§ Mr. Rossi
I beg to move amendment No. 36, in page 17, line 18, leave out from 'employment' to end of line 20.
The effect of this amendment is to reverse a change made in Committee whereby employers, but not employees, would be exempt from liability to pay national insurance contributions and surcharge on statutory sick pay.
I made clear in Committee that I had a great deal of sympathy with the arguments put forward by my hon. Friends. Indeed, I started off in this matter at their position, since I believe that the financial and administrative burden of the SSP scheme on business should be kept to the absolute minimum. However, having looked again at the effects of the change, I must urge my hon. Friends to support this amendment which restores the position to that in the Bill originally presented—that SSP should be treated in the same way as wages and occupational sick pay and be subject to national insurance contributions by both employer and employee. I urge this precisely because I stick to the principle of minimising the effect of the scheme on employers.
The reason for this apparent paradox is that the clause as it stands will certainly save employers without sick pay schemes a little money. At the same time, it will add greatly to their administrative burdens.
While the total cost to the Government would be large, the sums of money involved for individual employers are quite small indeed. Average annual sickness absence in this country has fallen to just over a week. So on average, employers would save £3 or £4 a head a year by way of contributions and surcharge. In exchange for that they will have extra administration—almost twice as much work in calculating the remittances due each month and a comparable increase in the amount of monthly documentation. This is because they would have to do the calculations on the week's remuneration both including and excluding the SSP element and then add the two together.
584 For a company with thousands of employees, the tradeoff between the savings from not having to pay contributions and the extra administration may not matter. Computerised payrolls could probably cope. However, it will be a different equation for the small business man.
That takes me to my second main point. The £60 million loss of revenue to the Government from excusing employers from contribution liability on SSP would, in the main, benefit firms which have existing sick pay schemes, the very ones which are already more than fully compensated under 100 per cent. self-deduction for heir extra costs under the scheme. Only about £15 million will go to firms with no existing sick pay provision. Thus, to help these businesses to the tune of £15 million the Government are losing £60 million in revenue. That is surely an unacceptable costly way of helping them.
What would the Government do about the loss of revenue? We would have to make the loss up somehow. Those whom it is intended to help could end up by paying higher contributions, reducing the help to them from the proposed exemption. The Goverment have done a great deal to improve the working environment of small firms. The most recent measures were those announced by the Chancellor of the Exchequer in his Budget Statement. These are sensible and direct ways of helping small businesses, unlike the exemption of all employers from liability to pay national insurance contributions on SSP, which is administratively cumbersome and financially wasteful.
Hon. Members, especially those who took part in the discussions in Committee, will have noticed that I have referred to the cost as £60 million rather than £65 million, the latter being the sum that we discussed in Committee. The change arises from the 1 per cent. reduction in the rate of national insurance surcharge announced by the Chancellor in his Budget Statement. The entire House welcomed that change, which demonstrated the Government's determination to help businesses large and small.
Finally, there is a point of principle. Since the schemes started in 1948 the national insurance fund has been financed by three parties. When an employee contributes to building up his benefit rights, his employer and the State join in to share the cost. The clause as it stands breaks that principle for the first time. It requires the employee to contribute on part of his pay without the employer also doing so. Breaching the principle is wrong and could set a precedent that could backfire against employers.
I understand the concerns of those who wish to see the clause remain as amended in Committee and I should like to go some way to meet them, but that proved not to be possible for the reasons that I have given. I hope that the House will support the amendment, which will restore the position. Exemption of SSP from employer's contributions is costly and helps small employers very little while imposing a substantial administrative burden on them. There are better ways of helping pall businesses, as has been shown by the contents of the Budget.
§ Mr. John
The best thing that I can say is that the Government are seeking to correct a clear defeat that they sustained in Committee by a large margin of 15 to seven in a way that is not wholly consistent or convincing. The chambers of commerce have brought forward the "2 Minute Briefing", which is a title that overrates the value of the document.
§ Mr. John
I had not thought of that. I thought that perhaps it was the time that it took to crumple it and throw it in the wastepaper basket.
The National Federation of the Self-Employed and Small Businesses was anxious that this measure should be secured. It supplied briefing material to the Committee which seemed to indicate that there would be extra employment opportunities. It was for that reason that the Opposition supported a number of Conservative Back Benchers in Committee to force the measure through.
In a tripartite quarrel between the Government, the chambers of commerce and the National Federation of the Self-Employed and Small Businesses, I feel that I am intruding into private grief. I therefore leave them to sort matters out as best they can. For a party that proclaimed itself to be the party of the self-employed, the Conservative Party does not seem to be doing very well at the moment.
§ Mr. Gary Waller (Brighouse and Spenborough)
A number of my hon. Friends, from the best of motives, but, I think, misguidedly, made this change to the Bill in Committee. I cannot speak for them now—I believe, however, that one of my hon. Friends, Mr. Deputy Speaker, hopes to catch your eye—but I believe that they have changed their minds as a result of information that has subsequently emerged. The Opposition saw their opportunity to have a bit of fun and to defeat the Government on what is no small point. As my hon. Friend has remarked, there was £60 million of public money involved.
It is clear that most of the money would have gone to the larger companies. The 900, 000 smaller employers would have shared only £15 million which averages, for each firm, 30p a week or £16 a year. In return, they would have had to devote a great deal more time to administrative work. According to the Association of British Chambers of Commerce, there would have been great difficulty in working out the liability for employers' national insurance contributions. This would not have been a problem for the larger firms with computerised payrolls. For the smaller firms, however, the burden could have been considerable. The briefing to which reference has been made stated thatthe change made by the Committee cannot help small firms. It will in fact do damage to them.
In case there is any doubt about the mattter, it is worth reporting that the association consulted all its constituent members. Not one of the 87 chambers of commerce and industry that belong to the association raised the provisions of clause 22 with the organisation. The matter is conclusive.
I am sure that the Opposition have no wish to see the amendment go through. I am not surprised to find that they are not pressing it. I suport my hon. Friend in the change that he now makes.
§ Mr. Andrew F. Bennett
I felt that the "2 Minute Briefing" by the Association of British Chambers of Commerce had not been well thought out. Although my reference to the "2 Minute Briefing" was a crack against the association, the title suggests that only two minutes had been spent thinking about the problem. The association claims in the briefing that it consulted all its members. Those members, having considered the matter, 586 did not feel that there was anything at stake. As hon. Members have heard, it is the Government's view that most employers do not fully understand the scheme and that staff will have to be sent on training courses in order to understand it. When staff have been trained, I suspect that any consultation with its members by the association will produce a different answer. It will have become clear that there are far more snags than had been anticipated.
Much of the briefing was concerned with the problems of working out the difference between paying the contribution and not paying it. I hope that the Minister will confirm that the benefit level of most employees who are sick for one week will be below the level that will trigger off either a contribution by them or by their employer to the national insurance fund. Taking the £37 and the fact that there will be three non-paid days, we are actually talking, in the first week, of a benefit of about £22. Even assuming a generous uprating by the Government in November, I do not think that the amount of benefit paid for the first week will go above the level that triggers off the national insurance contribution.
For the first week, there will be no requirement either to deduct the national insurance contribution either from the employee or the employer. In the second week, in most instances, there will be a requirement. I believe that if a person returns to work during the second week, the benefit will be added to his salary and the deduction will be made on the combination of benefit and wage or salary paid during that period.
The Minister stressed that the vast majority of people are off work for one week or less and that people are certainly covered within two weeks. Therefore, at least 50 per cent. of those involved will not be required to pay national insurance contributions on the benefit. The calculations will have to be made individually for the first week, and, where that person is off a second week, a different calculation will have to be made. Those involved in that kind of administration might begin to think that they should get some money back from it.
The Government sold the scheme to employers on the basis that it would not cost them anything. It may well be that the Government said that this is an expensive procedure, but the Government should think hard about returning to their original pledge that it would not cost employers anything. As soon as it costs employers something, some of them will feel resentful. When they start to implement it, unable to vent their anger and disgust on the Government, some of them will be tempted to take it out on their employees. That would be a sad way to bring in the scheme.
If the Government are not prepared to stick to this amendment, they should still consider returning to their original pledge that it would be a no-cost scheme to the employers and not to tax the employers to the extent of an extra £60 million.
§ Mr. Michael Brown (Brigg and Scunthorpe)
My hon. Friend the Minister has courteously put forward the Government's view as regards the effect of this clause. We had a long debate in Committee and at this late hour it would be unreasonable of me to detain the House unduly.
Notwithstanding the Minister's considerable efforts to allay my fears and those of my colleagués, I still have 587 reservations and I do not hold to the view that was expressed by my hon. Friend the Member for Brighouse and Spenborough (Mr. Waller).
Much reference has been made during this short debate to the "2 Minute Briefing" sent out by the Association of British Chambers of Commerce. This morning I sought a meeting with the National Federation of the Self-Employed's parliamentary and press office. It said that, notwithstanding the Minister's assurances in Committee and in the letter that he sent to Committee members, the association is still concerned. It said that employers carry out a first-class service on behalf of the State, collecting the nation's taxes free of charge. The work involved with PAYE and VAT falls heavily on the small business sector that does not have, and cannot afford, administrative staff to carry out this work. The SSP will make additional work a statutory duty. It still maintains that it would be grossly wrong to impose yet another tax—as it describes it—on those employers for doing work for the State.
The amendment leaves sick pay in taxation and the class 1 employee's contribution can still be collected. It removes the 13.7 per cent. class 1 employer's contribution completely and, as has been said, the effect of the Government's amendment will be to take £60 million back into the revenue. The case has fairly and reasonably been made that at this stage in our nation's economic affairs the Government can ill afford to lose £60 million. In Committee it was said that the Government are actually getting £60 million that they were not getting before. One or two of my colleagues question whether the Government were right to seek to raise revenues in the Bill. That was a technical argument and I do not want to repeat the arguments which we had at great length in Committee.
There will be many small employers in my constituency, and I suspect in the constituencies of other hon. Members, who are not fully aware of the implications of the Government's restoration of the clause to what it was before the Committee stage. I predict that many hon. Members will inflate the Minister's postbag, when small employers write to them about this.
The National Federation of the Self-Employed makes the point that it has committed its members in the areas and regions. The Association of British Chambers of Commerce made its submission at a very late stage yesterday. It made no representations to us, as far as I was concerned as a member of the Committee. At that stage, it did not recommend accepting the Government's position. Therefore, it is intriguing that it should seek to persuade us now that it is the spokesman for small business men. However, it does not appear to have consulted locally.
§ Mr. Rooker
I do not know why, but I received three copies of the "2 Minute Briefing" in three separate envelopes. I sent them all back and pointed out that the ABCC was obviously very affluent. Will the hon. Gentleman comment on the last part of the briefing in which the ABCC, seems to ask for a Select Committee investigation into those bodies that purport to represent industry? It seems to imply not only that the National Federation of the Self-Employed but other bodies that made similar representations to hon. Members are not representing their members. When the Government have organised their 600, 000 seminars to explain the scheme to 588 employers between September 1982 and March 1983, we shall find out quickly who represents the small sector of industry.
§ Mr. Brown
I somewhat resented the comments in the conclusion. Hon. Members' motives in moving and supporting the amendment in Committee seemed to be challenged. My hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd), who is unable to be with us tonight, took great exception—as several Committee Members did—to the contents of the concluding paragraph. Indeed, the National Federation of the Self-Employed, which has consulted far more widely, said that the chambers of commerce represented among others big business, bank managers and the managers of high street branches of big outfits, whereas the National Federation of the Self-Employed was made up exclusively of small, independent entrepreneurs.
At this late stage, it is not for me to go into a great debate between the respective merits of the chambers of commerce and the NFSE. I find myself in an extremely unusual position, because I voted a certain way in Committee, and the official Opposition often challenge one about what will happen. I regret that the official Opposition are unlikely to give me an opportunity to continue to express my view.
§ Mr. Brown
I shall not give way. I am free to express my view when the Question is put. However, in Committee, we thought that we had made such a convincing case that we would carry the Opposition with us. Indeed, we did so. However, I fear that my lone voice tonight will be unable to carry the official Opposition with me in such great numbers. [Interruption.] In Committee, we made the case and the Opposition joined us and I was grateful for their support. I regret that mine is probably a lone voice tonight.
§ Mrs. Sheila Faith (Belper)
I shall not delay the House for more than a minute. As my constituency has not got the high rates of unemployment that other parts of the country have—because of the high proportion of small businesses and the large number of entrepreneurs—and as many of my constituents are taking the plunge and opening new businesses and setting up new enterprises, and as I am most anxious to give them the best possible support, I supported my hon. Friends in Committee, who wished to amend clause 22. In that way, employers would not have to pay national insurance contributions when responsible for sick pay.
We were warned that administration would be difficult and that the amount of money saved would not compensate for that difficulty. But, because we were all so anxious to encourage small businesses, we ignored that advice and also the fact that only a small proportion of the money that it would cost the Government would go to the small business sector. Of course, at that time the Minister could not divulge the contents of the Budget. Since then, my right hon. and learned Friend the Chancellor of the Exchequer has helped the small business sector immeasurably and all businesses, by giving relief on the 589 national insurance surcharge. In this way, the Government have shown their commitment to small businesses. Therefore, like my hon. Friend the Member for Brigg and Scunthorpe (Mr. Brown), I am determined to vote with the Government tonight.
§ Amendment agreed to.