“There needs to be rigorous examination of all the possible options and a robust comparison between the two options of a GoCo model and DE&S+…we will support what we hope is a genuine competition.”—[Official Report, 10 June 2013; Vol. 564, c. 53-54.]

That is what we have conducted and the hon. Gentleman is standing at the Dispatch Box complaining about it.

The hon. Gentleman tells me that this is the statement I did not want to make. Well, he gets the prize—of course it is the statement I did not want to make. I hoped that we would find a wide field of GoCo competitors able to engage with the process of delivering a value for money proposition to the taxpayer, but let me tell him how it works. The Opposition can stand on the sidelines slinging mud and insults, but the Government have to deal with the situation as it exists in the real world. We have to take the situation as we find it and manage the risks. [Interruption.]

Mr Speaker: Order. The hon. Member for Plymouth, Moor View (Alison Seabeck) must calm down. She is shouting noisily and I can hear her above her hon. Friends, who are also misbehaving. They must calm themselves. Let us hear from the Secretary of State.

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Mr Hammond: I will come to the hon. Lady in a minute.

We have to deal with the situation as it exists and we have to find solutions. What I have outlined today is the solution to the challenge facing DE&S in the real world.

The hon. Gentleman asked some specific questions. He asked me when the decision was taken. He says that we knew three weeks ago that we had received only one bid, and later asked me what the role of the Treasury had been. Since we received notification that we would not get a bid from the alternative consortium, we have been engaged in discussions with the Cabinet Office team, the Treasury team and my own senior officials to look not only at the risks inherent in trying to continue a contracting process with a single bidder, but how we can reinforce the DE&S plus proposition and the best way to go forward. I am sorry if he would have liked a decision more quickly, but I have to tell him that three weeks was the period it took to arrive at a robust conclusion on where we are and where we need to go. We have learned from the process. Talking to bidders and potential bidders has identified some of the challenges and issues we will be able to address to construct the DE&S plus process that I have set out today and, crucially, import private sector skills.

The hon. Gentleman mentioned Lord Levene’s report, but omitted to tell the House that the report gives the Department an excellent result overall for the delivery of the transformation process. He will know—I am sure he has studied this diligently—that Lord Levene explicitly had no remit to address DE&S plus, because it was being dealt with through a separate process driven from the Gray report. It is no secret, however, that Lord Levene, who once ran defence procurement, has always been a sceptic of the GoCo process. It is no secret that Lord Levene believes that only if DE&S plus has total freedom to hire, fire and remunerate on a fully private sector model can it succeed inside the public sector. As the hon. Gentleman and other Members with experience of Government will know, however, there are all sorts of public accountability reasons, relating to managing public money, why that is simply not possible to deliver in its purest form.

The hon. Gentleman asked me about GoCo as a potential future solution. All the evidence from this competition tells us that GoCo can deliver a value for money proposition for the taxpayer. To make it contractible, we will have to develop the DE&S proposition significantly so that it has a better and stronger baseline against which potential contractors can measure their return, and so the Department can be confident that we are not giving away public money in any contract we enter into. It remains a possibility for the MOD, once DE&S-plus is match fit, to consider running the GoCo competition again to test the proposition, in the interests of the armed forces and taxpayers, and to challenge the private sector to come forward with a proposal that will deliver value for money against the match-fit DE&S.

The hon. Gentleman asked me about part 1 of the Defence Reform Bill. Our intention is that it should continue as it stands. It will provide the legislative framework for testing the GoCo proposition, should a future Government wish to do so.

I anticipated that the hon. Gentleman would ask me, quite properly, about the costs involved in pursuing the GoCo competition. The calculation I have is that just under £7.4 million has been expended on the process.

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The hon. Gentleman asked me what discussions had been held with Bechtel. He will appreciate that until the formal announcement was made to the House a few moments ago, what I could have said to, and discussed with, Bechtel was heavily constrained. In the interests of propriety, I have had no direct communication with Bechtel, but my officials have been in contact. The indication we have is that it is interested in being considered for the provision of support to the public sector DE&S plus entity through one of the support contracts that we will be letting. The invitation to negotiate that we issued for this competition made it clear that the Government could terminate the process at any point and that bidders would not be entitled to compensation or reimbursement of bid costs. The legal advice I have had is that if any such claim was received, we would be in a very strong position to resist it, and I would intend to do so.

Finally, the hon. Gentleman asked, quite properly, about the impact on staff at DE&S, not just in Abbey Wood —they are spread all across the world—but particularly in Abbey Wood. As I speak, Bernard Gray, the Chief of Defence Matériel, is, I understand, holding a town hall meeting for staff at Abbey Wood to explain to them the position and the plans for the future.

Mr James Arbuthnot (North East Hampshire) (Con): My right hon. Friend has just said that these changes would

“permit the recruitment into DE&S of key commercial and technical staff at market rates and with minimum bureaucracy”.

What exactly does that mean? Does it mean that the civil service terms and conditions of service have been abandoned, and only for DE&S?

Mr Hammond: It means that the Treasury and the Cabinet Office have agreed that we will have a bespoke regime for this central Government trading entity, recognising that it faces one of the most commercial sectors of the marketplace. We will be able to employ people with technical and high-level management skills at market-reflective salaries and to recruit them through an accelerated process that does not require us to go through the usual nine to 12-month process required to recruit senior civil servants.

Mr Bob Ainsworth (Coventry North East) (Lab): The part of Bernard Gray’s report with which the previous Government, who commissioned it, had the most difficulty was that concerned with the GoCo company, because at that stage we could not see how it could be made to work. The process that the right hon. Gentleman has been through has shown the difficulties with moving to that kind of model, but rather than taking it off the table, he says it could be enacted at some time in the future. What kind of reaction does he expect to get to that from industry and DE&S staff themselves? The Chairman of the Defence Committee just raised the importance of getting the right skills into this area. With the uncertainty that the Secretary of State’s announcement today leaves hanging over the future of the organisation, will that be enhanced or made more difficult? What kind of a reaction does he expect from industry to this uncertainty?

Mr Hammond: I am grateful to the right hon. Gentleman for his question, because he knows something about this. I recognise his concern, but it is my judgment that

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the kind of people we are looking to attract into DE&S—people with high-level commercial skills—will not be afraid of the possibility of a future evolution into a GoCo.

We can do a great deal to deliver significant change within the public sector—we can bring in people with the right skills, we can upskill staff, we can install new systems, processes and controls, all of which we will now commit to doing, and we can apply external resource to programme management—but we will still essentially be talking about a system where private sector skills sets are employed to advise but civil servants make decisions. Those private sector participants will be paid flat fees; they will not be “at risk” in the structure. That does not fundamentally change the culture. It is an open question whether we can get far enough through that construct or whether, once we have made DE&S as lean and fit as it can be within the public sector, we will need to test again what additional value for the taxpayer could be generated by making the culture shift that having a risk-taking private sector strategic manager take over day-to-day running of the operation would deliver.

Sir Gerald Howarth (Aldershot) (Con): I congratulate my right hon. Friend on having grasped this particularly difficult nettle. Does he agree that in addressing the skills issue so ably highlighted by Bernard Gray, these proposals raise the prospect of having an intelligent customer in the Ministry of Defence and therefore of avoiding some of the ghastly procurement mess-ups created by Labour? Would he be good enough to indicate how he sees ministerial accountability being applied to the new agency? Will it report direct to Parliament, as he mentioned, or will it report to Ministers, who would then report to the House?

Mr Hammond: There were two questions there. First, my hon. Friend is absolutely right to point out that for a customer-supplier interface to work, we need skills on both sides. This is not just about upskilling DE&S; simultaneously, we are also carrying out a project within the MOD that will continue to upskill the customer side to ensure that we can be an intelligent customer. On accountability, of course Ministers will be accountable to Parliament for DE&S’s activity, but as I have announced, the chief executive will be an accounting officer with a direct line of accountability, via the Public Accounts Committee, to Parliament.

Angus Robertson (Moray) (SNP): The long-standing inability of the MOD properly to manage procurement continues with this debacle, but what concerns me is not just the project or financial management of procurement, but the delivery of often life-saving equipment to our service personnel. Does the Secretary of State agree, therefore, that whatever emerges from this shambles, we cannot allow a situation where the MOD recommends potentially life-saving equipment, such as anti-collision systems for Tornado jets, but then does not deliver it for 15 years?

Mr Hammond: This is probably not the time for a discussion about anti-collision systems, which I know is a subject the hon. Gentleman has raised recently and no doubt will want to raise again. Hon. Members must

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understand the distinction, however, between failures of the procurement process and the difficult prioritisation of spending decisions. The latter is the responsibility of Ministers and cannot be derogated or laid off on to any other organisation; Ministers have to make those difficult prioritisation decisions, and we then have to hope for an organisation that can execute them efficiently. Today, we are essentially talking about the execution part of the process.

Sir Nick Harvey (North Devon) (LD): I commend the Defence Secretary for the practical decision he has announced today and congratulate him on the progress he has already made in tackling the long-running problems of defence acquisition, not least in empowering the front-line commands, reducing the number of changes to requirements and upskilling the MOD as a customer. The entity he has described is indeed DE&S plus operating as a practical rather than simply a theoretical option. It is essential that those dealing with industry can do so with the same sorts of terms and conditions as those that industry enjoys, and this is a way of giving them that opportunity. I ask him, however, not to abandon entirely the possibility of a GoCo in the long term and to put those measures on the statute book so that a future Government, of whatever colour, could decide to take the model further.

Mr Hammond: My hon. Friend is absolutely right. There is a long history of failure in defence procurement by Governments of both main parties going back decades. We now have to construct a model that works. As I just said to the right hon. Member for Coventry North East (Mr Ainsworth), the former Defence Secretary, we can do a lot within the public sector in DE&S plus, but we cannot make the culture change that some people think is necessary. It is right and proper that we do what we can in the public sector to make DE&S, as a public sector body, as high a bar as we can for a private sector challenger to have to match and exceed, but we should not be afraid, once we have done our internal reform work, to allow the private sector to make proposals again to see whether it could deliver yet more value for money for the taxpayer. That is, after all, our principal responsibility.

John Woodcock (Barrow and Furness) (Lab/Co-op): There was surely no reason the Secretary of State had to wait until the GoCo option had collapsed before coming forward with these amended DE&S plus proposals. Does that not show that he was never truly neutral on the choice between an in-house option and a GoCo, that he wanted to rig the process in favour of a GoCo, and that that bias has blown up in his face, costing taxpayers and his own personal reputation?

Mr Hammond: I remind the hon. Gentleman that his Front-Bench spokesman welcomed the competition and said that we needed to test the GoCo proposition against the DE&S plus proposition—

Mr Kevan Jones (North Durham) (Lab): Read Hansard.

Mr Hammond: I have the Hansard quote in front of me. The former shadow Secretary of State welcomed the competition and said that we needed to test the two propositions against each other, which is what we have

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done. The hon. Member for Barrow and Furness (John Woodcock) makes an assertion that I can tell him is wrong. I have always recognised that there are significant risks to the GoCo proposition and significant potential benefits from it. The challenge is to weigh the risks and the benefits and we would not be able to do that until we received the bids, which is why we had to run a competition.

We have seen the proposal that has been worked up by the DE&S plus team only in the last three weeks. It has worked behind a Chinese wall and has made clear that it believes that there will have to be an injection of external private sector skills in the form of an external business partner, in addition to the freedoms and flexibilities that it seeks within the organisation. That is the model that we are now going to put in place.

Peter Luff (Mid Worcestershire) (Con): Although I accept that the Secretary of State had little choice but to make the announcement that he has made today to the House, I am sure that he will share my deep sense of regret that we cannot move more rapidly to the greater savings and performance improvements that a GoCo would have delivered. Can he reassure me a little about the private sector’s role in this new organisation? Can he unpack for me a little how the private sector will operate within the GoCo model and the DE&S plus model, and particularly reassure me that this is not just a recipe for more contractors?

Mr Hammond: I am grateful to my hon. Friend—someone who, again, knows something about this from his long service in the Department. The key distinction is between a model that puts the private sector in day-to-day leadership of the organisation—working on an incentivised fee that places it at risk—and a model where the private sector provides specific skill sets to civil service decision makers. That is the distinction. What we envisage in the DE&S plus model is probably three separate contracts; one to provide us with programme management support, a spine for the organisation; one to provide us with HR support, an area of particular weakness in DE&S; and a task-and-finish project to install some additional financial control systems within the organisation.

John McDonnell (Hayes and Harlington) (Lab): I said on Third Reading of the Defence Reform Bill that having one bidder stretched the concept of competition to absurdity, so I welcome today’s decision. However, there are 16,000 workers whose futures are still vulnerable following the Secretary of State’s statement. May I suggest that it is not just about bringing in expertise; it is about retaining expertise and skills as well? I would welcome the Secretary of State personally meeting the unions to assure them that, under his new proposals, there will be no detriment to their conditions of service.

Mr Hammond: I have personally met the unions and I am aware of their concerns. I have also explained to them the opportunities that this model will create for employees in DE&S. The core DE&S—that is to say the part of the organisation that is responsible for procurement —has about 9,500 people. The hon. Gentleman is absolutely right to say that one of the big challenges at the moment is retaining the highly skilled people. We are losing people to the private sector; worse, we are losing people

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to other parts of the public sector that have greater freedom to hire. That is why we must address this issue in the way I have outlined today.

Bob Stewart (Beckenham) (Con): In 1984 I was a young major in the Ministry of Defence, and Michael Heseltine, as Secretary of State, definitively told us that he had sorted out defence procurement. It is clearly a basket case and very difficult. How will my right hon. Friend compensate majors and lieutenant-colonels who are doing equivalent jobs to those being done by people from outside the Army but are not getting the same sort of salaries? How will we balance that?

Mr Hammond: The military component in DE&S is vital. It is a relatively small number—about 1,500 military personnel. They will of course continue to rotate as part of a career development plan on normal military terms and conditions. For the kind of flexibility that I have talked about today, we will need to hire in specialist skills from the commercial sector and that will not alter or affect in any way the very important role that the military will continue to play.

John Robertson (Glasgow North West) (Lab): The Secretary of State talked about mud-slinging from Opposition parties. I am sure that he slung some mud in years gone by when we were in government. I deal with real people and the great worry about procurement—as always, particularly on the Clyde and in shipbuilding—is that statements that have been made recently will now be shelved until we sort out the process. Can he assure me and the 2,000 people who work in the Scotstoun yard that after everything that has been said up to this point—barring the wrong result next year in the Scottish referendum—the Clyde is still secure?

Mr Hammond: The statement that I have made today has no impact on the announcement I made a few weeks ago about the rationalisation of the shipbuilding industry and BAE Systems’ decision to concentrate complex warship building on the Clyde.

Mr Bernard Jenkin (Harwich and North Essex) (Con): I commend my right hon. Friend’s statement, not least because it is the statement that the Public Administration Committee wanted him to make, having expressed in our report on procurement some scepticism that the GoCo would work. Is not the DE&S plus plus proposal still something of a contortion to get round stupid, outdated and silly restrictions on the ability to retain senior civil servants in role as senior responsible owners over the lifetime of projects and on the ability to bring in new people with the right commercial skills? Why are we having to go through this exercise when we should be reforming the civil service so that this kind of flexibility is available to all Government Departments and all procurement projects?

Mr Hammond: I understand my hon. Friend’s position, which is long held and loudly expressed, but DE&S is, if not unique, a very unusual organisation within the civil service. It is almost wholly commercial in what it does. Most of its interaction is with the commercial sector and it is competing directly for skills with the private sector marketplace. It is not like a policy making department. It is absurd that we are constrained to deal

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with civil servants whose job is commercial in nature in the same way as we deal with policy making civil servants in a central Whitehall policy Department. The freedoms and flexibilities that the Treasury and the Cabinet Office have agreed for DE&S plus will free us from that constraint, which will make DE&S plus a much more credible and commercially focused proposition. However, as I have said, I would not like to rule out the possibility of challenging it in the future with a GoCo competition to keep it on its toes. Let us try everything and make sure we get the best value for money for the taxpayer.

Mark Hendrick (Preston) (Lab/Co-op): How will the further involvement of the private sector and the introduction of the GoCo model square with the national interest of having a proper defence industrial strategy for the UK, or do the Government no longer believe in a defence industrial strategy?

Mr Hammond: We have a defence industrial strategy. The question from the hon. Member for Glasgow North West (John Robertson) about the Clyde yards will remind the House that, just recently, we made a very important step forward in allowing BAE Systems to explain to the world how it is going to manage complex warship building in the future to ensure that we retain a credible and viable complex warship building operation in the UK.

Mr Julian Brazier (Canterbury) (Con): My right hon. Friend has won some important concessions from the Treasury, and not just on terms and conditions of service for these key people, but in other areas, such as partly restoring the ability for annual financial carry-over, which was lost under the previous Government. Does he think he would have been able to win those concessions had he not been floating a more radical alternative?

Mr Hammond: My hon. Friend raises a fascinating proposition: was this all some complex ruse to try to squeeze greater concessions out of the Treasury? I can assure him that that was not the intention. We genuinely wanted, and want, to explore the possibilities of using the private sector in a strategic role and, through DE&S plus, in a more traditional supportive role to get the best value-for-money proposition for the taxpayer—nothing more and nothing less.

Nick Smith (Blaenau Gwent) (Lab): The Secretary of State has talked about the MOD becoming a better, intelligent customer, which is a good thing, but how will he get senior officers to adopt the different mindset and skills needed to do that?

Mr Hammond: There are two parts to that question. We have made substantial progress on the mindset by devolving budgets to the front-line commands, which now control their own budgets and have significant autonomy in prioritising their requirements. Front-line commands are therefore managing their own requirements, rather than having somebody else tell them what their priorities are. That has had a significant impact on the culture among the senior military cadre. As for skills, we recognise that there is an upskilling requirement,

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which is a key element of the intelligent customer project that we are currently running in the Ministry of Defence, which includes bringing in civilian specialist skills to support the military command budget holders in acting as customers.

Dr Julian Lewis (New Forest East) (Con): This is a sensible decision, but one of the perennial problems with defence procurement under successive Governments has always been the way in which specifications for what is to be procured are changed by Ministers and especially by the military along the journey. Will the new model be any more capable of coping with that perennial problem than any of the previous iterations?

Mr Hammond: Yes. I hope we have already made good progress on this issue by introducing a much more disciplined boundary between DE&S and the customers, but the intention of setting up the body as a central Government trading entity is that there will be a hard boundary between it and its customers. We will be able to move—much more quickly, in fact, than we would with a GoCo—to a hard-charging regime, where the customer pays for the cost of the changes he is imposing. In my judgment, when front-line commands hold their own budgets and have to pay the cost of making a change, there is nothing more likely to cause them to think twice about making such changes.

Toby Perkins (Chesterfield) (Lab): If I may return to the question that my hon. Friend the Member for Barrow and Furness (John Woodcock) asked a moment ago, it is now 22 months since the Government White Paper on defence procurement. Why is DE&S plus being considered as a serious option only now? Is it not because it was put on the back burner, as all the Government’s attention was focused on the GoCo?

Mr Hammond: No; the first phase of the overall project was about designing what we required in DE&S and looking at how the interface would work with the devolved customer—the devolution of budgets to the front-line commands is also a new step that we have introduced. We have also resourced the work on developing the DE&S plus model since we launched the MatStrat—matériel strategy—competition earlier this year, so that work has had proper resourcing. Although the proposal that has been put forward is nowhere near as detailed as that put forward by the private sector bidder for the GoCo proposition—as it is only right to expect—it is a sound framework for building a public sector solution to the challenge we face in DE&S.

Mr Philip Hollobone (Kettering) (Con): Having visited Abbey Wood with the armed forces parliamentary scheme, may I congratulate my right hon. Friend on being bold and innovative in trying to reform the massive defence procurement system? Can he give the House his best examples under the current system of something that has been procured well and something that has been procured badly, and the lessons learnt from both?

Mr Hammond: There are countless examples of excellent procurement results in the UOR—urgent operational requirement—system. Indeed, it is common ground among Members who take an interest in this issue that we have to try to import some of the lessons from the

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UOR system into the routine procurement system. I do not want to pre-empt the major projects review that the National Audit Office will publish in the new year, but I can promise my hon. Friend that he will see programmes that deliver on time and within budget on a scale that he will not have seen before. That is a sign of the progress that is being made, although there is much further to go.

Gavin Shuker (Luton South) (Lab/Co-op): Part of getting value for money for the taxpayer out of the defence industry must surely be about sending clear, consistent signals to that industry. Does the Secretary of State believe that this affair has met that test?

Mr Hammond: Yes, and if the hon. Gentleman talks to the defence industry, he will find that it is getting a clear and consistent signal. Let me be clear: this is—[Interruption.] I beg to disagree with the hon. Member for North Durham (Mr Jones): that is what the industry is saying. This is not about beating people up over their profit margins; it is about working together to try to ensure that we do projects in a way that can deliver value for money. It is about not letting contracts where the costs of any overruns are split 90% to the taxpayer and 10% to the industry. No wonder the industry is having a quiet word with the hon. Gentleman.

Jack Lopresti (Filton and Bradley Stoke) (Con): Will the Secretary of State give the House an assurance that, although difficult decisions will be made, with potentially a detrimental effect on some staff at DE&S, these decisions will be made intelligently and with great sensitivity? Given what has been, to say the least, quite a long period of uncertainty, can he give an assurance about when staff at DE&S will receive some much needed clarity on how the plans will affect them individually?

Mr Hammond: We are 800 posts gapped in DE&S at the moment, so this is not some project to reduce the number of staff. The objective is to increase the number of staff by filling some of the gapped posts, but as the process takes place—this will not happen immediately—there will need to be a more robust approach to upskilling staff and monitoring their performance, to ensure we have the right people in the right jobs and with the right support to deliver the outcome we need. However, there is no transfer going on and no TUPE involved. I can give my hon. Friend an assurance that those concerned will remain in the public sector and remain covered by the public sector protections that they already enjoy today.

Guy Opperman (Hexham) (Con): Everyone agrees that defence acquisition has troubled many Governments for many years. I welcome the Secretary of State’s statement today, but would he be so kind as to write to me in the near future about whether the decision will make any changes to the provision of equipment facilities or to the jobs of my constituents who work in Albemarle barracks, MOD Longtown or RAF Spadeadam?

Mr Hammond: I am happy to write to my hon. Friend, but as I have just said, there will be no changes as a direct consequence of today’s announcement in the numbers employed or the place of employment. However,

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obviously I cannot give him an absolute assurance that over time the organisation will not evolve, as it becomes leaner and more efficient.

Jeremy Lefroy (Stafford) (Con): I welcome my right hon. Friend’s statement. He referred to more than £4 billion of centrally held contingency for defence procurement to address risks as they crystallise. Can he update the House on whether that has had to be drawn on so far and, if it is in future, whether it will be replenished?

Mr Hammond: The answer is no: the £4 billion—it is actually slightly over £4 billion—remains intact. As I told the House when I made the aircraft carrier statement, we originally provided a larger sum of contingency. We allocated part of that specifically to the anticipated cost increase in the aircraft carrier—that was fully provided at the time of the May 2012 statement—but we have not had to make any further call on that contingency. We will wait and see what the major projects review report says, but as I see it at the moment, I do not anticipate any call on that contingency in the foreseeable future.

Mr Peter Bone (Wellingborough) (Con): I am sure the whole House would like to thank the excellent Secretary of State for making an oral statement. It is very difficult for Ministers to come and make statements that they do not want to make, and I am sure the House will welcome the right hon. Gentleman’s coming here and allowing us to put questions to him. The only issue I think the House has to deal with today is whether the announcement will improve defence procurement. If that is the case, it should be welcomed. Is it going to improve it?

Mr Hammond: I am happy to confirm to my hon. Friend that I am confident that the announcement will improve defence procurement and that it will set us on a path of evolution for the future, enabling us to keep our options open and allowing us to explore and continually challenge the organisation to deliver better things for our armed forces at better value for the taxpayer.

David Mowat (Warrington South) (Con): The Secretary of State said that the DE&S plus bid was somewhat less detailed than the Bechtel bid, which presumably means that if they were both evaluated on a level playing field, the Bechtel bid would be likely to win. Will my right hon. Friend tell us whether the major learning points or good points in the Bechtel bid will be incorporated into what is now going forward with DE&S plus?

Mr Hammond: My hon. Friend asks a very good question. The material contained in the Bechtel bid is “commercial in confidence”, and Bechtel will have spent a considerable amount of money generating the bid, and would naturally not expect the Department to abuse that confidence. I can tell my hon. Friend that the broader process, the work we have done on DE&S plus and the preliminary discussions we have had with bidders and potential bidders have pointed the way to the future development of DE&S in a way that I think has been most helpful, and will inform the process going forward.

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Points of Order

2.11 pm

Mr Peter Bone (Wellingborough) (Con): On a point of order, Mr Speaker. Earlier today, we had Treasury questions. We have only a few opportunities during the year to question the Chancellor but the Chancellor was not here today; he was at a routine meeting in Brussels. Is not the first duty of the Chancellor to be in Parliament to answer questions and should not the Chief Secretary to the Treasury, his deputy, have been the one in Brussels? What is your ruling on that?

Mr Speaker: It is for Ministers to decide, and I must say that, so far as I was concerned, the Chancellor of the Exchequer discharged his obligations by courteously writing to inform me of his intended absence and the reason for it. The hon. Gentleman has made his point very clearly. Nothing disorderly has happened. I think there would be a general agreement across the House that it is overwhelmingly desirable for Ministers to be present for their own Department’s Question Time sessions. There are occasions on which that does not prove practical. I think it right and fair to leave it there for today.

Greg Mulholland (Leeds North West) (LD): On a point of order, Mr Speaker. Earlier at Treasury questions, a Treasury Minister provided an answer from the Dispatch Box that was, I am afraid, clearly based on incorrect information provided by an official. It referred to pub closure figures and the CGA statistics. The Minister said that there was evidence to show that free-of-tie pubs close in greater numbers than tied pubs. CGA, which compiled the figures, has made it clear that there are no figures in existence for that comparison, yet officials are still wrongly briefing Ministers. Can you advise us, Mr Speaker, how we can correct what was clearly an inadvertently misleading statement from the Dispatch Box?

Mr Speaker: I am grateful to the hon. Gentleman for his point of order, but this is the second occasion on which I have become aware of his displeasure. The first occasion was at the time of the answer, when I heard him bellowing his disapproval from a sedentary position with the words “not true” or something along those lines. The hon. Gentleman is nothing if not a persistent woodpecker. I must tell him, however, that Ministers are responsible for the accuracy of their answers. The hon. Gentleman has made his point with great force, and it is on the record. May I politely suggest that he might like to have a private conversation with the Minister if he wishes to pursue the matter further. At least for today, we will leave it there.

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Business of the House (Today)

2.14 pm

The Leader of the House of Commons (Mr Andrew Lansley): I beg to move,

That, at today’s sitting, notwithstanding Standing Order No. 20 (Time for taking private business), the Private Business set down by the Chairman of Ways and Means may be entered upon at any hour, and may then be proceeded with, though opposed, for three hours, after which the Speaker shall interrupt the business.

On Thursday 5 December, I confirmed that business for today, 10 December, would be the remaining stages of the National Insurance (Contributions) Bill, followed by opposed private business. The motion on the Order Paper seeks to protect the time available to debate the proposed private business. The programme motion previously agreed by the House on 4 November for the National Insurance (Contributions) Bill provides a full day for consideration of Report and Third Reading. The House also needs to debate and approve a statutory instrument relating to terrorism.

The motion I have tabled—with the agreement of the Chairman of Ways and Means—would therefore allow the private business to run for up to three hours following the conclusion of the National Insurance (Contributions) Bill and the statutory instrument on the prevention and suppression of terrorism. A motion is needed because consideration of Government business will probably take us beyond 4 pm, the normal time for commencing opposed private business on a Tuesday. It would also allow the House to sit beyond the moment of interruption, if necessary. I hope that Members will not want to obstruct the business that the Chairman of Ways and Means has set down for today. I commend the motion to the House.

2.15 pm

Mr Peter Bone (Wellingborough) (Con): I was rather surprised to hear what the Leader of the House said in his closing remarks—that the Chairman of Ways and Means was entirely happy with this. Earlier today, I recall the Chairman of Ways and Means standing up and announcing that opposed private business would be taken at 4 o’clock today, in accordance with Standing Order No. 20. Nothing that the Leader of the House has said affects the ability of the House to sit after that. The point of the Standing Order is that there is a specific time for opposed business—between 4 pm and 7 pm. That allows those involved in the consideration of the private business to know what time the House is going to debate it.

I have heard an enormous number of complaints, and I am sure that the Leader of House will have heard them, about sitting late to discuss opposed private business. That is entirely because the Government continue to take Standing Orders, rip them apart and say that they are not going to abide by them. What should have happened today is that the debate on Government business should have continued to 4 o’clock and then stopped so that the opposed private business could be dealt with. After finishing the debate on private business, we should then have gone back to the previous debate. That is what should have happened; this Government are not being fair to those who are interested in listening to, and hearing about, opposed private business. People

10 Dec 2013 : Column 163

who are interested in those Bills do not know what time they will be debated, which is completely the wrong attitude. That is why we have Standing Orders; they are there to help the House.

I am minded to divide the House on this issue so that Members can say whether or not they want to sit late tonight to discuss opposed private business. If they are willing to do that, I do not want to hear another murmur from any hon. Member about sitting late and having to listen to my hon. Friend the Member for Christchurch (Mr Chope). This is a really important issue, with the Executive deciding that their business must overrule the procedures for Parliament. I urge the Leader of the House to think again.

2.17 pm

Mr Philip Hollobone (Kettering) (Con): I support my hon. Friend the Member for Wellingborough (Mr Bone). You will know, Mr Speaker, as the guardian of the Standing Orders in this place, how important they are to the effective running of House business. We had an interesting debate—I think it was on Monday last week—about the amendment of certain Standing Orders. I am not aware that the Government approached the Procedure Committee—or indeed any other Committee—with a view to amending Standing Order No. 20.

This issue crops up again and again with opposed private business. If the Government are not happy with the rule that allows us to debate these matters at 4 o’clock on any given afternoon, they need to make representations to the appropriate Committee to get the Standing Order permanently amended. Indeed, we would not even be having this debate at this time on this afternoon, were it not for one or two hon. Members objecting at the requisite point on previous evenings when this item was on the Order Paper and it was not possible to have debate like the one we are having this afternoon.

There must be very good reasons, laid down in “Erskine May” or other House publications, to explain why Standing Order No. 20 is in place. These Standing Orders are very difficult to make, and there must have been substantial debate about the merits and demerits of this Standing Order when it was drawn up. The House, in its wisdom, has decided that opposed private business should be debated between the hours of 4 pm and 7 pm on any given day, and I suggest that Members’ minds may be fresher at that time than later in the evening.

You will know, Mr Speaker, that some of this opposed private business is extremely arcane. Many fine points of detail are extracted by Members who are interested in scrutinising such legislation, and my hon. Friend the Member for Christchurch (Mr Chope) is an exemplar in that regard. However, when he tries to do a service to the House by scrutinising such detailed legislation, what he is faced with, again and again, is criticism from other Members who resent having to debate such detailed items well into the evening, and well past the time at which they had expected to be able to go home.

The reason such legislation is not debated between 4 pm and 7 pm is that, on each occasion, the Executive try to fiddle with the Order Paper—fiddle with the agenda—so that it is not debated at the appropriate time. Some of us, including my hon. Friend the Member for Wellingborough and me, are fed up with that abuse

10 Dec 2013 : Column 164

of the parliamentary timetable, but, despite our best efforts to obtain a reasonable response from the Executive, we are not getting that reasonable response.

I suggest to the Executive that if they want to amend Standing Order No. 20, they should set about trying to get that done through the Procedure Committee. Until they do so, I do not see why the House must debate the order of opposed private business when it is clearly laid out in the Standing Orders of the House, which all of us should do our best to abide by.

2.21 pm

Mr Lansley: With the leave of the House, Mr Speaker, I shall respond to the points made by my hon. Friends the Members for Wellingborough (Mr Bone) and for Kettering (Mr Hollobone).

As was pointed out by my hon. Friend the Member for Kettering, the House could have considered this matter on earlier occasions, but the motion was objected to on those occasions. If the House had approved it at an earlier stage, it would have been clear to Members who are interested in the opposed private business that it would be dealt with later in the day.

We are not seeking to amend Standing Order No. 20. We are asking the House, “notwithstanding Standing Order No. 20”, to fix the time of the business today, our purpose being to ensure that time is available for both the public business and the opposed private business. I make no apology to the House, or beyond, for the fact that we give priority to public business in this place. As it happens, however, there is more pressure on public business than usual today as a consequence of yesterday’s tributes to Nelson Mandela. Today’s urgent question and statement, and, indeed, the motion relating to terrorism, might otherwise have been taken yesterday.

This is a decision for the House, and the House is being invited, notwithstanding Standing Order No. 20, to ensure that there is sufficient time for the public business today, followed by the protected three hours for the private business.

Mr Hollobone: Will the Leader of the House give way?

Mr Lansley: No.

Question put.

The House divided:

Ayes 264, Noes 7.

Division No. 155]

[

2.23 pm

AYES

Adams, Nigel

Afriyie, Adam

Aldous, Peter

Amess, Mr David

Andrew, Stuart

Arbuthnot, rh Mr James

Bacon, Mr Richard

Baker, Steve

Barclay, Stephen

Barker, rh Gregory

Bellingham, Mr Henry

Beresford, Sir Paul

Berry, Jake

Bingham, Andrew

Binley, Mr Brian

Birtwistle, Gordon

Blackman, Bob

Blackwood, Nicola

Boles, Nick

Bradley, Karen

Brady, Mr Graham

Brazier, Mr Julian

Bridgen, Andrew

Brine, Steve

Brokenshire, James

Brooke, Annette

Bruce, Fiona

Bruce, rh Sir Malcolm

Buckland, Mr Robert

Burley, Mr Aidan

Burns, Conor

Burns, rh Mr Simon

Burrowes, Mr David

Burt, rh Alistair

Burt, Lorely

Byles, Dan

Cairns, Alun

Campbell, rh Sir Menzies

Carmichael, rh Mr Alistair

Carmichael, Neil

Carswell, Mr Douglas

Chishti, Rehman

Clark, rh Greg

Clarke, rh Mr Kenneth

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Colvile, Oliver

Cox, Mr Geoffrey

Crockart, Mike

Crouch, Tracey

Davey, rh Mr Edward

Davies, David T. C.

(Monmouth)

Davies, Glyn

de Bois, Nick

Djanogly, Mr Jonathan

Dodds, rh Mr Nigel

Dorries, Nadine

Doyle-Price, Jackie

Drax, Richard

Duncan, rh Mr Alan

Duncan Smith, rh Mr Iain

Ellis, Michael

Ellwood, Mr Tobias

Elphicke, Charlie

Evans, Graham

Evans, Jonathan

Evans, Mr Nigel

Evennett, Mr David

Fabricant, Michael

Farron, Tim

Foster, rh Mr Don

Fox, rh Dr Liam

Freer, Mike

Fullbrook, Lorraine

Fuller, Richard

Gale, Sir Roger

Garnier, Sir Edward

Garnier, Mark

Gauke, Mr David

George, Andrew

Gilbert, Stephen

Glen, John

Graham, Richard

Grant, Mrs Helen

Gray, Mr James

Grayling, rh Chris

Greening, rh Justine

Grieve, rh Mr Dominic

Griffiths, Andrew

Gummer, Ben

Gyimah, Mr Sam

Halfon, Robert

Hames, Duncan

Hammond, rh Mr Philip

Hammond, Stephen

Hancock, Matthew

Hands, Greg

Harper, Mr Mark

Harrington, Richard

Harris, Rebecca

Hart, Simon

Harvey, Sir Nick

Haselhurst, rh Sir Alan

Hayes, rh Mr John

Heald, Oliver

Heath, Mr David

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Herbert, rh Nick

Hinds, Damian

Hollingbery, George

Hopkins, Kris

Howarth, Sir Gerald

Howell, John

Hunt, rh Mr Jeremy

Hunter, Mark

Huppert, Dr Julian

Jackson, Mr Stewart

James, Margot

Javid, Sajid

Jenkin, Mr Bernard

Johnson, Gareth

Johnson, Joseph

Jones, Andrew

Jones, rh Mr David

Jones, Mr Marcus

Kawczynski, Daniel

Kelly, Chris

Kwarteng, Kwasi

Lamb, Norman

Lancaster, Mark

Lansley, rh Mr Andrew

Latham, Pauline

Laws, rh Mr David

Lee, Dr Phillip

Leech, Mr John

Lefroy, Jeremy

Leslie, Charlotte

Letwin, rh Mr Oliver

Lewis, Brandon

Lewis, Dr Julian

Lilley, rh Mr Peter

Lloyd, Stephen

Lopresti, Jack

Loughton, Tim

Luff, Peter

Macleod, Mary

Maynard, Paul

McCartney, Karl

McCrea, Dr William

McIntosh, Miss Anne

McPartland, Stephen

McVey, Esther

Menzies, Mark

Metcalfe, Stephen

Miller, rh Maria

Mills, Nigel

Milton, Anne

Mitchell, rh Mr Andrew

Moore, rh Michael

Morgan, Nicky

Morris, Anne Marie

Morris, David

Morris, James

Mosley, Stephen

Mowat, David

Mulholland, Greg

Mundell, rh David

Munt, Tessa

Murray, Sheryll

Murrison, Dr Andrew

Neill, Robert

Newmark, Mr Brooks

Newton, Sarah

Nokes, Caroline

Norman, Jesse

O'Brien, rh Mr Stephen

Ollerenshaw, Eric

Opperman, Guy

Ottaway, rh Richard

Parish, Neil

Pawsey, Mark

Penning, Mike

Penrose, John

Percy, Andrew

Perry, Claire

Phillips, Stephen

Pincher, Christopher

Poulter, Dr Daniel

Pugh, John

Raab, Mr Dominic

Reckless, Mark

Reid, Mr Alan

Rifkind, rh Sir Malcolm

Rogerson, Dan

Rosindell, Andrew

Ruffley, Mr David

Russell, Sir Bob

Rutley, David

Sanders, Mr Adrian

Scott, Mr Lee

Selous, Andrew

Shannon, Jim

Sharma, Alok

Sheerman, Mr Barry

Shelbrooke, Alec

Shepherd, Sir Richard

Simpson, Mr Keith

Skidmore, Chris

Smith, Chloe

Smith, Henry

Smith, Julian

Smith, Sir Robert

Soames, rh Nicholas

Soubry, Anna

Spencer, Mr Mark

Stanley, rh Sir John

Stephenson, Andrew

Stevenson, John

Stewart, Bob

Stewart, Iain

Stewart, Rory

Streeter, Mr Gary

Stride, Mel

Stunell, rh Sir Andrew

Swales, Ian

Swayne, rh Mr Desmond

Swinson, Jo

Swire, rh Mr Hugo

Syms, Mr Robert

Teather, Sarah

Thornton, Mike

Timpson, Mr Edward

Tomlinson, Justin

Tredinnick, David

Truss, Elizabeth

Turner, Mr Andrew

Tyrie, Mr Andrew

Uppal, Paul

Vara, Mr Shailesh

Walker, Mr Robin

Ward, Mr David

Watkinson, Dame Angela

Weatherley, Mike

Webb, Steve

Wharton, James

Wheeler, Heather

White, Chris

Whittaker, Craig

Wiggin, Bill

Williams, Mr Mark

Williams, Roger

Williams, Stephen

Williamson, Gavin

Willott, Jenny

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, Jeremy

Wright, Simon

Yeo, Mr Tim

Young, rh Sir George

Zahawi, Nadhim

Tellers for the Ayes:

Amber Rudd

and

Gavin Barwell

NOES

Chope, Mr Christopher

Davies, Philip

Field, Mark

Hermon, Lady

Nuttall, Mr David

Skinner, Mr Dennis

Wilson, Sammy

Tellers for the Noes:

Mr Philip Hollobone

and

Mr Peter Bone

Question accordingly agreed to.

10 Dec 2013 : Column 165

10 Dec 2013 : Column 166

Resolved,

That, at today’s sitting, notwithstanding Standing Order No. 20 (Time for taking private business), the Private Business set down by the Chairman of Ways and Means may be entered upon at any hour, and may then be proceeded with, though opposed, for three hours, after which the Speaker shall interrupt the business.

10 Dec 2013 : Column 167

National Insurance (Contributions) Bill

Consideration of Bill, not amended in the Public Bill Committee.

New Clause 3

Reduction of secondary Class 1 contributions for certain age groups

‘(1) SSCBA 1992 is amended as follows.

(2) In section 9 (calculation of secondary Class 1 contributions)—

(a) in subsection (1) for “the secondary percentage” substitute “the relevant percentage”, and

(b) after subsection (1) insert—

“(1A) For the purposes of subsection (1) “the relevant percentage” is—

(a) if section 9A below applies to the earnings, the age-related secondary percentage;

(b) otherwise, the secondary percentage.”

(3) After section 9 insert—

“9A The age-related secondary percentage

(1) Where a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) above, this section applies to the earnings paid in the tax week, in respect of the employment in question, if the earner falls within an age group specified in column 1 of the table in subsection (3).

(2) For the purposes of section 9(1A)(a) above, the age-related secondary percentage is the percentage for the earner’s age group specified in column 2 of the table.

(3) Here is the table—

(4) The Treasury may by regulations amend the table—

(a) so as to add an age group in column 1 and to specify the percentage in column 2 for that age group;

(b) so as to reduce (or further reduce) the percentage specified in column 2 for an age group already specified in column 1 (whether for the whole of the age group or only part of it).

(5) A percentage specified under subsection (4)(a) must be lower than the secondary percentage.

(6) For the purposes of this Act a person is still to be regarded as being liable to pay a secondary Class 1 contribution even though the amount of the contribution is £0 because the age-related secondary percentage is 0%.

(7) The Treasury may by regulations provide that, in relation to an age group specified in the table, there is to be for every tax year an upper secondary threshold for secondary Class 1 contributions.

That threshold is to be the amount specified for that year by regulations made by the Treasury.

(8) Subsections (4) and (5) of section 5 above (which confer power to prescribe an equivalent of a secondary threshold in relation to earners paid otherwise than weekly), and subsection (6) of that section as it applies for the purposes of those subsections, apply for the purposes of an upper secondary threshold in relation to an age group as they apply for the purposes of a secondary threshold.

(9) Where—

(a) a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) above,

(b) the earner falls within an age group in relation to which provision has been made under subsection (7), and

(c) the earnings paid in the tax week, in respect of the employment in question, exceed the current upper secondary threshold (or the prescribed equivalent) in relation to the age group,

10 Dec 2013 : Column 168

this section is not to apply to the earnings so far as they exceed that threshold (or the prescribed equivalent); and for the purposes of section 9(1) above the relevant percentage in respect of the earnings so far as they exceed that threshold (or the prescribed equivalent) is, accordingly, to be the secondary percentage.

(10) In subsections (7) to (9) references to an age group include a part of an age group.”

(4) In section 122(1) (interpretation of Parts 1 to 6), at the appropriate place insert—

““age-related secondary percentage” is to be construed in accordance with section 9A(2) above;”.

(5) In section 176(1)(a) (parliamentary control: instruments subject to affirmative procedure) after “section 4C;” insert—

“section 9A(7);”.

(6) SSCB(NI)A 1992 is amended as follows.

(7) In section 9 (calculation of secondary Class 1 contributions)—

(a) in subsection (1) for “the secondary percentage” substitute “the relevant percentage”, and

(b) after subsection (1) insert—

“(1A) For the purposes of subsection (1) “the relevant percentage” is—

(a) if section 9A below applies to the earnings, the age-related secondary percentage;

(b) otherwise, the secondary percentage.”

(8) After section 9 insert—

“9A The age-related secondary percentage

(1) Where a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) above, this section applies to the earnings paid in the tax week, in respect of the employment in question, if the earner falls within an age group specified in column 1 of the table in subsection (3).

(2) For the purposes of section 9(1A)(a) above, the age-related secondary percentage is the percentage for the earner’s age group specified in column 2 of the table.

(3) Here is the table—

(4) The Treasury may by regulations amend the table—

(a) so as to add an age group in column 1 and to specify the percentage in column 2 for that age group;

(b) so as to reduce (or further reduce) the percentage specified in column 2 for an age group already specified in column 1 (whether for the whole of the age group or only part of it).

(5) A percentage specified under subsection (4)(a) must be lower than the secondary percentage.

(6) For the purposes of this Act a person is still to be regarded as being liable to pay a secondary Class 1 contribution even though the amount of the contribution is £0 because the age-related secondary percentage is 0%.

(7) The Treasury may by regulations provide that, in relation to an age group specified in the table, there is to be for every tax year an upper secondary threshold for secondary Class 1 contributions.

That threshold is to be the amount specified for that year by regulations made by the Treasury.

(8) Subsections (4) and (5) of section 5 above (which confer power to prescribe an equivalent of a secondary threshold in relation to earners paid otherwise than weekly), and subsection (6) of that section as it applies for the purposes of those subsections, apply for the purposes of an upper secondary threshold in relation to an age group as they apply for the purposes of a secondary threshold.

10 Dec 2013 : Column 169

(9) Where—

(a) a secondary Class 1 contribution is payable as mentioned in section 6(1)(b) above,

(b) the earner falls within an age group in relation to which provision has been made under subsection (7), and

(c) the earnings paid in the tax week, in respect of the employment in question, exceed the current upper secondary threshold (or the prescribed equivalent) in relation to the age group,

this section is not to apply to the earnings so far as they exceed that threshold (or the prescribed equivalent); and for the purposes of section 9(1) above the relevant percentage in respect of the earnings so far as they exceed that threshold (or the prescribed equivalent) is, accordingly, to be the secondary percentage.

(10) In subsections (7) to (9) references to an age group include a part of an age group.”

(9) In section 121(1) (interpretation of Parts 1 to 6), at the appropriate place insert—

““age-related secondary percentage” is to be construed in accordance with section 9A(2) above;”.

(10) In section 172(11A) (parliamentary control: instruments subject to affirmative procedure) after “4C,” insert “9A(7),”.

(11) The following come into force at the end of the period of 2 months beginning with the day on which this Act is passed—

(a) any power conferred on the Treasury by virtue of this section to make regulations, and

(b) the amendments made by subsections (5) and (10).

(12) So far as not already brought into force by subsection (11), the amendments made by this section come into force on 6 April 2015.’.—(Mr Gauke.)

Brought up, and read the First time.

2.36 pm

The Exchequer Secretary to the Treasury (Mr David Gauke): I beg to move, That the clause be read a Second time.

Madam Deputy Speaker (Dawn Primarolo): With this it will be convenient to discuss amendment (a), at end insert—

‘(13) The Treasury shall publish a review of the level of youth unemployment as at December 2013 and the effect on the level of youth unemployment if the amendments made in this section were required to be brought into force on 6 April 2014.’.

Mr Gauke: New clause 3 brings forward an important initiative announced by my right hon. Friend the Chancellor of the Exchequer in his autumn statement of last week. He announced that employers employing workers under the age of 21 would no longer have to pay employers’ class 1 national insurance contributions. Proposed new section 9A of the Social Security Contributions and Benefits Act 1992 and its Northern Ireland equivalent bring this into effect by introducing a zero rate of secondary class 1 NICs for all employers on the earnings of employees under the age of 21. As my right hon. Friend the Chancellor made clear, the Government believe this measure will, alongside other initiatives on apprenticeships and work experience placements, help to address the problem of youth unemployment in the United Kingdom. The measure will apply both to new and existing employees aged under 21 and is not time limited.

10 Dec 2013 : Column 170

Mr Philip Hollobone (Kettering) (Con): I congratulate my hon. Friend on introducing this proposal. How much will it cost and how many young people will it help?

Mr Gauke: I am grateful to my hon. Friend for his question. The details of the costings can be seen in the autumn statement document published last week. The initial cost is £460 million and that then increases beyond that. All those working who are under the age of 21 will be able to benefit from it, although there is one caveat that I wish to make in a few moments.

This is a step in the right direction. It is striking that this Government came to office inheriting an increase in NICs and we have not only increased the thresholds for paying employers’ NICs, but we have introduced the employment allowance which gives £2,000 off for businesses in respect of employers’ NICs, and now we are exempting those under the age of 21. All this will help to create employment.

Ian Swales (Redcar) (LD): Will the Minister clarify whether the years in which employers do not pay contributions for people under 21 will still qualify under the pension arrangements as years worked?

Mr Gauke: Yes; this will not make any change in that regard. It is worth bearing in mind that the changes relate to employers’ national insurance contributions, and that employees’ contributions will remain unchanged. There is no change in terms of contributory benefits.

The new clause contains regulation-making powers to vary the age group and the rate of secondary class 1 NICs for that group, and to reduce the rate of secondary class 1 contributions for a previously specified age group. For example, the Government could allow for an increase in the age bracket of employees falling into the zero-rate band of secondary class 1 contributions. I want to reassure hon. Members that that power is capable of placing an employee only in a lower percentage bracket, and that it is therefore a relieving power only.

There is also a regulation-making power to ensure that the benefit of the zero rate or reduced rate of secondary class 1 NICs will be enjoyed only in respect of earnings below a certain level. In other words, the power will provide a means of introducing an earnings limit. As the Chancellor announced in the autumn statement, this will be set initially at the level of the upper earnings limit, which is expected to be the equivalent of about £42,000 a year in 2015-16. I would be happy to take the House through the new clause, subsection by subsection, although all that information is provided in the explanatory notes. Perhaps, instead, I will respond to any questions on those subsections that arise during the debate.

Let me turn to the Opposition’s amendment (a) to the new clause. It proposes:

“The Treasury shall publish a review of the level of youth unemployment as at December 2013 and the effect on the level of youth unemployment if the amendments made in this section were required to be brought into force on 6 April 2014”—

rather than in April 2015. I hope that the hon. Member for Birmingham, Ladywood (Shabana Mahmood) will not mind my anticipating some of her remarks, but I want to take this opportunity to explain why the amendment is unnecessary.

10 Dec 2013 : Column 171

The Government are committed to increasing employment levels for all, and employment is now at its highest ever level, while unemployment is lower than when we came to power. I recognise the challenges posed by youth unemployment, and dealing with them has long been a priority for the Government. For example, about 370,000 young people have been supported through the Work programme since June 2011. Furthermore, the Youth Contract provides almost £1 billion in funding to support up to 500,000 young people into employment and education opportunities. The autumn statement announcement on abolishing employer NICs for under-21s builds on those policies and has been widely welcomed by industry. Indeed, the director-general of the CBI, John Cridland, has said that the policy

“will make a real difference and help tackle the scourge of youth unemployment.”

Sheila Gilmore (Edinburgh East) (Lab): There has been considerable criticism that there has not been a significant take-up of the wage incentive attached to the Youth Contract. To what degree has that influenced this decision to try to achieve the same thing through national insurance measures?

Mr Gauke: Our motivation—and, I am sure, that of any sensible Government—is to do everything we can to address the issue of youth unemployment. That means trying a number of approaches and adopting a number of policies. It is difficult to quantify the number of jobs that will be created as a consequence of the measure, because many factors will come into play, but we believe that it will be helpful none the less. As I said, the director-general of the CBI also believes that it will make a real difference in tackling the scourge of youth unemployment.

Mr Brooks Newmark (Braintree) (Con): It is probably worth considering the fact that a lot of businesses, particularly retail businesses, work on very small margins. Does my hon. Friend agree that the extra money that they will receive through not having to pay this jobs tax will probably encourage them to hire a young person rather than someone who is over 21?

2.45 pm

Mr Gauke: My hon. Friend makes an important point. We have to set this in the context of a range of Government measures, including the introduction of the employment allowance and the measures on business rates that we announced last week, which I am sure he will be the first to acknowledge will help retailers and small businesses in particular. All those measures will help to put in place the conditions that will encourage firms to take people on and to increase employment and wages. This is all about achieving sustainable growth in living standards. There is no short-cut to achieving that, but measures such as these will help us to ensure that the economy is on a strong footing and that we are in a position to improve the living standards of the British public.

Ian Swales: This might be a trivial drafting point, but will the Minister explain exactly what age he is talking about? The new clause refers to people “under 21”, which suggests that it would apply to people before they reach their 21st birthday. Is that correct?

10 Dec 2013 : Column 172

Mr Gauke: The exemption is available up to, but not including, the month in which the employee turns 21. I hope that that makes the matter clear to my hon. Friend.

Returning to the Opposition’s amendment, I see little point in the Treasury publishing a review of the level of youth unemployment. The Office for National Statistics is responsible for publishing statistics on employment, and those regular releases are available to the public through the ONS website. There is a limited case for the Treasury intervening and also publishing a review.

In addition, I do not think that there is much value in attempting to estimate the impact of a policy being introduced on a theoretical date. We announced in the autumn statement that employer NICs would be abolished for those under 21 years of age from April 2015. I can understand why the hon. Lady raises the question, but attempting to deliver that a year earlier, in 2014, would increase the administrative costs to business, and rushing the measure through in that way would be likely to lead to cost confusion and the failure of many employers to take it up. Such a tight time frame would not give employers, payroll software developers and Her Majesty’s Revenue and Customs enough time to update their IT systems. It would also not give HMRC enough time to ensure that the policy could be implemented in a way that did not disrupt its other important IT systems. Given that the policy cannot be delivered in April 2014, it would not be a good use of Government time and resources to attempt to estimate the impact of something that we do not intend to do and that cannot be delivered.

I dare say that I shall return to this matter later, but in the light of those comments, I hope that the hon. Lady will not press her amendment to a vote. I also hope that the new clause will be able to stand part of the Bill. It is an excellent measure that will help many of our constituents by increasing employment.

Shabana Mahmood (Birmingham, Ladywood) (Lab): I wish to speak to amendment (a) to new clause 3. I welcome the Minister’s explanation of the thinking behind the new clause and his clarification of how the age limit will be interpreted. His clarification of the measure’s impact on pensions was also helpful, given that we did not have these proposals before us when the Committee considered the Bill.

In general, the Government’s new proposal, announced in the autumn statement last week, will hopefully encourage employers to take on more young people under the age of 21. With youth unemployment so high—it is nearly 1 million—and long-term youth unemployment a real concern, some action is welcome but, as the Minister has anticipated and as our amendment suggests, we have some concerns about how the Government are going about dealing with the issue.

I will deal first with some practical points relating to new clause 3 before moving on to our more substantive concerns about the Government’s approach. I have briefly discussed the impact of the measures with various stakeholders who have been scrutinising the new clause since the Government tabled it. Given that we were unable to scrutinise it in Committee, because of when it was tabled, it would be helpful if the Minister at least gave the House the benefit of his thoughts on the issues

10 Dec 2013 : Column 173

I am about to raise. Members of the other place can then take forward some of our concerns if there is more in them.

What impact does the Minister think the new measure will have on young people who are employed part time? As he will know, we have seen a huge rise in part-time employment and insecure employment, for example through the growth of zero-hours contracts, something the House has debated a great deal in this Parliament. My understanding is that many young people who work part time will not be caught by the measure because they earn far beneath the primary threshold. What consideration has he given to the impact on young people who are employed part time, given that for so many of them their first job is part time? As many Members will know, it is now not unusual for young people on the Work programme to be offered only part-time employment of zero-hours contracts, so it would be helpful if he explained the Government’s thinking on that.

I would also welcome the Minister’s view on how the measure might interact with the willingness of employers to take on graduates and the impact it might have on graduate employment. That is not about passing a value judgment on whether someone is taken on when they are 18 or whether employers decide to employ a graduate, but the Minister knows that the other announcements made in the autumn statement in relation to young people were about an increase in student numbers of 30,000 and a removal of student number controls to enable universities to take on as many students as they like. The number of 18-year-olds, in particular, participating in higher education is likely to increase.

It would therefore be helpful if the Minister outlined the Government’s thinking on how those two changes will interact and how they will ensure that they work in a complementary way, rather than skewing one type of recruitment practice ahead of another. Those issues are worthy of much greater deliberation than we will have the opportunity for today, so we might need to return to them, depending on what happens as the Bill makes progress.

I have two other points to make on the practicalities of new clause 3. First, we need to ensure that it is promoted properly to employers, particularly micro-businesses and even one-man bands, which might be encouraged to take on a young person, perhaps a family member. How will we ensure that they know exactly how that will operate and how it will interact with the employment allowance? That is important to ensure that micro-businesses, in particular, are well aware of how the two things align and that there is no confusion that could lead to a decrease in take-up. Secondly, my understanding is that no new funding has been announced to pay for the proposal, so it would be helpful if the Minister set out where the money will come from and how the costs are expected to increase, and not only in the first or second years, but in future years.

There are two main points of difference between the Opposition and the Government in relation to the new proposal. First, it is not bold enough. The Minister will know, because we have discussed it before, about the scale of the challenge we face and what the Government could and should have done to tackle the scourge of youth unemployment.

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Jenny Chapman (Darlington) (Lab): Welcome though the measure surely is, does my hon. Friend not feel, as I do, that with almost 1 million young people unemployed, it might be too little, too late?

Shabana Mahmood: I am grateful to my hon. Friend for her intervention and agree with her entirely. I was going to move on to that point. We disagree with the Government’s approach because we do not think that the proposal is bold enough, but we are also concerned about the timing—I will return to this later—because it has a direct impact on our proposed amendment to the new clause.

Youth unemployment is nearly 1 million—around 940,000 young people are unemployed—and the most recent figures, published in November, show that long-term youth unemployment has increased. Given the scale of the problem and the impact that every single day of unemployment has on a young person’s overall life chances, I believe that the Government should have come back with a much bolder offer in the autumn statement. It was a missed opportunity to go further and faster.

The Minister will not be surprised to hear that I think the Government should have adopted our alternative proposal for a compulsory jobs guarantee for every young person under the age of 25 who is out of work, funded by a tax on bank bonuses. [Interruption.] It has been spent only once—Government Members should look at the detail. The young person would have to take up the job or risk losing their benefits.

Sheila Gilmore: I am sure that my hon. Friend will agree that the idea of a jobs guarantee has been proposed not only by the Labour party; it was also a recommendation of the Government’s recent social mobility commission, which criticised the impact of the Youth Contract and suggested that a jobs guarantee would be a much better approach.

Shabana Mahmood: My hon. Friend is absolutely right. The Government’s Youth Contract has been branded a failure by their own advisers. It is also worth noting that the Work programme is finding work for only one in six long-term unemployed people. The House heard earlier, when the Secretary of State for Work and Pensions was called to answer an urgent question, about the other difficulties with the Work programme.

The scale of the problem we face in relation to youth unemployment is stark. I speak as the Member who represents the constituency with the highest rate of unemployment in the country. I meet many young people every day in my constituency who are themselves the children of people who found themselves unemployed in the last great recession in the 1980s. They are having the same problems that their parents’ generation had. Every day that a young person tries hard but fails to get a job increases their desperation and depression. I recently held a youth jobs fair in my constituency, along with my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne) and my hon. Friend the Member for Birmingham, Erdington (Jack Dromey). More than 2,000 young people attended, and every one of them spoke of their desperation and their desire to find work and the difficulties of finding work in the current climate.

In those circumstances, knowing how much of a knock a young person’s life chances take when they find themselves unemployed for a long period, I think that it is right for the Government to consider taking much

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bolder action. The fact that they have failed to do so shows that they have failed to meet the scale of the challenge of our times. I fear that we are storing up a much bigger problem for the future.

In the absence of such action, my point to the Minister is that we hope the new clause will stimulate more employment for young people and encourage employers to consider taking on a young person, and that it therefore helps to get to grips with some of the problems. It is a good proposal. It does not go as far as we would like and perhaps it will not have the impact that a compulsory jobs guarantee would have, but on its own terms it is a good proposal, so why not do it now? Nothing the Minister mentioned seemed to be an insurmountable problem. He said that the IT situation would be a little difficult, but we should not let IT difficulties at HMRC stop us getting to grips with the scourge of youth unemployment. He has failed to introduce the employment allowance as soon as we believe it should have been introduced. He also decided not to scrap the regional national insurance employers holiday, so letting it run for three years, yet he knows that it fell far short of the targets that were set for it at the beginning.

The Minister said that the problem with the April 2014 date is that the Government wanted to wait until real-time information was all online and working properly. However, I have interrogated others on this point, and it was apparently not impossible or too difficult for the Government to amend the IT situation so as to enable the employment allowance to be brought in earlier than April next year. I am afraid that the same point applies to the proposal on national insurance for under-21s. The Minister has said nothing that suggests that it should not be brought in as early as possible, April 2014 being the best date on offer.

3 pm

Richard Fuller (Bedford) (Con): If I heard the hon. Lady correctly, she said that she wanted the cut in the jobs tax to be brought in sooner, yet in 2010 she said in Committee that she was proud to stand on a record of increasing the jobs tax. Does that represent a flip-flop?

Shabana Mahmood: It does not represent a flip-flop, as the hon. Gentleman well knows. It would not be a debate on this issue if he did not make the point that he has made on a number of occasions. I would have felt as though I had missed out on something if he had not made that intervention, so I am grateful to him. He will not be surprised if I repeat my previous answers to him in relation to national insurance. I was very proud to stand for election on the Labour party manifesto at the 2010 general election and proud that the Labour Government had got the recovery under way at the time of that election—a recovery that was choked off by this Government as soon as they came into power. [Interruption.] Government Members might not like to hear it, but I am afraid that that does not stop it being true.

Let me clarify my point about the employment allowance. From the moment it was announced in the Budget, our immediate critique was not that it should not be introduced —we supported its introduction from the beginning—but to say, as we have continued to say, “Bring it in as soon as possible—why wait?” If there were compelling reasons

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for the wait, it would be understandable, but I am afraid that I find nothing compelling in anything the Minister has ever said about the delay in bringing these proposals forward. All the issues relating to IT and systems and getting software up and running could be sorted out, with a bit of will.

I understand that software developers are still waiting on HMRC to give them the full guidelines on what software they will need to produce to make sure that take-up of the employment allowance goes ahead with relative ease. I hope that the Minister has had sight of the submission by Mr Holloway of the Learn Centre to the National Insurance Contributions Bill Committee, which was submitted after the Committee had disbanded but was still made available to all its members, because it contains concerns about the delay in getting proper clarification and explanation to software developers on what they need to do in relation to the employment allowance. Given that it is December and they have to get ready for the employment allowance to come online in April 2014, they will not have a huge amount of time to get everything in place and ready. If that is the position on the employment allowance, then why not add in the proposal on NICs for under-21s and deal with both issues at the same time?

Given that we are speaking from the Opposition Benches—unfortunately—our amendment does not propose that the measure should be introduced immediately in 2014; otherwise Government Members would no doubt have shouted at us about the cost of doing so and the spending commitment entailed. However, we have asked for a review that would look at the level of youth unemployment now and the impact that introducing the measure in April 2014 would have had on the level of youth unemployment as it stands today. That is because the Government should not escape scrutiny for the impact that this measure may have had compared with what it will have, I hope, when it comes into force in 2015. If it is found that the measure would have had a significant impact, as we believe it would, that is an important bit of information and the Government would be put under pressure to introduce it sooner than they intended.

This Government found money in the autumn statement for the married couples allowance. They have always said that the recognition of marriage in the tax system is symbolic. However, government is about choices and priorities, and if money can be found immediately to do something that is symbolic and sends a message, then surely it should be found for a practical Government measure that helps to prioritise our young people who need jobs today and not on a date far from now. The choices and priorities of this Government are wrong and they should think again. The emergency presented to this country by the current rate of youth unemployment cannot wait to be dealt with on some future date. The Government should reconsider the start date of this proposal. We therefore intend to press our amendment to a vote.

Mr Brooks Newmark (Braintree) (Con): I am someone who looks at a glass of milk as being half full, not half empty, and I think that the Government have done much to help young people back into work. The hon. Member for Birmingham, Ladywood (Shabana Mahmood) may wish to mock the Youth Contract, but it has

10 Dec 2013 : Column 177

encouraged businesses to offer over 21,000 jobs to people at risk of long-term unemployment. Those 21,000 people appreciate the youth contract and want the job that it has enabled them to have.

We have over 1 million young people in apprenticeships, which are also getting young people back on to the jobs ladder. Indeed, the latest Office for National Statistics labour statistics indicate a significant rise—of about 50,000 in the past three months alone—in the number of young people in work. The number of young people seeking jobseeker’s allowance has fallen by 13,000—the 17th consecutive monthly fall. That is good news indeed. Many constituencies, of Members throughout the House, have benefited, as has Braintree, which has seen a fall in long-term unemployment, regular unemployment and youth unemployment.

On top of all that, I was absolutely delighted to hear the Chancellor supporting the Million Jobs campaign manifesto, which, I hasten to add, I helped to draft, by abolishing the jobs tax for under-21s. It is extremely important that if we are cutting taxes we do it to help those in society we really want to help. As a father of five children between the ages of 16 and 25, I am extremely sensitive to that age group. It is important that we get young people into work, and the new Government initiative does just that. It will enable even more young people to get a foothold on the employment ladder by providing a highly attractive incentive for businesses to hire a young person under 21. I thank Lottie Dexter, the director of the Million Jobs campaign, who has worked extremely hard not only in running it but ensuring that the draft manifesto that we put out only six weeks ago caught the Chancellor’s attention so much that he decided to support it in his autumn statement. I am delighted to support the new clause.

Sheila Gilmore: Our debate in Committee on the wider aspects of the Bill made it clear that employers may well use the allowance, which was originally the major part of the Bill, in a number of ways and that job creation would not necessarily be the only result. Some employers, for example, might choose to provide higher wages, while others might choose to provide more training for the upskilling of their work force.

The Minister did not touch on this, but I presume the same might be said for the current proposal, because it is not, as I understand it, tied to taking on a new employee; rather, it relates to anyone who employs a young person, which, obviously, simplifies the issue in many ways. It would be useful to consider and, indeed, encourage not just the take-up of new jobs—although that is very important—but the issue of upskilling.

As Members of all parties have said—Government Members often throw this at us—structural issues relating to youth unemployment have been around for some considerable time. Many things have been written about the causes, including whether there is a problem with a lack of entry-level jobs and whether people are skilled enough.

Mr Newmark: Would the hon. Lady at least like to join me in welcoming the fact that youth unemployment in her constituency over the past year has dropped by 19.8%?

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Sheila Gilmore: I believe that relates to the claimant count, which is not always the same as youth unemployment, because some people in the 18-to-25 age group will have run out of contributory benefits and fallen off the claimant count. I still see an issue when I look around me, even in a city that, in comparison with the rest of Scotland, has always done better with regard to employment.

Of course, it is a good thing. [Hon. Members: “Hear, hear!”] No one is going to say that it is a bad thing. That would be ridiculous.

Mr Newmark: Just give the Government some credit.

Sheila Gilmore: I have two things to say to that. Is it a good thing that youth unemployment—or the claimant count at least—has fallen in my constituency? Yes, it is. Do I give the Government credit for that? Well, I am not sure whether it is down to the Government or not, so we should put that to one side.

We would not be debating the proposal, and it would not have been included in the autumn statement, if the Government did not believe that youth unemployment is still an issue and a problem. Many statements are being made about how wonderful it is that youth unemployment is coming down, but the Government clearly believe, like us, that there is still a problem. If there was no problem, I doubt the proposal would have been made.

Although many young people are not necessarily unemployed for long periods, there are groups of young people who find themselves unemployed for a year or even two years, which, as we know, is of huge consequence to people’s future life, health, well-being and income.

Mr Newmark: I am sorry to hear that the hon. Lady’s approach to what the Government are doing is one of, “Bah, humbug!” Given that it is Christmas, will she at least acknowledge, first, that the Government are doing a good job by bringing youth unemployment down in her constituency and throughout the country and, secondly, that this particular initiative of abolishing the jobs tax for under-21s is a good one? It is Christmas.

Sheila Gilmore: It is indeed Christmas and, given that many families up and down this country will be struggling through Christmas, I do not think the Government will receive much thanks. For example, a rising number of people are having to resort to food banks this Christmas and, indeed, throughout the year. We could trade these issues backwards and forwards.

The point I was making was about giving young people who are in employment the opportunity to be trained and to upskill because, while it is very important to get a first job, being able to progress is also extremely important. Will the Minister consider monitoring—in future or even when the proposal is implemented—what happens in practice? Perhaps the Government should tie the proposal to certain beneficial outcomes, such as making the provision available to employers who agree to use it either for the creation of a job or for the upskilling of an existing worker. It would be highly desirable not to encourage practices such as zero-hours contracts, which Members on both sides of the House said were bad when we debated them, so perhaps the allowance should be tied to employers who do not provide young people with zero-hours contracts.

10 Dec 2013 : Column 179

3.15 pm

Mr Gauke: First, I thank hon. Members for welcoming the proposal. I am grateful to the hon. Member for Birmingham, Ladywood (Shabana Mahmood) for describing it as a good one. I will respond to some of her specific questions and then deal, as she did, with the area of contention, to the extent that one exists.

On part-time workers, it is right to say that employers of staff earning below the secondary threshold of £148 per week—which applies to a lot of part-time staff—will not be affected directly by this change. It is worth pointing out, however, that some employers may at present be discouraged from increasing the hours of an under 21-year-old because they may then have to pay employers’ national insurance contributions. To that extent, the proposal may well help those part-time workers who want to extend their hours, because it will increase the incentives for their employers to do so. That will also enable an employer with both part-time and full-time employees to connect the work of the two groups.

Similarly, there is no direct interaction with the employment allowance. Obviously, the measure will reduce the national insurance contributions bill of a number of employers, which may allow the employer’s allowance to spread further: the £2,000 would be just as valuable to the employer, but it would contribute more to reducing their total NICs bill. I think that is a fair point to make.

The hon. Lady asked about the interaction with university numbers, which we have said we will increase. Again, I do not think there is a direct interaction. The Government are trying to do everything we can for young people with regard to increasing choices, providing more university places and creating a good environment with more jobs for them. If the hon. Lady is worried about graduates over the age of 21 hitting the labour market, the point I would make is that extending the policy to those under 22 or 23 would be significantly more expensive, which must be taken into consideration in the light of the pressures on the public finances. Overall, we think the package is a good one.

On youth unemployment generally, I touched on a number of measures earlier, and my hon. Friend the Member for Braintree (Mr Newmark) mentioned some that we are taking, such as the Work programme, and which should be recognised. In case it has escaped the notice of the hon. Member for Birmingham, Ladywood, youth unemployment in her constituency has fallen by 15.6% in the past 12 months, and we have ambitions to take it down even further.

I thank my hon. Friend the Member for Braintree for his work on the Million Jobs campaign and, indeed, on this policy. He certainly contributed to the policy process for the autumn statement, and I thank him for all his efforts.

To turn to the areas of contention, my hon. Friend the Member for Bedford (Richard Fuller) referred to a certain pattern: first, the Labour party goes into the general election advocating an increase in employer’s national insurance contributions and then, following the election, every time this Government come forward with policies to reduce employer’s national insurance contributions, it complains that we are not bold enough

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and that we should go further and faster. I must say that his characterisation of that as a flip-flop is entirely accurate.

In relation to our not making the change now, I have set out the reasons for that. Attempting to deliver it a year earlier, in April 2014, would increase the administrative cost not just to HMRC, but to business. Rushing the measure through in that manner would be likely to lead to cost, confusion and the failure of many employers to take it up. Payroll companies need time to update their software and employers need time to download it, and such a time frame would put the policy at risk. Does the hon. Member for Birmingham, Ladywood really think that, with 18 months to run in this Parliament, the Government prefer to introduce the measure in April 2015, rather than in April 2014? If we could possibly introduce it safely in April 2014, we would, but we can do it in April 2015. That is absolutely the right thing to do, and we will not jeopardise that policy.

Finally, the hon. Lady asked about progress on the employment allowance. HMRC has been in discussions with various interested parties over many months. There is ongoing engagement with relevant groups, including software providers, on the draft employer guidance, with a view to making it available on the HMRC website in the new year. HMRC will also target communications to key interested groups, and use its publications and products to build further awareness in February and March. We believe that that is all on track.

I welcome the support for the policy. I understand why the hon. Lady asks why we should not make the change in April 2014, although given that her party has at no point advocated getting rid of employer’s NICs for under-21s, it would be slightly strange for her to push the matter to a vote. There are good practical reasons why we cannot do it, much though we would like to, so I will be disappointed if she presses her amendment to a Division. None the less, I welcome the support given to the measure, and I am proud that the Government are taking real steps to deal with youth unemployment.

Question put and agreed to.

Clause accordingly read a Second time.

Amendment proposed to new clause 3: (a) at end insert—

‘(13) The Treasury shall publish a review of the level of youth unemployment as at December 2013 and the effect on the level of youth unemployment if the amendments made in this section were required to be brought into force on 6 April 2014.’.—(Shabana Mahmood.)

Question put, That the amendment be made.

The House divided:

Ayes 225, Noes 294.

Division No. 156]

[

3.23 pm

AYES

Abbott, Ms Diane

Abrahams, Debbie

Ainsworth, rh Mr Bob

Alexander, rh Mr Douglas

Ali, Rushanara

Allen, Mr Graham

Anderson, Mr David

Ashworth, Jonathan

Bailey, Mr Adrian

Bain, Mr William

Balls, rh Ed

Barron, rh Mr Kevin

Beckett, rh Margaret

Begg, Dame Anne

Benn, rh Hilary

Benton, Mr Joe

Berger, Luciana

Betts, Mr Clive

Blackman-Woods, Roberta

Blears, rh Hazel

Blenkinsop, Tom

Blomfield, Paul

Blunkett, rh Mr David

Bradshaw, rh Mr Ben

Brennan, Kevin

Brown, Lyn

Brown, rh Mr Nicholas

Brown, Mr Russell

Buck, Ms Karen

Campbell, Mr Alan

Campbell, Mr Ronnie

Caton, Martin

Champion, Sarah

Chapman, Jenny

Clark, Katy

Clarke, rh Mr Tom

Coaker, Vernon

Coffey, Ann

Connarty, Michael

Corbyn, Jeremy

Crausby, Mr David

Creagh, Mary

Creasy, Stella

Cruddas, Jon

Cryer, John

Cunningham, Alex

Cunningham, Mr Jim

Cunningham, Sir Tony

Curran, Margaret

Danczuk, Simon

David, Wayne

Davidson, Mr Ian

Davies, Geraint

De Piero, Gloria

Denham, rh Mr John

Dobbin, Jim

Docherty, Thomas

Donohoe, Mr Brian H.

Doran, Mr Frank

Doughty, Stephen

Dowd, Jim

Doyle, Gemma

Dugher, Michael

Durkan, Mark

Eagle, Ms Angela

Edwards, Jonathan

Efford, Clive

Elliott, Julie

Ellman, Mrs Louise

Engel, Natascha

Esterson, Bill

Evans, Chris

Farrelly, Paul

Field, rh Mr Frank

Fitzpatrick, Jim

Flello, Robert

Flint, rh Caroline

Flynn, Paul

Fovargue, Yvonne

Gapes, Mike

Gardiner, Barry

Gilmore, Sheila

Glass, Pat

Glindon, Mrs Mary

Godsiff, Mr Roger

Goggins, rh Paul

Greatrex, Tom

Green, Kate

Greenwood, Lilian

Griffith, Nia

Gwynne, Andrew

Hain, rh Mr Peter

Hamilton, Mr David

Hamilton, Fabian

Hanson, rh Mr David

Harris, Mr Tom

Havard, Mr Dai

Healey, rh John

Hendrick, Mark

Hepburn, Mr Stephen

Hermon, Lady

Heyes, David

Hillier, Meg

Hilling, Julie

Hodge, rh Margaret

Hodgson, Mrs Sharon

Hoey, Kate

Hood, Mr Jim

Hopkins, Kelvin

Howarth, rh Mr George

Hunt, Tristram

Irranca-Davies, Huw

Jackson, Glenda

Jamieson, Cathy

Jarvis, Dan

Johnson, rh Alan

Johnson, Diana

Jones, Graham

Jones, Helen

Jones, Mr Kevan

Jones, Susan Elan

Jowell, rh Dame Tessa

Keeley, Barbara

Kendall, Liz

Khan, rh Sadiq

Lammy, rh Mr David

Lavery, Ian

Lazarowicz, Mark

Leslie, Chris

Lewell-Buck, Mrs Emma

Lewis, Mr Ivan

Llwyd, rh Mr Elfyn

Love, Mr Andrew

Lucas, Ian

MacNeil, Mr Angus Brendan

Mactaggart, Fiona

Mahmood, Shabana

Malhotra, Seema

Mann, John

McCabe, Steve

McCann, Mr Michael

McCarthy, Kerry

McClymont, Gregg

McDonagh, Siobhain

McDonald, Andy

McDonnell, John

McGovern, Alison

McGovern, Jim

McGuire, rh Mrs Anne

McKechin, Ann

McKenzie, Mr Iain

McKinnell, Catherine

Meale, Sir Alan

Mearns, Ian

Miller, Andrew

Morden, Jessica

Morrice, Graeme

(Livingston)

Morris, Grahame M.

(Easington)

Mudie, Mr George

Munn, Meg

Murphy, rh Paul

Murray, Ian

Nandy, Lisa

Nash, Pamela

O'Donnell, Fiona

Onwurah, Chi

Osborne, Sandra

Owen, Albert

Pearce, Teresa

Perkins, Toby

Phillipson, Bridget

Pound, Stephen

Powell, Lucy

Qureshi, Yasmin

Raynsford, rh Mr Nick

Reed, Mr Steve

Reynolds, Emma

Reynolds, Jonathan

Riordan, Mrs Linda

Ritchie, Ms Margaret

Robertson, Angus

Robertson, John

Robinson, Mr Geoffrey

Rotheram, Steve

Roy, Mr Frank

Roy, Lindsay

Ruane, Chris

Ruddock, rh Dame Joan

Sawford, Andy

Seabeck, Alison

Sharma, Mr Virendra

Sheerman, Mr Barry

Shuker, Gavin

Skinner, Mr Dennis

Slaughter, Mr Andy

Smith, Angela

Smith, Nick

Smith, Owen

Spellar, rh Mr John

Stringer, Graham

Stuart, Ms Gisela

Sutcliffe, Mr Gerry

Tami, Mark

Thomas, Mr Gareth

Timms, rh Stephen

Trickett, Jon

Turner, Karl

Twigg, Derek

Twigg, Stephen

Umunna, Mr Chuka

Vaz, rh Keith

Vaz, Valerie

Walley, Joan

Watts, Mr Dave

Whiteford, Dr Eilidh

Whitehead, Dr Alan

Williamson, Chris

Wilson, Phil

Winnick, Mr David

Winterton, rh Ms Rosie

Wishart, Pete

Wood, Mike

Woodcock, John

Wright, David

Wright, Mr Iain

Tellers for the Ayes:

Heidi Alexander

and

Nic Dakin

NOES

Adams, Nigel

Afriyie, Adam

Aldous, Peter

Amess, Mr David

Andrew, Stuart

Arbuthnot, rh Mr James

Bacon, Mr Richard

Baker, Norman

Baker, Steve

Baldry, Sir Tony

Baldwin, Harriett

Barclay, Stephen

Barker, rh Gregory

Bellingham, Mr Henry

Benyon, Richard

Beresford, Sir Paul

Berry, Jake

Bingham, Andrew

Binley, Mr Brian

Birtwistle, Gordon

Blackman, Bob

Blackwood, Nicola

Boles, Nick

Bone, Mr Peter

Bottomley, Sir Peter

Brady, Mr Graham

Brake, rh Tom

Brazier, Mr Julian

Bridgen, Andrew

Brine, Steve

Brokenshire, James

Brooke, Annette

Bruce, Fiona

Bruce, rh Sir Malcolm

Buckland, Mr Robert

Burley, Mr Aidan

Burns, Conor

Burns, rh Mr Simon

Burrowes, Mr David

Burstow, rh Paul

Burt, rh Alistair

Burt, Lorely

Byles, Dan

Cairns, Alun

Campbell, rh Sir Menzies

Carmichael, rh Mr Alistair

Carmichael, Neil

Carswell, Mr Douglas

Cash, Mr William

Chishti, Rehman

Chope, Mr Christopher

Clark, rh Greg

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Colvile, Oliver

Cox, Mr Geoffrey

Crockart, Mike

Crouch, Tracey

Davey, rh Mr Edward

Davies, David T. C.

(Monmouth)

Davies, Glyn

Davies, Philip

Davis, rh Mr David

de Bois, Nick

Djanogly, Mr Jonathan

Dodds, rh Mr Nigel

Dorries, Nadine

Doyle-Price, Jackie

Drax, Richard

Duddridge, James

Duncan Smith, rh Mr Iain

Dunne, Mr Philip

Ellis, Michael

Ellwood, Mr Tobias

Evans, Graham

Evans, Jonathan

Evans, Mr Nigel

Evennett, Mr David

Fabricant, Michael

Fallon, rh Michael

Farron, Tim

Featherstone, Lynne

Field, Mark

Foster, rh Mr Don

Fox, rh Dr Liam

Freer, Mike

Fullbrook, Lorraine

Fuller, Richard

Gale, Sir Roger

Garnier, Sir Edward

Garnier, Mark

Gauke, Mr David

George, Andrew

Gibb, Mr Nick

Glen, John

Goldsmith, Zac

Graham, Richard

Grant, Mrs Helen

Gray, Mr James

Greening, rh Justine

Grieve, rh Mr Dominic

Griffiths, Andrew

Gummer, Ben

Gyimah, Mr Sam

Halfon, Robert

Hames, Duncan

Hammond, Stephen

Hancock, Matthew

Hands, Greg

Harper, Mr Mark

Harrington, Richard

Harris, Rebecca

Hart, Simon

Harvey, Sir Nick

Haselhurst, rh Sir Alan

Hayes, rh Mr John

Heald, Oliver

Heath, Mr David

Heaton-Harris, Chris

Henderson, Gordon

Hendry, Charles

Herbert, rh Nick

Hinds, Damian

Hoban, Mr Mark

Hollingbery, George

Hollobone, Mr Philip

Hopkins, Kris

Horwood, Martin

Howarth, Sir Gerald

Howell, John

Hughes, rh Simon

Huppert, Dr Julian

James, Margot

Javid, Sajid

Jenkin, Mr Bernard

Johnson, Gareth

Johnson, Joseph

Jones, Andrew

Jones, rh Mr David

Jones, Mr Marcus

Kawczynski, Daniel

Kelly, Chris

Knight, rh Sir Greg

Kwarteng, Kwasi

Lamb, Norman

Lancaster, Mark

Lansley, rh Mr Andrew

Latham, Pauline

Laws, rh Mr David

Lee, Dr Phillip

Leech, Mr John

Lefroy, Jeremy

Leslie, Charlotte

Letwin, rh Mr Oliver

Lewis, Brandon

Lewis, Dr Julian

Liddell-Grainger, Mr Ian

Lilley, rh Mr Peter

Lloyd, Stephen

Lopresti, Jack

Lord, Jonathan

Loughton, Tim

Luff, Peter

Macleod, Mary

Maynard, Paul

McCartney, Jason

McCrea, Dr William

McIntosh, Miss Anne

McLoughlin, rh Mr Patrick

McPartland, Stephen

McVey, Esther

Menzies, Mark

Metcalfe, Stephen

Miller, rh Maria

Mills, Nigel

Milton, Anne

Mitchell, rh Mr Andrew

Moore, rh Michael

Morgan, Nicky

Morris, Anne Marie

Morris, David

Morris, James

Mosley, Stephen

Mowat, David

Mulholland, Greg

Mundell, rh David

Munt, Tessa

Murray, Sheryll

Murrison, Dr Andrew

Neill, Robert

Newmark, Mr Brooks

Newton, Sarah

Nokes, Caroline

Norman, Jesse

Nuttall, Mr David

O'Brien, rh Mr Stephen

Ollerenshaw, Eric

Opperman, Guy

Ottaway, rh Richard

Paice, rh Sir James

Parish, Neil

Patel, Priti

Pawsey, Mark

Penning, Mike

Penrose, John

Percy, Andrew

Perry, Claire

Phillips, Stephen

Pincher, Christopher

Poulter, Dr Daniel

Pugh, John

Raab, Mr Dominic

Reckless, Mark

Redwood, rh Mr John

Rees-Mogg, Jacob

Reevell, Simon

Reid, Mr Alan

Rifkind, rh Sir Malcolm

Rogerson, Dan

Rosindell, Andrew

Rudd, Amber

Ruffley, Mr David

Russell, Sir Bob

Rutley, David

Sanders, Mr Adrian

Sandys, Laura

Scott, Mr Lee

Selous, Andrew

Shannon, Jim

Shapps, rh Grant

Sharma, Alok

Shelbrooke, Alec

Shepherd, Sir Richard

Simpson, Mr Keith

Skidmore, Chris

Smith, Chloe

Smith, Henry

Smith, Julian

Smith, Sir Robert

Soames, rh Nicholas

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stanley, rh Sir John

Stephenson, Andrew

Stevenson, John

Stewart, Bob

Stewart, Iain

Stewart, Rory

Stride, Mel

Stunell, rh Sir Andrew

Sturdy, Julian

Swales, Ian

Swayne, rh Mr Desmond

Swinson, Jo

Swire, rh Mr Hugo

Syms, Mr Robert

Tapsell, rh Sir Peter

Teather, Sarah

Thornton, Mike

Thurso, John

Timpson, Mr Edward

Tomlinson, Justin

Tredinnick, David

Truss, Elizabeth

Turner, Mr Andrew

Tyrie, Mr Andrew

Uppal, Paul

Vara, Mr Shailesh

Vickers, Martin

Walker, Mr Charles

Walker, Mr Robin

Wallace, Mr Ben

Ward, Mr David

Watkinson, Dame Angela

Weatherley, Mike

Webb, Steve

Wharton, James

Wheeler, Heather

White, Chris

Whittaker, Craig

Whittingdale, Mr John

Wiggin, Bill

Williams, Mr Mark

Williams, Roger

Williams, Stephen

Williamson, Gavin

Wilson, Mr Rob

Wilson, Sammy

Wollaston, Dr Sarah

Wright, Jeremy

Wright, Simon

Yeo, Mr Tim

Young, rh Sir George

Zahawi, Nadhim

Tellers for the Noes:

Gavin Barwell

and

Jenny Willott

Question accordingly negatived.

10 Dec 2013 : Column 181

10 Dec 2013 : Column 182

10 Dec 2013 : Column 183

10 Dec 2013 : Column 184

New clause 3 added to the Bill.

New Clause 4

Class 4 contributions: partnerships

‘(1) SSCBA 1992 is amended as follows.

(2) After section 18 insert—

“18A Class 4 contributions: partnerships

(1) The Treasury may by regulations—

(a) modify the way in which liabilities for Class 4 contributions of a partner in a firm are determined, or

(b) otherwise modify the law relating to Class 4 contributions,

as they consider appropriate to take account of the passing or making of a provision of the Income Tax Acts relating to firms or partners in firms.

(2) “Firm” has the same meaning as in the Income Tax (Trading and Other Income) Act 2005 (and includes a limited liability partnership in relation to which section 863(1) of that Act applies); and “partner” is to be read accordingly and includes a former partner.

(3) Regulations under this section may have retrospective effect; but they may not have effect before the beginning of the tax year in which they are made.”

(3) In section 176(1)(a) (parliamentary control: instruments subject to affirmative procedure), after “section 18;” insert—

“section 18A;”.

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(4) SSCB(NI)A 1992 is amended as follows.

(5) After section 18 insert—

“18A Class 4 contributions: partnerships

(1) The Treasury may by regulations—

(a) modify the way in which liabilities for Class 4 contributions of a partner in a firm are determined, or

(b) otherwise modify the law relating to Class 4 contributions,

as they consider appropriate to take account of the passing or making of a provision of the Income Tax Acts relating to firms or partners in firms.

(2) “Firm” has the same meaning as in the Income Tax (Trading and Other Income) Act 2005 (and includes a limited liability partnership in relation to which section 863(1) of that Act applies); and “partner” is to be read accordingly and includes a former partner.

(3) Regulations under this section may have retrospective effect; but they may not have effect before the beginning of the tax year in which they are made.”

(6) In section 172(11A) (parliamentary control: instruments subject to affirmative procedure), after “18,” insert “18A,”.

(7) The amendments made by this section come into force at the end of the period of 2 months beginning with the day on which this Act is passed.’.—(Mr Gauke.)

Brought up, and read the First time.

Mr Gauke: I beg to move, That the clause be read a Second time.

Mr Deputy Speaker (Mr Lindsay Hoyle): With this it will be convenient to discuss the following:

Government new clause 5—Limited liability partnerships.

Government amendments 1 and 2

Mr Gauke: New clause 4 is needed as it addresses a tax issue arising under existing partnership tax rules where the immediate entitlement to partnership profits is restricted by the alternative investment fund managers directive—AIFMD. HMRC received further information about this during the partnerships review consultation. Following their discussions with the funds sector representatives and the Financial Conduct Authority with responsibility for the AIFMD implementation in the United Kingdom, the Government intend to put in place a statutory mechanism to address the issue, subject to parliamentary approval.

It is important to note that the vast majority of fund managers would not be affected; only those who operate through a partnership would be affected. Under existing partnership tax rules, tax is charged on profits as they are earned, rather than when they are received. An unfunded tax charge can therefore arise on profits that are allocated to an individual partner of an AIFM partnership and which are then deferred in line with the regulatory requirements of the AIFMD. That is because the partner cannot access the deferred profits in the year when they arise.

The new mechanism that the Government propose is designed in such a way as to meet the Government objective of a partnership review to achieve fairer taxation by stopping tax-motivated allocation of profits in mixed membership partnerships that typically include individual and corporate members. The new power introduced under new clause 4 will support the introduction of the mechanism and will be used to change the relevant national insurance contributions legislation by regulation, once the related Finance Bill 2014 legislation becomes

10 Dec 2013 : Column 186

law. It will also allow NICs legislation to be amended in future to reflect any subsequent changes to income tax legislation in that area, to maintain symmetry between tax and NICs positions.

New clause 5 and amendment 2 replace clause 13, which would have removed limits on the Treasury categorising members of limited liability partnerships who satisfy certain conditions as employed earners for the purposes of NICs, rather than self-employed earners. New clause 2 provides an express power to treat LLP members who meet certain conditions as employed earners for NICs purposes. Those conditions will be set out in regulations and will follow income tax legislation introduced in the Finance Bill 2014. Broadly, it will mean that the individual member of the LLP has no or little real economic interest or risk in the LLP, and instead will be rewarded by a fixed salary. Those conditions will be based on proposals on which HMRC has consulted, as part of the public consultation on changes to partnership tax and NICs rules. HMRC has been advised that in response to those proposals, structures with only corporate members were being promoted as a way around the proposed legislation. The schemes involved the individual establishing a personal service company or other intermediary, with that intermediary becoming a member of the LLP in place of the individual in order to avoid those provisions.

New clause 5 provides power to make regulations to achieve the policy objective of the measure, and counteract the artificial imposition of a company or intermediary to avoid the impact of the measure. Regulations will follow new income tax legislation in the Finance Bill 2014. That power will enable the reclassification by regulation of certain LLP members as employed earners for NICs purposes, even when they hide behind a company or intermediary.

The treatment of members of LLPs as self-employed was designed to replicate the position of traditional partnerships. The new clause will ensure that those tax rules are not used to create a tax advantage, and it creates a level playing field between partnerships that have not sought to misuse tax rules for LLPs and those that have done so. I appreciate that that was a rather technical explanation for rather technical new clauses, but I hope it was of use and that the House will agree that new clauses 4 and 5 be added to the Bill, instead of clauses 12 and 13.

Shabana Mahmood: I am grateful to the Minister for that helpful explanation of new clauses 4 and 5, and particularly the technical points and why the Government are no longer proceeding with clauses 12 and 13. I had some concerns in Committee about the impact of clause 13 in disapplying section 4(4) of the Social Security Contributions and Benefits Act 1992. That seemed to be possibly going too far and was ripe for lawyers to have fun with—I was one in my former life. I note that the Government have got rid of that problem and clarified their intention for LLPs by tabling new clause 5.

New clauses 4 and 5 both state that the Government can bring forward regulations to deal with their more technical aspects. Will there be an opportunity for consultation on those draft statutory instruments when they are ready, so we can ensure that no further issues arise as the Government try to implement the objectives that new clauses 4 and 5 are trying to achieve?

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Mr Gauke: I thank the hon. Lady for her support for these measures. Detailed proposals in the form of draft regulations will be published early in the new year, and they will tie in with measures in next year’s Finance Bill. There will therefore be plenty of opportunity to consult on those regulations, and I look forward to debating with her measures on partnerships in next year’s Finance Bill. In that sense, I assure the hon. Lady that the measures will receive an appropriate amount of scrutiny, and I hope that the new clauses will stand part of the Bill.

Question put and agreed to.

New clause 4 accordingly read a Second time, and added to the Bill.

New Clause 5

Limited liability partnerships

‘(1) SSCBA 1992 is amended as follows.

(2) After section 4A insert—

“4AA Limited liability partnerships

(1) The Treasury may, for the purposes of this Act, by regulations—

(a) provide that, in prescribed circumstances—

(i) a person (“E”) is to be treated as employed in employed earner’s employment by a limited liability partnership (including where E is a member of the partnership), and

(ii) the limited liability partnership is to be treated as the secondary contributor in relation to any payment of earnings to or for the benefit of E as the employed earner;

(b) prescribe how earnings in respect of E’s employed earner employment with the limited liability partnership are to be determined (including what constitutes such earnings);

(c) provide that such earnings are to be treated as being paid to or for the benefit of E at prescribed times.

(2) Regulations under subsection (1) may modify the definition of “employee” or “employer” in section 163, 171, 171ZJ or 171ZS below as the Treasury consider appropriate to take account of any provision falling within subsection (1)(a) to (c).

(3) If—

(a) a provision of the Income Tax Acts relating to limited liability partnerships or members of limited liability partnerships is passed or made, and

(b) in consequence, the Treasury consider it appropriate for provision to be made for the purpose of assimilating to any extent the law relating to income tax and the law relating to contributions under this Part,

the Treasury may by regulations make that provision.

(4) The provision that may be made under subsection (3) includes provision modifying any provision made by or under this Act.

(5) Regulations under this section are to be made with the concurrence of the Secretary of State.

(6) Section 4(4) of the Limited Liability Partnerships Act 2000 does not limit the provision that may be made by regulations under this section.”

(3) In section 4B (power to make retrospective provision in consequence of retrospective tax legislation), in subsection (3), after paragraph (c) insert—

“(d) section 4AA (power to make provision in relation to limited liability partnerships)”.

(4) In section 10 (Class 1A contributions: benefits in kind etc), at the end, insert—

“(11) The Treasury may by regulations modify the law relating to Class 1A contributions in the case of an employed earner’s employment which is treated as existing by virtue of regulations under section 4AA.”

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(5) SSCB(NI)A 1992 is amended as follows.

(6) After section 4A insert—

“4AA Limited liability partnerships

(1) The Treasury may, for the purposes of this Act, by regulations—

(a) provide that, in prescribed circumstances—

(i) a person (“E”) is to be treated as employed in employed earner’s employment by a limited liability partnership (including where E is a member of the partnership), and

(ii) the limited liability partnership is to be treated as the secondary contributor in relation to any payment of earnings to or for the benefit of E as the employed earner;

(b) prescribe how earnings in respect of E’s employed earner employment with the limited liability partnership are to be determined (including what constitutes such earnings);

(c) provide that such earnings are to be treated as being paid to or for the benefit of E at prescribed times.

(2) Regulations under subsection (1) may modify the definition of “employee” or “employer” in section 159, 167, 167ZJ or 167ZS below as the Treasury consider appropriate to take account of any provision falling within subsection (1)(a) to (c).

(3) If—

(a) a provision of the Income Tax Acts relating to limited liability partnerships or members of limited liability partnerships is passed or made, and

(b) in consequence, the Treasury consider it appropriate for provision to be made for the purpose of assimilating to any extent the law relating to income tax and the law relating to contributions under this Part,

the Treasury may by regulations make that provision.

(4) The provision that may be made under subsection (3) includes provision modifying any provision made by or under this Act.

(5) Regulations under this section are to be made with the concurrence of the Department.

(6) Section 4(4) of the Limited Liability Partnerships Act 2000 does not limit the provision that may be made by regulations under this section.”

(7) In section 4B (power to make retrospective provision in consequence of retrospective tax legislation), in subsection (3), after paragraph (c) insert—

“(d) section 4AA (power to make provision in relation to limited liability partnerships)”.

(8) In section 10 (Class 1A contributions: benefits in kind etc), at the end, insert—

“(11) The Treasury may by regulations modify the law relating to Class 1A contributions in the case of an employed earner’s employment which is treated as existing by virtue of regulations under section 4AA.”’.—(Mr Gauke.)

Brought up, read the First and Second time, and added to the Bill.

New Clause 1

Post implementation review

‘(1) Her Majesty’s Revenue and Customs must, after one year, prepare a post implementation review of the employment allowance which the Minister shall lay before Parliament.

(2) The review must consider—

(a) what impact the employment allowance has had on the number of jobs;

(b) what impact the employment allowance has had on wage levels;

(c) overall take-up of the employment allowance;

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(d) the geographical spread of businesses, charities and sports clubs taking up the employment allowance; and

(e) the effectiveness of Her Majesty’s Revenue and Customs’ strategy to promote the employment allowance.’.—(Shabana Mahmood.)

Brought up, and read the First time.

Shabana Mahmood: I beg to move, That the clause be read a Second time.

Mr Speaker: With this it will be convenient to discuss

New clause 2—Administrative and compliance costs review

‘(1) Her Majesty’s Revenue and Customs must, after six months of the Act coming into force, prepare a review which the Minister shall lay before Parliament.

(2) The review must consider—

(a) whether there are any administrative or compliance costs associated with the employment allowance being reported by those applying for it; and

(b) whether businesses, charities and sports clubs are having any problems in claiming the employment allowance.’.

3.45 pm

Shabana Mahmood: Given that I am still relatively new to my shadow Treasury brief, I am not yet—as hon. Members who served in Committee will no doubt be pleased to note—suffering from review fatigue. Both of the new clauses seek further reviews from the Government. New clause 1 envisages a post-implementation review, which was the subject of some debate in Committee, and I felt it was worth having a further discussion to push the Government a little more in relation to the impact that the employment allowance will have on jobs and wage rates, and the effectiveness of the promotion of the employment allowance to all those who are eligible for it.

New clause 2 envisages an administrative and compliance cost review—a one-off review to take place six months after the employment allowance comes into force. It was prompted by the evidence of Mr Holloway, which I mentioned earlier, and I shall go into more detail shortly.

In Committee, the Minister helpfully indicated that he would publish information on two of the elements that I have included in new clause 1—the overall take-up of the employment allowance and its geographical spread. I understand from his comments in Committee that the information on the geographical location of those taking up the employment allowance will probably be available on a regional basis. I hope that he will clarify that point when he responds to the debate. The Minister said that he would put information on both elements in the Library so that Members can raise questions about the effectiveness of the employment allowance and its take-up levels. We have in mind the previous regional national insurance employers’ holiday, which had difficulties from the start. We have made the point that those difficulties should have been dealt with sooner, and it is in that context that we think the Government should have a formal post-implementation review of the take-up of the employment allowance.

Richard Fuller: The hon. Lady earlier made the breathtaking assertion that although the Labour party was proudly in favour of increasing the jobs tax in 2010,

10 Dec 2013 : Column 190

its attempt now to reduce it was not a flip-flop. With the proposal of an annual review, businesses will be concerned that the Labour party is not committed to the employment allowance, as we are. The hon. Lady said in Committee that she could not commit the Labour party to supporting the employment allowance at the next election, so will she therefore admit that Labour’s support for employment allowance is at risk in their shuffle of policies before that election?

Shabana Mahmood: I will repeat exactly what I said to the hon. Gentleman when we had this debate in Committee: we have been unequivocal in our support for employment allowance since it was introduced in the Budget earlier this year. We have taken every opportunity to say to the Minister and his colleagues in the Treasury team that it should be introduced sooner. We could not have been more unequivocal in our support.

The purpose of the review is not to put the employment allowance at risk. The regional national insurance employers’ holiday scheme had problems with take-up from the start. They were raised with Ministers in this House at every available opportunity—in oral and written questions—yet we had to wait for the full three years of the scheme to run before the Government brought forward a proposal without the same problems. That is the context for tabling new clause 1. We want employment allowance to succeed and not suffer from low take-up—we want it to be taken up. The Government say that it will be taken up by 90% of eligible employers. I am sure that all Members want to see 100% take-up, and there seems to be no real reason why 10% should be missed off. We want to ensure that take-up is not affected by any unforeseen issues during roll-out.

Ian Swales: Does the hon. Lady accept that she can comment on the previous scheme precisely because the Government keep all such schemes under review? Neither scheme needs a review to be in the Bill.

Shabana Mahmood: It would be helpful for the review to be in the Bill, as it would concentrate the Government’s mind in ensuring that it works. We had to wait the full three years for the previous scheme to finish before we had a change of course towards something that will not suffer the same problems. Both points are good reasons to include a review in the Bill.

In Committee, the Minister remarked on take-up and geographical location. I am sure all Members want the scheme to be taken up nationally, and for it not to be skewed by region because promotion is not good enough in some parts of the country and employers do not find out about it. We had a good debate on whether the review should consider the impact on the overall number of jobs and wage levels. I included both in the new clause because they are worth considering.

The Minister and other members of the Committee said that they hoped the £2,000 made available to employers through employment allowance will be passed on to employees, either by increasing wages or taking on more employees. There was also the hope that employers would be encouraged to reinvest that money in the business, in research or innovative practices to help productivity. It is worth trying to measure the impact of employment allowance on job levels and wage levels. I take on board the point made in Committee by the

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Minister, and by members of the Committee on both sides of the House, that the decision to either increase wages or take on new workers is, for any business owner, based on a number of factors, and that employment allowance may be one of them. The policy is not being introduced in a vacuum. There is a clear intent and desire for it to stimulate employment and, hopefully, an increase in wages.

It seems sensible at least to consider the relationship between the employment allowance and job and wage levels. The new clause does not envisage a methodology, but I remind the Minister and hon. Members that when the Bill was introduced, the Federation of Small Businesses carried out a survey asking its members what they expected to do with the £2,000 allowance, and many said that they would increase job or wage levels or reinvest in their business. Employer surveys and other stakeholder engagement methods would be useful means of interrogating the impact of the employment allowance on job and wage levels. It is worth putting that in the Bill.

Ian Swales: The hon. Lady makes an interesting argument, but who would be responsible for carrying out such a survey? Would the FSB, for example, be the best people to carry it out or does she envisage some kind of Government process?

Shabana Mahmood: In evidence to the Committee, the FSB said it would survey its members again anyway. The Government could look at that survey and work with the FSB to see how it surveys its members. They might want to take a representative cohort of people who have taken up the employment allowance; discuss with them its impact on their businesses; and then extrapolate lessons for national take-up. I do not seek to prescribe exactly how they should carry out the review—I am sure there are clever bods in the Treasury whose job it is to think of these things—but given what has happened already in this Parliament on national insurance, it is important that we concentrate the mind of the Government. The House expects and wants this policy to succeed and not to suffer the problems of the previous policy. It also wishes to continue pressing the Government on this point.

The last element of new clause 1 concerns the effective promotion of the employment allowance to all who are eligible. In particular, I have in mind the FSB’s evidence to the Committee about the effectiveness of that communication. It is worth considering that in a review, particularly if there is a problem, such as a geographical inequality, with overall levels of take-up. How the allowance is promoted will clearly have an effect. Charities and sports clubs are rightly eligible for this £2,000 reduction in their national insurance bill, but there is a risk that they might miss out and that we promote the allowance to businesses more effectively just because they have more stakeholders and larger bodies getting the message out. The new clause seeks to ensure that we keep across that concern and that not only eligible businesses but other groups that rightly fall within its scope take up the employment allowance.

New clause 2 seeks a short administrative and compliance costs review six months after the Bill comes into force. It is motivated by two things in particular. First, as I mentioned earlier, the Government expect 90% of those

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eligible to claim the employment allowance. The Institute for Fiscal Studies and others—we heard this in the Committee evidence session—have asked about the other 10%. The system for claiming the employment allowance is straightforward and everybody expects the running of it to be smooth. However, one wonders why 10 per cent. are always assumed to miss out.