the eighteenth century. People did not regard the taxes as reasonable and were damned if they would pay them. They did not pay them, and the Government could not, even by hanging, force them to do so. We have reached that same stage in relation to income tax today.
I do not understand why the Government require these additional powers. I hope that I can have the attention of the Chief Secretary on this, because I have some specific questions to put to him about what is wrong with the present powers. Under the Taxes Management Act 1970, a Board of Inland Revenue officer can by notice require delivery of copies of accounts and documents relevant to income tax statements already requested of a taxpayer. That seems to meet the point about documents.
The production of a document in the hands of a stranger to court proceedings can he secured by a subpoena duces tecum or a witness summons. Why, therefore, do we need these additional powers? As to the powers sought in, regard to entry and search for documents—relevant to Section 20B in the schedule—the power of entry and search on private premises has always hitherto been very substantially restricted and limited. The power is restricted to police where a person is to be arrested, or is reasonably expected to be arrested, under the Misuse of Drugs Act 1971, or in pursuance of a valid warrant. It is restricted to immigration officers, under the Immigration Act 1971, where they wish to satisfy themselves whether there are immigrants on an aircraft or ship. The search is specifically restricted to the aircraft or ship. They cannot, under that Act, enter premises.
It is also restricted, by information on oath, to Customs officers who under the 1011 Customs and Excise Act 1952 have satisfied a justice of the peace to order the issue of a warrant if there are reasonable grounds to suspect that items liable to forfeiture are kept in a building or place. Lastly, the power is restricted to local government employees under various statutes in certain very specific circumstances. I do not see why we need to extend the list in this situation, and I see no reason why in particular we need to add the proposals that we have before us.
I do not see how we can distinguish between major tax evasion, which the hon. Member for Dudley, West (Dr. Phipps) was trying to tell us about and non-major tax evasion. We have already found that in the case of VAT the power is being applied right down the scale to very small traders indeed, in a way which I doubt whether Parliament ever realised would happen. We were told by the Government in 1972 that this was meant to be applied only to major tax evaders—people who were trying to get away with murder in tax evasion—but we find that it has been applied at very low levels.
The hon. Gentleman may well say that it will not affect his constituents. That is a very unconvincing argument. For he cannot stand up in this House and say that none of his constituents at relatively low levels of income ever evades taxation. I am not accusing just the hon. Gentleman's constituents, or just mine. But there is no one here with his eyes open who does not know that a very large numbers of our constituents are evading taxation at quite low level of income.
This is done by moonlighting, and by taking supplementary benefit or unemployment benefit and doing a job on the side. There are very many ways in which it is going on, and sooner or later some Government will decide to clamp down on this and will use the very powers that we are being asked to pass in this clause. The Government will use the powers on taxpayers at a very low and humble level.

§ Dr. Phipps
I did not say that my constituents were not evading tax. I made the point that there was tax evasion on a small scale but that the whole 1012 purport of the current legislation was to tackle major tax evaders.

§ Mr. Pardoe
I am quite aware that the hon. Gentleman said that in the second part of his remarks, but in the first part he said that it was almost impossible for those on PAYE to evade income tax. It is not impossible for those on PAYE to evade income tax. It happens all the time. It may not be a very large amount of money, but much of the VAT evasion is not very large and the powers are used in that respect.
I say to the Chief Secretary that it these powers are necessary they should not be introduced without a substantial quid pro quo in tax efficiency. That would mean having a self-assessment system. There might well be a stronger argument—although I am certainly not making it here and now—for these powers if we had a self-assessment system for all income tax, and then said that anyone in the 10 per cent. sample caught infringing tax regulations would be punished very hard. We might need very substantial powers on these lines if the sample system was to be worked effectively.
That might be arguable. What is not arguable is that we should go ahead with the present system, which does not save a single officer and does not mean that we shall be able to work the system more efficiently or save money. But apparently we have to pass these very stringent laws in spite of that.

§ Dr. Phipps
Would the hon. Gentleman not agree that in the case of the self-employed person who withholds information from his accountant, we are effectively already dealing with a self-assessment system?

§ Mr. Pardoe
Yes, indeed. In the case of some of the self-employed, we are dealing with a situation of self-assessment. To a large extent on all Schedule D incomes, whether one is self-employed on all one's income or on part of it, it is a self-assessment system. But not everyone is self-employed, and even there the Government have not made out a case for these very stringent powers at this stage.
6.0 p.m.
My second comment to the Chief Secretary is that the proposed legislation, in my view, will have the opposite effect to the 1013 one that he imagines. It will encourage further attempts to evade by those who are so minded. I should prefer to see encouragement to become honest by creating an indictable offence of, say, aggravated tax evasion, where the sum involved is, say, more than £1,000. It would then be triable in a Crown Court, and I suggest a maximum penalty of five years up to £100,000 and 10 years above that figure. If we had penalties of that kind, we would deal with tax evasion without giving Inland Revenue officers all these totally unnecessary powers.
The Chief Secretary does not need the powers, and they were castigated by the Chancellor back in 1972. I hope that the Chief Secretary has read the debate on 12th June 1972. If he has not, I am happy to pass him my own marked copy. It is a disgusting read. It is even more disgusting when it is compared with the speech today of the right hon. and learned Member for Surrey, East, because there we see hypocrisy galore.

§ [Mr. A. P. COSTAIN in the Chair]

§ Mr. Ridley
The hon. Member for Cornwall, North (Mr. Pardoe) underlined the duty of Governments to propose and the duty of Oppositions to oppose. He seemed to find some virtue in Liberalism in this rather obvious position. It seems to me that what is lacking in him and in the party that he espouses to lead—we wish him every success—is a dose of responsibility—actually to have to propose and to have to defend—

§ Mr. Pardoe
A dose of power.

§ Mr. Ridley
A dose of power, yes. The hon. Gentleman agrees with me. Although on this occasion he is right, it is too easy a course to assume that the mere fact of government will allow one to preserve all one's liberal principles intact.
I was glad, Mr. Costain, that your predecessor in the Chair did not call me from the other side of the House. Sitting where I was at that stage, I thought that I might have been able to see the Chief Secretary's speech, all carefully written out for him by the Inland Revenue staff.
The Chief Secretary will probably keep asking the Opposition "Are you in favour of tax evasion?" The latest technique of the Governorment's orators is to keep asking the Opposition whether or not they are in favour of something. We had this endlessly with the Chancellor's 1014 deal with the unions: "Why do you not welcome it?" It happened six times a day. It was a sort of "Have you stopped beating your wife?" question. I am sure that we shall have it from the Chief Secretary today: "Are the Opposition against tax evasion?"
As the right hon. Member for Down, South (Mr. Powell) evidenced flogging, so I evidence sheep stealing. It was not all that long ago that a person could be hanged for stealing a sheep. When that was abolished, I have no doubt that the Government or the reactionary trusty defenders of the past like the Chief Secretary would have said continually to the abolitionists "But are you in favour of stealing?" Mind you, Mr. Costain, in a way, stealing is perhaps a slightly more severe offence than not paying taxes. We have too readily slipped into the assumption that to take from someone else is exactly the same as to evade one's taxes.
It seems to me that there is a slightly higher degree of crime involved in pinching from one of one's fellow men than there is in failing to yield to the public that which the public has levied upon one and which one might not entirely accept as a proper level of taxation.
I am very interested in this problem, because last week the Select Committee on Nationalised Industries published a report on the readiness with which gas and electricity boards disconnect consumers for not paying their bills—that is, for stealing. Refusing to pay a bill is not to give what one should give. In a sense, it is very similar to tax evasion, although just a degree or two worse, because one has actually consumed the electricity, whereas with paying tax one has had absolutely nothing.
The Select Committee's Report says, on page 7: To use disconnection in this way, as a kind of sharp warning, is we believe inappropriate to an age when (for example) provisions for security of tenure and protection against harassment for debt have been successively extended by Parliament and accepted by society as a whole. Why should we feel so lenient about those who do not pay their electricity bills and so infuriated by those who do not pay their taxes? I can suggest an answer to that question. It is that in the minds of Government supporters those who do not pay their electricity bills are 1015 small people, old people, people on short means and people on supplementary benefit. Tax evasion, of course, is practised only by the rich. Only those who have enormous untold heaps of money ever go in for tax evasion. For that reason, it is right to bring in these Gestapo, Spanish Inquisition-type powers, to deal with the rich tax evader. But we must forget about the poor person who does not pay his bills.
This was evidenced by the hon. Member for Dudley, West (Dr. Phipps) who, having been drummed up as part of the stage army to show that even Socialists were interested in this debate, was rash enough to make a speech and to bring in with him his bogus sense of Socialist morality which he evidenced by saying that he did not think that a court should convict someone who stole only £5 but that if he stole £50,000 that was wicked. That is the de minimis argument; it is the "housemaid's baby" argument. It does not matter what the crime is so long as it is a small one.
These powers are totally inappropriate for dealing with the smaller forms of tax evasion. Let us take the case of the moonlighter. We know that there are propably millions of people who have other jobs to which they go and draw cash for their labour. There cannot be a single hon. Member who has not personally experience of meeting some of them, or at least of hearing about some of them.
In the middle of the night, there is a knock at the door. "Inland Revenue here. I want to speak to your husband and search for his documents." The housewife says "He's gone out moonlighting". There are no documents, because the very essence of moonlighters is that they do not keep documents. There may be a drawer stuffed with pound notes, but there is no evidence to show from where they came. The powers are totally inappropriate in that case.
Let us take another example, which hon. Members have been too squeamish to mention. Let us take the case of the prostitute. In the middle of the night, there is a knock at the door. "Come in." "We have come to search your books." One can imagine the scene that will develop from this syndrome, and who will 1016 win that battle is not for me to say. These powers are not suitable for people of this kind, yet that is where the vast bulk of the money goes. It is not a case of a few men cheating by millions, but of millions of men cheating by a few pounds.
It is intolerable that the purpose of this clause is to go for one class of society, because it is thought politically safe for the Government to do that and because it is thought that these are people who cannot be described as ordinary working people. I heard the right hon. Member for Lanark (Mrs. Hart), who is one of our tax experts, along with the hon. Member for Dudley, West, say in a radio interview that these powers are not intended to apply to ordinary working people—the OWPs. These powers may be applied to OWPs, but they arc being presented on the basis that they will not. It is disgraceful.
What will happen if Inland Revenue officers discover something else in their searches? Suppose they find a packet of drugs, or evidence of theft or other crimes. Will they be prepared to inform? Suppose they discover personally embarrassing matters. The opportunities for prosecution or blackmail will be there. How are their powers to be delineated? There is no power of random search in cases of burglary, robbery, drug peddling or murder. Ours is becoming a society in which crimes that are dangerous to the population are treated as less serious than crimes that offend against the Socialist ideal.
To seek powers of this sort because we think there may be a few rich people who are not paying taxes through fraudulent means, whereas all the heap of human weakness and sin, verging on the criminal, that goes on among us is not to be subject to random searches, is to get our priorities entirely wrong. It is to elevate class hatred above protection of the community. When the hon. Member for Dudley, West says that these powers are necessary for the protection of society, he is really saying that he is prepared to subjugate powers that protect society to his desire to pursue a vendetta against the classes in this country who have carried on businesses, earned money, provided employment and made it possible for us to have as high a standard of living as we have today.

1017

§ 6.15 p.m.

§ Mr. Douglas Crawford (Perth and East Perthshire)
I do not wish to detain the House for long in putting on the record the position of my party in this matter. In doing so, I would state a truth that is self-evident to most people, though not, perhaps, quite as self-evident to the Government. Governments rule by consent of the governed and taxes are raised with the consent of those from whom they are raised. England and Scotland both have great charters enshrining individual liberty. The people who assembled at Runneymede in 1215 and Abroath in 1320 would not be enamoured with Clause 48, especially the part that refers to Schedule 6(20B)(2).
At a time when there is much talk about personal liberty, the effort by the Government to impose Clause 48 as it stands is a considerable threat.
As for the growth of computerisation, there is a need for citizens to know what particular information about themselves is being computerised. Not only should they have the right to know what information is on the computer; they should have the right of access to it whenever they wish. Access to that information by anyone else should be severely limited.
It may not be known to hon. Members, but if a person defaults for two weeks on payments on his credit card he can, if the computer is programmed incorrectly, be described as an undischarged bankrupt without his knowledge. There is a need for the individual to have access to the computer files and to be able to find out what is said about him.
The hon. Member for Basingstoke (Mr. Mitchell) said that an Englishman's home is his castle. In Scotland we are not that affluent, though the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) could truly make that claim. But then, perhaps, he is more English than the English. However, we have homes in Scotland, and they should be private. If our privacy is invaded, as with computerisation, we should know what is being required of us, what is being taken away, and whether our desks or our pockets are being invaded.
The Younger Committee on Privacy, which concentrated mainly on computers, 1018 said that citizens should have a right of access to computer files. The same applies in this case. If a person's home is invaded he should know the purpose behind it. The Bill contains no provision for this. I should like to read the relevant part. Schedule 6(20B)(2) provides that On entering the premises with a warrant under this section, the officer may seize and remove any documents or other things whatsoever found there which he has reasonable cause to believe may be required as evidence for the purposes of proceedings in respect of such an offence as is mentioned in subsection (1) above. There is no mention of the police, or whether one may have a legal representative present at the time when the warrant is presented.
It was said earlier that this, in effect, meant that a person was being considered guilty until proven innocent. That is the precise opposite of liberty of the individual. The clause is monstrous. It should be resisted, and the amendments supported.

§ Mr. Peter Hordern (Horsham and Crawley)
I am sorry the hon. Member for Cornwall, North (Mr. Pardoe) has left. He felt that the best way to deal with tax evasion was to increase substantially the penalties. I think that the best way is to reduce taxes so that there is not so much incentive for people to defraud the Inland Revenue.
That is the difference between our approach and that of the so-called Liberal Party. It is curious that the Liberals, of all parties, should be suggesting that we deal with this problem by increasing penalties rather than by diminishing taxes.
I am glad to have been called on this subject, even though I feel like the person who is the only one not out of step.
As every hon. Member has reminded us, this subject has been discussed at some length. I remember that in 1972 there was considerable concern about the extensive powers that the Customs and Excise wanted for the discharge of VAT duties. That concern was voiced by the President of the Law Society and Chairman of the Bar Council and there was a long and impressive correspondence in The Times and other newspapers.
All that I say about that time is that the argument I put forward from the 1019 Government Benches—I was supported by Mr. Peter Trew, who was then the hon. Member for Dartford—was that the powers that the Customs and Excise authorities were seeking were wrong in themselves—far too extensive and quite different from those that had obtained for a very long period. These powers were based not on purchase tax, which was originally suggested, but on the very old Customs and Excise Act 1823. That was the origin of the powers. They have nothing to do with VAT. The powers of entry and search originated in 1823. They were given to Customs officers to stop smuggling and to enable them to try to count the barrels of rum, the kegs of brandy, and matters of that sort. The powers were transported almost word for word at the time of purchase tax.
Purchase-tax was introduced as a temporary war-time measure. It is understandable that the powers were considered suitable at that time. Purchase tax applied to only 70,000 traders. My objection to the extension of the powers under the VAT proposals—Mr. Peter Trew supported me—was that they were to be extended not to 70,000 people but to 1½ million.
We now see the proposals carried forward almost word for word as they appeared in the VAT proposals. I cannot help but remind the Committee of some of the things that were said in Standing Committee by the present Chancellor of the Exchequer in 1972. He said of my hon. Friend the Member for Worthing (Mr. Higgins), who was then the Financial Secretary, that he had forced the Committee to accept a vast extension of the Customs and Excise powers, amounting to a snoopers' charter. In the same column he said they have given power to the Customs and Excise to violate the privacy of millions of our fellow citizens, never subject to this violation before, so that they can check whether the information given in this form is accurate and honest." — [Official Report, Standing Cornminee E, 14th June 1972; c. 837.] It is a strange metamorphic of the Chancellor of the Exchequer, who was then so eloquent as Shadow Chancellor in saying what he did about the powers which were given under VAT. However, the powers in the Bill are to be reinforced even more and will apply to a substantially larger 1020 section of the public. They include those under Section 20B, which allow the offices of a taxpayer's barrister, solicitor or accountant to be broken into at any time of the day or night and for papers to be searched.
I know it will be argued by the Government that these powers will apply to only a handful of cases, namely, to those who defraud the Revenue regularly. It is said that it will be necessary to prove that they have perpetrated fraud. I shall take up that argument, but, as my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) argued, the massive tax evasion in this country is carried out not by the relatively few tax evaders but by the hundreds and thousands and, dare I say, even millions of people who work a little bit on the side here and there. That form of tax evasion, I should think, is far greater in sum than the evasion practised by the handful, if that is what the Government say it is, of those who are guilty, for that is the word, of tax evasion.
I wonder just how alarmed that handful of people will be by these measures. Will they be alarmed by the thought that their solicitor's offices or accountant's offices may be broken into at any time of the day or night and that papers will be revealed for all to see? Surely those in that position will have very careful advice from their advisers to transfer their affairs to Leichtenstein, or some other such country. The idea that the Revenue will be able to find those people is rather far-fetched.
Surely the transition from Opposition to Government should not have transformed the Chancellor from the great defender of human rights that he purported to be in 1972 to the pliant tool of the Inland Revenue. It seems that the Chancellor is Mr. Plant's plant. Schedule 6(2)(3) provides that taxpayers are to make documents available on behalf of their spouses or on behalf of any sons or daughters that they may have. These measures also relate to widows. They apply even when the subject of inquiry is dead. I suppose we should be grateful that the only thing the Revenue has stopped short of doing is making provision to subpoena St. Peter, but that may well happen before long.
I shall examine Mr. Plant's claim that he is the originator of this measure. Perhaps we should not blame the Chancellor. 1021 We all know what happens in these affairs, and particularly under this Government. Clearly they have been got at by the Inland Revenue. In an interesting article in the Sunday Times Mr. Plant said: The mere omission by a taxpayer from his return form of an item of income does not necessarily involve fraud; he may, for instance, have honestly believed the item was not taxable; yet again, though knowing it was taxable, he may have omitted it through mere negligence or carelessness. That was his view.
That is almost word for word what the Chancellor had to say about the matter on Second Reading. In fact, he quoted Mr. Plant, and I am sure that he did so with great care, so that his words should not be misunderstood in any way. Quite apart from the propriety of Mr. Plant's laying down what the Chancellor should say, I am rather concerned that Mr. Plant, who, I imagine, is a civil servant, should write articles of this kind and give advice to the Opposition. After all, that is what he did in his article.
In a later passage in the same article Mr. Plant said that Ministers stand apart from the detailed operation of the tax system, and it is important they should do so lest any possible claim be made that important decisions affecting individuals could be influenced by political considerations. If that is true of Ministers, it is certainly true of civil servants. Surely that is true of Mr. Plant as well.
Let us examine Mr. Plant's proposals. There has been some correspondence in The Times on the matter by people who know what they are talking about and who are legally qualified. In a letter to The Times on 7th May a Mr. Newbold wrote: The novelty and the danger in these new provisions is that it extends the power of the Revenue to obtain search warrants to non-criminal cases. He then wrote: The truth is that 'fraud' is not necessary a criminal offence and fraud forms part of the civil law … It is therefore entirely possible on the state of the law as it now stands that an omission of something from a tax return could result in a warrant being obtained under the proposed powers. I prefer Mr. Newbold's thinking on this matter to that of Mr. Plant. I hope that the Chief Secretary will deal with the matter and set out exactly what the definition of fraud should be and whether, as I believe is the case, the Revenue now has 1022 power to go in merely on suspicion or on the understanding that there may be a case of fraud. It is my belief that it has every right to enter and search premises on the mere suspicion that this may have happened. All that the Revenue has to do is persuade a magistrate, such as the hon. Member for Dudley, West (Dr. Phipps), who is apparently a magistrate, that the powers are required. I regard with great admiration the powers of the hon. Gentleman, but judging from his remarks this afternoon I do not regard him as the best expert on tax or on law in this place. If he is a typical example of a magistrate, I am concerned what the situation may be—[Interruption.] Does the Chief Secretary wish to intervene?

§ The Chief Secretary to the Treasury (Mr. Joel Barnett)
No.

§ Mr. Hordern
The argument is put forward that these powers exist in other countries and that we should not be so fussed about them. I do not think that that argument is any good. The fact is that in the United States, where I understand such powers exist, there is the power of self-assessment. In this country we see the number of tax inspectors and those employed by the Inland Revenue grow every year.
The Inland Revenue's objective—this has been stated quite openly to the Public Accounts Committee—is not to raise more revenue but to ensure that the revenue is paid into the Exchequer. That may be a very good view, but the fact is that the number of tax inspectors and others employed by the Inland Revenue is growing very quickly. I believe that that is happening at the expense of the net intake into the Exchequer. It is a fact that the number employed by the Inland Revenue in the United States is exactly the same as in this country, and the number here is growing all the time.
6.30 p.m.
I do not see how Mr. Plant's clause—for that is what it is—can be operated on a selective basis. I do not think that Mr. Plant will be able to investigate only those who have committed fraud, or those who have been suspected of committing fraud, amongst the wealthier members of the population. If these powers mean anything, they must be applied also to those who have been suspected of cash transactions, of moonlighting, of earning a little on the side, 1023 and so on. The powers cannot be applied selectively.
I do not know whether the Chief Secretary will use this in his argument, but I should like him to pay particular attention to this point. It would be wrong and indefensible, and a new principle in our tax powers, if there were any element of selection about these powers to be used against one section of the population and not against another.
I am alarmed about the increase in powers that the Inland Revenue has sought and obtained in recent times. Not long ago we debated, late at night, the powers to be given to those who were sub-contractors in the building industry. They took the form of new tax exemption certificates. These were certificates with photographs on cards. I said at the time that I thought that it was a dangerous innovation. It is not too fanciful to suggest that the powers now being sought by the Inland Revenue will be used in a very different fashion in years to come, perhaps by a Government of a very different complexion from this one. After all, this Government are too wet to be worthy of any serious consideration. Some years hence a different Cabinet may well be armed with the powers to apply a very different regime in this country. It is time that that point was made.
I can just imagine the prospect of Mr. Plant bursting into taxpayers' homes. I can imagine the reception that he will get. I can also imagine what the Chancellor of the Exchequer would have said if he had still been on the Opposition side of the House, as Shadow Chancellor, the great defender of human rights, liberty and privacy, instead of the pliant tool of the staff federation—for that is what he has become. It is all part of a piece. First, he was all deference to the trade unions. Now he is all deference to, and the pliant tool of, Mr. Plant himself.
I notice that when the Chancellor is on a weak point he generally takes it upon himself to have a go at the Opposition. He did so in a recent article in the Sunday Express, in which he said But when the whole world is praising our achievement"— I must say that I had not entirely noticed that— 1024 the British Conservatives confine themselves to grumpy nit-picking, and some of them go further. The new breed of Tory Trotskyites has joined with the extreme Left in attacking the new pay deal and accusing the trade union leaders of betraying their members. That was the Chancellor having a go at us.

§ Mr. Joel Barnett
Read on.

§ Mr. Hordern
I shall read just one other piece of it.

The Temporary Chairman
I hope that the hon. Gentleman will relate this to the amendment.

§ Mr. Hordern
I am relating this very closely to the amendment. I think that the Chancellor would also say that it would be most unpatriotic to say— I do not see a devaluation being delayed beyond the summer of this year."—[Official Report, Standing Committee E; 19th June 1972, c. 1080.] Those remarks were made by the Chancellor on the Finance Bill in June 1972. It therefore comes very ill when this Chancellor accuses us of lack of patriotism. There was nothing to which he would not descend, no measure to which he would not stop, to present the Opposition in its starkest but most irresponsible terms when he was Shadow Chancellor. We shall accept nothing from this Chancellor, as he is instructed to do his work as the tool of the Staff Federation of the Inland Revenue.

§ Mr. Peter Rees
It is a great pleasure to follow the speech of my hon. Friend the Member for Horsham and Crawley (Mr. Hordern), whose contribution on this subject has been consistent and honourable.
From the absence of contributions by Government Members, with the honourable exception of the hon. Member for Dudley, West (Dr. Phipps), whose misconceptions have been amply exposed by others of my hon. Friends, it would be tempting to infer that this is a bipartisan debate. I regret to have to say, however, that the Division lists will show that Government Members are too craven to intervene and will hide behind the bland geniality of the Chief Secretary.
It is a little difficult to debate this question seriously with the Chief Secretary, because I suspect that he has deliberately 1025 disencumbered himself of serious advice from the Law Officers and will project himself as the Sancho Panza to the Chancellor's Don Quixote.
The Chief Secretary has a particular knack of indicating by a nod and a wink that in the days of his private practice he, too, was a little familiar with fiscal impropriety; he is not one of the sea-green incorruptibles like the Financial Secretary. However, on this occasion we shall expect a little more from him. We shall expect him to tell us in some detail and with some care what exactly are the pretexts for the whole odious apparatus contained in Schedule 6 and how much evasion the Inland Revenue has detected over the past few years. Every parliamentary Question so far has failed to elicit from the Government even a rough estimate of how much tax has been lost by evasion.
We shall want from the Chief Secretary information about cases that can be covered by Schedule 6 but cannot be covered by the precise powers that the Inland Revenue has at the moment.
I suspect that the real basis for Schedule 6 is a vague unease on the Government Benches. The Left wing is always ready to play on the lacerated conscience of the Home Secretary about police powers. The Left wing is ever ready to press for the release of the Shrewsbury pickets and Mr. Jeff Davies, but when it comes to questions of taxation it bays for the blood of the property classes.
Others of my hon. Friends have exposed the misconceptions in the attitudes of the Left wing. For every one business man that the Chief Secretary produces with two sets of accounts I will produce two—what is the phrase?; I appeal to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley)—" ordinary working people" who have two jobs, one of which is assessed under Schedule E and one of which escapes the tax gatherers' net.
I have heard it said that there are trade union officials who receive—I believe the phrase is "backhanders". How many of those trade union officials have been returning those backhanders to the Inland Revenue? Perhaps they, too, will be vulnerable to the attention of the Revenue authorities. Will that please Mr. Plant?
1026 In my experience—I believe that this echoes the feeling of my hon. Friend the Member for Cirencester and Tewkesbury—the country at large recognises a basic distinction between crime—I will extend that to cheating the social security people—and the evasion of tax.
Unless the distinction to which I have referred is recognised by Government Members it may lead them to courses that, politically, they will ultimately regret. I am not concerned here to justify the definition; I merely point it out. I believe that ordinary people recognise that distinction, because at the end of the day under the taxation system the State is taking what they have earned and saved. At present there is a deep revulsion and a feeling that in almost every enterprise that they undertake the State is now their senior partner.
If Government Members have not recognised this point of view, I would only draw their attention to what is happening in Sweden. They may remark the impact on the Swedish social conscience of the departure of Mr. Ingmar Bergman. They may remark how Mr. Palme's status in that country has been affected by the treatment of Miss Bibi Anderson, or Mrs. Lindgren. I instance Sweden only because there is the pattern for so many of the political aspirations and achievements of Labour Members, and therefore they may recognise that in a democracy constructed on lines that they hope will soon obtain in this country there is a limit beyond which one cannot press the taxpayer.
It is right that we should examine the existing position. The Committee should ask itself whether the administration in this field is defective. We have an extremely able and gifted inquiry branch. It should be recognised frankly that its methods are not always impeccable. Its methods even now are often open to criticism. Before the Chief Secretary considers enlarging the powers at its disposal I suggest to him and the Committee that he might institute an independent inquiry into its activities.
Over the years I have asked a series of questions about the number of assessments with which the inquiry branch is concerned, going back not just beyond 1959 but way back beyond 1955. I believe that if the country realised that 1027 there are people at this moment who are being asked to account for what they may have earned and what profits they may have generated 20 or 30 years ago, the feeling would be that enough is enough.
If the administrative machinery is adequate, is there some defect in the law? As other of my hon. Friends have said, in cases where assessments are in time, where they relate to matters within the past six years, the onus is on the taxpayer to displace those assessments. This is in stark contrast to the criminal law. It is the taxpayer who has to rebut what is raised against him; it is not for the Revenue to justify the assessments that it raises.
If an assessment is raised out of time, it is for the Revenue to justify fraud or neglect, but having done so—and in my limited professional experience it is relatively easy if one looks back over the years at a complex set of accounts to find some small matter where the taxpayer may have slipped up—the onus of displacing the assessment shifts to the taxpayer. I say that even at this present time the law is solidly weighted in favour of the Inland Revenue.
So far we have heard nothing about this from the Labour Back Benches, but perhaps we shall hear from the Chief Secretary in reply. The Inland Revenue is already equipped with two powerful sections. I mention them specifically because I very much hope that the Chief Secretary will give us his view on them. I refer to Sections 51 and 52 of the Taxes Management Act. Under Section 51 the Inland Revenue has the right, through a body of commissioners, to require the production of documents relevant to a case. Under Section 52 the Revenue has the right, with very limited protection to the taxpayer to exclude his professional advisers, to require the attendance of almost any witness who may, in its consideration or in that of a body of commissioners, be able to give relevant evidence.
Why, against that background, do we have to have Schedule 6 fastened on our necks? What particular cases has the Chief Secretary in mind that are not covered by Sections 51 and 52? Is it that he wants the Revenue to be able to rummage through a wife's housekeeping 1028 accounts? Does he want children to be brought to court to produce their savings books? Is that the kind of case that has brought him here to introduce Schedule 6?
What about professional advisers? The protection there is illusory, for two reasons. First, if a professional adviser is found at any time to have been guilty of however small an element of fiscal impropriety, even impropriety quite unconnected with the affairs of the taxpayer in question, professional privilege is immediately removed from him. Again, this particularly odious measure enables the Revenue, with a warrant from a justice of the peace, to break into the house of an individual, or professional or business premises. There is no professional privilege there.
If any example were needed of the illusory nature of the protection afforded by a body of justices of the peace, it was the speech of the hon. Member for Dudley, West who not only showed that he has not appreciated the basis of these provisions, but demonstrated how readily he would be prepared to grant such a warrant to a member of the Inland Revenue.
6.45 p.m.
It may come as a surprise to some hon. Members to know that in advance of the decision of this House the Revenue has started to set up a series of offices called, with bureaucratic understatement, "special offices". That has a flavour not of Russia but of 1984. Let me tell the Committee—because the answer that I received to my Question may have escaped the attention of hon. Members —that the Financial Secretary said: These offices will handle work of special complexity from existing tax offices, including major cases of avoidance and evasion. Now we start to see that there will be a blurring of distinction between avoidance and evasion.— One office of 17 staff has been set up in Edinburgh."— I am sorry that the hon. Member for Perth and East Perthshire (Mr. Crawford) is not here to know that there is a certain partiality—

§ Mr. Ridley
That is the first good argument that we have heard for devolution.

1029

§ Mr. Rees
I am obliged to my hon. Friend, but it could just be that the electoral tremors north of the border led the Treasury Bench to decide that in these matters a little more attention should be given to the Scottish nation—that their tax affairs should be demonstrably on a clearer, cleaner basis than are those of us corrupt people south of the border. One office of 17 staff has been set up in Edinburgh and two more of about the same size will be set up on 7th June in London and Manchester. This will be the new public holiday. It will be not Labour Day, but Revenue Day. Most of the staff for these three offices have been found from existing staff: —this will be bad news co Mr. Plant, who no doubt envisages that the number of members in his federation will be doubled— the total additional cost is about £30,000 per annum —that I beg leave to doubt, for reasons that I shall deploy. Other offices will be set up as experience suggests. There we have it. The experience generated by Schedule 6, unless we can emasculate it in Committee, will no doubt suggest to the Treasury Bench that every major county centre should have its special office dedicated to routing out avoidance and evasion. The Financial Secretary went on blandly to say: The authority lies in the Boards statutory responsibility for the care and management of the taxes."—[Official Report, 11th May 1976; Vol. 911, c. 128.] I am surprised he did not say "in their dedication to protect the interests of ordinary taxpayers".
I am sceptical about the figure of £30,000, and I take up the point made by my hon. Friend the Member for Horsham and Crawley. The accusation has been levelled at these Benches over past weeks and months that we are not specific in what we would like to see cut out of Government expenditure. I shall now give the biggest hostage to fortune, and the Front Bench on my side can disown me if it likes.
If the Committee refers to the public expenditure White Paper, which we debated with so much vehemence a matter of months ago—I am sorry that there are not present Back Benchers to inflict on the 1030 Government the sort of salutary lesson that they were able to do, with our assistance, on a previous occasion—it will see in Table 13, on page 104, under the heading "Other Public Services" a projection of expenditure between 1970 and 1979–80.
Even the most blurred eye will see that the cost of tax and rate collection rose from 1970, when even then it cost £327 million to £363 million in the last years of Lord Barber—and creditable though his efforts were I must draw that to his attention—and will rise to the quite staggering figure of £477 million in 1979–80. If I were challenged by the Chancellor of the Exchequer or the Chief Secretary to say where I see scope for cuts in Government expenditure, I would say that I see it in the cost of tax and rate collection. Against that background, I doubt very much whether these special offices will cost only £30,000 a year in five years' time, and I also take leave to doubt whether they will bring in very much tax.
Beyond that, it is right to remind the Committee that in a tax case, at least until it reaches the High Court, the special and general commissioners have no power to award costs against either the taxpayer or the Revenue. However innocent the taxpayer, once he is in the hands of the inquiry branch—and I have no doubt the techniques of the special offices will be the same—he is immediately set on a long, agonising and extremely expensive inquiry. Even if at the end of the day he is cleared by the general or special commissioners, he has no way of recouping his expenses from the Revenue.
If the Chief Secretary is really serious in his concern for the ordinary taxpayers, I suggest that he should deal specifically with this point. There should be some measure by which the taxpayer can be compensated if he is cleared of a fiscal impropriety after a prolonged inquiry.
What we are being asked to do today and in Committee upstairs is to erect a massive prying inquisitorial superstructure to reassure the Chancellor and his Ministers, to get into their minds, Chinese or occidental, tiny or capacious, that the last drop of blood has been extracted from the taxpayers of this country.
No doubt those who set up and operated the Spanish Inquisition did so 1031 with the highest motives. No doubt their only concern as they fastened the thumbscrews was for the souls of those they were consigning to eternity. I accept that the Chancellor and the Chief Secretary are acting with lofty and disinterested motives, but there will be a deep feeling of revulsion from the whole tax-gathering machine when the country realises what is being inflicted on it in its name. Any confidence between the taxpayers and the Revenue will be rapidly dissipated and costs of tax collection increased as a result of these measures.
Long after his other efforts are swept away by the economic gale he has raised, the Chancellor will be remembered by his Friends below the Gangway as the poor man's Stalin, and by the rest of the country as the fiscal Torquemada.

§ Mr. George Younger (Ayr)
The Chief Secretary is fighting a lone battle today. There is no one to support him on his Benches, and no Law Officer, either Scottish or English, to give him advice. Throughout the debate there has been a marked absence of hon. Members on the Government Benches, and it seems that the Labour Party is too embarrassed to give any support to the Chief Secretary.
This Committee today has responsibilities to the electors which it is extremely important should be discharged properly. We must bring home to the public the fact, that, despite what is said in this debate, this clause and the schedule mean just one thing. From the time that the Bill is passed, it will be possible for any citizen of this country, rich or poor, and no matter where he lives, to find, without warning, that a tax inspector can appear at his house, demand entry, and demand to search it, whether or not the owner is present. He can do this even if the house is occupied only by children, or the man's wife. The snooper is able to come into any home in this country. That is what hon. Members opposite will be voting for if they pass this clause tonight.

§ Mr. George Cunningham (Islington, South and Finsbury)
We have that now.

§ Mr. Younger
As the hon. Gentleman says from a sitting position, we have that now. I agree. There has to be 1032 some infringement of personal liberty in any democracy, but up to now it has been confined to matters in which serious or criminal offences are involved. The point is that every ordinary citizen who has to fill in a tax return, or who is liable to PAYE, will be threatened by a visitation. Everyone will find himself or herself liable to this if the Government have their way tonight. The Committee must bring home to people the fact that it is not just a question of a business man finding an inspector on his door if the Inland Revenue cannot get the information from the business records. Perhaps it is acceptable to some extent for a business man to be visited, and investigated at his home in certain circumstances, because a business is not a private affair; it has a public interest. But when a private home and a family can be broken into by tax inspectors this is a major departure—in principle and degree—from anything we have had until now.
The Chief Secretary has to give us the reasons. He must say in precisely what circumstances these powers will be necessary to provide information that there is no other way of getting. We will have to say in what precise circumstances entry into a private home under warrant will be the only way of getting tax that is thought to be due. It has to be something that cannot be done in any other way, because the Inland Revenue already has powerful sanctions. As has already been pointed out, it has the sanction of putting a very high assessment on someone in order to put the onus on him to disprove it.
I hope that the Chief Secretary will be prepared to consider changing the details proposed in Schedule 6 in Committee upstairs. If these details are to be sacrosanct and resisted at every step by the Government, this will be a very serious and wrong attitude on their part. The Chief Secretary must be prepared to produce safeguards for property that has been taken without proper records being taken of it. He must be prepared to cover the point of damages, and accept admendments on the obligation of wives or children alone to refuse entry because the master of the house, whose affairs are primarily being investigated, is not present. If private homes are to be invaded, there must be changes in the details. I hope that when he replies the Chief Secretary will bear in mind that while very 1033 few people in this country will have any time for those who deliberately avoid paying tax, very, very few will have any time for a Government who produce new Regulations to allow inspectors to go into private houses and snoop on people's private affairs and private possessions The Government are doing something very different from anything that we have had hitherto. It is a difference of degree, which people will not accept.

§ [Sir MYER GALPERN in the Chair]

§ 7 p.m.

§ Mr. Nigel Lawson (Blaby)
I wish to make only two points and I shall try to do that very briefly. First I should like to draw the attention of the Committee to the Inland Revenue Management Review which took place a couple of years ago, and the proposals by the Review Committee for the structure of the Department which were published in January last year. A radical restructuring was proposed and a number of reasons were given in the review for that. The review was signed by a number of eminent people of whom the most eminent was the Chairman of the Board of Inland Revenue, Sir Norman Price. The document says: The Committee share the views expressed to them by many with the Department that the task of countering avoidance and evasion is being tackled with less intensity than all would wish. It goes on: The Committee hope that the proposal to employ more management officers would make it possible to set up special units of fully trained Inspectors to undertake counter-avoidance and evasion work. It is this linking together of avoidance and evasion which makes some of us feel that the clause is even more sinister than it might appear.
My second point is in the form of a question to the Chief Secretary. Its relevance may be lost on him but it will not be lost on other hon. Members or still less on members of the public. The former Minister of State at the Home Office said last month in an answer in this House: It is really a question of control inside the country. There are things that some countries do about internal surveillance of people living in their territory, but I suspect that the great majority of Members of the House would resist any such incursions into the freedom of individuals living in this country. That is the weakness of our immigration control.—[{Official Report, 8th April 1976; Vol. 909, c. 623.] 1034 Perhaps it is, but my question is this: why is there this very high Government sensitivity about individual freedom when the question at issue is immigration control dodgers, but no such sensitivity when the question at issue is tax dodgers?

§ Mr. Joel Barnett
This has been an interesting debate. I have been asked a lot of questions, the principal one of which was why we need these powers. I shall try to ignore some of the exaggerated statements that have been made about how these powers will be used. I must entirely disagree with the hon. Member for Ayr (Mr. Younger), who said that such powers are not otherwise available. They are available in another area.
I am glad that we all agree that in an efficient system of collection of tax dishonesty is unacceptable but that we should always be careful to balance any such system with a care not to go too far into the infringement of personal liberty. I have never disagreed with the basic policy of trying to get a balance into these matters, and I said so when we debated them on Second Reading.
The powers are needed, as I am sure all hon. Members will be aware, to assure all taxpayers that they are not suffering because of a tiny dishonest minority. The weakness of the present powers is that, in effect—I took note of all the emotive language that hon. Members have used about snoopers, and the rest—they create a tax evaders' charter, because under the present system it is easy for a dishonest taxpayer, in certain circumstances, to evade his tax.
I want to come to the point made by a number of hon. Members that power is available to an inspector of taxes to raise an estimated assessment that is very likely to be far in excess of what might otherwise be the tax liability. Such a power is certainly available. Where such an assessment is raised it is for the taxpayer to disprove that assessment. The difficulty is that without the power we are seeking the taxpayer can submit a set of accounts—either by failing to give his accountant full information or by submitting the figures himself—which it is not possible for an inspector to dispute. He is not in a position to do so, since he cannot go behind the figures to see whether information has been omitted.
There is also, of course, scope for enormous delay and scope to make these 1035 estimated assessments ineffective by the withholding of documents or their destruction, when under these powers those documents would be available. In our present system if an inspector of taxes has no positive reason to be dissatisfied with the return or the set of accounts he has no power to check the basic documents. That is why we have powers under Section 20 that documents should be made available. I would have thought that the making available of documents by a taxpayer to back up his account was not in itself a serious infringement of personal liberty.
I am coming to the major point that every hon. Member has referred to, namely the powers of search and entry.

§ Mr. Peter Rees
Before the Chief Secretary leaves the question of documents, will he say whether the inspector will ask for all the underlying documents from which the accounts are constructed, even though he does not have serious grounds for believing that fraud has been committed? If that is so, what is the advantage of this provision over Section 51 of the Taxes Management Act 1970?

§ Mr. Barnett
In the normal course of events inspectors will accept a trader's accounts as submitted by his accountant. The hon. and learned Gentleman knows that that has always been the case and will continue to be so. There will normally he no need to go behind a set of accounts signed by a reputable accountant.
The hon. Member for Down, South (Mr. Powell) and the hon. Member for Ayr asked me to answer the straight question why precisely the Inland Revenue needs the powers of search and entry in the case of suspected evasion of tax. I was asked to be precise about the areas that we are talking about. The right hon. Member knows that by the very nature of things we cannot be precise about tax evasion. One does not know with any precision where the tax evasion is and the extent of it until one has these powers. I accept that that means that we have to be paricularly careful about giving the powers and the safeguards allied to them. The safeguards are crucial to the powers.

§ Mr. Powell
If that is the right hon. Gentleman's answer to my question, how 1036 can he defend the assertion that these powers will be used in only a handful of cases, since he has declared that he cannot define the circumstances in which they will be used and that they are only a matter for exploration?

§ Mr. Barnett
There cannot be a random search because of the safeguard that before there can be a search a warrant must be issued by a justice of the peace.

§ Mr. John Loveridge (Upminster)
The Chief Secretary says that a random search will not be possible because it will be necessary to get a warrant from a justice of the peace. I have been a justice of the peace and I know as well as the Chief Secretary does that when an official brings something of such a technical nature as this before him the justice is obliged to accept the complete good faith of the official. He is not competent to examine the case being put before him. Therefore there is no protection against the random search.

§ Mr. Barnett
I was coming precisely to the point of the safeguard of justices of the peace, but I should like to pursue the argument a little further in respect of how the powers will be used. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley), in a customarily witty speech, really gave the answer. With the benefit of his vivid imagination he gave the example of an inspector of taxes knocking on the door of a prostitute in the middle of the night and interrupting whatever she might be doing at that time, to ask for her books and records. The hon. Gentleman said that these powers are not suitable for this type of case. He is absolutely right. I assure him that it is extremey unlikely, to say the least, that they would be used in that type of case.

§ Mr. Ridley
If the VAT inspection teams are anything to go by, there may be seven men calling.

§ Mr. Barnett
It may even be seven ladies calling. I was going to say something in passing about the VAT powers, because these are directly covered by the clause.

§ Mr. William Clark
The Chief Secretary said that when the inspector issues an excessive assessment it is up to the taxpayer to put in some accounts. 1037 If he puts in accounts the Chief Secretary said the Revenue had no alternative but to accept them. Why then should the Revenue search his premises? If it is still dissatisfied with the accounts that have been submitted, surely it can ask for capital statements, yearly rests, and if the taxpayer refuses to give them the inspector can go before the commissioners and obtain the power to go to the bank accounts, and so forth. The Chief Secretary is not misleading the House, but he is rather over-simplifying the position, because if the Revenue has to accept accounts there is no point in search.

§ Mr. Barnett
With great respect to the hon. Gentleman, I know that, as a member of my own profession, he will be aware of what happens in the case of capital statements. Before one gets to the submission of capital statements, many months and often years have gone by, and documents have either been mislaid or positively destroyed. The hon. Gentleman knows that that happens and that, before a back duty investigation is completed, in most cases years go by. He knows that is the case.
I am sorry to see the hon. Member for Croydon South (Mr. Clark) shaking his head in disagreement, because if he does not know that, his experience is somewhat different from my own.

§ Mr. William Clark
It may be that the Chief Secretary's experience may be very much different from mine: I am delighted about that. What I am trying to say is that if the taxpayer has made a gain or profit in cash, and has salted the cash away somewhere, it will be reflected in the assets in the name of that taxpayer.

§ Mr. Barnett
I do not know that the hon. Gentleman has added to the point that he was seeking to make. I do not know if what he is saying in any way detracts from the need for the Revenue to have real powers in order to ensure that the dishonest taxpayer should pay his full share of tax.

§ Mr. John Nott (St. Ives)
The Chief Secretary knows well that there are positively hundreds of back duty investigations outstanding, some of them stretching back for eight to 10 years. The Chief Secretary himself mentioned back 1038 duty investigations. Is it suggested that, when these have been outstanding for a long time, powers of entry and search will be appropriate in order to bring those back duty investigations to a conclusion?

§ 7.15 p.m.

§ Mr. Barnett
With respect, I did not say that. Perhaps the hon. Gentleman did not appreciate that I used the words "back duty investigation" because they were used by his hon. Friend. He talked about capital statements and capital rests; that is what comes out of back duty investigations. Certainly, I am not suggesting that this will be the sort of case in which powers of search and entry will be used. As we have said on many occasions, the powers will be used in only a handful of cases. I am certainly not talking about all these capital statements.
I assure hon. Gentlemen of one thing —that there will be no question of random searches of the kind they so rightly fear. An inspector of taxes will not be able to swear an oath that in his view, and his view alone, there is a suspicion of fraud; he will have to get a clearance from the board at Somerset House. I am prepared to consider amendments to write that into the Bill on Report. Certainly there will be no question of these powers being exceeded.
Let me come immediately to the most important factor—the question of safeguards. I readily concede that, when one is giving these powers to the Inland Revenue, safeguards are absolutely essential. The new Section 20B(1) contains the statement: If a justice of the peace (or, in Scotland, a justice of the peace, a magistrate or a sheriff) is satisfied on information on oath given by an officer of the Board that there is reasonable ground for suspecting that an offence involving any form of fraud in connection with, or in relation to, tax has been or is being committed on any premises, or that evidence of the commission of such an offence is to be found there". As I understand it, the commission of fraud is a criminal offence in the normal sense of the word. First of all, we have the safeguard that information has to be given on oath by an inspector of taxes. I do not take that lightly. I do not believe inspectors of taxes, any more than any other citizen, will falsely swear on oath. I do not believe that for a 1039 moment, nor do I believe any hon. Member on the Opposition Benches believes that.
A further safeguard is that there have to be "reasonable" grounds for suspecting, not just minor grounds. I believe these are powerful safeguards. Justices of the peace are our traditional safeguard in this country, despite what the hon. Gentleman said, where there is a suspicion of a criminal offence. This applies in about 50 other cases. It is quite wrong to suggest that justices of the peace would take these matters lightly. One does not need great knowledge of the law on the part of either justices of the peace or anybody else. If an inspector of taxes swears on oath that in his view there is at least a suspicion on reasonable grounds that a fraud, a criminal offence, has been committed, I do not believe that these are inadequate safeguards. I believe that justices of the peace arc the proper authority for the issue of search warrants, and that if we did not follow that practice here it would be taken as a criticism of the way in which these matters are at present handled and would be a serious slur on the justices."—[Official Report, Standing Committee E, 12th June 1972; c. 816.] Let me make it quite clear that the words I have uttered are not my words—they were the words of the Financial Secretary in 1972 when asking the Committee to support identical measures for VAT.
The hon. Gentleman asked me what I said. The fact is that we did not like VAT, nor the measures introduced with it, but I am prepared to concede that in the years since the introduction of these powers they have been found to be necessary and effective.

§ Mr. Hordern
As the right hon. Gentleman knows, he opposed those powers at the time as I opposed them. However, the point that he makes is the point about justices of the peace. He says that this case is on all fours with the references normally made to justices in cases of fraud. But surely the distinction here is that when an inspector goes to a justice of the peace he has to satisfy him on reasonable grounds that a fraud has taken place. But how is the justice to know that those grounds are reasonable, given the state of his knowledge of the tax law?

§ Mr. Barnett
I know that the hon. Gentleman was one of his party who 1040 opposed his own Government over those powers. But if I may be allowed to continue the argument about the powers and the safeguards, I noted with great care what the right hon. and learned Member for Surrey, East (Sir G. Howe) said about the identical powers which were taken by a Conservative Government when he was one of the Law Officers. He said that he would recognise that there was a need for a review of those powers now but went on to say that he would not go along with those—no doubt he meant his hon. Friends—who would seek to remove the powers in respect of VAT.
I was glad to hear him say that and I should like to hear from him whether, when we have adequate safeguards—as I believe we shall have when the Bill is on the statute book—he will seek to remove these powers to ensure that dishonest taxpayers who have been committing criminal offences are caunght whenever possible. I gather that he will not tell us whether that will be the case.
I deplore as much as anyone who has spoken in this debate the heavy-handed abuse of authority, whether in this respect or in any other. That is why I and the Chancellor are prepared to consider additional safeguards to make sure that there is no abuse of power. What I want to make clear on the VAT powers is that the publicity has been in a tiny minority of cases—about 10—and that all those cases have been fully investigated. There is no justification for the allegations except in two relatively minor cases. In very few cases have searches failed to lead to evidence of VAT offences. Almost invariably, they lead to the ascertainment of offences.
However, I recognise the concern of hon. Members, including my hon. Friend the Member for Dudley, West (Dr. Phipps) and others of my hon. Friends who are concerned about the safeguards. I hope that the hon. Member for Gloucestershire, South (Mr. Cope), who suggested that one safeguard might be a Minister's signature on the warrant, will on reflection recognise that that would hardly be satisfactory, given that a Minister should not have the detailed information of a personal taxpayer's case.

§ Mr. Cope
I was suggesting that the Minister's signature should be not on the warrant but on the information.

1041

§ Mr. Barnett
With respect, a Minister could do that only if he had the details of the personal taxpayer's case. It has always been a tradition that they should not be available to a Minister and we shall continue that situation.

§ Sir G. Howe
I want to take the Chief Secretary back to the remarks he just made about the VAT powers as used and would refer in particular to the case of Mr. Button of Gravesend, the facts of which are set out in parliamentary reports. In that case, seven or eight officials were present at the taxpayer's home for eight hours and extended their search to many articles of a private nature, including a child's satchel. Is that regarded as a routine inquiry up with which the taxpayer may have to put, or is it something in respect of which the right hon. Gentleman is prepared to say the officials went beyond their powers? An answer is important to enable us to judge these provisions.

§ Mr. Barnett
The right hon. and learned Gentleman will have more knowledge than I of how search warrants are used, not only in tax cases. But I cannot comment on detailed cases. That would be quite wrong. However, where any case is brought to our attention which even remotely appears to be an abuse of authority, that case will be fully investigated. I can give that complete assurance.

§ Mr. Peter Rees
Would the right hon. Gentleman consider the precedent set by the Home Secretary and institute an independent appeals procedure to look into abuses of power by the Inland Revenue? There seems to be a fair analogy between the police and the Inland Revenue. That might allay the concern of taxpayers.

§ Mr. Barnett
rose—

Several Hon. Members
rose—

§ Mr. Barnett
Before I give way to anyone else—no one can accuse me, I hope, of being discourteous—perhaps I could continue to indicate where I am seeking, by what I think is a better means than the hon. and learned Member has just suggested, to improve the safeguards so that we have proper checks and balances to prevent abuse of power by officials.
1042 I have had discussion with the Home Secretary and the Lord Chancellor with a view to seeing whether one can substitute some other person for a magistrate from whom an inspector of taxes would be able to obtain a search warrant. The right hon. and learned Member for Surrey, East suggested on Second Reading the substitution of a High Court judge. I am sure that he is aware that it is contrary to precedent for a High Court judge to be placed in this situation. What is more, it would be extremely inconvenient, to say the least, if, in the case of a serious fraud, an inspector of taxes had to go to a High Court judge—[HON. MEMBERS: "Why?"] I hope that hon. Members will just wait a minute.
Nevertheless, I recognise that there is a serious case for extending the safeguard. I am not suggesting, however, as some hon. Members have, that the justices of the peace would not be perfectly capable of doing this job. What I suggest, following my discussions with the Lord Chancellor and the Home Secretary, is that we use a circuit judge. I hope that no one will suggest that that would be inadequate for the purpose. I gather that there are about 250 of them in England and Wales, which will make it much more convenient. This will also, I hope, strengthen the safeguard that an inspector of taxes would need to obtain that search warrant by providing the necessary information on oath before a circuit judge.

Several hon. Members
rose—

§ Mr. Barnett
I am not finished yet. I must ask hon. Members to contain themselves.
I hope that that will provide greater accessibility, as well as a substantial safeguard. I understand that in Scotland—I say this with some hesitation because other hon. Members are more knowledgeable on the matter than I—a sheriff might be considered the equivalent of a circuit judge. I am glad to see the hon. Member for Ayr nodding assent.
In Northern Ireland, I gather that a county court judge would be something like the equivalent. We would hope to make both those substitutions, and I hope that that would be a substantial additional safeguard.
1043 If serious propositions are put to us in Committee for extending the safeguards on some of the more serious points made in this debate, we shall of course consider them.
Following this debate and some of the things said in it, I hope that it will not be considered that moving from the traditional person who provides the warrant, namely the magistrate, will be in any way a reflection on the way in which the existing powers are used by justices. Nor do the special cases that we are talking about—the extension of the powers of officials—in any way reflect upon the competence and responsibility of magistrates in the performance of their duties.
I hope that the Committee will feel that I have gone a long way to meet the serious points made. I emphasise again that the powers in Schedule 6 will be needed in an infrequent number of cases only, where serious fraud is suspected and evidence is likely to be destroyed. They would be used for the purpose of countering criminal tax evasion. That is what we are talking about.

§ 7.30 p.m.

§ Mr. Loveridge
I appreciate the efforts which the Chief Secretary has made to satisfy the doubts I voiced earlier about the safeguards. I hope, however, whoever signs the warrant, that the inspector will have to provide the full background, documentation and details of the allegation so that the person signing the warrant can be in possession of as much technical knowledge as possible to enable him to interpret what he is signing and that he will not merely sign on the say-so of an inspector, however honourable he may be.

§ Mr. Barnett
When the hon. Gentleman thinks about what he has said, he will realise that he is being a little insulting to circuit judges. I hope he will recognise that circuit judges are not likely to give a warrant just on the say-so of an inspector of taxes, although inspectors of taxes are very responsible people, as anyone who has had dealings with them will know. In addition, the inspector of taxes will not ask for a search warrant without first having cleared it with the Board of Inland Revenue. These are substantial safeguards.

1044

§ Mr. John Gorst (Hendon, North)
In moving from magistrates to county court judges, the Chief Secretary has made an important concession. If one magistrate refused to give a search warrant, the Inland Revenue official might tout around to get another magistrate to sign. I ask the Chief Secretary to ensure that the county court judge is told if another county court judge has already turned down an application.

§ Mr. Barnett
I was talking about circuit judges in England and Wales, not county court judges. I find it hard to believe—I am not a lawyer and do not know how these things work—that if an inspector of taxes went to a circuit judge for a search warrant and it was refused, the inspector would tout around other circuit judges. I doubt whether any lawyer in the House would imagine that would happen.
I hope that those who read our debates and those who have listened to what has been said here and elsewhere will recognise that the fears that have been expressed about these powers are grossly exaggerated. The need for the powers is, I hope, evident to all. It is certainly evident to honest taxpayers who ask only that dishonest taxpayers who are committing criminal offences are brought to justice and required to pay the proper tax. I ask my hon. and right hon. Friends to support the clause.

§ Mr. David Howell (Guildford)
The Chief Secretary tells the Committee that he is not a lawyer and does not know how these things work. It is nothing short of disgraceful, when we are dealing with a matter which involves a further major incursion into the liberty and privacy of the subject—all are agreed on that, whether, like the Chief Secretary they believe it is necessary or, like the Opposition, utterly unnecessary—that a Law Officer has not bothered to show his nose during the debate. That registers, along with the Chief Secretary's engaging candour about ignorance of the law and how these things work, just what attitude the Government take. We realise that the Chancellor cannot be here, but it is extraordinary that we have not had the benefit of the advice or even the attendance of a Law Officer during this debate.
We are moving into an entirely new area. We are moving into the home, into personal taxes on income, into capital 1045 transfer tax and, if a wealth tax comes along, no doubt we shall be moving into the use of these powers there.

§ Mr. Barnett
indicated dissent.

§ Mr. Howell
The Chief Secretary may shake his head. He has produced no evidence—

§ Mr. Barnett
If the hon. Gentleman reads the Bill he will find that it does not apply to capital transfer tax.

§ Mr. Howell
We shall watch the safeguards and reassurances, but so far we have not heard enough to satisfy us.
As for the powers, the right hon. Member for Down, South (Mr. Powell), my hon. Friend the Member for Ayr (Mr. Younger), the hon. Member for Cornwall, North (Mr. Pardoe) and many others repeatedly asked why the new powers were needed for a handful of cases. The phrase "handful of cases" is one of Mr. Cyril Plant's contributions to the debate. We want to know why it is a handful of cases and why the powers are needed when the Inland Revenue already has powers to obtain search warrants in criminal cases.
The Chief Secretary wants to extend that power to non-criminal cases and has not explained why. The phrase used in the Bill is "any form of fraud", and fraud is not necessarily a criminal act. It can also arise under the civil law. The Chief Secretary glossed over that and has not admitted that what is being done extends major new powers into non-criminal cases.

§ Mr. Barnett
If the hon. Gentleman will read the Bill he will perhaps understand that a fraud on the Revenue is a criminal offence.

§ Mr. Howell
The phrase used in the Bill is "any form of fraud", and any

1046

§ form of fraud can apply to civil as well as criminal cases. That is not made clear in the Bill nor has it been made clear by anything the Chief Secretary said.

§ We agree that there is nothing to be said in defence of those who deliberately defraud the public revenues, and that applies both to major tax manoeuvres of the sinister kind to which the Chief Secretary keeps referring and the moonlighting and other practices by which cash changes hands and is not declared for tax. We have no sympathy with either kind of tax evasion nor with those who insist on seeing these provisions as applying only to a few. According to the hon. Member for Tottenham (Mr. Atkinson) there is £3,000 million to £3,500 million worth of work being done which is not declared for tax purposes. This is a widespread matter which affects many, not just a few.

§ These powers allow the Inland Revenue with the approval of a magistrate—now perhaps of a circuit judge—to go into the home of an individual and, under Section 20B, the premises or home for his professional advisers when they may not have been accused, may not have been convicted and may not even have been in a position to provide the information required. That is a major new incursion into the liberties and privacies of an individual. It is an attack on legal privilege, an attack on our liberties, an attack not on a handful of cases but on a great many cases. The Opposition, even with the reassuring smokescreen of the safeguards, say that we shall have none of it. We shall have none of the clause and none of the schedule. We reject them, and I urge my hon. and right hon. Friends to oppose the motion.

§ Question put, That the clause stand part of the Bill:—

§ The Committee divided: Ayes 198, Noes 185.

1049

Division No. 139.]	AYES	7.40 p.m.
Abse, Leo	Boardman, H.	Cocks, Michael (Bristol S)
Anderson, Donald	Bottomley, Rt Hon Arthur	Cohen, Stanley
Archer, Peter	Boyden, James (Bash Auck)	Coiquhoun, Ms Maureen
Armstrong, Ernest	Bradley, Tom	Concannon, J. D.
Atkins, Ronald (Preston N)	Bray, Dr Jeremy	Conlan, Bernard
Bagier, Gordon A. T.	Brown, Hugh D. (Proven)	Cox, Thomas (Tooting)
Barnett, Guy (Greenwich)	Brown, Robert C. (Newcastle W)	Craigen, J. M. (Maryhill)
Barnett, Rt Hon Joel (Heywood)	Brown, Ronald (Hackney S)	Crawshaw, Richard
Bates, Alf	Buchan, Norman	Cronin, John
Bean, R. E.	Buchanan, Richard	Cunningham, G. (Islington S)
Bennett, Andrew (Stockport N)	Campbell, Ian	Cunningham, Dr J. (Whiteh)
Bidwell, Sydney	Canavan, Dennis	Davidson, Arthur
Bishop, E. S.	Carmichael, Neil	Davies, Bryan (Enfield N)
Blenkinsop, Arthur	Clemitson, Ivor	Davies, Denzil (LlanelN)
Deakins, Eric	Latham, Arthur (Paddington)	Rooker, J. W.
Dean, Joseph (Leeds West)	Lewis, Arthur (Newham N)	Roper, John
de Freitas, Rt Hon Sir Geoffrey	Lewis, Ron (Carlisle)	Rose, Paul B.
Dempsey, James	Lipton, Marcus	Ross, Rt Hon W. (Kilmarnock)
Doig, Peter	Litterick, Tom	Rowlands, Ted
Dormand, J. D.	Loyden, Eddie	Sandelson, Neville
Duffy, A. E. P.	Luard, Evan	Sedgemore, Brian
Eadie, Alex	McCartney, Hugh	Shaw, Arnold (Ilford South)
Edge, Geoff	McElhone, Frank	Sheldon, Robert (Ashton-u-Lyne)
Edwards, Robert (Wolv SE)	Macfarquhar, Roderick	Short, Rt Hon E. (Newcastle C)
Ellis, John (Brigg & Scun)	McGuire, Michael (Ince)	Sillars, James
Ellis, Tom (Wrexham)	Mackenzie, Gregor	Silverman, Julius
Ennals, David	Mackintosh, John P.	Small, William
Evans, Fred (Caerphilly)	McMillan, Tom (Glasgow C)	Smith, John (N Lanarkshire)
Evans, loan (Aberdare)	McNamara, Kevin	Snape, Peter
Ewing, Harry (Stirling)	Madden, Max	Spearing, Nigel
Faulds, Andrew	Magee, Bryan	Spriggs, Leslie
Fernyhough, Rt Hon E.	Mellalieu, J. P. W.	Stallard, A. W.
Fletcher, Raymond (Ilkeston)	Marquand, David	Stoddart, David
Fletcher, Ted (Darlington)	Marshall, Dr Edmund (Goole)	Stott, Roger
Foot, Rt Hon Michael	Mason, Rt Hon Roy	Strang, Gavin
Ford, Ben	Maynard Miss Joan	Taylor, Mrs Ann (Bolton W)
Forrester, John	Mellish, Rt Hon Robert	Thomas, Jeffrey (Abertillery)
Fraser, John (Lambeth, N'w'd)	Mendelson, John	Thomas, Ron (Bristol NW)
George, Bruce	Miller, Dr M. S. (E Kilbride)	Thorne, Stan (Preston South)
Gilbert, Dr John	Miller, Mrs Millie (Ilford N)	Tierney. Sydney
Ginsburg, David	Mitchell, R. C. (Soton, ltchen)	Tinn, James
Golding, John	Molloy, William	Tomney, Frank
Gould, Bryan	Morris, Charles R. (Openshaw)	Torney, Tom
Graham, Ted	Moyle, Roland	Wainwright, Edwin (Dearne V)
Grocott, Bruce	Noble, Mike	Walden, Brian (B'ham, L'dyw'd)
Hamilton, James (Bothwell)	Ogden, Eric	Walker, Harold (Doncaster)
Harper, Joseph	O'Halloran, Michael	Walker, Terry (Kingswood)
Harrison, Walter (Wakefield)	Orbach, Maurice	Ward, Michael
Hart, Rt Hon Judith	Orme, Rt Hon Stanley	Watkins, David
Hatton, Frank	Ovenden, John	Weitzman, David
Heffer, Eric S.	Padley, Walter	White, Frank R. (Bury)
Horam, John	Palmer, Arthur	White, James (Pollok)
Howell, Rt Hon Denis	Park, George	whitlock, William
Huckfield, Les	Parker, John	Willey, Rt Hon Frederick
Hughes, Rt Hon C. (Anglesey)	Parry, Robert	Williams, Alan (Swansea W)
Hughes, Robert (Aberdeen N)	Pavitt, Laurie	Williams, Sir Thomas
Irvine, Rt Hon Sir A. (Edge Hill)	Perry, Ernest	Wilson, Alexander (Hamilton)
Irving, Rt Hon S. (Dartford)	Phipps, Dr Colin	Wilson, Rt Hon H. (Huyton)
Jackson, Colin (Brighouse)	Prentice, Rt Hon Reg	Wilson, William (Coventry SE)
Janner, Greville	Prescott, John	Wise, Mrs Audrey
Jay, Rt Hon Douglas	Price, William (Rugby)	Woodall, Alec
Jenkins, Rt Hon Roy (Stechford)	Radice, Giles	Woof, Robert
John, Brynmor	Richardson, Miss Jo	Young, David (Bolton E)
Johnson, James (Hull West)	Roberts, Albert (Normanton)
Jones, Barry (East Flint)	Robertson, John (Paisley)	TELLERS FOR THE AYES:
Judd, Frank	Robinson, Geoffrey	Mr. Tom Pendry and
Kilroy-Silk, Robert	Roderick, Caerwyn	Mr. Donald Coleman.
Lamond, James
NOES
Adley, Robert	Crouch, David	Hall, Sir John
Aitken, Jonathan	Davies, Rt Hon J. (Knutsford)	Hall-Davis, A. G. F.
Alison, Michael	Dean, Paul (N Somerset)	Hamilton, Michael (Salisbury)
Amery, Rt Hon Julian	Dodsworth, Geoffrey	Hampson, Dr. Keith
Arnold, Tom	Drayson, Burnaby	Harvie Anderson, Rt Hon Miss
Atkins, Rt Hon H. (Spelthorne)	Dykes, Hugh	Hawkins, Paul
Banks, Robert	Eden, Rt Hon Sir John	Hayhoe, Barney
Beith, A. J.	Edwards, Nicholas (Pembroke)	Hicks, Robert
Bell, Ronald	Elliott, Sir William	Higgins, Terence L.
Berry, Hon Anthony	Emery, Peter	Holland, Philip
Biffen, John	Fell, Anthony	Hordern, Peter
Body, Richard	Fisher, Sir Nigel	Howe, Rt Hon Sir Geoffrey
Boscawen, Hon Robert	Fletcher, Alex (Edinburgh N)	Howell, David (Guildford)
Brittan, Leon	Fookes, Miss Janet	Hunt, David (Wirral)
Brotherton, Michael	Forman, Nigel	Hunt, John
Brown, Sir Edward (Bath)	Fowler, Norman (Sutton C'f'd]	Hurd, Douglas
Bryan, Sir Paul	Fox, Marcus	Hutchison, Michael Clark
Budgen, Nick	Freud, Clement	Jenkin, Rt Hon P. (Wanst'd & W'df'd)
Bulmer, Esmond	Gardiner, George (Reigate)	Jessel, Toby
Channon, Paul	Gardner, Edward (S Fylde)	Johnson Smith, G. (E Grinstead)
Churchill, W. S.	Glyn, Dr Alan	Johnston, Russell (Inverness)
Clark, Alan (Plymouth, Sutton)	Gorst, John	Kershaw, Anthony
Clark, William (Croydon S)	Gower, Sir Raymond (Barry)	Kilfedder, James
Clarke, Kenneth (Rushcliffe)	Gray, Hamish	Kimball, Marcus
Clegg, Walter	Grieve, Percy	King, Evelyn (South Dorset)
Cockcroft, John	Griffiths, Eldon	King, Tom (Bridgwater)
Cooke, Robert (Bristol W)	Grimond, Rt Hon J.	Kitson, Sir Timothy
Cope, John	Grist, Ian	Knight, Mrs Jill
Crawford, Douglas	Grylls, Michael	Knox, David

1048

1049

Lamont, Norman	Mudd, David	Skeet, T.H.H.
Langford-Holt, Sir John	Nelson, Anthony	Smith, Dudley (Warwick)
Lawrence, Ivan	Newton, Tony	Speed, Keith
Lawson, Nigel	Normanton, Tom	Spicer, Michael (S Worcester)
Le Merchant Spence	Nott, John	Stainton, Keith
Lester, Jim (Beeston)	Osborn, John	Stanbrook, Ivor
Lewis, Kenneth (Rutland)	Page, John (Harrow West)	Steen, Anthony (Wavertree)
Lloyd, Ian	Page, Rt Hon R. Graham (Crosby)	Stewart, Donald (Western Isles)
Loveridge, John	Paisley, Rev Ian	Stradling Thomas, J.
Luce, Richard	Pardoe, John	Tapsell, Peter
McAdden, Sir Stephen	Parkinson, Cecil	Taylor, R. (Croydon NW)
McCusker, H	Penhaligon, David	Taylor, Teddy (Cathcart)
Macfarlane, Neil	Percival, Ian	Temple-Morris, Peter
Macmillan, Rt Hon M. (Farnham)	Peyton, Rt Hon John	Thomas, Rt Hon P. (Hendon S)
Marshall, Michael (Arundel)	Powell, Rt Hon J. Enoch	Thompson, George
Marten, Neil	Prior, Rt Hon James	Tugendhat, Christopher
Mather, Carol	Pym, Rt Hon Francis	Vaughan, Dr Gerard
Maude, Angus	Rathbone, Tim	Wakeham, John
Maudling, Rt Hon Reginald	Rees, Peter (Dover & Deal)	Welder, David (Clitheroe)
Mawby, Ray	Rees-Davies, W. R.	Walker, Rt Hon P. (Worcester)
Maxwell-Hyslop, Robin	Renton, Rt Hon Sir D. (Hunts)	Walters, Dennis
Mayhew, Patrick	Renton, Tim (Mid-Sussex)	Wells, John
Meyer, Sir Anthony	Rhys Williams, Sir Brandon	Whitelaw, Rt Hon William
Miller, Hal (Bromsgrove)	Rippon, Rt Hon Geoffrey	Wiggin, Jerry
Mills, Peter	Roberts, Michael (Cardiff NW)	Wigley, Dafydd
Mitchell, David (Basingstoke)	Roberts, Wyn (Conway)	Wilson, Gordon (Dundee E)
Moate, Roger	Rodgers, Sir John (Sevenoaks)	Winterton, Nicholas
Molyneaux, James	Sainsbury, Tim	Wood, Rt Hon Richard
Monro, Hector	Shelton, William (Streatham)	Young, Sir G. (Ealing, Acton)
Moore, John (Croydon C)	Shepherd, Colin	Younger, Hon George
More, Jasper (Ludlow)	Shersby, Michael
Morgan, Geraint	Silvester, Fred	TELLERS FOR THE NOES:
Morrison, Charles (Devizes)	Sims, Roger	Mr. W. Benyon and
Morrison, Hon Peter (Chester)	Sinclair, Sir George	Mr. John Corrie

§ Question accordingly agreed to.

§ Clause 48 ordered to stand part of the Bill.