Column Number: 479
Standing Committee B
Thursday 12 June 2003
[Sir Nicholas Winterton in the Chair]
(Except clauses 1, 4, 5, 9, 14, 22, 42, 56, 57, 124, 130 to 135, 138, 139, 148 and 184 and schedules 5, 6, 19 and 25, and any new clauses and schedules tabled by Friday 9th May 2003 relating to excise duty on spirits or R&D tax credits for oil exploration.)
The Chairman: It is five minutes to the hour of nine on Thursday. I welcome all Committee members to this sitting. I am sure that the Committee will continue to make excellent progress. I keep very close tabs on what is going on even if I am not in the Chair, and I congratulate the Committee on the progress that it has made.
Exemption where homeworker's additional expenses met by employer
Mr. Stephen O'Brien (Eddisbury): I beg to move amendment No. 251, in
I welcome you back to the Chair, Sir Nicholas, as we start our debate on employment income and taxation. We discussed clause 135 on the Floor of the House in relation to the various pressures and difficulties affecting such constituents as nannies, gardeners and butlers. With that background in mind, we arrive at this clause.
The clause permits employers to pay home workers. All Committee members will be deeply conscious of how much more significant the question of home working is these days. That is not just because of the demands of jobs and electronic opportunities to work at home; it would be helpful for Committee members to bear teachers in mind in relation to the clause. Under the clause, employers can pay home workers amounts free of tax to represent reasonable additional expenses that put them on a closer footing with site employees. I make no complaint about the need to put matters on a better footing.
The amendment is a probing one. It would be very helpful after I have outlined the reason for the amendment if the Paymaster General would outline whether the Government have target amounts in mind. The change is welcome, but Inland Revenue Budget note 3 states that no records will be necessary to substantiate a claim of up to £2 a week. We are concerned that £2 a week is a small figure, and is not necessarily commensurate with the £5 and £10 limits on personal incidental expenses that apply each night for night workers. We feel that £5 a week would be a
Column Number: 480
more realistic figure for the no-record keeping rule. That comes against a background of presuming that when the concession is formally published, it will refer to the need for the employee to keep records. It is difficult to see how an employer can provide the ''supporting evidence'' that the payment is wholly in respect of additional household expenses incurred by the employee carrying out his duties at home without record keeping by the employee, whom we note is not referred to in that context in Budget note 3.
Given the modern approach—the Paymaster General may want to confirm this in her reply—there is probably a case for a general review on the law relating to home working. It may be helpful if I highlight a case, which was helpfully brought to my attention by my hon. Friend the Member for Salisbury (Mr. Key), concerning tax relief for teachers. My hon. Friend's constituent, Mr. Chris Chelu, is a teacher who has engaged in extensive correspondence with the Paymaster General. He says:
''I feel that it would certainly help make teachers feel more valued if they were to have this tax relief.''
Mr. Chelu also makes this interesting point on home working:
''As regards the Unions and their attitude to the 1265 hours of directed time, if we assume that teachers work in school for 40 weeks of the year, this only works out to 31.6 hours a week of directed time. I can't imagine that the unions accept that teachers should only work these hours. The job would not get done properly if this was the case. We all know that teachers work much longer hours than that, as has been shown by many surveys, and we also know that the hours that they work cannot be all fitted in at school and that the vast majority of teachers work at home. This tax relief is not a vast amount of money, and giving parity with university lecturers would oil the wheels a little and encourage teachers to accept the constant changes that seem to be part of education policy these days.''
Mr. Chelu took his case to the ombudsman, who, understandably, disappointed him by saying that it was not within his remit to examine taxation. I raise the issue today because we are examining a combination of two issues, the sum and the absence of record keeping, which we must try to put on a realistic basis. The amendment is designed to probe the Government on the amounts that they have in mind. Mr. Chelu states:
''it is clear that I am not the only teacher to feel aggrieved by the attitude of the Government and tax authorities in this matter.
I feel that it is most unfair that one group of educational professionals, university lecturers, should be treated to a tax relief, whilst another group, school teachers are denied the same, when both have contracts which do not formally oblige them to work at home.''
The issue was first raised in an article in The Times Educational Supplement. Mr. Chelu continues:
''Dawn Primarolo says that there is no obligation on teachers to work at home . . . If all teachers took Dawn Primarolo at her word she would be responsible for the complete meltdown of the school education system.''
I do not endorse that argument and am not challenging the Paymaster General's position on the technical issue. However, I have drawn attention to that important area because we need to consider it.
I hope that the Paymaster General can elucidate the Government's thinking on setting a realistic amount that fairly reduces the bureaucratic burden of record keeping on the employer. The amount should relate to
Column Number: 481
people, such as teachers, who must work at home. The amendment suggests that the amount should be defined as a sum not exceeding twice the national minimum wage, which would be reasonable.
Mr. Michael Jack (Fylde): I welcome you, Sir Nicholas, back to the Chair.
I rise to support my hon. Friend the Member for Eddisbury (Mr. O'Brien) with my first question to the Paymaster General. What research did the Inland Revenue carry out to decide that £2 was the right figure? What enormous investigative analysis lies behind it? The amendment is correct to ask for a more realistic sum. If the home worker were to work five days a week, the per diem rate would be 40p. If they worked seven days, as many do, it would be even lower, at about 30p. In this day and age, when a home worker is required to use broadband technology to connect to their place of business, more than 30p a day worth of expenses may be incurred for that alone.
The clause states that
'' 'household expenses' means expenses connected with the day to day running of the employee's home.''
My conjecture is that one would knock up more than 30p to 40p a day just in having a brew a couple of times a day, making the odd phone call and keeping the light on. The Paymaster General will, no doubt, chastise us for having the nerve to question the £2 figure. She will say that the employer is not restricted from paying above that amount, but then at yet another cliff edge in the Bill we fall into the record-keeping arrangements that the clause ignores.
To be realistic about the matter, perhaps the Treasury should take a leaf out of the officeholder book, in which if one passes the wholly, necessarily and exclusively incurred rule, their expenses as predefined by their arrangement with their employer—the arrangement between the officeholder and the employer—can be automatically offset against income tax without the requirement for unnecessary record keeping.
The proposal is welcome but, to use a northern expression, a tad on the mean side. I look forward to hearing the justification for the £2 figure and, perhaps, the Paymaster General's agreement with my hon. Friend's proposal that a higher figure should be allowed in the clause.
Mr. John Baron (Billericay): I, too, Sir Nicholas, welcome you to the Chair this morning.
The majority of points have been covered. I rise in support of my right hon. and hon. Friends and would like to raise some further points. I, too, fully support this initial step to give a statutory exemption from income tax for the reimbursement of additional expenses that are incurred from home working. It is very welcome and I congratulate the Government on introducing it. It is worth remembering that some 1 million employees work from home in one form or another. The measure will be very welcome news indeed.
Column Number: 482
Home working is an important aspect of the modernisation of working practices in the UK. There is every indication that, if industry in this country is to remain competitive, home working will become an increasingly important characteristic of the way in which businesses lower costs and create a more flexible working environment. That is also welcome.
I wish to raise two very quick points. Could the Paymaster General give us some indication of how home working might be encouraged, and of the costs and benefits involved? What consultation is being undertaken on the matter? The impact of the uniform business rate and the difficulties in respect of travel expenses require full consideration in any such consultation.
My second point is about the sum of £2 a week. If we are to encourage home working, greater flexibility, and the modernisation of our working practices, welcome though the initial step of £2 is, it seems a little mean, bearing in mind the general running costs of a home. I ask the Government to consider the matter again and see what can be done.