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I think that it will be clear to the House that the type of arrangements needed to make an employer opt-out work cannot possibly be in the best interests of employees entitled to tax credits. The award of tax credits could not be finalised until the Revenue and the employer had agreed who would make the payments. Therefore, needy families would be kept waiting for vital income to which they were entitled--and that would not be acceptable to the Government. Employees of employers who move in and out of the fewer-than-10-employees category would be thoroughly confused and would not know where they were from one award to the next.

I am sure that the Lords amendments were prompted by a concern to protect small businesses from damaging administrative burdens. However, the Opposition are not alone in wanting small businesses to flourish. The Government are committed to creating a climate in which small and medium-sized enterprises are able to thrive, and we are proud of the measures that we have introduced in the past two years to make that happen.

Since March 1997, we have lowered the small companies tax rate twice: the rate is now 20 per cent. Moreover, as the Chancellor announced in his March Budget, from April 2000, there will be a new 10p rate--which is the lowest rate of corporation tax for small

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companies among major industrialised countries. The new small business service, which was also announced in the Budget, will provide better and more targeted support and assistance to small businesses. There will also be a new business guide, business tax starter pack and guidance for new employers, and a new helpline service for new employers, offering fast-track support. The Government are committed to assisting small employers and to ensuring that their compliance costs are reduced.

The Budget also raised the threshold for quarterly payment of PAYE tax from £600 to £1,000 per month, thus extending the quarterly scheme to an additional 130,000 employers--who could each save up to £100 annually. Since 1997, we have abolished advance corporation tax, bringing a £1 billion cash-flow advantage to business and benefiting many small businesses. We have also enhanced capital allowances for small companies, which have been in place since July 1997.

As part of the service for all new small businesses, we shall, from April 2000, be providing assistance with their payroll operation. The Department of Trade and Industry is consulting on the method of delivery of that service. We intend that the service should be delivered by means of a voucher scheme, whereby all eligible businesses will be able to redeem a voucher with any commercial provider on a list held by the small business service. The scheme should do much to ease the burdens on small businesses of running their payroll.

Specifically, in the coming months, and after April 2000, all employers will be given guidance to enable them to pay tax credits smoothly and with the least possible extra work. There will be a targeted publicity campaign involving all the media and there will be seminars across the country which will be of particular interest to small businesses.

Small employers have nothing to fear from paying tax credits through the payroll. Many of them will gain from the more satisfied and motivated work force who will result.

Miss Julie Kirkbride (Bromsgrove): I have listened with interest to the hon. Lady's explanation of why she does not believe that the Government's proposals would be unfair on small businesses, but she knows that the working families tax credit cannot be paid through the tax code because of the distortions that would ensue. It will have to be a separate item, which means that the benefits that she is claiming for small businesses will not be so great. If she is serious about helping small businesses, why not compensate them for the administration of the scheme in line with the existing precedent of the payment of statutory maternity pay? That would be a welcome way forward for small businesses.

Dawn Primarolo: The hon. Lady cannot have been listening to the points that I have just made about the DTI's consultation on the voucher scheme and our services to small business. That point is addressed by the proposals. I do not intend to go back over the debate on tax credits that we have had in this and another House. If the hon. Lady informs herself, she will see that the requirements on business are no more onerous than under the family credit system.

Mr. Geraint Davies (Croydon, Central): Does my hon. Friend agree that the amendments are not sincere,

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but are wrecking amendments? There is no logic to choosing 10 employees as a threshold. Companies will vary between nine, 10 and 11 employees during a year. There is no linkage with turnover. The amendments are an incentive to small companies not to grow larger than 10 employees. The Opposition are using the amendments to hide the fact that they want to scrap the working families tax credit and give away the billions of pounds that they have been promising willy-nilly to smokers and others in debates on the Finance Bill.

Dawn Primarolo: I have made it clear that the amendments are wrecking amendments which would break the tax credits principle. The arrangements that the Government have made across many areas to support small businesses show that we are determined to deal with compliance costs while assisting small businesses to discharge their obligations in the tax system. The hon. Member for Chingford and Woodford Green made it clear when he was Opposition spokesman on social security that the Conservatives opposed the introduction of the working families tax credit. They are trying to use the issue of employers to conceal that opposition, which would be rejected by the electorate. The millions of families who will benefit will be horrified to hear that, for all the Conservatives' words about supporting families, they oppose a policy that will help families in poverty.

I hope that I have convinced the House that the amendments would involve red tape which would not be in the interests of tax credit recipients. The system would be time consuming and costly. Conservative Members claim to be concerned about compliance costs for small business, but the amendments would impose more compliance costs and burdens. The Government are already addressing the needs and concerns of all employers, large and small, through consultation on the detailed schemes that I have set out. The CBI has made clear its welcome for our policy. I urge the House to reject the amendments and support the Government's policy on the introduction of tax credits.

Mr. Pickles: I am most grateful to the hon. Lady. The Opposition will long remember her closing remark--that the CBI agrees with the measure so we must support it. I am not entirely sure what Mr. Monks and Lord Hattersley would have to say about that, but at least we know that, in the great debate within the Labour party, the hon. Lady is on the side of the toffs.

Dawn Primarolo: I hate to spoil the development of the hon. Gentleman's speech as he warms to his theme, but I am sure that he does not need reminding that the TUC also supports our policy, as do a large number of organisations, including the National Council for One Parent Families. Perhaps the hon. Gentleman could broaden his theme somewhat.

Mr. Pickles: At the moment I am trying not to broaden myself.

The hon. Lady is quite right, but she chose to refer to what she thought was most important--the praise of the CBI. I recognise that she is a creature of the current Labour party and wish her every success in the forthcoming reshuffle.

Mr. Tony McNulty (Harrow, East): What about the hon. Gentleman?

Mr. Pickles: We have had our reshuffle.

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It seems to me that the hon. Lady was attempting to create a paper tiger in order to destroy it. Lords amendment No. 1 is not, by any stretch of the imagination, a wrecking amendment: it is a very narrow amendment that would help the general development of the Bill. The hon. Lady said that it would be disastrous to the Government's policy, as payments through the wage packet were central to the Government's scheme. Payments through the wage packet would remain central to the Government's scheme even if the amendment were accepted. The amendment would not affect that. Essentially, the Government have painted themselves into a corner.

Mr. Derek Twigg (Halton): Will the hon. Gentleman answer the question that the Minister has asked him at least twice? If his party got back into government, would they scrap the working families tax credit and therefore take away money from 5.75 million children--yes or no?

Mr. Pickles: I am grateful for the opportunity to answer the hon. Gentleman, who has not participated in our proceedings so far and therefore cannot be blamed for relying too heavily on the briefing from the Government Whips. However, I am afraid that the Whips have let him down. I shall give the hon. Gentleman a full answer, as he deserves one.

My hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) said that we would not have introduced such a scheme. Frankly, the credit is very similar to family credit and it does not improve on it. As the right hon. Member for Birkenhead (Mr. Field) said, the working families tax credit will take money away from children. It will effectively transfer money from men to women. It will increase stigma. It will do little to help people at the lower end of the income scale--and it will significantly increase fraud.

My hon. Friend the Member for Chingford and Woodford Green said that we will probably have to follow Canada's example. Canada introduced a similar system a number of years ago and has effectively had to reverse it. If the hon. Member for Halton (Mr. Twigg) thinks that the party that introduced family credit would not provide some in-work benefit, I have to disabuse him. There is no question about that. However, the hon. Gentleman supports a more expensive mechanism for delivering in-work benefit. I am sorry to have shot the hon. Gentleman's fox, if he will forgive me the hunting metaphor, but this is a further example of the Government's creating a paper tiger in order to destroy it.

The Government apparently have two contradictory aims: to reduce the burden on business and to change people's attitude to in-work benefit. However, their chosen method in respect of the latter involves imposing burdens on business. The amendment seeks to square the circle that the Government have created.


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