Finance Bill

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Mr. Bercow: My right hon. Friend has rightly picked up on a point to which I did not refer; namely, the reference to specified persons. If one considers the clause, there is further reason for anxiety that there will be different categories of specified person. Specified persons will not necessarily all be equal to one another. In subsection (7)(c), the Government arrogate to themselves the power

    ''to make different provision for different cases''.

There are different types of specified person. What is their nature, and how will they be treated differently? We are none the wiser.

Mr. Jack: I could, but I will not at this stage go through much more of the Bill, partly because I suspect that I might be wandering out of order.

Mr. Luff: I would encourage my right hon. Friend to do that, because subsection (8) goes to the nub of our concerns about the clause:

    ''the imposition on any person''—

that is who the specified person is—

    ''of any requirement or the issue to any person of any request''.

There are extraordinarily sweeping powers in the clause.

Mr. Jack: I am grateful to my hon. Friends for embroidering and adding to my point. In the spirit of modernising our tax system and using the benefits of the systems run by Electronic Data Systems on behalf of the Inland Revenue, I would have liked the Government, first, to produce a document showing how the development could be introduced over time, together with a draft of the regulations so that people would have had an opportunity to consider what they were being asked to approve; and secondly, to consult on it and deal with all the proper points of security, technical compatibility and all of the electronic items,

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all of which could have been discussed. I do not think that the report to which others have referred went into the detail that is now being invoked by clause 132. I have many concerns; for example, it is difficult to see where dispute resolution comes into the process.

Let me conclude by saying why I am concerned that the Government may be rushing their fences. All members of the Committee receive payments from the House of Commons Fees Office from time to time. I received a piece of paper advising that such a payment had been sent to me electronically. I searched for it on my bank account, but it did not appear. I rang my bank, which told me that there must have been an error that I should check. To cut a long story short, a check was run from the Fees Office via the Bank of England, which showed conclusively that the electronic data had arrived at my bank, but my bank continued to deny that the transaction had ever taken place. I was left in the middle in an electronic no-man's-land. I could not personally, as a citizen, prove absolutely that the transaction had taken place. I could tell my bank that the paying authority had the authority of the Bank of England that the transaction had taken place, but the bank still denied it. Eventually, it accepted the force of the argument, but that is one example of what can go wrong in the world of electronic transmission. I shall not labour the point, but it illustrates that if the Government compel citizens and businesses to go down that route, they must be able to demonstrate, before pressing the e-button, that they have their act together and can answer all the questions that people are rightly posing.

There is no compulsion in this country to vote, yet we are being invited to make an important transaction between the world of business and the Revenue an irrevocable process with the weight of law but without publication of the details of the regulations and without consultation on all the questions that have been asked. On this occasion, supportive as I am of the use of electronics in the Revenue, I believe that this is a misjudgment by the Government.

Rob Marris (Wolverhampton, South-West): That was an interesting intervention from the right hon. Member for Fylde (Mr. Jack). Like him, I support the Government's encouragement for businesses and individuals to be up to date with the e-revolution. However, I have reservations about the compulsory aspect at this stage. I seek reassurance and an explanation of ''specified persons'' and ''specified information'' in subsection (1), although ''specified information'' is adumbrated later in the clause.

The Paymaster General said that we are discussing PAYE, but I do not see that in the Bill and I should like reassurance on that, as well as on the software, to which the right hon. Member for Fylde referred. I am a member of the Select Committee on Work and Pensions, which is all too aware that the software for the Child Support Agency let the Government down on 20 March when the change in the Child Support Agency had to be pulled. That is not the only software difficulty experienced by the Government and, indeed, the private sector has also had huge difficulties with software and computer systems.

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The explanatory notes refer to 2010, but that date is not in the Bill. I should like some reassurance from the Paymaster General. I support the project in terms of encouragement, but there are some i's to be dotted and some t's to be crossed.

Mr. Howard Flight (Arundel and South Downs): I shall be brief. The various reasons why people may not want to use electronic communication have been set out and I want to stress the point made by my right hon. Friend the Member for Fylde about evidence, which is crucial to businesses' and individuals' dealings with the Revenue.

It is blindingly obvious to me that many businesses and individuals will use electronic communication in future or are already using it. If they want to do so, that is fine, but the Soviet habit of compulsion that is creeping into the Government is absolutely unacceptable. Death and paying taxes are perhaps the two most important and greatest certainties of life. The Paymaster General may respond by saying that the clause does not matter because the negative resolution procedure is available, but everyone knows that that is bogus. The reality is that the clause would give the Revenue the power to insist with fines of £3,000 for anyone who does not do whatever it insists on. I am sorry, but that is completely unacceptable in a free society.

Mr. Hendrick: The hon. Gentleman talks about a free society. He will remember, as I do, the days when people were paid in cash. It became the norm that people had bank accounts and were paid electronically, as the right hon. Member for Fylde referred to earlier. That was not seen as some big infringement of civil liberties. In the same way that electronic systems occasionally go wrong, pay packets occasionally went missing. Why is the provision such a big infringement?

Mr. Flight: With the greatest respect, the hon. Gentleman seems to have a complete mental block as to what the essence of liberty is. Many people still are paid in cash. If people want to be paid in cash, they can be. That is an arrangement between them and their employers. It has nothing to do with their dealings with the state. The payment of tax is a particularly important issue. It touches on people's private affairs, and is potentially vulnerable to leaks and so on. The Paymaster General's letter to the right hon. Member for Leicester, West was entirely right and I shall repeat it:

    ''I confirm that is not Government policy to force people to use the internet . . . we are committed to offering them the choice of electronic services.''

That is what we are about as a society. The clause is outrageous, and the Committee should throw it out.

Mr. Mark Hoban (Fareham): I support the amendment, which would make the requirements to file electronically permissive rather than mandatory. The Paymaster General muttered from a sedentary position earlier that about 94 per cent. of businesses have access to the internet. It is very important that they have access, but businesses use the internet for different purposes, and they are conscious of the risks attached to using the internet for transactions. My

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right hon. Friend the Member for Fylde mentioned the issues concerning the electronic transmission of data, and the failure of that in the transaction to which he referred. Other businesses may have concerns about the security of the information that they have transmitted. Hon. Members will be aware of the problems that the Inland Revenue had with its software for the online filing of self-assessment, when it became apparent that people filing returns had inadvertent access to the data of other taxpayers. If we are not sure that the systems will be secure, people will not want to use the internet to transmit end-of-year returns. The security of data once they have been transmitted is a legitimate concern and a good reason why the amendment moved by my hon. Friend the Member for Buckingham should be accepted. The provision should be made permissive rather than mandatory.

Dawn Primarolo: First, it is important to put the debate, and the purpose of the Carter review, in context. The previous Government commissioned work and tried to pay particular attention to the compliance cost to business in running the PAYE system. The clause refers only to the PAYE system. That is for employers with employees who are returning their tax and national insurance information. The previous Government tried very hard in the circumstances, without huge success, which reflects the technological developments of which the Government are now able to take advantage. The previous Government tried to reduce compliance costs, particularly for small and medium-sized businesses, but were unable to do so.

The current Government have continued to look specifically at how compliance costs for smaller businesses could be reduced and businesses, in particular smaller ones, could be empowered and provided with methods of developing their business potential through the use of new technologies that we are developing. The Carter review was commissioned as an independent review to discuss with all the representative bodies that have been referred to today, and the small business representatives, how progress could be made on achieving the dual objectives that everyone wanted: how to try to reduce compliance costs and how to encourage and provide for the greater use of e-technology.

12.45 pm

The Carter review, having consulted widely, reported to the Government and that report was published. We then asked for further comments. The Government propose a package of incentives spread over five years to encourage small employers to switch to electronic filing and realise the benefits of IT support for the payroll. The Government are committing, over those five years, £420 million of incentives to be paid to intermediaries. We already provide, through the Inland Revenue sites, the opportunity for direct returns through PAYE, which have caused none of the problems to which hon. Gentlemen have referred—Armageddon has not occurred for those businesses. However, many businesses, especially small ones, have told the

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Government that they want to work through intermediaries.

The response to the review was to pay all the money in incentives, but not have the final benefit of electronic communication until 2010. Carter recommended 2007, but the Government decided that we need a little longer and chose 2010. The reason is so that clean data are provided. One problem for small businesses and their representative bodies, mentioned in many representations made during the debates on this Finance Bill, is that there are many reasons why correct information is not provided—paper floating around, returns sent to the wrong place, returns not sent in on time—which can lead to incorrect data being stored by the Inland Revenue. What happens then is that inquiries can occur that need not have been made, causing more compliance costs and pressure on a business; or service to the business can be delayed while there are endless investigations to piece all the data together, or a completely wrong assessment may be made. Small businesses were widely consulted, on this matter specifically—hon. Members can see from the Carter report, which is in the Library, exactly what they said and that it was not only the Government contributing to the review—and concluded that they wanted effective, quick and accurate service from the Inland Revenue on their PAYE. They wanted to ensure that they could attempt to reduce their compliance costs and they welcomed the opportunity to develop their business through e-commerce.

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