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Baroness Hollis of Heigham: That was such a comprehensive speech and as I believe that I agree with every word of the noble Lord, Lord Goodhart, I almost wonder whether I need to reply to him. Perhaps I had better not just say, "Ditto, ditto".

Lord Higgins: In that context, what view does the noble Baroness hold about a company providing flu injections, given the crisis in the health service last year?

Baroness Hollis of Heigham: I do not have a view on that at the moment. I am sure that when I contemplate it, I shall have a view and I shall then be delighted to share it with the noble Lord, Lord Higgins.

Clause 73 is a further step towards the alignment of tax and national insurance contributions (NICs). The clause provides for the extension of Class 1A NICs--

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the shorthand commonly used for national insurance contributions--to cover, from April 2000, benefits in kind such as private health insurance, beneficial loans or use of a company yacht. It means that in future employers will pay NICs on all benefits in kind that they provide which are subject to income tax. The Class 1A NICs charge will be based on the taxable value of the benefit in kind, so that there is parity of treatment between cash and non-cash earnings.

That change, announced by the Chancellor in his 1999 Budget, was recommended by Martin Taylor in his report The Modernisation of Britain's Tax and Benefit System. As we have heard, the Opposition's amendments aim to remove two types of benefits from liability to Class 1A NICs: childcare benefit and the provision of private medical insurance.

First, I shall deal with Amendment No. 187 where there is little difference in the Committee in terms of the desired outcome. This March, in the Budget, the Chancellor announced one exception to the simple rule that what is taxable is also NIC-able. He said that, to encourage employers to provide childcare to help their employees, Class 1A NICs will not be charged on the value of any in kind childcare arranged by the employer. That will, of course, be welcomed by employees. It will not involve the employer in any greater effort than recording the value of the provided childcare in a different box on the P11D form with which they are familiar.

That has been done to encourage employers to help employees with children by providing more childcare facilities. Having been heavily involved in the WFTC Bill, it is quite clear that apart from getting an immediate family relative to care for a child, the childcare most favoured by people moving into the labour market is workplace nurseries, or employer-funded childcare of the sort that is congruent with the person's working hours.

Employers who organise places in commercial nurseries, arrange for a childminder, provide a workplace nursery or provide childcare vouchers will not pay Class 1A NICs. As the noble Lord, Lord Goodhart, said, that precisely fits the working families' tax credit scheme.

In spirit, therefore, Amendment No. 187 is the same as the Chancellor's announcement. We appear to differ only on the best way to deliver the necessary legislation. We believe it is preferable to set out the definition of childcare in regulations so that everyone is clear what is and what is not covered.

The noble Lord, Lord Higgins, knows well that it is traditional in relation to the NICs scheme for the primary legislation to be rather wide, but encompassing regulation-making powers. The details are properly set out in regulations. The Delegated Powers and Deregulation Committee recognised that in relation to the provisions in this Bill. The detail can then be amended if need be without unnecessarily taking up parliamentary time as to the type of childcare and so forth. Amendment No. 187 is therefore unnecessary. If we have not already done so, we will send a copy of the regulations to Members of the Committee indicating to what they apply.

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However, like the noble Lord, Lord Goodhart, the same argument does not apply to Amendment No. 188. At the core, childcare removes a barrier to work; private healthcare is part of the remuneration for work. That is the distinction the Government draw. I am sure it is one that the noble Lord, Lord Higgins, understands. Excluding private healthcare from Class 1A would undermine one of the main purposes of introducing Class 1A NICs; that is, to bring closer together the NICs' treatment of cash and non-cash earnings. The speech made by the noble Lord, Lord Goodhart, both tonight and at Second Reading, was exactly right when he said treating some form of perks as NIC-free distorts the system of wages and salaries. The extension of Class 1A will reduce that distortion.

I also agree strongly with the view expressed by the noble Lord, Lord Goodhart, that there is a significant difference between the two amendments. As I say, childcare is provided to remove obstacles; to help employees with children cope with work and family responsibilities, whereas private healthcare is regarded as part of the remuneration.

Lord Higgins: I wonder if I may pursue a point to which the noble Baroness did not give an answer earlier. Does she think that flu injections given by a company ought to be chargeable to NICs on that company, given the clear beneficial effect and reduction in the cost to the National Health Service which would have resulted had flu been more widespread last winter? Would it not be a good idea to encourage that and not to penalise it in the future?

Baroness Hollis of Heigham: I hope to receive some advice which I can share with the noble Lord in a moment or two. It is only large firms that can afford to offer their employees many and various benefits in kind. Rather than subsidise those large firms at the expense of small firms and their employees by minimising NICs they pay on benefits they provide, we prefer the level playing field approach and at the same time putting more money into the NHS where it is most needed.

Members of the Committee may not be aware that NICs are equal to 0.9 per cent of the value of all benefits subject to Class 1A NICs, and that percentage will go towards funding the NHS. In other words, in response to an earlier question raised by the noble Lord, Lord Higgins, that £17 million extra is the statutory percentage of each NICs class passed to the NHS. So it is not a question as to how the NHS is going to spend it; it is simply part of the tithing of the NICs percentage that goes direct to the NHS.

Lord Higgins: It may be more convenient for me to interrupt the noble Baroness. Where does that extra £17 million appear in the Government's provision for the National Health Service? The crucial question is whether the £17 million is extra for the National Health Service. Where does it appear in the government accounts that we are going to spend an extra £17 million on the National Health Service? Does the noble Lord wish to intervene?

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Lord McIntosh of Haringey: I merely wish to say that that is a different Bill. We will deal with the Government resource Bill in due course.

Lord Higgins: With respect to the noble Lord, it is not a different Bill. The matter came up at Committee stage in another place and we were assured that it was an extra £17 million. I was simply saying, as I said earlier, that I do not believe that that is so.

Baroness Hollis of Heigham: As I understand it, and if I am wrong of course I shall write to the noble Lord, whenever the NICs scheme is altered and more revenue is raised as a result of these measures, a statutory percentage of that 0.9 per cent passes to the NHS, neither more nor less; that represents £17 million in this case and therefore that goes across. That is my understanding of the situation but, if I have misled the noble Lord, I shall of course write to him.

The noble Lord also asked whether flu jabs were taxable and therefore NIC-able. They are indeed taxable, and therefore NIC-able. Such small amounts, however, are usually wrapped up by the firm in a PAYE settlement agreement, which is therefore to the mutual convenience of all concerned.

The costs have been detailed in the regulatory impact assessment; it falls only on employers; it is about the alignment of taxes and NICs, the alignment of cash and non-cash benefits, and greater fairness between big and small firms, with no obvious financial gain to the Treasury. I hope that, for all of those reasons, and above all because one should not be distorting the system by seeking to evade proper NICs and taxable payments by going through the benefits-in-kind route, the noble Lord will withdraw his amendment.

11.45 p.m.

Lord Higgins: As the Government propose to implement what my amendment does by way of a statutory instrument, then of course I am prepared to withdraw it. I have sympathy for those members of the Labour Party who were forced to go through the division lobbies to the contrary effect only a short time ago.

As far as the second amendment is concerned, I look forward to seeing what information the noble Baroness manages to ascertain with regard to the question of the National Health Service.

Amendment, by leave, withdrawn.

[Amendments Nos. 188 to 191 not moved.]

Lord Higgins moved Amendment No. 192:

    Page 76, line 26, leave out ("with 6th April 2000") and insert ("on 6th April of the year after the date of commencement of this Act, or, if this Act comes into force on various dates, the earliest of those dates,").

The noble Lord said: This is the final amendment we are debating this evening. It refers to the question of timing.

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Effectively, it seeks to amend the clause on page 76 of the Bill which suggests that all these changes in National Insurance contributions shall come into effect with effect from 6th April 2000. In other words, it is a piece of retrospective legislation.

I am not sure to what extent anyone was informed in advance that this was going to be the case. It would seem more reasonable, however, not to backdate it and make it retrospective but to ensure that it happens next April rather than at the present time, and indeed for some weeks past. I beg to move.

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