Examination of witnesses (Questions 220 - 239)
WEDNESDAY 28 OCTOBER 1998
MR GABS
MAKHLOUF, MR
TONY ORHNIAL,
MR GEORGE
ROWING and MS
SUE WALSH
220. It is all very well to say that Family
Credit is already with us and people are accustomed to that process,
but, for example, how will small businesses, which are cash-strapped,
deal with the cash flow to outlay monies? That is new. How will
they cope with that?
(Mr Orhnial) There are things that are new and
things that are old. One thing that is old is the traffic in information,
as it were, between the employer and what is currently the Family
Credit Unit, or the employee in the process of verifying wages
and things of that kind. What is new is the need to pay it through
the payroll and the need in most cases to fund it out of the tax
and National Insurance contributions that they have collected
on our behalf from their employees. With the smaller employers
who may not have sufficient liquidity, we shall simply enable
them to apply to us to be put in funds in order to pay those tax
credits.
221. To apply to you to be put in funds:
that is a suitcase of money, is it? The Revenue will come along
and say, "Keep this under the desk in case you need it",
or "Here's a handful of fivers that you might need".
(Mr Rowing) No. The principle is that the Working
Families Tax Credit will be paid out of tax and NIC wherever possible.
We recognise that there will be situations where an employer is
not in possession of sufficient tax and NIC to cover the tax credits.
To that extent they clearly need funding. Similar situations occur
where they have to pay out Statutory Sick Pay or Statutory Maternity
Pay and they do not have enough funds. Already we have experience
in having to fund employers, albeit quite infrequently in this
sort of area. We shall need procedures in place to get this money
to employers.
222. Can you give us an assurance that one
or two-person businesses will not have to carry the can in terms
of outlaying cash? Do I understand you to say that you are going
to get this money in their hands before they have to pay it out?
(Mr Rowing) If they apply in time the money will
be there for them to use.
223. If they make the application in time.
(Mr Rowing) Yes.
Miss Kirkbride
224. What happens if they do not?
(Mr Rowing) These are some of things on which
we are having to talk to employers about. What is enough time?
When will it need to get there? If you work back from when they
need it to when they have to ask for it, there has to be a period
of time there.
225. Will it be incumbent on them to pay
the staff the credit even if they do not have the money in the
bank because they did not apply in time? These are small businesses
and they are really more worried about how many customers they
have in their shops than about tax credits.
(Mr Rowing) They need to pay their staff the tax
credits in the same way as they would need to pay the wages and
statutory sick pay and statutory maternity pay.
226. So they are prosecuted if they do not
get themselves organised?
(Mr Rowing) No, not necessarily prosecuted. Prosecution
is for people who have broken the law wilfully. The aim of the
Revenue will be to help these people to get into a position where
the system works. That is our aim in our approach to all of our
discussions with employers. What do we need to do to make the
system work?
(Ms Walsh) Our approach is to help employers and
there are a number of ways in which we can and will do that. Indeed,
we are already dealing with employers. The starting point is to
help them to understand what it is that they need to make sure
that they are in a position to get funds if they need funds from
us. I can go into some detail if you would like about some of
the things that the Revenue does already to help employers and
to give them advice and support.
227. How big an operation is this? How many
employers do you think might be in this position? You said that
SSP and SMP are already done in this way, but how much bigger
a burden is working family tax credit in comparison to what you
say you are doing already?
(Ms Walsh) We have not finalised those figures
yet. We are still looking at it.
228. Can you give us an idea?
(Ms Walsh) Yes, if I had an idea. Clearly, there
will be more employers involved. I do not have figures that I
can give you. We are aware of that and part of our planning is
to make sure that that advice and support is available to them.
229. Do you know how many employers will
need to be cash-flow funded?
(Ms Walsh) Not yet, no. We are still looking into
those figures.
Mr Flight
230. I anticipate a long recession and a
large number of companies going under. When that happens the administration
of companies tends to be chaotic before receivers are installed
and so forth. Are contingency plans being made by the Revenue
over the next three years to deal with that? I could envisage
a substantial mess in terms of administering this in such a situation.
(Mr Orhnial) As I said earlier, we are still working
on some of the finer details of the scheme. We needed to get the
basic structure that worked in the normal case. One of the issues
at which we are looking is what to do in an extreme situation
like that which you mention, not particularly because we are thinking
of the next three years, but because we need to have thought that
through and have arrangements in place for those cases in whatever
sort of times of economic activity may happen.
231. What are they?
(Mr Orhnial) We are not there yet on that. The
details of that sort of arrangement will be published in due course.
Chairman
232. What happens if I have three cleaning
jobs? Which employer pays my Working Families Tax Credit?
(Mr Orhnial) As I say, the details that we are
able to give you at this stage are the ones in the Financial Secretary's
answer yesterday.[4]
There are a number of different ways in which we can approach
that particular issue. We have yet to settle on the final details
of what we do for people in multiple employments.
Mr Leigh: I am not
sure that that answer is good enough. You have given an answer
saying, "Yes, we have sorted it out and it is all fine and
hunky-dory", but here we are and you are not prepared to
share the information with us. You are asked a direct question
from the Chairman. There are tens of thousands of people in this
position, particulary on low incomes, who are working in two or
three jobs, and you are not giving us any information. What is
the point of having this session?
Ms Buck
233. Do you know how many people work for
multiple employers? Can you start by helping us on that?
(Mr Orhnial) We have the figures from the Family
Credit record currently, because that is the only base that we
have to go on and that suggests that about three per cent are
in this situation. As for giving you more detail, these are issues
on which decisions have not yet been taken, so it is not a question
of withholding details from you. I can tell you the kind of options
that one might be looking at. For example, you could split the
tax credit between the three employers.
Chairman
234. Between the three? A third each?
(Mr Orhnial) It is certainly a possibility if
you are thinking about the range of options. Another possibility
is to try to identify the main employer in those three. There
are options. We need to settle and agree with our ministers which
way to go.
Ms Stuart
235. In the Written Answer on 27 October
it says: "But from April 2000 employers will pay the tax
credits to employees through the wage packet unless a couple choose
to have them paid direct by the Revenue to the self-employed or
non-earning partner." You are clearly pursuing the line of
saying that there is a way by which people can choose to have
it paid directly. So some decisions have to be made. We have had
written questions and verbal questions in the Chamber about how
to deal with the self-employed and we have been told that it is
in the melting pot. We have a Family Credit benefit, one of the
few benefits which is efficiently administered, and we are ending
up with devising a system that will bring the one and only benefit
which is properly administered into the same state of chaos as
all the others.
(Mr Orhnial) That is hardly something that you
can expect me to comment on. Let me give you answers to the two
questions of fact. The question of choice among partners in a
couple about which one of them was to receive the tax credit is
something that was announced early on in the history of the Working
Families Tax Credit. Yesterday's answer merely confirms that where
we are talking about a couple, they can choose between them which
gets the tax credit and if it happens to be a non-earning partner
or a self-employed partner, then that person will get it directly
from the Revenue. As far as the self-employed are concerned, we
do not envisage any great changes. They will continue to be paid
directly by us.
236. Will you give them a benefit book or
send them a cheque? How will you do it?
(Mr Orhnial) Obviously, if they have bank accounts
and they opt to do it that way, we shall pay them that way. The
question of alternative methods, like an order book, is still
something at which we are looking.
237. On this panel we have a project manager.
A project manager's role in industry—and I have been told
that I can draw on that analogy—would include having made
some assessments. You talk about three per cent being in this
position. How many is that numerically? You must have some kind
of pathways that you consider to be the most efficient routes
to pursue. I think we have a right to expect you to share some
indications of what you think are the ways forward, rather than
you saying that it is in the melting pot, in which case, these
sessions are absolutely pointless.
(Mr Makhlouf) Can I make a general point to put
this into context? We are talking about a credit which will come
into operation in a year's time, and which will be paid through
the payroll in 18 months' time. Although I realise the frustration
caused by the fact that we do not have every single piece of detail
sorted out at this time, I think it is important to bear in mind
that there is a vast amount of work going on. We recognise the
issues of multiple employment, for example. As Tony said, there
are options and people are in the process of considering these
options. At some point we shall make decisions in time for when
the credit is introduced. I am sorry that there are some questions
that we cannot give you a spot-on answer to at the moment. That
is not because we are not doing the work.
238. Would it be useful to have some indication
of what the options are? There are people in multiple employment
and people have trust in their employers. These are real issues.
If there is any purpose in these kinds of questions there must
be a sharing of the weighting of the options and what path you
are going to pursue and what the problems may be. You say that
there is a variety of options, so you must have some indication
of which avenues appear to be more fruitful to pursue at this
stage than others.
(Mr Makhlouf) As a general point, again, depending
on the specific issues, yes, is the answer to that. On some issues
we are really earlier in the process rather than later.
239. On multiple employers, what are the
options you are pursuing, in terms of where you are pursuing the
options? What are the most fruitful outcomes?
(Mr Orhnial) Both of the options that I have put
before you are possible runners. They have advantages and disadvantages
to them. At the end of the day which of the options we pursue
is something that ministers will need to decide upon.
4 HC Deb 27 October 1998, vol 318 col 91-2w. Back
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