PAY AS YOU EARN REPAYMENTS (Hansard, 15 July 1981)

§ The Minister of State, Treasury (Mr. Peter Rees)
I beg to move amendment No. 36, in page 18 line 34, leave out 'or' and insert: 'in respect of a period including that time; or (aa) he has claimed'.

Mr. Deputy Speaker
With this we may take the following amendments: No. 38, in page 18, line 37, after '1977', insert: 'which is taxable by virute of section 27 above'. Government amendment No. 39, No. 40, in page 18, line 39, leave out: 'he is disqualified at the time' and insert: 'he has been disqualified for a period of not less than four weeks'.

§ Mr. Rees
Amendment No. 36, taken with amendment No. 39, restricts the power to withhold tax refunds, so that the order-making power will apply only in the case of claimants whose benefit is taxable. It meets precisely the purpose of amendment No. 38, which stands in the names of the right hon. Member for Stepney and Poplar (Mr. Shore) and the hon. Member for Edinburgh, Central (Mr. Cook). The matter was ventilated in Committee, and I hope that the hon. Gentleman will feel that ample justice has been done. He knows the ways of parliamentary draftsmen. For some obscure reason, the amendment that I moved is slightly superior—purely on technical grounds—to his amendment. I hope that the basic principle is the same.

§ Mr. Cook
I do not know whether it is appropriate for me to welcome the Minister of State to our deliberations today, because I am tempted to complain that it is unfair of the Treasury Bench to throw fresh troops at us after we have been battling all the afternoon. However, we are grateful to him for moving the amendment, and we welcome it.
The amendments meet the purpose of an amendment that we moved in Committee. Without the amendments, the effect of the clause as drafted would be to provide for the withholding of refunds for any person who claimed supplementary benefit, for whatever reason, when he was entitled to a refund. The clause would therefore bite on pensioners claiming supplementary pensions, on sick people claiming supplementary benefit, and on single-parent families claiming supplementary benefit. Plainly, the intention was not to catch these people, because they could not conceivably have a supplementary benefit that was taxable under the Bill. I entirely accept that the Treasury never intended it to have that effect. I therefore welcome the fact that the Treasury has accepted our observation and put it into less defective language than that of our amendment.
I am tempted to take up the point made earlier by the hon. Member for Gateshead, West (Mr. Horam), and say that this may illustrate the lack of joint study and joint consultation between the DHSS and the Treasury on the interaction between the tax regime of our State and the social security system. This is a case where a Bill, put forward in all good faith—I do not challenge the intention of the Bill—had the effect of going much wider than the Treasury draftsmen had envisaged. That might demonstrate what the hon. Member for Gateshead, West said 1270 about there being a strong case for more consultation and a joint study between the Treasury and the DHSS to ensure that the growing complexity and interaction of the social security system and tax regime are catered for adequately.
Amendment No. 38 is redundant. We tried to move a similar amendment in Committee and we tabled amendment No. 38 in case the commitment had slipped Ministers' minds. We are delighted that it has not. We accept that amendment No. 38 is defective.
Amendment No. 40 is on a slightly different tack. It attempts to achieve the same purpose. Amendments Nos. 36, 38 and 39 relate to the unemployed person. Amendment No. 40 relates to the person on strike. As the clause stands, there is no provision to limit the right to withhold the tax refund from strikers who have made a claim for benefit. The right to withhold refund will be applied to all strikers, whether or not they have claimed benefit.
Our view is that that provision is unreasonably wide. Only a small proportion of workers on strike claim benefit. For instance, a single man cannot claim any benefit when on strike, because a striker is entitled to benefit only in respect of a wife or other dependant. A man who does not have a wife or dependant does not qualify for benefit. However, tax refunds to which that person might be entitled will be withheld on the basis that when he returns to work a calculation will be made between the taxable benefit and the refund. In the case that I have described such a calculation cannot apply. There is no taxable benefit and therefore there is no reason for withholding the refund.
In Committee we moved an amendment which was intended to deal with that position. The amendment was rejected. Instead of tabling that amendment again we have tabled a different amendment to provide that the right to withhold benefit from all strikers will run only from the fifth week of the strike. We may have approached the problem at a tangent, but we chose the method because of one of the arguments by the Chief Secretary when responding to the debate in Committee.
In support of our amendment I referred to the small proportion of strikers who claim benefit. I said that in the last year only 7 per cent. of strikers claimed benefit and that in none of the preceding five years had more than 5 per cent. of strikers claimed benefit. The implication that I drew was that as a result of the clause 100 per cent. of strikers would have refunds withheld, although only 5 per cent. had any benefit that could be taxable under the terms of the clause. It is unreasonable that 100 per cent. of strikers should have their refunds withheld to facilitate the taxation of the 5 per cent. who claim benefit.
To rebut my argument the Minister said that I was working out the percentage from all those on strike and thereby biasing my sample. He said that I should have looked at those involved in long strikes, although they are not defined. The Chief Secretary argued that those on long strikes had a higher uptake of benefits. He put the figure at one-third—still a minority, but a substantial minority.
If the purpose of the regime ushered in in the clauses is to tax those who claim benefit because they are involved in longer strikes, let us incorporate in the Bill a provision that will limit the mechanism to those involved in longer strikes. That is why we proposed the amendment. It would allow those involved in a short strike to claim their first tax refund, which would normally be paid at the end of 1271 four weeks. It would catch those involved in a longer strike, who would be unable to obtain any tax refund beyond the first four weeks.
10.15 pm
I apprehend that that proposal might commend itself to the Treasury Minister because, as well as having the effect of allowing those on short strikes to claim their first refund, which would be of benefit to them, it would also be of benefit to the Treasury, because it would exclude from the operation of the mechanism the administrative burden of stopping refunds and calculating benefits for those on strike for a short time, and the revenue to be gained from taxing their benefits must be modest. It would also ensure that at least in those cases where refunds were withheld there was a sporting chance—one in three—that the person having his refund withheld was claiming benefit that was taxable under the Act.
As the legislation stands, in all those cases where refund is withheld only in one in 20 will there be a benefit that is taxable. I cannot believe that that is what the Treasury meant to happen. I understand the Minister's difficulty. I hope that he will see his way to accept the amendment, which seeks to provide for the striker a similar protection to that which we have already accepted for the unemployed. If it is not possible for him to accept the amendment, I hope that he will bend his mind to the difficulty and tell the House that it is not the Treasury's intention that we should end up with a position in which a large number of people who are not claiming benefit—who are not eligible to claim benefit—are simultaneously having their refunds withheld to facilitate the taxation of the few strikers who do claim benefit.

§ Mr. Peter Rees
I wish to respond to the persuasive case advanced by the hon. Gentleman in support of amendment No. 40. The difficulty is that it would have the consequence of excluding about 85 per cent. or more of all strikers. That may be the hon. Gentleman's intention. I do not entirely follow his argument that that would reduce the administrative burden, because by not paying tax refunds there would be an automatic alleviation of the administrative burden.
I find it difficult to meet the hon. Gentleman's argument head on because the Government propose to withhold refunds from all strikers not because some of them are benefit claimants but because the large majority of the unemployed are claimants and will have their refunds withheld. That point is not affected by the question whether only 5 per cent. of strikers in a particular strike are claimants, or whether, in a longer strike, 25 or 30 per cent. are claimants. The Government's intention is to achieve a broad, practical equivalence of position between strikers and unemployed. Refunds, therefore, are to be deferred from strikers as a whole, and from the beginning of the strike.
I listened carefully to the hon. Gentleman. It may be that a certain confusion crept into our debates in Committee. I hope that the hon. Gentleman was not misled into thinking that the Government were advancing these provisions on some basis that I could no longer support. Right from the beginning this was the Government's position on that point.

§ Mr. Cook
The Minister made a point that was also made by the Chief Secretary when we debated the matter 1272 in Committee of the whole House. I wish to draw his attention to the point that I put then to the Chief Secretary. If the argument is that it is necessary to achieve equity and balance between the unemployed and the strikers, I invite the Minister to refer to paragraph (a) of the clause, which makes it perfectly plain that refunds can be withheld only when the unemployed person has made a claim for benefit. In other words, the right to withhold refund does not apply where the person has become unemployed and there is no benefit which is taxable within the terms of the Bill.
However, if the hon. and learned Gentleman refers to paragraph (b), which deals with the striker, he will see that the right to withhold refund applies to all strikers even though in the majority of cases there will not be any benefit that is taxable. Far from it being the purpose of the Treasury to achieve broad equivalence between the unemployed and the striker, it is the Opposition who are seeking to achieve that parallel by providing that the striker shall have his refund withheld only if there is at least a reasonable probability of a benefit being claimed, whereas only the unemployed who claim benefit will have their refund withheld. I accept that that is the appropriate approach.

§ Mr. Rees
I follow the theme of the hon. Gentleman's intervention. It was thought to be a pointless exercise that the unemployed should claim a tax refund when they became unemployed, whereas at the same time they were claiming unemployment benefit that was taxable but that would be taxed at the year end. That was an absurd position. It was thought to be equally absurd that strikers should be able to claim their tax refunds immediately and, to the outward eye at least, be in a more favoured position than the unemployed. I understand the Opposition's reservations about the whole system of taxing benefits. I understand the broad division of principle. As for the equivalence between strikers and the unemployed, I had hoped that there was a certain identity of view between the two sides of the Committee and the two sides of the House.

§ Mr. Cook
I ask for the leave of the House, Mr. Deputy Speaker. The hon. and learned Gentleman referred to the Opposition's reservations about the regime and mechanism of taxation that is being created in the part of the Bill that we are discussing. I shall not be tempted into giving him my observations. If he has any doubt about them, I am sure that the Financial Secretary, who has recently heard them, will be happy to refresh the hon. and learned Gentleman's mind.
Leaving aside general prejudices, we find it unsatisfactory that we have ended up with a mechanism that, in providing primarily for the taxation of the 5 per cent. who will claim a taxable benefit, will stop the refund to all strikers. I cannot accept that there is broad equivalence between the striker and the unemployed. An unemployed person's right to withhold his refund is dependent on a claim for benefit. The striker's right to withhold his refund is not dependent on a claim for benefit. In the great bulk of cases the mechanism will be applied where there is no claim for benefit. In many instances, no claim for benefit will be possible.
I appreciate that the amendment is a roundabout way of meeting our argument. The Minister said that we would let out of the right to withhold refund 85 per cent. of all strikers. I am prepared to accept that figure. We would hope for a high degree of correlation between that 85 per 1273 cent. and the 95 per cent. who make no claim for benefit. I appreciate that the amendment is not a direct way of addressing ourselves to the problem. We do not propose to press the amendment to a Division. However, I think that it was right to record our own dissatisfaction with a mechanism that when applied will mean that those who are not claiming a taxable benefit will have withheld from them tax refunds to which they are otherwise entitled. We shall not press amendment No. 40.