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Mr. Duncan Smith: What consultation?
Mrs. Lait: Indeed, and the new clause does not match the Government's own definition of what is good regulation. It is not transparent, there has not been full consultation and there has been no indication of any preparedness to accept alternatives--and there are alternatives.
For instance, the 3 Sixty group, which has been working on behalf of many of those service companies, has come up with at least three alternatives, any one of which would achieve what I am sure the Government want to achieve. First, they could adopt a minimum salary level based on a percentage of the total contract value. Secondly, as happens in Ireland, expenses could be allowed, as now, and all remaining moneys could be paid as a salary, but with employees' national insurance only. Thirdly, salary level could be based on the multiple of the Government's minimum wage, which I should have thought was a subject dear to their heart. There are other options and they should be considered, instead of using this scatter-gun, blanket approach which has clearly distressed many people and taken their minds off the businesses that they should be running to earn the money that pays the taxes that keep the Government going.
The new clause shows that the Government have not thought through, and are not prepared to consult on, fundamental changes affecting a lot of people who are making this country effective, competitive and up to date. Those people should be able to develop the skills that would make modern projects a byword for and the watchword of this country--an objective that I should have thought the Government would want to proceed with--but the Government are adopting an old-fashioned, old Labour approach that will close down opportunity. That reflects the Government's arrogance and there are no guarantees that people who want to run their businesses in such a way can continue to do so.
Mr. Andrew Miller (Ellesmere Port and Neston):
I have listened to some of the most extraordinary speeches and interventions from Conservative Members that I have ever heard in this place. The Conservative party seems to be in favour of lump labour, which is an extraordinary diversion.
May I answer an important point raised by the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith)? I have read Inland Revenue
35 carefully and I do not believe that this matter was hidden away. As the hon. Member for Beckenham (Mrs. Lait) acknowledged, it was foreshadowed in the Budget. That leads to the explanation that seems to have been supported by the 3 Sixty group, which the hon. Lady prayed in aid in her speech. The group says:
Where we have difficulties, and my hon. Friend the Minister may be in a position to clarify this point, is with the relationship between the new clauses and the consultation process that is going on as part of Inland Revenue 35. Subsection (1) of new clause 15 says:
My hon. Friend the Minister says that there will be extensive discussions on this matter. That is important, because there are fine divisions between the employment situations that hon. Members have described, which would fall one side of the regulations or the other. I am sure that no one in the House would seek to defend the extreme situation that I described--at least, I presume not. Looking round the Chamber, I see no one seeking to do so.
What is needed to satisfy the concerns being expressed by the Public Contractors Association is an assurance--I appreciate that this relates to subsequent matters that are in the hands of Inland Revenue officials--that the certification scheme that will emerge will be based on the widest possible consultation.
Sir Robert Smith:
My concern is that the Government often provide draft regulations to justify the wording of a clause and to show that such powers are needed. If, after consultation, it transpires that the Government are going down the wrong road, the wrong powers will have been given them. Sadly, it is not an extremely effective process for modifying regulations.
Mr. Miller:
The hon. Gentleman makes an interesting point, but I understand from the several thousand responses to the web site to which the hon. Member for Beckenham referred that there has been a wide debate, particularly within the IT sector, on this point. The 3 Sixty group and others are concerned that
Having said that, I believe that careful consideration must be given to some parts of the building industry. The effect of the draft regulations on a partnership in my constituency--one partner lives in the constituency of my right hon. Friend the Member for Birkenhead (Mr. Field) and the other lives in mine--may be that it would not be able to tender for work. I know that is not the Government's intention. That company is perfectly legitimate, and my right hon. Friend and I have spoken to both partners.
I appreciate that my hon. Friend the Minister is not able to answer for the Revenue, but will he confirm my understanding of the importance in the new clause of the simple word "may"? I urge him to ask his hon. Friends in the Treasury to pass on to the Revenue the concerns that are being expressed not about the principle--because all hon. Members must accept the principle--but about the details that could emerge if the wrong interpretation is put on an extremely well-meaning clause.
Mr. Eric Forth (Bromley and Chislehurst):
I come to this debate not as a member of the Committee that has considered the Bill, but as a mere Back Bencher, so I am handicapped. However, I am fortunate in that only today, I received from a constituent some material that suggests that he is outraged at what the Government are doing. It may help the Committee if I were to share with hon. Members some of what my constituent had to say. It is highly pertinent, and it gives the game away, given what the Minister said about consultation.
I received this fax a few hours ago, so it is hot off the press. It says:
What my constituent goes on to say is apposite to the background to the new clause:
My constituent has given me a copy of the Inland Revenue press release; his letter to the Inland Revenue dated 12 March; a copy of the amendments to the Bill--the new clause that we are now discussing--and various notes. His letter of 12 March was to Elaine Carey of the personal tax division of the Inland Revenue in new wing, Somerset house. He wrote that he wanted to engage in the consultation process, stating:
I suspect that the Minister will say what he said earlier: that the consultation will be on the regulations. He is falling back on the argument--the very flimsy argument--that if we nod through the important principles that lie behind the new clause, people in business need not worry, because they will be involved in a process of consultation on the regulations. The principles will be settled now, with hardly any debate, with no notice and with no opportunity for real consultation. Having led business to believe two or three months ago that there would be consultation, the Government hold out the prospect of consultation on the regulations.
You and I know, Madam Speaker, that the real opportunity for proper debate, amendment and so on arises in the early stages of legislation. Once legislation has been set in terms of new clauses such as this, opportunities for consultation on the regulations will be--I will not say zero, but they will certainly be minimal. Moreover, there will be no opportunity to amend the regulations, which will be presented on a take it or leave it basis. This is the challenge that faces the Minister this evening: how will he satisfy my constituent that there will be any realistic opportunity for people in business to have a proper say in the process?
Certainly people in business will be affected by the outcome, whatever it is. The Minister must tell us in much more detail what exactly he is offering the business community in terms of real consultation and real dialogue, rather than the con trick that has been perpetrated so far and the disgraceful conduct in which the Government have engaged tonight by attempting to slip through on the q.t. a wide-reaching measure that they introduced just a few days ago.
"It is currently possible for a permanent employee to leave a company on a Friday to return on Monday doing exactly the same job but indirectly engaged as a 'consultant', paying reduced tax and national insurance."
Nobody in the House could defend such a practice.The 3 Sixty group and the Public Contractors Association do not seek to do so. I am sure that the hon. Member for West Aberdeenshire and Kincardine will acknowledge that that practice cannot be right.
"Regulations may make provision for"
all the things that are set out thereafter. I seek guidance from the Minister, but that seems to pave the way to producing such regulations as described in the new clause, subject to the outcome of the Inland Revenue's consultations.
"the Inland Revenue are not accepting any invitations to seminars and have suggested group approaches."
The Revenue needs to consult all relevant bodies, including people like the Public Contractors Association. The building industry is notorious for bypassing regulations. Some years ago under the previous Administration, I found it extremely difficult to find a plasterer who would provide
so much as a VAT receipt. I wonder whether that has changed. Clearly, we cannot countenance allowing people to continue to behave in that manner.
"To introduce ourselves I am Deputy Chairman of"--
X plc--
"and we are a major employer in Bromley, with a turnover of £200 million. Both the company and my home address are in your constituency.
Those are not my words: they are the words of my constituent, who is the deputy chairman of a company with a turnover of £200 million.
Although I am concerned about the above Bill, I am also concerned about the erosion of our democracy."
"On the 9th March 1999 in the Chancellor's budget statement it was announced that changes were to be introduced to counter avoidance in the area of personal service provision. This document . . . was introduced under the title of IR35."
He has sent me a copy of that document, which I may or may not have cause to share with hon. Members in a moment. Crucially, he goes on to say:
"In this document the Inland Revenue announced they would be working with representative bodies who were interested in contributing to reforms in this area. We as a company and the industry sector under which we operate were happy to enter into debate and affect the outcome in a democratic way.
17 May 1999 : Column 741
if I am in the House; I ask you!--
However, I have heard today that on Friday 14th May 1999 an amendment was made to the Welfare Reform and Pensions Bill, which implied that the Inland Revenue had already reached its conclusions without any meaningful discussions having taken place.
If you are in the House this afternoon"--
"when the bill is discussed I would be most grateful if you could raise this question and let me know the outcome."
There is an immediate opportunity for the Minister, when he replies to the debate, to let my constituent in Bromley know just what the devil is going on.
"I would welcome the opportunity to work with you to reduce avoidance but as you state 'minimise the impact of these changes on ordinary businesses'.
Here we have a problem. It would appear that real people in real businesses were conned into believing that they were going to engage in some sort of consultation with the Government, and have been shocked to find that the Government are attempting--rather typically--to slip into this important Bill a crucial new clause, with no notice and, certainly, no consultation.
I hope it will be of mutual benefit."
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