§ Question proposed, That the clause stand part of the Bill.
§ Mr. BlairI have a short point on the detail of clause 13. It is fair to say that this clause is fairly broadly drafted. It says:
The Board may by written notice require any person to give them, within a period of thirty days or such longer period as may be specified in the notice, any information which is so specified and which—The clause says that the board may require by written notice "any person" to give information. Is that provision limited to those people who are employed by the scheme employer and who are engaged in the profit-related pay scheme, or does it mean any person at all? For example, 1014 does it mean a customer of the employer? When we come to schedule I, we will see more clearly the computations about the profit and loss account, and we will need to ensure that we get the proper profit and loss account upon which to base profit-related pay. Before we give the Inland Revenue such broad powers, we should ask from whore it can require information. On the present drafting, the Bill appears to mean people who are not even employed by the scheme employer.
- (a) that person has or can reasonably be required to obtain, and
- (b) the Board consider they need to have in order to perform their functions under this Chapter."
§ Mr. BrookeWe have passed over a number of clauses fairly quickly, and it may be helpful if I say a brief word about the Inland Revenue's attitude to the management of the scheme as a whole. This is the background to the clause that we are discussing. As the hon. Gentleman implies, this clause empowers the board to obtain information in connection with profit-related pay schemes additional to that provided by the return and the report which are covered in clause 12.
The Inland Revenue will not normally be involved in the day-to-day running of profit-related pay schemes. On occasions when the Inland Revenue needs to become more closely involved, adequate information powers are clearly necessary. Clause 13(1) provides a general authority to seek information.
Specific anticipated examples of that are cited in subsection (2), and subsection (3) lays an obligation on a scheme employer to pass certain information to the hoard. The general authority permits the board to require information related to a profit-related pay scheme from any person who has that information or who can reasonably be required to obtain it, provided the requirement is in writing, allows the person at least 30 days to reply and is information which the board considers that it needs about that scheme.
The cited examples deal with situations where such information is likely to be needed. The first case concerns information related to concellation of a scheme. Situations in which this might occur are dealt with in clause 10. The second case is about information related to employee or employer tax liability. This is to ensure access to all pay documents for profit-related pay purposes. The third case concerns information related to the administration of a scheme and this may be especially necessary where one scheme covers several employers in a group of companies. The fourth case concerns information related to changes of persons paying profit-related pay under a scheme. This may be relevant to reorganisations within groups.
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The hon. Member for Sedgefield (Mr. Blair) asked a specific question about any person giving information. A wide variety of circumstances may call into question the operation of a registered scheme and the continued entitlement to tax relief. Therefore, the powers provided are wide and permit information to be obtained from any person about a profit-related pay scheme. Such powers are especially likely to be needed in group situations. The employer who registers a scheme may be the parent company, but it will be the subsidiaries who hold details of administration and payment. I hope that it will reassure the hon. Gentleman when I tell him that this information provision is closely modelled on the equivalent authority in respect of approved share option schemes in schedule 12(14) to the Finance Act 1984. The 1984 legislation did not prove contentious in Committee and has posed no significant problems in operation.
§ Mr. BlairThe Minister is right in thinking that I require reassurance. A profit-related pay scheme is different from an employee share ownership scheme because by its very nature a PRP scheme deals with the computation of profit. That exercise is different from dealing with the dividends paid under a share scheme. The powers proposed here are broad and the Revenue will be able to require any person to give it any information that it wishes. There is no requirement upon the Revenue even to act reasonably in doing so.
§ Mr. Tim SmithThe person has to have the information that the Revenue is seeking or has to be able reasonably to acquire it.
§ Mr. BlairIt is true that the person has to be reasonably able to obtain the information, but there is no duty upon the Revenue to act reasonably in obtaining the information that it requires. The matter of a customer has been raised. As I understand it, the Minister says that the Inland Revenue is entitled under clause 12 to require information from customers, presumably about a sale deal or a contract. That does not arise in employee share ownership schemes and they are wide powers for the Revenue.
One of the dangers of debating the Bill in the way that we are is that things can slip through without the Committee requiring some fairly stringent limitations on the powers of the Inland Revenue. I should like to know whether solicitors or other third parties could be required by the board to give information. If they are, that constitutes a broad power for the Inland Revenue. If we are to involve people who have nothing whatever to do with the scheme, it is important that we at least get a statement of intent from the Minister that the powers will not be abused or used to require information from people who are not participating in any way in a scheme. I should be obliged to the Minister if he could give me that assurance.
§ Mr. BrookeI am not sure that I can afford the hon. Gentleman all the assurances that he wants. Effectively, he is asking whether somebody to whom the Revenue made a request for information will be able to resist that request. In this area, enforcement by means of penalties has to be sanctioned by the special commissioners of income tax, the independent appellate body. Therefore, there is an appeal against such a request if it is unreasonable. I am reluctant to accept that it would be unreasonable; that hypothesis was adumbrated by the hon. Gentleman.
§ Mr. BlairWith respect, will the Minister answer my two specific questions? Do the provisions apply to customers and to other third parties such as solicitors?
§ Mr. BrookeSubject to correction, yes, but I shall certainly let the hon. Gentleman know if I have given him an incorrect answer. Earlier, I referred to the phrase "any person" and I stand by that wording.
§ Mr. Austin MitchellThis is an extremely important point. Is the Minister now saying that access to solicitors' records and a requirement on solicitors to give information about their clients are implicit in the Bill?
§ Mr. BrookeI have been seeking to say that, while the Revenue will have a relatively light control over the process, if circumstances arose in which they needed information, they could seek it. I continue to make the observation that there will be the opportunity to resist the 1016 provision of that information by reference to the special commissioners for income tax, should the request be regarded as unreasonable.
§ Mr. MitchellDoes the Minister realise that he is abrogating an extremely important professional principle? It is true that some of my best friends are solicitors and I would not wish to seem to be speaking in defence of their interests, but the principle of confidentiality is vital to the solicitors' profession, and, indeed, to other professions. Yet the Minister blithely tells us—with no contradictory message coming along the supply lines from the Olympian powers that usually rescue Ministers—that he is abrogating that essential professional principle. That surely cannot be correct.
§ Mr. BrookeI repeat that the information provision is closely modelled on the equivalent authority in respect of approved share option schemes in the Finance Act 1984. That was self-evidently before my time; I was not involved with the Committee on the Bill, although I dare say that the hon. Members for Great Grimsby (Mr. Mitchell) and for Sedgefield (Mr. Blair) were. I do not know what they said in similar circumstances in 1984, but I know that this was not a contentious issue in 1984. That provision has worked perfectly satisfactorily and I hope that the Committee will be confident that this provision will work similarly.
§ Mr. BlairI shall not labour the point, but I am really not persuaded by the analogy with the employee share option provision; for the simple reason that in that case the board would not be engaged in the same calculation. The whole purpose of profit-related pay schemes is to tie pay to profits; that involves a wholly different set of computations.
I think that we very often allow the Revenue to get away with much greater powers than it needs and it is a serious matter if we are about to pass a clause which will allow the Revenue to interfere with the normal rights of confidentiality of clients and solicitors and to obtain information from people who have nothing whatever to do with the profit-related pay scheme. The Minister says that they will have a right of appeal, but they will have that right only within the terms of the statute. The board's powers are qualified only by subsections (1)(a) and (1)(b). The person can be required to give information that he
can reasonably be required to obtain".There will be a lot of information that a person can reasonably obtain, because it is to hand, but he may not want to divulge that information and perhaps should not be forced to do so.The second qualification is that
the Board consider they need to havethe informationin order to perform their functionsunder the Bill. That is very wide indeed, and I hope that we have at the very least put down a marker to make it clear to the Inland Revenue that the provision is not intended to give it carte blanche to trawl the accounts of people who have nothing to do with the profit-related pay scheme.It is incumbent upon the Government and the Revenue to ensure that legislation of his nature is drawn as narrowly as possible. It should give the Revenue only the powers that it needs to perform its duties adequately. This provision is drawn much more widely than it need be.
§ Mr. BrookeAs I said in my opening remarks, there is a potential marginal disadvantage in passing over a number of clauses without debate, because the framework for the Revenue's involvement has not been discussed or described.
As I said earlier, the purpose is that there should be minimum and minimal Revenue interference and involvement in the scheme, to leave maximum flexibility and freedom to employers. As is apparent from the rest of the provisions, this is very much a employer-orientated scheme.
The hon. Member for Sedgefield is worried lest people who could be placed in an embarrassing position with regard to confidentiality were obliged to provide information under the arrangements, although he recognises that the wording is such that the board may require a person to give it information only that
that person has or can reasonably be required to obtain".The debate has demonstrated that the Revenue would be most unlikely to ask someone for information to which a degree of controversy or drama was attached without first asking those in the employing organisation who might be expected to provide the information to do so. We are talking about an unusual case, because in a scheme intended to be run with minimum Revenue involvement and maximum flexibility and freedom for the employer, the first source of information will clearly be the employer. However, I understand why the hon. Member for Sedgefield wished to pursue the question of the wording.The Revenue will go to those who are most likely to have the information readily to hand. However, it needs some residual powers so that it can secure the information that the House would properly expect it to secure to ensure that the relief is provided properly. This is an unusual case, but I am grateful to the hon. Member for Sedgefield for raising it in these terms and this tone. I am sure that the Revenue will have heard what he has said.
§ Mr. KirkwoodI am sorry to prolong the debate. The Committee will be grateful to the hon. Member for Sedgefield (Mr. Blair) for raising this matter. The point had certainly not occurred to me during our cursory examination of the Bill. Will the Treasury Bench reexamine the matter and come up with a slightly more convincing series of answers on Report? As a solicitor—albeit of the Scots variety—I would like to ask the Minister what sactions he thinks the Inland Revenue will have at its disposal if a solicitor pleads professional privilege. That would put both the solicitor and the Inland Revenue in a very difficult position.
I therefore echo the fears expressed by the hon. Member for Sedgefield and others, because I am not satisfied either. There seems little point in pressing the matter to a Division today, although if the hon. Member for Sedgefield has a mind to do so I shall certainly support him. A more positive approach might be for the Government to look at the matter in more detail and to return to it on Report.
§ Mr. Austin MitchellI echo the remarks of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood). The Minister's reply was unsatisfactory. It is in this way that liberties are thrown away—with blithe assurances that the circumstances will be highly exceptional, that the provisions will be invoked with sensitivity and that the Inland Revenue, that well-known instrument of sensitivity, care and kid-glove handling, will operate will all due 1018 processes in this instance. On the basis of such assurances, essential professional practices and liberties can easily be lost.
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If a Labour Government had proposed a similar provision in a Finance Bill Committee there would have been howls of outrage from the Conservative Opposition. A heart-rending, tear-jerking picture would have been painted of the demise of liberty in this country as a result of the terrible powers being invoked by Somerset house. I heard just such harangues on the Finance Bills of 1977, 1978 and 1979 until my heart bled for the poor British people subjected to such tyrannical powers. Yet a Conservative Minister now blithely invokes just such powers.
The precedent from 1984 that the 'Minister cited is not adequate because these are more trenchant, more wide-ranging powers. The Minister may be riding them in on the back of the 1984 concession, but that concession cannot be claimed as a precedent because he is extending the circles of tyranny. Perhaps more important, the Minister's argument that the Revenue would go first to the directors of the firm and only secondarily to the legal advisers is not satisfactory either. If the Revenue does not obtain satisfaction from the directors there will be an ever-widening circle of inquiry which will lead directly to the infringement of an essential professional practice. The confidentiality of the relationship between professional adviser and client will be infringed and abrogated by the clause.
There is not a great deal that we can do about the matter today, but I hope that we can return to it on Report as the Minister's reply was not satisfactory.
§ Mr. BrookeI am grateful to the hon. Members for Roxburgh and Berwickshire (Mr. Kirkwood) and for Great Grimsby (Mr. Mitchell) for prolonging the debate. In the context of the latter's earlier reference to overselling, I hugely enjoyed his reference to "circles of tyranny", a phrase which we shall no doubt read in other places.
A sinister quality has been read into the clause which it does not possess, but it is absolutely right that the Committee should be vigilant in these matters. The Inland Revenue proposes to manage and oversee the scheme on behalf of taxpayers everywhere with a light touch, but feels that residual powers are necessary. The hon. Members for Great Grimsby and for Sedgefield (Mr. Blair) said that the 1984 case to which I alluded was not an adequate support for the argument that I was advancing. I can only say that the 1984 case exists and has not given rise to the dramas and ever-widening circles of tyranny to which the hon. Member for Great Grimsby has referred.
Of course, this is an issue of public moment. The Keith committee, with which we have been concerned in other contexts, has made various proposals on professional privilege. Those proposals are still under consideration, but I accept the spirit in which the Opposition have raised this matter. I shall, of course, look at it again to see whether any greater reassurance can be given.
§ Question put and agreed to.
§ Clause 13 ordered to stand part of the Bill.
§ Clauses 14 to 17 ordered to stand part of the Bill.