The
Committee consisted of the following
Members:
Chairman:
Sir
Nicholas
Winterton
Bottomley,
Peter
(Worthing, West)
(Con)
Breed,
Mr. Colin
(South-East Cornwall)
(LD)
Brennan,
Kevin
(Lord Commissioner of Her Majesty's
Treasury)
Cable,
Dr. Vincent
(Twickenham)
(LD)
Ennis,
Jeff
(Barnsley, East and Mexborough)
(Lab)
Evennett,
Mr. David
(Bexleyheath and Crayford)
(Con)
Francois,
Mr. Mark
(Rayleigh)
(Con)
Gray,
Mr. James
(North Wiltshire)
(Con)
Hall,
Mr. Mike
(Weaver Vale)
(Lab)
Khan,
Mr. Sadiq
(Tooting)
(Lab)
McCarthy-Fry,
Sarah
(Portsmouth, North)
(Lab/Co-op)
Marris,
Rob
(Wolverhampton, South-West)
(Lab)
Murphy,
Mr. Denis
(Wansbeck)
(Lab)
Neill,
Robert
(Bromley and Chislehurst)
(Con)
Purchase,
Mr. Ken
(Wolverhampton, North-East)
(Lab/Co-op)
Timms,
Mr. Stephen
(Chief Secretary to the
Treasury)
Touhig,
Mr. Don
(Islwyn)
(Lab/Co-op)
David
Weir, Committee
Clerk
attended the Committee
Fifth
Delegated Legislation
Committee
Tuesday 13
March
2007
[Sir
Nicholas Winterton
in the
Chair]
Draft Social Security (Contributions) (Re-rating and National Insurance Funds Payments) Order 2007
10.30
am
The
Chief Secretary to the Treasury (Mr. Stephen
Timms):
I beg to
move,
That the
Committee has considered the draft Social Security (Contributions)
(Re-rating and National Insurance Funds Payments) Order
2007.
The
Chairman:
With this it will be convenient to consider the
following:
Draft
Social Security Contributions (Consequential Provisions) Regulations
2007
Draft Social
Security (Contributions) (Amendment No. 2) Regulations
2007
Draft
Social Security, Occupational Pension Schemes and Statutory Payments
(Consequential Provisions) Regulations
2007.
Mr.
Timms:
I begin by bidding you a warm welcome to the Chair,
Sir Nicholas. The draft order and the three sets of draft regulations
were laid before the House on 24 January and 19 February. I confirm
that it is my view that they are compatible with the European
convention on human
rights.
The
draft order has the effect of increasing contribution rates and
thresholds for self-employed people and the weekly rate of voluntary
class 3 contributions from6 April this year, broadly in line
with inflation. Northern Ireland has a separate national insurance
scheme, but it is closely co-ordinated with the scheme in Great
Britain. In particular, contribution rate parity is maintained, and the
draft order covers both Great Britain and Northern
Ireland.
The
three sets of regulations were laid on 19 February. They make use, for
the first time, of powers contained in the National Insurance
Contributions Act 2006. They provide for three things: first, the
application of a backdated national insurance contribution liability on
the amount of employment income charged to tax under the provisions of
schedule 2 to the Finance(No. 2) Act 2005 and section 92 of
the Finance Act 2006. Secondly, they put in place rules for
the recovery and collection of that national insurance contribution
liability. Thirdly, they ensure that those backdated earnings count for
contributory benefit, occupational pension and statutory payment
purposes. Like the draft order, the regulations apply to both Great
Britain and Northern
Ireland.
Let
me put the regulations in context with a short summary of the
background to the National Insurance Contributions Act 2006. My right
hon. Friend the
Paymaster General, who is sadly not able to be with us this morning,
made a statement in the 2004 pre-Budget report that the Government were
determined to ensure that all employees and employers paid the proper
amount of tax and national insurance due on the rewards of employment,
however those rewards were delivered. She made it clear that on
becoming aware of arrangements aimed at frustrating that intention, we
would introduce legislation to close them down, where necessary from
the date of that statement, 2 December 2004. Following the statement,
retrospective tax changes taking effect from that date were included in
schedule 2 to the Finance (No. 2) Act 2005 to allow national insurance
contributions legislation to be backdated to mirror the retrospective
tax changes.
A
National Insurance Contributions Bill was introduced in October 2005,
becoming the National Insurance Contributions Act 2006 after Royal
Assent on 30 March. The powers in that Act enable the Government to
deal effectively with future tax and national insurance avoidance
arrangements designed to frustrate the intention that the proper amount
of national insurance contribution should be paid from the rewards of
employment.
Mr.
James Gray (North Wiltshire) (Con): Is there not a
worrying precedent there? The Minister is effectively saying that
because he has discovered a loophole or gap in regulations, the
Government can now introduce retrospective legislation such as this to
close it. Surely it should be incumbent on Her Majestys
Government to close such loopholes when they pass the original
regulations.
Mr.
Timms:
The hon. Gentleman is right, of course, about what
is essentially happening, but I am pleased to remind him that there has
been wide support across and outside the House that the draft
legislation is a right and proportionate approach to increasingly
sophisticated attempts to reduce the amount of tax and national
insurance due from employers and employees.
I
have read the debates in Committee, the House and indeed the other
place on the matter over the last year or two, and I am pleased that
there is, quite rightly, agreement across the House. When imaginative
schemes are being devised specifically and purely for the purpose of
reducing the amount of tax and national insurance liable, the
Government should act to block them. That is what we did in the 2006
Act. The draft legislation is a novel but proportionate and effective
approach to dealing with a
problem.
Mr.
Gray:
The Minister is introducing an interesting and novel
approach, as he says. Surely it is perfectly legitimate for businesses
or individuals to seek to use every legitimate mechanism at their
disposal to avoid or reduce their tax burden. Instead of saying simply,
These people are clever and have clever new ideas, so
were going to bring in retrospective legislation to prevent
them from using them, surely the Government should have people
just as clever working for them to come up with ways to prevent such
loopholes in advance rather than retrospectively. I am asking merely
about retrospection, not whether reducing tax is abad
thing.
Mr.
Timms:
I am pleased to tell the hon. Gentleman that that
is precisely what we have done in the draft legislation and in enacted
legislation. We have provided the means to deal with any such problems
that arise, and in that way to take account of the fact that ingenious
minds will no doubt be applied to finding ways to reduce the liability.
It is not unexpectedthat people will attempt to devise such
means. The instruments are an effective way of dealing with them. I
think that that will be welcome to Opposition
Members.
Let
me speak a little further about each of the three regulations. The
Social Security (Contributions) (Amendment No. 2) Regulations will
amend the principal regulations, the Social Security
(Contributions) Regulations 2001, to apply the backdated national
insurance contributions liability to employment income from
employment-related securities. The intention to close a number of
schemes using employment-related securities to avoid tax and national
insurance was announced in the Budget last year. As I said, it is a
proportionate, carefully targeted response to a small number of
employers who continue to enter into such schemes despite a clear
warning from the
Government.
Provisions
in schedule 2 to the Finance (No. 2)Act 2005 and section 2 of
the Finance Act 2006 apply a tax charge to income from
employment-related securities and securities options used in avoidance
arrangements. The charge is backdated to 2 December 2004. Powers in the
National Insurance Contributions Act 2006 can be used to ensure that a
national insurance contributions liability is also applied to the same
income backdated to the same date.
The Social Security
Contributions (Consequential Provisions) Regulations 2007 enables the
recording, collection and recovery of that backdated national insurance
contributions liability. Employers will be required to amend the pay
records of those employees in receipt of retrospectively treated
employment income for years in which the income was actually received,
applying the rate of national insurance contributions in force for the
year in question.
For
contributions arising by virtue of the Social Security (Contributions)
(Amendment No. 2) Regulations 2007, employers will have until 19 June
this year to pay the additional contributions due to HMRC.
Before20 May 2008, employers must submit a separate return for
each relevant year, setting out each affected employees amended
earnings and national insurance contributions. Where additional
national insurance contributions due include primary contributions,
employers will be able to recover those from the affected
employees earnings during 2007-08 and
2008-09.
The
regulations mirror the provisions on collection and recovery of tax.
The equivalent tax regulations, the Income Tax (PAYE) (Amendment)
Regulations 2007, similarly require employers to amend the pay records
of those employees in receipt of retrospectively treated employment
income for the years in which the income was received, applying the tax
code or higher rate of tax in force for the year in question. Payment
of the tax will also be due by the same date, 19 June 2007, and a
return for each relevant year before the same date of20 May
2008. If employers are unable to recover the additional tax due from
employees pay in the period ending 5 May 2007 by virtue of
existing provisions in
the Income Tax (Earnings and Pensions) Act 2003 as amended by the
Finance Act 2006, and if an affected employee does not make good to
their employer the tax due and then paid by their employer within 90
days of 6 April 2007, that sum will become additional taxable income of
the employee in
2007-08.
Thirdly, the
Social Security, Occupational Pension Schemes and Statutory Payments
(Consequential Provisions) Regulations 2007 ensure that the earnings
subject to backdated national insurance liability also count for
contributory benefits, occupational pensions and statutory payment
purposes so that employees do not lose out on entitlements that they
would have enjoyed had the payments been earnings at the time they had
received them. Those and the collection regulations also provide the
framework for dealing with any future payments retrospectively treated
as earnings, and not only those brought into liability by the proposed
regulation.
So, in
keeping with the commitment that my right hon. Friend the Paymaster
General gave during the passage of the Bill last year, the regulations
were published in draft for comment on 16 August 2006. The comments
were generally helpful. They did not suggest any substantial drafting
issues. HMRC has published on its website a summary of the comments and
its responses to them. Most of the comments focused on national
insurance contributions avoidance disclosure rules, which were
published at the same time. Those are subject to the negative
resolution procedure. They are made under powers in the Act. Even
though comments were passed on the rules, they were really on points of
detail and did not raise issues of policy or principle. I hope that
that will further reassure members of the Committee about the response
there has been to the measures.
The Government are committed to
deterring avoidance activity. I think that that aim would be shared
right across the House. The regulations are the first use of new powers
in the National Insurance Contributions Act 2006 and I commend them and
the re-rating order to the
Committee.
The
Chairman:
Before I call the representative of Her
Majestys Opposition, I remind members of the Committee that the
debate can continue for a total of one and a half
hours.
10.45
am
Mr.
Mark Francois (Rayleigh) (Con): It is a pleasure to serve
under your chairmanship, Sir Nicholas. Last Thursday, we debated a
statutory instrument about the annual uprating of tax credits, and we
are now debating, at least with the first order, the uprating of
national insurance.
This is the third time that I
have debated the principal order. I was expecting to debate it with the
Paymaster General, as on the previous two occasions. I understand that
she cannot be here because she has suffered a bereavement. We on the
Opposition Benches offer our condolences and I would be grateful to the
Chief Secretary to the Treasury if he would pass those on.
Nevertheless, we are pleased to see the Chief Secretary in lieu of the
Paymaster General for those perfectly understandable reasons.
On this occasion we are debating
four interrelated statutory instruments that are connected to national
insurance. I have some questions to put to the Chief Secretary about
the first order, which is about uprating, and then I shall discuss the
three remaining instruments together, not least because they relate to
retrospective changes to national insurance. As my right hon. Friend
the Member for North
Wiltshire
Mr.
Gray:
I am not yet a right hon.
Member.
Mr.
Francois:
It is purely a matter of time. My hon. Friend
made the point that retrospective taxation changes are something about
which we should always be wary, and so I shall scrutinise the
Governments rationale in some detail, and I hope that the Chief
Secretary will offer some reassurances.
The first order uprates
national insurance contribution rates for the new tax year beginning in
April and has direct implications for classes 2, 3 and4 of
national insurance payments. Class 2 contributions are paid by
self-employed people once their profits reach a certain level, and are
normally paid by a fixed weekly amount in arrears. The order proposes
to raise the amount from £2.10 to £2.20, an increase of
more than 4.7 per cent.
Class 3 contributions are paid
voluntarily by people who want to fill in gaps in their records.
Usually, but not always, such payments are contributions toward a
retirement pension. The order increases the prescribed amount from
£7.55 to £7.80, an increase of 3.3 per cent.
Class 4 contributions are paid
by self-employed earners in addition to class 2 contributions and are
currently levied at 8 per cent. between the lower and upper profit
limits, then, since 2002, at an additional1 per cent. on
profits or gains above the upper earnings limit. The order will
increase the lower limit from £5,035 to £5,225, an
increase of 3.77 per cent. The upper limit will be increased from
£33,540 to £34,840, an increase of more than 3.8 per
cent.
We have before
us in the first order three classes of national insurance rates and
bands that have increased at differing rates, varying from 3.3 to 4.7
per cent. Will the Chief Secretary say on what basis the increases are
being made? Were they based on the consumer prices index, the retail
prices index, average earnings, or some other figure? From memory, the
Paymaster General has sometimes attributed such increases and the
differences between them to the rounding of figures. Has that factor
played a
part?
Similarly, on
two previous occasions in the run-up to a Budget, which this year will
be presented on21 March, I have asked the Paymaster General to
rule out on principle the full-scale merger of the tax and national
insurance systems. On both occasions, the Paymaster General was able to
reassure the Committee that no such merger was being considered. For
the benefit of the Committee and our constituents, and at the risk of
starting some sort of mini tradition, may I ask the Chief Secretary to
repeat the reassurance that the Government are not planning to announce
a full-scale merger of tax and national insurance in the Budget? It
would be helpful to have that on the record.
Those are the questions I have
about the uprating. We then come to the three remaining instruments,
which are essentially anti-avoidance measures which relate back to a
written statement made by the Paymaster General on 2 December 2004 to
coincide with that years pre-Budget report.
The Treasury
took steps in that written statement to begin to address what they
perceived to be avoidance of tax in such areas as, to quote one
example, the payment of a bonus to an employee in the form of dividends
on shares in a specially constructed company. There were other examples
as well. The relevant tax measures for dealing with this were included
in the Finance Act 2005 and then in section 92 of the Finance Act 2006.
Those dealt with the income tax implications of those measures. Changes
in national insurance, however, are traditionally dealt with separately
and the associated anti-avoidance measures relating to national
insurance were included in the subsequent National Insurance
Contributions Act 2006. That gave Ministers regulation-making powers in
this area and those consequent regulations are the ones that we are
debating this
morning.
The
principal one of the three regulations is the Social Security
(Contributions) (Amendment No. 2) Regulations 2007, which has the
practical effect of ensuring that retrospective tax treatment, as I
outlined earlier, is mirrored by a retrospective national insurance
treatment.
As the
accompanying explanatory memorandum points
out:
Payments
to employees involving employment-related securities which avoid income
tax and national insurance contributions are treated as employment
income for tax purposes by provisions in Finance Act 2005 and Finance
Act 2006. The provisions in both finance acts are retrospective to 2
September 2004. These regulations ensure that payments to employees are
similarly retrospectively treated as earnings and create a national
insurance liability on those payments.
The Social
Security Contributions (Consequential Provisions) Regulations 2007
contain several measures, including setting out the extent to which
employers can recover additional employee contributions from the
employee and mirror the Income Tax (PAYE) Regulations 2003
(SI2003/2682), which dealt with the payment of backdated tax. The
explanatory memorandum in this instance explains that the instrument
sets out how national insurance contributions due on these new earnings
are recorded, paid and reported to Her Majestys Revenue and
Customs.
The Social
Security Occupational Pensions Schemes and Statutory Payments
(Consequential Provisions) Regulations 2007 essentially dictate that
any such payments which are collected in this area should be allowed to
count as contributions towards national insurance statutory
contributions, contributory benefits and occupational pension schemes,
and that in itself does not seem unreasonable.
We can see in essence what the
Government is trying to do here. Nevertheless, I have several questions
for the Chief Secretary on how all of this is likely to operate in
practice. To begin with there is the question of the extent of these
measures. The instruments themselves do not provide a separate
regulatory impact assessment. One was provided for the National
Insurance Contributions Act 2006. That regulatory impact assessment
estimated that the measures would
be limited in extent and that they would probably affect some 500
employers with an anticipated upper limit of some 10,000 employees and
that additional costs would be incurred of around £3,000 per
employer. On what were those estimates based in practice? Perhaps the
Minister could give us at least an outline of the calculations that Her
Majestys Revenue and Customs used when they sought to come up
with the figures in calculating the likely extent.
There is also the debate about
the retrospective nature of these measures that will now come into
force in the new tax year, but which are, as I understand it and I
think the Minister confirmed this morning, designed to be backdated in
effect to the time of the PBR written statement in December
2004.
As a rule of
thumb, the House is normally quite wary about passing retrospective
legislation unless there are special mitigating circumstances. In this
instance, the Institute of Chartered Accountants of England and Wales
said:
Although
we understand the desire to counter unreasonable avoidance...we do not
think that the introduction of retrospective legislation has a place in
UK taxation.
Presumably
the Minister will argue that these measures were necessary to combat
what he would judge to be unreasonable avoidance. However, if that is
the case[Interruption.]
The
Chairman:
Order. Will the hon. Member for Wolverhampton,
North-East please take a seat in the
Committee?
Mr.
Ken Purchase (Wolverhampton, North-East) (Lab/Co-op): I
apologise, Sir
Nicholas.
Mr.
Francois:
Thank you, Sir Nicholas. If
that is the Ministers argument, why has it taken the Government
so long to come up with these regulations, thus increasing the element
of backdating, as it were? If it was so urgent to
address this issue, bearing in mind that the income tax changes were
first included in the Finance Act 2005, why were these regulations not
consulted on in time for the National Insurance Contributions
Act 2006? Why, in essence, did the Government not introduce those
regulations in advance? In total, it has now taken more than two years
for these regulations to be enacted, a point that was raised by my hon.
Friend the Member for Fareham (Mr. Hoban), the shadow
Financial Secretary, on Third Reading of the National Insurance
Contributions Bill.
As
Mike Warburton, who is a tax partner at Grant Thornton, has
observed:
Uncertainty
is bad for business, bad for the economy and the threat of
retrospective legislation is an uncertainty we could do
without.
Therefore,
will the Minister make an undertaking that any future retrospective
taxation will be mitigated by faster enactment into law? These are
special circumstances and the Opposition acknowledge that.
Nevertheless, the Government could have acted more quickly, so as to
reduce the element of backdating.
Mr.
Gray:
Does my hon. Friend agree that there is a worrying
precedent here? Almost every Budget speech includes tax-raising
measures that are camouflaged as
measures to close tax loopholes. If the precedent that is being set this
morning were to be extended, who knows which tax areas would not then
be subject to possible retrospection?
Mr.
Francois:
My hon. Friend makes a good point. We now have
the second longest tax code in the world. Only India has a longer tax
code than the United Kingdom, and we are likely to overtake them when
we get the 2007 Finance Bill. One of the reasons why we have such a
very long tax code is that it has been greatly added to by reams of
anti-avoidance legislation, for which the Chancellor has a particular
penchant, and this measure is yet another example of
that.
The Government
are arguing that there are special circumstances that necessitate the
introduction of this anti-avoidance legislation, and moreover they are
introducing it retrospectively. When my hon. Friends debated the 2007
Finance Bill, we acknowledged, up to a point, the Governments
case, as the Chief Secretary has indicated. Nevertheless, we are still
concerned in principle about the requirement for retrospective
legislation. That is why I have a number of points to put to the Chief
Secretary this morning about how the measure will operate in practice,
and we hope that this process is by no means going to become the norm.
The Government have argued that this is a very special circumstance and
we hope that we will not see much more of this in practice. Equally, if
the Government feel compelled to introduce such retrospective
legislation, why has it taken them two years tocome up with
the regulations that they intended to enforce?
In terms of how the measure
will operate in practice, I would be grateful if the Minister could
comment on the mechanism for payment for employees with liabilities
that will now arise from 6 April 2007. Is it conceivable that the PAYE
system could necessitate an employee paying back substantial amounts in
a short period of time? Are there provisions for employees who may have
switched employer, or indeed employees who now have no employer? How
will the Government deal with people in those
circumstances?
Finally,
in the explanatory memorandums the Minister states that these
provisions are compatible with the European convention on human rights.
Given the discussion on Third Reading of the National Insurance
Contributions Bill about the lack of a transition period, will the
Chief Secretary comment on why he believes that the measures are
compatible with EU
law?
In summary, we
can understand the history of the process and see what the Government
are seeking to do and why. However, I would be grateful if the Chief
Secretary could answer the questions that I have asked him. I reiterate
that we should like specific reassurance that such unusual
retrospective legislation will not become a normal Treasury tactic and
that, in the rare cases in which it is judged necessary, such measures
will be enacted as quickly as is practically possible for the certainty
of our tax code and of
taxpayers.
11.1
am
Mr.
Colin Breed (South-East Cornwall) (LD): I wish briefly to
signal our broad support for the regulations, which are the final part
of this retrospective legislation.
As has been said, we should not encourage retrospection or use it
regularly, because of uncertainty and the way in which it will affect
peoples lives. After all, people have made decisions affecting
themselves and their families for financial reasons, based on an
understanding of current regulation, only to find that it is changed.
That could affect them considerably.
However,
there is broad agreement that if retrospection is intended to counter
unreasonable avoidance and if people are deliberately avoiding paying
proper tax and national insurance, perhaps it should be used. That
applies even more when an explicit warning has been given that, should
people continue to do that, they would fall within anti-avoidance
legislation. Nevertheless, none of us would wish retrospective
legislation to become the norm. The circumstances may be seen, if not
as unique, as very special circumstances. We hope that we will not see
such measures
regularly.
Fair
taxation demands that fair contributions be made. Those with the
capacity and finance to find loopholes and technicalities to avoid
their proper responsibilities should be found out and made to pay their
proper contributions. Overall, we support these final
regulations.
11.3
am
Mr.
Timms:
I am grateful to the hon. Member for Rayleigh for
his response to what I said. I felt that he was a little grudging about
the steps that the Government have taken to tackle tax avoidance. The
shadow Financial Secretary, the hon. Member for Fareham, whom the hon.
Gentleman mentioned, said in the debate last June that he supported
measures to tackle tax avoidance. There was not quite the same ringing
endorsement in what the hon. Member for Rayleigh said this morning. The
hon. Member for Fareham went on to say that he was cognisant of the
risk of tax avoidance and the way in which people seek to hide
remuneration through schemes dressed up as share option schemes and so
on. He was absolutely right. The hon. Member for Rayleigh said that he
could see what the Government were trying to do, for which I am
grateful, but it is right that across the House we recognise the
seriousness of the problems and the need to address
them.
Mr.
Francois:
I do not think that I shall bog the Committee
down by reading out a lot of extracts, but on that occasion my hon.
Friend the Member for Fareham also criticised the Government for the
delay in coming up with draft regulations. I have also criticised the
Minister for that, so in fact my hon. Friend and I have been quite
consistent.
Mr.
Timms:
I will certainly come to the point about the
alleged delay in a moment, but I shall first answer the hon.
Gentlemans questions about the re-rating changes. He asked
whether they would be in line with the retail prices index or the
consumer prices index. They will be in line with the RPI, as in other
legislation on such matters. Of course, rounding issues arise each
year, but RPI is used and consistently applied.
The hon. Gentleman asked me
whether I could reassure him about the Governments intentions
regarding merging tax and national insurance, and I think that I can.
They are different systems with different purposes. Tax is a charge on
all income; national insurance is a contributory system, not a tax.
Those different purposes are the reason for lots of the differences
between tax and national insurance contributions. In the past, we have
acted to align tax and national insurance to reduce burdens. We
announced a review of the case for further alignment at last
years Budget, and that work is continuing, but we have no plans
to merge tax and national
insurance.
The hon.
Gentleman asked me about the basis for the figures in the regulatory
impact assessment. Those estimates have been calculated, for example,
using historical data on the numbers of employers who have used schemes
to avoid tax and national insurance, and we have considered the
administrative costs of revising and paying the national insurance
liability. We have used a fairly conventional means of estimating the
overall liability.
He
expressed concern, as did the hon. Member for South-East Cornwall,
about retrospection as a general approach. I am particularly grateful
for what the hon. Member for South-East Cornwall said about the need
for such an approach in the circumstances, but my right hon. Friend the
Chancellor made it clear at the 2004 pre-Budget report that we were no
longer prepared to play cat and mouse with those trying to avoid paying
their fair share. All those who still attempt to avoid their
responsibilities can have complete certainty that the Government will
act to close those routes. The evidence is clear that our approach has
been successful.
The
hon. Gentleman asked me why it had taken more than a year to bring the
draft legislation to parliamentary scrutiny. It follows the coming into
force of the National Insurance Contributions Act on30 March
last year. A commitment was given during the passage of the Act that
affirmative regulations made using powers in the Act would be subject
to consultation. First drafts were produced last August to allow for 12
weeks of consultation starting in August, followed by further drafting
refinement. The draft legislation before us this morning has benefited
from all that, and the process has allowed HMRC to produce a good and
coherent set of regulations that will come into force on the same day.
I do not think that there has been undue
delay.
We have been
careful to incorporate safeguards to prevent the powers from being
misused. I can reassure hon. Members that they will not be used too
widely. For example, we cannot use them without a corresponding
retrospective tax measure. The report on the Bill by the Delegated
Powers and Regulatory Reform Committee
concluded:
We
consider that the powers in the Bill are sufficiently circumscribed and
are appropriate.
I hope
that that is
reassuring.
On the
point about uncertainty, there really is none. The Government have made
it clear since 2 December 2004 that where employment-related rewards
are paid in a way that seeks to escape liability for tax and national
insurance, we will act to stop it. There is no uncertainty. Anyone who
is not attempting to escape
liability need not worry about the regulations. They can get on with
running their business successfully without having to be
concerned.
In terms of
retrospection, we have made it clear that we will use appropriate and
fair measures to tackle avoidance wherever it emerges. My right hon.
Friend the Chancellors December 2004 statement was clear and
focused, providing certainty. I can reassure the hon. Gentleman that we
have taken steps when drafting the order and regulations to ensure that
they are fully compatible with our obligations under the European
convention on human
rights.
Finally, I
agree with the hon. Member for South-East Cornwall, who said that,
given the scale of the challenge that we face in this area, the
measures are a proportionate response. I hope that the Committee will
support
them.
Question put
and agreed to.
Resolved,
That
the Committee has considered the draft Social Security (Contributions)
(Re-rating and National Insurance Funds Payments) Order
2007.
Resolved,
That
the Committee has considered the draft Social Security Contributions
(Consequential Provisions) Regulations 2007.[Mr.
Timms.]
Resolved,
That
the Committee has considered the draft Social Security (Contributions)
(Amendment No. 2) Regulations 2007.[Mr.
Timms.]
Resolved,
That
the Committee has considered the draft Social Security, Occupational
Pension Schemes and Statutory Payments (Consequential Provisions)
Regulations 2007.[Mr.
Timms.]
Committee
rose at twelve minutes past Eleven
oclock.