Finance Bill

[back to previous text]

Mr. Chope: On a point of order, Mr. Benton. I was wondering about new clause 26. Will we be able to deal with that?

The Chairman: At the moment we are discussing the new clauses together with clause stand part. There will be an opportunity to move new clause 26 formally later in the agenda.

Schedule 37 agreed to.

Clause 130 ordered to stand part of the Bill.

Clause 132

Mandatory e-filing

Mr. Bercow: I beg to move amendment No. 227, in page 104, line 7, leave out 'requiring' and insert 'permitting'.

The Chairman: With this it will be convenient to take the following amendments: No. 228, in page 104, line 38, leave out 'or requirement'.

No. 229, in page 104, line 41, leave out 'or requirement'.

No. 254, in page 105, line 9, leave out 'required' and insert 'permitted'.

No. 231, in page 105, line 20, leave out subsection (7).

Mr. Bercow: Good morning, Mr. Benton, and welcome to the Chair. We are dealing with a very important set of amendments, and it is essential to explain the background to them.

Clause 132, as Members and others will doubtless be aware, provides for mandatory filing of payroll returns and information over the internet by 2010. The Conservative party supports measures to encourage electronic communication, but we strongly believe that this provision is totally unreasonable. In view of the Government's lack of success with electronic systems, including, I should emphasise, the Passport Office fiasco and the recent withdrawal of the electronic filing of self-assessment tax returns due to a security failure, this measure is manifestly not a reasonable or even responsible approach.

11.45 am

The essence of the amendments with which we are now dealing—we shall turn to others in due course—is to propose a permissive rather than a prescriptive approach. In other words, by contrast with the Government, we are saying that if people wish to file

Column Number: 524

their tax returns electronically, now or by 2010, they should be permitted to do so. We are the party of choice. On the other hand, people should be under no obligation to do so if they do not wish to. That is where the Government's prescriptive approach is widely resented.

We hope, even now, at the 59th minute of the 11th hour, that the Government will withdraw. I can say, in a constructive spirit, to whichever Minister responds to the debate, that we would not in any way seek to exacerbate the Government's embarrassment were they now to say, ''Sorry, we accept that we got it wrong. Some powerful representations have been made to us and we have decided to reconsider. We have abandoned prescription in favour of a permissive approach. Will you Conservatives now bank the concession and say no more about it?'' The answer to that would be yes.

I have always taken the view, the more so over the years, that there is no shame in making a mistake, only in failing to acknowledge the possibility of having done so. That is the offer that I make. I ask the Ministers just to think about it. They can do this very painlessly. Hon. Members on this side will not bang on and bore the Government rigid, for months to come, about the fact of their failure and embarrassment. I am dangling a pretty juicy carrot, and Government Members should not dismiss it lightly. Think of the endurance test to which Members will otherwise have to be subject.

The issue is very serious, and I shall deal first with the views of respected tax practitioners. I shall come on to other aspects of the debate in due course, especially under amendment No. 230, but at this stage I pray in aid the tax faculty of the Institute of Chartered Accountants in England and Wales. Its view, I am sure the Minister would agree, is important to our debate, although not the only valid opinion. The tax faculty says:

    ''The Government and the Revenue should be concentrating their efforts on ensuring that its''—

I presume, the Revenue's—

    ''e-filing systems are easy to use, robust and reliable and only then encouraging taxpayers to use the service.''

That seems a reasonable position. It goes on to say:

    ''We object to this clause in the strongest possible terms and believe that is should be withdrawn.''

It continues:

    ''It needs to be appreciated that the obligation to apply PAYE is not limited to businesses. Many individuals engage nannies, gardeners and other helpers and have an obligation to deduct PAYE from the salaries of such people.''

The clause has its origins in the report prepared by Patrick Carter on payroll services, and I do not doubt that Ministers will invoke that in support. However, it is important to recognise that the tax faculty of the Institute of Chartered Accountants in England and Wales made a representation to that review. In it, it emphasised that it disagreed with some of the conclusions reached in the report, particularly that there should be compulsory e-filing of payroll returns. It said:

Column Number: 525

    ''Whilst the future of efficient payroll management, both for employers and for the Inland Revenue lies in an electronic solution, we are concerned at the unrealistic time scales which have been proposed and the element of compulsion suggested . . . Problems within the current electronic solutions need to be resolved before consideration of whether electronic filing should be made compulsory.''

It went on significantly and cogently to add:

    ''Such a decision should only be reached after further debate in the light of experience of the current electronic filing methods.

    We are aware that other representative bodies submitted similar representations and we are deeply disappointed to find that, not only has such a provision been included in the Finance Bill, but the proposed scope of the provision has now been extended to include compulsory e-filing generally.''

The Institute of Chartered Accountants in England and Wales and others question whether the unamended clause is compatible with the European convention on human rights, as the Government somewhat unconvincingly claim. That is the judgment of the ICAEW.

The Chartered Institute of Taxation is presumably of some relevance to our deliberations. It stated:

    ''We feel strongly that the attempt to make an e-filing regime compulsory is the wrong approach. Whilst supporting the moves towards e-filing we believe the incentives should be by way of carrot, not stick. There are considerable administrative efficiencies to be gained from electronic communications but many of these benefits will accrue to the Revenue. The costs savings need to be shared. It is not fair to impose further costs on the taxpayer and businesses.

    We find these particular clauses''—

clause 132 and associated clause 133—

    ''onerous and un-deregulatory and are most concerned that general empowering clauses, with so little substance, have been placed in a Finance Bill. If compulsory e-filing in specified circumstances is deemed necessary (for employers, following Carter for instance) then proposals of substance should be brought before Parliament for proper debate. Statutory Instruments should only be used to fill in or change minor details. They should not be used to contain the whole legislation.''

In other words, the CIOT is saying that we should know for what we are speaking or voting for or against, if our deliberations are to be accessible and intelligible to the outside world. The Government should not present us with what is, effectively, a skeleton in the Bill, which we are invited to support, on which the flesh will be added only at a later stage by people acting on behalf of the Government. Parliament must be given an opportunity to express a view about the substantial flesh placed on the skeleton.

There may be a simpler way of putting it—I am sure that several of my right hon. and hon. Friends want to contribute to the debate—but that summarises the essence of the undesirability of the Government's approach. They say very little in terms of specifics. They give themselves Henry VIII powers and ask us to trust them. They say that the detail will come later, that Parliament will not have a chance to comment on it, but that they are people of good will who will behave themselves. They say that everyone will be happy—of course, it will be too late to register that one is not happy—and, never mind, they are good chaps and chapesses, lie back and think of England; all will be all right on the night.

Column Number: 526

As all hon. Members know, I am an extremely charitable fellow. I try to see the best in my parliamentary colleagues of all parties. Therefore, I say gently to the Paymaster General—I do not want to wound her in any way—that I have not been altogether encouraged by her record. I am not willing to be mollified by the soothing bromides for which she is renowned. That is not good enough for me. I am, frankly, more persuaded by the professional concerns of the Institute of Chartered Accountants in England and Wales and the Chartered Institute of Taxation. We want a permissive rather than a prescriptive regime.

That is a compelling argument in its own right, but there is another relevant consideration, especially when we are being invited to take something on trust. I have referred bluntly and perhaps, from the vantage point of the Paymaster General, woundingly to my inability on the strength of the record entirely to trust her, on the basis not of abstract and pejorative comments, but of precedent. I am sorry to say that in addition to the skeleton in the Bill, there is another lurking in the ministerial cupboard on this subject and it is my duty to bring it to the Committee's attention. It is in the form of an exchange between the Paymaster General and her right hon. Friend the Member for Leicester, West (Ms Hewitt), the Secretary of State for Trade and Industry.

On 9 August 2000, the Secretary of State for Trade and Industry wrote on behalf of her constituent, Mr. Jim Fear of 139 Winchester Avenue, Leicester, to the Paymaster General about the Income Tax (Electronic Communications) Regulations 2000. The Secretary of State for Trade and Industry emphasised Mr. Fear's concern—this is important and not a laughing matter—about being forced to use the internet. That troubled him and offended against his principles. The Secretary of State for Trade and Industry, quite properly in her capacity as a constituency Member of Parliament, wrote to the Paymaster General, who sent a two-page reply. Her prose was of the finest and she would probably like me to read out all of it, but I shall resist that temptation. She wrote to her right hon. Friend on headed Treasury notepaper on 21 September 2000. Paragraph 2 of her letter, which started, ''Dear Patricia'', stated:

    ''You said that Mr. Fear was concerned about being forced to use the Internet and felt that Regulation 4 could be used in this way. I confirm that it is not Government policy to force people to use the Internet, but we are committed to offering them the choice of electronic services. Those who prefer to use paper to communicate with the tax authorities will continue to be able to do so.''

That seems clear, but the Government now propose to have mandatory e-filing by 2010. They believe that they can somehow bridge the gap between the letter of September 2000 and the contents of the Bill, and minimise, if not remove, the Paymaster General's embarrassment by invoking the notion that an intermediary can undertake the e-communication and e-filing. However, with all respect to the Paymaster General, although she may genuinely believe that that is a satisfactory compromise, it can be satisfactory only if the people at whom it is principally aimed judge it to be satisfactory. I am sorry to say that people who, for whatever reason—

Column Number: 527

some are motivated by conscientious and religious objection—object to being forced to use the internet to file their tax returns, do not consider the concession being offered by the Government as in any way satisfactory to meet their concerns.

In a letter dated 20 June to Mr. Ron Davis of 14 Church Lane, Whitchurch, Bristol, the Paymaster General stated:

    ''I am able to confirm that it remains Government policy not to force individuals to use the internet personally''.

My hon. Friends will note the insertion of the word ''personally''. The letter continues

    ''and reassure you that nothing in clause 132 nor the regulations that will follow will create such a requirement.''

The Paymaster General goes on to talk about the use of intermediaries.

People who are unhappy about the clause are not persuaded by the Paymaster General's letter, and it is important to emphasise why they are not. They believe that it should be a matter of choice as to whether they, or those acting on their behalf, use the internet for the purpose of filing tax returns. They are not satisfied that the Government have any such arrangement in mind. They believe—the wording of the clause justifies their belief—that by 2010 the Government will require e-filing of tax returns. That is not something that they want to see.

12 noon

I would say to the Paymaster General that a certain insult has been added to injury, probably inadvertently, by the fact that on page 7 of the employers bulletin, published by the Inland Revenue on 11 May 2002—importantly, before the passage of the Bill—there is an item rather unoriginally and prosaically entitled, ''The future's bright, the future's e-payroll''. It goes on to say:

    ''All employers will have to send their year-end returns and forms electronically from May 2010.''

That is a direct breach of the promise that the Paymaster General made in her reply to her right hon. Friend the present Secretary of State for Trade and Industry in September 2000.

We do not believe that the Government have made a compelling case for the U-turn that they have performed. It is in the name of choice and a permissive approach, rather than instruction, prescription and compulsion, that I commend the amendment to the Committee. I save myself a little bit for other amendments to the clause to which we need to turn in due course.

Previous Contents Continue

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2002
Prepared 25 June 2002