§ Mr. Michael Forsyth (Stirling)I beg to move,
That leave be given to bring in a Bill to clarify the criteria used to determine self-employed or employee status for the purposes of tax and other legislation.The Bill gives every worker the right to be self-employed. Any Government trying to create a climate for job creation must study the ease with which new firms can be started. That means producing a society in which people at all levels can make decisions, break into new ventures, and seek to exploit their skills and talents in new markets. It means a society with a variety of jobs and types of employment.
The Government have made huge strides in making the conditions right for people to start firms. There have been more than 100 measures, including the highly successful enterprise allowance scheme, and the proposals of the Secretary of State for Employment for lifting the burdens on business will help to remove some of the obstacles to success.
Further purposive action on taxes and regulations could bring rapid results. The Bill is a helpful measure, under which anyone can agree with his employer that he or she is henceforth to be treated as self-employed merely by completing a simple form. The Bill gives the Inland Revenue a right of appeal through the tax commissioners where there is any doubt about employee status. Employee status can be determined only by the commissioners where there is evidence that the taxpayer gains his earnings from one employer under one contract of employment only and where the taxpayer has the right, under his contract of employment, to be reimbursed for authorised out-of-pocket expenses. In other words, the Bill will change the burden of proof so that the inspector of taxes will have to make a case that a person cannot be treated as self-employed, whereas at present he has a complete and arbitrary discretion.
The Bill is entirely in line with Conservative philosophy. Our people should be encouraged and permitted to take the step of self-reliance and the route to independence. Self-employment is one of the most obvious escape routes from that sterile employee culture which was recently condemned by His Royal Highness the Prince of Wales.
The immediate effect of the Bill will be to enable people to work without their employers having to calculate PAYE, and worry about the hassle of national insurance contributions, or about being taken over the threshold for registration of VAT because they have employed people. Employers will be able to employ people under contract when needed, without the fear of becoming locked in by employment protection laws and the other burdens on businesses. It is a short cut. At a stroke, employers will be relieved of that burden.
This one act, which the Inland Revenue seems so determined to prevent, would enable hundreds of thousands of people to be employed by small firms. It would, dramatically lower the cost of employing them, without lowering wage levels. The Treasury would still get its money in the end, albeit from self-employed people and after a delay.
The most important aspect concerns not the creative supply side effects but the iniquity of the retrospective way 148 in which the Inland Revenue determines self-employed and employee status. It has been waging a battle against the self-employed. The PAYE system is terribly convenient for the Inland Revenue because employers become unpaid tax collectors. The Revenue has been examining particular groups of workers to see whether it can challenge their self-employed status.
I was appalled to see in a written answer in column 387 of Hansard of 13 July 1983 that between 1979 and 1983, 7,000 self-employed taxpayers engaged in the film, television and radio industry—I hope that the BBC is listening—were reclassified as employees, following reviews by the Inland Revenue. A further 100,000 people in part-time or occasional employment were also reclassified by the Inland Revenue.
There are no cut and dried rules, and that leaves employers and employees vulnerable. I refer the House to the case of the umbrella man. [Interruption.] It has nothing to do with wets. The Times of Saturday 15 June reported about an umbrella man with a highly successful business, James Ince and Son, which employed people on a self-employed basis. Following a review by the Revenue the firm, which had had no idea of the consequences, was faced with back taxes and national insurance contributions because the self-employed workers were reclassified as employees. That small firm faced a bill for £19,000. But for the fact that it had a freehold, the firm would have been put out of business.
There may or may not have been justice in that case, and there are hundreds of others. The National Federation of Self-Employed and Small Businesses and the Institute of Directors are pressing for this type of reform. We must have defined criteria so that small businesses are left in no doubt about the status of their employees. Small businesses cannot afford fancy accountants and professional advice. They rely on professionals to audit their accounts, and they must make judgments as they go along.
The Bill would also end the bureaucracy surrounding the issue of sub-contractors' exemption certificates which enable self-employed people in the construction industry to be paid gross, without deductions. That system is thoroughly wicked. It effectively operates as a licence to work. To get an exemption certificate to be treated as a self-employed sub-contractor, one must show that one has been employed for three of the past six years. If one cannot show that, one cannot become self-employed.
I am grateful to my hon. Friend the Member for Cannock and Burntwood (Mr. Howarth), who has drawn my attention to cases in his constituency of unemployed people who cannot take up employment because they cannot get the necessary certificate. The Treasury says that it has made a concession and that, if our constituents will put up a bond for £2,500 to the Revenue, they may operate as self-employed people. That is Catch 22, since those who are unemployed, those who are seeking work, have neither the money nor the record of employment with which to meet those criteria. That is invidious.
Pessimists in the House will say that the day of full employment have gone for ever. I believe that that is arrant nonsense. Some jobs are there now if only we made it possible for people to fill them. We must take the market at its own value and we must take the opportunities which it holds for our people. Our children should be encouraged to see self-employment as a realistic and admirable option in the schools. Far from fearing change and progress, 149 which follows from changing times and technology, we should embrace it. The Bill seeks to provide a secure base from which to do that.
Mr. Eric S. Heifer (Liverpool, Walton)I should like to oppose the Bill. Although I do not understand everything that the hon. Gentleman said, I understand clearly what he was saying in relation to self-employment in the construction industry.
One of the great curses in this country has been the development of self-employment—the lump system—in the construction industry. Over the years the lump system has undermined craftsmanship, good workmanship and good products for the people in the industry. Some employers — a worthy number of employers —are opposed to the lump in the construction industry. However, it has grown up and it is consistent, with the philosophy which the Government have developed in the past few years.
It is a myth to believe that everyone can be self-employed, and it is rubbish to suggest that the answer to our unemployment problems is self-employment. It has done great damage to the people of this country and to our industries and I believe that the House would be wrong to allow the Bill to go through. Even though it is a minor Bill with no great consequences, it shows the basic philosophy and attitude of many—not all—Conservative Members.
The Bill would also undermine trade union rights which have been built up over hundreds of years. It also undermines the safety and health legislation that has been necessary to protect the interests of working people in industry over the years. Without making a great speech, I hope that hon. Members will oppose the hon. Gentleman and tell him that there is no place in our country for legislation of this kind.
§ Question put, pursuant to Standing Order No. 15 (Motions for leave to bring in Bills and nominaton of Select Committees at commencement of public business):—
§ The House divided: Ayes 174, Noes 125.
151| Division No. 59] | [3.48 pm |
| AYES | |
| Adley, Robert | Carlile, Alexander (Montg'y) |
| Alexander, Richard | Carlisle, Kenneth (Lincoln) |
| Alison, Rt Hon Michael | Cartwright, John |
| Ashby, David | Chapman, Sydney |
| Ashdown, Paddy | Chope, Christopher |
| Aspinwall, Jack | Churchill, W. S. |
| Atkins, Rt Hon Sir H. | Clark, Dr Michael (Rochford) |
| Baker, Nicholas (Dorset N) | Clark, Sir W. (Croydon S) |
| Baldry, Tony | Cockeram, Eric |
| Beaumont-Dark, Anthony | Conway, Derek |
| Beith, A. J. | Coombs, Simon |
| Bellingham, Henry | Cormack, Patrick |
| Bevan, David Gilroy | Corrie, John |
| Biggs-Davison, Sir John | Couchman, James |
| Body, Sir Richard | Currie, Mrs Edwina |
| Bottomley, Mrs Virginia | Dickens, Geoffrey |
| Bowden, Gerald (Dulwich) | Dykes, Hugh |
| Brandon-Bravo, Martin | Fairbairn, Nicholas |
| Brinton, Tim | Fallon, Michael |
| Brown, M. (Brigg & Cl'thpes) | Farr, Sir John |
| Bruinvels, Peter | Favell, Anthony |
| Budgen, Nick | Finsberg, Sir Geoffrey |
| Burt, Alistair | Fookes, Miss Janet |
| Butterfill, John | Forman, Nigel |
| Forsyth, Michael (Stirling) | Murphy, Christopher |
| Forth, Eric | Nicholls, Patrick |
| Fox, Marcus | Owen, Rt Hon Dr David |
| Franks, Cecil | Page, Sir John (Harrow W) |
| Freud, Clement | Page, Richard (Herts SW) |
| Galley, Roy | Parris, Matthew |
| Gardiner, George (Reigate) | Pawsey, James |
| Glyn, Dr Alan | Penhaligon, David |
| Gorst, John | Pollock, Alexander |
| Gow, Ian | Portillo, Michael |
| Gower, Sir Raymond | Powley, John |
| Greenway, Harry | Prentice, Rt Hon Reg |
| Gregory, Conal | Price, Sir David |
| Griffiths, Peter (Portsm'th N) | Pym, Rt Hon Francis |
| Grylls, Michael | Raffan, Keith |
| Hampson, Dr Keith | Rathbone, Tim |
| Hancock, Michael | Ridsdale, Sir Julian |
| Harris, David | Rossi, Sir Hugh |
| Haselhurst, Alan | Rost, Peter |
| Hayes, J. | Rowe, Andrew |
| Hayward, Robert | Ryder, Richard |
| Heddle, John | Sackville, Hon Thomas |
| Heseltine, Rt Hon Michael | Sayeed, Jonathan |
| Hickmet, Richard | Shepherd, Colin (Hereford) |
| Hicks, Robert | Sims, Roger |
| Hill, James | Soames, Hon Nicholas |
| Hind, Kenneth | Speed, Keith |
| Holland, Sir Philip (Gedling) | Spence, John |
| Holt, Richard | Spencer, Derek |
| Howarth, Alan (Stratf'd-on-A) | Squire, Robin |
| Howell, Rt Hon D. (G'ldford) | Stanbrook, Ivor |
| Howell, Ralph (Norfolk, N) | Steel, Rt Hon David |
| Howells, Geraint | Steen, Anthony |
| Hughes, Simon (Southwark) | Stern, Michael |
| Jenkin, Rt Hon Patrick | Stevens, Lewis (Nuneaton) |
| Jessel, Toby | Stewart, Andrew (Sherwood) |
| Jones, Gwilym (Cardiff N) | Stradling Thomas, Sir John |
| Jones, Robert (Herts W) | Taylor, John (Solihull) |
| Kellett-Bowman, Mrs Elaine | Taylor, Teddy (S'end E) |
| Kennedy, Charles | Temple-Morris, Peter |
| Kershaw, Sir Anthony | Terlezki, Stefan |
| Knight, Greg (Derby N) | Thomas, Rt Hon Peter |
| Latham, Michael | Thompson, Patrick (N'ich N) |
| Leigh, Edward (Gainsbor'gh) | Thorne, Neil (Ilford S) |
| Lewis, Sir Kenneth (Stamf'd) | Thornton, Malcolm |
| Lilley, Peter | Thurnham, Peter |
| Lord, Michael | Townsend, Cyril D. (B'heath) |
| Lyell, Nicholas | Trotter, Neville |
| McCrindle, Robert | Wainwright, R. |
| McCurley, Mrs Anna | Walker, Bill (T'side N) |
| MacKay, Andrew (Berkshire) | Wallace, James |
| Maclean, David John | Ward, John |
| McNair-Wilson, M. (N'bury) | Warren, Kenneth |
| McQuarrie, Albert | Watts, John |
| Malins, Humfrey | Wells, Sir John (Maidstone) |
| Marlow, Antony | Whitfield, John |
| Maxwell-Hyslop, Robin | Wiggin, Jerry |
| Meadowcroft, Michael | Wilkinson, John |
| Merchant, Piers | Winterton, Nicholas |
| Meyer, Sir Anthony | Wood, Timothy |
| Miller, Hal (B'grove) | Wrigglesworth, Ian |
| Montgomery, Sir Fergus | |
| Morris, M. (N'hampton S) | Tellers for the Ayes: |
| Morrison, Hon C. (Devizes) | Mr. Neil Hamilton and |
| Mudd, David | Mr. Gerald Howarth. |
| NOES | |
| Anderson, Donald | Brown, Gordon (D'f'mline E) |
| Archer, Rt Hon Peter | Brown, Hugh D. (Provan) |
| Ashley, Rt Hon Jack | Brown, N. (N'c'tle-u-Tyne E) |
| Ashton, Joe | Callaghan, Jim (Heyw'd & M) |
| Atkinson, N. (Tottenham) | Campbell-Savours, Dale |
| Bagier, Gordon A. T. | Carter-Jones, Lewis |
| Banks, Tony (Newham NW) | Clark, Dr David (S Shields) |
| Barnett, Guy | Clarke, Thomas |
| Bell, Stuart | Clay, Robert |
| Bennett, A. (Dent'n & Red'sh) | Clelland, David Gordon |
| Boothroyd, Miss Betty | Clwyd, Mrs Ann |
| Boyes, Roland | Cook, Frank (Stockton North) |
| Bray, Dr Jeremy | Crowther, Stan |
| Cunliffe, Lawrence | Marek, Dr John |
| Cunningham, Dr John | Marshall, David (Shettleston) |
| Dalyell, Tam | Martin, Michael |
| Davies, Ronald (Caerphilly) | Mason, Rt Hon Roy |
| Davis, Terry (B'ham, H'ge H'l) | Maxton, John |
| Dixon, Donald | Maynard, Miss Joan |
| Dobson, Frank | Meacher, Michael |
| Douglas, Dick | Michie, William |
| Dubs, Alfred | Mikardo, Ian |
| Duffy, A. E. P. | Millen, Rt Hon Bruce |
| Dunwoody, Hon Mrs G. | Miller, Dr M. S. (E Kilbride) |
| Eadie, Alex | Morris, Rt Hon A. (W'shawe) |
| Eastham, Ken | Nellist, David |
| Evans, John (St. Helens N) | Oakes, Rt Hon Gordon |
| Ewing, Harry | O'Brien, William |
| Fatchett, Derek | O'Neill, Martin |
| Faulds, Andrew | Park, George |
| Fields, T. (L'pool Broad Gn) | Parry, Robert |
| Fisher, Mark | Patchett, Terry |
| Flannery, Martin | Pavitt, Laurie |
| Foot, Rt Hon Michael | Pike, Peter |
| Forrester, John | Radice, Giles |
| Foster, Derek | Richardson, Ms Jo |
| Foulkes, George | Roberts, Allan (Bootle) |
| Fraser, J. (Norwood) | Roberts, Ernest (Hackney N) |
| Garrett, W. E. | Robertson, George |
| Hamilton, James (M'well N) | Rogers, Allan |
| Hamilton, W. W. (Fife Central) | Rooker, J. W. |
| Harman, Ms Harriet | Ross, Ernest (Dundee W) |
| Harrison, Rt Hon Walter | Sheerman, Barry |
| Hattersley, Rt Hon Roy | Sheldon, Rt Hon R. |
| Haynes, Frank | Shore, Rt Hon Peter |
| Heffer, Eric S. | Short, Ms Clare (Ladywood) |
| Hogg, N. (C'nauld & Kilsyth) | Skinner, Dennis |
| Home Robertson, John | Smith, C. (Isl'ton S & F'bury) |
| Hughes, Dr Mark (Durham) | Snape, Peter |
| Hughes, Robert (Aberdeen N) | Stott, Roger |
| Hughes, Roy (Newport East) | Straw, Jack |
| Hughes, Sean (Knowsley S) | Thomas, Dafydd (Merioneth) |
| Kaufman, Rt Hon Gerald | Thompson, J. (Wansbeck) |
| Lamond, James | Thorne, Stan (Preston) |
| Leadbitter, Ted | Torney, Tom |
| Leighton, Ronald | Welsh, Michael |
| Lewis, Ron (Carlisle) | Williams, Rt Hon A. |
| Lewis, Terence (Worsley) | Winnick, David |
| Litherland, Robert | Woodall, Alec |
| Lloyd, Tony (Stretford) | Young, David (Bolton SE) |
| Loyden, Edward | |
| McDonald, Dr Oonagh | Tellers for the Noes: |
| McKay, Allen (Penistone) | Mr. William McKelvey and |
| MacKenzie, Rt Hon Gregor | Mr. Jeremy Corbyn. |
| McTaggart, Robert |
§ Question accordingly agreed to.
§ Bill ordered to be brought in by Mr. Michael Forsyth, Mr. Neil Hamilton, Mr. Christopher Chope, Mr. Michael Grylls, Mr. George Gardiner, Mr. Michael Fallon, Mr. Gerald Howarth, Mr. Robert B. Jones and Mr. Stefan Terlezki.
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- RIGHT TO BE SELF-EMPLOYED 52 words