Clause 317 - Functions

Proceeds of Crime Bill – in a Public Bill Committee am 4:45 pm ar 15 Ionawr 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs) 4:45, 15 Ionawr 2002

I beg to move amendment No. 480, in page 183, line 35, leave out paragraph (e).

Photo of Mr Bill O'Brien Mr Bill O'Brien Llafur, Normanton

With this we may take the following amendments: No. 481, in page 183, line 36, leave out paragraph (f).

No. 482, in page 183, line 37, leave out paragraph (g).

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs) 5:00, 15 Ionawr 2002

Clause 317 deals with functions. When I read it, I fully understood why the director might take over the functions of the Board of Inland Revenue in so far as it related to income tax, capital gains tax, corporation tax and—just about—national insurance contributions. However, when it came to statutory sick pay, statutory maternity pay and student loans, I wondered what lay behind the provision. Arguing against myself—as, at any rate, the amendment is probing—I acknowledge that administrative matters may have to be taken into account in relation to those elements in deciding the others, but I could not imagine the director taking a great interest in those three areas on their own. The best that I can do is listen carefully to what the Minister has to say, and when I am more enlightened, I may chip in and ask some more questions.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

Before the Minister responds, I want to say that I was somewhat less charitable than my hon. Friend the Member for Beaconsfield when we discussed this matter. My initial reaction was that the draftsman must have a vivid imagination concerning the kind of thing that could be the subject of criminal behaviour. Although I have been involved in fraud cases relating to national insurance contributions on one or two occasions during my practice at the Bar, I certainly have not been involved in cases relating to statutory maternity pay or sick pay. It will take a great deal for the Minister to convince me of the relevance of subsection (1)(e), (f) and (g) to the Bill. It seemed to me that a sledgehammer was being used to crack a nut. The provision seemed to fall into the category about which one could say, ''If it is not necessary for it to be there, it is necessary for it not to be there.'' I can just about agree with the inclusion of paragraph (d), on national insurance contributions—although even that is pushing it a bit—but the provision is supposed to be hitting at serious criminal wrongdoing. I find it difficult to understand why paragraphs (e), (f) and (g) should be in a Bill of this sort.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

The hon. Gentleman should not underestimate other people's ingenuity. Some time ago, there was a case that he may have read about in the press, involving individual learning accounts,

which on the surface was surprising, but it was lucrative none the less. We are talking about serious people involved in serious activities. However, that is not necessarily the reason for the inclusion of the matters under discussion.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

I understand why the Minister raises that issue. I was equally concerned, as were all hon. Members, of every party, about the serious fraud involving individual learning accounts. As the Minister has raised it, it would be relevant for me to say that if the Government had taken a bit more notice of some of the concerns raised by my hon. Friends about the way in which the individual learning accounts scheme was set up, they might not have got themselves into quite such a mess. However, I shall not pursue that, as it would be wide of the debate.

The issue under discussion is taxation powers, which is different from organised fraud by supposed providers of individual learning accounts.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

If the hon. Gentleman is inviting me to believe that he previously flagged up the issues, I would want to look into that in some detail, based on his past record.

Clause 317 was drafted to provide clarity about which taxation functions the director is to have and which are not appropriate. An important feature during the development of the Bill has been the maintenance of a single, national and consistent taxation system. The amendments would result in a variation from that, as the director would not be able to undertake such taxation functions. It would also be extremely difficult for the director to take on general revenue functions in relation to the subject as an employer, without taking on SSP, SMP and student loans, as they are part and parcel of the PAYE process. To attempt to disentangle such functions from the process would be an unnecessary and time-consuming activity.

The clause will provide for the Revenue to carry on with certain functions if that is more appropriate. Even when the director has served notice on the Board of Inland Revenue, the Revenue is not divested of such functions and may continue to operate in the delivery of certain tasks, such as the more resource-intensive routine functions, which will free up the director to focus on using his taxation functions in the best way to contribute to the reduction of crime.

When speaking to earlier amendments tabled to clause 311, I said that the Board of Inland Revenue had no role in the tax affairs of a specified person or company to the extent set out in the notice. That is not, in fact, the case: the director and the board may both exercise functions when that is appropriate. I wish to put the record straight so that there is no misunderstanding about the Bill.

Photo of Mark Lazarowicz Mark Lazarowicz Labour/Co-operative, Edinburgh North and Leith

Will the Minister clarify one point that may deal with the concerns expressed by Opposition Members? Am I right in thinking that the subsection (3) will considerably restrict the sort of widespread use of the Bill that they have described? Will it not provide real protection against the possibility of the Bill being misused as they have hinted might happen?

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

My hon. Friend is right. The last thing we want is for the director to wander into areas that are not appropriate to his functions. We have a list of matters for which he may take responsibility. We also have a list of matters for which he should most definitely not take responsibility. It is not our intention to tie the director to dealing with statutory sick pay and other such matters, but they are part of the system. To disentangle them would be a lot worse than dealing with them as they are dealt with now, under the Revenue's procedures. That is our basic argument. The hon. Gentleman said that it would take a tremendous argument to persuade him that such provisions were justified—but the matter is relatively simple, in that those are the areas that it is necessary to include so that the director can pursue his functions.

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok

The Minister has explained well why he would keep paragraphs (e), (f) and (g). I understand that most of the roles are covered by the Board of Inland Revenue, but given that corporation tax is listed under subsection (1), should not VAT also be listed? Some complex fraud and financial arrangements will include cheating on VAT. To some extent, VAT will be indistinguishable from income tax, capital gains tax and corporation tax. All such matters should surely be taken together. Will the Minister expand on that?

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

My hon. Friend is right. We are giving the director Revenue powers. VAT is not a Revenue function, but a function of Customs and Excise, whose powers are different from those of the Revenue. If we thought it necessary to involve the director in Customs and Excise powers, too, we would have included such a provision in the Bill and we would have had to justify it, but that is not a case that has been made to us.

As I have said, there is a case for pursuing the proceeds of crime by giving the director Revenue powers. However, VAT and the rest fall under the powers of Customs and Excise, which will continue to use the powers that are appropriate to it. Customs and Excise was consulted when the Bill was being drafted. It had a wide input with regard to what should and should not be included not only in part 6, but in the whole of the Bill.

Statutory sick pay, statutory maternity pay and the recovery of student loans may, however, have a bearing on the true tax position of an individual who is the subject of the director's inquiries. For the director to be able to establish the true tax position, he will need to have the full range of general revenue functions.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

I was not persuaded by the Minister's first point, but I understand that there may be substance to his second point. Rather than including the existing paragraphs (e), (f) and (g), we could follow the logic of the intervention by the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz). Will the Minister say why there should not be a new subsection (3)(g) saying that the director should not waste his time investigating the minutiae of statutory maternity pay, statutory sick pay and student loans? That would be another way of addressing the point.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

I do not think that there is a necessity for a new subsection (3)(g) saying that the director should not waste his time. Having taken on the responsibility for the matter, the director has to be able to make an assessment. When the individual concerned is an employer, the director has to be able to take into account the way in which the other issues, as well as income tax, are being dealt with. It is self-evident, therefore, why the list and the safeguard list are written as they are. Clearly, there are areas into which the director should not be required to go, nor would he be wanted there.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

This has been an interesting debate. As my hon. Friend the Member for Surrey Heath said, the most cogent argument presented by the Minister is the need for the director to take such issues into account. When a tax assessment is issued, such factors will have to feature when we are dealing with an individual who is, for example, an employer. I can see that argument.

In the context of taxing money suspected to be the proceeds of criminal activity, it is a fairly far-fetched idea—although still possible—that connected to the criminal activity there would be a legitimate business that provided for statutory sick pay and statutory maternity pay. I am not sure where student loans fit into such an example. However, that illustrates the complexity of the system.

Will the Minister give us an assessment of how many staff would have to be transferred from the Inland Revenue to the director's office? I suspect that, to administer the system, that is what would happen, because it does not sound as if only the director and a couple of other people would be needed. In view of the overall complexity of the tax system, it seems more likely that a discrete department would have to be set up. In taxing individuals and companies in that way, the objective is not only to locate particular sums and ask for 40 per cent., but to take into account the complex tax regulations that cover issues such as sick pay and maternity pay in determining the correct figure.

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath 5:15, 15 Ionawr 2002

What my hon. Friend rightly says leads me to a further thought. In light of our increasing knowledge about the increasing complexity of the system, might the Minister be forced to review the compliance cost assessment that the Government must provide for all Bills? My hon. Friend and I might want to re-examine that in light of what he has just said.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

Perhaps the Minister would like to intervene or comment on that before I finish speaking. My hon. Friend is right, and I hope that the Minister will forgive us for raising the matter in this way. The Bill is Government legislation, and we want it to work, but the more I examine it, the more complicated the Revenue functions seem to be. The Minister may, however, say that the provision has not caused a problem in Ireland, which may be a compelling reason for not worrying about it.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

We spoke earlier about the need for a memorandum of understanding on how the Revenue will work with the director. The jobs involved must be

done anyway. Therefore, regardless of whether Revenue staff do the routine jobs so as not to involve, and unnecessarily increase the number of, the people working for the director, the director will work the matter out in a common-sense way with the Revenue.

The hon. Gentleman should not minimise the issues involved. I should have thought that one of the most regular ways in which criminals try to legitimise their income is to set up front companies that employ people, pay statutory sick pay and do all the other things that companies must do. That is exactly how such activity goes on, and will be found out.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

The Minister is right, and I do not disagree with his analysis. However, he may agree that if a criminal sets up a front company for the purpose of laundering his assets, and the director cannot seize those assets under part 5 or the confiscation provisions in part 2, the mere fact of setting up a front company would normally imply that the criminal involved is prepared to pay tax in the ordinary way to the Board of Inland Revenue. However, we are discussing the director's use of taxing powers in order to tax money that in ordinary circumstances might be expected to escape the attention of the Board of Inland Revenue. I may have misunderstood the matter, but that is what I would normally assume lay behind the provision.

I accept that, as the Minister said earlier, as the director will focus on criminality and the proceeds of crime, he may turn his attention to a front business that is not only fuelled by ''funny money'' but does not pay tax properly. On the whole, history has shown that many people who engage in criminality do not pay their taxes, and try to minimise or evade tax generally, as well as having acquired their money unlawfully and illegitimately in the first place. I do not believe that there is a great deal between us, but if a business exists, the Board of Inland Revenue will try to tax it and will take all those factors into account.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

Yes, but the most relevant point is the focus. There are many small businesses in my constituency, and as long as they order their affairs so as not to draw undue attention to themselves, the Revenue will not single out a particular shop or small business that fronts a scam and launders money derived from it. However, the director may get there, because of other intelligence that he has. The main issue is the focus.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

The Minister is right.

I have a cottage on the River Thames, and when I am staying there, I occasionally notice moored in the local marinas very large pleasure craft that never seem to do very much. They change hands from time to time, and I do not suppose that I will be spilling the beans if I mention that there are anecdotal rumours that money is often laundered by acquiring and selling those large assets. Such transactions might generate capital gains tax, for instance.

Large pleasure craft—

Mr. Davidson rose—

Photo of Mr Nick Hawkins Mr Nick Hawkins Ceidwadwyr, Surrey Heath

Do they have drawing rooms?

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I do not know, but as they are often described as gin palaces, I suspect that a drawing room is the last thing they would have.

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok

I was going to ask what the rate of exchange was between a cottage on the Thames and sheep and cattle? How many sheep and cattle did the hon. Gentleman's relatives have to steal to fund the purchase of his ill-gotten gain? Will the Minister consider whether his cottage can be reclaimed by the state?

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

My family benefits from the fact that its more nefarious activities were brought to an end by the union of the crowns in 1603. I am glad to tell the hon. Gentleman that as a result of that of that union, the people in the borders who were not deported to Northern Ireland, or, subsequently, to America—and who were not hanged, either—succeeded in transforming themselves into legitimate business men. That happened such a long time ago that even I would find it difficult to distinguish, for the benefit of the hon. Gentleman, between the assets that I own that are derived from criminality, and those that have subsequently been lawfully acquired.

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok

Is that the case for the defence?

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I return to the debate on the clause.

The Minister has persuaded me that I must not interfere with statutory sick pay, maternity pay or student loans, although I will be interested to see how those provisions work in practice. However, I am conscious of my own ignorance, and if those who sit in the other place have greater expertise, they will be able to draw on our discussion to point out any deficiencies that they identify in this part of the Bill.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 317 ordered to stand part of the Bill.