Brown to strip power of Customs

RADICAL reforms of Britain's heavily criticised tax services are likely to result in more than 10,000 job losses, Financial Mail has learned.

A top-level Treasury review favours stripping Customs & Excise of its responsibilities for collecting VAT and duty on such items as petrol and alcohol. These would be taken over by the taxman.

Customs would be reduced to collecting only those duties payable at ports and airports on goods brought into Britain. A powerful sub-ministry under the Treasury's control would co-ordinate all tax administration while Customs would see its national investigation service hived off to the Home Office as part of a 'British FBI', trailed by Tony Blair this month.

The shake-up will make a big difference to millions of small business owners and self-employed people who complain about the time-consuming burden of liaising with various tax-collecting agencies.

Under the proposals, they will no longer have to deal with one set of tax officers for VAT and excise duty and a completely different set for corporation tax, income tax, National Insurance and other matters.

Much of the blueprint for change has been borrowed from Australia. Treasury officials are believed to have visited Canberra recently and been impressed by reforms introduced to the country's revenue services during the past decade.

By cutting out duplication between the Inland Revenue and Customs, about 12% of the current joint payroll of 86,772, which excludes the national investigators working for Customs, could be cut.

The review, headed by Treasury Permanent Secretary Gus O'Donnell, was ordered by Chancellor Gordon Brown on July 2 after a series of fiascos involving both services.

Revenue chairman Sir Nicholas Montagu and outgoing Customs chairman Sir Richard Broadbent have been under fire over a sale-and-leaseback deal on hundreds of properties with Mapeley Steps, a company based in a tax haven.

The Revenue was also criticised over the bungled launch in April of new tax credits to millions of families and its failure for six years to send reminders to 200,000 people to top up their state pensions.

A judicial inquiry this month recommended that the Customs - the oldest department of state with a history stretching back to the 9th Century - should lose the power to prosecute its own cases.

'We have to wait until autumn for final recommendations,' said one source close to the review, 'but the thinking is towards a finance department, headed by a Minister, under the Treasury's wing and a division of responsibilities between Revenue and Customs on the Australian model.'

It is understood that a merger between Revenue and Customs has been rejected on grounds of cost and complexity.

The Public and Commercial Services Union, which represents thousands in both services, said: 'We welcome any changes that bring clearer accountability, but this should not be used as a way to cut jobs.'