§ Many motorists do not own their own cars but drive those provided by their employers. The scales for taxing the private use of company cars have been substantially increased in recent Budgets, but many employers continue to pay their employees in cars rather than in money. I propose to increase the car scales again this year by 20 per cent. This increase will yield £190 million in 1991–92and £250 million in 1992–93.
§ If people are paid in kind, there is no reason why they should be taxed more lightly than people paid in cash, yet our present system also gives employers an incentive to provide employees with cars rather than cash. Under our present arrangements, they avoid making any contribution to the national insurance fund on the benefit that the employee receives from private use of a car.
§ I propose that company cars and fuel should now become liable for national insurance contributions, assessed according to the scale charges used for taxation. My right hon. Friend the Secretary of State for Social Security will introduce a Bill to that end. Employers will pay at the main rate, but there will be no change for employees.
§ Employers' national insurance contributions on cars and fuel will yield an extra £610 million a year of contributions. This will reduce an anomaly in the national insurance contributions system, making it more neutral between different kinds of payment, and will widen the national insurance contributions base.
§ These new arrangements will take effect from April, but contributions will be collected annually in arrears, so employers will not be asked to pay their first contribution until June 1992. They are already familiar with the scale charges used for the tax so they should be able to make the necessary calculations with the minimum of extra work. They are already familiar with the scale charges.
§ I turn now to what I regard as one of the greatest scourges of modern life. I refer to the mobile telephone. I propose to bring the benefit of car phones into income tax and to simplify the tax treatment of mobile phones by introducing a standard charge on the private use of such phones provided by an employer. Tax will be paid of £200 for each phone for 1991–92. I hope that, as a result of this measure, restaurants will be quieter and the roads will be safer.