My Lords, it is a matter of great regret to me that, because Brexit is such a dominant issue in our politics, I often find myself in opposition to my noble friend Lord Forsyth. It is therefore a great pleasure to be able to say how much I admire the way he has chaired the Economic Affairs Committee and its sub-committee. The fruit of his chairmanship has been shown in the considerable media attention that our reports receive. They receive it not only because a certain amount of effort is put into obtaining that coverage but because they deal authoritatively with matters of topical and widespread concern, and in a detailed fashion that demands answers. The Government—HMRC, on this occasion—have largely responded in the same spirit. I do not by any means accept all the points made by HMRC and shall come to those in a few moments, but the quality of the response has been rather good.
That leads me to make a general remark. In inquiries and debates of this kind, we inevitably focus on issues of concern and matters that have gone wrong; that is what we are for. But, having been paying taxes of one sort of another for the last 60 years now, on the whole I have found the Inland Revenue—latterly HMRC—quite reasonable to deal with. My affairs have certainly been simple compared with those of many businesses, including many small businesses, but in my relationship with it over many years I have not found HMRC difficult to deal with. I have found it reasonably sensible and understanding of problems that have arisen. It is invidious to compare one public-facing government department with another, because their functions are very different, but if one compares HMRC’s record with that of the various departments which at different times have had responsibility for social security, HMRC emerges rather well from any such comparison—perhaps particularly so at the moment.
My noble friend Lord Forsyth went through the recommendations and details of the two reports and there is no point in members of the committee following each of the points that he made, so I shall confine myself to very few. I agree with his strictures about the pace at which Making Tax Digital is being introduced and I feel that this is an example of the problems that arise when those who work for very large organisations, with a wealth of specialist expertise, have difficulty in understanding the way in which those who have small businesses and do not have very much expertise at their disposal actually live.
Many years ago now, I was chairman of the Civil Aviation Authority, which is a very fine body. We dealt a great deal with small airlines, as well as with large ones. I remember being struck by how difficult some of the officials at the CAA found it to put themselves in the position of people running small businesses and understanding the pressures on them. In the case of Making Tax Digital, we have another example of that.
Having said that, however, the Government have a responsibility to encourage the digitalisation of the economy. The process of introducing taxes is one way they may do that, so I recognise that fact.
So far as the other proposals are concerned, on treating taxpayers fairly I applaud the Government’s acceptance of our view that HMRC should do more to publicise action against promoters of tax avoidance schemes. These schemes are of course promoted to boost the profits of the advisers, sometimes to the very great disadvantage of the clients of those firms, who get into trouble later. The important thing here is to change the risk-to-reward ratio to make it clear to the promoters that they are running great reputational risks by plugging schemes at the outer limits of what is permissible, or go beyond what is permissible.
By contrast, I greatly regret the Government’s rejection of our proposal that naming and shaming should be restricted to those who have actually broken the law, as distinct from those engaged in legal activities of which HMRC disapproves. I realise that that naming and shaming is not done casually, and that various steps must be gone through before HMRC goes public in these matters. But the practice of naming and shaming people who have not done something that is, or has been demonstrated to be, illegal seems contrary to the basic principle of natural justice. It is also in line with the deeply objectionable current practice of using innuendo and denigration to generate accusations and change behaviour. This is not something a government department should participate in. It is dangerously close to the way the police and others have behaved in the case of sexual allegations, the most extreme example of which is that of Wiltshire Police and Ted Heath.
I also regret the out-of-hand rejection of the proposal to give the First-tier Tribunal the power to conduct judicial review. I accept that, as HMRC says in its response, the Ministry of Justice and the judiciary would need to be involved in reviewing the need and mechanism for such a change, but the terms in which the rejection are couched show no recognition of the reasons for the recommendation. They are to try to even out the balance between the small taxpayer on one hand and the large government department on the other. It would have been helpful if rather more detail or meat could have been given in explaining why this is such a bad idea.
In general, we must recognise that we are dealing with a government department that has a good record. We are putting forward proposals to improve it and to try to ensure that those who work for large government departments, with all the expertise at their disposal, show a greater understanding of the position of small businesses and individuals who lack those advantages.
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