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Baroness Miller of Hendon: That was a satisfactory answer. I accept what the noble and learned Lord said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Viscount Thurso moved Amendment No. 18:
The noble Viscount said: This is a probing amendment. Before I probe, perhaps I should declare an interest for the sake of good order. I am an employer and have a number of live-in staff. It may therefore be construed that I have an interest in this matter although a number of employers to whom I have spoken believe me to be speaking against my interests. I leave that to one side.
This is a straightforward question. I have no intention of pressing the amendment; I simply want to know a little about the Government's thinking. The amendment relates to live-in staff. The ones of whom I have knowledge are the harbourmaster at Scrabster harbour where I am the chairman and where he is obliged to live in the harbour house, and at Champneys where a number of staff, for example, head green-keepers, are often obliged to live on the premises.
Essentially, there are two kinds of live-in staff. There are those for whom the employer provides accommodation, largely because it may be difficult to find accommodation in the area. The staff often pay a rental contribution and the accommodation arrangements are largely of an administrative nature. If there is any difference between the cost of the accommodation provided and the rate the employer charges the employee for it, the Inland Revenue considers that to be a benefit in kind and taxes it as such. I am not concerned with those employees.
The amendment seeks to find out how the Government feel about the other kind of employee; that is, those who fall into a category which satisfies two Inland Revenue tests. The first test is that they are required by their contract, for the better performance of their duty, to live in. The second test usually applied is that it is the custom and habit of that specific trade.
In circumstances where the employees may not live out, where they are absolutely required to live in, it is accepted that living in is not a benefit in kind. There is usually a differential in the rate paid. Clearly, if an employee lives in a tied house or flat, there are costs to the employer. In that circumstance, the rate for the job may be less than for a similar occupation where someone is permitted to live out. There is also clearly an exchange of values. Some value is received by the employee and some value is given by the employer.
When the old Hotel Catering Wages Council was in existence, it dealt with the matter quite simply by setting two rates; that is, a live-in rate and a live-out rate for jobs. I am concerned that employees will lose out if some sort of similar provision is not made. If the value of their live-in accommodation is not taken into account, it will become easier or perhaps make more financial sense for the employer to pay the live-out wage and then charge a deduction. The actual net pay packet that the employee receives will then be less than otherwise. It is a very straightforward point. I fully accept that the drafting of this amendment may be hopelessly bad and I have probably got it in the wrong place. As I said, I simply wanted to ask the Government their views on this question. I beg to move.
Lord Clinton-Davis: I am grateful to the noble Viscount for addressing an issue that was worth being addressed. It is, of course, a probing amendment. We have drafted Clause 2 in such a way that it enables ensuing regulations to cover a wide array of topics affecting pay and working arrangements. Clause 2(2)(d) covers the situation envisaged because it stipulates that the regulations may make provision for cases where,
while subsection (4)(a) and (b) enable the regulations to treat accommodation as,
and to say what its value is. I believe that that is the point that the noble Viscount has addressed.
We shall look carefully at the recommendations that the Low Pay Commission makes in that regard and in other areas. We shall make a decision on that. These are issues that will come before the House in its consideration of regulations.
The noble Viscount mentioned a tax regime in the same context as the minimum wage regime. There are different considerations which apply. We shall be looking at those in the next amendment.
Viscount Thurso: I am most grateful to the Minister for that reply which addresses all of the points I wished to raise. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Miller of Hendon moved Amendment No. 19:
The noble Baroness said: In moving this amendment I shall speak also to Amendment No. 22. They are to incorporate a new subsection temporarily numbered (4A). Amendment No. 19 is purely a paving amendment. The plain and simple effect of the main amendment, Amendment No. 22, is to define "remuneration". It is defined as being anything which the Inland Revenue would treat as taxable. In other words, if it is subject to income tax then it is income. It is as simple as that.
The Inland Revenue has spent several generations defining the meaning of "income" and "benefits in kind". It has, item by item, closed one loophole after another. There is a vast body of statute, case law and Inland Revenue practice notes covering both phrases. By the same token, Acts governing income tax have defined that expenses personally incurred by an employee himself should be regarded as deductions from his gross pay; for example, for a telephone and the nominal rent of an office at the home of the employee working from there.
The PAYE system also has the advantage of anticipating one of the requirements of this Bill. Each employee receives an annual certificate called Form P60 showing the amount of his gross pay and benefits. In other words, we have a method of defining income which has stood the test of time and which would doubtless continue to be refined with successive Finance Acts.
What we do not need is a second system defining income and benefits. We do not need a second system which may possibly be in conflict or inconsistent with the existing main system. We do not need a confusing system where income for one set of purposes is different from the income for another; a system which may mean that employer and employee alike will not be absolutely and consistently clear about how and where they stand.
Who, I ask, is going to draft the regulations defining pay and benefits? Are experts to be seconded from the Inland Revenue, or is it to be done by dedicated amateurs on the subject in the DTI? However able officials undoubtedly are, they may find themselves overwhelmed by the amount that they have to learn about a highly complex and specialised subject. How often will the Secretary of State have to come back to Parliament with amending regulations to rectify errors and omissions and to close loopholes?
I cannot conceive of any valid reasons why the Secretary of State should want to take on the onerous burden of defining "income" for the purposes of this Bill and then shepherding that definition through both Houses of Parliament when the work has already been done for her very competently by the Inland Revenue. I am sure that the Secretary of State and her officials at the DTI have more than enough to do without reinventing the wheel. When I was in the mail order business, advertising agencies would come to me with suggested new adverts to replace my already successful ones. That was due to something called the "not invented here" syndrome. As the Americans say, "If it ain't broke, don't fix it".
What we need in the operation of this legislation are fewer regulations, fewer possible contradictions between the Inland Revenue and the DTI, and less expensive bureaucracy, not more. I do not accuse the Secretary of State of having empire-building ambitions. However, if it is good enough for the Inland Revenue, it ought to be good enough for the DTI. I beg to move.
Viscount Bridgeman: I should very much like to support my noble friend Lady Miller on this amendment, to which I referred briefly when we were considering an earlier amendment. As my noble friend said, the Inland Revenue has vast experience of, and case law and practice on, the question of tips, to which the noble Viscount, Lord Thurso, spoke with his considerable experience. The amendment sets out clearly and concisely a summary of Revenue practices. I very much hope that the Minister will reconsider his rather inflexible attitude to the definition of the "hourly rate" in the context of this amendment.
Lord Clinton-Davis: I thought that the noble Baroness indulged in some dangerous doctrine when she said that what is good enough for the Inland Revenue must be good enough for the DTI. I am not sure that her government would have accepted that doctrine. I believe that it was Winston Churchill who once said of the Treasury that it is like an inverted Micawber, waiting for something to turn down--
Page 2, line 9, at end insert--
("( ) the employee is, by the terms of the contract of employment, required to live in for the proper performance of their duties").
"the remuneration consists, in whole or in part, of benefits in kind",
"forming part of a person's remuneration",
Page 2, line 16, at beginning insert--
("Subject to subsection (4A) below,").
10 p.m.
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