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Lord Higgins: It is unlikely that our debates on the Bill in Committee will turn out to be remarkably exciting or passionate. At Second Reading we on this side made it clear that in a number of respects we had doubts about the Bill. It is nonetheless right that today we should examine it in considerable detail, although I hope that that does not necessarily mean the debate will be prolonged. Perhaps I may make one or two preliminary remarks.
First, I declare an interest as the chairman of an occupational pensions scheme. Secondly, I wish to pay tribute to the way in which the noble Baroness, Lady Hollis of Heigham, prepared previous discussions on the Bill and our discussion today. For the first time a set of explanatory notes has been provided with the Bill. They have been very helpful on what is a complex and technical measure. In addition, following Second Reading, the noble Baroness wrote to me and a number of my colleagues dealing with some of the technical points raised in the debate. She was also kind enough earlier to arrange a briefing meeting, which was very helpful. I must apologise for the fact that I was prevented from attending the second such meeting. The invitation was nonetheless appreciated. In relation to legislation of this type, that kind of preparation is of considerable advantage.
To some extent the Bill institutionalises the move of the social security contributions system into the area controlled by the Chancellor of the Exchequer, in particular the Inland Revenue; and the distinction between contributions paid into the national insurance
scheme, which in turn give the right to obtain certain benefits, is eroded if it becomes more and more the case that this is simply a tax. We debated this point at some length at Second Reading and I do not wish to burden the House with greater detail now. We remain of the view that the contributory principle is of great importance and should be preserved. We had some doubts as to whether, in terms of costs and savings, the arguments in favour of the Bill were justified. I pointed out that the Minister responsible for these matters in the previous government reached the conclusion that that was not so.The drafting of the Bill is of great complexity and gives some cause for concern. To an enormous extent it deals with reference to other legislation, and on occasions even two or three tiers of legislation. That makes the statute book very confused.
I am not clear to what extent some of the clauses in the Bill mean that the rights of this House to debate the legislation or secondary legislation will be changed at all because it comes under the Chancellor and the Treasury rather than the umbrella of the Department of Social Security. I therefore hope that the Minister can give a clear assurance on that point.
I wish to raise a further point in relation to this clause. The matter is done by reference to Schedule 1 from Clause 1 and there are separate points for debate on that. The explanatory notes, the overall summary, points out that the transfer will take place from the Department of Social Security of its operational functions and goes on to state that,
- "policy responsibility for NICs would transfer to the Inland Revenue once decisions had been reached on a new benefit entitlement test".
We have tabled a number of amendments, some seeking to leave out clauses while some are more specific. That may help to give greater focus to the discussion, and is why the Marshalled List looks rather more elaborate than it might otherwise do. I hope that the Minister will reply on those two points. After we have dealt with the government amendments that have been tabled, perhaps we may then deal with Schedule 1 and the question of the schedule itself. That is probably a better point at which to raise the substantive issues.
3.45 p.m.
Lord Skelmersdale: My noble friend Lord Higgins has, with his customary zeal, laid out suggested rules of engagement for the debate. I found them extremely helpful. So far as concerns the grouping of my amendments, perhaps I may suggest gently to the noble Baroness that, since my Amendment No. 3 and her Amendment No. 4 cover the same matter, it would be sensible to group them together. Then I shall be happy to move my group of amendments en bloc. Since they
cover exactly the same order and the same line in the Bill, perhaps the Minister will take a few seconds to consider that suggestion.
Lord Goodhart: I, like the noble Lord, Lord Higgins, apologise for my absence from the meeting arranged by the noble Baroness last week. Unfortunately, it clashed with another meeting arranged by the noble and learned Lord the Lord Chancellor to discuss the Access to Justice Bill. I hope that the noble Baroness will forgive me for having chosen to attend that meeting rather than the one which she arranged.
In order to save time later in the debate, I wish to make it clear at this point, as we did at Second Reading, that we strongly support the principle behind the Bill. We believe that, whether or not the contributory principle is in itself important, transfer of the functions of collecting and managing contributions should be to the Inland Revenue. The contributions have been for many years past, and arguably always have been, a tax rather than part of a genuinely contributory system, given that the amount of benefits to which anyone is entitled is--with the sole exception now of SERPS--independent of the amount that they have contributed, although in a number of cases the number of contributions made may be relevant. On that basis therefore we feel that the Bill makes the right move. As the noble Lord, Lord Higgins, said, the Bill is complex. However, it is not my intention on behalf of my party to intervene in the debate to any greater extent than is necessary.
As can be seen, we have tabled only one amendment. It is therefore unlikely that I shall wish to contribute to any great extent on more than a few of the others. In remaining silent I broadly indicate consent to the principle of the Bill.
Baroness Hollis of Heigham: I thank the noble Lords, Lord Higgins and Lord Goodhart, for their welcome, with varying degrees of enthusiasm, in general and their welcome in particular for the degree of briefing. I wish to pay tribute to the officials for the work they put in through offering facilities and access. I appreciate that the meeting was inevitably called at short notice because of the intervention of the Christmas vacation. It had to be held at the beginning of the week in which the Bill arrived. I am sorry that neither of the two Front-Benchers was able to attend, which we fully understand. However, it will not prevent us trying to respond to any points, if not from the Dispatch Box then through letters or subsequent meetings.
Both noble Lords and the noble Lord, Lord Skelmersdale, said that it is a technical Bill. Therefore, I may well suggest to the Committee, on various occasions, that I wish to follow up in correspondence points which are made. I know that certain points may be important for tax lawyers and others to follow and I shall do that rather than trying to rely on the more formal words in Hansard. I hope that the Committee will forgive me if I go down that route more than is usual. I too do not wish to engage in repeating our Second Reading debate.
First, I wish to address the points raised by the noble Lord, Lord Higgins, who asked whether the Bill would affect the powers of scrutiny of the House of Lords by virtue of transferring it to another body and potentially an Order in Council. No, I am assured from the Box that there is nothing in the Bill that will affect the proper House of Lords' scrutiny of changes to NICs structures.
Secondly, I emphasise that the Bill in no way erodes the contributory principle. It was part of a major arena of our debate at Second Reading and I do not wish to repeat that ground. As was said at the time, the welfare benefits system is based on three different structures of benefit: means-tested or income-related benefits, contributory benefits based on the national insurance principle and also what I call universal category or contingency benefits which are by virtue of the group of people to whom you belong--for example, an entitlement to disability living allowance or an entitlement to child benefit.
It is true that means-tested benefits have grown at the expense of contributory benefits, not in the past 18 months but in the past 15 or 20 years. That is primarily because the previous administration reduced unemployment benefit as a contributory benefit paid for two years to a six months only contributory JSA. More positively, the previous administration, with the support of Members of the House, developed the growth of in-work benefits which have been classically income-related and therefore means-tested.
It is precisely because of the problems of means-testing that the Chancellor announced, and will bring to the House reasonably shortly, a Bill to replace the main in-work benefit, family credit, with a working family tax credit system. That is to overcome the problems that have been identified by noble Lords about means-tested benefits.
Nothing in the Bill will affect the contributory principle. There is much else in what the Government are doing, including, for example, changes to incapacity benefit and widows' benefit and the like which will extend the role of the contributory principle. We wish to ensure that people see a proper return for being in the labour market. We recognise that there is no single structure of benefit which will fit all forms of need. I am sure we shall continue to have a mixed economy, with that effect.
Finally, I remind the Committee that Clause 1 is one of the keystones of the Bill. It introduces Schedules 1 and 2. Schedule 1 transfers to the Inland Revenue the day-to-day operational functions currently discharged by the Contributions Agency on behalf of the Secretary of State. Those functions, in relation to NICs, statutory sick pay, statutory maternity pay and contracting out matters will be exercised by the Inland Revenue from the day appointed for the operational transfer.
Schedule 1 amends the provisions of Acts which confer such functions on the Secretary of State and also other provisions which make consequential references to his exercise of those functions. Functions conferred on the Secretary of State by the subordinate legislation listed in Schedule 2 are also transferred to the Inland Revenue.
We intend that the day appointed for the transfer of operational functions under Clause 27 should be 1st April, the start of the new financial year. Clause 27 also allows regulations concerned with operational functions transferred under Clause 1 to be made from Royal Assent so that they too can be in force by 1st April.
With my efforts to answer the main points raised by the noble Lord, Lord Higgins, and appreciating the welcome given by the noble Lord, Lord Goodhart, I hope that the noble Lord, Lord Higgins,will feel able to withdraw his objections to Clause 1.
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