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PETITION
Community Pharmacies
9.32 pm
Mr. Paul Truswell (Pudsey): I wish to present a petition signed by more than 3,500 of my constituents and others regarding their concerns about the recommendations of the Office of Fair Trading on community pharmacies. I pay particular tribute to Mr. Tom Liptrot, a community pharmacist in my constituency, who has been assiduous in promoting this petition.
- The implementation of the Office of Fair Trading recommendation to remove restrictions on entry to the community pharmacy market could create instability in the community pharmacy sector, put a blight on the investment plans of pharmacies, frustrate the plans of primary care trusts, and thereby reduce access to community-based services, none of which would be consistent with the Department of Health's policy document "Pharmacy in the Future—Implementing the NHS Plan".
The petitioners therefore request that the House of Commons call upon the Government to reject this recommendation.
Construction Industry (Tax Treatment)
Motion made, and Question proposed, That this House do now adjourn.—[Joan Ryan.]
9.33 pm
Mr. Alan Hurst (Braintree): I am pleased to have the opportunity to bring this important matter before the House. Although I have no direct experience of the building industry, I come from a family who for generations worked in that industry. My father was a lifelong member of the Amalgamated Society of Woodworkers, a predecessor union to UCATT. One of my earliest memories is of attending the union's Christmas party for children at the Oakleigh Co-operative hall, probably in 1950. My next memory was of my father building a council estate in Didcot in 1951. He was a general foreman on a construction site for Laings, and I spent a week down there with him as he patrolled the site giving directions to the people working there, all of whom I understood to be the employees of the contractor.
That was a long time ago. This Government and previous Governments have wrestled with the problems over the past 40 or 50 years. Reform of the Inland Revenue construction industry scheme was announced in the Chancellor's pre-Budget statement in November 2002, together with the publication of the consultation paper entitled "The Inland Revenue and the Construction Industry—Working together for a New Scheme". That may be said to be a first. If its aims can be achieved, there will be considerable progress.
The revised scheme, which is to be implemented in 2005, sets three broad aims: to reduce the regulatory burden on the industry; to improve compliance, particularly with regard to tax obligations; and to assist businesses properly to assess the proper status of their workers. Reducing paperwork is linked to the introduction of computerisation. At present, "employers" issue slips or vouchers supposedly every time a payment is made to the "self-employed man or woman", and that is then sent off for tax reconciliation at the end of the year. One of the major problems has been that employees often do not receive the vouchers, or they receive them en bloc, as a result of which they have considerable difficulties in assessing the tax calculation at the end of the period.
The proposal is that the Inland Revenue computer system will simplify that enormously. Provided that it works—and that is what used to be called a conditional clause—it should make some considerable progress but the Revenue over 30 years has been trying to overcome tax evasion in the construction industry without any real and lasting success. My fear is that, unless we are careful with the revised scheme, there will be further disappointment and public confidence will wane further.
The consequences of failure are not just a loss to the Inland Revenue, which has been estimated by Dr. Harvey, who was engaged by UCATT to assess the position, to be about £1.2 billion to £2 billion per year, but a loss to every taxpayer in the country. I recently tabled a parliamentary question to my right hon. Friend the Paymaster General, and I believe that there are no clear figures or estimates from the Government as to what the loss is, although I suspect that they will
concede that there is a loss. However, false self-employment has further consequences. It goes to the heart of the industry. It fragments the work force and denies workers in the industry employment rights. The man who is said to be self-employed but in reality is not loses all the protections that the employed man would have, and risks losing social security benefits if he fails to pay his national insurance contributions.On the face of it, there is a short-term gain for contractors in employing the self-employed. That comes about because they escape liability for employers national insurance contributions. Nor are they obliged to offer many of the rights and protections that they would have to offer to those who are on the payroll. The whole system is essentially false. It is a fantasy world. One can go to building sites, look at the men employed and they will all appear to be doing the same job, working there week after week. They will all appear to be on the same terms but some will be employed and some will be purporting to be self-employed. The working man is in a difficult position because if he complains, he may risk losing his job. It is not unknown for contractors to insist on self-employment rather than to offer any choice.
There may have been some progress over the past two or three years but even today, a union official in my division, Ron McKay, told me of a building site close by. He believes that 100 per cent. of those working there—it is quite a large site—are purporting to be self-employed.
I suppose that the problem really started back in the 1960s. Before then, the majority of workers were on the pay-as-you-earn scheme. They were engaged perhaps by a subcontractor, but predominantly by a main contractor, and they were paid weekly. At the end of the week, the employer sent to the Exchequer the tax deducted and the national insurance contributions. The workmen were protected by the labour laws then appertaining and by the benefits flowing from the social security system.
At some point in the 1960s, something known as "the lump" became almost a public scandal. I recollect television programmes on the effect of the lump—in other words, of payment in cash to virtually uncertified workers. The Revenue had virtually no idea whatsoever what the position was, how many people were employed and what tax should be paid. And of course, the workers themselves had no protection whatsoever against unscrupulous employers.
The then Government sought to get hold of the situation through the Finance Act 1970. A scheme was introduced involving issuing a 714 certificate in respect of those who were believed to be genuinely self-employed and genuinely independent contractors. They were paid gross by the main contractor, and had to account for tax in the normal way, as any self-employed person does. If they could not do so, they were issued an SC60 contract, tax was deducted at source and the matter was sorted out—or not—at a later date. Of course, the employer still did not pay any employers national insurance contributions.
It would seem that for many years, Governments did not have a clue as to how many people were employed and how many were self-employed. I recently tabled a parliamentary question on this matter, but figures for the self-employed in the construction industry could be
given only from 1994. It seems that there are no figures for before that time, which is perhaps because there was a different system, or because the information was just unknown.Governments have recognised the problems, and in that respect I give credit to the former Chancellor of the Exchequer, the right hon. and learned Member for Rushcliffe (Mr. Clarke), who in the mid-1990s sought to enforce the existing system. In essence, enforcement turns on proper definitions, so that a judgment can be made as to whether someone is properly self-employed or their status is in fact a charade. When such enforcement and compliance was taking place, a remarkable rise took place in the number of those listed as employed, rather than as self-employed.
The new construction industry scheme—the CIS4 scheme—involved the issuing of some 800,000 cards in a little more than a year. That is an enormous number of cards to justify the "ticket to ride" to self-employment. The problem appears to have returned to a considerable extent in the past few years. Indeed, in the mid-1990s about half of those in the construction industry were listed as self-employed.
On the face of it, the new scheme was an attempt to regularise the position, but it appears not to have worked. Other Members have dealt with this issue in recent times. My hon. Friend the Member for Chatham and Aylesford (Jonathan Shaw) has spoken of the effect of bogus self-employment, and my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham), who is in his place, initiated a debate on this subject and on the work of Dr. Harvey in particular. Dr. Harvey's main contention was that mass false self-employment has damaged the construction industry. He argued that it has contributed to skills shortages, whereby major employers no longer invest in training. That and low capital investment are the classic ingredients for low productivity.
The Government have recognised the problems. As I said, a further scheme will be implemented in 2005. In 1998, my right hon. Friend the Deputy Prime Minister produced a report entitled "Rethinking Construction", which contained plenty of worthy ideas. Ultimately, however, unless we get to task with the issue of employment and self-employment, all the other matters will fall by the wayside.
One of those matters is health and safety. The building industry has acquired an appalling record over the years. Indeed, last year, there were 85 fatalities and 4,862 serious injuries. It is right to say that the Health and Safety Executive has taken dynamic action to bring that down by on-the-spot inspections of sites and by seeking a greater degree of compliance. The industry itself has set targets to reduce the fatalities and injuries by a considerable degree over the next five years.
The new scheme outlined by the Government is based on verification. It switches the burden from the subcontractor to the main contractor. If that is the case, it is a very positive move forward, which means that the buck will stop with the main contractor, who has many incentives to act in a responsible way. He will have a further responsibility to rein in the subcontractors who are not always so responsible.
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