Employment Bill

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Mr. Hammond: I may have misunderstood the Minister, but I heard him say that statutory adoption pay will affect around 200 people. That is a small number. Do the Government not want a higher target for increasing the number of adoptions and expect adoption leave and pay to be correspondingly higher?

Alan Johnson: In the few minutes since I spoke, we have considerably revised that figure up to 3,000. God knows how 200 became lodged in my mind. The hon. Gentleman is right and has given me the opportunity to correct myself. None the less, the figure is small compared with the number of women who take maternity leave.

The amendment calls for employers to be reimbursed for the full amount of the associated employers' national insurance contribution. That is already done for small employers paying statutory maternity pay, who receive compensation calculated to cover the cost of associated employers' NICs. That will be extended to statutory paternity pay and statutory adoption pay, and the relevant provisions are in clause 7.

On Thursday, Opposition Members recognised the important principle that the amendment calls for further compensation to be paid to employers—employers would be paid an amount to cover the new schemes. We recognise that employers will incur a cost for implementing and administering the new schemes and that is why we have tried to make the schemes as similar as possible to statutory maternity pay and why the Inland Revenue will provide

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extensive support and guidance to employers to keep costs to a minimum.

On principle, however, we do not accept that employers have a right to cover administration costs from the public purse. I do not think that any hon. Member would agree with the proposition that citizens, including employers, should be paid for complying with the law. We all incur costs to meet obligations, whether it be time spent to complete tax returns or take a trip to the post office to tax our cars, or the many thousands of pounds a limited company pays to have its annual accounts audited. The position is the same here, and there is no reason to go beyond what we have already said we will do. We do not accept the argument for changing the principle of not reimbursing citizens or companies for complying with the law. I hope that I have clarified our intention on the employer's right to recover costs, and that we shall not have the same discussion when we go round the course on clause 7. I also hope that I have resolved any confusion about the clause's purpose, and I invite the hon. Member for Runnymede and Weybridge to withdraw the amendment.

10.45 am

Norman Lamb (North Norfolk): Clearly, everyone accepts that this is the wrong place for the amendment. Nevertheless, there is a case for all organisations that employ people incurring the cost of administering the scheme. If the burden were shared among all taxpayers, some people who have no children would say, ''Why should we contribute to the cost of companies administering paternity leave?''

Mr. Hammond: The point is that the choice is between sharing the burden among all taxpayers whether they have children or not, or sharing it among all employees, whether they have children or not, of the employer in question. I suggest to the hon. Gentleman that the wider base is more appropriate.

Norman Lamb: The wider base will be used to pay for the majority of paternity leave. Given that the costs will be insubstantial and that the scheme's administration should not be complex, it is pragmatic to judge that companies should incur that limited cost. We have received no representations from employers' organisations demanding that that part of the cost should be paid by the state. The amendment is in the wrong place, but I still reject the principle behind it.

Mr. Prisk: The Minister made a point at the end of his speech on which I was unable to intervene because I am not quick enough on my feet at this time in the morning. It related to the established principle of not recognising costs to employers where they are dealing with the administration of laws. Can he square that with the recent reviews of payroll costs undertaken by his colleagues in the Treasury, which are supported by the Under-Secretary of State for Small Business? Those reviews examine how the Government can square the need to recognise the disproportionate cost of these administrative burdens on small businesses. I would be grateful if the Minister were to explain how his earlier statement squares with that review.

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Mr. Hammond: I shall seek to withdraw the amendment, but I have a couple of points to make to the Minister, who I hope will have a few more words to say.

On statutory paternity pay, I accept that we are discussing burdens that would be small in practice. The issue of where the line is drawn is therefore a matter of principle. I do not want to get into lengthy debates about straws and camel's backs because we have been around that territory before. Nevertheless there is a feeling, of which I am sure the Minister will be aware, in business, and in small business in particular, that we are moving into dangerous territory where the Government routinely regard business as an extension of the welfare state. They are using businesses' expensive and extensive payroll infrastructures as the mechanism for delivering benefits and financial support that would have been regarded 20 or 30 years ago as something that one collected from the post office on a Thursday morning.

That is happening because the Government are intent on wiping out the post office network, and in particular the rural sub-post office network. They have undoubtedly had to think of an alternative method of delivering those benefits because they have told us that the post office network is an administratively expensive mechanism for delivering benefits and financial support. Disingenuously, they have sought to find what would be, from their point of view, a completely free system requiring employers to shoulder the burden. Of course, we are talking not only about statutory paternity pay or statutory maternity pay, but about the working families tax credit and a panoply of other benefits. The Government appear to have resolved to use the pay packet as the principal method of delivering financial support to those who are in work.

Alan Johnson: I remember that the hon. Gentleman took part in debate on this issue in Finance Bill proceedings. We are talking about a relationship between the employer and the employee. It is right that paternity pay is issued through the pay packet. Some employers who now pay paternity leave willingly will be grateful for assistance from the state that they do not get at the moment. Under these provisions, they will be able to claim back 92 per cent. to 100 per cent. of what they already pay out.

Mr. Osborne: Will the Minister give way?

Alan Johnson: Hold on, this is an intervention—a pretty long one, Mr. Benton, but I am using it to deal with the point raised by the hon. Member for Hertford and Stortford.

Through the working families tax credit and the children's tax credit, we are trying, for the first time in my lifetime, to deal with the problem of people who find that marginal tax rates are an enormous disincentive to moving from the dole queue back into work, and with the fact that there is a world of difference between money arriving in a giro cheque and money arriving in a pay packet.

Let me tell the hon. Member for Hertford and Stortford that we must consider every opportunity to reduce any unnecessary burdens on business in

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administering the schemes. That is a world away from changing the principle—adopted by all Governments, including the previous Government and ourselves—that citizens or companies should not be compensated for carrying out the law. There is a vast difference between those two concepts.

Mr. Hammond: I accept that that point was addressed more to my hon. Friend the Member for Hertford and Stortford than to me.

High effective marginal tax rates are a problem, and a pretty intractable one, in every system.

Norman Lamb: Will the hon. Gentleman give way?

Mr. Hammond: I shall in a moment.

We could have a lengthy debate about in-work benefits, but I am sure that you would not encourage us to do so, Mr. Benton. That fascinating subject needs to be looked at again, because we are in danger, if we are not careful, of creating a society in which low wages and in-work benefits are considered the norm. That would be completely the wrong way to go. We should encourage a society in which the economic dynamics are such that people in work do not routinely need benefits to enable them to have a decent standard of living. The Government seem to be heading in the direction of accepting that people in work and pensioners will routinely need support from the benefits system.

Norman Lamb: Will the hon. Gentleman give way?

Mr. Hammond: In a moment. I just want to make my point. The Minister is right to say that we do not reimburse citizens for complying with their routine obligations under the law. However, it is a matter of degree. The Bill is not asking people to comply with a routine requirement of the law. It makes a wholesale transfer to employers of a responsibility that has been a responsibility of Government, and a cost to Government through the operation of the benefits system. That process has been going on for some time, and the present Government have accelerated it.

Conservative Members worry about the cumulative burden of the role that the Government are imposing on employers. It is wrong for the Minister to say that it is beyond the pale even to consider making payments to employers for shouldering that burden on the Government's behalf. I am not suggesting that the employer payroll is not the most efficient way of delivering the benefits: employers may be willing to offer that service to the Government. However, it is unreasonable of the Government to torture century-old Inland Revenue legislation, which was not established with the intention that people should ever be paid money through the payroll system of tax collection, to remove a burden hitherto borne by the state. The Minister is wholly wrong to suggest that the Government could not consider such a proposition. As my hon. Friend said, the Chancellor of the Exchequer commissioned a study of the payroll administration burdens of the part of the welfare state that employers administer through the payroll. I have referred to that previously in the Committee and the Minister and the

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Under-Secretary for Small Business—he is knowledgeable about and interested in the matter—will know that a system operating in the United States allows small employers to claim cost support for the administrative burden of managing payroll-based systems.

The amendment is not impossible and, since they are considering the matter, it clearly would not conflict with any principle that the Government hold dear. I accept that the costs would be small, but I do not accept that it is proper in principle for Government to transfer parts of their function wholesale, remove costs from their budget and expect someone else to take up the burden without compensation.

I shall now give way to the hon. Member for North Norfolk who has been exceptionally patient.

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