Finance Bill

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Mr. David Laws (Yeovil) (LD): Good afternoon, Mr. McWilliam. I apologise for stepping over the line, or perhaps not, earlier in proceedings.

The hon. Member for Hertford and Stortford (Mr. Prisk) raised a number of practical concerns expressed by tax practitioners about clause 78 and schedule 13. As he has clearly set those concerns out, there is no need for me to repeat them in detail. The principal concerns are about the extent of the relaxation of employers' responsibilities in respect of the management and funding of workplace nursery schemes. The hon. Gentleman indicated that there is concern about whether the relaxation goes far enough.

Will the Government consider relaxing the regulations further, so that employers do not have to be involved with schemes exceeding the £50 threshold? Is it not possible for the Government to be more generous and flexible, so that employers can involve local providers and schemes without having to micro-manage the issues? I am grateful that the Paymaster General is indicating that she may comment on the matter later.

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Dawn Primarolo: I was indicating that employers can do that—that is exactly what the measure provides for. When I respond I will explain why that is.

Mr. Laws: I am grateful for that clarification and await the forthcoming explanation.

The second practical issue raised by the hon. Member for Hertford and Stortford was about the much publicised suggestion that grannies could be involved in the delivery of child care. As well as causing enthusiasm among people who might have benefited, the idea raised concerns about whether such a scheme would be open to abuse. Our understanding is that under the proposed system a grandparent taking care of children could not be paid by the voucher unless the service is carried out at the grandparent's registered child care home rather than at an employee's home. We understand why the Government have introduced that restriction—one could imagine the scope for avoidance were that not so. However, several practitioners have suggested that the grandparent could be paid by vouchers if they are registered and approved for child care. That might at least provide hoops for the individual to leap through. How have the Government approached that issue? Will there be scope for greater flexibility in the future?

Having joined the hon. Member for Hertford and Stortford in raising those concerns, I shall raise some different issues about the clause and schedule. It would be helpful to understand the thinking behind the Government's proposals and what the precise cost over the next few years will be. He spoke about some of the costs that are set out in the Red Book—£20 million for 2005-06 and £25 million for 2006-07. The Government introduce many reliefs and allowances, but rarely publish the economic justification of the costs and benefits underlying policy changes. One often wonders how much economic analysis underlies the estimates, and what the assessed benefits will be from the expenditure of even a relatively small amount of taxpayers' money.

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Were any assessments undertaken of how many additional people may be able to enter employment as a consequence of this assistance with child care? Is it envisaged that the assistance will make employment more accessible for people who otherwise would not enter it, or is it a perk for people with those child care responsibilities, without necessarily having any positive impact on the number of people in employment? In other words, in crude economics speak, will it be a deadweight cost to the Exchequer, or do the Treasury's estimates make any allowance for additional income that might accrue as a consequence of having more people in employment? It would be helpful to know what underlying assumption the Government have made, and whether they believe that their policy will have any impact. My concern is that quite a few of the policies to introduce new allowances and reliefs seem to have been introduced without much evident assessment of whether they will have any economic benefit over time.

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Has the Paymaster General undertaken any investigation into the potential scope for legitimate tax avoidance that these proposals would create? She will know that many employers have already considered the possibility of a salary sacrifice being made in exchange for vouchers, in order to reduce tax liabilities. One complaint about that measure is that it relatively modest and moderate, and will not cost much. The Paymaster General might respond that, for many people, it might not be worth bothering with, but one can imagine that in a large company, if there were a strategy of asking employees to give up income to swap for vouchers in order to take advantage of the tax returns—

Dawn Primarolo: Fifty pounds.

Mr. Laws: The Paymaster General scoffs at her own policy, but if she does not believe that £50 is a significant tax avoidance, it is unlikely to have much impact on incentivising child care. She seems complacent about the issue, despite the fact that tax avoidance measures are supposed to be central to this Budget. I am already aware of clients approaching tax advisers to ask whether such schemes could be put in place. I alert the Paymaster General, who in so many of our debates on the Bill is telling us that we must close tax avoidance opportunities, to the fact that she may be opening one up here. I should be interested to know what allowance she has made in her costings for that, so that she does not have to come back to the Committee—if she is still dealing with the Finance Bill in three or four years—to tell us that she is closing this loophole, in the same way as the Government have had to come back to us on other issues, such as the film industry tax relief, to tell us, to their great embarrassment, that the measure has ended up costing far more than they were expecting.

If the Paymaster General can deal with the practical concerns that were clearly addressed by the hon. Member for Hertford and Stortford, she may also be able to give some time to my concerns about whether the economics behind the proposal have been thought through, and tell us clearly what the benefits are expected to be.

Rob Marris: I believe that the state should make provision for childcare. In the 1970s and 1980s I spent a lot of time—I suspect that the Minister spent even more—fighting for equal pay for work of equal value, and equal pay for men and women, on the basis that people should get paid for the work that they do, not for who they are or for their personal characteristics or circumstances. The momentum of the proposals in schedule 13 is to reinforce a trend that is already happening in certain workplaces such as the NHS, of people being paid additional amounts because they have children, rather than because of the work that they do. That is iniquitous, unfair and unequal, and it goes against what I—and, I strongly suspect, the Minister—struggled for in the 1970s and 1980s. When replying to the debate, I should be grateful if the Paymaster General—to use her sexist title—could explain the momentum behind this schedule.

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Dawn Primarolo: I congratulate the hon. Members for Hertford and Stortford and for Yeovil (Mr. Laws) for so eloquently putting to the Committee the representations made by the Chartered Institute of Taxation and the Institute of Chartered Accountants. I commend the Inland Revenue website to both hon. Gentlemen, should they have been unable to peruse it, and suggest that they look at the consultation document and the responses to it. There they will see what was said by those organisations and what was recommended to the Government as a result.

Far from the impression given by the hon. Member for Hertford and Stortford—I am sure that it was inadvertent—of there being a swathe of disappointment outside the House about our provisions, the Government have received congratulations on the process. Indeed, I have spoken on the issue at a number of business breakfasts and on Business Link days, and employers have been requesting information on how to proceed.

It might help the Committee if I first touch on the current position and how the schedule will change it. I shall then deal with the points made by both hon. Gentlemen. Throughout the consultation, employers pressed on the Government that although they were keen to see the proposals developed they wanted it done in a way that minimised further administrative requirements and gave employers the opportunity to expand the types of provision that they could make available to their employees.

The clause is modest. The proposals are not a panacea for working parents seeking child care in order to return to part-time or full-time work. They are part of a series of provisions put in place by the Government to expand child care facilities—through child care payments and tax credits, direct investment in nursery education, Sure Start and child trust funds. Time and again, and especially now, with employment being so high and recruitment therefore being so difficult, employers need to plan and develop their businesses to take account of the child care responsibilities of their staff—both to retain staff and to recruit them.

The consultation specifically engaged employers on the basis that, although many provisions are made under the tax system, we wanted to know what else would encourage them to provide more child care support for their staff—balanced, of course, by the cost to the taxpayer, by value for money and by issues such as those raised by my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) of whether salary would be sacrificed or fairness in the work force compromised. I shall come to each of those points now as I answer hon. Members' questions.

Mr. Laws rose—

Dawn Primarolo: If the hon. Gentleman has another question, he can certainly ask me it now. However, if he is about to repeat what he has asked me, perhaps he might give me a chance to answer it first.

 
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