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The Earl of Listowel: Before the noble Baroness sits down, perhaps I may ask her to clarify one further point arising from what she has just said. What about young women who are pregnant and approaching the birth of their child who wish to move into more appropriate accommodation which they might be able to afford once the baby is born? If they wish to move into that accommodation three months or so before they are entitled to, because it is more than a single room rent will they be able to do so under this arrangement?

Baroness Hollis of Heigham: By my definition, they would certainly be eligible for payments from the exceptional hardship scheme if the local authority so devised. I am not sure whether they would qualify as an exempt group. I stand to be corrected on that, but I believe that at the moment they do not qualify as an exempt group as do care leavers. However, in my view,

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the type of situation that the noble Earl described would merit serious consideration by a local authority for an exceptional hardship scheme.

Earl Russell: I thank the Minister very warmly for that reply and for being, I believe, as helpful as she possibly could be. Again, I express my gratitude for what was done for those aged over 25 with regard to the single room rent. I am sure that the Minister remembers, as I do, a good many private conversations on that subject. I shall not repeat them.

I am also grateful to her for again publicising the existence of the hardship money. That is important and it needs to be repeated. However, granted that there is no apparent logic in what she describes, it is easier to be logical in the allocation of an adequate budget than in the allocation of an inadequate budget. Many local authorities believe themselves to have an inadequate budget. In handling an inadequate budget, one must select priorities in a way that will always be illogical. Therefore, possibly if the Government were able to give a slightly more generous interpretation than they have yet done to the phrase "crude and universal capping", as used in their manifesto, we might see a little more progress on this matter.

I thank the right reverend Prelate and the noble Earl, Lord Listowel, for raising the issues of care leavers and pregnant women, both of which I should have liked to raise myself but I felt that I had trespassed on the patience of the Committee long enough. These two issues can easily be, as it were, chipped off the monolith of the single room rent and altered even if the policy were to be unchanged. Were that--I hope not--to be the case, I hope that those two bits might be chipped off it.

I am not altogether convinced by what the Minister said with regard to people in work having worse accommodation than those on housing benefit. After all, a great many people in work are now on housing benefit. In the London Borough of Kingston a new police constable receives housing benefit. I believe that by raising questions such as those, the Minister simply draws attention, first, to the level of wages, which is outside our purview tonight, and, secondly, to the more general problems of the housing market. Those are questions which I think all of us in all parties need to think about a good deal more fundamentally than we yet have done.

Obviously we are not going to solve the problems of housing by fundamentally non-market solutions. Equally obviously, we are not going to solve them by pure market solutions in a market working as it is. Every taxation provision, every legislation provision, all of these are things that influence the market. We should wonder whether the market is actually balanced correctly as it is at the moment because it certainly is not delivering any very substantial supply of rented accommodation at the lower end of the market while, at the same time, we have a flood of money going into the upper end of the housing market, especially in the London area, which is creating a very considerable distortion and absorbing capital which might be more productively invested elsewhere.

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This again is not a question which I think the Committee would wish me to pursue at this time of night. I merely give notice that I think all of us, including myself, need to go away and think about it. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 71 and 72 agreed to.

[Amendment No. 186 not moved.]

Clause 73 [Contributions in respect of benefits in kind: Great Britain]:

Lord Higgins moved Amendment No. 187:

    Page 74, line 36, at end insert--

("( ) Nothing in this section shall apply to any childcare provision by the employer, which shall be exempt from Class 1A contributions.").

The noble Lord said: My Lords, the clause which this amendment seeks to alter is one which has obvious implications as far as the Budget is concerned and raises our usual dispute as to whether a particular measure should be implemented by the Department of Social Security or the Treasury. It also raises the question whether everything which is taxable ought to be NICable. The Government are somewhat in disarray as far as that is concerned.

Amendment No. 187 actually seeks to do something which the Chancellor of the Exchequer said he was going to do in the Budget: to encourage employers to help employees with child care, all provision in kind will remain exempt from employer class 1A national insurance contributions when these are extended to other employee benefits from April 2000. This matter was raised on the same amendment in another place and, despite the fact that it did what the Government said in their Budget they were going to do, the Government went through the Lobbies to vote it down. My understanding is that they are now proposing to do this by regulation, which does seem a rather strange series of events.

In all events, the noble Baroness, with her customary courtesy, sent me, I presume in draft, the various regulations relating to some of these matters. I am minded of the comment by the noble Baroness, Lady Castle, either at our last meeting on this Bill or the one before, where her secretary read out the totally incomprehensible piece of legislation and Lady Castle replied, "Read out the explanatory notes" and her secretary replied, "That is the explanatory note". The explanatory note to these draft regulations which the noble Baroness has sent me runs to three closely typed pages. Even so, I have to say that, as an explanatory note, it is not a great help. For example, the explanatory note says at one point that regulation 8 substitutes regulation 47 of the principle regulations (direct payment of class 1A contributions). As an explanatory note, I defy anyone to understand what on earth that means and, if we are going to have explanatory notes--and they can sometimes be very useful--simply referring to other legislation without

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actually saying what the principle legislation does is such-and-such and this does something else is really not very helpful.

None the less, I am grateful to the noble Baroness for this and no doubt she will tell us that they are now prepared to accept the amendment which we have in front of us this evening, at any rate in principle.

The other aspect which, even at this time of night, is worth raising is that Amendment No. 188 states:

    "Nothing in this section shall apply to any healthcare provision by the employer, which shall be exempt from Class 1A contributions".

We are saying, as regards whether something taxable must be NIC-able, that if it is not so in the case of childcare it should not be so in the case of healthcare.

In replying to this matter in Committee in another place, the Minister, Mr Rooker, said that of that £225 million which this stealth tax will raise--and he seems to think that a stealth tax is something which people dealing with this kind of legislation understand, rather than that the public at large do not understand--£17 million which is raised as a result of not exempting healthcare provision by an employer will go to the National Health Service.

In answer to an intervention by Mr Pickles, who asked whether that is extra money, Mr Rooker replied that of course it is extra; it is £17 million new income. It is true that it is £17 million new income but I have looked in vain to discover where that national health provision has been increased by £17 million. I do not believe that it has but no doubt if I am wrong the noble Baroness will tell me where that extra £17 million for the National Health Service, which is to result from the Government coming into that money by not exempting healthcare provisions from NICs, is going to turn up. I do not believe that it does and I look forward to hearing from the noble Baroness where it is to be found. I beg to move.

11.30 p.m.

Lord Goodhart: On these Benches, we start from the proposition that the tax base for NICs should be the same as the tax base for Schedule E income tax. If that is not the case, as past history has shown, there is a real chance of tax avoidance through the use of devices some of which, like payment in gold bars, are completely absurd and indefensible. Some, like the use of company cars, may originally have had some justification but have reached the level at which they distorted the economy and basically, people were being forced to take company cars whether they needed them or not simply because it was a more tax-efficient way of paying income.

Therefore, in any case the test must be that there should be a presumption against exempting from NICs anything which is taxable for Schedule E.

Against those tests, Amendment No. 187 has some justification. It is extremely difficult to see any justification for Amendment No. 188. The special position as regards childcare has already been

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recognised to some extent by virtue of the fact that in-house childcare facilities provided by an employer for employees are not taxable. The value of the childcare provided is not taxable under Schedule E and, therefore, it would be logically indefensible to make that subject to NICs.

Of course, a great deal of childcare is provided outside the employer's property and much of it in a way where the cost of it must come out of taxed income. Nevertheless, childcare is in a special position because, of course, it is impossible for many people, particularly women with children, to take employment at all unless childcare has been provided. That has been recognised by the extremely generous childcare allowances which are provided in the working families' tax credit. Therefore, I understand entirely, and indeed would support, the principle behind Amendment No. 187.

Amendment No. 188 seems to be in a different position. After all, there is such a thing as the National Health Service. Many businesses provide payment of subscription to private health providers as part of the employment package. There is nothing wrong with that and in many cases it is in the interests of the business to do so because it ensures that key employees are able to get treatment at times most suitable to the employer.

I speak as the father of a son who recently suffered a serious knee injury playing football. Luckily the cost of his treatment was met through the private health insurance taken out by his employer. He was able to get immediate treatment at a time that suited both him and his employer.

Nevertheless, it seems that if that is part of the employment package provided by an employer for the employee, it is difficult to see why the employer should not be required to pay Class 1A contributions, given that it is recognised by the Government that it would not be sensible to take the further step of going the whole hog and making these subject fully to Class 1 contributions. Therefore, while we support Amendment No. 187, we are unable to support Amendment No. 188.

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