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Mr. Deputy Speaker (Mr. Michael Lord): With this, it will be convenient to take Lords amendment No. 96.

I inform the House that the amendment involves privilege.

Mr. Denham: The Government brought forward in another place amendments to give effect to the national insurance reforms announced in the Budget, and we have debated those separately. For one of the reforms--the transfer of the Contributions Agency to the Inland Revenue from April 1999--the Government need additional powers. They are designed to allow the Government to incur necessary preparatory expenditure in advance of the enactment of the substantive legislation that would effect the transfer. That is the purpose of amendments Nos. 82 and 96.

The transfer of the Contributions Agency to the Inland Revenue represents a major streamlining of the system, which will benefit employers and individual contributors alike. We want to ensure that the transfer takes place as quickly and smoothly as possible. We plan to bring forward appropriate legislation to transfer operational functions to the Inland Revenue in due course. However, finalising the details in time for a new Bill to be introduced in this Session has not proved possible.

Providing continuity of service to contributors and employers in moving to the new merged organisation is vital. There is much to be done to achieve that: we must change computer systems; forms and leaflets must be redesigned; and employers need to be kept informed. We need to start making operational preparations in good time so that, in the event of legislation being enacted to effect the changes, there is no risk of disruption of service in April 1999. That is prudent management designed to ensure that the transfer meets its central aim--improving service to employers and contributors alike.

Amendment No. 82 and the consequential amendment linked to it, No. 96, are designed to ensure that there is no doubt about the propriety of spending the right amount at the right time to make the necessary preparations for the transfer. They provide an essential step towards a smooth and speedy shift of responsibilities, and I commend them to the House.

Mr. Waterson: The aim of the provision is clear, and I am grateful to the Minister for explaining it. However, it is extraordinary that we are debating the proposal for the very first time so late at night; the matter was first raised in another place. Everyone agrees that it is important.

As the Minister said in his recent letter setting out his intentions, which was much appreciated, the provision would enable preparatory expenditure in advance of the substantive legislation. He said:


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    The Government decided to introduce the paving power in this Bill


    "as it was the earliest suitable legislative vehicle."

Conservative Members dispute that. It should have been dealt with in the usual and, we would say, the proper way, not tacked on to the end of a substantial Bill that has already been in Committee.

The policy is hopelessly muddled--which is all too typical of the Government, whether in social security or in other spheres of government--and no substitute for meaningful and radical welfare reform. That view was expressed in the other place, where Baroness Hollis talked of "streamlining". The Minister also used that word and, as was said in the Lords, we heard that substantive legislation would be tabled "in due course". He told us when that would not happen--that is, during this Session--but I press him a little more on when the legislation will be ready. Will he produce a draft Bill for comment and consultation?

10.45 pm

There was considerable debate in the Lords about what the proposals mean. The transfer of authority would constitute a clear breach of the contributory principle. That is our main objection. It would not only go against everything that the Minister for Welfare Reform has ever said about welfare reform, but would clearly contradict the Government's attempt to restore the contributory principle through their stakeholder pension plans. On 21 December 1997, The Sunday Telegraph reported a remark on that subject:


I entirely associate myself and my hon. Friends with the words of the Secretary of State for Education and Employment.

Our view is that the proposals put the cart before the horse. They make no sense; we need thoroughgoing proposals for welfare reform. The March 1998 Green Paper on the subject stated that


How do the Government square their decision to merge the Contributions Agency and the Inland Revenue with the commitment to update the contributory principle? The proposed merger appears to be a first step in a more far-reaching programme of tax and benefits integration, although the word "integration" did not find favour with Baroness Hollis, who preferred to talk about "alignment", whatever that may mean. It is another spin doctor- manufactured word.

A number of problems are involved with merging taxes and benefits, none of which has been satisfactorily addressed by the Government so far. First, whereas assessment for taxes is based on individual income, assessment of eligibility for benefits is usually based on the family unit. The Government are already in a mess of

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their own making over their attempt to square that circle in the working families tax credit package. Secondly, there is the problem of the period of assessment. Taxes are assessed annually, but benefits are based on short-term need. The assessment of a benefit claim, therefore, is logically based on a much shorter period.

The Government's stakeholder pension proposals are said to be aimed at strengthening the contributory principle and bringing people on low or irregular pay into the system. That policy objective will be undermined by the decision to push for further integration of tax and benefits. It is perfectly clear, as it has been for the past year or more, that the Government cannot agree among themselves on a single course for their welfare reform project, which is one of their flagship policies.

It is a fiction to suggest that national insurance contributions are not a tax in every sense of the word. We have heard about the definition, or lack thereof, of the word "alignment", which was used in the other place. What savings does the Minister envisage resulting from the policy? It was stated in the other place that the estimate of 200 jobs saved should be a gross underestimate. It is clear to the Opposition that there are a considerable number of problems with the policy, which have not been thought through by the Government. They are putting the cart before the horse. It would be unwise for the Government to proceed with this further integration of tax and benefits unless those problems have been properly addressed. In those circumstances, we cannot support the amendment and we shall press it to a vote.

Mr. Peter Bottomley: I agree strongly with my hon. Friend the Member for Eastbourne (Mr. Waterson). In another place, my predecessor Lord Higgins made the point that this matter ought to have formed a separate Bill, or should have been included in a Finance Bill.

Anyone who has actually considered the new clause will notice that subsection (4) is uncontroversial, in that it applies to Northern Ireland that which would otherwise apply to the rest of the United Kingdom. Subsection (3) states:


which is fairly normal. However, when one reaches subsections (1) and (2), one finds that, if not quite Henry VIII, they are at least Henry VII, if I can put it that way. They basically say that, whatever other provision Parliament makes, the Government can spend money on what they want in respect of this matter.

There are particular issues relating to the amalgamation of national insurance contributions and taxation, whether from the point of view of the employer or the employee, employment or unemployment, or of better administration. Those issues deserve more than a 20-minute debate on the Floor of the House of Commons after 10 o'clock at night. The Government, backed up by their vast serried ranks of Members who were not here for the debate, may be able to force the new clause through, but they ought to feel ashamed of the way in which they have abused their position in Parliament. I hope that the people will notice what they have done tonight.

Mr. Denham: I explained earlier the importance of enabling the preparatory work to take place, so that the

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transfer could take place smoothly and effectively next April. I believe that the Bill, concerned as it is with both national insurance matters and our proposals to simplify and streamline the benefits system, is an entirely appropriate way in which to bring those matters before the House and ensure that the preparatory work can be done. Of course, further legislation will be required to effect the transfer and, at that stage, there will be appropriate and full scrutiny of the detail of our proposals. I do not believe that there is an issue on that score.

The hon. Member for Eastbourne (Mr. Waterson) said that there is no sense at all in the proposal, unless we get rid of the contributory principle, but we disagree. We believe that bringing the two organisations together so that employers have to work with only one organisation will be simpler for business, albeit that at the point of merger and beyond there will be two systems--a tax system and a national insurance system with their different requirements. It will be easier for employers to work with one organisation, and the change will give us an opportunity to streamline our operations and simplify our procedures. That is worth doing, irrespective of any future reforms.

The hon. Gentleman rightly quoted the words of the welfare reform Green Paper, that there are opportunities to modernise and update the contributory principle, to simplify it for employers and to strengthen the link between work and earning entitlements to benefits. We shall take that work forward, but I disagree that there is no point in proceeding on the basis of the current system.

The hon. Gentleman asked about savings. The main purpose of the change is to simplify matters by combining the activities of the two bodies. As we have said publicly, we expect some 200 jobs to be saved after April, from a combined work force of 60,000.

We want to provide a better service for employers. The Government's proposal has been welcomed throughout the business community, and I think that businesses will be astounded to discover that the official Opposition have tried to block it by taking an anti-business, anti-employer stance.

Question put, That this House doth agree with the Lords in the said amendment:--

The House divided: Ayes 257, Noes 119.


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