Grand Committee Report of 22 February 2005

Official Report of the Grand Committee on the Commissioners for Revenue and Customs Bill
(First Day)
Tuesday, 22 February 2005.
The Committee met at half past three of the clock.
[The Deputy Chairman of Committees (Lord Ampthill) in the Chair.]
The Deputy Chairman of Committees (Lord Ampthill): Before I put the Question that the Title be postponed, perhaps I may remind your Lordships of two points of procedure. Noble Lords will speak standing, and the House has agreed that there shall be no Divisions in a Grand Committee. Unless, therefore, an amendment is likely to be agreed to, it should be withdrawn.
If there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.
Title postponed.
Clause 1 [The Commissioners]:
Baroness Noakesmoved Amendment No. 1:
Page 1, line 4, leave out "Revenue and Customs" and insert "Customs and Revenue"
The noble Baroness said: In moving Amendment No. 1, I shall speak also to the 13 other amendments in the group which are in similar form. They would replace the words "Revenue and Customs" in the title of the organisation to be created by the Bill with the words "Customs and Revenue". The amendments apply to Clauses 1 to 4 of the Bill.
At first sight this set of amendments might seem superficial as we do not customarily involve ourselves with the names of bodies or the names of Bills. But I believe that we should carefully consider the title of the new body and not simply accept without question that it would be called the Commissioners of Revenue and Customs.
Within the name we shall be encompassing a whole raft of important ideas which lie behind the two current organisations and which will be fighting for a place in the new organisation. I apologise in advance for the length of what I shall have to say on these amendments. The name of the new organisation goes to the heart of what the new organisation will be about and it is important that the Committee considers the matter in some detail.
Mergers are generally the coming together of two significant bodies to create one more significant whole. The new body should be much more than the sum of
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the parts. I am sure that this is what the noble and learned Lord the Attorney General meant when he said at Second Reading that:
"Integration is not the same as merger: it is a more fundamental change that brings services together to produce new and better solutions".—[Official Report, 7/2/05; col. 587.]
The noble and learned Lord I think was trying to make some new distinction for mergers, but, as I believe I said at Second Reading, that is what has generally been encompassed within the concept of merger in the private sector. So, for me, there is nothing new and magic in the term "integration" because it describes what businessmen have customarily sought when making business mergers. It is a matter of much evidence that they have often not achieved in practice what they have sought. But that is another matter, and we shall return to what is achieved from this merger or integration in due course.
Mergers are not takeovers where one party is dominant over the other. Takeovers normally entail the loss of identity in whole or in part of one of the bodies being taken over. I am sure that the Government do not intend a coming together of the Inland Revenue and the Customs and Excise to be a takeover by either party. It is intended to be a merger or an integration.
In the private sector, the issue of what a merged body is called is always a matter of considerable interest. A takeover generally results in the loss of the name of the minor party, with, at best, the name of the minor party being reserved for brand purposes. So people look to the name of the merged organisation to give some clue as to where the balance of power lies. Very often, wholly synthetic names emerge in order deliberately to obfuscate where the power indeed lies—for example, when British Steel merged with a Dutch steel organisation, it ended up with the name Corus plc, which had nothing whatever to do with any of the organisations, deliberately so as not to lay bare the organisational issues that lay beneath that.
From my own world, which is accountancy, there are currently four major players—the big four, PriceWaterhouseCoopers, Deloitte & Touche, KPMG and Ernst & Young. Each of them has been formed by one or more mergers and countless takeovers. Each of the names reflects the most delicate positioning, both inside the organisation for partners and staff and externally for customers and markets. That is why the name of the new organisation is so important and why I am taking the time of the Committee today.
It is important that people know whether there is a dominant party in the integration and what that means for those people who have to deal with it. If there is not a dominant organisation, we need to see how that is best communicated. At Second Reading, there was some discussion about the different cultures of the Inland Revenue and the Customs and Excise and the matter was examined at some length by the Treasury Select Committee in another place. Surprisingly, the issue of contrasting cultures received only the most glancing of references in the report by Gus O'Donnell that led to the proposals to create the integrated organisation.

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I shall read out the description of the two cultures given by the Association of Chartered and Certified Accountants when giving evidence to the Treasury Select Committee in another place:
"The Inland Revenue is more prepared to negotiate and has a more human face. By contrast, mention Customs investigators to accountants and businesspeople and exasperation sets in. Once the Revenue has made a ruling, it generally sticks to it. VAT offices change their minds more often—partly because they tend not to commit themselves in writing. The historical background to Customs is that it was not set up as a tax collecting agency, chasing payments from people who are essentially honest. It was set up to chase smugglers".
The issue of what sort of merged or integrated department is being created is fundamental for the taxpayer. The placing of "Revenue" ahead of "Customs" in the title could indicate to the outside world that the more business-friendly Inland Revenue is to be the winner in the new organisation. That would be popular in the business world. Can the Minister say whether that is what the Government are wishing to convey in their choice of name? I hope that the Minister will say something about the way in which the name has been chosen.
It may be that the Government wish no inference to be drawn about the kind of organisation that the new body will be. In that case, the Government should try to find either a new name unrelated to the two existing names—rather like Corus in the steel case—or they should take a more strictly logical approach. I suggest that the strictly logical approach to naming the new organisation would be either to follow an alphabetical approach or an historical approach.
An alphabetical approach would lead to the conclusion that "Customs and Revenue" would be the correct name because "Customs" and "Excise" come before both "Inland" and "Revenue". But an historical approach is more serious because the Customs and Excise is, by a very long way, the more senior of the two organisations. A nationally organised customs service can be traced back over 800 years, to the time of King John. Indeed, the roots of the customs service are said to be in Saxon times. In 1671, Charles II put the service in the hands of commissioners, as it is today. By contrast, the Board of Inland Revenue is a mere stripling, having been formed in 1849, and deriving from the introduction of income tax seven years earlier.
As well as it being logical to put "Customs" before "Revenue", it would show some reverence for the institutions and history of our land. On the other hand, putting "Revenue" before "Customs" in the title of the new organisation is something of an historical affront to the more senior organisation. I suggest that it shows the lack of care for the history and culture of our institutions that the Government have shown in a number of ways over the past eight years.
It is for reasons of historical accuracy and verbal neutrality that my amendments replace the title "Revenue and Customs" with "Customs and Revenue". If the Government wish to keep the title as shown in the Bill. I invite the Minister to lay out clearly and
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unambiguously what the rationale for the judgment was, and what that means for the culture of the merged organisation.
If these amendments are accepted by the Government, which I earnestly desire, a number of other amendments will be required, including the title. I have drafted the amendments in terms of Clauses 1 to 4 merely to facilitate today's debate in Grand Committee. I have not even attempted to amend Clause 1(2) or Clause 4(2) for the simple reason that I find the Welsh language almost impossible to understand and certainly impossible to pronounce. An early experience taught me never to tangle with the Welsh language, and so I hope that for today the Committee will accept the spirit of my amendments as encompassing Clause 1(2) and Clause 4(2). I beg to move.
3.45 p.m.
Lord Campbell of Alloway: I support the amendment. Customs and Excise is the dominant partner in this merger; it is the senior partner. It has coercive investigatory powers that are more draconian than the Revenue has ever had to use. In my Amendment No. 21, I deal with the fact that the cultures and patterns of working of these two departments are wholly disparate.
Lord Newby: This is a fascinating discussion. If the title of the new merged department is to reflect its brand value, as it were, and if by having "Revenue" before "Customs" the intention is that the department should treat taxpayers in a somewhat more flexible way than the average excise man on a bad night, I will be all in favour of it. Therefore, I am sorry that I cannot support the amendment proposed by the noble Baroness.
On a matter of historical accuracy, the noble Baroness said that Customs was set up to chase smugglers—I do not believe that was the case. Customs was set up simply to collect the King's revenue when he had personal control of that revenue and Parliament had nothing to do with it. Smuggling was a relatively late development on a grand scale, which of course reached its height in the 18th century when Walpole, as Chancellor of the Exchequer, employed his own smuggler. In the early days of the history of the department, it had a less flamboyant role.
Baroness Noakes: I was quoting from the Association of Chartered Certified Accountants. I am glad to report that that is not a body of which I am a member. I will make sure that the association is told of its error.
Lord Brooke of Alverthorpe: I am against the amendment. This is a business merger; and of the two parties coming together there is no question that the Inland Revenue is the bigger of the two. If we are following the business model found outside, the bigger of the businesses normally comes first in the title. I do not for one moment believe that Customs and Excise will be taken over by the Inland Revenue; indeed, I

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hear fears from within the Inland Revenue that the new partner is a pretty strong one. Indeed, when it took over the National Insurance Contribution Agency, the Revenue discovered that it was a strong partner too. We do not need to worry on that score. The impression that is given to the public at large must reflect reality, and the Revenue side is the big business piece. That is what people need to know.
Looking some 15, 20, or 30 years down the line, it is the Customs side, if anything, that may not be quite what it has been in the past, or even what it is at the moment. I struggle to see the Revenue side declining. We should stick with something that will hold with time. I hope that we will oppose the amendment.
Lord Brooke of Sutton Mandeville: I am delighted to follow my namesake and—as all Brookes believe themselves ultimately to be related—my noble kinsman as well. I have a very slight declaration of interest to make, in that I was the Minister responsible for Customs and Excise between 1985 and 1987. I apologise to the Committee for not being present at Second Reading. With the amount of business that the Government are loading on us in what I understand to be the last two months before an election, I find that there are manifold diary conflicts, and I am afraid that I had such a conflict on that day. If I offend by making any remark that sounds like a Second Reading remark, I ask to be forgiven.
I have an emotional involvement in the subject. It was said at Second Reading that an enormous attraction of service in Customs and Excise was the enthusiasm that people had for belonging to it. Even the noble Lord, Lord Newby, said that. Having been its Minister. I absolutely concur with the enthusiasm expressed at Second Reading.
I have one or two minor factual observations to make. Although it is perfectly correct that Customs started in the 13th century—the noble Lord, Lord Newby, may well be right in his observations about its purpose—I think that I am right to say that the true origins of Customs and Excise activity occurred in the City of London in about the 7th century AD. In a remarkable reverse of normal procedure, it was at that stage a privatised service. Until at least about 1500, the City of London was the business centre of the kingdom, with Westminster very much for the public sector and the task of government.
When the king and court left Westminster at the end of the 13th century or the beginning of the 14th century to fight the wars in north Wales and against Scotland, the whole centre of gravity of government moved to the north. Tourism takings in Westminster fell off to the extent that, during that period, 30 times as much money was given to St Thomas a Becket's tomb in Canterbury as was given to Edward the Confessor's in Westminster Abbey. When the king brought the court back in the middle of the 14th century, to try to build up the economics of Westminster he established a wool tax, which was to be secured and exacted at Westminster rather than in the City. All exports were to go out through Westminster. Market forces allowed that to continue for only about 10 years, and it then
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moved back to the City. Involvement in that—including that, obviously, of Chaucer —was very much City-based during the ensuing years, before the Revenue began.
Although my noble friend Lady Noakes fell back on some of the language about 1842, I noticed that. at col. 1171 of the report of Second Reading on 8 December, the Paymaster General actually took the Revenue back 300 years. It is not as Johnny-come-lately as we might have thought. Nevertheless, the origins of Customs go back much further than those of the Revenue.
It is obvious that the title as set out is not alphabetical, so it is a deliberate move to place the Revenue as its first item. In moving the amendment, my noble friend is absolutely right to come back to the difference in cultures, which is significant. I shall make one observation about the Second Reading debate. In my experience as a Customs and Excise Minister, the essential difference was that Customs would strike what I will call a business bargain with the sectoral interests with which it had to deal, so that a simple interpretation would be reached in negotiation between the industry and the Excise that would make the tax easier to collect. As a taxpayer, however, I have found a greater preoccupation on the part of the Inland Revenue with the detailed letter of the law. That is a massive cultural difference. I was a little surprised, admirable though I think the O'Donnell review is, that there was not more reference to those differences, which will be a significant problem in terms of negotiations. When I negotiated with the noble Lord, Lord Brooke of Alverthorpe, my namesake and distant kinsman, I believe that, at that stage, he was responsible for the Inland Revenue and not for Customs and Excise. Therefore, my negotiations with him were entirely on an Inland Revenue basis, but I was certainly conscious of that distinction.
The cultural side is important. My noble friend is entirely justified in putting down this amendment and since I have not previously seen any explanation of why the title was written in the way it was, I am much looking forward to hearing the Attorney-General's reply.
The Attorney-General (Lord Goldsmith): I am rather sorry to have to get up, because I have been enjoying this debate enormously and feel that, having already produced a rift politically on matters of historical accuracy, some achievement has been made. However, I do not want that remark to detract in any way from the fact that I entirely accept that the integration of two of the oldest departments in Whitehall is an historic event and that the name of the new department is a serious issue. I will do my best to answer the question asked by the noble Baroness, Lady Noakes, and most recently by the noble Lord, Lord Brooke of Sutton Mandeville, about why this name has been chosen.
The title needs to say clearly and recognisably what the new department does. In that respect, some of the devices that have been taken in the private sector—the noble Baroness, Lady Noakes, referred to one name that said nothing about its predecessors and possibly nothing

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about the business that the new company carried on—are not at all appropriate for a government department. The name also needs to stand the test of time.
Of course, the intended name incorporates first of all the long history of both predecessor departments. It includes key words from each. It places Revenue before Customs but it adopts a similar form to that of the current department of Her Majesty's Customs and Excise. If we had gone further towards the precedent of Customs and Excise and called the department, as the noble Baroness would wish, Customs and Revenue, that would probably do very little to help create a new and separate identity for the new department and it could well lead to confusion and the continued inadvertent use of the expression Customs and Excise. Customs and Revenue, Customs and Excise: one could see how that confusion would arise. Revenue and Customs means a quite distinct and deliberate change of identity.
The new title does invoke the history of the two current departments and I will say a little more about the historical issue in a moment. But it also looks to the future. The title does not reflect the relative importance that people may decide the Government are placing on the two departments and may differ in this respect from what I know happens in the private sector. There is quite a battle sometimes about whose name will be most prominent in the name of the new company, because that indicates that the management of the new company has won the battle and demonstrated that it is the stronger. That is not what this merger or integration is about. The Government hold both departments in equally high regard.
The name reflects better what the new department will actually be doing. Her Majesty's Revenue and Customs will primarily be a revenue raising department and that will be reflected in his name. That does not mean that the Government are not committed to the department's other non-revenue raising functions. Customs' role in securing the frontier is vital to the new department and we firmly believe that the benefits from creating a single department will apply to international trade just as it will to other areas. But primarily revenue raising—and revenue, of course—would include within it duties.
The name of the department will encompass what the department will be doing while maintaining its links with history. So it was that on Thursday 13 May it was announced that my right honourable friend the Chancellor of the Exchequer had chosen this name and that this had been approved by Her Majesty the Queen. It has to be noted, though I do not put it at the forefront of my opposition to the amendment, that any change now in the name would require a further approval by the Queen.
Let me say something about the other ideas that the noble Baroness, Lady Noakes, has expressed about how to put the names together. I hope that I have said enough about the rationale behind why the name was chosen. First, I am not persuaded by the alphabetical argument when there are considerations on the other side—the scale of the two activities and the need clearly to
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distinguish customs from excise. I do not believe that the noble Baroness really put that reason at the forefront of her argument.
As for the historical argument, we have heard already from the erudite and interesting observations made so far that the question of precisely who has the right to claim seniority is not so straightforward. Under their current names, the Inland Revenue has existed since 1849 and HM Customs and Excise since only 1909. On the other hand, the Inland Revenue is a direct descendent of a national government institution which does, as the noble Lord, Lord Brooke of Sutton Mandeville, said, go back to 1694 and the Board of Stamps; whereas Customs can, as the noble Baroness said, trace its lineage further back to the reign of King John.
But again, if one gets even more antiquarian than that, one can find shadowy ancestors of both departments in Anglo-Saxon times. The Income Tax Appeal Commission can trace its descent and in some cases its precise boundaries to the hundreds and wapentakes through which Saxon taxation was administered. A charter of King Athelbald of Mercia has a reference from the 8th century to customs duties. Members of the Committee have made further references. It is very important to the history of both departments but not, I would suggest, ultimately in any sense a clincher as to how the new department should be named.
One point of agreement is that it is wrong to say that the origins of the body to which reference was made, and of which the noble Baroness was ready to show that she was not a member, were related to chasing smugglers. Even in 1203, the non-revenue functions were ancillary to the revenue raising. I am told that the revenue raised in 1203 was £5,000—and huge riches they no doubt were at that time.
A number of noble Lords have referred to the cultural point. As I said on Second Reading, both departments have long and proud histories and we shall not want to lose the best of each culture. There is already a cultural overlap: values centred on integrity, honesty and a focus on helping people to pay the right tax and receive the correct benefits at the right time. There is also a clear determination from both bodies to take robust action against those who seek to avoid their obligations. So there is already a strong shared culture, and we would expect that through time, the incremental approach, having strong leadership, unified communications and the involvement of staff, there will be still greater convergence in the cultures of the two constituent parts of the new department.
The noble Lord, Lord Campbell of Alloway, referred to the practice of negotiation of agreements by way of example, as did other Members of the Committee. It is right to say that both departments currently use a mixture of negotiated agreements and formal proceedings. They have the powers to do so and those powers will be inherited by the new department.
It may well be said that in the past the Inland Revenue has been more ready to negotiate than Customs has been, although the contrary has been

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expressed in the course of this debate. But whatever the historical practice. the new department will need to develop its own policy on this question. I hope that Members of the Committee will agree that ultimately what really matters is how this new department will carry out its functions.
While I am grateful to the noble Baroness for the opportunity to debate this question and to answer the question put to me, I am also grateful for the opportunity to debate the rich heritage of both departments. I hope that she is now satisfied that there is a good, rational basis for the choice of name and that it will provide a sensible banner for the important work the new department will undertake. I hope therefore that she will feel able to withdraw her amendment.
4 p.m
Lord Brooke of Sutton Mandeville: Before my noble friend winds up on her amendments, perhaps I may add a small footnote on what the Attorney-General has said. I find, culturally, that if you examine the ministerial prefaces to government documents, which are frequently written by people other than the people who wrote the report, you find a degree of discrepancy between the ministerial reading of the situation and that of the document published in the Minister's name. I cite as an example the regional assemblies legislation, which was prefaced by both the Prime Minister and the Deputy Prime Minister who referred to directly elected regional assemblies which then never appeared in the Bill. That despite the fact that the two senior Ministers and the Government expressed extreme enthusiasm for them.
Perhaps I may draw attention to the preface by the Chancellor of the Exchequer to the O'Donnell report. There arc references to these titles in the first, third and fifth paragraphs. Asymmetrically, there is no reference to them in the seventh. In the first paragraph, the Chancellor of the Exchequer refers to "HM Customs and Excise and the Inland Revenue". In the third paragraph, he refers to "Customs and the Revenue". In the fifth paragraph, he refers to "Customs and Revenue". He did not have the nerve in the seventh paragraph to go the full distance, which the Bill now goes, and put "Revenue" first. So, like the Cheshire Cat, it simply melted away at the edge of the page.
Lord Barnett: I was delighted to hear the comments of my noble and learned friend the Attorney-General that he had the approval of Her Majesty the Queen for this name change. I do not know whether he gave her the full case as he has done today or how much it would cost to change now. I presume measures have already been taken to use the name currently suggested in the Bill. One might put "Customs" first because of the higher rewards they pay. I have read papers on the Peers' seminar, at which only my noble friend Lord Sheldon and I were present. Understandably, the Attorney-General was unable to be present. He does not have to apologise to me—indeed, I find it astonishing that he finds the time to come here and answer this debate or be here at all.
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I do not understate the importance of our debates and while it is important that the Attorney-General rather than some junior Treasury Minister is here, I am grateful to him, as I am sure are we all. Nevertheless. I find it astonishing that he is here rather than some junior Treasury Minister—although we do not have any in your Lordships' House. We have only one noble friend who replies to all Treasury matters with great aplomb, even though he does not tell us anything.
As I say, the rewards argument could be a good one for the noble Baroness but she did not use it. We were told in the Peers' seminar of 8 February 2005—I did not hear it said then, but I read about it now—which my noble friend and I attended for a short while in the hope that my noble and learned friend might appear. that the rewards that Customs and Excise apparently paid in 2003–04 were £946,300, as compared to one payment of £100 by the Inland Revenue. So far as rewards are concerned, there is a strong case for putting Customs first, although the noble Baroness did not use that argument.
I do not terribly mind which way the names are put. I do not want to waste too much of the time of the Committee, but I think that the noble and learned Lord the Attorney-General told us that the name needed to deal with the test of time, and that it could lead to confusion if we accepted the amendment. I am confused by the whole thing. I am sorry that the noble Baroness has taken up a fair bit of time. As she will know we have only four hours, as we understand that the agreement is that the Sitting will take only four hours, happily. That agreement was made specially so that we could all go and watch Arsenal on television this evening.
I am astonished that the Attorney-General is here at all, but I look forward to hearing him at least tell us what it would cost to accept the noble Baroness's amendments.
Lord Goldsmith: I need to touch briefly on some of those points. I am sorry that I am not a junior Treasury Minister; the former Treasury Minister who has just spoken would plainly prefer to see one in this Committee. The Bill deals with an important issue that relates to a department of mine, which is the creation of the Revenue and Customs Prosecutions Office. That second half of the Bill is my policy and my department; I shall be responsible for it. For those reasons, I am very much personally concerned with the Bill, so I agreed that it made sense for me to deal with the whole Bill rather than troubling another Minister with it. I hope that that will satisfy the noble Lord's curiosity, if nothing else.
I am glad that we held the Peers' seminar on 8 February. Unfortunately, it was double-booked with a seminar concerning an aspect of the Serious Organised Crime and Police Bill that is of some controversy. I was present to deal with that issue, and strode as soon as I could to the other Committee Room to find that the noble Lords, Lord Barnett and Lord Sheldon, had already left. I am sorry about that. I notice the noble Baroness, Lady Noakes, shaking her head about that, so let me say at once that if there is a

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desire for any discussion on the form and terms of the Bill outside the Committee, I shall be extremely happy to arrange it with any Peers who wish to participate.
I have two other short points. I am glad that the noble Lord, Lord Barnett, has returned to the question of rewards, which interested him greatly at Second Reading and he has studied it further. I shall deal with a comment made by the noble Lord, Lord Brooke of Sutton Mandeville. It is not right at all to say that my right honourable friend the Chancellor did not broach the question of the name as it appears in the Bill in the foreword to the O'Donnell review. Consideration of the detail of the Bill has obviously taken place since then. It was his decision that the name be as in the Bill, for the very good reasons that I have sought to outline. I do not at all pray in aid the cost of changing the name, as I made clear.
Baroness Noakes: I thank all Members of the Committee who have taken part in the debate. I have to tell the noble and learned Lord that I was not aware of a Peers' seminar on 8 February. I would have attended or ensured that someone on my team did. Perhaps it was for Peers only from his own Benches. No information was conveyed to me.
Lord Brooke of Alverthorpe: It was for all.
Baroness Noakes: I am sorry. I was not there, and had no knowledge of any such meeting. I do not know what has gone wrong, but I was surprised that no meeting had been arranged by the noble and learned Lord. One is customary, as I am sure that he is aware.
Lord Goldsmith: As I indicated, I do not know why the noble Baroness did not know about it. I understood that details were circulated to all, but I repeat what I said about being very happy to meet her or any other Members of the House who wish to discuss any aspect of the Bill outside the Committee.
4.15 p.m.
Baroness Noakes: I thank the Minister for that. Since we are now into the Grand Committee stage, we might take a view on that after Grand Committee to see whether that is appropriate before Report stage, which we would do in any event.
This has been an interesting debate, partly about the historical background, about which I have learnt even more than I learnt in preparing for these amendments. The intervention of my noble friend Lord Brooke was particularly interesting. His perception of Customs and Excise, probably because he was once responsible for it, is that it is very much better and nicer than the Inland Revenue, when it is clearly the view of the business world that it is the other way around. That will soon be a thing of the past.
One of my reasons for tabling the amendment was to try to tease out what kind of organisation we are trying to create. The noble and learned Lord referred to a strong shared culture. Many outside would find it easier to point to the differences in culture than to the common points
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at which they meet. That is why so many commentators, including the Treasury Select Committee in another place, have focused on this aspect of the different cultures. The noble and learned Lord talked about the need to develop its own policy on how to carry out its functions in the future. That is what concerns the business world and those who will have to deal with the new organisation; what is that new culture? I accept however that in debating an amendment such as this in Grand Committee we will not get to the bottom of that. We may return to some aspects of that as we go through the Bill, because it has considerable importance in the outside world. It is a considerable challenge to the chairman of the new organisation, and to the organisation itself, to bring together these two strong cultures and create something from them. It is also of considerable importance to the outside world, which is why I raised it.
I say to the noble Lord, Lord Barnett, that if he waits around for Amendments Nos. 51 and 52, we will return to rewards. I knew that he would want to do that. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakesmoved Amendment No. 2:
Page 1, line 6, at end insert —
"() There shall be a minimum of five and a maximum of 15 Commissioners.
() Commissioners shall be appointed only after a formal process of selection undertaken in accordance with the procedures for the time being laid down by the Civil Service Commissioners."
The noble Baroness said: This is a probing amendment designed to ascertain how the Government see the new Commissioners for Revenue and Customs Bill operating so far as the appointment of commissioners is concerned. Other amendments will deal with other aspects of the governance of the new organisation, but I will use this amendment to deal with some of the basic points, so that we can deal with the later amendments more efficiently.
The Bill is remarkably vague about how the new organisation is to operate. We are told that it is to be a non-ministerial government department, which I assume is a government department that is not headed by a Minister. I hope that the noble and learned Lord will be able to explain the significance of that in terms of the powers, responsibilities and accountabilities of the people who will make up Revenue and Customs. For example, under Clause 11, the Treasury is able to direct the commissioners. Does that mean that the commissioners are accountable to the Treasury? Is that Treasury Ministers, officials, or both? There is the question of which Treasury Ministers are involved. I hope that the Minister will say something about how that will work in practice and how the organisation will get a coherent sense of direction.
If the Revenue and Customs was being set up as a non-departmental public body, or a public corporation, the enabling legislation would have to contain explicit details about the structure of it and about who is to run it. Amendment No. 2 probes the question of how many commissioners are to be appointed, and why there are

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not limits set down in legislation. The Minister may well say that the existing legislation covering the Inland Revenue and Customs and Excise has no details covering the details sought by this amendment. Of course, the legislation constituting those bodies goes back a long way, as we explored a little in our previous debate. It certainly predates modern thinking on how organisations, whether in the public or the private sectors, should operate in today's more managerial world.
Therefore, Amendment No. 2 seeks an answer to what numbers of commissioners there will be and how they will be selected, because it is inappropriate in today's environment for the Act simply to state that Her Majesty will appoint an unspecified number of commissioners by Letters Patent. An upper and lower limit would be a sensible way to start to define what kind of organisation is being created by the Bill.
The second leg of the amendment refers to the way in which the commissioners are to be selected. The amendment is not intended to be controversial because it simply refers to a formal process of selection. I am sure that some formality of process is necessary prior to Her Majesty issuing Letters Patent. It refers for example to procedures laid down from time to time by Civil Service commissioners which would allow all procedures to change over time and evolve, as they have done, over the years. The purpose of the amendment is to show that there is a proper formal process of selection for those whose appointment may ultimately be formalised by Her Majesty. The steps leading up to that should be more clearly defined. I beg to move.
Lord Goldsmith: This is the first of a number of amendments which address the corporate governance arrangements of HM Revenue and Customs. I understand the reasoning and thoughts behind these amendments. The noble Baroness, Lady Noakes, made clear at Second Reading that she was interested in ensuring that the new department has the right corporate governance arrangements in place. She and the noble Baroness, Lady Wilcox, have experience of corporate governance from their previous roles with the Inland Revenue.
I will first explain the general approach taken by the Bill on corporate governance. HM Revenue and Customs will be a government department, so many of the requirements for its governance are already set out in arrangements that cover all such government departments. For example, there are government accounting responsibilities and other codes that touch on what government departments do and those will apply to the new department. There is therefore no need to overlay the Bill with detailed rules of governance that will often be found in statutes that govern non-departmental public bodies where it is necessary to set those out because there is no general body that applies.
It is right to underline, as the noble Baroness did, that this will be a non-ministerial government department. As the O'Donnell review noted—in paragraph 6.14, I believe—that is to underpin the
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importance of taxpayer confidentiality, maintaining the distance between Ministers and the department itself to which I made reference at Second Reading and to which I know that we will return. I am sure that we will also return to the issue of the wider, more general relationship between Ministers and the department—in relation to Clause 11, for example. If the noble Baroness permits, I will leave my observations on that until we get to the relevant amendments and clauses.
I return to the question of how much detail to set out about the governance arrangements. Given that the requirements on the new department are set by the overall requirements on central government departments, within that framework the detailed proceedings can be matters for the commissioners collectively to determine, as those details will he about their rules and arrangements for the discharge of their statutory responsibility for functions as set out in the Bill.
There is another point: as we have seen, particularly in the area of corporate governance —for example from the Cadbury report up to the current Combined Code on Corporate Governance—that it is a developing and sensitive area where what is best practice may change. So it is an advantage to leave a degree of flexibility in order to be able to adapt to the latest and best practice without being constrained by over-rigorous legislative revision.
Flexibility to develop and implement innovative approaches—which is what the O'Donnell review referred to—indicates the approach that has been taken in the Bill. I want to underline that that does not detract from the commissioners' accountability for their corporate governance arrangements. They will be subject to appropriate parliamentary scrutiny. For example, it is intended that the top-level governance arrangements will be published in the annual and spring reports of the department as part of its good corporate governance practice. The reports will include details of the current commissioners, the membership of the management board and the top-level committees, and details of any changes since the last report. Customs and Excise routinely follow such an approach and that will continue.
That indicates the general approach to corporate governance and what is said in the Bill. If we turn specifically to this amendment, Amendment No. 2 specifies a range of from five to 15 commissioners to be appointed at any one time. There are a number of factors, which will vary over time, that determine what the right number of commissioners will be. I recognise that the amendment appreciates that point by specifying a range.
But the question is whether the Bill ought to be specific on this issue. I do not consider that it needs to be. There will be clarity about the number of commissioners and their top-level governance arrangements, which will be reported to Parliament. But the commissioners will need flexibility to respond to the circumstances at the time—for example, to wider corporate governance issues generally; to the lessons learnt managing the new organisation; and to the skills and resources that are available to the commissioners. I accept that it is likely

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that a number between five and 15 will turn out to be appropriate as the correct number of commissioners in the future. But it is unnecessary to specify that in a statute.
I turn to the second element of the amendment, the procedures for the appointment of commissioners. There are safeguards. Ministers will be consulted on their selection and appointment, which is necessary as part of the process of appointing commissioners by Letters Patent. The consultation will include discussion on any major changes in their number so, to take an extreme example, if there were any risk of the number falling below five, I would anticipate that Ministers would seek assurance from the commissioners that the suggested number reflected the latest view of sound corporate governance practice.
I wish to make two points on the wider issue of the selection and appointment of commissioners. First, as required by Clause 1(5), they must be civil servants and they will act in accordance with civil service codes of conduct. For externally advertised candidates, that includes the full and proper involvement of the Civil Service Commissioners in their selection and appointment, with selection by interview, including independent panel members. One can see that the procedures are incorporated in those circumstances.
There are also instances when an internal candidate, already a civil servant, is selected to be a commissioner. For the predecessor commissioners, that would not require reference to the Civil Service Commissioners, except for the separate and particular arrangements when selecting a permanent secretary. There seems to be no reason for that to change. But I emphasise that, as part of the process of appointing a commissioner by Letters Patent, Ministers would be consulted.
In conclusion. I share the noble Baroness's desire to see that Revenue and Customs has proper corporate governance arrangements in place. But the Bill and existing arrangements outside and off the face of the Bill on the matters covered by the amendment already achieve that end. I hope that those assurances on how this works in practice will persuade the noble Baroness that it is not necessary to press the amendment.
4.30 p.m.
Baroness Noakes: Before I consider what to do with my amendment perhaps the Minister would answer two questions. First, who decides how many commissioners there will be? A linked question to that is: why should there not be any parliamentary limit already placed on that decision? Secondly, the noble and learned Lord said that Ministers would be consulted if there were to be a new appointment. I was not clear on what he was saying about the involvement of Ministers in the appointment. It is very important to ensure that appointments within the Civil Service are free of ministerial involvement. So, what is the nature of the ministerial involvement in the appointment of any commissioners?
Lord Goldsmith: On the first question, as I was seeking to make clear, it would be for the commissioners to consider the number of commissioners needed
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appropriately to run the department. But to do that in consultation with Ministers and subject to the report to Parliament, which would give Parliament the opportunity, as always, to express a view if it was unhappy with how the department was going.
On the extent of the involvement of Ministers in a particular appointment, as I have again indicated in relation to external appointments, there needs to be the full and proper involvement of Civil Service commissioners in the selection and appointment—selection by interview including independent panel members. It follows that the ability and the involvement of Ministers after that process has taken place is necessarily a very limited one. I hope that that reassures the noble Baroness on the process, and that it will produce people of the quality and independence required.
Lord Campbell of Alloway: Perhaps I may ask the noble and learned Lord what the merit is in leaving it to the commissioners to decide how many or who should be a commissioner and so on? It is all very messy and vague. Surely, it is for the Government to decide initially how many commissioners there should be, and there should be some machinery for adapting it to future needs in a very wide fashion. The Government cannot just remove all responsibility for doing anything and say that the commissioners can get on and decide what to do. That is not the right approach.
Lord Goldsmith: The noble Lord asks why we should leave it to the people whose responsibility it is to run the department. That is what the commissioners are there to do. Why should we leave it to them to decide how to run it? With respect to the noble Lord, it seems to me very right and proper to recognise that as the people who have the responsibility for running the department, and in running it as a non-ministerial department. they should be the first to indicate what is necessary in order to run the department well, efficiently and properly. However, as I have said, the Government do not abandon all responsibility for this because Ministers need to be consulted. Appointment by Letters Patent will require consultation with Ministers before those letters can be issued. That seems to me to be a very appropriate combination of government input—in the noble Lord's terms—together with leaving it to the people whose job it is to run the department to determine how best to do so.
What is being proposed is not in any event an amendment which puts a responsibility on government to determine the number of commissioners. it is Parliament putting a straitjacket on what might turn out to be an inappropriate number—inappropriately small or inappropriately large—when one looks at changing circumstances. That ultimately is the critical point. If I may say so with respect, the noble Lord's point does not seem to me to touch on whether it is necessary to state in the Bill what the number of commissioners would be. I hope that the arrangements that I have outlined will provide sufficient reassurance that this department will be run properly and well by

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fully competent, fully qualified and appropriately appointed commissioners. Surely that is what matters Most.
Lord Sheldon: My noble and learned friend will be aware that when civil servants are appointed, there is a certain amount of independence in the method of appointment. Of course, in many departments the Minister will be consulted. That is normal. But when one is dealing with £400 billion of revenue, the involvement of the politicians may be a little less certain in these matters. So should there not be a greater level of independence?
My noble and learned friend mentioned consultation. I was a little uneasy about that word because it looks as though there could be considerable input by Ministers into the appointments process. That could be quite dangerous in situations where substantial sums of money are involved and where there may be a considerable interest by the person becoming involved.
Lord Goldsmith: I have experience of dealing with appointments involving the Civil Service appointments procedure. As my noble friend may well recall from his time as a Minister, it is a very independent process in which, whatever the level of the appointment, Civil Service Commissioners will. following interview, identify the person whom they regard as being the best for the job. The ability of a Minister not to appoint the person who has been put forward is extremely limited. It is certainly not a question of a Minister being able to choose a person for the job. It is an independent process which produces an independent Civil Service, and it is right that that should be so.
I was focusing particularly on the concerns expressed by the noble Baroness and, to some extent, on those expressed by the noble Lord, Lord Campbell of Alloway, about consultation on the number of commissioners—the central point of the first part of the amendment. That requires Letters Patent, and therefore necessarily consultation with Ministers is required before the Letters Patent are issued.
Baroness Noakes: I have found this debate a little unsatisfactory because it seems that the Government have not taken this legislative opportunity to define the central features of the new organisation. Customs and Excise and the Inland Revenue have grown as they have, and I have tabled this and a number of similar amendments in order to tease out how the Government see them going forward.
Basically the Government are saying, "We can do almost anything we like because there won't be any rules written down". For example, no rules will be written down about how people are to be appointed. When an external appointment is made, a Civil Service procedure will be followed, but that will not be the case when an internal appointment is made for a commissioner post. The same rigorous selection process would not be applied other than at Permanent Secretary level, but not all the commissioners will be at Permanent Secretary level if the current practice is followed.
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I was trying to say that we should be setting out features of this new organisation based fundamentally on how it is currently operated so that we can be clear about how it will go forward. I am not clear that it will be enough for the commissioners to decide what their own organisation will be, for them to consult Ministers and then to report that in their annual report. The report is always published at least seven months after the end of the year and therefore, broadly, the parliamentary committee reviews it when almost another year has elapsed. How can that parliamentary committee, which has no powers other than to say, "We don't like it", get involved? The Minister spoke, for example, of the need to remain flexible because corporate governance changes. Yes, indeed it does. However, I do not believe he will find that a single one of my amendments would create inflexibility. I can point him to a number of recent statutes which have created other bodies which have needed to create bodies with sufficient flexibility to be able to cope with anything over a reasonable period of time. I do not believe that by constraining as I suggested I was trying to put a straitjacket around it.
I feel that the Bill has a hole in it; that is, what kind of organisation it is that we are creating? We are saying that we create commissioners and they create their own organisation and somehow, a year and a half after the event, a parliamentary committee might be able to catch up with some of that. I do not believe that that is a satisfactory way, in today's world, for the Government to be creating a major body with major interfaces to the public. I shall withdraw the amendment at this stage because we shall be returning to some of those themes later. However, I record that I find the noble and learned Lord's approach unsatisfactory. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakesmoved Amendment No. 3:
Page 1, line 6, at end insert—
"()The Commissioners shall collectively be referred to as the Board of Revenue and Customs, and one of the Commissioners shall be designated as the chairman of the Board."
The noble Baroness said: As we had an extensive debate on the previous amendment, I will try to take this one at a little more speed. Again, it teases out another aspect of how the organisation is to be run.
The Bill provides merely that there will be commissioners and that they can organise themselves as they like. When one creates an organisation. one should have some sense of how it is to be run. It is relatively clear that both Customs and Excise and the Inland Revenue are organised into boards and they have chairmen. That is perfectly normal for any kind of organisation, whether it is in the public or private sector. Sometimes they are called councils, not boards, but that is the general impression and what we would expect to find for any body being created in any sector.
The Explanatory Notes state that it is customary for one of the commissioners to be designated chairman in the Letters Patent. I am not sure when that first arose, but it now appears to be the practice that one person is designated to be the first among equals to lead the

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organisation. My amendment is therefore designed to reflect that practice. It is difficult to envisage any organisation which does not have a designated leader.
The amendment deals with fundamentals—it does not apply complicatèd, straitjacket corporate governance—providing that there is a chairman and that the commissioners form a recognisable body. This is an opportunity to reflect organisational practice as we find it in the 21st century and has been practised for at least a century if not longer. It is an opportunity to place on the face of the Bill some elements of the organisation so that we do not have to leave it to the commissioners to work everything out for themselves. I beg to move.
Lord Campbell of Alloway: It is almost the same point and I have to support the amendment. I feel that one ought to define the set-up and structure on the face of the Bill. That is a tidy way to do it and, in any event, if matters have to be dealt with in a court of law, which may well arise, any court will want to see the structure and how it is laid out. It is quite wrong—the same point arises—to leave the matter in the air or to the commissioners to sort out. It is the wrong approach.
4.45 p.m.
Lord Goldsmith: The issue raised by this amendment is, in part, the issue we debated a moment ago and also the specific issue of whether it is necessary for the Bill to stipulate both that collectively the commissioners shall be called "the Board of Revenue and Customs" and that one of them be the chairman.
As I said in debating the previous amendment, there are requirements and guidance on corporate governance which flow from the fact that something is a government department. Beyond talking about government accounting issues, I did not indicate what those were. However, they include, for example, the Civil Service code and the Cabinet Office toolkit for boards, which is aimed at maximising the effectiveness of departmental boards. I can add that the Treasury is also reviewing corporate governance in central government departments with a view to producing a code of good practice which provides an overview of the processes and responsibilities within departments. So there will be another source from which the department will find guidance on its operation.
Returning to the two issues raised by the amendment. should the Bill stipulate that the commissioners should be called "the Board of Revenue and Customs"? It is certain that HM Revenue and Customs will have a board of management and I am happy to place that on record. However, this issue illustrates the advantage of not specifying details on the face of the Bill which may be unnecessary and perhaps unhelpful.
Let me explain. The element of the amendment requiring a hoard follows the current arrangements in the Inland Revenue where two or more commissioners acting together are referred to as "a Board of Inland Revenue". Plainly, it is not necessary for the legislation to require the commissioners to be referred to together as "a board". They are not referred to as such in Customs and Excise legislation and it seems unnecessary to
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perpetuate what is in fact a Victorian expression in relation to Inland Revenue which comes from the styling in the Inland Revenue Regulation Act 1890.
Let me take this one stage further. The amendment as it stands would identify the board as consisting solely of commissioners. That in itself may be unhelpful. The appointment of non-executives is a key part of modern corporate governance practices and it would therefore be a restriction of the way in which the department could be organised to say that the board is only and can only be commissioners. That may be a disadvantage in getting the right non-executives in post.
The noble Baroness will recall that she was a non-executive member not of the Board of the Inland Revenue but of the departmental board. For some people, being not of the board itself but of a different and apparently inferior board may be a disincentive. So putting this provision on the face of the Bill may be counterproductive and unhelpful.
As to how this will work in practice, the chairman designate of HM Revenue and Customs is yet to finalise the arrangements, but the intention is for the board of management's initial membership to be drawn from a combination of all the commissioners, plus all of the non-executive directors and some, but by no means all, of the executive directors. That would meet modern corporate governance practice. The precise composition will no doubt change over time with the needs of the organisation. The balance of executives and non-executives is a much discussed issue.
So, there is no advantage and much potential disadvantage in specifying the first element of the amendment in the Bill; so too in relation to the other element. Why does the Bill need to specify that one person should be designated the chairman? I am sure that the noble Baroness is right in saying that in all organisations there needs to be someone who takes the lead, but whether that person has the title of chairman, or some other title, will no doubt depend on the circumstances.
There will need to be a Permanent Secretary appointed to head the department, because this will be a central government department. That is not going to change; that was the basis of the appointment of David Varney. His recruitment was on the basis that as Permanent Secretary he would also be chairman. As covered in the Explanatory Notes to Clause 1, the intention is to continue the existing practice of the Permanent Secretary being designated as chairman in the appointments Letters Patent. It is going to happen; there will be someone in that position, but it would not be helpful to insist in the Bill that someone should have that specific title. I hope that that is more reassuring than the previous explanations were found to be relation to previous amendments.
Baroness Noakes: I thank the Minister for that, but he has neatly explained in his answer why I felt it necessary to table the amendment. I completely understand that under the Inland Revenue there is the statutory board, and the management board beneath. That is what happens across much of Whitehall. The

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point of tabling the amendment was in part to bring out the fact that we do not know what kind of organisation will be created by this Bill.
The Minister referred to the likely intention, which would follow practice both in Inland Revenue and Customs and Excise, that the board will comprise commissioners, some executives, and some non-executives. but the Bill does not state that. It is left entirely to the commissioners to work out their own organisation. I put it to the Minister that the Government would not create any body other than a government department in this way. We can look at any statute created recently, such as one that I worked on at the end of the last Session, the Pensions Bill, which created the Pensions Regulator and the new Pension Protection Fund. In each of those cases, the way in which the organisation was to be governed was set out, including executive appointments, non-executive appointments. and the fact that a person was to be called chairman. This is normal in other legislation.
The only point at which we find that the Government do not apply this perfectly sensible approach to specifying what kind of organisation we are creating, is when we get to this organisation, which is a non-ministerial government department. We are allowed to have a complete mystery about how the organisation is to work in practice. It is to be left to people, who are appointed in a way that is not entirely clear, to work out among themselves how they are to organise, and which people to put on their management board, leaving everything else to be worked out away from any form of public scrutiny. It is curious that we have a completely different rule for this important government department than for any other body- that the Government have created in the past seven, going on eight years. I find that very strange.
For today, I am happy to withdraw the amendment, as that is the custom in Grand Committee. Indeed, the amendment is not perfect, as the noble and learned Lord will be aware. However, it has highlighted that we have a Bill that is completely lacking in clarity about how Revenue and Customs will operate in practice. While that has been the case in the past, we are missing an opportunity to lay down a structure that can then be looked at from the outside and explained in a rational way. I beg leave to withdraw the amendment.
Baroness Noakesmoved Amendment No. 4:
Page 1, line 6, at end insert—
"(1A) The Commissioners may appoint one or more persons to be non-executive directors provided that the number of non-executive directors may not exceed the number of Commissioners.
(1B) Non-executive directors appointed under subsection (1A) shall be appointed on terms and conditions to be set by the Commissioners, but shall not be regarded as staff for the purposes of section 2."
The noble Baroness said: Committee Members will be pleased to know that this is the last of the governance amendments for a while, although there will be some a little later. The issues that arise here
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relate to non-executive directors and build on matters that we have just been talking about, and I do not want to repeat those arguments. The amendment deals with how non-executive directors can be appointed and states that they can never be in the majority. The amendment also deals with the status of non-executive directors.
This is another probing amendment. On its own it does not fit within the Bill because it requires a board of a certain type in order to work. But I want to use it to debate the issues that arise in relation to non-executive directors, which are another aspect of the lack of clarity that has not been dealt with by the Bill.
As the noble and learned Lord said a moment ago and as I explained at Second Reading, my noble friend Lady Wilcox and I were appointed as non-executive members of the management board of the Inland Revenue back in 1992. I believe that those were the first such appointments to management boards across Whitehall and it is fair to say that there was a considerable lack of clarity about what we were, what we were supposed to do, what our status was and what our roles and responsibilities were.
For example—this will explain my personal interest in tabling the amendment—I had a vigorous dispute with a Treasury nitpicker, who is now in a yet more elevated post in Whitehall, over my legal status as a non-executive member of the Inland Revenue management board. The dispute eventually cost me a lot of money. The details need not trouble this Committee, but the plain fact is that there was no clarity about my status as a non-executive member of the Inland Revenue and the individual chose to exploit that. That is why I have a personal interest—although not a continuing personal interest—in putting something in this Bill to place non-executives on a proper basis.
That is particularly the rationale for the proposed new subsection (1B) in Amendment No. 4, which sets out that non-executive members are not staff for the purposes of Clause 2, and therefore they are not officers of Revenue and Customs. It also provides that their terms and conditions are to be set out by the commissioners. I do not know what the current experience is in Whitehall, but in the early days there was a considerable lack of clarity about the matter. We should be clear about the status of non-executives who are invited into government departments to assist in some way.
As the noble and learned Lord said and as is clear from the Explanatory Notes, it is the intention at present to use non-executives, which is why Clause 14 allows the commissioners to draft them in. Proposed new subsection (1A) of Amendment No. 4 would legislate for non-executives clearly in the Bill, as opposed to leaving their inclusion to be inferred from the more permissive conditions of Clause 14.
As I said earlier, the amendment allows for the number of non-executives not to exceed the number of commissioners. That is not in accordance with private sector corporate governance. However, for the purposes of debate, it is necessary to identify that non-executives

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must be in a certain proportion and I have assumed that it would always be right for a government department never to have a majority, although I have to say that that is not clear from the Bill either. Clause 14 could be used in quite another way.
I hope that the noble and learned Lord will see that my purpose in tabling Amendment No. 4 is to get him to set out how the Government see non-executives fitting into the Revenue and Customs organisation. I hope that he will explain why it is appropriate for the Bill to be silent on this category of person. I beg to move.
5 p.m.
Lord Campbell of Alloway: There appears to be agreement, but not quite for the same reason. I support my noble friend. We are setting up a new public body within the meaning of Article 8 of the European Convention on Human Rights. We have commissioners, but if they are to have power under some new structure to appoint non-executives, surely that should be stated in the Bill. We do not know whether the new structure will operate as the old structure did. So when you are making a new structure, surely a delegated power of appointment should be on the face of the Bill.
The other point is that the commissioners can set the conditions. That goes without saying. But it does not go without saying that they should not be regarded as staff. If that is the position, it should be stated in the Bill. We have a new structure and we do not know whether it is going to assimilate the old structure. We do not know enough about it. Frankly, the whole thing warrants clarification.
Lord Goldsmith: I seem to have difficulty in getting the point across, so perhaps I may reiterate it. This body will be a government department. Existing codes, guidance and requirements will apply to it. It is not the same as a private sector body; it is not the same as an agency; and it is not the same as some public body which is being established outside government departments.
The legislative approach which has been adopted is the same as that in relation to the predecessor department in Customs; for example, there is no statutory board in relation to Customs. Why is it necessary to say on the face of the Bill—
Lord Campbell of Alloway: I thank the noble and learned Lord for giving way. We are drifting into a misunderstanding. I am saying that it is a public body within the meaning of an article. I am not referring to it as being an ordinary public body outside that meaning. That is all.
Lord Goldsmith: Absolutely. It is not in the same category as other non-governmental public bodies or private sector bodies which are established. The current arrangements for the Inland Revenue and for Customs and Excise are that both engage non-executive directors. In neither case, so far as I am aware, is there any specific legislative provision for
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that to take place. There is no need for there to be specific legislative provision to appoint non-executive directors. I note that the noble Baroness's amendment is not a requirement to appoint them but simply purports to give a power to appoint—a power which it is not necessary to include because it is not necessary to have a specific legislative power for that to be done. It is therefore not necessary to have such a specific legislative power in relation to the precedent of departments and it is not necessary to have a specific legislative power here.
Secondly, it was stated that non-executive directors are not employees. In line with the recommended practice for central government departments, the non-executive directors of the predecessor departments are not employees. The same arrangements will follow forward into Revenue and Customs, and so I see no need for either of the parts of the amendment that the noble Baroness has moved.
I go further than that. She identified that the amendment seeks to put a limit on the numbers of non-executive directors, which does not correspond to modern corporate governance practice in the private sector. Increasingly in modern private sector corporate governance, the proposal is that at least half of a board should be non-executive members. The noble Baroness says that she proposes a limit for the purposes of debate. Why should that limit be right? Even if it is right today—which it might be—should it be enshrined for all time? To my mind, that is a fatal objection to the amendment.
I want to return to the point that I made at the outset—that is, this is a government department. In a private sector body there may be votes on the management board, but one does not see that in a central government department. Equally, in a central government department the head of the department, the Permanent Secretary. is necessarily not a non-executive. He is a civil servant. That does not correspond to modern practice in the private sector.
So, while I have sought to recognise the importance of good corporate governance arrangements throughout the debate on this and other amendments, the simple application of private sector models to a government department does not necessarily work. It is better to accept the requirements set out for government departments, including those that will be set out in the code for corporate governance arrangements for government departments, which the Treasury is working on at the moment.
Lord Brooke of Alverthorpe: I have some sympathy with the views that have been put forward by the noble Baroness. I recall the changes that came in in the old Inland Revenue—I go back to the Revenue. It is a government department. but it decided to introduce non-executive directors. It introduced them because it saw the world around it changing, particularly in the private sector, and it needed to make some amendments. It also had difficulties with its glass ceiling and gender balance. There was a view that that was the opportunity to get

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some women seen around the Board of Inland Revenue, which had hitherto been comprised solely of males. But we have moved on.
Again, we come to the document—I do not have a copy of it, but one has kindly been loaned to me—that sets out the governance. It states that the concept of sound corporate governance practice has developed considerably over recent years. That indicates the flexibility that HMRC requires to be able to adapt to new requirements without the need to amend legislation. It goes on to say that details on HMRC's governance arrangements will be published and available for parliamentary scrutiny. When will they be published and will it be done during the course of the examination of the Bill?
This is an unclear area. This is a government department and will continue to be one, but it appears that it is a government department that will have non-executive directors. I do not believe that this can be left so that when we are dealing with the legislation we have no idea of the terms and conditions that will govern the way in which they will work.
5.15 p.m.
Lord Goldsmith: I hope to make it clear to my noble friend that there are present arrangements in relation to both constituent bodies in which non-executive directors are involved. The terms and conditions on which they work are clear. It is anticipated that those arrangements will continue, but it is important that arrangements should be capable of evolving over time.
I hope that my noble friend will agree that it is not necessary to say on the face of the Bill that there may be non-executive directors, any more that it was necessary previously to say that there may be non-executive directors in relation to the Inland Revenue. Had it been a requirement of law that that should be on the face of the Bill, the Inland Revenue would not have had the benefit of the involvement of the noble Baronesses, Lady Noakes and Lady Wilcox, without specific legislative change.
Lord Brooke of Alverthorpe: I am not necessarily pressing that this should be included in the Bill. I am saying that as we deal with the legislation, we shall need greater clarity in this area. If I gave the impression that I referred to terms and conditions alone, I was not doing so; I referred, too, to roles and responsibilities, which have not been clearly defined hitherto, as far as I could ascertain. They need to be given greater clarity, even though they may not necessarily be included in the Bill. I hope that we can get a fairly early sight of that rather than have to wait a long time for it.
Lord Goldsmith: I want to be as helpful as I can to my noble friend and to other Members of the Committee. On creation, details will be published of top level governance, including on the Internet site. Any changes thereafter will be published the same way and there will be reports to Parliament. In the mean time, I shall see what further detail I can provide by way of satisfying noble Lords' concerns as to whether
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the terms and appointments of non-executive directors and others will be clear to them and therefore to others. The best way in which to do that would be for me to set down in a letter what I can say in that regard. which I shall send to all Members of the Committee who participate in the debate.
I hope that the Committee will feel more reassured that the need for clarity in governance arrangements is absolutely understood, and the real debate has been not about that and the importance of such arrangements but about how much needs to be included in the Bill.
Lord Brooke of Alverthorpe: I am grateful for the assurances that the Minister has given me. I said that I was not pressing hard for the matter to be included in the Bill—and, after what the Minister has said, I feel much more comfortable with the response.
Baroness Noakes: I thank the noble Lord. Lord Brooke of Alverthorpe, for taking part in the debate. To give him a little background, it was not the commissioners of the Inland Revenue who thought that it was about time that they should move forward. I believe the then Paymaster General decided that somebody was needed to crawl over the figures—which was why I was one of the first appointments. Then, opportunistically, it was claimed that there was a gender balance problem, which was why the first two appointments were my noble friend Lady Wilcox and myself. We were constantly referred to as the "two ladies", which we hated.
I shall deal with a couple of points of detail then move on to the overall theme. One point of detail was whether a balance between executives and non-executives should be written into the Bill. I believe that the Minister said that he would regard having a balance written in as a fatal objection: if it is a fatal objection to this amendment, it is a fatal objection to a very large amount of legislation that his Government have passed in the past seven years. Provisions along those lines were included in the Bill creating foundation hospitals; I could refer to the Pensions Regulator and trawl through a whole lot more, if Members of the Committee wanted me to.
Lord Goldsmith: The noble Baroness will recall that I said, "in this Bill".
Baroness Noakes: It does not create an inflexibility over time to define a balance. It is interesting that the Minister resists any form of specificity.
On another point of detail, the Minister said that it is clear that the people referred to are not employees, but it was not clear when I had the altercation with the Treasury civil servant. That was precisely the nature of the altercation—whether I was an employee of the Inland Revenue. It was precisely the lack of clarity at the time that led to a loss of money in circumstances that I do not need to explain to the Committee, and it was that lack of clarity that led me to propose the amendment. I believe that it is on the matter of that lack of clarity that the noble Lord. Lord Brooke of Alverthorpe, has voiced his support.

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At the end of the day, I believe that the Government's position is that this is just another government department, government departments are our playthings and we decide what they do and do not do over time. If the Treasury decides to issue a code, government departments will have to comply with it; until then, it is something of a free for all, unless Parliament catches up with them a couple of years after they have done something.
I do not believe that that is a satisfactory way to go forward. The Bill gives us a good opportunity to lay down some markers for the kind of organisation that Parliament expects to see. I am sure that we shall not be able to pursue this much today, but I will want to reflect very carefully on the Government's approach between now and Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Clause 2 [Officers of Revenue and Customs]:
[Amendments Nos. 5 to 11 not moved.]
Clause 2 agreed to.
Clause 3 [Declaration of confidentiality]:
[Amendment No. 12 not moved.]
Lord Sheldonmoved Amendment No. 13:
Page 2, line 18, leave out "make a declaration" and insert "take an oath"
The noble Lord said: There are two main considerations in the merger of the Inland Revenue and Customs and Excise. We are seeing very big changes in procedure, but when you bring these two very large departments together there will obviously be very great changes in the way they operate. We understand that with £400 billion it is a major undertaking. We have seen by the comments by my noble and learned friend and others that this merger is slowing down. When the debate took place in the House of Commons it looked as though it would go much faster than it is. We are seeing that the prosecution service will be the main mover in keeping to the schedule to save the 3,200 staff which was envisaged at the time.
The most important aspect is the standard of honesty that we have to try to maintain. The great advantages that we had in the last century came with the NorthcoteTrevelyan reforms of 150 years ago. We gained enormously from that. The level of corruption throughout the whole of our administration and the Civil Service has been much less than in comparable countries. It is the tradition that has been so valuable—
The Deputy Chairman of Committees (Baroness Hooper): There is a Division in the Chamber. I suggest we stop and resume after 10 minutes.
[The Sitting was suspendeclfor a Division in the House from 5.17 to 5.27 p.m.]
Lord Sheldon: As I was saying before the Division, this important aspect of the Bill needs to maintain the
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standards of honesty that we have had the enormous advantage of retaining over the years. It came from the Northcote-Trevelyan report, which produced the kind of Civil Service that we have come to expect. When we have tradition in such matters, it is easier to retain it so, fortunately, we have not had the disadvantage of having to undergo the dangers of corruption that we see in so many other countries.
The best way to retain standards is to keep things much the same. If you bring about major changes, you change the structure and the opportunities for people to do things that they otherwise not would do. There could be a decline in standards. Because of that, I feel that this is not a time to replace the oath. It has been one of the great standards that we have had, and the dangers of moving away from it are clear—to me, at any rate.
Those dangers are also clear to a very important person who had responsibility for these matters, Jim Callaghan—the noble Lord, Lord Callaghan. He sent me a letter on 10 February that referred to my speech at Second Reading. I now have the privilege of reading that letter out. It states:
"Dear Bob,
Amalgamation of the Revenue in Customs & Excise
I was of course very interested to read the HMRC debate. especially so when you made the point about the need to keep the Revenue as a statutory duty. I highly agree with what you say and hope you will convince the Attorney.
To give you an example, I have never forgotten the importance attached to the occasion when I was required to take the Revenue Oath, even though it is seventy-five years ago when it happened. I was seventeen years old at the time, in 1929. and just out of school, having passed the Civil Service entrance examination and been appointed to Maidstone Tax Office. When I had been there for only a week or two, Norman Sparks, the Senior Clerical Officer, told me what I had to do and then escorted me personally to the office of the Commissioner for Oaths. The Commissioner was a man named William Day, a huge man with a large beard, who sat me in front of his desk whilst he explained the importance of what I was undertaking, and I then took the Oath in the presence of the SCO.
As you will realise from what I am saying, it had a great effect on the young impressionable mind of a seventeen year old. Perhaps the Revenue Oath is even more important nowadays, when many young people seem ready to enter into their obligations without too much thought, so I hope you will continue to insist on its value, and that you are successful.
Trust you are keeping well, and with kind regards, Yours ever, Jim Callaghan.
PS If it is of any help you can quote my experience—and anyway it will show people I'm still aliver!!"
That is a very important recommendation for this amendment, which I have the privilege to move.
5.30 p.m.
As I said, by international standards we have this enormous advantage over other countries, and it is when these major changes are brought about that this kind of thing can occur. If things are left much the same, the same tradition of high standards of honesty is more likely to prevail. When new systems are brought in, and with an amount of £400 billion, it will

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always be possible for a number of things to go wrong. Quite rightly the noble Lord, Lord Callaghan, saw that, as indeed I do. I beg to move.
Lord Campbell of Alloway: I was going to support this amendment in any event but, of course, following what was said by the noble Lord, Lord Sheldon, at col. 599 of the report of Second Reading, I wholly agree that one does not want to downgrade the system.
The Earl of Northesk: I, too, support the amendment. Like my noble friend Lord Brooke of Sutton Mandeville, I should perhaps begin by apologising to the Committee that this is my first intervention on the Bill. I should have preferred to give some indication of the nature of my concerns at Second Reading but, in the event, that was not possible. With that in mind, I hope that in due course the Committee might allow me a modicum of leeway in explaining the context of some of my later amendments.
I should also say that I am only too well aware of the collective experience and expertise of the Committee in Revenue and Customs matters. For me, given my relative lack of experience, the moving of the amendment by someone as distinguished as the noble Lord, Lord Sheldon, argues strongly in its favour.
I also view with approbation the Government's acquiescence to the arguments of my honourable friends and others during scrutiny of the Bill in another place. The result was, in fact, the insertion of this clause on Report. It is wholly appropriate that any individual appointed as a commissioner or an officer of Revenue and Customs should be subject to a duty of confidentiality and that that duty should be subject to an appropriate form of declaration. I am sure that that is common ground among us all. As the Paymaster General put it at Second Reading in another place:
"It is vital for continuing compliance rates that taxpayers provide information to the Revenue departments. The bedrock of that process is the knowledge that their confidentiality is protected".—[Official Report, Commons, 8/12/04; col. 1177.]
That being so, the contribution that the maintenance of a culture of confidentiality within the Revenue can make towards closing the tax gap—after all, that is one of the Government's stated purposes in seeking the integration—should not be underestimated. The proposition for the taking of an oath—it is but a small step further along the road that the Government have already embarked on attaches due gravity and solemnity to the importance of the issue.
That said, my principal motive for supporting the amendment stems from a slightly different perspective. I believe it is just as important that the self-same gravity and solemnity provided for by the amendment be attached to the principle of privacy rights emanating from Article 8 of the ECHR. As I said, I support the amendment.
Lord Barnett: I would normally support my noble friend in whatever he said, but on this occasion I am only too delighted to do so, especially as he referred to the remarkable letter that he received from my noble
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friend Lord Callaghan. I would want to support my noble friend Lord Callaghan anyway because he was kind enough to appoint me to his Cabinet. I am not sure that "kind" is the right word because I was Chief Secretary for five years in that government, but I was very grateful to him then and I am now. I am sure that every Member of this Committee will want to wish him well for many more years in good health.
I am pleased to support my noble friend Lord Sheldon—and my noble friend Lord Callaghan—in the point that he made. I hope that my noble and learned friend the Attorney-General will throw away his brief, say how much he agrees with what my noble friend said and simply support the amendment. It is a simple thing to do and we could all then move on to the next amendment, because I cannot imagine that my noble and learned friend would want to resist the type of support given to this amendment. I briefly and strongly support the amendment and hope that my noble and learned friend will do so too.
Baroness Noakes: We support the amendment and I join in the good wishes sent to the noble Lord, Lord Callaghan. We certainly wish him well for the future and would like him back with us to join in our proceedings.
When the Bill was first published, there was to be no declaration. We were told that it was to be a matter of employment contract between individual members of the staff of Revenue and Customs and that organisation. It was only in response to strong representations by my honourable friends in Standing Committee in another place, coupled with representations made from outside, that the Government wisely took the decision to step back from simply letting it be a matter of a term in an employment contract.
What people hoped would appear was a reinstatement of the oath, but when the government amendment appeared, it came back as a declaration of confidentiality. I know that my honourable friends in another place regretted that the Government had not gone so far as to keep the oath, which was regarded as an important part of the relationship of the individual officer and his duties of confidentiality towards the taxpaying public. In another place, half a loaf is always better than none when there is no chance of overturning a large government majority, so there was no outright opposition at that stage because clearly progress had been made. However, I speak for my honourable friends in saying that they would regard the amendment moved by the noble Lord, Lord Sheldon, as infinitely preferable to what we have in Clause 3.
Lord Goldsmith: The noble Lord, Lord Barnett, as ever, is seductive in his invitations to all Members of the Committee. I hope that I made it clear at Second Reading how much I agree with my noble friend Lord Sheldon about the importance of maintaining standards of honesty, and in particular about the importance of maintaining a strong obligation of confidentiality in relation to taxpayers' affairs. In witness of that, the Bill contains important provisions

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imposing the obligation of confidentiality subject to certain exceptions, which we will no doubt come to explore a little later in Committee, and imposing the strong criminal sanction for unauthorised disclosure. We went further in response to what was said in another place in recognising the symbolic quality of the witness declaration and have provided for that in Clause 3. Up to that point, I agree entirely with the noble Lord and indeed with other noble Lords who have spoken.
I also agree—how could I not?—with the importance attached by my noble friend Lord Callaghan to the impression that making a formal statement has, as he says, on an impressionable young 17 year-old and will have on others. I want to associate myself with the good wishes sent to my noble friend and also to record the fact, as has been recorded in other places, that he recently passed a milestone in becoming the oldest surviving English Prime Minister. In any event, I send many congratulations and all our very best wishes to him.
But here I part company with my noble friend Lord Callaghan for one simple reason: although what happens in the Inland Revenue is referred to as an oath, it is not an oath at all. It may well have been one when my noble friend first joined the Maidstone tax office in 1929, but it has not been an oath since, we think, the 1950s. I shall find out the date and let Members of the Committee know what it is on a subsequent occasion.
The position in relation to the Inland Revenue is that Section 6(4) of the Taxes Management Act 1970 provides that any person appointed an inspector or collector, or appointed by the board to serve in any other capacity, is obliged to make a declaration in a statutory form. The form is set out in the Act. It provides:
"I, A.B., do solemnly declare that I will not disclose any information received by me in the execution of the duties which may from time to time be assigned to me by the Board of Inland Revenue except for the purposes of my duties or to the Board of Inland Revenue or in accordance with their instructions, or for the purposes of any offence relating to inland revenue, or in such cases as may be required by law".
In other words, it is a solemn declaration and not an oath at all.
So far as concerns Customs it is slightly less formal, but only slightly. All those who come to Customs and Excise as civil servants have to sign an employment document which specifically identifies that, as civil servants, they owe a duty of confidentiality to the Crown. There is also specific reference to the need to protect information which is held in confidence and other matters. What was inserted into Clause 3 of this Bill was a requirement for a solemn declaration.
Lord Sheldon: "Solemn" does not appear.
Lord Goldsmith: What else can it be? According to Clause 3, every person appointed under this Act as a commissioner,
"shall make a declaration acknowledging his obligation of confidentiality under section 18".
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Plainly that is a solemn declaration. I have no doubt that those who will be operating the system will want to make sure that they drive home to those joining the service, in the same way as it was impressed on my noble friend Lord Callaghan, what their obligations are by reminding them of that—by making the signing of the declaration an event which is memorable. Keeping the history and the tradition of this is precisely what Clause 3 does.
It is interesting that "oath" has remained when in fact it is not an oath at all. It is the substance of the making of a declaration, acknowledging obligations which are in any event imposed, but recognising the symbolic value of that act. Continuing that obligation to make a declaration is precisely what Clause 3 does.
Therefore, I hope that my noble friend will see that what has been done meets the concern that he has perfectly properly and rightly expressed about the need to emphasise the duty of confidentiality, which we want to continue in the new organisation as it was in the constituent bodies.
5.45 p.m.
Lord Campbell of Alloway: Is this declaration for people who are either agnostics or atheists, who are unable to take an oath and therefore make a declaration?
Lord Goldsmith: I cannot answer that question. All I can say is that that is what appears in part III of Schedule 1 to the Taxes Management Act 1970, which sets out the form in which a declaration is required for those who join the Inland Revenue.
Lord Newby: Is the declaration to be a separate document? I was racking my brains while the discussion was going on earlier about what I signed when I joined Customs and Excise. The reason why I could not remember it with the clarity of the noble Lord, Lord Callaghan, was that it was not the same kind of document at all; it was just an employment contract. I subsequently signed the Official Secrets Act.
Will all officers of the new merged department sign a separate document analogous to the document signed in the past by officials of the Inland Revenue, or is it the Government's intention that it should be part of the broader document that they sign? I believe that it is the general view of this Committee that a separate document brings with it a solemnity which simply signing a broader document covering all kinds of matters does not.
Lord Brooke of Alverthorpe: Much of the revenue and customs work is now outsourced, where confidential information is handled by big international IT companies—previously EDS in the Revenue and now Capgemini. What terms and conditions in regard to that are applied to the employees of those companies? Is a declaration required of them? I should imagine that the

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same terms would apply across the board, whether the people have direct appointments within Customs or the Inland Revenue or are in the outsourced companies.
Lord Goldsmith: I shall deal first with the point made by the noble Lord, Lord Newby. He is right that the position in Customs and Excise is different and has been different. The acceptance and confirmation of the obligation of confidentiality has come by way of signing the terms and conditions of employment which have referred specifically to that obligation. I outlined that a little earlier.
As for the declaration to be required as a result of Clause 3, the clause makes it clear that the form will be a matter for the commissioners to correct. However, I can go this far: it is plain that it needs to be a formal acknowledgement, and something recognised as such. Therefore it seems likely that it will need to be something in a separate document, so as to make that clear. Probably the detail of the text will need to be developed in conjunction with the terms and conditions of employment, so it is probably right not to specify it in the Bill. However, once the terms are decided. I will be happy to ensure that a copy is placed in the Library.
The substantial point is that, for those subject to the obligation, it will be a formal declaration—and I would go further and say that it will necessarily be a solemn declaration of the responsibility that they are undertaking. That is the point of making it a specific obligation under the Bill. I am sure that it will be given the necessary solemnity by those in management positions.
With regard to the question raised by the noble Lord, Lord Brooke of Alverthorpe, the new declaration, as the clause makes clear, applies only to officers, not to contractors or to those not appointed as commissioners or officers of Revenue and Customs. However, there will be other reasons why those people will be bound by the obligations of confidentiality so that statutory duties and criminal sanctions imposed under the Bill will in appropriate cases apply to them too. I am told that all with access to customer data will have confidentiality requirements imposed on them by their contracts.
It is right that those who are officers should be subject to this specific and formal requirement. Others who may have access to information will still be bound strongly by the obligation not to disclose it—which will be enforceable by criminal sanction—but not by having this form of declaration applied to them.
Baroness Noakes: I can say to the noble Lord, Lord Brooke, that we have later amendments designed to explore much the same concerns that he raised in relation to those involved in the Capgemini and Fujitsu projects in Customs and Excise.
The Bill is predicated on grandfathering all the existing employees, which will include the Inland Revenue ones who have made a declaration and the Customs and Excise ones who have signed a contract of employment. How is the Minister sure that there is equivalence between the two organisations in terms of the
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commitment to be made? We have new people making a declaration of confidentiality and Inland Revenue individuals who have made such a declaration, but existing Customs and Excise people who have signed a contract of employment. The grandfathering approach in Clause 3 seems valid only if everyone has signed a declaration already, not simply some people having signed a contract of employment. Perhaps we should revisit the issue.
Lord Goldsmith: I respectfully disagree. I do not think that anyone suggests that the present standards of honesty and integrity, including the maintenance of confidence within Customs and Excise, are any less than in the Inland Revenue. I am not aware of any suggestion that we do not trust the existing officers of Customs and Excise to obey those obligations of confidentiality. They accepted those obligations as a matter of law and contract in a somewhat different way from the formal declaration made by the Inland Revenue, but those same very high standards apply. That is why it seems entirely appropriate to accept the continuation of the declaration practice in relation to new employees, but to accept that those who have previously been within Customs and Excise already obey and understand those standards of confidentiality.
Lord Sheldon: I am very pleased to hear the kind tributes paid to my very good friend the noble Lord, Lord Callaghan. It is valuable that his views have influenced some of the statements made during the debate.
I am a bit uneasy about the terms to be decided. I hope that a solemn declaration will perhaps be witnessed as well. If my noble and learned friend could add "witnessed" to "solemn declaration", it might go some way to meet some of the strong feelings.
The matter is important. There have been obligations on all the Revenue departments for many centuries, but the danger comes when you make such changes. When you do so, some of the standards can be diluted, so it is important that we look at the terms and make sure that they are as strong as we can make them.
Lord Goldsmith: I take the liberty of intervening simply to confirm what my noble friend would like confirmed. The declaration will be witnessed.
Lord Sheldon: I am grateful to my noble and learned friend for that assurance. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Northeskmoved Amendment No. 14:
Page 2, line 22, after "appointment" insert "and, in any event, within one month"
The noble Earl said: My difficulty here is that I discern a slight lacuna in the drafting of the clause. I have no doubt that the phrase,
"as soon as is reasonably practicable",

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is in a standard legislative form. However, it begs the question of what period of time the Government would adjudge to be consistent with it. Did they envisage a fortnight, a month, six months or a year?
With no specific indication in the Bill, and given the importance of taxpayer confidentiality, there is something to be said for requiring any appointee to make the necessary declaration within an appropriate timescale. At the heart of my assumption is that an appointee who is hesitant about committing to the duty of confidentiality renders himself potentially unfit for appointment, the more so if a failure to make such a commitment can be spun out ad infinitum.
To address that, the amendment—I assure the noble and learned Lord the Attorney-General that it is probing—advances the proposition that the requisite declaration should be made within a month. After all, the essential point here is that, in order to sustain taxpayer trust, the regime of confidentiality needs to be—and be seen to be—adequately robust. I beg to move.
Lord Goldsmith: I shall resist the amendment, and shall explain why. I assure the noble Earl that the obligation of confidentiality starts immediately. The statutory obligation of confidentiality in Clause 18, and the criminal sanction which applies to its breach in Clause 19, will apply from the first moment. It is not necessary to worry about whether those obligations are there; they are.
Equally, I assure the noble Earl that the phrase,
"as soon as is reasonably practicable"—
he rightly says that it is used in statutes from time to time—is not an open-ended statement at all. It does not mean "whenever you feel like it", but at the earliest moment that is reasonably practicable. It does not mean the first feasible moment—that might be "as soon as is practicable"—but as soon as is reasonably practicable to take account of the possibility that there may be reasons why the declaration cannot be signed at that moment.
The likelihood is that most staff will make the declaration within the first few days of their appointment. If not, it is extremely likely that the vast majority of them would do so very shortly thereafter. Save in unusual cases, it is unlikely that anyone would fail to do so within a month. It must be done within such time as is reasonably practicable, and there could be circumstances in which it is not reasonably practicable to do it within a month. As a simple example, someone might be appointed and then fall ill. They may be unable to come into work for a number of weeks. It would not be reasonably practicable during that period to make that person sign the declaration. If we had a strict cut-off time, however, that person would then be in breach of the statutory obligation to do it within one month.
I agree with the noble Earl that it is important to make sure that the matter be treated as an obligation to be dealt with at a very early stage. That is the effect of the obligation to do so as soon as reasonably
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practicable. I respectfully counsel against trying to put on a time limit that could be artificial and might, in exceptional cases, cause a problem. I invite him not to press the amendment.
Baroness Noakes: At what point does this run? Is a person appointed when a letter is sent saying, "You will be employed", or is it from the date specified—"You will be employed from 1 March 2005"? There could be a difference about whether it would be reasonable to put a time limit on it, whichever way you went. I mention that because, when a person commences employment, they will sign a contract of employment. There should be no reason why not. There should be every expectation that a statutory declaration is signed at that point.
There should not be any case in which someone who is appointed does not sign the declaration. Leaving a gap where there could be people who have not signed declarations is unhelpful. I am teasing out at what point this first arises and whether leaving this so open-ended as "reasonably practical" creates a practical gap that needs to be dealt with.
6 p.m.
Lord Campbell of Alloway: That clearly arises in relation to the next amendment.
Baroness Noakes: Yes, indeed.
Lord Campbell of Alloway: The point raised by my noble friend is bang on with regard to the next amendment. I had not spotted it until she raised it.
Lord Goldsmith: I am being torn in two different directions. My noble friend Lord Sheldon, for reasons that the Committee found utterly convincing on the last amendment, thought it necessary that the declaration should be witnessed and should have some solemn form attached to it. I am glad to say that he did not go quite as far as to say that we should follow the example of the experience of noble Lord, Lord Callaghan, and insist that each declaration should be witnessed by,
"a huge man with a large beard",
but, none the less, he has in mind some form of solemn event when the declaration is signed. Now that might be a different moment from the moment when a contract of employment is signed—so I am being pulled in two different directions.
It is important to note that the expression "as soon as is reasonably practicable" is an expression that is well recognised in law, and courts regularly have to apply it. It is far from being an open-ended opportunity. Let us take, for example, employment legislation. A claim has to be brought within a certain period of time, unless it is not reasonably practicable to do so. Quite frequently, people find that they have gone beyond the statutory time limit. They say that there was this or that reason for doing so, and tribunals regularly say that "as soon as is reasonably practicable" is a tight obligation. Tribunals consider whether it was reasonably practicable to bring a claim,

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not whether a person has an excuse for not having done so. So I reject the suggestion that this is a loose expression. It is a pretty tight expression as it stands.
As to the moment from which it applies, I am told by the Box that the understanding is that it is from the moment that a person starts work. I do not know what the practice is in relation to contracts of employment. In the private sector, one may well be sent a contract of employment giving a starting date before starting work, and one is expected to sign the contract before that date. If that is so, then the moment for the solemn declaration would necessarily be later. I hope that answers the three points and is of some assistance to the noble Baroness.
The Earl of Northesk: I am grateful to the noble and learned Lord the Attorney-General for that response. I think that a slight issue remains, but this is a probing amendment. I always recognised that the noble and learned Lord would be able to satisfy me on the construction of "reasonably practicable". I am entirely happy with his response, although, as my noble friends have recognised, it leads into the next amendment. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Northeskmoved Amendment No. 15:
Page 2, line 26, at end insert—
"() The appointed person shall not be subject to the provisions of sections 17 to 21 until such time as the declaration mentioned in section 3(1) has been duly signed."
The noble Earl said: I repeat that it is entirely right and proper that any individual appointed as a commissioner or an officer of Revenue and Customs should be required to make a declaration committing himself to the obligations of Clause 18. That is all good and well, but I am uncertain whether there is any provision in the Bill to prevent such an appointee, if he so chooses, from effecting disclosures of information to which he may become privy as a result of this appointment, even though he may not have made the requisite declaration.
While acknowledging that the drafting of the amendment may well be imperfect, its purpose is straightforward. It bars appointees from involvement in the disclosure regime until such time as they have complied with the requirement of Clause 3. Where we are dealing with matters that engage Article 8 rights, it is appropriate to ensure, as far as possible, that any opportunity to circumvent those rights is properly and adequately constrained.
I note that the noble and learned Lord the Attorney-General may have responded this issue in the previous amendment by reference to contracts of employment. None the less, I would welcome the noble and learned Lord's clarification of the matter. I beg to move.
Baroness Noakes: I support my noble friend's amendment but perhaps I may ask the noble and learned Lord to address one question. Do any consequences flow from not signing a declaration of confidentiality, as required by Clause 3?
Lord Goldsmith: I shall deal, first, with the substantial point made by the noble Earl. I understand
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that the purpose behind his amendment is to enforce strongly the obligation of confidentiality. I share that purpose and desire with him, but I think that his amendment, if accepted, would have the opposite effect. I know that he does not intend that but perhaps I may explain why.
The consequence could be that someone who is fully aware of his obligation of confidentiality —because it has been explained to him and because he knows full well that such obligations attach in the organisation— but who, for some reason. has not signed the declaration could with impunity, so it would appear, then disregard the obligation of confidentiality and provide confidential information without fear of sanction under the other provisions of the Act. I am sure that the noble Earl will agree that that is not what he intends to happen.
The important point—I am grateful for what the noble Earl said about the answer that I gave during debate on the previous amendment—is that we get on with the declaration, but that does not prevent the obligations of confidentiality being in place. Even if an employee has not signed the declaration. I have no doubt that before he starts work he will be reminded of the importance of confidentiality. No doubt that will be one of the early things to be impressed upon people when they enter an organisation.
The noble Baroness asked what the consequence would be if someone did not sign the declaration.
Baroness Noakes: A contract of employment could be signed before the statutory declaration.
Lord Goldsmith: We shall have to look into that but there is no doubt that the department will expect its new staff to sign. That is plainly what Parliament and this Committee want. Therefore it is likely that a failure to sign will be a breach of the contract. I do not know, in any sense, the full terms and conditions of employment and therefore do not know whether any adjustment needs to be made to ensure that that is the case. The noble Baroness has made a point which will no doubt need to be considered by those who are concerned with these matters, but I hope that the basic answer is of some assistance.
The Earl of Northesk: Once again, I am grateful to the Attorney-General for his response, although I should stress that during my introductory remarks I explained that I am horribly conscious that my drafting skills may not be as good as they should be in this case. Nevertheless, I am glad that I moved the amendment because we have obviously teased out an issue here which requires a little further attention. But, certainly for the moment, I am happy to beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
Clause 4 ["Her Majesty's Revenue and Customs"):
[Amendments Nos. 16 to 20 not moved.]
Lord Campbell of Allowaymoved Amendment No. 21:
Page 2, line 35, at end insert—
"() The discretion exercised by the Commission of Inland Revenue as regards arrangements as to composition shall be retained."
The noble Lord said: In every sense, this is a probing amendment. I wish to apologise to the Committee for not having been able to attend Second Reading to put down a marker for the amendment, as was my intention—and my name was on the list. I also apologise for having spoken today and not having apologised before.
The object of the amendment is to include in the Bill a safeguard for retention of the excellent discretion of the commissioners for Her Majesty's Revenue to make arrangements as to composition—which includes, of course, the concessions that they make. The amendment is complementary to Amendment No. 23 in the name of my noble friend, which I wholly support. A further object of the amendment is to seek to achieve compatibility with the convention that I will come to in a moment.
At Second Reading the noble Lord, Lord Thomas of Gresford, kicked this ball into play when he spoke about the need for the independence of the prosecuting authority such as would protect the interests of the individual taxpayer. The noble Lord, Lord Barnett, picked up the ball to ask whether his assumption that the two departments would carry on as before was right. He passed the ball to his noble friend, the noble Lord, Lord Sheldon, who ran with it and touched it down for a try, which could only be converted at a later stage of the Bill.
In a short passage, the noble Lord said:
"Another important difference between the two departments is the kind of expertise they have of necessity acquired in the course of so many years with their very long pasts. The history of Customs and Excise, which comes from intercepting smugglers and dealing with criminals, is something that we know and is well recorded in so much of our history. Although the present day approach has over the years altered the attitude of that department, it is still rigorous; more rigorous than the Inland Revenue. The Inland Revenue's history comes from dealing with mostly honest but certainly unwilling taxpayers. It is not easy to see how these two different kinds of expertise will survive, still less be transferred with success from one part of the new department to another. It is still more difficult, given the present level of work by each of these two departments, which are under considerable strain.".—[Official Report, 7/2/05; col. 597.]
The point was made in a very short passage from the noble Lord, Lord Brooke of Alverthorpe. who said:
"Returning to the different cultures between the two partners, I have a question for the Attorney-General. The Inland Revenue has always been seen as having a somewhat lighter touch than Customs. I wonder whether that will continue or whether there will be a harmonisation of approaches. If so, which culture is likely to prevail?".— [Official Report, 7/2/05; col. 602]
The point was taken up by the noble Lord, Lord Newby, who said that,
"the traditional Customs and Excise officer looked down on those lesser mortals with a very considerable degree of scorn. There was a tremendous esprit de corps in Customs, which may or may not
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have been desirable in every last respect as regards an ebullient way of dealing with taxpayers, but it certainly existed and was certainly a different culture than that which obtained in the Revenue. Putting these two cultures together will not immediately lead to efficiency savings".—[Official Report, 7/2/05; cols. 604–5.]
I suppose I have an interest to declare, in that years ago I was on the prosecuting attorneys list for Customs and Excise. I have never done a tax case in my life, and I know nothing at all about it.
6.15 p.m.
Now I come to a slightly more complex affair. The noble and learned Lord said in this context:
"The use of those powers will be subject to guidance which I shall issue to ensure that they are used only where necessary and proportionate".—[Official Report, 7/2/05; col. 615.]
That was in response to what my noble friend had said about the coercive investigatory powers and the draconian position of Customs and Excise compared to the Revenue at cols. 608 and 610, to which I have already referred.
With great respect to the noble and learned Lord, what he said was not satisfactory. It was at the end of a long speech, which dealt with many other things. However, there are matters here that require serious consideration. Why? Because the Bill provides no procedural safeguards and no relevant criteria to regulate decisions as to enforcement by any identifiable person. The resort to such powers relates to the use, exchange and disclosure of information relating to an individual taxpayer's private life. As being confidential, it without doubt engages Article 8 of the Convention on Human Rights.
The HMRC, as it is called, is a public authority for the purposes of Article 8(2), and it may not interfere with the taxpayer's exercise of this right, except in accordance with the law, and if necessary in a democratic society in the interests of national security. public safety, or the well-being of the country for the prevention of disorder or crime, or for the protection of health or morals, or for the protection of the rights and freedoms of others. None of those exceptions applies, or begins to apply, to the ordinary, run-of-the-mill case of assessing and collecting taxes and making an arrangement by composition or by concession.
There is a problem here that cannot just be ignored. There is a want of clarity. Safeguards ought to be built into the Bill. For the HMRC to exercise certain powers under this Bill if those exceptions do not apply—and none of them will apply in the ordinary, run-of-the-mill case at all—there would be a breach of Article 8(2) and it would be incompatible with the convention, and the courts would so rule. The specific concerns—there is not time to deal with them here and I shall not attempt to do so—on which the onus is on the Government to satisfy that the Article 8(2) exceptions apply, are referred to in the report of the Joint Committee on Human Rights. I declare an interest—I cannot call it a disinterest—as a Member. I shall refer to the specific aspects to save time and repetition when dealing with Amendments Nos. 32, 35, 36 and 37 to Clauses 17 and 18, because theirs is a generic application.

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The question is—and I conclude with it—should not the safeguard as proposed by this amendment be on the face of the Bill in some form? I pretend to no expertise in drafting, and someone could do it very much better than I, but there must be some form of safeguard. It must be drafted by someone who realises that in the ordinary run-of-the-mill tax assessment, collection and composition the exceptions will not clear; they will not apply. There is a risk the whole time of incompatibility and unenforceability. It is suggested that there should be—not necessarily in these words but in some terms probing in every way—a statutory safeguard on the face of the Bill as a break on the Orders in Council that arc in Amendment No. 23 proposed by my noble friend, which I support. I beg to move.
Baroness Noakes: I do not pretend to have the competence of my noble friend on matters of human rights and Article 8, or any other article. At the start of his speech, he was talking about the Inland Revenue's discretion, which was the nature of the amendment. That led me to realise that I did not know what was going to happen to extra-statutory concessions, which are an extraordinarily valuable part of the way in which the Inland Revenue, but not by Customs and Excise, operates at present. Can the noble and learned Lord say something about how that—which by definition would not find its way into statute but is an important part of the way in which tax law is operated by the Inland Revenue but not by Customs and Excise—will find its way into the new body? Or will that be lost in the wash when the two are merged?
Lord Goldsmith: I listened with great interest to what the noble Lord, Lord Campbell of Alloway, has said. Of course, I am well aware of his membership of the Joint Committee on Human Rights. There are some aspects of what that committee has said that we will want to come back to. I accept and entirely agree with him that Article 8 on the right to privacy will apply to the new department as it applies to other government departments. Those protections will apply. I will return to the detail of their application and to why certain disclosures are, in the Government's view, perfectly proper. Those are the subject of particular amendments, to which we will come later.
I will say two things on the general question of the Bill's compatibility with the Human Rights Act. First, as I explained at Second Reading, there is an important ring-fencing of the powers. Secondly, the safeguards contained in the Human Rights Act and the Data Protection Act are not in any way overruled by the Bill. I therefore do not share the noble Lord's view that there are not appropriate safeguards in place. There are strong and appropriate safeguards.
That is not the most important point on this amendment. This amendment touches on the discretion which presently is exercised in relation to compounding or otherwise negotiating settlements of particular liabilities. I share the noble Lord's view that it is important that the new department should continue where appropriate to deal flexibly with the errors, omissions and sometimes frauds which it discovers. I can
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assure him that flexibility will continue under the Bill as currently drafted and it is not necessary to make any specific provision for it.
Both departments have powers to conclude agreements to settle arrears of tax, including interest and penalties, without the need for formal proceedings. Where proceedings have been commenced, there are various powers to conclude them informally. Both departments, for example, can settle civil appeals by agreement. Both departments can offer the prospect of a civil settlement instead of criminal proceedings, provided that full disclosure is made. All of those powers will be vested in the new department under Clauses 5, 6 and 7 as currently drafted. I can therefore say to the noble Lord that he need not be concerned that those powers will cease to exist for the new department because they will continue to have such powers and there is no need to make further provision to that effect.
In answer to the question from the noble Baroness, Lady Noakes, on whether extra-statutory concessions will continue, the answer is yes. The commissioners' powers of collection and management will enable them to continue the policy of extra-statutory concessions. Again, those powers are being transferred through.
With the promise that I will revert to questions of privacy and Article 8 when we come to those clauses, I hope that I have given enough reassurance for the noble Lord to withdraw his amendment.
Baroness Noakes: Perhaps I may clarify the point on extra statutory concessions. As I understand it, they apply only to the Inland Revenue. When we have the merged organisations, will they apply to other taxes currently operated by Customs and Excise? The one which obviously comes to mind is VAT because it is a business tax and when it was first introduced which department it went into was decided almost on the toss of a coin. As I understand it, there is a similar mechanism. Are we going to have old Inland Revenue and old Customs and Excise carrying on in the new organisation?
Lord Goldsmith: That is a detailed question on which it is important to have a clear and precise answer. If the noble Baroness will permit, I will write to her about it rather than attempting to get an answer standing at the Dispatch Box.
Lord Campbell of Alloway: I am grateful to the noble and learned Lord, but the fundamental problem still arises to be faced. I understand his point of view, but to save time, I cannot do justice to my amendment until I have spoken to Amendments Nos. 32 and 35 to 37, which are concerned with Clauses 17 and 18. There I develop the arguments on which I rely and at this time do not wish to repeat. If the noble and learned Lord would understand and forgive me for not replying and acquit me of obduracy, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4 agreed to.
Clauses 5 to 7 agreed to.
6.30 p.m.
Baroness Noakesmoved Amendment No. 22:
After Clause 7, insert the following new clause—
"DISPUTES AS TO FUNCTIONS

(1) The Treasury shall appoint a person to consider applications under this section.

(2) An application may be made under this section by any person who believes that an officer of Revenue and Customs is exercising a function or has exercised a function which is not in accordance with section 6 or 7.

(3) The Treasury may make regulations as to the way in which applications under this section may be made and how they are to be dealt with."

The noble Baroness said: We now come to the issue of the powers of the new Revenue and Customs. The integration is being undertaken at such speed that the Government have not taken the time to work out how Revenue and Customs will work in practice. They will be doing this following some form of consultation. I raised the issue of consultation at Second Reading and the noble and learned Lord told me:
"Treasury Ministers are still considering what form the consultation will take".—[Official Report, 7/2/05; cols. 612–13.]
Is the noble and learned Lord yet able to say when the consultation will emerge? I appreciate that only two weeks have elapsed since Second Reading. However, it is an important issue and, if he cannot say when it will happen, perhaps he will say a little more about what kind of consultation is being considered.
I hope that the Government are committed to a wide-ranging consultation allowing all potentially interested parties to debate the issues fully and in a reasonable timescale. I say that because I know that in another place the Paymaster General indicated that matters would be brought forward in the 2006 Finance Bill. While that sounds rather a long way away, given the potential complexity of drafting and some of the quite serious issues that arise in relation to whether the powers should be levelled up or levelled down, it is not that far away. Therefore, it is important to know what kind of consultation and what kind of timescale will be involved.
I am sure that the noble and learned Lord will agree that in a perfect world the powers of the new organisation would have been worked out before commencing the merger process. That is especially important as the powers themselves have a particularly powerful influence on the culture of the new organisation.
But, of course, we do not live in a perfect world and so the Government have introduced Clauses 6 and 7, which are intended to ensure that the existing powers are ring-fenced and capable of use only in the context in which they were originally created. We do not oppose that approach, but the issue remains of what happens if, say, an officer seeks to use his Customs and Excise powers for an Inland Revenue purpose.
This issue has been raised with us by the Institute of Chartered Accountants of Scotland, which has said that there are concerns about a transfer of powers by stealth. It refers in particular to the different access provisions currently enjoyed by the Inland Revenue and Customs and Excise.
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The examples that the Institute of Chartered Accountants of Scotland give are the powers under the PAYE regulations and for corporation tax under the Taxes Management Act, neither of which give rights of access to premises or powers to interview taxpayers. On the other hand, VAT inspectors can do those things. What happens if an enthusiastic VAT inspector decides to go on a fishing expedition for PAYE or corporation tax purposes using his access and interview powers? Does the taxpayer have any realistic method of ensuring that Revenue and Customs officers do not exceed the powers so painstakingly ring-fenced in Clauses 6 and 7?
I anticipate that the noble and learned Lord will say that the taxpayer retains the right to seek judicial review. If he does, I shall be watching very carefully to see whether he says it with a straight face. I am sure that, as a law officer, he will know that the remedy of judicial review is a very large sledgehammer to crack an often very small nut. It is an expensive process and it does not give accessible justice in normal circumstances—the circumstances of an ordinary taxpayer.
Similarly, an application to the Parliamentary Ombudsman may well be available but that is an extremely slow procedure for delivering a just solution, as anyone involved in the Equitable Life affair will be aware. The taxpayer needs a simple, purpose-built process to deal with the issue of powers that are being transferred and purportedly ring-fenced by Clauses 6 and 7 until the whole issue of the powers of the new body are put on to a proper statutory footing and it becomes much clearer.
I have drafted Amendment No. 22, which may not be a perfect amendment, to create a simple and effective appeals procedure to allow a taxpayer access to some simple form of justice if he feels that his rights are being infringed. The amendment states that the Treasury must appoint a person to consider applications about Clauses 6 and 7 powers. It is deliberately light touch, leaving the details to be provided by the Treasury in the way it thinks appropriate. We have drafted a regulation-making power to cover this so that arrangements can be changed as circumstances change.
The amendment says nothing about what happens if there is a finding against the Revenue and Customs. I am assuming that the Revenue and Customs would then put the matter right in whatever way was appropriate. Failing that, the taxpayer might then have to fall back on judicial review, but he would by then have a finding which would fortify his own position and case.
As I mentioned, this is not a perfect amendment in drafting terms. I hope that the noble and learned Lord will not attack it on that basis and will treat it as a probing amendment. But I do hope that the noble and learned Lord will recognise that it is a serious issue which has been raised and that it does need a serious response. I beg to move.
Lord Campbell of Alloway: I support the amendment in principle, really because every profession now has some means of challenge by

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anybody who wishes to challenge the conduct that he receives at the hands of those in the department and so on. I can see in this context every reason to support the amendment; not necessarily in the terms in which it is drafted. It is the spirit of the thing, and I think that the access should be there.
Lord Newby: The interest in the amendment is not so much the short-term problem in the way that the text of the amendment seeks to deal with the matter—that is, the period between now and the next stage of legislation—but that it foreshadows a really big issue which is coming down the track relating to powers.
One of the virtues of the merger, as set out by the Government, is that it will enable officers of the new merged department to deal with a company's entire tax problems. In theory, a single person will look at the income tax, PAYE, corporation tax, VAT and other matters dealt with by a company.
As long as there are differing powers relating to different taxes, there will be considerable scope for muddle, confusion and potential abuse. If I were to go into a company in this all-seeing tax officer mode and I wished to investigate a revenue problem that that company might have, but would like greater powers in which to do that than those I have wearing a Revenue hat, I might decide that it would be extremely helpful to wear a Customs and Excise hat— a VAT hat, if you like—to gain access or whatever. I think that this is potentially a big problem that we shall need to look at in greater detail, probably not with this Bill, but in the next Bill. It is worth pointing the issue out before consultation gets very much further. How will a multi-hatted tax officer segregate in his mind how he deals with one tax or another, in the context possibly of a single visit, when he has sole responsibility for a company?
I am not sure that this particular amendment is required in the short term, because I do not think that current officers of the Revenue or of Customs and Excise are likely to be exercising that broader responsibility in the short term. Given what the Minister said at Second Reading, I think that the noble Baroness has flagged up a potentially major long-term issue.
Lord Goldsmith: I have listened carefully to the concerns expressed by the noble Baroness. In large measure, the answer to the concerns expressed in her amendment is that that has just been given by the noble Lord, Lord Newby. In the Bill as it is, with the ring-fencing of powers in Clauses 6 and 7, there is no need to be concerned about the misuse of powers. I shall explain why in a moment. I shall also point to the existing adequate procedures for dealing with cases where there is a problem and I shall identify what they are.
At Second Reading, I explained the position with relation to ring-fencing of powers. The idea of ring-fencing powers is not new in this field. A number of existing powers are already ring-fenced so that they already cannot be used by officers, even for functions of the same department. Officers are well aware that
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there are certain powers that are particular to certain functions. The idea of ring-fencing as the two departments are put together will not come as a surprise to any officer involved, or cause any difficulties of understanding. Officers are accustomed to distinguishing between powers that are proper to their purpose and other powers.
I also indicated at Second Reading that it was not the intention that officers would overnight become people who would be dealing with every single aspect of tax or duty. So they will not have occasion to seek to deal with powers that are outside their normal day-to-day work. Integration will take place gradually and initially the same people, for the most part, will continue to perform the same functions as now, exercising the powers with which they are already familiar.
There are safeguards to minimise any risks and to ensure that the public know their rights. My right honourable friend the Paymaster General announced at Second Reading in the other place that an advice note would be produced to aid clarity and public understanding of what HMRC's powers for different taxes and tax credits are in different situations. A draft advice note is already in the Library and Inland Revenue and Customs have been consulting on its content. It is intended to provide guidance to claimants and taxpayers. It will cover the main areas of interaction between them and the two departments. The advice note will be made available to customers during inspections and visits by HMRC officers, as well as being available on the HMRC website. There will be good information about this.
Pending the outcome of the review—to which reference has been made by the noble Lord, Lord Newby, and by the noble Baroness—most HMRC officers will continue to work as before, using the same powers, and taxpayers will have their rights explained to them.
What are the procedures for dealing with an error, whether made inadvertently or otherwise? First. there are existing internal complaints procedures that will be followed through into the new department. If a taxpayer believes that an officer has simply ignored the departmental instruction not to use powers inherited from the wrong department, he could make a complaint, which would usually be the quickest means of resolving that problem. The two current departments have similar complaint procedures that will be adopted by HMRC.
I have little doubt that the misuse of powers by an officer is regarded as a very serious matter in both departments and that that will continue to be the case. So there is the internal complaint mechanism. The noble Baroness wondered whether what she had in mind—or perhaps it was the noble Lord, Lord Campbell of Alloway—was not far from an internal complaints procedure. But there is one already, and there will plainly continue to be such a complaint procedure. There are possibilities to involve a legal tribunal. I say that with a straight face because there is more than one procedure and also because I do not accept and agree with what the noble Baroness said about judicial review.

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6.45 p.m.
A genuine dispute between a department and a taxpayer on what the law permits in a particular case could reach a legal tribunal in a number of ways. First, it may be open to the individual to decline to comply with the request, which request is believed to be unlawful. In those circumstances it may be open to the department to seek to impose a penalty. If that penalty is resisted, the matter must be determined by a legal tribunal. Equally, there are bespoke appeal rights which apply to particular powers and which will go to legal tribunals.
There is also the possibility of applying for judicial review. It is a procedure which is used much more regularly these days than it was 10 or 20 years ago. A large number of judicial review applications are made. As a Law Officer, I know very well how much litigation the Government face on that front. But I do not rely solely on judicial reviews being the answer. It may be that that would be a last resort for many people. But the other procedures that I have identified—internal complaints and the other legal procedures which would be available where there are bespoke appeal rights, or the ability simply to contest a particular sanction that is imposed—should provide adequate opportunity for this to be tested.
So, I hope that it has been useful to explore what the procedures are and that the noble Baroness will see that they should meet the concerns that this new clause was meant to deal with.
I cannot sit down without saying that I am afraid I cannot say anything further about the timing of the consultation. For the next occasion that the noble Baroness raises the matter I shall do my best to be in a position to say something more positive.
Baroness Noakes: I thank the noble Lord, Lord Newby, for his support of these important new powers. We shall have an opportunity to debate that in the context of any new Bill in your Lordships' House. Of course if the matter is contained in a Finance Bill we will lose that opportunity. But we will let that pass for the time being.
I believe that there is still a concern about how the powers will be used. People think that the new organisation, with which we understand the Government wish to press ahead from the beginning of April, will start to act across taxes to try and deliver some kind of seamless operation to taxpayers. If that happens, the concern arises that powers might perhaps inadvertently, or over-enthusiastically, be used.
The Institute of Chartered Accountants of Scotland, which I cited as the source of the concerns that led to my tabling the amendment, has seen the draft advice note. I believe that it is available on the website. The advice note failed to resolve any concerns and possibly made the institute more worried.
I am very grateful to the noble and learned Lord for setting out all the ways in which a taxpayer might seek to ascertain how powers could be correctly used if a dispute arose. I shall certainly go back to the Institute of Chartered Accountants of Scotland and ask it to
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consider again whether it believes that that provides an adequate answer. I think that that is the right way to go forward. I thank the noble and learned Lord for his answer and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule I agreed to.
Clause 8 [Power to transfer Functions]:
Baroness Noakesmoved Amendment No. 23:
Page 4, line 29, at end insert—
"() After section 5(1) of that Act insert—
"(1A) No Order in Council which—

(a) provides for the transfer to any Minister of the Crown of any functions previously exercisable by the Commissioners for Her Majesty's Revenue and Customs or by the officers of Revenue and Customs, or

(b) directs that functions of the Commissioners for Her Majesty's Revenue and Customs or of the officers of Revenue and Customs shall be exercisable concurrently with another Minister of the Crown, or shall cease to be so exercisable,

shall be made under this Act unless, after copies of the draft thereof have been laid before Parliament, each House presents an Address to Her Majesty praying that the Order be made.""
The noble Baroness said: Clause 8 deals with the possible transfer of functions both in and out of Revenue and Customs once it is created. This area has caused much concern. The Treasury Select Committee in another place and a number of lobby groups have raised concerns about the clause. I acknowledge that the Delegated Powers Committee, which published overnight, did not raise concerns about the way in which Clause 8 is constructed, but I am not prepared to accept that as a conclusive reason for not debating the issues, which is why I wish to raise the concerns in your Lordships' Committee.
We have read the debates in another place and feel unconvinced by what appears to be the Government's basic argument about the necessity for Clause 8 as currently drafted: it is that the provisions from transfers in and out of non-ministerial government departments already exist in other legislation, so why not this one, and that any transfers would be no less rigorous than those that already exist. I hope that the noble and learned Lord will be able to give examples of legislation that covers non-ministerial government departments in this way.
Non-ministerial departments are different from ordinary government departments. They are created deliberately without a Minister at their head because of the nature of their activities. It is the nature of Revenue and Customs, and its activities and relationship to individual taxpayers in this case, that causes concerns at heart. A member of the Treasury Select Committee in another place described this clause as having the effect of a licence allowing Ministers to transfer powers willy-nilly under the Ministers of the Crown Act 1975. The 1975 Act transfers functions subject to the negative procedure only, thus restricting Parliament's ability to scrutinise fully any changes that are proposed. The Treasury

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Select Committee in another place recommended that transfers should be subject to the affirmative procedure and that is what this amendment is about.
While dealing with this amendment, there are some issues that I would like to clarify in relation to Clause 8. First, in Clause 8(1), subsection (4) of new Section 5A to the 1975 Act appears to treat commissioners and officials as if they were Ministers of the Crown, which is presumably a comparison that is not the current status quo. We were mystified why this provision should be created under subsection (4). If it is necessary now, why was it not necessary in 1978 when the Government of Wales Act was originally mooted?
The power in Clause 8 allows pretty well anything to be transferred. There are some exceptions, but they are narrowly drafted. and it is difficult to tell what is and is not within the power to transfer. One is looking for the Minister to be absolutely clear about the powers that could be transferred under the Ministers of the Crown Act 1975. Can we be absolutely clear about what can and cannot be transferred?
Our amendment steers a middle way between what the lobby groups want, which is the clause removed completely and transfers to be subject to primary legislation; and the current draft, which has minimal parliamentary scrutiny, which is the negative procedure. We have steered a middle way, because we think that it is proper to have some parliamentary oversight of functions and powers being transferred in and out of Revenue and Customs, without going so far as to restrict completely how things should work.
As a technical point, we recognise that the amendment does not cover Scotland and Wales; but as a probing amendment, it allows the issues to be debated. I beg to move.
Lord Goldsmith: It may be helpful for me to start by explaining the structure of the clause, because I hope that it will answer some of the questions raised by the noble Baroness, Lady Noakes.
The Bill establishes HMRC as a non-ministerial department. That is driven by the important principle that the administration of revenues should be conducted at arm's length from Ministers. Those Revenue functions are the driver for HMRC's establishment as a non-ministerial department. The effect of making it a non-ministerial department is that the sensible machinery of government change arrangements that exist in the Ministers of the Crown Act 1975 would not apply. It is my understanding that the way of bringing in the powers in the Ministers of the Crown Act is precisely to make the deeming provision, which new Section 5A(2) would have, namely to treat for purposes of the Act the commissioners as Ministers of the Crown. It is not for any other purpose; it is simply the way of bringing in the benefit of those other powers.
However, while that would bring in the ability to use the powers in the Ministers of the Crown Act for machinery of government changes, that is subject to an important restriction. I respectfully take issue with the noble Baroness in saying that it is a narrow restriction; it
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is not narrow, because the Bill prevents the transfer out from HMRC under this provision of any of the Revenue and tax credit functions that HMRC will inherit from the Inland Revenue and Customs and Excise. That is the effect of new Section 5A(3), that an Order in Council may not provide for the transfer of functions specified in Section 5(1) of the Commissioners for Revenue and Customs Bill. Section 5(1) is the collection and management of revenue for which the commissioners of Inland Revenue were responsible, the collection and management of revenue for which the commissioners of Customs and Excise were responsible, and the payment and management of tax credits for which the commissioners of the Inland Revenue were responsible before the creation of this new section.
That carves out of this power altogether the important collection and management of revenue and payment and management of tax credits that would be the responsibility of the two predecessor departments. That is an important restriction, which means that what drove this to be a non-ministerial department will remain, in the sense that those functions cannot be transferred in and out using this provision.
There will be other powers, and things have moved on a lot since 1975, when the Ministers of the Crown Act was passed. The role of HMRC will be more varied than the role that either the Inland Revenue or Customs and Excise had in 1975; with child benefits, statutory payments in the new department, and other functions. In relation to those, which do not fall within this properly protected area, there is no reason, in the Government's view, why responsibility for those powers and areas of government activity should not, like any other government activity, be subject to the possibility of moving them from one department to another under the machinery of government changes that exist in the 1975 Act.
So I am saying that we should keep out of these provisions the important revenue tax credit business. Other provisions should be subject to the same possibility of change as for other government departments. The 1975 Act works well: it has been used on many occasions. There is no intention at the moment to transfer any particular business. That is not at all what is in mind. I am reminded that my right honourable friend the Paymaster General in the other place wrote to the Committee setting out the Inland Revenue business that could be transferred out. The noble Baroness may have seen the letter, but I am happy to provide a copy for her to see the sort of things involved. However, I hope that she will be reassured by what I have to say. I will put it in short form.
7 p.m.
If the department had been established as an ordinary ministerial department, these provisions would simply have applied automatically. We accept that it is sensible and right to make the department non-ministerial to maintain the distance from Ministers, which means that the provisions cannot apply. We do not allow them to apply to the core tax credit and revenue issues, but there is no reason why they should not apply to the rest.

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The disadvantage of the noble Baroness's proposal is that, if there were a requirement for a positive affirmative resolution, there would have to be parliamentary time for any change in relation to one of these other areas, whatever the significance and however little the controversy might be. It would not be a good use of parliamentary time and there is no reason why the provision should not be subject to the same sort of rules as other government business. I hope that that is sufficient to reassure the noble Baroness on this point.
Baroness Noakes: I thank the noble and learned Lord for that explanation and I would be grateful if he would provide a copy of the Paymaster General's letter because that was not passed on when I inherited some papers from my colleagues in the other place. The concerns still arise about what could potentially still be transferred out. Issues do not arise about what could be transferred in: the issue is what might be transferred out.
Although the reference to the functions in Clause 5(1) appears comprehensive, others could be contentious. I would not like to predict what might be contentious, and it would repay looking at the list provided to the Committee, but an example might be child trust funds, which concern the individual circumstances of individual taxpayers and children who are entitled to child trust fund entitlements of various layers. Could those functions be transferred in and out? Should they be capable of being transferred willy-nilly, to use the words of the Member of the Treasury Select Committee in another place, or should they be subject to some form of parliamentary procedure, other than the negative procedure? What is at issue is not the wish to ossify Revenue and Customs as an organisation but to ensure that there is a parliamentary procedure that examines something being taken away from its functions.
Lord Goldsmith: It might help if I intervene for a moment. Of course, I understand that even under the Ministers of the Crown Act there is a parliamentary procedure, but it is a negative rather than a positive resolution. That means that if there is controversy about an issue, it is open for that to be raised and a Motion put forward so that it can be debated.
Baroness Noakes: I completely understand that, but this is not a power that is exercisable without any parliamentary procedure. I am sure that the noble and learned Lord will recognise that on Opposition Benches, that procedure—the requirement to pray against a negative resolution—is one that gives even less opportunity for parliamentary scrutiny in practical terms than an order, which must pass through both Houses of Parliament. That is a fact of life. Given the volume of secondary legislation that gushes out of government departments day after day, those that require a positive parliamentary procedure ensure that Parliament pays attention, which is why, in Opposition, we always seek those powers.
I will consider what the noble and learned Lord said and I would be grateful to receive a copy of the letter. I am sure that the noble Lord, Lord Newby, would be
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as well. We can consider this matter again. My instinct remains that an additional parliamentary procedure would be safer in terms of safeguarding the kinds of functions that ought to remain for a body such as Revenue and Customs. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 8 agreed to.
Clause 9 [Ancillary powers]:
On Question, Whether Clause 9 shall stand part of the Bill.
The Earl of Northesk: By way of reassurance to the noble and learned Lord the Attorney-General, my purpose is merely to seek clarification. At first blush, the remit of the clause seems extremely broad—so broad as to potentially undermine, if not neuter, many of the welcome safeguards elsewhere in the Bill. While relatively content with the use of "necessary" in the clause, I am rather less comfortable with the use in that context of "expedient … incidental or conducive".
I acknowledge that the Explanatory Notes give some useful examples of what is envisaged here: nevertheless, taken to its logical conclusion, it is not impossible to envisage a situation arising whereby, for example, commissioners might conclude that it might be "expedient … incidental or conducive" to the exercise of their functions to disclose just about any item of taxpayer information much more widely than the Bill on the surface permits. Certainly, I cannot discern any constraint on the exercise of the clause's powers.
On the related issue, what I like to call the "transposition note"—the table of provisions relating to the predecessor departments—makes it clear that,
"no express provision for exercise of these powers by the Customs and Excise currently exists".
The Government have maintained throughout that the process of integration should not result in any extension of powers not already held to either the Inland Revenue or Customs and Excise. As the Minister explained at Second Reading and fleshed out in the context of earlier amendments, the Bill deliberately makes only those changes necessary to establish HMRC. It therefore transfers the powers of the two existing departments to HMRC but ring-fences to prevent their inadvertent extension within HMRC. There are therefore no changes in how the powers can be used as a result of the Bill.
That aspect is reinforced at paragraph 298 of the Explanatory Notes, which states:
"In order to prevent the accidental spread of the wider powers to the whole of the new department's business, it is necessary to ring fence these powers by reference to the matters inherited from each predecessor department".
And yet to my interpretation no such ring-fencing exists in respect of this clause. Instead, apparently extensive additional powers are conferred on Customs and Excise. Why? In the circumstances, I would be grateful if the Minister would elaborate on the nature of any legacy powers insofar as they may exist for Customs and Excise in this area.

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I willingly acknowledge that I may have misconstrued the construction of the Bill. Perhaps the key lies in the clause's heading—"Ancillary powers". Come what may, I very much hope that the Minister will be able to reassure me that my misgivings are misplaced.
Lord Goldsmith: I hope that I can. This clause does not provide the commissioners with any new coercive powers over taxpayers; that would be a matter of concern, plainly. To take the example of confidentiality that the noble Earl gave, it does not allow them to override the express obligations in that regard that one finds in other parts of the Bill.
It is not unusual to provide that people can do things that are ancillary to their substantive powers, which are transferred. As the noble Earl said, examples are given in the Explanatory Notes, which refer to,
"gathering of information relating to the exercise of its functions… establishing advisory bodies… entering into agreements… acquiring and disposing of property; and … promoting, or assisting in the promotion of, publicity about the tax system".
I could add, indeed, the giving of advice to Ministers about the operation of the system for collection or management of taxes.
It is sensible to make such provision in the Bill. The noble Earl is right to say that that is treated as implied; indeed, it is implied with regard to Customs. But there exists a clear precedent in Section 1(2) of the Inland Revenue Regulation Act 1890, which gives the commissioners all of the,
"necessary powers for carrying into execution every Act of Parliament relating to Inland Revenue".
That does not allow them to override the express constraints in relation to the exercise of powers otherwise imposed—or, as I said, to override the obligations with relation to confidentiality.
Customs and Excise has always had the implied powers to enter into contracts and do all the things that the clause would permit. It is recognised in the commissioners' Letters Patent. even though it does not appear in the Bill. I have helpfully been provided with a copy of one, which states that the relevant person is appointed,
"for the collection of Our Revenue of CUSTOMS AND EXCISE … and the management of all matters belonging and incidental to such collection".
It goes on. The matter is recognised already in relation to Customs and Excise and explicitly in relation to Inland Revenue. The clause does not take those powers further than that, and certainly does not provide for any new coercive powers or undermine the protections about which we have talked in relation to other provisions.
Baroness Noakes: Where does the limitation arise? The clause mentions,
"anything … necessary or expedient…incidental or conducive".
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How does the Minister interpret the clause so that it covers only benign things such as contracts and data, rather than slightly less benign things such as coercive powers? What leads to that interpretation?
Lord Goldsmith: I shall take the two examples put to me. One is that the commissioners might say, "Actually, we think it expedient to disclose this taxpayer's information much more widely than the Bill provides". That would not be permissible under the clause, if only for the reason that it would contravene an express provision in the Bill, which sets out expressly the obligations. A general power of this sort could not override those.
Equally, where coercive powers would be set out clearly in a Bill—"in this and that circumstance, you can search premises if you have a judicial warrant" or whatever it may be—you could not use a power of this sort to circumvent those clear express permissions, subject to express conditions. You could not therefore use an ancillary power of this sort, well recognised in statute in the private sector, to give yourself a coercive power over a taxpayer when it is clear that the scheme of all the legislation is that those coercive powers are explicitly set out. That is how I would explain the matter.
Baroness Noakes: My point is that you could use the power to fill a gap. I understand that you could not use the ancillary power to override an explicit set of provisions. However, the power is very widely drawn and something may not be explicitly provided for. it seems capable of interpretations in ways less innocuous than the noble and learned Lord suggested earlier about contracts and information. That is the heart of our concerns on the matter.
The Earl of Northesk: My major concern arose purely because the clause states:
"The Commissioners may do anything".
The provision then sits there completely unconstrained.
Lord Goldsmith: One has to read on. The commissioners may not do anything. That would be a wonderful power to have; I hope that such an Act is passed and that Ministers of the Crown are included as its beneficiaries. The commissioners,
"may do anything which they think … necessary or expedient in connection with the exercise of their functions, or incidental or conducive to the exercise of their functions".
One starts with a clear limitation. What are their functions?
To take that a stage further, commissioners could not say, for example, "We think that it would be expedient to go out and apply the thumbscrews to a taxpayer who is not answering our questions as we would like", if only on the grounds that it is clear that the structure of the tax Acts and Customs and Excise Acts is that, where there are powers to compel a taxpayer or someone else to do something, they are spelt out explicitly. I am confident that the courts would not regard such a power, however widely expressed, as giving power to do something coercive of

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that sort when it is plain that the whole scheme of the legislation spells those things out explicitly, subject to all sorts of safeguards such as those referred to. I am not sure that in relation to each and every tax one would not find a code stating what one can and cannot do in terms of coercive powers, and there simply is not room to say, "Well, we think we'll add something else", when Parliament has not explicitly given us the power to do that.
The Earl of Northesk: Once again, I am grateful to the noble and learned Lord, at least for offering me a modicum of reassurance. I remain rather concerned about the clause and I suspect that I may well have to return to it at a later stage, if only to try to satisfy myself that some form of constraint is placed on it. I can see, as my noble friend Lady Noakes has pointed out, that potentially the clause could generate a degree of leakage on the margins. But, in the mean time, I am happy to withdraw my opposition to the clause standing part.
Clause 9 agreed to.
Clause 10 [The valuation office]:
Baroness Noakesmoved Amendment No. 24:
Page 5, line 14, at end insert—
"(Al) The Commissioners of Revenue and Customs may arrange for valuations of property to be provided in accordance with subsection (1) and the officers of Revenue and Customs who provide such valuations shall be known as the valuation office.
(B1) Where subsection (A1) applies, the Commissioners shall nominate one of their number to be responsible for the valuation office."
The noble Baroness said: I was surprised to find that Clause 10 had no counterpart in existing legislation and that, indeed, there was no statutory basis for the valuation office, which has operated as a semiautonomous part of the Inland Revenue for many years. It was formed in 1910 and, to use the Whitehall jargon. in 1991 became a Next Steps agency. It is a significant body. It employs around 5,000 staff and operates from 85 offices.
While no harm is done by the valuation office having only an informal existence, it is clearly proper for it to be placed on a statutory footing. However, Clause 10 is curious because it is headed "The Valuation Office" but the term appears nowhere in the clause itself. So the existence of the valuation office will remain in the shadows, existing only in the heading to a clause after the Bill becomes law.
Amendment No. 24 would do two things. First, it unambiguously provides for the existence of the valuation office, and I am sure that, in particular, the staff who work for the office will be pleased that their organisation will, for the first time, have a proper statutory basis. The name of the office is clearly an important part of that. Earlier today, we spent a lot of time talking about names, and clearly a name is important for the parent body. I believe it is also important for the significant body that exists within it.
Secondly, the amendment would ensure that valuation office matters were represented at the highest level in the commissioners of Revenue and Customs. I believe that in
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the past one of the commissioners has sometimes taken specific responsibility for the valuation office, although I do not believe that that is current practice. As I understand it, the chief executive of the valuation office reports to the chairman of the Board of Inland Revenue. I believe that the former practice, involving another commissioner with less onerous responsibilities, was a sensible approach with one commissioner dedicated to valuation office issues, although my amendment would allow either approach to be taken.
The noble and learned Lord will note that I have not included in the amendment a requirement for a commissioner to be engaged full-time on valuation office matters because that would clearly be too inflexible. But the amendment requires that when the commissioners come together, the valuation office will effectively be at the table— in particular when issues affecting the valuation office are raised. Again, I believe that the staff of the valuation office would be reassured by that. I beg to move.
7.15 p.m.
Lord Goldsmith: If I understand correctly—I have listened carefully to what the noble Baroness said—her concern centres around what will happen to the Valuation Office Agency which operates at present. It is currently an executive agency within the Inland Revenue. The functions are currently carried out on the basis of the Royal Prerogative, as expressed in the Treasury Minute of 1920. The Bill provides an opportunity to embody the agency's non-statutory remit within primary legislation. I think that is the explanation for why it appears in the Bill. That explicit legislative backing to its work will regularise its position.
Apart from that, there will be no change in the Valuation Office Agency's status or functions. So far as governance is concerned, because members of the agency are by virtue of Clause 10 officers of HMRC, it is already the case that they are required by Clause 2(3) to comply with the directions of the commissioners. Under Clause 5, the commissioners are responsible for all the functions that previously were vested in the commissioners of Inland Revenue and of Customs and Excise. The clause does not, as she said, specify that those offices carrying out property valuations will be known as the valuation office.
Let me explain that. The Valuation Office Agency will be an agency of HMRC, as it is an agency of the Inland Revenue now—it is not a separate legal entity. The commissioners are entitled to organise officers providing valuation services into an executive agency, but the legal form is it is still officers of Revenue and Customs who are providing those services. That is in line with what some other agencies do; for example the Highways Agency is an agency of the Department for Transport that administers the trunk road network and motorways. The powers that the agency uses are the Secretary of State's powers, and although its staff are organised in an agency for good administrative reasons, they remain without any legislative underpinning for the existence of the agency itself.

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I have little doubt that there will continue to be good reasons to organise this function in the form of an agency, but it will be for the commissioners to organise the collective responsibilities of HMRC, and there is no need to require that in the Bill. I hope that the explanation is sufficient for the noble Baroness to feel able to withdraw her amendment.
Baroness Noakes: I thank the Minister for that explanation. I hope that he noted that my amendment did not try to create a separate legal entity in the valuation office. I merely tried to draft that the persons engaged in that activity were to be referred to as the valuation office. This is a significant organisation in its own right. We talked a lot about culture when we dealt with the first group of amendments. The Valuation Office Agency has a distinct culture; it is a distinct organisation within the Inland Revenue.
My amendment did two things: first to try to get the valuation office recognised; secondly to ensure that there was a commissioner who was positively responsible for the valuation office. The Minister did not answer that point—
Lord Goldsmith: The noble Baroness is quite right. The current position is that the chief executive reports to the chairman. That position might well change—not in the sense that I know that there is a change in mind, but it is something that is capable of changing. It would not be sensible to set it out in statute. There may be another way of doing it. The commissioners will be responsible for the proper administration of all the functions and responsibilities of staff under their responsibility. There is no more sense in requiring there to be a specific nominated commissioner responsible for the Valuation Office Agency than there is to say that a specific commissioner should be responsible for some other activity of Revenue or Customs. The basic responsibility will be there. It is not necessary to say that a particular person should be nominated to look after it. We should rely on his proper judgment, subject to parliamentary scrutiny and accountability, to run the whole department properly.
Baroness Noakes: I thank the Minister for that reply. He may or may not be aware that the immediately preceding arrangement was that there was a commissioner who was specifically responsible for the Valuation Office Agency, which meant that it was represented at a higher level.
Lord Goldsmith: I am simply saying—not on the face of any statute. It may well be a sensible thing to do, but we should not require it in statute.
Baroness Noakes: I take what the Minister says. I will not labour the point. I wanted to air the issue that the Valuation Office Agency, ignored by statute entirely until today, now has only a half-life created by Clause 10. I thought that was a bit of a pity. I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
Baroness Noakesmoved Amendment No. 25:
Page 5, line 26, at end insert—
"() Any fee charged for the provision of a valuation under subsection (2) shall not exceed the costs incurred in connection with providing that valuation."
The noble Baroness said: We are staying with the valuation office and now descending into more prosaic matters and I am slightly more on home territory. Clause 10(2) allows the valuation office to charge fees where valuations are done for those outside the Revenue and Customs.
The valuations carried out by the valuation office are wide reaching. The valuation office carries out valuations for council tax and business rate purposes as well as many other purposes, for example the valuation of NHS property. I believe that the valuation office started life as an adjunct to the core Inland Revenue functions—providing valuations of property to assist with the assessment or collection of tax—but its current scope goes way beyond that. The issue of the charging of fees, which is provided for in Clause 10 (2) is not necessarily a small matter.
The amendment is simple. It provides that where a fee is charged outside Revenue and Customs, that fee should not exceed cost. That is, Revenue and Customs should not make a profit from its valuation activities. The valuation office will be a monopoly supplier of valuations in nearly all instances; it is important that it does not have any opportunity to abuse its ability to price.
Again, the Institute of Chartered Accountants of Scotland drew this matter to our attention. It proposed a slightly different amendment to create a right of appeal against a fee. We may need to revisit that issue at a later stage, but my own amendment is more modest for the purposes of today's debate. I hope that it is uncontroversial in its approach by seeking to put beyond doubt that the valuation office should not seek to profiteer from its monopoly functions. I beg to move.
Lord Goldsmith: I do not at all disagree with the noble Baroness that the valuation office should not be able to "profiteer" from its position. The way to achieve that it does not charge excessive fees is this: the Valuation Office Agency operates in accordance with the published Treasury fees and charges guide. It is subject to internal and external audit to ensure that it operates fully in line with Treasury guidance. There is no intention that the agency should change its practices and start to charge excessively in any sense for its services. In that way, the assurance that the noble Baroness seeks about the operation of the Valuation Office Agency can be provided. Therefore, it is not necessary to put this on the face of the Bill. There are adequate other safeguards that will keep the position as the noble Baroness has described it and as I agree it ought to be—namely, not charging excessive fees for the work that it does.
Baroness Noakes: I thank the noble and learned Lord for placing on the record that the valuation office will be subject to the normal fees and charges

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memorandum prepared by the Treasury, which is what I expected him to say. I will ensure that the Institute of Chartered Accountants of Scotland sees what he has said in Hansard and I hope that it will be satisfactory. For today, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10 agreed to.
Lord Goldsmith: This may be a convenient moment for the Committee to adjourn until Thursday at 3.15 p.m.
The Deputy Chairman of Committees (Baroness Ramsay of Cartvale): The Committee stands adjourned until Thursday at 3.15 p.m.
The Committee adjourned at twenty-nine minutes past seven o'clock.