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The hon. Member for Epping Forest (Mrs. Laing) said that it was a question of balance. I agree. We must consider what provides value for the money for the taxpayer when administering the system. We made it clear at the outset that we are committed to delivering the work and families legislation in a way that strikes the right balance between the needs of children, families and employers. We looked at a range of issues that affect employees and employers. At the time of the 2004 pre-Budget report, we made a commitment to consider the possibility of direct payments as a way of easing the administration of leave and pay. After careful consideration, we concluded that the scheme would be out of proportion to the benefits accruing, representing neither good value for money for the taxpayer nor a significant saving for employers. Hon. Members asked about costs and it was estimated that set-up costs would be up to £75 million with annual running costs of £50 million.
Those costs should be contrasted with an estimated net benefit for employers of about only £1 million a year. A figure of £38 million was mentioned, but if we accepted new clause 1, which applies to employers with 50 employees or fewer, HMRC's analysis would be relevant. I accept that hon. Members wish to question the figures as they try to make their case, but those figures were widely available. In the CBI response, no one questioned the figures or the detail, nor did they offer alternative figures to explain why the direct payment scheme would work. There would not be any net benefit for the taxpayer or, indeed, small businesses. As for the cost to business of the whole Bill, the majority of costs fall on the Government, as the Treasury reimburses business for statutory maternity, adoption and paternity pay at 92 per cent. for large businesses and at 104.5 per cent. for smaller businesses. As the right hon. Member for Wokingham said, that is worth about £390 million a year. Small businesses will bear only a small proportion of the costs of the Bill. For example, of
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the £29 million to £43 million net cost to business of extending maternity and adoption pay, small businesses will pay only £1 million to £8 million.
We have taken the problems for small businesses into account. I do not think that there are differences between us on whether the self-employed or small businesses are affected, but we must achieve the right balance. We are not starting from scratch, as we already have statutory maternity and paternity pay. The principle of the Bill has been accepted by all parties. I raised an article in today's Financial Times with the hon. Member for Epping Forest (Mrs. Laing). I accept that she has not had time to read it, but it suggests that the Opposition have changed their view on paternity leave and fathers taking time off when their child is born. In earlier debates, however, she backed what we are trying to achieve.
Mr. Sutcliffe: I accept that the hon. Lady is sincere and I accept the view of the hon. Member for Peterborough (Mr. Jackson) that the Labour party does not have a monopoly when it comes to political parties caring about employees and working conditions. The proof of the pudding, however, is the action that is taken. The Opposition talk about attacking business where necessary, but the article gives the impression that, in this instance, paternity leave may not be appropriate.
Mr. Prisk: The Minister says that the proof is in actions, not words, but the business community clearly understood that there was a one-for-one package. Why, therefore, did the Minister not back his words with actions?
Mr. Sutcliffe: The hon. Gentleman may attack the CD-ROM proposal, but we have regular meetings with small businesses to look at what can be done. We have set up Employee Direct, particularly for small businesses, to see what can be done about the burden of regulation and to try to make sure that we ease it.
In the context of direct payments, much has been made of the cost of such payments. In its response, the CBI attacked us, saying that we were trying to hide the figures. That is the not the casethe figures are on the website and have been placed in the Library. HMRC took a great deal of advice from a specially convened advisory group of payroll experts who were representatives of both large and small employers, payroll bureaux and software developers. HMRC's own analysts also carried out extensive analysis that was published on its website when the 2005 pre-Budget report was published.
Having given the House the headline figures, which demonstrate why a direct payment scheme would neither offer good value for money for the taxpayer, nor
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offer employers the savings that they might have hoped for, I will briefly explain why, even if we opted for a direct payment scheme employers would still be left with administrative responsibilities.
Mr. Nigel Dodds (Belfast, North) (DUP): Given the doubts expressed today about the costs and the burden on small businesses in particular, can the Minister give the House an assurance that if the new clause is not acceptedI sincerely hope that it will behe will keep the matter under review? If the costs are much greater to small businesses, will he look at the provisions in new clause 1 again and revisit the matter?
Mr. Sutcliffe: I am happy to give the House an assurance. The Government do not think that the direct payment scheme, given the cost both of setting it up and of its administration, is appropriate. However, regulations will flow from the Bill and we will have to consult with small businesses on regulations on additional paternity leave and so on. The hon. Member for North Norfolk rightly pointed out that the figure of 104 per cent. related to the national insurance contribution. We will consider whether we need to change the position as to who can access the 104 per cent. We will also consider how we can further relieve the burden on small businesses, but I do not want the House to run away with the view, which understandably comes from the Opposition, that because we are not providing direct payments, we are not prepared to consider the burdens on businesses, particularly small businesses. In the context of the Bill, I have tried to outline where the burden on small business lies.
Mr. Prisk: Is not the Minister embarrassed that what would cost £1 million if run by business will, it appears, cost £50 million if his Department runs it? Is not that an embarrassing statement in terms of the protection that he and his colleagues are meant to provide to the public purse?
Mr. Sutcliffe: No, I am not embarrassed, but I understand why the hon. Gentleman is trying to distortthat might be too strong a wordthe position. The effect on certain small businesses that have written payrolls rather than more technologically developed ones is complex, and that has been included in our calculations.
Mrs. Laing: If we accept the Minister's calculation of what the provision would cost the Government or the taxpayer to administer, will he accept that £400,000 is not a realistic figure to put on the cost to small businesses? It is not just a question of how many stamps are required and how many letters they post but of the time and the additional burden involved. Surely the overall cost for small businesses must be far greater than £400,000.
Mr. Sutcliffe: I am prepared to accept the word of the payroll experts and the experts at Revenue and Customs who have come up with those figures. The time involved in administration is incorporated in those figures.
Even if cost were not an issue, there are other issues relating to direct payment that would increase administrative responsibilities. In many instances, the
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scheme would add new responsibilities for employers, which I am sure is not what Members want. I therefore hope that Members will allow me a little time to explain why the Government believe that the actuality of a direct payment scheme, as well as the burden of costs, would not benefit employers.
Norman Lamb: Does the Minister accept that, even though there are some new burdens in passing information over, even the Government's regulatory impact assessment accepts that those are less than the saving that would be made? The RIA assesses it as a small saving of £1 million, but those burdens are still less.
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