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Madam Deputy Speaker: The hon. Gentleman has made a point that is now on the record, and I suggest that he pursue the matter through the usual channels.
Mr. Eric Forth (Bromley and Chislehurst) (Con): Further to that point of order, Madam Deputy Speaker. Is there no protection that the Chair can offer the House in circumstances such as those that my hon. Friend the Member for Christchurch (Mr. Chope) has outlined? If the House is asked to vote on a programme motion immediately following a Second Reading on certain assumptions, or even understandings, the Programming Sub-Committee will meet fairly soon after that, presumably on the basis of those assumptions. If the Government are then free to move the start date of the Committee as my hon. Friend suggests, does that not make nonsense not only of the whole concept of programming, but of any kind of relationship that may or may not exist between the usual channels? I ask this because if the situation that my hon. Friend outlined is the case, and if there is any chance of its being repeated, the House is now completely at the mercy of the Government, who, it seems, can do anything they like, notwithstanding motions passed by this House.
Madam Deputy Speaker: I confirm what I have already said—that the matter raised by the hon. Member for Christchurch (Mr. Chope) could be pursued through the usual channels. As for the right hon. Gentleman's other point, that could well be raised in the Second Reading debate.
Orders of the DayNational Insurance Contributions and Statutory Payments Bill
Order for Second Reading read.
2.11 pm
The Paymaster General (Dawn Primarolo): I beg to move, That the Bill be now read a Second time.
The Bill is a modest measure, which continues the work undertaken with employers on reducing paperwork and record keeping that is considered unnecessary. It is a technical Bill, and I do not intend to pore over the detail of each and every clause this afternoon—as I am sure hon. Members are greatly relieved to hear—because that pleasure awaits in Committee. Rather, I intend to give the House an overview of the reasons for the changes that are being made and of what the Bill will do.
In 1997, the Government considered the way in which the tax and national insurance systems operated. Income tax under PAYE—pay as you earn—and class 1 national insurance contributions are paid largely by the same group of people. They are both collected in the same way—by payroll deductions administered by employers. That creates duplication of administrative effort. Both employers and ordinary taxpayers were required to deal with two different organisations in relation to their tax and national insurance affairs. That was especially the case for employers who were visited regularly by both the Inland Revenue and the Contributions Agency to check on their operation of PAYE and contributions. Therefore, my right hon. Friend the Chancellor of the Exchequer announced at the time of his March 1998 Budget that the Contributions Agency and the Inland Revenue would be merged. He said:
- "Employers and employees will . . . benefit from . . . the establishment of a single organisation to deal with both income tax and national insurance."
The merger was implemented by the Social Security Contributions (Transfer of Functions, etc.) Act 1999 and, again, Members on both sides of the House supported it. However, as my noble Friend Baroness Hollis made clear during the debates on the Bill in the other place, it did no more than provide for
- "a technical transfer of functions—of the Contributions Agency"—
- "to the Inland Revenue and of policy responsibility for collecting national insurance contributions to the Inland Revenue and Treasury."
- "Over time these transfers will reduce the burdens on business and take a first step towards removing the technical differences between tax and NICs rules that employers fear will trip them up."—[Official Report, House of Lords, 10 December 1998; Vol. 595, c. 1038.]
A lot has been achieved since 1997. We have made significant steps towards simplifying national insurance contributions. We have abolished the entry fee. Before 1999, when people reached the lower limit for starting to pay national insurance, it was calculated as a percentage of all their income. We restructured it to ensure that only the amount of earnings above the lower limit was liable to national insurance. We have aligned the primary and secondary thresholds with the income tax thresholds so that tax and national insurance both start at the same time. We have radically simplified the number of rates of employers' national insurance by reducing them to one. We have made significant changes to the way in which the Inland Revenue is organised so that tax and national insurance matters can be administered together. For example, the Revenue now operates joint employer compliance reviews covering tax and national insurance, and has introduced some new teams for the joint handling of expatriates' tax and national insurance affairs.
In some areas, however, the administrative alignments that we want to make require changes in primary legislation. The Bill includes those measures.
Rob Marris (Wolverhampton, South-West) (Lab): My right hon. Friend mentions the simplification that has already taken place without the need for legislation such as the Bill. Has she any idea of how much money has been saved for business through that simplification?
Dawn Primarolo: I do not have those figures to hand, but they would have been included in the regulatory impact assessments as the changes were made. I am happy to look into that and to ensure that my hon. Friend receives a detailed answer. I hope that I will have the opportunity to respond at the end of the debate.
Mr. John McFall (Dumbarton) (Lab/Co-op): My right hon. Friend will be aware that administrative simplification is extremely important to business: indeed, the Select Committee on the Treasury has received several submissions on that issue. She mentioned the joint committee that is working with business representatives. Can she give us a flavour of the comments that they are making, as that would be helpful to my Committee's future inquiries?
Dawn Primarolo: In going through each part of the Bill, I am responding directly to observations that have been made. Indeed, draft clauses were circulated to interested parties to check with them that the proposals in the Bill met the requirements that they identified. As my hon. Friend will be aware, some people would like a complete alignment of tax and national insurance. But that involves significant difficulties: first, the national insurance system flags entitlement to benefit; and, secondly, the increased requirements that would be placed on employers to provide the detailed information that we would require in order still to be able to judge on individuals' benefit entitlement were greater than those of the current system. To assist employers, the Government are trying to ensure that, wherever possible, the national insurance system runs in the same way as the tax system as regards inspection, appeals, payments, recovery or—as is touched on in the Bill—
share schemes. Perhaps I shall deal with my hon. Friend's points as I cover each clause; if not, I am happy to return to them at the end of the debate.
Mr. Mark Prisk (Hertford and Stortford) (Con): Is the Paymaster General ruling out any further alignment of the various systems?
Dawn Primarolo: I am not ruling out further alignment. It is sensible to proceed by recognising the principles of the national insurance system in terms of flagging entitlement for the individual, and the responsibility of the employer and the employee to make their contributions. However, we are continuing our consultation exercises and discussions with the teams—they are not limited by a time period, and are an ongoing central function that is now required—and if any further clear improvements can be developed, the Government will certainly consider them. I cannot say that there are any obvious ones that we would want to introduce now, but I would not like to mislead the hon. Gentleman. As businesses and officials continue to hold discussions on the day-to-day operation of the system, it is impossible to say that no other changes will ever be requested. The door is not closed, but I am not aware of having omitted anything from the Bill that would be required in this regard. Of course, certain points have been made in those discussions, and I am sure that they will be the subject of more detailed debate in Committee. At each point the Government have had to make decisions on how the system operates, and I would be happy to tell the hon. Gentleman exactly why we have made those decisions.
The Bill aligns officers' powers to obtain information when investigating national insurance contributions with their powers in relation to tax. This relates to the point made by my hon. Friend the Member for Dumbarton (Mr. McFall). It will bring clarity for employers and introduce a consistent approach by Inland Revenue officers. Opposition Members specifically sought this move when the transfer of national insurance to the Inland Revenue was originally debated. At that time, it was recognised that differences existed between the then contribution agencies and the Inland Revenue's inspection powers. The Government felt, however, that a thorough review was needed to determine whether those differences were justified, and, if not, what type of alignment was necessary.
We have undertaken such a review and concluded that the old national insurance powers needed to be replaced by those most commonly used for tax and other aspects of the Revenue's business. This does not amount to an extension of the Inland Revenue's powers; in fact, the reverse is the case. The Bill provides for the Inland Revenue to abandon the powers of entry and examination that it has for national insurance purposes. It does not have such powers in relation to tax matters, and it is inconsistent that it should have them for national insurance.
We therefore propose to replace the Revenue's current power to obtain information for national insurance purposes with a power that ensures that, when the Revenue asks for information, the request is subject to third-party scrutiny to ensure that it is reasonable.
We consulted employers' representatives on these changes and they supported them. In particular, the Chartered Institute of Taxation has welcomed the intention behind this legislation, as has the TUC.
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