(i)  To carry out, as part of a fundamental expenditure review (FER), an examination of the revenue collecting responsibilities, including policy formulation and advice, of the Inland Revenue and Customs & Excise to determine whether the current structure of the two departments with the tasks assigned between them on the present basis gives best value for money.

  (ii)  To identify options for change and, for each option:

—  an estimate of the savings and costs involved;

—  the likely timescale in which net savings could be achieved; and

—  the main issues—including the implications for revenue and compliance, for deregulation, customer service and policy formulation—that would need to be addressed.

  (iii)  To identify in broad terms common areas of activity where improvements in efficiency, revenue and compliance, deregulation and customer service could be achieved without major structural changes.

  (iv)  To produce a note of the emerging findings by the end of October 1993, including recommendations for further more detailed work on the main options, to be completed by mid-December.

  I am writing in respect of a report comparing the practicalities of merging Inland Revenue and Customs & Excise and closer working mentioned in paragraph 1.9 of the Customs & Excise "Fundamental Expenditure Review: Final Report" of September 1994.

  The report was cited in the written evidence we received from Customs & Excise in respect of our on-going inquiry into the department (paragraph 3.18). Customs & Excise stated that "closer working has made much progress and secured many of the benefits of a merger that were considered in the FER. Moreover, the concerns raised then about costs remain valid . . .". In the light of these comments we wish to explore further how the costs and benefits of a merger of the two revenue departments were analysed in advance of the 1994 Fundamental Expenditure Revenue and the extent to which that analysis remains valid today.

  The Sub-committee requested a copy of the report during its evidence session with Customs & Excise officials on 3 November. On 17 November Customs & Excise refused out request and on 24 November the Clerk of the Sub-committee replied asking for information about the report, including the terms of reference and the facts on which advice to Ministers in the report was based. We were sent the extremely broad terms of reference on 26 November, but were told that the factual information we requested was unavailable. We questioned Dame Valerie Strachan on 29 November about this matter and were given an account of some of the conclusions of the report. Nevertheless, we have no means of validating Dame Valerie's evidence, nor of forming a judgement on the way in which the analysis of merger options was conducted, nor of assessing the relevance of the report's conclusions to the present debate without access to the full report.

  Customs & Excise have advanced three arguments in support of their stance on this matter. First, they have argued that the report constitutes confidential advice to Ministers. Since we have been given information about the way in which the report was prepared and the conclusions it reached I fail to see how the detail of the report could be considered so confidential that it cannot be divulged to a Select Committee. Secondly, we were told by Dame Valerie that the Sub-committee could not receive the report because it had been submitted to Ministers in a previous administration. While this argument may be relevant with respect to papers which have not been made available to Ministers in the present Government, there is surely no suggestion that you have not seen a report still cited as a justification for Government policy on a key area of administration. Thirdly, we have been told that the report is too old to be of relevance to the Sub-committee. If this argument is valid then I do not understand why it should have been cited by Customs & Excise in their written evidence but, regardless, the Sub-committee is best placed to judge the relevance of the report to our inquiry.

  Consequently, the Sub-committee would wish you, as the Minister responsible for Customs & Excise, to order that the report we have requested repeatedly from the department be made available to us immediately. It would be convenient if you could reply to our request by 8 December, so that we can take account of your response when you appear before us on 15 December.

30 November 1999

  Thank you for your letter of 30 November asking for a copy of a particular report looking at the practicalities of merging the Inland Revenue and Customs & Excise.

  As Customs officials have explained, the report to which you refer was confidential advice to Ministers of the previous administration. They have supplied you with a copy of the terms of reference, and although it was not possible to extract factual material about costs and benefits in time to include in John Lester's letter of 26 November to Mark Egan, Dame Valerie Strachan did give you an account of that factual material when she appeared before you on 29 November. I hope that has proved of some help.

  The convention of dealing with papers of this kind was last set out in a reply to a Written Question on 24 January 1980 when the then Prime Minister said:

"It is an established rule that after a General Election a new Administration does not have access to the papers of a previous Administration of a different political complexion."

  The current Government abides by this convention. I can confirm that, in keeping with that rule, the report has not been shown to me or discussed with me, nor have I asked to see it.

  I do not think that the sentence you quote from paragraph 3.18 of the written evidence submitted by Customs and Excise officials was intended to rely on the factual material on the report. The then Government concluded in 1994 that it would pursue a policy of closer working between the two departments. The present Government has also adopted this approach although, as I have explained, we have not seen the report and it did not form the basis for decisions of the present Government.

  Officials have tried to assist you by giving you the terms of reference of the report and by Dame Valerie answering further questions on the factual material but I cannot go further and give you a report which was confidential advice to previous Ministers and which has not formed the basis of the decisions of this Government. I will, of course, be pleased to answer questions on our approach to the question of whether to merge the two Revenue departments when I give evidence to you on 15 December.

8 December 1999

  Further to your appearance before the Treasury Sub-committee earlier today, and your letter of 8 December, I write on behalf of the Sub-committee to reiterate its disappointment that you will not make available to Parliament the report prepared by Treasury, Customs & Excise and Inland Revenue officials for the last Government on the costs and benefits of merging the revenue departments. I have enclosed the full written answer from the then Prime Minister on the convention regarding the availability to Ministers of the papers of a previous Administration of a different political complexion which you quoted in your last letter and again in evidence today.[11] I would wish to draw your attention to the fact that this is not a convention which binds, or has been approved by, Parliament—it relates entirely to the conduct of Ministers. I would also wish to highlight the sentence in the fifth paragraph of the written answer, that:

In any instance (whether an individual case or not) where it is decided that papers of the previous Administration ought to be disclosed to a new Government, difficulty may be avoided if, as a matter of courtesy, the former Minister is consulted before this is done.

  As the report in question was prepared for the then Chancellor of the Exchequer, the Sub-committee would wish you to request the permission of Kenneth Clarke MP for the report to be made available both to you and to us.

  You indicated this morning that you appreciate the legitimacy of our request to see a paper which has been referred to in the written evidence submitted to us by Customs & Excise, particularly since the Sub-committee received an account of some of the conclusions of the report in oral evidence from Dame Valerie Strachan, the validity of which we are unable to judge without reference to the full report. I would be grateful for a reply to this letter by 7 January 2000.

15 December 1999