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7.45 pm
The hon. Gentleman overlooks the fact that overall the self-employed continue to get an extremely good deal. How much would they pay in national insurance contributions on profits of £30,000 a year, and how much would an employee pay on earning that amount? The hon. Gentleman also overlooks the fact that the national insurance contributions of an employer who is self-employed are deductible from his profits and gains. That deduction reduces their class 4 liability. Such employers already have an advantageous position in the national insurance system. Through the amendment the hon. Gentleman seeks to reject the basic principle that all of us should contribute something to assisting growth and investment in the NHS.
I move on to the amendments that relate to service companies. These amendments seek to ensure that a one-person service company with a turnover of less than £1 million should pay employers' national insurance contributions at the old rate of 11.8 per cent. rather than the proposed new rate of 12.8 per cent. The amendments may be intended to apply only to those service companies that come within the legislation on service companies that is commonly referred to as IR35. However, the hon. Gentleman does not define the term "service company". There is not such a definition in legislation. The amendments as drafted would allow a huge number of firms that he would not intend to have relief to have access to it. Drafting problems aside, we do not believe that the intended objective is appropriate, and I shall briefly explain why.
We introduced the service company legislation to address a specific unfairness in the tax system. Put broadly, the legislation ensures that someone who works through a service company or for an intermediary, such as a partnership, but who is otherwise no different from a conventional employee, pays broadly the same tax and national insurance contributions as an employee. That means that anyone choosing to work through a service company, but otherwise working in a way that makes them no different from a directly employed employee, will pay essentially the same tax and national insurance contributions as a direct employee.
The hon. Member for Oxford, West and Abingdon went on about fairness, equity and progression. Yet he objects to the idea that people in the workplace who are in exactly
the same working position as others should be able to play with the tax rules to ensure that they pay less than somebody working alongside them.It is important to recognise that in the working arrangements in service companies, there are two separate and distinct legal bodies. There is the service company as the employer and the person employed by it who is on PAYE. Each is a separate body and each has their own rights and responsibilities and access to different parts of the tax system.
Where someone chooses to be employed in a service company, that company will have full employer responsibilities, and that includes the 1 per cent. increase. I do not believe that it is fair or appropriate to say that those service companies as employers will not be expected to discharge their responsibilities. The amendments are a sop to try to find as many Trojan horses as possible to come into tax legislation so that employers in future will not have to pay their contributions. That is not acceptable. I ask my right hon. and hon. Friends to vote against the amendments. They are about breaking the principle that all of us, employers and employees, should make a contribution to the NHS.
The hon. Member for East Carmarthen and Dinefwr talked about the public sector. Amendment No. 13 provides that we excuse public sector employers from paying the 1 per cent. national insurance contribution increase on employee class 1 secondary NICs. I will not detain the House because I know that the hon. Gentleman spoke specifically about the principle for the public sector. That being so, I will not go into the fact that the amendment does not cover Northern Ireland, for instance. There are other rather important points. Effectively, however, the amendment suggests that we should excuse the Government and other public bodies from making their own employer contributions.
Although the Government believe firmly in the public sector, we do not think it should be treated as a special case in terms of national insurance contributions. We believe that public and private sectors should be on a level playing field. Let me add that trying to agree on a definition of a public-sector company could lead us down some difficult and complex routes.
It would be strange to suggest that public-sector employers should not be subject to the same requirements as all other employers, but I think that the hon. Member for East Carmarthen and Dinefwr made a genuine point about future investment in all our public sectors. Let me say this to him. The increases in national insurance contributions must be set against a background of high levels of growth in spending on key services. Spending on services will be £19.5 billion higher in 2003–04 than in 2002–03, which is itself a substantial increase.
I think it entirely wrong, in terms of principle, to try to distinguish the responsibilities of employers by virtue of whether they belong to the public or the private sector. Whichever sector they are in, employers have responsibilities in regard to their employees, not just in national insurance but across the board. It is dangerous to suggest that we can somehow make an exception in the case of national insurance contributions.
We are discussing a proposal in the context of wider spending on public services. No doubt the hon. Gentleman will want to pursue his point in the future—indeed, he said that he would—but if he presses his amendment I will have to ask my right hon. and hon. Friends to oppose it. I hope that, as the principle has been given a good airing, he will decide not to do so.
If any of the amendments are put to the vote, I shall ask my colleagues to oppose them.
Mr. Bercow: I am mortified that the Paymaster General has not been persuaded by the quality of the amendments.
Mr. Bercow: I am grateful to the Paymaster General for that, but apparently she was not quite persuaded. Methinks, Sir Alan, that she doth protest too much.
When there was some incentive for the provision of private medical insurance for pensioners, there was also some increase in take-up. Since the vicious and unnecessary removal of that tax incentive, we have seen the damage that has been done: people who benefited from the provision and afforded the insurance have since been unable to do so. We were offering some encouragement to employers providing private medical insurance packages for their staff. As Labour Members know, the atavistic hostility to that incentive was plain for all to see.
We were in favour of helping unincorporated businesses suffering under the heavy, and increasingly heavy, burden of taxation imposed by this Government. The Paymaster General made it abundantly clear that she did not sympathise, that she thought that those businesses already had it very easy, and that she did not want to assist them. We wanted to help personal service companies, but she did not.
I am very disappointed, and we intend to press our amendment to a vote.
Question put, That the amendment be made:—
The Committee divided: Ayes 126, Noes 338.
AYES
Amess, David
Atkinson, Peter (Hexham)
Bacon, Richard
Barker, Gregory
Baron, John
Bellingham, Henry
Bercow, John
Beresford, Sir Paul
Blunt, Crispin
Boswell, Tim
Bottomley, Peter (Worthing W)
Bottomley, Rt Hon Virginia
Brady, Graham
Browning, Mrs Angela
Burns, Simon
Burnside, David
Cameron, David
Chope, Christopher
Clifton–Brown, Geoffrey
Collins, Tim
Conway, Derek
Cormack, Sir Patrick
Cran, James
Davies, Quentin (Grantham)
Davis, Rt Hon David (Haltemprice)
Dorrell, Rt Hon Stephen
Duncan, Peter (Galloway)
Fabricant, Michael
Fallon, Michael
Field, Mark (Cities of London)
Flight, Howard
Flook, Adrian
Forth, Rt Hon Eric
Fox, Dr Liam
Francois, Mark
Garnier, Edward
Gibb, Nick
Gillan, Mrs Cheryl
Goodman, Paul
Gray, James
Grayling, Chris
Green, Damian (Ashford)
Greenway, John
Grieve, Dominic
Gummer, Rt Hon John
Hammond, Philip
Hawkins, Nick
Hayes, John
Heathcoat–Amory, Rt Hon David
Hendry, Charles
Hoban, Mark
Hogg, Rt Hon Douglas
Horam, John
Howarth, Gerald (Aldershot)
Jack, Rt Hon Michael
Jackson, Robert (Wantage)
Johnson, Boris (Henley)
Key, Robert
Kirkbride, Miss Julie
Laing, Mrs Eleanor
Lait, Mrs Jacqui
Lansley, Andrew
Leigh, Edward
Letwin, Oliver
Lewis, Dr Julian (New Forest E)
Liddell–Grainger, Ian
Lidington, David
Loughton, Tim
Luff, Peter
McIntosh, Miss Anne
MacKay, Rt Hon Andrew
Maclean, Rt Hon David
McLoughlin, Patrick
Malins, Humfrey
Maples, John
Mates, Michael
May, Mrs Theresa
Mercer, Patrick
Mitchell, Andrew (Sutton Coldfield)
Moss, Malcolm
Murrison, Dr Andrew
Norman, Archie
O'Brien, Stephen (Eddisbury)
Osborne, George (Tatton)
Page, Richard
Paice, James
Pickles, Eric
Prisk, Mark
Randall, John
Redwood, Rt Hon John
Robathan, Andrew
Robertson, Hugh (Faversham)
Robertson, Laurence (Tewk'b'ry)
Roe, Mrs Marion
Ruffley, David
Sayeed, Jonathan
Selous, Andrew
Simmonds, Mark
Simpson, Keith (Mid–Norfolk)
Soames, Nicholas
Spelman, Mrs Caroline
Spicer, Sir Michael
Spring, Richard
Stanley, Rt Hon Sir John
Steen, Anthony
Streeter, Gary
Swire, Hugo
Syms, Robert
Tapsell, Sir Peter
Taylor, John (Solihull)
Taylor, Sir Teddy
Tredinnick, David
Turner, Andrew (Isle of Wight)
Tyrie, Andrew
Viggers, Peter
Walter, Robert
Waterson, Nigel
Watkinson, Angela
Whittingdale, John
Widdecombe, Rt Hon Miss Ann
Wiggin, Bill
Willetts, David
Winterton, Mrs Ann (Congleton)
Winterton, Nicholas (Macclesfield)
Yeo, Tim
Young, Rt Hon Sir George
Tellers for the Ayes:
Mr. Desmond Swayne and
Mr. Julian Brazier.
NOES
Adams, Mrs Irene (Paisley N)
Ainger, Nick
Ainsworth, Bob (Cov'try NE)
Allen, Graham
Anderson, Janet (Rossendale)
Armstrong, Rt Hon Ms Hilary
Atkins, Charlotte
Austin, John
Bailey, Adrian
Baird, Vera
Baker, Norman
Banks, Tony
Barnes, Harry
Barrett, John
Barron, Kevin
Battle, John
Beard, Nigel
Begg, Miss Anne
Benn, Hilary
Bennett, Andrew
Benton, Joe
Betts, Clive
Blackman, Liz
Blears, Ms Hazel
Blizzard, Bob
Boateng, Rt Hon Paul
Bradley, Rt Hon Keith (Withington)
Bradley, Peter (The Wrekin)
Bradshaw, Ben
Brake, Tom
Breed, Colin
Brennan, Kevin
Brooke, Mrs Annette L
Brown, Russell (Dumfries)
Bruce, Malcolm
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burnham, Andy
Burstow, Paul
Cable, Dr Vincent
Cairns, David
Calton, Mrs Patsy
Campbell, Alan (Tynemouth)
Campbell, Mrs Anne (C'bridge)
Campbell, Rt Hon Menzies
(NE Fife)
Campbell, Ronnie (Blyth V)
Carmichael, Alistair
Casale, Roger
Caton, Martin
Cawsey, Ian
Challen, Colin
Chapman, Ben (Wirral S)
Chidgey, David
Clapham, Michael
Clark, Dr Lynda
(Edinburgh Pentlands)
Clark, Paul (Gillingham)
Clarke, Rt Hon Tom (Coatbridge)
Clarke, Tony (Northampton S)
Clelland, David
Clwyd, Ann
Coaker, Vernon
Coffey, Ms Ann
Cohen, Harry
Coleman, Iain
Connarty, Michael
Cook, Frank (Stockton N)
Cook, Rt Hon Robin (Livingston)
Corbyn, Jeremy
Corston, Jean
Cotter, Brian
Cox, Tom
Cruddas, Jon
Cryer, John (Hornchurch)
Cummings, John
Cunningham, Jim (Cov'try S)
Cunningham, Tony (Workington)
Dalyell, Tam
Davey, Edward (Kingston)
Davey, Valerie (Bristol W)
Davidson, Ian
Davies, Rt Hon Denzil (Llanelli)
Davies, Geraint (Croydon C)
Dawson, Hilton
Dean, Mrs Janet
Denham, Rt Hon John
Dismore, Andrew
Dobbin, Jim
Dobson, Rt Hon Frank
Donohoe, Brian H
Doran, Frank
Doughty, Sue
Dowd, Jim
Drew, David
Drown, Ms Julia
Eagle, Angela (Wallasey)
Edwards, Huw
Efford, Clive
Ellman, Mrs Louise
Ewing, Annabelle
Farrelly, Paul
Field, Rt Hon Frank (Birkenhead)
Fisher, Mark
Fitzsimons, Mrs Lorna
Flint, Caroline
Flynn, Paul
Follett, Barbara
Foster, Rt Hon Derek
Foster, Don (Bath)
Foster, Michael (Worcester)
Foster, Michael Jabez (Hastings)
Foulkes, George
Francis, Dr Hywel
Galloway, George
Gapes, Mike
Gardiner, Barry
George, Andrew (St Ives)
Gerrard, Neil
Gibson, Dr Ian
Gidley, Sandra
Gilroy, Linda
Godsiff, Roger
Goggins, Paul
Griffiths, Jane (Reading E)
Griffiths, Win (Bridgend)
Grogan, John
Hall, Mike (Weaver Vale)
Hamilton, David (Midlothian)
Hamilton, Fabian (Leeds NE)
Hancock, Mike
Hanson, David
Harris, Dr Evan (Oxford W)
Harris, Tom (Glasgow Cathcart)
Harvey, Nick
Healey, John
Heath, David
Henderson, Doug (Newcastle N)
Henderson, Ivan (Harwich)
Hendrick, Mark
Hepburn, Stephen
Heppell, John
Heyes, David
Hill, Keith
Hinchliffe, David
Hodge, Margaret
Holmes, Paul
Hood, Jimmy
Hoon, Rt Hon Geoffrey
Hope, Phil
Hopkins, Kelvin
Howarth, Rt Hon Alan (Newport E)
Howarth, George (Knowsley N)
Howells, Dr Kim
Hughes, Beverley (Stretford)
Humble, Mrs Joan
Hurst, Alan
Iddon, Dr Brian
Illsley, Eric
Ingram, Rt Hon Adam
Irranca–Davies, Huw
Jackson, Glenda (Hampstead)
Jamieson, David
Jenkins, Brian
Johnson, Alan (Hull W & Hessle)
Johnson, Miss Melanie
(Welwyn Hatfield)
Jones, Helen (Warrington N)
Jones, Jon Owen (Cardiff C)
Jones, Kevan (N Durham)
Jones, Martyn (Clwyd S)
Joyce, Eric
Keen, Alan (Feltham & Heston)
Keen, Ann (Brentford & Isleworth)
Kemp, Fraser
Khabra, Piara S
Kidney, David
Kilfoyle, Peter
King, Ms Oona (Bethnal Green)
Kirkwood, Archy
Knight, Jim (S Dorset)
Kumar, Dr Ashok
Lamb, Norman
Lammy, David
Lawrence, Mrs Jackie
Laws, David
Lazarowicz, Mark
Leslie, Christopher
Levitt, Tom
Lewis, Ivan (Bury S)
Liddell, Rt Hon Mrs Helen
Linton, Martin
Lloyd, Tony
Love, Andrew
Lucas, Ian
Luke, Iain
Lyons, John
McCabe, Stephen
McCafferty, Chris
McDonagh, Siobhain
McFall, John
McGuire, Mrs Anne
McIsaac, Shona
McKechin, Ann
McKenna, Rosemary
McNamara, Kevin
McNulty, Tony
Mactaggart, Fiona
McWalter, Tony
Mahmood, Khalid
Mahon, Mrs Alice
Mallaber, Judy
Mann, John
Marris, Rob
Marsden, Gordon (Blackpool S)
Marshall–Andrews, Robert
Martlew, Eric
Meacher, Rt Hon Michael
Miliband, David
Miller, Andrew
Mitchell, Austin (Gt Grimsby)
Moffatt, Laura
Mole, Chris
Moonie, Dr Lewis
Moore, Michael
Moran, Margaret
Mountford, Kali
Mullin, Chris
Munn, Ms Meg
Murphy, Denis (Wansbeck)
Murphy, Jim (Eastwood)
Naysmith, Dr Doug
Oaten, Mark
O'Brien, Mike (N Warks)
O'Neill, Martin
Organ, Diana
Palmer, Dr Nick
Pearson, Ian
Perham, Linda
Picking, Anne
Pickthall, Colin
Pike, Peter
Plaskitt, James
Pollard, Kerry
Pond, Chris
Pope, Greg
Pound, Stephen
Prentice, Ms Bridget (Lewisham E)
Prentice, Gordon (Pendle)
Price, Adam
Primarolo, Dawn
Prosser, Gwyn
Pugh, Dr John
Purchase, Ken
Purnell, James
Quin, Rt Hon Joyce
Quinn, Lawrie
Rammell, Bill
Rapson, Syd
Reed, Andy (Loughborough)
Reid, Alan (Argyll & Bute)
Rendel, David
Roche, Mrs Barbara
Rooney, Terry
Ross, Ernie
Roy, Frank
Ruddock, Joan
Russell, Bob (Colchester)
Ryan, Joan
Salmond, Alex
Salter, Martin
Sanders, Adrian
Savidge, Malcolm
Sawford, Phil
Sedgemore, Brian
Sheridan, Jim
Shipley, Ms Debra
Simon, Siôn
Simpson, Alan (Nottingham S)
Singh, Marsha
Skinner, Dennis
Smith, Angela (Basildon)
Smith, Geraldine (Morecambe)
Smith, Jacqui (Redditch)
Smith, John (Glamorgan)
Smith, Llew (Blaenau Gwent)
Smith, Sir Robert (W Ab'd'ns)
Soley, Clive
Southworth, Helen
Starkey, Dr Phyllis
Steinberg, Gerry
Stevenson, George
Stewart, David (Inverness E)
Stewart, Ian (Eccles)
Stinchcombe, Paul
Stoate, Dr Howard
Strang, Rt Hon Dr Gavin
Straw, Rt Hon Jack
Stringer, Graham
Stuart, Ms Gisela
Stunell, Andrew
Sutcliffe, Gerry
Taylor, Ms Dari (Stockton S)
Taylor, Matthew (Truro)
Thomas, Gareth R (Harrow W)
Thomas, Simon (Ceredigion)
Thurso, John
Timms, Stephen
Tipping, Paddy
Todd, Mark
Tonge, Dr Jenny
Trickett, Jon
Truswell, Paul
Turner, Dennis (Wolverh'ton SE)
Turner, Dr Desmond (Kemptown)
Twigg, Derek (Halton)
Twigg, Stephen (Enfield)
Vis, Dr Rudi
Walley, Ms Joan
Ward, Ms Claire
Wareing, Robert N
Watts, David
Webb, Steve
Weir, Michael
Whitehead, Dr Alan
Williams, Rt Hon Alan
(Swansea W)
Williams, Hywel (Caernarfon)
Willis, Phil
Wills, Michael
Winnick, David
Winterton, Ms Rosie (Doncaster C)
Wishart, Pete
Wood, Mike
Woodward, Shaun
Woolas, Phil
Worthington, Tony
Wray, James
Wright, David (Telford)
Wright, Tony (Cannock)
Younger–Ross, Richard
Tellers for the Noes:
Mr. Ivor Caplin and
Jim Fitzpatrick.
Question accordingly negatived.
Mr. Chope: I beg to move amendment No. 10, in page 3, line 3, at end insert—
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