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Mr. Sutcliffe: I fear that, however eloquently I try to explain the position in relation to direct payments, Opposition Members have already made their minds up. They have decided that they want this scheme and, no matter what explanation I give, they will push for it to   be developed. I ask them to bear with me a little further.

A direct payment scheme would add new responsibilities for employers. Because statutory maternity pay and other payments listed in the new clause are wage replacements, which are subject to the full range of payroll deductions and paid net, direct payment would mean Revenue and Customs becoming a temporary payroller for SMP and other statutory payments to employees of potentially any employer in the country, taking off the full range of payroll deductions. Employers would not, however, lose all their current tasks and responsibilities in relation to those payments. For example, they would remain responsible for making earnings-based contributions such as employers' national insurance contributions and employers' contributions to occupational pension schemes. They would also continue to be responsible for completing periodical returns such as the employer's annual return. Many employers also provide occupational maternity and paternity pay on top of the   statutory minimum, which is something that the Government welcome. Handing responsibility for statutory payments to the Government would still leave such employers with the responsibility of making those occupational payments, in addition to having to pass on new information to Her Majesty's Revenue and Customs.

2.15 pm

For a direct payment scheme to work properly for both employers and Revenue and Customs, a potentially complex two-way information exchange would be necessary, which, as I have pointed out, would impose new burdens on employers. HMRC would require detailed information to be provided by employers to high standards of accuracy and to tight time limits in order to take on that function, and employers would still need information from HMRC to fulfil their obligations and to take back the payroll at the end of the direct payment period.

During the work and families consultation, many people, including the ad hoc advisory group of payroll experts, pointed out that such complex information
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exchanges could not realistically take place without error. Dealing with the consequences of errors would fall to the employers as a new burden, as employees would in the first instance turn to their employers for an explanation. Of course, the errors would also affect the employees concerned.

Given the cost of a direct payment scheme, it does not represent value for money for the taxpayer, which is why we have not moved forward with such a scheme. The administration of such a scheme would not benefit businesses, particularly small businesses.

Mr. Prisk: The key word in the new clause is that companies "may" transfer responsibility. Such companies can make their own sensible assessment as to   whether it is right in their circumstances. No compulsion is involved—the new clause would merely allow them to make that transfer. Does the Minister therefore accept that companies are better able to judge that than he is?

Mr. Sutcliffe: With due respect to hon. Members, the bulk of the reason for their position is that the CBI has withdrawn its support for the Bill because of the issue of direct payments—[Interruption.] It is important to see direct payments in the context of the whole Bill. The CBI and most employers' organisations support the principles of the Bill, as do all political parties.

Because of the costs involved, we not believe that a direct payment would represent value for money for the taxpayer. It would not provide the benefits that hon. Members claim, not only because of the costs involved but because of the administration of the scheme. The issue of cash flow was raised with regard to small businesses, but small businesses can apply for funding upfront in relation to the administration of schemes. Throughout the process, we have consulted small businesses and the business community about how to deal with the issue.

I am unlikely to be able to change the view of Opposition Members, given the positions that they have set out. I hope that they will take in good faith what the Government have said about the costs of a direct payment scheme and that they understand that such a scheme would not work for the reasons that I have given. I hope that the hon. Member for North Norfolk will withdraw the motion.

Norman Lamb: Liberal Democrat Members are not satisfied with the Government's response and will seek to divide the House on the new clause. The Minister says that our whole position is driven by the CBI, but it is long-standing Liberal Democrat policy and part of our election manifesto. I am delighted that Conservative Members added their names to our new clause and that the CBI supports Liberal Democrat policy, which seems an entirely good thing. We are not responding to any change of position from the CBI—our position has been the same throughout, and we tabled such a proposal in Committee, as the Minister knows.

I repeat that we strongly support the Bill, which provides new rights that are thoroughly welcome and will help in achieving a better work-life balance for families. As the Conservative spokesman mentioned, however, it is important to ensure that there is
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confidence in the changes and reforms introduced, and   that the Government bring business with them. The Government must acknowledge that they have a problem. For example, it is not good that the CBI has withdrawn its support, because the Bill ought to be a package of proposals around which everyone can unite. The Government have lost that big tent, to coin a phrase, and they ought to be thinking about how they can recover that position.

The hon. Member for Hertford and Stortford (Mr.   Prisk) just reiterated a point that I, and others, have already made: this is all about giving employers a right. They might seek to transfer responsibility to the Government if they considered that that was in their interests. Self-evidently, the new clause is directed at the employers who would benefit most in terms of cost savings.

I want to deal briefly with what has been described as the incredible disparity between the assessed cost of the Government's running the scheme—50 million quid—and the assessed savings for employers—£1.1 million. That is based on the regulatory impact assessment. I   support the RIA process in principle, but we need to be clear about the severe limitations imposed by the way in which such assessments are conducted. They tend to   be self-serving, in that they are prepared by the Departments that seek to benefit from them. Her Majesty's Revenue and Customs obviously does not want an additional responsibility, so self-interest is involved in the delivery of an assessment that is discouraging from the point of view of employers.

We should bear it in mind that many small employers still make their calculations manually. It seems incredible to me that the saving to employers should amount to only £1 million, while it would cost the Government £50 million to operate the scheme on an automated basis. That simply does not make sense. We believe—as, I think, do the Conservatives—that the   employers' costs have been underestimated, and the Government's costs have been overstated.

Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): Is this not yet another illustration of why we need an independent body to assess the quality of regulatory impact assessments? The House would then be better informed of where the true figure might lie.

Norman Lamb: I entirely agree. There must be an element of independence in the RIA process, for, without it, the figures simply cannot be robust enough. There should also be a reassessment once the regulation has been introduced. Perhaps the Minister will confirm that that will happen. He said that he would keep the matter under review in response to an intervention, and, a year on, we ought to establish what the actual costs have been.

A number of factors have led us to conclude that this assessment is wrong. I heard what the Minister said at the end of his speech, but I still believe that, for many employers statutory maternity and paternity pay has cash flow implications which could be avoided if the payments were made directly by the Government. We should also bear in mind the time taken away from wealth generation. The time spent on completing a
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manual declaration could be spent on making money—generating wealth for the business. I bet that the assessors did not calculate that loss adequately.

Mr. Sutcliffe: The assessors did take account of those figures, but the Government are taking a number of other measures to help small businesses improve their payroll systems and are considering better ways of giving them information. The hon. Gentleman must accept that. He is speaking out of context.

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