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Viscount Astor: I was happy to add my name to this amendment put forward by the noble Baroness, and she has explained the reasons extremely fully. I do not need to add anything, therefore, except that I note that we are also speaking to Amendment No. 90 tabled in the name of the noble Lord, Lord Williams of Mostyn, to which the noble and learned Lord will no doubt speak momentarily. I looked carefully to see whether that gave any help to the concerns that we have on the clause, and I am not sure that it really does. However, I shall listen with care to the noble and learned Lord.
Lord Skelmersdale: I, too, looked at subsection (4) and, as is my wont, being occasionally somewhat dyslexic, I read it backwards. I discovered very quickly that the whole of subsection (4) hangs on subsection (1). The only difference I observed from subsection (1) was the fact that the orders may be made for producing an exception for the non-disclosure provisions. Apart from that, no orders need to be made, as I understand it, because they are already there in the exemption given by subsection (1). In that case, what do we want all this for at all? Would it not be far better to put the non- disclosure provisions in paragraph(c) into subsection (1) and do away with this subsection altogether?
The Earl of Northesk: I rise to support the noble Baroness, Lady Nicholson, and my noble friend Lord Astor in the amendment. I have nothing to add to their argument except one small thought. It struck me that it may be intended to accommodate a number of "what if?" scenarios; in other words, attempts to pre-empt technological advances before they have taken place. I would contend that there are more appropriate and better ways of achieving this object on the face of the Bill rather than by the subsection as currently drafted.
Lord Falconer of Thoroton: If I may say so, a formidable case would appear to have been put up in relation to Clause 28(4). However, with respect to all the excellent speeches that have been made, it appears to some extent to be based upon a slight misunderstanding of the inter-relation between Clause 28(1) on the one hand and Clause 28(4) on the other. If I may, I shall deal with the whole clause to try to explain what we are trying to achieve with Clause 28(4).
With differences of detail between subsections (1) and (3), their basic approach is that where in the individual cases the purposes referred to--prevention and detection of crime, and so on--would be prejudiced, there are exemptions from the requirement to apply the first principle--fair and lawful processing--and other particular principles or provisions of the legislation referred to in Clause 28(1). The one that is important in this context is the Schedule 1, Part II, paragraph 2 requirement for information about processing to be given to data subjects when data about them are obtained from them or from third parties. You can have an exemption under Clause 28(1) in relation to that sort of data.
The common feature of subsections (1) to (3), and indeed the theme which runs through the equivalent provisions in the present data protection law, is that the exemptions shall apply where the crime, offender and taxation purposes would otherwise be likely to be prejudiced in the particular case. There are no general exemptions, for example, on the basis that some of the data are of a type which might prove to be relevant to crime, offenders and taxation. It meets the point that was made a few moments ago to the effect that, "Why don't you just bung the non-disclosure provisions referred to in Clause 28(4) into Clause 28(1), and that meets the point?". The answer is that they are dealing with different things. Clause 28(1)deals with an individual case where, for example, the prevention or detection of crime would be prejudiced, or would likely to be prejudiced, by complying with, for example, Section 7. Clause 24(1) gives the Secretary of State power to exempt information in a general area, not on a case-by-case basis.
Lord Falconer of Thoroton: I was going to go on, but please interrupt me if I have not explained it adequately. Subsection (4), as proposed in the Bill, deliberately widens the approach of Clause 28(1) to bring in cases where a category of information may prove to be relevant to crime, offenders and taxation but it is not known at the time whether or how much of it will be relevant.
I stress that any exemptions under subsection (4) would not extend beyond crime, offenders and taxation and that they would have to be set out in an order subject to affirmative resolution. Ministers would have to bring forward a particular proposition and justify it to Parliament. It is not, therefore, an open gateway for the Executive to pass through as it likes. Nothing could be done without explicit parliamentary approval.
As Committee Members will know, the Government have tabled an amendment to remove one part of subsection (4). I will turn to that later, and deal first with the fundamental question raised by the amendment of the noble Baroness, Lady Nicholson of Winterbourne--why have we included the provision at all--having explained how it relates to Clause 28(1). Essentially it is to protect important functions, carried out on behalf of the public and which benefit us all, which need to be balanced against the protections in the Bill for individuals in the Bill--
Lord Falconer of Thoroton: The immediate reasons for bringing forward the proposal relate to the collection of taxes. Without the protection afforded by subsection (4), key areas of the Inland Revenue's business, which are central to the fight against tax evasion and fraud, would be put at risk. This is particularly so under the new tax self-assessment system which is now being introduced. Given the extent to which data controllers nowadays hold information on computer or in structured manual collections, these problems may not have been so apparent in 1984 as they are now.
The key issues are that it is likely that the Revenue would have to tell people about whom it has received information from third parties, for example, from banks, through the use of its statutory powers, what that information was and what the Revenue intended to do with it. It may not be able to receive information provided voluntarily by third parties which is necessary to identify "ghosts" and "moonlighters" and help in identifying tax dodgers. It will not be able to maintain the confidentiality of systems designed to identify falsely completed tax returns.
Disclosure of some of the information the Revenue holds and indications of how it identified false tax returns would enable rogues to arrange their tax affairs in such a way as to avoid inquiry and therefore detection. It would be tantamount to giving burglars a wiring diagram of the alarm system. In other words, if you do not have a general exemption in relation to certain specified sorts of information, people who wish to dodge their taxes would simply ask for particular categories of information and then use that as a blueprint for how to dodge their taxes.
Your Lordships may well ask whether these concerns about tax evasion and fraud are sufficiently serious to justify this clause. I believe they are. Tax evasion and fraud harm those honest citizens who pay their proper share of taxes: the tax burden evaded by the few falls on the many, so that every honest taxpayer subsidises the tax-evader's lifestyle. Furthermore, the infrastructure of a civilised society, transport and roads, schools, health and social services that we all rely on, the policing, the social housing, the system of law and order which protect our peace of mind, our families and our property, are all funded by tax. Tax evasion means less revenue to fund these services.
A couple of examples may help your Lordships appreciate the amounts of revenue at risk here. In a recent Inland Revenue project, information obtained informally from a trade body led to investigations which yielded nearly £70 million in additional tax. In two Revenue initiatives in the retail sector, tax-relevant information provided voluntarily by third parties suggested a potential loss of tax of about £100 million. Important sums of money could well be lost if there is not at least this power.
While it is not possible to provide precise figures for the amount of tax at risk if the exemptions were not available, it is fair to assume that these will be substantial and that those who have something to hide would soon find out how to gain access to Revenue information.
Honest members of the public need have nothing to fear from the power and I believe they would welcome this measure to safeguard initiatives to act against the small minority who cause significant loss to the public purse through tax evasion and fraud.
Your Lordships have also asked why we seek a general power to exempt by order. The reason is that the needs of the Inland Revenue to operate in the public interest are the most immediate and obvious example, but practices do and will change elsewhere in government and we may come across similar situations elsewhere. As indicated earlier, both the Inland Revenue case and any other would have to be justified individually to Parliament, and the exemption could not be made unless Parliament agreed through affirmative resolution.
I therefore invite the Committee to reflect on the reasons why we included this provision. There is nothing sinister about it at all; we have to reconcile the interests of individuals with the wider public interest. This discussion is not really about the power of Inland Revenue officials but about the interest we all have as individuals in crime being tackled effectively and in the tax collection system working fairly and in the interests of the law-abiding majority. On that basis, and in recognition of the Government's more targeted amendment, to which I will come in a moment, I invite the noble Baroness to withdraw her amendment.
Just to repeat, the important distinction between Clause 28(1) and Clause 28(4), which gives the reason for Clause 28(4), is the need to deal with categories of information rather than on a case-by-case basis, which is all that Clause 28(1) is concerned with. With the analysis I have given about what the prospective risks are of people obtaining information from the Inland Revenue as to the information it has, it seems to me that an extremely strong case can be made for the existence of the exemption power. Used responsibly, and subject as it is to parliamentary scrutiny, it is an appropriate safeguard in relation to the abuse of the tax system through the data protection principle which will occur if there is not such an exemption power.
With respect to what was said by the noble Viscount, Lord Astor, it meets head on the point made by the Select Committee on Delegated Powers and Deregulation; namely, that Clause 28(4) would, on the face of it, permit the Secretary of State by exemption to cut the heart out of the provisions of the Bill by giving exemption in respect of the first data principle. Our amendment effectively prevents that, and meets the criticisms that have been made. I very much hope that that indicates an earnest of the Government's genuine intentions in this respect. In those circumstances, I shall move the government amendment in due course.
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