Treasury Committee Press Notice No. 55

Session 2003-04 11 November 2004


The merger of Customs & Excise with the Inland Revenue into a single tax collection agency should save money on administration, and be of benefit to the taxpayer, says a report published today by the Treasury Committee .

The Committee welcomes the decision to unite the departments, which it recommended back in 2000, but suggests a detailed analysis of expected costs and benefits should be carried out as soon as possible.

MPs also point out that significant risks are attached to a move of this size. They warn service may be affected during the upheaval, particularly when taking into account plans to reduce staff by 12,500.

Taxpayer confidentiality must also be upheld. The Committee supports plans to block Treasury officials and special advisers gaining access to individual tax records, and recommends this principle should be put into the Bill.

The Committee also notes that the new Executive Chairman, David Varney, reports to three different Treasury Ministers, an arrangement it describes as "cumbersome" and which it recommends be reviewed.

Michael Fallon MP, Chairman of the Treasury Sub-committee which undertook the inquiry, today said:

"The merger should provide benefits to both taxpayer and government. But tax receipts and the level of service to the public will be at risk as a result of the disruption and the decision to cut 12,500 jobs. Moving Revenue and Customs officials into the Treasury building also raises concerns about the confidentiality of tax records and we want this safeguarded in the Bill. We will keep a close eye on both these issues."

Note for Editors

Mr Michael Fallon is available for comments on the report on 0797 367 6506. The Report can be purchased from Stationery Office Bookshops (tel: 0870 600 5522). The full text will also be available on the Internet ( at or before 3.30 pm today.

Further Information

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List of the Report's conclusions and recommendations

The case for merger

1. Our predecessors concluded in April 2000 that the merger of the Inland Revenue and Customs and Excise would "improve compliance with taxation, reduce businesses' compliance costs and reduce the Government's revenue collection costs" and recommended that such a merger should proceed. We are pleased to note that the Government have now accepted that recommendation. (Paragraph 10)

Expected costs and benefits

2. Witnesses supported the proposed merger as a logical development that should in principle provide benefits to both taxpayers and the government. We hope this proves to be the case in practice and that a detailed analysis quantifying the expected costs and benefits will be carried out as soon as practicable. (Paragraph 20)


3. Whilst desirable in principle, merging the revenue departments is a major challenge involving significant change over a prolonged period. The Treasury and the revenue departments acknowledge that this process carries risks, but are confident they can be overcome. Other witnesses expressed doubts that existing levels of service could be maintained, particularly in view of the significant staff reductions that are planned. We note these differing views. (Paragraph 30)

4. We consider that tax collection and customer service must remain the departments' first priority during the merger process. We recommend that this be clearly articulated by Ministers and senior management to ensure that in the event of conflicting priorities it is clear which takes precedence. (Paragraph 31)

Legislation: confidentiality and powers of the new department

5. Merging the revenue departments to create Her Majesty's Revenue and Customs requires legislation. It appears that a two-stage approach is to be adopted. The bill to create the new department will transfer the existing powers to require information, gain access to premises and so on unchanged. Consideration of what powers the new department needs to discharge its functions and whether they are proportionate and reasonable is to be delayed to a later date. (Paragraph 45)

6. We recognise the pragmatic nature of such an approach to minimise any delays to the merger and to reaping the benefits that are expected from it. However, we are concerned that the powers the new department needs to discharge its functions should be subject to proper parliamentary scrutiny. We would therefore welcome a firm commitment from the Government to introducing 'second stage' legislation as soon as possible and recommend that this be in the form of a draft bill. (Paragraph 46)

Tax policy-making

7. The Treasury has assumed responsibility for tax policy development and has an additional 150 staff, half of whom have transferred from the revenue departments, for this work. We endorse steps to strengthen the Treasury's capacity in this area, but note the concerns that the arrangements adopted may detach policy-making from implementation and operations. (Paragraph 52)

8. The transfer of responsibility for tax policy development to the Treasury and the move of some Customs and Excise and Revenue staff to the Treasury building have raised concerns about confidentiality. We welcome the commitment given to maintaining taxpayer confidentiality and the assurance that there will be no access by Treasury officials or Treasury Ministers or special advisers to individual tax records and recommend that this principle be carried forward into the bill. (Paragraph 53)

Ministerial accountability

9. We welcome steps to modernise the accountability arrangements that will apply to the new department. We support the introduction of a Framework Document setting out who is accountable to whom, for what, in the new department, and the proposal that the Chancellor issue an annual Remit to the Executive Chairman outlining the department's main new and ongoing tasks. (Paragraph 56)

10. However, we note that the Executive Chairman will be reporting to three Treasury Ministers on various aspects of the new department's work, an arrangement which, at least in theory, appears cumbersome. We recommend that this aspect of the new arrangements be reviewed in the light of practice after the new department has been created. (Paragraph 57)