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4.2 pm
Dawn Primarolo: With the leave of the House, I shall respond to this afternoon's interesting debate. I shall respond particularly to points made by Opposition Members on the imposition of the 1 per cent. national insurance rise effected last year. First, however, it is important to reiterate the purpose of the Bill.
The Bill takes forward the Government's commitment that the Inland Revenue will work with employers' representatives and others on reducing technical differences between the administration of tax and national insurance. It extends employers' options for meeting their national insurance contributions liability when paying earnings in the form of shares or other securities, and it helps protect employees' rights to statutory sick and maternity pay by improving the means of tackling employers who fail to meet their obligations.
The hon. Member for North Norfolk (Norman Lamb) asked me a number of questions, first with regard to the accusations made by the Institute of Chartered Accountants in its report of April 2002. I confirmed in an intervention that I would answer those points. I shall also give the hon. Gentleman the time line that he requested, to demonstrate to the House that much has been done in the past five years. Not only did the Government, on their election, merge the Contributions Agency with the Inland Revenue—which the previous Government failed to do for 18 years—but there has been steady progress across the board in achieving the objectives that we set. A great deal has been achieved
since 1999—and, indeed, since April 2002, when the Institute of Chartered Accountants made its observations. The institute referred to the integration of national insurance contributions into the general work of the Inland Revenue and welcomed it, saying that there were benefits and that it had resulted in a much greater awareness of national insurance issues across the board—something that the previous Government totally failed to achieve.The first two points made by the Institute of Chartered Accountants related to long delays in dealing with correspondence and a failure to deal with it. I think that the performance speaks for itself, however, and I shall give the House the details. The performance of the national insurance contributions office, or NICO, in dealing with the public has been shown to be at the very highest level. Its last report, published in November 2003—the hon. Member for North Norfolk is free to go back through its previous reports—showed that more than 93 per cent. of post was dealt with completely and correctly within 15 days, and that more than 98 per cent. of phone calls were answered within 20 seconds. I wonder how many MPs' offices manage such a response rate. More than 93 per cent. of complaints to the director were investigated and dealt with within 15 days. That deals with the first two allegations.
The next two allegations related to the employers helpline and the lack of consistency. Again, the issues relate to procedures and structures that this Government have put in place. If hon. Members wish to know how bad things were, they merely have to look at the situation pre-1997 and the difficulties that employers experienced at that time. There is now a dedicated national insurance contribution contact centre in addition to the employers helpline. The staff are trained to handle both national insurance and tax aspects of employers' queries. The report refers to a period almost two years ago when the helpline was not fully established. I ask hon. Members to ponder for a split second how long it takes to conduct training and to put such facilities in place, fully equip them and make them operational. As I said, the previous Government had 18 years and did not manage it. The feedback is currently very positive. The Inland Revenue is continually updating and reviewing guidance to ensure consistency across the Revenue and the national insurance contributions office. We have a better guidance project and are in consultation with the public and employers to ensure that the highest standards of guidance are available to staff and the public.
I turn now to accusations Nos. 5 and 6, which are that national insurance issues and problems appear to have been downgraded and that key national insurance personnel appear to have moved on or left. There is a full integration of employer compliance reviews, with all employer compliance officers fully trained in national insurance. That is precisely what the employers said that they needed. National insurance contribution knowledge forms part of a mandatory examination programme of inspectors who will be involved in dealing with medium-sized and large businesses. A rolling programme of national insurance training is being undertaken to ensure that inspectors who completed
their initial training before the merger took place now have knowledge that goes across the whole organisation.How long do hon. Members seriously think that it takes to bring all that information together—one minute, or two or three minutes? That is functioning now and that result has been achieved. Staff involved in handling queries at inquiry centres have also been trained so that there is a point of contact for employers—precisely the objectives of the merger. As I said, a dedicated national insurance contact centre has been established, in addition to the employers helpline. New teams dealing with expatriate workers are trained to handle both their tax and national insurance inquiries. That is an improved service. It is going on now and it has been doing so over the past five years.
Mr. Prisk: Will the Paymaster General give way?
Dawn Primarolo: No, I should like to make some progress.
Then we come to the accusation that claims for the repayment of national insurance have become more complicated—but there have been no such changes. In fact, the merger has allowed us to simplify the procedure by enabling national insurance staff handling repayments of class 4 national insurance contributions to have access to the self-assessment system so that they can quickly verify the amount overpaid through self-assessment without having to make separate inquiries to tax personnel. And we have enhanced the system to enable the automatic issue of application forms for repayment when someone has paid more than the maximum contribution in class 1.
Those are issues that have been dealt with in consultation. Opposition Members make it sound as though nothing has been done, because they choose to believe that rather than looking at the facts.
Dawn Primarolo: I will not give way.
Opposition Members repeatedly suggested that the list of aims for the merger had been left filed in some corner with no action being taken. The hon. Member for North Norfolk helpfully suggested that perhaps a timeline or checklist would help, so I shall give it to him. We received several proposals, and have acted on all but one. The first was that we should adopt the Inland Revenue tax information powers for all classes of national insurance, statutory sick pay and statutory maternity pay. That is in the Bill. The next was that we should adopt Inland Revenue inspection powers for SSP and SMP. That is in the Bill. The next was that we should repeal section 110ZA of the Social Security Administration Act 1992. That is in the Bill. The next was that we should make some minor changes to the powers to inspect employers' records contained in regulations to make the national insurance regulations match the tax regulations. That was done in 2000. The next was that we should ease the calculation of class 1 national insurance on marginal items of pay—for example, expenses—by giving employers more time to process payments. That was achieved by amending guidance issued to employers. The next was that we
should simplify the procedure for dealing with arrears and errors involving class 1 NICs by using estimation, while protecting individuals' contributory benefit entitlement. That was achieved by issuing new guidance on the calculation of NICs to Revenue staff.The next proposal was that we should align the definition of pay for the purposes of tax. We are making that alignment where possible, as opportunities present themselves, in consultation with employers. The next was that we should move the national insurance charge from class 1 to class 1A on employer payments into FURBS—funded unapproved retirement benefit schemes. The hon. Member for Bury St. Edmunds (Mr. Ruffley) asked why that was not in the Bill; I shall return to that in due course. The next was that we should extend the deadline for payment of NICs due in respect of employees seconded abroad. That was done with effect from the 2002–03 tax year. The next was that there should be better guidance on the tax and national insurance liability of remuneration packages of employees seconded abroad. That has been taken on board as part of the review of residence and domicile. The next was that we should make minor amendments to national insurance regulations to align tax and NICs treatment of certain travel expenses. That was completed in 2000 through regulations. The final proposal was that we should extend the scope of PAYE settlement agreements to cover third parties, which would allow third parties to account for tax and national insurance on payments that they make to the employees of others. That matter is still outstanding.
Having suggested that nothing has been done, the hon. Member for North Norfolk asked about initiatives. I can give him examples of help being given directly to employers. They are being encouraged to make greater use of new technology instead of the traditional paper that causes many of the mistakes that come back to bite them later. That is being achieved by making online services more comprehensive and user-friendly, and by providing electronic guidance. Our business support team workshop provides targeted support to employers through one-to-one visits, enabling employers who have made mistakes to get themselves on to surer ground for the future and to avoid unnecessary obligations through promoting dispensation and PAYE settlement agreements. There are employer helplines and nationwide networks of local offices that can advise on all queries. I could go on.
That is not a record of this Government doing nothing, as Opposition Members suggest. Their description of inaction is a correct description of what they did when they had the opportunity to change things but did nothing.
The hon. Member for North Norfolk asked whether the Government believed that there should be a structural alignment of tax and national insurance. If he reads the employers' observations in the various studies, he will see that there are very mixed views on that issue. The biggest problem is to determine whether removing national insurance would place more obligations on employers by requiring a flag in the system relating to entitlements to contributory benefits. The Government are not attracted to the structural alignment that he suggests, for all the reasons that are widely known and outlined in the literature. Our approach is to continue to work with employers' representatives and others to
examine opportunities to align the tax and national insurance rules at a practical level, where possible, while always having regard to the importance of protecting individual benefit entitlements.The hon. Gentleman also asked about the penalties regime. The £300 penalty is the maximum that could be charged for each incident. In regard to statutory sick pay and maternity pay, if someone were to fail to produce their SSP records for 25 employees, the maximum penalty would be a total of £7,500. The penalties must also be proportionate to what has taken place, and cases in which an employer has failed to pay SSP or SMP do not usually involve penalties of more than a few hundred pounds. Clearly, however, we must be able to deal with such cases.
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